Asia News Update

Asia: IPOs, share placements and rights issues hit four-year high in 2014

Source: Wall Street Journal, 12 Oct 2014

Burgeoning Automotive Industry Lends Momentum to the Engineering Plastics Market in Southeast Asia

The types of share sales along with issues of convertible debt have reached USD 197 billion, of which figure is up 15% from USD 171 billion y/y. The MSCI AC Asia Pacific Index is down 1.9% this year, although it is up 6.6% after a five-month low in February. The Hang Seng Index, which is the region’s top IPO venue in Hong Kong, is down 0.9%.

A couple of big IPOs, including a USD 1.8 billion offering by Japanese staffing-services provider Recruit Holdings Co., are expected in Japan. India is expected to have share sales by companies, of which stock prices have surged. S&P BSE 200 index of India has risen 24% this year. The volume of initial offerings, placements, rights issues and convertible bonds in Australia, which is once a quite market for IPOs, has jumped 70% y/y.


Japan: Toyota supplier Denso considers expanding production

Source: Bloomberg, 7 Oct 2014

Denso Corp. has announced that it is now considering expanding production in Japan, which is a signal that Abe’s weak yen policy has drawn back the interest in domestic production. The yen’s decline of 28% in the past two years, which is moderating the trends of dwindling export and deteriorating domestic auto industry, may also boost support for the policy. It is estimated that automakers will add 22 million auto production unites worldwide by 2021 whole the annual output will decrease by more than 1.6 million vehicles in the following 10 years.

Moody’s Corp. estimates that capital spending growth at Japanese companies will decline to 1.3% at the end of March this year, which compares with 12.3% spending growth in fiscal 2012. The currency between the yen and the dollar is at an average of 103.30 this fiscal year. Denso, which is 22% owned by Toyota, has been working on the improvement of productivity at domestic plants in the wake of the global recession, Japan earthquake and the yen’s surge. The company is searching for the companies with distinctive technologies like image processing, which will improve vehicle safety, as the choices of acquisition.

Malaysia: Budget in 2015 spurs manufacturing automation

Source: The Rakyat Post, 11 Oct 2014

According to Malaysian Automotive Institute (MAI) chief executive officer Mohamad Madani Sahari, the automation capital allowance is just up to 200% on the expenditure will benefit manufacturers of energy-efficient vehicles. The Ministry of Science, Technology and Innovation has been injected MYR 1.3 billion to commercialize 360 high-impact innovative products in the next five years. The government also offers MYR 290 million in research funds to support high-impact research, development and commercialization program.

MAI is leading research on electric buses using lithium ion batteries, with the first model expected by January in 2015. And SME Bank is welcomed to establish the sustainable mobility fund of MYR 70 million to develop the electric vehicle manufacturing industry in Malaysia. The expectation of Malaysia to adopt new and sustainable technologies in its automotive industry is demonstrated by the initiative to develop the electric vehicle manufacturing industry.  

Thailand: Political crisis and expiring tax break hit car sales

Source: Bloomberg, 8 Oct 2014

Japanese manufacturers in Thailand have been hit by a double whammy of political crisis and an expiring tax break for first-time vehicle buyers, which have raised hesitations on plans of future investment. The influence from the ending of the tax break has intensified this year, which caused auto purchases to soar more than 80% in 2012 y/y. The industry figures of Thailand show that car and truck sales have fallen by at least 30% each month y/y since January.

Toyota’s Thai operation expected that sales by all automakers my fall almost a third to 920,000 vehicles in 2014 y/y, which is more than double the drop that predicted in January. Honda, Mazda Motor and Mitsubishi Motor have all warned of falling sales in Thailand since the anti-government street protests that paralysed parts of Bangkok began last November. The foreign carmakers’ expansion plans are also influenced by the longstanding domestic political crisis, including Toyota’s proposals for USD 609 million of further investment.


Indonesia: Clariant invests USD 17.86 million in adding a new production line

Source: Chemicals Technology, 10 Oct 2014

The project, which will allow the company to better cater to the domestic, personal and home care segments, will enable the new facility to produce esterquat and methylquat for consumer care products like fabric softeners and hair conditioners, as well as establish highly flexible, local manufacturing capabilities to support the region's increasing preference for sustainable and safer ingredients. The facility will add 12,000t of capacity for liquid and solid products that are used as key ingredients in consumer care products as planned in 2015.

The new production line installation for the facility in Tangerang will enhance Clariant's ability to share its latest innovations with Asia's personal care and home care markets, which are based on a highly competitive platform through close proximity to raw materials and customers in Southeast Asia. Clariant has been holding operations in Tangerang in Indonesia for more than 20 years. The company offers a variety of products for home care and personal care applications.

China: CB&I secures contract for polypropylene technology

Source: Chemicals Technology, 10 Oct 2014

CB&I has signed a contract with Shenhua Ningxia Coal Industry for offering license and engineering design for a polypropylene unit in Yinchuan City in Ningxia, China. According to the contract, CB&I will offer its Novolen technology for the petrochemical complex, which has already housed two units equipped with Novolen that are designed to produce 600,000t of polypropylene grades each year. Shenhua Ningxia’s site will be the largest polypropylene site in China after the third polypropylene unit is in operation.

The industry’s polypropylene capacity at the complex will increase to 1.6 million tonnes per year through the project, with the production of 196,000t of polymer grade propylene and 20,000t of comonomer grade-I butene, which will be largest capacity of any of the Novolen technology licenses in China. Besides, CB&I has also announced that it has contracted with Bahrain Petroleum on licensing its LC-FINING and ISOCRACKING technologies as well as providing engineering design for the planned residue hydrocracking and vacuum gasoil hydrocracking facilities, which is worth more than USD 100 million.

India: BASF invest EUR 150 million in commissioning a new chemical plant

Source: Chemicals Technology, 8 Oct 2014

As part of BASF’s investment plans of more than EUR 10 billion in Asia Pacific between 2013 and 2020, it has just taken a EUR 150 million to commission a new chemical production facility at Dahej in the state of Gujarat in India, which is the company's largest investment in the country so far and has created 200 direct and 300 indirect jobs, with a expectation of further 50 jobs in the future. The polyurethane-manufacturing hub, as well as care chemicals and polymer dispersions plants are housed in the new complex.

The care chemicals plant in the new complex is company's first sulphation plant in India while the polymer dispersions unit caters to paper and board, architectural coatings, construction, adhesives, and fibre bonding customers in northern and western India, which complement BASF's Mangalore facility. The polyurethane-manufacturing hub, which will produce Elastollan thermoplastic polyurethane, Cellasto microcellular polyurethane components and polyurethane systems, includes a methylene diphenyl diisocyanate splitter for processing crude MDI.

Construction & Property Development

Australia: Chinese investors push into Melbourne and Sydney boldly

Source: Sydney Morning Herald, 11 Oct 2014

Australia's exuberant property market, pushed by fierce competition and local and international investor's enthusiasm, shows no sign of abating. After the Reserve Bank has warned that bubbly property markets could be hit with a price correction, Chinese investors are lifting their Australian residential and commercial real estate investment aggressively at a time. Australian dwelling values rose 9.3% over the 12 months to September, which is stimulated by a record 15-month run of historically low interest rates.

RP Data figures show that Sydney's homes have risen 4.3% and Melbourne's 8.1% over the same period. Housing finance data shows that investors paused for breath in August, with loans falling slightly by 0.9% but debt for new dwellings rising a healthy 2.5%. Developers from China are encouraged to go overseas and get experience with other countries' rules, regulations and cultures, either on their own or in joint ventures due to the central government’s relaxing requirements for outbound investments.

Singapore: Property companies face USD 18.5 billion borrowings

Source: Bloomberg, 10 Oct 2014

Bloomberg-compiled data shows that 80 property companies on Singapore’s stock exchange have been reported a total of SGD 23.5 billion (USD 18.5 billion) borrowings, which have to be reimbursed in their latest filings in one year. Savills Plc. predicts that with the expansion of Singapore’s economy cooling to 2.4% in the Q2/2014, from 4.8% in the Q1/2014, as well as a 10-year low population growth that will cause further fall on home prices, the refinancing for real estate investment trusts (REIT) will be more challenging.

The number of residential dwellings under construction still remains high despite the weaker demand, which reach a record in Q2/2013 and some 65,270 apartments were in the pipeline as of June 30. The 42 listed developers on Singapore’s stock exchange have been reported SGD 13.4 billion of short-term borrowings in their latest filings. The retail sales that will have influence on some REITs have decreased for four of the past five months, which is the worst performance in two years.

Japan: Tokyo becomes the largest commercial property investment market in Asia

Source: Property Report, 9 Oct 2014

Tokyo has recently been defined as the biggest commercial property market in Asia with a reported 30.4% increase in real estate investments last year. Many international investors have surged by 43% in the APAC region last year, showing strong interests. Due to the cooling measures, regional investors from Hong Kong, Singapore and China are all experiencing a slowed growth in their respective domestic markets.

United States-based investors, as well as Canadians, British nationals and Germans top the international buyers in Asian markets。 Outbound capital in Asia surged by 56%, which represents the growing international investment activities of Asian investors. With the Americas and Asia reporting growth rates of 46% and 43%, respectively, cross-border investment rose by 38.8% in total. The Americas have spent USD 75.3 billion on commercial investments last year, and remained the top source of cross-border capital.

Consumer & Retail

Hong Kong: The Occupy Central protests have a deep influence on retail sales

Source: FinanceAsia, 6 Oct 2014

The sales of fashion retailers fall between 30% and 50% y/y with Central and Admiralty 50%, Causeway Bay 15% and those in Mong Kok between 30% and 40%, while department stores and supermarkets fall around 10% to 60%. Enterprises of small and medium size saw declines of up to 80%. Jeweller sales saw fall in Central and Admiralty around 35% to 45%, around 28% to 40% in Causeway Bay and 33% to 55% in Mong Kok.

At the same time, department stores, sales of supermarkets and pharmacies fell by 20% to 35% in Central and Admiralty, 30% to 45% in Causeway Bay and 10% to 25% in Mong Kok. Fast food outlets sales dropped surprisingly 40% in Central and Admiralty, 30% in Causeway Bay and by 25% in Tsim Sha Tsui (TST), southern Kowloon.

Vietnam: Retailers are facing fierce competition

Source: China Post, 6 Oct 2014

Local retailers in the country will face difficulties in competing with those wholesale giants like Germany’s Metro, the company entered Vietnam as a wholesaler but its 19 outlets operate as retailers. Many foreign investors want to establish joint ventures with local companies on the condition of holding a 51% stake. Many successful Vietnamese retailers like Saigon Co.op, Phu Thai, HC, and Nguyen Kim are facing intense competition from foreign giants like E-Mart, Big C, Lotte, and Lock & Lock.

The Vietnamese retail market is estimated to be worth USD 125 billion a year. And a number of large foreign wholesalers, like Japan's Aeon Group, in Vietnam are seeking to expand their operations. Japan's Aeon Group has a large mall in Ho Chi Minh City and plans to invest USD 100,000 on opening a 24-hour shop next year with profitable 300 outlets to be set up. Local retailers should seek to set up joint ventures with foreign partners to achieve success.

Thailand: Unilever invests THB 8 billion on middle-class consumers and ASEAN market

Source: Bangkok Post, 10 Oct 2014

Unilever has announced a THB 8 billion investment plan to cash in on a growing Thai middle class and opportunities arising from the single regional market, among which 2.6 billion will be spent on a new headquarters, 2 billion on a new warehouse, 1.5 billion on a new cold room for ice cream, 1.2 billion on expansion of the company’s personal care product manufacturing plant, and 700 million on a food processing plant.

Unilever Thailand has a total sales of THB 40 billion in2013, of which 40% is from personal care products, 36% from home care and 24% from food and ice cream. There are also eight manufacturing sites in Thailand for serving domestic consumption and exporting to 20 countries. So far, Thailand is the third-largest Asian manufacturing site of Unilever, on which the company will continue to invest in the future.

Energy, Resources & Environment

Japan: LNG producers cooperates together to beat down prices

Source: Bloomberg, 10 Oct 2014

Tokyo Electric Power Co. and Chubu Electric Power Co. have announced to work together as the world’s biggest consumer of liquefied natural gas. Tokyo Gas Co. and Korea Gas Corp. plans to cooperate in fuel purchasing to reduce prices. Tepco and Chubu Electric, which is two biggest buyers in Japan, has announced in a statement on October 7 that they will form a joint venture by the end of March for thermal-power generation and fuel imports.

The venture may purchase 35 million to 40 million metric tons a year, which is almost half the nation’s annual use, to rival Korea Gas as the largest importer of the fuel, which is the dominant energy source in Japan. Japan has spent a record JPY 7 trillion (USD 64.9 billion) on a record 87.49 million tons of LNG imports in 2013. Prices of LNG delivered to northeast Asia may top USD 20 per million British thermal units this winter if there’s a cold spell in northeast Asia combines with disrupted flows of Russian gas to Europe.

Asia: Fuel-subsidy cuts move threaten to suppress energy demand

Source: Wall Street Journal, 9 Oct 2014

As governments in many Asia countries cut down on expensive energy subsidies to rein in spending and cut deficits, consumers are paying more at the pump instead of benefiting from a global slide in oil prices. However, the moves made by governments have threatened to suppress fuel demand growth in Asia at a time since the energy use has already crippled by weak economic activity.

Diesel prices in Malaysia have increased 10% after a price increase last week while India’s diesel prices have risen up to 6.5% so far this year. And analysts are forecasting that Indonesia’s diesel price will rise by 23% later this year due to the subsidy cuts. Thailand and Vietnam are also planning to cut subsidies. Together with Malaysia, India and Indonesia, all five Asian countries together had accounted for 8.3% of global oil demand last year. Indonesia plans to overhaul its fuel subsidy programs, which will lead to a fuel price increase of 23% in November.

China/India: Asian superpowers plan to improve energy efficient vehicles

Source: Asia Briefing, 8 Oct 2014

The worldwide rallies demanding urgent action on climate change and a UN Climate Summit puts renewed pressure on China and India to control their high levels of pollution and seek out other, cleaner sources of energy. China remains the first-place polluter in the world with an account for 29% of the record 36 billion tonnes of carbon emitted in 2013 while India accounts for 7.1% at a fourth place.

China plans to adopt 500,000 energy efficient vehicles in use by the end of next year and 5 million by 2020, of which the 10% vehicle purchase tax has been waived until the end of 2017 for locally produced and imported new energy vehicles. The Indian government to produce 6 to 7 million electric vehicles by 2020 by launching the National Electric Mobility Mission Plan in 2013. The Heavy Industry Ministry is also concerning some USD 4.2 billion in subsidies for the purchase of electric and hybrid cars and has recently submitted a proposal to the Finance Ministry.

Financial Services

Malaysia: Three banks merge to form the largest lender bank in the country

Source: Wall Street Journal, 9 Oct 2014

Three Malaysian banks, including CIMB Group Holdings, RHB Capital and Malaysia Building Society, will merge to form the country's largest bank and one of the biggest lenders in Southeast Asia, which could extend Muslim-majority Malaysia’s lead in an industry with the more than USD 2 trillion worth of assets globally management. Shareholders will receive one RHB share for every 1.38 CIMB share they own. And CIMB shareholders will own 70% of the combined CIMB-RHB entity while RHB shareholders will own the rest. The deal is planned to be completed by mid-2015.

The merged bank Malayan Banking Bhd., or Maybank, would outrank the country’s current number 1 by assets with assets of more than USD 150 billion. The government owns majority stakes in the three banks, as well as in Maybank. Shares in CIMB were trading at 6.98 ringgit while RHB was at 8.70 ringgit and Malaysia Building Society at 2.37 ringgit before being suspended ahead of the announcement. A 90-day exclusivity agreement for three banks has launched on July 10 and has ended on Wednesday and would resume trading on Friday.

China: The establishment of Alibaba’s private bank causes online financial competition

Source: WantChinaTimes, 12 Oct 2014

The government has approved Alibaba Group Holding to set up a private bank earlier this week, which will trigger fierce competition in the online financial services sector. The user number of another bank, China Minsheng Banking, soared to 1 million and online transactions of RMB 18 billion (USD 2.9 billion) have been conducted, after it has launched its online banking services on February 28.

Taiwan also plans to allow the purchase of insurance and mutual funds and to allow applications for micro-loans online in order to actively develop its online banking sector. The online financial products are also planned to launch, like the Taiwanese version of Yu'ebao, which is an online monetary fund operated by the Alibaba Group. Taiwan will provide offline-to-online payment methods once regulations to govern third-party payment services are formulated through these financial products.

Myanmar: Nine foreign banks win licenses to operate in the country

Source: East Asia Forum, 13 Oct 2014

The Central Bank of Myanmar (CBM) has awarded licenses to nine foreign banks to operate in the country on September 30, which includes ANZ from Australia; Bangkok Bank from Thailand, Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank and Sumitomo Mitsui Banking Corporation from Japan, Industrial and Commercial Bank of China, Maybank from Malaysia; and the Overseas Chinese Banking Corporation and United Overseas Bank from Singapore.

Myanmar lacks capital, which is right at the top of the list, as well as lacks many critical components for genuinely transformational growth and development. Foreign banks will be only approved to offer loans to foreign entities in Myanmar, in foreign currency and only after putting down USD 75 million in capital, upon which it is difficult to envision much return in the short-run.

Logistics & Transportation

Japan: Shipping firms expanding non-shipping business, plan to build cold storage facility in Vietnam

Source: Bloomberg, 10 October 2014

Kawasaki Kisen Kaisha Ltd, Japan Logistic System Corp, and Cool Japan Fund Inc are collaborating to construct a USD 15 million refrigerated storage facility near Ho Chi Minh City, Vietnam. Kawasaki Kisen and Japan Logistics will together invest USD 7.65 million, while Cool Japan will allocate USD 7.35 million. The 9,300m² unit will support restaurants and convenience stores in Vietnam. This project is part of an effort by Japanese officials to boost everything from pop music, managa comics, TV shows, and traditional cuisine to establish new foreign markets. Kawasaki Kisen, which obtains nearly 90% of its sales from shipping, is boosting its other businesses after a decline in freight rates that led to losses in two of the previous five business years. Nippon Yusen KK and Mitsui OSK Lines Ltd are also establishing non-shipping businesses to secure profits.

Nippon Yusen is investing in truck logistic centers located in China and North America. Mitsui OSK, for instance, is investing in deep-sea gas output and transportation to meet the rising demand for LNG. In the Q3/2014, Vietnam’s economic growth rose to 6.2% as increasing foreign investment strengthen manufacturing and exports, in comparison to a 5.4% gain q/q. Shinichi Yamazaki, analyst at Okasan Securities Group, says, “Building a refrigerated warehouse brings a new meaning to Cool Japan. It’s very interesting idea to build a warehouse with the goal of promoting washoku. It’ll help the shipping line and Japanese companies’ profits at the same time. With the backing of the government, it could be the first of more ventures into emerging economies in Asia.”

China: State Council releases 2014-2020 Logistic Industry Plan blueprints

Source: South China Morning Post, 06 October 2014

The Chinese State Council has released a blueprint for developing logistic infrastructure and capacity over the following 6 years and has authorized a plan to nearly double the size of the Tianjin port in an effort to enhance import-export flows. The 2014-2020 Logistic Industry Plan points out issues the sector faces and its projects to debottleneck the domestic supply chain. The total logistics costs accounted for 18% of the GDP in 2013, which is more twice the level in developed countries. By 2020, the government seeks to lower the logistics costs to 16% of GDP. To achieve this target, officials are encouraging collaboration across various regions and between methods of transport, such as the reduction of red tape and toll fees, vertical integration of transport and warehouse operators, and improved collaboration between seaports, airports, railways, and expressways.

In the 2014 International Logistics Performance Index published by the World Bank, China ranked 28th place. The position is the second highest among developing economies in Asia-Pacific, succeeding Malaysia. Nonetheless, the World Bank reports that the domestic performance was lower than its weigh, with just 75% of deliveries meeting quality criteria. Chinese officials are also promoting investment in cold chain infrastructure and significant growth in the outsourcing of logistic service. In another note, the State Council authorized an infrastructure plan to install 71 more berths at Tianjin Port, which handled over 500 million tons of cargo in 2013. Further information about the project has not been disclosed.

Thailand: Transport Ministry seeks to establish new railway department

Source: Asia One, 11 October 2014

If there are no difficulties, the department is anticipated to take effect in 2015. In the initial stage, the primary role of the new department would be as a regulatory body – involved with investing in infrastructure, offering maintenance, administrating services and ticketing, implementing safety policies, and licensing railway operations. Over the next 10 years, the domestic railway network is forecasted to double from its current 4,000 km. Last week, representatives from public and private companies in the transport and logistics industry met to discuss the plan before it’s presented for consideration to the Cabinet and the National Legislative Assembly.

At the meeting, there was a general agreement about the need for a railway transport department, however several representatives were unconvinced of the details of its implementation, whether it would be function adequately, and whether the development process would be feasible. They agreed that the new department should guarantee that urban expansion is considered when building railroads. Rail, of all the transport modes, is the only one that lacks a regulatory body of its own. Furthermore, half of the THB 1.94 trillion, 10-year, transport development plan is directed on the rail system. Pichet Kunathammarak, head of the OTP’s inter-city transport and traffic network development group, states that the reorganization could assist the State Railway of Thailand remove its debt burden.

Manufacturing & Industrial

Singapore: Manufacturing vital for productivity growth

Source: Channel NewsAsia, 08 October 2014

According to the Second Minister for Trade and Industry S Iswaran, the manufacturing sector has played a crucial role in the domestic economy as it leads productivity growth, innovation, and trade. He says, “our manufacturing productivity has grown strongly since the start n 2009 of our renewed productivity drive, registering 9% strong growth annually.” He noted the importance engineering and transport engineering in the sector. Furthermore, he stated that there is a shift in the global manufacturing landscape and there are various crucial trends and developments that domestic companies should be aware of. Consumers, for instance, are more and more seeking manufacturers for services, not only for products, especially in the B2B markets.

Iswaran emphasized that productivity gains includes more than investing in technology advancements and equipment, and that corporations should also modernize their business processes to boost employee performance. He pointed out Workforce Development Agency (WDA) training courses have assisted enterprises attain considerable productivity improvements. Since four years ago, 134 firms have implemented these training courses and over 500 workers have been trained. Iswaran noted that employees should also continue to enhance their education and skills to strengthen the nation’s competitiveness and economic growth in the long-term.

Australia: Labor and energy costs cripple the manufacturing sector

Source: The Sydney Morning Herald, 13 October 2014

The productivity slumping below wage growth, which makes Australia the most expensive place in the world to manufacture anything. The small and medium enterprises (SMEs) lacks of willingness to capitalize on a fast-growing market for luxury products in Asia since traditional manufacturing crumbles. The average pay rise has been about 3% per year while the average productivity improvement in Australia during the past 15 years has been a touch below 2% net.

Employment in the Australia traditional manufacturing sector, which has been hit hard in recent years, has rapidly fell by 140,000, or 13%, between 2000 and November in 2013. NSW has lost 52,900 jobs, or 18.5% of its manufacturing workforce, during the 13-year period. Victoria shed 95,100 jobs, which is more than 29% of its manufacturing workforce.

Indonesia: Country needs new growth model to improve GDP

Source: AsiaOne, 11 October 2014

The Indonesia's gross domestic product (GDP) is still dominated by household consumption, which accounts for almost 60% of GDP. The next government is now facing the task that whether it can increase the share of exports and investments in the country’s GDP. So far, due to its overreliance on household consumption, the growth has struggled to exceed 6%. As the country's lack of infrastructure has driven up logistics costs, discouraging exporters and manufacturers from expanding their output, the underdevelopment of exports and investments in Indonesia is attributed to economic inefficiency.

The Indonesia's incremental capital output ratio (ICOR) currently stood at 5.7, which means that each 1% of economic growth could be achieved through 5.7% of additional investments in capital and is higher than the international standard of 3. The government plans to build more infrastructure to achieve an economic growth target of 7%, which would need at least IDR 6,000 trillion (USD 624 billion) of additional investment in infrastructure.

Pharmaceuticals & Healthcare

Singapore: Entire healthcare information system to change to cloud computing by Q1/2015

Source: The Straits Times, 12 October 2014

By the end of 2014 or start of 2015, the whole public health-care information technology system will change to clouding computing – this implies all public hospitals and institutes, polyclinics, community hospitals and the majority of nursing homes will receive the same computing resources. As each institution will no longer have to manage its own IT system, there would be considerable cost savings. Through a system less prone to breakdowns, doctors will be able to access patient’s complete records. Chong Yoke Sin, CEO at iHis, notes that it will be a more protected system, as it will secure individual’s medical information in one place.

She noted that establishing the hCloud will cost USD 50 million for the first decade and that it will take nearly 2 years to transfer the information currently stored at the different institutes to the hCloud. In addition, it will also ease the set-up of new applications, as there will be no need to acquire and set-up more computers. The hCloud will have sufficient capacity to host new applications or extend current ones. As it will be a completely private system, there is no chance of being hacked. Nursing homes that signed up for NHelp will also be hosted on hCloud. With this advanced system, no more than 22 minutes of downtime per month is forecasted. Other benefits include no slow down in information retrieval, even during peak use, and backups.

Japan: Aspen partners with GlaxoSmithKline

Source: BDlive, 10 October 2014

GlaxoSmithKline (GSK) has recently announced that it will take 25% stake in Aspen Phamacare’s subsidiary in Japan. Aspen Japan will conduct its commercial operations in a strategic partnership with GSK. While Aspen Global Inc will transfer marketing permission and give continual distribution rights to Aspen Japan for all the company’s products being marketed and distributed in the country, GSK will transfer marketing permissions and give distribution rights to Aspen Japan for specific mature products. No financial details were disclosed. Aspen states, “It is expected that, through this agreement with GSK, Apsen will be able to harness more opportunities and grow its presence in one of the world’s biggest pharmaceutical markets.”

One of the key drivers in the growth in the generic medicines market is the ageing community in fully developed countries. Ron Klipin, analyst at Cratos Wealth, noted that Aspen was seeking a multifaceted strategy as it want to expand in developing countries, while taking advantages of the opportunities presented in developed nations. Japan, the second largest pharmaceutical market worldwide, had sales of nearly USD 112 billion in 2012. However, Japan is not a growth market for GSK as the forecasted growth for prescription drugs in developed countries ranges between 1% and 4%, according to Vestact. Furthermore, Japanese authorities have implemented initiatives to boost the generic medicines. As the group faces challenges in the domestic market, such as a drop in government spending on antiretroviral medicines, this global expansion will greatly benefit Aspen.

Taiwan: Legislators debate government assistance on health insurance for Chinese students

Source: The China Post, 7 October 2014

During a review of a bill on the National Health Insurance (NHI) coverage for Chinese students, legislators failed to reach an agreement on whether such students should pay full or partial premium. Democratic Progressive Party (DPP) and People First Party lawmakers assert that all foreign students, including those from China, should pay the full premium. They suggest that the government should discontinue offering premium subsidies to non-Taiwanese students. Tien Chiu-chin, DDP legislator, states that the government should instead provide more funds to enhance benefits for healthcare workers and should take action to prevent the abuse of medical resources. Chiu-chin warns that granting Chinese students access to the NHI program might create an outlet for Chinese patients to receive NHI-covered medical services in the country.

Another KMT legislator also points out that the government should limit NHI coverage to Chinese students, as Taiwanese students have to pay much higher premiums to receive health insurance abroad. However, KMT Legislator Wang Yu min states that students are not expected to have high health care costs or cause of burden on NHI resources due to their age. Wang notes that overseas student pay 60% of their NHI premium, with average costs accounting for just 47% of the self-paid premium. Currently, the monthly payment for the NHI coverage is TWD 1,249 - overseas students pay a premium of TWD 749 and the government contributes the rest. Chinese students are currently not enrolled in this program.

Private Equity

India: Everstone Capital projects to invest in consumer goods and services

Source: The Wall Street Journal, 6 October 2014

Everstone Capital Asia plans to invest USD 650 million in enterprises that have considerable operations in India. The third fund, Everstone Capital Partners III LP, will have USD 700 million hard cap, according to the International Finance Corp, which projects to invest up to USD 50 million. The fund manager will utilize the funding to invest in consumer goods and services, such as health care, education, and financial services. In the past several years, partners have been competing with less-than-expected returns, yet Modi’s administration has recently allocated nearly USD 1.7 billion to assist startups.

However, David Bonderman, co-founder of TPG Capital, says, “The new government is a turning point…and will absolutely benefit India, but what ails India can’t be fixed by one person (Modi). After Modi euphoria there will be disenchantment, but it will level out.” According to a report from Bain & Co, limited partners’ confidence in the country’s potential is intact, yet investors are more rigid with their investment distributions. Several regional fund managers have decided to freeze out. Navis Capital, for example, will no longer invest in India after managing portfolio enterprises there, such as India Hospitality Corp, and formerly allocating a large amount of its South East Asian funds in India.

Japan: Small and medium-sized enterprises need private equity funding

Source: Asian Investor, 14 Oct 2014

Risa Partners Asia is interested in Japanese small and medium-sized enterprises to expand outside their home market for the first time, which is being supported by Japanese regional banks backed by Japanese electronics firm NEC Group, to develop a more diverse pool of capital and a broad network for Japanese SMEs to tap into Southeast Asia. Risa Partners Asia will be able to claim alliances with 170 Japanese regional banks, which will help it to introduce investee companies to Japanese SME partners as well as increase funding options.

Vietnam has so far accounted for 75% investments that Risa Partners Asia has made to date via the JPY 9 billion (USD 83.5 million) Japan Southeast Asia Growth Fund, which is launched last year in partnership with the Development Bank of Japan. The rest of the fund’s investment, which has long been a focus of investment in Asia by Japanese companies, is in Thailand. The GP plans to make deals of USD 5 to 10 million, which is in size with a focus on Singapore and Indonesia as well as Thailand and Vietnam.

Indonesia: CVC starts taking share orders for Link Net

Source: Wall Street Journal, 12 October 2014

CVC Capital Partners tapped investors keen to acquire shares in PT Link Net. This share sale could obtain around USD 650 million and be the largest one in the Indonesia this year. Sources familiar with the matter, stated that the CVC’s Link Net offering has attract the nine cornerstone investors, such as BlackRock Inc, Morgan Stanley, Goldman Sachs Group Inc, William Blair & Co, Columbia Wanger Asset Management LLC, and Neuberger Berman Group; these group of investors are likely to obtain about 40% stake. The sources also note that CVC plans to sell Link Net each share between IDR 6,200 and IDR 6,700 (USD 0.51 and USD 0.55). Last week, several key emerging economies, such as Indonesia, have noticed a drop in stocks.

In Indonesia the market has been affected further as concerns that the President-elect Joko Widodo could struggles to follow through with the anticipated economic restorations and infrastructure spending. In spite of the recent drop, the Jakarta Composite Index is one of the best performers in Asia – it surged 16% this year. As Link Net was listed in the Indonesian Stock Exchange earlier this year, 10% of the company was offered to investors. In the latest share sale, another 60% of the firm is expected be floated. CVC and Lippo Group held 49% and 51% stake, respectively, before it’s listing in June. It is unknown which shareholder sold the 10% stake previously. CVC has been considering to un-lock value in several of its investments and divest its shares.

Technology, Media & Telecommunications

South Korea: Analysts question Daum Kakao’s ability to grow overseas

Source: The Wall Street Journal, 1 October 2014

On October 1, Kakao Corp officially acquired Daum Communications Corp. Daum Kakao will become a key participant in the domestic technology sector particularly because of the large dominance of Kakao Talk (it’s installed on 93% of smartphones in the country). Once the company is listed in October, it will have a market capitalization of about USD 10 billion. However, analysts question the company’s ability to expand worldwide. Daum is practically unknown outside South Korea and Kakao has had difficulty to expand its user base beyond the domestic market in the past several months. BNP Paribas Analyst Justin Lee notes that for the messaging apps, capturing the market first is crucial. Daum Kakao will have to compete with WeChat and Line who already have dominance in the foreign markets.

Lee also is unsure of how much Kakao’s recently launched mobile payment service, Kakao Pay, will strengthen market expansion and growth in revenues. Choi Sae-hoon, co-chief executive at Daum Kakao and former CEO at Daum Communications, states, “Thus far, the company’s attempts at venturing overseas have been centered around Kakao Talk, but we’re looking for other ways in approaching this and looking to partner with others.” He didn’t disclose who these partners could be. Kakao Founder and Chairman Kim Beom-su will not hold a position in Daum Kakao or be involved in daily operations, however will continue to advise on important strategic decisions. Beom-su will hold 40% stake of this new company. A few months before the acquisition, Kakao was seeking to expand into Southeast Asian countries, including Indonesia, Philippines, and Malaysia, where it’s not yet a dominant mobile messaging app.

Japan: Line plans to offer a financial service by 2015

Source: Tech In Asia, 6 October 2014

By Spring 2015, Line plans to provide a personal finance tracking service in Japan. A Line user will receive notifications from the bank when money is deposited or withdrawn, if they add their bank’s official account to the friend list. In addition, individuals will be able to verify the current amount of cash in the account anytime. Line has chosen to rely on NTT for IT support as cyber security is of great concern nowadays.

Recently, Line has troubles with data security. If the company is able to gain its customer trust again, then the firm will favorably expand beyond messaging. Daisuke Sasaki, CEO at Freee, says, “When it comes to online banking platforms, NTT Data has huge market share in Japan. If NTT Data is serious about supporting more of this kind of integration, there will be a huge opportunity for the fintech industry in Japan…it could be the sunrise of a new fintech era here in Japan.”

Hong Kong: PCCW plans expansion in clouding computing

Source: South China Morning Post, 13 October 2014

PCCW Solutions has allocated large investments to become a cloud center for Asia. The corporation’s strategies include: establishing more high-performance data centers and promoting advanced cloud computing capacities to assist the demand of increasingly sophisticated online businesses in Hong Kong and also mainland China. George Fok Yiu-cheng, managing director at PCCW, notes that city’s government, extensive broad telecommunications and transport infrastructure, and labor force are strategic assets that differentiate it from other potential cloud hubs in Asia.

Fok Yiu-cheung, "We are advocating that Hong Kong develop into a cloud hub…this concept means that the city must not only have the necessary infrastructure like data centers, but also people with the right skill set to provide the managed services to support such applications as e-commerce payment gateway and internet banking. I believe Hong Kong has that skill set." According to Gartner, information technology services would reach USD 4.19 billion in Hong Kong by 2018, an increase from the forecast of USD 3.31 billion this year. PCCW Solutions will strengthen its activities in Mainland China, concentrating on financial services, telecommunications, and retail.