Business Daily #1384 September 15, 2017

Relax is the key for your remaining vacations Consigliere Pages 8 & 9

Friday, September 15 2017 Year VI Nr. 1384 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Auto industry

Development

Volkswagen makes massive cars recall in Mainland Page 11

Hotel Estoril reform process kicks off Page 4

Typhoon

MGTO updates on impact of Hato to local industry Page 3

www.macaubusiness.com

Money

Angolans finding new ways to avoid currency crisis Page 16

Justice

Public prosecution appeals against absolved in Ho Chio Meng case Page 5

Harassment accusations cloud campaign Election

Group 12 candidate revealed yesterday she had received anonymous threatening calls requiring her to abandon her candidacy. The harassment has spread to the surrounding environment of the group. Page 2

Airbnb model not for the MSAR

Head of local tourism department said yesterday that the business model for sharing houses that Airbnb made popular is not on the schedule to be discussed. She also said that such services are still illegal and a majority of residents are opposed to it.

How to save the Vegas gap

Hotels Drew Rosser, Vice President of Sales at hotel service company SHR, shared its point of view about the local hospitality industry.

Comparing with Las Vegas, the expert remarked that there is still a huge gap between both hubs in terms of management practices. Page 5

An empire at stake

Gaming Billionaire Kazuo Okada is trying to gain back his company with the help of his daughter. After a series of confrontations happening in the heart of the board, the tycoon might have chances to return to the top. Page 7

China’s figures below expectations

Sharing economy Page 4

HK Hang Seng Index September 14, 2017

27,777.20 -116.88 (-0.42%) Worst Performers

Want Want China Holdings

+2.84%

Tencent Holdings Ltd

+0.90%

China Mobile Ltd

-1.70%

China Merchants Port Hold-

-1.16%

Hengan International Group

+2.29%

AAC Technologies Holdings

+0.50%

Geely Automobile Holdings

-1.68%

Link REIT

-1.16%

China Mengniu Dairy Co Ltd

+2.28%

CNOOC Ltd

+0.43%

Galaxy Entertainment Group

-1.31%

Sun Hung Kai Properties Ltd

-1.10%

China Overseas Land &

+1.30%

Sands China Ltd

+0.40%

China Life Insurance Co Ltd

-1.24%

China Construction Bank

China Resources Land Ltd

+1.01%

Kunlun Energy Co Ltd

China Shenhua Energy Co

-1.23%

CITIC Ltd

+0.13%

-1.04% -0.60%

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

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Investment Mainland’s expansion cooled in August as factory output, investment and retail sales all slowed. Fixed-asset investment in urban areas rose 7.8 percent in the first eight months of the year, being the slowest record since 1999. Page 10

2 Business Daily Friday, September 15 2017

Macau Election

Candidates under threat Group 12 led by Sze Lee Ah said anonymous phone calls are asking them to quit election Cecilia U cecilia.u@macaubusinessdaily.com

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he second candidate of the electoral candidate Group 12 - Power of the Citizens - Joana Chong said she had received anonymous phone calls from different people asking her to quit the election otherwise saying ‘be careful when stepping out of home’.

Speaking on yesterday’s conference, the first candidate, Sze Lee Ah, said they all have been receiving different levels of harassment in the past three months.

“Why are these people giving out threats to any of our members [...] even now,” said Sze, while voicing out that they will not quit the election.

Chong, the second candidate, while shedding her tears, said that she never would have thought that running in an election would be that difficult.

“I don’t understand why other groups could happily do their campaign while we

can’t,” lamented Chong. “I have considered to quit, but advisers say if I quit I will pose significant threat to Mr. Sze.” She revealed that they have already filed a case with the related department, while refusing to disclose the exact department that they had approached for assistance due to legal issues.

When asked whether they had reflected the situation to the Electoral Affairs Commission (CAEL), CCAC or the police, Sze said that they “think it is more effective to collect more solid evidence before approaching the CCAC [Commission Against Corruption]”.

The candidate said they had lodged a complaint to the police yesterday morning about the removal of their poster but the police simply concluded that it was a result made by the wind.

Sze also said that the harassment also affected their promotional plan, since even supporters are being harassed.

Group 12 candidates during the event denouncing the facts

“It would be difficult to ask our supporters to testify for us because they are all scared,” said the candidate.

“They even harass their families, elderlies and kids [...] that’s too much.”

The group wished to let this matter be known by the public as to ensure some safety for the group.

“It has been going on like this for two to three months,” said Sze. “We thought it

would end soon but the issues have become more serious and so we decided to let the public know.”

Sze was a trustee for the group of legislator, Chan Meng Kam, in 2013’s Legislative Election.

Serve for the youth

The group advocates to fight for more opportunities for young people in the city, such as the implementation

of free tertiary education as to strengthen competitiveness.

Group 12 also suggests to cancel registering for election voting, as to allow permanent residents who reach 18 or above to be eligible for voting.

Sze said he is a member of many associations related to the young population and many young people wished him to strive for opportunities for young people.

Election

CCAC: No violation found Cecilia U cecilia.u@macaubusinessdaily.com

Deputy Commissioner, Lam Chi Long, told the press that basically no violation of offering benefits was discovered over the course from March up until now. Some practices in the MSAR granted benefits to people in order to gain their political favour.

After attending the TDM Radio programme Macao Forum, Lam said they had performed over 2,900

inspections, with some 1,900 inspections in restaurants and venues that provide banquets as well as 1,000 inspections over activities that could offer funding or free tours. CCAC is currently following-up a few cases that are suspected of provision of benefits for campaigning.

Meanwhile, CCAC pledged to arrange in accordance with the possible situations on Election Day, including continued inspection over venues that could hold banquets.

On the other hand, Electoral Affairs Commission (CAEL), Tong Hio Fong, encourages legitimate voters to vote for this coming election.

When asked by the press about the insufficiency of the Electoral Law, Fong said CAEL will compose a report after the election and suggestions will be included. He pointed out an example that the law does not specifically suggest the action over a candidate who had paid Facebook for campaigning.

Also, regarding a complaint about

a candidate for not serving the People’s Republic of China and the Macau Special Administrative Region, the CAEL head said that more concrete and objective evidence should be collected to decide whether the candidate in question is violating the regulations.

According to the Electoral Law, all candidates are required to sign a statement saying that the legislators have to support the Basic Law as well as to serve both the Mainland and MSAR.

Politics

Getting some expert advice The city’s Chief Executive (CE) Fernando Chui San On met a team of 22 experts on Wednesday to discuss the optimisation of Macau’s response measures for any public emergencies.

The team is coordinated by the Hong Kong and Macao Affairs Office of the State Council and the National Commission for Disaster Reduction.

Invited by the MSAR government, the team is to help Macau to conclude the relief work phase of the city’s management of the aftermath of Typhoon Hato, and to analyse the city’s efforts in search and rescue as well as relief matters.

Aside from members relating to disaster reduction and meteorological

matters, the team also consists of experts in crisis prevention and in mitigating the impact of disasters, as well as advisers on emergency alert systems, water resources, architecture, electricity supply, telecommunications and firefighting.

The CE said the meeting marked an important step for the city to lay out its short-, medium- and longterm plans for response to natural disasters.

Earlier this week, the CE held talks with authorities from the Guangdong government regarding the eventual construction of a tidal wall to prevent flooding in the Inner Harbour area. C.U.

The Chief Executive, Mr Chui Sai On, meets with experts from the National Commission for Disaster Reduction at the Government Headquarters.

Source: GCS

Tourism

MGTO takes part in 22nd UNWTO The Macao Government Tourism Office (MGTO) is currently attending the 22nd session of general assembly held by UNWTO (World Tourism Organization) from September 11 to 16 in Chengdu.

The deputy director of MGTO, Cecilia Tse, and head of Organizational Planning and Development Department,

Ricky Hoi, attend the assembly as an Associate Member to further enhance the city’s involvement in international tourism organisations and exchange perspectives with other participants on tourism and Sustainable Development Goals (SDGs).

The United Nations set 2017 as the International Year of Sustainable

Tourism for Development. As such, with the theme set as ‘Tourism and the Sustainable Development Goals: Journey to 2030’, the 22nd session will try to solidify actions to ensure tourism as the leading contributor for the achievement of the universal Sustainable Development Goals.

This session introduced the new

topic - Smart Tourism in the Special Session.

During the session, a new UNWTO Secretary General for the the new term will also be elected.

According to MGTO, over 1,300 registered delegates from over 130 countries and regions had attended the assembly. C.U.

Business Daily Friday, September 15 2017 3

Macau Tourism

Walking the line As some hotels and travel agencies remain with halted operations due to flooding, the city’s tourism department remains cautious about the impact of Typhoon Hato in the tourism levels this year, accepting the number of total visitors could be lower than 30 million at the end of 2017 Nelson Moura nelson.moura@macaubusinessdaily.com

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ccording t o the Macau Government Tourism Office (MGTO) Director, Maria Helena de Senna Fernandes, as of yesterday, the Legend Palace Hotel, Pousada Marina Infante Hotel, Broadway Hotel and the Sun Sun Hotel at the Inner Harbour still had their operations suspended in different levels, due to damages caused by the passage of Typhoon Hato.

Of the four properties, two include gaming facilities, with Broadway Hotel in Cotai being operated by casino operator Galaxy Entertainment Group Ltd, and Legend Palace Hotel - which opened in February of this year at Macau Fisherman’s Wharf complex - being operated by Macau Legend Development Ltd. “Legend Palace said last week that they would require at least two to three weeks to clean up damages from the flooding […] After the typhoon, every property was affected in different extent due to the interruption of

energy and water supply,” she added.

Two of the properties also requested a temporary suspension of their license, with Ms. Fernandes not disclosing which ones.

Previously the MGTO head said at the first day of the Pacific Asia Travel Association (PATA) Travel Mart trade show more than 90 per cent of hotels and 80 per cent of travel agencies in the MSAR have already resumed operations.

As of July of this year there were 107 hotel establishments and 223 travel agencies operating in the MSAR, according to data from the MGTO.

Aiming low

Ms. Fernandes also admitted the territory might see less than 30 million visitors at the end of the year due to the effects of the Typhoon on August 23 on the local gaming industry, an amount not seen since 2014.

“We’re very cautious with predictions for the second half of this year, we hope to be able to keep the same number registered in the same period of last year but

Tourists found Border Gate closed during the typhoon crisis

there will be a bit of a setback due to the recent typhoon,” she added.

Last year Macau received 30.95 million visitors, with 18.48 million having visited the city in the first seven months of this year, more 5.3 per cent than in the same period of last year.

After the typhoon, MGTO requested tour operators to suspend the arrival of tour groups, from August 25 until September 2, in order to

allocate more resources to rescue missions and restoration work in the city.

However international travel agencies still maintained their activity, with the city receiving at least 60,000 visitors daily during the exclusion period, MGTO informed.

Ms. Fernandes added that although several events had to be cancelled due to Typhoon Hato - such as 29th Macau International Fireworks Display

Contest - several upcoming events such as the 31st Macao International Music Festival, this year’s Grand Prix and the Light Festival will maintain entertainment offerings for visitors.

“We need to build back the image that we’re back in business and our tourism offers haven’t been severely affected […] The government wants to maintain at least one large event every month,” she added. advertisement

4 Business Daily Friday, September 15 2017

Macau Opinion

Pedro Cortés*

Election day Sunday, we will have elections in Macau. It is the most democratic moment of our second system. From a far place, what I have read seems to give hope for the future composition of the Assembly if some of the candidates are elected. On the other hand, we have seen some xenophobic speeches and personal attacks which are a trend in the international political scene. Unfortunately, people who have not been born in Macau tend to consider themselves as the heralds of the Region, without respecting those who made Macau the biggest gaming market in the world. I somehow understand the lure and enticement of those who, to get votes, attack nonresidents. It is engrained in the bones of persons who lack culture and worldly acumen. Same applies to disgusting personal attacks as the one made on Mr. Pereira Coutinho. My solidarity to him. Speaking on this, there is a Spanish saying along these words: “Yo no creo en brujas, pero que las hay, las hay”. That is to say that a court hearing on a specific matter during the electoral campaign, makes us think.

Well, what I expect is that the elections come without any incidents and that those who have a better vision for the future of Macau win.

They shall represent the residents without forgetting the remaining citizens of this wonderful place. In a place where the government seems to not be capable of facing the problems, the next Legislative Assembly will have a decisive role for all of us - to safeguard what the Second System is and give conditions to our younger generation.

About this generation, it is great to understand that there are very capable kids prepared for the future. Kids who have studied abroad and who have world within them with a global view of the problems. Macau cannot close itself in a dome without looking into what is around. Around is not the Asian southeast region but, otherwise, the world itself. The future generations will not forgive if we continue to have politicians with flaps around their eyes. The less flaps the politicians have, the better will be Macau’s future. *lawyer and frequent contributor to this newspaper.

Tourism

Sharing services not welcomed Housing sharing services such as Airbnb have caused problems to the local population and should remain illegal for now due to their association with “clandestine” and “criminal activities” the head of the Macau Government Tourism Office said yesterday Nelson Moura nelson.moura@macaubusinessdaily.com

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henquestionedonthe government’s stance over hospitality and rental services such as Airbnb, Ms. Fernandes said it was still “premature” to talk about allowing these services in the city, with any service that “uses homes to accommodate visitors” being an illegal operation in Macau at the moment, the Director of the Macau Government Tourism Office, Maria Helena de Senna Fernandes, said yesterday.

“The legal system in Macau defines that if any transaction is being made for a housing property or any property that isn’t designed for commercial use, this is illegal,” she added.

Ms. Fernandes also stated that the majority of Macau residents opposed these services, with two separate surveys in 2014 and 2016 not being “favourable” towards having these services at this point in time in the city.

“Macau has had problem with illegal accommodation, with the issue having created a lot of problems to residents […] People have been renting their houses, rooms, sofas,” Ms. Fernandes said.

When questioned on what kind of problems and difficulties these services were causing to Macau residents, Ms. Fernandes said that these kind of business transactions have “occurred in areas surrounding casino areas” with the people using these accommodations being

“engaged in clandestine activities, illegal operations or even criminal activities”.

“It caused many people coming in and out of different apartments and other kinds of illicit activities,” she added.

The MGTO Director followed by saying that a “consensus” needs to be reached before “these kind of Uber concepts” are introduced, possibly referring to sharing economy services.

“This is a problem that existed before Airbnb came into business […]

Any new concept has its pros and cons. In terms of Macau this concept is not generally accepted. We will continue to monitor this issue,” she added.

The MGTO head stated that in order

to provide low-cost accommodation to visitors the government was working in converting “independent buildings” into “family hostels”.

“There are currently 600 rooms in budget accommodation in the city.

We’re encouraging people to request the Land, Public Works and Transport Bureau (DSSOPT) to change the usage of their property from ‘housing’ to ‘commercial’ so they can operate a budget guest house. There are perfectly legal solutions for the market,” explained Ms. Fernandes.

Ms. Fernandes also said her department had currently around 20 applications for hotel licenses with 17 being of budget hotels, three for five-star hotels, one for the fourstar category, and two for three-star hotels.

Hotel Estoril

Reform process ready to take off The government will initiate the public tender for the architecture design plan of the project to remodel the old Hotel Estoril this month Nelson Moura nelson.moura@macaubusinessdaily.com

The public tender for the architecture design plan for the remodelling of the old Hotel Estoril will be launched “the next week or at the end of the month” the Secretary for Social Affairs and Culture Alexis Tam said yesterday.

Speaking at the sidelines of the PATA Travel Mart trade show Mr. Tam informed that after the submitted design projects to be developed in the

abandoned hotel are evaluated and the project awarded, the government will focus on the construction tender.

The government intends to develop a future youth recreation centre and performance spaces for the Macau Conservatory at the building near Tap Seac Square.

In April 2015 the MSAR government stated the reconstruction project would be granted directly to Portuguese architect Álvaro Siza Vieira, opting to change to a public tender

process one year later.

On July of last year the Urban Planning Committee allowed a future development in the building to demolish the building’s facade, including the mosaic created by Italian sculptor Oseo Acconci, with the decision remaining under the Director of the Land, Public Works and Transport Bureau (DSSOPT).

When questioned why it took almost a year since the building project was approved by the committee, Mr. Tam responded that the project required the cooperation of three services - the Education and Youth Affairs Bureau (DSEJ), the Culture Bureau and the Sports Bureau - while also requiring Chinese and Portuguese language material and translation.

Hotel Estoril was built in 1962 by local gambling tycoon Stanley Ho and has been abandoned since the 90s, with the government’s plans to renew the building meeting with opposition by some society groups.

Associations such as the New Macau Association and city planners association Macau Root Planning have requested that the building and its mosaic facade should be preserved, with the Cultural Bureau stating that the building wouldn’t be considered cultural heritage.

Business Daily Friday, September 15 2017 5

Macau Tourism

MSAR in need of catching up Compared to Las Vegas integrated resorts in Macau are lagging behind in terms of revenue management, booking agent innovation and customised offers, an expert told Business Daily Nelson Moura nelson.moura@macaubusinessdaily.com

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ocal resorts can still better implement methods to improve their revenue performance and customised booking, with these aspects having already matured in Las Vegas, the Vice President of Sales at hotel service company SHR, Drew Rosser, told Business Daily.

“The two largest revenue generators apart from renting rooms are charging for early check-in and late checkout” Drew Rosser, VP of Sales at SHR According to Mr. Rosser, revenue management alludes to the methods for maximising the revenue a hotel is able to get by room, day of week, by month and throughout the entire year.

“Having a revenue strategy is a different way to run the

hotel. In the few meetings we’ve been having here in Macau with various hotels a few told us they’re just now starting to think about using revenue management.

In some cases they don’t even have revenue managers on staff, but they know it is something they’ll have to do. In Vegas they’ve been doing it for years,” he added.

According to the SHR representative, this approach is a new “mindset” on how to manage room rates with local resorts traditionally not having a revenue management strategy, “giving rooms away and not charging” for them.

“Four to five years ago in Macau 80 per cent of hotel rooms would be complimentary but now that percentage is down to around 15 per cent,” he added.

Know your customer

Another aspect Mr. Rosser sees lacking in the local hotel and tourism industry is a more innovative and complete grid of internet booking agents, that can provide more elaborate information to customers while allowing more personalised requests.

“What we’ve seen here is that Internet booking agents are fairly simple in terms of what they offer to consumers but that’s starting to change. If you look at hotel websites of hotels in Las Vegas, not just their website but the hotel booking agent, it is more complex in

Drew Rosser, VP of Sales at SHR

terms of the rates and the various things they are offering to consumers,” he added.

In order to be able to provide a better customised service, customer data analysis is crucial to understand what customers want to do or what their preferences are, with hotels now using customer relationship management (CRM) programs.

“Big data analysis is huge at the hotel industry now. If they recognise you went to the spa, ate at multiple different food outlets or play golf, they will send you offers that include those specific things,” he added.

The analysis also allows hotels to better coordinate what comps (complimentary services) should be provided to certain customers

from services such as transportation from the airport, to specific “flowers, wine, champagne or chocolates”.

However the SHR representative stated that apart from renting rooms, the two largest revenue generators for hotels nowadays are charging for an early check-in or a late check-out.

Here to stay

When it comes to entertainment offerings by integrated resorts Mr. Rosser is adamant that “gaming is here to stay” but it will become a smaller part of the offerings.

Mr. Rosser stated that since 2007 Las Vegas gaming revenues have dipped and became static, while in Macau after hotel room occupancy and gaming average daily

revenues peaked in 2014, occupancy outpaced average daily revenues for the first time this year.

One aspect that may be contributing to this decline is the lower interest Millennials - customers born after 1980 - have towards gaming when compared to previous generations.

“They’re much more interested in experiences. If they’re going to a traditional gaming centre they’re going to clubs, shows, restaurants but not spending a lot in casinos,” Mr. Rosser considered.

This has led Las Vegas to develop a more “in your face” advertising of entertainment offers, bringing shows, magicians, singers and attracting customers that go specifically for those shows.

Election

Online campaign Facebook pages set up by pan-democratic legislator Au Kam San and first candidate, Sulu Sou Ka Hou of the seventh group - New Progress for Macau Association got the most fans as of September 13, according to the data gathered and provided by mnemono, an online platform developed by Coding Guys of which the developer also collects online statistical data.

With the inevitable approach of going online, most of the candidate groups had set up facebook pages to deliver their political ideas and plans

to the public.

Recently, the Electoral Commission (CAEL) had also charged a group of paying Facebook to advertise and to promote them.

According to the data, aside from candidate group 1 (New Ideals of Macau), group 17 (Macau Righteousness) and group 22 (Mutual Base Grassroots), the rest of the candidate groups are active on Facebook.

In terms of the number of likes, Sou has got the most likes for his posts, with the highest in a day 2,212 likes. C.U.

Trial

MP appeals against defendants absolved in Ho Chio Meng-connected case The Public Prosecution’s Office appealed on September 14 against the acquittal of three defendants in an action moved in the Court of First Instance in connection with the trial of former Chief Prosecutor, Ho Chio Meng, an official announcement informed yesterday.

The three defendants targeted by the Public Prosecution Office’s appeal are Antonio Lai Kin Ian, former chief of the Public Prosecutor’s Office, Chan Ka Fai, former chief of the Group of General Administration, and Alex Lam Hou Un, who had been mentioned on the fake companies set up by the other defendants.

They were the only three absolved of all charges in a group of nine defendants when the Judiciary Council

of Macau announced its verdict on August 15 in the parallel case against the convicted Prosecutor General.

When the sentence was announced, the whereabouts of Alex Lam Hou Un was unknown, Chan Ka Fai was not reachable by the court, and Antonio Lai Kin Ian was absent from the sentencing for medical reasons. S.Z.

6 Business Daily Friday, September 15 2017

Macau Follow-up

CTM: operating normal

‘We tested the service after we received your enquiry, and found no Local telecommunications company specific problem’, stated CTM’s reply replied to Business Daily’s enquiry email. that ‘CTM’s network and services The switch to Telegram is triggered are operating normal’, in the wake by the recent announcement made of the many complaints received by the Chinese authority that creators from residents claiming that communicating application - Telegram of online groups on WeChat would be responsible for contents and - requires a VPN (virtual private network) in order to be able to access. information within the group chat. C.U.

Results

Mandarin Oriental with 49 pct occupancy in H1 TurboJET Premium Grand class passengers up 19 pct y-o-y, Harbour Mile project still pending gov’t Master Plan Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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he Mandarin Oriental Macau, operated by local group Shun Tak Holdings Limited, saw occupancy during the first six months of the year reaching just 49 per cent, as compared to citywide average of 84.7 per cent, according to data both from a filing by the company with the Hong Kong Stock Exchange and that from the Statistics and Census Service (DSEC).

Shun Tak points out that the hotel ‘maintained an average room rate of about MOP2,000’ during the period in question and that its occupancy was due to ‘clear differentiation strategies in the upmarket non-gaming

segments’ and that it ‘maintained leading ranking in online booking platforms’.

The hotel does not have a gaming element, contrary to the other major international hotel brands in the city – MGM China, Sands China and Wynn Macau.

Regarding one of the group’s other hospitality properties, located in Coloane, it saw a 76 per cent occupancy rate during the period ‘amid intense competition from new hotels in adjacent Cotai’. The group notes that ‘it continues to occupy a niche market popular among holidaymakers,’ given the resort’s more remote location and nearby golf course.

For the group’s TurboJET ferry services, it currently operates two berths out of the new Taipa ferry terminal, but

‘in the future, the company will extend its service to up to 90 daily sailings, in order to cater to the growing demand of vacation-makers heading to Taipa and Coloane’.

Shun Tak also notes that its ‘Premier Grand class passengers registered a year-onyear increase of 19 per cent’ during the six-months.

Shun Tak’s planned development of the Nam Van area in Macau, the ‘Harbour Mile’, set to occupy the entire coastline between the Macau Tower and One Central – also a Shun Tak property – and offer 3.4 million square feet of gross floor area, is still pending the government’s review of the ‘Master Plan of Nam Van area’. The group notes that it ‘had renegotiated its position with the original sellers of the site in

November 2016, in order to facilitate future strategizing of its investment in accordance with the best interest of its shareholders’.

The group in November announced that it was asking for power-of-attorney to ‘act in the name and on behalf of’ companies owning

land related to the Nam Van project so that it could ‘among others, exercise any and all of their rights or legal entitlements in relation to any real estate properties held’ by the companies and sign agreements, make submissions, filings and applications to ‘obtain any necessary consent, authorisation or permit for the transfer or assignment of all or part of the [land rights] as well as any land rights that may be granted to’ the companies in the event of a land swap.

Regarding the overall outlook so far it notes it ‘has navigated out of a cyclical trough in terms of profit recognition and its transportation and hospitality divisions have both registered stable returns on the back of higher visitor numbers.’ advertisement

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Business Daily Friday, September 15 2017 7

Gaming

Board

Okada fights back for control of Japan’s Universal Sources say that how the battle for Universal shakes out could alter the course of a long-running dispute between Universal and Wynn Resorts Emi Emoto and Nathan Layne

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early three months after his ouster from the board at Universal Entertainment Corp, billionaire Kazuo Okada (pictured) is fighting back to try to regain control of the US$2.2 billion Japanese gaming group.

Okada is expected to say he has reinstalled himself as director of Okada Holdings Ltd, the Hong Kong parent of Universal, according to a person close to the 74-year old tycoon.

That development, which the person said was made possible by a recent change of heart by Okada’s daughter to support her father, marks a significant step in his effort to wrest back control of Universal itself.

Winning back the gaming empire he founded five decades ago is just the latest challenge Okada faces in a chequered career. He is locked in a legal battle with former associate Steve Wynn, and has been subject to a slew of tax, gaming and law enforcement probes, including those related to a US$2.4 billion casino in the Philippines.

Key Points Okada takes step to regain control of Universal parent - source Seeks also to call Universal EGM to install new board Battle for Universal may impact lawsuit vs Wynn Resorts But his ouster from Universal in June was more personal.

His son, daughter and wife voted him out of Okada Holdings in May, replacing him with two directors friendly to Universal’s board, which then dismissed him based on allegations he misappropriated US$20 million in company funds. Okada has denied wrongdoing.

Universal did not respond to questions about the changes at Okada Holdings. It has also declined to make its president, Jun Fujimoto, available for interview. People familiar with the matter say Fujimoto largely engineered the boardroom coup that ousted Okada.

How the battle for Universal shakes out could alter the course of a long-running dispute between Universal and Wynn Resorts, say people familiar with the litigation strategy on both sides.

Writing to a Universal shareholder

in June, Fujimoto said Okada was “unfit” to represent a public company, echoing Wynn’s reasoning for dismissing Okada as a director of Wynn Resorts in 2012.

Okada says he is worried Fujimoto will settle with Wynn to access more than US$2 billion held in escrow while the suit is ongoing. The money is owed to a Universal subsidiary, and not Okada, who wants a trial.

“This is what scares me most,” Okada told Reuters in an interview on July 13. “It’s natural for them to think that getting the money is the smart thing to do.”

Changing sides

Okada says his son Tomohiro and daughter Hiromi turned against him partly because they were not being paid the full dividends on their stakes in Okada Holdings, a problem he blamed on subordinates.

Contacted by phone, Tomohiro declined to comment. Hiromi could not be reached for comment.

Okada managed to get Hiromi back on his side over a series of meetings this summer, the person close to Okada said, but his relationship with Tomohiro remains strained.

Okada owns 46.4 per cent of Okada Holdings. With support from his daughter’s 9.8 per cent holding, Okada last month submitted a filing to Hong Kong’s corporate registry seeking to reinstate himself as director.

Tomohiro, who owns 43.5 per cent, is contesting the move, and the registry has not made any documents public, citing “issues with the company”.

Even if Okada takes back control of Okada Holdings, re-establishing himself at Universal is not a given, some legal experts say, noting the Universal board could fight him in court, citing the misappropriation allegations.

Okada wrote to the Universal board last month demanding a special shareholders’ meeting to install a new board, including himself. Okada Holdings, which owns two-thirds of Universal, has the right to call such a meeting under Japanese corporate law.

High stakes

For Okada, the stakes go beyond his position at Universal.

He also owns Aruze Gaming America, a slot machine maker that competes globally with International Game Technology Plc and others.

Okada’s ability to defend himself against Universal’s allegations could

impact Aruze Gaming America’s licenses to operate in the United States.

Gaming regulators in Nevada, Mississippi and Louisiana told Reuters that they were investigating Universal’s allegations against Okada.

“I’m concerned,” said Allen Godfrey, executive director of the Mississippi Gaming Commission, referring to Universal’s allegations that Okada committed fraud against the

company. “But there are always two sides to every story. The dust hasn’t settled on this yet.”

Okada and Universal sued Reuters for defamation in Tokyo in 2012 for its reporting on a US$40 million payment made by a Universal affiliate in 2010 to a Philippine consultant.

Three courts found the case had no merit, including Japan’s Supreme Court, which rejected a final appeal in July. Reuters advertisement

8 Business Daily Friday, September 15 2017

Consigliere

Realms of relaxation Summer is coming to an end throughout the Northern Hemisphere, but I’m sure you still have plenty of vacation left to enjoy.

Moreover, if you have not enjoyed all your vacation I am sure that your body has resented that.

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Óscar Guijarro oscar.g@macaubusinessdaily.com

e all know that feeling of mental and physical exhaustion after a long period of work without vacations. Getting up every day to go to work is a titanic effort. Our senses take time to gain speed, we need litres of coffee to gather enough energy to make the grade at the job and we fall asleep just as we take a seat in front of the telly every night.

So those September-October holidays are not a luxury, they are a necessity to be able to give the best of us in the coming months.

But let’s forget the hustle and bustle of a cultural vacation. Forget about visiting 10 countries in 15 days. Forbid having breakfast in Paris, lunch in London and dining on the way to New York. What your body needs is relaxation, peace of mind, healthy eating and professional care to recharge

Switzerland

The place par excellence in Europe to ski and relax. But with the firsts snow still distant, it is the moment to enjoy its wonderful landscapes of green meadows and gigantic mountains.

“Many things have changed in a century in the world of spas” Join the novel The Magic Mountain by Thomas Mann and get into the skin of spa’s visitors a 100 years ago. The origin of the classic view of spas lies between its pages.

The book happens around a spa in Davos, in the heart of Switzerland, the city that annually hosts the World Economic Forum.

However, many things

Japan

Another milestone of well-being and rest. In this case the word to follow is ryokan. The word ryokan defines a type of inn that has existed in Japan since the 8th century. Some of them have continued to operate since then, making them the oldest hotels in the world. The Nishiyama Onsen Keiunkan was opened in 705.

These types of establishment have everything that we can expect from the Japanese tradition around the care of guests. They usually have rooms with tatami, communal bathrooms and other common areas where you can wear traditional clothes. Especially attractive is the overwhelming attention of the staff.

Although many of them are located

your batteries.

Yet, we are not suggesting that you go into a creepy clinic with dubious treatments in order to leave there literally being someone else. Health and luxury are not at odds. Quite the contrary, health and luxury join some of the best places on the planet to regain health.

Let’s go around the globe to see what we can find, if we want to say goodbye to our fatigue.

have changed in a century in the world of spas - especially in the latter part of the 20th century. Hydrothermal treatments saw a real revolution in the last 25 years of the past century by unifying different ways of treating the body with water. Variations in water pressure, temperature, acidity and salinity can now be found in Swiss’ spas and all over the world.

One of the most interesting venues in the world of relaxation-holiday is the Tschuggen Grand Hotel. Its history begins in 1883, when the German citizen Otto Herwig arrived in the Swiss locality of Arosa due to suffering respiratory problems. Convinced of the air quality of the region he founded a sanatorium that became the Grand Hotel in the winter season 1929/1930, becoming a landmark for ski followers. In 1966 the hotel was destroyed by fire and its reconstruction took more than four years. In 2004

the hotel took a new turn to undergo a major renovation that led to the opening of the “Tschuggen Bergoase” spa.

The renovation was carried out by the Swiss architects Mario Botta and Carlo Rampazzi, providing it with a completely renewed aspect that blends it with the surrounding landscape. In addition, the Tschuggen Express was opened, taking tourists to the skiing slopes.

As for the spa, Mario Botta also intervened in its design. It is a 5,000 m2 facility distributed over four floors with panoramic views from the very inside of the mountain. The design of the facilities includes a sauna area, the treatment suites, the fitness area, and the Medical Wellness area. It also has a rooftop pool that reflects the alpine landscape. The spa’s offer is based on effectiveness and professionalism, as the company itself defines on its website.

in large cities, the most important are in natural spaces. Like the Sansou Murata, which is in the vicinity of Yufuin, a popular spa area in Oita Prefecture on Kyushu Island.

This ryokan was built in 1992.

The twelve guesthouses of the complex were brought from the northern region of Niigata, where they had been used for over 100 years. In addition, guests can enjoy the thermal baths in their own rooms. Sansou Murata stands out for its “omotenashi”, the word that defines the traditional mode of Japanese hospitality, however they can also speak English, unlike many other similar centres. Meals are served in the guest’s room.

Enjoy the Weekend

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hen it comes to talk about the most popular artists, Canadian singer Abel Makkonen Tesfaye AKA The Weeknd (pronounced “the weekend”) undoubtedly has a place on the list. In the end of 2010, R&B singer Drake released a mysterious song by an unknown and unsigned singer on his blog. The only information given was the name of the artist and song, ‘The Weeknd - Loft Music’. The post created a lot of buzz and confusion with members of the blog who liked the song. Two months later, a YouTube channel called xoxxxoooxo released a video of a new song by the The Weeknd. After that, this mysterious singer kept releasing songs online until 2013 and the identity of The Weeknd has been revealed as 20-year-old Canadian rapper Abel Tesfaye. If you are a R&B music lover, you have heard his platinum single “The Hills” and “Can’t feel my face” which went on to top the Billboard Hot 100 chart. If you never listened to his songs, you might know the rumours and seen the pictures of the relationship between him and the queen of Instagram Selena Gomez

and Victoria’s secret angel Bella Hadid.

The Weeknd does not only have excellent performance in music but also does a great job in the fashion industry. It’s not news that singers jump into the team of designer, for example, Rihanna and Pharell are big names in fashion now. In the end of 2016, The Weeknd did a successful collaboration with Puma by releasing the IGNITE Limitless Hi-Tech sneakers. The sneakers had a very good sale and he was acclaimed “The second Kanye West”- the singer who designs the most famous and expensive sneakers “Yeezy.”

In order to showcase more unique personality and talent in design and get rid of the name of “the second xxx”, The Weeknd also launched his brand XO, it is the same name of his label.

XO showcases a large range of clothing, which is reflecting the individual characteristic of the singer. Cream rises to the top, The Weeknd’s design is well received by worldwide fans now, so long as you talk about fashion icon and fashion singer, he enjoys the equal popularity with the names I mentioned before.

This year, The Weeknd teams up with Puma

Business Daily Friday, September 15 2017 9

Consigliere

Morocco

Another of the common memories that we always resort to when talking about spas is the Arab culture.

Arab baths can be found all over the North African coast with roots spreading to centuries ago. This culture of passion for water as a means of wellbeing is exponentially increased in the Moroccan concept of riad.

The riads were the traditional houses of the wealthy classes of Morocco. Emulating the structures of the Roman traditional domus, they are an evolution built around a central courtyard with a pool, well or water tank. The vegetation populates the common areas, with all the rooms turning their life towards the central patio. The intricate Arab architecture takes on

new meaning in the Roman structure to create spaces where relaxation, serenity and exaltation of the senses can restore us the peace of mind we need so much during our holidays.

Marrakech is one of those cities where you can enjoy the riads to its maximum level. Among the vast offerings of Marrakech, the name of Royal Mansour shines with self-light. The hotel is one of the jewels of the crown of the national hospitality industry. A true wonder with 53 riads in its grounds that take guests to another dimension.

The villas are connected by paths with a private medina, the name for downtown in the North-African culture.

Vegetation and architecture blend in to create a unique environment.

The resort has 2,500 m2 of spa on three levels - a natural development for the Mansour as bath rituals are an essential part of the Moroccan tradition. But unlike other cultures where the natural obscurity of the materials and the approach to nature

imposes its design, in the Royal Mansour the luminosity of the Andalussi culture affirms its prominence.

The hotel offers facials, hydrotherapy, therapeutic wraps, plus two hammams and relaxation areas. Hammam is the word given in

Short guide for beginners

Bali

Asian cultures have been especially important in defining the aesthetics and functioning of modern spas.

Massages and therapies that have been developed in cultures such as China, India, Thailand or Indonesia, to mention just a few, are the basis of the relaxation treatments that can be found in the main cities of the planet. But they have also brought their aesthetics, their colours, smells and forms to spas around the world.

However, in Bali, one of the islands of Indonesia, we can find that they are far from simply sitting still in their tradition. In addition to an extensive usual offer, we can find options as interesting as the Bulgari resort.

The prestigious Italian luxury firm, besides being famous for its jewellery and watchmaking designs, now diversifies its business with a hospitality offer. In Bali it has a complex located on a promontory of volcanic origin at 150 meters above sea level with direct access to a private beach through a funicular. In the resort they combine design, luxury and nature.

The venue is the second experience in the signature sector after its hotel in Milan.

It’s highest point is a Hindu temple where they perform religious rituals

daily. The relaxation and fusion with the environment are two elements present in the architecture of the centre, which has private villas and mansions. It also has the exclusive Bulgari Villa, of 1,300 m2 on two levels and all the amenities of a modern palace. It is designed for celebrations that can hold up to 50 guests.

once again. During his current Legend of the Fall World Concert Tour, The Weeknd has teased some of the key styles, that kept his fans, sneakerheads and the fashion set intrigued.

He is ready to show the world the new styles that reflect his personal style merged with Puma’s sport-inspired silhouettes. This Puma x XO Parallel Collection is him personified and here to break the rules of street wear: bomber jackets, boots, and kimonos are finished with camo, suede, and denim. Classic meets futuristic. Military meets luxury. The collection releases in 3 drops. The first drop is the first-ever Puma x XO footwear – the Puma Parallel. Inspired by military and utilitarian gear, the all-new silhouette is a mid-cut sneaker boot that’s fully decked out in luxurious Italian nubuck leather upper. The smooth rubber midsole features IGNITE cushioning technology. The

boot boasts a contemporary blocked heel design with an extended Form strip and co-branded labels.

The Weeknd also has a new collection with H&M hitting stores later this month. The Toronto star recently announced his latest collaboration with the retail giant on Instagram, sharing a glimpse at one look from the collection. In the picture, he wears a purple letterman jacket with a huge “W” on it. He actually showcased the jacket in his appearance on Lil Uzi Vert’s “XO Tour Llif3” video last week. This is the second time The Weeknd collaborates with H&M. This time they will release a full 18-piece collection hits select H&M stores and online shop. Mentioned in passing, H&M also released the new additions to another famous Canadian singer, Justin Bieber’s, range of Purpose-based apparel a week ago.

“Asian cultures have been especially important in defining the aesthetics and functioning of modern spas” But if we focus in relaxation, we cannot fail to mention the spa facilities. Exclusive pavilions can be reserved for treatments for a minimum of three hours. The menu includes options such as exfoliation with yogurt and spices, and body polishing as practiced in the palaces of the island of Java during the seventeenth century.

Edwina Liu, Essential Macau Editor

Morocco to the Arab steamy baths. It also has facilities for beauty and a culinary offer based on the Mediterranean diet filtered by the local sieve. The change of culture is totally radical and ten days in a riad may work miracles on a weary soul.

If you do not want to be lost to the immense catalogue of massages that unfolds in the best establishments in the world, we are going to give you some clues about them.

Thai Massage: It is an energetic massage. Relaxation is only obtained at the end of it, as the massage process includes firm pressure and rotations based on traditional Ayurvedic medicine.

Reflexology: It is a technique that aims to achieve its therapeutic goals by pressing specific points of the body that connect with areas remote from it, and not always muscular.

Swedish Massage: A combination of studies on Oriental massage crossed with the Western manners and applied to muscle relief. It lacks the glamor of the rituals of the Eastern cultures but its effectiveness made massages popular in Europe.

Aromatherapy: It is a massage for the senses. The manipulation is superficial and the composition of the oils used in the massage are the real secret of its success.

Temperature Massage: Can be with stones or bandages. It allows for muscular distension.

Vacuum Massage: Very popular in China. It exerts the suction effect by burning the air contained in some glass capsules. It leaves purple circles in the applied areas for a few days.

Exfoliations: Using different materials, dead skin is removed while massaging the most superficial muscles.

Hydrotherapies: Based on the baths, they combine jets of water at different temperatures and pressures.

10 Business Daily Friday, September 15 2017

Greater China Economy

Mainland’s economy losing some steam as investment growth hits 18-year low A year-long, government-led construction boom has lifted demand and prices for everything from cement to steel to glass, helping offset an expected drag from property cooling measures and a regulatory crackdown on riskier types of financing Kevin Yao and Lusha Zhang

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hina posted a rare flurry of disappointing data yesterday -- including its slowest growth in investment in nearly 18 years -suggesting the world’s second-largest economy is finally starting to lose some momentum as borrowing costs rise.

Factory output and retail sales also grew less than anticipated, though a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and comfortably on target ahead of a key leadership reshuffle next month.

“I think the risk (for China) isn’t in the next couple of months but rather the next couple of years,” said Capital Economics’ Julian Evans-Pritchard.

“Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow and the structural drags on growth remain quite strong and are real risks.”

Analysts had widely expected China’s August data to show industrial output and retail sales growth had accelerated after fading slightly in July, while investment was seen as only marginally softer.

That would have fit into a pattern of stronger-than-expected readings from China in the first half of the year and upbeat surveys on August factory activity.

A year-long, government-led construction boom has lifted demand and prices for everything from cement to steel to glass, helping offset an expected drag from property cooling measures and a regulatory crackdown on riskier types of financing.

But August’s data suggested the strong boost from Beijing’s infrastructure building spree may be starting to fade.

Fixed-asset investment, a key growth driver for the world’s second-largest economy, grew 7.8 per cent in January-August from a year earlier, the weakest pace since December 1999 and cooling from 8.3 per cent in January-July.

The main drag appeared to be a slowdown in infrastructure investment due to a significant drop-off in government fiscal spending over the past two months, analysts said.

China frontloaded fiscal spending this year to produce rosy growth ahead of the once-in-five-years Communist Party Congress next month, Evans-Pritchard said. But local governments are constrained by annual budgets and have had to pare back spending in the second half of this year, he added.

That likely had a knock-on effect on industrial output, which rose 6.0 per cent in August on-year, the weakest pace in nine months, statistics bureau data showed.

Analysts polled by Reuters had predicted output would grow 6.6 per cent in August, up from 6.4 per

cent in July.

The statistics bureau said unusually hot and wet weather weighed on industrial output last month, adding that the economy remained on a steady, improving trend. On a monthly basis, output rose nearly half a per cent.

China’s crackdown on pollution may have also dented industrial output, as Beijing looks to close older, smog-belching mines and factories, said Nie Wen, an economist at Hwabao Trust in Shanghai.

Still, economists at Nomura maintained their view that the economy would expand 6.8 per cent in the third quarter from a year earlier, easing only slightly from 6.9 per cent in the first half.

That would keep China on track to easily beat the government’s fullyear growth target of around 6.5 per cent, even if there is some further softening late in the year.

Property

Overall investment may have softened further if not for an unexpected rebound in the property market, which directly affects 40 other business sectors in China.

Despite a series of government curbs which have largely succeeded in cooling red-hot housing prices, activity in the property market snapped back in August, possibly as developers turn their focus to smaller cities with fewer restrictions.

Property investment, which mainly focuses on residential real estate but also includes commercial and office space, grew 7.8 per cent in August on-year, versus 4.8 per cent in July,

according to Reuters calculations from yesterday’s data.

New construction starts measured by floor area, a telling indicator of developers’ confidence, were up 5.3 per cent after contracting in July for the first time since last September.

Key Points Softer data points to some loss of steam for China’s economy But overall growth still solid, seen easily hitting 2017 target Investment, industrial output, retail sales growth all ease Jan-Aug fixed-asset investment growth at near 18-year low Aug industrial output growth weakest in 9 months, up 6 pct y/y But property investment, new construction re-accelerates Growth of private investment slowed to 6.4 per cent in January-August from 6.9 per cent in the first seven months of the year, suggesting small- and medium-sized private firms still face challenges in accessing investment-finance.

Private investment accounts for about 60 per cent of overall investment in China.

Retail sales also miss

Retail sales also confounded market expectations, rising 10.1 per cent in August on-year, the slowest pace in six months and cooling from 10.4 per cent in July. Analysts had expected

a slight pick-up in demand.

Again, however, sales rose at a decent clip from a month earlier, and shoppers are expected to throng the stores and online sites as usual in October over the long Golden Week holidays.

Other data for August released last week was mixed, with imports beating expectations -- pointing to still solid domestic demand, while exports grew less than expected. Producer and consumer inflation quickened more than forecast.

Producer prices, particularly for building materials, have surged this year, giving China’s long-ailing and heavily-indebted industrial sector its best profits in years. But some analysts said higher prices may also be skewing the data and exaggerating the strength of its economic recovery.

Foreign investment in China has remained tepid, though a sharp rebound in the yuan currency may be a game changer if sustained.

Foreign direct investment (FDI) in China fell 0.2 per cent in the first eight months of 2017 from a year earlier to RMB547.94 billion (US$83.72 billion), Commerce Ministry data showed. But for August alone, it rose 9.1 per cent.

China’s outbound non-financial investment (ODI) slumped 41.8 per cent in January-August from a year earlier as authorities continued to crack down on speculative outflows and “irrational” overseas asset purchases which had pressured the yuan.

Some acquisitive and high-profile Chinese firms have had to scrap plans for global acquisitions in recent months. Reuters

Business Daily Friday, September 15 2017 11

Greater China Metal

In Brief

Environmental crackdown hits August metals output In the first eight months of the year, China produced 22.17 million tonnes of aluminium, up 6.1 per cent from the same period last year Tom Daly

China’s non-ferrous metal output fell to a one-year low in August, in a sign that Beijing’s environmental crackdown is curbing supplies of base metals, with aluminium also hit by efforts to rein in output.

Production of 10 nonferrous metals - including copper, aluminium, lead, zinc and nickel - fell 2.2 per cent to 4.42 million tonnes, official data showed on Thursday, the lowest in a year and the first year-on-year drop since December 2015.

Key Points Non-ferrous metals production lowest in a year Lead, copper smelters shut after inspections

because of the crackdown. Lead has been particularly hard hit, with 80 per cent of illegal secondary smelters shut down since the second half of last year, according to research group Antaike.

China’s primary aluminium production fell for a second successive month in August to its lowest level since April 2016, as the government’s effort to curb excess smelting capacity starts to bring results.

Aluminium output fell 3.7 per cent year on year to 2.64 million tonnes last month, and was down nearly two per cent on July, the data from China’s National Bureau of Statistics showed.

The government will release a breakdown of the other individual metals later this month.

August was the first month after Shandong-based smelters China Hongqiao, the world’s top

aluminium producer, and Xinfa Group were forced to shut a combined 3.2 million tonnes per year of illegal capacity.

More cuts could follow, said Jackie Wang, an aluminium consultant at CRU in Beijing.

“We do think aluminium production will go slightly down going forward,” she said. “Because of the supply-side reform cuts and upcoming winter cuts, we expect to see a bit of a deficit in Q4 in China.”

In the first eight months of the year, China produced 22.17 million tonnes of aluminium, up 6.1 per cent from the same period last year.

Ja n u a r y -A u g u st n o n f e r r o u s production was up 4.9 per cent at 36.4 million tonnes. The other non-ferrous metals are tin, antimony, mercury, magnesium and titanium. Reuters

Aluminium output falls on capacity closures “I think it is definitely related to the crackdown on production that will pollute the environment,” said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

The impact of China’s environmental protection campaign was also evident in weak industrial production growth, she said.

China has launched an aggressive campaign to curb choking smog in its northern regions, promising to close more factories and enforce bigger emission cuts in coming months, along with random spot checks to ensure targets are met.

Smelters of copper and other nonferrous metals have faced closures

VW China has been asked to recall 103,573 vehicles, FAW-Volkswagen 2.35 million vehicles and SAIC Volkswagen 2.4 million vehicles

million Official estimates of how many cars in China have air bags made by Takata

The recall comes after Chinese watchdogs asked the German automaker as well as General Motors Co and Daimler AG’s Mercedes-Benz to recall vehicles with Takata air bags earlier this year.

Hong Kong’s currency system can’t realistically serve as a conduit between China and the rest of the world, according to a former chief executive of the Hong Kong Monetary Authority. The city’s status as a global financial centre makes its economy especially vulnerable to volatile fund flows -- a dilemma that will only deepen as China relaxes its capital controls, Joseph Yam wrote in a blog post yesterday. It may be wise to let local stocks be priced and traded in the yuan as well, he suggested.

Hong Kong’s dollar is pegged to the greenback. Yam -- known for defending the peg during the Asian financial crisis -- is not one to shy from controversy. The local dollar spiked in 2012 after he called for a review of the peg. Just last month, Yam, now on the Hong Kong government’s executive council, advocated a more proactive fiscal policy, a stance that was seen as a subtle dig at the last administration. The peg means Hong Kong has to track U.S. monetary policy.

Massive inflows since the global financial crisis have contributed to inflation and asset rallies, making the city the world’s least affordable housing market.

Germany’s Siemens to set up robotics research centre in China

VW, partners to recall 4.86 mln vehicles over Takata airbags

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Ex-HKMA chief just cast doubt over the Hong Kong Dollar’s future

Setup

Recall

Volkswagen AG and its Chinese joint ventures FAW-Volkswagen and SAIC Volkswagen will recall 4.86 million vehicles in China due to potential issues with Takata Corp air bags, a blow to the carmaker in the world’s largest auto market.

Currency

Official Chinese estimates show over 20 million cars in China had air bags made by Takata, which have been linked to at least 16 deaths and 180 injuries globally. The air bags have the potential to explode with too much force and spray shrapnel.

The defect led to the biggest recall in automotive history and eventual bankruptcy of the Japanese maker.

Volkswagen told Reuters in an emailed statement yesterday that after discussions, Chinese authorities had concluded the fault could occur in rare cases when the air bag was deployed, “which may create a potential safety risk”.

“Acting upon advice from the Chinese safety authority, Volkswagen Group China therefore made this recall decision.”

The carmaker said it had not received any reports related to the issue affecting its vehicles globally, and that a parts analysis had found

Takata air bag inflators - the suspected cause of the defect - were in “normal condition”.

China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) said in a statement that VW China would recall 103,573 vehicles, FAW-Volkswagen 2.35 million vehicles and SAIC Volkswagen 2.4 million vehicles.

Key Points Recall of vehicles to begin in March -watchdog Watchdog had previously asked VW to recall cars Takata airbags linked to deaths, injuries globally The watchdog said the recall would run from March next year into 2019.

Volkswagen said the carmaker and its Chinese partners would provide free air bag replacements on the recalled cars.

Volkswagen, which also owns the high-end Audi AG brand, is not the only carmaker hit by recalls in China related to Takata air bags.

As of the end of June this year, 24 out of 37 affected automakers had recalled 10.59 million vehicles. A further five had made plans to recall 1.26 million vehicles.

Volkswagen delivered 3.98 million vehicles in China last year, an increase of 12.2 per cent on 2015, making it the biggest foreign automaker in the country. Reuters

German industrial group Siemens said yesterday it was setting up a robotics research centre in China, the world’s biggest market for industrial robots. The Chinese government has said robotics is a strategic priority, part an effort to encourage technology innovation in its industry. The Siemens research centre at Beijing’s Tsinghua University would focus on combined mechanics and electronics, human-robot collaboration and the application of artificial intelligence in robotic controllers, the German firm said. “Siemens is investing heavily in the future of China and partnering with the country and many customers on its way to digitalisation,” the Munich-based group’s Chief Technology Officer Roland Busch said. Siemens makes about 14 per cent of its sales from its digital factory industrial hardware and software division, one of its fastest-growing businesses.

Its other businesses are in energy, transportation and healthcare.

IPO

ZhongAn online is said to set terms for up to US$1.5 billion IPO ZhongAn Online P&C Insurance Co. has set tentative terms for a Hong Kong initial public offering that could raise as much as US$1.5 billion, people with knowledge of the matter said, as it pursues the city’s first major fintech listing.

The company, backed by Chinese billionaire Jack Ma, plans to sell shares at HK$53.70 to HK$59.70 apiece, the people said. Shanghaibased ZhongAn is seeking a valuation of as much as US$11 billion, according to the people, who asked not to be identified because the information is private. It plans to start taking investor orders Sept.

18, the people said. ZhongAn Online is seeking a listing amid a rally in the city’s benchmark Hang Seng Index, which last month hit its highest level in more than two years. Any deal would add to the US$9.4 billion of first-time share sales in Hong Kong this year, data compiled by Bloomberg show.

12 Business Daily Friday, September 15 2017

Asia Employment

Sizzling Australia jobs growth in August no spark for inflation In total 269,000 jobs have been created so far this year, the labour force has also expanded by an equally sizable 257,000 Swati Pandey and Wayne Cole

A

ustralia’s jobs blew past expectations to surge the most in two years in August, yet unemployment was static as more people looked for work, limiting upward pressure on wages, inflation and interest rates.

Yesterday’s data from the Australian Bureau of Statistics (ABS) showed employment leapt 54,200, the biggest jump since October 2015 and far above the 15,000 increase forecast by economists. That was the 11th straight month of gains, the longest streak in 23 years.

The data will be welcomed by the Reserve Bank of Australia (RBA), yet the surge in jobs is unlikely to convince it to nudge rates higher.

“While the strength in the labour market is very positive for momentum in the economy, the outlook is still mixed because price pressures are low,” said Diana Mousina, senior economist at AMP Capital.

“We don’t think that the central bank needs to be raising interest rates.

Wages growth is still too low.”

While a blockbuster 269,000 jobs have been created so far this year, the labour force has also expanded by an equally sizable 257,000, keeping the jobless rate steady at 5.6 per cent.

Indeed, the participation rate was the highest since September 2012.

That slack in the labour market is likely to keep wages growth near record lows and restrain inflation which is stuck under the RBA’s target band of 2-3 per cent.

The RBA slashed interest rates twice last year to a record low 1.50 per cent to help stoke inflation. It has since

stood pat on policy for over a year and most economists polled by Reuters this month see rates steady over a one-year horizon.

The biggest argument against raising rates is the downbeat consumer sector which is battling record-high mortgage debt and rising living costs at a time when income growth has remained subdued.

Consumer confidence in Australia has slumped in sharp contrast to upbeat business polls.

The divergence between the two is unusual and could well be a stumbling block for Australia’s A$1.7 trillion economy which has had a dream run of 26 years without recession.

The Australian dollar briefly hopped up 20 ticks on the data to touch a high of US$0.8017. It last stood at US$0.8003 against a resurgent

greenback.

“Stronger employment means more people have money in their pockets, ready to spend,” said Craig James, chief economist at broker CommSec. “A stronger economy also means higher revenue and profits and clearly that is positive for sharemarket investors and superannuants.”

Low paying jobs

Yesterday’s data showed employment was racing at an annual rate of 2.7 per cent in Australia, compared with 1.4 per cent in the United States.

Over the past six years, annual U.S. jobs growth has not exceeded 2.3 per cent.

Part of the story behind sluggish wage growth is that many of the new jobs being created are in service

sectors that tend to pay less overall.

ABS does not give a sector-wise break-up of jobs in its monthly series but quarterly data shows health, education and accommodation all boasted healthy gains in the year to June while services in general accounted for two thirds of all jobs.

One hopeful trend was a marked pick-up in hiring within professional services - everything from architects to lawyers - which tend to pay well over the average.

Some 62,000 net new jobs were created in this sector in the year to June, easily the strongest of the 12 industries covered.

Economists say an increase in government spending for infrastructure projects around Australia means more jobs in construction and engineering sectors. Reuters

Technology

Samsung ties robot-car efforts into Harman after US$8 billion deal The company is also creating a fund to invest in an array of technologies needed to enable self-driving and connected cars, from sensors and machine vision to artificial intelligence and security Gabrielle Coppola

Samsung Electronics Co. is upping its US$8 billion bet on automotive technology, forming a separate business unit within Harman to house autonomous driving products and placing US$300 million into a new fund investing in startups in the space.

The autonomous driving unit will compete on everything from driving algorithms to systems integration, Dinesh Paliwal, Harman’s chief executive officer, said in a phone interview. That will include an advanced-driver assistance platform with open software that allows outside engineers to build products off of it -- a shot at Mobileye, which was acquired by Intel Corp. this year in a move that mirrored Samsung’s automotive leap.

“Our industry is literally screaming, saying, ‘We love Mobileye but we need an open platform,”’ Paliwal said.

“Competition is the best thing ever.

The auto industry wants us to do it and we think we have the capacity and the fuel power.”

The South Korean smartphone

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maker, which snapped up U.S.-based Harman International Industries Inc. last year for US$8 billion to elbow its way into the hotly contested market for automotive tech, is betting it can marry its consumer electronics expertise with Harman’s presence in dashboards all over the world. If it works, it will be able to offer carmakers a lightning-quick connected

system for infotainment, mapping, concierge services and autonomous driving -- without the competitive anxieties other tech giants like Apple Inc. or Alphabet Inc.’s Google tend to arouse.

Startup fund

John Absmeier, vice president of smart machines for the Samsung

Strategy & Innovation Centre and former director of Delphi Automotive Plc’s autonomous vehicle project in Silicon Valley, will lead the new unit, which was announced yesterday at the Frankfurt motor show.

To further access to new tech, Samsung is also creating a fund to invest in an array of technologies needed to enable self-driving and connected cars, from sensors and machine vision to artificial intelligence and security. The fund’s first strategic investment will be in TTTech, a safety-controls developer for autonomous systems.

In a statement announcing the unit, Samsung was careful to note that it won’t enter the car-manufacturing business, positioning itself as non-threatening ally to automakers.

Samsung in August received a California permit to test autonomous cars on public roads.

“If we were not acquired by Samsung, in five years’ time we would have been struggling,” Paliwal said.

“This is all about scale going forward.” Bloomberg

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Business Daily Friday, September 15 2017 13

Asia In Brief Inflation

India’s August wholesale inflation rises most in four months

Policy

Japan’s low-inflation puzzle unlikely to sway BOJ into action The BOJ is set to keep intact a pledge to guide short-term interest rates at minus 0.1 per cent and the 10-year government bond yield around zero per cent Leika Kihara

Japan is in the middle of a solid economic recovery, with business confidence at a decade-high. But inflation remains stubbornly low.

Sounds familiar?

The Bank of Japan, having tried many tricks in its monetary policy playbook to vanquish decades of falling consumer prices, is expected to stand pat next week and signal that no further stimulus is forthcoming.

The nine-member board will likely debate why inflation remains puzzlingly low. While that question has been a perennial one for Japan, the mystery this time is that prices remain tame even as job availability hit a 43-year high and consumption has rebounded.

Given the slow inflation, some policymakers already worry that the BOJ may have to cut its inflation forecasts again at a quarterly review of its projections in October, say sources familiar with the bank’s thinking.

“It’s too early to think about new projections. But it’s true inflation remains lacklustre despite pretty strong economic growth,” said one of the sources.

Low inflation is a global phenomenon, including in many parts of Asia, Europe and the United States. In Japan, the problem has persisted since the late 1990s.

At the two-day rate review ending on Sept. 21, the BOJ is set to keep intact a pledge to guide short-term

interest rates at minus 0.1 per cent and the 10-year government bond yield around zero per cent under its yield curve control (YCC) policy.

It is also seen maintaining a loose pledge to keep buying bonds so its holdings increase at an annual pace of 80 trillion yen (US$724 billion).

The BOJ has actually slowed purchases as strong demand for bonds briefly drove down 10-year bond yields below zero per cent. Maintaining the current pace of buying would see the BOJ purchasing around 60 trillion yen per year.

Key Points 2-day rate review ends Sept 21, decision expected 0230-0430 GMT BOJ seen keeping interest rate targets unchanged Weak inflation may force BOJ to cut forecast again in Oct Gov. Kuroda to stress BOJ nowhere near exit from easy policy Kuroda to brief media 0630GMT But central bank officials say they have no plan to change or remove the pledge as the BOJ may be forced to accelerate buying again if external factors send yields spiking.

In a post-meeting briefing, BOJ Governor Haruhiko Kuroda is likely to stress the bank is in no rush to

follow the footsteps of its U.S. and European counterparts in dialling back stimulus.

Japan’s economy expanded at an annualised rate of 2.5 per cent in the second quarter thanks to robust exports and a pick-up in consumption.

A recent survey showed manufacturers’ confidence at a decade-high.

But core consumer prices rose just 0.5 per cent in July from a year earlier, well below the BOJ’s 2 per cent target, as firms remain wary of scaring away households with price hikes.

The central bank cut its price forecasts in July and now expects inflation to hit 1.1 per cent in the year ending in March 2018, still exceeding a 0.6 per cent rise projected in a Reuters poll.

Some BOJ officials concede that another cut in the forecast may be inevitable at the October review, but add that any such downgrade would not trigger additional easing.

In an analysis in July, the BOJ partly blamed weak inflation on companies’ efforts to streamline operations to meet labour shortages, such as automating operations with new machinery.

“Such efforts would boost productivity and won’t necessarily be bad for the economy,” justifying standing pat on policy even if inflation remains subdued, another source said.

The BOJ has had to push back the timing for reaching its price target six times since it deployed its massive stimulus programme in 2013. It now expects consumer inflation to hit its target by March 2020. Reuters

Results

Hermes warns of second-half slowdown after profit beats on Asia In July, Hermes reported first-half sales rose 10 per cent Robert Williams and Corinne Gretler

Hermes International warned second-half sales may slow after the French luxury handbag maker reported profit for the first six months of the year that exceeded analysts’ estimates, boosted by strong demand in China and increasing appetite for leather bags.

Operating profit rose 13 per cent to 931.3 million euros (US$1.1 billion), Paris-based Hermes said in a statement Thursday. Analysts had predicted 919.5 million euros. The operating margin widened to a record 34.3 per cent.

The first-half results benefited from the non-recurring impact of foreign exchange hedging from 2016, which won’t extend into the full year, Hermes said. The company maintained what it called an

“ambitious” goal for medium-term revenue growth as it expects to keep weathering “growing economic, geopolitical and monetary uncertainties around the world.”

In July, Hermes reported first-half sales rose 10 per cent, excluding currency shifts, as new production sites boosted supply of its signature Birkin and Kelly handbags. Bloomberg

India’s wholesale inflation accelerated the most since April on higher food and fuel costs. Wholesale prices rose 3.24 per cent in August from a year earlier, the Commerce Ministry said in a statement on Thursday.

That’s close to the 3.2 per cent median estimate in a Bloomberg survey of 31 economists. Wholesale price inflation in July stood at 1.88 per cent. While the data is in line with expectation of a seasonal rise in food prices and after disruption to supply chains following the implementation of a nationwide goods and services tax in July. The index for food articles rose by 5.75 per cent, the statement said, while fuel, power and lighting prices rose 10 per cent.

Manufactured products rose 2.45 per cent. It follows the release of consumer price data on Tuesday which showed India’s August inflation rate accelerated the fastest since March, exceeding expectations ahead of the central bank’s policy review in October.

Bailout

IMF delays Mongolia bailout payment after gov’t ousting The International Monetary Fund (IMF) will delay disbursing bailout funds to Mongolia after the country’s prime minister and Cabinet were toppled in a parliamentary no-confidence vote last week, the fund said on Thursday. Cash-strapped and debt-ridden Mongolia was granted a US$5.5 billion rescue package from the IMF and other partners in May after clashes with investors, government overspending and declining commodity export revenues tipped the country into an economic crisis last year. However, the Mongolian People’s Party (MPP) government, which negotiated the IMF deal, was ousted by parliament last week amid allegations of corruption and incompetence, as well as a damaging July presidential election defeat. The IMF office in Mongolia confirmed that what would have been the first review of the bailout package would now be delayed until a new administration is formed. That review had been expected to result in the disbursement of about US$37.82 million of the funds.

M&A

Pension funds to buy majority of Copenhagen Airports in US$1.6 bln deal A Canadian and a Danish pension fund, Ontario Teachers’ Pension Plan (OTTP) and ATP, have agreed to buy a 57.7 per cent stake in Copenhagen Airports (CPH) from Australia’s Macquarie for about 9.8 billion Danish crowns (US$1.57 billion). The transaction depends on approval by the Danish and European Union authorities and is expected to be completed in the fourth quarter, the parties said in a joint statement. The two funds estimated the offer price would be about 5,700 crowns per share, but said this could fluctuate depending on the date of completion. Shares in the airport company rose as much as 12.3 per cent after the announcement to 5,750 crowns per share. Macquarie has invested more than 10 billion crowns during its 12 years of ownership in the company which owns Kastrup airport, the main international airport serving Copenhagen. The Danish state owns 39.2 per cent of the firm and Denmark’s Finance Minister Kristian Jensen said on Twitter he was “very satisfied” that the future ownership was clarified and was looking forward to working with the new shareholders.

14 Business Daily Friday, September 15 2017

International In Brief Automotive

Merkel says car industry must work hard to rebuild trust Chancellor Angela Merkel called on German car industry to clean up its act for the sake of it employees and the wider economy as she opened the Frankfurt motor show on Thursday, pointing to threats on the horizon to the combustion engine. “A lot of trust has been destroyed. That is why the industry must do everything to win back confidence, in its own interest and that of employees and German industry,” Merkel said. Merkel noted that the Volkswagen emissions scandal had broken just after she opened the car show two years ago, adding that the industry faced many challenges, such as suggestions that China might eventually ban combustion engines. She predicted that combustion engine cars would still be needed for decades as demand was booming in many parts of the world, while German automakers were also making strides to roll out new electric models.

M&A

UK confirms Murdoch’s Sky bid will be examined over broadcasting standards Rupert Murdoch’s planned $15 billion takeover of European broadcaster Sky will be referred to regulators over concerns about broadcasting standards, Britain’s Culture and Media Secretary Karen Bradley said on Thursday.

Bradley had said on Tuesday she was “minded” to refer TwentyFirst Century Fox’s planned purchase of the 69 percent of Sky it does not already own to the Competition and Markets Authority (CMA) to look into corporate governance. “Yesterday I received letters on behalf of both parties to the merger, confirming that while they disagree with my ‘minded to’ decision they would not be making substantive representations in relation to it,” she told parliament. “As a result, I can confirm that my ‘minded to’ decision is now final and I will now refer the merger to the CMA for a phase 2 investigation on media plurality and genuine commitment to broadcasting standards grounds.” Bradley said the CMA would have 24 weeks to investigate the merger plans.

M&A

Internet

EU set to demand Internet firms act faster to remove illegal content The guidelines, expected to be published at the end of the month, are non-binding but further legislation is not ruled out by Spring 2018 Julia Fioretti

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ompanies including Google, Facebook and Twitter could face European Union laws forcing them to be more proactive in removing illegal content if they do not do more to police what is available on the Internet.

The European Union executive outlined in draft guidelines reviewed by Reuters how Internet firms should step up efforts with measures such as establishing trusted flaggers and taking voluntary measures to detect and remove illegal content.

Proliferating illegal content, whether because it infringes copyright or incites terrorism, has sparked heated debate in Europe between those who want online platforms to do more to tackle it and those who fear it could impinge on free speech.

The companies have significantly stepped up efforts to tackle the problem of late, agreeing to an EU code of conduct to remove hate speech within 24 hours and forming a global working group to combine their

efforts remove terrorist content from their platforms.

Existing EU legislation shields online platforms from liability for the content that is posted on their websites, limiting how far policymakers can force companies, who are not required to actively monitor what goes online, to act.

Key Points EU wants step up in efforts against illegal online content Does not rule out further legislation Offers guidance on how such content can be removed quickly “Online platforms need to significantly step up their actions to address this problem,” the draft EU guidelines say.

“They need to be proactive in weeding out illegal content, put effective notice-and-action procedures in place, and establish well-functioning

interfaces with third parties (such as trusted flaggers) and give a particular priority to notifications from national law enforcement authorities.”

Trusted flaggers

The guidelines, expected to be published at the end of the month, are non-binding but further legislation is not ruled out by Spring 2018, depending on progress made by the companies.

However, a Commission source said any legislation would not change the liability exemption for online platforms in EU law.

A spokesman for Twitter had no comment on the draft but pointed to the company’s latest data on its efforts to tackle abuse showing it was taking action on ten times the number of abusive accounts every day compared to the same time last year.

Facebook and Google declined to comment.

The Commission wants the companies to develop “trusted flaggers” - experienced bodies with expertise in identifying illegal content - whose notifications would be given high priority and could lead to the automatic removal of content.

It also encourages web companies to publish transparency reports with detailed information on the number and type of notices received and actions taken and says the Commission will explore options to standardise such transparency reports.

The guidelines also contain safeguards against excessive removal of content, such as giving its owners a right to contest such a decision.

The Commission wants companies to hone technology used to automatically detect illegal content so that the volume which needs to be reviewed by a human before being deemed illegal can be narrowed down. Reuters

Tax

Swiss Life speaks to DOJ about possible tax evasion by U.S. clients

Dangote Cement approaches South Africa’s PPC about takeover

With the crackdown on bank secrecy in Switzerland, regulators have voiced concern that insurance wrappers could be used for tax avoidance

Dangote Cement Plc has approached PPC Ltd. about a takeover deal, signaling the start of a possible bidding war for South Africa’s biggest cement maker after an earlier offer led

by Canada’s Fairfax Financial Holdings Ltd. Dangote has told PPC’s board that it’s interested in buying “the entire share capital,” the Lagos-based company said late Wednesday in a statement to the Nigerian Stock Exchange.

“This communication is still at the preliminary stage,” the cement maker said. The approach by the company owned by Aliko Dangote, Africa’s richest person, follows a joint offer from Torontobased Fairfax and PPC’s domestic rival AfriSam Group Pty Ltd. While PPC will consider all bids, the Public Investment Corp., its largest shareholder, supports a tie up with AfriSam and Fairfax, people familiar with the matter said earlier this week. LafargeHolcim Ltd., the world’s biggest cement maker, is also monitoring PPC’s situation, the people said.

John Revill and Oliver Hirt

S

wiss Life could face a fine in the United States after it was contacted by the U.S. Department of Justice (DOJ) about whether it helped U.S. clients avoid tax, Switzerland’s biggest life insurer said on Thursday.

The disclosure comes as U.S prosecutors have been widening their probe of Swiss banks who have been helping wealthy American clients dodge taxes to include insurance companies.

Swiss Life said the inquiry related to its cross-border business with U.S. clients.

Its portfolio with U.S. clients of Swiss Life Liechtenstein and Swiss Life Singapore was around 250 million Swiss francs (US$259 million), down from 1 billion francs a few years ago.

“All insurance contracts have been categorized and been reported pursuant to the FATCA legislation,” Swiss Life said, referring to the 2010 U.S. anti-tax evasion law.

“Swiss Life will use the opportunity for dialogue and explain its past

cross-border business in cooperation with the U.S.,” the company added.

The DOJ inquiry concerns Swiss Life’s insurance wrapper business, life insurance policies into which the very wealthy can place stocks, private equity holdings and other bankable assets, exploiting tax benefits on investment income held in such policies.

With the crackdown on bank secrecy in Switzerland, regulators have voiced concern that insurance wrappers could be used for tax avoidance.

The Zurich-based company started selling the products in 2006, but stopped selling them in the United States in 2012. Swiss Life returned funds to hundreds of American clients who had invested in insurance wrappers linked to bank accounts at Bank Frey in 2013, The Wall Street Journal has reported.

Banks ensnared in the matter have typically agreed to pay fines equivalent to around 1 to 7 per cent of the U.S. assets under management in question. That could mean Swiss Life may face a fine of up to around US$70 million if found to have helped aid tax evasion.

Swiss financial institutions have been in the crosshairs of U.S. authorities seeking to crack down on tax evasion by American citizens, a hot topic in the wake of the 2008 financial crisis.

Credit Suisse agreed to pay a US$2.5 billion fine in 2014 after it admitted helping U.S. citizens evade tax, while investigations continue against other large banks.

Smaller banks have also been targeted, with Leodan Privatebank AG shutting down after paying US$500,000 to reach a settlement with the DoJ in 2016.

Smaller Swiss banks, which for years benefited from clients bringing money to Switzerland to take advantage of bank secrecy rules, are struggling due to a global clampdown on tax evasion and costly regulation.

The U.S. investigation comes as Swiss Life, which last month reported a 5 per cent increase in net profit during the first half of 2017, focuses on trimming costs and raising third-party asset management and investment income to offset sluggishness in its core life insurance business. Reuters

Business Daily Friday, September 15 2017 15

Opinion

Yuan bears, don't get too excited just yet David Millhouse head of China research and strategy at Forsyth Barr

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any have been quick to speculate that the recent move by the People’s Bank of China to scrap the 20 per cent reserve requirement for trading foreign currency forwards is a signal that the government intends to depreciate its currency. That narrative was strengthened on Tuesday as the PBOC lowered the yuan fixing rate by the most in eight months.

One can probably assume that the PBOC wants to slow the recent pace of currency appreciation, which saw the yuan reach its strongest level since December 2015, but I would caution about misunderstanding the government’s intentions.

What is more likely is that the PBOC b e l i ev e s c a p i t a l f l i g h t r i s ks h av e diminished, as evident by the recent rise in foreign-exchange reserves, and the policy of yuan liberalization can continue at a slow and steady pace.

Sun Guofeng, head of a PBOC-affiliated financial research institute, was quoted in Caixin as saying the “adjustment was made as the current market environment has changed greatly, which means countercyclical macro-prudential policies have given way to a neutral monetary policy.” Sun added that “academia and market participants are in agreement that currently the yuan’s exchange rate reflects economic fundamentals and is generally at a reasonable equilibrium level.”

Sun’s point on the market environment is pertinent. The reserve ratio on currency forwards was introduced in October 2015 in an attempt to temper yuan depreciation following the adjustment in the daily fixing rate. To be clear, the PBOC has not scrapped the reserve requirement rule, but simply reduced the reserve deposit back to zero. If the PBOC wants to curb dollar demand in the future, it can always raise the ratio again.

In addition to normalizing policy, lowering the reserve requirement will have some positives for China’s capital markets. The move should narrow the spread between offshore and onshore forward prices on the currency, allowing users of the China Stock and Bond Connect programs to hedge their currency risks more cheaply and easily. Interestingly, foreign flows into Chinese stocks and bonds have been increasing recently, with Shanghai Stock Connect inflows reaching a one-year high at the end of Aug. 30, while Bond Connect transactions hit new highs last week.

The PBOC would like to see more two-way volatility in the currency. The yuan was viewed last year as a one-way negative bet, while this year has been marked by steady appreciation as a result of U.S. dollar weakness, China’s positive economic performance, and restrictions placed by the government on capital outflows. Those factors will likely continue to support a stable yuan for the rest of the year. Note that Chinese Premier Li Keqiang said this week that China’s economy will maintain its momentum, and that officials won’t seek to boost exports by devaluing the yuan.

Finally, with the Communist Party’s twice-a-decade leadership congress due to start on Oct. 18, and U.S. President Donald Trump potentially making his first visit to China in November, it’s hard to see the political motivation for the government to push for further yuan weakness. Bloomberg Prophets

Hurricanes deliver shock to scrap-metal market Shelley Goldberg investment adviser and environmental sustainability consultant

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fter this year’s string of ferocious hurricanes and an 8.2 magnitude earthquake in southern Mexico, the markets assume that the destruction will produce an abundance of scrap metal that it is ready for collection and recycling. These markets hope the result will be falling prices in expectation of an oversupply.

The reality is quite different. There won’t be an excess of ferrous scrap. Instead, demand for scrap metal, rebar and steel products will far outstrip supply. And to make matters worse, the industry was largely unhedged despite having the tools available to do so -- not just insurance, but futures contracts.

Although the consequences w e r e d eva st a t i n g, t h e remains of all of these storms predominantly consisted of water-saturated homes, destroyed white and light goods, unusable furniture and mass quantities of garbage.

The earthquake in Mexico, meanwhile, took place in the south, in regions much less developed than the north and Mexico City.

Additionally, scrap metal remaining from these recent disasters isn’t easily accessible due to the ravaged roads and infrastructure leading to the damage.

According to Nathan Fruchter, founder of Idoru Trading Corp., an independent ferrous scrap metal trading company, “the cleanup needs to be well underway before the first bits and pieces come out.” He believes it will be at least a month if not two before the scrap is heading to scrapyards. “And when it does, it’s the light stuff and thousands of defunct cars that will go straight into the shredders,” he says.

But this will take time. Insurance companies need to assess damages, while infrastructure, trucking and other services have to get back on their feet.

Not all transportation and logistics companies are up and running, and some may have to close permanently. In normal circumstances, much of U.S. scrap would be exported to Latin America, but for now, cannot move out. And the longer it stays, the more vulnerable it becomes to rust from water and debris. Many of the recycling facilities in Southern states are impaired, unable to ship their contracted tonnages to Mexico until the infrastructure is functional. Mexican mills, in need of replacement tonnage, will have to source scrap further along the East Coast, eating into exports typically bound for Turkey.

The result is that both the prices of metal scrap and steel prices should rally.

“

About 70 to 80 million metric tonnes of scrap are processed by the recycling industry each year, according to the Institute of Scrap Recycling Industries, making it approximately a US$21 to US$24 billion market. Included in that figure is 15 to 20 million metric tonnes that is exported, according to U.S. Census Bureau information. The value of exports at today’s prices would be about US$5 billion to US$7 billion.

What can industry do to better prepare for such unforeseen idiosyncratic events? Fruchter suggests: While there’s no direct link between the London Metal Exchange trading and recent natural disasters, the sudden speed at which they come about is a perfect reason why the industry should reconsider implementing futures contracts as a hedging tool. By hedging with futures whose prices are fixed basis the index, they can be better protected from price fluctuations and physical shortages.

London Metal Exchange steel scrap and steep rebar futures contracts are cash-settled, basis Platts, trading out 15 months.

Their contract settlements are based on the monthly average index prices of specific Turkish imported scrap and exported rebar, as Turkey is the world’s biggest scrap metal market.

These contracts, introduced on the LME in 2015, have yet to gain sufficient traction -- not because they weren’t designed appropriately, but because the audience they were designed for, namely recyclers and steel mills, has been slow to adopt them. Although LME futures trading volume is slowly expanding, the recent natural disasters serve as a call for the market to reconsider them as hedging tools. Futures contracts are most useful when there’s sufficient liquidity. In order for these contracts to see increased liquidity, the top three or four recyclers and steel mills in major scrap-trading nations -- not only Turkey, but South Korea, Mexico, India and the Gulf states -need to begin trading them to encourage others in the market to follow suit. Speculators serve an important role as well and should not be seen as market manipulators but rather as market liquidity providers.

Surely there will be additional unforeseen and destructive acts of Mother Nature that will influence scrap metal and many other raw materials. And industry, both producers and consumers, should take this into account in their risk-management practices by hedging. It’s in the best interest of their businesses, their bottom lines, and for the affected communities to more quickly resurface.

This year has been marked by steady appreciation as a result of U.S. dollar weakness, China’s positive economic performance, and restrictions placed by the government on capital outflows

”

Bloomberg Prophets

16 Business Daily Friday, September 15 2017

Closing Privatisation

PAGCOR pays Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Local and foreign interest in acquiring casino assets of the Philippines Amusement and Gaming Corporation (PAGCOR) to be put on sale next year will depend on ‘valuation and terms’ proposed, since the state-run company ‘does

not own the properties in which their casinos are [located],’ the former head of the Marketing and VIP Services Departments at PAGCOR, Christopher M. Tio, told Business Daily.

The regulator-cum-corporation announced during the weekend that it is set to privatise 17 of its properties starting in 2018.

In response to our questions, Tio explained that the gaming sector is being particularly targeted among other sectors of economic activity ‘as one of the pillars of the effort’ to raise money for public coffers.

‘PAGCOR is the third largest revenue producer for the government after the Tax and Customs bureaus,’ he

explained.

Behind the reasons for targeting gaming and other agencies to generate larger public revenue, the former PAGCOR agent said that the Philippines government ‘has embarked on a massive public infrastructure plan that requires serious funding’ which, along with other ongoing social costs,

‘has put incredible pressure on the Finance Secretary.’

Income from all sorts of gaming operations in the Philippines, including casinos and online gaming, amounted to P14.04 billion (US$274.11 million/MOP2.20 billion) in the first quarter ended March 31, according to the latest financial results released by PAGCOR.

Currency

As petrodollars dry up, weary Angolans ship BMWs to Portugal The new government of Joao Lourenco, who takes over as president on Sept. 21 as the 38-year rule of Jose Eduardo dos Santos ends, will have no choice but to devalue as the liquidity squeeze persists Henrique Almeida and Paul Wallace

D

esperate f o r hard currency, Angolans are coming up with new ways to convert their kwanzas into dollars and euros.

Filipe Afonso got tired of waiting in line at a bank to exchange his kwanzas for greenbacks. So he bought two second-hand BMW motorcycles, shipped them to Portugal and sold them for euros to pay for his family’s expenses back home.

“You do what you need to do to get hard currency,” said Afonso, who runs a truck dealership on the outskirts of Luanda, the capital of the former Portuguese colony.

Others travel hundreds of miles to sell diapers, flatscreen televisions or beer in the neighbouring Democratic Republic of Congo, where foreign currency is more readily available. Real estate and art are used to hedge against what many expect to be a precipitous decline in the kwanza.

Angola, Africa’s second-largest oil producer and an OPEC member, was one of the world’s fastest-growing economies for about a decade after a civil war ended in 2002. Flush with petrodollars, the government spent billions building roads, railways and other infrastructure, while skyscrapers went up across Luanda. But with

the sharp drop in crude prices that began in 2014, economic growth slowed to zero last year, and foreign-exchange inflows dwindled.

Authorities are in a bind: a devaluation of the kwanza is needed to attract investment and spur exports, but that would also fuel inflation, which soared as high as 40 per cent this year, in a country that imports almost all its consumer goods. Defending the currency’s peg is depleting foreign-exchange reserves, which have plunged in the past four years.

“There continues to be rumours and gossip on the streets about a potential devaluation of the kwanza, but I don’t think this will happen before the end of the year,” said Tiago Dionisio, a Lisbon-based analyst for Eaglestone Advisory SA. “Devaluation would put further pressure on consumer prices.

Tax

I think the local authorities will continue to defend the kwanza at the expense of international reserves.”

The kwanza trades at 395 per dollar on the black market, almost 60 per cent weaker than its official rate of 166, where it’s been pegged since April 2016. Though the central bank has let it depreciate more than 40 per cent since mid-2014, making it one of the worst-performing oil currencies in that period, analysts say it’s still too strong.

Renaissance Capital said in July its fair value was 314.

“The currency remains highly overvalued,” David Earnshaw, an analyst at Fitch Group’s BMI Research, said in a Sept. 12 note. He expects the central bank to shift to a more flexible regime in 2018 and drop the kwanza more than 20 per cent to 210 against the greenback.

Money laundering

Concerns about money laundering in the banking sector prompted foreign banks to halt dollar supplies to Angolan lenders in 2016, worsening the shortage.

The new government of Joao Lourenco, who takes over as president on Sept. 21 as the 38-year rule of Jose Eduardo dos Santos ends, will have no choice but to devalue as the liquidity squeeze persists, Moody’s Investors Service said in a research note on Aug. 30.

Thousands of Chinese and Portuguese workers have already packed up and left because of difficulties in obtaining hard currency, according to the Angola-China Industrial and Commerce Association and Portugal’s Construction Sector Union.

Those who have stayed behind are getting creative.

Every Wednesday, Juliol Lusol, 33, catches one of dozens of buses in Luanda that are headed to Luvo, an open-air market 348 miles to the north on the border with the Congo.

Import ban

“I’m not trying to make a profit,” said Lusol, as he waited on the side of a dirt track in Luanda for a bus to load half a dozen boxes of diapers, television sets and beer. “I just want to get dollars.”

The flow of Angolan goods to Congo became so intense that last month the Congolese

Business volume

government imposed a sixmonth ban on imports ranging from cement to beer from its neighbouring country.

Angola is not the only oil producer to try and defend its currency after the plunge in crude prices. Russia and Kazakhstan spent billions of dollars propping up their units before giving up and floating them. Nigeria, Africa’s biggest crude exporter, has eased some capital controls this year, but maintains several restrictions and operates a system of multiple exchange rates to protect the naira.

Angola’s foreign-exchange reserves have almost halved since 2013 to US$17.5 billion, their lowest level in six-anda-half years, a sign that access to dollars is likely to remain limited for the foreseeable future. The government has started talks with international banks about raising US$2 billion through a Eurobond, which may enable it to maintain the kwanza’s peg for longer.

Nuno Gaspar, head of the Luanda-based property developer Gestimovel, is selling residential and office buildings by punting real estate’s safe-haven status.

“Most of our buyers are Angolans or Angolan companies eager to escape the possibility of a kwanza depreciation,” Gaspar, 46, said. “People with kwanzas are looking to invest in property, art, wine and even cars to avoid losing their money.” Bloomberg

Bid

France sees more EU states joining Julius Baer chief sees Asia push over tax on online giants making up a third of business

Ryanair CEO says in process of finalising Alitalia offer

French Finance Minister Bruno Le Maire said he expected more EU countries to join in the coming days a French-led push to tighten the taxation of online giants like Google and Amazon.

Germany, Italy and Spain have already signed onto a French proposal that digital multinationals such as those two leading companies should be taxed in Europe based on their revenues, rather than only profits as at present.

Currently such companies are often taxed on profits booked by subsidiaries in low-tax countries like Ireland, even though the bulk of their sales comes from other EU countries.

Le Maire is due to present the plan to other EU counterparts at a meeting in the Estonian capital of Tallinn on Saturday.

A French Finance Ministry source said the proposed tax was the best way to move quickly, because there were far fewer constraints under international tax law for a levy based on a company’s revenues than for profits. Reuters

Ryanair is in the process of finalising a binding offer for Alitalia, which will see it keep the brand, long-haul operations but changing the fleet for short-haul routes, CEO Michael O’Leary said yesterday.

“We would have to order new planes, whether Boeing or Airbus,” O’Leary told Reuters, adding that Ryanair preferred to own its fleet, rather than lease planes, as Alitalia does.

He said Ryanair hoped to preserve jobs for pilots and crew, although warned they would have to be on new terms in line with Ryanair’s cost base.

He added that Ryanair was not interested in bidding for Air Berlin because the process was not transparent, repeating previous accusations that it was a stitch-up designed to make Lufthansa stronger.

He said he expected EU competition authorities would demand substantial remedies in the event Lufthansa buys Air Berlin, with the carrier likely to have to give up slots on routes within Germany to preserve competition. Reuters

Julius Baer Group Ltd., Switzerland’s third-largest publicly traded private bank, sees Asia accounting for about a third of its business in the next five years as the firm adds staff to tap into rising affluence in the region.

The Zurich-based bank’s hiring spree from last year is paying off in a “very big way,” Chief Executive Officer Boris Collardi said yesterday. Asia currently accounts for about 20 per cent to 25 per cent of its business, he said.

Asian inflows helped the bank boost net new money in the first six months by 6 per cent on an annualized basis, in what Collardi has described as the firm’s “best half-year ever.” In July, the 43-year-old CEO said Julius Baer will continue to recruit in Asia and may add more hubs there. The bank’s cost-income ratio is higher in Asia -- in the high 70s -- but this isn’t a problem because revenue is rising, Collardi said in Singapore. Bloomberg