Insurance market expands 58 pct in 2015 AMCM Page 2 Monday, March 21 2016 Year IV Nr. 1005 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai
www.macaubusinessdaily.com
Strong gov’t hand Gaming Daiwa gaming analysts read the tea leaves. With regard to the gaming concessions’ renewal. It’s unlikely that any of the operators will be dropped, they say. But the gov’t is definitely in a strong position to influence current events. Perspectives enhanced by an interview with legislator José Pereira Coutinho. Page 7
Going for growth
Bloomberg
events, non-heritage attractions, immigration controls and hotels ‘performed considerably more poorly’ than before. The study analyses ten different sectors such as events, transportation, retail and immigration, with immigration faring worst. While events rated the greatest satisfaction. Page 3
M&A
Credit cards
Education
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Anbang raises stakes for Starwood Hotels
Mainland merchants to pay smaller fees to issuers
16° 20° 19° 21° 17° 22° 13° 19° 12° 17° Today
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University of Macau celebrates 35th anniversary
King of the Fairy Tales He’s one of Mainland China’s best-selling children’s authors. Zheng Yuan Jie was in Macau for the fifth Macau Literary Festival. In addition to promoting his fairytale books encouraging children to be imaginative he spoke to Business Daily of his abiding dream. Setting up a fund that would overshadow that of the Nobel Prize for Literature for writers everywhere to encourage great literary works.
HK HSI March 18, 2016 20,671.63 +167.82 (0.82%) Galaxy Entertainment Sands China Ltd China Resources Power
+7.14% +4.23%
Tencent Holdings Ltd
+3.68%
Bank of East Asia Ltd/The
+3.05%
Belle International Hold-
+2.44%
Ping An Insurance Group
+2.35%
Bank of Communications
+2.23%
Want Want China Hold-
+1.84%
Hong Kong & China Gas
-0.98%
Hang Lung Properties Ltd
-1.33%
Cheung Kong Property
-2.40%
Kunlun Energy Co Ltd
-2.50%
Lenovo Group Ltd
-3.39%
Li & Fung Ltd
-4.39%
I SSN 2226-8294
Interview Pages 8&9
+9.61%
Source: Bloomberg
Tourism Unsatisfactory news from IFT’s Macau Tourist Satisfaction Index. The Tourism Research Centre of the Institute for Tourism Studies found in 2015 Q4 that the satisfaction of tourists stood at 67.8 points on a scale of 0 to 100. The lowest rating since the first quarter of 2011. Casinos,
Source: AccuWeather
Unsettling Survey
Economy Growth policy is of paramount importance. Chinese Vice Premier Zhang Gaoli yesterday conceded the downward pressure on China’s economy. Given the weak global economy, the country must maintain appropriate expansion, he says. Page 10
2 Business Daily Monday, March 21 2016
Macau 27.9 per cent and 24.7 per cent of the total, respectively.
Non-life market
Compared to the significant increase in the life insurance market, the nonlife insurance market only posted a slight year-on-year increase of 6.4 per cent in gross premiums last year, which reached MOP2.08 billion. The sector’s premiums primarily came from policies for Property All Risks and Employee’s Compensation, accounting for some 40 per cent and 20.1 per cent of the segment’s total, respectively. Meanwhile, insurers in the non-life sector settled claims for MOP879.2 million last year, a year-on-year increase of 21.7 per cent. Some 25.8 per cent of total claims were for Employee’s Compensation, which amounted to MOP226.8 million, in addition to claims of MOP192.3 million from vehicle policyholders.
China Life dominates life insurance market Insurance
Insurance market grows 58 pct in 2015 In particular, gross premiums from life insurance sector surged 73.6 pct y-o-y while those of non-life insurers registered only slight y-o-y growth. Kam Leong kamleong@macaubusinessdaily.com
L
ocal insurers raked in total gross premiums of MOP14.1 billion (US$1.76 billion) for 2015, up 58.3 per cent yearon-year and attributable to the notable expansion of the local life
insurance market, according to the latest data released last week by the Monetary Authority of Macau (AMCM). Last year, insurers in the city generated MOP12 billion in gross premiums from the life insurance market, which represents a year-on-year increase of 73.6 per cent from MOP6.93 billion in 2014, whilst total approved claims by
the sector only jumped some 13.2 per cent year-on-year to MOP2.55 billion. Of the total claims, maturity values to policyholders accounted for 29.8 per cent of the total, amounting to MOP760.5 million, followed by claims for death and dividends to policyholders, totalling MOP713.5 million and MOP630.2 million, or
In terms of gross premiums, China Life Insurance (Overseas) Co. Ltd. secured its leadership in the city’s life insurance market, accomplishing some MOP6.75 billion-worth of premiums last year, accounting for 56 per cent of the market total. Meanwhile, AIA International Ltd. also earned gross premiums of some MOP2.9 billion for the year, which represents 17.4 per cent of the segment total. Nevertheless, the company’s approved claims totalled MOP1.2 billion, which accounts for nearly half of the market total. China Taiping Insurance (Macau) Company Ltd. led the non-life insurance market by generating total gross premiums of MOP605.2 million, occupying 29 per cent of the sector total. But the total amount of its approved claims is also the highest compared to other non-life insurers, reaching MOP255 million or 29 per cent of the market total.
Property
China Overseas Land’s annual net profit jumps by a fifth Chairman expects Hong Kong and Macau property market to see “normal adjustment” and the company wants to expand its business in both cities. China Overseas Land & Investment Ltd, the country’s fifth-largest developer, said net profit jumped 22.5 per cent in 2015 and that it aims to achieve more contract sales this
year on improved liquidity in the industry. The state-owned firm said its net profit climbed to HK$33.3 billion last year.
“The group is prudently optimistic about the Mainland China property market in 2016. It is expected that property liquidity will improve, as more policy support from the
government is forthcoming,” company chairman Hao Jian Min said in a statement. “The China property market is expected to remain stable in 2016 while market consolidation will accelerate.” Core profit excluding revaluation gains grew to HK$27.6 billion (US$3.6 billion) last year from HK$22.9 billion in 2014 according to Reuters calculations. However, that fell short of a Thomson Reuters Starmine SmartEstimate of HK$28.95 billion from a poll of 25 analysts. Ho added that he expected Hong Kong and Macau property market will see “normal adjustment” and the company wants to expand its business in both cities. China’s home prices rose climbed 3.6 per cent in February from a year ago, the fastest clip in almost two years, thanks to red-hot demand in big cities, but the risks of overheating in some places combined with weak growth in smaller cities threaten to put more stress on an already slowing economy. The country’s largest property developer Vanke China said on Monday it expected land prices in major cities, already at record levels, will continue to rise this year. Shares of the developer rose 1.5 per cent. The broader market rose 0.7 per cent. Reuters
Business Daily Monday, March 21 2016 3
Macau Tourism
Shine comes off visitor satisfaction According to IFT’s Macau Tourist Satisfaction Index, in 2015 Q4 the satisfaction of tourists stood at 67.8 points on a scale of 0 to 100. João Santos Filipe jsfilipe@macaubusinessdaily.com
I
n the fourth quarter of last year, tourists’ satisfaction sunk to the lowest level since the first quarter of 2011, according to Macau Tourist Satisfaction Index (MTSI) published last week by the Tourism Research Centre of the Institute for Tourism Studies (ITRC). The overall tourism satisfaction in the fourth quarter of 2015 stood at 67.8 points on a scale ranging from 0 to 100 points. This is the second worst score since MTSI started publishing such results in the third quarter of 2009. The worst score was 66.1 points in the first quarter of 2011. ‘The service performance of most sectors declined in Q4 compared to the last quarter. A slight drop in satisfaction was recorded for restaurants, retail shops and tour guides/operators
but other sectors - namely casinos, events, non-heritage attractions, immigration and hotels - performed considerably [more] poorly’, the study reads. The study analyses ten different sectors related to tourism such as events, transportation, retail and immigration controls.
Poor service
In comparison with the last quarter of 2014, all sectors but transportation and tour guides and operators were ranked with a lower score during the fourth quarter of 2015. Visitors to Macau in 2015 gave transportation 68.9 points, while one year ago it was 68.5 points. Likewise, tour guides and operators were assessed last year at 66.9 points, which was an increase from 66.6 points. Of all the sectors, the one tourists preferred most was events which scored 75.8 points. However, this score represented a decline of 3.6 points year-on-year from 79.4 points. At the same time, casinos were the third preferred sector, scoring 67.3 points, which was a decrease of 2.7 points year-on-year from 70.3 points. By contrast, immigration, retail shops and non-heritage attractions were the most disappointing sector
Retail
Ferragamo shares jump in Milan after earnings exceed estimates The shoemaker says sales drop also reflects continued weakness in Hong Kong and Macau. Luxury shoemaker Salvatore Ferragamo SpA rose in early Milan trading after reporting quarterly earnings that beat estimates and forecasting “a positive year” amid a tough industry backdrop. Earnings before interest, tax, depreciation and amortization increased 11 per cent to 324 million euros (US$365 million), Ferragamo said after European markets closed on Thursday. Analysts predicted 313.3 million euros. The shares rose as much as 3.7 per cent. Ferragamo is benefiting from selling more high-margin small leather
goods and having shallower discounts. The gross margin widened 2.2 percentage points to 67.5 per cent in the quarter, with the Italian shoemaker saying it can expand further to as much as 69 per cent “in the medium, longer run.” “The company looks well placed to continue to deliver superior earnings growth,” said Thomas Chauvet, an analyst at Citigroup. Ferragamo’s performance is all the more striking, given an economic climate which the company said “shows critical elements for the luxury sector.” And sales in January and February “have not been particularly good,” the shoemaker said. Like-for-like sales this year are down broadly in line with the single-digit percentage decline seen in the fourth quarter, Ferragamo said, echoing similar comments by Tod’s and Hugo Boss. While the sales were penalized by an aggressive refurbishment plan, the drop also reflects continued weakness in Hong Kong and Macau, subdued trends in the U.S. and more volatile tourist flows into Europe after the November terror attacks in Paris, Chauvet said. Bloomberg
for visitors. In the fourth quarter of 2015, the immigration services scored 65.4 points, down from 65.9 points a year ago, relegating it to the worst satisfactory level of a service in Macau. As for retail shops, tourist satisfaction dropped to 66.4 points from 69.0 points, a decrease of 2.6 points yearon-year. Non-heritage attractions scored 66.5 points, down from 69.9 points.
Hotels and casinos less satisfying
The MSTI also analyses the annual score for all sectors. With regard to this classification there are points that may cause concern for the gaming and hotel operators. Casinos’ overall score for the whole of 2015 stood at 69.1 points, which is a decline year-on-year from 70.2 per cent. While the score is clearly positive, visitor satisfaction with gaming venues has been declining since 2013, when the score was 71.5 points. Satisfaction with hotels decreased to 69.6 points from 71.1 points. The Macau Tourist Satisfaction Index produced by IFT is based on the answers of 1,119 tourists, with most from Mainland China (60.7 per cent), followed by Hong Kong (24.2 per cent) and Taiwan (7.5 per cent).
4 Business Daily Monday, March 21 2016
Macau One Platform
More effort needed by MSAR to become an effective Sino-Luso platform
Not good enough
T
he city lacks a topdown design for developing itself into a trade and economic co-operation service platform between China and Portuguese-speaking countries, suggests a local study released last Saturday by Macau Economic Association. In its research on the city’s strategies for being a
Law
Sino-Luso platform, the Association pointed out that the Special Administrative Region has a few shortcomings that need addressing in order for the city to reach its goal. These restrictions include its small scale economy, monophonic industrial structure, lack of relevant talent and low popularity of the Portuguese language, as well as the lack of hardware
and favourable policies. ‘The government should strengthen its top-down design for being a platform in order to make different government departments, all officials, public servants and even residents understand more about the aim of being such a platform, so that they could provide different levels of assistance and co-ordination,’ the report said.
In addition, it suggests the government conduct more research and studies on Portuguese-speaking countries so that they can better match Mainland Chinese companies based on the demand and supply found from the studies. ‘The government should also provide favourable policies for local-registered companies engaging in Sino-Luso trade apart from striving for more favourable policies from the central government such as relaxing
its strict articles under the Closer Economic Partnership Arrangement (CEPA),’ the Association said, adding cultivating more talent is necessary as well. Nonetheless, the economic group agrees that Macau has made certain ‘satisfactory’ achievements as a platform. ‘The total bilateral trade value, exports and imports between China and Portuguese-speaking Countries have all reached satisfying and exciting results,’ it claimed in the study. K.L.
Ho Chio Meng case shakes faith in legal system
Rui Cunha: Changes to Court of Final Appeal necessary Case of former prosecutor highlights defects in the current system. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
C
ases of influence-peddling in the office of former Chief Prosecutor Ho Chio Meng weren’t evident, but defects in the way the case is being handled are, says Rui Cunha – namesake of the Rui Cunha Foundation and founder of C&C Lawyers – in an interview with Portuguese language
radio broadcaster TDM on Saturday. “There were cases which we were involved in that we might have found strange, why certain positions were taken, why a certain severity in one case and leniency in other cases,” said Cunha. The former judge called these instances “options”, saying that “we can’t point out one case or another as revealing specific intent to delay or accelerate.” With regard to the case itself Cunha expressed sadness that “someone linked to law and linked to the whole judicial structure of Macau could be involved in problems of this type.” The lawyer believes that the case has not eroded the foundation of the legal system but the public perception
and faith in the integrity of the system: “Normally we see in a judge a person who is ideal, an example to follow; by this measure, naturally, it affects the whole system.” Cunha also pointed out that there were certain aspects of the case which could benefit from review: “in terms of the circumstances in which this transpired,” he said, “there are aspects that can lead to more questions and foment a certain perplexity such as the […] fact that people in certain positions are being subjected to special jurisdictional conditions that do not permit an appeal.”
Changes needed
In Cunha’s view, for maximum
accuracy certain changes should be made to the system itself, including to the Court of Final Appeal “as quickly as possible,” which he believes should have “at least” five judges instead of the current three, “so that in the revision (of cases) there can be divergent opinion.” He justifies this by saying: “No-one is infallible, especially judges.” Given Cunha’s experience as a judge, the lawyer appreciates oversight, saluting whenever “one of my decisions was rectified in a higher court,” he told the broadcaster. Cunha pointed out an ever-rising number of court cases and suggested a division of the Court of Second Appeal to help ease the pressure: division into three areas: “an area for criminal law, an area for civil law and an area for labour law.” The C&C founder believes that a complete system review of the judiciary structure is necessary but should be changed “only in the parts that are essential, not because of haste to change, not only for the satisfaction of being able to say that something new was done.”
“No-one is infallible, especially judges.” Rui Cunha, Founder of C&C Lawyers
The lawyer also believes that all practitioners of law in Macau should be fluent in the two official languages or have a way to “understand and be understood in the other language they don’t know”. This necessity, he believes, comes from a need to understand the history and administration of the MSAR, in which “everything” was written and conducted in Portuguese, and a need to proceed into the future of the city, which for the most part is “gradually being conducted in Chinese.”
Rui Cunha, namesake of the Rui Cunha Foundation and founder of C&C Lawyers
Corporate
Shun Tak Group supports ‘Earth Hour’ for eighth consecutive year Shun Tak Group turned off all nonessential lighting of its properties, tourist facilities and high-speed ferry services in Hong Kong and Macau between 8:30pm and 9:30pm on Saturday in support of the tenth edition of ‘Earth Hour’ organised by WWF, as well as to demonstrate the
company’s commitment to conserving the environment and promoting sustainability. The company has participated in the event for eight consecutive years since its inception in Hong Kong in 2009. In addition, the company broadcast a promotional video of ‘Earth Hour 2016’ on its TurboJet vessels for two weeks before the event.
Macao Water and Zhuhai Water co-organise World Water Day activities
The Macao Water Supply Company Ltd. jointly hosted a series of activities for World Water Day themed ‘Be Grateful to our Water Source, our bond of Macao & Zhuhai’ with Zhuhai Water Group in Zhuxiandong in Zhuhai on Saturday. The campaign aims to increase public
awareness of the valuable water resource and environmental protection in addition to enhancing the friendship between the two cities. The events attracted a total of 200 participants from Macau and Zhuhai, including government officials such as the Vice Mayor of Zhuhai, Mr. Liu Jia Wen, and the Director of the Macau Marine & Water Bureau, Ms. Susana Wong Soi Man.
Business Daily Monday, March 21 2016 5
Macau Gaming
New games are expected to be developed and tested in the UM’s gaming laboratory.
Mock gaming facilities in UM to train future casino managers UM demonstrated gaming tables and machines introducing Responsible Gambling in its gaming laboratory on open day. Bami Lio bami.lio@macaubusinessdaily.com
G
aming equipment and machines were demonstrated, and a Responsible Gambling display room was opened to the public on the occasion of the 35th anniversary of the University of Macau (UM). Nearly 20 buildings were opened to the public, while the ‘1st UM Sports Day’ was held on Saturday.
The Institute for the Study of Commercial Gaming (ISCG) Gaming Laboratory is UM’s mock casino located in the Faculty of Business Administration. Gaming equipment and machines as well as machines introducing Responsible Gambling are displayed in the laboratory. The facility started its operation in 2013 as the university moved its new location from Taipa to Hengqin.
Gaming tables demonstration
A laboratory technician and helpers were specially assigned on the open day to publicly demonstrate how the gaming tables and machines work to simulate a real casino. The laboratory technician further explained to Business Daily that the laboratory is expected to provide training for students who may become future
Education
Practical for industry
Students on both Bachelor’s and Master’s programs are entitled to use facilities in the laboratory. Summer training courses of baccarat,
blackjack and dice are provided for students of Bachelor programmes in year two because these games are popular in the local gaming industry. Experiments are conducted in the laboratory. New games are developed and tried out in this training room, with students in the same majors invited to play the games and evaluate the stability of the gaming systems. The structure and technical development of slot machines are also introduced on the courses. Machines introducing Responsible Gambling are also equipped in the teaching facility with the main purpose of reducing social costs and negative effects caused by gambling. Currently, there are some 18 such machines operating in the territory’s gaming market.
Society
MOP5 mln for technology teams in Horizon 2020 The Science and Technology Development Fund (FDCT) will sponsor teams to participate in Horizon 2020 – the EU Framework Programme for Research and Innovation - in the amount of MOP5 million, with an annual ceiling of MOP1 million, according to Portuguese language news outlet Lusa. The fund, whose focus is the ‘necessities of technological development’ in the SAR sponsors Macau candidates providing they participate as ‘a co-operative group comprised of members from, at least, three EU member countries; in other words, have partners […] of three nationalities’ with whom they ‘enter into a co-operation agreement or memorandum’.
managers in casinos. They can also learn from the mock casino as some of them are under the legal age of 21 regarding visitation to casinos. There are five baccarat tables, two blackjack tables, one dice table, one roulette table, nine slot machines, and one system of live baccarat, with tables and machines sponsored by local gaming operators. UM also had a surveillance system in the teaching equipment to provide opportunities and environment for students especially majoring in gaming management to get used to the real gaming industry.
Eligible candidates are local higher education institutes and their respective institutes and research centres, local laboratories and other research and science and technology development entities, non-profit private firms, businesses and companies and active researchers in fields located in the SAR. Sponsorship for selected candidates begins this year. Horizon 2020 is a ‘financial instrument’ that implements an initiative for ‘securing Europe’s global competitiveness’. The research and innovation programme has made available nearly ‘80 billion euros of funding over 7 years (20142020)’ according to the website of the Brussels-based group. K.W.
UM graduates’ median monthly income MOP14,375 in 2015 University of Macau Rector Wei Zhao stated at the opening ceremony of the 35th anniversary of the University of Macau (UM) that over 26,000 students had graduated from the university since it started operation. Currently, almost 10,000 students are studying at the institution. Professor Haydn Chen, vice rector (student affairs) of UM stated that two-thirds of job-hunting graduates had found a job prior to graduation last year. Most of the graduates last year found jobs in education, banking and finance, and entertainment and gaming. Their median monthly income was MOP14,375 (US$1797). A two-day Career and Internship Fair was held in
UM starting March 17. The two-day fair was supported by some 100 companies with more than 5,000 jobs on offer to the 1,500 graduating students of Bachelor’s programmes this year. Rectors from 35 of the city’s secondary schools joined the
tree planting ceremony and it was the first time that UM had held the anniversary celebration in its new campus on Hengqin. Wei Zhao stated in the opening ceremony that the university ranked 39th in the world’s top 100 young universities, according to the latest 100 Under 50 (years old), a university ranking list released last week by Times Higher Education. UM says it plans to build a first-rate university with more outstanding graduates. B.L.
6 Business Daily Monday, March 21 2016
Macau Gaming
Summit Ascent sees loss of HK$85.4 million in 2015
Russian adventure suggests big plans but shallow pockets Group loss due to pre-opening of Tigre de Cristal Casino; phase II construction begins in “late 2016”. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
T
he opening of the Tigre de Cristal casino in Vladivostok in October last year contributed to a loss of HK$85.4 million (US$11.01 million) in 2015 for Summit Ascent, a majority investor in the project, an even greater loss than the HK$78.9 million posted in 2014, according to the company’s annual results filed yesterday with the Hong Kong Stock Exchange. The loss was attributed to the pre-opening expenses of project management, staff and training costs incurred prior to the start of casino operations. Lawrence Ho, Chairman and non-executive director of the company, however, is confident, stating: “We expect to be running at close to optimal levels on a ramped-up basis sometime during the Summer of 2016.” Adjusted EBITDBA (net income after adjustment for pre-opening expense, impairment loss, depreciation
and amortisation, interest, and taxes) amounted to HK$14,346,000 from October 8 until year-end. “We only expect our visitation and gaming metrics to increase,” said Ho in his statement, expounding that the group is “further encouraged by the monthon-month improvements seen thus far during the Winter season.”
The Russian Government does not impose a percentage tax on overall gaming proceeds, but currently has in place a tax on individual tables and slots, with the monthly rates per table and per slot at RUB125,000 (MOP14,735.81) a n d RU B 7 , 5 0 0 ( M O P 8 8 4 . 1 5 ) , respectively.
No table limit
Integrated Entertainment Zone
Three types of gaming revenue for the casino were detailed; namely, rolling chip business, mass table business and slots business (see Chart for performance breakdown). The group had 321 slot machines operating as of February 2016 and boasted an average of 612 registered players entering the casino daily between test launch and 2015 year-end, approximately 50 per cent of whom were ‘non-Russian (predominantly Asians)’. As stated in the report, the Russian Government does not impose any limits on number of gaming tables or slot machines; as such, the ‘Tigre de Cristal is at liberty to adjust its gaming capacities according to business needs’.
Summit Ascent holds 60 per cent in Oriental Regent, an investment holding company with entire equity interest in G1 Entertainment - the holder of a gaming licence to conduct gaming activities in the Integrated Entertainment Zone (IEZ) of the Primorye Region. Summit Ascent derives a 3 per cent management fee income of total gaming revenue generated by Oriental Regent. Tigre de Cristal is currently the only casino operating in the Integrated Entertainment Zone. Chairman Ho stated that the group will “expect our monopoly position to remain intact until at least 2018”. Two other groups have
Summit Ascent 2015 performance breakdown Rolling Chip Turnover (HK$)
2015 November 258,197,000 16,990,000 6,879,000 10,111,000
Turnover Gross Win Less: Rebate Net win after rebate Mass Table Business (Rubles)
Total table drop (Rubles) Table net win (Rubles)
December 312,277,000 10,928,000 6,160,000 4,768,000
January* 355,055,000 10,233,000 5,879,000 4,354,000
October 278,000,000 59,000,000
2015 November 434,000,000 83,000,000
December 448,000,000 101,000,000
January* 407,000,000 107,000,000
October 473,000,000 36,000,000
2015 November 778,000,000 54,000,000
December 763,000,000 56,000,000
January* 1,010,000,000 60,000,000
Slots (Rubles)
Total Slot Handle (Rubles) Slot Net Worth (Rubles)
2016 February* 382,412,000 19,963,000 11,131,000 8,832,000
2016 February* 412,000,000 89,000,000
2016 February* 1,058,000,000 75,000,000
*Note: Based on unaudited management accounts
Lawrence Ho, Chairman and non-executive director of Summit Ascent Holdings
indicated they’ll commence property development in the IEZ, while two other groups are expected to reveal their plans regarding the Zone in the near future.
Future plans
Construction of Phase II of the project is set to begin in ‘late 2016’ with conceptual drawings for the project already commissioned and the project set to open in late 2018. It includes an expected 500 hotel rooms between two hotels, a gaming area with 100 VIP tables, 500 slot machines, a golf course, MICE facilities, shopping mall, nightclub and concert facilities. The master plan for the IEZ includes a water and amusement park, golf courses, ski area and yacht club. According to the report, the group plans to start its ‘rolling business using only casual junkets initially without fixed-room operators,’ to preserve the ‘bargaining power of the casino vis-à-vis fixed room operators’. Fixed room operations for one or two VIP fixed rooms are expected to begin in May after the group has ramped up its ‘own casual junket business’. Plans also include procuring additional and higher value gaming tour operators or ‘casual junkets’ to be signed over the next quarter and accelerating player acquisition programmes in key feeder markets.
“We expect our monopoly position to remain intact until at least 2018.” Lawrence Ho, Chairman and non-executive director of Summit Ascent Holdings
Business Daily Monday, March 21 2016 7
Macau
Gaming Licences
Concession renewal to strengthen government influence Daiwa Capital Markets expects all gaming operators to retain their licences beyond 2022. João Santos Filipe jsfilipe@macaubusinessdaily.com
T
he renewal of the gaming licences will give more power to the local government to influence the decisions of the operators. This is the view of a research note published by Daiwa Capital Markets, following an interview with local legislator José Pereira Coutinho. “Among some of the possible changes under consideration is giving the government a greater ability to exert further influence over the operators”, the report of the analysts Jamie Soo and Adrian Chan reads. “In Mr. Pereira Coutinho’s view this could involve
shortening the new concessions terms (from 2025 years currently), and/or amending the existing laws and regulations and to add specificity in areas that the existing framework does not adequately address.” Currently, three gaming licences in Macau’s gaming sector have been awarded to SJM Holdings, Galaxy Entertainment Group and Wynn Macau, while MGM China, Melco Crown and Sands China are sub-concession holders.
Sub-concessions troublesome
According to the calculations of Daiwa Capital Markets, the sub-concessions together generated MOP108 billion
Junkets
Jimei plans new entertainment complex in Cambodia Junket operator Jimei International Entertainment Group Ltd. is to develop an integrated-entertainment complex in Cambodia with the country’s resort developer Yeejia Tourism Development Company Ltd., according to its filing with Hong Kong Stock Exchange last week. According to the junket promoter, it reached a framework agreement with Yeejia on March 17 to establish a joint venture for the development in the Southeast Asian country. The integrated project would include property, hotel, golf course, theme park and
(US$13.5 billion) in 2015, or 46 per cent of the region’s total gross gaming revenue, which stood at MOP230.8 billion. However, the renewal of the sub-concessions is seen as potentially troublesome by Mr. Pereira Coutinho, mainly because it may lead to a public outcry, given that these concessions were never put up for public tender. By contrast, in November 2001 the three original licences were put up for public tender in a field of more than 20 bidders. “Strictly speaking, there is no legal definition of what specifically constitutes a gaming sub-concession and Macau’s Gaming Law technically does not acknowledge
or regulate the granting of these sub-concession licences”, the report explains. “This situation gives rise to potential issues upon the 2020/22 licence renewal. Despite the gaming sub-concessions being essentially functionally independent of the gaming concession and sharing the same legal obligations and status, their elevation closer to full concession status may create complications as sub-concessions were never put up for public tender.”
Process unlikely to be timely or orderly
The view of Daiwa Capital Markets is that it is a “stretch” to consider the possibility of any of the casino operators
not having their gaming licence renewed through the renewals process. “Legally and technically, the gaming concession should be reopened for bidding once the 25 years is up”, it is explained. “That said, given that the six operators have continued to invest significant resources in casino projects, it is a stretch to imagine the government driving out any of the six incumbent concessionaires when their terms technically expire”, they remarked. Nevertheless, the Japanese brokerage firm says that the concessions renewal “process is unlikely to be timely or orderly . . . given the lack of clarity”.
Gaming Revenue
other entertainment and tourism business. Meanwhile, the agreement also includes Chinese constructor MCC International Incorporation Ltd. – which will provide construction and consultancy services to the Jimei-Yeejia joint venture. For the joint venture, Jimei will be in charge of providing the land use rights of a Cambodian land plot for the new project as well as all other relevant consents, such as approvals, licence and permits, whilst Yeejia would be responsible for formulating the development project plan, arranging for and procuring finance. Jimei currently owns interests in the junket business in NagaWorld casino resort owned by Cambodian gaming operator NagaCorp Ltd. in the country, which includes seven gaming tables in the casino property. K.L.
Landing Int’l casino revenues slip 19 pct in 2015 Mainland real estate developer Landing International Development Ltd. saw its revenues generated from its Korean casino business register a year-on-year plunge of 18.5 per cent to HK$17.4 million (US$2.17 million) for the whole year of 2015, it informed Hong Kong Stock Exchange last Friday. In its filing, the company currently running a casino in Hyatt Regency Jeju Hotel in Jeju, South Korea in a partnership with Genting Hong Kong Ltd. - did not explain the factors causing such a drop in casino revenues. In fact, Landing posted a loss of HK$73.6 million in its casino business for the year, expanding more than 2.5
times compared with its loss of HK$20.3 million in 2014. Despite its loss in the segment, Landing said in its filing that there are still a ‘series of advantageous factors’ of its developing casino business in South Korea, claiming it perceived ‘an upward trend in the number of Chinese tourists travelling to South Korea and the gaming industry in Korea is expected to gain advantage from the booming tourism in South Korea’. ‘The Group aims to develop the Jeju Casino as one of landmarks of Jeju Korea,’ it stated. For 2015, the Chinese property developer registered a total net loss of HK$987.97
million, which grew by 236.4 per cent compared to that of HK$293.7 million for 2014, although its total turnover increased 10.4 per cent yearon-year to HK$246.5 million. Landing explained that the total net loss is mainly due to the loss on disposal of property subsidiaries, loss on disposal of financial assets, as well as increase in administrative expenses and financial costs. By contrast, the company’s casino business partner, Genting Hong Kong, told Hong Kong Stock Exchange last Thursday that its total net profit had soared by 448 per cent year-on-year to US$2.1 billion from US$384.1 million for 2015. K.L.
8 Business Daily Monday, March 21 2016
Macau Interview Literature
‘Although children have learned a lot at school they don’t have a curious mind [making them] creative to invent things’ One of the Mainland’s most successful writers, Zheng Yuan Jie visited Macau for the first time for the fifth Macau Literary Festival. The children’s fairytale writer tells Business Daily that besides the fairytale kingdom he builds to encourage children to be creative and inquisitive, he also wants to use his wealth to set up a literary fund to encourage great writing.
Since my books are published mainly in China and other countries like Japan and Korea, children in Macau are not like the Mainland Chinese children who are very familiar with my books.
Annie Lao annie.lao@macaubusinessdaily.com
What is the core message of your books for children? The most important message to children is that I want to keep their imagination and curiosity open because children’s imagination is very rich. Since they have not much knowledge, when they see something they will think from their point of view without any limitation in their own thinking to reach an explanation of their own. This is very precious. But once they start going to school, they seem to lose this ability to be imaginative. Also, their parents and teachers are actually doing the same thing alongside the current school’s curriculum that limits children’s imagination. Although they have learned a lot at school they don’t have a curious mind to create and invent things. That’s the reason there are very few creators and inventors. For instance, Albert Einstein had a childlike mind of innocence, like other successful people who are aged around 70 to 90 who still think like a child because they have a childlike mind of innocence, curiosity and knowledge. Only having curiosity without knowledge [means one] cannot be creative. I hope my books can awaken children’s imagination; meanwhile, I hope they have the awareness of equity, which means not making trouble for other people, respecting all kinds of people, and having the sense of being in an ethnic group in a nation with free competition.
It’s your first visit to Macau. What do you think of the city? I feel very good in Macau. Originally, I thought Macau was only for gambling. But after I came here because of the Fifth Macau Literary Festival, and talking with some of the local journalists and some writers at the Festival, I feel that for me now Macau is not only for gambling but has its own culture. I also feel very safe in Macau, being able to walk alone in the street after midnight or 2:00 am without getting robbed. What differences do you discern in Macau from other regions? In recent years, I’ve been to many countries. I’ve rarely seen cranes that are used to build housing in Japan, the US, Spain and Italy, but in Macau there are so many cranes, which means its economy is thriving. Macau’s economy is prosperous so that’s why housing is being built everywhere. I can only see this situation in Mainland China, but China’s economy has been slowing down, especially in Beijing where I can see fewer cranes nowadays. Macau not only has the Macau Literary Festival, it also has the culture festival and film festival. I didn’t know that Macau was a place to visit before. After visiting Macau this time, I’m impressed by it. I’m thankful for being invited to be a guest at the festival so I’m able to come to Macau for the first time. What was the reaction of the children during your Young Readers Session in Macau?
Passion for writing How did you become a writer? Except for writing, I had nothing to do. When I was young, I was really good at writing. My teacher always praised me for my good writing skills so I thought I could be a writer. I had very little schooling when I was a kid. I only had four years of primary school education due to the Cultural Revolution in China at that time. When I was 22 years old, I [was eligible to sit] the College Entrance Examination in 1977 but I didn’t take the exam. It’s because I thought even if I didn’t go to university I could still earn a living. I rely on my writing skills to make money.
Funding literary prize As one of the richest Chinese writers, can you share with us how you manage your wealth?
I don’t mange my wealth. I don’t invest in the stock market. I don’t buy properties. I only want to put my money aside for a literary prize. I’ll set up a literary prize in the future, funded by the money I’ve earned from publishing my books. It will be used to praise one individual who is excellent at writing every year from all around the world. I want the value of the prize to be worth more than the value of a Nobel Prize for Literature. I’ll offer this prize to one great writer every year after I pass away. I need to work hard for this. I expect the fund will be worth about 900 million yuan. What does the management of money mean to you? I think the meaning of managing money is that the money you own belongs to you, not going into other people’s hands, and by giving your money to help people who are in need, doing meaningful things. For me, the literary prize is meaningful, which means the money I spend belongs to me forever.
Zheng Yuan Jie
Zheng Yuan Jie is a Mainland Chinese fairytale author. Born in 1955 in Shijiazhuan, in Hebei, he started his writing career of children’s fairytales in 1978, since when he has been a solo writer for a monthly children’s literature magazine called ‘King of Fairy Tales’ for 31 years in China. The first issue of the magazine was published in 1984. His well-known characters include PiPilu, LuXixi, Shuke, Beita and Luoke. His His PiPilu storybooks have sold over 100 million copies
‘Macau is not only for gambling; it also has its own culture’ When there was an earthquake disaster in China, I donated my money to the children who suffered from this tragic event. By doing this, the money I donated belongs to me forever. If I spent 1 million yuan to buy a car which was not mine, it’s not going to be mine in a way. Not a lot of people realise this.
Difficulties in publishing Have you ever faced any difficulties publishing your books in China? Overall, it has been smooth. But some topics remain taboo. For example, I want to share sex education with children through my books because
worldwide, and are one of the top ten books. In 2008, he was awarded the China Charity Award model by the Ministry of Civil Affairs in China. In the same year, he was awarded the International Copyright Creative Gold Award by the United Nations, the first Mainland Chinese writer to receive this award. He twice topped the Richest Chinese Writers List in 2009 and 2012. He says he believes that children’s imagination and curiosity should not be limited by the conventional curriculum of school education.
Business Daily Monday, March 21 2016 9
au Macau
their parents are too shy to talk about sex to their children. When I was young, I asked my mum “where did I come from?”. My mum said to me “you were picked up from a rubbish bin”. After that, I thought it was not a good thing, but in fact that was wrong. Actually, the origin of life is a very good and divine thing to talk about. Due to the lack of sex education in Mainland China, I want to educate children about this topic through my works. However, I was criticised for doing this. The publishers said to me I should not write about sex education in fairytale books which they consider ‘unsuitable for children’ to read. Because of that, the content of my books [regarding] sex education was deleted. I can’t even use the word ‘marriage’, which got deleted, too, in my books. Do you feel limited in your writing in China? No; they just say writing about sex education in children’s books is not good so I stopped writing about this. I can then not write about this topic but let children think that “they were picked up from a rubbish bin”. I didn’t
think of writing on this topic before but having seen so many children reading my works I started to think of this idea of letting them know about sex education in my books. They can then know more about their psychical bodies.
Future plans Will your books be translated into English? Yes, they will. But I’m in no hurry for this because the market for children’s books is huge in Mainland China with a children’s population of about 350 million. The sales volume of my books has been really good. If I could find suitable publishers for the English version of my books, I would consider it. There’s no rush for that. The main reason is that if my books were translated into English less money would be paid to the original writer as some part of the money would be paid to the translators. The publishers usually pay about 13 to 15 per cent of the copyright tax of my books; even with 15 per cent copyright tax, they would consider it to be profitless. Plus,
adding on another 6 per cent of the copyright tax they need to pay for my works to be translated into English. It’s not all about money but I don’t lack money right now. What are your immediate plans? I’m still writing the monthly children’s literature magazine King of Fairy Tales all on my own for 31 years now. The magazine has published about 200 million copies. I’m still working on this at the moment for this year. I’ve never been to other countries before except for last year. It’s been 30 years without travelling abroad because I’ve been writing for the magazine. Each month, I need to write about 90,000 words. I start
‘The market for children’s books is huge in Mainland China, with a children’s population of about 350 million’
writing from 4:30 am to 6.30 am in the morning every day. I wake up at 4.30 am too when I’m in Macau. This is my morning routine. What is your plan after visiting Macau for the Festival? After my visit to Macau, I’m going to write my new 100-book series on travelling fairytales as I’m writing the books every day now. In these new books, I’ve created a character who has visited Macau. And I’m going to write about one country in each book of the series, including China. The first book is bout Japan, the second book is about the UK and the third book is about China. Macau is the focus of the seventh book in the series. After I’ve finished writing these books, I think a lot of Mainland Chinese children are going to ask their parents if they can visit Macau as I’m going to write about Macau as a very interesting place to be. When will your new books be published? The new book on Macau will be published in July this year since it still needs some time to be illustrated.
10 Business Daily Monday, March 21 2016
Greater China Structural Data
Economy still under pressure but improving Beijing has pledged to make monetary policy more flexible this year.
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hina’s economy still faces downward pressure but recent data points to some improvement in activity, Vice Premier Zhang Gaoli said yesterday. Chinese leaders have repeatedly tried to reassure jittery financial markets and China’s major trading partners that Beijing is able to manage the slowing economy, following a slide in the country’s stock market and depreciation of the yuan. “We don’t want to shy away from saying that China’s economy is facing downward pressure, but overall the progress is steady,” he said. Recent data, until early March, including fixed-asset investment and employment, showed that the economy is improving, Zhang told a high-level economic forum in Beijing. China’s manufacturing output in January and February grew at its weakest pace since 2008, according to data released by the National Bureau of Statistics earlier this month. The government will make pre-emptive policy adjustments to help keep economic growth within a reasonable range, Zhang said, reaffirming the official stance. The government also needed to
prevent risks in the stock, debt, currency and property markets, prevent “cross infection” between the markets and ward off systemic risks in the economy, Zhang said. China will press ahead with “supply-side reforms” to cut excess industrial overcapacity, focusing on such sectors as coal, steel, aluminium and plate glass, he added. The government has set a growth target of 6.5 percent to 7 percent for 2016. The world’s second-largest
economy expanded by 6.9 percent in 2015, its slowest pace in 25 years. Beijing has pledged to make monetary policy more flexible this year even as it leans more on increased fiscal spending and tax cuts to support economic growth and cushion the pain from structural reforms. Finance Minister Lou Jiwei told the same forum that he saw little market impact caused by Moody’s recent downgrade of its outlook on China’s government debt.
On March 2, Moody’s Investors Service lowered its outlook on Chinese government debt to “negative” from “stable”, citing uncertainty over authorities’ capacity to implement economic reforms, rising government debt and falling reserves. “I don’t care too much about its ratings,” he said, adding that the government will be able to deal with the problems cited by the ratings agency. Reuters
Vice Premier Zhang Gaoli
Key Points • Recent data, until early March, shows economy improving - V.Premier • Says govt needs to prevent cross-infection in markets • Govt able to deal with problems cited by Moody’s - Finmin
Business Strategy
Bank Cards
Resources Beer’s losses lead management to rethink focus The brewer expects consolidation in the beer industry going forward and plans to grow its business organically and through acquisitions. Donny Kwok
Ch i n a R e s o u rc e s B e e r (Holdings), which controls the nation’s largest brewer that makes the world’s No. 1-selling Snow beer, posted a wider loss in 2015 due to losses in non-beer businesses that were hit by a slowing economy. Th e Ch i n es e b r e w e r, which earlier this month announced the purchase of London-based SABMiller’s 49 percent stake in their CR Snow joint venture for US$1.6 billion, said its net loss grew to nearly HK$4 billion (US$516 million) last year from HK$161 million in 2014. Revenue increased 1 percent to HK$34.82 billion. The company sold off its nonbeer businesses to its parent in September but their
underperformance till then during the year hurt the bottom line. Profits from its beer business rose 9.2 percent to HK$831 million, helped by a 3.2 percent increase in average selling prices. That was despite sales volume decreasing 1.3 percent in a market that is shrinking due to slower economic growth and changes in consumer spending habits. Jason Hou, general manager of the China Resources Snow Breweries joint venture through which the company runs its beer operations, said he expected to see low single-digit growth in both beer sales volume and average selling price for this year. “We will not cut our price,” Hou told a results conference. “We will focus
on developing our mid- to super-premium beer products in the next few years, tracking the growth trend of this market segment in the mainland.” The premium beers segment is expected to make up over a third of the US$80 billion Chinese market by the end of the decade - compared to less than 10 percent in 2010. The brewer expects consolidation in the beer industry going forward and plans to grow its business organically and through acquisitions. “We believe that the beer market will be further consolidated over the medium term, especially at the expense of smaller regional players,” Chairman Chen Lang said in a statement. The company has no plans to sell a stake in CR Snow for now but is open for partnership and acquisitions opportunities in the future, Hou said. The company said it planned to use a combination of funding options for the stake purchase from SABMiller. Its shares ended up 3 percent on Friday, outpacing a 0.8 percent rise in the benchmark Hong Kong index. Reuters
Government cuts transaction fees Card-issuing banks will not be allowed to charge merchants more than 0.35 percent of a transaction amount for debit cards. China’s central bank said on Friday it will cut the fees the country’s merchants pay for bank card transactions, a move that will lower their costs but cut income for lenders at a time their soured debt levels are increasing. The action, to take effect on September 6, will result in a 7.4 billion yuan (US$1.14 billion) cut in the fees merchants pay in a year, the People’s Bank of China (PBOC) said on its website. Under the coming policy, card-issuing banks cannot charge merchants more than 0.35 percent of a transaction amount for debit cards, while credit card transactions cannot incur a charge exceeding 0.45 percent of the amount swiped, according to the PBOC. At present, the ceiling on fees that merchants pay varies, depending on the sector.
Banks can charge restaurants, hotels, jewellery and auto businesses a maximum 0.9 percent of a transaction amount. While merchants will benefit from the new rules, pressure on banks will be increased, said Xingyu Chen, a bank analyst at Phillip Securities (Hong Kong) Ltd. However, he added that the impact “won’t be that big” as such fees are not a main source of income. Bad loans increased to a decade-high last year as China’s economy grew at its slowest pace in over two decades. O ffi ci a l data sh o w e d China’s banks had 1.3 trillion yuan of bad debt, for a non-performing loan ratio of 1.67 percent, at the end of 2015. Three months earlier, the ratio was 1.59 percent. Reuters
Business Daily Monday, March 21 2016 11
Asia M&A
Starwood gets US$13 billion bid from Anbang Marriott, which has until March 28 to counter Anbang’s offer, said it was considering its options.
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tarwood Hotels & Resorts Worldwide Inc on Friday said a US$13 billion cash offer from China’s Anbang Insurance Group Co was superior to one from Marriott International Inc, setting the stage for the largest-ever deal by a Chinese company in the United States. The operator of Sheraton and Westin hotels said the Chinese insurer’s offer beat Marriott’s previously agreed cash and stock offer by nearly 15 percent, and that it planned to scrap the proposed deal with the rival hotel chain. Anbang has been on a U.S. hotel buying spree as Chinese insurers rush to acquire cash-generating assets as they struggle to keep up with the policy liabilities of the country’s aging population. U.S. assets are also seen as a good hedge against weakness in the Chinese yuan currency. The Anbang-led consortium which also includes private equity firms J.C. Flowers & Co from the United States and Primavera Capital from China - has bid US$78 per share in cash, or US$13.16 billion overall, based on shares outstanding as of February 19. Anbang’s bid is binding and fully financed, Starwood said. Starwood will have to pay a US$400 million breakup fee to Marriott if it walks away from their deal. Starwood’s shares were up 5 percent at US$80.20 in afternoon trading, their highest level since November. Dan Wasiolek, a hotel industry analyst at Morningstar, said Marriott could still counter with a higher offer. “Marriott can increase their offer because they have the balance sheet flexibility,” he said, suggesting the larger rival hotel company could sweeten its offer by US$700 million in cash. If Anbang’s offer is successful, it would boost the company’s reputation as one of China’s top corporate acquirers, adding Starwood to its stable with its nearly 1,300 hotels in about 100 countries. Starwood brings with it several well-regarded hotel
brands as well as a loyal business customer base. The offer follows Anbang’s US$6.5 billion deal struck last week for Strategic Hotels & Resorts Inc and its US$2 billion purchase of New York’s iconic Waldorf Astoria hotel last year. John Paulson, president of hedge fund Paulson & Co, Starwood’s largest shareholder, welcomed Anbang’s sweetened offer, saying it “better reflects the value of Starwood.” He called the Chinese company a “proven, sophisticated buyer of related assets.”
“Anbang may have to requalify the chain for coverage under federal travel regulations” Michael Wessel, American commissioner of the US‑China Economic and Security Review Commission
Beijing-based Anbang’s bid for Starwood epitomizes its meteoric rise since it was founded in 2014 with an initial focus on car insurance. Thanks to a spate of deal making at home and abroad, privately held Anbang now manages more than 1.9 trillion yuan (US$292.3 billion) in assets, according to its website. Its chairman Wu Xiaohui married the granddaughter of former Chinese leader Deng Xiaoping.
Regulatory review
A deal with Anbang would likely face a review by the U.S. Committee on Foreign Investment in the United States (CFIUS), an interagency panel that reviews deals to ensure they do not harm national security. A CFIUS probe would take around 10 weeks and would focus on the proximity of Starwood’s several hundred U.S. hotels to critical facilities
and the protection of customers’ privacy, such as credit card data and information that passes through hotel Wi-Fi, said a source close to the deal. Anbang won approval to buy the Waldorf Astoria last year and to buy annuities and life insurer Fidelity & Guaranty Life just this week, giving it confidence that it can also win approval for the Starwood deal, the source said. In 2012, CFIUS ordered the purchase of a wind farm in Oregon to be reversed because it was too close to a naval base. Stephen Heifetz, a partner with law firm Steptoe & Johnson LLP, said this was unlikely in this case. “I’d be surprised if there were any deal-killer for a large multi-property location,” he said, although he warned that the companies might have to make some concessions to get the deal through. Other CFIUS experts have said previously that U.S. regulators might be concerned about a Starwood property, the W Hotel in downtown Washington, which overlooks the U.S. Treasury Department and the White House. The U.S. government would also likely reconsider allowing some government officials to stay in the chain’s hotels, said Michael Wessel, a commissioner on Congress’s U.S.-China Economic and Security Review Commission. “Anbang may have to requalify the chain for coverage under federal travel regulations,” he said. “If any individual properties posed a problem, one of the mitigation strategies could either be the sale of problem assets to another chain or potentially to limit reimbursement for government employees on government business at those properties.” In either deal, Starwood shareholders will also receive stock in Interval Leisure Group Inc, which is buying Starwood’s vacation ownership business for about US$5.67 per Starwood share. Lazard and Citigroup Global Markets Inc are financial advisers to Starwood and Cravath, Swaine & Moore LLP is its legal counsel. PJT Partners Inc is Anbang’s financial adviser, while Skadden, Arps, Slate, Meagher & Flom LLP is its legal counsel. Reuters
In Brief Premier
Government to make preemptive policy changes China, which expanded at its slowest pace in 25 years last year, will make pre-emptive policy changes to support growth and ward off financial risk, Premier Li Keqiang said in remarks published on Friday. The government would make sure it achieved its main economic development targets this year, state radio quoted Li. Premier said the government would closely watch the economic situation at home and abroad. The government would “make good use of fiscal and monetary policy tools to strengthen pre-emptive and timely fine-tuning, prepare policy reserves and effectively guard against various risks”, Li said. Property
Suzhou unveils rules to cap home price rises Authorities in China’s Suzhou city have introduced measures to cool a red-hot housing market by putting a cap of 12 percent on annual home price gains, the local government said on Friday. The move would make Suzhou the first second-tier city to rein in surging home prices after senior officials raised concerns about the country’s overheated housing market during an annual parliament meeting this week. China’s four biggest cities including Shenzhen, Shanghai and Beijing, where prices surged most, were also working on measures to cool the market in response to recent strong sales and prices gains. Sponsorship
Wanda signs contract with FIFA Chinese company Wanda Group has signed a highest-level sponsorship contract with FIFA, according to a statement released by the world soccer governing body on Friday. The contract will grant Wanda the highest level of sponsorship rights, which includes the next four FIFA World Cup editions, the statement said. As part of their agreement, Wanda will have rights to all FIFA competitions and corporate activities up to and including the 2030 FIFA World Cup, according to the statement. Wanda Group chairman Wang Jianlin said he hoped their cooperation with FIFA will enhance the development of soccer in China. M&A
China Security & Fire to acquire security assets China Security & Fire Co Ltd plans to acquire security assets in Australia and Thailand for more than US$150 million, the latest example of Chinese companies expanding overseas through acquisitions. Chinese companies have been actively making foreign acquisitions in sectors such as property, consumer, financial and commodities. China Security & Fire, which sells security products, plans to spend A$157.5 million (US$120.3 million) to purchase security related assets owned by Securecorp Australia Pty Ltd and eWitness Nominees Pty Ltd, it said in a filing to the Shanghai stock exchange on Friday.
12 Business Daily Monday, March 21 2016
Asia Gold
Indian jewellers call off strike Jewellery sales in India have fallen since the start of the year due to higher gold prices. Rajendra Jadhav
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ndian jewellers called off a 19-day strike late on Saturday after government assured they will not be “harassed” by the excise department in collecting a new tax, the head of a trade body told Reuters. Jewellers from the world’s
1,000 Tonnes Approximate amount of gold India imports annually
second-biggest gold consumer went on an indefinite strike from the start of March after government reintroduced a 1-percent excise duty on gold jewellery after four years. “We have called off strike. From tomorrow jewellers will open shops,” said Mohit Kamboj, president of India Bullion and Jewellers Association (IBJA). “The excise duty will remain there, but the government has assured us officials from excise department will not harass jewellers,” he said. Successive governments have struggled to curb appetite for gold in Asia’s third-largest economy, despite the imposition of a 10-percent import duty in 2013 and other restrictions.
Annual imports of up to 1,000 tonnes of gold, accounting for about a quarter of India’s trade deficit, have also prompted the government to launch a scheme to mobilise a pool of more than 20,000 tonnes of the metal in homes and temples. The government decided to form a committee to address jewellers’ concerns, related to implementation of excise duty, Kamboj said, adding the committee will submit
Digital Heist
A U.S. embassy official in Dhaka tells Reuters Washington stands ready to assist the government of Bangladesh in its investigation.
Bangladesh has formally sought assistance from the U.S. Federal Bureau of Investigation to track down the cyber crooks who stole US$81 million from its central bank’s U.S. account, the interior minister said on Saturday. Unknown hackers breached the computer systems of Bangladesh Bank in early February and attempted to steal US$951 million from its account at the Federal Reserve Bank of New York, which it uses for international settlements. Some attempted transfers were blocked, but US$81 million was transferred to accounts in the Philippines in one of the largest cyber heists in history. The central bank governor resigned on Tuesday, as details emerged in the Philippines that US$30 million of the money was delivered in cash to a casino junket operator in Manila, while the rest went to two casinos. “We sought the FBI’s assistance when a group of FBI met with me for investigating the central bank heist last month,” Interior Minister Asaduzzaman Khan told Reuters. An U.S. embassy official in Dhaka told Reuters Washington stood ready
to assist the government of Bangladesh in its investigation. A senior police official involved in the investigation said that an FBI team was expected to visit the Criminal Investigation Department (CID) of police in Dhaka yesterday. The CID was also coordinating with Interpol to track down the perpetrators. “We are trying to find out what type of security there was, what safety measures were taken, and how the thieves penetrated the fire wall,” he said. The chief of the main opposition Bangladesh Nationalist Party said on Saturday that if elected her party would ensure real autonomy for the central bank. “There will be no interference or influence from the political party,” Begum Khaleda Zia said at a party conference. A central bank official said two engineers from secure network operator SWIFT (the Society for Worldwide Interbank Financial Telecommunication) had started tests on Saturday. He said the system would be upgraded if needed. “Bangladesh is a member of the SWIFT society, so we use its service for international transactions,” the official added. Reuters
Investment applications double The government hopes the new policies targeting industrial clusters and value-added sectors will draw foreign investors back. Thailand’s investment applications nearly doubled in the first two months of 2016, mainly in the technology, farm and chemical industries, helped by new policies launched last year, the investment agency said on Friday. Foreign and Thai firms submitted investment applications worth a combined 32.44 billion baht (US$931.9 million), up 96 percent from the same period a year earlier, the Board of Investment said. Foreign firms alone applied to invest 12.5 billion baht, a five-fold jump. The big increase, however, also reflects a low comparative base in 2015, when the government introduced new policies that led to a slump in submissions that year. The government hopes the new policies targeting industrial clusters and value-added sectors will draw foreign investors back to Thailand, which has been under military rule since a coup in May 2014 ended prolonged political unrest. Faced with poor exports and sluggish domestic demand, the junta has focused on promoting investment to help pull Southeast Asia’s second-largest economy out of a rut. “We have continued to organise events to tell our policies domestically and abroad...and found that most investors remain confident to invest in Thailand,” Hirunya Suchinai,
secretary-general of the investment board, said in a statement. The agency expects its target of 450 billion baht in overall investment applications will be achieved, she said.
“It’s vital to reassure investors that politics are stable and government policies clear” Piyasak Manason, Chief economist with Kiatnakin Bank
Hirunya told Reuters last month she expected foreign investment proposals in Thailand to jump 82 percent this year to 194 billion baht from 2015, when they plunged to 106.5 billion. “It’s a good sign for the government, but we have to see if they can continue to keep this up. It’s vital to reassure investors that politics are stable and government policies clear,” said Piyasak Manason, chief economist of Kiatnakin Bank. “I’m worried they may just be applications and may not necessarily mean actual investment,” he added. Reuters
Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk João Santos Filipe; Michael Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Bami Lio; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Francisco Cordeiro Web & IT Janne Louhikari Photography Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily. com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com Founder & Publisher
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But Finance Minister Arun Jaitley surprised the market on February 29 by maintaining import duty and imposing excise duty. “There is lot of pent-up demand. Imports will rise from next week,” said a Mumbai-based dealer with a private bullion importing bank. India’s February gold imports dropped to US$1.44 billion, from US$2.91 billion in January. Reuters
Thailand
Bangladesh seeks FBI’s help in investigating central bank theft
Serajul Quadir
its report in 60 days. The government imposed an excise duty in 2012, but was forced to roll it back after jewellers went on strike. Jewellery sales in India have fallen since the start of the year due to higher gold prices and as consumers delayed purchases hoping for a cut in import duty in the budget. This has forced importers to offer a discount of up to US$53 per ounce to clear inventory.
Business Daily Monday, March 21 2016 13
Asia LNG
Huge Petronas project runs into further delays An ambitious plan to build Canada’s first LNG export terminal faced challenges from the start. David Ljunggren, Julie Gordon and Emily Chow
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major liquefied natural gas export project in Canada ran into another delay on Saturday when the federal environmental assessment agency was granted an extra three months to finish an impact study. Ottawa did though commit to announcing a final decision on the project this year, which would end a long-running saga for Malaysia’s state-owned oil giant Petronas. The firm and its partners have been waiting nearly three years for a permit to build the Pacific NorthWest LNG facility in northern British Columbia, on the Pacific coast. News of the latest delay broke on Saturday, when federal Environment Minister Catherine McKenna agreed to the Canadian Environmental Assessment Agency’s request (CEAA) for the extra three months. The CEAA - which had been due to deliver its report to McKenna by March 22 - said it needed more data from the project’s backers after they handed over a series of documents and observations on March 4. A spokeswoman for McKenna said the federal cabinet would announce a decision three months after the backers had handed over the requested additional information. The ambitious plan to build Canada’s first LNG export terminal faced challenges from the start, including
controversy over its chosen site, which local aboriginal and environment groups said would destroy a critical salmon habitat. It is also the first major project to have an environmental assessment completed under new rules that include the impact of upstream production on project emissions. A spokesman for Pacific NorthWest did not immediately respond to a request for comment. Petronas, battling a profit-sapping slump in prices that could produce heavy losses, can ill afford to splurge on future supply.
‘Gas prices are currently a quarter of 2014’s peak’ But neither can it afford a lengthy and inconclusive process with authorities in Canada, where the project is seen as a test of Prime Minister Justin Trudeau’s green credentials. Trudeau’s Liberals came to power last November promising to do a much better job of protecting the environment than the previous Conservative government. But the Liberals, who say Canada must cut emissions of greenhouse gases, are also under pressure to push through approvals of projects in the energy sector, which is losing jobs due to the slump in oil and gas prices.
“The agency has requested additional information from the proponent in order to determine whether the project is likely to cause significant adverse environmental effects,” it said in the statement. The request for more time to complete the impact study raises the prospect of more conditions on construction. This could simply make the project economically enviable, analysts say, leaving Petronas to write off billions already invested. For Petronas, and Malaysia, the conditions have changed dramatically since it launched the project, long considered a front-runner among dozens proposed for British Columbia. Gas prices are currently a quarter of 2014’s peak. Last month, Petronas cut jobs and announced some US$12 billion in spending cuts over the next four years - the same sum analysts estimate it has sunk into the Canadian project. And Malaysia’s economy too is cooling, dampened by China and a domestic financial scandal. Petronas is one of the country’s biggest employers and accounts for nearly a third of the government’s oil and gas-related revenue. The stakes are also high for Canada, which is seeking to kick start the local LNG industry, said Wood Mackenzie analyst Chong Zhi Xin, speaking before Saturday’s announcement. But those ambitions come as Trudeau promises to transform Canada’s environmental image. If built, environmental campaigners say the Petronas project would tarnish that. Reuters
In Brief Myanmar
Local banks rated as largest income tax payers Some five local Myanmar giant banks including three military owned ones were rated as the largest income tax prayers among 50 in the fiscal year 2014-2015, according to an announcement of the Ministry of Finance on Saturday. KBZ Bank, the biggest local bank which serves as the fund settlement bank for Yangon Stock Exchange, is the largest tax income payer. The bank paid more than 20 billion Myanmar kyats (about US$20 million) as income tax. The bank stood five times as the largest tax payer during the outgoing U Thein Sein government. Bangladesh
Main opposition holds council Bangladeshi ex-Prime Minister Khaleda Zia unveiled her future plans as her largest opposition party Saturday held its 6th National Council in the capital city of Dhaka. She also reiterated her demand for an interim election under a non-party government. About 3,000 councillors approved Khaleda Zia and her elder son Tarique Rahman as chairperson and senior vice-chairman of the Bangladesh Nationalist (BNP) respectively. Twotime ex-PM Khaleda and her son, who has been living in London since September 2008 after he was forced into exile by the army-backed government, were elected unopposed on March 6. Brunei
Healthcare budget cut for upcoming fiscal year Brunei’s healthcare budget for the upcoming fiscal year has been reduced by 9.2 percent, following Brunei’s move to prioritize prudent spending, local media reported Friday. At the meeting of the 12th Session of the Legislative Council (LegCo), Awang Haji Zulkarnain, Brunei’s minister of health, tabled a total spending of 349.6 million Brunei dollars (US$257.7 million) for the fiscal year 2016-17, a decrease of 35.6 million Brunei dollars (US$26.2 million) from the previous year’s allocation. A breakdown of the budget was not disclosed, but recent LegCo meeting reported cuts to pharmaceutical expenditure, among other welfare provisions. Thailand-Cambodia
Defence ministers to meet over co-operation Cambodian defence minister Gen. Tea Banh will fly to Bangkok next week, where he is scheduled to meet with his Thai counterpart Gen. Prawit Wongsuwan to discuss continued cooperation along the border, the defence ministry said in a statement on Saturday. The two ministers will meet in the 11th meeting of Cambodia-Thailand General Border Committee, which will be held on March 23 and 24, the statement said. “The meeting will be focused on three important topics, covering security affairs, relations and cooperation, and development along the border of the two countries,” it said.
14 Business Daily Monday, March 21 2016
International In Brief Eurozone
Bundesbank boss criticises ECB ‘bazooka’ The president of Germany’s Bundesbank on Saturday criticised the latest package of stimulus measures by the ECB including slashing rates still further, warning against “reckless” moves and unintended fallout. In an interview with German journalists Jens Weidmann indicated he was “not convinced” by the efficacy of an unprecedented barrage of stimulus measures to jumpstart the eurozone economy. “The package decided on did not convince me overall,” said Weidmann. “I have always drawn attention to the fact that the longer the effect of an ‘ultra-relaxed’ monetary policy lasts the weaker (that effect) becomes, Weidmann told reporters. Brazil
Central bank seeks to weaken currency Brazil’s central bank plans to auction up to US$1 billion worth of reverse currency swaps today, in an indication that policymakers are uneasy with recent gains in the real that could worsen the magnitude of the nation’s harshest recession in decades. Officials at the central bank began consulting foreign currency traders on whether there was any demand for reverse currency swaps in an auction, according to four traders with direct knowledge of the situation. The auction of reverse swaps is the first in three years, according to Thomson Reuters data. Argentina
Government secures World Bank loan Argentina has secured US$3.5 billion in new financing from the World Bank over the next two years to help fund water, health and housing projects as well as a child welfare programme, the Finance Ministry said on Friday. The financing, which will be in addition to an impending disbursement of US$2.8 billion, will be welcome hard currency for the centre-right government of Mauricio Macri which is having to rebuild the country’s low foreign currency reserves. IMF
Panama needs to stick to stronger deficit controls Panama should follow more effective deficit controls, an International Monetary Fund (IMF) commission said late on Friday, citing waivers and extensions that could threaten to undo recent gains in reducing the country’s debt. Valerie Cerra, head of the IMF commission meeting in Panama this week, proposed a new fiscal council or independent body to supervise a law that sets tougher limits on the public finances of the Central American country. The IMF estimates that Panama will grow 6.1 percent this year, while its midterm GDP growth forecast for the country is between 6 and 7 percent.
Iran
Khamenei says economy first as new year begins Unemployment in Iran stands at a little over 10 percent but youth unemployment is around 25 per cent.
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ran’s supreme leader said yesterday that the economy must come first, insisting in a Persian new year’s day message that domestic production is the best route to a strong recovery. The Nowruz holiday comes just two months after implementation began of a landmark nuclear deal between Iran and world powers led by the United States, triggering the lifting of a raft of international sanctions and raising the prospect of renewed foreign investment. Ayatollah Ali Khamenei has said repeatedly that foreign investment will only help if it is used to develop Iran’s domestic industries. “Hopes exist for the year 1395... but to achieve these hopes we must make efforts day and night without interruption,” Khamenei said in a pre-recorded television address. “The economy must be our priority,” he said, dubbing 1395 “the year of the resistance economy and action”. The ending of the 13-year standoff over Iran’s nuclear programme has raised expectations of recovery after years of economic difficulties, including high inflation which dramatically reduced Iranians’ purchasing power. The economy exited a deep recession little more than a year ago. But although international oil sales have resumed and exports risen since the nuclear deal went into effect in January, the price of crude means receipts have been low, and growth remains weak.
“The solution is the economy of resistance,” Khamenei said. “With the economy of resistance, we can fight unemployment and recession, control inflation and confront the threats of enemies.” He said the government of President Hassan Rouhani had put in place “extensive measures” to repair the economy. “Steps have been taken and these preliminary actions must continue,” the supreme leader said, in a possible nod to Rouhani’s taming of inflation, which has fallen to 13 percent from more than 40 percent when the president took office in August 2013.
“I do not expect that these problems will be solved in a year, but I’m sure that if appropriate actions are taken, we will see the effects at the end of the year.” Unemployment in Iran stands at a little over 10 percent but youth unemployment is around 25 percent, making job creation vital. In a separate message, broadcast immediately after Khamenei’s, Rouhani echoed the supreme leader, and said economic growth of five percent was his aim for the next 12 months. “I have hope, and am certain that with interaction with the world, we can move towards economic prosperity,” he said. AFP
“I have hope, and am certain that with interaction with the world, we can move towards economic prosperity” Ayatollah Ali Khamenei, Supreme Leader of Iran
Supreme Leader of Iran Sayyed Ali Hosseini Khamenei
Congo
Government orders extractive firms to pay taxes in U.S. dollars Mining and oil companies contribute more than US$2 billion per year to government revenue. Amedee Mwarabu Kiboko
Mining and oil firms in Democratic Republic of Congo must pay taxes and import duties in U.S. dollars from Saturday rather than in the national currency, the Central Bank of the Congo said. The decision is part of an attempt by authorities to increase reserves of foreign currency, weakened by a slump in global mining and oil prices that has hit government revenue. It reverses a policy established in 2014 to require companies to pay taxes in francs as part of a drive to wean the central African country off dollars.
Congo is Africa’s top producer of copper, and mining is key to an economic boom that has seen growth rates of 8 percent for five years, among the highest in the world, according to International Monetary Fund figures. Mining and oil companies contribute more than US$2 billion per year to government revenue, according to the Extractive Industries Transparency Initiative, which sets a global standard for accountable management of natural resources. The measure would enable the Bank to “get a grip on some of the currency supply” and allocate it rationally to the public and private sector, said
Governor Deogratias Mutombo. The government of President Joseph Kabila counts macro-economic stability as a key achievement. Senior officials say privately, however, they fear that lower global commodity prices and higher government spending in an election year could put that at risk. Kabila is due to step down after presidential elections set for November, when his second term ends. Critics say his administration has failed to spend sufficiently on infrastructure, health, education and boosting employment to address the needs of the vast country. The central bank said in February it would buy francs and increase the percentage of deposits banks must lodge with it, in an early move to prop up the currency. Congo’s exchange rate has held steady and stands at 936.95 to the dollar, according to the central bank. Inflation last year was less than 1 percent. Reuters
Business Daily Monday, March 21 2016 15
Opinion Business Wires
PHILSTAR The Philippines’ balance of payments (BOP) remained in deficit in February, albeit narrower, as a return of capital inflows partly offset higher foreign debt payments, the central bank reported Friday. The BOP – a summary of all inflows and outflows in an economy – posted a gap of US$316 million last month, more than two times lower than the US$813 million in January. A deficit indicates more resources left the country than entered. For the first two months, the shortfall widened to US$1.129 billion. The Bangko Sentral ng Pilipinas has forecast a surplus of US$2.2 billion for the year.
THE KOREA HERALD Lotte and Shinsegae, the nation’s two retail giants, are planning to build shopping complexes in Seoul and neighbouring cities to curb the rapid growth of online retailers. By 2018, Lotte plans to open four shopping malls -- two in Seoul and the other two in Incheon -- to lure customers wanting to enjoy shopping and cultural activities at one site. The malls will be outfitted with retail stores, supermarkets, movie theatres and restaurants on floors ranging in size from 160,000 square meters to 410,000 square meters -- equivalent to the size of 70 football fields.
Check your fund manager’s privilege
Y THE TIMES OF INDIA The World Health Organization has suspended the approval of tuberculosis drugs made by India’s Svizera Labs, a major supplier to developing countries, following an investigation into standards. The United Nations agency, which acts as a drug watchdog in markets lacking robust local regulation, said on Friday it had suspended all TB products made at Svizera’s Mumbai site because manufacturing standards and quality management were unreliable. It also said independent experts should retest batches of medicine already on the market and it might be necessary to recall supplies, depending on the outcome of those tests.
ou might want to consider firing your money manager in favour of a woman or someone from a less wealthy background. Two recent studies highlight that mutual fund managers from less affluent backgrounds and seasoned hedge funds with female managers both outperform. Maybe the movie “Trading Places,” in which a homeless man ran rings around affluent financial executives, wasn’t so far fetched after all. The argument here isn’t that women or those with less family money enjoy some inherent advantage as money managers, but that in order to break in and build a career they must be made of finer stuff. A study of U.S. mutual fund managers released in February hand-collected census data on the households in which managers grew up in order to measure how family background relates to performance. As you might expect, fund managers, as a group, come from wealth. Their fathers’ incomes are in the 90th percentile, they grew up in houses worth double the local median and were more likely to go to private schools and expensive universities, according to the study. All of those advantages are some of the reasons they were well positioned to get to work in a highly paid and competitive industry like fund management. But while their families’ investment in them has paid off, how are their clients doing? Not quite so well, it seems. Fund managers from families in the top 20 percent of parents’ income underperform those from the bottom 20 percent by 1.54 percentage points annually by a standard measure of risk-adjusted return, the study found. “We argue that managers born poor face higher entry barriers into asset management, and only the most skilled succeed. Consistent with this view, managers born rich are more likely to be promoted, while those born poor are promoted only if they outperform,” Oleg Chuprinin of University of New South Wales and Denis Sosyura of University of Michigan write in the study. Those from wealthier backgrounds have an easier time getting additional funds or being transferred to work at larger funds but those from poor backgrounds have to outperform to get the same rewards. “A manager from the 25th percentile of parents’ income has to outperform a manager from the 75th percentile by about 0.74 percent per year to stand an equal chance of promotion,” according to the study. There was some indication that managers from poorer backgrounds had more concentrated portfolios and traded more, perhaps indicating that
James Saft Reuters columnist
they take on more risk to try to overcome other disadvantages.
Small sample size
There are, of course, some caveats here. The study uses data from the 1940 census to establish family background and was very rigorous about being sure about matching the right fund manager. That leads to a small sample size, 208, with a bias towards older managers. It is possible that the industry has become more meritocratic in recent years. A 2015 study of hedge funds found that only 2.6 percent in the sample were managed exclusively by women and 4.6 percent name any women as managers, again resulting in a fairly small sample size. There were only 439 hedge funds identified with any women managers over the 20 years covered by the study, carried out by Rajesh Aggarwal and Nicole Boyson of Northeastern University. Female-only funds do about as well as male-only funds, while mixed-sex teams seem to underperform both male- and female-only funds. What was striking was that among hedge funds that survive (and remember many hedge funds fail in the first few years), those with at least one female manager have better performance than male-managed surviving funds, despite having lower assets under management. “Using media mentions as a proxy for investor interest, female-managed funds receive proportionately less attention. Our results suggest that there are no inherent differences in skill between female and male managers, but that only the best performing female managers manage to survive,” the authors write. Among surviving hedge funds, those with female management had a buy-and-hold annual return of 7.52 percent against 6.69 percent for male firms. Female-run hedge funds also produced more risk-adjusted outperformance, doing better by about 0.60 percentage point annually. Again, though the sample size is smaller than ideal, both studies seem to indicate a truth that is easy to imagine: that people who cross major boundaries, in this case of gender and economics, to pursue their careers face high hurdles. That winnowing process only allows the best to get through. Reuters
“It is possible that the industry has become more meritocratic in recent years”
THANH NIEN NEWS Tensions are running high inside an industrial park in southern Vietnam as dozens of companies operating there have protested a fee that they say is unreasonably high, leading to threats and retaliation from the property’s manager. In a complaint sent to Long An Province authorities, food producer Tango Candy Ltd. said the management of Tan Duc Industrial Park has recently announced a so-called infrastructure fee of more than VND10,000 (US$45 cents) a square meter a year. Companies located in the park will have to retroactively pay for the past three years.
16 Business Daily Monday, March 21 2016
Closing M&A
Foxconn lowering offer for Japan’s Sharp
Taiwan’s Foxconn is lowering an offer for loss-making Japanese electronics maker Sharp Corp from an initial plan of 489 billion yen (US$4.4 billion), the Yomiuri newspaper reported yesterday. The reason behind the move is that Foxconn appears to be concerned about financial risks of potential liabilities at Sharp and its business outlook, according to Yomiuri. The newspaper did not say how much Foxconn, formally known as Hon Hai Precision Industry Co, will lower the offer to.
Sharp late last month said it would issue around US$4.4 billion worth of new shares to give Foxconn a two-thirds stake in a deal the Taiwanese company backed out of at the last minute. Foxconn’s total investment was set to total nearly US$6 billion, according to a source. Foxconn is seeking guidance from Sharp on its latest quarterly performance as part of its efforts to finalize the planned acquisition, a person familiar with the matter said. Reuters
China’s financing
Central bank chief sounds warning over rising debt The OECD said corporate debt alone now stands at 160 percent of China’s GDP.
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eople’s Bank of China Governor Zhou Xiaochuan sounded a warning over rising debt levels, saying corporate lending as a ratio to gross domestic product had become too high and the country must develop more robust capital markets. China still has a problem with illegal fundraising and financial services are insufficient, Zhou said in a speech at the China Development Forum in Beijing yesterday. He said the country still needs regulation to guard against excessive leverage in foreign currencies. “Lending as a share of GDP, especially corporate lending as a share of GDP, is too high,” Zhou said. He said a high leverage ratio is more prone
to macroeconomic risk. In a briefing on March 16, Premier Li Keqiang said a high corporate debt ratio “is not new in China” and China would seek to bring it down with capital-market reforms. Corporate debt alone now stands at 160 percent of China’s GDP, according to the Organization for Economic Cooperation and Development. The group’s secretary-general, Angel Gurria, said earlier in the day that sectors with especially high leverage include cement, steel, coal and flat glass, and China must address the issue. He called it a short-term risk.
Senior executives
Zhou, 68, spoke on the second day of a three-day forum, where some of
the world’s best-known executives -- including Facebook Inc.’s Mark Zuckerberg, UBS Group AG’s Sergio Ermotti and International Business Machines Corp.’s Ginni Rometty -- mingled with top government officials. The Chinese leadership’s message overall was that it would press ahead with necessary structural reforms even as economic growth slows. “That transition is going to be good for China and is going to be good for the world,” International Monetary Fund Managing Director Christine Lagarde said at the event. “Like any transition, it will not go without some bumps on the road. And we should expect them because there is a delicate balance to be struck between deliberately slowing economy and reforms that need to be accelerated.” Leaders including the PBOC’s Zhou have stepped up efforts to cushion
“That transition is going to be good for China and is going to be good for the world” Christine Lagarde, Managing Director of the International Monetary Fund
Lee Kuan Yew
IPO
China’s economic slowdown, with the central bank announcing on Feb. 29 a 0.5 percentage point cut to the amount of deposits banks must hold as reserves. Excessive monetary policy stimulus isn’t necessary to achieve China’s growth targets and prudent monetary policy will be maintained if there isn’t any big economic or financial turmoil, he said March 12.
Robust markets
One option for addressing high leverage is to develop “robust capital markets,” Zhou said. The country should channel more savings into the capital markets, which will help reduce leverage in the corporate sector and boost equity financing, he said. The nation’s defence of the currency depleted its foreign-exchange reserves by US$513 billion last year, the first-ever annual drop. Asked about a rapid decline in China’s foreign-exchange reserves, Zhou said growth in reserves have been “explosive” after 1997 and between 2002 and 2008. Given the speed with which inflows grew, it was now only natural to see big outflows. “It may well be that for too long a lot of investors were being used to having a currency that was appreciating, and of course it moves both ways depending on circumstances,” Lagarde said at a question-and-answer session with Zhou. She said the yuan’s rate was broadly in line with fundamentals. Bloomberg News
Commerce
Nine organisations gather to Bank of Tianjin said to price Guangxi plans hold remembrance event near bottom end infrastructure to boost international trade Nine organisations from the Chinese, Malay, Indian and Eurasian communities yesterday jointly organised a remembrance event to commemorate the legacy of Singapore’s founding Prime Minister, Mr Lee Kuan Yew, who died on March 23 at age of 91 last year. More than 1,000 people, including ministers and members from public and private sectors, were present at Stamford Green, where the event was held, to honour the late Lee Kuan Yew for building Singapore a cohesive, multi-racial society. Four youth representatives from the Malay, Indian, Eurasian and Chinese communities have delivered a speech in honour of the late prime minister. Some highlighted his contribution to a clean nation with mutual respect, while others pay tribute to his personal character such as self-discipline and hard-working. Twenty-eight year-old Cheong Xuan Yong, who graduated from the Nanyang Technological University (NTU) in 2014 with honour in biomedical science and a bachelor in traditional Chinese medicine, honoured Lee for his bilingual policies in promoting Singapore from a under-developed city-state into a modern nation as well as his dedication in preserving nature. Xinhua
Bank of Tianjin Co., a commercial lender based in the northern Chinese port city, and its owners raised US$949 million after pricing a Hong Kong initial public offering near the bottom end of a marketed range, according to people with knowledge of the matter. The bank and some existing investors sold a combined 995.5 million shares at HK$7.39 apiece, the people said, asking not to be identified as the information is private. The shares were offered at HK$7.37 to HK$9.58 each, according to the lender’s prospectus. Bank of Tianjin is the first company to price a Hong Kong IPO of more than US$300 million this year, as the Hang Seng China Enterprises Index rebounds from a roughly seven-year low hit last month. The offering will add to the US$861 million raised from first-time share sales in the city this year, the slowest start since 2011, data compiled by Bloomberg show. A Hong Kong-based external spokeswoman for Bank of Tianjin declined to comment. The three Chinese lenders that listed in Hong Kong last year are all trading above their IPO prices, with Bank of Jinzhou Co. rising 27 percent since its December listing. China Zheshang Bank Co., a commercial lender in eastern China, is scheduled to price its US$1.75 billion first-time share sale on March 21 Bloomberg News
South China’s Guangxi Zhuang Autonomous Region plans to strengthen local infrastructure and establish the region’s Beibu Gulf as a free-trade zone to increase trade and partnerships with the ASEAN. Guangxi Communist Party secretary Peng Qinghua said at a conference yesterday that the government will build more transportation, energy and water conservation infrastructure as well as develop the local information technology industry. Established in 2006, the Beibu Gulf Economic Zone comprises six cities: Nanning, Beihai, Qinzhou, Fangchenggang, Yulin and Chongzuo. It has become increasingly important in connecting southwest and central China with southeast Asian countries. Ports in the zone can handle 224 million tons of cargo every year,” said Zhou Xiaoxi, Beibu Gulf Port Group’s board director. In 2015, it handled 204 million tons of cargo, more than three times the figure in 2006. It operates 25 shipping routes every week to major ports in the ASEAN, said Zhou. Guangxi will continue opening up under the Belt and Road initiative, said Peng. Xinhua