Asia News Update
Asia: Accelerated growth in venture capital investment
Source: FTSE Global Markets, 23 September 2014
According to research published by Preqin, there’s a rapid growth in venture capital investment across Asia for the last few years, especially in emerging economies in Northeast and South Asia. So far this year, investments of USD 29.6 billion has been directed towards buyout opportunities across the region, compared to USD 25.7 billion in 2013. In China, buyout agreements have totaled USD 16.7 billion. Across Northeast Asia, venture capital deals has risen considerably over the past few several years – 60% more capital has been invested in comparison to all the capital invested in 2013.
From January to September, USD 2.7 billion have been invested in 231 venture capital transactions across South Asia, an increase from 1.7 billion invested in 346 transactions in 2013. Christopher Elvin, director of private equity products at Preqin, says, “There are a number of possible influences for the reinvigoration and resurgence of Asian private equity activity, such as the accelerated integration of ASEAN nations and the re-opening of China’s IPO market, both of which have been notable drivers of the Asian economy.”
Philippines: Motor vehicle sales rise by 26% y/y from January to July
Source: Asia One, 25 September 2014
Philippines has recently been reaching other Asian countries that have more developed auto industries. According to a recent report issued by the ASEAN Automotive Federation, the Philippines increased its motor vehicle sales at least by 26% for the first seven months of the year, in comparison to the same period in 2013 (better than sales growth reported in Vietnam, Singapore, Malaysia, and Indonesia). The report also revealed that the nation has the second-highest growth rate at 23.1% y/y from January to July in terms of motor vehicle output, surpassed only by Vietnam.
Antonio Zara, president and managing director at Nissan Philippines Inc, says, “One can't imagine that our current auto industry is less than a quarter of Thailand's despite a population which is 40% more. I expect significant growth to come from outside Metro Manila." Toyota Motor Asia Pacific Japan Project General Manager Vince Socco believes that the nation will be one of the most valuable automotive markets for Toyota – the country is anticipated to become the third largest market of corporation in Asia, succeeding Thailand and Indonesia. Additionally, BMW executives have agreed that the Philippines will become an important participant in the automotive sector.
China: Tesla plans to open 10-12 stores by the end of 2014
Source: NASDAQ, 26 September 2015
As China offers considerable growth opportunities, Telsa Motors Inc plans to boost its operations in Hong Kong – which the corporation considered to be the Norway of Asia. Even though the company started operating in China this year, it anticipates that domestic sales will be equal to those in the US by next year. By late 2015, it additionally plans to manufacture 100,000 premium electric cars and have global sales of at least 500,000 vehicles per annum.
The corporation has hired a China director and Tesla expects to open from 10 to 12 stores in China by the end of this year. Furthermore, it plans to establish service centers and a Supercharger network for its Chinese clients. Hong Kong clients are expected to charge their electric cars solely once a week as a result that the city solely extends across 10 miles. The electric carmaker forecasts that the nation will account for 30%-35% of its worldwide sales growth this year. By 2017-2018, the company projects to manufacture its vehicles in China as well.
Indonesia: Toyota plans to boost exports by 30% in 2014 and 2015
Source: The Jakarta Post, 23 September 2014
Under its projects to turn Indonesia into Asia’s automotive manufacturing hub, PT Toyota Astra Motor (TAM) reports it will concentrate more on surging exports. Hiroyuki Fukui, president director at TAM, said, “We have around 70 (export) destinations and our exports — combined with that of Daihatsu’s — comprise more than 80% of total Indonesian (automotive) exports.” Fukui added the corporation doubled capacity for its second plant in Karawang, West Java, this year and an engine plant with an output capacity of 216,000 units per annum is expected to start operations by the end of 2015. In H1/2014, Toyota Motor Manufacturing Indonesia (TMMIN) increased its exported by 10.7% y/y to 67,757 CBU units.
For the same period, the corporation also exported more than 20,800 CKD units, more than 30.6 million components, 25,000 engines, and 48,000 cylinder heads. For the first half of 2014, Toyota has exported a combined total of USD 870.2 million worth of cars and components. The corporation plans to boost 2014 and 2015’s exports by 30% on an annual basis. Fukui stated that the corporation would need more tier II and tier III suppliers to become more competitive and meet it’s long-term goal of making Indonesia its output hub. Through TMMIN, Toyota currently operates four facilities in the country with an overall output capacity of 250,000 vehicles per annum.
Malaysia: Clariant opens new
labs in Shah Alam
Source: Chemicals-Technology, 24 September 2014
Clariant has opened its new laboratories for oil and pigment services in Shah Alam, Malaysia. The labs will allow the corporation to provide innovative technologies and products to domestic clients. The Clariant Oil Services’ facility is the first lab for the corporation’s oil business in the Asia Pacific. The new labs offer standard and manual testing processes, formula simulation, and performance testing in emulsion, flow assurance, corrosion, and scale control technologies.
The ASEAN Pacific Technical Application Center for its pigment business was also upgraded in capacity to offer customizable technical services, including coating, painting, printing, plastics, and other specialized applications. Phil Adams, director at Clariant Pigments Asia Pacific, says, “With the upgraded lab, we will be able to better support the increasing demand in both local and regional markets more efficiently and we will continue to build on our dedication to offering innovative and sustainable solutions to out customers from various industries.”
India: ONGC Petro Additions’ petrochemical facilities to begin operations next year
Source: Chemicals-Technology, 22 September 2014
The operations at the ONGC Petro Additions’ OPaL petrochemical facilities in Dahej, Gujarat are expected to begin in June 2015. The original plan was the start operations by the end of 2012, however the facilities had a various delays. A K Banerjee, finance director at ONGC, says, “ "While the delay is mainly on account of contractors, project cost has gone up primarily because of interest payout during the construction phase." The complex appraisal is now nearly INR 271.22 billion as a result of interest accumulated during construction and startup, commissioning expenses, foreign exchange variation, and change in project scope (the project cost was estimated to be INR 124.4 billion in 2006 and INR 213.96 billion in August 2012).
For the OPaL project, ONGC, GAIL India, and Gujarat State Petroleum were planned to hold 26%, 19%, and 5% stake. The remaining 50% share was initially projected to be offered in an IPO, yet ONGC Chairman and Managing Director Dinesh Sarraf reported that there is currently no plan for an IPO and the balance equity will be given by ONGC. OPaL will manufacture polymers utilized in packaging firms in addition to chemicals utilized in the output of plastics. The corporation plans to exports its products to Africa, China, Singapore, Turkey, Pakistan, Vietnam, Malaysia, Indonesia, Bangladesh, and Sri Lanka.
Singapore: ExxonMobil Chemical plans to expand hydrocarbon fluids production by 10%
Source: Chemicals-Technology, 25 September 2015
ExxonMobil Chemicals projects to surge its hydrocarbon fluids output capacities by 10% at its manufacturing plants in Singapore and Antwerp, Belgium. The corporation plans to start expansion by mid-next year and its completion is scheduled for 2016. The expansion will allow the corporation to provide to the rising demand for hydrocarbon fluids and advance refining streams into specialty chemical products. ExxonMobil Chemicals offers hydrocarbon fluids, such as ultra-low aromatic grades, distillation ranges, and evaporation rates in its Exxsol D, Escaid, Isopar, Somentor, and Solvesso products.
Elissa Sterry, ExxonMobil Chemical intermediates products vice president, says, "The investments in new capacity at our Singapore and Antwerp facilities demonstrate ExxonMobil's commitment to meet evolving customer needs…our fluids are tailored to meet specific end-use requirements, providing customers with a competitive advantage.” In March, the company reported its plans to build halobutyl rubber and Escorez hydrogenated hydrocarbon resin facilities at its petrochemical complex in Singapore. In July, the corporation additionally reported its plans to install a coker unit at its Antwerp refinery.
Construction & Property Development
Asia: REITs becoming more prominent in developed markets
Source: Nikkei Asian Report, 25 September 2014
Since 2001, when the region’s first REIT listing emerged in Japan, the market capitalization of Asia’s REITs has surged to USD 140 billion, with nearly USD 30 billion more in Australia, according to the Asia Pacific Real Estate Association (APREA). Peter Verwer, chief executive at APREA, stated that the developments in Thailand, India, and China “show the REIT growth engine is shifting into a higher gear in the Asian real estate market place.” On September 18, Thailand’s Impact Growth REIT reported that its retail offering had been completely subscribed in only a day and eventually was 4.1 times oversubscribed. In India, the Securities and Exchange Board presented detailed rules for REIT listing, noting they should be at least INR 2.5 billion and solely include commercial properties.
Verwer also mentioned that his association has been meeting with Chinese authorities to develop an REIT legislation in the nation. The slow REITs development in Indonesia, China, and India has benefitted Singapore. The REIT sector has more than doubled in the past 5 years, however concerns about increasing interest rates have considerably slowed new Singapore REIT listings in the past year. Hong Kong, on the other hand, is about to have a further push as the Securities and Futures Commission announced that the REIT could start investing in new plans and financial instruments instead of only current properties. In the last two years, prices of listed Japanese REITs have tripled and have considerably boosted in 2014 by a new tax benefit.
Thailand: Japanese developers report domestic projects
Source: OPP Connect, 27 September 2014
Mitsui Fudosan, Mitsubishi Estate Group (MEC) and the Saha Group have reported separated development projects across Thailand and other Southeast Asia regions. Mitsui Fudosan Co and Mitsui Fudosan Residential Co are constructing two high-rise condominiums in Bangkok: the 50-storey Ashton Asoke in Asok is projected to have 783 units and the 36-storey Ideo Q Siam-Ratchathewi in Ratchathewi (Central Bangkok) is projected to have 550 units. Currently, the Mitsui Fudosan Group has 11 residential development plans in Southeast Asia, and 13 commercial plans. Furthermore, it has another condominium project with Ananda Development Public Co, the Ideo Q Chula-Samyan, which is set to feature 1,598 units.
The Mitsui Fudosan Group has residential projects in China, Indonesia, Malaysia, Singapore, and Thailand. By the end of the FY2017, the group aims to invest nearly USD 4.57 billion in Europe, North America, and Asia. Meanwhile, Mitsubishi Estate Group reported investments of nearly USD 1.8 billion for projects in Europe, the US, and Asia until the end of 2016. In Thailand, MEC has invested USD 320 million for four condominium projects with its strategic partner AP. As the first three projects were developed in 2013, the fourth project called the Aspire Sathorn-Thapra was launched last week. Saha Group has also reported plans to collaborate with Tokyu Group to build buy-to-let residential property in Chonburi Province later this year. Tokyu has other projects in Vietnam, Western Australia, and the US.
Singapore: Real estate buyers expect prices to further drop
Source: Channel NewsAsia, 26 September 2014
The Asia Property Market Sentiment Report, a survey conducted by iProperty.com, revealed that even though prices of residential properties in Singapore dropped over the past several months, individuals are waiting for prices to fall further as they believe they are still very expensive. Twenty-two percent of the 2,805 respondents disclosed that they don’t project to acquire property at the moment, a rise of 10% six months ago, as a result of high prices and concerns of meeting the down payments. In Q2/2014, prices of private homes were nearly down 3% of its peak in Q2/2013, whereas prices of public resale homes were down 5% from its peak in Q2/2013. Fifty-three percent of the respondents believe that new and resale private condominium prices will continue to drop in 2014.
Compared to six months ago, there was a 15% increase in the number of homeowners that wish to sell their properties. Sean Tan, general manager at iProperty.com Singapore, says, “The report shows that both property sellers and buyers are nervous a year after the start of the Total Debt Servicing Ratio (TDSR). In the second half of 2013 report, just after the TDSR was announced, 59% of owners were confident their properties would retain its value; now only 38% think so, a decline of 21%. Another 25% are unsure if the value will be retained.” The survey also showed that 56% of the correspondents are in favor of the government’s decision to maintain cooling measures in place in spite of the repeated suggestions by the industry practitioners to adjust various restraints.
Consumer & Retail
Hong Kong: Excessive retail rental prices affecting local trade
Source: European CEO, 25 September 2014
Retail rental prices In Hong Kong average at $4,334 per sq. ft. per annum, surpassing rental expenses in New York, Paris, and London for the past two years. As it might be perceived as an optimal location for high-end retailers, the inflow of these luxury companies could affect the cultural authenticity of the city. The Causeway Bay area has had a full transformation in the past 10 years, with local businesses unable to satisfy the demands of their landlords. Before noodle stands, teahouses, and several other local retailers where once located in that area, however the new tenants are luxury brands, such as Louis Vuitton, Cartier, and Burberry. Although cooling measures were implemented in 2012 to stabilize price increase in the residential property market, prices in the luxury industry are still rising, yet at a slower rate than in the last years.
However, CBRE Retail Executive Director Sebastian Skiff, says, “Whilst generally speaking we still see strong demand for prime streets across Hong Kong, we are seeing rental growth leveling off, and flat to negative in secondary streets, with vacancies rising.” Industry specialists suggest that this is as a result that Chinese citizens are altering their shopping habits. Less spending is causing luxury retailers to reevaluate expansion projects and to alternatively improve their current stores. Hong Kong should develop a balanced retail environment and keep its authenticity, such as Tokyo and Singapore have done. The city should continue attracting international retailers, but in addition offer abundant support for local businesses.
India: Euromonitor forecasts luxury market growth of 86% from 2013 to 2018
Source: CNBC, 24 September 2014
According to an Euromonitor International report, India’s luxury market will rise 86% in constant value terms from 2013 to 2018. Over the same period, the luxury market in forecasted to grow 74% in China, 62% in Malaysia, and 59% in Indonesia. Furthermore, the total retail value of luxury goods in India is anticipated to grow 63% over the next four years, in comparison to the expected 59% in China. Fflur Roberts, head of luxury goods at Euromonitor, stated that India’s luxury good market has been growing by more than USD 255 million per annum in absolute terms, significantly stronger than Singapore and Australia.
However, Erwan Rambourg, author of The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun, stated that although India could be the fastest growing market currently, it will not considerably change alter the luxury landscape over the next 10 years.
Rambourg believes that China will continue to be the world’s biggest luxury participant, even though sales are dropping as a result of higher prices and repression of corruption; he expects that Chinese consumption will account for 35% of worldwide luxury sales in 2015 and 50% in the next decade. He added that Indian buyers have a different mentality in regards to spending. He says, “The view of many wealthy Indian individuals is that raw material counts a lot whereas in luxury brands, what counts are design, logo and general wow impact." Furthermore, a study revealed that international brands face numerous barriers in India, such as lack of high-quality shopping environments, high custom taxes on imported goods, and increasing fake markets.
Cambodia: Consumerism booms as middle-class is growing
Source: Business Insider, 28 September 2014
Cambodia has the most favorable demographics to accelerate economic growth with its rapid-growing working population and lower dependency ratio. The growing consumer class that earns triple the average income is now purchasing smartphones, flat-screen TVs, motorcycles. In Phnom Penh, for example, more malls, office buildings, hotels, and fast-food restaurants are being built. Chy Sila, CEO of CBM Corporation, says, “People can afford to pay so now's the time, we're ready for big brands to come here.” According to the World Bank, the economy in Cambodia rose by 8.1% between 2000 and 2012 and 7.4% last year.
The World Bank has also reported that government is making an effort to decrease poverty, having reduced the poverty ratio from 53% of its population in 2004 to 20% in 2011. Additionally, overseas direct investment has risen from 2.65 billion in 2007 to 10.8 billion the past several years. Cambodia’s Credit Bureau anticipates that loans will exceed USD 14 billion by 2020 and credit demand to nearly double to 3.3 million individuals. Central Bank Governor Chea Chanto has reported that in the H1/2014, banks deposits rose by 13% and loans to the private sector increased 28%. Many Cambodians, however, don’t have such privileges and continue have a daily salary of USD 2.60 (which is almost half that of Vietnam and a fifth of Thailand).
Energy, Resources & Environment
China: Country working to reduce CO2 emissions
Source: The Energy Collective, 25 September 2014
Even though China has not made any further post-2020 pledges during last week’s UN Climate Summit in New York City, Vice Premier Zhang Gaoli reported that the country will work to reduce its total CO2 emissions as soon as possible. He stated that the nation will provide USD 6 million to support South-South cooperation fund on climate change. Minister Xie Zhenhua, vice chairman of China’s National Development and Reform Commission, also stated that the country will attempt to submit its intended nationally determined contributions to a post-2020 global climate commitment in H1/2015.
China’s CO2 emissions, lead primarily by its heavy reliance on coal, accounted for more than 60% of the rise in the global emission over the past 10 years.
According to the Global Carbon Project’s annual update, those emissions currently account for nearly 30% of the total global CO2 emission. Despite the fact that another research disclosed China as being more carbon-intensive than average, the nation has implemented various policies to reduce coal utilization, boost efficiency and renewable energy, and advocate low carbon development. A Greenpeace report revealed that coal demand in China dropped for H1/2014, even as its GDP continues to rise. A decline in coal consumption, however, doesn’t automatically lead to a reduction of CO2 emissions; other emission sources, such as oil utilization in the transportation sector, must also be taken into consideration.
Japan: Authorities show support for zero-energy buildings
Source: The Wall Street Journal, 26 September 2014
Earlier this year, Abe’s administration reassured its plans of making all new public building zero-energy by 2020, and a similar goal for private buildings by 2030 on average. Even though analysts consider Japanese objectives challenging, corporations don’t think it’s unrealistic. Kajima Corp, for instance, announced its plans to construct a medium or high rise zero-energy building by 2020, whereas Obayashi Corp is researching a life-cycle zero-energy building that takes into consideration all the energy utilized in construction and materials output. Additionally, Taisei Corp has reported that is recent green building, which has one solar panel in the roof and three on the side, cuts energy utilization by 75%.
The primary issue for zero-energy buildings is currently the cost. Taisei has not revealed the total cost to build its new office, however the project obtained support from a government-affiliated body that provided nearly 66% of the solar panels cost. Officials reported that the company wants to offer a zero-energy building with a price of only 20% more than an ordinary building by 2020. By developing more efficient side solar panels, costs could be dropped. Solar panels solely convert around 5% of the forthcoming solar energy into electricity. Mr. Mizuishi, a member of the Nomura Research Institute, believes that it will take time for building owners to comprehend zero-energy buildings, which could take several years to recover the upfront cost. Yet, he noted that Japanese companies could take the lead in the subtropical Asian markets.
India: Government considers nuclear energy as priority
Source: Channel News Asia, 28 September 2014
India relies on coal to generate nearly 66% of its electricity, however power blackouts often occur and there’s an increasing demand as economy and the middle class is growing. As there is a power crisis made worse as a result of the cancellation of more than 200 coal mining permits in the country, Prime Minister Narendra Modi wants to switch to nuclear energy. However, he will have to assure that public that nuclear is safe and eliminate the foreign proliferation concerns to obtain the imports of uranium and technology that the nation needs to generate atomic energy. According to the World Bank, around 400 million people still don’t have access to electricity in India.
Currently, the 20 nuclear plants in the country account for less than 2% of its power capacity, however the government wants to increment the capacity to 25% by 2050. Amit Bhandari, an energy and environment specialist at Gateway House, says, "Concerns of power disruptions raised post the Supreme Court judgment on the coal issue show how reliance on single source of energy is unhealthy…it makes sense investing in nuclear energy, which provides clean power and a hedge against coal supply shocks." The government has been seeking help from countries, such as Japan, Australia, and China, to achieve this goal. Nonetheless, foreign allies continue to be concerned of offering assistance to a nuclear-armed nation that has not signed the non-proliferation treaty.
Australia: Sydney fails to become a top financial center
Source: Sydney Morning Herald, 25 September 2014
According to the Global Financial Centers Index issued by Z/Yen Group, Sydney is ranked 23rd in a worldwide poll of attractive global financial centers, behind Hong Kong, Singapore, Tokyo, Seoul, and Shanghai. Sydney was placed 9th on the list in 2007, 11th in 2009, 16th in 2012, and 23rd in 2013 and 2014. Even though Sydney is failing in its hopes of becoming a global financial center, Financial Services Council Chief Executive John Brogden believes that Asia Region Funds Passport (AFRP) will help Sydney recover. The AFRP, which is scheduled to begin in January 2016, will ease free trade in funds management services between Australia, New Zealand, South Korea, Singapore, Philippines, and Thailand.
However, a recent data released by the Financial Service Council (FSC) disclosed that foreign investment in Australian fund managers accounted for only 3.4% of funds under management, in comparison with more than 60% in Hong Kong and 80% in Singapore. Other factors contributing to the weak performance is the nation’s taxations and complexity of corporate structures. Corporate Advisor Mark Johnson has suggested the creation of an investment manager regime (IMR) to permit foreigners to utilize Australian fund managers to invest money outside of Australia without being taxed in Australia. Johnson also advises for a cut of the managed investment trust withholding tax rate. The government, however, has not implemented these regimes.
Hong Kong: Banks suspend operations during protests
Source: BBC, 28 Sep 2014
Due to the mass pro-democracy protests, Standard Chartered and several other banks have shut down the branches that offer over-the-counter services as well as ATMs and cash deposit machines in affected areas. Some of the staffs are also advised to work from home or go to secondary offices. Standard Chartered also announced in a statement that it had made plans for continuous services to customers for contingency and Bank of China said it had also shut down some operations at some branches because of the situation. DBS Bank also temporarily closed its branch in the Admiralty neighborhood.
According to the Hong Kong's de-facto central bank, 29 bank branches, offices or ATMs of 17 banks in Hong Kong will be temporarily shut down due to the protests. The Hong Kong Monetary Authority (HKMA) has also announced that the affected banks had activated their business continuity plans to maintain the normal operations of the core functions of the banking system. The HKMA will also inject liquidity into the banking system if it is necessary.
Indonesia: Major banks get ready for financial supervision
Source: The Jakarta Post, 27 Sep 2014
Major banks have announced that they are ready for the integrated supervision on financial conglomerates, which controls a significant portion of the financial industry’s assets, from Financial Services Authority’s (OJK). The regulator’s data shows that the 31 conglomerates manage around 70% of the total assets of the country’s banking industry by the end of June, which is equal to INR 5.3 quadrillion (USD 441.41 billion). The supervision will be carried out on all groups by the end of 2015 while the four largest banks by core capital, which is known as BUKU IV lenders, will be on supervision earlier by mid-2015.
The part of the supervision would include the execution of three new regulations on risk management, good governance and capital requirements. Bank Mandiri, which is now the biggest financial group in Indonesia, has so far met with existing requirements set for each of its subsidiaries. Mandiri’s conglomeration is made up of banks, a securities firm, a multifinance company, insurance firms and a remittance office. The amount of its consolidated assets reached INR 764.94 trillion in June 2014. OCBC NISP, which has no subsidiary at the moment but is related to several financial companies owned by Singapore’s OCBC Bank Group, has also claimed that the upcoming regulations should be fully supported.
Logistics & Transportation
South Korea: UPS expands its air hub at Incheon International Airport
Source: Post & Parcel, 25 Sep 2014
UPS opens its newly expanded hub at Incheon International Airport, which covers an area of over 9,000 square meters. The increased capacity of around 60% will enable UPS to increase the capability of import, export and transshipment by around 50%. UPS is the first global logistics providers in Korea to operate on new Auto Sorting System to reduce shipment inspection delays and is now able to handle bulky or palletized shipments with a new Cargo X-ray System.
UPS expands its air hub in South Korea in order to build an extensive and integrated logistics network across Asia Pacific. The hub will operate 80 weekly flights, which connects Korea to the markets in Asia, Europe and the U.S. With the support from UPS’s industry leading capabilities and advanced technologies, all kinds of businesses in Korea will now be able to have more reliable supply chains in air freight, ocean freight, contract logistics as well as a variety of delivery choices to 220 countries all over the world.
Vietnam: CEVA Logistics expands in northern Vietnam to tap growth
Source: JOC, 23 Sep 2014
CEVA Logistics has launched a new branch office in Hanoi, the capital city of Vietnam, to expand in the northern region of Vietnam, which has been growing fast recently with many operations, manufacturing and increased trading activities established by multinational companies. Logistics services offered by the office include air and ocean freight, contract logistics, warehousing and distribution, local transportation and domestic value-added services.
The country is expected to have the fastest growth in air cargo markets by an expansion at 6.6% in 2015-2017 by the International Air Transport Association since 25% of its trade by value shipped by air. And the government also plans to have 26 airports operating by 2020 because of lacking adequate airport infrastructure. The country has also managed to attract investment from companies like Microsoft, Samsung and Intel for its plan of becoming a top exporter of high-tech goods, particularly electronics. Vietnam’s GPD rose up from 5.09% in Q1/2014 to 5.25% in Q2/2014 y/y since the situation for exports has improved and is expected to average 6.2 % in 2014-2015.
Indonesia: Port service users support IPC to increase handling charges
Source: The Jakarta Post, 20 Sep 2014
The Indonesia Port Corporation (IPC)’s plan of increasing container handling charges (CHC) and terminal handling charges (THC) imposed on shipping companies at Tanjung Priok Port, which haven’t increased since 2008, are supported by port service users. IPC has currently imposed a THC of USD95 for 20-foot containers, including an USD 83 CHC and a USD 12 surcharge. Siswanto Rusdi, the director of the National Maritime Institute (Namarin), believes that reasonable tariff adjustments will enable port operators to make further capital investments to increase the port’s capacity and efficiency as well as reduce logistics costs in the long run.
However, Indonesian National Shipowners Association (INSA) and the Indonesian Logistics Association (ALI) think that the government should not raise the charges, which will affect the country’s competitiveness since Indonesia has the highest CHCs among ASEAN countries. The CHC in Malaysia is around USD 65 while it is USD 70 in Thailand and USD 50 in Vietnam. Transportation Minister EE Mangindaan has announced that the ministry would decide on the price adjustment before the end of 2015.
Manufacturing & Industrial
India: Country needs to make progress in manufacturing industry
Source: East Asia Forum, 24 Sep 2014
Fast expansion of the industrial base through labour intensive manufacturing seems to be the perfect way of increasing the GDP growth rate. India has to seize the opportunity provided by international production sharing networks. The production network can just deliver rapid growth in manufacturing. One main reason why India has been an outlier in the development of international production networks is the low stock of foreign direct investment (FDI) in its manufacturing sector. The lack of affordable land, supply of high quality power, labour laws, and simple tax structure is also impediments.
The investment environment in India should be improved in order to stimulate the investment in manufacturing, which is not only stimulated by multinational corporations but also by domestic enterprises. International production networks will have the place in India through off-shoring as well as outsourcing. Improving the manufacturing sector will be the key for Indian government in ensuring GDP growth as well as a better future.
Singapore: Manufacturing output increases 4.2% in August y/y
Source: Channel News Asia, 26 Sep 2014
Manufacturing output, which is driven by growth in nearly all clusters, rose 4.2% in August y/y. And the output increased 3% y/y when excluding biomedical manufacturing, whose output rose 9.7% in August y/y. The medical technology segment expanded 20.6% while pharmaceuticals output grew 7.5% because of the higher output in active pharmaceutical ingredients and biologics products. The electronics cluster’s output increased 7.2% y/y in August. The output of chemicals cluster increased 2.3% last month. The precision engineering cluster expanded by 1.9%.
The output of general manufacturing industries cluster declined 0.2% in August, which is affected by the weak demand for commercial printing. The food, beverages and tobacco, and miscellaneous industries segments grew 1.7% and 0.2% respectively. Output of the transport engineering cluster decreased by 0.8%, pulled down by a 19.5% contraction in the aerospace segment because of a drop in the number of repair jobs from commercial airlines. The marine and offshore engineering segment grew 9.1%, with the help of higher contributions from rig building projects.
China: HSBC: Manufacturing sector rises up in September 2014
Source: Channel News Asia, 23 Sep 2014
HSBC announced that its preliminary purchasing managers index (PMI), which tracks activity of factories and workshops in China, rose up to a two-month high of 50.5, which is higher than a final reading of 50.2 in August. Chinese government has introduced a number of measures to boost growth since April, which includes small business tax breaks, targeted infrastructure cost and incentives to spur lending in rural areas and to small companies. And the report from last week said that the People’s Bank of China would also inject USD 81 billion (SGD 102.7 billion) into the top five banks to spur lending to companies.
China's economy expanded by an unexpectedly 7.5% in Q2/2014, up from 7.4% in June-August, which was the worst since a similar 7.4% expansion in July-September 2012. Beijing is targeting expansion of about 7.5% this year since it tries to pull off a delicate transformation of the country's growth model whereby consumer spending becomes the main driver rather than investment. China releases its own official PMI at the beginning of each month. That indicator came in at 51.1 in August, which decreases from 51.7 in July.
Pharmaceuticals & Healthcare
Malaysia: Country's healthcare system impresses WHO
Source: The Borneo Post, 27 Sep 2014
Despite the cost of only around 4.3% of Malaysia’s Gross Domestic Product on healthcare sector, the World Health Organisation (WHO) is impressed with its healthcare system. Compared to other 37 member states under WHO West Pacific, the life expectancy average of 74 years and infant mortality rate of 0.6% live births of Malaysia makes its healthcare one of the best among them. Some of the member states spend at least 8% of their GDP on the healthcare sector.
All 37 member states under WHO West Pacific are on the alert of facing the Ebola outbreak, of which Singapore and Hong Kong are at the top of the list because of their international linkages. Dr Shin Young-Soo, WHO regional director (West Pacific), said that the Ebola epidemic would probably continued for around 6 to 9 months. The states might put major economic powers on board to fight against the epidemic spread out of Africa.
South Korea: Smart hospitals continue to develop with new technologies
Source: AsiaOne, 29 Sep 2014
Unlike the hospitals in the US and other countries which are encouraged to adopt EMR systems by the government, hospitals in South Korea are not encouraged to do so. However, the number of facilities with the system in hospitals has still increased fast within the past decade. According to the research by the Korean Society of Medical Informatics in 2011, the adoption rate of EMR systems in South Korea has greatly increased from 21.4% in 2005 to 77.3% in 2010.
Seoul National University Bundang Hospital, which is one of the main health care facilities in South Korea that has a completely electronic medical record system, together with South Korea's wireless telecommunication operator SK Telecom, signed a contract of USD 70 billion won (SGD 85 million) in July to establish an IT system for Saudi Arabia's Ministry of National Guard while the Samsung Medical Center, another major Korean hospital, has collaborated with its subsidiary Samsung Electronics to work on its EMR system.
China: Verdict for Glaxo reveals three take-home messages
Source: Forbes, 25 Sep 2014
The investigation of GlaxoSmithKline corruption scandal ended up in September 19 with a fine of nearly USD 500 million on the British drug maker. The verdict has revealed three important messages to multinational pharmaceuticals. First, the cost of increasing product sales in China by giving bribes and other illicit tactics can be quite high. Second, while the law in China is still good only in theory, multinationals can also be victims of the capricious and arbitrary politics. Third, Chinese healthcare reform is now at key point with almost no low hanging fruits left.
A Chinese scholar said that the GSK corruption scandal has provided an excellent opportunity for China to rectify its chaotic pharmaceutical market. It also reflects the lack of further development for China’s healthcare reform. The Chinese regulators seems to have no other choice but to depend on greater measures to push big pharma to cooperate in the healthcare reform since it has already failed in kicking off critical reform measures.
Japan: An increase in exit activity helps country’s PE turn around
Source: eFinancialNews, 24 Sep 2014
An increase in exit activity has helped Japan’s turnaround in private equity market. However, according to Greg Hara, president of midmarket buyout firm J-Star Co., the improving market environment has also raised competition for deals and boosts pricing on companies. Market participants did not seem positive about corporate carve-outs, and some of Japan’s largest conglomerates have seen selling non-core units to private equity firms. Kohlberg Kravis Roberts has just completed the acquisition of an 80% stake in Panasonic Healthcare in a deal worth around USD 1.7 billion in early 2014.
The managing director and co-head of Carlyle’s Japan buyout team Tamotsu Adachi said that it was difficult for private equity firms to be sure with a corporate carve-out given that most have very strong corporate cultures, which will make proposed changes slow. And although electronic companies have been more active in divesting non-core units when faced with rising competition from China and Korea, companies in other industries may feel much easier to do so.
China: Private equity firms pour record amounts of capital into the country
Source: Wall Street Journal, 25 Sep 2014
Private equity firms have been pouring a record amount of capital into China since the early 2014 while the world’s second-largest economy is growing slow. Private equity firms has risen up to USD 16.7 billion of deals so far in 2014, which has achieved the highest value on record. Compared with USD 25.7 billion for all of 2013, there has been USD 29.6 billion of investments so far in 2014 throughout Asia.
New York firm Blackstone has made select investments over the years and is seeing value in the region. The firm has raised more than USD 4 billion as of June 30 for an Asian real estate fund primarily on China, India, Australia and Japan. Fellow megafirms Kohlberg Kravis Roberts & Co., Carlyle Group and TPG Capital all have raised billions of dollars in the past few years for private equity investments in Asia, which will likely encounter plenty of competition as they deploy capital in the coming years. The Asia-based general partners are also sitting on USD 129 billion of dry powder.
Singapore: GIC’s RAC Investment reflects more private equity deals
Source: Bloomberg, 25 Sep 2014
GIC Pte’s investment in U.K. Road Assistance Company Ltd. shows the state fund’s commitment to private equity, of which the asset class will attract more sovereign funds. Carlyle and GIC will together own a majority stake in the business with RAC management holding the remaining shares that didn’t disclose the value of the transaction. Private equity made up 9% of GIC’s portfolio as of March 31,which compares with 3.7% at Korea Investment Corp. as of December and 7.3% at Australia’s Future Fund (FGX) as of June 2013. And the world’s biggest, Norway’s state fund, doesn’t invest in private equity.
GIC’s has recently made the purchase of a 28.5% stake in Rothesay Life Ltd. from Goldman Sachs Group Inc. in 2013 and Blackstone Group LP also bought a stake of the same size from Goldman Sachs. GIC benefits from consistent dividend payments by companies like RAC while Carlyle canceled a planned initial public offering for RAC on the London Stock Exchange following the GIC investment.
Technology, Media & Telecommunications
Japan: SoftBank Corp in talks to acquire DreamWorks
Source: The Global and Mail, 28 Sep 2014
Japan’s SoftBank Corp is in talks to acquire DreamWorks Animation SKG. The talks were first reported by a private sourcing, said that a buyout would value DreamWorks at USD 3.4 billion. The entertainment trade publication has announced that SoftBank had offered USD 32 per share, which is a substantial premium to the stock’s Friday closing price of USD 22.36, for DreamWorks.
SoftBank held the equivalent of more than USD 17 billion in cash and equivalents as of the end of June. The share price of DreamWorks has drop 37% this year after two consecutive quarterly losses, a string of weak-performing releases and the production costs of its movies which concern the investor. DreamWorks announced in July that the U.S. Securities and Exchange Commision was investigating a writedown it took at the end of 2013 on the animated flop “Turbo”.
Vietnam: Hanel DTT cooperates with Sundrew Myanmar to build open e-government platform
Source: News VietNamNet, 29 Sep 2014
Vietnam's Hanel DTT Technology Joint Stock Company has signed an agreement with Sundrew Myanmar Company to cooperate with an open e-government platform (OEP) based on open source technologies in Myanmar. OEP has been established in Da Nang City, Ha Noi City and the fourth level of public healthcare services of the Ministry of Health. The OEP 1.1 version will be launched with basic functions meeting the demands of authorities at the end of 2014. The OEP 2.0 version will be released in 2015 with improved functions to support technologies, including cloud computing, mobility and big data.
VNPT-I will continue to cooperate with A1 Construction Company Ltd to implement telecom and software products and IT solutions. VINASAT centre, which is under the management of VNPT's subsidiary Viet Nam Telecom International (VTI), will offer satellite bands for the Myanmar Ministry of Defence. VNPT and the Elite Telecom Public Company Limited will also set up a plan to establish a joint venture to provide Internet services there after doing the survey on the society. At the end of 2012, only 5.4 million of Myanmar 60 million people, which is equivalent to 9%, owned mobile phones, compared to 70% in Cambodia, 87% in Laos and 100% in Thailand. The government of Myanmar hopes that the amount of mobile phone users will rise up to 75 to 80% by 2016.
Indonesia/Australia: Telekom Indonesia acquires 75% stake in Australian contact center
Source: ZDNet, 29 Sep 2014
Telekom Indonesia has acquired 75% of Sydney-based Contact Centres Australia (CCA) for AUD 11 million through its Australian subsidiary. Telekom Indonesia is also at a key position in expanding Telstra, Australia's telecommunications incumbent, into the Asia-Pacific region. The two companies will form a joint-venture company, which will allow Telstra to offer network applications and services in Indonesia in 2015.
Last week, CEO David Thodey responded the concerns from retail shareholders about the potential loss of Telstra’s intellectual property, which is as the part of the deal, stating that Telstra has safeguards in place and the deal has required Telekom Indonesia to retain a majority ownership of the joint-venture company so that it could comply with Indonesian foreign ownership laws.