Asia News Update
China: Silk Road USD 40 billion fund boosts businesses in related regions
Source: Reuters, 16 February 2015
China’s central bank governor said on 16 February 2015 that a USD 40 billion Silk Road infrastructure fund had started work along the lines of a long-term private equity venture, boosting businesses in countries and regions along the road. The People’s Bank of China (PBOC) said in a statement on February 16 that the fund was partially financed by China’s foreign exchange reserves with investors including China Investment Corp., China’s Development Band and the Export-Import Bank of China.
China has claimed that the Silk Road Fund would focus on China's Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative and welcome investors from Asia and beyond, aiming at building roads, railways, ports and airports across Central Asia and South Asia. The fund was similar to a PE fund, and was not a state-owned sovereign fund, said Zhou Xiaochuan, the governor of the PBOC. Zhou said that although China would consider setting up subsidiaries and branches in various industries and regions, it would not develop the fund into a multi-party development organization.
Citra Lestari, Proton Holding in discussions to create national vehicle
Source: Wall Street Journal, 07 February 2015
Indonesia plans to revive its automotive project halted nearly 20 years ago and has asked Malaysia for some assistance to revamp the car sector. Indonesia’s Adiperkasa Citra Lestari and Malaysia’s Proton Holding Bhd have signed a nonbinding agreement to explore the possibility of developing and making Indonesia’s national vehicle. Both companies agreed to complete a study within six months (if it turns out unfavorable, the project would be dismissed). Abdullah Mahmud Hendropriyono, chief executive of Adiperkasa, said a successful partnership could lead to job creation and help boost the domestic car industry.
Malaysia was the Southeast Asia’s top manufacturer of passenger vehicles until 2003, when Thailand had generous incentives for investors. In 2014, Indonesia overtook Thailand as Southeast Asia’s largest automobile market as a result to the local growing consumer market and Thailand’s political struggle that rattled overseas manufacturers. Abdul Harith Abdullah, chief executive of Proton, said, “Closer ties between both companies will facilitate international and regional investments, spurring more automotive markets activity and economic development.”
China: ZTE likely to invest USD 560 million in wireless charging technology by 2016
Source: Channel News Asia, 12 February 2015
According to a George Sun, a senior executive at ZTE Corp, the company plans to allocate CNY 1.5 billion (USD 240 million) in wireless charging technology for automobiles in 2015 and over CNY 2 billion in 2016. Sun also said the firm has signed deals with over 20 cities in China to offer wireless charging technology for public transportation. No further details were disclosed. Sun noted “So far the feedback (from local governments) is very, very positive. We solved the biggest headache of electric car charging for local government.” ZTE will likely conduct pre commercial trials of wireless charging for public transportation in 50-100 cities this year.
The technology saves space, permitting authorities to install it in bus terminals or car parks, even though the costs of wireless equipment are higher than traditional charging facilities. In order to reduce pollution, China has introduced aggressive targets for car fuel efficiency that will rise increasingly strict until 2020. Local authorities have offered tax reductions for eco-friendly vehicles and proposed extending subsidies, mostly for local producers, to assist car manufacturers meet these goals. On January 2015, ZTE said its profit for 2014 was likely to increase 94% due to its high-speed 4G network division and smartphone business.
India: Car sales increased by 3.2% y/y in January 2015
Source: The Wall Street Journal, 9 February 2015
In January, India’s sales of passenger vehicles retreated to a slow pace as a result of the rollback of excise tax breaks and year-end discounts. According to data provided by the Society of Indian Automobile Manufacturers, sales of new vehicles, sport-utility cars and vans rose by 3.2% y/y to 230,619 units in January 2015. Of the 13 vehicle manufacturers, 9 reported a decrease in sales. In December 2014, sales growth of 12% was registered. SIAM Director General Vishnu Mathur said December’s strong results was due primarily by consumer concerns that local authorities would permit the tax break, a cut in factory-gate taxes on vehicles, to expire at the end of month.
Furthermore, price discounts offered be manufacturers to clear year-end stocks bolstered demand in December. SIAM Deputy Director General Sugato Sen noted vehicle sales may continue muted in February and March consumer expect authorities to cut taxes across industries, such as the automobile sector, in the federal budget to be presented later this month. SIAM reiterated its forecast for passenger car sales to increase up to 5% this fiscal year through March. In the first 10 months of the year, sales grew by 3.6% to about 2.13 million units. Medium and heavy commercial vehicle sales rose by 37% in January to 21,363 vehicles as a result to rising freight movement and a rebound from last year’s sluggish sales.
South Korea: Daelim to expand Yeosu polybutene plant
Source: Chemicals-Technology, 12 February 2015
Daelim’s petrochemical business division will allocate KRW 74 billion (USD 67 million) to expand its highly reactive polybutene facility at Yeosu National Industrial Complex. After the completion, the firm will be able to produce 185,000 tons of polybutene per annum, including the plant’s annual production output of 85,000 tons of polybutene for general purposes.
Polybutene is utilized as raw material for lubricant additives and fuel purifiers. It enhances output efficiency as it facilitates the lubricant manufacturing process. Furthermore, green products can be made since polybutene has no chlorine ingredient. Over 90% of the company’s polybutene products are exported to giant lubricants additive manufacturers, such as Chevron and Lubrizol. The firm operates production plants by developing a technology to make general-purpose polybutene and highly reactive polybutene together, utilizing the swing process in a single facility.
India: Grasim Industries and Aditya Birla Chemicals merge
Source: Chemicals-Technology, 12 February 2015
Grasim Industries Board of Directors has approved the company’s plans to merge with Aditya Birla Chemicals (ABCIL). Grasim produces 452,500 tons of caustic soda annually at is manufacturing plants located in Nagda, Madhya Pradesh and Vilayat, Gujarat. Grasim’s core businesses are viscose staple fibre and cement and it holds a global market share of 9%. Under the agreement, Grasim will issue one share for 16 shares of ABCIL at INR 10 (USD 0.16) each.
Furthermore, the firm will issue 1.46 million new shares, which will raise its share capital to INR 933.1 million (USD 14.9 million). With the addition of ABCIL’s chlor-alkali business, the merger will strengthen Grasim’s portfolio of viscose staple fibre, caustic soda, and allied chemicals. Grasim will also be able to expand is local presence with ABCIL’s manufacturing plants across India – it operates three facilities in Rehla (Jharkhand), Renukoot (Uttar Pradesh) and Karwar (Karnataka) which have a combined capacity of 293,000 tons of caustic soda per annum. ABCIL also owns a captive power plant of 110 MW.
Japan: Scientist discover new process to develop dismantle supramolecular polymers
Source: Chemicals-Technology, 9 February 2015
Scientists from the RIKEN Center of Emergents Matter Science have found a new way to artificially develop and dismantle supramolecular polymers, which allows creating polymers with a broad range of properties for utilization of new applications. The new process uses traditional polymer chemistry methods and self-organizing capability of monomer elements - it incorporates addition of a mixture of monomers and initiator to the solvent. Takuzo Aida, study lead of research, said supramolecular polymers can have semiconducting properties if properly developed, so the method could be utilized to cut the transistor’s size.
Aida added “We found that the polymers can be easily disassembled, with almost 100% yield, so materials produced through this method will be completely recyclable, an important property for creating a sustainable society.” At an early stage of the experiment, the research team found that the corranulene core containing molecule in a fixed state self-assembled into a polymer through a chain-growth process after adding an initiator to the solvent. The scientists noted monomers added to the solvent would join the chain until the initiator is active – it allow to precisely control the size of the chains by changing the proportion of monomer and initiator. Furthermore, the team discovered that the method facilitates developing polymer of the same chirality by adding an initiator with the precise chirality.
Construction & Property Development
Australia: Government to examine foreign ownership in agriculture and real estate
Source: The Financial Times, 11 February 2015
Australian authorities are investigating foreign ownership in agriculture and real estate to combat public concerns that Chinese investment is pushing house prices and could potentially cripple the nation’s food security. Starting March 2015, agricultural land acquisitions worth more than AUD 15 million (USD 11.6 million) by overseas investors will be subject to regulatory approval from the Foreign Investment Review Board. Previously, the threshold was AUD 240 million. The tax office will undertake a stock-take of agricultural land ownership by overseas owners and new regulations on overseas investments in residential real estate will be defined in the following weeks.
Prime Minister Tony Abbott said foreign investment is important to the country, yet it has to serve the national interests. Hans Hendrischke, Chinese business professor at Sydney University, said, “There is concern among a rural constituency that land will be bought by Chinese investors, who will export all the products and distort export prices.” From 2006 to 2012, Chinese investors allocated AUD 1 billion into domestic agricultural businesses – a total of 2% of the total Chinese investment in Australia. In 2014, Credit Suisse noted that Chinese investors and newly arrived immigrants had spent AUD 24 billion on property in Australia over seven years. The bank expects these investors will spend AUD 44 billion in the following seven years.
Taiwan: Finance Ministry presents tax break proposal for homeowners
Source: China Post, 13 February 2015
The Taiwanese Ministry of Finance issued a plan to grant tax-exemption to homeowners who sell a home below TWD 40 million if they have if they have lived on the site for at least six years. Finance Minister Chang Sheng-ford said the reform’s purpose is not to raise tax revenue, but primarily to modify the country’s tax system so that it meets international standards. Additionally, the plan will protect the assets of the middle class, while hindering a concentration of financial resources in real estate and thereby preventing the distortion of the country’s economic development. The plan outlines owners must have not rented the property for at least five years before the sale.
Those who do not qualify will be eligible for a 4% tax cut for each year after the third year of ownership. The deductions will be cumulative, for up to 80% reduction applicable in the twentieth year. After the Lunar New year, the Ministry of Finance plans to submit the proposal to the Legislature for review. If it is approved, the bill will go into effect next year. The ministry’s scheme also includes an increased tax rate of 30% on properties sold within two years of being acquired, however it will not apply if the owner lives in the site being sold. Under the proposal, Taiwanese individuals purchasing real estate in the country will pay a single tax rate of 17%, while foreigners or corporations pay a higher tax rate of 30% to curb foreign speculation.
Japan: Inbound investments rose by 181% in 2014
Source: Bloomberg, 9 February 2015
Foreign direct investment more than doubled in Japan in 2014 as a cheaper yen made real estate and other assets more attractive to US and Asian buyers. According to data issued by the Ministry of Finance, inbound investment increased 181% to JPY 1 trillion (USD 8.4 billion) in 2014 – the highest since 2009. Asia and the US accounted for 54% and 47%, respectively, of the inflow. Kaori Iwasaki, an economist at the Japanese Research Institute, said, “The weakening yen makes Japanese properties cheaper for overseas buyers. Real-estate investment will probably become more active as we approach the 2020 Olympics.”
He added firms are opening offices in Japan to acquire real-estate and other assets. Prime Minister Abe plans to double the stock of foreign direct investment in the country by 2020 and is considering to lower tax on corporate income to make the nation more attractive for business. Authorities will reduce the company income tax rate by 3.29 percentage points over the following two fiscal years, aiming for a final tariff below 30%. Daiwa Institute of Research Economist Keiji Kanda said a 1 percentage point reduction in the country’s effective corporate tax rate will raise inward foreign direct investment by 3.5 percentage points.
Consumer & Retail
China: Nation to become the biggest retail market by 2018
Source: IBT Times, 13 February 2015
According PwC’s latest study titled “2015-2016 Outlook for the Retail and Consumer Products Sector in Asia,” China is expected to become the world’s largest retail market in 2018 despite the economic growth slowdown. Although retail sales have dropped from 15.6% in 2009, China is poised to register an 8.7% average annual retail volume growth in the next two years to overtake the US. However, PwC has also noted local retailers have to rethink their strategies as retail growth is decelerating.
In 2013, China became the world’s largest e-commerce market. According to the report, mobile payment accounted for 8% of the total online purchases in China in 2013 and could increase from 20% to 30% in 2016. In APAC, volume of retail sales rose nearly by 4.1% in 2014 and is forecasted to grow by 4.6% in 2015. The region’s retail market is projected to be worth USD 10.3 trillion in 2018, compared to the USD 5 trillion predicted for North America. APAC continues to be the top destination for the majority of global retail chains. Despite their economic struggles, China and India are expected to drive much of the regional growth.
Singapore: Retail sales increased by 2.6% y/y in December 2014
Source: Channel News Asia, 13 February 2015
According to the Department of Statistics, retail sales increased by 2.6% y/y to nearly SGD 3.7 billion in Singapore in December 2014. Excluding motor cars, retail sales dropped by 3.2% y/y. In comparison with the prior month, retail sales dropped by 2% m/m in December. Excluding motor cars, retail sales dropped by 3.3% m/m.
Motor vehicle retailers registered a sales increase of 41% y/y in December – the highest rise among the sectors. Nonetheless, Petrol Service Stations reported the highest year-on-year drop among all the sectors – a drop of 13.2%. Sales of food and beverages services increased by 1.9% y/y to SGD 686 million.
India: Consumers second most optimistic in APAC, says MasterCard
Source: NDTV Profit, 11 February 2015
According to a study conducted by MasterCard, India is the second most optimistic country in APAC after Myanmar. India scored 91.6 (out of 100) in the MasterCard consumer confidence index, while Myanmar scored 97.2. In the region, the overall sentiment witnessed a slight drop – in H2/2014 the reading was at 65.5 index points, while in H1/2014 the reading was at 68.3 index points. The research revealed India rates highest in its outlook towards employment prospective with a score of 93.5 points in H2/2014, compared with 88.5 in H1/2014.
India’s most optimistic city was Bengaluru with a score of 98.1 points, followed by Delhi with 97.3 points, and Mumbai with 87.2. Vikas Varma, head of MasterCard South Asia, said: “For consumer confidence to remain buoyant, it is imperative that the government continues to be steadfast in its pursuance of key reforms – the benefits of which will eventually help further boost the consumer sentiment.” He added the younger generation of consumers (which age below 30 years) are more optimistic, demonstrating the rising opportunities ahead. The study was conducted between October and November 2014 and involved 8,235 respondents from 16 nations.
Energy, Resources & Environment
Australia: Authorities review nuclear power impact
Source: Bloomberg, 12 February 2015
Even though Australia has the world’s largest uranium reserve, it has never had a nuclear power facility. Authorities, however, are evaluating whether to reserve its long-held ban. The state of South Australia, where BHP Billiton operates the mine of Olympic Dam, is setting up a royal commission to examine the economic and environmental impact. Furthermore, the government is set to publish an extensive energy report in the next few months. Tony Irwin, director at SMR Nuclear Technology Pty, said, “This is going to open the door to a proper informed debate and a comparison of nuclear against other low emissions technologies.”
Four years after the Fukushima nuclear disaster, interest in nuclear power has been revived partly because it has no greenhouse gas emissions. Industry Minister Ian Macfarlane said the government believes all energy options, such as nuclear, should be part of any discussion about the nation’s future energy mix. However, noted there are considerable hurdles to install a nuclear power facility in Australia as there are federal prohibitions against the technology. Furthermore, it has opposition from environmental and community groups. The Conservation Council of South Australia, for example, said the state should consider renewable energy instead.
Malaysia: MDB pulls back from plans to sell up to MYR 8.4 billion in bonds for power project
Source: Reuters, 7 February 2015
Malaysia Development Bhd (MDB) has abandoned its plans to sell up to MYR 8.4 billion (USD 2.4 billion of Islamic bonds (sukuk issue), according to sources familiar with the matter. The Islamic bond had been earmarked to raise capital for the construction of 3B in Negeri Sembilan – a 2,000 MW coal-fired power plant worth USD 3.6 billion. If the Islamic bonds have gone ahead in December 2014, as previously planned, it would have been the largest sukuk issue deal last year.
The Malaysian fund, which has 16 power and desalination facilities in six nations, has a debt pile of about USD 12 billion. According to another source, MDB also plans to pull back from the 3B power project. If MDB pulls out, Tenaga Nasional Bhd would likely take over the project. In February 2014, MDB and Mitsui & Co Ltd partnered to win the bid for Project 3B. The greenfield power facility was scheduled to start operations in 2018 and run for 25 years, however date has been postponed.
Singapore: LNG tankers idle due to gas downturn
Source: Reuters, 13 February 2015
More than a dozen LNG tankers are parked in and nearby Singapore – one of the world’s largest trading centers for fuel. With Asian spot LNG prices dropping by nearly two-thirds since February 2014 as stall demand combined with increasing output, shippers are parking their vessels close to ports, such as Singapore, where unused vessels can be kept and serviced until new orders are received. According to leading ship brokers, over one-tenth of the global fleet of 400 LNG tankers is currently unused due to the slowing growth in the biggest economies in Asia. According to Thomson Reuters shipping data, seven vessels have been idle in the east coast of Johor, Malaysia, for more than two weeks, and two other tankers south of Batam, Indonesia, for a few months. In Singapore, half a dozen LNG tankers have been anchored.
The 15 vessels have a combined capacity of 2.26 million cu. m of LNG, or nearly two weeks’ worth of the gas demand in Singapore. Partly affected by the drop in oil prices, gas markets have recorded an Asian price premium over Europe decline from over USD 10 per million mmBtu in 2014 to a discount of over USD 1.50, deteriorating tanker demand. In Asia, LNG prices have declined to nearly USD 6.90/mmBtu from over USD 20/mmBtu in 2014. Several analysts say the future of the whole LNG sector may be impacted as the crash in Asian demand is so severe. ANZ bank said, “The weakness in energy markets is threatening to derail LNG’s emergence as the permanent energy source.”
Australia: CIMB to close its regional investment banking operations
Source: Reuters, 8 February 2015
CIMB Group Holdings Bhd announced on Monday it is closing its investment banking operations in Australia. The decision comes after the Malaysia’s second biggest lender by assets conducted a review of its entire business. Zafrul Abdul Aziz, CIMB Group's acting chief executive officer, said “the realities of today's capital markets and the absence of sufficient flows have directly contributed to this decision.” On Friday, CIMB said it wanted to cut costs in its investment banking and equities segment by 30 percent in 2015. The decision will impact nearly all of the 103 employees based in Australia.
In 2012, CIMB entered the Australian market and in 2013 it won a contract to provide advice to Warrnambool Cheese and Butter Factory Co, which was being targeted in a three-way global takeover battle. The contract ranked the company second in Q3/2013 in the equity capital market, giving it a 13.6% market share. In 2014, Australia’s biggest year of initial public offerings, the company raised USD 494.3 million, the ninth most raised by an investment bank.
Asia: JPMorgan CEO Nicolas Aguzin taking over responsibility of APAC banking heads
Source: Bloomberg, 12 February 2015
JPMorgan Chase & Co.’s Asia-Pacific banking co-heads Greg Guyett and Tom DuCharme are exploring other opportunities within the firm. Their responsibilities are being taken over by regional CEO Nicolas Aguzin. The bank created the co-head positions two years earlier to improve coverage of corporate clients. The positions are now scrapped in an effort to give Aguzin the opportunity to strengthen cooperation between different parts of the business. His extra responsibilities now include investment banking, corporate banking and treasury services.
In the past 12 months, at least five of the banks senior bankers changed roles, quite or are preparing to step aside. Therese Esperdy, who previously was a co-head of Asia-Pacific banking, is now chairman of the financial institutions group in the US. The chairman of China investment banking, Frank Gong, is leaving after less than one year in the job, according to sources. His predecessor, Fang Fang, resigned in March 2014 due to an investigation by US regulators into the Asian hiring practices. Other changes in management were Shao Zili, former China chairman and CEO, who transferred to the role of Asia-Pacific vice chairman.
China: Citic Securities sells biggest even structured note as domestic demand grows
Source: Bloomberg, 13 February 2015
A Citic Securities Co. unit sold its biggest ever structured note, worth USD 50 million, as demand from Chinese investors grows for higher yielding investments. The unit, CSI Financial Products Ltd. said it sold the securities on Jan. 28. The sell brings the total number of issuances to three. The structured note is a callable, six-month bond. For the first three months, the bond pays a 3% annualized coupon. Afterwards, it pays 3.5% for the remaining three months. Citic plans to continue offering products service, including customized fixed-income products.
The sale illustrates the growing demand from Chinese investors for structured products. Cnbenefit said offerings in China grew by 40% in 2014. Structured notes have become more attractive since the Chinese government increased supervision of shadow banking. John Goff, the head of global markets structuring for Asia ex-Japan at Nomura Holdings Inc., said, “The product capabilities of Chinese brokerages, such as adding complex structures, are still not enormous yet. At the same time, the name recognition and marketability of local players are significantly better than an international house.” Haitong International Securities Group CEO Lin Yong, said, “For now, it’s more of a cooperation mode between local brokerages and foreign investment banks. A year or two from now, that may start to change because domestic houses are really building up their product technology and capability.”
Logistics & Transportation
Malaysia: EPF, Goodman enter joint venture to develop logistics assets
Source: The Star, 14 February 2015
The Employees Provident Fund Board (EPF) and Goodman Group entered into a joint venture to develop logistics assets. The total development value of the assets is MYR 1.4 billion. The EPF believes the joint venture is good for the countries since Goodman Group has strong customer relationships globally and there is a high customer demand for modern logistics space. Additionally, EPF is trying to promote the country as a preferred destination for foreign direct investment in the South-East Asia region.
Mohamad Nasir Ab Latif, EPF deputy chief executive officer for investment, said, “This is the third collaboration we had established with Goodman Group. Our first partnership started in 2012 focusing on assets in Australia, followed by Germany in 2013. We are delighted that our partnership has brought a world-class logistic developer to Malaysia. Our commitment in this project is part of EPF’s diversification programme to invest in inflation-linked assets. These asset classes were effective inflation hedging tools, befitting the fund’s long-term objectives as a retirement fund, and the EPF would continue to explore opportunities in real estate, infrastructure and natural resources in accordance with its strategic asset allocation.”
Indonesia: Transportation Minister says Cilamaya Seaport project may be tendered in 2015
Source: Indonesia Investment, 13 February 2015
Ignasius Jonan, Indonesia’s Transportation Minister, said that the Cilamaya port project, located in Karawang (West Java), might be tendered in 2014 to the private sector. Currently, the central government is preparing the terms of reference (TOR) for the project. The construction is projected to take five to ten years and to cost around IDR 130 trillion. Thus far, no investor has showed interest in the project. Although the project should be financed with private funds, the government may provide incentives to make it more attractive. The government aims, through the Cilamaya project, to reduce the country’s logistics costs and ease traffic at the Tanjung Priok port.
In 2014, the previous administration decided to postpone the project because of conflict with state-owned energy company Pertamina regarding the location. Now, the government has decided to relocate the port three kilometers to avoid conflict with Pertamina. However, this project could still impact the farming area. The project is part of the Metropolitan Priority Area (MPA) for Investment and Industry in the Greater Jakarta Area, a framework created by Indonesia and Japan. The MPA aims to enhance the attractiveness of the Greater Jakarta area for direct investment and industrial development. This should be achieved through accelerated infrastructure development.
Australia: Cache Logistics to purchase three distribution warehouses for AUD 70 million
Source: Digital Supply Chain, 8 February 2015
Cache Logistics Trust announced it has entered into separate sale and purchase agreements to purchase three distribution warehouses in Australia for AUD 70 million. When including the stamp duty and other expenses the total acquisition cost is around AUD 75.6 million. McPhee Development, Larapinta Logistics and Sonton originally owned the distribution warehouses. McPhee Distribution Services will leaseback 60.6 percent of the total area. This will increase to 83.2 percent from April 2018 onwards.
Daniel Cerf, Chief Executive Officer of Cache, said, “This strategic investment into Australia is in line with the Cache’s growth strategy to provide our unitholders with long-term stable distributions. The addition of three quality distribution warehouses [in Melbourne, Sydney and Brisbane] on freehold land will not only strengthen the portfolio, but also provide income and geographical diversification. These, being our first acquisitions in Australia, further demonstrate our interest in continuing to grow Cache accretively and in a prudent manner. We are pleased to have found a good partner in our dealings with McPhee Distribution Services and would like to thank them for the opportunity to work together.”
Manufacturing & Industrial
China/South Korea: Countries to invest in industrial robots
Source: The Financial Times, 10 February 2015
According to a new study released by the Boston Consulting Group, robots will replace a growing number of jobs in sectors, such as automotive and electronics in the next several years. Global sales of industrial robots increased by 23% in 2014 and are expected to double by 2018. Even though these robots have been utilized for many years, recent advances in technology have reduced their expenses and boosted their capabilities. The prices of industrial robots have dropped steadily from about 14% in the past four years to USD 133,000 for a common system.
China, the US, Japan, Germany, and South Korea are forecasted to account for nearly 80% of the total investments in industrial robots over the next 10 years. Contrarily, heavily regulated countries such as Brazil and India are likely to be the slowest to embrace the new technology. BCG estimates that around 200,000 industrial robots were delivered in 2014, up from 163 in 2013. By 2018, the number could increase to 400,000. Hal Sirkin, senior partner of BCG, said “Historically robots have been used very rigid and unable to apply logic to what’s in front of them. The new generation of robots will be applying logic to the environment and making their own decisions.”
India: Prime Minister Modi invites GE to build ships
Source: The Economics Times, 14 February 2015
Prime Minister Narendra Modi invited, while pitching his “Make in India” campaign, General Electric (GE) to build ships in the country. Modi said, "India offers immense opportunities for the ship-building sector." Modi also congratulated GE on its first multi-modal manufacturing plant in India. The plant, which is the result of a MoU between GE and the state government, will manufacture product for the energy, oil & gas, aviation and transportation sector.
Modi said, "The opportunities for manufacturing in India are immense. We are blessed with demographic dividend. We want to move further ahead in manufacturing sector. I assure you that in the field of development & giving employment there are lot of opportunities here in India. On the basis of our youth and talented manpower, we want to take our economy to newer heights. We want India's railway sector to develop, get more technology, give speed and make it the driving force of our economy. Government focusing on ease of doing business in India; has ensured predictability in all policies.”
Malaysia: Industrial Production Index increases 7.4% in December 2014
Source: New Straits Times, 10 February 2015
Malaysia’s Industrial Production Index (IPI) increased by 7.4% in December 2014 y/y. The Statistics Department said, “The increase was due to positive growth in all indices of manufacturing (7.8%), mining (6.9%) and electricity (3.0%).” The IPI increased by 2% m/m because of increases in manufacturing (3%) and electricity (0.1%). The Statistics Department said that manufacturing output had the strongest growth of 7.8% y/y.
In December 2014, three sub-sectors contributed to the growth: electrical and electronic products with 18.3%; petroleum, chemical, rubber and plastic products with 5.2%; and non-metallic mineral products, basic metal and fabricated metal products 4.1%. The mining sector in specific had its output increased by 6.9% y/y. The increase in the crude oil index by 12% and the natural gas index by 1.4% contributed to the increase in the mining sector. The electricity sector had an increase in output of 3% y/y. The IPI increased by 5.8% in the fourth quarter compared to the same quarter in 2013. This is attributed to the increase in manufacturing, mining and electricity indices, which increase by 4.9%, 8.6% and 3.2% respectively.
Pharmaceuticals & Healthcare
India: Sun Pharma profits fall in Q3/FY15
Source: Reuters, 14 February 2015
Sun Pharmaceutical Industries Ltd. said on 14 February 2015 that its net profit fell unexpectedly in Q3/FY15 due to a decline in sales in the United States and costs from resolving regulatory issues at a manufacturing plant. However, the company expected that it would meet its guidance for revenue growth of 13% to 15% for FY15. The company's net profit in Q3/FY15 was INR 14.25 billion (USD 229.60 million), down from INR 15.31 billion in Q3/FY14. The managing director of Sun Pharma, Dilip Shanghvi, said that sales of formulations in the United States fell 5%, mainly due to increased competition for the antibiotic generic drug doxycycline.
Sun Pharma’s earnings were also affected by the costs related with addressing the observations, which were raised by U.S. Food and Drug Administration after an inspection of Sun's Halol manufacturing plant in September 2014. The company is currently in the process of acquiring Ranbaxy Laboratories Ltd., and is waiting for the approvals from the high courts of the states of Punjab and Haryana to close the deal during FY15. The company agreed to buy Ranbaxy for USD 3.2 billion in April 2014. Shanghvi said that the company also continued to look for other acquisitions in the United States and bolt-on deals in emerging markets.
China: Booming healthcare business draws investors
Source: Reuters, 10 February 2015
China's booming healthcare business attracts investors to rush in to help M&A deal values surpass those of the hot Internet sector due to the country’s preparation of catering to hundreds of millions of elderly patients. PE firms like TPG Capital and industry players like Malaysia's IHH Healthcare Bhd, which are encouraged by a relaxation of foreign ownership rules last year and a rapidly ageing population, are investing in Chinese hospitals, pharmaceutical companies and device makers. The companies have begun to hire doctors and expedite local licenses and permits for starting work on planned projects by leveraging connections of local partners.
As China tries to cope with the boom in its ageing population, it has forecast that healthcare spending by the private sector, state-owned enterprises and consumers would treble to CNY 8 trillion (USD 1.3 trillion) over the next five years. Thomson Reuters data showed that China healthcare mergers and acquisitions more than doubled to a record USD 18.5 billion in 2014 after years of steady growth. The deals totaled USD 6.9 billion in January 2015 alone, which is an acceleration that points to another blockbuster year. Deals involving China's ecommerce, Internet software, services and infrastructure trailed healthcare with USD 17.9 billion in 2014.
Malaysia: Toshiba expands production to aim at healthcare demand
Source: Nikkei Asia Review, 12 February 2015
Toshiba spent about JPY 1.68 billion (USD 14 million) on its third plant for diagnostic imaging systems outside Japan, with a total area of 8,582 square meters, focusing on ultrasound systems used during pregnancy and to monitor vascular health. The capacity of the plant will rise from 235 ultrasound systems per month at the beginning to 400 eventually. Devices, which are made at the Penang facility, will be marketed to hospitals in Southeast Asia, the Middle East, Europe and the U.S. Toshiba's medical systems are used by hospitals in Singapore and Malaysia, which are operated by IHH Healthcare.
Toshiba plans to become one of the top three manufacturers in diagnostic imaging systems by 2017. The new Penang plant of Toshiba also fits with Malaysia's efforts to attract more health care companies and manufacturing since the country are trying to foster new industries and employment. Malaysia expects to create 181,000 jobs in healthcare sector by 2020. On the other hand, Penang is an attractive location for Toshiba, which would offer good logistics and proximity to target markets.
China: Alibaba’s affiliate Ant Financial plans to seek new investors
Source: The Wall Street Journal, 10 February 2015
Alibaba’s financial services affiliate is believed to be finalizing the plan of bring in new investors such as private-equity firm Primavera Capital Group, which values the company at tens of billions of dollars. It is also said that Zhejiang Ant Small & Micro Financial Services Group is in discussions, which plans to bring in a clutch of other Chinese institutional investors, including China Development Bank’s CDB Capital, Postal Savings Bank of China Ltd., and other domestic investors. Caixin Media reported earlier among others that Ant Financial was at the final stage of the investments by CDB Capital and Postal Savings Bank.
Among those known to be participating in the fundraising, Primavera Capital appears to be the only private investment firm, and an early investment in Ant Financial would be a coup for the company. The remaining known investors are state-backed institutional investors, which would help Ant Financial convince incumbent Chinese financial firms and regulators to view its rapidly expanding platform in tightly regulated financial services market. By taking advantage of Alipay’s massive user base, Ant Financial has been expanding its service. The company and an asset management firm launched Yu’e Bao in 2013, which allows users to invest the money in their Alipay accounts in a money-market fund.
India: IHH and TPG compete for controlling stake in Global Hospitals
Source: Reuters, 10 February 2015
IHH Healthcare Bhd and TPG Capital Management are competing for a controlling stake in India's Global Hospitals in a deal, which would value the privately owned chain at USD 350 million. Global Hospitals put up the stake for sale in 2014 and it is said that founder and current chairman K. Ravindranath and private equity firm Everstone Capital were also among those selling their holdings. Global Hospitals is in talks with "several people" about the stake sale but declined to provide specifics, said a spokesman from the company. IHH Healthcare and TPG also declined to make any comment.
"Healthcare is recession proof," said Deven Choksey, managing director of KR Choksey Securities. According to Thomson Reuters data, private equity investments into the sector stood at USD 552 million in 2014, slightly lower than the USD 786.2 million in 2013. The deal would be TPG's the largest acquisition to date in Indian healthcare if it is successful. And an investment into Global Hospitals would mark a further expansion in Indian healthcare for IHH, as it already owns a nearly 11% stake in Apollo Hospital Enterprises.
Japan: Bain Capital spends USD 422 million in purchasing Ooedo-Onsen Holdings
Source: Reuters, 13 February 2015
Bain Capital Partners LLC said on 13 February 2015 that it had agreed to buy Japanese hotel and spa operator Ooedo-Onsen Holdings, which capitalizes on a tourism boom before the Tokyo 2020 Olympic Games. It is said Bain would pay about JPY 50 billion (USD 422 million) for Ooedo-Onsen 's shares and debt. Bain said in a statement that Ooedo-Onsen sales have risen about 30% annually since 2007. Ooedo-Onsen expects to book revenue of about JPY 35 billion for its fiscal year ending February from its 29 hotels and spas nationwide.
The deal comes as the Japanese government expects to increase foreign tourists, relax some visa regulations and extend the sale of tax-free items, which could help boosting the country's sluggish economy. According to Japan National Tourism Organization, about 13.4 million foreigners visited Japan in 2014, a 29% jump y/y. The government has set a target of 20 million visitors in the year when Japan hosts the Tokyo 2020 Olympic Games, including some close to Odaiba.
Technology, Media & Telecommunications
South Korea: Fair Trade Commission investigates Qualcomm
Source: Reuters, 11 February 2015
South Korea's Fair Trade Commission is investigating Qualcomm Inc., which adds to antitrust woes for the U.S. chipmaker after the company agreed to pay fine in China. South Korea's Maeil Business newspaper reported that the Fair Trade Commission would look into whether Qualcomm is abusing its dominant market position. The newspaper said that the commission plans to send inquiries to domestic smartphone makers including Samsung Electronics Co Ltd as well as Qualcomm competitors such as Intel Corp as part of its investigation.
Qualcomm is also facing the antitrust probes from Europe and the United States. According to the news from Reuters in August 2014, Chinese antitrust officials had met with their South Korean counterparts in their investigation of Qualcomm. Qualcomm agreed to end a 14-month government investigation into anti-competitive practices in China with a USD 975 million fine on 9 February 2015. The company will also have to cut royalty rates on patents used in China as part of the deal that will help smartphone makers such as Xiaomi Inc. and Huawei Technologies Co Ltd.
Singapore: SingTel net income rises 11.2% in Q3/FY15
Source: Light Reading, 12 February 2015
SingTel's net income rose 11.2% y/y to SGD 970 million (USD 776 million) in Q3/FY15 while operating revenue was up 3.8% y/y to SGD 4.4 billion (USD 3.5 billion). The company owns stakes in some of the biggest phone companies in Asia, including India's Bharti Airtel Ltd. and Indonesia's PT Telekomunikasi Selular, and it generates most of its revenues and profits outside Singapore. SingTel Optus Pty. Ltd., which is its wholly owned Australian subsidiary, accounts for about 57% of SingTel's sales and has made great effort to erode Telstra Corp. Ltd.'s dominance in the mobile sector.
While Telstra said it had finished 2014 with 16.4 million mobile customers, generating AUD 5.3 billion (USD 4.1 billion) in mobile revenues in H2/2014, Optus flagged customer growth in both its prepaid and postpaid businesses in 2014 and managed to boost average revenue per user, although it remains a long way behind Telstra with 9.4 million on the same date. More impressively, SingTel also reported a 7% y/y increase in revenue in Australia's consumer market in Q1/2015, to AUD 1.9 billion (USD 1.5 billion). All of this shows a dramatic turnaround since Q4/2013, by the time when Optus revealed that mobile revenues had fallen by 7.6% y/y with its loss of 160,000 customers in mobile-phone business in 2013.
Australia: Vodafone and JCDecaux cooperate on cheaper mobile network
Source: The Sydney Morning Herald, 16 February 2015
In order to expand networks and attract more customers to boost revenues, Telstra, SingTel-Optus and Vodafone Hutchison Australia are spending billions of dollars every year on building mobile towers and systems. But JCDecaux and Vodafone Group have now worked together on a cheaper solution that installs "small cells" into ad shells to offer stronger high-speed 4G mobile signals to dense concrete jungles, which will result in full-strength services in places that are now black spots because of tall or dense buildings.
JCDecaux, which is worth EUR 7.178 billion (USD 10.46 billion), runs ad shells and bike rental systems around the world except Melbourne's maligned Bike Share scheme. The company signed a global agreement with Vodafone Group, the company that owns half of Vodafone Hutchison Australia, in December 2014 to investigate the installation of small cells in its ad shells in sixteen countries including Australia.