Asia News Update

China: Alibaba profits overtake eBay and Amazon ahead of IPO

Source: Bloomberg, 27 August 2014

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



China’s biggest e-commerce operator, Alibaba Group Holding Ltd., achieved an operating income of USD 1.1 billion in the 3-months ending June, which was 42% more than the total profit of eBay and Amazon. Net income nearly tripled to USD 1.99 billion, which was more than double compared to their competitors, when including one-time gains. Revenue also increased 46% to USD 2.54 billion. From the 2.34 billion shares, the stock-based compensation value of USD 59 per share indicates a market value of USD 138 billion. However, according to analysts’ estimates, the company may be valued at USD 187 billion after the IPO.

Alibaba pointed to the growth in mobile users as a key reason for their recent performance, with numbers increasing from 163 million in March to 188 million in June. Mobile transactions make up 32.8% of their total transactions, up from 27.4% in the previous months. Recently, the firm acquired UCWeb to include internet browsers and an app store for their mobile services. An investors meeting will be held in Singapore and Hong Kong first, before arriving to London and New York on 8 September, with trading expected to debut on 16 September.

Automotive

India: Toyota dealers most satisfying according to JD Power Asia Pacific study

Source: India Today, 28 August 2014

According to a study by JD Power Asia Pacific, Toyota dealers have been named most satisfying in India with 866 points out of a max 1000 points. Maruti Suzuki, Honda, and Hyundai came second, third and fourth, respectively. This is important because Indians are increasingly considering the reputation of the dealer as a factor when buying, with the study showing an 11% increase from 5 years ago. Also, customers who consider reputation, availability of model and hassle-free negotiation of the dealer, pay on average 4% more than those who choose a dealer for other reasons, such as location.

Other findings show that efficiency is increasing, with time needed to complete paperwork falling from 10 days to 9 days in 2014, and average delivery time falling from 12 days to 9 days in 2014. Average amount of discount has increased 12.4% y/y. Owners who have a sales satisfaction score of over 926 are 1.5 times more likely than those who have a score of below 815, to recommend their dealer to others. Only 15% of owners got their vehicles delivered with a special ceremony, or were asked for their feedback on their purchase experience.

Indonesia/Thailand: Indonesia to overtake Thailand as Southeast-Asia’s biggest car market

Source: Bloomberg, 26 August 2014

With better economic growth and political stability, Indonesia is expected to beat Thailand as the biggest car market in Southeast-Asia for the first time since 2011, with sales in Indonesia to amount to 1.2 millio in 2014, compared to 1 millio in Thailand. This coincides with an increase in vehicle sales of 6.6% in Indonesia for H1, compared to a 40% decrease in Thailand. The slump in Thailand is owed to the recent coup on May 22, which sent the economy close to recession. Whereas, in Indonesia, consumer confidence is at a 20-month high, as President Joko Widodo is expected to lay out economic growth policies.

The recent trends is also supported by other economic indicators. Although the average 2013 income in Indonesia was 30% below those in Thailand at USD 9559, Indonesia’s income growth from 2008 was 12 percentage points faster than in Thailand. Also, Indonesia’s economy grew by 5.17% in 2014 H1, compared to a 0.1% growth for Thailand. Furthermore, vehicle production output has increased by 15% in Indonesia in 2014 H1, compared to a 29% fall in Thailand, for the same period.  

China: Government considers RMB 100 billion injection to fund charging stations for e-vehicles

Source: South China Morning Post, 28 August 2014

With demand for e-vehicles limited by the lack of charging stations in China, the government is contemplating a RMB 100 billion investment to build charging stations and encourage growth in clean cars. This fund would lead to an increase in consumer confidence for e-vehicles and also help China, the world’s largest carbon emitter, to tackle pollution and develop an electric vehicle (EV) market, which already composes of BYD and Kandi Technologies. However, further details of the plan are yet to be disclosed, such as the duration of the plan, and whether or not the charging stations will be compatible with cars by US carmaker, Tesla Motors.

In the meantime, Beijing will be excluding new-energy vehicles (NEVs), such as electric cars, plug-in hybrids and fuel-cell vehicles, from a purchase tax, which will come into force next month. Beijing will also be forcing their departments to purchase NEVs as their official vehicle. Furthermore, the government is considering a draft initiative, which will allow non-carmakers to build EVs in an attempt to boost competition. This would allow firms, such as Wanxiang, the owner of Fisker Automotive, to manufacture electric vehicles.

Chemicals

India: Reliance Industries’s Hazira cracker unit to cease operation for four weeks to boost productivity


Source: Chemicals Technology, 28 August 2014


India’s Reliance Industries (RIL) is to temporarily shutdown operations at its Hazira cracker complex, near Surat in Gujarat, to allow for maintenance and turnaround activities. The Hazira cracker facility, which focuses on the production of polymers, polyesters, fibre intermediates and petrochemicals, will be offline for four weeks. The firm pointed out that with advanced planning and inventory management, they expect minimal impact on its external sales, and said that the decision will not affect other cracker operations in other locations.

Recently, RIL disclosed plans to import 1.5 millio tonnes of ethane per year from the US, to be used as a feedstock substitute for its cracker facilities. This move is expected to save the company about USD 450 million per year due to low US ethane prices and rising production. Furthermore, RIL has sealed storage and capacity deals with a US terminal for liquefaction and export of ethane and have ordered six ethane carriers from Samsung Heavy Industries, to transport liquefied ethane to India. RIL recently reported an annual profit of USD 5.7 billion with a turnover of USD 74.5 billion, for the year ended 31 March.


Malaysia: Toyo Engineering seals USD 2.3 billion contract to service Petronas steam cracker complex


Source: Chemicals Technology, 22 August 2014


Toyo Engineering has been granted a USD 2.32 billion contract from PRPC Refinery and Cracker, a subsidiary of Petronas, to service a planned steam cracker complex in Malaysia, which is expected to be built in the middle of 2019. The consortium comprising of Toyo-Japan and Toyo-Malaysia will be managing the project, and will be providing services for an ethylene production plant, pyrolysis gasoline plant, butadiene extraction plant, benzene separation plant, MTBE production plant, and utility and offsite facilities.

The refinery and petrochemicals project, called RAPID, will be in Pengerang in Johor, Malaysia, and will be the largest liquid-based green-field downstream in the country. The project will include a refinery with a capacity of 300,000 barrels per day, and a petrochemicals facility. With a combined annual capacity of 7.7 million tonnes from the project, the refinery will supply naphtha and liquid petroleum gas feedstock for the petrochemical complex, as well as, produce gasoline and diesel. The project will also produce various products, such as synthetic rubbers and high-grade polymers. It will form part of Petronas's USD 27 billion Pengerang Integrated Complex (PIC) development, which is designed to reinforce their position in the Asian chemicals market.

China: CB&I Technology wins Shenhua Ningxia Coal contract for petrochemicals complex


Source: Chemicals Technology, 27 August 2014


Chicago Bridge & Iron (CB&I) has won a contract from Shenhua Ningxia Coal Industry to provide licensing and engineering design services for its petrochemicals complex in Ningxia, China. The facility, which will supply 196,000 tonnes of polymer grade propylene and 20,000 tonnes of comonomer grade-1 butene, will be built in Lingwu, Yinchuan City, and will incorporate CB&I's olefins conversion technology (OCT), comonomer production technology (CPT) and CDHydro selective hydrogenation technology.

The CDHydro technology will enable Shenhua Ningxia to include different feeds from the adjoining steam cracker into the downstream OCT unit. In addition, CB&I's CDIsis technology will be used to convert isobutene into normal butenes, which will improve the availability of potential polymer grade propylene from the steam cracker C4s. According to the firm’s operating group president, the project demonstrates the firm’s ability to adapt their broad technology portfolio to different client needs. Prior to winning this contract, CB&I also secured a contract with Poland's Polski Koncern Naftowy (PKN) Orlen to license and design a metathesis plant for an on-purpose propylene production unit in Plock.

Construction & Property Development

Myanmar: Government investigates property sector over money laundering

Source: Radio Free Asia, 28 August 2014

The government of Myanmar are looking at possible money laundering within the real estate sector, amid an investigation involving the investments of a former prime minister’s grandson and a deal with a businessman who is financially blacklisted by the US. The move comes after concerns of a large inflow of “black money” in the property sector and an anti-money launder law in March, which required businesses to report transactions and properties worth more than around USD 100,000. Properties that violate the law could be confiscated by the courts.

The law, which relies mainly on self-reporting, is raising concerns that it is discouraging investment and business activity in the region. With the current regulations, the government is allowed to obtain a combined income and stamp tax of 35% on property transactions worth more than USD 300,000. Also, Myanmar is about to sign memoranda of understanding with Japan and the UK for information exchanges related to transnational money laundering, after already signing agreements with Bangladesh, Indonesia, Nepal, Russia, Sri Lanka, South Korea and Thailand.

South Korea: Taubman Asia increases stake in Hanam Union Square shopping center 

Source: NASDAQ, 27 August 2014

Taubman Asia, a subsidiary of Taubman Centers Inc., has allied with another Asian institution to purchase an additional 19% stake in the Hanam Union Square shopping center project in Hanam City, Gyeonggi, South Korea, raising its individual stake from 30% to 34.3%. The new alliance currently holds 49% of the project, and the move is expected to improve Taubman Asia's current relationship with Shinsegae Group. The project will have a gross leasable area of around 1.7m sq. ft. and will be conveniently accessible through the seven-lane Misari Expressway that is connected to the Greater Seoul freeway network. The centre is anticipated to open in late 2016.

Taubman is currently following a property restructuring strategy and investors believe that this deal will lead to the company's bottom-line strengthening in the future. Apart from the project in Hanam Union Square, Taubman Asia manages the operations of IFC Mall in Seoul, and has two project in Xi’an and Zhengzhou. Besides the recent investments, the firm is also shedding its non-core assets. For example, the company recently sold 7 US malls to Starwood Capital Group, in a transaction worth USD 1.4 billion.

Singapore: Sentosa Cove’s luxury house prices fall 20% over past year

Source: The Malaysia Insider, 29 August 2014

Sentosa Cove, the man-made island resort and the only place where foreigners can buy landed property, has seen house prices fall by about 20% in the past year. This comes after lending restrictions and taxes on foreign demand burst a bubble in the luxury real estate market. The slide could still continue with demand for houses still low even after the price drop, with only 12 apartments and one house being sold all year round.

Although this will adversely affect the city state’s banks with new mortgages up to 40% below 2013 levels, the policies seem to be having the desired effects, after private house prices increased by more than 60% between 2009 and 2013. Singapore's prime residential market, classed as the costliest 5% of properties, saw prices falling 7.3%. United Overseas Bank, Singapore's third-largest lender, last month reported that their bad debt charges doubled for the second quarter, stating that investors were finding it difficult to service the luxury property loans. The number of properties being put on the auction by banks after buyers defaulted on mortgages, quadrupled to 64 in H1/2014 from 16 in H2/2013.

Consumer & Retail

Australia: Gen2 Retail Evolution Lab unveils new integrated technology

Source: Mashable, 28 August 2014

The multimillion-dollar lab, the Gen2 Retail Evolution Lab by AOPEN, will permit clients and retailers to have a hands-on experience with new integrated technology. This technology will allow the client to obtain information and save time, while allowing retailers to engage with their clients in a different way. An example of this new method include a restaurant window that changes into a touchscreen – so that the client can order when the store is closed or before walking inside. Another example would be electronic labeling in supermarkets permitting retailers to display the ingredients and important nutrition facts.

Stephen Borg, CEO of AOPEN Australia and New Zealand, stated that this new technology would also allow wait staff in restaurants to concentrate on connecting with their customers instead of memorizing menu details. It could also be used in clothing retail – where customers will be able to utilize a 19 inch Tablet attached a mirror in fitting rooms to select different sizes or colors. In addition, windows in stores could change into large touchscreens with purchasing options linked up. Borg stated, that unlike the iPads, the newly designed interactive tablets are optimal for the commercial environment, allowing retailers to see them as positive complements to their businesses.

Japan: Production less than the forecast as spending declines in July

Source: Bloomberg, 29 August 2014


In Japan, industrial manufacturing increased less than the anticipated in July, household spending declined, and the inflation rate remained unchanged. According to the trade ministry, production rose by 0.2% from June – less than the expected for a 1.0% gain in a Bloomberg News survey. Not including fresh foods, consumer prices increased 3.3% y/y, the same rate as in June. The yen was slightly changed at 103.72 per dollar. In August, production will increase 1.3% percent m/m, while increase 3.5% in September. A separate data revealed that the unemployment rate was 3.8% and household spending decreased 5.9% y/y. The total inflation rate was 3.4%, while not including perishable food and energy the rate was 2.3%. The central bank announced that the consumer prices would rise about 1.25% for some time before hitting its 2% inflation goal.

Removing the effect of higher sales taxes, inflation was 1.3% in July, according to BOKJ’s projections. Private consumption, which consists of nearly 60% of the economy, dropped 5% in Q2/2014 from the previous three months – as consumers decreased spending after the 3% of sales taxes increased to 8% in April. By the end of 2014, Prime Minister Shinzo Abe will decide whether to increase the levy to 10% in October 2015. The economy declined 6.8% in Q2/2014, and is expected to increase by an annualized 2.7% in Q3/2014, according to a Bloomberg survey. Consumer spending power is lower as a result of inflation created by the BOJ and the sales levy. In July, disposable incomes adjusted for rising prices dropped 5.2% y/y.

Thailand: Less consumer spending, but upmarket brands not affected

Source: Warc, 28 August 2014


Consumer research business Kantar Worldpanel reported that high levels of household debt have lower consumer spending – especially rural Thailand and non-essential purchases. However, upmarket brands have not been affected. The research, which surveyed 4,000 households, revealed that on average the country’s 22.5 million households made 4.1 shopping trips per week – urban and rural consumers setting out 3.3 and 4.8 times, respectively. As the urban consumers used THB 132 per trip, rural consumers spent THB 66.

Howard Chang, Kantar general manager, mentioned that growth in the number of shopping trips had dropped from 7% to 3% in first seven months. Howard Chang reported household debt as a cause, in spite of the rural Thais have benefitted from the rice-pledging scheme. These people have cut down purchases of items such as hair conditioner, facial cleaner, mouthwash, laundry additives, and toilet paper. In addition, the research shows that they looked for more promotions and other channels. Howard added that cash coupons or infrastructure projects could be potential ways for the government to add money to the fiscal system.

Energy, Resources & Environment

China: Country cooperates with Turkmenistan to construct natural gas pipelines

Source: Global Post, 28 August 2014

Chinese Vice Premier Zhang stated that China is prepared to expand trade and economic cooperation with Turkmenistan. China, in collaboration with Turkmenistan, will continue developing the construction of natural gas pipelines linking both countries and enhancing safe transportation of energy. In addition, he proposed that both countries should create key projects of interconnectivity, infrastructure construction and cargo transit through China’s ports.

China has been collaborating with Turkmenistan to build China-central Asia natural gas pipelines extending on the land of Turkmenistan, Kazakhstan, Uzbekistan, and China. Line D, which is part of the projected pipelines, is anticipated to be launched by the end of 2014 and ready for gas transmission in 2016. By then, the combined gas transmission of lines A, B, C, and D is expected to reach the goal of 65 billion cubic meters per year. Recently, China and Turkmenistan agreed negotations valued more than USD 6 billion, including trade, loan to the construction of natural gas pieplines and treatment facilities.

Myanmar: US investors will finance two solar energy plants worth USD 480 million

Source: Bloomberg, 28 August 2014

Myanmar has agreed with ACO Investment Group to develop two solar energy plants. The 150-megawatss solar units, which are valued at USD 480 million, are anticipated to account for 10% of 12% of the country’s power generation. The facilities are scheduled for completion in 2016. This plan is the first solar energy development in the Mandalay region. As Myanmar depends greatly on hydropower, which declines in production during dry season, this new project will aid the country to supply stable energy.

US President Barack Obama is expanding US trade and investment ties with Asia-Pacific countries and is advocating the development of infrastructure necessary for the emerging nations to grow. In the next 10 years, Asia-Pacific is expected to be engine of global growth. These countries are expected to import round USD 10 trillion of goods and services by 2022, about 2.5 times today’s levels.

Australia: International scoreboard reveals poor energy efficiency in transport

Source: Eco-Business, 27 August 2014

A recent international scoreboard published by American Council for an Energy Efficient Economy reported that Australia has poor energy efficiency of its land transport compared to developed nations and key emerging economies. Which means that Australians are utilizing more energy to travel each kilometer. Nations could earn a 25 points for on land transport energy efficiency on eight various metrics. The land down under scored zero for fuel economy of passenger cars on performance and the setting of prospective requirements, and for having no fuel efficiency requirements for heavy trucks. For each of the four criteria, such as utilization of public transport and investment in rail transit versus roads, the nation scored only one point each. However, Australia got the full points for energy intensity of freight transport.  

The total cost of road vehicle activities, such as the fuel they utilize, purchasing and maintaining the cars, road works, road crashes and external costs is nearly AUD 173 billion each year (conservative estimate in 2013-2014 terms). The Bureau of Infrastructure Transport and Regional Economics report stated that the three levels of government and private sector are now allocating more than AUD 20 billion per year on road construction and maintenance. By constructing more freeways will lead to more traffic, and therefore increase road congestion with more liquid fuel utilization. Expansion of urban railways, the use more buses, cycling and/or walking, will be a more reasonable approach to cut liquid fuel use and emissions.

Financial Services

Singapore: Needs to keeps its financial reform moving

Source: Financial Times, 26 August 2014

In Singapore, foreign exchange trading has changed very much. There has been an impact in the electronic trading and the regulatory changes that have affected financial benchmarks. Singapore has not much to say about its role in the forex investigations, further that is stands ready to assist. Singapore has chosen a wait and see approach to how it carries out various global regulatory incentives, especially policies of the derivatives markets. When, it comes to financial benchmarks and foreign exchange, the country has encouraged laws that try to strengthen the transparency on how financial benchmarks are established and forex markets operate.

Last year, the UK’s Financial Conduct Authority requested banks to examine potential wrongdoing in forex and various other non-Libor benchmarks. As a result, Singapore banks dealt with early investigated of their conduct. A new set of rules for both markets were presented in June 2013 and banks have been rushing to adopt them even if they are not yet reforms. In addition, the nation has been attempting to fight money laundering and tax evasion. Even though financial services represent 12% of Singapore’s economy, it needs to do more than to demonstrate it is ahead in tackling illicit money flows from different sources.

South Korea: Financial Industry Union plans a general strike for September 3

Source: Business Korea, 28 August 2014

On August 26, 90% of nearly 86,000 members of the Korea Financial Industry Union voted to go on general strike on September 3rd. The union failed 18 times negotiating with employers requesting annulment of discrimination against non-regular employees, motherhood protection and gender equality, and retirement age extension. The union addressed ordinary salary concerns and a business culture that does not focus on performance.

In addition, it disagreed with the coalition between Korea Exchange Bank and Hana Bank, financial sanctions on KB, the government’s restructuring project for financial firms in the public sector, and the restructuring of overseas banks. Experts on the subject stated that the general strike is unavoidable due that those issues are connected. Deputy Prime Minister Choi Kyung-hwan and Minister of Employment and Labor Lee-Ki-know attempted to discourage the union on August 26, but were unsuccessful. Banking and public financial services will probably be affected by the strike as most of the members pertain to these industries.

China: HKEx requests time to implement levy rules on cross-border transactions

Source: Reuters, 29 August 2014

Hong Kong’s stock Exchange has requested Chinese authorities to give investors time to adjust to any tax regulations that could come into place shortly after the cross-border share trading scheme starts. They are also concerned that the Chinese regulators would exercise any levies retroactively. Currently, the Hong Kong Exchanges and Clearing Ltd are discussing the terms of the scheme, named Hong Kong Shanghai Connect, with the China Securities Regulatory Commission (CSRC), the mainland’s stock regulator.

The scheme, which is expected to start next month, will permit investors to trade Shanghai-listed shares through Hong Kong stock exchange and vice versa. China, unlike Hong Kong, holds a 10% capital gains levy on all stock purchases made on the mainland. However this levy has never been obtained on shared bought under a range of cross-border foreign investment programs, such as the Qualified Foreign Institutional Investor (QFII) and the Reminbi Qualified Foreign Institutional Investor (RQFII) schemes. The time asked by the HKEx would permit both regulators more time to impose a uniform tax rule for all trading schemes.

Logistics & Transportation

Singapore: Container Management System unveiled to provide real-time updates on container depots


Source: Channel NewsAsia, 26 August 2014


On August 26, the Container management system (CMS), powered by Containerchain Solutions and operated by CDAS Logistics Alliance, was launched to supply visibility and information of the container depot activity status. This allows transport operators to project their fleet deployment more efficiently. Time spent in queuing at the container depot will lower by 30% and shipment per day will rise by 20%. Considerable time saving will also be achieved as depot operators will be able to utilize the CMS to project in advance the release and return of containers.


Mr. Sharafdeen, president of the Container Depot Association in Singapore, stated that with the CMS manual data entry error could be dismissed and develop a more efficient stream of information. Senior Minister of State of Trade and Industry Lee Yi Shyan presented CMS at the Logistics and Transportation Conference 2014 in Resorts World Sentosa. Another recent industry plan that SPRING assisted is the Mobileye initiative lead by Singapore Transport Association, which applies the utilization of assistive driver technology in the trucking industry, whit a view to decrease accidents by 40%.


Indonesia: Kadin supports president-elect Jokowi’s sea highway initiative

Source: The Jakarta Post, 28 August 2014

In order to resolve Indonesia’s prominent logistic distribution congestion, The Indonesian Chamber of Commerce and Industry (Kadin) has called for the commitment of the president-elect to enhance the sea transportation. Natsir Mansyur, Kadin deputy chairman for regional empowerment, stated that the sea highway program presented by president elect Jokowi Widodo during his campaign was reasonable to help the economic growth in the eastern part of the nation. Nonetheless, he announced that the projects should be executed in line with the current government’s logistics plan for 2010 to 2025 that has elected Kuala Tanjing Port in North Sumatra and Bitung in North Sulawesi as the nation’s international hub port for eastern and western part of the country, respectively. In addition, he stated that the Pendulum Nusantara, Pelindo II’s program to connect six key ports, should also be contemplated.

The main goal of the sea highway initiative, intended to connect five key cities – Medan in North Sumatra, Jakarta, Surabaya in East Java, Makassar in South Sulawei and Sorong in West Papua – is the enhance connectivity in the country’s economic and to cut the high logistical cost that have affected the competiveness of domestic goods compared to imported products. Kokowi’s economic group has mentioned that within the upcoming five years, ten commercial seaports are planned to be constructed or restored. Senator reported that the nation’s current logistic cost was 26% of GDP, among the highest in Southeast Asia, and that the federal authorities project to cut it to 19% within the upcoming five years.

Thailand: Infrastructure projects to become AEC logistics hub

Source: The Nation, 29 August 2014

As Thailand will execute an eight-year, THB 2.4 billion, project to the create the nation’s transportation infrastructure, Director of the Rail Project Development Office Roengsak Tongsom believes country will become a main logistic center in the Asean Economic Community (AEC). The objective of the plan is to enhance the logistic system and join all transportation platforms - such as rail, air, road, and water - extending beyond the national borders, as various plan to connect with the neighboring countries’ transportation systems.

The first goal is to create a ten rail routes in Bangkok and its suburbs, valued THB 700 billion in total, in the next five years. This will change the overcrowded capital by developing the residential area beyond the core business districts and into the suburbs. The next project is to create the country’s wider transportation system and connect Thailand and neighboring nations by rail - especially by a double track system. Nearly THB 741.46 billion will be invested for the construction of railways utilizing a double-track system and it is scheduled for completion in 2021.

Manufacturing & Industrial

India: MAIT ICT SME Conclave 2014 created to assist SMEs who plan to set up production facilities

Source: IBN Live, 29 August 2014

The Indian government is supporting SMEs who want to develop manufacturing facilities. MAIT, the top body representing India’s IT hardware, training and R&D services industries, in collaboration with the Ministry of Communication & Information Technology and Ministry of MSME established “MAIT ICT SME Conclave 2014” in Noida to create awareness and inform SMEs about the different initiatives, regulations, and plans by the government. MAIT SME Conclave provides one stop for all MSMEs to connect with each other and different government bodies to express their main concerns related to the policy framework, funding, among others and to get a better insight of the different projects and opportunities that can be used for the benefit of the sector.

Rahul Gupta, Chairman and SME Chapter for MAIT, stated that in order to brand itself as a leading IT & manufacturing global center, the Indian government must develop an ecosystem across all sector verticals so that enterprises can build and increase the whole value chained needed for excellent results. He added that authorities need to restructure the taxation and incentives system, as well as reform the current regulations such as subsidized land, developing manufacturing corridors, providing subsidies to plant and machinery manufacturers. 

Thailand: Industrial output continues to decline in July

Source: The Wall Street Journal, 29 August 2014

According to government data released last week, Thailand’s industrial output dropped for the 16th consecutive month in July as a result of decrease auto manufacturing and slow export growth. The Manufacturing Production Index (MPI) dropped 5.2% y/y in July, compared with a revised 6.3% decrease in June. Moody’s analytics stated that political instability was the cause of the decline, while HSBC added that poor export growth and weak recovery in domestic demand.

Exports and imports dropped 0.85% and 2.86% y/y in July, respectively. The nation’s automotive output declined 24.89% y/y in July due to a decline in domestic demand after the end of the government’s first-car tax incentives last year. Furthermore, capacity utilization lightly lowered to 60.09% in July, compared with 60.58% the previous month. Nalin Chutchotiham, an economist at HSBC, believes that there could be negative impact on Thailand’s domestic demand, such as setback in business investment to extend current capacity and weaker consumption spending, if the export growth remains weak.

Singapore: Manufacturing production rose 3.3% y/y in July

Source: Channel NewsAsia, 26 August 2014

In July, the biomedical sector pushed the manufacturing production in Singapore to increase 3.3% y/y. Excluding the biomedical industry, the manufacturing output dropped 2.2% y/y. On a seasonally adjusted month-on-month basis, manufacturing production increased 2.7%, however decreased 0.8% when excluding the biomedical manufacturing. On year-on-year basis, the biomedical output manufacturing segment’s production rose 28.5% in July. Medical technology had a production growth of 30.8% as a result of strong export demand for medical tools and equipment. On the other hand, the pharmaceuticals segment rose 28% primarily because various mix of active pharmaceuticals ingredients are being produced. The chemicals segment production increased 9.2%, supported by the petrochemicals cluster which rose 12.1%, partially as a result to maintenance shut down in various plants last year.

The specialties segment rose 11.7%. The precision engineering sector’s production increased 4.4% y/y in July, propped up by the machinery and systems division which rose 10.9% with greater demand for semiconductor-related equipment and mechanical engineering work. The production for the electronic s segment dropped 2.9% y/y, while the other electronic modules and components cluster and computer peripherals cluster rose 20.2% and 1.4%, respectively. Nonetheless, production in the semiconductor sector declined 1.6%. In July, the general manufacturing industries segments production dropped 5.9%. The food, beverages and tobacco sector and the miscellaneous industry sector dropped 1.8% and 7.7%, respectively. The production for transport engineering segment dropped 9.9%, affected by the marine and offshore engineering sector that fell 9% and the aerospace sector that dropped 16.2%.

Pharmaceuticals & Healthcare

South Korea: More patents for medicine and medical supplies

Source: Business Korea, 29 August 2014


As the amount of patent applications for medicine and medical tools in dropping in countries such as the U.S. and Japan, it is rising in Korea. On August 28, there were 19,631 PCT applications in the health and medical sectors, according to the analysis of Patent Cooperation Treaty (PCT) international application trends in health and medical filed from the Korea Health Industry Development Institute. This comprises 10.3% of the total. The amount of international PCT applications filed in the country is rising every year. The amount of PCT applications in medicine and medical tools declined by 1.3% y/y to 7,711 cases in 2014.

In terms of occupancy, the medicine and medical tools have been in fifth place since 2009, yet slipped to seventh place in 2013. Last year, PCT applications of the top ten nations in medicine and medical tools accounted for 78.2% of the total – US. Japan, Germany, Korea, and China accounted with 40.2%, 7.6%, 5.8%, 5.6%, and 5.3%, respectively. Even though most nations reported less PCT applications per year, the number of applications and occupancy ration increased in Korea and China. When the total amount of patent applications dropped in 2013, Korea scored the highest growth of 2.5% out of the top 10 countries. Last year, the number or patent applications in medical technologies rose by 4.8% to 11,920, and the average annual growth rate remained at 3.3%.

Thailand: Bumrungrad seeks to expand overseas as domestic demand declines

Source: Reuters, 28 August 2014

As a result of the political unrest, Bumrungrad Hospital Pcl is considering opportunities to expand in Vietnam, Myanmar and China. The second largest hospital operator in Thailand, lower its 2014 revenue growth target ranging of 10 to 15 percent to 7 and 10 percent due to the domestic political crisis. The company’s foreign patients, who account nearly 60% of revenue, dropped 12% for outpatients and 8% for inpatients in H1/2014.

CEO Dennis Brown said that the corporation been interested in investing in China, however he was worried about the availability of doctors as many still work with public hospitals (to further expand the private hospital sector, China will permit overseas investors to completely own hospital in seven cities and provinces). Vietnam also has an issue with availability of doctors, while Myanmar needs to create the infrastructure.

Japan: Influenza drug Avigan could possibly reduce Ebola infection in affected patients

Source: Chemical & Engineering News, 28 August 2014

Japanese authorities introduced, however not yet approved, Avigan influenza drug as a treatment for Ebola. The drug, produced by Fuijifilm subsidiary Toyama Chemical, was certified as an influenza treatment at the beginning of 2014. The drug, a polymerase inhibitor, prevents viral gene replication within infected cells to avert the expansion to uninfected cells. Even though the drug has not been used on Ebola patients, a spoke woman of the company stated that that the corporation is aware that independent researchers disclosed that the drug reduced the Ebola infection in mice.

She added that the company has enough supplies of favipiravir for more than 20,0000 people and has created a system for steady production of the drug. Avigan could be a possible treatment for the disease. As one patient died after being treated with ZMapp, an antibody mixture created by Mapp Biopharmaceuticals, other drugs development include siRNA compound from Tekmira Pharmaceuticals and an antisense drug from Sarepta Therapeutics. Furthermore, this week the National Institute of Allergy & Infectious Disease will start human safety tests on a GlaxoSmithKline vaccine for advancement in Ebola treatment.

Private Equity

China: Carlyle interested in purchasing various commercial properties from China Vanke

Source: Reuters, 27 August 2014


Carlyle Group is negotiating with China Vanke Co Ltd to purchase several of Vanke’s commercial properties through assets or shares acquisitions. Vanke agreed on the matter after two sources reported that Carlyle was working a deal to acquire stakes in nine of the company’s shopping malls. One source stated that the transaction was valued between CNY 6 to7 billion (USD 976 million to 1.4 billion) while the other source reported that it could be valued up to CNY 10 billion. No further details were given on the agreement. Later this week, a non-binding memorandum of understanding could be signed.

The transaction would permit Carlyle to enter China’s real estate market where properties have returns of nearly 4.5-6%. Rental margins of commercial properties are nearly 60-80%, greater than the 40-50% of residential projects. Furthermore, Vanke could also benefit from the negotiation, as it could aid to rapidly generate returns, as there is a decline in the residential market and slow economy, constraints liquidity for developers in China. Another property developer, China Resources Land, also mentioned it was seeking into financial tools, including real estate investment trusts and property funds, to generate cash.

Indonesia: KKR hires three new executives for Southeast Asia

Source: The Wall Street Journal, 26 August 2014

To concentrate on negotiations in Indonesia and credit investments in Southeast Asia, Kohlberg Kravis Roberts & Co has hired three new executives. Jaka Prasetya is a new member in the corporation and will serve as a managing director to drive KKR’s Indonesia efforts, in addition to the company’s credit and special situation initiatives in Southeast Asia. Rahul Bhargava and Allan So, have also joined the firm as directors. The three new hires were previously part of Leafgreen Capital Partners.

After the first negotiation in Indonesia, the company appointed these executives, which will be based in Singapore. The announcement is the most recent evidence that global private equity firms’ rising appeal in Indonesia. Last year, Joseph Bae, Asia managing partner in KKR< stated that the company anticipated alternative credit, such as loans and mezzanine financing, to further develop as in the Asian operations over the coming year, in an attempt to fill gap in Asia’s underdeveloped debt market. KKR is projecting to offer loans, advances and various banking-like services to businesses in India, and provide direct lending and mezzanine debt across the region.

Australia: Pacific Equity Partners sold Veda’s stake making AUD 243 million profit

Source: Reuters, 28 August 2014

Pacific Equity Partners announced it sold its stake on Veda Group Ltd, generating AUD 243 million (USD 227.42 million) profit on share gains over eight months. As the company sold 33.33% of Veda in an IPO in December 2013, PEP stated that it would maintain the rest at least until the company announced it first annual results. Last week, the company reported that in year ended June 2013 and the actual annual net profit exceeded the forecast by 8%.

After this release, PEP told Veda that the company had offered 32% of share is a block trade to a confidential buyer, keeping the remaining 31%. Veda reported that PEP had sold the stake at AUD 2.15 per share, or AUD 580 million. Before the December listing, the stake was valued AUD 336.8 million (based on its issue price). Veda’s shares increased to 6.3% to close at AUD 2.20 on Wednesday, before PEP sold its stakes, which almost double their issue price of AUD 1.25. PEP is benefiting from the high share prices and robust global interest in Australian businesses.

Technology, Media & Telecommunications

Taiwan/Japan: ITRI and Komori Machinery present new touch panel technology

Source: The China Post, 27 August 2014


Taiwan’s Industrial Technology Research Institute (ITRI) together with Japanese printing company Komori Machinery Co. have developed a new touch panel technology that guarantees to cut the production cost of technology component by 30% compared with existing technology. The new conductive layer of touch panels is created of metal mesh, instead of most common material- indium tin oxide (ITO).

Liu Chun-ting, general director of the ITRI’s Electronics and Optoelectronics Research Laboratories, reported that the metal mesh, which is made up lines of minimum width of 0.0005 cm, is greatly transparent and responsive. Furthermore, the Komori’s printing technology will allow the printing to be done in one step. Lui stated, “this new technology can put Taiwan at least one year ahead of its competitors.” He added that this is a great opportunity to change ITO film technology, as the new metal mesh has low sheet resistance and it is less expensive to make.

India: Mozilla unveils USD 33 smartphone

Source: Bloomberg, 26 August 2014

To create market share for its open source software in India, Mozilla Corp. presented its first low-cost smartphone for USD 33 (INR 1,999). The device, named Cloud FX phone, will operate Mozilla’s Firefox operating system and provide games and other content through its applications store. Cloud FX phone has a RAM memory of 128 megabytes, a camera of two-megapixel, and a processor of one gigahertz.

In India, more people connect to the Internet through smartphones than computers. According to Brad Rees, CEO at the London-based marketing company Mediacells LTds, customers in India will purchase nearly 225 million smartphones in 2014. Intex Technologies produced the Cloud FX smartphone and expects to sell 500,000 Mozilla phones in the following three months. Furthermore, Mozilla will unveil a USD 38 phone this week manufactured by Spice Mobility Ltd. Other negotiations with Indian smartphone manufacturers will be a reported in the following weeks.

Singapore: Uber service could be established with no problems

Source: Tech in Asia, 27 August 2014

Even though Uber has problems to fully establish various Asian countries, such as the Philippines, Indonesia, South Korea, India, and Malaysia, the service has been accepted in Singapore and supposedly it is not intervening with the local taxi industry. A Land Transport Authority (LTA) spokesperson mentioned that they are analyzing the impact of third-party applications on the taxi sector and how it could benefit taxi drivers and users. Two conditions that LTA considers will protect the interest of domestic users are: taxis in the country are obligated to be insured and the conduct of the taxi drivers are also regulate under a framework that does not permit overcharging passengers.

However, the spokesperson stated that Uber vehicles don’t classify as taxis and are similar to car rental and limousine companies that offer its transportation services in Singapore. These services are not registered to individuals and not used for hire on any road or take passengers at taxi stands. As a result, Uber may not need to abide by any taxi policies in Singapore. However, if they are requested to do so, if Uber cars are insured and drivers comply with the policies under the TDVL framework, the service could be well established in Singapore.