Business Daily #1368 August 24, 2017

New Balance wins copyright lawsuit in Mainland IP Page 10

Thursday, August 24 2017 Year VI Nr. 1368 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Sanctions

The effects of Typhoon Hato were the strongest to be felt in Macau this century and possibly for the last three decades. Only serving to prove how Macau’s money has been lavished - by the hundreds of millions of patacas, billions of patacas - on mostly private and commercial institutions, in support of associations (some of them connected to political decision makers) and what passes as infrastructure.

In recent years, Macau has been lucky not to have felt the fury of the region’s infamous typhoons, which have sidestepped the city. Maybe that’s why the authorities have relaxed the already relaxed work they normally do.

A direct hit and the impact of insufficient infrastructure investment have revealed what has long been known but which few seem to care about: heavy flooding, lengthy power outages, and serious damage to the entire city as a result of poor or insufficient maintenance of public spaces.

It’s shameful.

The little investment that is made in the city is lost in a labyrinth of interests, with public works taking four and five times longer and costing many times the estimated cost. With second-rate materials that shortly afterwards reveal what nobody investigates: streets that collapse, windows that are torn from their frames, roofs that disappear. And no-one takes responsibility. Noone demands dismissal. Nobody wants to know because the autonomy enacted by the Basic Law - and the fact that Macau is not a political problem for Beijing, yet - dissolves the guilt through the mists of the following dawn.

With its coffers overflowing, the problem of Macau remains the same: certain elites continue to fill their pockets without the slightest tinge of conscience because there is no accountability. And it is better that some problems continue to be swept under the rug. And because the government manages to placate the justifiable wrath of the citizenry with small subsidies and supports, crumbs that deceive a population already of itself without a great political conscience and little motivated to demand what would be legitimate: good governance in a city that has everything to become a truly exemplary example of development.

Not this!

Neighbouring city needed to close its stock market yesterday Page 3

Hato power

Blackouts and cuts worsen typhoon aftermath Page 2

Reform

Petrochina activity in U.S. points to change Page 16

T10 Trauma Typhoon Hato

Virtually out of a clear blue sky. Fast-moving Typhoon Hato laid waste far and wide.

Shaking the city to its core. Fallen trees, shattered windows, flooded streets, five casualties - and an ocean of debris. With widespread power outages and water cut-offs catching public facilities, authorities and consumers completely off-guard. Pages 2 & 3

No business like snow business

Images of havoc

We collect some of the most shocking photos of Typhoon Hato’s trail of destruction.

From the flooded surroundings of Ponte 16 to the procession of fallen trees around Lou Lim Iok. Disrupting businesses, lives, property . . . and the city’s complacency.

Interview Sebastien Portes, GM for Hong Kong and Macau at Club Med, is super confident. In the company’s regional strategy. The top-notch hospitality operator is linking properties for multi-destination tourism across the Greater Bay, China and Asia. With sport and skiing key drivers. Pages 6 & 7

Mainland tightens grip Currency Rates in China reached almost a five-month record yesterday. The central bank drained funds for a third day.

To reduce speculative financing. Page 9

Graphic Pages 4 & 5

HK Hang Seng Index August 22, 2017

27,401.67 +246.99 (+0.91%) Worst Performers

Ping An Insurance Group Co

+4.20%

Wharf Holdings Ltd/The

+2.75%

Want Want China Holdings

-6.49%

Hong Kong Exchanges &

-0.77%

China Overseas Land &

+3.73%

China Life Insurance Co Ltd

+2.58%

China Unicom Hong Kong

-2.59%

Tencent Holdings Ltd

-0.61%

CITIC Ltd

+3.34%

Industrial & Commercial

+2.55%

Lenovo Group Ltd

-1.80%

Hang Lung Properties Ltd

-0.41%

Geely Automobile Holdings

+2.92%

BOC Hong Kong Holdings

+1.98%

Hong Kong & China Gas Co

-1.21%

Power Assets Holdings Ltd

-0.37%

China Resources Land Ltd

+2.83%

AAC Technologies Holdings

+1.96%

Cathay Pacific Airways Ltd

-0.84%

Hang Seng Bank Ltd

-0.29%

28° 31° 26° 30° 27° 30° 27° 31° 26° 32° Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Macau should not be like this

China turns off gasoline tap to North Korea Page 8

Hong Kong

www.macaubusiness.com

2 Business Daily Thursday, August 24 2017

Macau Typhoon

The aftermath of Hato MSAR Gov’t also announces policy to assist affected local SMEs Cecilia U cecilia.u@macaubusinessdaily.com

T

he roads and alleys were in complete chaos. Sirens blasted in some buildings.

People were busy removing spoiled goods and products from their shops near the Rua dos Ervanarios in the Inner Harbour.

The proprietor of a tailor’s located in the most seriously affected part of the city told Business Daily that his losses would amount to at least MOP300,000.

“My computer and the machines are all dead,” said the owner. “And many of the clothes are useless.”

He said the flood reached more than 1.60 metres in just a few minutes, leaving him and his wife no time to rescue their goods from the shop.

“We had already prepared for the flooding by putting our things on a high table,” said the owner’s wife.

“But the flood this time exceeded our expectations; this time the flood was more serious than Typhoon Hagupit.”

A shop selling damp bedding at a very low price attracted many residents.

Another worker employed by a pharmacy said they might have lost over MOP100,000-worth of products.

Many owners were also saddened by their trashed motor vehicles, with many trying hard to bale the seawater out of their vehicles.

Firefighters and police removed hanging metal sheets which had fallen from rooftops and shops.

And Business Daily also noticed that a couple of tour buses parked outside shops at Averia Preta when Signal 8 was hoisted.

Compensation

The Economic Services Bureau (DSE) announced that the MSAR Government had set up a special fund granting MOP600,000 to support local SMEs (small and medium sized enterprises) severely affected by the super typhoon.

The fund allows eight years of repayment, and affected firms may approach the Chamber of Commerce, the Industry and Commerce Federation of Macau Central and Southern District, the Industry and Commerce Federation of Islands of Macao, the Industry and Commerce Association of Macau Northern District and the Federal General Commercial Association of Macau Small and Medium Enterprises for fund application.

Meanwhile, the Macao Monetary Authority (AMCM) urged local insurance firms to expedite works in meeting insurance claims. AMCM also advised affected firms to prepare documents for the claims.

According to an official announcement made by the Civil Protection Operations Centre, the super storm resulted in five fatalities and 153 injuries.

Meanwhile, Hengqin authorities informed affected firms and individuals that a tax rebate would be granted to deserving cases.

Hato

City of lights in the dark A blackout near noontime yesterday as Typhoon Hato raged across the city may have a negative impact on GGR as CEM struggles to restore power supply Sheyla Zandonai sheyla.zandonai@macaubusiness.com

In spite of the violent Typhoon Hato that hit the city yesterday not all casinos in town shut down their operations, a note from Union Gaming said yesterday.

The brokerage firm contradicted several media reports claiming that all casinos had been closed due to the typhoon.

‘We believe that many, but not all, of the casinos inside flagship properties were operating – albeit at diminished capacity in some cases – as of late afternoon,’ the note read.

Casinos, which take on large amounts of power to keep running – Macau has just literally been labelled the ‘brightest city in the world’ this week – also rely on generators to back up power outages.

The Gaming Inspection and Co-ordination Bureau (DICJ) issued a statement yesterday urging casinos located in parts of the city which have been affected by power cuts to cease gaming operations in order to ensure the safety of customers and staff.

Companhia de Eletricidade de Macau (CEM) also urged customers to limit usage until power could be restored.

Near noontime yesterday, a failure of the power supply cable from Zhuhai to Macau

caused the city to black out, according to information released by CEM via mobile message.

Yesterday evening, the local power supplier said in another message to customers that ‘with the typhoon impacting the Mainland’s power

supply capacity to Macau the local power supply is unable to be fully restored,’ claiming further that power facilities have also been flooded in some areas of the city.

Some 82 per cent of Macau’s power in 2016 was imported from Mainland

China.

Reports attributed the power cuts in Macau yesterday to an extensive shutdown in the city of Zhuhai, north of Macau, South China Morning Post (SCMP) reported.

Following yesterday’s typhoon, Union Gaming said

it expected gross gaming revenue (GGR) growth to take ‘a couple of basis points hit,’ something which the brokerage said ‘could easily become notably worse should power supply issues remain overnight and into the next day [today].’

Business Daily Thursday, August 24 2017 3

Macau Hato

Diving from the skies Typhoon Hato’s fury did not spare even sizeable structures in the city, with cranes falling off buildings like acrobatic divers Sheyla Zandonai sheyla.zandonai@macaubusiness.com

As Typhoon Hato wreaked havoc in Macau yesterday, several big structures and construction sites around the city have been destroyed or collapsed, while electricity and water supply have been cut off for several hours – with services only partially re-established by the time this paper went to print.

At least two cranes used on the construction site of Nova Grand building, a development by Shun Tak Holdings Limited in Taipa, toppled over during the storm generated by the tropical cyclone.

Cranes were also observed falling on a construction site in the new development area of Hengqin.

A residential building near Casino Ponte 16, operated by SJM, had several windows blown out by the severe gusts of wind that rampaged through the city as the typhoon approached Macau.

The structure crowning the top of the Macao Cultural Centre edifice has also been seriously affected.

Reports about serious damage to the structure of Integrated Resorts in Cotai were also received. Union Gaming, a brokerage, said in a note yesterday that there were ‘photos of flooded casino floor(s) circulating,’ which the brokerage believes are of a ‘3rd party casino(s) on the Peninsula.’

It was the first time in five years that a typhoon had pushed the Meteorological and Geophysical Services (SMG) to hoist the tropical

storm warning signal to T10 by mid-morning yesterday.

The maximum sustained wind near the ce ntre at that moment reached some 165 kilometres per hour, according to information provided by the Hong Kong Observatory.

Previously, the local meteorological bureau had hoisted the signal from no. 3 to no. 8 at 9:00am, and then to 9 an hour or so later.

By that time, all the bridge connections between Macau and Taipa had already been closed to traffic. At 3:00pm they still remained closed.

By early afternoon, the same services updated the warning to ‘+10.’

A T10 tropical cyclone falls into the category of a severe typhoon. The aggravation of conditions would lead to a super typhoon.

Typhoon

Hong Kong lowered storm signal after closing markets Severe Typhoon Hato made landfall in China after it lashed Hong Kong with heavy winds and rain, forcing the city to issue the highest storm warning and its stock exchange to cancel trading for the day.

The Hong Kong Observatory issued the signal 8 at 2:10 pm yesterday, after hoisting signal 10 for five hours. It’s the first time since Typhoon Vicente in July 2012 that the city raised its highest-level warning. The last time Hong Kong had to cancel full-day trading was in October 2016, when Typhoon Haima forced schools to close and airlines to suspend flights.

‘About 450 flights have been cancelled at Hong Kong International Airport as of 11:00 am, according to the Airport Authority’ Severe Typhoon Hato has made landfall over Zhuhai of southern China, the Observatory said. The storm is moving away from Hong Kong and weakening gradually. Hato, named after the Japanese word for pigeon, is forecast to move west-northwest

A man and his children play in the strong wind during the passing of Typhoon Hato at Tsim Sha Tsui, Hong Kong yesterday. Source: Lusa

at about 25 kilometers per hour into inland Guangdong.

About 450 flights have been canceled at Hong Kong International Airport as of 11 am, according to the Airport Authority. Cathay Pacific Airways Ltd. said a majority of flights to and from Hong Kong between 6 am and 5 pm on Wednesday have been suspended. Hong Kong Chief Executive Carrie Lam has to stay in Hangzhou for another day due to flight cancellations, Radio Television Hong Kong reported.

Most businesses closed and much of the city’s public transport shut down with the initial hoisting of the signal 8. Earlier today, MTR Corp. canceled train services in open sections and

maintained limited services underground on an adjusted schedule. All schools were closed.

The storm also affected some Hong Kong-listed companies that were due to report earnings yesterday. Health and Happiness H&H International Holdings Ltd. and K. Wah International Holdings Ltd. are among those that canceled their press conferences.

Sinotrans Ltd. postponed a briefing to today. Zhou Hei Ya International Holdings Co., however, decided to hold its investor presentation and press conference as planned.

The Observatory warned of “flash floods” due to the heavy rains. Waves of “a few feet high” were seen near the shore at the residential area Heng

Fa Chuen on Hong Kong Island, with water rushing into building lobbies and carparks, according to RTHK. Residents in fishing village Tai O were urged to take shelter as the Observatory said there may be “waist-deep flooding” in the low-lying areas.

The government opened 26 temporary shelters and 279 people had sought refuge. As of 11 am, a total of 34 people sought medical treatment at public hospitals. There were 182 reports of fallen trees. Several trees fell onto a highway in the Wan Chai business district, while traffic remained light as most people weren’t going to work. Some still made it to the office.

Clement Cheng, a Hong Kong-based trader at RBC Investment Management Co., went to work by car at 7:40 am and found the office empty except himself and an analyst.

‘It’s the first time since Typhoon Vicente in July 2012 that the city raised its highest-level warning’ “I need to get into the office to manage some regional orders,” said Cheng.

“It is super windy in Hong Kong. I can feel my apartment moved a bit this morning.” Bloomberg News

Blackouts

CTM service to be affected following overuse of backup The telecommunications company said yesterday in a communiqué that they had suffered ‘a scale power blackout since 12:00 noon today (August 23), which affects the operation of CTM telecom equipment located in various district of Macau.’

The company said that they had activated ‘the UPS system to back up power supply for the equipment; due to the continued investment in the UPS system, the backup power supported the equipment to continuously operate for 8 hours.’

CTM says that, ‘as the power supply is unstable, while the power company

is not able to provide the schedule and arrangement of power recovery, the UPS system which CTM adopted will gradually be used up after functioning for more than 8 hours. If the power supply has not yet been resumed, the fixed line service, Internet service and leased line service in certain area will gradually be affected.’

Two telecom equipment rooms located in the Inner Harbour were seriously damaged by flooding, CTM says, and it will need restoration work for the damaged equipment as soon as the water subsides, the company indicated.

4 Business Daily Thursday, August 24 2017

Macau

T

Wake up call

he most heavy floods Macau registered in decades, trees torn apart all over town and the islands, cars seriously damaged, people trapped hours in the city’s skyscrapers, entirely roads blocked, hundreds of distress calls, garages with more water than swimming pool, cranes collapsing and windows shattered every where. Three dead and two disappeared.

The videos in the social media couldn’t be more revealing. Electricity cuts and a massive water problem. Too much on the roads, none in the houses. A brutal mess. And almost no words from political figures by the time citizens were on the streets evaluating the losses. The CE and the Social Affairs Secretary, at night, finally evaluated the problem. Clearly, there much more to be done…

Inner Harbour near Ponte 16

Lou Lim Ieoc Garden

Ave. Coronel Mesquita

Rua do Campo Library

Business Daily Thursday, August 24 2017 5

Macau

Red Market

Macao Cultural Centre

West End of San Ma Lo

Inner Harbour near to the Saint Lawrence Market

Rua das Estalagens

Vehicles affected by floods…

… and by fallen trees

6 Business Daily Thursday, August 24 2017

Macau Opinion

Interview | Hospitality

Big plans in the Bay and beyond Ashley Sutherland-Winch* Phone scam survival guide Is anyone else horrified that the almost 30 per cent of victims affected by recent scams by phone in Macau, causing monetary losses of around MOP12.5 million in less than a month, were university students?

Judiciary Police (PJ) reported this week that upon analysing the complaints and investigating data collected from the cases filed from July 20 to August 9, the PJ are meeting with the Tertiary Education Services Office (GAES) and education institutions to ‘discuss the development of several awareness and prevention campaigns in academic institutions.’

It seems that students are falling for phone scams due to their lack of knowledge on the issue.

On August 8, I received a PJ advisory by text message warning that there had been a ‘huge spike in the number of phone scams in Macao.’ The message explained that scammers are posing as Customs officers, Immigration department officials, and even the PJ. With scams on the rise, we all need to remember these important points to avoid fraud. 1- Do not answer phone calls from unknown numbers.

Simply picking up the phone is an indication to criminals that your number can be used for fraudulent activity. If the call is legitimate or important, the caller will leave a voicemail. 2- Remain cautious and sceptical if answering calls from a stranger. This is especially true if the questions being asked require you to answer an affirmative “Yes” or “No.” These questions might include, but not be limited to “Can you hear me?” “Is it a convenient time for you to talk right now?”

3- Do not give your personal information to strangers. This seems obvious but since recent scammers in Macao are posing as officials pretending to be legitimate, it is better to give no personal information over the phone. 4- Configure your phone to automatically switch calls from unknown numbers to voicemail. One thing you should know is that scammers never, under any circumstances, leave voice messages.

Do not let your guard with email, either. In early August, the local telecommunications company’s name - CTM - was being used to send fraudulent email scams. Once CTM learned of the scam, they were quick to warn customers confirming that the company would not normally request customers provide personal information such as their ID number, user ID, password and account number over the telephone or via email.

Safeguard your money and identity from scammers and please do not become a statistic. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.

An ambitious expansion for all-inclusive hospitality operator Club Med, with a new segment specifically for the Mainland market, two brand-new properties to open in October, and an aim for 30 properties in Asia within the next three years, explains Sebastien Portes, General Manager Hong Kong and Macau at Club Med. Shooting to become the leader in premium ski holidays in China and partnering up to prepare for the Olympics, the group is linking together properties for multi-destination tourism across the Greater Bay, China and Asia.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

H

ow many properties is ClubMed currently operating in China?

Now we have four. There is one in Sanya, one in Guilin and two in the northern provinces which are ski resorts. They’re Yabuli, next to Harbin, and Beidahu, next to Changchun. We will open two new resorts on the first of October and our new segment – that is called Club Med Joy View.

It’s a new segment dedicated to China and the objective is to build some properties within driving distance from the Tier-1 cities, starting with Beijing, Shanghai and Guangzhou. The idea is basically to offer a kind of short experience of Club Med very close to the big cities, a weekend escape, a nature escape, so either on the countryside or at the seaside.

It’s really aimed at targeting those people willing to escape the city; most of the stays will be just two days, one night, which is much shorter than what we usually do in Club Med. And during the week, it will be mostly used for MICE [meetings, incentives, conventions and exhibitions] purposes, seminars, conventions and so on.

And for the very first time we will introduce a new pricing model, in which we will sell the room only – with breakfast, exactly similar to the hotel business.

And the all-inclusive – which is what I would say is the DNA of Club Med – would be only an option in these properties. Again. we are competing with a new set of hotels which are just normal, city hotels.

Where will they be and when can we expect them?

These two new properties will be opening on the first of October under this new segment name: Club Med Joy View.

One will be in Anji, which is next to Hangzhou, and which actually will be interesting for Macau people because they have direct daily flights to Hangzhou. So this property will ve one hour from Hangzhou Airport. The second property is called Golden Beach; it will be three hours driving distance from Beijing. And these two projects are new properties, so it’s new buildings, brand new when opening on the first of October.

Obviously, the dimension and the pace of the developments have accelerated since we were acquired by our Chinese shareholder Fosun. It was back in May 2015, so obviously they are very ambitious, they don’t invest directly in the properties, but they find the investors for us. And it opens a lot of doors; currently, we are receiving one development project per day, meaning an owner will give an existing property to the management of Club Med, or build a property with us.

And this is the pace now of development of Club Med; it’s really fuelled by a lot of people coming proactively to us.

Is the buegeoning middle class in China a primary target?

Today, we’re targeting the top 5 per cent wealthiest households in China, so we’re still aiming at affluent Chinese people.

Obviously, with Club Med Joyview we have widened the scope to the top 12 per cent, more or less, highest incomes in China. So it’s not yet what we’d call middle, it’s upper-middle class, but yes, this is the move obviously that we need to make and fast because we are not

alone in identifying this as a massive opportunity.

So, globally speaking for Club Med this middle-class, upper-middle Chinese middle class is by far the most strategic target. Club Med Joyview will aim at recruiting these people close to their home so that they just have a taste of Club Med for one weekend, and obviously then it will be an ambitious marketing and loyalty strategy to circulate them within our portfolio, starting with our premium all-inclusive resorts in China, then premium all-inclusive resorts in Asia and then moving forward in Europe and America.

How are you managing the MICE element?

It will be basically split – the weekend will be FIT (fully independent traveller) leisure people, mostly families, and the weekdays will be mostly occupied by groups. But for the very first time with Club Med Joyview we will have a higher mix of clientele; we expect similar to the hotel industry, we expect around 40 per cent of the business coming from MICE, and 60 per cent coming from FIT. So, there will be more mixed, while in our current premium all-inclusive resorts we do have rather 85-15 per cent split, 85 leisure, families and 15 per cent being the MICE business. We already do the MICE business, but it’s indeed a narrow part of our clientele today and Club Med Joyview aims at also recruiting new types of MICE business – conventions, exhibitions, one-day seminars, weddings – so we will tap into a lot more MICE opportunities and MICE segments than we were able to do with our distant destinations.

How will travel agencies figure in all this?

Indeed, the objective for us is to avoid as much as possible the cannibalisation of our existing clientele; we don’t want this clientele to go from four days holidays in our premium resorts down to just one weekend.

There are two strategies – one in the leisure part will be almost only online distribution through our own website and through some OTAs (Online Travel Agencies) in China and from a marketing standpoint, we’ll work on really original marketing as opposed to the really national marketing we are making for the premium resorts. We’ll really activate the catchment area around the resorts, which is roughly three to four kilometres around the resort.

We’ll really activate regional marketing to make sure that we capture new segments, a new audience around these Club Med Joyview resorts, while doing more ambitious national strategy on our Club Med premium resorts.

How about partnerships?

We have projects, that are still confidential, that are takeover projects so that might go fast, of existing properties currently managed but in other international brands, and that we might take over in one to two years - in Guangdong or even closer to Guangzhou/Shenzhen.

It’s a matter of a few months before we, I think, get an agreement on at least the first property.

We’re still extremely motivated in settling in this southern province. We do have a lot of projects identified here but that don’t match the level of quality Club Med is expecting in terms of minimum area – so we are talking about five to six hectares minimum, very nice seaside

if it’s on the seaside, very nice natural landscape if we’re in the countryside.

We’re still looking into very exclusive properties, that’s why out of all the [propositions] that we receive every day we have to make tough selections.

And of those identified as potential Club Med very few of them will actually become Club Med; it’s a matter of connectivity to the big cities – it needs to be two to three hours maximum driving distance. And we aim at having a mix of clientele, not only depending on one city. The great thing about this region here is that we have at least four big sources of revenue in a very close area – Guangzhou, Shenzhen, Hong Kong, Macau and Zhuhai – it’s a massive source of travellers that have average incomes higher than the average in China, so it’s a very interesting target for us.

What percentage of clientele in China is from the Mainland?

In China, we currently have around 85 to 90 per cent that are Mainland Chinese in our China properties. That would be true for Guilin, Sanya and Yabuli [ski resort]. But we do aim at diversifying the clientele. The main resort where we want to diversify is Sanya; it’s obviously the most famous travel destination within China. There is an existing massive Russian market travelling there.

Hong Kong, Taiwan and Korea are also quite well represented thanks to the international brands that have settled here recently. And we are aiming at increasing the business from Europe, from Singapore, from Australia – where we do have a big client base.

But obviously we can only do so by combining a visit to this Sanya property together with a visit to Hong Kong, a visit to Guangzhou. What we’re trying to develop is some city-stops concept that is basically three days, two nights in Hong Kong, Shenzhen, Guangzhou.

The client would stop for a city escape and then connect with Sanya to have a beach retreat.

[Thus] it starts with Sanya. Guilin is already a well-known international destination, so the same will apply for Guilin. We want to use Hong Kong as a hub, possibly also Guangzhou, and then offer an extension stay in Guilin.

And the last part is the ski business, which is very interesting.

Right now, the ski properties in China are 99 per cent Chinese, but this will transform massively in the few years to come. With China hosting the Olympic Games in 2022 it will become an international ski destination, with fantastic facilities, properties, ski domains. It’s still very limited the offer there, six domains have been identified as having the international standard, with numerous slopes, different ski lifts, some premium accommodation, only six key domains are identified with international standards today. We expect maybe 30 to 40 of them by 2022. So it will become an international destination.

Here, Club Med is very clear: we want to be the leader in the premium ski holidays in China. That’s why we already have these two properties and we’re the only international brand with two ski properties in Northern China. We signed a deal for a third one which is called Thaiwoo, three hours driving distance from Beijing, which will be an Olympic site. This one will open in December, 2019. We’ll have at least three ski properties and very actively looking for more.

But again the criteria is – we need a

Business Daily Thursday, August 24 2017 7

Macau Macau clients as they also have direct flights via Tiger Air; it’s a very easy connection and when you land in Singapore you have a 45-minute ferry connection to Bintan. The Lacoste partnership will be the next big thing in terms of organising some events, co-branded events in our resorts.

good ski domain, minimum 20 kilometres of slopes, good natural snow condition – which is not always the case around Beijing – so that’s why we’re rather setting in Northern China – Heilongjiang and Jilin Province’s more natural ski conditions – but we’re very, very aggressive and ambitious in the ski business.

We believe this is most probably for Club Med the biggest source of growth in the three, four years to come.

Is Club Med partnering directly with the Olympics?

We are in discussions with the CSA – the Chinese Ski Association – to see whether we could host the training of their national teams, to train on our properties. And we have the same kind of project with the Hong Kong Ski Association and the Australian Ski Association.

So, yes we try to link to this Olympic moment, which will obviously help grow the ski business very quickly in China.

We’re already at the early stage of discussion, but there is interest on both sides. At least with CSA and Hong Kong Ski Association, we have active discussions.

Hong Kong has a ski team?

It’s very niche and actually they are building the team, so we’re helping identify some talent and recently hosted in France a qualification of one of the possible athletes. She made the slalom with us, so that we can assess her potential and she’s been integrated within the Hong Kong ski team thanks to Club Med. These are young talents, a young girl of 14, she’s

Sebastien Portes, General Manager Hong Kong and Macau at Club Med just joined the national team.

They have an ambitious plan, they want to build their own team for 2022. We will, I hope, announce a more ambitious partnership by the end of this year with the Hong Kong Ski Association, as we do want to have a closer partnership together.

Are seaside properties also aiming at competitions – is the brand overall aligning itself with sport?

Yes, so we do already have global partnerships for most sports. For tennis we have a global partnership with Babola, we help in organising some events; for skiing it would be a global partnership with Rossignol, and for Golf also we have a global partner. We have this relationship, but it’s more suppliers for all the material that we offer to our guests as

part of our all inclusive deal.

We are exploring more ambitious events, with some of the partners.

One of these global partnerships that is now developing is with Lacoste, the French fashion brand, [with whom] we have very strong plans – we are targeting the premium segment, very much into tennis and golf, and they have very ambitious development plans in Asia. So this partnership has already been launched in Europe and it includes some sports events around golf and tennis mostly.

Some Lacoste champions, golf and tennis champions, organising some training for our clients, during a team week. And this will come in Asia starting in February 2018, most certainly with a golf and tennis event organised with Lacoste in Bintan, next to Singapore.

Which will be interesting for

What plans are afoot, particularly for 2018?

The big new property opening.

There are these two properties around Beijing and Shanghai, Club Med Joyview, and the next big thing is the opening of our new ski resort in Hokkaido, Japan, which is called Tomamu’ it’s opening on 8th December 2017, so in a few months time.

It will be the second ski property in Japan, twice the capacity of the existing one. It’s 1,200 beds, compared with 600 beds in Sahoro [Japan] today.

Altogether we’ll increase the capacity to 1,600 beds in Hokkaido, Japan. In line with our ambition to become the leader for the premium ski holidays in Asia and globally, so that’s why we’re investing so much into new ski properties. This one is the next big thing that will be a bi-seasonal resort, opening until the beginning of April and then during the Summer season, Tomamu being a very wellknown Summer destination in Hokkaido, with a golf course, hot springs, etc, will also be a game changer for the Summer season.

And then in Southeast Asia the next project after this one will be in Sri Lanka, [on the] southwest coast, an hour and a half from Colombo, which will be

a new property – what we call a greenfield – a new building, and this one will open in Winter 2019, the opening date has still to be clarified exactly.

And this is quite interesting, as well. It will be a totally new property for Club Med, obviously a beach resort but still connected to a lot of cultural activities, excursions. We’ll develop a new type of clientele there, most probably also connecting with our Maldives resorts for honeymooners, so that they can combine a cultural tour od Sri Lanka, one or two nights in our property in Sri Lanka and then connect with the Maldives for a more exotic getaway.

And then moving forward to 2020 we have a new property in Lombok, next to Bali, and a new property in Hainan, next to Haikou and the new ski property in China, Taiwoo, next to Beijing. This, together with all the new Club Med Joyview properties, [means] we aim at having around 30 properties in Asia within three years time.

Is Club Med interested in operating its own private jet fleet?

It’s not the strategy in Asia.

We are partnering with airlines in Europe, so we charter some flights in Europe. We charter some flights in Asia; in Taiwan [we] partner with China Airlines to connect with Ishigaki [Japan] to connect with Sanya. For most other countries we would partner with some existing airlines to charter some flights.

Having said that, we don’t expect to launch a Club Med airline at all! advertisement

8 Business Daily Thursday, August 24 2017

Greater china Energy

Customs: July gasoline exports to North Korea almost wiped out A prolonged supply cut would threaten critical supplies of fuel and could force North Korea to find alternatives Chen Aizhu

C

hina’s gasoline exports to North Korea evaporated to a dribble in July, according to customs data, the strongest sign yet that the suspension of sales of the fuel by state oil major CNPC has cut critical supplies to its isolated neighbour.

Beijing’s General Administration of Customs said yesterday Chinese shipments of gasoline dropped 97 per cent from a year ago to just 120 tonnes of the fuel - worth little more than US$100,000. The number was down from 8,262 tonnes in June.

Monthly fluctuations in the data are not unusual, but this was the fourth-lowest volume on Reuters’ records of customs data going back to January 2010.

Key Points July gasoline exports down 97 pct vs year ago Just 120 tonnes shipped to North Korea in July CNPC stopped sales over payment fears - sources Iron ore imports in July lowest since Feb Customs data also showed China’s trade with North Korea fell last month as a ban on coal purchases from its isolated neighbour slowed imports amid growing pressure from the United States to rein in Pyongyang’s missile programme.

A prolonged supply cut would threaten critical supplies of fuel and could force North Korea to find alternatives to it main supplier amid international pressure on

Pyongyang to curb its nuclear and missile programmes.

At the end of June, Reuters reported China National Petroleum Corp (CNPC) suspended sales of gasoline and fuel to North Korea over concerns CNPC would not get paid for its goods. Fuel prices in the country surged following the cut and the measure is still in place, people familiar with the matter say.

“This confirms that CNPC has truly stopped supplies,” said one Beijing-based trading source familiar with China’s oil transactions with North Korea. “The amount is so small, it’s what would typically be lost during transportation.”

Gasoline typically accounts for the bulk of fuel exports to North Korea, but July data showed the biofuel, ethanol, took the top spot with shipments of 4,137 cubic metres, worth USUS$1.9 million.

Meanwhile China’s iron ore imports from North Korea fell sharply in July, the month before the United Nations passed a vote to impose tougher sanctions on Pyongyang.

The United Nations Security Council unanimously imposed new sanctions on North Korea targeting its exports of coal, iron ore, lead, lead ore and seafood in sanctions to take effect in early September.

Arrivals of iron ore fell 24.5 per cent in July from the same month a year earlier to 175,980 tonnes. That’s down 21 per cent from June and the lowest since February, according to customs’ records.

Beijing had pressed traders to stop buying from the country even before the United Nations Security Council vote on further sanctions to rein in Pyongyang’s missile and nuclear programme, a sign of China tightening the screws on Pyongyang.

In July, China bought no coal from North Korea, the fifth month after Beijing halted coal shipments in February. Reuters

Commodities

Coal imports from Australia climb for second month China imposed a ban on coal shipments at small ports from July 1, along with more random checks on coal cargoes Chinese coal imports from key supplier Australia chalked up yearon-year gains for the second straight month in July, customs data showed, as local output of the commodity

eased amid a crackdown on illegal mining and pollution.

Cargoes from Australia rose 4.4 per cent from July last year to 7.47 million tonnes, according to the data from the General Administration of Customs released on Wednesday.

Imports from neighbouring Mongolia jumped over 30 per cent in July

from the year before to 2.26 million tonnes, the data showed, although that was below record levels struck in June.

Major producers from Mongolia are looking to boost shipments to China in the wake of a ban on coal purchases from North Korea and as China’s largest producer Shenhua

Energy closed two large pits near the Mongolian border.

Meanwhile, shipments from Indonesia dropped by nearly 9 per cent to 3.03 million tonnes in July. Imports from Russia fell 1.7 per cent to 1.64 million tonnes, the data showed.

Key Points July imports from Australia climb 4.4 pct on-year to 7.47 mln T Mongolia cargoes up over 30 pct on-year, but off June record China has been clamping down on illegal mining at home China imposed a ban on coal shipments at small ports from July 1, along with more random checks on coal cargoes.

Lookin g forw ard, a w armer-than-usual winter has been forecast for southern China, potentially crimping appetite for coal.

The forward structure of the thermal futures curve shows investors are betting on prices peaking in October before falling steadily until August 2018.

China’s coal production in July fell 4.5 per cent from a month earlier to its lowest since October, according to government numbers released in mid-August. Reuters

Business Daily Thursday, August 24 2017 9

Greater China Currency

Money rates hit 5-month high as liquidity stress flares again Interbank assets and liabilities both shrank in the second quarter for the first time since 2010 Winni Zhou and John Ruwitch

China’s key short-term money rates leapt to their highest in nearly five months on Wednesday, as the central bank drained funds for a third day, keeping up the pressure on financial institutions to scale back more speculative forms of financing.

Similar bouts of tightness in June and July had raised fears of a cash crunch that led to the People’s Bank of China (PBOC) pumping money into the markets to keep rates under control.

The volume-weighted average rate of the benchmark 14-day repo traded in the interbank market rose 2 basis points to 4.4476 per cent, the highest since March 31.

Key Points 14-day repo rates jump to highest since March 31 PBOC refrains from injecting net funds via OMO for 3rd day Record RMB2.3 trln of NCDs due to mature Sept - state media The benchmark rate has jumped around 90 basis points in the past two weeks. The 7-day repo rate has also risen this week.

Wednesday was the third day the PBOC refrained from injecting net funds into markets via its open market operations.

The PBOC has drained a net RMB100 billion (US$15.01 billion) so far this week through reverse bond repurchase agreements, according to Reuters calculations.

Some traders said cash conditions have been tight for a week.

Seasonal factors including corporate

tax payments weighed on liquidity last week, and month-end cash demand started to emerge, adding to the pressure, they said.

“The market will continue to monitor how the PBOC operates in open market operations in the run-up to the end of the month,” said a Shanghai-based trader, adding conditions were likely to remain tight next week.

Some traders are awaiting the rollover of special treasury bonds due on Aug. 29, when the PBOC may inject additional funds.

But surviving the month-end cash demand crunch is only one hurdle for financial institutions who must start to prepare for a quarterly health check by the central bank.

“We believe a number of factors will keep interbank liquidity fairly tight into the next macroprudential assessment (MPA) at the end of September,” economists at Nomura said

in a report, citing a large amount of Negotiable Certificates of Deposit (NCDs) maturing this month and next as well as the low excess reserve ratio of commercial banks.

Shanghai Securities News said yesterday a record RMB2.3 trillion worth of NCDs is due to mature in September.

The monthly maturity is set to be the largest since the introduction of NCDs by the central bank in December 2013.

The rate on three-month AAA-rated NCDs was at 4.3997 per cent on Tuesday, according to data from China Foreign Exchange Trading Service, 10 basis points higher than two weeks earlier.

Li Qilin, chief macro researcher at Lianxun Securities, said the PBOC was very likely to “rescue the market” by lending more medium-term lending facility loans, together with

net injection through reverse repos, as what the central bank did in June.

David Qu, markets economist at ANZ Bank in Shanghai, also expects the authorities to inject some funds to avoid hurting the market too much.

“I will let you live but won’t let you live too comfortably, and certainly won’t let you use the money to do bad things,” Qu said, speaking in the first person voice of the central bank.

Chinese authorities have been keen to force deleveraging this year - especially lending between banks - to reduce speculative activity and risks to the financial system.

Interbank assets and liabilities both shrank in the second quarter for the first time since 2010.

Through Aug. 18, the PBOC drained RMB245 billion on a net basis from money markets so far this year via open market operations. Reuters

Commodities

Russia remains Mainland’s top oil supplier for 5th month in a row in July Russia held its spot as China’s top crude oil supplier for a fifth month in a row in July, with shipments up 54 per cent over a year earlier, data showed on Wednesday.

Russian shipments last month came in at 4.97 million tonnes, or about 1.17 million barrels per day (bpd), the General Administration of Customs said in a more a detailed breakdown of commodity trade data released on Aug. 8.

Key Points July Russian shipments to China 1.17 mln bpd, +54 pct on yr July Saudi supplies 940,000 bpd, -0.8 pct on yr Angola 2nd-largest supplier on YTD basis for 3rd mth Jan-July U.S. supplies make up 1.5 pct of total For the first seven months of the year, Russia’s volumes to China grew nearly 16 per cent year-on-year to 34.22 million tonnes, or 1.18 million bpd.

China bought a total of 34.74 million tonnes of crude oil in July, or about 8.18 million bpd, down from June but still up about 12 per cent from a year earlier.

Imports in the first seven months grew 13.6 per cent year-on-year to 247 million tonnes, or 8.51 million bpd, Saudi Arabia was China’s second biggest supplier in July, with volumes at 3.99 million tonnes, or about

940,000 bpd, down 0.8 per cent from a year earlier.

Supplies from the Kingdom rose only 0.4 per cent in January-July from the same period a year earlier to 30.59 million tonnes, or 1.05 million bpd.

Shipments from Angola, China’s third-largest supplier in July, fell 17.1 per cent from a year earlier to 3.91 million tonnes, or 921,520 bpd.

Year-to-date, Angola maintained its second-ranking for the third month in a row, with January-July supplies up 15 per cent.

Chinese refineries have taken more Brent-related, sweet West African crudes in recent months, scaling back on sour Middle East grades because of the narrowing price differentials that make West African supplies more attractive.

Russian crude exports to China grew this year after independent refiners expanded their diet to include the Urals grade exported from the Mediterranean. China also snapped up almost all of the ESPO blend exports from the Pacific port of Kozmino.

Chinese imports of U.S. crude, which started last year, were about 174,000 bpd in July and amounted to 3.8 million tonnes for the first seven months of the year, or 1.5 per cent of the country’s total imports.

Chinese buyers have over the period also ramped up imports of Brazilian oil, with first-seven months shipments up 41 per cent on year.

Imports from Iran inched up 0.45 per cent on year in July at 568,720 bpd while supplies from Iraq shot up 16 per cent at 857,020 bpd, customs data showed. Reuters

10 Business Daily Thursday, August 24 2017

Greater China IP

Mainland court awards New Balance US$1.5 million in trademark case New Balance, which entered China in 2003 and has more than 2,000 stores in the country, has been dragged into a protracted litigation battle on the Mainland where hundreds of trademarks in variations identical to its ‘N’ logo are registered Pei Li

A

Chinese court has ordered three domestic shoemakers to pay more tha n RM B 10 m i l l i o n (US$1.5 million) to New Balance in damages for infringing the U.S. sportswear company’s signature slanting logo.

The amount of compensation, though small by international standards, is according to lawyers one of the highest to be awarded to foreign companies in trademark disputes in China.

The ruling follows a speech by President Xi Jinping last month in which he vowed to punish intellectual property (IP) infringers. U.S. President Donald Trump recently authorized an inquiry into China’s IP practices amid estimates that IP theft by the country could be as high as US$600 billion.

An intermediate court in coastal industrial town Suzhou said in its ruling last week that three defendants - including an individual who registered a company in Colorado as New Bai Lun -should stop infringing the American company’s iconic trademark and their deceiving promotion of products.

“Although this sort of decision is still rare, it sends a strong and powerful message that should make it easier for foreign brands doing business here,” said Carol Wang, a lawyer at

Lusheng Law Firm, which represented New Balance.

The court ruling document first appeared on social media on Tuesday and was later confirmed by the law firm to Reuters.

“The winning of this case has given us confidence to continue our proactive brand protection strategy in China,” Angela Shi, brand protection manager of New Balance, said in a statement to Reuters.

The three Chinese defendants Zheng Chaozhong, Xin Ping Heng Sporting Goods Limited Company

and Bo Si Da Ke Trading Limited could not be reached for comment.

New Balance, which entered China in 2003 and has more than 2,000 stores in the country, has been dragged into protracted litigation battle in the mainland where hundreds of trademarks in variations identical to its “N” logo are registered.

Last year, it was dealt a blow when a Chinese court ruled against it for trademark infringements and ordered it to pay RMB5 million in compensation to a local company.

In the past, local courts were hesitant to rule in favour of foreign companies in similar cases as they had to take multiple factors into account, including local stability and employment, said Wang Xiang, a Beijing-based lawyer at Orrick Herrington & Sutcliffe, who has no connection to the latest trademark case.

“It’s about time for the government to enhance intellectual property protection enforcement, as many IPs now will be owned by Chinese companies,” he said. Reuters

Negotiations

JD.com, Thai retailer Central in talks for e-commerce JV The joint venture with Central Group will focus on e-commerce and finance sectors Chayut Setboonsarng and Julie Zhu

China’s JD.com Inc is in advanced talks with Thailand’s Central Group to launch an e-commerce joint venture in Thailand with a planned total investment of US$500 million, people familiar with the matter told Reuters.

The venture will help China’s second largest e-commerce retailer expand its overseas business beyond Indonesia and boost its presence in Southeast Asia where rivals Alibaba Group Holding and Amazon are ramping up competition with new services, such as a quick delivery service in Singapore.

Indonesia currently accounts for almost all of JD.com’s investments outside China, including an e-commerce platform and travel start-up, Traveloka.

JD.com plans to enter the Thai market later this year and use Thailand as a hub to service other countries in the region such as Vietnam and Malaysia, JD.com chief executive Richard Liu told Reuters in June.

The joint venture with Central

Group, owned by the billionaire Chirathivat family, Thailand’s third-richest, will focus on e-commerce and finance sectors, one of the sources said. The deal has yet to be finalized as the companies are unable to agree on ownership terms, two sources said.

JD.com declined to comment on the joint venture and Central Group did not respond to requests for comment.

The sources declined to be named as the talks are not public.

The joint venture will be another attempt by Central Group to penetrate the country’s fast-growing e-commerce market, after it purchased the Thai arm of online fashion retailer Zalora last year.

Thailand’s e-commerce market, valued at US$900 million, is expected to grow 29 per cent over the next 10 years, according to a report from Google and Temasek published in 2016. Major players include Alibaba-backed Lazada, Thailand’s CP Group unit Ascend and South Korea’s 11 Street.

The same report estimated that the e-commerce market in Southeast

Asia, a region of around 600 million, will soar 16-fold to US$88 billion by 2025.

For JD.com, the investment in Thailand would come after it ended talks

last month to invest in Indonesian online retailer Tokopedia, which instead raised US$1.1 billion from a group of investors including Alibaba, a separate source told Reuters. Reuters

Business Daily Thursday, August 24 2017 11

Asia Consolidation

India to speed up state bank mergers for broader economic revival Banking sector reforms are a major plank of Modi’s administration to revive credit growth Rajesh Kumar Singh and Devidutta Tripathy

I

ndia approved a proposal yesterday to set up a ministerial panel to speed up consolidation of state-run banks as part of its efforts to revive credit and economic growth.

Prime Minister Narendra Modi will name the members of the panel, which will oversee proposals for mergers from the boards of the banks, Finance Minister Arun Jaitley said after a meeting of the federal cabinet.

New Delhi owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia’s third-biggest economy.

Key Points Cabinet approves mechanism to oversee state bank mergers Finance minister says merger proposals to come from bank boards State-run banks hold lion’s share of US$150 bln in sour assets

But these banks also account for the lion’s share of more than US$150 billion in sour assets plaguing the sector, and need billions of dollars in new capital in the next two years to meet global Basel III capital norms.

Banking sector reforms are a major plank of Modi’s administration to revive credit growth, which has slowed

Prime Minister Narendra Modi

to multi-decade lows as banks struggle with bad loans.

After top lender State Bank of India merged with its five subsidiary banks and also took over a niche state-run lender for women earlier this year, officials have said that more deals are being planned.

“The object is to create strong banks,” Jaitley told reporters, adding decisions would be solely based on “commercial considerations”.

The minister also said the onus of initiating such merger proposals would be on the boards of the banks.

Local ratings agency CRISIL, a unit

of Standard & Poor’s, said the new mechanism was an important first step towards kick-starting the consolidation process.

While analysts and investors have hailed the government’s plan to have fewer but nimbler banks, they are sceptical of the benefits of merging two or more weak banks or a weak bank with a stronger bank that could strain the stronger entity.

Bank employee unions have also opposed merger proposals over concerns they could lead to job losses.

A million bank workers observed a one-day strike on Tuesday opposing

bank mergers.

Nine of the 21 state-run banks reported a net loss for the last financial year ended March. Thirteen had posted losses the previous financial year.

Non-performing loans in the state banking sector have more than doubled in the past two years and were 12.5 per cent of their total loans at the end of March. Including restructured loans, total stressed assets were more than 15 per cent, central bank data shows. State-run banks as a group had a negative return on assets at the end of March, the central bank said. Reuters

Review

NZ doubles budget surplus forecast, cuts GDP growth projections First-quarter growth undershot expectations as construction output fell for the first time in two years Charlotte Greenfield and Ana Nicolaci da Costa

T

he New Zealand government more than doubled its b u dg e t s u r p l u s forecast this year but cut growth forecasts in a spending update on Wednesday, flagging that the country’s next government will have less spare cash.

The update comes a month before New Zealand goes to the polls on Sept. 23 to elect a new government, in what is becoming a close race between the incumbent conservative National Party and its centrist Labour Party challenger.

Labour has surged in the polls since 37-year-old Jacinda Ardern took the party leadership less than a month ago in a gamble aimed at energising its campaign to unseat Prime Minister Bill English and his National Party-led coalition.

The bad news for both sides

is that while the latest fiscal numbers look good on international comparisons, they’re unlikely to give political parties the capacity to deliver on vote-catching campaign promises.

“Those looking for Treasury to announce that there was money to burn ... will be very disappointed,” BNZ Head of Research Stephen Toplis said in a note.

“There were many who had assumed that the recent

windfall gains that were flowing into tax revenues would provide the base for a much stronger future revenue track: They didn’t.”

The Treasury raised its budget surplus forecast for 2016/17 to NZ$3.706 billion (US$2.3 billion), boosted by a spike in corporate tax revenues, well above the NZ$1.62 billion surplus it forecast in May. It reduced its economic growth calculation for the

year to June to 2.6 per cent from 3.2 per cent previously, and cut its growth projection to 3.5 per cent in the year to June 2018 from 3.7 per cent in the May budget update.

More caution

New Zealand has been among the fastest-growing developed economies in recent years, but first-quarter growth undershot expectations as construction output fell for the first time in two years.

The Treasury said strong population growth, a better international economy, and fiscal and monetary stimulus would continue to underpin growth, but capacity constraints would weigh on its projections.

“They’ve basically decided they were a little bullish perhaps in the budget around some of the constraints in the construction sector,” Finance Minister Steven Joyce told reporters, referring to previous Treasury forecasts.

Joyce said the revisions meant another round of tax cuts would not be possible until 2020, but the Nationals still planned to extend a flagship programme slated for 2018 to reduce income tax and increase government transfers to households.

Key Points Govt forecasts NZ$3.706 billion budget surplus on tax surge Growth forecasts nudged downward ahead of national election Data suggests incoming government will have less to spend Phil Borkin, senior economist at ANZ, told Reuters the Treasury was right to take a more cautious view on the growth outlook, noting: “On our numbers we think the Treasury is still being a little too optimistic.” Reuters

12 Business Daily Thursday, August 24 2017

Asia Monetary policy

Indonesia tests if 7th rate cut can lift frustratingly soft consumption Economic growth in the country with 250 million people has failed to accelerate as policymakers had hoped Market research firm Nielsen this week said that in the second quarter, consumers in Indonesia were the third most optimistic in 63 countries it surveyed, following only those in the Philippines and India.

Gayatri Suroyo and Cindy Silviana

A

cut in interest rates by Indonesia’s central bank may not be enough to give sluggish consumer spending a jolt, as weakness in purchasing power and a reluctance by banks to lend undercuts efforts to boost Southeast Asia’s biggest economy.

Bank Indonesia (BI) on Tuesday unexpectedly cut its benchmark policy rate for the first time since October, bringing the rate down 25 basis points to 4.50 per cent. It also announced some plans to tweak credit rules in a bid to boost lending and consumption.

Josua Pardede, economist at Bank Permata said expects the average interest rates banks offer to remain above 10 per cent by yearend despite Tuesday’s policy rate cut.

The central bank had already trimmed the benchmark six times by a total of 1.5 per centage points last year, to limited effect. Commercial banks only followed slowly by lowering their lending and deposit rates, but loan growth has remained weak partly because banks concentrated on tackling bad loans.

Consequently, economic growth in the country with 250 million people has failed to accelerate as policymakers had hoped. The

Muted market reaction

second-quarter’s annual growth rate of 5.01 per cent the same as in the first quarter - highlighted how the economy is stuck in a lower gear.

“I think interest rates do not directly affect certain sectors,” said Jahja Setiaatmadja, the chief executive of Indonesia’s largest bank by market size Bank Central Asia.

“If you lower interest rates for working capital loans but sales have not risen, it wouldn’t result in demand

for new loans,” Setiaatmadja told Reuters.

Policymakers have openly said they are confused over why people aren’t spending, with some officials calling it “a mystery”.

Private consumption accounts for over half of Indonesia’s gross domestic product (GDP).

Indonesia’s inflation rate is low historically, exports are improving, investment is growing and consumer confidence is high.

Market reaction to the rate cut was muted, with the rupiah barely moving, while the yield on Indonesia’s benchmark 10-year government bonds and the stock index showed only mild gains.

“Subdued market reaction after the rate cut is evidence that market is less optimistic on the direct linkage between lower rates and consumer purchasing intention,” said Taye Shim, head of research at Mirae Asset Sekuritas Indonesia.

According to Pardede of Bank Permata, addressing the issue of declining purchasing power in the “middle-low” section - the bottom 40 per cent of the population - was crucial. He argued this should be done by using fiscal measures including programmes to create jobs.

“BI wants to boost credit growth and all the changes are directed at the banking industry. But the question is how fast can banks respond by lowering their rates,” said Pardede, noting how lenders faced different liquidity conditions and risks.

“As long as purchasing power in the middle-low is still weak, demand for

corporate credit will not grow too much,” he said.

Another risk to bank lending is bad loans, which in June made up 3 per cent of outstanding loans.

The chief banking supervisor at the Financial Services Authority (OJK) Heru Kristiyana said the authority would not extend a 2015 incentive expiring this week that allows flexibility for banks to restructure souring loans.

“Subdued market reaction after the rate cut is evidence the market is less optimistic about the direct linkage between lower rates and consumer purchasing intention” Taye Shim, head of research at Mirae Asset Sekuritas Indonesia Banks that still have a high non-performing loan ratio may set aside more provisions, Kristiyana said, which could hit bank profitability, capitalisation and risk appetite. Reuters

Energy

Singapore firm inks deal to run Cambodia’s first oil field A single platform will be built, with plans for further platforms and the exploration of two more fields if the first becomes lucrative Cambodia yesterday signed a deal with a Singaporean energy company to develop its first-ever oilfield, the latest move in the impoverished country’s much-delayed plan to become an oil-producing nation.

‘The Singaporean firm KrisEnergy holds a 95 per cent stake in the first block and the Cambodian government the remainder’ KrisEnergy signed the agreement with the government in the capital Phnom Penh to develop an offshore field in the Gulf of Thailand which they hope will produce 8,000 barrels a day by 2020.

Energy Minister Suy Sem hailed the signing as a “historic event” and said the nation would become an oil producer country in the future.

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The Gulf of Thailand boasts significant oil deposits that have been exploited by Thai and Malaysian companies since the 1980s.

But Cambodia, one of Asia’s poorest nations, has been slow to get in on the act.

Chevron first found proven reserves in Cambodian waters in 2005.

The kingdom was soon feted as the region’s next potential petro-state.

Its government estimates there are hundreds of millions of barrels of crude and vast reserves of natural gas in six blocks off the coast.

But production stalled as the government and Chevron failed to agree over revenue sharing, leading the US oil giant to abandon the project and sell its stake to KrisEnergy in 2014.

Under the deal KrisEnergy will start extraction on one section of a 3,000 square kilometre (1,158 sq mile) block known as the Apsara field to the southwest of Cambodia’s coast.

A single platform will be built, with plans for further platforms and the exploration of two more fields if the first becomes lucrative.

The Singaporean firm holds a 95 per cent stake in the first block and the Cambodian government the

remainder.

Under the agreement KrisEnergy has 60 days to declare a final investment decision.

“This is is a major step. It is Cambodia’s first oilfield,” Kelvin Tang, chief operating officer of KrisEnergy, said during the ceremony.

Cambodia estimates it will make at least US$500 million in royalties and taxes from the first phase of the

project.

There are concerns that oil revenues could evaporate into its notoriously corrupt bureaucracy.

But Economy and Finance Minister Aun Pornmonitoth said the oil revenue would fuel economic development.

He said the government was fully prepared to avoid the “resource curse”. AFP

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Business Daily Thursday, August 24 2017 13

Asia Tech Inc

In Brief

Myanmar’s startups map past, shape future with virtual reality Tech start-ups are emerging around the commercial capital Yangon Phyo Hein Kyaw

Gasps echo across the hall as the Myanmar school kids trial virtual reality goggles, marvelling at a device that allows some of Asia’s poorest people to walk on the moon or dive beneath the waves.

“In Myanmar we can’t afford much to bring students to the real world experience,” beamed Hla Hla Win, a teacher and tech entrepreneur taking virtual reality into the classroom.

“If they’re learning about animals we can’t take them to the zoo... 99 percent of parents don’t have time, don’t have money, don’t have the means,” she added.

Few countries in the world have experienced such rapid discovery of technology than Myanmar which has leapfrogged from the analogue to the digital era in just a few years.

During the decades of outright junta rule, which ended in 2011, it was one of the world’s most isolated nations, a place where a mobile phone sim card could cost up to US$3,000.

For half a century its generals cut off the country, restricting sales of computers, heavily censoring the Internet and blocking access to foreign media reports.

But today phone towers are

springing up around the country and almost 80 percent of the population have access to the Internet through smartphones, according to telecoms giant Telenor.

Budding start-ups

Tech start-ups are emerging around the commercial capital Yangon, many seeking to improve the lives of rural people, most of whom still live without paved roads or electricity.

“The increase in activity from last year till now -- new start-ups, more people determined to become entrepreneurs and working in the tech sector in general -- is significant,” said Jes Kaliebe Peterson, CEO of community hub Phandeeyar.

Virtual reality is the latest advance to cause a stir, with a handful of entrepreneurs embracing tech for projects including preserving ancient temple sites to shaping young minds of the future.

The Phandeeyar incubator works with more than 140 start-ups. Among them Hla Hla Win’s virtual reality social enterprise 360ed which is using affordable cardboard VR goggles attached to smartphones to break down barriers in Myanmar’s classrooms.

She founded the non-profit last year after 17 years working in the

The Phandeeyar incubator works with more than 140 startups

woefully underfunded education system in a bid to bring learning to life.

“I see it as an empathy machine where we can teleport ourselves to another place right away,” she told AFP. And it’s not just school children who benefit from stepping into places they could only ever dream of visiting.

360ed has used virtual reality to help Myanmar teachers attend training courses in Japan and Finland and is working on setting up deals with schools in India, Pakistan, China and Bangladesh.

“With VR there’s no divider, there’s no distance,” Hla Hla Win said.

While 360ed is thinking about the future, Nyi Lin Seck is obsessed with the past.

Some 600 kilometres north of Yangon, the budding tech entrepreneur and founder of 3xvivr Virtual Reality Production launches a large drone into the skies above Bagan, one of Myanmar’s most famous tourist sites.

The drone, which carries a 360-camera, circles one of the many ninth-to-thirteenth century temples that dot the landscape of what was once a sprawling ancient city.

The data it records allows those with virtual reality headsets to explore the temples, their crumbling centuries-old walls so close it feels like you can touch them.

A former head of the local TV station, Nyi Lin Seck says he makes most of his money providing virtual reality footage for hotels and luxury apartments.

But after an earthquake damaged the Bagan site last year, he vowed to use the tech to preserve a digital replica of Myanmar’s archaeological treasures.

“A lot of artworks on the pagodas collapsed and were lost. Using this technology, we can record up to 99 percent of the ancient art,” he says.

Renewables

Thai Superblock to invest up to US$600 mln per year The company which previously made building materials, is among Thai firms shifting to renewables like solar and wind to benefit from a government drive to promote renewable energy

Thailand’s Superblock PCL , one of Southeast Asia’s biggest renewable energy producers, plans to spend up to 20 billion baht (US$602 million) per year on expansion at home and abroad to tap rising demand for green energy, its chairman said.

As part of plans to more than double power generation capacity by 2021 from 845 megawatts (MW) currently, Jormsup Lochaya told Reuters in an interview his company signed a deal to develop new wind power projects in Vietnam last week with combined capacity of 700 MW. “Over the next three-four years, we want to have more than 2,000 MW, which will come from investment in Thailand and overseas,” the executive said, speaking in an interview late on Tuesday.

Jormsup said Superblock also plans massive expansion in China - raising its solar capacity there from just 30 MW to 1,000 MW over the next three years.

Thailand is leading a nascent boom in Southeast Asian renewable power generation, which has

already taken off in countries from China to India and Japan.

Combined global wind and solar power capacity has soared from just 18,600 MW in 2000 to 763,000 MW in 2016, according to the International Renewable Energy Agency (Irena), outpacing expansion in other fuels.

Superblock plans to invest 15 billion to 20 billion baht per year, largely in renewables.

“We are looking at several power deals but expect to finalise one later this year,” he said. Sources of finance will include a 10 billion baht infrastructure fund the firm plans to launch late this year, he added.

The firm aims to grow quickly, targeting revenue of 9 billion baht to 10 billion baht this year, more than double the 3.8 billion baht it booked last year, he said.

As part of its expansion, Jormsup said that Superblock plans to list a subsidiary, Super Solar Energy, on the Thai bourse next year.

Jormsup said demand for renewables was strong in Vietnam, where the deal signed last week covers the development of six wind power projects.

“Foreign direct investment is

Thai July exports up but below forecast Thailand’s customs-cleared annual exports rose for a fifth straight month in July, but fell short of expectations, as demand from major markets increased.

Exports, a key driver of Thailand’s growth, rose 10.5 per cent in July from a year earlier after June’s 11.7 per cent rise, commerce ministry data showed yesterday. A Reuters poll expected an annual rise of 11.6 per cent in July.

In January-July, exports grew 8.2 per cent from a year earlier, Pimchanok Vonkhorporn, an official at the Commerce Ministry, said at a briefing.

Mapping the past

AFP

Wirat Buranakanokthanasan

Trade

flowing into Vietnam... so demand for electricity will increase,” he said. “Nuclear is banned there and people don’t like coal, so they will turn to renewable energy more.”

The company also plans to invest in solar power in Vietnam, he said.

Key Points To boost capacity to over 2,000 MW in next 3-4 years Signed 700 MW wind power deal in Vietnam Southeast Asia at early stages of renewable boom Superblock expects revenue to more than double this year

Vietnam is struggling to meet its soaring electricity demand growth of around 11 per cent a year and wants to boost its renewable energy output amid rising resources scarcity and environmental concerns.

As well as Vietnam and China, Superblock also plans to invest in Japan, Cambodia, Laos and Myanmar, the executive said. Reuters

Regulator

Indonesia loan growth picks up Indonesian bank loans in July grew 8.2 per cent from a year earlier, the country’s financial service regulator said in a statement on Wednesday, faster than the pace in June. Loans grew by 7.8 per cent in June.

The gross non-performing loan ratio edged higher in July to 3 per cent from 2.96 per cent a month earlier.

Indonesia’s central bank on Tuesday cut its outlook for 2017 loan growth to 8-10 per cent, from 10-12 per cent previously.

Credit

S.Korea’s household debt growth slowest in almost 2 years South Korea’s household credit grew at its slowest pace in the second quarter due to tighter lending rules, while mortgages continued to grow solidly, the central bank said yesterday. Household debt during the June quarter of this year, including loans and other debt owed by South Korean households rose 10.4 per cent from a year earlier to 1,388.3 trillion won (US$1.23 trillion), preliminary data from the Bank of Korea showed. It was lower than the second quarter’s 11.1 per cent increase and marked the slowest growth since a 10.4 per cent rise in the third quarter of 2015.

Prices

Malaysia’s July inflation rate eases Malaysia’s consumer price index in July rose 3.2 per cent from a year earlier, government data showed on Wednesday, slowing in pace for the fourth month in a row. July’s annual inflation rate was just below the 3.3 per cent forecast by economists in a Reuters poll. Headline inflation reached an eight-year high of 5.1 per cent in March, but has since moderated. Inflation was driven by higher fuel and food prices from a year earlier, with the transport index rising 7.7 per cent from a year earlier, data from the Statistics Department showed.

14 Business Daily Thursday, August 24 2017

International In Brief

Theresa May compromises on EU Court Prime Minister Theresa May conceded that European Union law will influence the U.K. long after Brexit, a climbdown aimed at accelerating divorce talks that seemed to be initially accepted by euroskeptics in her Conservative Party.

Seven months after May declared the U.K. would “take back control of our laws and bring an end to the jurisdiction” of the European Court of Justice, her government will say in a position paper yesterday that it’s now seeking to bypass just the body’s “direct jurisdiction.”

The diluting of a onetime “red line” paves the way to EU judges having some say in the U.K. following Brexit, though perhaps not in a binding way. The test will be if EU officials accept the shift as enough to speed up sluggish negotiations resuming next week.

“Talk of the ECJ having no direct jurisdiction suggests that the government recognizes that if we are to have a close working relationship with the EU immediately after Brexit and into the future, then European judges will continue to play an important role in determining the shape of the laws that could affect us,” said Andrew Hood, a trade lawyer at Dechert LLP and former U.K. government official.

Tag

Sixty? Too young to be rich Octogenarians rule the rich, with a big share of top U.S. wealth Ben Steverman

S

ixty? That’s young — for a rich person.

Six of the 25 richest Americans are over 80, according to the Bloomberg Billionaires Index. Carl Icahn and Charles Koch, for example, are 81. Earlier this month, Sheldon Adelson turned 84 and George Soros hit 87. Warren Buffett, the fourth-richest person in the world, with a net worth of US$77 billion (616 billion patacas), celebrates his 87th birthday next week.

New data from the Internal Revenue Service show just how old the top millionaires and billionaires in the U.S. are. While people over 80 make up only 3.7 percent of the population, the IRS estimates they control a larger share of the nation’s top fortunes than people under 50.

The wealthy have probably always been older than the general population. Despite the example of Mark Zuckerberg, the world’s fifth-richest person, at 33, it usually takes a long time to amass great wealth. Still, the imbalance is striking.

Every few years, the IRS analyses the wealth of the richest Americans.

Its Personal Wealth Study examines a rarefied group: people potentially subject to the estate tax, which is levied on individual fortunes of US$5.5 million or more.

The latest study, released this month and estimating personal wealth in 2013, finds 584,000 Americans, or about 0.2 per cent of the U.S. population, with a combined net worth

of US$6.9 trillion. People in their 80s and 90s control US$1.2 trillion of that wealth. Adults under 50, roughly 43 per cent of the population, hold barely US$1 trillion.

Wealthy people in their 80s have the highest average net worth of any age bracket. One reason is that octogenarians have less than half the debt, as a percentage of their total assets, than adults under 60.

Measuring the wealth of the world’s richest people is difficult. Billionaires rarely take surveys, and they have every incentive under tax laws to make their fortunes look smaller than they are. The IRS bases its wealth estimates on estate tax filings. The fortunes of millionaires and billionaires who died are extrapolated to the holdings of the wealthy who are still alive.

The richest Americans may be far wealthier than the IRS estimates. For one thing, wealth managers and attorneys have found creative ways, such as trusts, to help the rich pass money to their heirs tax-free before they die.

“Estate planning has become more sophisticated over the years, with an increasing number of tax dodges, so that estate values are increasingly underestimating the true wealth of the living population over time,” said New York University economics professor Edward Wolff.

Estate tax data generally haven’t shown the wealthiest Americans taking a larger slice of the country’s wealth over time. That contradicts survey data and other measures based on macroeconomic data. In a

paper published last year, Emmanuel Saez and Gabriel Zucman, of the University of California at Berkeley, found that the share of U.S. wealth held by the top 0.1 per cent more than tripled from 1978 to 2012, from 7 per cent to 22 per cent.

Still, the IRS data give a unique insight into the portfolios of the wealthiest Americans. The agency finds, for example, that the richest Americans’ investments are heavily concentrated in businesses and non-public stock, and that their personal residences make up a small part of their wealth, only a bit more than their art collections.

So why are so many wealthy people living, and prospering, not just into their 70s but into their 80s and even 90s?

One explanation is they’re staying much healthier than other Americans.

The wealthiest men, in particular, are outliving poorer Americans by a widening margin, Saez and Zucman estimate. As recently as the early 1980s, the death rates of the rich and the general population were pretty similar. At ages 65 to 79, men in the top 1 perc ent were 12 per cent less likely to die than the average American man in any year in that range.

In the most recent estimates of Saez and Zucman, the richest men in that age range had mortality rates 40 per cent lower than average.

At this point, Americans’ overall longevity has stalled, and middle-class wealth and incomes have stagnated. One thing hasn’t changed: It’s still a great time to be rich. Bloomberg

Tag

Trump’s billionaire donors miss out on post-election stock gains Brendan Coffey and Jack Witzig

Norway’s PM builds hope for second term The economic recovery could be coming just in time for Norwegian Prime Minister Erna Solberg in her bid for a second term.

Trailing by more than 10 percentage points in July’s polls, Solberg’s Conservatives have narrowed the gap with the opposition Labor Party, according to pollofpolls. no, a poll tracking website.

Analysts point to healthy economic numbers as a possible explanation.

“The economy is back on its feet, growth is in place and now employment is also rising,” said Erik Bruce, senior economist at Nordea Bank AB. Bruce talks of “healthy” and “solid” mainland growth in the second quarter providing further evidence that the “oil related downturn is behind us.”

A regional survey by the central bank showed that businesses in June were the most upbeat they’ve been since before the crisis while consumer confidence has surged.

“Things are now looking different -- unemployment is going down, growth is rising, more people are coming to work,” Solberg told reporters in Oslo yesterday.

D

onald Trump’s wealthiest supporters haven’t benefited as much as the stock market in the wake of his election.

Twenty-four donors on the Bloomberg Billionaires Index, who federal records show collectively gave US$29.3 million to the Trump campaign and related political groups, have seen their fortunes rise 0.6 per cent since the Nov. 8 vote. That compares with a 14.6 per cent gain for the Standard & Poor’s 500 Index in the same period through last Tuesday.

Trump, 71, the first billionaire president, won a surprise victory with a “Make America Great Again” theme that promised to bring a businessman’s approach to tackling government challenges. He formed a presidential cabinet heavy on military and business leaders whose combined net worth is valued by the Bloomberg index at US$6.1 billion.

Renewed rally

U.S. stocks rose Tuesday amid speculation the Trump administration is gaining momentum in its efforts to reform the tax code. The S&P 500 had slid from its Aug. 7 peak on concern that the administration’s failure to pass major legislation signalled his policy agenda was imperilled.

Performance for the billionaire Trump donors was depressed by their holdings concentrated in the energy and retail industries. Energy stocks have been weighed down by high stockpiles, while stores and their landlords have faced headwinds from Amazon.com Inc. and the growth of online shopping. The worst performer of the group was

Continental Resources Inc. Chairman Harold Hamm, who dropped 26.9 per cent.

Trump’s wealthiest supporter is casino magnate Sheldon Adelson, whose fortune has risen 4 per cent since the election, making him the world’s 24th-richest person with US$31.5 billion. The best-performing member of the group was Thomas Petterfy, chairman of Interactive Brokers Group

Inc., who rose 20 per cent to US$16.2 billion and is ranked 60.

The index, a daily ranking of the world’s 500 richest people, grew by US$641 billion since the election, a 14.5 per cent gain that’s lifted the combined net worth of the 500 billionaires to US$5.06 trillion. Trump, whose real estate and licensing fortune is valued at US$2.9 billion, doesn’t rank among the top 500. Bloomberg

Business Daily Thursday, August 24 2017 15

Opinion Aging Japan wants automation, not immigration Daniel Moss a Bloomberg View columnist

J

apan’s next boom may be at hand, driven by the very thing that is supposed to be bad for its economy.

Japan’s aging and shrinking population has been partly blamed for the on-again, off-again nature of growth and deflation the past three decades. Lately, it’s been driving a different and just as powerful idea: In the absence of large-scale immigration, the only viable solution for many domestic industries is to plow money into robots and information technology more generally.

Humans will still be needed, of course, and that’s behind a separate by-product of Japan’s demographic challenges that I wrote about during a visit there last month.

With unemployment down to 2.8 per cent, companies are increasingly realizing they need to pay up to attract and keep qualified personnel. The other option -- increased immigration -- is politically difficult.

Japanese tech innovation in yesteryear was about gadgets and games designed to give pleasure. Think Sony’s iconic Walkman and Nintendo games. Now the demand in Japan comes from an older demographic. A nursing home may well be the place to look for the next wave.

As my colleagues Henry Hoenig and Keiko Ujikane wrote this week, an owner of nursing homes in the Tokyo area plans to spend 300 million yen ($2.7 million) on software to make life easier for employees and residents.

Hoenig, Toru Fujioka and I heard anecdotes like that numerous times during a December trip to Kadoma, a city near Osaka. The area was once an industrial powerhouse that rode Japan’s post-1945 industrial surge with local employers l i k e Pa n a s o n i c Corp. Now, Mayor Kazutaka Miyamoto frets openly about whether there will simply be enough wage earners to pay the taxes to maintain hospitals, public transport and schools (for those few children who are born and actually stay).

Miyamoto does not share the worries that dominate conversations about robots and AI in the West. He almost laughed when pressed on the issue in a conversation in his office. What if robots eliminate jobs?

He said that would be a good thing. He told us to look around: There aren’t many people on the streets in the middle of a weekday.

He doesn’t see any real appetite for immigration on a scale that would substitute for more robots and AI. Few businesses we spoke to that day did. One small manufacturer insisted that immigration would dilute Japan’s homogeneous society. He would happily get a few robots if he could afford them. Wait until the price comes down.

Bank of America Merrill Lynch forecast IT investment in Japan to rise as much as 9 per cent annually in coming years, with the difference in software investment per worker versus the U.S. falling to 5 to 1 by 2020 from about 10 to 1 now.

The budding surge isn’t limited to manufacturers. Non-manufacturing companies planned 2.4 trillion yen in software investment in the fiscal year ending in March 2018, according to the Bank of Japan’s Tankan survey, released in July. That would be the most since 2009. Retailers plan to spend 146.4 billion yen on software this fiscal year, the most on record for data going back to 1999.

Another reason Japanese people don’t share American angst about robotics: Astro Boy. Cultural affection for the anime character has made it easier for people to feel more relaxed about robots and technology in their lives.

Just as well. That nurse assisting you in retirement may soon be a robot, along with the dog that keeps you company. Bloomberg View

‘Cultural affection for the anime character has made it easier for people to feel more relaxed about robots and technology in their lives’

Hong Kong’s index king can’t turn back European tsunami Shuli Ren a Bloomberg Gadfly columnist

H

ong Kong’s benchmark index provider is at a turning point. European regulations that take effect in January will test its ability to remain relevant.

Hang Seng Indexes Co. is already behind the curve. The company, owned by Hang Seng Bank Ltd., said last week that it would add non-stateowned Chinese companies to its gauge of so-called H shares in the city, a step that would allow the inclusion of new-economy stars such as Tencent Holdings Ltd. The Hang Seng China Enterprises Index, which is dominated by financial and industrial companies, has risen 17 per cent this year, compared with a 38 per cent surge in the MSCI China Index. Two years ago, rival index compiler MSCI Inc. made the decision to include U.S.-listed Chinese technology companies, whose shares have been on fire this year.

Unfortunately, Hang Seng Indexes will soon be hit by a regulatory tsunami from Europe.

Shaken by the Libor manipulation scandal, the European Union will require that the region’s financial entities -- from banks to fund managers -- only use third-country benchmarks that have been cleared by the European Securities and Markets Authority. Unless the Hong Kong provider can prove that its gauges meet these strict standards, no European institutional investor will be able to benchmark against any of the Hang Seng indexes.

Hang Seng Indexes has three options to become compliant. The first, which requires that “supervision and regulation in a third country should be equivalent” to the EU standards, wouldn’t work because the company isn’t regulated in Hong Kong.

Second, an EU entity could “endorse benchmarks provided from a third country.” Perhaps London-headquartered HSBC Holdings Plc, with a 62 per cent stake in Hang Seng Bank, could be the sponsor? But that would make HSBC “fully responsible” for Hang Seng’s compliance with the EU standards.

“

The third option would require Hang Seng Indexes going to a major market regulator, say in Paris or Frankfurt, to obtain recognition. European regulators would have to visit Hong Kong to make sure the company was in compliance.

Like the impending MiFID rules, the EU’s regulation of benchmark indexes is still young and it’s unclear how providers can clear the hurdles.

A spokesman for Hang Seng Indexes said it was assessing the regulations and their implications and couldn’t comment at this stage.

The question for Hang Seng Indexes is whether compliance will be worth the trouble. The company, which makes money by licensing its name, doesn’t get much from Europe.

More than 150 funds managing more than $41 billion of assets track the Hang Seng family of indexes, of which the best known is the blue-chip Hang Seng Index. Among these, only eight funds commanding $1.4 billion of assets are from Europe, data compiled by Bloomberg show.

European investors accounted for only 5.4 per cent of total cash equity trading in the city last year, according to Hong Kong Exchanges & Clearing Ltd. There’s no question that MSCI will go out of its way to comply with the European demands. Of the $15.2 billion of assets that are pegged to the MSCI China and Hong Kong indexes, $2.6 billion come from Europe. However, a far bigger $227 billion of assets under management are pegged to the MSCI Emerging Markets Index, in which Hong Kong-listed Chinese stocks have a 21 per cent weighting. Continental Europe accounts for almost half that amount.

The new European regulations will make the indexing world smaller, leaving a handful of global players, forcing regional compilers to become more local and perhaps even pushing some into oblivion.

Despite the limited presence of European money in Hong Kong’s stock market, Hang Seng Indexes would show foresight in bending to the continent’s will. Bloomberg Gadfly

IT IS OMINOUS THAT FED DOVISHNESS IS NO LONGER INSPIRING MUCH ENTHUSIASM FOR RISK ASSETS. THIS MAY REFLECT A LOSS OF CONFIDENCE IN THE CENTRAL BANK’S ABILITY TO STIMULATE DEMAND IF NEEDED

”

16 Business Daily Thursday, August 24 2017

Closing Corporate

North American exodus from PetroChina sparks speculation of company shift In the last several years, PetroChina built itself into one of the largest oil traders in North America Catherine Ngai

A

flurry of departures across the U.S. and Canadian units of Chinese state energy firm PetroChina Co Ltd have sparked speculation that the oil trader is reducing its presence in North America, even though the company says it is committed to the region.

More than 30 people in its Houston and Calgary offices have left PetroChina since 2016, including heads of desks in crude, financial, natural gas and chemical trading, the company confirmed to Reuters. Sources say that PetroChina had approximately 150 to 200 people at its peak two to three years ago, and now has between 100 and 150.

Nearly a dozen sources in New York, Calgary, Houston and Singapore, including current and former employees, told Reuters the departures suggest a shift in mind-set among firm management, and there are concerns about a broad pullback

from its presence in North America.

The sources interviewed, which also includes several who do business with the firm, said North American offices may have expanded too quickly.

Mark Jensen, spokesman for PetroChina International America, said the company is committed to business throughout the Americas. He previously said the company and its subsidiaries have restructured the organization where necessary over the last several months, and that the departures do not represent a change in strategy in the region.

A Beijing-based company executive, who has direct knowledge of the firm’s global operations, said “poor performances or missing profit targets” was the main reason behind the staff departures.

The official, who asked not to be named as he not authorized to speak to the press, said there will be some restructuring in some of the business divisions, particularly natural gas.

“The company believes natural gas shall have good potential to expand, both in terms of scale and profit targets,” he said.

The restructuring could start after Petrochina’s new chairman, an fuel marketing veteran who took over the top job last April, tours North American offices, likely later this year, added the source.

In the last several years, PetroChina built itself into one of the largest oil traders in North America, hiring top talent with the goal to compete with trading giants Vitol SA , Trafigura and Mercuria Energy Group, industry participants said.

The departures have been notable ones, including John Mee, director of financial crude trading; Jie Wang, president in Calgary; and Eric Dixon, domestic head of physical crude onshore, among others.

The company has also lost a number of key staff in other departments, including in legal and accounting.

One source said that the company is not currently looking to replace the

majority of those positions.

Sources interviewed said management’s mind-set over the last year has shifted toward tightening credit limits and shifting away from sources of activity common among oil traders operating in North America.

‘Mark Jensen, spokesman for PetroChina International America, said the company is committed to business throughout the Americas’ For instance, PetroChina appears to be shifting away from trading volumes on pipelines - which accounts for the lion’s share of crude trading in the United States - and favoring more vessel-based cargo trading, two sources familiar with PetroChina said.

In Houston, there are no longer any proprietary traders, according to two of the sources Reuters interviewed.

The company did not respond to a specific request for comment regarding the shift to waterborne trading or proprietary trading.

The departures come after major losses in commodities markets in the first half of 2017, as hedge funds and banks saw some of their worst results in years due to a lack of overall volatility and an unexpected sell-off in crude.

The firm has gotten rid of individual bonuses and is now using a team bonus plan across Canada, the United States and China, according to two of the sources spoken to by Reuters.

The company did not respond to a request for comment on this.

PetroChina is not set for a full retreat from the region, sources say. The company has certain commitments in the region, including a long-term contract on Royal Dutch Shell Plc’s Zydeco pipeline through 2019. In addition, PetroChina’s parent, China National Petroleum Corp, will need to keep its options open to import U.S. crude oil, sources said. Reuters

Labour

Reform

Monetary stance

Qatar limits hours, ensures pay for domestic workers

COFCO considers sale of Draghi says central banks must be Nidera in divestment effort open-minded to meet challenges

Qatar has approved a law limiting domestic staff to a maximum of 10 hours’ work a day, the first such protection for thousands of household maids, nannies and cooks in the emirate.

The “Domestic Employment Law” also orders employers to pay staff wages at the end of each month and entitles workers to at least one day off per week and an annual leave of three weeks, the Qatar News Agency reported.

They will also receive end-of-service benefits equating to a minimum of three weeks wages for each year of service when their contract ends.

The law prohibits staff being recruited from abroad who are older than 60 and younger than 18.

Hundreds of thousands of foreign workers have flocked to the gas-rich Gulf emirate in recent years, including almost 100,000 women working as house staff.

Other domestic workers covered by the new law include cleaners, gardeners and drivers.

Although Qatar has come under severe international pressure to improve its record on the treatment of construction workers in the run-up to the 2022 World Cup, until now domestic staff have not been protected by any legislation. AFP

After paying hundreds of millions of dollars for Dutchbased grains trader Nidera in a three-year takeover completed just months ago, Chinese state-owned food group COFCO is considering selling the troubled business, according to people familiar with its plans.

Aiming to become a stronger global player, COFCO had hoped to combine Nidera with Noble Agri, a unit of Singapore-listed trading house Noble Group, which it also began buying in 2014.

Any sale would mark an abrupt change in strategy, as COFCO looks to restructure its business as part of wide-ranging reforms of China’s state-owned companies.

Two sources say COFCO has tapped investment bank Morgan Stanley to work on plans to sell.

Unforeseen losses racked up by Nidera, and accounting irregularities unearthed last year in its Latin American operations have helped persuade COFCO’s management to look at ways to divest.

“Nidera’s continued losses have been worse than COFCO’s expectation,” said one of the sources. “And the accounting issue in Nidera’s Brazil business helped accelerate the sale.”

It is unclear how much the business would be valued at, as the process is at an early stage, said one source. Reuters

Mario Draghi said that while central-bank actions over the last decade have strengthened the global economy, it is important to be open-minded in readying for future developments.

In a speech that gave no specific signals on the European Central Bank’s current policy deliberations, the institution’s president stressed that officials must be “unencumbered by the defence of previously held paradigms that have lost any explanatory power.”

Speaking to an audience of 17 Nobel laureates and 350 young economists in the southern German town of Lindau, he said that research remains essential in designing monetary strategy.

“A policy response that has its foundation in rigorous research is less prone to being impaired by political compromise and easier to explain to the general public,” Draghi said. “Policy actions undertaken in the last ten years in monetary policy and in regulation and supervision have made the world more resilient. But we should continue preparing for new challenges.”

Draghi’s speech marks the end of a relatively quiet summer break as policy makers gear up to discuss the future of their stimulus program in the fall. The central bank is entering a crucial phase of its battle to restore euro-area price stability as the economy improves but inflation remains stuck below target. Bloomberg News