The lowdown on cryptocurrencies, mooning over moon cakes, and mixing it with the millenials on New York’s fashion catwalks Consigliere Pages 8 & 9
Friday, September 8 2017 Year VI Nr. 1379 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Golf
Local prison
Macao Open still searching for sponsor Page 2
www.macaubusiness.com
Crime
Better off in prison during typhoon Page 4
Trademark
Joint law enforcement operation nets 500 Page 5
Baidu stokes IP registration fever Page 5
Mainland interest in Macau picking up Property
Mainland developer Jiayuan International Group Limited has reached an agreement to acquire two plots in Taipa. For US$449.29 mln ‘in cash’. From local company San Kin Tai Property Development. Delivering, says Jiayuan, a great entrée to Macau whilst enhancing ‘brand influence in the Pearl River Delta Metropolitan Circle’. Page 3
Candidates for compassion Election Pearl Horizon buyers are desperate. Desperate enough to run in the upcoming Legislative Assembly elections. In order to put political pressure on an Administration doggedly clinging to the letter of the law re. land use. The group promises to withdraw if the case is resolved before the election is concluded. Page 4
Exports maintain trend
Trade Page 2
Mainland reserves keep growing FX Foreign-exchange reserves in China keep growing. Posting a seventh straight gain in August as the yuan rose in its best monthly performance for a decade. The stockpile has climbed US$11 billion to US$3.09 trillion. Page 16
HK Hang Seng Index September 7, 2017
27,522.92 -90.84 (-0.33%)
China Overseas Land &
Worst Performers
+3.00%
China Merchants Port Hold-
+1.20%
China Resources Land Ltd
+1.85%
China Mengniu Dairy Co Ltd
+1.17%
AIA Group Ltd
-1.75%
China Life Insurance Co Ltd
-0.82%
Wharf Holdings Ltd/The
-1.35%
BOC Hong Kong Holdings
-0.78%
Sands China Ltd
+1.77%
Hengan International Group
+0.73%
AAC Technologies Holdings
-1.15%
Hang Seng Bank Ltd
-0.77%
Henderson Land Develop-
+1.73%
China Unicom Hong Kong
China Resources Power
+1.42%
Sino Land Co Ltd
+0.71%
Tencent Holdings Ltd
-1.11%
CNOOC Ltd
+0.00%
PetroChina Co Ltd
+0.87%
+0.60%
Lenovo Group Ltd
-0.95%
27° 30° 27° 30° 27° 30° 26° 31° 26° 31° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
TUE
Source: AccuWeather
Official data is positive. Showing industrial exports in the territory kept performing in the last quarter. The pickup from Asian markets helps burnish the image of a sector crying out for manpower.
2 Business Daily Friday, September 8 2017
Macau Trade
Stable industrial exports in Q2 Local exports to Asia-Pacific region pick up Cecilia U cecilia.u@macaubusinessdaily.com
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he average waiting time of industrial orders by local exporters remained the same in the second quarter as with the first three months of this year at 2.4 months, the latest data from the Macao Economic Services (DSE) reveals. Sector-wise, orders of pharmaceutical products, garment manufacturing, other products and electronic or electrical appliances had an average waiting time of 5.1 months, 2.9 months, 1.9 months and 1.6 months, respectively. Respondents of the survey indicated that the market on the Mainland remained the biggest, with the index rate of 33.9 per cent in July, compared to 23.9 per cent registered in April this year and 32.3 per cent in July a year ago. The most significant change
in the index level was, in fact, markets in other Asia Pacific locations such as Singapore and Thailand, with the index rate ballooning from 0.8 per cent in April to 13.8 per cent in July. When asked about the upcoming six months’ prospects, some 12.4 per cent of respondent exporters expressed an optimistic outlook, up 4.7 percentage points quarter-to-quarter and 1.2 percentage points when compared to a year ago. Meanwhile, those who held a more pessimistic outlook accounted for 5 per cent of the total number of survey respondents, posting an increase of 1.7 percentage points compared to the first quarter, with a drop of 5.2 percentage points when compared to the same period in 2016. For the more cautious some 82.6 per cent of them - they anticipated a decline of 6.4 percentage points when compared to 89 per cent in
the first quarter.
Labour shortage persists
Meanwhile, 61.5 per cent of local firms complain of a labour shortage, an increase both in quarter-to-quarter and year-on-year figures. The DSE report shows that 86.6 per cent of responding pharmaceutical products manufacturers suffered
labour shortages, meaning the sector suffered labour shortage the most vis-a-vis other sectors. During the April-June period, the employment rate in export manufacturing experienced a quarter-to-quarter increase of 0.4 per cent. The report also disclosed that ‘labour shortage’ was the biggest challenge for
most firms, followed by ‘price competition with other regions’, ‘inadequate orders’ and ‘increasing cost of resources’. Regarding concerns about the upcoming three months, 25.4 per cent of firms that responded said ‘increase of salaries’ would be the major issue, followed by ‘labour shortage’ at 22 per cent.
Cultural Centre
Cultural Centre repairs underway, no set opening date No date has yet been set for the reopening of the Macao Cultural Centre in the wake of the damage caused by Typhoon Hato, which damaged the superstructure of the building (see image) resulting in the cancellation of all activities scheduled to take place in the venue, according to information provided by the Cultural Affairs Bureau (IC). Currently ‘the Land, Public Works and Transport Bureau has been
following up on repair works for the Macao Cultural Centre,’ notes the IC response to Business Daily enquiries. ‘At the present stage, the Bureau is conducting work to reinforce the Macao Cultural Centre and to eliminate hazard situations. Certain areas of the Centre are temporarily closed and all activities at the Centre are suspended. The reopening date of the Macao Cultural Centre will depend upon the weather and progress of
the work, hoping that it will reopen as soon as the repair works are concluded’ reads the response. Regarding potential costs resulting from the damage and subsequent repair, IC notes that they are ‘still being estimated’. Given the damage to the Centre and surrounding buildings, ‘the Cultural Affairs Bureau also appeals to the public to avoid visiting that area for their safety.’
Typhoon
A lot on your plate In order to obtain a vehicle tax refund, owners of vehicles damaged by Typhoon Hato should proceed with the cancellation of their licence plates before September 18 Owners of light vehicles, motorbikes or tourism buses damaged by Typhoon Hato should cancel their vehicles’ licence plates before September 18 in order to obtain a subsidy on vehicle taxes, the Transport Bureau (DSAT) announced yesterday. After the cancellation of the damaged vehicle’s licence plate, owners will be able to apply for a full repayment of their vehicle tax from the MSAR Government if they choose to purchase a new vehicle powered by sustainable energy sources, or an
80 per cent repayment in the case of purchasing a vehicle powered by non-renewable energy sources. Apart from filling in a form and providing a copy of their ID, upon cancellation residents will have to submit documents confirming where the damaged vehicle was located, together with photos and receipts of the company that towed the vehicle. Vehicle owners who have already cancelled their licence plates and removed the damaged vehicle before
September 6 will only have to submit supporting documents to the DSAT. The documents should by submitted in the three DSAT service areas: in Estrada de D. Maria II, the China Plaza Building, and at the MSAR Service Centre. Upon cancellation, owners can also request that the DSAT proceed with vehicle removal in order to facilitate the verification of the case information and assist with the procedures undertaken by the Financial Services Bureau (DSF) for the subsidy. N.M.
Real estate
Discussion
A Legend in the making
David Chow: Current law unfair to gaming workers
The latest property project of Trust Legend - located next to the public housing of Mong Ha at Edificio Mong Sin - will be launched this month. Speaking during yesterday’s press conference, Director of Sales Jack Cheang said Trust Legend is the first project that has succeeded in gentrifying old districts of Edificio Mong Sin and Mong Ha Sports Centre. The new project provides 340 units with 112 internal structures,
claiming that the number of internal structures cannot be found anywhere else in the city. Given the diversification, the developer had provided 20 demonstration units. The property, meanwhile, will implement a sustainable management model enabling the management fee to be 60 per cent or even 50 per cent of fees charged by equivalent properties without reducing the quality of service.
The MSAR Government should revise the laws in order that gaming workers not be required to work during strong weather conditions, according to local gaming mogul and Consultant to the Economic Development Committee and chairman of the Federal General Commercial Association of Macau Small and Medium Enterprises David Chow Kam Fai. Local Chinese language
newspaper Macao Daily reported Chow’s opinion pointing out the unfairness of the current law that casinos are allowed to operate 24/7 even in conditions of strong inclement weather. Chow remarked that workers’ safety should be of primary concern, noting that in regard to customers, tourists should be advised to not visit the city when there is the likelihood of a typhoon hitting, given that
they could be stuck in the casinos and gamble, while workers would have to go to work. He further said that responsibilities should not be placed on gaming operators, indicating that it would produce conflicts between investors and workers. Chow perceives that the government would not see a large impact due to the loss of one or two days’ gaming taxes.
Business Daily Friday, September 8 2017 3
Macau Property
Arriving in style Chinese property development group Jiayuan International Group Limited has entered into a HK$3.51 billion agreement to purchase 5,597 square metres of land in Taipa from San Kin Tai Property Development, a local company partially owned by local property investor, businessman and Legislative Assembly candidate William Kwan Wai Lam Nelson Moura nelson.moura@macaubusinessdaily.com
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hinese property developer Jiayuan International Group Limited has signed an agreement to acquire two plots of land in Macau for HK$3.51 billion (US$449.29 million) ‘in cash’ from local company San Kin Tai Property Development, according to a company filing with the Hong Kong Stock Exchange. The agreement, reached on September 6, involves two plots on Avenida Dr. Sun Yat-Sen, which together represent a total area of 5,597 square metres. The two plots are said to be located at ‘San Chai Village’ in Taipa, with lot TN20 occupying a site area of approximately 2,323 square metres and lot TN24 occupying 3,274 square metres. According to the release, the land areas are well equipped with nearby infrastructure, public and social amenities, as well as a ‘renowned school network,’ while being surrounded by ‘top-tier hotels and shopping arcades’. The group purchased the two land plots through Xiangyuan Property Development Limited, an indirect wholly owned subsidiary mainly engaged in property development incorporated in Macau on August 21 of this year. Meanwhile, San Kin Tai is mainly involved in property investment in Macau, with 40 per cent of the group owned by local businessman William Kwan Wai Lam, who also acts as guarantor for the purchase deal. The deal is expected to be
Pak Man Hong Kuok Wa Development Ltd.
Local property investor and businessman William Kwan Wai Lam is an executive of local real estate developer Sun Kian Ip Group, headed by Ng Lap Seng - the local developer that was convicted in July by a New York City federal court of six charges of bribery,
concluded by November 30 of this year, with another date still able to be agreed upon between the parties. ‘The Group believes that the Acquisition represents an excellent investment opportunity for the Group to establish its presence in the Macau property market and enhances its brand influence in the Pearl River Delta Metropolitan Circle’ the release announced. Jiayuan International also believes the deal would allow the group to increase its land reserves in the Guangdong-Hong Kong-Macau Bay Area ‘in line with the group’s strategy and commercial criteria for land development’.
Agreement with MSAR
According to the release, the MSAR Government’s urban development plans for the land plots issued in July 2015 indicate the owner would submit the plots to the Macau Government in exchange for the granting of an adjacent 3,826 square metres earmarked for urban land use. A net site area of 1,771 square metres would also be provided to the Macau Government for public amenities. The land grant contract for this 3,826 square metres ‘replacement land’ would have an initial concession period of not more than 25 years, renewable for successive terms of not more than 10 years upon the expiry of each concession period. The release states that on June of this year San Kin Tai submitted a construction plan proposal for a property development project on the replacement land, with
the proposed development providing a gross floor area of approximately 60,969 square metres comprising residential units, commercial units and car parks. As of now, San Kin Tai has not reached an agreement with the Macau Government for the land grant contract of the replacement land, or for the proposed development project, with Jiayuan International believing the land swap would take place around four months after the purchase deal is completed. The HK$3.51 billion to be
money-laundering and corruption. The group is involved in development projects in Mainland China and in Macau, such as Windsor Arch - a luxury residential project near the Macau Jockey Club in Taipa. Mr. Kwan’s company Pak Man Hong Kuok Wa Development Ltd. - is also
involved in the MOP20 million revamp project of the Capitol Theatre cinema. The property developer is currently running for this year’s Legislative Assembly (AL) elections as part of the New Union for Macau’s Development list, led by SJM Holdings’ Executive Director Angela Leong On Kei.
paid was reached following preliminary appraisal of the value of the two land plots by an independent property evaluator, current property prices in the nearby area, and the estimated value the properties to be developed on the replacement land. The Chinese group stated in the release that ‘the recent recovering gambling industry in Macau is a favourable factor in the short or medium
Jiayuan International Group Ltd.
According to Jiayuan International Group Limited’s most recent interim results, as of June 30 of this year, reveal the group’s property portfolio comprises 29 properties in various major cities in Mainland China, with a land reserve of more than 6.88 million square metres located in most of the major cities of Jiangsu Province.
Golf
Macao (Golf) Open yet to score title sponsor The upcoming Macao (Golf) Open 2017 is still seeking a title sponsor, according to information provided by the Sports Bureau (ID) to Business Daily. The event takes place from October 17-22 and is jointly organised by the Sports Bureau and Macau Golf Association. ‘Up until this moment there is no title or main sponsor for this year’s event. Notwithstanding this situation, organisation for the event is ongoing according to the schedule and we will endeavour [to do] our best efforts to stage a world class tournament and to continue the success of this major sporting
event in Macau,’ reads the Sports Bureau’s response to Business Daily enquiries. The Bureau did not directly answer questions regarding how the event would be financed, given the lack of title sponsor. This year’s event will welcome special guest Pavit Tangkamolprasert, the champion of last year’s tournament ‘to defend his title this year,’ notes the Bureau. With regard to other potential invitees, the Bureau says it is still ‘liaising with all parties concerned and further information will be announced in due course’.
term,’ with Jiayuan International believing the local economy will benefit from Chinese Government support under the ‘Belt and Road’ initiative. ‘It is believed that the Mainland and overseas investors’ increasing investment sentiment in respect of the Macau property market will also drive up the demand for Macau properties,’ the release concluded.
The group stated in a filing that it was planning a ‘continuous expansion in the Yangtze River Delta Region,’ while continuing to invest in the Pearl River Delta Metropolitan Circle. As of June 30 this year, the group registered RMB522.04 million (MOP646.92 million/ US$80.39 million) in profit, with its revenues for the period having increased by 36.6 per cent year-on-year to RMB2.90 billion.
4 Business Daily Friday, September 8 2017
Macau Opinion
Pedro Cortés*
Is this the end of the system? Well, after recent outstanding events, we are now in a political campaign for the Legislative Assembly of Macau. Within this, we have seen already amazing decisions made by the Commission of Electoral Affairs. One in relation to an interview of one of the candidates by the sole bilingual newspa per of Macau, Plataforma. In a nutshell, the view of the aforesaid Commission is that an interview out of the period of a campaign is considered propaganda and is therefore not acceptable. Well, there are rights in Macau consecrated by the Basic Law. Among them: freedom of the press. In my humble view, such right is more important than an interpretation of an ad hoc commission about electoral acts. Informing the population, which lacks in so many areas, is a fundamental right. What these interpretations may do is put in danger the second system as it was conceived. Macau is a place where we have had huge development in the past due to the fact that a semi-democratic system exists with freedom of the press and with fundamental rights. Those who must preserve it seem to not understand that they are where they are due to the fact that this system exists. Not happy enough with these interpretations, we had this week a tremendous interpretation on what are the new digital platforms. Facebook is facing (appropriate verb) a penalty because Macau candidates included paid announcements on the platform. Dear Sirs, I understand all your concerns and I respect them. But don’t you understand that the world has evolved? Don’t you understand that we live today in a world where digital platforms command media trends and are the conduit for passing messages of whatever nature? Some people in Macau need to understand that we are in a free place and the fact that we pay Facebook to advertise an idea (in this case a legal idea) cannot be considered a breach of the Electoral Law. Otherwise, we have embarked upon the beginning of the end of the second system as propagated by Deng Xiaoping. It also goes without saying that the same applies to the attempts to spy on the message platforms regarding rumour spreading. If it is the second system you want to kill, please inform us in advance so that we have time to prepare ourselves for the future. *Lawyer and frequent contributor to this newspaper.
Elections
Resolving their big issue by running for election The Pearl Horizon Buyers Rights Defence Union say they will withdraw from the election if the Pearl Horizon case is resolved Cecilia U cecilia.u@macaubusinessdaily.com
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laiming to be straightforward in having only one purpose, Kou Meng Pok, the first candidate of the group and also the Chairman of the Pearl Horizon Condominium Owners United Association, said they simply want to resolve the Pearl Horizon case, which has remained unsettled for two years. The group wishes to enter the Legislative Assembly (AL) in order to urge the government to allow the project to proceed as originally planned. “The Pearl Horizon Case is currently a big incident and an issue in the city,” said Kou. ”[The case] has caused a direct and indirect impact upon tens of thousands of people.” Stating that the power of the case is akin to the force of Typhoon Hato, the group perceives that it is necessary to resolve this “hidden danger” in society in order to avoid a repetition of the case. Pearl Horizon, located on lot-P of the Areia Preta zone on the Macau Peninsula, is designed to house 18 towers supporting 5,000-plus residential units. The MSAR Government announced that the developer’s land grant for the plot was invalid in January 2016, following the developer’s failure to complete the project before its land use term expired in December 2015.
Meanwhile, Kou said they would strive to improve residents’ happiness if they succeed in getting into the AL and resolving the issue. “Happiness would include food, clothing, transportation and housing,” said Kou. “But it also includes business environment, the government’s administrative efficiency as well as the fairness of distribution of resources.” Another candidate of the group, Lee Hon Tak, said the case could directly affect the banking sector as well as
Macao Monetary Authority (AMCM) if buyers could no longer support the ongoing instalments. As many suffered from mental problems because of the ongoing mortgage, Kou opined that banks could soothe the pressure by collecting the interest on the mortgage instead of the whole monthly mortgage amount. Kou proclaimed that the group would quit the election if the problem is resolved before the election is concluded.
Prison
Safer in prison during Typhoon Hato Repair works are underway, with no staff or prisoners injured during the passage of the storm Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
The authorities of Coloane Prison and Youth Correctional Institution have announced that ‘no cases of attempted escape during or after the typhoon have been discovered’, in response to Business Daily enquiries regarding the effect of the typhoon on the Correctional Services Bureau facilities, staff and inmates under its care. Despite the damage inflicted by the typhoon on the facilities (see image), ‘all the inmates and housed juveniles were safe and security was not affected,’ notes the bureau, adding that ‘no inmates or housed
juveniles needed to be moved to another location due to the typhoon,’ adding that the typhoon had caused ‘considerable damage to the exterior facilities and collapse of the surrounding trees and the resultant blocked roads’. Much like the majority of the MSAR ‘water and electricity were temporarily suspended’. Despite the suspension, the bureau said that the day after Typhoon Hato hit the MSAR, ‘the electricity and water supply of the Prison gradually resumed . . . [and that] . . . the traffic flow in the surrounding roads was fully restored within the same day’. The bureau says it has ‘for a long time . . . been stockpiling a considerable
Damage sustained by the prison facilities during the passing of Typhoon Hato. Photo: Max Bessmertny
quantity of backup food supply and bottled water . . . [in addition to being] . . . ‘equipped with a backup power generator for emergency use’. In addition ‘the correctional services and security work remained unaffected’ by the considerable force of the typhoon and that ‘the bureau also arranged for some staffers to go on duty to provide extra support during the typhoon.’ The bureau also told Business Daily that during the typhoon ‘no reports of any staff members or inmates requiring treatment due to physical unwellness were received.’ However, in the event of any medical necessity, the ‘bureau is staffed with medical professionals who work on shifts to provide round-the-clock medical services to inmates and staff members in need’. In regard to the damage itself, the response notes that ‘following the typhoon, the bureau immediately examined the degree of damage to the facilities and dispatched prison guards to help clear road blockage,’ and that currently ‘the bureau is now working to speed up the repair to the damaged facilities; it has also stepped up security to ensure that the damaged facilities can be replaced without affecting the safety of and services for inmates and juveniles.’ Neighbouring Coloane Village was severely affected by the passage of the typhoon, with damage still visible throughout, including fallen trees, stilt-houses washed away and struc tural and water damage evident in many buildings in the area.
Business Daily Friday, September 8 2017 5
Macau Crime
‘Thunderbolt 17’ nets big fish and little fry Almost 500 people were prosecuted following the second phase of the joint ‘Thunderbolt 17’ police operation in August Nelson Moura nelson.moura@macaubusinessdaily.com
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he second phase of joint police operation ‘Thunderbolt 17’ - enforced during the whole month of August - led to 497 people being prosecuted in the MSAR for possible involvement in 396 criminal cases, the Unitary Police Service (SPU) announced yesterday. ‘Thunderbolt 17’ was this year’s joint operation of police authorities from the MSAR, Guangdong and Hong Kong, having been orchestrated every year since the
handover of Macau to Mainland China in 1999. This year’s joint operation saw local efforts undertaken by the Public Security Police Force (PSP) and the Judiciary Police, co-ordinated by the SPU. ‘Macau police authorities sought to improve the situation of public order and security, especially in fighting cross-border crime and creating a deterrent effect on criminals, with very positive results,’ the SPU release informed. The second phase of the operation led to the involvement of 3,582 police officers, who conducted 176
inspections in casinos, saunas, massage parlours, bars, karaoke venues and other entertainment and gaming establishments as well as individual apartments. The operations resulted in 8,256 people being asked for identification, with 1,299 people taken to police stations for further questioning. Ten of those
detained had pending arrest warrants, with four transferred immediately to Macau Prison.
Case by case
Some 117 suspects were arrested in relation to 65 loan sharking crime cases, with 34 of the cases involving kidnapping. Around 36 suspects were
arrested with regard to 34 scams, with two perpetrated by phone by scammers posing as Chinese Government officials. A total of 21 people were arrested for possible involvement in 14 drug related criminal cases, with several types of narcotics seized, including 58 grams of the methamphetamine known as ‘Ice’ and 21 tablets of ‘Yaba’. The first phase of ‘Thunderbolt 17’ took place during a 97-day period between March 5 and June 10 of this year, with the prosecution of 1,782 people in Macau involved in a total of 1,293 crimes.
Trademark registration
Cloudfunding After e-commerce and Internet giant Alibaba, Baidu applies for trademark registration in the Macau SAR Sheyla Zandonai with Cecilia U sheyla.zandonai@macaubusiness.com
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ne of the biggest Chinese tech and Internet companies, Baidu Online Network Technology (Beijing) Co., Ltd., has applied for trademark registrations in the Macau SAR, a dispatch in the Official Gazette revealed on Wednesday. The company has applied
for services which include two different brand names comprising a total of six trademark protection applications. Overall, commercial services requested for registration include search engine software, data storage and cloud technology, as well as cloud-based apps. In particular, the services comprise the provision of Internet search engine, digital data storage, cloud
calculation, website creation and protection, as well as online telecom and GPS services, to name but a few. Baidu is a search platform reputedly controlling some 80 per cent of Mainland China’s market and handling about 3.3 billion searches per day, according to media reports. The search engine company, along with Tencent, owner of WeChat, and Alibaba,
an e-commerce and digital media service provider, are the three companies forming the core of China’s growing IT and content management sector. In early July, Alibaba Group Holding Limited had several applications for trademark protection approved in the city, for products including media, e-payment systems, nautical instruments, and file sharing software.
Nearly a month ago, the Macau SAR Government and Jack Ma, co-founder and CEO of the company, announced that a subsidiary, Alibaba Cloud, had been chosen to assist the local government fulfill the implementation of several services linked to the development of Macau as a ‘Smart City,’ including medical services, transport logistics, and bringing talent back to the city.
Litigation
Jack Lam off hook - plaintiffs not pursuing ‘bribery’ case Former Associate Commissioners of the Bureau of Immigration (BI) in the Philippines, Al Argosino and Michael Robles, have withdrawn their bribery complaint against local gaming tycoon Jack Lam, media outlets reported this week. The former Chairman of Jimei International Entertainment Group Ltd. – Lam sold the majority stake of the company in April 2017 – and four of his emissaries were accused of bribing the officials with P50 million (US$985,789/MOP7.93 million), aiming to settle a case involving the illegal
hiring of undocumented Chinese workers at Lam’s Fontana Leisure Park and Casino in Clark Freeport Zone, Pampanga, in late 2016. The former Commissioners have now claimed that the complaint had been based uon “mistaken assumptions or misinterpretation of facts and circumstances,” The Rappler reported. In a reverse decision following the initial accusations, the country’s Senate Blue Ribbon Committee, presided over by Philippines Senator Richard Gordon, concluded that
the incident amounted to “extortion” by the BI officials involved, and not the “bribery and economic sabotage” formerly ascribed to Lam, according to previous reports. In a verified motion to withdraw the complaint lodged by Lam’s lawyer Raymond Fortun with the Department of Justice on Monday, September 4, Argosino and Robles said they were compelled to retreat because “parties to the instant complaint executed affidavits of recantation and clarification which materially affect the instance case.”
Based upon the plaintiffs’ claim of “mistaken assumptions,” they said they have decided to retreat from “pursuing the instance case, now and in the future,” Interaksyon reported. The Philippines Amusement and Gaming Corporation (PAGCOR) shut down the Fontana operation in December 2016. Police raided the premises arresting over a thousand Chinese nationals lacking immigration papers who were working for a call centre-like operation suspected of being a front for online gambling activities. S.Z. advertisement
Expansion
Extension on bid deadline for Primorye plots fuels speculation Just as a subsidiary of Russia-based Summit Ascent, under local gaming mogul Lawrence Ho, has its eye on the MSAR, applying on Wednesday for a trademark in the territory for its Tigre de Cristal brand - that of the casino it is operating in the Primorye region of Russia, other local operators could have their eye on the remaining plots of the same region, according to analyst Patrick Crowley. An extension on the bidding deadline for the three remaining plots in the region, located near Vladivostok, until September could see local operators Galaxy Entertainment Group and/or Macau Legend bidding, opines Crowley, noting that “interest in the three
remaining plots was reported by the provincial regulator as originating from Chinese, Russian and European gaming concerns.” A “number of applications” received by the authorities for the rights to the plots have been received, with Crowley pointing to “at least already five bids”. The deadline on the bidding has been extended to September 28. Business Daily enquired from both Galaxy and Macau Legend of their intentions but had yet to receive a response by the time this story went to print. In the most recent interim reports published by both gaming operators no mention was made of developments in Russia.
6 Business Daily Friday, September 8 2017
Macau Vehicles
Chinese authorities mull cross-boundary licence issues
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uangdong authorities are to roll out policies to help resolve the problem of non-transferable cross-boundary vehicle licences, local Chinese language newspaper Macao Daily has reported. Mainland China, Hong Kong and Macao Cross-Border Automobile Association, led by legislators Chan Meng Kam and Si Ka Lon, had a meeting on Wednesday with the Department of Public Security of Guangdong Province Traffic Management Bureau in order to resolve the issue. According to Chinese regulations, cross-boundary vehicle licences between the Mainland and the MSAR cannot be transferred even if the registered company on the Mainland had already ceased operation and even in other situations such as divorce or intention to pass down to descendants. Given the inconsistencies of licence ownership, licences in question are unable to be used on other vehicles but instead must be cancelled. As a result, many vehicles with the licence have been used for decades, consequently posing safety issues and environmental problems. The department head of the Guangdong traffic bureau Shen Yongqiang has arrived at a consensus with the Association that licence holders could register for transfer when meeting the following criteria. For holders who obtained licences
via the purchase of property on the Mainland but later underwent divorce, received a court judgement or intend to transfer to a descendent could register the transfer of licence. It is also applicable to holders with registered companies that had
changed or companies that had re-registered - with the proviso of paying over RMB5 million tax per year in the name of the company. Both parties are also planning to conduct studies on non-transferable licences for SARs residents intending
to change properties in Mainland China. According to Macao Daily, there are currently 20,000 vehicles with cross-boundary licences, with an estimated 6,000 to 8,000 having non-transferable licences. C.U.
Philanthropy
Report: Chinese philanthropy on the rise Between 2006 and 2016 the number of foundations in China grew 430 per cent, amounting to 5,545 in total, while philanthropy by those of Chinese origin has been consistently on the rise in recent years, according to the results of a report by the Global
Chinese Philanthropy Initiative. The report focuses on the ‘giving trends, motivations, and impact of Chinese and Chinese American philanthropists,’ evaluating Chinese communities both on the Chinese Mainland, and in Hong Kong, Taiwan and Macau as well as of
Americans of Chinese descent. Total giving amounted to RMB101.9 billion according to the most recent available data, from 2014. The report notes that primary philanthropic efforts have been focused primarily on disaster relief like the Sichuan earthquake in 2008, while both those from Greater China as well as those of Chinese descent show similar trends. ‘Chinese and Chinese Americans give to similar causes, including higher education, health, and the environment. Education ranks as the most popular cause among both Chinese and Chinese American philanthropists, and some of the most notable gifts have been to colleges and universities’. Divergence is apparent, however, in the way that philanthropists in China - versus their counterparts in the U.S. - approach partnerships with government. ‘Among Chinese philanthropists, collaborative efforts with government agencies are common, especially in providing disaster relief, alleviating
poverty, and [higher] education. In the United States, partnerships with government entities are highlighted less frequently, with only a few philanthropists engaging in policy education activities’. Regarding MSAR philanthropists, the report highlights efforts made by former president of the Legislative Assembly Susana Chou Kei Jan via the Macao Tong Chai Charity Association. The Association estimates that it has ‘touched the lives of more than 135,500 children and 7,710 teachers in partnership with 32 partner organisations in Mainland China and Macau,’ notes the report. In summary, the group found that the overall philanthropic ‘impact was hindered by the lack of professional staff, policies, and structures to facilitate giving, and the limited capacity of recipients. The growth of Chinese American foundations and giving amounts are likely to continue, outpacing overall U.S. trends. The full report is available at www. gcpi.net K.W.
M&A
Sheung Wan property sale nets Hong Kong Resorts Int’l HK$750 mln Developer Hong Kong Resorts International has sold a property located in the Sheung Wan building in neighbouring Hong Kong (pictured) for nine times its purchasing price, raking in HK$750 million, according to the group’s filing with the Hong Kong Stock Exchange. The developer should make approximately HK$675.6 million off the sale, having held the property for 15 years, according to a mention in the Hong Kong Economic Times.
The purchaser is Blue Sapphire Global Limited, a limited liability company incorporated in the British Virgin Islands. The property is located on the 22nd Floor of China Merchants Tower in the Shun Tak Centre and had housed HKR International’s operations, with the group shuffling around staff to two other buildings in order to facilitate the sale, given that it was formerly headquartered on the floor sold. HKR International is
primarily known for developing Discovery Bay, on Lantau island in Hong Kong, and also operates in the MSAR via a 57 per cent equity interest in Health & Care (Macau) Dental Group Limited. The group’s most recently published results reveal that it received HK$823.9 million in profit for the financial year ending March 31, having achieved revenue amounting to HK$2.23 billion during the period, a 15 per cent decline year-on-year.
Business Daily Friday, September 8 2017 7
Gaming HKEX
Amax International to raise capital
C
asino investor Amax International Holdings Limited is aiming to raise HK$7 million from the placing and subscription of 20 million existing shares, according to the company’s filing with the Hong Kong Stock Exchange. The shares are to be sold to not less than six placees who are independent third parties. The filing stated that the placing value of the shares is at HK$0.35 each and the total subscription would represent approximately 3.23 per cent of the company’s existing issued share capital and 3.13 per cent of the issued share capital after the
issuing of the new shares. The company further wrote in the filing that the net proceeds from the subscription will amount to approximately HK$6.64 million and the amount would be aimed ‘to be used for general working capital and investment’ of the company. The casino investor earlier released a filing on Monday informing shareholders its intention to obtain the exclusive operating rights for a VIP room in an undisclosed Cambodian casino. The company also noted that it continues to pursue a request to a Macau court on June 19 to issue a court order appointing the
company’s Chairman and Chief Executive Officer, Ng Man Sun, as administrator of Greek Mythology (Macau) Entertainment Group Corp. Ltd., ‘in order to get access to and control of the books and records of
Greek Mythology’. The company holds 24.8 per cent of Greek Mythology (Macau) Entertainment Group Corporation Limited which operates and manages the Greek Mythology casino in Beijing Imperial Palace Hotel – previously named New Century Hotel – in Macau, the group’s 2017 annual report informed. Beijing Imperial Palace Hotel is currently shut after its operating licence was given back to the MSAR Government at the beginning of the year, while Greek Mythology casino was shut down by the Gaming Inspection and Co-ordination Bureau (DICJ) in 2015. C.U.
Theme park development
Landing in the Philippines Jeju Shinhwa World’s developer is proposing to invest in the construction of a theme-park-meets-Integrated-Resort in the Philippines Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Casino and amusement park developer Landing International Development Limited has proposed building a theme park Integrated Resort in the Philippines, the company announced in a press release yesterday. Landing Chairman and Executive Director Yang Zhihui met with Philippines President Rodrigo Duterte on September 4 in Manila to present the proposal. The President was said to have expressed interest in the project and
welcomed the investment, which the company claims will create jobs and bring Filipino nationals residing overseas back to the country. The interested parties did not reveal a location for the proposed project, which will comprise Asia’s first movie-themed indoor park, Waterpark, in addition to other entertainment and leisure facilities. In June, the Hong Kong-listed company reportedly withdrew from the potential acquisition of a gaming company in the country after seeking legal advice on its foreign investment, according to South China
Morning Post. Landing is the developer of the US$3 billion Jeju Shinhwa World project, another multiple movie-inspired theme park occupying 2.5 million square metres on Jeju Island in South Korea. Construction of the theme park began in 2013, with the company announcing that is expects full resort operations to commence by the end of this year. In its latest interim results, Landing has announced it is considering moving its gaming property located in the Hyatt Regency Jeju Hotel – also on Jeju Island – to Shinhwa World.
The company also operates other gaming businesses in London, at the Les Ambassadeurs Club, which generated revenue of HK$427.92 million in the first half of 2017, up 78.19 per cent year-on-year. The company, which started out in real estate in Anhui, China, gradually expanded to building and operating leisure and entertainment resorts and casinos. Currently, it is slowing down sales activities for properties during the second half of 2017, it revealed, in order to focus on the progressive opening and marketing of Jeju Shinhwa World. advertisement
8 Business Daily Friday, September 8 2017
Consigliere
Cryptocurrencies
Tales from the crypt of finance Surely you have heard the word in different forums. Maybe some years ago. Or surely you already know perfectly well what they are. But in case you do not, what we are talking about - or want to know more about - is why they are revolutionising finance Oscar Guijarro oscar.g@macaubusinessdaily.com
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itcoin and Ethereum are the two best known of them but new cryptocurrencies are still appearing. They have not even chalked up a decade of existence yet but the financial sector cannot take its eyes off them. Its disruptive impact has been felt at all levels of the economy and governments around the world are trying to understand the phenomenon. They are also beginning to create legislation to control the phenomenon. The idea underlying cryptocurrencies is to achieve a totally secure exchange system whilst overcoming the problems inherent in fiduciary money. The technological foundation of cryptocurrencies is extremely safe. The strongest of safes and the safest of banks are only as powerful as the resources allocated to break them. Similarly, breaking the security of cryptocurrencies is a colossal task and beyond the scope of private
initiatives, so their strength is extreme. In the end, the algorithms that operate the network that supports the cryptograms and the scattered structures on which they depend make the task a chimera. Like they say, if you want to break Bitcoin security, make sure you have more computers than Google. Another distinguishing feature of cryptocurrencies is that what they are is actually a transaction ledger. What gives life to the cryptocurrency, so to speak, is the bookkeeping of its exchanges and creation written in different chapters stored in computer systems distributed throughout the world. In addition, the very technological nature of cryptocurrencies imposes limits to its creation. That is, unlike fiduciary money, there is no unique entity that is in charge to create it at will. And there can only be a limited number of each cryptocurrency. Dollars continue to grow indefinitely depending upon the state of the economic and political circumstances of each period. However, the creation
of technological currencies is limited by a series of generation patterns, which are executed by systems of networks known as mines.
‘The fact that cryptomoney is far from the manipulation of the authorities represents a tremendous attraction for those who want to be financed through obscure channels’ But undoubtedly, what frightens people most about cryptocurrencies is that they do not need any intermediary to operate. Yes, you read
Bitcoin
Monero
Ethereum
Ripple
Litecoin
DeepOnion
The first of the list. Founded by Satoshi Nakamoto in 2009. A mysterious alias that probably hides a group of people. Currently, 16.4 million have been issued as at August 4 of the 21 million that can be issued. Website: bitcoin.org
The first based on Ethereum blockchain technology. Founded by Vitalik Buterin, it allows the creation of smart contracts and increased safety measures compared to Bitcoin. Some 93.7 million had been issued as at August 4. It started in 2015. Website: ethereum.org
The first to use the Scrypt algorithm, it kicked off in 2011, with 52.3 million issued in August of a possible 84 million. It is considered to be the silver of the currencies whilst Bitcoin is the gold. Website: litecoin.org
that correctly. It is not necessary for third parties to offer their services to execute the transactions. Obviously, this fact is scaring the financial titans of the world, and consequently the political systems whose financial stability rests on traditional structures. And yet the authorities and financial institutions have not opted for a strong ban. In the end, cryptocurrency benefits are many and politicians and bankers also participate in the feast. Put another way, banks, governments and magnates have interests in the cryptocurrencies. However they are also accused of attracting the attention of criminals and terrorists. The fact that cryptomoney is far from the manipulation of the authorities represents a tremendous attraction for those who want to be financed through obscure channels. The question that is now in all minds is whether it is too late to ride the wave of the cryptocurrencies. The answer is definitely not. Coins are still appearing every year. Here are some of them.
Founded in 2014. Monero’s strength is its privacy features. It is untraceable and fully private so many individuals wishing to remain anonymous for one reason or another are inclined to favour it. Website: getmonero.org
Chris Larsen and Jed McCaleb founded the cryptocurrency in 2012. Transactions via the currency are verified by consensus among net members, rather than using the mining procedure. All of its 100 billion limit have already been issued. Website: ripple.com
One of the latest to join the club, just 3.2 million have been issued as of this week. Its cap is 18.3 million. What makes it different from the others is that it uses deep Internet network Tor. Website: deeponion.org
Business Daily Friday, September 8 2017 9
Consigliere
Moon cakes to sink your teeth into
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ne of the most important festivals for Chinese people, the Mid-Autumn Festival is held on the 15th day of the 8th month of the lunar calendar under a full moon at night, corresponding to late September to early October in the Gregorian calendar. On this day, families traditionally get together for a reunion feast, admire the moon and enjoy delicious moon cakes. Today, moon cakes play as important a role as ever in the celebrations, with the gift of moon cakes having become a popular way of friends and family expressing their affection for each other. Now, with a month to go, is the perfect time to prepare your moon cakes – so here I will help you find the very best in town! If you are looking for some special flavoured moon cakes, JW Marriott Hotel Macau moon cake collection is your ideal choice. For those with a sweet tooth, the chef has prepared traditional White Lotus Paste with Egg Yolk as well as some special flavours such as Red Lotus Paste with Egg Yolk,
Supreme Custard, Red Wine Cranberry, Purple Sweet Potato and Pandan Paste. If you go for savouries, the unique Fresh Meat with XO Sauce moon cakes and the Preserved Ham and Assorted Nuts moon cake will definitely fit the bill. The moon cakes will be packaged in a lavish leather box designed to hold a bottle of wine in the future. F o r a n u n f o rg ettab l e Mid-Autumn Festival this year, why not enjoy delicious moon cakes through charitable at the same time? Mandarin Oriental, Macau is now offering a rare opportunity. In celebration of the Mid-Autumn festival, the luxury 5-star hotel has
teamed up with Fuhong Society to create an exquisite moon cake collection. The moon cake box - designed by young autistic Leong Ieng Wai – displays the artist’s strong illustrative ability and skilful outline of persons, buildings and vehicles on paper. His special preference of using 0.38mm ballpoint pen has earned him the nickname ‘0.38’. The moon cakes inside are designed by a talented culinary team, in which double egg yolk with white lotus paste, red bean paste with double egg yolk and five kernel with Yunnan ham speak culinary volumes. Meanwhile, Pandan paste
with double egg yolk adds a delightful Southeast Asian flavour to this delicacy. Now, we always talk about Green Consumption. Under the influence of this concept, resorts are paying more and more attention to their moon cake boxes. If you want an everlasting longevity
commemorative box, you have to get The Dream-Treasure-Box from Grand Hyatt Macau. This season’s design has been elevated by the inclusion of dazzling LEDs on the top, sides and inside of the box, projecting the beautiful glow of a full moon in the darkness. The illuminating effect also means the box can be used as an actual lantern and will be treasured long after the celebration has passed. And rather than traditional moon cakes, the hotel’s pastry chef has created a series of jelly moon cakes. With the intensely rich taste of the osmanthus, together with mandarin, peach and pear, the translucent cakes allows the LED light to radiate through, revealing the glowing treasure inside. Edwina Liu, Essential Macau Editor
Spring/Summer Week
New York fashion kicks off with millennials on the mind New York turns fashion hub of the world for a week that started yesterday, as top designers do battle for the hearts and minds of millennials in a social-media whirlwind of models and celebrities
U
.S. designer Tom Ford -- fresh back from a stint in Paris -- opened the extravaganza that is New York’s Spring/ Summer Fashion Week on Wednesday evening. Among the most hotly anticipated collections is Raf Simons’ second line for Calvin Klein, after an avant-garde show designed along with American artist Sterling Ruby last February. Considered one of the most talented designers of his generation, the 49-year-old Belgian joined Calvin Klein from Dior in 2016, embarking on a mission to overhaul the iconic New York brand, redesigning its logo and transforming its Madison Avenue flagship store. Simons will be rubbing shoulders with some of the great names of American fashion, from Ralph Lauren to Marc Jacobs, as well as newcomers Matthew Adams Dolan or Snow Xue Ga.
Catherine Triomphe
But New York Fashion Week is still smarting from the loss of a string of designers who have taken their collections to Paris or Los Angeles. Among the departees are Proenza Schouler and Joseph Altuzarra, who joined the likes of Tommy Hilfiger and Rodarte in leaving New York. “When a big name like Altuzarra announces he is leaving, it weakens New York as a creative hub a little more each time,” said Rene Celestin, founder of fashion show production group Obo. He believes that while the fraught U.S. political climate “does not help,” there are many reasons behind New York’s waning popularity -- and none which cannot be solved.
‘Natural cycle’
Imran Amed, founder and editor-in-chief of London-based website Business of Fashion, has watched fellow fashion capitals London and Milan bounce back from their own
low spells as part of what he calls a natural cycle. “I don’t necessarily see it as part of a negative trend in New York. I just think it is a time of change,” Amed said, in a sector shaken up by new technology, changing customer behavior, and an evolving fashion cycle. “All of the executives are focused on something we are calling the generation gap, which is the millennial and new consumers which are going to account for about 45 percent of the luxury goods
industry by 2025.” These younger generations, he says, expect a different kind of relationship with the brands they engage with, he added -- a trend evident in the recent collaboration between Coach and singer Selena Gomez, or Burberry’s campaign featuring Chinese pop star Kris Wu. In another trend to watch in New York, more and more designers are embracing plussize models, perhaps the most famous of whom -- size 16 Ashley Graham -- hit the
catwalk for Michael Kors in February. Graham, a star in her own right with five million Instagram followers, will be in the New York spotlight both on the podiums and as a guest at several galas, including the Fashion Media Awards -- where reality star-turnedmodel Kendall Jenner is to be named “fashion icon of the decade”. Critics have suggested the 21-year-old half-sister of Kim Kardashian is undeserving of the accolade -- but there is little doubt she can generate that all-important social media buzz. Also expected to cause a stir is Rihanna, whose Fenty collection, in collaboration with Puma, will be showcased on Sunday. And Jenner’s brother-inlaw Kanye West will no doubt spark a reaction with his sixth collection for his fashion brand Yeezy -- a show which has so far been shrouded in mystery. AFP
10 Business Daily Friday, September 8 2017
Greater China Currency
Yuan still seen weakening if dollar rebounds, but at more modest pace The yuan is expected to weaken to 6.70 in six months and then to 6.80 in a year Vivek Mishra and Sujith Pai
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he Chinese yuan will only give up some of this year’s strong gains against the dollar over the next 12 months, provided the U.S. Federal Reserve continues to tighten policy and gives the greenback a lift, a Reuters poll showed. Mainly driven by U.S. dollar weakness and helped by China’s tighter controls on capital outflows, the yuan is up more than 6 per cent so far this year, with more than half of those gains coming in the last three months. In August, the yuan posted its biggest monthly gain since the Chinese currency was revalued and taken off a fixed dollar peg in 2005. It was trading near a 15-month high of 6.53 against the greenback on Wednesday, and is close to recouping all of its stiff losses suffered in 2016. Reuters latest poll of nearly 60 foreign exchange strategists showed they continue to expect the yuan to soften in coming months if the dollar perks up, though they do not expect it to weaken as much or as fast as predicted just one month ago. The yuan is expected to weaken to 6.70 in six months and then to 6.80 in a year, which would mark a retreat of around 4 per cent from current levels, according to the poll conducted on Sept 4-6. That compares with the
previous poll released in early August, which showed expectations of a pullback to 6.85 in six months and 6.90 in a year. But those expectations are largely dependent on the strength of the currency on the other side of the exchange rate - the dollar. “Broad dollar weakness provides ample room for the PBoC (People’s Bank of China) to allow a stronger CNY (yuan) without fear of losing international competitiveness,” Carl Paraskevas, a senior financial economist at Lloyds wrote in a note to clients. “It is hard not to argue that much of the recent CNY strength has more to do with dollar weakness.” Late last month the greenback fell to its lowest in over 2-1/2 years against a basket of six major currencies on the expected hit to the economy from Hurricane Harvey and
increasing concerns that tension in the Korean peninsula could escalate. “The bigger picture is that we believe the USD will not be materially stronger than where it is now a year out; if anything, a tad softer,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. But not everyone is optimistic on the Chinese currency. “We are not convinced that the strength in the yuan so far this year is sustainable as we are still skeptical over the recent pickup in growth in China and have a bearish outlook for that,” said Lee Hardman, currency strategist at Bank of Tokyo-Mitsubishi UFJ in London. “We could also start to see capital outflows from China pick up again, which would put some downward pressure on the currency.” China has posted forecast-beating economic
growth so far this year, though many analysts believe it will eventually start to lose steam as higher borrowing costs and a cooling property market weigh on activity. Some traders believe that authorities may start tapping the brakes on the yuan’s strong ascent after a highly sensitive Communist Party Congress in October. Some Chinese exporters are already complaining of losses caused by the currency’s sudden turnaround. Traders had expected the dollar to strengthen at the start of the year on expectations of faster Federal Reserve interest rate hikes and on hopes of fiscal stimulus from the U.S. administration. But President Donald Trump has so far disappointed markets by failing to deliver on his pre-election promises, weighing on the dollar’s performance as hopes have faded for tax cuts. While the Fed is expected to announce plans to shrink its balance sheet as early as this month, comments from Fed members recently showed U.S. policymakers were increasingly split on the outlook for inflation and how the lack of it might affect the future pace of interest rate rises. Uncertainty over the dollar has helped maintain bullish bets on the Chinese yuan, according to a separate Reuters poll on currency positioning. Similarly, bets in favour of the Indian rupee were in place, though strategists see
it softening over the next 12 months. Early last month, the currency hit 63.62 per dollar, its highest since July 2015. The Indian rupee has gained over 5 per cent so far this year and was around 64.1 per dollar on Wednesday. The currency is now expected to weaken slightly to 64.50 per dollar in six months and then to 65.00 in a year, unchanged from last month’s poll.
“The bigger picture is that we believe the USD will not be materially stronger than where it is now a year out; if anything, a tad softer” Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore
“Our stronger rupee view is premised on a weaker dollar, undermined by a lower probability of comprehensive U.S. tax reforms by year-end, and risks of a more gradual pace of rate hikes next year,” said MUFG’s Hardman. Reuters
Official media
Beijing should relax stock index futures trading as market recovers Normalising index futures trading can allow investors to adequately hedge their risks, says the Economic Information Daily China’s stock market recovery has created the condition for regulators to further relax rules on stock index futures trading and fully exit emergency measures adopted during the stock market turbulence of 2015, a publication affiliated to the official Xinhua News Agency reported yesterday. The Economic Information Daily, in an opinion piece, also called for further reforms in initial public offerings, suggesting regulators stop window guidance in IPO pricing. “In 2017, China’s A-share market has generally been stable. Market volatility has greatly decreased, valuation structure is getting more rational and investors’
confidence is gradually recovering,” the newspaper said.
‘China imposed a series of restrictions on stock index trading during the summer of 2015’ “From current circumstances, the market has the condition to further promote market-oriented reforms and
further relax stock index futures trading.” China imposed a series of restrictions on stock index trading during the summer of 2015, when the Shanghai share index lost 40 per cent of its value in three months, blaming derivatives for worsening a crisis that sent shockwaves across global financial markets. In February, China’s securities regulators relaxed certain rules on stock index futures trading, and said the government would gradually unwind restrictions. Chinese stocks have rallied to 20-month highs buoyed by a recovering economy as well as optimism over financial and economic reforms. The Economic Information
Daily said that China’s stock market has come out of the shadow of the 2015 crash and is “back to normal”, so there is room to “fully exit emergency restriction measures imposed during the crisis, and continue to push forward securities market reforms.” Normalising index futures trading can allow investors to
adequately hedge their risks, making China’s A-share market more attractive to institutional capital, the newspaper said. In terms of IPO reform, the editorial suggested that the market should decide IPO pricing and timing, without the interference of regulators. Reuters
Business Daily Friday, September 8 2017 11
Greater China In Brief Liquidity
C.bank lends RMB298 bln via MLF China’s central bank said yesterday it injected RMB298 billion (US$45.70 billion) into the financial system via one-year medium-term lending facility (MLF) loans. Interest rates for the MLF loans were unchanged at 3.20 percent, the People’s Bank of China (PBOC) said in a statement on its website. Two batches of MLF loans worth RMB169.5 billion are maturing on the same day. And another batch of sixmonth MLF loans, with a volume of RMB113.5 billion, is due to mature on Sept. 16. In the same statement, the central bank said it had skipped reverse repos yesterday. Trade
U.S. starts probe into steel flanges from China
Going public
Logistics firm Best, backed by Alibaba, launches U.S. IPO Best follows a number of Chinese logistics companies in going public Elzio Barreto
Best Inc, a Chinese logistics company backed by Alibaba Group, is launching a U.S. IPO that is seeking as much as US$932 million to fund an expansion of its logistics and supply chain network, develop new technology and open more convenience stores. The Hangzhou-based company,
led by Johnny Chou, a former Greater China president for Alphabet Inc’s Google, plans to list on the New York stock exchange and the IPO will be equivalent to 16.4 per cent of the firm’s enlarged share capital. China is the world’s biggest logistics market, notching up US$1.6 trillion in annual revenue in 2016, with demand for express delivery services expected to jump 17.9 per advertisement
cent annually in the six years to 2021, Best said, citing forecasts from consulting firm iResearch. The offering will include an issue of 53.56 million new American Depositary Shares (ADS), each representing one class A ordinary share, in an indicative range of US$13 to US$15 each, according to a filing with the U.S. Securities and Exchange Commission on Wednesday. Existing shareholders, including private equity firms CDH Investments, China Renaissance Capital, state-owned Everbright Financial Holding Investment Holding and a unit of Goldman Sachs Group Inc, are selling another 8.54 million ADSs.
Key Points Shares offered in range of US$13-US$15 Company led by former Greater China president for Google IPO pricing set for Sept 19, debut set for following day CEO Chou is offering 1 million shares, while his brother George Chow, the company’s chief strategy and investment officer, is selling 250,000 shares. Best follows a number of Chinese logistics companies in going public. They include S.F. Holding, YTO Express and STO Express which listed in Chinese markets, and ZTO Express, which raised US$1.4 billion with a New York listing in October. Best is offering shares at a 2019 forecast price-to-earnings (P/E) ratio of 17.7–20.4 times, according to a term sheet seen by Reuters, compared with 13.7 times for ZTO. P/E ratios tend to be higher in China and SF Holding trades at 35.3 times while YTO trades at 21.7 times. The IPO is slated to be priced on Sept. 19 and its market debut is set for the following day. The company plans to use US$300 million to expand its convenience stores and its logistics and supply chain services, with another US$100 million set aside for technology investments. The remainder will be used for general corporate purposes and potential acquisitions. CITIC CLSA, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, KeyBanc Capital Markets, Oppenheimer & Co and Stifel were hired as underwriters. Reuters
The U.S. Department of Commerce on Wednesday said it began an investigation into possible dumping and subsidization of stainless steel flanges from China and India. Commerce Secretary Wilbur Ross announced the trade action in a statement, saying: “The Department will act swiftly, while assuring a full and fair assessment of the facts, to ensure that everyone trades on a level playing field.” In 2016 imports of stainless steel flanges from China and India were valued at an estimated US$16.3 million and US$32.1 million, respectively, the statement said. Technology
Drone maker DJI says it is hunting security flaws Chinese manufacturer SZ DJI Technology Co Ltd, the world’s largest civilian drone maker, said on Wednesday it was hunting for security flaws in its flight-control software after coders found its apps could be “hot patched” to circumvent scrutiny by Apple Inc and Alphabet Inc. “We have updated the apps to remove the suspect code,” Adam Lisberg, spokesman for DJI, said of the hot-patching problem. “We are going through all the code now to see if there’s anything else we didn’t know about.” E-commerce
Mexico signs deal with Alibaba Mexico’s government said on Wednesday it has inked a deal with Alibaba Group Holding Ltd, to get Mexican products and services, especially from small- and medium-sized firms, onto the top Chinese e-commerce firm’s platform. The deal comes as Mexican President Enrique Peña Nieto wraps up a trip to China to discuss trade and investment, as part of a strategy to diversify and open new markets for his country’s products. With U.S. President Donald Trump repeatedly threatening to terminate the North American Free Trade Agreement, a deal that underpins US$1.2 trillion in trilateral trade between the United States, Canada and Mexico, Peña Nieto’s government has stepped up efforts to open up new trade channels.
12 Business Daily Friday, September 8 2017
Asia Official data
Australian retail loses its fizz, trade surplus shrinks Workers are also collectively taking a pay cut, according to analysis by Morgan Stanley Swati Pandey and Wayne Cole
A
ustralian retail sales braked in July as consumers, burdened by stagnant wages and rising utility bills, sharply cut back their spending at department stores and on household goods. Australian Bureau of Statistics’ (ABS) data published yesterday showed retail sales were flat in July, upsetting expectations for a 0.3 per cent increase after a solid 1.8 per cent gain in sales the June quarter. The Reserve Bank of Australia (RBA) has long feared ballooning debt in the red-hot property sector was pinching consumers’ ability to spend elsewhere in the economy. Analysts had questioned the recent momentum in retail and vehicle sales,
given mortgage debt is accelerating faster than incomes. “This (spending momentum) is unlikely to continue as the wealth effects flowing from property price gains in Sydney and Melbourne slow,” said Shane Oliver, chief economist at AMP Capital. “Rapid power cost increases and high debt are also not helping. All of which is driving low consumer confidence.” Gas and electricity prices rose by around 20 per cent on July 1, weighing on household budgets at a time when private debt has skyrocketed to 190 per cent of disposable income. As a result, consumption growth so far has largely been driven by a tick up in population and a slowdown in the savings rate which is sitting at an 8-1/2 year low of 4.6 per cent. Australians are also collectively
taking a pay cut, according to analysis by Morgan Stanley, which shows average non-farm compensation shrank by 0.3 per cent in the June quarter. And, average hourly earnings contracted for the first time since 1993. Many economists believe gross domestic product (GDP) growth will probably fall short of the Reserve Bank of Australia’s upbeat forecast of around 3 per cent a year over the next two years. Data out on Wednesday showed Australia’s A$1.7 trillion economy expanded 1.8 per cent last quarter from a year ago. “The slump in real household income growth and the weakening outlook for dwellings investment suggests to us that the RBA’s GDP growth forecast is too optimistic,”
said Paul Dales, chief economist at Capital Economics. “We believe 2.5 per cent will be nearer the mark, which will force the RBA to keep interest rates at 1.5 per cent until late 2019. That would be roughly a year later than the financial markets expect.”
Narrowing surplus
Neither was there much good news on the trade front with Australia’s surplus on goods and services narrowing unexpectedly to A$460 million in July, almost half what analysts had forecast.
Key Points July retail sales unchanged vs forecast of 0.3 pct rise Data puts question mark over consumer spending momentum Australia’s trade surplus unexpectedly narrows to A$460 mln Export earnings fell 2.2 per cent to A$31.07 billion, led by falls in gold, iron ore and coal prices. That was a surprise to many as commodity prices had started climbing in July after a couple of soft months. Analysts noted miners often reported the prices they received with a considerable delay, so it was possible exports could be revised up once the ABS obtained the updated numbers. Commodities have been on a tear of late, with a strong outlook. The RBA’s commodity index, which mirrors Australia’s export mix, jumped 7.8 per cent in August when using spot prices and was up over 25 per cent for the year. Copper touched a three-year peak this week and gold a one-year top. The main futures contract for iron ore in China has surged 40 per cent since late June, a huge windfall to Australian miners’ export earnings and profits. Reuters
Currency
NZ dollar limping on election uncertainty The kiwi has been sliding since end-July on nervousness ahead of hotly contested election Swati Pandey
A hotly contested New Zealand election is set to check its currency, though analysts expect a resurgence in commodity prices to boost the fortunes of the Australian dollar which is flirting with a two-year top. A Reuters survey of 49 analysts predicted the Australian dollar at US$0.7800 in one month, unchanged from the previous poll. The analysts then expect it at US$0.7767 three-months ahead, with US$0.7700 now pencilled in on a six-month horizon. That’s an upgrade from the start of 2017, when the Aussie was forecast at US$0.7200 in six and 12 months. The Aussie held at US$0.7990 yesterday and recently hit a top of US$0.8066. It faces stiff chart resistance around 80 U.S. cents after repeatedly failing to achieve a
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sustained break of that level. The highest forecast was US$0.8100 for one-month ahead from Morgan Stanley and the lowest at US$0.7300 from Nomura and Banco Santander. Australia’s commodity-driven currency has found support from a recent rally in commodity prices. Copper hit a three-year high on Tuesday, aluminium was at its highest since February 2013 and iron ore was up 48 per cent from June lows. The resource-rich Australian economy gets a nice bump up in national income from higher commodity prices. The New Zealand dollar was forecast at US$0.7200 in a month, not far from current levels of US$0.7214 but down from US$0.7330 in the previous poll in August. It tumbled to US$0.7200 recently to the lowest
since June 2017. Median forecasts further out were closely grouped, with the kiwi seen at US$0.7150 in three months, US$0.7100 in six months and back to US$0.7200 on a 12-month horizon.
Key Points Aussie seen at US$0.7650 in a year, vs US$7600 in Aug poll Kiwi seen at US$0.7200 in 1 year, unchanged from Aug poll The kiwi has been sliding since July-end on nervousness ahead of a hotly-contested election on Sept.23. The centre left Labour Party has come from behind to run neck and neck with the ruling centre right National Party, leading to some uncertainty among investors.
The currency came under selling pressure after a poll showed support for Labour overtaking the ruling National party, turning the September election campaign on its head, and the make-up of the next government even more uncertain. “This uncertainty, along with some weaker activity and inflation data appears to have been mostly reflected in a weaker NZD, especially against the AUD considering the recent surge in bulk commodity prices,” said Tony Morriss, rates strategist at Bank of America Merrill Lynch. The antipodean currencies had surged this year against a beleaguered U.S. dollar which is loitering around 2-1/2 year lows amid political woes, expectations of a slow pace of tightening by the Federal Reserve and heightened tensions on the Korean peninsula. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Friday, September 8 2017 13
Asia Monetary meeting
In Brief
Malaysia’s central bank holds key rate Economy expands at better-than-expected pace of 5.8 per cent in second quarter Joseph Sipalan
Malaysia’s central bank, leaving its key interest rate unchanged as expected yesterday, struck a more upbeat tone on the country’s and Asia’s economic performance this year. Bank Negara Malaysia (BNM) kept the overnight policy rate (OPR) at 3.00 per cent - where it has been since July 2016 - and gave no sign of a need to change the “accommodative” rate anytime soon. “There was no hint of a potential rate hike in the near future,” said Julia Goh, a UOB economist based in Kuala Lumpur. In her view, there will be no rate change “at least until after the first quarter of 2018”. The central bank said growth in the global economy is “becoming more entrenched”, wording BNM did not have in its last statement, on July
13, when it said growth continued to strengthen. Asia’s growth is driven by “sustained” economic activity and strong external demand, it added. Malaysia’s growth “will be stronger than earlier expected”, BNM said, while inflation “continued its moderating trend”. “Underlying inflation, as measured by core inflation, will be sustained by the more robust domestic demand but is expected to remain contained,” the central bank said. All 11 economists polled by Reuters had predicted no change in policy yesterday.
per cent in July. Meanwhile, exports and the economy have accelerated. Exports surged 31 per cent in July. Malaysia’s economy expanded at a better-than-expected pace of 5.8 per cent in the second quarter, on the back of domestic demand and robust exports. That took first half growth to 5.7 per cent.
Faster pace
Inflation seen continuing to moderate
When inflation hit an eight-year high of 5.1 per cent of March, some analysts predicted at least one rate hike in the second half of 2017. But headline inflation slowed the following four months, easing to 3.2
Key Points Benchmark interest rate kept at 3.00 pct C.bank says global growth more ‘entrenched’
No hint of a rate hike in near future - analyst
Energy
Singapore firms, PLN to provide LNG for remote west Indonesia Pavilion Energy and Keppel Corp have signed a heads of agreement with Indonesian state electricity utility PT Perusahaan Listrik Negara (PLN) for small-scale liquefied natural gas (LNG) distribution to western Indonesia, the two Singapore companies said yesterday. Pavilion Gas and Keppel Offshore & Marine Ltd will work with PLN to distribute LNG to remote parts of west Indonesia, as well as generate electricity at PLN’s power plants, the companies said. “Small-scale LNG enhances Singapore’s role as a regional hub for LNG storage and reload, breakbulk and distribution,” Seah Moon Ming, chief executive officer of Pavilion Energy and Pavilion Gas, said in a statement. Commodities
In August, BNM raised its full-year 2017 growth forecast to above 4.8 per cent, instead of the 4.3-4.8 per cent predicted in March. The economy expanded 4.2 per cent in 2016. Yesterday, the central bank said Malaysia’s growth prospects “will be sustained by the more positive global growth outlook and stronger spillovers from the external sector to the domestic economy”. While BNM said there are signs of “sustained momentum in global growth”, it said the outlook “may be affected by political and policy developments in major economies and geopolitical risks.” The ringgit has gained more than 5 per cent against the dollar this year. BNM said the strengthening “better reflects” the economic fundamentals. Reuters
India seen importing 800,000 T of wheat About 800,000 tonnes of wheat from the Black Sea region is expected to arrive in India over September and October as millers boost reserves in expectation of tight domestic supplies, according to two trade sources and trade flows data. The country is likely to receive 247,000 tonnes of wheat in September, the highest monthly arrival since February, according to Thomson Reuters agricultural flows data, with five vessels scheduled to arrive from Ukraine. October arrivals are expected to surpass half a million tonnes, said the two traders. They declined to be identified as they were not authorised to speak with media. M&A
Expansion
McDonald’s Japan adding restaurants as turnaround gains momentum The company’s plans include adding electronic payments at every store and expanding delivery service through UberEats Lisa Du and Grace Huang
McDonald’s Japan is adding to its restaurant count in the second half of the year, underscoring a turnaround that has seen same-store sales climb for 21 straight months.
“There’s more work to do and there’s so much more potential in Japan” Sarah Casanova, McDonald’s Holdings Co. Japan Chief Executive Officer
McDonald’s Holdings Co. Japan plans to open more restaurants than it will close in the second half, said Chief Executive Officer Sarah Casanova, adding that she expects the trend in new stores to continue next year. That comes after the fast-food chain shuttered restaurants for years as it faced food-contamination scandals that sent sales plummeting. The stock in Tokyo has gained 64 per cent this year, outstripping the 30 per cent gain of McDonald’s Corp. “We’re seeing balanced growth,” Casanova said in an interview at the company’s Tokyo headquarters Wednesday. “There’s more work to do and there’s so much more potential in Japan.” The purveyor of chocolate french
fries and Hawaiian Loco Moco burgers is positioning itself for growth after rebounding from a series of food scandals in 2014 and 2015 -a turnaround that earlier this year prompted its U.S. parent to reverse a decision to sell a stake in the company. McDonald’s Japan raised its full-year profit outlook in August as it invests in remodelling restaurants and expansion. The company said it will open 10 new stores in Japan in the final half of the year, while closing seven. The last time it had a net addition for a sixmonth period was in 2012, according to company data. The count for all of 2017 will show a net reduction of 10 restaurants, McDonald’s Japan said, leaving it with about 2,900 stores. Still, that’s a sharp slowdown in closings from recent years. The company shut more than 100 stores in 2015
as it dealt with food-contamination problems. Same-store sales climbed 15 per cent in August from a year earlier, McDonald’s Japan reported on Wednesday, citing successful launches of regional items including its Tokyo roast beef burger and Osaka beef cutlet sandwich. Casanova has led the turnaround, closing underperforming stores and remodelling others to be more modern. The company’s plans include adding electronic payments at every store and expanding delivery service through UberEats. Earlier this year, Oak Brook, Illinois-based McDonald’s, which has a 49.9 per cent stake in the Japanese company, reversed its previous decision to explore options to sell its holding, saying it had confidence in the company’s strategy. Bloomberg News
Western Digital in talks for stake in Toshiba unit after IPO Western Digital Corp is in talks to gain voting rights of just under 16 per cent in Toshiba Corp’s memory chip unit on the assumption that it will be listed in the future, Kyodo news agency reported yesterday. Representatives for Western Digital and Toshiba declined to comment on discussions surrounding the US$17 billion-US$18 billion auction of the world’s No. 2 NAND producer. Western Digital, which jointly invests in Toshiba’s key chip plant but which has been at loggerheads with its partner over the auction, has offered to drop out of a group bidding for the unit in return for a stronger position in their joint venture, sources told Reuters this week. Appeal
Samsung’s Lee replaces attorney Samsung Electronics Co Ltd Vice Chairman Jay Y. Lee has replaced his lawyer ahead of an appeal against the five-year jail term he was given for bribery and other charges, a spokesman for his law firm said yesterday. Attorney Song Wu-cheol was replaced by Lee In-jae, a more senior representative attorney at law firm Bae, Kim & Lee LLC to “reinforce” the executive’s legal team, the spokesman said without elaborating. Jay Y. Lee was detained in February on charges that he bribed then-president Park Geun-hye to help him secure control of the conglomerate that owns Samsung Electronics.
14 Business Daily Friday, September 8 2017
International In Brief Trading
Top banks’ H1 commodity revenue slides Commodities-related revenue at the 12 biggest investment banks tumbled 41 per cent year-on-year in the first half of 2017 to its lowest since at least 2006, a consultancy said yesterday. The decline was mainly due to a drop in client activity and a slump in trading performance in the energy sector, financial industry analytics firm Coalition said in a report. Revenue from commodity trading, selling derivatives to investors and other activities in the sector fell to US$1.3 billion in the first six months of the year, it said. Budget
Algeria approves measures to cover deficit Algeria’s government has approved draft amendments to a law aimed at securing new funding sources to cover budget defects as it struggles to cope with a sharp fall in energy earnings. Amendments to the Money and Credit Law were endorsed at a cabinet meeting on Wednesday, chaired by President Abdelaziz Bouteflika, that discussed plans for the newly appointed government of Prime Minister Ahmed Ouyahia. The North African OPEC member country has been facing financial pressure since crude oil prices started falling in mid-2014, halving its oil and gas revenue, which accounts for 60 per cent of state budget. Monetary policy
Brazil signals gradual end to easing Brazil’s central bank slashed interest rates to a four-year low on Wednesday to spur an incipient economic recovery, but said the pace of monetary easing would probably be reduced next month as policymakers prepared to gradually stop cutting rates. The bank’s nine-member monetary policy committee, known as Copom, cut its benchmark Selic rate by 100 basis points for a fourth straight time, to 8.25 per cent. The decision was widely expected by economists in a Reuters poll. With inflation holding near 18-year lows and far below the bottom of the central bank’s target range, policymakers have slashed borrowing costs since last October. Amnesty program
U.S. states sue Trump administration A coalition of U.S. states sued the Trump administration Wednesday over its decision to end an amnesty program for 800,000 people brought illegally to the United States as minors. The lawsuit was filed in New York federal court by Democratic attorneys general of 15 states including New York, Illinois and Hawaii, as well as the District of Columbia. It alleges the White House discriminated against immigrants of Mexican origin, who are the vast majority of the amnesty program’s recipients, and violated Constitutional due process rights that protect against arbitrary punishment.
Currencies
Analysts see one chance in four sterling will reach parity with euro in next year If May manages to get the repeal bill through parliament, strategists say, sterling might gain Jonathan Cable
S
terling stands one chance in four of weakening to parity with the euro in the coming year, according to analysts polled by Reuters this week, but only a few said that was their central forecast. Sterling has been whacked by Britain’s decision to leave the European Union, falling around 17 per cent against the euro since the June 2016 Brexit referendum. One euro was worth over 91p late on Wednesday. Asked the chance of the two currencies being equal in value at any point in the coming year, the median likelihood was pegged at 25 per cent. “It’s only under a hard Brexit scenario that we see it getting towards parity. The key determinant of sterling movements in the next 12 months is how the negotiations evolve,” said Oliver Mangan at AIB. Negotiations between Britain and the rest of the EU have been fractious, something Reuters polls have repeatedly said would be bad for sterling. But the chances Britain will undergo a disorderly exit have eased a bit, according to a Reuters poll last week. So medians in the poll of over 50 strategists suggest one euro will get you 91.1 pence in a month, the same in six months - half way through the initial Brexit negotiations - and 92.0p in a year, a weaker view for sterling than in an August poll. Britain’s economy avoided the expected post-referendum slowdown,
but it is now lagging behind a fast-recovering euro zone. Businesses are worried about Brexit and consumers feel the pinch of rising inflation and the weak pound, surveys showed on Tuesday.
“It’s only under a hard Brexit scenario that we see it getting towards parity. The key determinant of sterling movements in the next 12 months is how the negotiations evolve” Oliver Mangan at AIB
Meanwhile euro zone growth is accelerating and inflation is rising. The European Central Bank policymakers is expected to announce in October it will begin reducing its monthly asset purchases, according to another Reuters poll. No change is expected at their meeting later on Thursday. Bank of England rate-setters don’t
meet until next week and most economists polled by Reuters expect them to leave interest rates unchanged between now and the end of initial Brexit negotiations, in a little under two years. Only 14 of 59 economists expected one or more rate rises by the end of 2018. Michael Saunders, a BoE policymaker who voted to raise rates in August, said last week the Bank was “not indifferent” to the value of sterling but there was no particular level that worries the Bank. Inflation is already running well above the BoE’s 2 per cent target - in a large part because of the currency’s decline since the referendum - and any further drop in the pound’s value could add to pressure on the Bank to act. It made its biggest daily rise in nearly two months on Tuesday, before a parliamentary debate over Prime Minister Theresa May’s European Union repeal bill. If May manages to get the bill through parliament, strategists say, sterling might gain, since that would ease a little of the uncertainty that has kept the currency under pressure. Median forecasts suggested in one month a pound would be worth US$1.29, the same in six months and US$1.30 in a year. “Unless Brexit negotiations fail, the UK economy is in good shape, which should allow cable to remain close to US$1.30,” said Asmara Jamaleh at Intesa Sanpaolo. Reuters
Capital boost
World Bank executive says won’t persist with capital increase deadline U.S. President Donald Trump’s administration has signalled reluctance toward cooperating with multilateral institutions Leika Kihara and Takashi Umekawa
The World Bank should not be “bogged down” on a specific date for member countries to boost its capital, a senior executive of the multilateral lender said, suggesting a deal won’t be struck before the initial deadline of end-2017. Axel van Trotsenburg, the World Bank’s vice president of development finance, said the priority should be to ensure all member countries are comfortable with the deal. “It is always a challenge when you have 190 countries around the table. Everyone has an opinion and everyone has a priority,” he said, adding it was inappropriate to set a timeframe like “one week or one month.” “We like to find consensual solutions, where ultimately everybody is satisfied with the compromise that has been worked out,” he told Reuters yesterday. The World Bank has been pushing over the past few years for a general capital increase for its affiliate lender, International Bank for Reconstruction and Development (IBRD). It set a goal of agreeing on the capital boost in 2017 at an annual meeting in Lima in 2015, and hoped to push through a deal at its upcoming annual meeting in Washington in October. But an agreement will likely be delayed until the subsequent meeting in April next year as the United States,
the biggest shareholder of the World Bank, has refused to shoulder the fiscal burden, three Japanese government sources told Reuters. The U.S. disapproval may force the World Bank to scrap the capital increase plan altogether, the sources said on condition of anonymity because they are not authorised to speak to media. When asked about the chance of no agreement in October, Trotsenburg said he would not call it a postponement as there will be “continued work” for a deal. “If you do it ambitiously fast but you don’t do it right, you don’t have a good result,” he said. “You need to be focused on good results and don’t get bogged down on one date.” The United States holds a 17.25 per cent share in IBRD.
U.S. President Donald Trump’s administration has signalled reluctance toward cooperating with multilateral institutions, fuelling concerns about protectionism around the world. Trotsenburg also said the International Development Association (IDA), a World Bank arm that offers aid to the world’s poorest countries, plans to issue the first batch of bonds to fund its spending during the first half of next year. That will be part of a broader plan by IDA to diversify its resources beyond contributions from donor countries. IDA seeks to raise funds in the capital market through issuance of bonds during a three-year period until June 2020, and has secured triple-A credit ratings from Moody’s and S&P. Reuters
Business Daily Friday, September 8 2017 15
Opinion Business Wires
The Korea Herald South Korea will take steps to enhance the overall environment of poultry farms and ban sales of live chickens and ducks to prevent future outbreaks of avian influenza, the agriculture ministry said yesterday. The Ministry of Agriculture, Food and Rural Affairs said in a joint statement that it will work with a number of different organizations to better prevent bird flu as the country has witnessed several serious outbreaks in recent years, including one that led to the culling of over 33 million birds. Most local poultry farms raise egg-laying hens in battery cages smaller than an A4 sheet of paper, barely over the minimum requirement.
Taipei Times
Even a regulator as powerful as the U.S. Securities and Exchange Commission can have a hard time establishing jurisdiction, as evidenced by the continued operation of the Romanian exchange MPEx, which offers bitcoin-denominated “virtual securities.”
Premier-designate William Lai promoted acting Minister of Economic Affairs Sheng Jong-chin to minister and tapped National Development Council Deputy Minister Kung Ming-hsin to be Shen’s deputy. National Security Council adviser Lin Feng-jeng is to succeed Wellington Koo as the chairman of the Ill-gotten Party Assets Settlement Committee, Lai said. Koo has been appointed chairman of the Financial Supervisory Commission. Taiwan Institute of Economic Research (TIER) vice president Chiou Jiunn-rong is to be the next deputy minister of the National Development Council, Lai said.
Viet Nam News Prime Minister Nguyễn Xuân Phúc agreed in principle to HCM City’s (pictured) proposal on administrative decentralisation to the maximum possible extent during a working session in Hà Nội with the Standing Board of the municipal Party Committee. The PM said the Government’s Party Civil Affairs Committee, supported administrative decentralisation in the direction of allowing the city to undertake certain tasks of the government, ministries and central agencies relating to the approval of some kinds of projects and adjustment of several types of planning.
The Times of India Reliance Industries Limited, the oil-totelecoms conglomerate, said it will buy assets of Kemrock Industries and Exports Ltd, in a move to enter the composites and carbon fibre manufacturing business. Reliance Industries said it won an e-bidding process for Kemrock Industries, a company based in Gujarat. The e-bidding process was conducted by a consortium of 11 banks, led by Allahabad Bank. This participation is a part of Reliance’s efforts to enter the Composites business and establish a leadership position in this large and growing market in India.
Go ahead and try to stop initial coin offerings Elaine Ou a Bloomberg View columnist
C
hina’s ban on initial coin offerings has provided a much-needed pause in the booming market, where people ranging from legitimate entrepreneurs to outright thieves attract money by selling digital tokens. But the move also raises a question: How can any government control a phenomenon that transcends national borders and rules? The Chinese central bank’s decision to outlaw token sales is significant in part because the country has become an important hub for the digital offerings. As of July, Chinese platforms had raised nearly US$400 million from more than 100,000 investors. It’s thus not surprising that digital currencies tumbled after the ban was announced. Regulators in China and elsewhere have good reason to be concerned about coin offerings. Although they provide global entrepreneurs with a useful alternative to traditional venture capital -- which is local, labourintensive and often inaccessible -- they are rife with abuse. Promotional campaigns -- which can feature such celebrities as Mark Cuban, Paris Hilton, and Floyd Mayweather, and even billboards in Times Square -- sometimes border on the downright predatory. About 60 per cent of exchange-traded digital currencies end up dead or dormant. Most tokens confer no rights beyond purported access to a future service -- such as a chance to win a Lamborghini. Such vague promises can attract hundreds of millions of dollars in part because they get plenty of help from the media (including this one). Reports of record-breaking token sales, or of the latest hot offering, reinforce the fear of missing out. Excited by the rare success stories -- such as the astronomical gains achieved by early investors in the Ethereum currency -everyone wants to go all in on the next thing. As a result, even a coin that represents nothing more than the F word can achieve a market cap in the millions. Curbing token sales, though, won’t be easy.
“
The decentralized, tamper-proof design of the blockchain resists oversight: When China tried to suspend withdrawals at bitcoin exchanges, the trade simply moved to other venues and messaging apps. Most tokens are administered through a piece of software called a smart contract, which functions like a digital vending machine running on thousands of computers around the world. Even a regulator as powerful as the U.S. Securities and Exchange Commission can have a hard time establishing jurisdiction, as evidenced by the continued operation of the Romanian exchange MPEx, which offers bitcoindenominated “virtual securities.” In some cases, regulators might not even have anyone to contact: New trading platforms are completely decentralized, with no identifiable point of control. That said, maybe the threat of regulatory action could put a chill on the kind of mass marketing that helps make coin offerings so popular. FT Alphaville’s Alphachain project offers a sense of what sellers might raise in the absence of gratuitous advertising: After a month on the market, it had collected less than US$10 in bitcoin and ether. Entrepreneurs who choose digital coin offerings often complain that the venture capital industry is too clubby and insular. That’s true! It is, and it should be. Such early-stage funding is granted on nothing more than the founder’s reputation. Regular investors have grown a bit spoiled thanks to consumer protection agencies -- by enforcing laws against false advertising and fraud, they enable people to do business with complete strangers without getting scammed at every corner. A decentralized blockchain doesn’t leave room for such oversight, which means that participants are again trading on reputation alone. Without hype and endorsements to propel them, aspiring fundraisers may ultimately find that coin offerings are just as community-based and labour-intensive as their real-world counterparts.
Excited by the rare success stories -such as the astronomical gains achieved by early investors in the Ethereum currency -- everyone wants to go all in on the next thing
”
Bloomberg View
16 Business Daily Friday, September 8 2017
Closing Korean crisis
N.Korea pledges ‘powerful counter measures’ against U.S.-backed sanctions
abroad, and subject leader Kim Jong Un (pictured seating) to an asset freeze and travel ban, according to a draft resolution seen by Reuters on North Korea on Thursday pledged to take Wednesday. “powerful counter measures” to respond to U.S. “We will respond to the barbaric plotting around pressure or any new sanctions against it over sanctions and pressure by the United States its missile programme, accusing Washington of with powerful counter measures of our own,” the wanting war. statement read. Pyongyang’s pledge, made in a statement by its The same statement also accused South Korea and delegation to an economic forum in Russia’s Far Japan of using the Russian forum to play “dirty East, came after the United States said it wanted the U.N. Security Council to impose an oil embargo politics,” saying the event was meant to be about discussing economic cooperation in the region and on North Korea, ban the country’s exports of not about criticising its missile programme. Reuters textiles and the hiring of North Korean labourers
FX
China August reserves rise for 7th straight month Despite the yuan’s newfound strength, most analysts believe that tougher forex controls will largely remain in place for some time
C
hina’s foreign exchange reserves edged up in August for a seventh straight month, largely in line with market expectations, as tighter regulations and a weaker dollar continued to keep capital outflows in check. Reserves rose nearly US$11 billion in August to US$3.092 trillion, compared with an increase of US$24 billion in July. Economists polled by Reuters had expected foreign exchange reserves to rise by US$19 billion to US$3.1 trillion. It is the first time that China’s reserves have climbed for seven months in a row since June 2014, and marked the highest level since October last year. A dramatic slowdown in capital
outflows - which are seen as one of China’s biggest risks - has helped boost confidence in its economy this year ahead of a key political leadership reshuffle next month. China burned through nearly US$320 billion of reserves last year but the yuan still fell about 6.5 per cent against the surging dollar, its biggest annual drop since 1994. Its forex pile, the world’s largest, fell below the closely watched US$3 trillion level in January for the first time in nearly six years, raising market fears that Beijing may devalue its currency to relieve the pressure. But the Chinese currency has gained more than 6.5 per cent against the dollar so far this year, erasing all its 2016 losses, thanks largely to the U.S. currency’s sharp reversal and
Funding
Beijing’s steady tightening of forex controls. The yuan has also been boosted by fresh steps by the central bank to flush out speculators who were betting the currency would continue to fall. In August alone, the yuan rose 2.1 per cent against the dollar, its best month since 1994, and yesterday it broke through RMB6.5 per dollar for the first time since May 2016.
Clampdown continues
Since late last year, Chinese authorities have steadily clamped down on outflows and have widened their net in search of other ways that capital may be leaving the country. In recent months, regulators have turned their attention to “irrational” overseas investment on high-profile acquisitions such as hotels and football teams around the world. The state’s cabinet issued rules on acquisitions abroad for the first time in August, signalling a further slowing of the flood of money that has flowed overseas in recent years. China’s non-financial outbound direct investment plummeted 44.3 per cent in January-July from a year earlier. But Chinese acquisitions in countries officially linked to the Belt and Road initiative, a signature foreign policy of President Xi Jinping, totalled US$33 billion, surpassing the US$31 billion tally for all of 2016, Thomson
Rating
Reuters data showed. Despite the yuan’s newfound strength, most analysts believe that tougher forex controls will largely remain in place for some time after the Communist Party Congress in mid-October, even if that complicates Beijing’s goal of attracting more foreign investors into mainland stocks and bonds.
‘The value of gold reserves rose to US$77.702 billion at the end of August’ Foreign exchange analysts polled by Reuters expect the high-flying yuan to give back much of its gains over the next year, if the dollar gets a lift from any further U.S. interest rate hikes. The yuan is forecast to weaken to 6.90 per dollar in a year, according to the poll, from about 6.5 now. Chinese authorities may also start to fret that the rapid pace of yuan gains could blunt export competitiveness. The value of gold reserves rose to US$77.702 billion at the end of August, from US$75.084 billion at end-July, data published on the People’s Bank of China website also showed. Reuters
Lending
EU warns of ‘real risk’ of Moody’s downgrades Bank Mainland cities face surging funding new funds for terror attacks of Communications on profit pressure costs on default concerns There is a “real risk” of increased funding for attacks in Europe as the Islamic State (IS) group loses ground in Iraq and Syria, the EU’s security chief warned yesterday. IS, which is also known as Daesh, has lost an estimated 90 percent of its territory in Iraq and 85 percent in Syria as a result of military campaigns, some of them backed by Western forces. At one time, the group held around half of Syria, much of it uninhabited desert, but today it controls just 15 percent, according to Syria specialist Fabrice Balanche. “As we have success against Daesh on the ground in Iraq and Syria, they are moving funds out of Iraq and Syria,” Julian King told the civil liberties committee in the European Parliament. Last month, a UN report said that IS was continuing to send remittances abroad -- often small sums, making them difficult to detect -- as part of a bid to step up its international efforts “as demonstrated by the higher pace of attacks in Europe.” The report said funding sources were still based on oil profits and the imposition of taxes on local populations in the areas under its control. AFP
Moody’s Investors Service downgraded China’s fifth-largest listed state-owned lender Bank of Communications (BoCom) yesterday, citing the impact of higher market funding cost on profitability. While China’s largest five banks heralded a positive second-half after reporting steady margins and a faster profit growth, there are concerns banks with relatively fewer deposits will likely see their funding costs rise. Moody’s downgraded BoCom’s long-term and short-term deposit ratings, their baseline and adjusted credit assessment and their counterparty risk, according to a note. The outlook cut was partly a result of the bank’s “weaker funding profile when compared to other state-owned Chinese banks”, said Moody’s, adding that the lender’s deposit franchise was thinner than its peers. BoCom is also likely to see its profitability hit amid increasing market funding costs, said Moody’s. In a separate note yesterday, Moody’s downgraded two BoCom subsidiaries - Bank of Communications Financial Leasing and BoCom Leasing Development Hong Kong Company Limited - given their reliance on the bank’s support. Reuters
China’s cities, towns and counties are facing surging borrowing costs as investors anticipate landmark defaults. A local government financing vehicle (LGFV) in the country’s East was recently forced to pay a coupon on a bond that matched a record. Average financing costs in credit markets for the units that finance roads, bridges and sewers have jumped, with yields for some borrowers surging the most in six years. Chinese investors are gradually accepting a new reality: the government is reducing support for the local funding units as it tries to curb their massive borrowings. In August, a builder of social welfare housing in the southern province of Hunan said it will change from a government financing arm to a regular state-owned company, fuelling concern it will lose financial support from regional authorities. At least 40 other LGFVs across China announced similar plans from 2015. “Investors’ faith in the government’s implicit guarantee for LGFVs is weakening,” said Wang Ming, chief operating officer in Shanghai at Shanghai Yaozhi Asset Management Co. “The pricing of LGFV bonds is more and more reflecting their own credit fundamentals, which aren’t good. Default risks of weaker LGFV bonds are rising.” Bloomberg News