Business Daily #1374 September 1, 2017

Inspirational vacations, Kyoto cuisine, and Macau’s first Michelin Guide Street Food Festival. Plus cooking secrets to fry for!

Consigliere Pages 8 & 9

Friday, September 1 2017 Year VI Nr. 1374 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Politics

Date proposed for Communist Party Congress Page 16

Typhoon

Zhuhai to upgrade typhoon warning system Page 5

Post-typhoon

www.macaubusiness.com

Art

7,000 SMEs apply for financial succour Page 3

Junket Tak Chun Group to support local art space Page 16

Post-typhoon

Hengqin Authority releases RMB200 million for recovery Page 2

Tempting tourists back Tourism

Tourists are expected to return tomorrow. Following an uncomfortable hiatus caused by Typhoon Hato. The President of the Macau Travel Industry Council talks to Business Daily about the sector.

Praising the speed of recovery; while prioritising the rebuilding of the city over business losses. Page 3

Bling is the thing

Luxury Luxury bounced back big in July. DSEC figures reveal imports jumped a glittering 34 pct. With imports from Taiwan alone posting a whopping 55.8 pct y-o-y increase. Page 2

Galaxy taps into VIP momentum

Results Galaxy has released its figures for 2Q. EBITDA adjusted earnings climbed 45 pct due to stronger generalised VIP performance. Plus diversification in mass market and non-gaming areas. Page 5

Mass power

Late data is conclusive. The mass market is consuming the industry little by little. A Union Gaming analyst says gross revenue from the niche grew 14.8 per cent y-o-y in the last quarter.

Sunny side up

Gaming Page 4

HK Hang Seng Index August 31, 2017

27,970.30 -124.31 (-0.44%) Worst Performers

China Merchants Port Hold-

+6.22%

New World Development

+2.49%

Industrial & Commercial

-2.66%

China Unicom Hong Kong

-0.87%

Kunlun Energy Co Ltd

+5.72%

Galaxy Entertainment Group

+1.76%

China Construction Bank

-2.28%

CNOOC Ltd

-0.85%

China Mengniu Dairy Co Ltd

+5.42%

MTR Corp Ltd

+1.22%

Want Want China Holdings

-2.08%

Lenovo Group Ltd

-0.70%

Wharf Holdings Ltd/The

+2.62%

Link REIT

+1.10%

Bank of Communications

-1.16%

Ping An Insurance Group Co

-0.64%

Sun Hung Kai Properties Ltd

+2.59%

Sino Land Co Ltd

+1.04%

BOC Hong Kong Holdings

-0.99%

China Mobile Ltd

-0.63%

26° 32° 26° 33° 26° 30° 27° 30° 28° 31° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

PMI Mainland manufacturing data for August has beaten forecasts. The official factory gauge rebounded, suggesting the economy may remain robust. Enough to offer policymakers more room to continue curbing financial risks. Page 10

2 Business Daily Friday, September 1 2017

Macau

Trade

Luxury imports thunder back Gold jewellery, handbags, wallets and watches all up Kelsey Wilhelm Kelsey.wilhelm@macabusinessdaily.com

M

erchandise imports and exports of the MSAR in the month of July saw a 34 per cent and 8.7 per cent increase year-onyear, reaching MOP1.11 billion and MOP6.15 billion, according to the most recent statistics from the Statistics and Census Service (DSEC).

Imports from Taiwan during the month saw a 55.8 per cent increase year-on-year, while those from the European Union fell 28.1 per cent

during the same period (see Chart).

Of the total imports, those valued highest during the month were fuels and lubricants, reaching MOP622.6 million, although seeing only a 0.2 per cent uptick. Mainland China continued to be the main origin of imports during the first seven months of the year, making up 32.8 per cent of the value of goods imported.

Luxury rules

The luxury sector saw a rebound during the month, seeing a 63.1 per cent increase in the value of imported handbags and wallets, reaching

MOP323.8 million, while that of gold jewellery saw a 49.6 per cent uptick year-on-year in July, reaching MOP526.4 million. The value of imported watches posted a 40.4 per cent increase when compared to the same month last year, reaching MOP422.1 million.

In the first seven months of the year the food and beverage sector imported the most amongst the segments, at MOP6.67 billion, a 2.7 per cent year-on-year increase.

During the seven-month period the value of imports of gold jewellery, watches, handbags and wallets all

increased more than 30 per cent year-on-year.

The export of diamonds and diamond jewellery saw a 22.3 per cent uptick year-on-year in July and a 34.8 per cent increase year-onyear for the first seven months of the year, reaching MOP34.3 million and MOP478.8 million, respectively.

The primary receiver of exports from the MSAR was Hong Kong, at MOP589.5 million in July, a 38.3 per cent increase, while exports to France also increased significantly - by 44 per cent year-on-year - to MOP5.7 million, according to the data.

Hengqin

Hengqin City pours RMB200 mln into recovery The Hengqin Authority has disbursed RMB200 million (US$30.33 million) to help rebuild facilities and build­ ings affected by the onslaught of Typhoon Hato last week, according to infor­mation issued by the area’s administrative body.

The amount will be specifically used for disassembling tower cranes, construction lifts, and other temporary buildings on construction sites that were damaged during the calamity.

In order to ensure optimum use of the money, the Authority has appointed the anti-graft office of Hengqin City to monitor the use of the funds and to regulate declaration procedures.

According to the press release, posted by the Hengqin City Administrative Office, the Authority estimates damages amounting to approximately RMB2.68 billion in Hengqin caused by the super typhoon, during which 137 construction sites suffered

various levels of damage.

Huafa Tennis Hall, Chimelong Ocean Kingdom and Zhuhai Da Heng Qin Company Limited were some of the victims of Typhoon Hato.

The Authority also reported that some 43,000 individuals were affected in Hengqin.

Earlier, the Authorities also rolled out tax rebate measures for 10 different areas including corporate income tax and individual income tax for affected firms and individuals in need. C.U.

Election

Candidate group drops out of election One of the candidate groups in this year’s Legislative Assembly elections has decided to withdraw from the running. The fifth group on the candidate list - Pink Love Citizens, also known as the Workers’ Self-Help Union Macau - announced it would be pulling out of the election

via Facebook post, saying that they considered it more urgent to help the city recover from the recent damage wrought by typhoons Hato and Pakhar.

‘We notice that [repairing] the current condition of the city is much more important than taking part in the

upcoming election,’ stated the group. ‘Therefore, we have decided to drop out of the sixth election.’ The union pledged to use their limited resources and time to help residents in need.

The group is led by Lei Kit Meng, chairman of the Workers’ Self-Help Union.

Politics

Secretary for Security: Rumour that PLA killed resident originated in U.S. The city’s Secretary for Security Wong Sio Chak said rumours on the Internet about the People’s Liberation Army allegedly beating a resident to death had originated in

the United States, local broadcaster TDM Radio reported. The Secretary told the press that the rumour was then forwarded to Hong Kong, passing through several servers from

different countries before reaching the MSAR. The rumour in question claimed that a local resident was beaten to death by PLA members during their

mission to help cleanup and rescue efforts in the city last week.

Following the devastation of Typhoon Hato, various negative rumours have sprung up online.

Business Daily Friday, September 1 2017 3

Macau Funding

DSE: 7,000 apply for SME support

applications, with the amount reaching MOP42.15 As at August 30, over 7,000 applications for SME million (US$5.23 million). (small and medium size enterprise) post-typhoon In order to efficiently offer assistance to SMEs, the government department has set up two support were collected under the Industrial more stations to serve enterprises in need, or 14 and Commercial Development Fund by Macao stations in all.

Economic Services (DSE).

DSE advised applicants to provide valid Of these, DSE has approved some 843

information and documents and to avoid false declarations.

DSE rolled out two schemes to assist SMEs to overcome difficulties following the direct hit by Typhoon Hato; namely, an interest-free loan of up to MOP600,000 and another subsidy of up to MOP50,000.

Tourism

Open for business The President of the Macau Travel Industry Council assured Business Daily that the city will be ready to handle the arrival of package tours after September 2, with tourism researchers believing the measure to be positive for residents and tourists alike Nelson Moura nelson.moura@macaubusinessdaily.com

The MSAR will be ready and able to receive package tours after September 2, the President of the Macau Travel Industry Council, Andy Wu Keng Kuong, has assured Business Daily.

“After previously meeting with Macao Government Tourism Office (MGTO) we took into consideration the recovery of the water and energy supply, together with the conditions and recovery period of the city’s streets, hotels and other tourism facilities. Then we jointly agreed the city would be ready once again to receive package tours after September 2,” Mr. Wu told Business Daily.

The Macau Travel Industry Council President also told Business Daily that the industry was not worried about possible losses to their business during the period, since they “place the recovery of the city as their main priority”.

The MGTO held urgent meetings with representatives from travel agencies operating in Macau and hotel associations, one after Typhoon Hato and another after Typhoon Pakhar, with a consensus reached first that tour group arrangements would resume on August 30, but later changing the resumption date to September 2.

While MGTO believes the period will allow the recovery of the city’s roads - plus local conditions for hospitality and image - the other involved parties believe the period will provide members of the trade with an opportunity to restore their facilities and services.

Representatives from MGTO told Business Daily that the arrangement did not involve any enforcement over travel agencies, with no infractions to be incurred should a company decide to operate during the agreed period.

The department also stated it would contact the China National Tourism

Administration and its counterparts in Shenzhen and Hong Kong to facilitate the co-ordination of package tour resumption.

Business as usual

As of June this year, some 224 travel agencies and 1,871 tour guides were operating in Macau, with a total of 669,600 visitors having arrived on package tours or joined local tours in June.

According to the most recent information provided by MGTO, 61 of the 64 3 to 5-star hotel establishments in the city already had full access to water and electricity, with two establishments un-contactable and one without power and water supply.

Meanwhile, of the 45 2-star establishments in the city, 26 had access to water and energy, 13 could not be contacted; four had no access to water, and two had no water or power supply.

MGTO told Business Daily that “considering the difference in sit­ uations experienced by each travel agency and hotel in the aftermath” tour group numbers are “ex­pected to increase gradually”.

Breathing period

Tourism and hotel industry researchers at the University of Macau (UM) were unanimous in agreeing that the advantages of having a suspension period far surpassed its short-term economic impact.

According to University of Macau’s Professor Glenn McCartney, a specialist in integrated resort management, the economic impact of the suspension of package tours likely had a larger impact on gaming operators, hotels and other businesses that are more dependent upon mass-market tourists.

However, having a recovery period and a set date to resume tourist tour operations would be important to

convey the message of “going forward” and of being “open for business” to outside travellers.

“This says ‘we’re ready to receive you in a safe manner and we have the infrastructure’ […] Recovery has to be very well managed because it sets the tone in the months ahead and allows business to get back to Macau” Professor McCartney stated.

Meanwhile, Associate Professor of International Integrated Resort Management Amy Siu-Ian So told Business Daily that the decision was positive for both residents and tourists.

For Ms. So there could be an increase in visitation to hotels and casino properties on Cotai during the initial opening up period - with the Macau Peninsula having been affected to a greater level by Typhoon Hato – however, that increase is likely to be only “temporary” and would not make a “great difference in the long-run”. advertisement

4 Business Daily Friday, September 1 2017

Macau Opinion

Pedro Cortés*

Our good people The extraordinary events of last week triggered an extraordinary reaction from the people of Macau.

It also revealed an extraordinary incapacity by our public departments to cope with a tragedy. It seems that something is wrong in a place where we need to have the assistance of the citizens to clean the city. Ditto when an autonomous Region needs to ask help from the PLA. Without the population and the soldiers our city would not be back on track.

It is also extraordinary the power of money. First, the immediate measures of the government were to put at the disposal of all entities loads of cash. Then, of course, the guilty conscience of the gaming operators made them open to many things, in a beauty contest which should make us wonder whether it is genuine or solely to keep in the good graces of the government.

Well, another lesson shall be learned: the behaviour of non-residents - Filipinos, Nepalese, Vietnamese, non-resident Chinese and others - towards a city which treats them most of the time with something akin to a dismissive attitude.

Despite the catastrophic conditions of Hato, these selfless individuals went to the streets to clean up and help all of society. They are heroes.

It is a lesson which, hope­ fully, our politicians will take on board when next they mull laws restricting the rights of the members of these communities. The same shall apply to the so-called expats. We have felt a sense of brotherhood as never before. No barriers before the tragedy were erected. The images of an integrated people should make us hopeful for the future of Macau.

When pitfalls exist, people tend to unite. We had that in Macau. Unfortunately, as in many other situations, in two or three months, in a city where an interview with a newspaper is seen as propaganda, our officials will forget what happened and start imposing difficulties upon those communities who have come to feel Macau is their home.

Since many long years ago, Macau has been an amalgam of creeds, races and origins.

It is in the bones of our city and it must continue to be so. Respect for the rights of foreigners should be one of the priorities of our government. And the same applies to the respect of freedom of the press and free speech – unlike another catastrophic event last week when Hong Kong journalists made us feel a little ashamed of certain interpretations. *lawyer and frequent contributor to this newspaper.

Gaming

Analysts: Mass strengthens in Q2 Mass market performance is up 15 pct y-o-y in Q2 this year according to Union Gaming Cecilia U cecilia.u@macaubusinessdaily.com

G

ross gaming revenue from the MSAR’s mass tables grew 14.8 per cent year-on-year in the second quarter, according to analyst Grant Govertsen of Union Gaming. The report by the group notes that while being in line with its estimates it was 780 basis points higher than the 7 per cent official increase stated by the local Gaming Inspection and Co-ordination Bureau (DICJ).

The group’s analysis of VIP gross gaming revenue during the quarter pointed to a 30.8 per cent year-onyear increase, as opposed to the 34.8 per cent increase stated by the DICJ, and a 15.8 per cent increase in slots as opposed to DICJ’s 17.2 per cent.

The 20 per cent increase in overall gross gaming revenue was in line with DICJ data, the group notes.

The onslaught of Typhoon Hato, followed by Typhoon Pakhar ‘took a large bite out of what would have been a spectacular gross gaming revenue growth rate for the month of August,’ said Govertsen. The group notes that after the 29 per cent year-on-year increase in July ‘it had appeared that August could have approached or even eclipsed that rate’ - the group’s expectations now, however, are for the results to be ‘in the low 20 per cent range’.

Following the devastation of the super typhoon last week, the group perceives that the city as such lost the chance to obtain ‘a spectacular GGR [gross gaming revenue] growth rate for the month of August’.

Furthermore, Union Gaming expects September’s performance ‘to be in the high teens’.

In broad terms, the growth rate for the third quarter would be similar to the rate in the second quarter, in the low 20 per cent range, the

analyst points out.

‘We would expect the VIP and mass splits to be fairly similar, too, with mass growth in the mid-teens and VIP approaching 30 per cent,’ writes the analyst.

Without taking into account the new properties of Wynn Palace and The Parisian, the analyst notes that the prospects of same-store gross gaming revenue growth ‘was in excess of 9 per cent during the quarter’.

Growth rates by segment are estimated at 16.8 per cent for VIP, 3.3 per cent for mass, and negative growth of 1.8 per cent for slots.

With yesterday’s interim result announcement of Galaxy Entertainment Group posting stronger mass market growth compared to the other five gaming operators in the city, Union Gaming continue to identify Galaxy as ‘a top pick’ in playing the ongoing recovery of Macau.

Retail

M & S in talks with Al-Futtaim to discharge SAR stores British multinational retailer Marks and Spencer (M&S) has announced that it is in discussions with its long-time franchising partner Al-Futtaim for the potential purchase and franchising of the retailer’s M&S owned retail business in Macau and Hong Kong. This would see Al-Futtaim become the ‘new sole franchisee’ for the brand in

the SARs, according to a company release.

According to the release the parties are commencing a due dilligence period set to last several months, a the colthoughmpany notes that ‘M&S employees will be kept informed of any developments throughout the process and M&S sotres in Hong Kong and Macau will continue to trade as

normal’.

In accordance with the strategic review of its international business in November 2016, the British firm proposes placing greater attention on its established franchise and joint venture partnerships, operating fewer wholly-owned markets.

Marks & Spencer entered the Hong Kong market in 1988, since when it has established 25 stores in the HKSAR and two in Macau.

The group set up its first Macau store in August 2014, in The Venetian.

The partnership between M&S and Al-Futtaim was established in 1998 when the first M&S store was launched in Dubai. Currently, Al-Futtaim manages 43 M&S stores in Singapore, Malaysia and seven other markets in the Middle East.

“In November, we set out our plans to create a more sustainable, profitable and customer-centric international business for M&S by focussing on our established partnerships,” said Paul Friston, M&S’s International Director. “Al-Futtaim is a key partner to M&S in Asia and the Middle East and we are both committed to putting the customer at the heart of everything we do.” C.U.

Business Daily Friday, September 1 2017 5

Macau Results

Galaxy profit soars most since 2012 as VIPs drive growth High rollers, who account for more than half of the group’s total gaming receipts, increased 5 per cent in the first half of the year Daniela Wei

G

alaxy Entertainment Group Ltd. posted its biggest quarterly earnings gain in almost five years as high-stakes gamblers helped to boost profit in the world’s largest casino hub.

The Macau casino operator’s adjusted earnings before interest, taxes, depreciation and amortization climbed 45 per cent to about HK$3.29 billion (US$420 million) in the second quarter, according to Bloomberg calculations based on Galaxy data released yesterday. That’s the steepest increase since the third quarter of 2012, and tops the median estimate of HK$3.2 billion from eight analysts surveyed by Bloomberg.

Shares of Galaxy rose 1.8 per cent in Hong Kong to close at HK$49.10, the highest since December 2014. The stock has advanced about 45 per cent this year.

Casino operators in Macau including Galaxy are benefiting from high-stakes VIP gamblers, even as the companies shift to courting tourists and leisure gamblers.

The company has boosted business in the higher margin mass-market segment and non-gaming elements such as hotels to fend off competition from MGM Resorts International and Las Vegas Sands Corp.

Casino competition

Galaxy posted a “strong performance in the context of the competitive new supply on Cotai,” said Union Gaming Group LLC analyst Grant Govertsen after the results, referring to the Macau strip where new casinos have popped up. “In addition, their StarWorld property on the peninsula continues to show strong growth, making it a significant outperform in that geography.”

Still, there are concerns that China’s efforts to

curtail capital outflows could squeeze availability of funds for junkets. The government said this month it will prohibit or restrict domestic companies from making overseas investments in sectors including gaming industry, real estate, hotels and entertainment.

The naming of “restricted” industries may have an impact on the junkets’ liquidity environment, as a portion of their collateral base and liquidity channels involve real estate, investment platforms, and entertainment-related sectors, Jamie Soo, an analyst at Daiwa Capital Markets Hong Kong Ltd., wrote in a note on August 21.

VIP gains

Galaxy’s gaming revenue from high rollers, which accounts for more than half of the group’s total gaming receipts, increased 5 per cent in the first half of the year.

Mass table games revenue grew 15 per cent in the six

months.

Operations at some casinos were disrupted this month after a typhoon affected power and water supply. Deutsche Bank AG cut Macau’s August gaming revenue growth forecast to as low as 16 per cent from the previous 22 per cent to 24 per cent, as the impact of typhoon Hato may linger

Disaster warning

Economy

Zhuhai enforces warning, alert system for typhoons

Well-to-do neighbours

New regulations on safety management during times of typhoon and heavy rainstorm have been issued in the neighbouring city of Zhuhai, according to official information published yesterday.

The regulations detail measures such as the time during which t r av e l a n d o u t d o o r p u b l i c activities should be suspended in the case of typhoons and severe storms, declaring that emergency conditions should remain in place until the all-clear signal sounds or further notice is issued by the authorities.

The regulations established in Zhuhai are based upon China’s four-colour code weather warning system - red, orange, yellow, and blue - with the colour red signalling the most severe state.

The Macau SAR Government’s Civil Protection Bureau, overseen by the Unitary Police Service (SPU), also has a colour-based alert and warning system in place, of five

categories. In addition to the four colours defined in China’s standards, the local system includes a green one for a ‘normal situation where there are no risk indicators.’

The red alert in Macau characterises an ‘especially large’ level of risk, defining a ‘critical situation,’ which may produce an influx in the number of hospitalised persons, requiring technical teams or evacuation procedures, inflicting high numbers of causalities, and causing important environmental impact, to name but a few consequences.

The SPU was unable to provide additional information on whether or not the service had triggered the system alert before Typhoon Hato hit Macau last Wednesday, August 23.

According to the neighbouring region’s official information, Zhuhai has become the first city in Guangdong Province to implement such specific security measures related to calamitous weather. S.Z.

for weeks, Deutsche Bank analyst Karen Tang wrote in a note Monday.

“We are doing our best to resume normal operations as quickly as possible and we are confident that Macau and Galaxy Entertainment Group’s short and long-term prospects remain bright and promising,” Galaxy said in the statement. Bloomberg News

The profit from Zhuhai Holdings Investment Group Limited for the fist six months of this year increased 30.5 cent year-on-year to reach RMB25.13 million Nelson Moura nelson.moura@macaubusinessdaily.com

Shipping and property conglomerate Zhuhai Holdings Investment Group Limited registered RMB25.13 million (MOP30.6 million/US$3.8 million) in profit for the first half of the year, 30.5 per cent year-on-year, the group’s unaudited financial results reveal.

The group’s total revenue fell by around 16 per cent yearly during the period to reach RMB1.24 billion.

This yearly decrease was attributed to the company’s decision to reduce the proportion of receivables for the fuel wholesale business under the city energy supply segment in the fund in order to reduce business risks.

Nevertheless, according to the filing, the group’s expansion of its business volume of product oil retail still allowed an incremental increase in its unaudited consolidated profit.

The group provides energy supply businesses through Zhuhai Jiuzhou Energy Co., Ltd. (Jiuzhou Energy Company) - a wholly owned subsidiary of its ferry company Zhuhai High-speed Passenger Ferry Co., Ltd. According to the release, the sales volume of the product oil retail business in the first half of this year went up 22 per cent yearly to 12,000 tonnes, while the product oil wholesale business plunged 38 per cent year-on-year to 197,000 tonnes.

‘The product oil wholesale business has been extended to Qinzhou, Hangzhou, Fushun, Nantong, among other cities, through effective business expansion,’ the release announced.

As of June 30, the group owned RMB6.88 billion in properties under development in non-current and current assets, representing 59.6 per cent of its total RMB11.56 billion in assets. advertisement

Hong Kong road warning system. Source: Lusa

6 Business Daily Friday, September 1 2017

Macau Results

Success Universe revenue from Ponte 16 dives in H1 Company installed race simulators and ‘invited street performers’ to counter competition

T

he co-operator of the Ponte 16 property, Success Universe, saw a 32 per cent yearly decrease in its shared profit from the project during the first half of the year, according to the group’s filing with the Hong Kong Stock Exchange. The decrease in profit, amounting to HK$7.2 million (US$920,000), coupled with a ‘decrease in the operating revenue and increase in loss of the Group’s travel business’ were the main contributors to the group’s 67 per cent increase in loss year-on-year, which hit HK$21.1 million during the period.

The group’s travel business saw HK$269.7 million in revenue, although managing a HK$8.3 million loss, a 130.5 per cent increase year-on-year.

Given the continued moratorium established on paperless lottery sales in the Mainland, the group notes that its lottery business turned in ‘a modest performance,’ amounting to HK$11.9 million in revenue, a 291 per cent increase year-on-year, ‘primarily attributable to the receipt of commission and service income contributed by the provision of technology services platform.’

Losses in the segment amounted to HK$1.2 million, an 88.8 per cent reduction year-on-year.

Regarding the group’s Ponte 16 property it notes that the challenges and ‘intensive competition driven by

Success Universe is co-operator of pictured Ponte 16 property

new supply of hotel rooms and gaming tables’ has pushed it to introduce a game zone with 16 race simulators as well as inviting ‘street performers to share their passion for creativity and performance at the outdoor plaza

of Sofitel Macau at Ponte 16’.

Occupancy of the hotel during the period was 89 per cent, while adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) of the casino saw a 5

per cent year-on-year decrease, to HK$136.3 million. The group notes it ‘remains committed to gaining a stronger foothold in the entertainment and tourist-related industries in the Asia Pacific region’. K.W.

Results

Future Bright: ‘No material damage from Hato’ Group thinking of ‘cautiously expanding’ into Taiwan market Food and beverage and property company Future Bright saw an 8 per cent annual increase in its loss for the first half of the year, according to the group’s filing with the Hong Kong Stock Exchange. Losses increased to HK$16.9 million, as the group was still unable to find a tenant for its currently vacant ‘Yellow House’ property located at the bottom of the steps leading to the Ruins of St. Paul’s.

Additionally contributing to the results was a HK$10.9 million loss from the group’s food souvenir business and ‘soft performance’ of new restaurants opened in late 2016.

Despite posting revenue of some HK$411 million during the period in the food and catering business, ‘about 94.8 per cent’ of the group’s overall revenue, and a 16.2 per cent year-on-year increase, the segment still sustained a HK$6.4 million loss.

The group’s chairman, Johnny Chan See Kit, said that the second half of the year ‘should still be challenging . . . [but] . . . may improve hopefully with steady increases in visitor inflow to Macau’ as well as continued improvements in local gaming revenue.

In regard to the effects of Typhoon Hato on the company’s operations, the chairman notes it ‘has caused no material damage to the Group’s assets’.

The chairman said Future Bright will continue to look for opportunities for restaurants and food counters in Macau and for mass market restaurants in both Hong Kong and the Mainland over the next two years.

In addition, the group ‘is also exploring the viability of cautiously expanding its mass market restaurants into the Taiwan market,’ notes Chan. K.W.

Loss

China Star posts 225 pct increase in loss in H1 Continues to pursue sale of Lan Kwai Fong Hotel to Paradise Entertainment Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

The current operator of Lan Kwai Fong Hotel, China Star Entertainment, Limited, saw a 225 per cent yearly increase in its loss during the first half of the year, according to the group’s filing with the Hong Kong Stock Exchange. In total, the loss amounted to HK$127.14 million (US$16.25 million).

During the period, HK334.27 million was generated by the group’s hotel and gaming service operations, while just HK$1.35 million was generated

by its film business and HK$8,000 was earned from its property development operations.

The group notes that despite a gradual pickup in the gaming revenue during the period it would continue to pursue the sale of the three wholly-owned subsidiaries related to the property to gaming machine manufacturer Paradise Entertainment given that ‘it is the right moment for the group to realise considerable investment gain from this operation’.

The sale would be for a consideration of HK$2.38 billion.

Looking forward, the group notes

that its ‘major future investment in Macau’ will be the development of a two-tower luxury and residential complex next to Hotel Lan Kwai Fong as well as a residential site in Nam Van lake, designated as Lot C7.

The group has outstanding commitments relating to the sites totalling HK$1.34 billion in project costs and a further HK342,000 in purchase and renovation and equipment costs.

China Star entered into a purchase agreement for Lot C7 late in April of this year, and notes that currently ‘an architect has been engaged and is still in the process of compiling a

development plan’ for the property.

China Star purchased a company owned by its director Tiffany Chen Ming Yin, securing 50 per cent interest in the company that ‘indirectly owns’ the entire interest in the 4,669 square metre plot, according to the results.

The plot had originally been swapped with the government in a deal under former Secretary of Transport and Public Works Ao Man Long in August 2001, traded for two plots comprising 3,997 square metres and which made up the popular tourist attraction of the Mandarin’s House.

Business Daily Friday, September 1 2017 7

gaming Change

Former Jimei group bets on Hollywood Starlight Culture Entertainment Group, formerly known as Jimei Entertainment Group - chaired by mogul Jack Lam until his resignation and share sale mid-year has seen its losses increase to HK$237.85 million in the first six months of the year, according to the group’s filing with the Hong Kong Stock Exchange. This compares to a profit of HK$28.55 million registered in the same period of last year.

The group’s revenue fell 84.8 per cent year-on-year during the period, hitting HK$20.19 million, as compared to costs amounting to HK$23.82 million.

The recent change of company name, coming in the wake of a shutdown of a facility operated under Lam in the Philippines late last

year and Lam’s subsequent share sale and demission, ‘brings a fresh corporate image and more accurately reflects the Group’s commitment to diversifying its business in the future,’ notes the filing. The group points out this diversification aims to ‘start a new chapter in the development history of the Group’.

The group has engaged American film director Felix Gary Gray ‘in relation to the development and production of motion picture projects . . . [to] . . . tap into the business of film production and distribution’ for a three-year term to ‘develop three theatrical motion picture projects’.

In addition, as of July 3, the group has engaged Roland Emmerich, director of films such as ‘Godzilla’,

‘Independence Day’ and ‘The Day After Tomorrow’ for a three-year term also to develop three films with the same goal.

During the period the

group’s loss in the entertainment and gaming segment amounted to HK17.27 million, while in the media and culture segment it reached HK$11.71 million.

The gaming segment, in particular, was affected by the termination of its junket arrangement via its subsid­ iary with NagaWorld early this year. K.W.

Public-private deal

Imperial Pacific wants US$10 million deposit back Hong Kong-listed Imperial Pacific International (IPI) Holdings Limited is seeking to retrieve a deposit of US$10 million (MOP80.60 million) the company made with the Department of Public Lands (DPL) of the Marianas, the Saipan Tribune reported this week.

DPL Secretary Marianne Teregeyo confirmed IPI’s request, declining to provide further information on claims

the matter has yet to be discussed with the department’s lawyers.

According to Teregeyo, the money was deposited in late 2016.

The money is said to have been deposited as a ‘good-faith advance’ from the casino operator to DPL in order to secure the lease of the Garapan property where the company’s casino has been constructed, the publication notes.

The DPL Secretary explained that IPI had deposited the additional US$10 million because IPI had requested “additional things from DPL” - the extra deposit would cover for DPL assuming “that risk,” the department’s Secretary was quoted as saying.

The Secretary added that she is set to meet IPI to discuss the latter’s request for releasing the security

deposit for its public land lease in Garapan, which originally entailed IPI paying US$250,000, the Marianas Variety reported yesterday.

Teregeyo further clarified that deposits are not income for DPL, claiming they are remitted after an audit at the end of every fiscal year to determine the surplus that would be remitted to the Marianas Public Lands Trust (MPLT) fund. S.Z. advertisement

8 Business Daily Friday, September 1 2017

Consigliere

Have vacation days left?

Here are six inspirational trips perfect for right now

I

Nikki Ekstein

f you still haven’t checked into the Silo Hotel in Cape Town or snapped an Instagram shot underneath the hammerhead shark exhibit at Miami’s new Frost Science Museum, you’ve got some work to do. And fast.

Earlier this year, Bloomberg anointed the 20 most exciting destinations for 2017. Given that the year is two-thirds over, it seems a good time to take stock of your adventures—and figure out how to use your remaining vacation days.

Where to begin? Use this cheat sheet as your guide.

to bringing the Christmas spirit to life. But keep an open mind about Santa Park if you go in the fall: it contains the Arctic Treehouse Hotel, one of the most striking places to see the skies light up in greens and purples. Its striking suites have panoramic windows and whitewashed interiors, creating an illusion of continuity into the snow-covered countryside.

Feeling cold just thinking about it? Warm up at Loyly, a newly minted sauna on the Helsinki coast that’s restoring glamour to a once-ubiquitous tradition: open-to-the-public bathhouses.

Miami

Egypt

Art Basel means that December is always an exciting month in Miami. But go a little earlier and you’ll find that these days, the South Florida art world is in full swing, full time. An exhibition about dominoes at the Pérez Art Museum Miami sounds odd until you consider how the game has become an emblem of Cuban culture; the Bass Museum reopens in early October with a technicolor retrospective by Swiss mixed-media artist Ugo Rondinone; and in September, Faena Art will become part-roller skating rink, part-art installation, with a floor and DJ booth covered in massive, psychedelic murals.

If that feels like a lot to take in, consider this: The brand-new Frost Museum of Science has an exhibit dedicated to the science of looking. It’ll make you think twice about your perspective, in ways that are both figurative and literal.

Visits to Egypt are on the rebound—which is great news for Egyptians and a mixed bag for travellers. Some rough numbers to consider: Six years after the country clocked 1.5 million monthly arrivals, tourism plummeted to 329,000 last May. Now, the figures are surpassing 700,000 for the first time since October 2015.

In other words: Plan a trip—soon, if you’re interested in getting the pyramids all to yourself. And if you really want to guarantee some space and privacy, get out of Cairo and onto a Nile River cruise—the 27-cabin Oberoi Zahra is offering two sailings each month for the rest of the year, starting and ending in Luxor and Aswan.

Myanmar

Cape Town

After checking into the Silo last month, I’m happy to report that one of the year’s most hotly anticipated hotel openings has somehow exceeded the hype. The geodesic, dome-like windows! The crystal decanters with complimentary brandy! The layer cakes at tea time! Even if weather shuts down the stunning rooftop pool, you’ll never want to leave. Which is just fine, because come September, the ground floor will transform into the continent’s first contemporary African art museum, the Zeitz MoCAA. Inside will be the world’s largest collection of its kind, with nine floors of exhibition space that will include works from such cutting-edge artists as Swaziland’s Nandipha Mntambo and South African Wim Botha. Cape Town minus the epic outdoor adventures? It’s suddenly an appealing proposition.

Finland

The Northern Lights are in a dimming cycle, which means that they’ve been progressively appearing less frequently since 2015 and will continue to decline for an additional eight or so years. (The decade-long trend is part of normal solar cycles.) Even so, sightings are still easy to come by in Finland’s northern Lapland, starting in September and stretching all the way through March.

Avoid going during the festive season, since the town of Rovaniemi explodes with Santa Claus-everything around then—it’s dubbed itself the “official hometown” of the bearded gift-giver, with an amusement park dedicated

Visiting Southeast Asia during the summer months isn’t an ideal strategy: The temperatures climb far past the point of reason. So if you missed your chance at a trip early this year, consider booking for late 2017.

Already, the temple-filled, historic city of Bagan is reaching a tipping point for travellers. Myanmar natives are discovering domestic tourism after many years of political conflict; ever-growing numbers of Chinese are arriving on tour buses; and backpackers from Europe are there seeking great value. You should still go: Just ask your tour guide to take you to Shwesandaw Pagoda for sunrise, rather than sunset (when the crowds are at peak saturation), and head to a different spot to watch the sun cast its glow on hundreds of brick stupas.

Inle Lake is where you’ll still get Myanmar to yourself. The Sanctum Inle hotel is far more beautiful in person than its website would suggest, with what may be the only five-star rooms in the area (and service to match).

Once you’re zipping around the floating villages in your own longboat, you’ll rarely see another traveller—and the few modern businesses that have sprung up have retained a strong sense of local identity. Take the Inthar Heritage House, a restaurant and hospitality school for Inle youth; it serves fresh, flavourful tea leaf salads and Myanmar curries, which you’ll scarcely find anywhere else.

Sri Lanka

Want to ride in a hot air balloon over parades of elephants and pods of blue whales in the morning, then go spotting leopards in the afternoon? That’s the type of safari you can take in Yala National Park, in south-eastern Sri Lanka—and it’s the central premise behind Wild Coast Tented Lodge, opening this October with 36 opulent, pod-like tents. Go for three days to get your fill of land and sea animals, then pair that with a couple of blissed-out beach days in the Maldives. (Our hotel pick there? Soneva Fushi, some of whose overwater bungalows have waterslides that plunge into private pools.) Bloomberg

Reaching for the stars Macau is a tiny city that has a mature catering industry.

It is the place that not only offers many Michelinstarred restaurants but is a favourite city beloved by renowned chefs from all over the world.

I have some good news for all foodies. There will be an array of time-limited Michelin-starred events taking place in Macau during September and October – which I’m sure will satiate the most demanding palate!

Authentic Kyoto cuisine

Japanese food is not new to you; however, Kyoto cuisine is rarely seen here.

Yamazato, Hotel Okura Macau will bring authentic Kyoto Cuisine to Macau from September 15 to October 22. This time, Yamazato proudly announces that Mr. Daisuke Usui - Executive Chef of Kyoto Hotel Okura’s famed Michelin starred restaurant Awata Sanso - will be the guest chef here, preparing delectable

Kyoto dishes.

Mr. Daisuke Usui is the sole member of Awata Sanso. Under his supervision, the restaurant has received awards, including a Michelin star, for eight consecutive years. If you are a Japanese food lover, you have to seize this opportunity to savour delights such as Conger pike eel served in Dobin Tea Pot, and Grilled Wagyu Beef with White Miso Sauce.

Each dish relates its very own story

Business Daily Friday, September 1 2017 9

Consigliere

Source: Bloomberg. Photographer: Daniel Patterson

You are making scrambled eggs all wrong In his new book, Coi chef Daniel Patterson urges home cooks to experiment in their kitchens—starting with basic breakfast Kate Krader

I

t’s hard to think of a dish as elemental as scrambled eggs.

The only requirements for the original two-ingredient recipe (if you don’t count seasoning) are fat for cooking and eggs. Though plenty of ways exist to make them more ambitious, with fancy ingredients and elegant presentations, it seems impossible to think of a way to change them beyond the three-step process of cracking, whisking, and pouring into a hot pan.

But Daniel Patterson has figured it out.

The San Francisco-based chef has earned Michelin stars and a James Beard award for his fine-dining restaurant, Coi. He is a co-founder of Locol, the California fast-food spot whose mission statement is to save the world by offering well-sourced, affordable burgers, soft serve, and coffee in underserved neighbourhoods.

Patterson is likewise on a mission to give home cooks a point of view in their own cooking. In a cookbook just out this month, The Art of Flavor (Riverhead Books), he has teamed up with perfumer Mandy Aftel to teach readers to be confident in their flavor combinations, rather than blindly relying on recipes. (Patterson compares this to the way people unthinkingly follow GPS directions in their car.)

Patterson’s goal is for home cooks to cook without recipes. “Chefs make multiple decisions simultaneously

to enthral diners as they savour the exquisite textures and tastes.

Michelin Guide Street Food Festival

It is generally believed that tasting the food appearing in a Michelin Guide means paying through the nose. In point of fact, the quality of food cannot be determined by price. Michelin Guide Hong Kong Macau also recommends a huge array of street food for all kinds of foodies.

This October, Michelin Guide Hong Kong Macau’s first ever Michelin Guide Street Food Festival debuts in Macau’s Studio City entertainment resort.

A one-of-a-kind event in which food lovers will be able to savour a myriad of flavours from some of Asia’s top chefs under one roof, participants can taste signature dishes and one-off festival creations at value-for-money prices. Small plates start from just MOP40 and can be bought with Street Food Coupons purchased at the event.

A remarkable line-up of eateries from Singapore and Japan will

when they’re creating dishes. This book allows people to make their own recipes. Much of that is functional: determining you want acid in a dish, and then deciding from options like Champagne vinegar, or balsamic, or citrus. Brown sugar or honey or a juice if you want sweetness. Once you get a sense of what works for you, you gain confidence.”

Learn to hit your flavour target, says Patterson.

“There are a million recipes out there, but hardly any that explain why you’re mixing this with that, or that empower you. This book is about the ‘whys,’ about knowing what your flavor target is, and how to hit it,” says Patterson. “If you like spicy foods, high acid foods, dishes with that rich umami flavor, then get a handle on the ingredients that push that forward.”

Take sweet potatoes, he says. One of his favourite dishes in the book is for a soy-glazed version. Using three ingredients (sweet potatoes that are roasted, plus melted butter and dark soy sauce), Patterson transforms a staple side dish into one with sophisticated layers of dark, sweet, and salty flavours. “It will change your Thanksgiving,” predicts Patterson.

To lead cooks to a place of understanding, Patterson takes time out in The Art of Flavor to point out the power of some ingredients to undo the wrong direction a recipe might go in. In the book’s final chapter, “The

descend upon Macau to cook here for the very first time, including the world’s first-ever street food stall to have been awarded a Michelin star Hong Kong Soya Sauce Chicken Rice & Noodle from Singapore. The humble hawker turned Michelin-acclaimed chef, Chan Hon Meng, will be flying in to cook at Studio City alongside fellow Singaporean Wayne Liew from Keng Eng Kee, the popular street food stall known for its fusion of Hainanese cuisine with Malaysian-style Zi Char home-style food. Other talented chefs from Singapore cooking up a storm at the Festival will be Manjunath Mural from the one-starred Song of India as well as Han Liguang from Labyrinth which has been awarded its first star in the recently announced Michelin Guide Singapore 2017.

Moreover, local famous one Michelin-starred Cantonese restaurant Pearl Dragon, Michelin-recommended Shanghainese restaurant Shanghai Magic and Michelin-recommended Bi Ying will also participate in this event.

Edwina Liu, Essential Macau Editor

Seven Dials,” Patterson highlights the seven kinds of flavour adjustments (salt, sweet, sour, bitter, umami, fat, and heat) you can make to a dish.

There are “Sweet Rules”: If you’ve added too much salt to a dish, a hit of sugar can alleviate that. So can a hit of a tangy ingredient, such as a squeeze of lemon juice. (Under “Sour Rules” you learn that sour balances almost every other flavour.) From “Fat Rules,” you confirm that fat, like a knob of butter, fixes and balances just about everything.

It was this kind of experimentation that led Patterson to his most trailblazing recipe, a transformation of scrambled eggs. The background: He had always cooked his eggs in a non-stick pan. When his eco-conscious wife took issue with the hormone-disrupting problems associated with Teflon, he cooked his eggs in cast iron pans and soon found the egg remnants cumbersome to clean.

Patterson had a “eureka” moment: Why not try cooking the beaten eggs in boiling water? Eggs are poached all the time; these would just be beaten first. Experimentation taught him that eggs wouldn’t stick to the bottom of the pan if you add them to a mini-whirlpool of simmering water.

In the meantime, the intense heat of the water bath would cause the air bubbles in the eggs to expand, while simultaneously setting the protein.

The resulting eggs are terrifically

light, fluffy, and tender, like an expertly made omelette. It also lends itself to any number of toppings, from a drizzle of olive oil to a wedge of goat cheese, even gravy. We like the way butter melts into it.

Boiled Scrambled Eggs

Serves 2 4 large eggs, as fresh as possible Salt and freshly ground pepper Unsalted butter

In a bowl, beat the eggs until well-blended, about 30 seconds.

(Tester’s Note: For lighter scrambled eggs, crack each egg into a fine mesh strainer set over a bowl; a little bit of the watery egg white will drip out.

Discard it, rinse the strainer, and set over your sink.)

In a medium pot of water, heat four or more inches of water to a low boil over medium heat. Add a few large pinches of salt.

Your scrambled eggs are done.

Stir the water to create a whirlpool, then pour in the eggs. Cover and count to 20. Uncover: The eggs should be floating on the surface in ribbons. Carefully pour the eggs into the strainer and let drain, gently tapping the strainer against the side to shake off any extra water. Divide the eggs between plates. (Tester’s note: Blot off any excess water from the plate with a paper towel.) Season the eggs with salt and pepper and a hunk of butter and serve with toast.

Bloomberg

10 Business Daily Friday, September 1 2017

Greater China

Global boost

Factory growth unexpectedly speeds up Demand is so robust that futures prices for steel reinforcing bars used in construction have surged 9 per cent this month and more than 50 per cent this year Elias Glenn

G

rowth in China’s manufacturing sector unexpectedly accelerated in August, suggesting the world’s second-largest economy is still expanding at a healthy clip despite rising financing costs and a cooling housing market.

Along with stronger U.S. economic growth reported overnight, China’s official factory readings indicated the global economy remains on solid footing for now, despite concerns that growth may begin to fade in coming months.

China’s resilience so far this year has surprised economists and given an extra boost to a global recovery despite Beijing’s crackdown on riskier types of lending and ever-tougher curbs to get the overheated housing market under control.

The official Purchasing Managers’ Index (PMI) released yesterday rose to 51.7 in August from the previous month’s 51.4, confounding economists’ expectations for a marginal decline.

Production, total new orders and business expectations all shifted into higher gear, while a separate industry survey showed activity in the steel sector expanded at the fastest pace since April 2016 thanks to a year-long, government-led construction boom.

In particular, a sharp pick-up in input prices bodes well for resource companies’ earnings and investment in coming months, ANZ said.

“The price-driven recovery will continue at least in the third quarter”,

said Raymond Yeung, Greater China chief economist for ANZ in Hong Kong.

“On the demand side, infrastructure spending and fixed asset investment continue to maintain (at decent levels)...I see no reason for a sharp downturn even after the fourth quarter this year.”

The sustained rally in industrial commodities’ prices largely reflects stronger demand for building materials and government efforts to reduce excess capacity by shutting inefficient and heavily polluting mines and mills.

Demand is so robust that futures prices for steel reinforcing bars used in construction have surged 9 per cent this month and more than 50 per cent this year.

Output prices also rose at the fastest pace since December, indicating strong pricing power for producers, which should fatten profit margins and give firms extra breathing room in the country’s fight against a rapid build-up in debt.

“We expect domestic steel production and sales to remain strong in September, with market prices remaining elevated,” the China Federation of Logistics & Purchasing (CFLP) said in survey on the sector.

Defying gravity?

China’s economy grew by a faster-than-expected 6.9 per cent in the first half, with resurgent exports and robust retail sales adding to the momentum from the infrastructure building spree and record lending by state-controlled banks last year.

China watchers still maintain the economy will start to lose some altitude eventually, as higher financing costs for companies and homeowners start to drag on activity.

But they do not foresee a 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.

Key Points China factory activity stronger than expected, services slows Aug official manufacturing PMI 51.7 (vs. July 51.4) Official services PMI 53.4 (vs. July 54.5) Analysts still predict a slowdown eventually After a strong start to 2017, the government looks certain to comfortably meet or beat its full-year growth target of around 6.5 per cent. ANZ is forecasting 6.7 per cent.

However, analysts did note a number of areas that bear watching, including a slowdown in new export orders.

A separate official reading on China’s services sector showed expansion slowed to 53.4 in August from 54.5 in July, the slowest pace of growth since May 2016, but still comfortably above a reading of 50, which separates growth from contraction.

China’s leaders are counting on

growth in services and consumption to rebalance their economic growth model from its heavy reliance on investment and exports.

Slower growth was seen in the property and financial sectors, while the information technology, broadcasting and aviation industries expanded strongly, the National Bureau of Statistics (NBS) said in a statement along with the data.

A sub-index for the construction sector fell to 58.0 in August from 62.5 in July.

While still quite robust, the lower reading may suggest the strong economic impulse from the massive government infrastructure spending is starting to fade.

Data for July came in mostly below expectations as growth in imports faltered, while industrial output grew at the slowest pace since early this year.

“Looking ahead, if we are right to believe that tighter policy will continue to weigh on investment spending in the coming quarters, then we doubt that the current pace of industrial output growth can be sustained for long,” Capital Economics’ economist Julian Evans-Pritchard wrote in a note.

The data yesterday showed manufacturers cranked up production in August, with a reading of 54.1 from 53.5 in July, while new factory orders rose to 53.1 from 52.8 in July.

That suggested domestic demand picked up, as export orders fell to 50.4, the lowest reading since January and down from the previous month’s 50.9. Reuters

Business Daily Friday, September 1 2017 11

Greater China Investors

In Brief

Funds boost equity allocations, cut cash

Inter-bank market

Central bank bans new issuance of long-term NCDs

Fund managers have raised their suggested equity allocations to 76.9 per cent, from 75 per cent a month earlier, according to a poll Chinese fund managers boosted their suggested equity exposure for the next three months as major indexes pierced key resistance and market sentiment picked up on further signs of an expanding economy, a monthly Reuters poll showed.

The recent market rally was bolstered by strong corporate earnings that have raised hopes economic momentum will remain solid through the rest of the year, defying analysts’ expectations for a gradual slowdown.

Sentiment was also underpinned by signs that Beijing is stepping up efforts to restructure the country’s lumbering and often inefficient stateowned enterprises (SOEs) by opening the door to more public and private investment in the long-protected sector.

The fund managers raised their suggested equity allocations to 76.9 per cent, from 75 per cent a month earlier, according to a poll of eight China-based fund managers conducted this week.

The fund managers have, meanwhile, kept their suggested bond allocations for the coming three months unchanged at 10 per cent.

They have cut recommended cash allocations to 13.1 per cent for the next three months, from 15 per cent the previous month.

“The market could maintain its upside momentum, after the benchmark Shanghai Composite Index in late August breached the 3,300 mark to hit its highest in 20 months,” a South

China-based fund manager said.

Analysts say market bears would capitulate if the Shanghai Index can hold firmly above the 3,300 point mark - a level at which there has proven to be stiff resistance, with three failed attempts to breach it over the past nine months.

There have only been fleeting breaches of the 3,300 point level since 2015, with the index quickly falling back each time.

The fund managers surveyed held mixed views on asset allocations for the next month, with four suggesting the same level of equity exposure, three suggesting an increase, while one recommended a cut.

While average recommended allocations to most major sectors were little changed, those to metals shares continued to rise for the third straight

month to 8.8 per cent - their highest in seven years - reflecting a sustained rally in the prices of upstream resources and industrial products.

Average recommended allocations to electronics and technology stocks were raised to 23.8 per cent from 22.1 per cent, according to the poll.

The value investing strategy that attaches more importance to enterprise competitiveness, earnings growth and valuations could continue to dominate among market participants in the second half, a Shanghai-based fund manager said.

Leading blue-chip firms with stable results and valuations that are not rich are still worth investing in, while investors could also seek opportunities in growth stocks that start to be reasonably valued, the fund manager added. Reuters

M&A

Magnate revamps Hollywood deal amid crackdown on overseas investment

such as film, sports and real estate, due to concern about high levels of debt.

It has also restricted the export of capital to deter investment abroad, particularly in sectors unrelated to a firm’s core business, in the hope of stemming depreciation of the yuan.

In February, Recon Wenyuan said it planned to spend up to US$100 million to buy 51 per cent of Millennium Film, whose productions include “The Expendables”.

Yesterday, it said interested parties would not pursue the deal as it could not be completed before a previously agreed deadline of Aug. 31. advertisement

Industry body

Coin offerings create financial risks Launches of new digital currencies, known as initial coin offerings (ICOs), have shaken up social and economic order, created hidden financial risks, and in some cases may amount to fraud, China’s National Internet Finance Association said.

ICO investors should be wary and report any suspected crimes to police, the state-backed association said in the latest sign of growing official concern about ICOs. On Monday, the financial magazine Caixin reported regulators were preparing new rules on digital coin offerings and may ban them until the rules are in place.

FX

PBOC derivatives’ short position unchanged

China’s cabinet issued rules on acquisitions abroad for the first time this month A Chinese magnate, known for the purchase of English soccer club Aston Villa, has revised a plan to buy the majority of a Hollywood studio for US$100 million due to increased government scrutiny over outbound deals in the entertainment sector.

Tony Xia said in a tweet yesterday he would no longer conduct the acquisition via his listed firm Recon Wenyuan Cable Co Ltd, but through a separate non-listed entity due to a “new Chinese policy of film industry restriction.”

The government has been tightening regulation following big-money deals overseas, especially in areas

China’s central bank said yesterday financial institutions are not allowed to issue inter-bank negotiable certificates of deposit (NCD) with a tenor exceeding one year from Sept. 1. NCDs with a tenor of one year or less can still be issued, the People’s Bank of China said. Issuance of NCDs has risen quickly over the last year, with smaller lenders aggressively raising money via the instruments, and then using the proceeds to make higher-yield, risky investments. The PBOC said earlier this month it would start to include NCDs, tenors within one-year, issued by banks with assets of more than 500 billion yuan (US$75.11 billion) from the first quarter of 2018.

Later yesterday, Xia retweeted a Twitter post stating Xia had dropped the deal, and attached a comment saying the post was not accurate and that another entity would “continue the deal”.

Xia is not the first magnate to cut a listed firm from a deal. Gao Jisheng’s Lander Sports Development Co Ltd pulled out of a deal for English soccer club Southampton in April, before completing it independently earlier this month.

42 per cent fell in 2017 outbound M&A as of Aug. 14 Thomson Reuters

China’s cabinet issued rules on acquisitions abroad for the first time this month, possibly signalling a further slowing of funds that have flowed overseas in recent years. Thomson Reuters data showed outbound mergers and acquisitions this year fell 42 per cent as of Aug. 14 versus the same period last year. Reuters

China’s central bank said yesterday that its holdings of short foreign currency positions in forwards and futures versus the yuan were unchanged for a second month in a row in July. The People’s Bank of China held US$6.04 billion of such positions with commercial banks as of the end of June, steady from one month earlier, official data showed. China started to report the data early last year, following speculation the central bank was using currency swaps and other derivatives to intervene in offshore forex markets to prop up the yuan.

HKMA

HK Exchange Fund assets at HK$3.91 trln end-July Assets at the Exchange Fund, which is used to back the Hong Kong dollar, totalled HK$3,912.2 billion (US$499.95 billion) at the end of July, the Hong Kong Monetary Authority (HKMA) said yesterday. The figure was HK$7.3 billion higher than the total at the end of June, with foreign currency assets increasing by HK$20.1 billion while Hong Kong dollar assets down by HK$12.8 billion, the city’s de facto central bank said in a statement. The HKMA said the rise in foreign currency assets was mainly due to the purchase of foreign currencies with Hong Kong dollars and mark-to-market gains on foreign currency portfolios.

12 Business Daily Friday, September 1 2017

Asia Manufacturing

Japan’s factory output falls but growth momentum intact The rainy and cool weather in August may dampen consumer spending in Japan Tetsushi Kajimoto

J

apan’s industrial output fell more than expected in July, pulling back from the previous month’s gain, as manufacturers curbed production of general-purpose and electrical machinery in a likely sign of a temporary slowdown in factory activity.

Industrial output fell 0.8 per cent in July from the previous month, dragged down by production of semiconductor production equipment, turbines and power generators, preliminary data from the Ministry of Economy, Trade and Industry showed yesterday.

Key Points July industrial output -0.8 pct vs f’cast -0.5 pct Manufacturers expect output to rise in Aug, fall in Sep Economy seen on track for steady growth -analyst The reading compared with the median estimate of a 0.5 per cent drop in a Reuters poll of economists, following a 2.2 per cent increase in June.

Still, manufacturers forecast factory output would rebound in August, underscoring the view that Japan’s economy, the world’s third-largest, is on track to extend a growth run in the current quarter on the back of better external and domestic demand.

“Production fell in reaction to June’s gains but it remains in a recovery trend,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “Likewise the overall economy will continue a steady expansion in the current quarter, although we cannot expect such robust growth seen in the previous quarter.”

The rainy and cool weather in August may dampen consumer spending in Japan, while in the U.S. - Japan’s key export market - damages

wrought by hurricane Harvey was a source of concern, Tokuda said.

Besides the weather factors, there’s no immediate risk to Japan’s growth at least until later this year when China’s economy could start to slow, and next year when the on-going tech boom may peak out, he added.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 6.0 per cent in August and decline 3.1 per cent in September.

The ministry stuck to its assessment

of industrial output, saying production is picking up over time.

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.

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. Reuters

Investment

Indonesia’s President says approvals must be much faster The goal of the new measures is to create a single submission system for investors Indonesia’s government said yesterday it aims to slash the time it takes to process investment applications, which can take up to five years in some sectors, to as little as one day as it tries to boost growth in Southeast Asia’s largest economy.

“In 2018, we want to be on par with the most advanced countries in license processing,” coordinating minister of economics Darmin Nasution said.

President Joko Widodo, who unveiled measures in a new package of government policies, attacked a lack of progress in tackling red tape to improve the investment climate.

“There’s so much we have to improve, so much to fix,” Widodo said in a speech at the Indonesia Stock Exchange.

The new measures include setting up task forces in ministries and regional governments, and ensuring that officials share data so no investment applications are held up.

Indonesia’s economy has been growing at around 5 per cent in the last few years, but policymakers have been frustrated by an inability to speed up the pace, partly due to sluggish consumption and fairly tepid investment.

Foreign direct investment (FDI) into Indonesia represented less than

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2 per cent of all global investment on average in 2012-2016, government data showed, and over that period less than 30 per cent of foreign commitments were eventually realised.

Incoming FDI declined in 2015 and 2016, and is rebounding now, Bank Indonesia’s balance of payments data shows. The central bank recorded a nearly 40 per cent increase in the first half of 2017, to US$8.82 billion.

Past unsuccessful launch

The goal of the new measures is to create a single submission system for

investors so they only have to go one place to get all required licences, said coordinating minister of economics Darmin Nasution.

In January 2015, within months of becoming president, Widodo launched a similar move, setting up what he called “one-stop service” for investment licensing at the Indonesia Investment Coordinating Board (BKPM).

The former furniture exporter has also previously instructed ministers to cut the number of business permits in all sectors.

Despite that, Nasution said it still

took up to five years to start a business in some sectors, adding that BKPM could only work on nine out of about 150 permits needed.

“We have to change things from the basic idea that the licensor is not a ruler, he is there to serve” Darmin Nasution, Indonesia’s Coordinating Minister of Economics

Indonesian President Joko Widodo. Source: Lusa

“We now know that we can’t just tweak the rules,” Nasution said. “We have to change things from the basic idea that the licensor is not a ruler, he is there to serve.”

This year, Widodo’s administration aims to cut the time needed to get a full investment licence from threefive years to a matter of months, and then try a new method of processing from January to cut the time to just a day. Reuters

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Business Daily Friday, September 1 2017 13

Asia Inc.

In Brief

Australian businesses boost spending plans in long-awaited revival RBA governor Philip Lowe recently reiterated that the drag on Australia’s economy from mining was almost over Swati Pandey

Australian business investment rose in the second quarter while companies upgraded their spending plans for the year ahead, reflecting a long-awaited and much-needed revival outside of mining.

Investment grew a seasonally adjusted 0.8 per cent in April-June to nearly A$28.3 billion (US$22.37 billion), data from the Australian Bureau of Statistics (ABS) showed yesterday, beating expectations of a 0.3 per cent gain.

Importantly, spending on equipment, plant and machinery climbed 2.7 per cent and should add directly to economic growth in the second quarter.

Figures due next week are likely to show Australia’s A$1.7 trillion gross domestic product (GDP) expanded by around 0.7 per cent, up from a sluggish 0.3 per cent in the first quarter.

“The data shows finally a more convincing, stronger picture on the non-mining capex front. I won’t be surprised to see consensus estimate for GDP lift from here,” said Su-Lin Ong, senior economist at RBC Capital Markets.

Latest estimates for business investment in the year to June 2018 were revised up sharply to A$101.8

billion, from a previous A$85.4 billion. Spending plans for sectors including utilities, construction and retail trade, were running at record highs.

“Non-mining capex rose for the third straight quarter. I think it’s a bit more encouraging than it has been for a while. The fact that its continuing and the plans are a bit stronger is a good sign,” added Ong. That would be welcomed by the Reserve Bank of Australia (RBA) which has kept interest rates at a record low 1.50 per cent since August 2016 hoping that economic growth will accelerate to around 3 per cent.

RBA governor Philip Lowe recently reiterated that the drag on Australia’s

economy from mining was almost over and cutting rates further would only serve to inflate a debt-ridden bubble in the country’s housing market.

Other measures of economic growth have also been buoyant. Data on Wednesday showed construction spending boasted its biggest increase on record last quarter.

Separate data on Wednesday offered upbeat news on the outlook for housing construction, a mainstay of the economy in recent years.

Measures of business conditions and confidence have also been trending near decade highs.

“If you get a pick-up in business investment it’s a pretty good sign for the economy,” RBC’s Ong said. Reuters

Monetary policy

Bank of Korea stands pat as household debt, North Korea eyed The BOK has kept its policy rate unchanged since June 2016 Dahee Kim and Choonsik Yoo

South Korea’s central bank kept its key interest rate unchanged at a record low yesterday, as expected, saying there was still “a considerable amount of uncertainty” despite affirming its confidence in an economic recovery.

Governor Lee Ju-yeol declined at a news conference after the decision was announced to give any guidance on the near-term direction of monetary policy, but his references to South Korea’s heavy household debt suggested the central bank was leaning towards tightening.

“The governor did not say so outright but his comments as a whole gave an impression that the central bank may raise interest rates if needed to contain household debt,” said Kim Jina, fixed income analyst at IBK Securities.

Lee said the Bank of Korea’s (BOK) seven-member monetary policy committee voted unanimously to

keep the base rate unchanged at a record-low 1.25 per cent, where it has been since June last year.

All 19 analysts in a Reuters poll forecast the central bank would hold rates this week, but most see the bank tightening policy sometime next year.

Lee held back from making new comments on the household debt problem but he did acknowledge its scale. South Korea’s household debt stands at more than 90 per cent of gross domestic product and poses a potentially serious risk to the economy.

He said the central bank needed more time to assess its policy stance and to study the effects of a series of economic and financial policy packages introduced by the new government in the past few weeks.

Heightened tensions over North Korea’s repeated missile firings are another big factor that could hurt the economy, Lee said, but added it would be premature to quantify their impact.

Governor Lee Ju-yeol declined to give any guidance on the near-term direction of monetary policy

The government of President Moon Jae-in has pledged to keep the housing market from overheating and to manage household debt. It is due to unveil fresh steps aimed at containing growth in household borrowing next month.

Key Points Base rate kept at 1.25 pct (Reuters poll 1.25 pct) Governor Lee: No change in view on economy Lee: More time needed to assess developments Analysts say economy not yet strong enough for rate hike Those measures would follow laws announced early this month to raise capital gains taxes on owners of multiple homes and impose fresh mortgage curbs to rein in speculators.

They are the most stringent on record and demonstrate the government’s deep concerns over rampant household debt.

The central bank will also be watching closely for the effects of an 11 trillion won (US$9.79 billion) supplementary budget that was approved by parliament in late July. The budget will mainly focus on creating social service jobs.

The BOK has kept its policy rate unchanged since June 2016 and is widely expected to hike rates sometime next year as the economy improves.

There are, however, lingering doubts that the recovery is unquestionably rock-solid, and policymakers have expressed concerns that economic gains may be too narrowly focused in some sectors and not as broadly based as they would like.

Reuters

Central bank

Thai private consumption, investment up Thailand’s private consumption and private investment rose from the previous month, central bank indexes showed yesterday, indicating economic recovery is gaining more traction. The Bank of Thailand’s (BOT) private consumption index for July rose 0.7 per cent from the previous month, when it had risen 0.2 per cent. The index for private investment was up 0.9 per cent in July from June, when it had declined 0.4 per cent.

The BOT said there was a current account surplus of US$2.77 billion in July after a US$4.28 billion surplus in June. Exports, based on financial settlements, rose 8.0 per cent in July from a year earlier, the central bank said.

Aviation

Qantas drops Dubai stop for Singapore Australia’s Qantas Airways will not fly to Emirates’ Dubai hub from next year and instead re-establish its Singapore stopover, redrawing a five-year-old alliance with the Gulf carrier to focus on Asian demand. Qantas had made Dubai its hub for European flights under a 10-year deal it agreed with Emirates in 2012, as Qantas’s loss-making international division struggled. But since the alliance began, Australia’s biggest airline has turned the corner, cutting costs, hiking fares and returning record profits, allowing it to switch back to the Singapore hub its customers liked better.

Crude

Asian imports of Iranian oil rise Imports of Iranian crude by major buyers in Asia rose in July from a 14-month low during the previous month, as purchases from South Korea surged by nearly 30 per cent and those from China held steady, offsetting declines from Japan and India. China, India, South Korea and Japan together imported 1.52 million barrels per day (bpd) last month, government and ship-tracking data showed. While imports rose from the previous month, they were down 7.1 per cent from a year earlier. Iran is aiming to raise oil output to around 4 million bpd by the end of the year.

M&A

Toshiba misses own deadline for chip unit sale Toshiba Corp failed to seal a deal to sell its prized chip business by a self-imposed deadline yesterday, raising doubts about whether it can plug a balance sheet hole in time to avoid a delisting and keep the chips unit competitive. The board of the embattled Japanese conglomerate met earlier in the day to review a US$17 billion offer by a consortium led by Western Digital, as well as bids from groups led by Bain Capital and by Taiwan’s Foxconn.

Toshiba said in a statement it was continuing to talk with all three suitors and had not made any decision to reduce the pool of candidates.

14 Business Daily Friday, September 1 2017

International In Brief Angola

Hyway wins Moçâmedes railway maintenance Angola’s government is going to spend €47.1 million maintaining 900 kilometres of railway line in the south of the country by China Hyway on behalf of Caminhos-de-Ferro de Moçâmedes (CFM), which does not have the technical ability for the job. China Hyway was also responsible for the rehabilitation and modernisation of that line which cost US$56.5 million (€47.1 million), and this was one of the reasons for this second contract to be awarded to them. The government also authorised this month two other Chinese companies to main the Luanda (428 km) and Benguela (1,344 km) railways, which have also been rehabilitated.

Portugal

Investigators have 45 days to show status of former PM enquiry Portugal’s assistant attorney general has given the director of the department investigating the Marquês operation 45 days to “provide information about the state of the inquiry involving former MP José Sócrates.

The Public Prosecutor said on Tuesday that the inquiry must be concluded by 20 November, after the investigators received the last inquiry letter back from Switzerland on 22 August.

José Sócrates is one of 31 accused – 22 people and 9 companies and is suspected of qualified tax fraud, corruption and money laundering.

Prices

Euro zone inflation rises more than forecast before ECB meeting Unemployment held steady at 9.1 per cent in July, Eurostat said separately Francesco Guarascio and Balazs Koranyi

E

uro zone inflation rose more than expected in August, official data showed yesterday, just as the European Central Bank prepares to debate whether to tighten policy after 2-1/2 years of unprecedented stimulus.

Inflation in the 19-country currency bloc, targeted by the ECB at just below 2 per cent, accelerated to 1.5 per cent in August from 1.3 per cent, coming just ahead of expectations for 1.4 per cent on the back of higher energy costs, Eurostat said yesterday.

Underlying inflation, or prices excluding volatile food and energy costs, a figure closely watched by ECB policymakers, held steady at 1.3 per cent, beating forecasts for 1.2 per cent.

While the figures may strengthen the case of conservative policymakers, who are pushing for the ECB to wind down its asset-buying next year, the ECB is also now dealing with a strengthening euro, which pushes down prices.

Launched 2-1/2 years ago when the threat of deflation appeared real and imminent, the ECB’s 2.3 trillion euro bond purchase scheme is due to expire at the end of the

year, and policymakers promised to decide this “autumn” whether to extend the purchases or wind them down. The euro zone economy is now growing for the 17th straight quarter, but wage growth is still paltry and sizable slack in the labour market suggests that wage inflation, a vital ingredient for overall inflation, may be sometime away, an argument for some policymakers to continue with stimulus.

‘A complication is the euro’s 13 per cent rise against the dollar this year’ Indeed, unemployment held steady at 9.1 per cent in July, Eurostat said separately, with France, Spain and Italy all above the euro zone average.

ECB meets

ECB policymakers will next meet on Sept. 7 and while few specific decision are expected, ECB President Mario Draghi could start laying the ground for the bank’s next move for

when they meet on Oct 26.

A complication is the euro’s 13 per cent rise against the dollar this year, which could dampen inflation by reducing the cost of exports, and may slow growth by making euro zone export more expensive.

Tightening policy would also make the euro more attractive.

Indeed, policymakers already expressed concern about the euro’s appreciation when they met in July, the minutes of that meeting showed, warning about the dangers of an “overshooting” currency.

Sources told Reuters this week rapid gains by the euro against the dollar are worrying a growing number of policymakers at the ECB, raising the chance its asset purchases will be phased out only slowly.

Speaking at the U.S. Federal Reserve’s Jackson Hole conference last week, ECB President Mario Draghi argued that while growth has taken hold, patience was still needed for inflation to rise to target.

He said that inflation will move towards target once growth accelerates and the so-called output gap closes but warned that “we have to be very patient” as low productivity growth and the labour market slack will take considerable time to be resolved. Reuters

GDP

U.S. Q2 growth revised up The U.S. economy grew faster than initially thought in the second quarter, notching its quickest pace in more than two years, and there are signs that the momentum was sustained at the start of the third quarter. Gross domestic product increased at a 3.0 percent annual rate in the April-June period, the Commerce Department said in its second estimate this week. The upward revision from the 2.6 percent pace reported last month reflected robust consumer spending as well as strong business investment. Growth last quarter was the best since the first quarter of 2015.

Auto industry

EU rolls out stricter car emissions test New on-road car emissions testing comes into force in the European Union on Friday as regulators strive to prevent a repeat of Volkswagen’s diesel emissions scandal. The German carmaker’s admission in September 2015 that it used software to cheat U.S. diesel emission tests highlighted the laxness of the EU’s own tests, prompting reforms.

The new process, known as Real Driving Emissions (RDE), is designed to reflect everyday driving conditions and to narrow the disparity between road and laboratory test results. Until now only laboratory tests have been used as the benchmark for assessing vehicle emissions.

Real estate

Frankfurt luxury flat prices rise on hopes of Brexit banking bonanza Dublin has also seen house prices jump, by more than 11 percent in the year to June John O’Donnell

The prices of new luxury flats in Frankfurt have jumped by 25 percent in the past year, according to fresh data, fuelled by market hopes that thousands of London bankers will move to the city after Brexit.

The rise puts the price of an upmarket two-bedroom flat at up to roughly 1 million euros (US$1.2 million), making the small city, which has struggled with the reputation of being among Germany’s dullest, also one of its most expensive.

Britain’s plan to leave the EU has caused banks and money managers in London to look at moving parts of their business elsewhere to enable them to sell across the continent without additional costs or trade hurdles after Brexit.

Frankfurt and Dublin have emerged as popular choices.

The rise in property prices in Frankfurt, shown in city data comparing the price of newly built apartments in the first six months of 2017 with a year earlier, comes as Frankfurt prepares to build 20 new skyscrapers within five years to provide offices

and apartments.

There are currently more than 30 high-rise buildings on its skyline.

While a long-running property boom driven by low interest rates has prompted such building, the potential migration of bankers from London has increased investor enthusiasm, and prices, this year.

Key Points Top apartments jump 25 percent in one year Frankfurt plans 20 new skyscrapers within five years Dublin prices rise, while London lags

“We are ready for Brexit,” said Mark Gellert, a spokesman for Frankfurt town hall’s planning division. “We can imagine that the people who come to Frankfurt due to Brexit will take up this offer of high-end apartments.”

The data showed that the price spiral is concentrated on new luxury

apartments, while other properties in less fashionable locations remain affordable.

Dublin has also seen house prices jump, by more than 11 percent in the year to June, according to Ireland’s Central Statistics Office. House prices in London during that time rose by less than 3 percent.

A recent study commissioned by Frankfurt’s chief promoter, predicted that there would be 10,000 new bankers in the city within four years and that their arrival could create tens of thousands of additional jobs, from estate agents to building workers.

Some, however, are sceptical that this will happen.

“You can see the optimism that Frankfurt will profit from Brexit already filtering through in rising property prices,” said Christine Kuhl, a head hunter with Odgers Berndtson in Frankfurt.

“But the hiring of new staff has yet to start and I don’t expect it until Spring next year. Some of the optimism about thousands of extra jobs is also overdone. The real impact of Brexit may be more modest.” Reuters

Business Daily Friday, September 1 2017 15

Opinion Business Wires

Bangkok Post Consumers will be able to use standardised quick response (QR) code payment on their smartphones to pay for purchases at shops, street vendors and motorcycle taxis starting in the fourth quarter of this year. The Bank of Thailand teamed up with five international payment networks and financial service providers in Thailand to roll out a standardised QR code for payment.

With the single QR code, merchants can display only one QR code to collect payment. Given the convenience, digital payment is expected to gain a strong footing and hasten the electronic payment era in Thailand.

Don’t fret for the HNA mudslinging, fear for its debt

Inquirer.net The Philippine largest lender BDO Unibank is raising US$700 million from an offering of offshore medium term senior debt notes, marking the largest single debt issuance by a Philippine bank to date. BDO’s notes will have a coupon of 2.950 per cent per annum and will be issued at a price of 99.909 per 100, with a maturity of 5.5 years, BDO said in a press statement. “The senior note issue is part of the bank’s liability management initiatives to tap longerterm funding sources to support BDO’s lending operations and general corporate purposes,” the bank disclosed to the Philippine Stock Exchange yesterday.

The Straits Times Singapore was the second largest Asian investor in offshore real estate in the first half of the year after China, according to analysis by CBRE. Singaporebased institutional investors, property companies and private equity ploughed US$6.8 billion (S$9.24 billion) into global real estate, up 20 per cent from US$5.6 billion a year ago. That figure is a little more than half of the US$12.7 billion invested in office, retail, mixed-use, industrial, hotel, residential and other commercial sectors in 2016. For China, outbound investment in real estate in the first half-year more than doubled to US$25.6 billion versus US$10.1 billion for the same period in 2016.

The Phnom Penh Post Cambodia’s insurance industry continued to experience strong growth during the first half of this year, with the total gross premium reaching US$68 million, an increase of 21 per cent compared with the same period in 2016, according to a report released by the Insurance Association of Cambodia (IAC). While the report did not break down premium growth by insurance type, IAC Chairman Huy Vatharo said life insurance accounted for the biggest upswing in terms of per centage, while general insurance, including fire, health and vehicle coverage, saw modest gains.

David Fickling a Bloomberg Gadfly columnist

I

nvestors regard the behaviour of executives in the same way that laissez-faire parents approach a teenage party: I don’t want to know what you get up to -- just don’t make a mess.

Take a look, for instance, at the performance of U.K. clothing retailer Sports Direct International Plc. Its Chief Executive Officer Mike Ashley held drunken management meetings in bars and on one occasion ended up vomiting in a pub fireplace, according to evidence produced in a lawsuit against the company by a former employee last month.

Sports Direct’s shares reacted to that news with a yawn: Here, though, is what happened two weeks later, when the company posted unexpectedly high revenue and predicted further earnings growth in the year ahead: That pattern stands to reason.

To the chagrin of corporate social responsibility advocates, investors generally don’t care how a company makes money, as long as it makes money. In its legal battles with a high-profile and colourful antagonist, HNA Group Co. risks forgetting that.

The acquisitive conglomerate is seeking at least US$300 million from exiled Chinese tycoon Guo Wengui in a case brought in New York over Guo’s “repeatedly false and defamatory statements” about the company, the Wall Street Journal reported yesterday.

Followers of Guo’s social media accounts will be well aware of the lurid stuff he’s been alleging in recent months, and others can get a flavour of it from HNA’s June court complaint: It’s only natural that a company of HNA’s size should want to protect its reputation -- particularly when many of Guo’s claims centre on its alleged political connections, a touchy topic in the run-up to China’s Communist Party Congress later this year. Still, there are more pressing matters that deserve management’s attention.

HNA’s financing costs more than doubled in the first half from a year earlier, Prudence Ho of Bloomberg News reported yesterday, hitting RMB14.2 billion (US$2.2 billion) in the six months through June.

That’s more than the trailing 12-month interest

“

costs of Apple Inc. and General Electric Co. put together: There’s nothing wrong with taking on a lot of debt, of course, as long as you’re using it to finance productive investments that generate the profits necessary to cover interest bills. On that front, HNA is badly falling down.

Financing costs in the first half comfortably exceeded earnings before interest and tax, Ho reported, meaning the company has to take on more debt simply to keep current on existing borrowings. That’s in keeping with the group’s usual way of doing business -- Ebit hasn’t exceeded the conventionally safe level of one times interest in any of the five years for which Bloomberg has data.

The usual way that companies get out of such a tight corner is to sweat their assets to generate more earnings and gradually reduce indebtedness. But HNA doesn’t appear to have any special genius for achieving such improvements. Returns on invested capital haven’t exceeded 2 percent in any of the eight years for which Bloomberg has data, compared with 10-year averages of 6.8 percent and 7.5 percent at similarly-acquisitive Berkshire Hathaway Inc. and SoftBank Group Corp.

While profitability is standing still, HNA seems to be paying more for its borrowings. Group net interest, as a proportion of average net debt, has climbed from 4.5 percent in its 2014 fiscal year to 6.8 percent in 2016.

Creditors don’t seem concerned. HNA’s US$473 million of 8.125 percent dollar bonds due in December 2018 have recovered strongly since a brief dip in July, and are now trading only narrowly below par. In ignoring Guo’s scandalous allegations, the holders of those notes are only doing what investors usually do -- but their nonchalance about the state of HNA’s balance sheet is another matter entirely.

The growth of this Chinese giant has been a thrilling journey. Increasingly, though, it’s looking like investors have hitched a ride on a runaway train.

There’s nothing wrong with taking on a lot of debt, of course, as long as you’re using it to finance productive investments that generate the profits necessary to cover interest bills.

On that front, HNA is badly falling down

”

Bloomberg Gadfly

16 Business Daily Friday, September 1 2017

Closing Luxury vehicles

Auto Italia delivers strong H1 profits despite losing Ferrari import and distribution rights

HK$160.7 million. This was noted as due to ‘the increase of both new car unit sales and after-sales services revenue’.

Luxury car distributor and holding company Auto Italia This increase, coupled with one from the provision of has, despite having its import and distribution rights property investment divisions services in the Mainland, of Ferrari cars into Macau and Hong Kong terminated, fair value gain on investment properties and gains from still managed to see a 210 per cent increase in profit, a disposal of a property, plant and equipment drove the reaching HK$35.4 million (US$4.52 million) during the first six months of the year, according to a company filing profit increase.

The group, as of August 17, also entered into a joint with the Hong Kong Stock Exchange.

The company’s import rights were terminated by Ferrari venture agreement to subscribe to 27.5 per cent of Targetco, the incorporated holding company of the effective May 27; however during the six-month period Target Group, for a total of about HK$55 million, in order the group generated a 76 per cent increase in revenue from its other luxury car import brand, Maserati, reaching to gain a foothold in a rental property in Glasgow. K.W.

Sponsor agreement

Art meets junket Starting today, local art space Art Garden is being officially sponsored by local junket operator Tak Chun Group Sheyla Zandonai sheyla.zandonai@macaubusiness.com

L

ocal art space Art Garden will be financially assisted

by Tak Chun Group, a junket operator based in Macau, Business Daily learned yesterday.

Tak Chun will provide the art space with financial support of more than MOP1 million per year, according to information provided to us by a source from Art Garden, who claimed the exact amount could not be disclosed at this stage.

The agreement signed by the art space located at Avenue Rodrigo Rodrigues and the junket group is effective today, September 1.

Our source claimed the deal entitles the space to five years’ support for local art development.

“Besides being the title sponsor, they will also support our promotion,” the source said, adding that the junket will further organise one exhibition every year.

Accordingly, the space is now to be referenced as the ‘Tak Chun Art Garden.’

The agreement is to be fulfilled in

two parts. After a two-year period, it will be renewed for another three years “according to the results” the Art Garden source explained.

Another reason why the agreement was set up this way is linked to the fact that Tak Chun is “new to the cultural field.”

“It is good for both sides to find the best promotion method in the two years,” said the source.

Partners in art

Art Garden is a space dedicated to local artists’ creation and exhibition.

Several associations are integrated

into the project, including Art for All Society, Macao Artists Society, Macao Sky and Earth Ceramic Association, and Macao Sculpture Association.

The space was relocated to the facilities it currently occupies, a five-storey building erected 50 years ago, since August.

The building - affected by last Wednesday’s Typhoon Hato – has suffered filtration problems that have “still to be dealt with,” according to our source.

Founded in 2009, Tak Chun Group, chaired by Levo Chan, owns and operates VIP gaming rooms in local casinos in Studio City, Altira, Wynn Palace and The Parisian Macao.

The group also operates concierge services, jet travel, and ticket services for the performing arts.

Beginning of enlightenment

Art for All Association is celebrating its tenth anniversary with the launch of an exhibition today to be held at the Tak Chun Art Garden titled ‘The Beginner’s Mind – Works by AFA Founders.’

In the exhibition, participating founding artists revisit the original intention of the Association, the growth of which they have nurtured for the last ten years.

A series of works ranging from paintings and videos to mixed media will be exhibited.

The founders of AFA are Bianca Lei, James Chu, Konstantin Bessmertny, Noah Ng Fong Chao and Tong Chong.

Infrastructure

Congress

FY2018

Taiwan passes special budget for stimulus plan

Beijing announces start date for party reshuffle

Japanese Gov’t budget request to top 100 trln yen

Taiwan’s parliament yesterday passed a special budget for a major infrastructure development plan, managing to steer it through fierce debate in the legislature with only a modest spending cut from the original proposal.

The budget was cut by 1.7 per cent to T$107 billion (US$3.53 billion) for the first phase, after wrangling between the majority ruling Democratic Progressive Party (DPP) and the opposition Kuomintang Party (KMT) over the past four days on how the funds should be allocated.

The original stimulus plan first proposed in March was worth T$840 billion in total, and was later cut by half to T$420 billion as authorities sought to bolster domestic demand and rebalance the island’s export-driven economy.

Taiwan’s economy is showing signs of recovery, prompting the government earlier this month to raise its growth forecast for 2017 and predict further gains in 2018, thanks to solid demand for components used in smartphones and other tech gadgets.

But concerns that Taiwan’s economy has become too heavily reliant on exports were a motivating factor for the domestic infrastructure development bill passed yesterday. Reuters

The Chinese Communist Party will likely begin its much-anticipated congress on Oct. 18, state media said, officially starting the clock on the country’s biggest political reshuffle since 2012.

The 19th Party Congress’s proposed start date was announced yesterday after a meeting of the party’s Politburo, according to the official Xinhua News Agency. While the schedule is technically a recommendation and requires approval from the broader Central Committee, that’s usually a formality.

The gathering of some 2,300 party delegates -- held every five years in Beijing -- will provide President Xi Jinping his biggest opportunity to reshuffle scores of top positions across the government and write his policies into the party’s guiding documents. As many as five of the seven officials on the Politburo’s elite Standing Committee -- and roughly half of the broader Central Committee -- could be replaced.

The Politburo said the congress came during a “critical period of the development of socialism with Chinese characteristics,” according to Xinhua.

The week-long event will determine Xi’s ability to implement policies such as overhauling the world’s largest military or reducing China’s US$33 trillion debt pile. Bloomberg News

Annual budget requests from Japan’s government offices will top 100 trillion yen (US$904 billion) for a fourth straight fiscal year, reflecting snowballing welfare spending due to the fast-ageing population, government sources told Reuters.

The requests, to be announced next week, totalled 100.96 trillion yen, slightly below the 101.47 trillion yen requested last year for the fiscal 2017 initial budget, the sources said on condition of anonymity because the plan has not been fixed.

Still, the relatively high spending underscores a challenge for Prime Minister Shinzo Abe, who faces pressure from within his ruling party to boost fiscal spending despite the fact that the economy has staged a sixth straight quarter of expansion.

Some analysts urge Abe to tackle fiscal consolidation while the economy is in good shape given that Japan is saddled with the industrial world’s heaviest debt burden at more than twice the size of its economy.

But Abe’s government prioritises growth over fiscal discipline while taking advantage of the central bank’s negative interest rate policy that brings down borrowing costs. The spending requests got a boost because the finance ministry did not cap budget requests by ministries and agencies. Reuters