Business Daily #1399 October 10, 2017

Macau Legend signs new VIP gaming room deal Gaming Page 7

Tuesday, October 10 2017 Year VI Nr. 1399 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm

www.macaubusiness.com

Tourism

Index

Infrastructure

Extended Golden Week brings in over 1 mln visitors Page 6

Awards

Inner Harbour tidal barrier feasibility study contract granted Page 2

U.S. economist Richard Thaler wins Nobel Economics Prize Page 16

Private poll shows weaker service sector in Mainland Page 8

Digital graveyard Recycling

The Environmental Protection Bureau has launched a trial scheme to collect and recycle electronic communication and technology materials.

Lasting close to one year, the scheme could lead to long-term recycling.

Expectations are for 50k units and 7,000 tonnes of materials in the trial period. There will be four collection points and a collection van at 16 points in city, available for citizens, schools, NGOs and public departments, but not private companies. Page 5

Building up health

The new Islands District Medical Complex received a MOP617 mln contract for its nursing institute, set to occupy a 16-storey building. With construction lasting 850 days, it is part of the first phase of the new 421,000 m2 hospital, including six other buildings, a 1,000-bed general hospital, and more.

Supporting local industry

SME Only one of three SME support schemes disbursed funds in September, but the amount surged from MOP840,000 in August to MOP42 mln. New applicants for the scheme totalled 79 during the month, while 109 were approved.

The Young Entrepreneur Scheme also dished out some MOP7.72 mln, a 34 pct increase m-o-m. Page 4

FX flows shift positive for China Health Page 3

HK Hang Seng Index October 9, 2017

28,326.59 -131.45 (-0.46%) Worst Performers

Want Want China Holdings

+6.07%

Henderson Land Develop-

+0.75%

Galaxy Entertainment Group

-3.25%

Kunlun Energy Co Ltd

-1.85%

Hengan International Group

+4.67%

Lenovo Group Ltd

+0.69%

AAC Technologies Holdings

-2.67%

Geely Automobile Holdings

-1.83%

China Mengniu Dairy Co Ltd

+1.59%

Link REIT

+0.55%

Sands China Ltd

-2.65%

Hang Seng Bank Ltd

-1.04%

+1.57%

CLP Holdings Ltd

+0.32%

China Resources Land Ltd

-2.02%

China Merchants Port Hold-

-1.04%

HSBC Holdings PLC

+0.19%

China Overseas Land &

-1.88%

CNOOC Ltd

-0.99%

Hong Kong Exchanges & WH Group Ltd

+0.84%

28° 31° 27° 32° 25° 32° 25° 30° 26° 30° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

Reserves Official data released yesterday showed foreign exchange reserves rose modestly in September. The number was slightly higher than markets had expected, with figures indicating that yuan outflows are remaining stable. Page 8

2 Business Daily Tuesday, October 10 2017

Macau Housing

Public housing in progress Contracts for housing and development projects costing MOP2.29 bln announced yesterday Cecilia U cecilia.u@macaubusinessdaily.com

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he local government has announced contracts for public housing and development projects totaling MOP2.29 billion, according to recent dispatches in the Official Gazette yesterday.

The largest contract relates to a February announcement for Phase 2 of the Mong Ha Social Housing project and the reconstruction of the Mong Ha Sports Pavilion, shortening the period of the project’s budget by one year, to terminate in 2021, and increasing the yearly amounts to be paid out. The total contract is worth MOP1.78 billion.

Another dispatch in yesterday’s Official Gazette revealed the recommencement of the Toi San Central Street Public Housing construction project, after a re-evaluation was made regarding the nearby environment in 2015.

The contract was granted to China State Construction International Holdings Limited, for a total cost of MOP503 million, to be divided into five instalments from 2017 to 2021.

The project will focus on social flats for the elderly, public facilities and public car parks, with the provision of 510 flats and buildings with 34 floors.

The MSAR Government has also granted a contract to Aecom Macau Company Limited for the

implementation study of the Wai Long Public Housing construction project, with the contract costing some MOP15.9 million, according to a dispatch.

The amount will be paid out in two

instalments spanning 2017 and 2018.

The proposed Wai Long project is set to create 8,000 public housing units, with a height cap of 155 metres on the site. Currently, the government is conducting an environmental

assessment for the site to evaluate noise pollution, air quality, traffic flow and other factors.

According to the tender document, the contract has a deadline of 290 days. C.U.

Water resources

Build that wall The MSAR Government granted a MOP56.62 million contract to a Chinese consortium for a feasibility study on the proposed tidal barrier to be constructed in the Inner Harbour Nelson Moura nelson.moura@macaubusinessdaily.com

A MOP56.62 million (US$7.04 million) contract for geotechnical prospecting and research for the study on the feasibility of building a tidal barrier in the Inner Harbour was granted to a consortium comprising three Chinese companies and institutes, a dispatch in the Official Gazette yesterday revealed.

The contract was granted jointly to China Water Resources Pearl River Planning Surveying & Designing Co., Ltd.; the Pearl River Hydraulic

Research Institute of the Chinese Ministry of Water Resources; and the Scientific Institute of Pearl River Water Resources Protection.

After Typhoon Hato seriously impacted the Inner Harbour area on August 23, the Macau government announced that construction of a tidal gate to manage tides in the Inner Harbour could start as soon as 2019.

At the end of August, the Deputy Head of the Land, Public Works and Transport Bureau (DSSOPT), Cheong Ion Man, revealed that the plan to construct a tidal gate at the Wanzai water channel had already

entered into its third stage, with an engineering survey and environmental assessment as well as other special research having already been completed.

Meanwhile, a release yesterday also informed that the Pearl River Hydraulic Research Institute had been granted a MOP4.97 million contract for the water resources section of the study, for the mid and long term planning for the use and development of the MSAR territorial waters until 2036.

In a release in September of this year, the Land, Public Works and

Transport Bureau (DSSOPT) informed that any works involving water resources in the Pearl River Delta would have to involve the neighbouring towns and cities situated in the upper reaches of the river estuary, requiring concerted regional co-operation.

The release also stated that solving the ‘complex flooding issue’ in the Inner Harbour would also require an in-depth assessment of the impact on the Inner Harbour channel and other issues such as the operation of quayside bridges, road layout, urban landscape, and cultural heritage preservation.

Society

Work

Alexis Tam: budget will increase for several departments next year

Searching for jobs

A budget increase for several public departments under the Secretariat for Social Affairs and Culture is likely in the coming year, according to statements by Secretary Alexis Tam Chon Weng to the press on the sidelines of an event yesterday.

The Secretary divulged that departments relating to health and social benefits would be the focus of the additional monetary resources, which would include areas such as medical infrastructure and special education, as well as historical conservation education.

Tam also explained that the better economic performance this year is the driver of the budget increase, given that the budget was unchanged during the less favourable economic environment last year.

The Secretary reiterated that the measure is still in its preliminary

An online platform to assist local residents and employers find work or employees has been launched by the Labour Affairs Bureau

stage, noting that final decisions will be announced during the policy address next month. C.U.

The Labour Affairs Bureau (DSAL) has launched an online platform to assist in finding jobs and filling vacancies in Macau, a department release yesterday informed.

According to the release, the new platform will allow employers to post job openings and search for potential candidates, while also allowing job seekers - who must be MSAR residents - to search for job offers.

After scheduling and taking a job interview through the website, the candidates will also be able to know if they were accepted for the job via the platform.

In the second quarter of this year, the MSAR unemployment rate was

at 2 per cent with around 7,900 people being unemployed as of the end of June, data from the Statistics and Census Service (DSEC) revealed. N.M.

Business Daily Tuesday, October 10 2017 3

Macau Health

Starting from somewhere After the completion of its foundation works, a MOP609 million contract has been awarded for the construction of the nursing college included in the new Islands District Medical Complex Nelson Moura nelson.moura@macaubusinessdaily.com

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he local government has approved three contracts related to the construction of the nursing institute to be developed in the new Islands District Medical Complex to be developed in Cotai, with the total amount involved in the contracts reaching around MOP617.17 million (US$76.77 million), a dispatch in the Official Gazette revealed.

The largest contract involves the institute’s construction, awarded to a consortium comprising CCECC (Macau) Companhia de Construção e Engenharia Civil China, Limitada and Companhia de Construção e Obras de Engenharia Tong Lei, Limitada for MOP609 million.

Meanwhile, a MOP4.53 million contract was granted to the Macau Laboratory of Civil Engineering (LECM) for quality control of the institute’s construction, with a MOP3.49 million contract being awarded to the Institute for the Development and Quality, Macau (IDQ) to provide quality control of electromechanical installations.

Ac c o r d i n g t o th e

Infrastructure Development Office (GDI), the nursing college will be a 16-storey building occupying 3,000 square metres, with the construction area to occupy 33,600 square metres.

The building will have three underground levels for parking, with the remaining floors for faculty and office use, including residences for teachers and students, as well as an activity centre.

The maximum deadline for the construction is set at 850 days, with the ground floors expected to be concluded after 380 days and the remaining floors within 200 days.

Health in progress

The nursing institute is part of the construction of the first phase of the new hospital complex, which in total will occupy some 76,000 square metres, with a gross floor area of some 421,000 square metres.

The first phase of the complex will include six buildings, the nursing college, a general hospital with around 1,000 beds, an auxiliary facility building, a staff dormitory, an administrative building and a central laboratory building, while the second phase will include

the development of a rehabilitation hospital.

The nursing college project was created by the architecture firm Eddie Wong & Associates Limited, a company owned by local architect Eddie Wong Yue Kai, which also developed the projects for the overall islands medical complex.

Mr. Wong is a member of the MSAR Executive Council and president of the Supervisory Board of the Architects Association of Macau (AAM).

In 2013, Mr. Wong’s company was granted the design

contract for the new medical complex for MOP235 million, with the project being delivered in August of last year.

In July of last year, Aecom Asia Company Limited, a subsidiary of the American construction and engineering group Aecom, received a MOP197.6 million contract to supervise the construction and the training of human resources used in the project management.

As of August of last year, the known expenses for the medical complex revealed by the government had reached

some MOP1.4 billion, with the government having estimated a total level of investment of around MOP10 billion.

According to the Health Bureau, as of August of this year, work on the foundations of most of the first phase buildings had been completed, with the public tender for the construction of the general hospital building expected to take place by the end of this year. The Health Bureau also indicated that by 2019 around 80 per cent of the complex construction should be complete. advertisement

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4 Business Daily Tuesday, October 10 2017

Macau SME

SME Aid Scheme distributed MOP42 mln in September million via its young entrepreneur aid scheme during the month of September, posting an increase of 34.3 per cent month-on-month.

The DSE approved 42 applications in September, while declining four applications and receiving 21 new applications.

For the year 2017, the majority, or 47 per cent of young entrepreneurs who have received support from the young start-up aid scheme, were involved in retail, obtaining some MOP19.24 million.

Cecilia U cecilia.u@macaubusinessdaily.com

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total of MOP42.01 million was disbursed by the MSAR Government to local SMEs (small and medium sized enterprises) in the month of September under the SME Aid Scheme, a surge when compared to the MOP840,000 released in August.

The data released by the Macao Economic Services (DSE) shows that the number of applications for the aid scheme amounted to 79 during the month. In total, 109 requests for the scheme were approved in September, according to the DSE information.

Implemented in 2003 and updated in 2012, the fiscal relief measures aim to provide interest-free business loans to a maximum value of MOP600,000 per applicant for different financial purposes, with a repayment period of up to eight years.

The Aid Scheme is one of three SME-specific schemes in place.

During the month of August, there were nine applications

Stable application for IP

for the SME Credit Guarantee Scheme, however none were approved during the month.

A third scheme, for specific projects, did not see any applicants or approvals during the month.

Regarding the ratio of industries for the different SME support schemes in 2017, businesses related to construction and public projects received the largest amount under the SME Credit Guarantee Scheme, accounting for

27.6 per cent of total funds approved under the scheme so far this year.

Regarding the SME Aid Scheme, the retail industry received the most support during the nine months, amounting to MOP64.5 million, taking up 31.8 per cent of the total amount distributed in 2017. This was followed by the construction and public projects industry, occupying 15.1 per cent, with MOP30.6 million provided.

The two greenlighted applications under the specific projects scheme were equally divided between construction and wholesale, at MOP1 million each. The scheme offers credit guarantees of up to 100 per cent of approved bank loans for SMEs to finance special projects.

Amount for young startups increased

On the other hand, the DSE disbursed some MOP7.72

For applications relating to intellectual property (IP), a total of 1,018 applications were made during the month of September, two less than in the previous month and 63 less than in the same month last year.

During the month, the DSE received 54 applications for extensions of invention patents, 12 applications for industrial designs or models, three invention patent requests, one utility patent application and one request for the name and emblem of an establishment.

Data service provision

Contract awarded for the operation of the Macau SAR Government Data Centre The Macau branch of a company headquartered in Hong Kong, Macroview Telecom (Macao) Limited, has been awarded an MOP8 million, three-year contract to provide services for the operation of the Government Data Centre for the Administration and Public Administration Services Department, according to a dispatch published in the Official Gazette yesterday.

The contract awarded to Macroview Telecom will be divided into three annual instalments starting from

2017, with MOP1.19 million paid in the first year, MOP3.98 million in 2018, and MOP2.79 million in 2019.

Founded in 1991, Macroview Telecom specializes in ‘internetworking’ solutions, as a provider of information and communication technology (ICT) solutions for data, telecom services, and network security.

The company currently operates seven offices and round-the-clock technical support centres in Macau, Hong Kong, Guangzhou,

Shanghai, Beijing, Dongguan, and Shenzhen.

In addition to services for local telecom operators Companhia de Telecomunicações de Macau (CTM) and Hutchison Telecom, the company also provides services to some of the casinos and hotels in the city, including Galaxy Resorts, Ponte 16, and Grand Waldo.

The provision of centralized services for the management of government data complies with the Macau SAR’s strategy to ‘further strengthen the development of the

security system and standards system for electronic governance,’ according to information available on the

Macau SAR e-Government portal operating under the Public Administration and Civil Service Bureau. S.Z.

Patacas

Money shows stable uptrend The Macao Monetary Authority released monetary data for August indicating a stable evolution in the provision of money Oscar Guijarro oscar.g@macaubusinessdaily.com

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0.2 per cent month-onmonth increase was seen in the money in circulation in August, according to the latest information from the Macao Monetary Authority (AMCM). The group’s data also indicates that demand deposits saw a 1.8 per cent month-on-month drop.

A decrease of 1.4 per cent was registered in the MSAR’s M1, when compared to the month before. Quasi-monetary liabilities rose 1.4 per cent and the sum of the two

M2 structure

items (i.e. M2) saw a 1.1 per cent increase to MOP574.4 billion.

On an annual basis, M1 and M2 grew 6.7 per cent and 14.0 per cent, respectively.

Comprising M2, the shares of pataca (MOP), Hong Kong dollar (HK dollar), renminbi (RMB) and United States dollar (U.S. dollar) were 31.1 per cent, 53.6 per cent, 4.4

per cent and 9 per cent, respectively, according to the Monetary Authority.

Resident deposits rose 1.1 per cent from July, to MOP560.0 billion, while non-resident deposits fell 3.9 per cent, to MOP261.3 billion.

Public sector deposits with the banking sector in August increased 0.3 per cent, to MOP187.8 billion. Total deposits in the banking sector dropped 0.4 per cent month-to-month, reaching MOP1,009.2 billion. The shares of MOP, HKD, RMB and U.S. dollar in total deposits were 20.3 per cent, 50.9 per cent, 4.8 per cent and 21.8 per cent, respectively.

AMCM also indicated that domestic loans to the private sector increased 0.3 per cent from July to August, amounting to MOP436.0 billion. External loans remained virtually unchanged at MOP424.2 billion.

A t e n d -A u g u s t , t h e loan-to-deposit ratio for the resident sector dropped to 58.3 per cent from the 58.6 per cent registered at end-July. However, the ratio for both the resident and non-resident sectors grew from 84.8 per cent to 85.2 per cent. AMCM revealed that the non-performing loan ratio remained virtually stable at 0.3 per cent.

Business Daily Tuesday, October 10 2017 5

Macau Recycling

Giving new life to electronics A near one-year trial scheme to collect and recycle electronic communication and technology materials was launched yesterday by the Environmental Protection Bureau Nelson Moura nelson.moura@macaubusinessdaily.com

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he Environmental Protection Bureau (DSPA) has launched a trial scheme to collect and recycle electronic communication and technology materials, set to last about one year.

The scheme will come to a close on September 27 of 2018, with the DSPA setting up four collection points - two in Macau, one in Taipa and another in Seac Pai Van - and providing a collection van that will be parked in 16 different areas of the city on a rotating schedule.

The collection and recycling scheme will focus mainly on cell phones, televisions, computers, printer toner cartridges, printers and scanners, with the DSPA stating it plans to collect 50,000 units of electronic equipment or around 7,000 tonnes of materials over the course of the scheme.

The collected computers will be evaluated by the DSPA, with the most recent models being donated to non-profit organisations if found to be in good condition.

The electronic materials collected will be dismantled, with parts able to be re-used sent to the local second hand market or processed at the Macau incineration centre to gather and re-use its component materials.

According to the DSPA, electronic microchips will be sent to Japan for recycling, with aluminium materials to be sent to mainland China.

“Actually recycling electronic materials is more efficient in the case of electronic devices. We hope residents can ponder if they really need to purchase or replace electronic equipment,” the Director of the DSPA Environmental Infrastructure Management Centre, Chan Kwok Ho, said yesterday.

According to the DSPA, the trial run service was directly awarded to the local branch of a Hong Kongbased company named Chong Heng Technology for MOP4 million, with

a public tender to be opened after the trial period.

The amount provided to the company will be adjusted according to the amount of materials recovered.

Not for private

The company will also provide a doorstep collection service for schools, public departments and non-profit organisations, with the entities able to call the company to pick up materials gathered for disposal.

“We didn’t include private companies in the collecting scheme because we believe private entities should be responsible for collecting and sending the materials for recycling themselves […] We also didn’t want to affect local recycling companies that already provide those services,” Mr. Chan added.

The DSPA representative stated that after the trial period ends, the department would consider if private companies should be included in the recycling scheme. advertisement

Hotel renovation

Green light to renew Hotel Central pending owner Hotel Central remains in ‘suspension of business,’ according to information provided to Business Daily by the Macao Government Tourism Office (MGTO).

The Office outlined that is has already received the ‘related application for change of facilities’ from the property owner, adding that it is ‘currently waiting for the applicant to follow up with the amendments required to be made on its application.’

MGTO had not provided clarification to Business Daily about the nature of the ‘amendments’ requested of the owner of Hotel Central by the time this story went to print.

On October 24, 2016, the consortium that bought the property in early 2016 announced that it was planning to renovate the building

and re-open it as a hotel, according to a press release from the Government Information Bureau (GCS).

Although no design details have been disclosed so far, the hotel’s current owners have claimed they planned for the new hotel to be ready for the celebration of the 20th anniversary of the Macau SAR, in 2019.

According to the Cultural Heritage Protection Law, the 89-year old Hotel Central, located on Avenida Almeida Ribeiro and in the vicinity of Senado Square, is considered as one of the architectural complexes and sites in that area.

In previous replies to Macau Business, the Cultural Affairs Bureau (IC) explained that it ‘expressed its views regarding the protection of cultural heritage on the basis of the overall protection of the complex.’ S.Z.

Heritage

Reviving understanding A MOP3.4 million contract to repair the Gates of Understanding (Portas do Entendimento) monument near the Sai Van Bridge has been awarded to CAA, Planeamento e Engenharia, Consultores Limitada, an Official Gazette release yesterday informed.

The contract - to be paid until next year – aims at repairing the monument, which has suffered visible decay

and damage since it was first installed in 1993.

It is currently closed to the public due to its dilapidated state.

The 40-metre high monument was designed by artist João Charters de Almeida e Silva in a project commissioned by the former Macau Portuguese government led

by Governor Vasco Rocha Vieira.

Composed of four concrete pillars, it is

designed to symbolise the historical connection between Chinese and Portuguese cultures. N.M.

by Billy Au

6 Business Daily Tuesday, October 10 2017

Macau Golden Week

Number of visitor arrivals surged during Golden Week Cecilia U cecilia.u@macaubusinessdaily.com

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he city accommodated 1,016,123 visitors during the eight days of the National Day Golden Week and the day leading up to it, a jump of 10.14 per cent when compared to the same period last year, the latest data from the immigration authorities reveal.

The data also shows that there were some 4,451,499 border crossings at the seven immigration checkpoints of the city during the period, with arrivals amounting to 2,226,967 and departures 2,224,532.

October 2 recorded the highest number of arrivals, at 272,930, whereas the highest number of departures during the period was on October 3, at 269,238.

October 4, the day of the Mid-Autumn Festival, had the lowest number of visitor arrivals; customarily the day is normally reserved for family visits and gatherings.

According to the data released by the Macao Government Tourism Office (MGTO), some 920,631 visitors arrived in Macau during the October 1 to 8 period, an increase of 10.3 per cent year-on-year. Among the total, 696,636 were Chinese

tourists, an increase of 11 per cent compared to last year.

In terms of the number of arrivals by ports of entry for the last day of Golden Week, there were some 76,109

crossings at the border, a drop of 2.6 per cent year-on-year.

In particular, 49,284 Chinese visitors crossed the border on Sunday, an increase of 32.4 per cent year-on-year.

Meanwhile, data released by the Tourism Administration of Guangdong Province revealed that some 3.39 million residents from Guangdong visited the SARs and Taiwan during the holiday period, with the highest number of residents coming from Shenzhen, Guangzhou and Dongguan.

The Tourism Administration of the Guangzhou Municipality, as reported by China News, also divulged that 6,500 tourists from Guangzhou traveled to Macau via tours during the long Golden Week, an increase of 42.28 per cent year-onyear.

Restaurant business

Still no re-opening date confirmed for SOHO eateries at City of Dreams All eight restaurants in the SOHO food district at City of Dreams (CoD) closed down during the summer and remain closed to date, the Macao Government Tourism Office (MGTO) confirmed to Business Daily.

‘Our Office has assigned staff to scrutinize the establishments concerned regularly, with no act of violation against the close-down order discovered,’ the MGTO spokesperson response reads.

The restaurants were shut down in June by the tourism authority due to a lack of operating licences, following a probing process that started in 2016.

Pursuant to the law, MGTO had to close down the businesses after they failed to provide the necessary documents in order to regulate their operations, further penalising them with a fine of MOP600,000, according to previous reports.

In its written reply to Business Daily, MGTO informed that the interested parties are still ‘following up with the advices given by the technical departments,’ and will be allowed to open again ‘after the licences are issued.’

At the time of the announcement, five other outlets in the property were under probe by MGTO, according to information provided then by the agency’s director, Maria

Helena de Senna Fernandes.

The relevant authorities have issued no updates about the current licencing situation or potential closing of the remaining five eateries.

SOHO opened in 2014 at CoD, a property of Melco Resorts & Entertainment Limited.

Melco had not replied to Business Daily’s enquiries by the time this story went to print. S.Z. advertisement

Business Daily Tuesday, October 10 2017 7

Macau Gaming

Bernstein: October gaming revenue up 8.5-11.5 pct The brokerage was also disappointed by the weak performance of gaming revenue during the extended Golden Week Cecilia U cecilia.u@macaubusinessdaily.com

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rokerage firm Sanford C. Bernstein is estimating a year-on-year increase of 8.5 per cent to 11.5 per cent in October’s gross gaming revenue (MOP23.7 billion to MOP24.3 billion), if the average daily rate (ADR) of gaming revenue remains between MOP660 million and MOP690 million for the rest of the month.

In the first eight days of the month, gaming revenue was MOP8.5 billion, with an average daily rate of MOP1.06 billion.

‘The month-to-date ADR number was in-line with our estimate, 49 per cent higher compared with September ADR of MOP712 million and 9 per cent over similar period (October 1-10) 2016 (ADR of MOP975 million),’ wrote the brokerage in its latest report.

According to the analysts, VIP volumes were weak during the first half of the week, but hit mid-teens yearon-year growth for the entire week driven by a high VIP hold rate.

For the mass market, the performance was poorer than expected,

up in the low-single digit percentage range year-on-year.

Although the number of visitor arrivals grew during the week, ‘[the] strong visitation growth did not correspond to strong mass [gross gaming

revenue] growth’.

The brokerage perceived that the less satisfactory performance ‘remains largely in the details regarding the breakdown between VIP and Mass and overall share data (which is not

available) and as such the weight of the overall [gross gaming revenue] number needs to be taken with a bit of skepticism as weekly channel checks have proven to be less than accurate and volatile’.

Gaming

Promoting VIP room in Macau Fisherman’s Wharf Macau Legend will receive 2 pct of the gaming revenue of the three VIP tables, as well as a monthly licence fee A VIP room located in gaming operator Macau Legend Development Ltd’s Macau Fisherman’s Wharf property, is set to be promoted by a company owned by the father-in-law of one of the operator’s executive directors, according to a filing with the Hong Kong Stock Exchange.

Mr. Frank Wong, father-inlaw of Macau Legend Executive Director Mr. Trainor-DeGirolamo, is set to, under his company Sheng Li V Limited, promote the Ka Sing VIP Club over the course of two years, for which he ‘shall be entitled to receive 57 per cent of the gross gaming income’

of the room from gaming licence holder Sociedade de Jogos de Macau (SJM).

The group managing the VIP room – Hong Hock, a

subsidiary of Macau Legend – will receive 2 per cent of the gross gaming income, to be paid out by Mr. Wong’s company, with guarantees that

‘0.05 per cent or below of the rolling chips volume in connection’ with the VIP room ‘be spent to consume at the hotels, restuarants and other businesses of the Group’.

Hong Hock will also receive a monthly licence fee per gaming table of HK$270,000, for licencing and expenses incurred on the VIP room.

Hong Hock will provide manpower, equipment, electricity and management of the operations and management of the VIP room.

Based on historical revenue, Macau Legend is ‘expected to share 2 per cent of the total gaming revenue of ap-

proximately HK$4,320,000 to HK$6,480,000 per year’ as well as ‘to receive the charge of approximately HK$3,600,000 to HK$5,400,000 per year in respect of hotel rental, food and beverages consumption’ by the patrons in the VIP room.

In addition, a company controlled by Mr. Wong, Seng Lei Loi Jewelry and Watches Company Limited, is set to rent a shop in Legend Palace for a term of two years ‘for retailing purpose for a total sum of approximately HK$450,000,’ notes the filing.

Security

Wynn says if Paddock was a customer, would have triggered ‘alarms’ He concluded that Las Vegas was susceptible to attacks in late 2015 and brought in security consultants for a six-month effort to secure the Wynn Las Vegas & Encore Resort Ben Brody

The behaviour of the man police say shot and killed 58 people in Las Vegas would have prompted a security probe before the massacre had he been staying again at Steve Wynn’s hotel, the billionaire casino magnate said Sunday.

“The scenario that we’re aware of would have indicated that he didn’t let anyone in the room for two or three days,” the chairman and CEO of Wynn Resorts Ltd. said on “Fox News Sunday.” “That would have triggered a whole bunch of alarms here, and we would have -- on behalf of the guests, of course -- investigated for safety.” An inquiry begins when a guest has a “do not disturb” marker on their room for more than 12 hours, he said.

The shooter, 64-year-old Stephen Paddock, amassed a stockpile

of weapons and then attacked an outdoor country music festival from his 32nd-floor suite at the Mandalay Bay Resort and Casino. Wynn said his staff knew Paddock from multiple, apparently uneventful visits to the billionaire’s own properties. The staff described Paddock as having “the most vanilla profile one could possibly imagine,” he said.

“Their behaviour was conservative, private, understated,” Wynn said of Paddock and his girlfriend, who wasn’t with him at the time of the attack and hasn’t been implicated.

The two didn’t drink and Paddock always paid promptly, Wynn said.

Wynn said he concluded that Las Vegas was susceptible to attacks in late 2015 and brought in security consultants for a six-month effort to secure the Wynn Las Vegas & Encore Resort. Doors are guarded at all times and there are magnetometers

“at every employee entrance and at every place of human collection like the nightclubs,” he said.

The security measures are undertaken with respect for guests’ privacy and freedom, Wynn said, adding that as many as 20,000 people a day may flow in and out of the building.

“Under most circumstances, it’s

unnecessary to wand people or to do any kind of invasive procedure,” Wynn said. “The things we’re looking for, that represent potential threats, are much more obvious and allow us a great deal of freedom in allowing us to not interfere with the normal flow of people.” He didn’t elaborate on what the staff watches for. Bloomberg

8 Business Daily Tuesday, October 10 2017

Greater China PMI

Survey puts services growth at 21-month low Picture of resilient economy blurred Elias Glenn

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ctivity in China’s services sector grew at its slowest pace in 21 months in September as new orders cooled, a private survey showed, blurring the picture of how the economy is performing heading into a key Communist Party Congress.

The findings of the Caixin/Markit survey reinforce views that China’s smaller companies are continuing to struggle, while large state-owned giants are apparently reaping most of the benefits from a year-long, government-led construction boom.

However, many analysts believe China’s robust industrial rally cannot be sustained much longer, putting pressure on policymakers to finds ways to energize the lacklustre private sector, which accounts for over half of the country’s investment and jobs.

The central bank threw a fresh lifeline to smaller firms last week in an attempt to redress that deep structural imbalance, offering an earnings booster to banks if they ramp up lending to more vulnerable sectors of the economy.

China is counting on growth in services, particularly high value-added services in finance and technology, to reduce the economy’s traditional reliance on heavy industry and investment.

But yesterday’s private survey suggested many services firms are facing a bumpy ride.

The Caixin/Markit services purchasing managers’ index (PMI) fell to 50.6 in September, the lowest reading since December 2015 and one of the weakest since the survey began in 2005.

A reading above 50 indicates growth, and any lower signals contraction. The index had hit a

three-month high in August.

To be sure, the private findings were in sharp contrast to official data which showed services activity expanded at the fastest clip since 2014 in September.

But an official factory survey showed a similar trend, with big companies seeing strong improvements in business conditions while smaller ones struggled to grow, exposing a key fault line underneath the rosy headline growth numbers.

Still, Capital Economics’ China economist Julian Evans-Pritchard, who has been among those predicting a broader slowdown, said it was too early to tell if the Caixin service survey pointed to a turning point just yet.

Retail sales over the just-ended Golden Week holiday rose 10.3 per cent from a year earlier, slowing but

only slightly from the pace in 2016, data showed on Monday.

“It is notable that there are signs of weakness in other parts of the economy and I do think services have softened a bit...I think we will see a slowdown in industrial production as well over the coming few months,” Evans-Pritchard said.

Is recovery in the late innings or extra innings?

After China posted forecast-beating growth of 6.9 per cent in the first half, analysts have said it was only a matter of time before it started to lose steam, especially as the government looks to contain the risks from an explosive build-up in debt, a campaign which is pushing up borrowing costs.

Still, economists expect September data to be released over the next few weeks could show a bounce in

activity after a slightly softer August, welcome news for leaders ahead of a twice-a-decade party congress that kicks off on Oct. 18.

Even if growth does start to fade, few China watchers see the risk of an economic hard landing. Beijing should easily meet or beat its fullyear growth target of around 6.5 per cent after the rousing start to the year.

“The Chinese economy generally held up well in the third quarter,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note accompanying the PMI survey.

“However, the expansion in both manufacturing and services cooled in September, suggesting downward pressure on economic growth may re-emerge in the fourth quarter.”

Reuters

FX

Reserves rise for 8th straight month in boost to President Xi China’s foreign exchange reserves rose modestly in September for an eighth straight month, and by slightly more than markets had expected, as tighter regulations and a stronger yuan continued to discourage capital outflows A dramatic slowdown in capital flight - which had been seen as one of the biggest risks to China - has helped boost confidence in the world’s second-largest economy ahead of a key Communist Party meeting this month, at which President Xi Jinping is expected to consolidate his grip on power.

Forex reserves rose US$17 billion in September to US$3.109 trillion, compared with an increase of US$10.5 billion in August, central bank data showed yesterday.

Economists polled by Reuters had expected reserves to rise by US$8 billion.

It was the first time that China’s reserves have climbed for eight months in a row since June 2014, and brought its stockpile -- the world’s largest -to the highest since October last year.

The consistent rise has led some analysts to believe the People’s Bank of China (PBOC) may have become a net buyer of foreign exchange for the first time in nearly two years.

“But we believe any such purchases reflect a desire to create uncertainty over the short-run trajectory of the currency rather than resisting medium-term appreciation,” Julian Evans-Pritchard, China Economist at Capital Economics, wrote in a note.

China has tightened rules on moving capital outside the country since late last year as it scrambled to support the yuan and stem a slide in its forex reserves.

Beijing burned through nearly US$320 billion of reserves last year and the yuan still fell about 6.5 per cent against the surging dollar, its biggest annual drop since 1994.

However, the yuan has seen a sharp rebound so far this year, thanks to a reversal in the dollar and a further widening of Beijing’s forex controls, including a clampdown on some

overseas acquisitions by Chinese firms which some suspected were really being used to channel money offshore.

The yuan had gained 7.5 per cent against the dollar through early September, but authorities have allowed it to backtrack a bit in recent weeks, possibly due to concerns that its rapid run-up would start to hurt China’s exports.

The dollar’s recent resurgence has also pressured the yuan of late, though few China watchers believe Beijing will allow it to retreat much

further and risk rekindling outflows.

Taken together, the regulatory measures, exchange rate forces and a stronger trade surplus may have brought China’s capital flows roughly into balance for the first time in years.

“We believe that Chinese officials view the outflows as a critical threat, as they deplete China’s FX reserves and invoke unpleasant memories of the Asian Financial Crisis,” economists at ANZ said in a recent note.

“Therefore, we think the authorities will prefer stability more than anything else in the near term, particularly as the 19th Communist Party Congress approaches in mid-October.”

The country’s outbound non-financial investment (ODI) slumped 41.8 per cent in January-August from a year earlier, as authorities kept a tight grip on outflows for what they call “irrational” overseas projects.

The state council said in August that China will limit overseas investment in property, hotels, entertainment, sports clubs and film industries.

The value of gold reserves fell to US$76.005 billion at the end of September, from US$77.702 billion at end-August, data published on the People’s Bank of China website also showed. Reuters

Business Daily Tuesday, October 10 2017 9

Greater China Pharma

Beijing to accept overseas trial data in bid to speed up drugs approvals The Cabinet also said it would look to improve the protection of medical intellectual property and boost the number and quality of clinical trial testing centres in China Adam Jourdan

China said it plans to accept data from overseas clinical trials to speed up approvals of drugs, a potential boon for international drugmakers as well as patients who often face lengthy delays for new medicines to reach the market.

The move, outlined by the Cabinet

late on Sunday, seeks to address high medicine costs and access to healthcare for China’s population of nearly 1.4 billion. In the past five years, China has approved just over 100 innovative new drugs, about one-third the number in developed markets.

Accepting overseas clinical data will help global drugmakers at time of growing competition from Chinese

rivals in the world’s second-biggest pharmaceuticals market as well as pressure from authorities which are anxious to rein in prices.

“Overall, China’s support for scientific innovation with drugs and medical devices is lacking, and the quality of products on the market still falls short of top international levels,” the draft proposals said.

“We must speed up the examination and approval of urgently needed drugs and medical devices.”

The proposals contained no timeline for implementation.

Key Points China to accept overseas clinical trial data Country the world’s No. 2 drug market after U.S. New drugs come to China 6-7 yrs later than int’l markets “We want to make our drug industry large-scale and strong, make it more competitive, and shift our long-term reliance on imports of new drugs,” Wu Zhen, deputy head of the China Food and Drug Administration, told a briefing on Monday. “(Some drugs) have been used overseas for 6-7 years before making it to market in China,” Wu added.

China in March proposed ways to speed up approvals for imported drugs, including reforming clinical trial requirements. It also wants to boost its own drug industry and see a shift from generic drugs and towards more innovative medicines and medical equipment. Reuters

Markets

Congress opens door for other Asia dollar bond sellers China’s Communist Party congress this month is expected to slow dollar bond issuance from the nation’s borrowers in the fourth quarter, which may be good news for issuers elsewhere in Asia as volumes are already at unprecedented levels Carrie Hong, Annie Lee and Lianting Tu

“China supply is expected to be slightly slower in the coming weeks,” with the up-coming Party Congress and the limited issuance quota from the Chinese regulator, said Chao Li, head of Asia bond syndicate at Standard Chartered Plc. “It could represent a good issuance window for non-Chinese issuers and some comparatively weaker names to access the market.”

“China supply is expected to be slightly slower in the coming weeks” Chao Li, head of Asia bond syndicate at Standard Chartered Plc China’s 19th national communist party congress, which kicks off Oct. 18, may already be curtailing sales from the nation’s borrowers, and Indonesia’s Geo Energy Resources Ltd. cited fewer issues in the market when it debuted a junk note at the end of September.

Spreads on Asian investment-grade dollar bonds over Treasuries fell to a decade low of 163 basis points this month as buyers expressed optimism about China’s economy and the region as a whole.

The political noises from China will start to kick in after the middle of October, which will shape market sentiments in the final quarter, said Arthur Lau, head of Asia ex-Japan fixed income in Hong Kong at PineBridge Investments. Investors have already turned slightly cautious on

the absolute yield level given the low yield on treasuries, he said.

A tightening of bond spreads in September may be partially due to fewer than expected new issues from better Chinese names, according to Salman Niaz, executive director of emerging-market debt at Goldman Sachs Asset Management. While speculative-grade Asian issuers recorded improved credit metrics in the first half, Goldman Sachs Group Inc. analysts recommend investors look to better-rated names because of high risks surrounding low-quality borrowers.

S&P Global Ratings and HSBC Holdings Plc have warned of the potential for price corrections in Asian bonds amid tight pricing.

Asian bonds may return investors only about 0.2 per cent in the fourth quarter after strong gains earlier in

the year, JPMorgan Chase & Co. said in a report last month. The U.S. bank predicts a total return of about 5.7 per cent for 2017, similar to last year, and says spreads on high-yield notes from the region are now “too thin” compared with investment-grade offerings.

Order books for Asian dollar bonds also fell in September, dropping to about 2.9 times, a low for the year, according to data compiled by Bloomberg News from available statistics.

JPMorgan expects spreads on Asian dollar bonds to widen to about 240 basis points by the end of the year, up from a little over 230 at the end of the third quarter.

While there are some roadblocks in getting regulatory approvals for Chinese sales, borrowers that have the green light, will probably sell after the Congress, Clifford Lee,

Singapore-based head of fixed income at DBS Group Holdings Ltd., said. Issuers in Asia ex-Japan have about US$18 billion of dollar bonds maturing before the end of the year.

Away from China, borrowers from India and Indonesia have both sold in excess of US$10 billion in dollar notes so far this year. Issuance from Indonesia is already at record pace.

“Indonesia is still a very strong story,” said Neeraj Seth, head of Asian credit at BlackRock Inc. “So you still have a decent level of nominal and real yields in Indonesia, so the local bonds look attractive. In the dollar space, it looks fair.”

Seth likes both hard currency and local currency India bonds. Defaults this year has made some investors wary of weaker Indian names, according to DBS’s Lee. Bloomberg News

10 Business Daily Tuesday, October 10 2017

Greater China Goldman Sachs

Reading PBOC signals takes ‘mosaic approach’ China’s central bank could adjust monetary policy again in the coming months, in response to changes in the economy or the shifting agendas of top political leaders following the 19th Party Congress, according to Goldman Sachs Group Inc

F

or hints on how monetary policy will evolve, investors should piece together a range of abstract and irregular signals ranging from interbank rates to quarterly reports, MK Tang, senior China economist at Goldman in Hong Kong, wrote in a note. Unlike global peers, the People’s Bank of China doesn’t make scheduled policy rate announcements, and speeches are relatively rare.

“Understanding policy intention is not always an easy task in China though, given an absence of regular ratesetting meetings and limited explicit guidance from senior officials” MK Tang, senior China economist at Goldman in Hong Kong

The reaction function, or how PBOC officials led by Zhou Xiaochuan set policy in response to economic data, may “potentially be re-calibrated after the upcoming party transition,” Tang said. That’s underscored by the central bank’s Sept. 30 announcement of a targeted reserve

PBOC headquarters

requirement ratio cut for banks to ensure credit reaches small businesses, Tang added.

President Xi Jinping will gather Communist Party officials for twicea-decade leadership reshuffle starting next week that could replace about half of the top cadres. In the lead up, authorities have been reining in debt risk and consistently pledging “prudent and neutral” policy, while leaving the benchmark lending rate unchanged for almost two years.

“Understanding policy intention is not always an easy task in China though, given an absence of regular rate-setting meetings and limited explicit guidance from senior officials,” Tang wrote. “It does not

mean that information is lacking, but it requires a mosaic approach that involves watching and analysing a broad spectrum of cues.”

Tang outlined five broad sets of signals for interpreting policy intent: The PBOC’s “official taxonomy,” such as calling for a prudent and neutral policy stance, released quarterly and typically set at the year-end Central Economic Work Conference.

The tone of irregular official comments, with rare deviations from the party line indicating a strong signal.

Quantitative liquidity indicators, such open market operations or changes to the Medium-term Lending Facility targeted lending program.

Interbank rate spreads, which reflect

financial leverage and influence the policy bias. The repo rate that covers only banks can reflect the policy stance more accurately than the general 7-day repo rate, and gravitates toward it over time, Tang said.

High-level actions like changes in the benchmark rate or required bank reserves.

“These various sets of signals each offer a different perspective, and are best pieced together to provide a more comprehensive read of policy intent,” Tang said. “Most recently, the RRR news in isolation is a dovish hint,” but other indicators such as liquidity operations and signs of financial leverage “would be useful supplementary signals to watch.” Bloomberg News

M&A

Noble Group explains why gas sale earned less than expected The lower sale figure is a blow for Noble Group as it bids for survival more than two years into a crisis marked by accounting criticisms Noble Group Ltd., the commodity trader struggling to avoid a default, has set out why it received millions of dollars less from the sale of its North American gas and power unit than the company had previously indicated, responding to queries from the Singapore exchange.

The figures differed because the unit’s working capital shrank, cutting the amount that needed to be paid by Mercuria Energy Group Ltd., Noble Group said in a statement yesterday.

The illustrative sum given earlier by Noble Group also didn’t take into account funds that were placed in escrow, it said.

The Hong Kong-based trader is under intense scrutiny from investors and regulators as it pursues a shrinkto-survive strategy, selling off businesses to pay down debt. As part of that, Mercuria paid Noble Group for US$102 million for the gas and power unit and deposited a further US$83 million into an escrow account. Noble Group had estimated it would be paid US$261 million for the business based on its end-of-June accounts, and the Singapore Exchange had asked the company to reconcile the difference between the figures.

The difference between the closing amount and the illustrative total consideration was a result of “a decrease

in North American Gas and Power’s working capital between 31 March 2017, 30 June 2017 and 30 September 2017,” the company said. In addition, the illustrative total consideration didn’t take into account the funds placed into escrow, it said.

Sale figure

The lower sale figure is a blow for Noble Group as it bids for survival more than two years into a crisis marked by accounting criticisms, a plunge in its securities and rating downgrades. The company had

already flagged a potential US$133 million loss on the unit’s disposal based on its estimated sale price of US$261 million, compared with the book value of US$394 million at the end of June.

According to a circular to shareholders in August, US$40 million of the total sale price would be deposited into an escrow account when the deal completed, unless the two companies disagreed on the valuation. In that case, Mercuria would deposit a higher amount in escrow to make up for the difference.

Noble Group is still pressing on with the sale of its oil business, with potential buyers pared down to Vitol Group and Mercuria, according to people familiar with the matter. Separately, people have said that Noble Group has struck a deal with Mercuria to tap about US$400 million of financing for its Asian business.

‘Noble Group had estimated it would be paid US$261 million for the business based on its endof-June accounts’ The lower sum for the gas unit “may not be as bad as it looks since some of it was due to a conversion of working capital,” Steve Wang, senior credit analyst at Citic CLSA Securities, said in a note. “This news is certainly balanced out with the encouraging report that Noble is receiving some additional trade financing through a deal with Mercuria. The downside being that Mercuria may be squeezing Noble hard on the price for its oil liquids business.” Bloomberg News

Business Daily Tuesday, October 10 2017 11

Asia Aviation

Thai air safety upgrade opens up growing China, Korea, Japan markets Shares in Thai Airways climbed nearly 8 per cent on the news before falling back to trade at over 5 per cent higher Aukkarapon Niyomyat and Wirat Buranakanokthanasan

T

hai airlines can now add flights to the growing China, South Korea and Japan markets after the UN International Civil Aviation Organization removed a red flag against Thailand over safety concerns, officials said yesterday.

Thailand was downgraded in June 2015 after its regulator missed a deadline to resolve significant safety concerns, meaning that airlines were unable to add further international routes, though they could continue to operate routine flights.

Key Points Airline shares jump on the news Expectations of FAA upgrade early next year Rivals to benefit more than Thai Airways: analyst The Civil Aviation Authority of Thailand (CAAT) said the ICAO had made the decision after a meeting last Friday.

The Montreal-based UN agency was not immediately

available for comment, but the red flag which appeared against Thailand on its website had disappeared.

“Although lifting the red flag is a significant turning point for her aviation industry, Thailand as well as CAAT need to carry on their missions to improve the aviation safety standards,” the CAAT said on its website.

Airline shares jump

Shares in Thai Airways climbed nearly 8 per cent on the news before falling back to trade at over 5 per cent higher. Shares in Asia Aviation, which operates as Thai Air Asia, rose as much as 5 per cent and later traded up nearly 4 per cent. Shares in airport operator Airports of Thailand rose over 2 per cent.

The biggest beneficiaries would be smaller carriers, such as Thai AirAsia X, NokScoot and Thai Lion, said Corrine Png, the CEO of Singapore-based transport research firm Crucial Perspective.

“The ICAO downgrade had seriously impeded these new entrants’ growth to lucrative markets such as Japan and South Korea,” she said.

“These airlines can now

Bangkok airport

grow more aggressively. This would, however, imply increased competition for Thai Airways when they expand.”

Thai AirAsia X CEO Nadda Buranasiri said his airline was studying new routes, including to Hokkaido in Japan, after the red flag was lifted.

“We will likely increase routes and frequencies for China, South Korea, and Japan,” he told Reuters on Monday, adding Thai AirAsia X now hoped to add three to four aircraft to its fleet next year.

Nok Airlines PCL Vice Chairman Patee Sarasin said new routes would be added as slots became available.

Thai Airways lacks enough aircraft to take advantage of the situation and expects rivals will boost routes to other Asian countries, said a source

at the national carrier who declined to be named because he wasn’t authorised to speak to the media. Thai Airways declined to comment.

U.S. yet to upgrade

CAAT director general Chula Sukmanop told a news conference that he expected Thailand would regain a Category One status from the U.S. Department of Transportation’s Federal Aviation Administration (FAA), which also downgraded Thailand in 2015. The FAA downgrade meant Thai carriers could not start new routes to the United States.

The CAAT said its aim was to be at “the world’s forefront” in safety and reach the global average in each safety category. Actions were still needed to address findings of

an ICAO inspection in January 2015 and an audit in July, it said.

ICAO’s red flag was based on its audit of the regulatory body, rather than individual airlines. Some major Thai airlines, including Thai Airways, Bangkok Airways, Thai Lion and NokScoot, have passed the International Air Transport Association Operational Safety Audit, a benchmark for global safety management in airlines.

Aviation safety is particularly important for Thailand given that tourism accounts for around 12 per cent of its economy, the second largest in Asia.

The countries which still have red flags against them are Djibouti, Eritrea, Haiti, Kyrgyzstan and Malawi, according to the ICAO list. Reuters

CEO

Saudi Aramco eyes joint venture deal in India by next year The world’s biggest oil producer is investing in refineries abroad to help lock in demand for its crude and expand its market share ahead of its initial public offering next year Promit Mukherjee and Nidhi Verma

State-run oil giant Saudi Aramco is in talks with several Indian refiners and hopes to land a joint venture deal by next year, the company’s chief executive told Reuters.

Aramco, like other major oil producers, wants to tap rising demand growth opportunities and invest in the world’s third biggest consumer.

“We are hoping to land on a JV sometime,” Aramco’s CEO Amin Nasser said at India Energy Forum by Cera Week in New Delhi.

Asked if a deal could be finalised next year, he said: “We hope so. We are in serious discussions.”

Aramco wants to buy a stake in the planned 1.2 million barrels per day (bpd) refinery in India’s west coast, India’s oil minister said in June.

Aramco plans to float up to

5 per cent of its shares in 2018 in what could be the world’s largest IPO, raising as much as US$100 billion.

Nasser said Aramco is interested in investing in

India’s downstream sector - refining, petrochemicals and fuel retailing including lubricants.

Saudi Arabia is competing with Iraq to be India’s top oil

supplier, with Iraq displacing it for a fifth month in a row in August, data compiled by Reuters showed.

Earlier this year Saudi Arabia pledged billions of dollars of investment in projects in Indonesia and Malaysia to ensure long-term oil supply deals.

The International Energy Agency estimates India’s refining capacity will lag fuel demand going forward, requiring investment in new plants.

Saudi Aramco earlier on Sunday launched a new office in New Delhi as it aims to expands its presence in India.

India’s oil minister Dharmendra Pradhan, who inaugurated Aramco’s India unit, said Aramco is interested in investing in refinery projects in the Asian country and “very soon they will come to India.”

Nasser said Aramco will increase its staff strength

in India by four fold compared to now. The company which had 14 employees has now raised staff numbers to around 30.

‘Earlier this year Saudi Arabia pledged billions of dollars of investment in projects in Indonesia and Malaysia’ “India by itself is an important market. The size of India’s market is huge. The growth in India last year is 8 per cent last year as compared to 1.5 per cent globally in energy,” Nasser said. Reuters

12 Business Daily Tuesday, October 10 2017

Asia Probe

Indonesia says investigating StanChart US$1.4 billion transfer to Singapore The probe is a potential blow for the bank, which is trying to turn around a reputation bruised by bad loans and regulatory fines Cindy Silviana and Hidayat Setiaji

I

ndonesia is investigating reports that US$1.4 billion held by Standard Chartered Plc in Guernsey, mainly on behalf of Indonesian clients, was transferred to Singapore just before the island moved to new tax transparency rules, officials said.

A source familiar with the matter said late last week, confirming news reports, that the Monetary Authority of Singapore (MAS) and Guernsey’s Financial Services Commission were looking into that movement of assets in late 2015 - months before the Channel Island adopted a global framework in the exchange of tax data.

Under those rules, countries automatically share annual reports on accounts belonging to people subject to taxes in each nation. Britain, Guernsey and Singapore have all signed up, but Guernsey implemented the rules ahead of Singapore.

Indonesian and other regulators have not confirmed the nature of the customers or of

worries around the funds, but a person familiar with the matter said part of the concern stemmed from links between some of those private banking clients and the Indonesian military.

“This was not a transfer by one Indonesian citizen but by many customers. We are now checking their annual tax reports, as well as their report of assets, for those who participated in the (Indonesian) tax amnesty,” Hestu Yoga Saksama, a spokesman for Indonesia’s tax office, said.

“If those assets are reported in annual reports or declared during the tax amnesty, it surely means there are no problems. But if they were not, we are going to follow up under the prevailing regulations.”

Heru Kristiyana, the deputy commissioner for banking at Indonesia’s financial regulator (OJK), told Reuters by text message on Monday that a supervisor was investigating the issue.

He said the regulator was co-ordinating with the director general of taxation and the anti-money laundering

agency, the Financial Transaction Reports and Analysis Centre (PPTAK).

A spokesman at PPTAK had no immediate comment, while the anti-corruption agency did not immediately respond.

The investigation was first reported by Bloomberg, which cited anonymous sources saying that Standard Chartered had reported the matter itself to the regulators.

It said the sources said regulators were looking into Standard Chartered’s processes, but had not suggested the bank colluded with

clients to evade tax.

Standard Chartered and MAS have declined comment.

Standard Chartered said last year that it was to close its trust operations in Guernsey and centralise that part of its business in Singapore.

But the probe is a potential blow for the bank, which is trying to turn around a reputation bruised by bad loans and regulatory fines, and says it is tightening compliance under a new chief executive.

Singapore and Indonesia said in July they were ready to share financial data

automatically for tax purposes.

Both countries could start exchanging financial information from next year if they introduce the necessary legislation, Indonesia’s Finance Minister Sri Mulyani Indrawati has said.

The Indonesian government launched a tax amnesty scheme last year to improve compliance and to encourage tax payers to bring back billions of dollars stashed abroad. Most of the offshore assets declared by taxpayers during the amnesty programme were kept in Singapore. Reuters

Survey

Philippines says policy trumps popularity after Duterte ratings dip Philippine President Rodrigo Duterte’s honeymoon period may be over, but his deadly anti-drugs campaign will not wane, his office said yesterday, after a fall in ratings that his opponents |said showed public disillusionment with his rule Karen Lema

Duterte has enjoyed strong opinion poll numbers since winning the presidency in last year’s elections but heavy scrutiny of his war on drugs, which has killed thousands of Filipinos, appears to have impacted his ratings.

Trust and satisfaction in Duterte fell to the lowest of his presidency in the third quarter of this year, a survey showed on Sunday, although sentiment about his leadership remained positive overall.

“The honeymoon period of the president is usually for a year, so this is expected,” Duterte’s communications secretary, Martin Andanar, said in a radio interview, adding it should motivate the government to deliver on its overall objectives.

The Social Weather Stations survey was conducted between September 23-27, two days after thousands of Filipinos rallied to denounce Duterte’s drugs war and his authoritarian leadership style.

The high death toll has stoked international alarm, although domestic polls have shown Filipinos are largely supportive of his tough measures to fight crime and drugs.

Police say they have killed 3,900 drug suspects during their anti-narcotics operations and deny executions

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have taken place, as human rights groups have alleged.

But the campaign has been under the microscope of late, due largely to the high-profile killing by police of a 17-year-old student on Aug. 16, which led to a senate probe. A murder investigation is under way.

Police said he was a drug suspect killed because he opened fire on them while resisting arrest, but security camera footage showed him in police custody. His family insists he was executed.

Staunch critics of Duterte were quick to take advantage of a survey slump they said reflected public discontent and scepticism about his drugs war.

“It’s very encouraging to know that the Filipino people are beginning to see the light,” said Senator Antonio Trillanes, a fierce opponent who has recently accused Duterte of concealing assets when he was Davao City mayor.

“They are now seeing Duterte for who he really is: a lying, rude, amoral, corrupt and oppressive former mayor who is totally incompetent about governance at the national level.”

Presidential spokesman Ernesto Abella also said the honeymoon was over, but Duterte was not motivated by popularity ratings and was “bent

Philippine President Rodrigo Duterte

on making sure that he addresses the three campaign themes which is crime, corruption and illegal drugs”.

Duterte’s office frequently cites polls, including SWS, as a sign of his public support.

Peace and order are also one of the cornerstones of the 72-year-old leader’s economic agenda, which aims to lift the country’s growth to

7-8 per cent during his six-year term.

Senator Risa Hontiveros said the ratings dip showed Duterte’s “authoritarian style of governance is losing its appeal and support”.

“The writing on the wall is simple and clear: President Duterte cannot govern based on fear, lies and killings,” Hontiveros said in a statement.

Reuters

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Business Daily Tuesday, October 10 2017 13

Asia Politics

In Brief

NZ First leader says foreign ownership to be part of coalition wrangling Labour and New Zealand First are thought to have more policies in common, with both looking to curb immigration Ana Nicolaci da Costa and Charlotte Greenfield

The party holding the balance of power in New Zealand’s election said yesterday foreign ownership restrictions would be part of its coalition talks, after a final tally showing greater support for the centre-left bloc drove the local dollar to a fourmonth low.

A final vote count published over the weekend - two weeks after the Sept. 23 poll - showed the centre-left Labour-Green bloc picking up two extra seats, bringing it nearer to the centre-right governing National Party’s tally.

With Labour-Green on 54 seats and National on 56 seats, both will need NZ First’s nine seats to meet the 61 seats needed for a majority in parliament in New Zealand’s proportional representation system.

When pressed by reporters on whether foreign ownership would

be a large part of negotiations with both National and Labour, NZ First leader Winston Peters said he doubted whether anyone in the press expected otherwise.

“So have you got that? It’s a yes,” he said.

National, which has sought to focus discussions on its careful management of the small, open trading economy, has repeatedly expressed support for open investment.

In contrast, Labour has suggested there is room for some restrictions.

It wants to ban overseas buyers from purchasing existing homes as it tries to tackle what it has described as a housing crisis in New Zealand.

Labour and New Zealand First are thought to have more policies in common, with both looking to curb immigration, renegotiate certain trade deals and adjust the role of the central bank.

Peters, a colourful 40-year political veteran who has in the past has

taken senior roles in both Labour and National governments, has set a self-imposed deadline of Oct. 12 to announce which party he will support.

When asked how this week’s talks compared to previous election negotiations, Peters said, according to local media: “They are similar in some ways because of circumstances. More like 1996 than 2005.”

In 1996 Peters formed a coalition government with National after two months of negotiation, while in 2005 he entered a confidence and supply agreement with Labour, which allowed the centre-left party to govern.

The 1996 election was much tighter than 2005 in which Labour won a wide lead.

“But we have a few days to go yet before we will know the outcome,” the New Zealand Herald quoted Peters as saying. Reuters

Health

India court bans firecracker sales in Delhi ahead of peak pollution season Top court yesterday temporarily banned the sale of firecrackers in and around the capital ahead of Diwali, the Hindu festival of lights, as it looks to prevent a repeat of severe air pollution that forced school closures last year New Delhi’s air quality has already hit “very unhealthy” levels, U.S. embassy data shows. This is often blamed on burning of unwanted vegetation on farms in neighbouring states usual at this time of year, worsened by fumes from fireworks.

The ban takes effect immediately and will run until Nov. 1, said a panel of Supreme Court judges headed by Justice Arjan Kumar Sikri, adding that its impact on the region’s air quality would have to be examined after the festival.

“All temporary licenses to sell firecrackers stand cancelled,” said Haripriya Padmanabhan, a lawyer representing the group that sought the ban.

“People who had already purchased crackers will be able to burst them.

Hopefully they won’t do that,” he told Asian News International, a partner of Reuters Television.

Diwali, traditionally ushered in with the burning of firecrackers, falls on Oct. 19 this year.

“This is a nice step, let us look at

M&A

Mantra Group receives bid from Accor Australian hotelier Mantra Group said yesterday it had received an indicative acquisition proposal from French hotel group Accor SA at A$3.96 per share for a buyout price of A$1.18 billion (US$916.98 million).

The offer price is A$4.02 per share less the Mantra’s final dividend for fiscal 2017, including a potential special dividend. Accor has been granted due diligence access to determine if a deal can be agreed upon and unanimously recommended by the Mantra board, Mantra said in a statement to the Australian Securities Exchange.

Consumption

Indonesia’s August retail sales rise Indonesia’s retail sales in August rose 2.2 per cent from a year earlier after a contraction in July, a central bank survey showed yesterday. August retail sales growth was mainly supported by the sales of food, said Bank Indonesia in a report on the survey.

In July, retail sales declined 3.3 per cent on a yearly basis, the first contraction in nearly six years. The survey of 700 retailers in 10 major cities projected that retail sales in September would grow 2.4 per cent from a year earlier.

Banking

CBA hit with class action suit

Celebrating Diwali festival

other sources of #airpollution too,” global environmental group Greenpeace said on social network Twitter.

But others saw it as an attack on tradition.

“We Indians will protest and burn crackers,” wrote one Twitter user, Ishkaran Bhandari. “We will uphold

our culture, traditions and celebrate Diwali.”

Last November, about a million children were forced to stay home from school, thousands of workers reported sick and queues formed outside shops selling face masks as New Delhi struggled with its worst pollution for nearly 20 years.

An Australian law firm formally filed a class action suit against Commonwealth Bank of Australia on behalf of shareholders yesterday, accusing it of failing to disclose widespread breaches of anti-money-laundering rules. The lawsuit by law firm Maurice Blackburn against the nation’s biggest lender follows one by the federal agency AUSTRAC, which has accused it of more than 53,000 breaches of anti-money laundry rules - breaches which have exposed it to billions in dollars of fines.

The suit said shareholders had suffered a significant share drop in the wake of AUSTRAC’s accusations.

Trade

‘India and giant neighbour China together account for more than half of the 4.2 million deaths attributable to air pollution worldwide in 2015’ Vehicle emissions and dust from construction sites were the factors blamed for that spike, besides firecrackers and farm burnings.

India and giant neighbour China together account for more than half of the 4.2 million deaths attributable to air pollution worldwide in 2015, a study by the U.S.-based Health Effects Institute (HEI) showed.

Reuters

Vietnam posts US$1.1 bln surplus in September Vietnam had a trade surplus of US$1.1 billion in September, much higher than the government’s forecast of US$400 million, the customs department said yesterday. Exports in September fell 2.1 per cent from a month earlier to US$19.34 billion, while imports edged up 0.3 per cent from August to US$18.24 billion, Vietnam Customs said on its website. Vietnam exported US$154.32 billion of goods in the first nine months of 2017, up 20 per cent from a year earlier, while imports increased 22.7 per cent in the same period to US$154 billion, leaving a surplus of US$320 million.

14 Business Daily Tuesday, October 10 2017

International In Brief Diplomacy

Iran promises response if Guards designated a terrorist group Iran promised yesterday to give a “crushing” response if the United States designated its elite Revolutionary Guards as a terrorist group. The pledge came a week before President Donald Trump announces final decision on how he wants to contain Tehran.

He is expected on Oct 15 to decertify a landmark 2015 international deal to curb Iran’s nuclear programme, in a step that potentially could cause the accord to unravel. Trump is also expected to designate Iran’s most powerful security force, the Revolutionary Guards Corp (IRGC) as a terrorist organisation, as he rolls out a broader U.S. strategy on Iran.

GDP

Bank of France keeps growth forecast The Bank of France maintained on Monday its forecast for French quarterly gross domestic product (GDP) growth of 0.5 per cent in the third quarter, unchanged from the second quarter. The prediction was part of the central bank’s September business climate survey, which showed that the sentiment indicator for the industrial sector was steady at 104 points in September, unchanged from the August reading. The sentiment indicator for the services industry was also steady at 100 points in September, unchanged from August, while sentiment in the construction sector edged up to 104 points in September from 103 points in August.

Politics

Sceptical Greens ready to start German coalition talks Germany’s Greens yesterday rejected a deal reached within Chancellor Angela Merkel’s conservative bloc to limit migrants to 200,000 a year, but said coalition talks should get under way anyway. Merkel’s Christian Democrats (CDU) appeared to make a concession to their conservative Bavarian allies on Sunday by agreeing to put a number on how many people Germany would accept per year on humanitarian grounds. The compromise was seen as clearing the way for the conservatives to jointly start talks with the Greens and Free Democrats (FPD) on forming a “Jamaica” tie-up - the name deriving from the black, green and yellow colours of the three blocs.

Report

Chief of Credit Agricole expresses interest in Commerzbank Credit Agricole’s chief, Philippe Brassac, has expressed interest in Commerzbank if the German lender were to be up for sale, according to an interview with the Handelsblatt newspaper. Brassac was quoted as saying that he would like the French bank to be better positioned in Germany, as it is in Italy. Credit Agricole’s strategy plan states that it will focus on organic growth until 2019.

“But this doesn’t mean that we wouldn’t take a look at interesting possibilities,” Brassac said in the interview published on Sunday.

GDP

Surge in German factory output points to strong growth The German government will present its updated projections for GDP growth, employment and inflation on Wednesday Michael Nienaber

G

erman industrial output posted its biggest monthly rise in more than six years in August, data showed yesterday.

It suggested the economy is firing on all cylinders again and set for solid growth in the third quarter, although a question about the make up of the new government could add uncertainty.

The combined production of manufacturing, construction and energy increased by 2.6 per cent on the month after edging down by 0.1 per cent in July, data from the Economy Ministry showed.

That was the strongest monthly gain since July 2011 and easily beat expectations in a Reuters poll for a 0.7 per cent rise, surpassing even the most optimistic estimate.

“These figures are very good,” Commerzbank economist Ralph Solveen said. He pointed to special factors such as plant holidays falling in July in some regions this year, meaning output was likely to come in weaker next month.

“Overall, we expect solid (GDP) growth in the third quarter. Our estimate is roughly 0.6 per cent on the quarter,” Solveen said.

Manufacturing output rose by 3.2 per cent, its biggest rise since March 2010, as factories churned out more intermediate goods, capital goods and consumer goods in August. Energy

output also rose while construction activity fell.

Manufacturers of cars and other vehicles were the main driver behind the overall surge, the ministry said, also pointing to earlier plant holidays.

The ministry said industrial production had gained momentum since the start of the year.

Solid upswing

“The good business morale and the positive development in industrial orders point to a continuation of the solid industrial upswing,” it said.

Data published on Friday showed that strong foreign demand, especially from clients outside the euro zone, drove a bigger-than-expected jump in industrial orders in August.

Key Points Car manufacturers main driver behind overall increase Ministry points to special factors such as plant holidays Analysts see GDP growth of 0.6 pct in third quarter ING Bank chief economist Carsten Brzeski said the strong production data provided further evidence that the economy had left its summer lull behind and returned to maximum speed.

“With the expected investment programme of the new government,

the current cycle should be extended by another couple of years,” Brzeski added.

The German economy grew 0.7 per cent on the quarter in the first three months of the year and 0.6 per cent from April to June, driven by increased household and state spending as well as higher investment in buildings and machinery.

Leading economic institutes have raised their growth forecast for the German economy to 1.9 per cent in 2017 and 2.0 per cent in 2018.

“The outlook further ahead is positive too, with domestic demand supported by low unemployment and still loose monetary policy and the global environment supportive,” Capital Economics analyst Jennifer McKeown said.

The economy might even benefit from a small post-election fiscal boost, McKeown said, adding she expected German GDP to rise by an even stronger rate of 2.3 per cent this year.

The biggest risks to Germany’s upswing come from the outside, Brzeski said, pointing to geopolitical risks, the stronger euro and a possible slowdown of the U.S. economy as a result of further absence of tax relief or investment programs.

Other risks include a slowdown of the British economy due to the continuing Brexit uncertainty and China’s transition from an important export destination to a serious competitor, he added. Reuters

ECB tests

Fifty-one euro zone banks vulnerable to rate shocks Results of the test, which started in February, are incorporated into the ECB’s guidance on how much capital each lender on its watch should hold Balazs Koranyi and Francesco Canepa

Fifty-one large euro zone banks are leaving themselves exposed to a sudden change in interest rates and may need to aside more capital against that risk, the European Central Bank said yesterday.

The ECB is preparing to start dialling back its monetary stimulus after years of ultra-low interest rates and massive bond purchases, paving the ground for rate hikes further down the line.

After simulating scenarios ranging from a sudden monetary tightening to the kind of lending freeze that followed Lehman Brothers’ collapse, the ECB found that most of the 111 euro zone banks it tested are well prepared for interest rates shocks.

But it cautioned it needed “intense discussions” with 51 of them after finding they may be making themselves vulnerable via large bets on derivative instruments and overly aggressive models for calculating risk.

A hike in interest rates could mean the banks suddenly need more capital.

“What we need to do is have intense discussions and check with the banks if they’re aware of the... risk and if they have enough capital if things go wrong,” Korbinian Ibel, a senior supervisor at the ECB, said.

Results of the test, which started in February, are incorporated into the ECB’s guidance on how much capital each lender on its watch should hold.

Ibel said the 51 banks may, in principle, see their capital demands rise by up to 25 basis points, although any

decision would depend on the individual circumstances of each firm.

Similarly, the remaining 60 banks could see their guidance reduced by the same amount.

The ECB’s supervisory arm, which oversees the euro zone’s largest banks and carried out the exercise, is formally separated from its monetary policy function.

Income and deposits

On aggregate, the ECB found that an increase of 200 basis points in interest rates would lead to a rise in net interest income of 4.1 per cent in 2017 and of 10.5 per cent by 2019 for the banks tested.

But when rates move, the net value of assets and liabilities of a bank also change. The economic value of the banks’ equity would, however,

decrease on aggregate by 2.7 per cent, the ECB said.

Banks, particularly in richer countries such as Germany, have long complained that the ECB’s ultra-low interest rates have squeezed the margins they make on loans.

Indeed, the ECB found that, should interest rates stay at their end-2016 level and absent any credit growth, the aggregate net interest income would decrease by 7.5 per cent.

Finally, the ECB warned that banks may be taking much of their customer deposits for granted based on recent years and failed to account for the rise of online banks and higher rates.

“One could assume that if interest rates rise, the share of stable deposits decreases, but this is not done by most of the banks,” Ibel said. Reuters

Business Daily Tuesday, October 10 2017 15

Opinion OPEC finds an unlikely saviour in the middle of a crisis Julian Lee a Bloomberg Gadfly columnist

T

here’s nothing like a crisis to create unlikely friends and, goodness knows, there are enough crises in the Persian Gulf to create the unlikeliest of alliances.

The visit by King Salman of Saudi Arabia to President Putin of Russia may not reflect a complete about-face by the desert kingdom, but it sends a very clear message that the U.S. is no longer the only great power calling the shots in the Gulf.

The relationship between the world’s two largest oil exporters has been growing closer ever since King Salman came to the throne and Mohammad bin Salman began his rise towards assuming the crown.

The deal to cut oil production, which has helped stabilize prices and is beginning to drain excess stock, was only achieved through the collaboration of the two countries. Even though OPEC countries have made much deeper cuts than their partners, action by OPEC alone wouldn’t have been nearly so effective. Cooperation between Saudi and Russia has “breathed life back into OPEC,” according to the kingdom’s oil minister Khalid Al-Falih, and the Russian president has indicated he is willing to extend cooperation beyond March 2018 if necessary.

There’s no real chance Russia will seek to join OPEC, nor that it would be welcomed. President Putin ruled out such a move last Wednesday. But he’ll continue to work with the group when their interests coincide.

Russia’s help on the oil price hasn’t gone unnoticed and Salman’s visit -- plus the deals that go with it -- are part of the reward. They’d have been unthinkable five years ago. Now, they reflect Russia’s importance in the Gulf; in particular, its dominant role in Syria.

Spending US$3 billion on Russia’s S400 air defence missile system is tiny compared with May’s US$110-billion deal with the U.S., but that it happened at all shows alliances are shifting. Securing Gulf oil may seem less vital to the U.S. in the age of shale, but the region’s ability to influence oil prices -- deliberately or accidentally -- is undiminished.

The Putin-Salman great pals act comes despite Moscow’s deep bond with Iran. That relationship isn’t about to change. Until the Soviet Union’s 1991 breakup, governments in Moscow and Tehran shared a common border of close to 1,200 miles, parts of which date to the 16th century. The Saudis clearly hope Russia can help keep Iran in check.

Could a Russian entity even become a cornerstone investor in the Saudi Aramco IPO, scheduled for next year? Both parties deny any discussions, but access to cheap-to-extract Middle Eastern crude could be attractive to Rosneft Oil Co PJSC, much of whose future development portfolio consists of expensive Arctic oil that may be uneconomic in a US$50 world.

Russian oil companies have built a string of upstream assets in Iraq and are among early bidders for Iranian projects. Taking an Aramco stake isn’t unimaginable.

In a barely disguised dig at the U.S., Putin explained Russia’s new-found attractiveness to Middle Eastern countries, saying (while keeping a straight face): “The most significant advantage we have is that we never double-deal. We are always honest with our partners.”

That Moscow can speak directly with Saudi Arabia and Iran -- something the U.S. hasn’t been able to do since the ‘70s -- gives it a real chance to reduce tensions between the two, should it so choose.

We’re a long way from seeing a Russian fleet based in the Gulf, but Moscow is showing itself as the emergent regional power and Riyadh seems to be playing along despite Iran. Don’t expect Putin to leave his new friend in the lurch by abandoning the OPEC output deal. Russia’s playing the long game. Bloomberg Gadfly

‘Russia’s help on the oil price hasn’t gone unnoticed and Salman’s visit -- plus the deals that go with it -- are part of the reward’

China doesn’t want your junk anymore but Japan does Adam Minter a Bloomberg View columnist

F

or 30 years China has recycled more cardboard boxes, plastic bottles and old computers than any other nation. By doing so, it’s saved millions of tons of resources and indirectly funded thousands of recycling programs and companies globally. But now it wants to stop. In July, China notified the World Trade Organization that it will soon prohibit the import of many types of recyclables. As a result, recycling programs and companies around the world are scrambling to find new destinations for the junk they once sent to China. In an increasing number of cases, that destination is a landfill.

It’s a true recycling crisis, but it doesn’t have to remain one. China’s decision -- publicly, the government claims the ban is driven by environmental issues associated with imported recycling -- effectively deprives its companies of a cheap source of raw materials. That’s incentive for other countries, companies and programs to invest in new, cleaner technology to take China’s place and gain access to those materials for themselves. Arch-rival Japan, long a major global recycling exporter, may be the first to seize the opportunity.

Like so many other countries, Japan has for decades relied on China as a major destination for its recycling. This solved an immediate problem, but was also a boon to Chinese manufacturers. After all, while environmental concerns have driven the expansion of recycling programs throughout the developed world, what goes into the blue bin is also manufacturing feedstock.

In the U.S., for example, almost 40 per cent of the aluminium supply comes from recycled resources. Close to half of China’s copper supply is recycling-based.

This is especially true for difficult-to-recycle items such as electronic waste. “Mining” an old mobile phone for gold or other rare metals is far cheaper than digging a mine, particularly if labour is inexpensive and environmental controls are limited. China’s output was extraordinary: At its peak, the country’s leading e-waste processing zone produced 20 tons of gold from old electronics annually. That’s roughly equal to 10 per cent of U.S. mined gold production in 2016.

The Chinese government has good reasons to get out of the trade. Pollution associated with electronic waste has become an embarrassing global cause; growing volumes of gadgets discarded by Chinese themselves have reduced the need to import more from abroad. Authorities had been steadily raising

“

barriers to such goods before finally deciding to ban them altogether.

This leaves the market open. With long-term government support for research, some of Japan’s biggest companies are moving to deploy technologies at home and abroad that will replace some of the low-cost and polluting recycling systems long used in China.

For example, Mitsubishi Materials is investing over US$100 million in precious metals refining plants devoted to electronics and -- looking to the future -- lithium-ion car batteries. Initially, Mitsubishi will focus on Japan, but it’s also planning to open a plant in the Netherlands, where it will be in a position to manage at least some of the European Union’s electronic waste once bound for China. Crucially, those plants won’t only make money as service providers; Mitsubishi also sees them as a hedge against expected future scarcity.

O f c o u rs e, r es ea rch a n d investment on that scale isn’t cheap or short-term. Mitsubishi, for one, doesn’t expect to have its recently announced plants fully operational until 2021. But once it does, the raw materials derived from those plants will be freely traded worldwide.

Chinese manufacturers, now forced to import those materials, will face higher costs and lower competitiveness, while Mitsubishi and Japan enjoy broad economic and environmental benefits. Indeed, the outlook is so bright that organizers of the 2020 Olympics are arranging for gold, silver and bronze medals for the Games to be made from electronic waste generated by Japanese consumers.

It’s an investment lesson that recyclers and governments around the world should heed. In the U.S., the Trump Administration could start by reversing its decision to de-fund Department of Energy programs focused on recycling technologies.

Recycling already supports over 750,000 American jobs; investment focused on creating new sources of sustainable raw materials will create more.

At the same time, the private sector should work more closely with recyclers to develop clean technologies and methods that will keep recycling closer to home. Private programs like the U.S.based Closed Loop Fund facilitate investment in such technologies for private companies and local governments, and they deserve broader corporate support. While no one program will suffice to make up for the loss of China’s recycling capacity, not investing at all would be a true waste.

The outlook is so bright that organizers of the 2020 Olympics are arranging for gold, silver and bronze medals for the Games to be made from electronic waste generated

by Japanese consumers

”

Bloomberg View

16 Business Daily Tuesday, October 10 2017

Closing Corruption

Beijing expels former Chongqing police chief from party for graft

The former police chief of the scandal-plagued major south-western Chinese city of Chongqing (pictured) has been expelled from the ruling Communist Party after a probe by the anticorruption watchdog found he wasted public money and abused his power.

He Ting, 55, was abruptly removed from his post without explanation in June, a position he had held since early 2012.

His downfall preceded that of Chongqing’s former top official, one-time city party chief Sun

Zhengcai, who was sacked in July and then put under investigation for suspected corruption.

In a brief statement, the graft-fighting Central Commission for Discipline Inspection said He wasted public funds, went to banquets organised by private firms, interfered in promotions and sought benefit for relatives’ companies.

He also had for a long time engaged in “superstitious activities”. Apart from being expelled from the party, he will also be forced to take early retirement and will have his illicit gains seized, the watchdog added, without saying if he would also face criminal prosecution. Reuters

Award

Richard Thaler wins Nobel for ‘making economics more human’ The 72-year-old takes home the US$1.1 million prize sum Ilgin Karlidag

U

. S . ec o n o m i st Richard Thaler won the Nobel Economics prize y est e r d a y f o r showing that economic and financial decision-makers are not always rational, but mostly deeply human.

Bridging the gap between economics and psychology, Thaler’s research focuses on behavioural economics which explores the impact of psychological and social factors on decisions by individuals or groups in the economy and financial markets.

“He’s made economics more human,” the Nobel jury said, calling Thaler “a pioneer” on integrating economics and psychology.

“By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes,” the jury’s statement said.

“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many

areas of economic research and policy.”

His work even earned him a glamorous foray into the movie business when he made a cameo appearance, alongside Christian Bale, Steve Carell and Ryan Gosling, in the 2015 movie “The Big Short” about the credit and housing bubble collapse that led to the 2008 global financial crisis.

Thaler told the Nobel committee by videoconference he was “pleased” by the award.

“Well, I was pleased. I no longer will have to call my colleague Eugene Fama ‘Professor Fama’ on the golf course,” he joked, referring to his University of Chicago colleague who won the prize in 2013.

“I think the most important recognition is that economic agents are human, and economic models have to incorporate that,” he said.

The 72-year-old takes home the nine million kronor (US$1.1 million) prize sum.

‘The dictator game’

Thaler is a professor at the University of Chicago -- a school popular with the Nobel economics committee. Of 79 laureates so far, more than a third have been affiliated with the university’s school

of economics.

One of the founders of behavioural finance, which studies how cognitive limitations influence financial markets, Thaler developed a model for explaining how people tend to focus on the narrow impact rather than the overall effect of each decision they make, which is called limited rationality.

This includes the study of how people’s loathing of losses can explain why they value the same things more when they own them as opposed to when they don’t, which is called the endowment effect.

Influential in theoretical and experimental research on fairness, Thaler showed “how consumers’ fairness concerns may stop firms from raising prices in periods of high demand, but not in times of rising costs”, the Nobel economics committee said in a statement.

Along with his colleagues, Thaler created a tool called “the dictator game” that was used in several studies to measure people’s attitudes to fairness from around the world.

New Year’s resolutions

And what about keeping New Year’s resolutions?

Thaler has shown that they

(L-R) Per Stroemberg, chairman of the committee Goeran K. Hansson, secretary of the committee and Peter Gaerdenfors, member of the committee, announce the 2017 Sveriges Riksbank (Swedish central bank) prize in Economic Sciences to U.S. economist Richard H. Thaler. Source: Lusa

can be hard to keep -- no matter how much people wish to fulfil them.

Using a planner-doer model, Thaler showed how short-term temptations disrupt people’s plans to save for their old age, rainy days or live a healthier lifestyle.

“In his applied work, Thaler demonstrated how nudging -– a term he coined -– may help people exercise better self-control when saving for a pension, as well in other contexts,” the Nobel jury said.

Fittingly, Thaler’s family name comes from the

Germanic word for “dollar”.

Last year, the Nobel Economics Prize went to British-American economist Oliver Hart and Bengt Holmstrom of Finland for their research on contract theory, which has helped design insurance policies and executive pay.

The economics prize is unique among the Nobel awards in that it was created by the Swedish central bank in 1968 -- the others were all set up through the 1895 will of Swedish inventor and philanthropist Alfred Nobel. AFP

Politics

Liquidity

Portugal

Japan challenger Koike questions stability of Trump White House

China c.bank injects US$8.6 bln in September

East Timor contributes most to fund to rebuild after fires

Tokyo Governor Yuriko Koike, leader of Japan’s nascent opposition Party of Hope, said yesterday that she’s unsure whether President Donald Trump’s administration is stable even while affirming the importance of the U.S.-Japan alliance.

Koike, 65, told Bloomberg in an interview that Trump’s White House may be unstable because of the many changes in personnel since the president took office in January. Her comments stand in contrast to Japanese Prime Minister Shinzo Abe, who has courted Trump in an attempt to bolster ties between the two allies.

The interview came hours after a poll indicated that her bid to upset Abe’s ruling party in a general election less than two weeks away may be losing steam.

Thirteen per cent of respondents to a Yomiuri survey said they’d vote for her party in the proportional representation section of the Oct. 22 lower house election, down from 19 per cent about a week ago.

Support for Abe’s Liberal Democratic Party fell slightly to 32 per cent in the telephone poll of 1,099 eligible voters. Twenty-seven per cent said they were still undecided.

Koike told Bloomberg that the emergence last week of the new left-leaning Constitutional Democratic Party of Japan may have been a reason for her party’s fall in the polls. Bloomberg News

China’s central bank injected a net RMB56.7 billion (US$8.6 billion) into the financial system via short- and medium-term liquidity tools in September, down 54 per cent from the previous month.

The People’s Bank of China has kept liquidity relatively ample ahead of a key Communist Party meeting this month, after it injected substantial cash in June to help avoid a crunch as Beijing tightened regulations to force banks to deleverage.

In a statement yesterday, the central bank said it lent RMB298 billion for one year to financial institutions via its medium-term lending facility (MLF) in September.

Outstanding MLF was RMB4.354 trillion at the end of September, compared with RMB4.339 trillion at the end of August, implying a net injection of RMB15 billion last month.

Meanwhile, the central bank extended RMB68.85 bln of loans to local financial institutions in September via its standing lending facility (SLF), it said.

The total outstanding amount of SLF loans was RMB63.68 billion at the end of September compared with RMB22.02 billion one month earlier, implying a net injection of RMB41.7 billion.

The central bank uses the MLF and the SLF as tools for managing short- and medium-term liquidity in China’s banking system. Reuters

The Government of East Timor was the entity that contributed the most to the Revita Fund, created to manage donations for the victims of the fires that raged in central Portugal over the summer, donating more than 1.2 million euros, according to the fund's first quarterly report.

This amount accounts for 32 per cent of the total cash donations collected by Revita to 30 September, which totalled 3,787,590.31 euros.

According to the first quarterly report of the fund, in total 35 entities made donations, of which 27 were in cash, six provided with movable assets not subject to registration and two rendered services.

The Government of the Democratic Republic of Timor-Leste contributed 1,249,901.41 euros, Santander Totta bank and the European Investment Bank provided 500,000 euros each and Banco Comercial Português donated 424,485.73 euros.

More than 61,000 euros were received from the Bank of Portugal, Casa de Portugal in Macau provided support of 50,000 euros, BCP BAN, SAS of 37,117 euros, Salvador Caetano SGPS Group 22,785 euros and FNAC Portugal delivered 20,453 euros to the Revita Fund.

The Revita Fund was created to manage donations to victims of the fires in the central zone of the country.

Lusa