Mainland regulators prepare laws for digital currencies Cryptocurrencies Page 9
Tuesday, August 29 2017 Year VI Nr. 1371 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro
www.macaubusiness.com
Real estate
Poll
China to boost rental housing construction in rural areas Page 5
Results
Labour
Shun Tak figures improve in H1 Page 5
Unemployment rate stable Page 2
eSport
Mainland videogame mercenaries find a fruitful biz Page 10
Forecast points to good China figures in August Page 9
Never again Post typhoon
After the catastrophe the city suffered last week, public bodies have started reacting and aim to adopt the necessary measures to prevent any repeat occurrence. The creation of the Commission for Reviewing and Monitoring the Improvements of the Response Mechanism to Major Disasters, chaired by the Chief Executive was set up yesterday. Page 2
Grand Hyatt goes to Jeju
Inner Harbour floods
Experts analyse the record of floods in the Inner Harbour, highlighting possible solutions and challenges, both political and technical
Casino Lotte Tour Development yesterday signed an agreement with the luxury hotel chain to operate the Jeju Dream Tower Integrated Resort in the South Korean enclave, Lotte informed BD. The hotel will be the largest Grand Hyatt in Asia. Page 6
Complaints get official
Typhoon aftermath Over 10,000 signatures supporting a petition to investigate the former head of the SMG were submitted to the government yesterday by Synergy Macao. The local association wants the creation of a committee to investigate the typhoon events and to allow the public to oversee the investigation process. Page 3
Japan cities duel for resorts HK Hang Seng Index August 28, 2017
27,863.29 +15.13 (+0.05%) Worst Performers
AAC Technologies Holdings
+11.11%
Sino Land Co Ltd
+1.68%
China Resources Power
-1.77%
Geely Automobile Holdings
-1.16%
Hengan International Group
+3.62%
Bank of Communications
+1.34%
Tencent Holdings Ltd
-1.64%
Lenovo Group Ltd
-1.15%
China Shenhua Energy Co
+2.08%
China Life Insurance Co Ltd
+1.20%
Sands China Ltd
-1.45%
CK Hutchison Holdings Ltd
-0.88%
Bank of East Asia Ltd/The
+1.88%
China Resources Land Ltd
+1.08%
China Unicom Hong Kong
-1.38%
Industrial & Commercial
-0.67%
China Merchants Port Hold-
+1.70%
Wharf Holdings Ltd/The
+0.98%
Galaxy Entertainment Group
-1.27%
Link REIT
-0.47%
27° 32° 27° 33° 26° 33° 27° 33° 27° 32° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
Gaming The legislation has not yet been enacted, but already contenders to host future casino complexes are placing their bets. Osaka and neighbouring locations fear they could impede each other’s offers. Page 7
Infrastructure Page 4
2 Business Daily Tuesday, August 29 2017
Macau Official Gazette
An ‘internal’ review committee set up
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he MSAR Government announced the establishment of an ‘internal’ committee to review the system for handling serious crises and to follow-up the improvements, a dispatch released yesterday in the Official Gazette revealed. The committee includes all five Secretaries of the government as well as the Commissioner-General of
the Unitary Police Service, and the Director-General of the Macao Customs Service. The committee will be headed by the Chief Executive. As such, the public expressed doubts about whether the committee would be able to adequately and objectively scrutinize the actions of government departments. Victor Chan Chi Ping, the director of the Government Information Bureau (GCS)
noted during yesterday’s press conference that the establishment of the committee to review the government follows the procedures similar to situations of dereliction of duty by civil servants. “The dispatch [in the Official Gazette] also states clearly that the committee would invite individuals from the society and experts to discuss matters,” said Chan. “The Chief Executive
also said earlier today [that departments] have to listen to opinions from the society.” According to the dispatch, the aim of the committee is to review the current crisis management mechanism, including weather forecasting, co-ordination of civil protection work, delivery of information as well as the current condition of related infrastructure. The committee will also
evaluate the roles of various public departments in dealing with different levels of crises, as well as studying how to strengthen public awareness in the event of a crisis. In addition, measures of improvement will be studied and created in areas such as awareness education, daily coordination of prevention measures and the strengthening of security and rescue operations.
The Chief Executive, Mr Chui Sai On, presides at a meeting of the Commission for Reviewing and Monitoring the Improvements of the Response Mechanism to Major Disasters. Source: GCS
Employment
Stable work The unemployment rate remained stable at 2 per cent between May and July of this year, with the total employed population reaching 384,100 people Nelson Moura nelson.moura@macaubusinessdaily.com
Macau’s gaming and junket activities continued to take up the largest chunk of the labour force of the city between May and July. While the total employment force amounted to 384,100, some 80,100 were engaged in the gaming sector, according to the latest data from the Statistics and Census Service (DSEC), albeit an almost 1 per cent reduction from the survey between
April and June. The Employment Survey released yesterday, indicates that the wholesale and retail trade sector employed 47,000 people or 12.2 per cent of the total employment force between May and July, with the construction sector employing almost 9 per cent. In total, the hotel and restaurant business employed 56,400 people or 14.7 per cent of the total employment force, while recreational, cultural, gaming and other services represented 24.1 per
cent of total employment. DSEC’s data also indicates that the total labour force in the city was 392,100, with the labour force participation rate being 71.4 per cent. The number of employed residents went up by 1,600 from the previous quarter to 282,600, with the unemployment rate for residents reaching 2.8 per cent. The overall unemployment rate remained at 2 per cent between May and July, with the number of unemployed people being 8,000, a
Source: DSEC
small 1.6 per cent rise from the previous period. According to DSEC, the number of fresh labour force entrants searching for their first job accounted for 15.2 per cent of the total number of unemployed, a rise of 4.4 percentage points from the previous period.
Helping hand
Meanwhile at the end of July, the number of non-resident workers in the MSAR increased 2.3 per cent year-on-year to 176,839
according to data published by the Labour Affairs Bureau (DSAL). The largest community of non-resident workers was workers from mainland China, 111,704 workers, followed by Filipino nationals with 27,626 and Vietnamese with 14,872. The hotel and restaurants sector employed the largest percentage of non-resident workers, at 50,049, followed by the construction sector which hired 31,339 overseas workers.
Source: DSEC
Business Daily Tuesday, August 29 2017 3
Macau Petition
Synergy Macau submits petition to gov’t The group collected over 10,000 online signatures to urge the gov’t to undertake accountability procedures against the former SMG head Cecilia U cecilia.u@macaubusinessdaily.com
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ome 11,593 signatures were collected by local association Synergy Macao, who submitted a petition with the signatures to the government yesterday at the Government Headquarters. Ron Lam U Tou, the director of the association, said the public is urging the government to set up a committee to investigate the matter and to allow the public to oversee the investigation process. “We also urge that the committee should have a specific responsible official and inform the works of the committee regularly,” said Lam. “We don’t want to see many creations of committees but no actual suggestions made.” The director suggested that the committee should perform examinations of the following issues: Investigate the reason for the damage caused by Typhoon Hato; roll out improvement measures and inform the public
about the schedule; review and upgrade local weather forecast and warning systems; assess the handling of local civil protection, aftermath and sudden crises as well as ways of informing the public; report on updates of the work to prevent flooding in low-lying areas; evaluate the current system of flood prevention of buildings; and inspect the management of power supply, in particular, how to ensure the current system can deal with flooding. “Also, CCAC [Commission of Audit] should investigate whether the former SMG [Meteorological and Geophysical Bureau] head or related officials had derelicted their duties,” suggested Lam. In fact, CCAC announced yesterday that investigations into the accountability of the former head of SMG in relation to the forecasting system and internal management had commenced, in the wake of receiving large numbers of complaints lodged by the public. Meanwhile, the association
head said there were no updates from the cross department committee studying the prevention of flooding in the Inner Harbour, which was set up in 2011. He also expressed that CCAC should check whether these committees are performing their duties properly. Lam also pointed out another problem that there are
many groups and committees being set up but no third parties present to oversee the progress of these committees and a lack of objectivity of the committees. “We are concerned that damage will be repeated in the future if no improvements are made,” said Lam. He agreed that some parties with recognised credibility,
for instance judicial authorities, should monitor the committees. The local group also suggested that the legal support of SMG should be updated. “Many regulations were obscure in the Chinese translation, and they don’t have specifications on the criteria of different typhoon levels,” noted Lam. advertisement
4 Business Daily Tuesday, August 29 2017
Macau Urban planning
Inner Harbour flooding prevention an overwhelming challenge Studies to rehabilitate and prevent flooding in the Inner Harbour were made almost 16 years ago, but according to an architect involved in the project, a lack of political will and opposing economic interests delayed a solution to the recurring problem Nelson Moura nelson.moura@macaubusinessdaily.com Cecilia U cecilia.u@macaubusinessdaily.com
A
n architect involved in an urban renewal and requalification project for the Inner Harbour and Barra area almost 16 years ago, believes the opposition of certain local interests and a lack of political will delayed any possibility of reducing the risk of flooding in an area of the city that was badly damaged by Typhoon Hato. In 2001, construction consultancy firm Macau Professional Services Limited (MPS) was granted a contract for a study on an urban renewal and rehabilitation project for the Inner Harbour and Barra area, Miguel Campina an architect involved in the project told Business Daily. The MOP5 million (US$620,457) contract approved by the then-Macau Chief Executive, Edmund Ho, involved a plan for an integral recovery of the whole river waterfront. “The study set some priorities with the notion that something had to be done [in regards to the recurring flooding issue],” the architect said. However, according to Mr. Campina, “studies were made, solutions were thought” but suddenly the project was halted with decisions being delayed because they were not considered to be of a “priority nature”. “The project was abandoned because other interests overcame it, namely interests for very short-term and short-sighted projects (…) Why it wasn’t made, the political power is the only one that can respond to that,” the architect told Business Daily. In previous comments, Mr. Campina told Business Daily that the direction for the area recovery was changed after the MSAR administration provided exploration rights in the area to Stanley Ho’s gaming group Sociedade de Turismo e Diversões de Macau (STDM), for the construction of the Ponte 16 Sofitel Hotel. “Obviously, an action of this magnitude demands the use of not small amounts of material resources, while
demanding decisions that could go against strong interests that are already installed in the area for a long time, which I’m sure will react negatively to the necessity to regulate the use of the area to allow its rehabilitation,” Mr. Campina stated. However although believing that “economic interests also had an influence” the area’s rehabilitation was mainly delayed due to a lack of political will to solve a “well known recurring situation” that causes “serious consequences to the city’s population and commerce”. “[Flooding] could be avoided and resolved since there are financial resources or specialised knowledge (…) Technicians know this and politicians can’t ignore it, since it happens year after year,” Mr. Campina added. Last year, an official gazette dispatch stated that the total value of the contract for the study had been adjusted to MOP3.4 million, with an initial MOP2.18 million having been paid in 2001 and the remaining payment amount only being made to the firm last year.
The effects
The impact of Typhoon Hato especially impacted the low lying areas near Rua Ribeira do Patane, with one of the streets that suffered a great deal of damage being Rua da Nossa Senhora do Amparo, where some businesses operated by local company Number 81 Co. Ltd were located. “In the worst period of Typhoon Hato the level of the waters reached as much as two meters high, flooding most of the stores in the street,” Number 81 Project Director, Duarte Silvério, told Business Daily. According to Mr. Silvério, the area is not equipped to deal with flooding of this magnitude, and although the store’s management attempted to make some preparations and place protective sand bags, they suffered a great deal of material damage to the store’s stock and electric equipment. “We had absolutely no warning from the government. The largest problem is that in Macau we always have this issue with typhoons, we treat a Signal 8 typhoon like a Signal 3, and a Signal 3 like there’s no typhoon,” Mr. Silvério added.
public parking lot located in Ponte 16 during floods last week. Source: Lusa
A view of the Inner Harbour with Ponte 16 in the centre of the image
Number 81 purchased 12 commercial spaces on Rua da Nossa Senhora do Amparo and Patio de Chon Sou, with Mr. Silvério saying most of the stores suffered some kind of damage. For the local resident, the occurrence of flooding in Macau and especially in these areas near the harbour is something periodical, with little having been done so far, even in regards to the prevention of flooding in buildings’ car parks where several of the 10 deaths caused by Typhoon Hato occurred.
The exceptional scenario
Both Mr. Campina and Mr. Silvério agree that the typhoon was of a magnitude rarely seen in Macau, with a special concurrence of a high tide joined by strong rain and winds making it a scenario harder to predict by developers. However, for Mr. Campina, the trend in building development in Macau has been to try to reduce costs, with the justification of better management of expenses or a lack of funds used to avoid planning for a theoretically more serious scenario. “There’s no way to rehabilitate an area of this nature without costs or decisions going against some specific interests, but that’s the politicians’ function, to make decisions that support the interests of the majority,” Mr. Campina added.
Not just one approach to resolve flooding
In the wake of the massive destruction in the Inner Harbour area caused by flooding during Typhoon Hato last
Wednesday, Sio Chi Veng, council president of the Macau Institution of Engineers, explained to Business Daily that there is no one solution to resolve the flooding issue. “Macau is special. Firstly, the city is small and the Inner Harbour is located at the downstream with a heavy population and transportation,” stated Sio. “So if we are to build massive underground reservoirs, the size of them would then have to be like 10 football courts.” He explained that the complex conditions underground make the approach difficult to implement. “A lot is happening underground given the many buildings in the area, plus many of these buildings are old,” noted Sio. The engineer said the construction of breakwaters and large water pumps are all workable, while saying that the issue can only be effectively resolved when multiple approaches are implemented. “Also it is necessary to co-operate with the neighbouring cities like Zhuhai,” stated Sio, explaining that it is impossible for Macau to control the water by itself. In fact, Victor Chan Chi Ping, the director of Government Information Bureau (GCS) replied to press enquiries during yesterday’s press conference, stating that the two studies to resolve flooding in the Inner Harbour District, which are being carried out by the Pearl River Water Conservancy Science Academy, are currently awaiting opinions from the Chinese State Council. The studies suggest co-operating with neighbouring Chinese cities including Zhongshan and Zhuhai. The GCS director pledged that progress would be expedited after the recent incident. Regarding the building of a sluice gate, Sio pointed out that even if there was a massive sluice gate, the need for electricity to run it proves that the recent incident would only make matters worse. When asked to compare the situation in Hong Kong, Sio indicated that there is more land in the former British enclave which enables them to build underground reservoirs. “It needs at least five to 10 years to come up with these underground reservoirs,” said the engineer. Nevertheless, he opined that “the most important thing that can be done is to put more attention on building basic infrastructures” for long-term development and to improve early warning systems in the short-term. “The flooding issue has been discussed since the time before the city was being returned to the Mainland,” said Sio. “Everyone knows where the problem is but never have they actually studied and come up with a solution.”
Business Daily Tuesday, August 29 2017 5
Macau Business
Back in the clear Shun Tak Holdings registered HK$699.3 million in net profit in the six-month period ending June 30 of this year, with the company announcing that 45 per cent of the units offered for pre-sale at its Nova Grand development have already been sold Nelson Moura nelson.moura@macaubusinessdaily.com
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hipping and property conglomerate Shun Tak Holdings Ltd registered net profits of up to HK$699.3 million (US$89.3 million) for the six-month period ending June 30 of this year, according to a company release with the Hong Kong Stock Exchange. The results come after the company saw net losses of HK$53 million in the same period last year. In total, Shun Tak registered revenues of HK$3.67
billion in the period, a yearly increase of 97 per cent from the HK$1.87 billion registered in the same period last year.
Selling space
According to the company’s unaudited consolidated interim results, the revenue from previously contracted sales of the 680,000 square feet Nova Park project - together with the disposal of its Chung Hom Kok Collection in Hong Kong - allowed the company to achieve an increased year-on-year profit of HK$630 million. The company announced that around 99 per cent of the
620 residential units of the Nova Park project in Taipa have been sold, with 85 per cent having been handed to homeowners. ‘Over the first half of 2017, the real estate markets across both Hong Kong and Macau have exhibited solid growth in prices and transaction volume, driven by strong economic fundamentals and local demands. Capitalizing upon this uptrend, the Group has continued to launch Nova Grand and received popular market response,’ the note stated. The Chung Hom Kok Collection is comprised of five
Shun Tak Centre in Hong Kong
luxury residential houses in Hong Kong that Shun Tak disposed for HK$1.58 billion to a ‘PRC-based listed company’, with the deal finalised in February of this year.
Shun Tak also added that 397 units of 2-bedroom and 3-bedroom apartments in its Nova Grand project have been launched for pre-sale, with 45 per cent of all available units having been sold. The project in Taipa - Phase 5 of the Nova City project includes eight towers with 2.3 million square feet of residential units and a 655,000 square feet mall complex, Nova Mall. According to the release, the ‘topping out of the tower blocks’ of the project was conducted in June 2017 with the completion scheduled for late 2018.
Typhoon
CTM providing support services to Macau residents The local telecommunication company, CTM, announced yesterday that it is launching a ‘caring support service’ estimated to cost the firm some MOP20 million. The service called “Telecom Facilities Aid Scheme” has been put in place to help mitigate the difficulties
encountered by small and medium-sized enterprises (SMEs) as well residents affected by Typhoon Hato last Wednesday, August 23. CTM said it has arranged technical teams to provide ‘on-site’ repair of damaged telecom services, pledging further that it will refrain from charging clients
for necessary replacement of damaged telecom equipment. In order to request the service, customers should dial CTM No. 1 hotline 1000 and report the faulty service. Upon receiving the request, the company will send technicians for onsite testing and assessment, to replace the
dysfunctional equipment. Th e c o m p a n y ’ s C E O , Va n d y P o o n , sai d that “CTM has stepped up disaster prevention facilities and enhanced the working mechanism to ensure the smooth provision of telecom services in case of future happenings of natural disasters.”
Additional measures being provided by the telecom firm since August 24 include temporary increases of 4G mobile data usage upon request, free use of CTM Wi-Fi hotspots across Macau, as well as inshop services such as mobile handset health checks, charging stations, and on loan mobile chargers. advertisement
6 Business Daily Tuesday, August 29 2017
gaming Jeju
Grand addition Jeju, the holiday destination island of South Korea, will have its Dream Tower Integrated Resort with casino operated by Grand Hyatt Paulo A. Azevedo
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rand Hyatt is the luxury hotel chain chosen to operate Jeju Dream Tower Integrated Resort, Lotte Tour Development told Business Daily. The services agreement was signed yesterday, giving the chain its sixth hotel in South Korea, the largest Grand Hyatt in Asia with 1,600 all-suite rooms and 11 restaurants and bars, and the second largest Hyatt in the world in terms of number of rooms. Scheduled to be completed by September 2019, the double tower integrated resort is located in the downtown area of Jeju, South Korea’s recreation island, and will become the tallest and largest integrated resort in the city. Jeju Shinhwa World, another IR, with several hotels and villas spread across various hectares of land, located 25-minutes drive from downtown, will have its first phase opening at the end of this year. Standing at 169 meters tall with 38 stories, Dream Tower is a resort complex co-developed by Lotte Tour (with 59 per cent of total gross floor area that also includes restaurants, a shopping mall and an observation deck) and China’s largest real estate developer Greenland Group and the world’s largest construction company CSCEC (with 41 per cent of the remaining space). Grand Hyatt will operate the 750 hotel rooms in tower one, belonging to Lotte Tour Development, as well as the 850 rooms of the hotel residence that will be put on the local property market.
South Korea-Jeju Dream Tower-Integrated Resort
In a press release, Lotte Tour Chairman, Ki-byung Kim stated that Dream Tower is expected to become “a major tourist destination on Jeju island”, will create “3,000
jobs included hoteliers and casino dealers, and contributes tens of billions of Korean won” to the local tourism fund. Earlier this month, Lotte Tour
issued convertible bonds worth KRW40 billion (US$35 million) to acquire a foreigners-only casino license, as reported by Business Daily.
VIP gaming
VIP pays off, kind of Imperial Pacific International Holdings is planning to increase the number of VIP rooms in its only casino on the Pacific Island of Saipan, following strong H1 performance Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Strong VIP performance at Best Sunshine casino on the Island of Saipan has pushed its casino operator, Imperial Pacific International (IPI) Holdings, to announce plans to open more VIP rooms by the end of 2017, according to a filing from the company with the Hong Kong Stock Exchange last Friday. The casino currently has a total of 16 VIP gaming tables. Gross revenue from its VIP gaming operations amounted to HK$7.09
billion (US$906.40 million/MOP7.30 billion) in the first half of 2017 ended June 30, up 46 per cent from HK$3.82 billion recorded over the same period in 2016. Net profits rose 8.9 per cent, amounting to HK$912 million, up from HK$837 million a year earlier. VIP rolling chip volume reached nearly HK$196.28 billion from HK$104.65 billion the year before. The company noted its VIP customers consist ‘primarily of credit players,’ who are mainly sourced from mainland China, Hong Kong, Macau, Korea and Saipan, and often
sourced ‘via intensive marketing campaigns.’ Following the beginning of operations with a new licensed junket operator in August 2016, which manages ‘a minor operation of the group’s VIP customers,’ IPI has announced that it expects ‘to commence collaboration with gaming promoters after they are granted junket operator licenses to operate on the Island of Saipan.’ The company has further linked the increase in gross revenues in the six months ended June 30 to a 37.4 per cent increase in the number
of visitor arrivals to the Commonwealth of the Northern Mariana Islands (CNMI), where Saipan is located. In particular, visitor arrivals from Hong Kong skyrocketed 216.5 per cent while visitors from Korea increased 78.1 per cent. During the period, the group invested in and acquired property, plant, and equipment worth some HK$1.33 billion, against HK$762.55 million a year before.
Credit on demand
IPI’s operating expenses for the six months ended 30 June 2017 include impairment of trade receivables of HK$2.08 million, staff costs of HK$338 million, and depreciation and amortizations expenses of HK$63 million. The amount represents an increase of HK$1.96 million from a year earlier, which the company said is mainly attributable to an ‘increase in impairment of trade receivables in accordance with the group’s normal provision of bad debt policy and management’s consideration of individually impaired trade receivables which are unlikely to be recovered.’ IPI added that the Board ‘does not rule out the possibility that the company may carry out further debt and/or equity fund raising plan(s) to further strengthen the financial position of the Group.’
Business Daily Tuesday, August 29 2017 7
Gaming Asian gaming
Not so good neighbour policy Strong lobbying for a casino license by three sites in Japan located within close range of each other could weaken the chances of all, unless emphasis is put on regional and not municipal development showed that 68 per cent of residents supported lifting the ban on casino gambling.
Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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hree sites are reportedly lobbying hard to get one of the first licenses to operate an Integrated Resort in Japan, the Japan Times reported on Sunday. Two sites are located in Osaka Prefecture, Yumeshima, an artificial island in Osaka Bay, and Riku Town in Izumisano, while another site, the Wakayama Marina City in Wakayama Prefecture, is located just south of Osaka. Yumeshima has already attracted interest from casino operators with business in Macau. These include Melco Resorts & Entertainment, which was said to have showed preference for Osaka over Tokyo, MGM Resorts International, and Las Vegas Sands Corp. Lobbying from Wakayama – which is not on the nine-cities list nationwide holding public hearings by a panel of experts appointed by the Diet to discuss detailed regulations of the Integrated Resorts Promotion Bill – was reported to have ‘irritated’ officials in Osaka city and
Focus on regional economics
A panorama of Osaka
Izumisano, who worry that Tokyo would not award two licenses for cities located in the same vicinity. Business and political interests in Osaka city and Prefecture were also said to have put forward a plan with hotels, convention and shopping centres, as well as cultural facilities as part of their lobbying strategy.
Supporters of Rinku Town have also advocated that the site’s location across the bay from Kansai airport in southern Osaka makes it ideal for attracting tourists to the area. Osaka city, the prefecture, and local businesses have been promoting the development of Osaka as a possible casino site since 2002.
In 2013, the city of Izumisano, where Rinku Town is situated, approved a resolution to support casino development, forming an attendant committee the following year. During the public hearing held in Osaka earlier this month, official information claimed that a survey conducted by the city in 2013
Wakayama is also touting the city’s proximity to Kansai airport – some 45 minutes away by car – claiming it can attract enough of its 6 million visitors to generate profits. In support, local officials have further claimed, in contrast to Yumeshima, that the construction of facilities in Wakayama Marina City could start immediately, according to the Japan Times. Wakayama’s position is that the upper house of Japan’s parliament, the Diet, needs to approach legislation on awarding casino licenses from the perspective of ‘regional economics,’ instead of focusing only on reviving the local economy. The Diet is expected to approve only two or three IR’s in the first stage. Suggestions collected during the public hearing, to be held from August 17 to 29, are likely to be considered during the writing of the bill, which is expected to be finalized by the end of 2017. advertisement
8 Business Daily Tuesday, August 29 2017
Greater China Housing
Beijing to boost rental supply by building on rural land The move to boost rental supply comes as China contains bubble risks
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hina will launch pilot programmes in 13 major cities, including Beijing and Shanghai, to build rental housing projects in rural areas as part of efforts to ease a housing supply shortage, the land ministry said yesterday. That would enable megacities such as the capital Beijing to supply rental homes in its suburban areas where most land is collectively-owned by rural villages, without having to expropriate the land first, analysts said. Chinese land is divided into urban and rural land regimes, granting ownership rights over urban land to the state while rural land is owned collectively and cannot be bought and sold freely. The launch of such pilot programmes could mark a significant step towards opening up the country’s largely non-existent rural land market, some analysts said. Under the current law, large-scale development, such as real estate development and factory building, is not permitted on rural land, except where the state has taken ownership of a parcel of land from a village collective, thus turning it into stateowned land. The move to boost rental supply comes as China contains bubble risks in its hottest markets where an increasing number of people are being priced out of the property market,
raising concerns for policymakers who prize stability. But some experts remain sceptical as the measures come with various conditions, such as requiring the majority of the rural land used to be existing land that has gone through some level of development but remains idle, instead of new land plots. “In reality these kinds of rural land are very few,” said an industry expert at a research institute affiliated with the land ministry, who requested anonymity as he is not authorised
to speak to media. Analysts said local governments who are heavily reliant on land sale revenue may have little incentive to fully implement the rental programme. “I don’t think local governments would actively push this because if rental housing supply rises a lot they might impact the sales market, hurting their land revenue,” the industry expert said, stressing that the government-led initiative means local governments
have “absolute power” in terms of implementation. The 13 pilot cities will submit specific implementation plans to the land ministry and housing ministry for approval by the end of November, a statement on the ministry’s website said. The statement did not provide details on targets for the number of rental homes or how much land would be dedicated to the pilot programme, but the rental homes will not be for sale. Reuters
Aviation
Korean peninsula crisis to trim Chinese airline profits The route cancellations accelerated in March after Beijing banned tour groups from visiting South Korea Brenda Goh
Beijing’s curbs on travel to South Korea are expected to take some shine off the first-half results of China’s topthree airlines, which have slashed seat numbers on flights between the countries amid tensions over North Korea. Air China, China Eastern Airlines and China Southern Airlines are expected to report higher earnings this week on the back of foreign exchange gains, but cuts on lucrative routes to South Korea could crimp yields. Data compiled by consultancy Flightglobal for Reuters showed the three airlines and their subsidiaries had cut seat capacity by 41 per cent by August compared to a year ago. The cuts came as China began to pressure South Korea over Seoul’s deployment of a U.S. missile defence system designed to thwart any North Korean attack, but which China sees as a threat to its own security.
The route cancellations accelerated in March after Beijing banned tour groups from visiting South Korea. In all, almost 400,000 seats have been cut. While Chinese airline yields were already falling due to rapid capacity expansion, analysts say the route cuts to South Korea were unhelpful. “South Korea is one of the Chinese airlines’ most profitable international routes and the sharp decline in traffic on these routes does have a negative earnings impact on the Chinese carriers,” said Corrine Png, chief executive of Singapore-based transport research firm Crucial Perspective. Other destinations where the airlines redeployed capacity, such as Southeast Asia, had more competition and were not as lucrative as the South Korean routes, she said. Air China and China Southern Airlines did not respond to requests for comment. A spokesman for China Eastern Airlines declined to comment.
Chinese airlines cut 91 China-South Korea routes between August 2016 to 2017, and added just four, data from air travel intelligence firm OAG shows. In comparison, they opened 63 routes from China to Thailand and 38 to Vietnam over the period. China Eastern, which had more exposure to South Korea than its two rivals, would report a 1.7 per cent decline in passenger yields in its halfyear results on Aug. 29, according to a forecast by Singapore-based brokerage UOB Kay Hian. It predicted a 0.8 per cent fall in passenger yields for China Southern, and that Air China, which reports on
Aug. 30, would post flat yields. Analysts said private budget carrier Spring Airlines was the Chinese airline most exposed to the South Korea curbs. It reported a 25.2 per cent fall in first-half net profit last week on higher operating costs. South Korean budget airline Jeju Air told Reuters last week that there were no signs that China would allow South Korean carriers to resume charter flights any time soon. It said China had declined its request to offer charter flights in August to and from the country - the latest in a series of rejections stretching back to January. Reuters advertisement
Business Daily Tuesday, August 29 2017 9
Greater China Forecast
In Brief
Factories seen posting another solid month of growth in August Data on Sunday showed industrial profits grew at the slowest pace in three months as a boost from higher commodity prices starts to fade China’s factories likely posted another solid month of growth in August, suggesting the world’s second-largest economy is still growing at a healthy clip despite rising financing costs and a cooling housing market, a Reuters poll showed. The official manufacturing Purchasing Managers’ Index (PMI) is expected to come in at 51.3 for August, down just a hair from July’s 51.4, according to a median forecast of 39 economists polled by Reuters. That would signal the 13th straight month of expansion for China’s manufacturers, who are enjoying their best profits in years thanks to a government-led construction boom and a recovery in exports. The 50-mark divides expansion from contraction a monthly basis. Driven by strong infrastructure spending and record bank lending last year, China’s economy grew by a faster-than-expected 6.9 per cent in the first half of 2017 and looks set to easily meet the government’s full-year target of around 6.5 per cent. That momentum has given policymakers room to focus on tackling financial risks stemming from a rapid build-up in debt and an overheated property market. Economists expect such cooling measures will start to drag on growth eventually, but do not foresee any sharp slowdown, especially as the government is keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle in the autumn. “Given that the economy is slowing
from an elevated position, the central government’s focus should change to stability concerns in place of a focus on economic growth,” analysts at Sun Hung Kai Financial said in a note on Monday.
Key Points China official PMI seen at 51.3 in August, vs 51.4 in July Factory sector seen expanding for 13th month Data due August 31 at 0100 GMT Some signs of fatigue may already be starting to show. China’s import and export growth slowed more than expected in July, raising worries about domestic demand. Industrial output, investment, and retail sales also underwhelmed
last month, while bank lending and money supply growth also slowed. Data on Sunday showed industrial profits grew at the slowest pace in three months as a boost from higher commodity prices starts to fade, but they were still up some 21 per cent in the first seven months of the year from the same period last year. Economists expect the findings of a private survey on China’s factory activity will be similar to the official reading. They predict the private Caixin/ Markit Manufacturing Purchasing Managers’ index (PMI) will dip slightly to 50.9 in August from 51.1 in July, which would be the first decline in three months. The official PMI survey will be published on Aug. 31, along with a similar survey covering the services sector, while the Caixin PMI is set to be released on Sept. 1. Reuters
Financing
Beijing sets up fund to aid SOE reforms China has set up a fund dedicated to supporting mixed-ownership reforms by state-owned enterprises (SOEs), the official China Securities Journal reported on its website yesterday. The fund, launched by statebacked China Structural Reform Fund Co, will have an initial capital of RMB5 billion (US$752.7 million) and will invest in SOEs controlled by both central and local governments that undergo mixed-ownership reforms, the newspaper said. The launch of the fund sends a signal that China will step up SOE restructuring. Beijing is pushing mixed ownership reforms as part of plans to revive the bloated and debt-ridden state-owned sector. Investment
Samsung Elec to boost Mainland NAND chip output Samsung Electronics Co Ltd expects to invest US$7 billion over the next three years to expand its NAND memory chip production in China’s north-western city of Xi’an, the South Korean tech giant said yesterday. In a regulatory filing Samsung said it approved US$2.3 billion of the expected investment of US$7 billion yesterday. In early July, when Samsung announced an investment of US$18.6 billion in South Korea, it said it would add a production line at its NAND plant in Xi’an, but did not set an investment amount. M&A
Cryptocurrencies
Regulators preparing new rules for digital coin offerings The report on China’s plans follow comments from the United States Securities and Exchange Commission in July that the tokens can be considered securities Chinese regulators are preparing new regulations on digital coin offerings and may ban them until the rules are in place, the financial magazine Caixin reported yesterday, as interest in the new fundraising channel grows rapidly in a regulatory grey area. Digital currencies, also called cryptocurrencies, such as bitcoin and a growing stream of alternatives, allow anonymous peer-to-peer transactions without the need for banks or central banks. They are also used by companies seeking to raise capital, in the form of initial coin offerings (ICOs) or initial token offerings (ITOs). The currencies exist in a legal grey area, however, with regulators scrambling to come up with rules that will not stifle innovative funding models while also protecting investors. ICOs have become a bonanza for digital currency entrepreneurs,
allowing them to raise millions quickly by creating and selling digital “tokens” with no regulatory oversight. But Chinese regulators, including the People’s Bank of China and the China Securities Regulatory Commission, are now considering how to handle ICOs, including whether to ban them outright until regulations are in place, Caixin reported citing sources. The report on China’s plans follow comments from the United States Securities and Exchange Commission (SEC) in July that the tokens can be considered securities, and therefore, may need to be registered unless a valid exemption applies. The PBOC and CSRC did not immediately respond to requests for comment. The popularity of coin offerings has surged in China this year, with 65 ICOs and RMB2.62 billion (US$394.6
million) raised from 105,000 individuals in the country, state-run Xinhua reported in July citing data from a government organisation that monitors online financial activity.
‘The popularity of coin offerings has surged in China this year, with 65 initial coin offerings and RMB2.62 billion raised from 105,000 individuals in the country’ Marketing events for an upcoming ICO held over the weekend at fivestar hotels in Beijing and Shanghai saw standing-room only crowds with several hundred prospective investors at each event. The government issued draft rules targeting illegal fundraising on Thursday, as the authorities step up a campaign to crack down on risky and illicit behaviour in the country’s financial sector. In China’s rapidly developing financial markets, regulators periodically crack down on what they deem to be illegal fundraising schemes, including online peer-topeer (P2P) lending platforms and pyramid schemes. Reuters
PICC in talks to acquire, buy stakes in regional insurers Chinese insurance giant PICC Group is in talks to either acquire or buy a stake in several Southeast Asian insurers and expects some deals to close before the end of the year, a senior executive said yesterday. Xie Yiqun, vice president of the group, formally called People’s Insurance Company (Group) of China (PICC), said he expects one or two deals to materialise this year with a few more to come in the next two or three years. PICC’s overseas push is in line with China’s Belt and Road initiative. Media
Dalian Wanda says report on chairman “groundless” Chinese conglomerate Dalian Wanda Group said yesterday a report claiming its billionaire chairman, Wang Jianlin, was prevented from leaving the country was “groundless” and that it planned to take legal action. Taiwanese news site Bowen Press had reported on Sunday that Wang, who was with his family, was stopped from leaving Tianjin airport on Friday and had been detained for a few hours. It was not clear from the report if Wang’s family had also been stopped from leaving. “That rumour first appeared in mid-August,” Wanda said in a statement, adding it “was scotched” when it was shown that Wang had travelled to Lanzhou on the same day.
10 Business Daily Tuesday, August 29 2017
Greater China
A user playing Honour of Kings. Source: Bloomberg
Game trade
Tencent’s hit game spurs black market for virtual mercenaries Honour of Kings has re-kindled a black market for player aids Lulu Yilun Chen
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ast week, Huang Zhibin was a 30-year-old Shenzhen business owner slaying foes into the wee hours. Then he became a bloodthirsty university student from Hong Kong, and later a 25-year-old office lady turned online warrior in Beijing. Welcome to a less visible world within Tencent’s mobile smash Honour of Kings, where professional doppelgangers get paid to help newbies climb both social and gaming ladders. The hack-and-slash blockbuster that’s fueled Tencent Holdings Ltd.’s US$400 billion market valuation is spurring a thriving underground market for battle-tested coaches who help acolytes up the rankings. Ready-made accounts go for as much as US$1,000 apiece. Alternatively, they can take over a social media profile to sow carnage in someone else’s name and save them the hours of work needed to increase an avatar’s ranking. Honour of Kings has re-kindled a black market for player aids -- some say cheats -- that’s been around since before World of Warcraft popularized the possibility of trading money for character prowess. With more than 200 million players hooked, the world’s top-grossing iOS mobile game in July has gone mainstream and in turn fostered something of a class system. Moms, students and office workers suss out their colleagues’ and friends’ ratings by linking their accounts to WeChat, Tencent’s messaging behemoth that permeates life in China. On Honour of Kings, it’s become a race to impress -- and many will pay for status. “These people have busy daytime jobs, and not all of them have the skills, but no one wants to be laughed at,” said 26-year-old Huang, who
has helped almost 200 people boost their rankings in less than a year. By day, Huang works as a high-speed rail mechanic in the coastal province of Fujian. By night, he charges a onetime fee of about RMB2,000 (US$299) to help newbies gain a coveted “Supreme King” label within a week. “Now you have office workers, businessmen who want to sway their acquaintances,” said Huang, who can make RMB10,000 (US$1,500) a month -- more than double his regular salary. Honour of Kings, created in-house by Tencent, is expected to generate as much as US$3 billion in revenue this year. An adaptation of the better-known League of Legends, players typically whack their way in teams of five through a battle arena against real opponents. Its mainstream cachet is such that female players outnumber males, unheard-of for the genre. The game itself is free to download and play, with Tencent getting revenue from users paying to upgrade their powers. The risk is that instead of buying from Tencent to gain a new amulet or avatar for the upper hand in battles, that money flows to the black market, said Jelle Kooistra, head of mobile at gaming consultant Newzoo. “I would strongly advise game developers that recognize these problems to clearly signal that account trading is not allowed,” Kooistra said. “If not, in-game spending can slowly drift away from official to non-official channels, particularly among those who spend the most.” Jane Yip, a spokeswoman for Tencent, didn’t respond to multiple messages requesting comment. It’s unclear how large the underground market has grown, but log onto e-commerce sites like Alibaba’s Taobao and there are scores of shops offering similar services and commodities. With Tencent restricting
playing time for children in response to official censure, enterprising merchants sell fake WeChat IDs for RMB40 apiece. Even the game’s own official message board is rife with notices touting private lessons. When playing as himself, Huang is a top-ranked warrior who wades through arenas with ease. One of his earliest customers was Jewin Zhu, a 36-year-old Chinese property developer based in Sydney who spotted his ad on a forum. Zhu was stuck, unable to master the “assassin” avatar he favored and feeling he needed it to maintain his social circle since the game serves as an ice-breaker or bonding exercise for newly forged WeChat acquaintances.
“I would strongly advise game developers that recognize these problems to clearly signal that account trading is not allowed” Jelle Kooistra, head of mobile at gaming consultant Newzoo “The main reason I still play this game is purely for the purpose of social networking,” said Zhu, who owns at least six accounts so he has the appropriate ones to match his business contacts. “When you meet someone new, this is the easiest way to bridge a connection.” While the terms of service for Honour of Kings bans accounts suspected of employing hired guns, Tencent
hasn’t taken any public action against these practices. Other publishers have, with Activision Blizzard Inc. banning the trade in World of Warcraft accounts for fear of jeopardizing not just the user experience but their own pricing power, said Kooistra. That may have to change as Tencent prepares to debut its biggest in-house title in the U.S., a market dominated by powerhouses like Activision and where WeChat is largely non-existent. While dominant on its home turf, the company has yet to demonstrate an ability to woo foreign audiences. Its biggest overseas hits -- Riot Games Inc.’s League of Legends and Supercell Oy’s Clash of Clans among them -- were acquired at a steep cost. Till then, Huang, an avid gamer since the fifth grade, is cleaning up. While some clients seek private tutoring, others want him to play on their behalf. The latter group willingly hand over their WeChat details so Huang can temporarily assume their identities. That’s no casual sacrifice: akin to Facebook, WeChat is the first resort for millions of people booking rides, ordering food or just looking up news, and comes with a digital wallet and entire contact list. But to many it’s a small price to pay and Huang says their private information is of no value or interest to him. For those worried about money stored on WeChat, Huang advises them to set up payment passwords so he can’t move their funds. He says he hasn’t encountered complaints so far. Indeed, Huang’s more worried about the competition, which is getting fiercer as the underground market grows. He’s had to lower his fees just to beat back rivals. “Too many people are offering the same service these days,” he complains. “That’s why word of mouth is very important.” Bloomberg News
Business Daily Tuesday, August 29 2017 11
Asia Bribery charges
Samsung scion Lee appeals against verdict Under Korean law, Lee can be kept in detention a maximum four months while a court considers his appeal Joyce Lee
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amsung Electronics Vice Chairman Jay Y. Lee has filed an appeal against the fiveyear jail term he was given for bribery and other charges through his lawyer, according to the Seoul Central District Court’s website yesterday. The website did not give any details about the appeal, which will be assigned to a higher court. The sentencing of the billionaire scion was a watershed for South Korea’s decades-long economic order, which has been dominated by powerful, family-run conglomerates. Lee’s lawyer has steered media inquiries to Samsung, whose spokeswoman did not have any immediate comment about the appeal against the sentence handed down on Friday. Lee, the 49-year-old heir to one of the world’s biggest corporate empires, was detained in February on charges that he bribed then-president Park Geun-hye to help him secure control of the conglomerate that owns Samsung Electronics, the world’s leading smartphone and chip maker. Samsung Group also has
Lee Jae-yong, vice chairman of Samsung Electronics Co., leave after his verdict trial at the Seoul Central District Court in Seoul on Friday. Source: Lusa
interests ranging from drugs and home appliances to insurance and hotels. Under Korean law, Lee can be kept in detention a maximum four months while a court considers his appeal. This means the appeals court that is assigned the case is likely to try to wrap up its ruling around January 2018, said criminal lawyers not directly involved in the case. Samsung Electronics Chief Executive Kwon Oh-hyun asked employees to rally around the company. “I believe all of you must be devastated by the lower court ruling... We management are also distressed,” he wrote in an internal message,
seen by Reuters, to Samsung Electronics staff on Monday. “Please do the best you can where you are... We management will also lead the way in overcoming the crisis with uncommon resolve,” Kwon added. Shares of Samsung Electronics closed down 2 per cent, compared with a 0.35 per cent drop for the benchmark Kospi index , while shares in the conglomerate’s de facto holding company Samsung C&T dropped 3.4 per cent and Samsung Life Insurance fell 2.9 per cent due to foreign selling after Friday’s sentencing, analysts said. “Reports from S&P and
Fitch over the weekend prompted worries among foreign investors, triggering them to unload more shares today than they did on Friday,” said Kim Ye-eun, a stock analyst at Cape Investment & Securities. “The leadership vacuum may not have short-term effect, but in the long-term, it is a serious problem.” Samsung Electronics said in a statement that Lee will keep his status as a member of the firm’s Board of Directors “unless there is a final determination of guilt.”
Possible defence strategy
Friday’s lower court ruling has several aspects that open
the way for an appeal, the criminal lawyers told Reuters. Out of the 43.3 billion won originally charged by prosecutors as bribery, only 8.9 billion won was accepted to be bribery by the lower court. Plus, Samsung’s defence is likely to argue against the lower court’s interpretation that giving financial support to Park’s confidant Choi Soon-sil is “effectively the same as Park herself receiving it,” the lawyers said. “Samsung is likely to argue that Lee is not guilty as Samsung’s support of Choi-backed ventures is not the same as giving bribes to the president,” said one of the lawyers, Byun Hwan-bong. “At the same time, as a precautionary strategy, they’re likely to try to bring down the sentencing due to extenuating circumstances - Lee could not reasonably refuse the demands of the country’s highest decision-maker,” Byun added. If the defence successfully argues such points, there is a chance that it can not only get Lee’s sentence brought down to three years or less but also get it suspended, allowing his release, these lawyers said. Reuters
Outlook
Japan govt keeps moderately upbeat view on economy in August Analysts expect the economy to continue growing at a healthy clip in coming quarters Japan’s government maintained its moderately optimistic view on the economy yesterday, signalling that a pick-up in private consumption and capital expenditure was underpinning a solid economic recovery. In its monthly economic report for August, the government also offered a slightly more upbeat view on public investment compared with a month ago, reflecting an increase in public works projects financed by last year’s supplementary budget. “Japan’s economy continues to recover moderately as a trend,” the Cabinet Office said in the report, maintaining the assessment for the third straight month. “Public investment is
moving on a firm note,” the report said, compared with the July report’s assessment that it was increasing resilience.
“Japan’s economy continues to recover moderately as a trend” Ethan Edwards, Cabinet Office report
The government kept intact its view that capital expenditure, exports and output were “picking up,” as well as its assessment that
consumption was “picking up moderately.” Japan’s economy expanded at the fastest pace in more than two years in the second quarter -- growing at a 4 per cent annualised rate -- as consumer and company
spending picked up, highlighting a long-awaited bounce in domestic demand. Analysts expect the economy to continue growing at a healthy clip in coming quarters, offering the Bank of Japan hope that a tight labour
market will finally start to boost wages and consumer spending. Some ruling party lawmakers have called for compiling another supplementary budget to ramp up fiscal spending. But the government has shrugged off the chance of compiling one for now, arguing that a strengthening recovery makes it difficult to justify additional spending. “The economy is enjoying a domestic demand-driven recovery,” Motegi told a news conference on Friday. “Under current economic circumstances, I don’t expect the government to submit a supplementary budget at this autumn’s extraordinary parliament session,” he said. Reuters
12 Business Daily Tuesday, August 29 2017
Asia Technology
Thousands of ATMs go down in Indonesia after satellite problems Some shoppers in Jakarta said stores could not process credit card payments using electronic data capture machines over the weekend
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housandsofATMs and electronic card payment machines in Indonesia went offline over the weekend, and it might take two more weeks before full service is restored, after an outage from a satellite belonging to state-controlled telecom giant PT Telekomunikasi Indonesia (Telkom). Around 15,000 ground sites across Indonesia were affected by the problem on the ‘Telkom-1’ satellite, whose service is used by government agencies, banks, broadcasters and other corporations, Telkom’s president director Alex Sinaga told reporters on Monday. A shift in the direction of the satellite’s antenna, which was first detected last Friday, had disrupted connectivity. Bank Central Asia (BCA), Indonesia’s largest bank by market value, had around 5,700 of its ATMs affected by the outage, or 30 per cent of the total operated by the bank, BCA chief executive Jahja Setiaatmadja told reporters. The Internet connection in some remote BCA branches were also affected,
he said. State-controlled Bank Rakyat Indonesia said around 300 of its ATMs were affected, but some had since been restored. Some shoppers in Jakarta said stores could not process credit card payments using EDC (electronic data capture) machines over the weekend, while Twitter users complained about a number of ATMs that were not online yet yesterday.
‘Around 15,000 ground sites across Indonesia were affected by the problem’ According to central bank data, there are more than 100,000 ATM machines in Indonesia. “Our estimation is by September 10, all (connections
to) 15,000 sites would be recovered,” Sinaga said. Up to Monday, around 17 per cent of the connections had been restored, he added, by shifting connections to other satellites and adjusting the direction of ground antennae. Telkom is shifting its connection from Telkom-1 to two other satellites owned by the company and other
satellites owned by foreign companies which cover Indonesia. Telkom-1, which was launched in 1999, has a design lifetime of 15 years, but according to a 2016 review and consultation with its maker Lockheed Martin it could operate normally up to 2019. “We do not rule out the
possibility that we will no longer use Telkom-1. We will decide in the next few days,” Sinaga said, adding that the company may use the orbit slot of Telkom-1 for its fourth satellite scheduled to be launched mid 2018. Telkom-1 contributes 0.6 per cent of Telkom’s total revenue, the company said. Reuters
Investigation
CBA hit with second regulatory probe after money laundering claims The bank has lost roughly US$9.9 billion of its market value since the AUSTRAC allegations first came to light on Aug. 3. Paulina Duran and Byron Kaye
Commonwealth Bank of Australia, the nation’s biggest lender, has been hit with a public inquiry into its governance and culture - the second regulatory probe to be launched this month after it was accused of massive breaches of money-laundering rules. The move represents the first time that the Australian Prudential Regulation Authority will hold a public inquiry into a lender and heightens pressure on the government to hold a broad parliamentary probe - known as a Royal Commission - into the banking sector. CBA was sued this month by financial intelligence agency AUSTRAC which alleges that criminals and terror financiers laundered millions of dollars through CBA accounts - the first lawsuit of it kind against a major Australian bank and exposing CBA to a fine potentially amounting to billions of dollars. Since then, the Australian Securities and Investment Commission has launched a separate probe while a class action law firm is planning a suit on behalf of shareholders. The bank has also flagged that CEO Ian Narev will retire by next June. “The overarching goal of the prudential inquiry is to identify any core organisational and cultural drivers at the heart of these issues,” APRA Chairman Wayne Byres said, adding
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that CBA will pay for the costs of the six-month probe. Narev, whose tenure as been marked by both record profits and misconduct scandals on the part of the bank, told reporters the bank supported the inquiry and he expected it would address “the way in which financial objectives are balanced by other objectives and assessed in target performance.” CBA, which blames a software coding error for its alleged failure to detect nearly 54,000 suspicious transactions, has lost roughly 10 per cent or A$12.5 billion (US$9.9 billion) of its market value since the AUSTRAC allegations first came to light on Aug. 3.
“For CommBank shareholders there’s going to be a real dollar cost to all of this. Also, you can safely say that professional and legal fees for this organisation are not going down,” said CLSA banking analyst Brian Johnson. APRA’s announcement immediately fuelled fresh calls for a Royal Commission into Australia’s banking system, which would have judicial powers such as calling witnesses and the right to recommend greater regulation or even criminal charges. “The Govt has done everything it can to protect the banks, but is now out of excuses. We need a Royal Commission,” Labor leader Bill Shorten tweeted yesterday.
Treasurer Scott Morrison, whose ruling conservative party opposes a Royal Commission, said the APRA investigation showed Australia’s existing regulatory regime had sufficient power to pursue civil penalties. “The things that a Royal Commission could potentially recommend: we’re already doing that,” Morrison told reporters.
Key Points Regulator to scrutinise CBA culture in public inquiry Follows money laundering lawsuit, corporate regulator probe CBA’s stock has lost 10 pct since money-laundering allegations Judith Fox, the head of the Australian Shareholders’ Association which represents retail investors, said the association would prefer to see the outcome of the various probes before assessing whether a Royal Commission was needed. The money-laundering allegations represent the third misconduct scandal under Narev. Last year, CBA admitted to using unscrupulous practices that cheated people out of life insurance payments, and in 2014 Narev publicly apologised after CBA advisors were found to have given customers poor financial advice. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Tuesday, August 29 2017 13
Asia Corruption
In Brief
India graft still endemic 10 months after cash ban, Kroll says India is ranked a lowly 130 in the ease of doing business by the World Bank
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early 10 months after India’s unprecedented ban on high value notes that was designed to tackle entrenched corruption, bribery continues to oil the wheels of business in Asia’s third-largest economy, according to a U.S. risk management firm that advises foreign investors. Gifting of land, houses, luxury watches and sponsoring expensive travel abroad are now the preferred bribes as tax authorities clamp down on high value cash transactions. And for India’s vast shadow economy, estimated by McKinsey & Co. at a fourth of the US$2 trillion economy, the cash ban has hardly made a dent. “Transparency, post demonetization, has marginally improved but I am not sure it has made a dent on corruption,” Tarun Bhatia, managing director at the Indian arm of Kroll Inc., said in an interview in Mumbai. “Of course, there is use of more plastic money than before but I don’t think it is a case where black money is no longer there. It has handicapped but not fumigated the parallel economy.” Jagdish Thakkar, a spokesman in the Prime Minister’s office, didn’t return calls seeking comment. While the use of credit and debit cards and digital transactions has risen from pre-note ban days, Indians mostly prefer cash for their daily transactions after limits for daily withdrawals were restored back to normal earlier this year. Besides, many Indians, especially in the vast hinterlands, lack a bank account or have limited access to technology or the Internet, making digital payments inconvenient. For four decades, New York-headquartered Kroll has helped clients
make risk management decisions about people, assets, operations and security. Their recent global survey showed companies worldwide are increasingly grappling with corruption and bribery challenges. “The majority believe the risk landscape is either not going to improve or actually get worse in 2017, their resources are insufficient to support their efforts, and they themselves may now be held personally liable for their organization’s compliance violations,” the report titled Anti-Bribery and Corruption Benchmarking Report said. For India, the biggest risk for foreign investors -- apart from corruption -is how to exit the country and wind up a business with minimum fuss if things go awry, Bhatia said. They are also wary about shell companies, which are typically used to launder money, he said. Whi l e th e g o v e r n m e n t has
uncovered about 300,000 shell entities and recently introduced a bankruptcy code, the nation’s legal system is fraught with delays and inadequacies, making winding up a challenging task for companies. India is ranked a lowly 130 in the ease of doing business by the World Bank and Prime Minister Narendra Modi has made attempts to lift the country’s image as a more business friendly destination in his trips abroad since taking office three years ago. And in a major reform, his government introduced a uniform goods and services tax across the country. Still, analysts believe more needs to be done. “Of course there are questions about the ease of doing business,” Bhatia said. “But an equally important question for prospective investors is ‘how easy is it to exit India if business plans don’t go according to plan?’” Bloomberg News
M&A
Western Digital CEO in Japan to finalise Toshiba chip deal Western Digital Corp’s chief executive is in Tokyo to finalise an agreement to buy Toshiba Corp’s memory chip business, ending months of dispute over the auction, a person familiar with the matter told Reuters yesterday. Toshiba is scrambling to sell its flash memory unit to cover losses from its bankrupt U.S. nuclear business Westinghouse. A group including Western Digital, U.S. private equity firm KKR & Co and Japanese government investors are offering around 1.9 trillion yen (US$17.3 billion) for the unit, separate sources previously told Reuters. Expansion
ExxonMobil says completes Singapore plant acquisition ExxonMobil said yesterday it has completed the acquisition of Jurong Aromatics, a refining and petrochemical plant in Singapore, that will meet fast-growing demand in Asia. The acquisition will boost the U.S. company’s aromatics production in Singapore to more than 3.5 million tonnes per year, including 1.8 million tpy of paraxylene, a petrochemical used in the making of plastic bottles and synthetic fibre, ExxonMobil said in a statement. The acquisition of Jurong Aromatics will also add about 65,000 barrels per day of transportation fuels capacity to ExxonMobil’s Singapore production, the company said. M&A
Diplomacy
Japan urges predictable, transparent Brexit ahead of visit by PM May British Prime Minister Theresa May will visit Japan later this week to discuss Brexit, trade and defence with Premier Shinzo Abe Tetsushi Kajimoto
Japan wants Britain’s exit from the European Union to be predictable and transparent so that Japanese companies can continue to operate smoothly in the country, a senior government official said yesterday. Deputy Chief Cabinet Secretary Yasutoshi Nishimura said the government would do its utmost to gather information on the Brexit negotiations, which he said remain “fluid”, as well as support Japanese corporate activity there. He made the remarks at a government task force meeting on Britain’s exit from the EU. British Prime Minister Theresa
May will visit Japan later this week to discuss Brexit, trade and defence with Premier Shinzo Abe. The visit is aimed at strengthening Britain’s relationship with key international investors ahead of the split. Since the shock Brexit vote, Japan has expressed unusually strong public concerns about the impact of Brexit on the United Kingdom, the second most important destination for Japanese investment after the United States. “The Japanese government must react to a sense of crisis among businesses and do the utmost to gather information and analyse it, and support Japanese firms based on the recognition that Britain’s exit from
EU has a direct impact on them,” Nishimura said. “We need to make use of Prime Minister May’s visit for conveying Japan’s stance to various levels (of officials) in Britain and EU.”
“We need to make use of Prime Minister May’s visit for conveying Japan’s stance to various levels (of officials) in Britain and EU” Yasutoshi Nishimura, Deputy Chief Cabinet Secretary
British Prime Minister Theresa May
Abe has expressed concerns about possible overnight changes in regulations when the country withdraws from the EU in March 2019. Since voting to leave the EU June last year, Britain has trumpeted decisions by Japanese carmakers Nissan and Toyota to continue production in the country as a sign that Brexit will not scare off global investors. But both those investments came after the government wrote letters to ease the firms’ concerns, drawing criticism that May was making secret deals and giving firms privileged information on Brexit. Britain said the letters were commercially sensitive. Reuters
Indonesia’s APP denies plan to buy Eldorado Brasil Indonesia’s Asia Pulp & Paper Co (APP) and its parent Sinar Mas Group denied they were planning to buy pulpmaker Eldorado Brasil Celulose SA, which is up for sale after its controlling shareholders got ensnared in Brazil’s worst corruption probe. Two people familiar with the situation had told Reuters on Sunday APP is in advanced talks to buy control of Eldorado Brasil. O Globo newspaper had first reported APP’s talks earlier in the day. Gandi Sulistiyanto, managing director of Sinar Mas, denied in a telephone text message that there was a plan to buy the company and pointed to the APP statement. Markets
Sri Lanka shares hit 1-week closing high after tax plan dropped Sri Lankan shares ended slightly firmer yesterday, recovering from a more-than-four-month closing low hit last week, as investors bought battered shares after the government’s decision to drop a proposed tax on profits from share trading. However, the day’s turnover touched its lowest in more than five months. It was 210.3 million rupees (US$1.38 million), lowest since March 13, and well below this year’s daily average of around 859.2 million rupees. Junior finance minister on Thursday said Sri Lanka will not go ahead with a proposed tax on profits from share trading that was planned as part of a major tax reform bill.
14 Business Daily Tuesday, August 29 2017
International In Brief Tourism Industry
Mauritius Lux Island Resorts’ annual pre-tax profit jumps 21 pct Mauritius hotels group Lux Island Resorts reported a 21.1 per cent jump in pretax profit for the year ended June, benefiting from a rise in visitors to the island and the sale and lease back of one of its resorts. European visitors are the luxury hotel group’s main source of income. It said it benefited as tourist arrivals from Europe to the island as a whole rose 9 per cent in the year through June. Lux announced a pre-tax profit of 582.85 million rupees (US$17.8 million) for the financial year, up from 480.93 million rupees a year earlier. Health
FDA warnings meant to protect consumers are falling under Trump The Food and Drug Administration is supposed to stand between consumers and faulty products that could do them harm. It oversees US$2.4 trillion of the U.S. economy—some 20 cents of every dollar Americans spend. But in the first months of Donald Trump’s presidency, the FDA has shown signs of retreating from its mission. From January to July, the agency sent 265 warning letters to companies, notifying them of what it alleged to be serious violations of federal rules. That’s the lowest tally for the first seven months of any year since 2008, according to a review of letters posted on the FDA’s website.
Disaster
U.S. officials say 450,000 in Texas likely to seek disaster aid Donald Trump approved an emergency request yesterday for Louisiana
U
.S. emergency management officials said yesterday they were expediting federal resources to Texas to help with rescue efforts after Hurricane Harvey swamped coastal areas of the state and forced 30,000 people to seek refuge in temporary shelters. Federal Emergency Management Agency Administrator Brock Long said more than 450,000 people were expected to seek disaster assistance due to flooding after Harvey made landfall during the weekend before weakening to tropical storm status. President Donald Trump approved an emergency request yesterday for Louisiana, where severe flooding also was expected. “We are not out of the woods yet, not by a long shot,” Acting Homeland Security Secretary Elaine Duke said at a news briefing early yesterday. “Harvey is still a dangerous and historic storm.”
Duke said federal agencies were focused at the moment on providing state and local officials in Texas with the assistance they need to continue search and rescue efforts to help those immediately affected by the flooding.
“Harvey is still a dangerous and historic storm” Elaine Duke, Acting Homeland Security Secretary
“Right now we are focused on rescue operations and will move into recovery operations later in the week,” she said. “But today we
are deeply concerned with those in Houston and surrounding areas who are stranded and in need of immediate assistance.” Federal Emergency Management Agency (FEMA) Administrator Brock Long said federal officials were focused on a “life safety and life sustaining mission” at the moment, helping with things like swift water search and rescue efforts over the 30 to 50 counties possibly affected by the storm in Texas. Brock said authorities were anticipating that some 30,000 people would be placed in temporary shelters due to the flooding. He said FEMA was in the process of deploying life-saving commodities while the Army Corps of Engineers was helping work to restore power and other federal authorities were involved in ensuring communications interoperability between federal, state and local officials. Reuters
Aviation industry
Qatar Airways chief to chair IATA board starting June 2018 Qatar Airways Group Chief Executive Akbar al-Baker has been elected chairman of the board of governors of the International Air Transport Association (IATA), the airline said on Sunday. Baker will start his one-year term in June 2018, taking over from current chairman, Singapore Airlines’ Goh Choon Phong. Qatar Airways has been recently forced to fly longer, more expensive routes after being denied access to the airspace of Saudi Arabia, Bahrain, Egypt and the United Arab Emirates as part of economic sanctions. Report
Romania may join euro zone in 2022, says foreign minister Romania, one of the fastest growing European Union members, may join the euro zone in 2022, once the incomes of its poorest citizens rise, foreign minister Teodor Melescanu said. “Already today we meet all formal requirements, we could join the currency union even tomorrow. But we’re afraid that it will have a negative effect on the poorest, pensioners’ incomes,” Melescanu told Polish Rzeczpospolita daily. “I think that we will adopt the euro in five years, in 2022,” he also said. The euro zone consists of 19 members. The latest one, Lithuania, joined the club in 2015.
A handout photo made available by NASA shows an image taken from the International Space Station (ISS) of Hurricane Harvey approaching Texas, on Friday. Source: Lusa
Financing
Angola starts talks with Eurobond banks as it seeks US$2 Billion Dollar inflows have slumped with oil revenue since the 2014 crash in crude prices Candido Mendes and Paul Wallace
Angola is in talks with banks to raise $2 billion via a Eurobond offering in what would be the OPEC member’s biggest debt sale on global capital markets. The government has yet to choose banks to lead the deal and media reports that Russia’s VTB Bank PJSC has the mandate are false, the Finance Ministry said in an emailed statement. The Eurobond issuance was approved by a presidential order on Aug. 4 and will help Angola lengthen its maturities, as well as make it easier for other borrowers from the country tap the market, according to the statement. “This process has several strategic objectives, namely the extension of
the debt profile and the creation of a reference price for national agents,” the statement said.
‘The kwanza sank 42 percent against the dollar as oil prices fell’ Africa’s second-largest crude exporter is in its worst economic crisis since ending a civil war in 2002 and the Eurobond announcement comes three days after the ruling MPLA party won Aug. 23 elections. President Jose Eduardo dos Santos is stepping down
after 38 years in power and -- if the results stand -- he’ll be replaced by MPLA candidate Joao Lourenco on Sept. 21. The two main opposition parties have rejected the provisional results. The sale may only take place toward the end of the year and can only happen after a new president and government are appointed, an official at the finance ministry said. Angola’s dollar inflows have slumped with oil revenue since the 2014 crash in crude prices, while economic growth fell to zero last year after averaging almost 9 percent in the previous 15 years. The kwanza sank 42 percent against the dollar as oil prices fell, but is still overvalued and may be weakened another 20 percent by the end of 2018, which would make foreign debts more expensive, analysts at BMI Research said Aug. 25. Angola last sold Eurobonds in 2015, when it raised US$1.5 billion of 10-year securities. Their yield was little changed at 8.34 percent as of 10:42 a.m. in Luanda, the capital. They’ve handed investors a 17 percent return this year, more than double the 8.2 percent average for emerging-market dollar bonds. Bloomberg News
Business Daily Tuesday, August 29 2017 15
Opinion Business Wires
Korea Herald Samsung Electronics Vice Chairman Kwon Oh-hyun delivered an official statement to staff yesterday on the latest verdict on the firm’s heir-apparent Lee Jae-yong, urging workers to continue giving best efforts at their respective positions. “Although this situation of uncertainties is regrettable, we should all steadily wait until the truth is revealed,” Kwon said in a statement sent to employees. On Friday, the Seoul Central District Court found Lee guilty of bribery, embezzlement and other charges in a massive corruption scandal that led to the ouster of former President Park Geunhye, slapping him with a jail term of five years.
Philstar More companies are putting on hold expansion plans, but are likely to hire additional workers in the fourth quarter. Francisco Dakila Jr., managing director of the BSP’s Monetary Policy Sub-Sector, said results of the Business Expectation Survey (BES) for the third quarter showed the percentage of businesses with expansion plans in the industry sector decreasing to 32.8 per cent from 34.6 per cent in the previous quarter. For the fourth quarter, Dakila said businesses are more optimistic as the confidence index rose to 51.3 per cent from 42.7 per cent in the previous quarter’s survey.
Taipei Times Foxconn Technology Group is being enticed to invest in Wisconsin with numerous regulatory waivers, raising concerns from environmentalists who are wary of the company’s reputation in China, where it has been accused of polluting rivers. The Taiwanese company best known for manufacturing Apple Inc’s products has said that its new plant will not damage the environment. Regulators have said they are simply streamlining the process for the company to set up shop, while still policing its activities.
The Phnom Penh Post The industry body for Cambodia’s garment manufacturers urged local factory owners to invest in the latest technology and machinery to increase efficiency and become more competitive as the country shifts to higher valueadded manufacturing. Speaking at the launch of the annual Cambodia International Textile and Garment Industry Exhibition and the Cambodia International Machinery Industry Fair last Friday, Ly Tek Heng, operation manager at the Garment Manufacturers Association in Cambodia, said that the organisation’s nearly 600 members need to seek out the best machinery for production.
Harvey may succeed where OPEC has struggled by boosting oil prices
H
urricane Harvey may achieve in global crude oil markets in a few days what OPEC and its allies have struggled to achieve in months - a tightening of supplies and a rise in prices. Harvey, which has been downgraded to a tropical storm, hit the coast of Texas on Friday as the most powerful hurricane to hit the U.S. state in more than 50 years, causing widespread damage and flooding. The region where the storm struck is home to some 2.2 million barrels per day (bpd) of refining capacity as well as being a major shipment point for both imports and exports of crude oil and fuel products. The refining capacity that has been idled because of the storm is about 11.2 per cent of the U.S. total, and the immediate impact is being felt in gasoline prices. Benchmark U.S. gasoline futures jumped as much as 6.8 per cent in early trade yesterday in Asia to touch US$1.7799 a gallon. Brent crude, the global oil benchmark, rose as much as 0.8 per cent in early Asian trade, reaching as high as US$52.84 a barrel. So far, this would imply the crude market is fairly relaxed about the impact of Harvey, but it’s possible the effect of the storm will travel far beyond U.S. gasoline prices, given the United States’ status as an emerging power in crude and refined product exports. It has been U.S. shale oil output that has largely frustrated efforts by the Organization of the Petroleum Exporting Countries (OPEC) and their allies to drive crude prices higher this year by restricting their own production. While much of the offshore crude production in the Gulf of Mexico was shut in ahead of Harvey’s passage, the yet to be quantified damage from the storm may lie with the onshore, shale oil output that was in the storm’s path. The Eagle Ford shale basin lies in the path of the storm and producers in the region have idled production. Among those oil companies that have halted operations in the Eagle Ford are ConocoPhillips, which produced 161,000 bpd of oil equivalent at the end of 2016 in the region, BHP Billiton with 99,000 bpd and Murphy Oil with 46,000 bpd, according to a report from S&P Global Platts. The risk is that this onshore production takes longer to return than the market may expect, given the apparent widespread damage to infrastructure from flooding in the region and the length of time it may take floodwaters to recede.
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Clyde Russell a Reuters columnist
If this is the case, customers for U.S. crude and product exports may well find themselves scrambling to line up replacement cargoes.
Global impact
The fallout from Harvey won’t just be limited to the United States and close neighbours. China imported about 130,000 bpd from the United States in the first seven months of the year, including some 174,000 bpd in July, making it the 15th biggest supplier to the world’s top crude buyer, according to customs data. The United States has been exporting around 1 million bpd of crude in recent months, and while not all of this will be affected by Harvey, as much as threequarters of this is shipped from the U.S. Gulf Coast region. It’s not only U.S. exports of crude that will be affected; the region is also a hub for imports. This means that trade flows will be disrupted, with some cargoes likely to be diverted. Overall, this makes it more likely that prices will rise in the short term as suppliers of crude to the U.S. Gulf Coast seek new buyers, and buyers of U.S. crude seek new supplies. It’s also likely that the spread between various crude grades will be affected, as the U.S. mainly exports light crude but imports heavier grades. A loss of U.S. exports of light crude may stoke demand for similar grades from suppliers such as Angola and Nigeria, while shippers of heavier crudes may have to offer discounts if cargoes headed for the United States have to be diverted. While Harvey may have a short-term impact on global crude and product markets, the question is how quickly U.S. production and exports return to normal. Even assuming it takes no more than a few weeks, Harvey’s impact may be somewhat longer lasting. In effect the storm has given OPEC and its allies, such as Russia, some breathing space. It does appear that Saudi Arabia, OPEC’s leading producer, is shipping less crude as it works to translate production cuts into lower exports. If other producers can follow suit in the next couple of months, it’s possible that any tightness caused by the impact of the hurricane can simply be extended, leading to a sustained price rally. Reuters
While Harvey may have a short-term impact on global crude and product markets, the question is how quickly U.S. production and exports return to normal
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16 Business Daily Tuesday, August 29 2017
Closing Interbank market
China introduces when-issued trading for government debt
in a statement on its website. When-issued debt refers to debt that has been announced but not yet China will allow participants in its issued. interbank bond market to trade government debt ahead of its issuance, All participants in China’s interbank bond market will be able to conduct its foreign exchange market operator when-issued trading on Chinese said yesterday. government bonds from four working The introduction of so-called “whendays before their issue date until one issued” trading for Chinese treasuries working day before, the statement said. will have benefits for price discovery CFETS will issue announcements five and strengthening of the government working days before each government bond yield curve, the China Foreign debt issuance, the statement said. Reuters Exchange Trade System (CFETS) said
Results
Evergrande to cut debt by 2020, choose profits over scale The developer has seen its shares surge close to 400 per cent this year Clare Jim
C
hina Evergrande Group, which has the second-largest debt pile among the nation’s corporates, pledged to slash its debt by 2020 after unveiling a jump in first-half profits that was aided by the early redemption of some bonds. The country’s No.3 property developer by sales also announced it is changing its growth strategy to focus on growing profitably, and reduce the size of its land reserves towards that end.
Key Points Evergrande aims to slash net debt ratio to 70 per cent by 2020 Core profit jumps, helped by rise in average selling prices Aims to be China’s No. 1 developer in terms of margins, not size Evergrande said yesterday it aimed to cut its net debt ratio to around 70 per cent by June 2020 from 240 per cent now, helped partly by the introduction of a third round of strategic investments of RMB30 billion (US$4.53 billion) to RMB50 billion by its unit, Hengda
Real Estate Group, expected after September. As a first step, it aims to lower the ratio to 140 per cent by end of June next year, and to 100 per cent in the year after. Its total borrowings stood at RMB673.5 billion as of end-June. Chief Executive Xia Haijun told an earnings briefing Evergrande would no longer aim to be the largest developer in China by sales, but instead attempt to be the No. 1 by margins. It will start to reduce the scale of land reserve by 5 to 10 per cent, or 10 to 20 million square meters, each year, he said. “In the last 20 years, Evergrande has been chasing scale, but why is Evergrande changing strategy this year? ... This is because we have the basis for a transformation,” said Xia. “Because China’s property market has moved from a golden era to a stable one, so we need to transform.” Evergrande’s core profit, which excludes revaluation gains, came in at RMB27.30 billion (US$4.12 billion) over the six months ended June, a more than three-fold surge versus RMB7.8 billion a year ago, thanks to a substantial rise in average selling prices and a full redemption of high-interest perpetual bonds.
Its net profit rose nine-fold to RMB18.83 billion, while gross margin rose by 7.5 per centage points to 35.8 per cent. However, the developer booked a net loss on the disposal of available-for-sale financial assets of RMB7.02 billion. Earlier this year, subsidiaries of Evergrande sold 1.55 billion A-shares in China Vanke at a lower than average buying price to stateowned Shenzhen Metro, ending a years-long struggle for boardroom control at the larger peer Vanke. Having half of its exposure
to smaller cities in China, Evergrande was less affected by a slew of government tightening measures to rein in the country’s overheated property sector. The developer said its future land purchases would be focused on Tier 2 and satellite cities in China that are less impacted by tightening policies, although it forecast land prices would rise steadily due to a shortage. Evergrande redeemed all its perpetual bonds, totalling RMB112.94 billion, by endJune. The bonds cost it US$1.6 billion in interest last year. Its dollar bonds were
trading higher by a quarter to a half point across maturities after its pledge to further cut its net debt ratio. The developer has seen its shares surge close to 400 per cent this year, driven by an imminent backdoor listing for most of its real estate assets in mainland China, fresh capital of RMB70 billion from strategic investors as well as share buybacks. Evergrande said it believed the Chinese economy would maintain a stable and favourable trend and that it was confident it could achieve its full-year contract sales target. Reuters
Legislation
Restructure
Cybersecurity firm
Beijing says nuclear safety law ready to be passed
China merges energy giants India and Pakistan hit into global leader by spy malware
A new nuclear safety law in China is ready to be passed, state media said yesterday, adding that the legislation will help prevent and deal with accidents and promote development of the industry. Safety in China’s nuclear industry has become increasingly important as it seeks to increase exports of its nuclear technologies. China has already signed agreements to build reactors in Argentina, Romania, Egypt and Kenya. It plans to build more than 60 nuclear plants at home in the coming decade and will see total domestic capacity rise to 58 gigawatts by the end of 2020. The new law is needed to better ensure nuclear safety, prevent and deal with nuclear accidents, protect people’s health and the environment and promote the industry’s development, the official Xinhua news agency said, citing parliament’s standing committee. The law is designed to oversee and manage risks associated with building nuclear facilities, the news agency added. The International Atomic Energy Agency released a report on China’s nuclear safety last year saying record had been strong but needed “further work” in areas such as waste management and handling ageing plants. Reuters
Chinese authorities have approved a mega-merger between the country’s largest coal producer and a top electricity firm, the government said yesterday, reportedly creating the world’s biggest power company in terms of capacity. The tie-up between the two state-owned companies -coal producer Shenhua Group Corp. and China Guodian Corp. -- will be named the National Energy Investment Group Co. Ltd., the State-owned Assets Supervision and Administration Commission said in a statement. The new firm will become the world’s largest power company in terms of installed capacity, according to Bloomberg News, which said its total assets will exceed RMB1.8 trillion (US$271 billion). Beijing has promised to cut its coal production capacity to curb pollution and shift the economy towards a consumer-driven one, while also trimming bloated industrial sectors. The main business of Shenhua Group Corp. involves the production and sale of coal, railway and port transportation of coal-related materials and power generation and sales, according to its website. China Guodian Corp. mainly develops, operates and manages power generation assets and organises electricity production and sales. AFP
Symantec Corp, a digital security company, says it has identified a sustained cyber spying campaign, likely state-sponsored, against Indian and Pakistani entities involved in regional security issues. In a threat intelligence report that was sent to clients in July, Symantec said the online espionage effort dated back to October 2016. The campaign appeared to be the work of several groups, but tactics and techniques used suggest that the groups were operating with “similar goals or under the same sponsor”, probably a nation state, according to the threat report, which was reviewed by Reuters. It did not name a state. The detailed report on the cyber spying comes at a time of heightened tensions in the region. India’s military has raised operational readiness along its border with China following a face-off in Bhutan near their disputed frontier, while Indo-Pakistan tensions are also simmering over the disputed Kashmir region. The malware utilizes the so-called “Ehdoor” backdoor to access files on computers. Reuters