Macau Business Daily August 24, 2015

MOP 6.00

Finally, 4G

Closing editor: Joanne Kuai

CTM is to launch its 4G network within two months. So says the telecommunication operator. Some HK$600 mln has been invested to construct the network. Expectations are high of the service and charges.

While competition mounts

Year IV

Number 864 Monday August 24, 2015

Publisher: Paulo A. Azevedo

Page 5

Gaming Related Crime on the Rise

Gaming related crimes are skyrocketing. In the first half of this year, illegal confinement cases more International assets held than doubled. While loan-sharking jumped by more than one third y-o-y. Secretary for Security by local banks jump Page 4 Wong Sio Chak said the situation demanded attention. Although adding that most criminals and victims are not local. Citing a 0.9 per cent y-o-y decline in overall crime, the Secretary said: “We can say that as at this moment the adjustment of the gaming industry has not impacted the Mainland, Macau ink pact to fight money laundering security situation of Macau” Page 4

Page

3

Lots waiting in the wings

Top IMF official rebuts talk of China crisis

Jetstar Pacific has announced its new Macau-Haiphong route. With the SAR to Ho Chi Minh route commencing September 22. The airline has more plans to expand its business to Greater China.

Meanwhile, Macau Interna­ tional Airport is in talks with other airlines vis-a-vis direct flights to India and Indonesia

Cracks appearing in China’s provincial loan‑guarantee industry

Page 5

All shook up The collapse of Chinese factory activity. Delivering shockwaves around the planet. Friday’s figures were the worst for six and a half years

Pages 8 & 9

Page 9

Page 10

HSI - Movers August 21

Name

Planning Ahead

Time and tide wait for no man. The president of the Legislative Assembly wants the gov’t to hand in its fiscal accounts by May. Giving legislators more time to deliberate upon budget plans for the new fiscal year. Ho Iat Seng said the next term would be a ‘key year’, with seven bills yet to be finalised

Page 2

Henderson Land Devel

+5.53

China Unicom Hong Ko

+3.24

Li & Fung Ltd

+2.74

Link REIT

+2.52

Hengan International

+2.22

Kunlun Energy Co Ltd

-3.34

Tencent Holdings Ltd

-3.38

Cheung Kong Property

-3.62

China Resources Powe

-3.76

Galaxy Entertainment

-4.43

Source: Bloomberg

Interview www.macaubusinessdaily.com

%Day

Viva Vending!

I SSN 2226-8294

Automation is the key. Particularly regarding increased rent and manpower costs. Toro Yu and Neo Van of LG Auto Ltd. say vending machines are the way to go. Hotel and company canteens are keen, they say, while gov’t departments need more persuading. As well as snacks and drinks, cultural products can be retrieved. With increasing options of third party payment sweetening these ‘convenience’ transactions

Pages 6&7

2015-8-24

2015-8-25

2015-8-26

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2 | Business Daily

August 24, 2015

Macau

Assembly president: Gov’t to deliver final fiscal accounts by May The insufficient time seen now between the delivery of the final fiscal accounts and the handing in of the new year’s budget plan has coloured the Assembly’s assessment of budget execution, declares Ho Iat Seng Stephanie Lai

sw.lai@macaubusinessdaily.com

L

egislative Assembly chairman Ho Iat Seng says the Assembly has urged the government to lengthen the time between delivering the final fiscal account and handing in the new fiscal year budget plan, an act that should enable a more accurate projection of the city’s budgeted spending.

Mr. Ho spoke during his Friday briefing of the Assembly’s work during the legislative year that ended mid-August, which is the second year of the 5th legislative term. Each legislative term of the MSAR lasts for four years.

“Our new legislative year starts in October, and it’s only around October-end that we will have the final fiscal accounts of the last financial year,” Mr. Ho said.

“The Chief Executive delivers the budget plan for the next fiscal year in November. So the Assembly is basically handling the final fiscal accounts and the budget plan [for the next fiscal year] at the same time, which, frankly, allows very little time for the Assembly to [properly] deliberate upon them.”

The Assembly president criticised that this has been a perennial issue with the city’s public finances leading to inaccuracies in the making of a new budget plan.

Mr. Ho reckons that the ideal time for government departments to submit their final fiscal accounts is May-end.

The Assembly’s wish to lengthen the time between delivering the final fiscal account and handing in the budget plan for the next fiscal year is their suggestion to the amendment of the budget framework law, Mr. Ho noted.

The amendment to the law is designed to be applied to the making of the public finance plan for fiscal 2017, Financial Services Bureau’s officials noted previously during their consultation on the legal change.

Under the amendment, the administration is required to report to the Legislative Assembly the overall budgeted expenditure they need for a project, and the years they need to execute the budget for the project. Currently, the official disclosure of the annual budget plan only includes regular and capital expenditure without detailed description of the cost of major infrastructure projects.

Any changes or increase in the overall expenditure budget made for a fiscal year will have to be deliberated upon by the Legislative Assembly, the amendment stated.

The budget allotted for a particular department or a project is also prohibited from being transferred to other departments or uses, according to the amendment.

Improved oversight

This amendment of the budget law is due to be deliberated upon and approved by the Assembly in the new legislative year starting mid-October.

2015/2016 “key year” for Assembly The Legislative Assembly plans to finish deliberating seven bills in the new legislative year starting midOctober. These seven bills are: the bill on animal protection, prevention of domestic violence, higher education system, the legal system on handling disputes over medical errors, as well as the amendment to the tobacco control regime, the external trade law, and the charter of the Civic and Municipal Affairs Bureau (IACM).

“The upcoming legislative year (2015/2016) is a key year for the Assembly. If a bill cannot be approved in the fourth legislative year (2017/2018), this bill will be withdrawn and cannot be carried to the new legislative term, and the government has to propose the bill all over again,” Mr. Ho said, adding that he hopes not to see several bills that are slated to be discussed in the

Mr. Ho believes that with the new budget law the Assembly should be able to better monitor the city’s public spending, especially major infrastructure projects.

Citing the example of the construction costs of the University of Macau’s Hengqin campus and its subterranean tunnel, Mr. Ho noted that the government had made “unpragmatically low” estimates of the public project costs which

upcoming legislative year can only be deliberated and approved in the fourth legislative year.

spending, namely on social welfare and education. This annual essential spending amounts to no less than MOP40 billion.

Ho: Frugal government needed The government should not only get cautious in its spending when it records lower revenue, the Legislative Assembly chairman remarked. He suggests that the government be frugal in its reception expenses, giving as an example that the government can choose not to host meetings in hotels.

The government’s fiscal surplus was MOP27.2 billion (about US$3.4 billion) in the first seven months of this year, some 59.1 per cent less than in the corresponding period a year earlier – a contraction that is primarily due to less revenue from direct taxes on gaming.

Mr. Ho noted that the government has already had a considerable budget carved out for “essential”

CE to decide if Assembly is to discuss new rental law The Chief Executive will decide if a new rental bill proposed by nine legislators should be discussed by the general assembly in the upcoming legislative year, Mr. Ho has informed media.

The amendment suggests an arbitration system to resolve rental disputes between landlords and tenants. This proposal is backed by legislators including Chan Meng Kam, Si Ka Lon, Song Pek Kei and José Pereira Coutinho.

Legislators that would like to propose a bill or legal amendment that involves government policy have to first obtain approval from the Chief Executive, the rules of the Assembly state.

eventually led to a backlash of criticism from the Assembly and public when it reported the final ballooned costs.

“The government initially posted a nearly MOP6 billion estimate for the construction of the University of Macau Hengqin campus, which was simply not accurate,” Mr. Ho said. “We are talking about a land [plot] of 1 million square metres. The government wanted to gain social

consensus easily by posting a low estimate.”

An Audit Commission report published in January 2013 revealed that the construction cost of the campus eventually ballooned to MOP10.2 billion.

“The government has to rectify this [budget estimate] issue,” Mr. Ho remarked. “But I believe Secretary for Public Transport and Public Works Mr Rosário is able to handle it.”

Business Daily | 3

August 24, 2015

Macau

Criminality related to gaming rockets During the first half of the year the number of illegal confinements increased by 112.5 per cent year-on-year, while loansharking cases jumped by more than one third João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he number of crimes related to the gaming industry increased 34.5 per cent year-on-year during the first half of the year to 679 cases from 505 during the first six months of last year, according to the criminality report for the first half of the year.

Illegal confinement cases increased 112.5 per cent year-on-year to 170 cases from 80 cases during the first half of 2014. The number of loansharking cases increased 39.1 per cent year-on-year to 153 cases from 110.

“From March to June, the number of crimes of illegal confinement and loansharking increased and this deserves our attention.

However, according to the information collected, most of the offenders and victims are not local residents”, the Secretary for Security Wong Sio Chak said in a press conference presenting the criminality report.

“Most of the cases happened inside casinos, which means that these crimes will not influence the stability of Macau society.

We can say that as at this moment the adjustment of the gaming industry has not impacted the security situation of Macau”, the Secretary claimed. From January to July, gaming

revenues declined 36.7 per cent year-on-year in the territory to MOP140.3 billion from MOP221.5 billion.

“The reduced number of big VIP gamblers and increasing difficulty in getting back gaming debt for some creditors has led to the rise in these crime rates”, Mr. Wong said concerning the causes behind the rise in such crimes.

Overall, the criminality rate in Macau decreased 0.9 per cent year-on-year to 7,025 crimes in the territory during the first half of the year from 7,090 for the same period of the previous year.

In terms of the nature of these crimes, crimes against property accounted for 56.2 per cent of the total, involving 3,951 cases, while crimes

against the person accounted for 18.5 per cent (1,298 cases), crimes against the Territory accounted for 8.3 per cent (583 cases), crimes against society 6.5 per cent (460 cases) and other crimes accounted for 10.4 per cent (733 cases).

As in the first half of last year, once again no murders were recorded in the territory.

4 | Business Daily

August 24, 2015

Macau Mainland, Macau ink pact to fight money laundering The central bank said Friday it has signed a pact with the financial regulators of Macau on anti-money laundering cooperation. A memorandum of understanding to “prevent money laundering and terrorist financing activities” was signed with the Monetary Authority of Macau, according to a statement on the website of the People’s Bank of China (PBOC). Both sides will strengthen information sharing, personnel exchanges and training, as well as cooperation on inspections. No specific measures were outlined in the statement. The PBOC said the agreement is of “great significance” as it will promote Beijing-Macau co-operation and improve the implementation of suggestions by the Financial Action Task Force (FATF), a global anti-money laundering body.

International assets held by local banks jump International assets as a share of total banking assets continued to increase in Macau during the second quarter of the year

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he share of international assets as a proportion of total banking assets in Macau increased to 86.6 per cent at the end of June from 85.9 per cent as at the end of the first quarter, according to international banking statistics from the Monetary Authority of Macau (AMCM). At the same time the share of international liabilities in total banking liabilities expanded to 83.0 per cent from 81.1 per cent in March.

At the end of the second quarter, total international assets amounted to MOP1,177.6 billion (US$147.5 billion), which means a 15.6 per cent increase year-on-year and a 13.7 per cent increase quarter-on-quarter.

During the period, international banking liabilities increased 16.6 per cent year-on-year to MOP1,129.0 billion (US$141.4 billion).

In terms of external assets, Mainland China, Hong Kong and Singapore accounted for 36.6 per cent, 31.5 per cent and 1.9 per cent, respectively. At the same time claims

on Portugal, the United Kingdom and Germany accounted for 4.5 per cent, 1.6 per cent and 1.1 per cent, respectively. As for external liabilities, Hong Kong, Mainland

and Thailand accounted for 44 per cent, 21.8 per cent and 5.9 per cent, while France, Portugal and Germany took up respective shares of 2.0 per cent, 1.7 per cent and 1.1 per cent.

With regard to international banking transactions, non-local currencies continue to be the dominant denomination. At the end of the second quarter, the Hong Kong dollar, US dollar, renminbi and other foreign currencies accounted for 37.7 per cent, 33.6 per cent, 21.8 per cent and 6.1 percent of total international assets as in 40.7 per cent, 36.4 per cent, 15.6 per cent and 5.6 per cent of total international liabilities, respectively. The pataca occupied 0.7 per cent of the share of total international assets and 1.8 per cent of international liabilities.

J.S.F.

Business Daily | 5

August 24, 2015

Macau

Jetstar Pacific launches new route to Haiphong

routes to open in Macau and Hong Kong, Jetstar is planning on operating routes to Mainland China with dates and destinations yet to be decided.

Direct flights to India and Indonesia

More routes are in the pipeline connecting Vietnam to Macau, Hong Kong and even Mainland China João Santos Filipe

jsfilipe@macaubusinessdaily.com

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etstar Pacific, headquartered in Vietnam, launched a new route between Macau and Haiphong on Friday. In September, the carrier will further expand the number of routes to Vietnam, adding a service between the territory and Ho Chi Minh. These moves are part of the strategy of the company to expand in China, which also includes a new route from Hong Kong to Nha Trang to be added in October.

“Many tourists are interested in these destinations. Haiphong is very close to Ha Long Bay, which is a very famous tourist destination. Before, people had to go to Hanoi and then on to Ha Long Bay but Hanoi is more than 200 kilometers away from Ha Long Bay. This new route will change this”, the Director of Jetstar Pacific Airlines for Greater China, Apotter Zhang, explained.

Haiphong is located some 60 kilometers west of Hai Long.

The route inaugurated on Friday offers two flights per week on Mondays and Fridays, taking 1 hour and 50 minutes. The company

is aiming for an 80 per cent seat occupancy rate for this new route.

“This first flight has a seat occupancy rate of 85 per cent but for the summer season we’re expecting a seat occupancy rate of 80 per cent. In relation to winter

we are still waiting to see the numbers”, Mr. Zhang explained.

In addition to the MacauHaiphong connection, Jetstar Pacific already operates a double daily route between the territory and Da Nang.

It is said the Macau - Ho Chi

Minh route will commence September 22.

“For our Macau flights, Mainland Chinese account for 70 per cent of our customers, while local residents account for 30 per cent”, the Jetstar Pacific representative added.

In conjunction with the

The Marketing Director of Macau International Airport (CAM), Eric Fong, revealed that this new route to the Vietnamese City is the result of contacts between CAM and the carrier.

“We have been in conversation for some time and they have told us that Haiphong is a popular destination and that they wanted to open a route from Macau to there. This increases the options for travelling for Chinese, Macanese and Vietnamese”, he said.

Mr. Fong also commented that CAM is working closely with other carriers in order to bring direct flights to India and Indonesia to the territory.

“We understand there are a lot of Indians and Indonesians traveling to Macau and we are providing airlines with this information. However, this decision to open these routes is dependent upon the commercial issues of the airlines”, Eric Fong said. “The carriers have to consider the best markets and take into consideration setup costs, aviation costs and other factors”.

The ceremony to celebrate the launch of Jetstar Pacific’s new route took place in Macau International Airport on Friday and was also attended by the President of the Macau Civil Aviation Authority, Simon Chan, and the Deputy Director of Macau Government Tourist Office, Cheng Wai Tong.

CTM: 4G services available in two months

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ocal telecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) said last Friday that its 4G mobile communication (LTE) network will be put in service in the coming two months, claiming its construction work for the construction of the network has been completed.

The vice president of CTM’s Network Services, Declan Leong, said in a press briefing that the company’s 2G and 3G network transformation project, as well as 4G network construction were completed as planned, indicating that the 4G network will cover more than 98 per cent of the territory’s outdoor coverage as soon as the service is officially launched.

According to CTM, its major shareholder - CITIC Telecom International - invested some

HK$600 million (US$74.7 million) to construct the new 4G network which could simultaneously support both Frequency-Division Duplexing (FDD) and Time-Division Duplexing (TDD) modes.

In fact, the parent company of the operator also said in its latest filing with the Hong Kong Stock Exchange last Friday that some HK$91.7 million had been incurred during the first half of the year as capital expenditure for the development of the LTE network in Macau.

The commercial vice president of CTM, Ebel Chan, told reporters that the company is still in discussions with the Bureau of Telecommunications Regulation (DSRT) on 4G service charges, claiming that the company seeks to set such fees lower than the current 3G service charges.

During the first six months of

the year, CTM’s parent company CITIC posted a 10.2 per cent year-on-year increase in its profit attributable to equity shareholders, reaching HK$397.2 million. The company said in the Friday filing that the jump ‘was mainly due to the significant increase in mobile sales & services and enterprise solutions revenue, and the steady growth in the Group’s Internet business.’

In addition, the company’s turnover posted a 5.1 per cent increase to HK$4.35 billion, compared to the HK$4.14 billion of one year ago during the six months.

In March, DSRT announced the grant of four 4G service licences to the city’s telecommunications operators; namely, China Telecom (Macau), Hutchison Telephone Macau, known as 3Macau, and SmarTone, in addition to CTM. K.L.

MTel: network construction behind schedule Meanwhile, the city’s new fixed-line telecommunications service provider MTel Telecommunication Company Ltd. said its current network covers 40 per cent of the Peninsula and 35 per cent of Taipa, which is behind schedule.

CEO Michael Choi Tak Meng told local Chinese newspaper Macao Daily that coverage should have exceeded 40 per cent of the Peninsula by now, indicating that the delay is due to the government speed in approving its applications for network construction involving road works.

6 | Business Daily

August 24, 2015

Macau

“Automation is the way to deal with increased rent and manpower costs” Co-founders of local vending machine operator LG Auto Ltd. Toro Yu and Neo Van believe the automation business is the new trend given the surge in operating costs such as rent and human resources in the city. In addition, they say they’ve provided a new channel for the city’s cultural and creative industry to reach more customers via their vending machines Kam Leong

kamleong@macaubusinessdaily.com Photos: Cheong Kam Ka

Toro Yu and Neo Van, co-founders of LG Auto Ltd.

Why did you start the vending machine business?

Toro Yu: In 2004, we had just

started working. We had the habit of travelling around, and I found out that the market for vending machines in the city was nearly empty compared to other countries, like there were no vending machines available in the city at all. For example, the first vending machine our company introduced sells snacks, which was also the first snack vending machine in the territory.

Why did you think the business was viable in Macau?

TY: We thought at that time that

running such a business would have several advantages. First of all, wages for workers were starting to climb at that time, while rental was also starting to surge. As such, using machines to replace human resources for sure is a viable business as it would help reduce costs. Consequently, we started to set up the business, seeking vending machines from all over the world.

How many machines were you operating in the beginning?

TY: At first, five machines was one

unit. So we imported five for the very first time. I still remember that our first machine was placed

in the University of Macau. After that, we also put our machines inside the Macau East Asian Games Dome, as there was a skating rink inside the stadium, which is a good location as many youngsters were playing there.

How many machines do you have now?

TY: As of now, we have around 150

machines.

Is the investment cost high?

TY: We invested around

MOP500,000 in the beginning, which were for the five machines and the warehouse. In fact, our company has moved three times following the expansion of our business. At first, we rented a 500 square foot street shop for storing our products. Then we moved to a unit inside an industrial building, occupying some 1,000 square feet. But it was not enough for our business after a while, so we moved again to our current location, which occupies around 5,000 square feet. Nevertheless, we’re planning to move again next month to an even bigger place, as our business is continuously expanding.

What were the major difficulties in setting up your business?

TY: Hardware issues. As the

machines are from overseas, their original settings may not be very satisfactory for us to use in Macau.

Where are your machines placed in general?

TY: Hotels, as our company is

Our new machines have PC terminals, which allow machines to connect with the Internet. Besides making them more convenient for us to conduct immediate supervision of the machines, it offers a few more payment methods

co-operating with most of the hotels in the city. The machines are primarily placed in their offices and staff canteens as well as staff restrooms. In addition, some are located in schools and public venues, such as stadiums. We also have some machines in the city’s shopping malls.

How did you reach co-operation with these hotels and venue operators?

TY: We introduced them to the

advantages of our vending machines one by one after drafting a proposal.

After all, our goal is to serve the city’s residents as some of the places in the city are very inconvenient, such as the Macau East Asian Games Dome, as basically there’s nothing around there.

Do you need to pay rent?

TY: It depends. We need to pay for

some, while some offer the spaces to us for free. For most of the commercial venues, the operators would only consider one question, whether to ask for rent or not. In fact, many of these operators will

Business Daily | 7

August 24, 2015

Macau

In fact, many of these (commercial venues) operators will reduce the rent themselves once they know some products we sell are cultural and creative products, probably because they want to support the industry as well

NV: For sure it will be better

reduce the rent themselves once they know some products we sell are cultural and creative products, probably because they want to support the industry as well. The real difficulty for us is placing our vending machines in public venues, as you need to negotiate with government departments. For that, the evaluation always takes a very long time.

Demands Why would residents opt for vending machines when Macau is rather a small place where everything is easily reached?

TY: Actually, you can notice that

the businesses of traditional convenience stores in the city have been experiencing a downturn in recent years, except those big scale or chain ones. You can see that the number of these traditional convenience stores have been decreasing with more shutting down their businesses. This reveals the problems we have mentioned – it’s hard for them to afford the costs of rent and human resources for their businesses.

Neo Van: In fact, big scale or chain stores are also facing the same problems. That’s why their products are usually more expensive compared to the traditional ones.

So cheaper prices are to your advantage?

TY: I wouldn’t say our products are

cheaper, but reasonable. Our prices are close to the product prices in the chain stores yet ours will not be higher than theirs. Convenience is our advantage. Like, sometimes, you don’t want to queue in a supermarket for 15 minutes just to buy a bottle of drink. So, we actually provide a convenient way for residents to buy things they want easily. For another example, some of our machines are located in offices or the canteens of hotels.

It isn’t easy for employees to buy some drinks or snacks outside their workplaces while they are working.

How has the market changed compared with 10 years ago?

TY: The demands have been increasing, for sure, following many big residential projects being completed and there are more hotel projects coming. The increased demands are also due to residents’ knowledge of vending machines is higher than before. In the past, when we told people we were engaged in the vending machine business no-one knew what a vending machine business was.

But now they know these machines sell drinks and snacks. In addition, we’re now selling products beyond food and drinks. We’re selling cultural and creative products featuring Macau, too.

NV: Yes; in fact, I think we share

Co-operation with the cultural and creative industries

machines in the city is less than 2,000… The competition was more intense in the past. But after we introduced our latest model of vending machine with the latest system I don’t think our competition with other operators will remain as intense as before.

It’s because we used to sell the same kind of products. But we are widening our product genre.

You’re cooperating with the cultural and creative industry . . .

TY: We’re selling their products

at a local shopping mall, which include notebooks, mobile phone cases, and wallets designed by local designers. In fact, we think that many products from the cultural and creative industry are not bad at all. We hope that the industry can reach more local residents through our vending machines.

How many cultural creative companies are you co-operating with?

NV: One at the moment - Macau Design Centre. We’re also looking for more spaces to place our machines to expand our cooperation with the industry.

What do they think about co-operating with you?

TY: They welcome the plan very

much as we’re offering one more channel for them to sell their products in the city. They can reach more customers by co-operating with us. In fact, businesses in the cultural and creative industry always have difficulty in affording rents. But without a shop, it’s also very difficult for them to reach more sources of customers. Our vending machines are helping them resolve this problem. The co-operation is win-win.

very similar concepts with each other.

Cultural and creative companies can hardly afford the rent for a big street shop in tourist areas. For example, there was one in the Yellow House near the Ruins of Saint Paul’s but it could not compete in the end because of the rent. We are very confident in our co-operation with these creative companies as we are offering them another way to open their tourist market again. In addition, [selling through vending machines] saves space, rent and human resources.

Is competition in the vending machine industry intense?

TY: The total number of vending

About your latest machine . . .

NV: Our new machines have PC

terminals, which allow machines to connect with the Internet. Besides making them more convenient for us to conduct immediate supervision of the machines, it offers a few more payment methods. The new machines not only support traditional payment methods, such as cash and Macau Pass, they also support Alipay and Wechat Payment. And there are several advantages to using these third party payment methods.

For example, we can conduct different promotional sales through these thirdparty payment software [options].

On the Mainland, operators use such payment platforms to offer sales and discounts to customers, like offering them e-tickets; and they can get souvenirs from the vending machines free by using their mobile phones.

Future plans & Government support What are the prospects for the industry?

and better, as rent and the city’s population will only keep climbing.

As such, there’s no doubt that the automation industry will keep expanding following the increasing costs.

What are your future plans?

TY: We’ll increase our total number

of vending machines to 250 by the end of this year. We also plan to put more machines in public venues as we want to popularise our vending machines and to reach more residents. We hope to cooperate with some street shops as well.

You’re also planning to put more machines in tourist areas, right?

TY: Yes, this is a proposal we have

been working on for a long time.

Nevertheless, it requires approval from the government if we want to put our machines in some of the spots. There are always cross-departmental issues inside the government that take a lot of time. Anyway, this is our target: let’s see how we can fulfil them one by one.

As an SME, did you apply for any interest-free loans from the government?

TY: Yes, we did apply [for the

SME Aid Scheme]. We used the loans mainly for capital turnover.

We think the aid scheme is good.

But we reckon that there is one problem with the scheme – the evaluation period takes too long, which may affect our original plans.

Do you think the government supports local SMEs enough?

TY: I would rank it 60 out of 100

marks. We companies, of course, want to expand our operating capital. But the government should improve its evaluation procedures and simplify their evaluation standards. The government has been supporting the city’s young entrepreneurs but it doesn’t mean that it actually understands the needs of each industry or business. That’s probably the reason why its evaluation of [administrative] applications is always so slow.

Well, the government does support SMEs. But the time it takes [to help] is always too long.

8 | Business Daily

August 24, 2015

Greater China

Weak deman

New orders, a proxy for l export orders shrank to t

A

ctivity in China’s factory sector shrank at its fastest pace in almost 6-1/2 years in August as domestic and export demand dwindled, a private survey showed, adding to worries that the world’s second-largest economy may be slowing sharply.

China’s surprise devaluation of the yuan last week and a near-collapse in its stock markets in early summer have sparked fears that it could be at risk of a hard landing which would hammer world growth, sending financial markets into a tailspin.

Japanese Economics Minister Akira Amari said on Friday he expected China’s government to take steps to prevent its economic slowdown from becoming a global problem.

The preliminary Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) stood at 47.1 in August, well below a Reuters poll median of 47.7 and down from July’s final 47.8.

The reading was the worst since March 2009, in the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis.

The flash PMI, the earliest economic measure to be released about China each month, is closely followed by global investors for clues on the health of the economy.

“The poor number confirms what higher frequency data has been suggesting, that more weakness in the economy is likely,” said economist

Money market stabilised after injections The central bank acted to address liquidity concerns, lending 110 bln yuan to 14 banks through its medium-term lending facility

Liquidity is still under pressure due to client dollar demand

C

hina’s primary money rates were mixed on Friday as investor confidence in the market recovered slightly following large fund injections by the central bank earlier in the week.

Liquidity conditions have tightened over the past 10 days, however, and traders said that they expect another major easing move by the central bank soon.

“We experienced a difficult week,” said a trader at a city commercial bank in Shanghai. “Basically it is impossible to buy overnight repos in the first two days.

The MLF (medium-term lending facility) and injections managed to ease the market, but more importantly, these movements relieved investors and major banks. Some major banks began to provide funds this morning.”

In the aftermath of China’s surprise yuan devaluation on August 11, market watchers have become concerned that investors were shifting rapidly out of yuan assets and into dollars, pressuring yuan liquidity and the money market. Tighter liquidity may also have been a factor in this week’s large equity market sell-off. Following a partial recovery earlier in August, China’s benchmark CSI

300 equity index was down 11 percent on the week by Friday afternoon.

The volume-weighted benchmark seven-day repurchase agreement (repo) rate, considered the best indicator of short-term liquidity conditions in China, rose 11 basis points from August 11 to August 20, finally hitting 2.58 percent on Thursday afternoon.

On Wednesday and Thursday, the central bank acted to address liquidity concerns, lending 110 billion yuan to 14 banks through its medium-term lending facility and injecting 120 billion yuan into money markets through

open market operations. The central bank’s open market injection of 150 billion yuan this week was the largest since early February.

The seven-day repo finally responded on Friday, and was trading at 2.5475 percent by late morning, down a moderate 3.26 basis points from the previous day’s closing average rate.

Nonetheless, liquidity is still under pressure due to client dollar demand, and real borrowing rates remain elevated further down the yield curve. Traders expect more easing measures soon.

“The central bank is discreet,” said a trader at a commercial bank in Beijing. “They have to take potential yuan devaluation and economic pressures in the next half year into consideration. But once the direct injections are not able to offset the liquidity shortfall sufficiently, the central bank has to cut interest rates.”

The one-day repo was up 0.99 basis point at 1.82 percent against Thursday’s close and the 14-day repo was up 1.75 basis points at 2.71 percent.

The Shanghai Interbank Offered Rate (SHIBOR) for the same tenor rose to 2.5990 percent, up 1.30 basis points from the previous close.

The spread in the five-year credit default swap rate on Chinese sovereign debt rose 0.47 percent to 105.16.

Reuters

Business Daily | 9

August 24, 2015

Greater China

nd sinks August factory activity

local and foreign demand, slumped to a three-year low, while new their worst level since June 2013 Chester Liaw at Forecast Pte Ltd in Singapore.

“The authorities claimed that there will be a rebound in demand in the second half but it appears that the opposite is happening. With H1 GDP scraping the bottom of the barrel at 7 percent, the authorities will have a fight on their hands to ensure that H2 GDP comes in at even the same level.”

A detailed breakdown of the activity survey showed conditions were deteriorating on almost every level, with factory output sinking to a near fouryear low, domestic and export orders declining at a faster rate than in July and companies laid off more workers.

U.S. Federal Reserve policymakers discussed China, Greece’s debt crisis and the weak state of the global economy at their last meeting in July, according to minutes of the meeting released this week. But analysts still expect the U.S. central bank to raise interest rates later this year.

U.S. stock futures fell sharply after the PMI report and most Asian stock markets and the Australian dollar extended early losses. Overnight on Wall Street, the S&P 500 sank to a more than six-month low on concerns about how China’s slowdown would impact U.S. firms’ earnings and global growth.

Growing risks

Chinese authorities have struggled to stabilise the country’s stock markets after a near-collapse in early summer, and stunned financial markets this month by devaluing the yuan by nearly 2 percent.

KEY POINTS China August flash PMI falls to 47.1 (poll 47.7, July 47.8) Sharpest contraction in activity in 6-1/2 years Orders fall at faster rate, more workers being layed off The central bank said the yuan move was a technical one and part of a reform process, but many investors fear the currency will be allowed to depreciate further amid political pressure to shore up flagging exports, risking a global currency war.

The gloomy PMI figure followed other official data last week that showed growth in China’s factory output, investment and retail sales were all weaker than expected in July, dashing hopes that the economy was finally stabilising after a flurry of support measures over the last year, including four interest rate cuts and a massive stock market rescue.

Analysts have warned that China will struggle to meet its official economic growth target of 7 percent this year if it doesn’t ratchet up policy support to combat cooling activity.

Some economists believe current growth levels are already closer to half that.

A dearth in new business caused factory output to shrink for a fourth consecutive month to hit a trough of 46.6, a level not seen since November 2011 and down from July’s 47.1.

As sales sag, the survey showed factories were cutting staff at a faster pace to rein in costs, depressing employment to a level not seen since the 2008/09 global crisis.

With demand so lacklustre, factories struggled again with deflationary pressure. Input prices fell for the 13th straight month, reflecting lower commodities prices, but output prices slid at their fastest rate in seven months as manufacturers were forced to slash prices amid fiercer competition.

Soft outlook

The latest PMI will reinforce bets that China must increase government spending, cut interest rates again and relax banks’ reserve requirements to get the economy back on an even keel.

To worsen matters, Chinese financial markets have suffered unprecedented turbulence lately, further denting investor and consumer confidence.

Chinese shares tanked as much as a third during a selloff last month. That shakeout also raised fears of tighter credit supply for companies, as statecontrolled banks shifted their funding priorities to supporting the stock market instead.

Equity and currency markets have also been hit by volatility after the yuan devaluation.

Executive Director forecasts a 6.8 per cent expansion in the Chinese economy this year

C

Carlo Cottarelli, IMF executive director

“Monetary policies have been very expansive in recent years and an adjustment is necessary,” said Carlo Cottarelli, an IMF executive director representing countries such as Italy and Greece on its board.

“It’s totally premature to speak of a crisis in China,” he told a press conference.

He reiterated an IMF forecast for a 6.8 percent expansion in the Chinese economy this year, below the 7.4 percent growth achieved in 2014.

China Shenhua Energy, the country’s biggest listed coal producer, reported a 42.6 percent fall in first-half net profit while second largest player China Coal swung to the red on weak demand and a slump in prices. China Shenhua Energy Co Ltd’s net profit in the first six months fell to 13.07 billion yuan (US$2.05 billion) and China Coal Energy Co Ltd posted a net loss of 1.07 billion yuan during the same period, versus a year-ago net profit of 780.2 million yuan, the companies said in filings on the Hong Kong stock exchange.

Banking regulator issues guidance to develop Silk Road China’s banking regulator has issued new guidance aimed at supporting the country’s so-called new Silk Road infrastructure initiative, along with regional development in the Beijing-Tianjin-Hebei area and the Yangtze River economic corridor that includes Shanghai. The government said it will speed up approvals for major construction projects, according to a document released by the China Banking Regulatory Commission on Friday

Ping An confident about profit growth rate in H2

Reuters

IMF official says “premature” to speak of crisis hina’s economic slowdown and a sharp fall in its stock market herald not a crisis but a “necessary” adjustment for the world’s second biggest economy, a senior International Monetary Fund official said on Saturday.

Fresh evidence of easing growth in China hammered global stock markets on Friday, driving Wall Street to its steepest one-day drop in nearly four years.

Coal producers post weak H1 results

“China’s real economy is slowing but it’s perfectly natural that this should happen ... What happened in recent days is a shock on financial markets which is natural,” he added.

China’s stock markets have fallen more than 30 percent since mid-year.

Following a slew of poor economic data, Beijing devalued the yuan in a surprise move last week.

Cottarelli said the IMF would discuss in coming months with Chinese authorities their decision to weaken the currency.

China is eager for the yuan to join the IMF’s Special Drawing Rights basket of currencies.

Turning to Greece, which is heading to an early election in September, Cottarelli said the IMF would decide in two or three months whether to join the latest international rescue efforts.

The IMF deems Greece’s debt unsustainable and has called for debt relief as a condition to participate in a third bailout.

“The debt sustainability assessment will take place after the launch of the programme (agreed with creditors) in two or three months.

The IMF will then be able to evaluate whether to intervene,” he said.

Reuters

China’s Ping An Insurance Group is confident it will maintain the same profit growth rate in the second half as in the first half, a top company executive said on Friday. The company expects its focus on fixed income investments to help it weather fluctuations in the stock market that could hurt profits, Timothy Chan, group chief investment officer said.

Investment growth facing downward pressure China’s investment growth faces relatively big downward pressure this year due to funding problems, the country’s top economic planning agency said on Friday. Han Zhifeng, an official at the National Development and Reform Commission (NDRC), made the remarks at a news conference.

First batch of mutual recognition funds under review China’s securities regulator has released a list of the first batch of funds it has accepted under the mutual fund recognition scheme, which allows funds to be sold across China and Hong Kong as part of Beijing’s market liberalisation drive. Applications from nine funds from Hong Kong-based asset management firms were under review by the China Securities Regulatory Commission (CSRC), according to a filing on the CSRC website posted on Wednesday.

The asset managers include Amundi Hong Kong, Hang Seng Investment, BOCI-Prudential, Bank of China Hong Kong, JP Morgan Asset Management, Zeal Asset Management and Schroders.

10 | Business Daily

August 24, 2015

Greater China Securities watchdog vow to punish share dumpers China’s securities regulator on Friday reiterated that it will investigate and “severely punish” major shareholders who sold shares despite a six-month ban. Starting July 8, the government banned major shareholders, corporate executives and directors who hold more than 5 percent of a company’s shares from selling stakes in listed companies for six months. The China Securities Regulatory Commission is looking into 52 alleged cases of this ruling being flouted, spokesperson Zhang Xiaojun said at a press conference. Zhang said the infractions have exacerbated market swings and disrupted market order.

Airlines’ 1H profits fuelled Listed Chinese airlines have begun reporting eye-watering rise in half-year profits, largely due to cheaper fuel. In a filing to the Shanghai Stock Exchange Friday, Shandong Airlines said it revenue rose 2.69 percent year on year in the January-June period, but its net profit were up by 364 percent. In mid the month, China Eastern Airlines reported annual revenue growth of 3.9 percent, but its net profit soared to 3.56 billion yuan (US$557 million) from 14 million yuan a year ago. Hainan Airlines recorded a 0.77 percent increase of revenue, while net profit grew 231.92 percent.

Global cruise giants move China is looking to secure a stake in the country’s US$8 billion cruise industry with a joint venture between two state firms. China Communications Construction Co., and CTS (HK) Group Corp., announced Friday that they will work together to offer cruises from the southern resort of Sanya. The joint venture will build its fleet through merger, acquisition and other cooperative agreements.

A maiden voyage from Sanya to Xisha Islands is expected some time this year.

The number of people taking cruises in China has grown at an annual rate of 34 percent over the past decade.

Toyota extends halt in Tianjin Toyota Motor Corp said on Saturday its operations near the Chinese port of Tianjin will remain shut at least through Wednesday due to safety concerns as fires continue to break out at the site of last week’s deadly chemical explosions.

“We will only restart operations when we have been able to confirm the safety of our facilities and their surroundings, and when our employees feel that they can once again go to work in a safe environment,” the company said in an email.

Taiwan to relax cap on mainland independent travellers Taiwan has announced it will increase the number of mainland tourists it allows to enter the island from 4,000 to 5,000 a day, after the island saw a slump in tourism data. Taiwan’s financial agency announced that the global spending slowdown resulted in a tourism revenue deficit from April to June. To boost tourism, at least four measures are being discussed that could attract up to 220,000 more tourists and generate 10.75 billion new Taiwan dollars (US$330 million) in tourism profits by the year end, a Taiwan development council official said.

Province’s debt crisis exposes economic fault line Many of the guarantee companies are in danger of default Shu Zhang and Matthew Miller

A

mini debt crisis in northern China is exposing cracks in a financial pillar of the country’s economic revival plan: the US$430 billion loan-guarantee industry.

China has a heavy corporate debt burden and its economy is slowing, putting borrowers under strain, but many lenders take comfort from the fact that their loans are insured against default through the nation’s almost 8,000 guarantee companies.

A third of these are state-backed companies that stand behind more than 60 percent of China’s guaranteed loans. They exist to facilitate finance for smaller businesses - China’s jobcreators - but a crisis unfolding in northern Hebei province shows that their ability to meet those guarantees is in doubt.

In Hebei, a gritty region of steel mills and factories close to the capital Beijing, one such company is technically insolvent, a fate likely shared by other guarantee firms as the world’s second-largest economy rapidly loses momentum.

Hebei Financing Investment Guarantee Group has sold too many guarantees, too cheaply, on loans that have now gone sour.

“The domestic financing guarantee model is a very bad one,” said Hebei Financing general manager Ma Guobin.

Companies such as Hebei Financing are obliged to sell guarantees to borrowers at low rates of interest to underpin finance for smaller businesses, which can struggle to obtain funds at viable interest rates without a guarantee.

“The industry is also immature and has many problems and shortcomings.

On many things we don’t have a choice,” Ma added.

Hebei Financing has guaranteed loans to more than 1,000 borrowers, including manufacturers that are bearing the brunt of the slowdown.

Many of these borrowers are in danger of default, presenting Hebei Financial with the prospect of having to pay out 32 billion yuan (US$5

We worry about the underlying fundamentals Sally Yim, senior credit officer, Moody’s Investors Service, Hong Kong

billion) in loan guarantees, which would wipe out its registered capital of 4.2 billion yuan.

Given the company is unable to meet all its guarantees, lenders face large losses unless they can persuade the Hebei government to intervene and bail them out.

Eleven of them recently petitioned the provincial government to stand behind Hebei Financing’s guarantees, and the government has formed a special committee to try and resolve the crisis.

“If there weren’t guarantees provided by Hebei Financing Investment Guarantee Group, investors would not have agreed to lend to those companies,” the petitioners wrote in a letter to the province’s Communist Party secretary and the governor.

The letter, reviewed by Reuters, was written by 10 trust firms and one fund manager, which raised funds from the public before onlending them. If the guarantees are not honoured, they may default in turn on returns pledged to their own investors.

To ratchet up the pressure on the Hebei government, the letter urged it to act in order to “prevent the crisis from triggering a public panic”.

Attempts to contact the Hebei government were unsuccessful.

The Hebei State-Owned Assets Supervisions and Administration Commission, which oversees Hebei Financing, declined to comment.

Tip of an iceberg?

“We see a lot of these companies in China, and we worry about the underlying fundamentals,” said Sally Yim, senior credit officer with Moody’s Investors Service in Hong Kong.

“You are bound to see more of these defaults, or troubles from these type of small guarantee companies,” she added.

Yim doubted this would pose a major risk to the financial system.

China has US$3.65 trillion in foreign reserves and could deal comfortably with several crises on the scale of Hebei.

However, a loss of investor confidence in the overall guarantee industry could be harder to contain.

If lenders suspect local governments will not bail out guarantee companies in times of trouble, the broader economy becomes the loser as businesses are starved of finance.

Beijing is moving to strengthen the system and unveiled plans last month to set up a national financial guarantee fund to back provincial guarantee firms such as Hebei Financing.

But it risks reinforcing the assumption among lenders that governments will bail them out and encouraging reckless lending.

Hebei Financing’s Ma said his firm carried out due diligence and required borrowers to provide collateral, but it was not allowed to price its guarantees according to the level of risk.

The lenders, however, can charge higher rates even though the risk of default rests primarily with the guarantor, he said.

“This is unfair. Very unfair. But we can’t do anything.”

Reuters

Business Daily | 11

August 24, 2015

Greater China

Profits of top 500 firms dip as innovation ignored While state-owned industrial firms still command a heavy presence in the top 500, Internet companies are also making a dent

P

rofits at China’s largest companies are feeling the pinch as the world’s second largest economy struggles to adapt to slower growth and weakened demand for its industrial goods.

Profit-growth slid at 169 of the country’s 500 largest companies by revenue this year, compared with 141 a year ago. Fifty-seven companies are now in the red, 14 more than a year ago.

Revenue shrank at 94 of the top 500, nearly double last year’s 50.

The downward trend facing the top 500 firms, with combined revenue amounting to nearly 94 percent of the country’s economic output, reflects the shifting of growth drivers, as weak demand from home and abroad has left the vast manufacturing sector saddled with overcapacity.

“It is not a surprise to see the downward trend extend further this year,” said Li Decheng, executive vice chairman of China Enterprise Confederation (CEC). “Economic growth is driven more by innovation than intensive labour and capital investment, which these large companies have relied on.”

China’s dwindling labour pool is also compressing corporate margins with rising labour costs. Less than 17

percent of Chinese are under 14 years old, even lower than that in advanced economies like the United States and Britain.

Global expansion could also weigh down on profits if overseas strategies are illconceived or poorly executed.

Undue consideration of political risks, a lack of understanding of the local culture and negligence over the demands of stakeholders,

including unions and environmental groups, have been blamed.

While state-owned industrial firms still command a heavy presence in the top 500, Internet companies are also making a dent. Online retailer JD.com, Internet conglomerates Alibaba and Tencent, search engine Baidu and IT infrastructure provider Inspur all made the list.

Technology and innovation are also redefining the way companies make money.

“Many big companies have ignored the rise of new technology and business models [...] leaving these companies behind,” said Liao Rong, deputy director of CEC research department.

The only way out is to commit to reform and innovation, said Li Jin,

Capital pump to help reform policy banks Policy banks have come under the spotlight as China pushes ahead with large-scale urban development and strives to export some of its industrial capacity

C

hina has finished injecting capital into two of its three policy banks, a major part of measures to reform these noncommercial lenders and underpin the struggling economy.

The China Development Bank (CDB) received US$48 billion and US$45 billion was channelled to the Export-Import Bank of China (EXIM) from the country’s huge foreign exchange reserve this week.

After the injection, CDB’s capital adequacy ratio (CAR), a measure of an institution’s ability to cushion loan risks, increased to 11.41 percent, from 9.06 percent at the end of 2014. EXIM did not disclose any previous figures, but its ratio is now 12.77 percent.

An anonymous source with the central bank told Xinhua that the government was working to “gradually” pump funds into the Agricultural Development Bank of China (ADBC), but these funds will not be from the forex reserve.

“The capital injections mark a key step in reforming the cash-

The capital injections will reinforce the banks’ policy roles and strategic importance to the state, as well as strengthen their ability to provide funding to areas not favoured by commercial banks Fitch’s research note

strapped policy lenders, who can not take deposits like commercial banks do,” said Wang Jun, a senior researcher with the China Centre for International Economic Exchanges.

“The move will improve the financial condition of policy banks and make them more resistant to risks,” said Wang.

These lenders were set up in 1994 to provide financial support to policydriven businesses.

CDB is mainly responsible for raising funds for large infrastructure projects; EXIM for promoting foreign trade and investment; ADBC for agriculture and the rural economy.

With thin margins, the government-backed policy banks are not profit driven. Limited and usually unstable capital sources led to their weak capital positions prior to this week’s injections.

To make things worse, lending aspirations made some of their investment very risky as the government did hold them to the CAR requirement.

chief researcher at China Enterprise Research Institute.

On average, R&D expenditure at the top 500 firms is 1.28 percent of revenue, even lower than the whole country’s R&D input of 2.01 percent of GDP. “If these companies begin to invest more heavily in innovation, it will mean a world of difference for the whole nation.” Li said.

Xinhua

The State Council issued a guideline for banks in April that overhauled corporate governance, improved liquidity, and controlled loan risks.

The guideline said the three policy banks should be regulated with CAR requirement, without giving further details. The market, however, widely expected the ratio to be no less than 10.5 percent, as with commercial banks.

“The CAR requirement can help ward off risks and prevent policy banks from expanding blindly. It is very necessary,” said Ding Zhijie, an assistant to the president of the University of International Business and Economics.

Stronger policy banks could benefit the broader economy, according to rating agency Fitch in a research note.

The agency expects CDB and EXIM to become more involved in the Belt and Road Initiative, with CDB also providing support to housing projects.

Should EXIM approve funds to foreign projects with Chinese participation, this could increase demand for domestic industries that may have been struggling with overcapacity and faltering exports.

The direct dollar injection is also likely to help EXIM, who has up to now relied on bond issuances for foreign currency funding.

Reuters

12 | Business Daily

August 24, 2015

Asia

Japan’s July core CPI falling for first time in 2 years It would be the first year-on-year fall since Bank of Japan launched a massive burst of monetary stimulus

KEY POINTS Core CPI f’cast -0.2 pct yr/yr, 1st fall since April 2013 Household spending seen up but trend remains weak July CPI, household spending due 2330 GMT Aug 27

Kaori Kaneko

Retail sale due at 2350 GMT Aug 27

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ore consumer prices in Japan were forecast to have slipped in July, the first fall in more than two years, a Reuters poll showed, highlighting the growing challenge confronting the Bank of Japan (BOJ) in its quest to meet an ambitious inflation target.

Other data, including household spending and employment, were expected to provide some positive news to policy makers even as fresh worries about China’s sputtering economy have sent global markets into a tailspin in recent weeks.

Annual core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, was projected to have dropped 0.2 percent in July from a year ago, the poll of 23 analysts showed, after a 0.1 percent rise in June.

It would be the first year-onyear fall since April 2013 when BOJ Governor Haruhiko Kuroda, at his first policy meeting, launched a massive burst of monetary stimulus and committed to achieve 2 percent inflation in about two years.

That goal was pushed back to around September 2016 after last year’s recession, a tumble in oil prices and lacklustre domestic demand made it clear that inflation will remain weak.

Kuroda recently warned that the new timeline could yet again be delayed if oil price falls persist.

On top of the weak price backdrop, Japan’s second quarter GDP contraction and a surfeit of grim economic indicators in China - Japan’s major trading partner could raise expectations of the BOJ expanding its stimulus.

“If falls in core consumer prices are to strengthen people’s deflationary mindset, the chances of the BOJ’s further easing could increase,” said Takumi Tsunoda, senior economist at Shinkin Central Bank.

This week’s data also includes household spending, which is seen rising 1.3 percent from a year ago in July, the poll showed, probably as hot weather spurred sales of summer clothing and air conditioners. In June, spending fell 2.0 percent.

“Since wage growth is tepid, the trend for consumer spending remains weak,” said Tsunoda.

The jobs-to-applicants ratio in July likely stayed at 1.19 in July, unchanged from the previous month and the highest since February 1992.

The jobless rate was forecast to stay steady at 3.4 percent in July.

Retail sales are forecast to show a 1.1 percent gain in July on-year, up for the four straight month but the pace of growth has moderated in the past few months.

Largest Korean ETF heralds worst money outflow on record amid crisis Bearish bets against the Korea ETF have tripled in the past month to 2.2 percent of shares outstanding on August 20 Nikolaj Gammeltoft

T

he iShares MSCI South Korea Capped ETF, the largest exchange-traded fund (ETF) tracking the country’s stocks, had the biggest weekly withdrawal since inception in 2000 amid investor concern over a revival of tensions on the Korean peninsula and an escalating selloff in emerging markets.

Traders pulled US$195.4 million from the ETF,

whose top holdings include Samsung Electronics Co. and Hyundai Motor Co., in the five trading days ended August 21, according to data compiled by Bloomberg. The fund, which has US$3.1 billion in assets, fell 7.2 percent in New York to an almost four-year low of US$45.67 during the week and is down 27 percent from a high in April.

Investors are losing con fid enc e t h a t S o u th

Korea can defuse tensions with its neighbour and withstand a slowdown in China, its biggest trading partner, according to Ankur Patel, chief investment officer at R-Squared Macro Management. North Korean leader Kim Jong-Un has threatened to launch an attack after exchanging fire across the border earlier this month in what is becoming one of the most serious confrontations between

the two countries in recent years.

Global rout

While the South Korean government pledged to stabilize financial markets amid provocations from the North and the fallout from China’s growth, there is only so much the Bank of Korea can do to prevent investors from exiting.

More than US$3.3 trillion has been erased from the

Reuters

value of global equities after China’s decision to devalue its currency spurred a wave of selling across emerging markets.

“South Korea itself can’t dictate its fortunes from here on,” Patel said by phone from Birmingham, Alabama, on Friday.

The central bank has cut interest rates four times in the past year to a record low of 1.5 percent and the government introduced its largest-ever budget this year.

Bearish bets against the Korea ETF have tripled in the past month to 2.2 percent of shares outstanding on August 20, according to data compiled by Markit, a London-based research firm.

Kim’s top military aide Hwang Pyong So and South Korean President Park Geun Hye’s chief security adviser Kim Kwan Jin are meeting at the border village of Panmunjom, the Unification Ministry in Seoul said in a text message.

Bloomberg News

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Business Daily | 13

August 24, 2015

Asia

Malaysia’s reserves fall again as ringgit continues to slide The ringgit has lost more than 16 per cent against the dollar this year, emerging as Asia’s worst-performing currency

M

alaysia’s international reserves have dropped again, a slide that’s beginning to worry some economists and investors as the ringgit continues to weaken.

Currency reserves fell to US$94.5 billion as of August 14, Bank Negara Malaysia (BNM) said on Friday, from US$96.7 billion as of July 31 and US$100.5 billion a month ago.

Reserves are at their lowest level since September 2009.

In a statement, BNM said the reserves are sufficient to finance 7.5 months of imports. Two weeks ago, it said reserves could cover 7.6 months.

Economists disagree on what’s a safe level of import-cover for reserves. Long ago, many considered three months safe, but with greater global capital flows, some consider the minimum six months.

Khoon Goh, senior FX strategist for ANZ in Singapore, said Malaysia has the lowest import cover ratio in the region, and that is “a source of vulnerability”.

“If you have a big war chest, the market knows you have the ability to step in so they are more cautious,” he said. “In the case of Malaysia, markets know their intervention capability is limited.”

Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, said Malaysia’s reserves

are adequate to satisfy redemption needs but onshore dollar demand is likely to be “overwhelming”.

He said Malaysia will later need to impose some foreign-exchange control for onshore dollar-buying.

On Thursday, Prime Minister Najib Razak and BNM Governor Zeti Akhtar Aziz said Malaysia would not impose capital controls or peg the ringgit against the dollar.

“There’s no intention of moving to a less flexible regime like a peg exchange rate regime,” Zeti said.

Malaysia last pegged the ringgit to the dollar at 3.8 in 1998, and that remained until 2005.

On Friday, the ringgit hit a fresh pre-peg 17-low year, losing as much as 1.1 percent to 4.1830 per dollar.

Multiple pressures

The ringgit has lost more than 16 percent against the dollar this year, making it emerging Asia’s worstperforming currency.

On Thursday, Zeti said the reserves are used as a “buffer” during difficult periods.

A protracted political crisis, slumping commodity prices and an investor exodus from emerging market assets have all undermined the ringgit’s appeal, and pressure intensified after China’s surprise yuan devaluation.

Thai hoteliers warn on Bangkok blast impact Two top Thai hotel operators warned on Friday that the bomb attack would have an impact on earnings, and reduced revenue growth forecasts this year after signs of slower foreign tourist arrivals Manunphattr Dhanananphorn and Khettiya Jittapong

T

he Erawan Group, one of Thailand’s top five hotel operators, is expected to be most hit given its flagship Grand Hyatt Erawan is next to the religious shrine where a bomb went off on Monday, killing 20 people.

The group cut its 2015 revenue growth target to 28 percent from 35 percent on expectation this year’s occupancy rate will be 75 percent, from an earlier forecast of 77 percent, as some customers cancelled or postponed bookings, the company’s

KEY POINTS Reserves at US$94.5 bln at mid-Aug, was US$100.5 bln a month ago C.bank - Reserves enough for 7.5 months of imports Reserves level is lowest since September 2009 The domestic crisis follows allegations of graft and financial mismanagement involving a state fund whose advisory board is chaired

by Najib.

BNM has maintained the country’s economic fundamentals are sound.

Malaysia grew 4.9 percent in the second quarter, beating expectations.

Saktiandi Supaat, head of FX research at Maybank Investment, said he does not expect the reserves to drop sharply below $90 billion, and his year-end forecast for the ringgit is 4.05 to the dollar.

“The weaker ringgit will probably support exports and give a trade balance boost,” he said.

Reuters

president, Kamonwan Wipulakorn, told Reuters.

But Erawan is confident it will make a net profit this year due to a strong first-half performance. It made a net loss in 2014 when business was hit by months of political unrest and a military coup.

The company is considering postponing an initial public offering of its real estate investment trust (REIT) worth up to 1.8 billion baht (US$50.51 million) due to the unfavourable market conditions, she said.

Erawan was on track to invest about 1.8 billion baht this year to open five budget hotels outside Bangkok, she said.

Shares in Erawan slid to a 15-month low after the blast and were down 2 percent early on Friday on concern about the tourism sector, one of the few catalysts for Thailand’s struggling economy.

Rival Central Plaza Hotel Pcl, which runs the five-star hotel Centara Grand, also close to the bombed shrine, is likely to miss a 2015 revenue target of 20 billion baht (US$561 million), Chief Financial Officer Ronnachit Mahattanapreut told Reuters.

“From preliminary assessment, we’ve lost about 17 million baht in revenue after booking cancellations.

It is difficult to achieve our revenue target this year,” he said.

Central Plaza’s third-quarter average occupancy rate is expected to drop to 70 percent versus more than 80 percent before the blast, Ronnachit said adding the rate for the year is likely to be below an 80 percent target.

However, strong earnings in the first half should help the company post strong growth for 2015 and the company aimed to focus on cost controls to boost profits, he said.

Reuters

Air India hires “Mr Turnaround” India is betting on a former railway bureaucrat who styles himself as “Mr Turnaround” to fix the financial troubles of debt-burdened national carrier Air India, which last made a profit in 2007. Ashwani Lohani, whose past roles include stints at India’s railways and a regional tourism board, will take over as chairman and managing director next week, an Air India spokesman said on Friday. He has a tough task ahead.

Once India’s biggest carrier, Air India’s market share has tumbled to about 15 percent amid rising competition from nimbler private sector rivals.

Sharp in talks with Hon Hai Japanese electronics maker Sharp Corp has entered negotiations with Taiwan’s Hon Hai Precision Industry Co for a tieup over Sharp’s struggling display business, the Asahi newspaper reported on Saturday. Investors and analysts have urged Sharp to overhaul its liquid crystal display (LCD) and consumer electronics divisions. Chief Executive Kozo Takahashi initially resisted but last month said he was open to major restructuring, including some kind of strategic deal for its LCD business. But Sharp was also seen as considering a Japan government-backed fund for support, and the situation was fluid.

CIMB Bank chief resigns CIMB Bank Bhd, a unit of Malaysia’s second-largest lender by assets CIMB Group Holdings Bhd, said on Friday its Chief Executive Officer Sulaiman Mohd Tahir would resign, effective November 22. It did not give a reason for the resignation but said Shahnaz Jammal, CIMB Group’s chief financial officer, would be interim CEO until a successor is appointed. Sulaiman is expected to join AMMB Holdings Bhd, the country’s sixth-biggest bank by assets, as group managing director, according to two sources familiar with the move. An official at AMMB was not immediately available to comment.

Record debt-servicing costs for FY2016 Japan’s finance ministry will seek a record 26.05 trillion yen (US$$213.5 billion) for interest payment and debt servicing of Japanese government bonds, in budgetary appropriations for the next fiscal year from April 2016, government sources said. The increase of 11.1 percent from the current fiscal year’s budget reflects ballooning national debt. The debt service costs consist of 15.21 trillion yen for debt repayment, up 14.3 percent from the previous year, and 10.8 trillion yen for interest payment and discount charge, an annual increase of 6.9 percent, the sources said on Friday.

France, India to conclude Rafale jets deal India’s purchase of French Rafale fighter jets could be concluded in about 10 days, a source with knowledge of talks on the deal told Reuters on Friday. Indian Prime Minister Narendra Modi said in April he had ordered 36 Rafale fighters to modernise his country’s warplane fleet, though detailed terms and conditions remained to be settled. Modi had opted to deal directly with the French government after three years of inconclusive negotiations with the plane’s manufacturer, Dassault.

14 | Business Daily

August 24, 2015

International RSA, Zurich investors face valuation gap Shareholders in British insurer RSA are bracing for a lowball bid from prospective suitor Zurich Insurance, putting one of Europe’s largest ever insurance deals in doubt. After flagging its interest to the market on July 28, Zurich has until Tuesday evening to make an offer or retreat for at least six months, unless RSA asks for an extension. A deal would make Zurich the leader in British commercial insurance, help it expand further into Canada and Latin America, and enter the lucrative Scandinavian market.

Peru tightens forex controls Peru’s central bank said Friday that it was tightening reserve requirements on currency derivatives in its latest bid to soften the sol’s slide against the dollar after it ended at its weakest level in nine years. The central bank said that it was lowering the limit on currency derivative operations to US$250 million per week from US$350 million starting Monday.

A new monthly limit of US$1 billion per month, from the current US$1.2 billion per month, would apply as of September 1. The central bank will double a currency reserve requirement on any operations that surpassed those limits, it said.

Brazil’s Camargo Corrêa to return US$202 mln Construction and engineering group Camargo Corrêa SA has agreed to pay 700 million reais (US$202 million) to compensate state-run companies for damages related to bribery and price-fixing, prosecutors said on Friday. The payment, one of the terms in a leniency accord, allows Camargo Corrêa executives to obtain immunity from related crimes that could be investigated in the future. The funds will mostly go to public companies that were victims of Brazil’s largest ever corruption scheme, prosecutors said. Camargo Corrêa also agreed to a fine of 104 million reais.

Puerto Rico asks to overturn restructuring ruling Puerto Rico on Friday asked the U.S. Supreme Court to overturn a ruling that blocks the restructuring of the commonwealth’s public agencies, as the island grapples with trying to restructure its huge debt load. In a petition seeking the court’s review, which was provided by one of the island’s lawyers, Puerto Rico said a lower court erred in concluding that U.S. bankruptcy law blocks the restructuring of the agencies’ debts. Puerto Rico also said the lower court decision leaves its public utilities in a legal “no man’s land” because neither federal law nor the island’s own law permits the needed restructuring.

EU tries to clear “fog of confusion” over U.S. trade pact The move came after Germany had urged the Commission to restore EU governments’ access to electronic reports on the state of the negotiations Barbara Lewis and Caroline Copley

T

he European Commission will publish detailed reports on its negotiations with the United States to forge the world’s biggest trade pact, EU trade chief Cecilia Malmstrom said on Friday, responding to criticism that the talks have been shrouded in secrecy.

If agreed, the Transatlantic Trade and Investment Partnership (TTIP) would encompass a third of world trade, and proponents say it would deliver more than US$100 billion of economic gains on both sides.

But opponents in Europe have voiced concern that it could erode EU standards on food safety and the environment, and argued the negotiations have not been transparent.

In a blog post, Malmstrom said one of her first decisions as trade commissioner when she took office last year had been to make the negotiations more open, but the debate “seems to have been caught up in a fog of confusion”.

To address that, she said that from now on the Commission will published “detailed and extensive reports” on its website in all official EU languages.

The move came after Germany had urged the Commission to restore EU governments’ access to electronic reports on the state of the negotiations, which it had halted last month in order to end a series of leaks.

A spokesman for German Economy Minister Sigmar Gabriel confirmed he had written to Malmstrom to express his concerns about that move, which he called “the latest setback in transparency efforts.”

It was essential that politicians in individual member states were fully informed about the talks, he wrote

KEY POINTS TTIP talks hit by criticism of secrecy Opponents fear erosion of food, environment standards Disclosure move follows German pressure for more openness in an Aug. 20 letter, published by investigative news site Correct!v.

“Only this way can we create the necessary legitimacy and acceptance for the talks, the result of which the German parliament must also vote on.”

Gabriel is struggling to drum up support for the TTIP, which is backed by only 39 percent of Germans, according to a PEW Research Center survey.

Russian Prime Minister to boost FX flows

Medvedev said it was incorrect to think Arab Bank says US$1 bln the government was increasing its control settlement is ‘inaccurate’ over exporters’ foreign currency sales Arab Bank Plc on Friday described as “inaccurate” a report that it would pay “slightly more” than US$1 billion to settle litigation brought by hundreds of Americans who accused it of facilitating militant attacks in Israel. Citing an unnamed lawyer with knowledge of the settlement, the trade magazine The American Lawyer reported that Arab Bank had agreed to pay “slightly more than US$1 billion” to settle. In response to the report, Arab Bank said in a statement, “The terms are confidential and we will not comment on them specifically beyond saying the report is inaccurate.”

R

ussia’s Prime Minister Dmitry Medvedev said on Saturday that the government and central bank were preparing measures to boost foreign currency sales in response to the weakening rouble.

His comments suggest Russia is again putting pressure on major exporters to help buttress the rouble by selling more of their foreign currency, a tactic used last December when the government ordered state exporters to sell part of their foreign

currency over an agreed time frame.

“Naturally we, I mean the government, will help the central bank in the sense of additional foreign currency inflows,” Medvedev said.

“In the near future we will launch foreign currency sales by our largest exporters, which will affect the rouble’s rates. So we, together with the central bank, will undertake a definite collection of agreed measures.”

It was not clear what demands the government has made of exporters

Asked for reaction to Malmstrom’s blog post, an economy ministry spokesman said: “We welcome that the Commission has moved on this important question. This step must, however, also lead to more transparency compared with the process up to now.”

He said Germany would keep talking to the Commission to make sure members of national parliaments were kept fully informed about the negotiations via access to ‘consolidated documents’.

So far, 10 rounds of TTIP talks have taken place and further negotiations are expected later this year with a view to finalising a deal in 2016, Malmstrom said early this month.

One hurdle was overcome in July when the European Parliament backed a compromise on setting up a new European court to settle disputes arising from any trade pact.

Reuters

this time nor how much difference they would make in practice.

Exporters increase foreign exchange sales near the end of each month in any case because they need roubles to pay monthly taxes.

Medvedev said it was incorrect to think the government was increasing its control over exporters’ foreign currency sales.

“We never weakened this control, and in future we don’t intend to weaken it,” he said, adding he had met with exporters and that the central bank also does so regularly to discuss their foreign exchange sales.

Such sales are the most important source of demand for the rouble, which has shed 18 percent against the dollar over the last month as the price of Russia’s main export, oil, tumbles on world markets.

Now worth 69.11 per dollar, the rouble is approaching its 2015 low of 71.85 reached on January 30, and its all-time low of 80 reached last December.

Reuters

Business Daily | 15

August 24, 2015

Opinion

The Fed, seeking to leave zero behind, wires grapples with Catch-22 Business

Leading reports from Asia’s best business newspapers

James Saft

Reuters columnist

THE TIMES OF INDIA After two weeks of consecutive falls due to plunging gold prices and international currency devaluations, India’s foreign exchange (forex) reserves gained US$1.08 billion in the week ended August 14. The reserves for the week under review stood at US$354.43 billion after falling

by US$321.1 million since July 31. For the week ended August 7, the reserves had declined by US$113.5 million to US$353.34 billion. The data furnished by the Reserve Bank of India (RBI), in its weekly statistical supplement showed that the foreign currency assets (FCAs) rose by US$1.03 billion to US$330.83 billion.

PHILSTAR Health industry groups in Southeast Asia have each adopted a code of ethics to reduce negligent practices that can harm patients’ safety and to boost the growth of small and medium enterprises in the sector. In a statement, the Asia-Pacific Economic Cooperation (APEC) Small and Medium Enterprise Working Group said 32 biopharmaceutical and medical device associations within the 10 member economies have reported progress in espousing their first code of ethics. This move increased the number of healthcare firms covered by a code to 19,000, of which 13,000 are SMEs.

THE KOREA HERALD South Korea’s stock-rich tycoons were hit by a loss in their assets as the country’s stock market fell to a two-year low last week amid continued jitters from China’s currency devaluation, data showed yesterday. The combined securities assets of the country’s 22 richest shareholders came to 64.64 trillion won (US$54.14 billion) after the trading session closed Friday, down 7.6 percent from the 69.89 trillion won tallied a week earlier, on August 13, according to the data compiled by market tracker Chaebul.com.

VIETNAM NEWS Viet Nam’s gold consumption in the second quarter reached 14.5 tonnes, down 23 per cent in comparison with the first quarter, according to a report on gold trends released recently by the World Gold Council. Of the total volume, gold bars accounted for 10.8 tonnes, down 25 per cent quarter-on-quarter, while jewellery made up the remainder, though also down 16 per cent. Total gold consumption in Viet Nam in the first six months of 2015 reached 33.3 tonnes, equivalent to 48 per cent of the figure from the same period last year.

United States of America’s Federal Reserve

I

f we define a “Catch-22” as being in need of something that you can only get by not being in need of it, then the Federal Reserve, mulling a rate hike off the zero lower bound in September, is kind of caught.

The minutes from the July meeting of the Federal Open Market Committee, besides showing a genuine split about when to proceed with the first interest rate hike since 2006, also betrayed nervousness over the limitations it faces given unprecedentedly low official interest rates.

Check out this puzzler of a passage from the minutes: “Another concern related to the risk of premature policy tightening was the limited ability of monetary policy to offset downside shocks to inflation and economic activity when the federal funds rate was near its effective lower bound.”

In other words, if we tighten from interest rates of virtually zero to just a bit higher we still have insufficient room to cut if it all goes wrong. This rather implies that the Fed is well aware that, as in the old story, given where they want to end up, they shouldn’t be starting where they are.

On that logic, the Fed might never be able to tighten, as whenever it wrenches interest rates to 25 or 50 basis points above zero, it would still lack ammunition.

But this is a counsel of despair only if the Fed chooses to follow it. The Fed isn’t constrained by the zero lower bound, but would have, instead, to rely on asset purchases or other extraordinary policy measures as a way to get extra leverage

if it needs to cut more than the 25 or 50 basis points it will likely hike in coming months.

Of course Fed policymakers call them “extraordinary” measures because they are supposed to be just that, and it will betray the weakness of the Fed’s position if they are forced to resort to more QE to deal with a garden-variety recession, rather than a full-scale clean-up after a financial crisis.

For that reason it is understandable that these issues are worrying the Fed. But it would be a mistake if it tipped the balance by very much. That’s especially true if what the Fed is worried about is financial market reaction to policy changes. Financial markets are never going to react well to tighter money and at a certain point will just have to re-price.

Lend me US$10 and i’ll lend it back.

We’ll both be up.

Interestingly, there is a related line of thinking making the rounds that the Fed is hurrying to get a rate hike or two in before it next wants to cut.

“I keep hearing the argument that the Fed needs to hike, so that if the U.S. economy slows down again it will have room to cut rates once more. In other words, it needs to get away from the zero bound so that the traditional monetary policy tool of rate cutting comes back into play in the future,” Jim Leaviss, a fund manager at M&G Investments in London, wrote in a note to clients.

“Surely for this to make sense you’d have to argue that a, say, 50 basis-point hike from 0.25 percent to 0.75 percent

The Fed makes monetary policy not for emerging markets, or for the rest of the globe, or even for financial markets, but for the United States

is less powerful in slowing the economy than a 50 bps cut from 0.75 percent to 0.25 percent is in stimulating it? Or believe that hiking rates is a sign of confidence in the economy and is therefore stimulative (on the other hand a later emergency cut back down from 0.75 percent if growth stalled might not send the best signal either).”

While this nails the circular logic surrounding much of this debate, it leaves out one factor that may actually be playing a role: the Fed’s need to demonstrate that it remains in control. There is a twitter feed I particularly enjoy, called “Hold my Beer GIFs,” in which people, almost always men, are filmed coming to spectacular grief while attempting to demonstrate prowess in unwise manoeuvres.

While Janet Yellen isn’t trying to impress the kids at the skate park, she, and her peers at the Fed, must be aware that the eyes of investors are on them, and that some think they are trapped and some think, obliged to hike. There is some pressure to show control, and with that comes some risks.

For that reason, I would tend to look through the concerns about China, energy prices and the rest of the global economy in the minutes. The Fed makes monetary policy not for emerging markets, or for the rest of the globe, or even for financial markets, but for the United States. That argues for tightening sooner rather than later.

They probably shouldn’t start from here, but the Fed hasn’t many other options.

Reuters

16 | Business Daily

August 24, 2015

Closing Brazil judge seeks probe into Rousseff’s 2014 campaign funds Investments heat up online news sector A Brazilian electoral court judge has requested a probe into President Dilma Rousseff’s 2014 campaign financing on signs it may have included money siphoned from state-owned oil company Petrobras. Judge Gilmar Mendes said in his request to prosecutors and federal police that there are indications Rousseff’s Workers’ Party was indirectly financed by Petrobras, which is forbidden under law. Rousseff’s campaign also received funds from companies entangled in a continuing probe into the kickback scheme involving Petrobras, Mendes said. The investigation into inflated contracts at Petrobras has roiled Latin America’s largest nation.

Suddenly the online news business is red-hot.

Money is flowing into digital news ventures at an unprecedented pace, as investors anticipate an accelerating shift away from traditional media, and new ways to generate revenue from news. BuzzFeed made news this past week with a US$200 million capital injection from Comcast’s NBCUniversal, and with the announcement of a joint venture with Yahoo Japan for Japanese readers.

Earlier this month, Vox Media also secured US$200 million from NBCU as the start-up seeks to ramp up its news websites including Vox. com, The Verge, Re/code and Bleacher Report.

Bitcoin CEO’s arrest leaves trail of unanswered questions The company initially said there was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them Hiroshi Hiyama

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he arrest of MtGox boss Mark Karpeles has begun to shed light on the defunct Bitcoin exchange after hundreds of millions of dollars in virtual currency vanished from its digital vaults last year.

But as details of a lengthy investigation by Japanese police trickle out, at least one crucial question remains unanswered: where is the money?

On Friday authorities issued a fresh arrest warrant for Frenchman Karpeles over claims he stole several million dollars from clients, including about US$48,000 allegedly spent on a luxury canopy bed.

Karpeles, 30, who has reportedly denied the allegations, was initially taken into custody earlier this month and has been held without formal charges for three weeks, as allowed under Japanese law.

A fresh warrant resets the clock on how long police can hold him and grill the self-

described computer geek over Tokyo-based MtGox’s missing Bitcoins.

So far, police have accused Karpeles of manipulating data and stealing sums that amount to just a fraction of the 850,000 coins -- worth around US$480 million at the time, or US$387 million at current exchange rates -- that disappeared last year.

MtGox, which once said it handled around 80 percent of global Bitcoin transactions, filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers.

The company initially said there was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them.

Karpeles later claimed he had found some 200,000 of the lost coins in a “cold wallet” -- a storage device, such as a memory stick, that is not connected to other computers.

Britain reopens embassy in Iran ransacked in 2011

But the whereabouts of the money and Karpeles’ involvement appear far from solved.

“If there were instances of mismanagement or fraud like this carried out by Mark Karpeles, then he should be held accountable,” Bitcoin investor Kim Nilsson told AFP. “(But) if these charges against (him) don’t adequately explain where all the Bitcoin ... money went, then there are still unresolved questions, quite possibly additional crimes and criminals, that must be investigated further.”

Real or fake?

Nilsson also questioned whether MtGox’s Bitcoin deposits were even real in the first place.

“Did MtGox at any point actually hold the coins in question, or have there been faked deposit entries merely making it look that way?” he asked

MtGox reportedly kept its own funds and clients’ money in the same bank account.

In an interview with Japan’s top-selling Yomiuri newspaper, Karpeles’ mother said her “genius” son learned computer languages at age three and started making simple programmes of his own two years later.

Back in 2006, Karpeles -- who reportedly lived in an US$11,000-a-month penthouse Tokyo apartment -wrote on his blog that computer crime was “totally contrary to my ethical principles”.

But four years later, a Paris court sentenced him in absentia to a year in prison for hacking. He had come to Japan to work for a web development company in 2009 and later got involved with the Bitcoin exchange.

Investors have called on the firm’s court-appointed administrators to publicise its data so that experts around the

AFP

Indonesia bear market sends buy signal to nation’s largest fund

China pension fund allowed to invest in stock market

B

world can help analyse what happened at MtGox. But the case presented a complex challenge to Japanese police, as financial watchdogs around the world struggle to work out how to regulate digital money.

Unlike traditional currencies backed by a government or central bank, Bitcoins are generated by complex chains of interactions among a huge network of computers around the planet.

Backers say virtual currencies, which started to appear around 2009, allow for an efficient and anonymous way to store and transfer funds online.

But critics argue the lack of legal framework governing the currency, the opaque way it is traded and its volatility make it dangerous.

Following Karpeles’ arrest, Tokyo vowed to boost digitalcurrency regulations.

S

I

ritain reopened its embassy in Tehran yesterday, a striking signal of how Western ties with Iran have thawed since protesters ransacked the ambassador’s residence and burned the Union Jack nearly four years ago.

Foreign Secretary Philip Hammond watched the British flag being raised in the garden of the opulent 19th century building while the national anthem played.

“Today’s ceremony marks the end of one phase in the relationship between our two countries and the start of a new one - one that I believe offers the promise of better,” he said.

The attack that forced the embassy to close was a low point in diplomacy between the two countries, he said, but the relationship had improved “step by step” since the election of Iranian President Hassan Rouhani in 2013. Hammond said the nuclear deal that the Islamic Republic struck with six major world powers last month was also an important milestone.

The agreement prompted a flurry of European visits - including from German and French ministers - aimed at positioning for the end of Iran’s long economic isolation.

tate Council published the final guideline on investment for the country’s massive pension fund yesterday, effectively opening the gate for more diversified and riskier products.

The final plan, released after considering public opinion, allows the pension fund to be invested in new products, including domestic stock markets, but restricts the maximum proportion of investments in stocks and equities to 30 percent of total net assets.

The fund will also be used to participate in major projects and purchase shares in state-owned enterprises to gain long-term yields.

The move is intended to create more value for the massive fund, which was previously parked in banks or invested in treasury bonds with low yields, a condition that has long spurred calls for changes as China faces a huge challenge in caring for its increasing elderly population.

While pushing for diversified investments, the State Council stressed an “active and cautious” approach in the process. “The management of the funds must prioritize safety and firmly control risks,” it reiterated.

ndonesia’s largest fund manager is taking the slump that’s driven the nation’s stocks into a bear market as the cue to start buying again.

BPJS Ketenagakerjaan, which manages around 193 trillion rupiah (US$13.8 billion), will enter the equities market along with other state-owned institutional investors, Elvyn Masassya, its president director, said in a text message on Sunday. Shares are “relatively cheap,” he said, without naming any.

The Jakarta Composite Index is trading at the cheapest levels in 20 months after plunging 5.4 percent last week. The benchmark gauge entered a bear market on Friday after falling more than 20 percent since the April 7 peak as capital outflows accelerated amid a weakening economy, slumping commodity prices and the prospect of higher U.S. interest rates.

U.S. rate speculation and China’s surprise devaluation of the yuan triggered a selloff in emerging markets that’s spreading to developed nations. Besides Indonesia, Taiwan and Hong Kong entered bear markets last week.

Foreign investors pulled $185.4 million from Indonesian stocks on August 20, the largest daily outflow since December 24.

Reuters

Xinhua

Bloomberg News