Macau Business Daily August 19, 2015

MOP 6.00

China developer Lander changes portfolio, focus on sports business

Closing editor: Joanne Kuai

Page 4

Investors’ ultimate technique for China: ‘Follow the leader’ Pages 8 & 9

Yuan has to renounce privileges in search for freedom Page 10

Year IV

Number 860 Wednesday August 19, 2015

Publisher: Paulo A. Azevedo

Studio City unveils brands set to open shop on the Boulevard Page 7

Paradise Lost

A devastating bomb blast in Bangkok. Threatening to topple its crown as second most visited city in the world this year. And severely dent the economy. The Hong Kong Gov’t has issued a red alert for the Thai capital. While Macau’s Tourism Crisis Management Office urges residents to adopt caution in travel plans for Thailand. The impact on bookings has yet to feed back to Macau-Bangkok airlines Pages

2&3

Political Ploy Austerity. A loaded word in most parts of the world. But somewhat out of context in Macau, say economists.

Who believe austerity Macau-style is more of a political message. They emphasise that the city’s finances are still in good shape

HSI - Movers August 18

Name

%Day

China Resources Powe

+4.08

China Unicom Hong Ko

+0.58

MTR Corp Ltd

+0.55

Link REIT/The

-0.23

Tingyi Cayman Islands

-0.26

China Life Insurance C

-3.00

China Merchants Hold

-3.02

Ping An Insurance Gro

-3.04

Belle International Ho

-4.16

Lenovo Group Ltd

-5.81

Source: Bloomberg

I SSN 2226-8294

Page 7

Neighbours

www.macaubusinessdaily.com

Macau New Neighbourhood. The Macau and Hengqin administrations propose a residential area. Explicitly for Macau senior resident care and educational facilities. Authorities say the plan is still in the initial discussion stage. With approval and instruction from central gov’t critical

Road tax to increase

Road tax is to increase next year. In order to control the number of vehicles in the city. The gov’t hasn’t yet disclosed the intended range of increase. Meanwhile, new contracts with bus operators TCM and Transmac in the hopper

Page 5

Page 4

Gaming

Soft Landing

Port in a storm

China’s housing market continues to recover. New home prices dropped in fewer cities for a fifth month in July.

Amid increased market confidence and lower interest rates

Hong-Kong based Success Universe predicts a loss for the first half. Due to the poor performance of casino-resort Ponte 16 in Macau. Compared to a profit attributable to owners of HK$47.7 mln in the same period last year, when increased number visitors boosted the mass market

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2 | Business Daily

August 19, 2015

Special

Tourism targeted by Bangkok attacks A deadly bomb attack and yesterday’s explosion at a pier, this without injuries, promise to trigger a slowdown in Thai tourism, with Bangkok adjudged the second most visited city in the world in 2015. Political unrest is set to continue

By Paulo A. Azevedo in Bangkok

N

o doubts remain: one of the primary victims of the Erawan shrine bomb attack, in the shopping heart of Bangkok, is tourism.

The impact of the attack carried out in one of the city’s busiest areas – right in the middle of Chit Lom station and Siam BTS station, the main station of the popular transportation system which intersects the Sukhumvit and Silom lines – promises to have devastating effects upon the country’s tourism marketing. Prime Minister Prayut Chan-o-cha asked the public not to rush in sharing information about the bombing on social media, in reality an impossible appeal. Less than one hour after the explosions that have so far claimed 22 lives and injured 116, including at least two foreigners, images of the blast caught

by CCTV cameras at the intersection of Ratchdamri and Rama I roads had flooded the Internet.

Bodies covered with white sheets at the popular Erawan shrine, visited by many locals but also Chinese tourists, appeared on the front cover of yesterday’s Bangkok Post. Titled ‘City Bomb Horror’, they did not hide the importance of the fact despite the lack of proper information. The same happened in The Nation, the second most read English language newspaper in Thailand. A banner headline in blood red reading ‘Bomb Carnage’ proclaimed the horror, the body copy of which went on to report that two explosions had rocked the city around 7:00pm, when many commuters were returning home and tourists were looking for a place to dine or just finishing their afternoon shopping in an area packed with shopping malls - the area of confluence of Gaysorn, Zen and Central World malls. Erawan had its windows shattered and further on, Paragon and Siam.

No responsibility claimed

The norm in a politically agitated Thailand - from which former Prime Minister Thaksin Shinawatra was forced to seek exile abroad and, years later, his sister was forced to abandon power by a military

Windows shattered at Gaysorn shopping mall across the road from Erawan shrine in Bangkok

junta that still rules the country - is for the responsibility for bombings to be unclaimed. In the streets of the capital rumours abound, with many political scenarios suspected (see box).

The blast of improvised bombs made with gunpowder stuffed inside a pipe, detonated in a similar way to a TNT device setting off, and is, according to local experts “politically motivated”, a source told Business Daily. “Tourists are normally the weakest link in a fight that has commenced since the King became ill” because “those [tourists] deaths attract bigger international media attention”.

Political unrest continues An exiled Prime Minister who has quickly condemned the Erawan shrine bombings, and his sister, also a Prime Minister, deposed by a military coup and a military junta that promises to put the country back on the path of democracy “as soon as possible”. Thailand, one of Asia’s most stable countries, has returned to troubled times and, apparently, won’t return to normality anytime soon.

On the one hand, the military, supported by the capital’s intelligentsia that has always accused the former Prime Minister of corruption and vote-buying in rural and poor areas. On the other, the Shinawatra clan supporters who, in the past, have fielded their ‘red shirts’ in confrontations and demonstrations in Bangkok.

The recent intention to strip former PM Thaksin Shinawatra of his police rank and also a new draft charter seem by former PM Yingluck as a way to give more power than the government and the parliament to the National Strategic Reform and Reconciliation Committee that now runs the country are motives being argued about as catalysts for the recent events.

According to unconfirmed theories here in Bangkok, the attacks may be linked to Uighur separatists. A revenge attack, rumours say, for Thai authorities sending 40 of them to China. Uighurs defy the Chinese central government in agitating for independence.

P.A.A.

In the peak tourism season, during the school holidays, the explosion and the terror “aim to create a sense of insecurity and to shake the confidence of important institutions”, Business Daily was told. The blast, the third and so far the biggest bomb attack since the military coup, will now be “in the middle of the Thai political games in the coming months”.

Economy will suffer

“The biggest and most rapidly growing tourism sector in Thailand for the past year has been the Chinese market and as we’ve seen during previous problems in Thailand the Chinese and Asians are the first to disappear at the slightest hint of trouble”, Derek Proctor, a well established businessman told Business Daily.

To this Irishman who manages a hospitality company and has lived in the country for more than 30 years, “to target a site that has a high number of Chinese visitors indicates the objective was to damage tourism and the economy”.

According to a study announced yesterday by Asia Channel TV, Bangkok is the second most visited city in the world, with 28.2 million people, lagging London by just 600,000. Tourism, representing 10 per cent of Thai GDP, was expected to ring up US$61 billion this year, numbers that will now inevitably slow down.

Asean tourists are the main source of visitor, at 31 per cent (followed by Chinese nationals at 28 per cent).

However, the number of Chinese has trebled, year-on-year, reaching a massive 4.5 million so far in 2015.

“The event is so out of proportion to anything that has ever happened

in Thailand throughout the recent troubled years that it’s difficult to imagine it could be more than a onceoff event”, says Proctor hopefully. A smaller explosion, that didn’t injure anyone, at a small pier on the Chao Praya river might suggest otherwise, however.

With a weak baht, exchanged on the street at almost 4.50 per Hong Kong dollar, more than half a baht per dollar in less than one year has resulted in increasingly attractive prices for tourists. The latest events might change the environment altogether, with the country facing losses of hundreds of billions of baht in revenues due to a possible drought of visitors.

“Each of the protest periods over the past seven years was devastating for tourism. The most immediately severe were the protests in 2010, which resulted in almost 100 deaths and which had the military out on the streets in free-fire mode”, Mr. Proctor explained to this newspaper.

“Each period of unrest has been followed by a period of relative calm following which tourism has recovered and businesses had a period of financial recovery. However, the recovery has grown increasingly feeble after each new period of unrest”, he said. The protests of last year and the subsequent military coup and imposition of curfews and martial law “have been proven the most costly”. Revenues during the time of protests “have been down 20 per cent on normal and over a full-year period run at 40 per cent of normal, producing a very difficult situation for companies operating in Thailand”, he explained.

Business Daily | 3

August 19, 2015

Special 274 apply for investment or management residency in 1H, 29 approved The Macau Trade and Investment Promotion Institute (IPIM) said it had received 274 applications for temporary residency during the first half of the year, of which 86.1 per cent or 236 of the total applicants, applied under the scheme for managerial personnel, technical and professional qualification, while 38 others filed their applications under major investment or investment plan, down 14 and 9 year-onyear, respectively. Meanwhile, the authorities approved 6 applications under the investment scheme, which compared to the same period of last year is a drop of 98. For those applying via the management scheme, the government granted temporary residency to 23 persons.

Disability subsidies to increase to MOP7,500 and MOP15,000

Travel cancellations follow Bangkok bomb blast Despite tourist jitters AirAsia and Air Macau say they have yet to see a huge impact on their current flight schedules for the Macau-Bangkok route Stephanie Lai*

sw.lai@macaubusinessdaily.com

W

hile the Macau authorities have so far received no reports of injuries or deaths of residents from the Bangkok bomb blast that killed at least 22 people, most local tour groups destined to depart for the Thai capital on or before August 23 have been cancelled. Macau Travel Industry Council president Andy Wu Keng Kuong told media of the decision reached between the travel agencies here and the airlines.

Quoting industry data, Macau’s Tourism Crisis Management Office said in a statement yesterday that about 20 local tour groups were travelling in Thailand at the moment, which approximated about 400 people.

Talking to media yesterday, Mr. Wu said he has yet to receive any news of tour groups requesting to return to Macau earlier following the Monday bomb blast that ripped through a religious shrine in Bangkok's commercial heart, killing 22 people and wounding more than 100.

Red alert

The dead included two travellers from Hong Kong, the city's Immigration Department confirmed yesterday morning.

Hong Kong has consequently issued a ‘red alert’ travel advisory warning against non-essential travel to the Thai capital – also a signal for tour suspension reference for the Hong Kongincorporated travel agencies that have branches in Macau.

Short-term impact The Erawan Shrine targeted by the bomb is located in Bangkok’s Ratchaprasong luxury retail district, packed with upscale boutiques, eateries and offices.

Ittirit Kinglek, president of the Tourism Council of Thailand, told Reuters there had been some cancellations from high-end tourists so far, but not a significant number.

“We think if there are no further incidents the impact on tourism will be shortterm,” he said. “Thailand will still be a destination that tourists would like to travel to.”

Lino Ho Weng Cheong, president of the Macau-Thailand Chamber of Commerce, also expects that the bomb blast would at most exert a short-term impact upon the

While Macau has yet to establish a travel alert system, the Tourism Crisis Management Office has urged residents to be cautious in making travel plans for Thailand.

The Office has also said it has so far received 19 enquiries about the bomb blast in the Thai capital, but the number does not involve any requests for help.

Airlines AirAsia and Air Macau told Business Daily that they have not had many requests for flight cancellations or experienced a big impact upon their current flight schedules for the Macau-Bangkok route.

tourism business in Thailand.

Most of the investments from Macau in the country are in the fields of finance or industrial production rather than tourism, Mr. Ho noted.

After shunning Thailand during months of political turmoil culminating in a coup in May last year, tourists had started returning to a country famed for its beaches and nightlife, with foreign arrivals up 29.5 per cent to 14.9 million in the first half of 2015.

In the period, Macau also saw a rise of 9.1 per cent to 20,700 outbound visitors from here travelling to Thailand via travel agencies. *with Reuters

“So far, we don't see any big impact on our current Macau-Bangkok flight schedules,” Air Macau's general manager of Public Relations Kenneth Zhao Hong told us. “But we will probably deploy bigger planes [to Bangkok] in case of encountering any surge in the number of passengers that want to return here earlier.”

Air Macau also announced yesterday that clients who have booked future flights to Bangkok yesterday or prior to that could change to other flights or destinations, as long as they depart before September 15.

Disability subsidies will increase 7.14 per cent to MOP7,500 and MOP15,000 per individual per year in 2015 in order to cope with the territory’s inflation. The proposal was presented by the Director of the Social Welfare Bureau, Iong Kong Io, and accepted by the Commission on Rehabilitation Affairs, which also recognised the need to update the amount paid because of increasing living costs.

Currently, the disability subsidy amounts to MOP7,000 per year, while the special subsidy accounts to MOP14,000 per year. The decision has yet to be published in the Official Gazette.

Fidelidade Insurance Non-Life to become Fidelidade Macau Fidelidade Insurance Company Limited (Non-Life) is to be renamed Fidelidade Macau Insurance Company Limited in October, according to the Macau Official Gazette. The dispatch suggests the Portuguese Fidelidade Group is closing its branch in Macau to open a subsidiary, which will be incorporated in the territory.

These changes are only related to the non-life branch of the company. According to the dispatch, the Fidelidade Insurance (Non-Life) licence will be revoked in October and the property transferred to subsidiary Fidelidade Macau.

Increasing parking spaces at Macau International Airport With an increasing number of Macau residents departing from Macau International Airport (MIA) to tourist destinations the demand for car park spaces at MIA has increased. In order to improve the condition of parking spaces at MIA, Macau International Airport Co. Ltd. (CAM) commenced the optimization work of car parks this year. Total vehicle parking spaces will be increased by 50% from 446 to 664 following the completion of the whole car park optimization work.

The whole project is expected to be completed within this year, to cope with the development of MIA as well as reducing the impact on the public.

4 | Business Daily

August 19, 2015

Macau opinion

Beware the ides of August

José I. Duarte Economist

T

his is the middle of the silly season.

There is a tradition – at least for me it is taken as such - of forgetting about the nitty-gritty world of politics and economics, and concentrating on the lighter sides of human existence . . . up to a point, at least.

So, no, I’m not going to discuss if the Commission for Corruption (CCAC) is the most appropriate place to start clarifying the mystery of the 16 missing land plots. In a less seasonal mood, I – or anyone else, for that matter – might wonder why the administration does not come forward with a simple communiqué identifying all the plots, the beneficiaries, and the reasons why she, I mean, the administration, felt those plots could not be recovered.

Maybe, just maybe, we could spare the CCAC for other, perhaps tougher-to-crack, investigations.

I will not, either, speculate on the much trumpeted snub to the government. It was made by no lesser than – no, no-one saw this coming – the Legislative Assembly.

Apparently, for the first time, a majority rejected a legislation proposal put forward by the government. Take due note: they not only disagreed with it, they actually rejected it! Just a couple of small bits of it, one has to recognise – but rejected!

However, today, mid-August, and the heat outside, conspire against holding to a thought for more than a few seconds.

No, you will find here speculative guesses on the underpinnings of such an unlikely event, or questions about the, possibly, incoherence of that vote when compared with similar matters in other pieces of legislation. Move on!

A more serious topic promises to be the demonstration (against?) domestic workers; or, better said, demanding more stringent regulation to prevent acts of violence against minors. Among the requests sits, the media tells us, that they – the maids – should be forced to sleep in employers’ residences; or, if not possible, their employers should pay for their lodgings.

The connection between lodging facilities and inclination to mistreat children must exist somewhere – but I feel too lazy to look for it today. Not that I condone violence against children, perpetrated by maids or anyone else, alien or family members, God forbid! But creating an association for that purpose and focusing on the labor regulations for domestic workers? I’m stuck. I will not develop the subject; my stamina has vanished. Can my news friends try to elucidate what to me, on a day like this, looks like an indecipherable enigma?

I think I did not fulfil my promise completely. I sense a hint of seriousness creeping into some of the lines above, with almost an effort to find some logic in it all. But I’m too tired to go back, and check and change and whatever… Hopefully, my editor will forgive me for that weakness and be satisfied with this today. (Come on!

It’s the middle of August!)

Hengqin’s ‘Macau New Neighbourhood’ in initial discussion stage

C

hief of the Office of the Secretary for Social Affairs and Culture Lai Ieng Kit says the city’s co-operation project with Hengqin – Macau New Neighborhood - is under preliminary study, claiming the project will need approval from the central government.

In June, Hengqin authorities announced a collaborative project with the Special Administrative Region, which seeks to establish a new 200,000 square metre residential area for Macau residents, by providing senior care and educational facilities.

In response to legislator Si Ka Lon’s recent written enquiry, the

Secretary’s Office Chief said the two governments have already started to discuss the viability of the project, saying the two parties are still preliminarily studying the issues involved.

“This co-operation project is not included in the Guangdong-Macao Co-operation Framework Agreement.

Meanwhile, [the city] will need to pay to use the land plot. The planning for the land plot, the way to use it, as well as the valuation method adapted for the cost, are all in the initial study stage,” Mr. Lai wrote.

In addition, he indicated that the two governments have to request the

central government’s approval and instructions for such a project, as it is important and complicated.

In the legislator’s interpellation, he queried the full content of the project, as well as how the local government can guarantee Macau residents enjoy the same rights and benefits in the new residential area as they do in the Special Administrative Region, in addition to asking the government to announce the progress of the cooperation project.

Mr. Lai said the local government will only announce the progress to the public when ‘appropriate’.

K.L.

Developer Lander changes firm’s name, now a sports business

S

henzhen-listed Mainland China developer Lander Real Estate Co. Ltd. announced yesterday that it has changed the firm’s name to Lander Sports Development Co. Ltd., with the business scope shifted entirely from property investment to sports.

The name change came into effect yesterday, while Lander’s stock code on the main board of the Shenzhen Stock Exchange remains 000558, according to the firm’s latest filing.

Lander Sports Development Co. Ltd.’s business scope embraces the organisation of sports activities; design, construction and management of stadiums; research and sales of sporting goods as well as engaging in sports agency business, according to the filing.

Lander signed a framework partnership agreement with Macau casino-resort operator The Venetian Macao Ltd. to co-develop sporting

events in late May, which entailed both parties co-organising and broadcasting large-scale sports events. But the deal was later terminated, although the reason has not been disclosed by either Lander or Venetian Macao.

Prior to the agreement with

Venetian Macao, Lander had established a broadcasting company in Macau with the aim of tapping into the international market of sports games and broadcasting, and introducing major sporting events to the audiences of Mainland China.

S.L.

Business Daily | 5

August 19, 2015

Macau

Gov’t: Road tax increase next year to control number of vehicles However, the Transport Bureau director declined to reveal the range of increase.

In addition, the official said the discussion on changing bus contracts with two bus operators will conclude soon Kam Leong

kamleong@macaubusinessdaily.com

T

ransport Bureau (DSAT) director Lam Hin San said yesterday that the government is studying increasing the road tax for vehicles, as one of the means of controlling the number of vehicles in the city. He hopes that such a tax hike can be implemented for the next tax payment period starting next January.

The DSAT head introduced the government’s drafted interim review for the Bureau’s policy on Traffic and Land Transportation in Macau (2010-2020) to the Transport Advisory Committee yesterday, claiming the focus of the review includes optimising the city’s public transportation, as well as controlling the number of vehicles.

Citing a consultancy study indicating the government

should control the growth rate of vehicles to within 4 per cent every year, Mr. Lam told reporters yesterday that the government is considering increasing the current road tax for vehicles, while declining to indicate the rate.

“There will be an increase.

But I cannot tell you the details now… Vehicle owners need to pay a road tax between January and March every year; we’re working in this direction,” the transport head said.

Asked by reporters whether it means that the government will start increasing the tax from next year, Mr. Lam said “We are striving for this direction.

But I can only tell you when [the plan] is more solid.”

Currently, the local government charges road tax of MOP350 (US$43.8) to MOP1,090 for each motorbike

per year. For light cars, the tax varies from MOP850 to MOP 4,500.

Meanwhile, the government has also proposed tightening the regulation so that every eight-year old vehicle has to have mandatory inspections, rather than the current 10 years.

He said the government had estimated that more than 90,000 of the 240,000 vehicles in the city will need to be inspected following changes in the regulations.

Nevertheless, the transport official said he cannot estimate how many vehicles will actually be scrapped following the introduction of the new regulation.

New bus contracts “soon”

On the other hand, the DSAT head said the government’s

discussion with two bus operators regarding changing their bus contracts will finish very soon. These two operators are namely, Sociedade de Transportes Colectivos de Macau (TCM) and Transportes Urbanos de Macau (Transmac).

Claiming the government is in the final stages of discussion with the two bus companies on changing their contracts, Mr. Lam said he may have new information to announce “within weeks”.

In 2003, the city’s graft watchdog, the Commission Against Corruption (CCAC), said in a report that the government’s “service provider contracts” with the three bus operators at that time had seriously violated the law which only allows the bus operators to run their service under “concession contracts.”

The government then applied the concession contract with the new bus operator Macau New Era that took over the bankrupt Reolian Public Transport Co., and started to negotiate with the other two bus companies to change their contracts which only expire in 2018.

But Mr. Lam said the government’s discussion with one of these two bus operators has been different on “money” issues.

“Money is the most difficult part to discuss. This is what I can tell you,” the director said. “But I don’t think the money issue is an unreasonable request [by the operator] as the Bureau’s position is to protect every cent of the taxpayers, while for the bus operator they want [to follow] the spirit of the previous contract.”

6 | Business Daily

August 19, 2015

Macau Success Universe: Results due to poor Ponte 16 performance

S Society: New Budget Framework Law alone can’t tackle budget overruns

F

rom the Hengqin campus of the University of Macau to public housing projects to the Pac On Ferry Terminal to the Light Rapid Transit (LRT) project, none of the costs were contained within the original estimates. The budget overruns in public projects here have become so commonplace that some legislators sarcastically describe the predicament as the ‘new normal’.

High hopes are riding on the long-awaited amendments to the budget framework law to resolve the issue but critics and observers say that while the proposed amendments could be helpful they are not of themselves enough.

The Financial Services Bureau has started a 45-day public consultation exercise – to finish on August 20 - on the proposed revision to the law, or, in its words, the new Budget Framework Law. Legislator Au Kam San believes the new

measures could enhance the transparency of the government to a certain degree but he criticises the proposed amendments for not addressing the core issue strengthening the supervisory powers of the Assembly on the government’s outlay.

Lou Shenghua, programme co-ordinator of public administration at the Macau Polytechnic Institute, acknowledges the proposed amendments were “steps forward” for the Legislative Assembly and the public in overseeing the government’s budget.

“The power of the Legislative Assembly will strengthen compared with the past but it is, of course, still incomparable with Hong Kong,” he remarked.

The scholar noted that the overhaul of the budget framework law alone, however, is not enough to resolve the budget overruns in public infrastructure.

“The problem demands a

series of changes in rules and measures. For example, the government has to strengthen its management of the progress of public works,” he said.

Eddie Joe Wu Chou Kit, president of the Macau Society of Civil and Structural Engineers, also believes the government’s management of infrastructure projects plays a key role in budget overruns. “If it takes 10 years to complete a threeyear project, the costs will balloon.”

He also queried whether the government departments could “accurately assess” project costs. “Past experience shows some government departments have had to compile a project estimate in a short time with incomplete information, and the budget then had to be revised upwards several times,” he added.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.

uccess Universe will record a loss for the first six months of the year as the result of a poorer than expected performance from its flagship investment, the casino-resort Ponte 16 in Macau, the company has announced in a warning filing with the Hong Kong Stock Exchange.

‘There is a further decrease in the group’s shared profit of the associates relating to Ponte 16, the flagship investment project of the group’, the announcement of the Hong Kong-based company reads.

Last year, for the first six months, Success Universe generated a profit attributable to owners of HK$47.7 million and an Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of around HK$206 million from Ponte 16, which was explained by an increase in the number of visitors to Macau and in

gaming revenue from the mass market segment of the venue.

This is the second warning Success Universe has issued regarding the interim results of the company. Initially, on July 13 it was announced that the company would record a ‘significant decline’ in terms of results based on the unaudited management accounts for the five months ended May 2015.

Besides the decrease of income from Ponte 16 resort, the results were explained in the first warning by the non-recurrence of the FIFA World Cup which boosted lottery business turnover in June 2014 and the voluntary suspension of the paperless lottery sales agency services, as suggested by the Ministry of Finance, the Ministry of Civil Affairs and the General Administration of Sport of China issued in January 2015 due to the illegal sale of lotteries through the Internet.

J.S.F.

Corporate

FADO’s Portuguese inspired pavlova collection

H&M debut full-concept flagship store in Macau

If ever you are standing among countless desserts, which would you pick? For the very first time, FADO restaurant at Hotel Royal Macau presents a sweet collection of Portuguese inspired pavlovas that will just melt in your mouth! Light, fluffy and made from egg white, pavlovas are a great base for desserts, a fact which

H & M, Hennes & Mauritz AB (H&M), inaugurated its full-concept flagship store at the Promenade, Galaxy Macau last week.

The two-storey high location occupies 2,200 square metres of shopping space, offering a varied range of fashion and quality at the best prices in a sustainable way to the fashion mavens of Macau. In celebration

inspired Luís Américo, Executive Chef of FADO, to reinvent the recipe by topping this meringue cake with four traditional Portuguese flavours: Egg Cream, Creme Brulee, Serradura and Port Wine Chocolate.

This Portuguese inspired pavlova collection is available at FADO restaurant from 1st September 2015 onwards.

of bringing a full-concept flagship store to Macau, a MOP500 gift card was awarded to the first customer in line, followed by a ribbon-cutting ceremony by Magnus Olsson, Country Manager of Greater China, Him Wong, H&M Area Controller of Hong Kong and Macau, and Poki Wong, H&M Store Manager of Galaxy Macau.

Business Daily | 7

August 19, 2015

Macau Balmain and Belstaff open first store in Studio City The first stores of fashion brands Balmain and Belstaff, and the first Hide Yamamoto restaurant in Macau are part of the lineup of 55 brands announced yesterday by Melco Crown for the US$3.2 billion (MOP25.6 billion) Studio City. The resort, opening on October 27, will also host the largest store of fashion brand Tom Ford in Asia. “Our retail offering is a totally new concept for Macau and Asia”, the Property President of Studio City, JD Clayton, said.

Austerity? A political message, say economists Gaming revenues are declining but the government budget is still generating a surplus; as such, economists tell Business Daily they believe that austerity is a political message

T

he Secretary for Finance and Economy, Lionel Leong, said in the past he would implement austerity measures should average monthly gaming revenue dip lower than MOP20 billion.

As gaming analysts are forecasting that the industry will generate less than MOP18.5 billion this month (only an amount of MOP19.741 billion or higher would maintain a monthly average revenue for this year of above MOP20 billion) tougher times for Macau are expected to become a reality in September.

However, for economists

contacted by Business Daily, while the “austerity measures” mentioned by the Secretary have not been explained, this change in policy is perceived more as a political sign than a necessity.

“The announcement of the austerity measures seems to be more a sign for the population to be careful in this ‘new normal’ phase, when gaming revenues are going to be around MOP17 billion and MOP18 billion per month”, economist José Sales Marques told Business Daily.

“The Secretary used the word austerity but it is a different

austerity than in the European context, where austerity measures are being implemented because of external debt and trade balance problems. The Macau Government’s budget is generating a surplus and the finances are healthy. So there’s no need for austerity”, he explained.

MOP27.2 billion surplus

From January to July the government recorded a surplus of MOP27.2 billion, exceeding the target for the year of MOP18.8 billion. As such, the view that Macau’s finances are very healthy is shared by José Isaac Duarte.

“The announcement of austerity measures challenges logic. The government may not be generating as much money with gaming revenues as they were probably expecting but they are spending less than they are generating. I don’t see any reason for such alarm”, he told Business Daily.

“All this concern of the government seems to lack a connection to reality in terms of the annual budget. As such, I believe it’s more related to politics and the new message that the Executive wants to transmit”, the economist said.

José Isaac Duarte also believes that even if the government records a deficit it has the means to deal with it because of the financial reserves accumulated in the past.

“The government accumulated financial reserves for many years during the gaming industry boom. But now gaming revenues are declining and they’re already talking of austerity. This raises the questions of what is the use of money. You accumulate reserves to use them in harsher times but if when these times arrive you don’t use them, what is the purpose of saving money?” he asked.

J.S.F.

8 | Business Daily

August 19, 2015

Greater China

“Follow t seizes dom

State supported investors trading patterns that am Saikat Chatterjee

S

PetroChina is one of the firms that short sellers track in order to see if public support is being deployed

ome foreign investors have found a new and simple way to make money from China’s dysfunctional stock markets - by dispensing with market research and playing “follow the leader” instead.

Rather than crunching data on earnings and stock valuations to come up with investment strategies, they are mimicking China’s so-called “national team”, a group of statebacked financial institutions tasked with propping up share prices.

When this team of brokers, fund managers and insurers intervene to buy up shares at the behest of Beijing, foreign investors quickly follow suit and purchase the same stocks. The only difference is that the foreigners are ready to sell as soon as they can lock in a profit, often within a few hours or days.

The end result, investors say, is that the national team is unwittingly encouraging short-term trading patterns that amplify the detachment of stock markets, which have become less responsive to fundamental drivers such as earnings trends, domestic economic data and shifts in global markets.

Home prices rise for third month China’s overall real estate investment growth continued to slow in the first seven months of 2015, but property sales and housing investment improved Kevin Yao and Xiaoyi Shao

C

hinese home prices rose for a third consecutive month in July, fuelled by a pick-up in sales and market sentiment, a rare counterpoint to a growing list of grim indicators in the world’s second-largest economy.

Average new home prices rose 0.3 percent in July versus June, according to Reuters calculations based on data

released by the National Bureau of Statistics (NBS) yesterday, slightly slower than June’s 0.4 percent rise.

Even a modest recovery in a sector that accounts for around 15 percent of GDP is a welcome boost for an economy heading for its weakest growth in 25 years.

Property sales bottomed out during the first half of 2015 after declining for more

than a year, propped up by a barrage of government support measures since last September, including a series of interest rate cuts and lower downpayment requirements.

Exports have tumbled, investment growth has hit repeated lows, and the stock market crashed 30 percent in a matter of weeks, keeping policymakers busy with an unprecedented array of support measures, including a currency devaluation and repeated attempts to increase lending.

Some of those measures, along with gains made on stocks in a 150 percent runup in the year before the crash, have helped buyers like Lilian Liu, a 33-yearold worker in the tourist industry, who purchased a second home in the eastern city of Hangzhou last month.

“It’s the policy that makes it possible to buy my second apartment. Without lower down-payments, I couldn’t make the decision this time,” she said.

While policy measures and increased lending helped fuel a wave of pent-up home buying in recent months, a huge overhang of unsold houses in smaller cities keeps the sector under pressure.

Compared with a year ago, home prices still fell 3.7 percent in July, easing from the previous month’s 4.9 percent drop, Reuters calculated from NBS data showed.

China Vanke, the country’s largest property developer, said on Monday that the housing market was slowly emerging from a yearlong slump, but it would take time to see a full recovery.

“The number of land acquisitions has decreased, and inventory is slowly being digested. It’ll take time, but it’s confirmed that a recovery is ongoing,” said Vanke President Yu Liang.

First tier leads the charge

The NBS data showed home prices across China rose month-on-month in 31 of

the 70 major cities monitored, up from 27 in June.

Prices in first-tier cities such as Beijing, Shanghai and Shenzhen have been leading the recovery.

“I’ve been watching the housing market for several months,” said a Beijing lawyer who gave his surname as Wang. “Upward is surely the direction of home prices in Beijing. A recent recovery in transactions helped me sell my first flat quickly and got the money to buy another one,” he said.

Beijing prices rose 1.0 percent last month from a year earlier, reversing June’s drop of 1.1 percent, while Shanghai prices were up 3.1 percent, compared with 0.3 percent in June.

The southern city of Shenzhen was the top performer, however, recording the fourth consecutive monthly rebound, up 23.6 percent in July from a year ago, following a 15.7 percent rise in June.

Reuters

Business Daily | 9

August 19, 2015

Greater China

the leader” trend mestic markets

s are unwittingly encouraging short-term mplify the detachment of stock markets

Some of the recent policy measures taken by China’s authorities in the markets have been quite puzzling and it hasn’t really increased confidence among foreign investors Karine Hirn, East Capital

“Some of the recent policy measures taken by China’s authorities in the markets have been quite puzzling and it hasn’t really increased confidence among foreign investors,” said Karine Hirn, Hong Kong-based partner of Swedish group East Capital, a US$3.5 billion fund management firm.

“That has prompted some investors to closely follow the intervention tactics taken by authorities rather than analysing and investing fundamentals which we think is required.”

The national team is easy to identify and simple to follow, foreign investors say.

It generally buys index heavyweights opportunistically when the market is tanking to shore up confidence.

PetroChina Co Ltd is one of its favourites: with a free-float of only 2.4 percent but a weighting of more than 6 percent of the Shanghai Composite Index, it can have an outsized impact on the nation’s biggest stock exchange.

Last week, when the index posted its biggest weekly gain in nearly two months, the top 10 index heavyweights, including PetroChina as well as stateowned banks and insurers, gained even as most other constituents declined, indicating authorities were intervening aggressively.

Most of these purchases happen in the last 30 minutes of trading and in heavy volumes, according to Reuters data analysis of last week’s trades, indicating the aim of this intervention is to ensure benchmark indexes close higher.

By bunching large buy orders in the last few minutes of trade, it also leaves traders who had shorted stocks earlier with no choice but to buy them back and cover their positions.

The only game in town

Goldman Sachs strategists said “supportive capital” had flowed into big blue chips or defensive stocks such as banks, insurers, food companies and healthcare firms. The national team spends relatively little money on buying shares in small caps.

“We watch what the large Chinese brokers are doing everyday and follow them blindly as that can be quite profitable in these illiquid markets,” said the head of an equity derivative trading desk at a European bank in Hong Kong.

The national team is becoming the only game in town. It has pumped 800-900 billion yuan (US$125-140 billion) into stocks, according to Goldman Sachs, yet trading volumes are shrinking.

Though some investors are following the national team, many others are staying out of the market altogether.

Daily combined turnover on the Shanghai and Shenzhen exchanges has more than halved to less than 700 billion yuan (US$109.5 billion) in two months.

In another sign of the growing dysfunction, Chinese shares traded outside the mainland, which are outside the remit of the national team’s buying campaign, are fetching lower valuations.

The Hang Seng China AH Premium Index, which measures the valuation gap for companies listed on both mainland exchanges and in Hong Kong, is near its highest level since March 2009, indicating a widening disconnect.

Investment vehicles that mirror the performance of onshore markets have also suffered outflows.

Reuters

Alibaba launches app helping investors buy funds Ant Fortune app will also let users check stock performance on the Shenzhen, Shanghai and Hong Kong exchanges

A

libaba Group Holding Ltd.’s finance affiliate unveiled a wealth-management app yesterday to help investors buy into hundreds of Chinese funds and track stocks trading from Hong Kong to the Nasdaq off their smartphones.

Ant Fortune complements the PayPal-like Alipay and other services proffered by Zhejiang Ant Small & Micro Financial Services Group, a conglomerate controlled by Alibaba co-founder Jack Ma. It reflects Ant Financial’s ambition to become the country’s premier online financial services provider.

The unit’s ties to Alibaba give it ammunition to challenge powerful state banks on their own turf.

Ant Fortune will let users buy some 900 fund products from more than 80 Chinese financial institutions commission-free. The company said that will help lower entry barriers for the 70 percent of the population who now do not invest in financial products because they’re either too expensive or difficult to understand.

In creating a standalone app for investment, Ant Financial hopes its more prominent Alipay, which handles an estimated four-fifths of online Chinese transactions, remains simple and uncluttered for users. The

product has morphed from a payment service into one that allows people to invest, pay for utilities and book movie tickets.

Ant Financial is now in discussions with Hong Kong funds about the possibility of providing indirect access to global financial markets, taking advantage of the China-Hong Kong mutual fund recognition program, the company said yesterday.

Uncertain landscape

The growing clout of new operators like Ant Financial in financial services has caught the eye of regulators.

China’s central bank is considering draft regulation that proposes a cap on the amount individuals can pay

More than 200 million users buy financial products through Ant Financial via services

via online payment services to 5,000 yuan daily, unless their identities are verified by a security token and electronic signature.

The draft rule also requires people provide at least five methods of verification before they can open so-called “comprehensive accounts,” which allow users to purchase, transfer funds and buy financial products.

Ma’s company already controls China’s largest payments provider and the biggest money market fund.

More than 200 million users buy financial products through Ant Financial via services like Yu’E Bao, a money market fund, and Zhao Cai Bao, a platform that lets small businesses and individuals borrow from investors.

The new app allows Zhao Cai Bao to focus on tacking on more functions for mobile users, after its trading volume soared to 260 billion yuan (US$41 billion) at the end of July compared with just 14 billion yuan about a year ago.

Ant Fortune will also let users check stock performance on the Shenzhen, Shanghai and Hong Kong exchanges.

It’s linking up with the U.S. Nasdaq to provide real-time trading information, the company said.

Bloomberg News

Taiwan’s yuan deposits see first decline Chinese yuan-denominated deposits held by Taiwanese banks fell in July, the first time since the island began allowing the service in February 2013.

According to the latest figures compiled by the island’s financial agency, the balance of yuan deposits received by local banks’ domestic banking offshore units (DBUs) and offshore banking units (OBUs) as of the end of July fell 1.57 billion yuan (about US$245 million) from a month earlier to 336.65 billion yuan.

Recent interest rate cuts by the PBOC and caution among investors in Taiwan are the major causes of the decline.

Foreign exchange outflow continues China continued to see a deficit in its foreign exchange settlement in July, indicating forex was flowing out of the country at retail level. Chinese banks sold US$184.9 billion’ worth of foreign currencies to individuals and institutions, and bought US$141.5 billion from them, resulting in a net sale of US$43.4 billion last month. The forex settlement deficit came in at US$148.8 billion in first seven months of 2015. Forex settlement is one of the main sources of China’s forex reserve, which decreased by US$42.5 billion in July, the third monthly drop in a row.

State Council investigating Tianjin blasts The State Council has established a team to investigate the cause of last week’s deadly explosions in Tianjin. A statement issued by the State Council yesterday said the team will “give a responsible answer” to the Party and the people, and that those found to be responsible will be given serious punishment. It said the team has already started its investigation in accordance with regulations on management of dangerous chemicals and on workplace safety, though it did not say when the team will announce any conclusions.

Jack Ma joins Alibaba’s US$4 bln Founder and chairman of Alibaba Group Holding Ltd. Jack Ma, and vice chairman Joe Tsai on Monday said they would use their own money to buy Alibaba shares as the company began a two-year plan to buy back shares worth US$4 billion.

The comoany did not disclose, in its filing to the New York Stock Exchange, how much the two will invest in the buyback as affiliated purchasers. Currently Jack Ma owns 7.6 percent of Alibaba and Joe Tsai owns 3.1 percent.

Dongfeng-Saab to develop new-energy cars Chinese automaker Dongfeng Motor entered into a deal with the owner of Swedish auto brand Saab to develop new-energy vehicles. Dongfeng and National Electric Vehicle Sweden AB (NEVS), which bought Saab Automobile in 2012, will collaborate on pure electric and extended-range electric vehicle research.

Dongfeng will support the construction of NEVS R&D and production bases in Tianjin by sharing its local expertise of suppliers, dealers and auto production.

NEVS will help with Dongfeng’s own brands meet European legal and technical requirements, and aid Dongfeng access major auto markets around the world.

10 | Business Daily

August 19, 2015

Greater China

Zhou Xiaochuan, People’s Bank of China governor

‘Impossible trinity’ ends as PBOC allows freer yuan Governor Zhou is trying to press on with moves to open the economy while adding monetary stimulus to keep growth

I

n giving markets a greater say in setting the yuan’s level, Zhou Xiaochuan is bowing to Nobel-prize winning economist Robert Mundell’s maxim that a country can’t maintain independent monetary policy, a fixed-exchange rate and free capital borders all at the same time.

The policy trilemma, or impossible trinity, is illustrated by Asia’s experience in the 1990s.

When some countries violated the dictum, their pegged currencies, high interest rates and open capital borders attracted a flood of foreign investment that quickly reversed along with their trade balances, triggering the Asian financial crisis of 1997-98.

The People’s Bank of China’s surprise shift to a more market-driven exchange rate mechanism a week ago was largely interpreted as a way to boost exports and improve chances of winning reserve currency status from the International Monetary Fund.

The policy trilemma suggests a third motivation: moves to open the capital account and the desire for more monetary policy flexibility meant a freer currency was needed.

“The PBOC is shifting priorities,” said Li Jie, head of the foreign-exchange reserve research centre at the Central University of Finance and Economics

in Beijing. “By freeing the exchange rate, it is focusing on domestic monetary policy independence and paving the way for freer capital flows.”

Until last week, here’s how it worked: the PBOC each day would set a reference rate for the yuan against the U.S. dollar and limit moves to 2 percent on either side. It also bought and sold the currency to influence the exchange rate -- having knock on effects on the liquidity situation at home.

maintain stability as it pushed for reserve currency status.

Verbal support

Last week, the PBOC decided enough was enough, announcing the biggest devaluation in two decades and adopting a more market-based methodology to determine the yuan’s daily fixing rate. Verbal support and assertions it would step in when there are excessive swings helped stabilize the

Printing yuan

For most of the past decade, that meant printing and selling yuan and buying dollars to keep a lid on the currency’s strength, resulting in a foreign exchange hoard of almost US$4 trillion and a broad money supply of 135 trillion yuan (US$21 trillion), almost double the U.S.’s level. To offset the resulting liquidity surge at home, the central bank would lock away funds by raising the ratio of deposits that lenders had to park at the PBOC as reserves.

That all changed over the past year. As yuan appreciation pressure shifted to depreciation pressure, and as more capital began moving out, the PBOC found itself on the defensive: Reserves dropped, it lowered banks’ reserve ratio requirements and tried to prop up the yuan to discourage outflows and

By freeing the exchange rate, it is focusing on domestic monetary policy independence and paving the way for freer capital flows Li Jie, head of the foreignexchange reserve research centre, Central University of Finance and Economics, Beijing

yuan by the end of the week, as did reports of on-going intervention.

“For the last decade, the central bank’s job was to soak up excessive liquidity, and in the future, its job will mainly become providing liquidity,” Huang Yiping, an academic adviser to the central bank, said in an interview last week.

“It’s possibly an easier job for the central bank.”

Governor Zhou could do with a lighter load. The 67-year-old central banker, in office since 2002 when Alan Greenspan was still Federal Reserve chief, is trying to press on with moves to open the economy while adding monetary stimulus to keep growth from slowing too fast.

“Exchange rate flexibility means that they can conduct an independent monetary policy going forward,” said David Dollar, a senior fellow at the Brookings Institution in Washington who previously worked for the U.S. Treasury in Beijing. “In the short run, that probably means monetary stimulus.”

Policy options

China may cut banks’ required reserve ratio amid tightening liquidity and expectations the yuan will remain weak, the official China Securities Journal said in a front-page article, citing unidentified analysts.

To offset any further capital outflows, the central

bank could also inject more liquidity into chosen lenders.

Benchmark interest rate cuts can lower borrowing costs, while a weaker currency should help boost exporters, who had been loosing competitiveness.

“The central bank is gaining a kind of automatic stabilizer,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “It’s in line with the PBOC’s overall goal of building up a more marketoriented central banking mechanism.”

A flexible exchange rate will increase room for the central bank to adjust monetary policy, PBOC Deputy Governor Yi Gang said at a briefing in Beijing last week. Ma Jun, chief economist at the central bank, said a more market-oriented pricing mechanism will help avoid excessive deviations from the equilibrium level and reduce the chance of sudden fluctuations.

Letting market forces decide the exchange rate has “untied the hands of the PBOC somewhat so that it can focus more on domestic economic activities when making monetary policy,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong. “It will help align China’s monetary policy objectives.”

Bloomberg News

Business Daily | 11

August 19, 2015

Asia

Weaker currency helping Australian transition from mining Central bank governor is still waiting for an improvement in business confidence as a precursor to higher investment by firms Michael Heath

A

ustralia’s central bank said a weakening currency is assisting a transition away from mining investment, while adding that accommodative policy remains appropriate to support growth.

“Economic activity had generally been more positive over recent months,” it said yesterday in minutes of its August 4 meeting when interest rates were left at a record-low 2 percent. “The further depreciation of the Australian dollar was expected to impart stimulus to the economy through stronger net exports.”

Policy makers are gaining a degree of confidence that post-mining boom growth is gaining traction, citing recent stronger data including hiring. The Reserve Bank of Australia (RBA) is also relying on its American counterpart to raise rates later this year, which could spur a further reduction in a local currency that has already dropped 8 percent in the past three months.

“There was likely to be a sizable market impact notwithstanding how well telegraphed the change in policy had been,” the RBA said of an expected Federal Reserve move. “It was likely that financial market volatility would increase and the U.S. dollar could appreciate further, including against the Australian dollar.”

‘No hurry’

“The tone seemed to us more upbeat than had been the case earlier this

Central bank headquarters

year,” said Adam Boyton, Deutsche Bank AG’s chief economist in Australia, adding that the cash rate was likely to remain at 2 percent for “some time.”

The RBA was a little more positive on key trading partner China, saying risks to growth in the world’s second-largest economy had “receded somewhat.” Still, the

central bank said the government in Beijing’s “policy response to the recent volatility in Chinese equity markets had clouded the mediumterm economic outlook.”

RBA Governor Glenn Stevens and his board have held rates for the past three months and signalled reluctance to cut further as house prices inflate in Sydney and Melbourne. The central bank said recent responses by lenders to measures imposed by the banking regulator that targeted property investors “would be expected to reduce the risks relating to the housing market.”

Even so, Stevens is still waiting for an improvement in business confidence as a precursor to higher investment by firms. Sentiment has been more positive, aided by tax cuts in the May budget, yet hurdles remain.

Businesses plan to cut investment in the next 12 months by the most on record, wage growth is at levels unseen since the early 1990s recession and the economy has grown below its 3.3 percent average for six of the past seven years.

“There remained considerable uncertainty around the timing and strength of the recovery in non-mining business investment,” according to the minutes. “The period of significant structural change for the Australian economy associated with the winding down of the mining investment boom would continue for some time.”

Japan considering asking firms to raise wages again next year Real wages fell 2.9 percent year-on-year in June, which was the fastest pace of decline in seven months

G

overnment is considering pressuring companies to raise wages again next year as the economy stalls due to weak consumer spending, several government sources said.

Prime Minister Shinzo Abe’s government has nudged major companies into raising wages for the past two years in the spring with a series of meetings with major business lobbies and labour unions.

Voices are now growing within the government to use the same tactic for next year’s wage negotiations, the sources said, after data this week showed the economy shrank in the second quarter as exports slumped and consumers cut back spending.

Abe took office in late 2012 with a pledge to vanquish decades of deflation and economic malaise

with structural reforms and monetary easing, but consumers have been cautious and inflation has ground to a halt.

The government’s previous requests have lifted salaries at Japan’s largest firms, but this has so far failed to spread through the broader economy.

This strategy has also drawn criticism that the government is intervening too much in the private sector.

Private consumption, which makes up about 60 percent of GDP, fell 0.8 percent in April-June from the previous quarter, or double the pace forecast by economists, data on Monday showed.

Figures from Japan’s top labour unions show wages are rising modestly, but this has yet to be seen in broader data

compiled by the government.

Real wages fell 2.9 percent year-on-year in June, which was the fastest pace of decline in seven months.

The Bank of Japan is trying to guide consumer inflation to 2 percent sometime around the first half of fiscal 2016, but the core consumer price

Bloomberg News

index rose only 0.1 percent in the year to July, weighed down by lower energy prices.

The government is also considering a new forum with private-sector companies to encourage more capital expenditure, the sources said, as business investment has also been weaker than expected.

Both the government and the BOJ consider capital expenditure an important driver of growth because this can create jobs, lead to higher salaries and increase productivity.

Reuters

12 | Business Daily

August 19, 2015

Asia

Singapore bankers rattled by Asian moves to chase undeclared wealth The move towards data sharing means radically changing a model that had been mainly based on the banks’ ability to offer strict client privacy in a low-tax environment Saeed Azhar and Eveline Danubrata

S

ingapore-based wealth managers, already under pressure from a global move towards tax information sharing, face a more immediate threat as Asian countries including Indonesia and India look to chase undeclared money in the low-tax city state.

A global crackdown on tax evasion launched during the 2008 financial crisis has already forced Switzerland and other European offshore hubs to surrender their prized bank secrecy.

Like those centres, Singapore has committed to automatically start sharing information with foreign tax authorities from 2018, in line with an agreement signed by more than 51 countries last year that seeks to put an end to tax evasion.

But Singapore banks face a more urgent challenge.

Indonesia, Singapore’s main source of wealth assets, is considering offering a tax amnesty to individuals willing to repatriate funds from abroad targeting US$225 billion Jakarta says is parked in Singapore alone.

“Indonesia accounts for 30-50 percent of business for private banks

in Singapore,” a Singapore-based banker at a top global wealth manager told Reuters. “Clients are worried and asking about this, (while) accounting and legal firms are pitching to help clients structure their transactions,” said another banker.

Both declined to be named due to client confidentiality rules.

The second banker said one client was considering whether to pass his wealth directly to one of his children, who is in the process of taking Singapore nationality.

Singapore, Asia’s second-largest offshore centre by assets behind Hong Kong, has thrived as a banking centre due to its political and economic stability, low taxes and rule of law.

It manages US$470 billion of private client assets, Deloitte data show.

Singapore’s central bank has said it has a rigorous regime to combat money laundering and is ready to take tough action if there are breaches.

Sources said Monetary Authority of Singapore (MAS) officials have been asking private banks if they have heard any client concerns about the exchange of information mechanism.

The MAS didn’t comment.

The finance ministry noted that Singapore would need to sign bilateral agreements before any automatic data sharing, and those deals would depend on partner countries having a “robust” legal framework to maintain information confidentiality and “confine its use to tax purposes”, a ministry spokeswoman said.

Italian model

Seeking to recoup funds it first bled in the aftermath of former president Suharto’s government, Jakarta is looking to introduce a tax amnesty, but has given no timetable for this.

“The idea is to first prepare the legal framework,” Suahasil Nazara, who heads the fiscal policy office, told Reuters.

The planned amnesty, private bankers say, is modelled on a successful but controversial Italian tax scheme that helped Rome recoup billions of euros unlawfully parked in Switzerland against the payment of a modest penalty.

This system, which was criticised for allowing tax evaders to come clean

The days of undisclosed assets being held offshore will, in time, become a thing of the past Mark Wightman, partner for wealth & asset management, EY Advisory

without too much pain, is a faster way to recover funds than wading through a myriad of tax and bank data.

Pressure mounts

India, too, is trying to turn up the heat on an estimated US$340 billion of undeclared wealth by its residents.

North, South Korea reach deal on joint factory park wage The complex is a key source of revenue for the impoverished North, employing 53,000 people whose salaries are paid directly to the North Korean government Ju-min Park

N

orth and South Korea agreed to increase the minimum wage for North Korean workers at a joint factory park by 5 percent, a South Korean industry representative said, ending a months-long dispute despite heightened tensions on the Korean peninsula.

The compromise, reached Monday, raises the monthly wage to US$73.87 at the Kaesong Industrial Complex, which is just north of the heavily fortified inter-Korean border.

“The fact that dialogue between South and North met with good results is

Kaesong industrial park

welcomed and a good signal for stable management in Kaesong,” Yoo Changgeun, vice chairman of the Corporate Association of Kaesong Industrial Complex, said yesterday.

The complex is a key source of revenue for the impoverished North, employing 53,000 people whose salaries are paid directly to the North Korean government by the 125 South

Korean companies operating there, mostly making textiles and industrial parts.

Kaesong is the last significant vestige of cooperation spawned by the neighbours’ first summit meeting 15 years ago. North Korea shut down the complex for five months in 2013, during a period of diplomatic tension.

The new wage is slightly below the US$3.65 increase, or 5.18 percent, North Korea had demanded, which exceeded the annual increase of 5 percent agreed when the zone was established.

Tension between the two Koreas escalated early this

month, with Seoul blaming Pyongyang for laying landmines that exploded in the Demilitarised Zone, wounding two South Korean soldiers. North Korea denied any involvement.

North Korea on Monday began blasting propaganda over loudspeakers across the border, days after the South took a similar step. The two sides had refrained from such tactics since 2004.

On Monday, U.S. and South Korean forces began annual joint military exercises that the North denounces as a preparation for war.

Reuters

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Business Daily | 13

August 19, 2015

Asia Toyota ends production at Russia plant Toyota Motor Corp said yesterday that it had stopped making vehicles under a joint venture at an assembly plant in Vladivostok, eastern Russia, as a weak Russian economy weighs on the country’s once-booming auto industry. The joint venture with Japanese trading firm Mitsui & Co and Russian automaker Sollers had been assembling Toyota’s Land Cruiser Prado sport-utility vehicle but production was discontinued in late June, a Toyota spokeswoman said. Toyota now exports about 1,030 Prados per month to Russia - about the same number previously assembled in Vladivostok - from its plant in Tahara, Japan.

HCM City to establish special economic zone Singapore’s financial district

The Securities and Exchange Board of India (SEBI), the market watchdog, has asked international private banks to register their offshore units with it if they are soliciting business in India, a Reuters report revealed earlier this month.

If banks agree to register, they could be targeted by requests from SEBI to disclose client information.

“These changes will certainly make things more complicated for wealth managers. (They) will have to factor in every high net worth client’s residence and domicile,” said Mark Wightman, a partner for wealth &

asset management at EY Advisory.

For local banks in Indonesia and elsewhere, the pressure on Singapore is opening up opportunities at home.

“The hope is that with the tax amnesty, more funds will be returned to Indonesia,” said Jahja Setiaatmadja, president director of Bank Central Asia, Indonesia’s biggest bank by market value.

For Singapore-based banks, the move towards data sharing means radically changing a model that had been mainly based on their ability to offer strict client privacy in a low-tax environment.

Swiss wealth managers including UBS and Credit Suisse were fined by U.S. regulators for allowing clients to deposit untaxed money, and still face lawsuits elsewhere.

“Everybody’s in limbo right now,” said a senior banker in Singapore.

“Clients are scared about opening new accounts and asking whether certain structures work.”

Experts believe Singapore could continue to be an attractive centre thanks to its strong legal system, security and a deep talent pool for wealth services.

Reuters

Vietnam’s Ho Chi Minh City is set to create a special economic zone spanning four districts to boost development, local online newspaper Tuoi Tre (Youth) News reported yesterday. The proposed special economic zone will be located in the four districts of 7, Can Gio, Binh Chanh and Nha Be to”leverage the potential and advantages for growth of Ho Chi Minh City,”said the municipal People’s Committee Chairman Le Hoang Quan. The zone will help attract investment, boost growth, improve infrastructure, generate jobs and strengthen import-export activities, he noted.

S.Korean minister marks central bank independency

Indonesia holds rates while standing guard on outflows Central bank expects annual inflation to cool to around 4 per cent by year-end from 7.26 per cent in July Hidayat Setiaji and Gayatri Suroyo

I

ndonesia’s central bank kept its key policy rate unchanged yesterday for the sixth straight meeting, as expected, saying the focus of monetary policy was maintaining the rupiah’s stability.

Southeast Asia’s largest economy is growing at its weakest pace in six years, but the central bank has to balance loosening policy to spur growth against financial market volatility and the risk of capital outflows when U.S. interest rates rise.

Bank Indonesia (BI) kept its policy rate at 7.50 percent, where it has been since February’s 25-basis-point cut.

The overnight deposit facility and lending facility rates were also left at 5.50 percent and 8.00 percent, respectively.

“We are keeping a balance in maintaining stability and pushing for economic growth,” said deputy governor Perry Warjiyo, adding that BI will respond to slower growth with an accommodative policy mix.

“There is excess liquidity so we are doing monetary operations so that it won’t become a factor weakening the rupiah,” he said.

The rupiah, emerging Asia’s

KEY POINTS Benchmark rate held at 7.5 pct, as expected in Reuters poll BI says monetary policy to focus on rupiah stability Economists say rate cuts will likely be gradual second-worst performer, is “undervalued”, central bank governor Agus Martowardojo reiterated. It slipped to 13,848 per dollar yesterday.

BI said it had been “desperately defending” the rupiah and will continue to maintain its presence in foreign exchange and bonds market.

Its foreign exchange reserves stood at US$107.6 billion at end-July.

Bleak trade data

Weaker-than-expected trade data earlier yesterday provided more evidence of sluggish growth at the

start of the third quarter as Indonesia’s trade surplus sharply widened.

Exports in July slumped 19 percent to a three-year low, while imports tumbled 28 percent, the biggest fall since 2009.

Economists say the central bank has room to cut rates later this year as inflation cools, but adjustments will be gradual.

“The worst of the market reaction to China’s “devaluation” appears to be over, but the rupiah is likely to come under further downward pressure as the Fed starts tightening monetary policy. Given this, any rate cuts in Indonesia are likely to be very gradual,” Gareth Leather, Asia economist at Capital Economics said.

ING Financial Markets in a report ahead of the rate announcement forecast a combined rate cut of 250 basis points from December to end-2016, bringing the rate to 5.00 percent.

Finance Minister Bambang Brodjonegoro on Friday said BI may have a window to lower its policy rate next year and help the government reach a growth target of 5.5 percent.

Reuters

South Korea’s finance minister said yesterday that even if the U.S. Federal Reserve starts raising interest rates, it does not necessarily warrant higher rates at home. “Interest rates are decided by the Bank of Korea, but just because the U.S. chooses to raise rates does not necessarily mean South Korea will immediately raise them as well,” said Finance Minister Choi Kyung-hwan (pictured) to lawmakers in parliament.

“I believe the central bank will choose accordingly based on the local situation.” Choi added the government was keeping a close eye on capital flows.

SMEs contribute 50 pct of Singapore’s GDP Small and medium-sized enterprises (SMEs) contributed around 50 percent of Singapore’s 2014 Gross Domestic Product (GDP), said Minister of Trade and Industry Lim Hng Kiang. In a written response to a parliamentary question on GDP growth and SME contribution, Lim said there is no further breakdown of GDP growth into contributions by SMEs and non-SMEs. Based on preliminary estimates which was released on August 11, Singapore’s economy grew by 1.8 percent year-on-year in the second quarter of 2015, slightly higher than the 1.7 percent based on advanced estimates, said the minister.

14 | Business Daily

August 19, 2015

International Greece eases capital controls for students and payments Greeks can now transfer up to 500 euros abroad and pay more towards tuition fees under a new incremental easing of capital controls imposed in June to prevent an implosion of the country’s banking system. Under a ministerial decree issued in the Official Gazette, bank accounts can be opened for debt repayments, while up to 8,000 euros for student tuition and living expenses paid abroad are allowed per academic quarter. However, individuals can still withdraw only 420 euros in cash from their bank accounts a week.

U.K. inflation quickens Economists forecast that the first increase in the benchmark rate from a record-low 0.5 per cent will occur in early 2016 Fergal O’Brien

While households will have seen individual prices rise and fall, the overall shopping basket bought by the country remains little changed in price compared with a year ago

Final nod for Shell to drill for oil in Arctic The Obama administration granted Royal Dutch Shell final clearance on Monday to resume drilling for oil and gas in the environmentally fragile Arctic Ocean for the first time since 2012, a move green groups vowed to fight. The U.S. Department of the Interior permit allows Shell to drill in the oil-rich Chukchi Sea off the northwest coast of Alaska.

Shell interrupted its drilling program in the region in 2012 after suffering a series of mishaps, including losing control of an enormous rig, from which the Coast Guard had to rescue 18 workers.

Russian railways chief to become senator The long-serving president of Russia’s state-owned railway company, Vladimir Yakunin, confirmed late Monday that he would step down next month when he is expected to become a senator.

Yakunin, 67, is close to President Vladimir Putin and is on the United States sanctions list over the Ukraine crisis.

He has headed Russian Railways, or RZhD, since 2005. Known for his Orthodox Christian beliefs, he is set to become a senator in the upper house of parliament representing Russia’s westernmost region of Kaliningrad.

U.S. graft probes may cost Petrobras US$1.6 bln Brazil’s Petrobras may need to pay record penalties of US$1.6 billion or more to settle U.S. criminal and civil probes into its role in a corruption scandal, a person recently briefed by the company’s legal advisors told Reuters. State-run Petroleo Brasileiro SA, as the company is formally known, expects to face the largest penalties ever levied by U.S. authorities in a corporate corruption investigation, according to the person, who has direct knowledge of the company’s thinking.

The settlement process could take twoto-three years, this person said.

German harvest battered by drought This year’s grain, fruit and vegetable harvests in Germany have been reduced by droughts in key areas and by the long summer heat wave, the national farmers’ association DBV said Tuesday. “The severe drought seen in large parts of Germany since May has left its mark on the grain harvest,” DBV said in a statement. Farmers were estimated to have harvested only 46.5 million tonnes of grain this year, a shortfall of 11 percent from last year’s record 52 million tonnes, it said. The heat wave and drought have also battered other crops, such as rapeseed, fruits and vegetables.

Richard Campbell, statistician, Office for National Statistics

Bank of England Governor Mark Carney says price growth will accelerate and the time to begin raising the interest rates is approaching

B

ritain’s inflation rate unexpectedly rose in July and a core measure of price growth jumped to the highest in five months.

The increase in the headline reading to 0.1 percent from zero was due to clothing prices, with smaller discounts in the summer sales this year compared with a year earlier.

Economists in a Bloomberg survey had forecast the rate would stay at zero. The core measure increased to 1.2 percent from 0.8 percent, higher than the 0.9 percent reading predicted by economists While the figures published yesterday were stronger than anticipated, inflation is still well below the Bank of England’s 2 percent target. Policy makers have said it will remain low in the short term because of the strength of the pound and a

renewed decline in oil prices. Over the longer term, Governor Mark Carney says price growth will accelerate and the time to begin raising the interest rates is approaching.

Policy maker Kristin Forbes said this week there are risks associated with delaying a rate increase and she’s watching for signs of domestic pressures. Services inflation, a proxy for domestic price growth, accelerated to 2.4 percent in July, the fastest in four months.

Food prices

The Office for National Statistics (ONS) report showed that U.K. consumer prices fell 0.2 percent in July from June. In addition to clothing, the main upward contribution to the annual rate was from transport costs such as air fares. Food and

Foreign buys of U.S. Treasuries in June rise Data showed foreign investors bought long-term U.S. securities for a fifth consecutive month in June

F

oreign inflows to U.S. Treasuries climbed in June to their highest level in 16 months, data from the U.S. Treasury Department showed, as worries about Greece and Chinese equities prompted a flight to safe havens.

Offshore purchases of U.S. Treasuries totalled US$69.8 billion in June, the largest since February 2014, when inflows hit US$90.5 billion.

Foreign investors bought U.S. government debt for a fourth consecutive month in June. Benchmark U.S. Treasuries, however, ended the

month with a yield of 2.3330 percent, higher than the 2.1280 percent at the beginning of the month.

U.S. equities showed an outflow of US$22 billion for the month of June, from net selling of US$14 billion in stocks in May. June’s outflows were the largest since November 2014.

Overall, data showed foreign investors bought long-term U.S. securities for a fifth consecutive month in June. Net buying of long-term U.S. assets totalled US$103.1 billion, up from a net inflow of US$93 billion in May.

non-alcoholic beverages fell on an annual basis for a 13th month, the longest stretch on record.

“This is the sixth month running that headline inflation has been at or close to zero,” said Richard Campbell, a statistician at the ONS. “While households will have seen individual prices rise and fall, the overall shopping basket bought by the country remains little changed in price compared with a year ago.”

The ONS said the retail-price measure of inflation was at 1 percent in July. That means regulated rail fares will increase by that amount on average next year under government rules on ticket prices. Prime Minister David Cameron has said that the cap will be maintained for the full five years of this Parliament.

Bloomberg News

However, including shortdated assets such as bills, overseas investors sold US$110.3 billion in June, compared with purchases of US$109.6 billion in the previous month.

Meanwhile, China’s holdings of U.S. Treasuries increased for a fourth straight month in June to US$1.271 trillion. China is still the largest holder of U.S. government debt, though is holdings peaked at US$1.317 trillion in November 2013.

Japan had the second-largest holdings of U.S. Treasuries, with US$1.197 trillion, down from US$1.214 trillion in May. Japan’s Treasury holdings have been falling for three straight months.

Belgium, the third-largest holder of U.S. debt as recently as February, increased its holdings in June to US$207.7 billion, from US$202.8 billion in May. The euro zone country’s holdings of U.S. Treasuries peaked at a record US$381.4 billion in March 2014, but have since dropped more than 40 percent, the data showed.

Reuters

Business Daily | 15

August 19, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

A new approach to Eurozone sovereign debt

TAIPEI TIMES

Yanis Varoufakis

Standard Chartered Bank slashed its economic growth forecast for Taiwan to 2 percent annually this year, from a previous estimate of 4.3 percent, due to plummeting external demand during the first half. The forecast is higher than the Directorate-General of Budget, Accounting and Statistics’ projection of an annual growth rate of 1.56 percent announced on Friday last week. Dwindling exports last quarter set headline growth back by 2.07 percent, after seeing a sharp reversal from the 2.59 percent gain recorded in the January-to-March period, Standard Chartered economist Tony Phoo said.

Former finance minister of Greece, is a Member of Parliament for Syriza and Professor of Economics at the University of Athens

BANGKOK POST The Bank of Thailand insists that despite shocks and changes experienced in the macroeconomic environment, the country’s fundamentals remain strong, as reflected in the country’s current account surplus, stable foreign exchange rate and low unemployment. Central bank governor Prasarn Trairatvorakul yesterday said speeding up infrastructure investment would induce a multiplier effect and create projects to benefit future generations. Public measures aimed at alleviating the plight of farmers and small and medium-sized enterprises are also feasible, Mr Prasarn said, adding that Thailand’s lower economic growth prospects stemmed largely from a slowdown in exports.

PHILSTAR Remittances from Filipinos living and working abroad grew 5.6 percent in the first half of the year as the June inflow zoomed to its highest level so far this year on the back of sustained demand for skilled Filipino manpower overseas. Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. reported that cash remittances from overseas Filipinos amounted to US$12.08 billion in the first six months of the year, US$637 million higher compared to US$11.45 billion in the same period last year.

“Remittances remained robust partly due to stable demand for skilled Filipinos abroad,” Tetangco said.

THE JAPAN NEWS The gap is growing between the price of butter in Japan and its price internationally.

While supplies of butter remain short in Japan, importing lowcost butter from overseas is complicated by the Japanese government’s sharp curtailing of the volume of imports to protect the nation’s relatively uncompetitive dairy farmers.

According to the Agriculture & Livestock Industries Corporation, a governmental organization, the price of butter in Japan sold to large-scale buyers rose to ¥1,374 per kilogram in June.

This is in contrast with an international price of US$3.125 (about ¥387).

G

reece’s public debt has been put back on Europe’s agenda.

Indeed, this was perhaps the Greek government’s main achievement during its agonizing five-month standoff with its creditors. After years of “extend and pretend,” today almost everyone agrees that debt restructuring is essential.

Most important, this is true not just for Greece.

In February, I presented to the Eurogroup (which convenes the finance ministers of eurozone member states) a menu of options, including GDPindexed bonds, which Charles Goodhart recently endorsed in the Financial Times, perpetual bonds to settle the legacy debt on the European Central Bank’s books, and so forth. One hopes that the ground is now better prepared for such proposals to take root, before Greece sinks further into the quicksand of insolvency.

But the more interesting question is what all of this means for the eurozone as a whole. The prescient calls from Joseph Stigltiz, Jeffrey Sachs, and many others for a different approach to sovereign debt in general need to be modified to fit the particular characteristics of the eurozone’s crisis.

The eurozone is unique among currency areas: Its central bank lacks a state to support its decisions, while its member states lack a central bank to support them in difficult times.

Europe’s leaders have tried to fill this institutional lacuna with complex, non-credible rules that often fail to bind, and that, despite this failure,

end up suffocating member states in need.

One such rule is the Maastricht Treaty’s cap on member states’ public debt at 60% of GDP. Another is the treaty’s “no bailout” clause. Most member states, including Germany, have violated the first rule, surreptitiously or not, while for several the second rule has been overwhelmed by expensive financing packages.

The problem with debt restructuring in the eurozone is that it is essential and, at the same time, inconsistent with the implicit constitution underpinning the monetary union. When economics clashes with an institution’s rules, policymakers must either find creative ways to amend the rules or watch their creation collapse.

Here, then, is an idea (part of A Modest Proposal for Resolving the Euro Crisis, co-authored by Stuart Holland, and James K. Galbraith) aimed at re-calibrating the rules, enhancing their spirit, and addressing the underlying economic problem.

In brief, the ECB could announce tomorrow morning that, henceforth, it will undertake a debt-conversion program for any member state that wishes to participate. The ECB will service (as opposed to purchase) a portion of every maturing government bond corresponding to the percentage of the member state’s public debt that is allowed by the Maastricht rules. Thus, in the case of member states with debt-to-GDP ratios of, say, 120% and 90%, the ECB would service, respectively, 50%

and 66.7% of every maturing government bond.

To fund these redemptions on behalf of some member states, the ECB would issue bonds in its own name, guaranteed solely by the ECB, but repaid, in full, by the member state. Upon the issue of such an ECB bond, the ECB would simultaneously open a debit account for the member state on whose behalf it issued the bond.

The member state would then be legally obliged to make deposits into that account to cover the ECB bonds’ coupons and principal. Moreover, the member state’s liability to the ECB would enjoy super-seniority status and be insured by the European Stability Mechanism against the risk of a hard default.

Such a debt-conversion program would offer five benefits. For starters, unlike the ECB’s current quantitative easing, it would involve no debt monetization. Thus, it would run no risk of inflating asset price bubbles.

Second, the program would cause a large drop in the eurozone’s aggregate interest payments. The Maastrichtcompliant part of its members’ sovereign debt would be restructured with longer maturities (equal to the maturity of the ECB bonds) and at the ultra-low interest rates that only the ECB can fetch in international capital markets.

Third, Germany’s long-term interest rates would be unaffected, because Germany would neither be guaranteeing the debt-conversion scheme nor backing the ECB’s bond issues.

Fourth, the spirit of the Maastricht rule on public debt would be reinforced, and moral hazard would be reduced. After all, the program would boost significantly the interest-rate spread between Maastricht-compliant debt and the debt that remains in the member states’ hands (which they previously were not permitted to accumulate).

Finally, GDP-indexed bonds and other tools for dealing sensibly with unsustainable debt could be applied exclusively to member states’ debt not covered by the program and in line with international best practices for sovereign-debt management.

The obvious solution to the euro crisis would be a federal solution. But federation has been made less, not more, likely by a crisis that tragically set one proud nation against another.

Indeed, any political union that the Eurogroup would endorse today would be disciplinarian and ineffective. Meanwhile, the debt restructuring for which the eurozone – not just Greece – is crying out is unlikely to be politically acceptable in the current climate.

But there are ways in which debt could be sensibly restructured without any cost to taxpayers and in a manner that brings Europeans closer together. One such step is the debt-conversion program proposed here. Taking it would help to heal Europe’s wounds and clear the ground for the debate that the European Union needs about the kind of political union that Europeans deserve.

Project Syndicate

16 | Business Daily

August 19, 2015

Closing Beijing cuts nationwide retail fuel prices again

UnionPay signs chip card standard license with Thailand

China announced yesterday that it will cut the retail prices of gasoline and diesel from Wednesday, tracking a continuing slide in global crude prices. The National Development and Reform Commission (NDRC), the nation’s top economic planner, said retail prices of gasoline will fall by 210 yuan (US$32.8) per tonne, or 0.16 yuan per litre, while that of diesel will drop by 205 yuan per tonne, or 0.18 yuan per litre. This is the fifth cut since June and the eighth of the year. Under an oil pricing policy in place since the start of 2013, the NDRC can adjust the price every 10 working days based on changes in the global market.

UnionPay International and Thai Bankers Association signed Chip Card Standard License Agreement in Bangkok yesterday. According to the agreement, the chip card standard of UnionPay will be introduced to local banks as the standard of Thailand’s banking industry. Thailand has become the first overseas nation which adopts UnionPay standard as its local uniform chip card standard. Cai Jianbo, CEO of UnionPay International, and Kobsak Duangdee, secretary-general of Thai Bankers Association, signed this agreement on behalf of the two sides.

Mainland markets slump 6% leading losses across Asia Markets are now awaiting the release of minutes from the Federal Reserve today, which could shed light on the US central bank’s timing for an interest rate rise

A

sian shares fell yesterday, with Shanghai leading the falls as investors doubted Beijing’s commitment to prop up shares while Bangkok slumped after a bomb attack in the Thai capital.

The dollar headed higher against the euro, meanwhile, helped by improving confidence in the US housing sector ahead of the release of US central bank minutes.

Shanghai closed down 6.15 percent, or 245.51 points, at 3,748.16 -- its biggest daily fall in three weeks -- while Hong Kong lost 1.43 percent, or 339.68 points, to end the day at 23,474.97.

Tokyo closed down 0.32 percent, or 65.79 points, at 20,554.47. Sydney fell 1.20 percent, or 64.55 points, to 5,303.10 and Seoul dipped 0.62 percent, or 12.26 points, to close at 1,956.26.

Thai shares, meanwhile, notched their steepest decline this year and the baht slid to its lowest level since 2009 after a bomb attack killed at least 20 people and injured scores in Bangkok.

Asian shares gave up early gains driven by a higher close on Wall Street as jitters about the health of China’s economy, the world’s second-largest, spread across the region.

Traders in China said they now doubt Shanghai will be able to break above the key 4,000 point level soon without evidence Beijing will unleash fresh stimulus.

Markets have long been on edge about slowing growth in China, but concerns reached

fever pitch last week after a shock devaluation of the yuan sparked fears it is stalling more than previously though.

The steep fall in the yuan scared many investors into dropping Chinese assets and last week Shanghai and Hong Kong shares saw US$531 million net outflows -- the ninth week of sales out of 10.

Fed in focus

Facing tight liquidity, China’s central bank yesterday said it pumped 120 billion yuan

into the money market, which state media said was the largest single-day cash injection since January 2014.

Even a pledge Friday by the securities regulator to keep supporting equities through the state-backed China Securities Finance Corp. for years to come has not reassured some dealers.

Speculation the Fed will soon raise its key rate for the first time in almost a decade has strengthened the dollar, while concerns the fall in the

Sri Lankan elections: Reforming options sight victory

Singapore sets up SGD10 mln fund to woo tourists

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T

ormer president Mahinda Rajapaksa’s attempt to stage a comeback in Sri Lanka’s general election has ended in defeat as results yesterday showed the alliance that toppled him making decisive gains.

The ruling United National Party (UNP) was likely to fall just short of an outright majority but Prime Minister Ranil Wickremesinghe should still command enough support to form a stable government.

The outcome is a triumph for President Maithripala Sirisena, who beat his former ally Rajapaksa in a presidential vote in January and called early parliamentary polls to secure a stronger mandate for reforms.

Wickremesinghe’s UNP won 93 of the 196 seats up for grabs in multi-member constituencies. The alliance led by Rajapaksa’s Sri Lanka Freedom Party took 83 seats after suffering losses.

Final representation in the 225-seat chamber will be decided when 29 national seats are allocated by proportional representation.

UNP sources said the party expected to win up to 107 seats overall - just shy of a 113-seat majority. It won 45.7 percent of the popular vote, ahead of 42.4 percent for Rajapaksa.

Reuters

yuan could spark a currency war has dragged on many Asia-Pacific currencies.

In Tokyo currency markets, the dollar was quoted at 124.32 yen, down from 124.41 yen in New York late Monday.

But it strengthened against the euro, which traded at US$1.1068 and 137.60 yen from US$1.1078 and 137.81 yen.

The Thai baht fell to 35.648 against the dollar, touching its lowest point since April 2009 on fears a deadly bombing in the capital could hit the vital tourism sector.

Bangkok shares slumped 2.92 percent, the most in eight months, led by a slump in tourism stocks while transport related companies were also hit.

Oil prices slipped as fears of a lasting global oversupply weighed on the market.

US benchmark West Texas Intermediate for September delivery was down 32 cents to US$41.55 in afternoon trade.

Brent crude for October gave up 11 cents to US$48.63.

AFP

Lenovo makes smartphones in India

L

he Singapore Tourism Board (STB) said yesterday that it is launching a new 10 million-Singapore dollar fund to enhance overall visitor experience and satisfaction in Singapore.

In conjunction with the launch of the new fund, the board is also calling for proposals for tour development and technology initiatives.

“Increasingly, travellers are seeking varied and engaging experiences that allow them to gain a deeper appreciation and understanding of our stories and heritage. They’re not just going for run-of-the-mill city tours but unique ones like back-of-house visits, precinct or interest-based tours,” said Choo Huei Miin, director of Visitor Experience and Capability Development, STB. She said that through the new fund, STB aim to “spur tourism businesses to create and deliver more and better experiential offerings that add to Singapore’s overall destination attractiveness.”

The number of tourists in Singapore declined by 3.1 percent to 15.1 million last year, mainly due to the drop in the number of Chinese tourists, which saw a sharp decline of 24 percent from a year earlier.

enovo Group Ltd. started making smartphones in India, becoming the largest Chinese company to produce mobile devices there after the government raised import taxes.

Lenovo will use contract manufacturer Flex’s factory outside the south-eastern city of Chennai for its Lenovo and Motorola brands, Amar Babu, chairman of Lenovo India, said yesterday in a phone interview. The brands will have a combined annual capacity of 6 million units, Lenovo said in a statement.

Foxconn Technology Group this year began producing smartphones in India for China’s Xiaomi Corp. and OnePlus after the Indian government raised taxes on some foreign-made goods to attract investment in manufacturing. Lenovo’s announcement marks the largest Chinese name yet to be lured by Prime Minister Narendra Modi’s Make in India campaign as competitors vie for a share of the world’s third-largest smartphone market.

Lenovo considered adding smartphone manufacturing to its own personal-computer plant in Puducherry in the southeast before deciding to outsource to Flex’s existing factory in Sriperumbudur, Babu said.

Xinhua

Bloomberg News