Asia News Update

Asia: China launches Asian Infrastructure Investment Bank

Source: Reuters, 24 October 2014

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



On 24 October, China launched a USD 50 billion Asian Infrastructure Investment Bank (AIIB), however Australia, Indonesia, and South Korea delegates were not present. China, which has limited voting rights in the World Bank and Asian Development Bank, is very enthusiastic to extend its influence and soft power in the region through the AIIB. The US has previously mentioned it concerns about the AIIB as officials considers it as a challenge to the existing banks. Jen Psaki, US State Department spokeswoman, says, “We ‎welcome the idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency…we have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly."

However during the ceremony, Chinese President Xi Jinping stated the AIIB follows multilateral rules and procedures. Senior Chinese Banker Jin Liqun is expected to be head of the bank and operations are expected to commence at the beginning of next year. The MOU said allowed capital of the bank would be USD 100 billion. According to the Australian Financial Review, US Secretary Kerry had requested Australian Prime Minister Tony Abbott to not be part of the AIIB. On the other hand, South Korea, which is one of the White House’s strongest diplomatic allies in Asia, has not announced if it will formally join the bank. Japan was not anticipated to attend the ceremony, as it’s China’s main rival in Asia. Delegates from 21 nations, such as India, Thailand, and Malaysia were present at the event. China is set to hold up to 50% stake.

Automotive

India: Tata Motors raises USD 750 million by issuing bonds

Source: The Economic Times, 27 October 2014

Tata Motors has raised USD 750 million from Asian and European investors; this bond issue got six times over subscription at USD 4.5 billion. The firm has priced the 5.5-year bonds of USD 500 million with a 4.625% coupon rate, whereas the10-year bonds of USD 250 million with a 5.750% coupon rate per annum. Earlier this year, it had sold 5-year benchmark bonds totaling USD 300 million with 5.53% coupon rate.

Tata Motors has announced the proceeds from this issue will be utilized to refinance external commercial borrowing, capital expenditure, and for general corporate purposes. Standard & Poor’s rated these bonds as BB, while Moody’s rated these as Ba2. Despite the negative free cash flow overall, Moody’s projects a stable outlook for Tata Motors. The global rating agency added the current fiscal year is crucial as the company’s sales slows and execution risks rises in terms of increased product development expenditures and the launch of foreign manufacturing operations.

Thailand: Auto parts industry forecasted to grow by 10% next year

Source: Bangkok Post, 21 October 2014

According to the Thai Autoparts Manufacturers Association (Tampa), the auto parts sector is expected to grow by 10% in 2015 due to increasing overseas orders. The association predicts the combined sales value for domestic auto parts manufacturers will be THB 400-450 billion in 2014 and will reach THB 500 billion in 2015. Furthermore, the association predicts auto parts supply will be evenly divided between the domestic and foreign markets next year. Atchana Limpaitoon, president at Tampa, noted the depreciating baht against key currencies should assist domestic sales. The domestic car sector also expected to export a total of 2 million vehicles next year.

On another note, the new Switch-Asia program plans to improve the competitiveness of the domestic auto parts sector – which is one of the primary drivers in the local economy. This program, which is key to improve its cost efficiency in the industry, plans to advocate SMEs in Asia to adopt sustainable consumption and output concepts. From 2012 to 2015, the Switch-Asia program has a budget of EUR 200 million; nearly 300 local auto parts SMEs are members.  

Japan: Small auto companies continue to prosper

Source: The Economist, 25 October 2014

Mazda, Mitsubishi, Suzuki, Subaru, and Daihatsu are five smaller Japanese auto companies that continue to thrive with the three large firms – Toyota, Nissan, and Honda. These second-tier firms sell from 1 million to 2 million vehicles per annum and are determined to disprove the idea that global scale and large volumes are indispensable. After several years of losses, these carmakers are making decent profits. The biggest exporters among the five, Subaru and Mazda, currently have record sales in North America. Additionally, Subaru now outsells VW in North America as well. As there is currently a falling and greatly unprofitable home market, Daihatsu has relied on Toyota’s support to expand its business abroad.

Even though Japanese automakers are more profitable than numerous enterprises in the sector that may not last as a succession of lean years suggests smaller companies lack cash to invest in new technology. Nonetheless, the Japanese government has supported these companies. Authorities have granted longstanding tax breaks to Suzuki, Mitsubishi, and Daihatsu to manufacture kei cars. In Japan, these tiny cars account for nearly 40% of new-vehicle sales. The largest carmakers, however, have said manufacturing kei vehicles diverts attention and fund from the development of models that have potential to be exported.

Chemicals

Malaysia: Flour and Technip JV obtains EPCM contract from Petronas


Source: Chemicals-Technology, 24 October 2014

Flour Corp, a JV with Technip, received an engineering, procurement and construction management contract from Petronas Refinery and Petrochemical. The services will be for Petrona’s Refinery and Petrochemical Integrated Development (RAPID) project in Johor, Malaysia. This project is part of Petronas’ Pengerang Integrated Complex (PIC) development and will consist of 300,000 bpd refinery and petrochemical complex.

PIC includes RAPID and its affiliated facilities, such as the Pengerang co-generation plant, a liquefied-natural gas re-gasification terminal, an air separation unit, and the raw water supply project. The JV had also been previously awarded the program management consultancy contract for the RAPID project. The refinery is anticipated to begin operation by 2019. Lim Kwee Keong, president at Technip Asia Pacific, says, “With the RAPID UIO contract, we are proud to be able to support Petronas in an expanded presence to deliver this national project of strategic importance to Malaysia.”


Australia: Nuplex Industries sells distribution and plastic additives units to Axieo


Source: Chemicals-Technology, 23 October 2014


Axieo, a company owned by Champ Private Equity, has acquired two units from Nuplex Industries for AUD 127.5 million (USD 144.8 million). The acquisition comprises of Nuplex Specialties (Nuplex’s agency and distribution business) and Nuplex Masterbatch (Nuplex’s plastic additives business). The sale of Australia and New Zealand operations of the businesses is expected be finalized by the end of 2014, whereas the transaction pertaining to masterbatch operations in Vietnam is planned to be completed by H1/2015. With this sale, Nuplex plans to shift the focus to its global resins business.

Nuplex will utilize the sale proceeds to reduce its debt, seek growth opportunities, surge research and development spending, and determine a possible return of capital to shareholders. Peter Springford, chairman at Nuplex, says, “The board was not actively seeking to divest these businesses, however they have become increasingly non-core to the company’s strategy as the resins business has continued to grow. When the offer was received from Champ, we undertook a careful evaluation of the medium-term outlook for both businesses, and in the context of Nuplex’s strategy, we assessed the return they could deliver shareholders as part of our portfolio relative to the offer price.”

China: Henan Billions Chemicals commissions TiO2 plant in Henan Province


Source: Chemicals-Technology, 23 October 2014

Henan Billion Chemicals has commission a titanium dioxide (TiO2) manufacturing and research facility in Henan Province. The 366,000m² plant utilizes a chloride-based technology to produce 100,000t of TiO2 per year with room to extend its capabilities. The facility also includes an Enterprise technology center, which will ease development, testing, and qualification of next generation based TiO2.

PPG Industries has provided the output process since 2012. Charles Kahle, R&D chief technology officer and vice president at PPG Industries, says,” The pre-production batches at the facility have scaled up well and we are in the final stages of qualifying commercial quantities of product.” PPG projects to utilize TiO2 produced at the facility as a pigment in its paints and coating. In 2011, Henan Billions Chemicals, which produces TiO2 and zirconium, generated revenues of nearly 300 million.

Construction & Property Development

Asia: Commercial real estate investments expected to grow next year, says JLL


Source: The Jakarta Post, 24 October 2014

Jones Lang LaSalle (JLL) forecasts the transaction volumes in 2015 will surpass levels of 2014 as liquidity conditions progress with nearly USD 200 billion of capital available for investment in the Asia-Pacific real estate market. JLL reported as transaction volumes dropped by 5%y/y to 85.2 billion in Q1/2014 and rose by 1%y/y to USD 30.3 billion in Q3/2014. Throughout Q4/2014, year-end volumes are expected to reach USD 120 billion. Stuart Crow, head of Asia Pacific capital markets at JLL, says, “Private equity groups alone have over USD 30 billion in uncalled capital ready to be deployed across Asia Pacific so we expect these groups to be active as both buyer and sellers. REITs also continue to sit below their targets gearing levels, and teamed with fresh IPOs and POs, these listed groups will also be actively seeking assets.”

Investment activity in Indonesia has been slow as investors are skeptical about Joko Widodo’s ability to carry out reforms. Transaction volumes progressed in Thailand, whereas in Malaysia more large assets are entering the market and investment activity is forecasted to rise next year. During the Q3/2014, investment activity dropped by 21% y/y to USD 3.3 billion in Singapore - activity was supported by a USD 1 billion transaction; however, market transaction volumes will probably progress next year. In Australia, investment activity rose by 40% y/y to USD 6.9 billion during the quarter ending September – local groups, especially REITs and wholesale fund have been very active. On the other side, transaction volume dropped by 7% y/y to USD 8.1 billion in Japan during the quarter. In China, investment activity declined by 43% y/y to USD 4.0 billion, yet JLL forecasts that once the wider economy stabilizes, transaction volumes will progress at a rapid rate.

Japan: GIC acquires a USD 1.7 billion office block in Tokyo

Source: The Financial Times, 21 October 2014

Singapore’s sovereign wealth fund GIC has purchase a landmark office block in Tokyo from Secured Capital. The 32-storey tower office component of Pacific Century Place Marunouchi, valued at USD 1.7 billion, is located next to Tokyo’s main railway station. GIC has announced that the total rentable office space is 38,840m². Domestic real estate market has been recovering as a result of Prime Minister Shinzo Abe’s regulations to strengthen the economy.

Furthermore, enterprises are expanding office space as the weaker yen bolsters earnings. For nine consecutive months, office rents has risen in central Tokyo. According to Real Estate Broker Miki Shoji, the office vacancy rate also dropped to 5% last month – for the first time in around six years. CBRE analysts mentioned the GIC compromise indicates the potential for further growth in office rent. With greater competition in the Japan’s Capital, investors are seeking at other key locations in addition to different asset classes such as retail and residential properties.

India: Housing prices remained stable last month as supplies declined, says CBRE

Source: The Economic Times, 26 October 2014

According to CBRE, Indian housing prices continued to be largely stable last month across the nation’s seven key cities while supply dropped marginally. CBRE monitors the real estate activities of seven cities: Delhi-NCR, Mumbai, Chennai, Kolkata, Pune, Hyderabad, and Bangalore. The consultant group reported new projects will be introduced over the next several months as a result of festive season, the recovery in economic sentiment, and tax incentives implemented by the new government. Prices remained stable in nearly all locations, excluding central locations in Chennai, which saw a surge of 8-10% m/m. Furthermore, CBRE stated the home-buyer demand continues to be focused on mid-end and high-end projects.

As of the organized retail space, the rental values continued to be stable across key markets in top cities, barring Mumbai’s Linking Road, which saw a drop of 3-4% m/m. The office market progressed in Q3/2014 due to the completion of several transactions towards the consolidation and expansion requirements of key corporate holders. CBRE says, “ Leasing activity remained upbeat with Bangalore, Delhi National Capital Region (NCR), and Mumbai leading the absorption of office space.” In September, IT/ITeS continued to account for a considerable portion of the commercial office space absorbed. The group reported back-office operations were key drivers of office space demand, with nearly 90% of the leased space last month.

Consumer & Retail

Japan/UK: Rakuten sets up British online marketplace

Source: Financial Times, 23 October 2014

Rakuten has launched a British portal to help surge high-street shops. Founded by Japanese billionaire Hiroshi Mikitani, the firm charges a monthly fee a fix percentage of commission of sales, which depend on product categories and volumes. Rakuten Managing Director Mike Bishop announced the UK is the biggest ecommerce market in Europe. He added the company’s target customers are small enterprises who are in remote areas. Rakuten plans to establish a different marketplace, rather than solely getting to the lowest price.

Bishop anticipated the top-performing categories to be fashion, health and beauty, and groceries. The company has previously allocated billions to purchase tech firms such as Ebates and Viber to grow internationally and compete with Amazon, eBay, and Alibaba. However, Andy Wade, retail analyst at Numis, states, “As Amazon is so dominant, Rakuten may need to offer better products, better services or ease of use in order to really get traction in the third-party platform market. “ The company has annual revenues of USD 5 billion, yet the majority comes from businesses in Japan, as it has a low brand profile in foreign markets.

Vietnam: Vingroup, real estate giant, enters retail sector

Source: VietNamNet, 26 October 2014


Vingroup, a real estate firm, has entered into the retail market in Vietnam and will offer domestic retailers better opportunities in the local market - which is mainly controlled by foreign participants. Statista reported the country’s forecasted retail turnover is USD 80 billion in 2014 and USD 100 billion in 2016. Even though the company is inexperienced in the retail sector, Vingroup has strong financial capabilities. Previously, Vingroup had surprisingly acquired 50 million shares or 10% of Vinatexmart (a retail chain which has not been doing so well).

Most recently, the group purchased 70% of Ocean Retail’s shares and changed the name to VinMart. With VinMart and VInMart+. The real estate firm plans to establish a retail chain including 100 supermarkets and 1,000 convenience stores across the country in the following three years. Additionally, VinGroup manages VinEcom, an e-commerce brand, which is forecasted to strengthen the group’s position in the retail sector. In recent years, three domestic groups, Son Ha, Ocean Group, and Vinatex, have also joined the retail sector due to the positive outlook the industry has.

China: Retail sales rose by 11.6% y/y in September

Source: Shanghai Daily, 21 October 2014


According to the National Bureau of Statistics, the growth in China’s consumer spending continued to ease last month as the nation’s Q3/2014 growth was the weakest since the financial crisis. Domestic retail sales surged by 11.6% y/y last month, however the growth pace has dropped for four months in a row. China International Capital Corp says, “The main culprit for the lower nominal retail sales growth was the decline in inflation. Adjusted for inflation, real year-on-year retail sales growth edged up compared with August, suggesting consumption remained stable.” From January to September, retail sales increased 12% y/y to RMB 18.92 trillion (USD 3.08 trillion).

Furthermore, data shows sales in rural regions increased by 13% y/y to RMB 2.6 trillion, while sales in urban areas rose by 11.9% to RMB 16.31 trillion in the January-September period. Online retail sales also rose by 49.9% y/y to RMB 1.82 trillion. From during the same period, domestic per-capita average disposable income was up by 10.5% y/y (or a surge of 8.2% in real terms after deduction price factors) to RMB 14,986. During the Q3/2014, China’s GDP rose 7.3%, in comparison with 7.5% in the Q2/2014 and 7.4% in the Q1/2014. In the first nine months, consumption accounted for 48.5% of the domestic economic growth.

Energy, Resources & Environment

Asia: Oil buyers enjoy discounts and better deals


Source: The Wall Street Journal, 23 October 2014

Asian oil buyers have benefitted from a drop in prices and increase in supply. Over the past 4 months, the oil prices for deliveries in Asia has fallen nearly 25%. Other benefits buyers enjoy are cheaper costs of transportation, flexible payment terms, and less trading restrictions. Adi Imsirovic, general manager at Clearsource Commodity Services Ltd, has stated traders in Asia have become visibly more confident - they are becoming price makers instead of price takers. One key trend is that large oil suppliers, such as Saudi Arabia and other Middle Eastern nations, have reduced prices for Asian customers. Earlier this year, Sinopec signed a 10-year contract with Kuwait to almost double oil purchases to 300,000 bpd; Kuwait offered to pay for all the costs of transportation.

According to Gulf oil traders, national oil companies from Iran and Iraq have also provided better credit and payment terms to Asian customers; Indian buyers, for examples, are permitted to defer payments to 90 days, in comparison with the usual 30 days. Additionally, UAE has lifted the destination clauses from its sales compromises that prohibit its customers to resell cargoes. Oil producers in the Middle East are more interested in protecting their current market share in Asia than pricing out competitors. Saudi Arabia’s most recent price reductions were its largest in the last few years and were soon followed by Iran, Iraq, and Kuwait. Latin American and African oil producers are also taking measures. Libya and Angola, for instance, have also made price reductions as they lose their usual markets in the US and Europe, and are forced to strengthen their presence in Asia.

Japan: Government project to create national grid stumbles

Source: Reuters, 21 October 2014

People directly involved in the national project to establish a domestic grid company have stated the body will not have sufficient power to succeed. Prime Minister Shinzo Abe’s plan was to create a company that could pledge equal access to all players. The key remit of the grid company, which is anticipated commence operations in April 2015, has been limited to ensure reliability of supply in emergencies – this means the company will not be able to force Japan’s 10 regional monopolies to increase interconnections and develop a real national grid. Authorities have reported the reforms to cut the cost of electricity as much as possible is back on track. Japan is the only nation in the world with two electricity frequencies and utilizes transformers to change power between east and west.

According to a trade ministry official, currently only 1.2 GW can be transferred and the current project is to raise it solely by an extra 0.9 GW at a cost of JPY 190 billion (USD 1.7 billion). However a professor at the National Graduate Institute of Policy Studies says, “the organization does not have the full power to make and implement plans.” Furthermore, executives at firms looking to enter the sector have said grid limitations could limit the ability of independent power sellers to drop prices. These independent sellers have been restricted to 4% of the market. The last stage of the reforms is to divide generation and transmission units under holding enterprises yet utilities will not be obligated to shed operations under the latest projects.

China: Energetic reform needed as clean sources are energy are not being utilized

Source: The Economist, 25 October 2014

An energetic reform in China is becoming more necessary as the country struggles to meet its higher demand and as the polluted environment is becoming more of a problem. China, which wants to keep its industry running smoothly, is aware it must cut its dependence on coal and raise its usage of renewable energy. Yet, coal currently supplies about 80% of its energy. For the first time, renewable energy accounted for more than the share comprise of fossil fuels and nuclear last year, however that is not enough. Large SOEs, which run under a mix of rigid planning and concealment, have hampered the progress of renewable energy in the unreformed power sector.

Power suppliers have insufficient incentives to compete on price, effectiveness, and to rely on more green measures. Dispatch is one problem in the domestic system; Grid operators are presumed to yield priority to electricity supplied by more effective and eco-friendly producers, however in practice grid operators are more likely to assist coal-fired facilities to recover the cost of their investment. Nonetheless, if grid operators followed the rules, coal facilities could still easily conceal how much they waste. Currently most of the energy generated is wasted; Authorities had previously introduced pilot reforms to promote more efficient dispatch in five provinces, but officials have not achieved much. Officials should encourage the utilization of clean sources, harshly penalize producers and transmitters that generate dirty energy, and create more competition in management of the grid.

Financial Services

Philippines: Central bank establishes new minimum capital requirements for banks

Source: Reuters, 20 October 2014

The Philippine central bank announced a new minimum capital requirement for banks – a move analysts believe would stimulate industry consolidation. The central bank reported banks would have to comply within the next five years. Furthermore, Bangko Sentral ng Pilipinas (BSP) adjusted the standards governing credit-risk taking activities of banks to prevent credit-driven asset bubbles – the new standard yields “cash-flow analysis and ability to pay” a greater function in deciding a borrower’s creditworthiness. For commercial banks, minimum capital levels surged from PHP 2.4 billion (USD 53.5 million) to PHP 4 billion, PHP 10 billion, and PHP 15 billion, depending on the amount of branches they have.

On the other hand, the universal banks (which are similar to ordinary commercial banks but are permitted to do functions of investment houses, for example underwriting) minimum capital level rose from PHP 4.95 billion to PHP 6 billion, PHP 15 billion, and PHP 20 billion, also depending on the amount of branches they have. BSP says, “ Asset growth, increasing complexity, technological innovation, liberalization of foreign bank entry, the opening of rural banks to foreign investments, and the upcoming regional banking integration were considered in adjusting the minimum capitalization of banks.” Financial institutes such as Mitsubishi UFJ Financial Group, CIMB Group Holdings CIMB.KL, and private equity enterprises such as TPG have stated their interest in the country as a there’s a prospective law that could replace a 60% cap on foreign ownership.

Singapore: Banking and finance jobs advertised surged by 56% y/y in Q3/2014

Source: Channel NewsAsia, 24 October 2014

Robert Walters has recently published Asia Job Index Q3/2014 in which it reported accounting and finance job advertising in Singapore rose by 56% y/y for the quarter ended in September. Industry specialists stated the surge was as result of the rising number of new participants from the asset management and hedge fund segment. In addition, various large banks are consolidating their operations. Chris Mead, regional director at Hays, says, “in particular, we have seen an increase in the smaller firms and new entries into Singapore.

Over the last six to nine months, that has increased almost 30%.” There are currently 289 fund management firms in the nation, in comparison to the 158 enterprises from last year. Nonetheless, various large banks are consolidating and benefitting form the opportunity to make better use of their office space. Industry specialist noted rigid regulations and higher costs have led to downsizing, particularly among European banks. Yet the hiring environment is forecasted to grow in the following six months, especially for regulatory reporting, internal audit, and compliance and risk.

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

Malaysia: China South Locomotive to manufacture 30 LRVs to be used in Kuala Lumpur’s Ampang Line


Source: Want China Times. 22 October 2014


China South Locomotive and Rolling Stock Corp. (CSR) has reach an agreement with a Malaysian company to provide 30 light rail vehicles (LRVs) for the country’s Ampang Line – 9 of the 30 will be manufactured on Malaysia. The new LRVs will be three-car trains with a maximum speed of 80 km/h and will be utilized on the Ampang Line and Ampang Extension Line (these lines are light rail lines in the Kuala Lumpur).


This is the second Malaysian mass transit vehicle project awarded to CSR Zhuzhou Electric Locomotive (CSR ZELC). CSR ZELC has allocated MYR 400 million (USD 122.6 million) to construct a rail transit equipment manufacturing facility in Malaysia last year, which will supply rail transit vehicle welding, assembly, testing, overhaul, and refurbishment. The first stage of this construction will conclude by the end of this year, when it will be able to manufacture 150 new vehicles per annum and overhaul 100 vehicles per annum.


Japan: Officials to offer rail technology to overseas investors

Source: Channel NewsAsia, 23 October 2014

After many years of protecting its own rail technology, the Japanese government seeks to bring together potential investors from overseas. During Shinkansen’s 50th anniversary celebration held on 22 October, Japanese Prime Minister Shinzo Abe noted the country received international assistance to get the project running back in the 1960s. He added, “It’s our turn to return the favor with the knowledge we have on its technology and use that to contribute to advancing it in the world.”

Shinkansen has now maximum speed of 320 km/h, the network has expanded, and frequency rose against the nation’s series of natural disasters. Despite the fact it has never recorded an accident, the country has not been aggressively selling the system abroad, unlike Germany, France, and China. However, Japan now wants to expand its bullet train presence across the world, bringing a group of potential overseas buyers together for the first time. Australia, Singapore, Malaysia, India, and the US have previously announced an interest to establish high-speed rail projects.

China: Citic and Trafigura form a logistics JV

Source: Reuters, 23 October 2014

A Citic Securities Co Ltd subsidiary and Trafigura will form a joint venture to set up a warehouse and logistics unit in China. The new enterprise, which will be managed by Citic Global Trade and Impala Terminals, will first focus on creating warehousing, logistics, freight-forwarding, and terminal business in Shanghai. Later, the JV plans to expand across China and overseas. Trafigura has reported that the new company will work to “international standards of security and operating processes.”

The attention has shifted to the domestic warehousing network after an investigation into metal financing scandal at Qingdao Port earlier this year. Trafigura and Citic’s Australian trading subsidiary were affected by the fraud that produced a cumulative loss among banks and trading houses forecasted to reach USD 1 billion, and with the domestic media predicting local banks had exposure of over USD 2.5 billion. For that reason, banks have requested tighter security before extending credit, with a special requirement for logistics firms to own and operate their own warehouses, instead of depending on third-party operators.

Manufacturing & Industrial

Singapore: Manufacturing output decreases 1.2% in September due to drop in biomedical sectors

Source: Channel NewsAsia, 25 October 2014

The Economic Development Board (EDB) said on October 24 that manufacturing output in the Republic contracted 1.2% in September, dragged down by a sharp drop in biomedical manufacturing. Compared to last year, output increased 0.5% excluding biomedical manufacturing. Output of the biomedical-manufacturing cluster contracted 10.3% y/y in September. The medical technology segment has expanded 28.1% while the pharmaceuticals segment decreased by 18.3%.

The chemicals cluster’s output rose 4.1% y/y with the growth of 12.8% in petrochemicals segment. Output of the transport-engineering cluster increased 3.9% y/y in September, with 11.2% expansion in the marine and offshore engineering segment while the output of the aerospace segment fell 18.1%. The precision engineering cluster output has dropped down by 0.2% while the electronics cluster output has decreased 1.7% y/y in September. The general manufacturing industries cluster’s output has decreased by 1.9%.

Thailand: Industrial sector slows down since military coup ended

Source: Wall Street Journal, 22 October 2014

According to a monthly survey released by the Federation of Thai Industries on October 22, the Thai Industries Sentiment Index in September fell continuously in two months to 86.1 from 88.7 in August. After a military coup May 22, which brought a measure of stability months and ended months of street demonstrations and political uncertainty that had driven the economy to the brink of recession, the index had risen for three months.

From the federation’s perspective, the fall in sentiment is due to the weak domestic consumption as well as more intense competition and liquidity constraints, all of which reduce the manufacturers’ motivation to invest more. A separate report from the automotive industry, which was hit hard by the prolonged political turmoil and has yet to make a recovery, reflected the gloom outlook. FTI’s Automotive Industry Club reports that total vehicle production in September decreased 15.6% y/y to 164,299 units, while domestic sales also dropped 27.5% y/y to 68,843 units.

China/India: India offers all facilities for industrial investment from China

Source: The Economic Times, 26 October 2014

Federation of Indian Chambers of Commerce and Industry (FICCI) said that with the government providing most of the facilities sought by Chinese firms and lower level of labour costs, China should invest more in India, especially in industrial corridors, which are new growth centres. China has just decided to set up two industrial parks in Gujarat and Maharashtra with an investment of USD 20 billion, which is just a beginning.

The economy in India operates in an open transparent and democratic way and offers good platform for business to come and to gain from the investment. On the reforms being carried out by the government, the biggest reform at the moment is uniform Goods and Services Tax while the second biggest reform industry wanted is a docile tax regime. Foreign investment is only 5% while domestic investment is 95%, but at the same time the sign shows that outlook from the Indian companies as well as job creation is positive.

Pharmaceuticals & Healthcare

Philippines: Mobile healthcare mClinica gets funds from 500 Startups and others

Source: Tech in Asia, 22 October 2014


The mobile platform mClinica, which caters to the pharmaceutical industry, has announced that it got undisclosed funds from 500 Startups, IMJ Investment Partners of Japan, and Kickstart Ventures of the Philippines, which will fuel mClinica’s expansion in Southeast Asia. Through mClinica, drug companies can use mobile phones to reach pharmacies and provide programs to improve patients’ health while patients can avail of discounts on medicines from pharmacies using the company’s platform, which will boost store sales and brand awareness through promotions by allowing the pharmacies and the drug companies to supply them to the patients.

mClinica has a powerful database that pharmaceutical companies and their distributors, as well as pharmacies can access real time since information on patients’ diseases, medicine purchases, and dosages are logged into its platform. So far, mClinica has over 1,400 pharmacies on its platform and access to over 20 million customers and has planned to expand to Indonesia, Vietnam and Thailand in the coming year, which its funders are optimistic about.

South Korea: SAP targets on Korean healthcare market

Source: The Korea Times, 26 October 2014

SAP has planned to provide more health-oriented devices and services in Korea in cooperation with major Korean technology companies. Adaire Fox-Martin, president of SAP's Asia-Pacific Japan, said that SAP targeted healthcare with HANA, which combines database, data processing and application platform capabilities. The company has experienced double-digit growth in software y/y and triple-digit in cloud computing with the HANA platform. SAP's Korean business also enjoyed the same growth.

One reason of SAP’s boosting profits is the factor of Korean companies' growing collaboration on health-driven projects using SAP's cloud-based HANA analytic tool. SAP plans to start offering "pilot programs" of the Care Circles solutions, which help doctors among SAP's health-related services, to its top Korean clients including Seoul National University Hospital Bundang. SAP has agreed with the South Korean government to establish its first innovation center in Korea but the location of the centre has yet to be fixed.

India/Japan: Japan and India cooperates on novel and affordable medical devices

Source: Asian Scientist, 24 October 2014

All India Institute of Medical Sciences (AIIMS) in India and Osaka University from Japan will cooperate on developing affordable medical devices. Prime Minister Shinjo Abe of Japan and Prime Minister Narendra Modi of India have announced the initiative in a joint press release. Both AIIMS and Osaka University will seek to develop innovative and low-cost medical technologies, including surgical instruments, as the Memorandum of Understanding signed between the institutions. The collaboration will first focus on the development of equipment for minimal access surgery as well as other surgical fields in the future.

The new project is expected to help the country adopt new medical device technologies for manufacturing surgical instruments within India itself instead of importing from other countries as well as reducing healthcare costs. The project will enable the exchange of trained medical and research personnel between the two nations in the form of study trips. Doctors and scientists will aim to analyze current clinical needs and the best ways of collaborating to develop new medical technologies during the trips.

Private Equity

Asia: Private equity fundraising is on course for outstanding year

Source: Wall Street Journal, 21 October 2014


After general partners secured more than USD 15 billion in new capital in Q3/2014, Asian fundraising is on track for a stellar year. According to data from Dow Jones LP Source, Asian fund managers raised USD 15.31 billion in Q3/2014 predominantly in the buyout, growth, venture capital and secondary sectors, which is nearly double the USD 8.89 billion that is raised y/y. Private equity firms raised USD 13.87 billion up from USD 7.03 billion last July to September of that USD 15.31 billion.

Managers have raised USD 46.46 billion in total through the first nine months of 2014, which is equal to the amount raised for all of 2013. With cautious investors willing to plow large sums of capital into top-performing managers that have a history of distributions, Asia’s regional mega-funds have dominated fundraising. The Carlyle Group, which closed a USD 3.9 billion Asian buyout vehicle in September and is ahead of its USD 3.5 billion target, is involved in firms spearheading in Q3/2014 fundraising Morgan Stanley’s Asian private equity arm also raised USD 1.7 billion for a fourth fund to invest across the region in July 2014, which surpasses its USD 1.5 billion target.

India: Private-equity firms rally Indian market by unloading shares

Source: Wall Street Journal, 20 October 2014

The strength of the Indian stock market enables private-equity firms to cash in on their investments in Asia’s third-largest economy. The benchmark S&P Sensex index has increased 25% this year on hope the South Asian economy is rising up again. Private-equity firms, which have poured money into Indian companies for more than five years, plan to use the surge in hope and share prices to sell stakes in some of the companies. Dealogic data shows that firms backed by private equity have raised $1.24 billion through equity share sales since January, which has increased more than 55% y/y.

Digital movie distributor UFO Moviez India Ltd. is planning an IPO in the next few months. Coffee Day Group, which is private equity backed, also has share-sale plans. General Atlantic sold a stake in India’s IndusInd Bank Ltd. for USD 65 million in September 2014. Providence Equity Partners sold a 2.4% stake in Idea Cellular for USD 230 million in the same month. Private-equity firms, which poured billions into India in 2007 and 2008, were influenced by a slowdown in the Indian economy and a plunge in the value of the rupee against the dollar. The value of rupee in 2008 has decreased more than 50% y/y.

Indonesia: Sequoia Capital and SoftBank invest in Tokopedia Funding

Source: Wall Street Journal, 22 October 2014

Investors including Sequoia Capital and SoftBank have been committed for a USD 100 million fifth round of funding for PT Tokopedia. The deal is one of the biggest investments into an Indonesian startup and also the Sequoia’s first investment in Indonesia. Young population and rising Internet and mobile usage in Indonesia as well as considerably less competition among general partners vying for deals relative to other places in Asia that make the Southeast Asian country an attractive place for investors.

Backed by U.S. private equity investor TPG Capital, Northstar Group is one of the firms that allocate the bulk of its capital to Indonesia, which comes from pan-Asian or Southeast Asian funds and flows into Indonesian deals. Sequoia invested in Tokopedia from its USD 530 million fourth Indian fund. Other investors in Tokopedia include CyberAgent Ventures, East Ventures, PT Indonusa Dwitama and SB Pan Asia Fund. SB Pan Asia Fund participated in the latest round while SoftBankInternet and Media Inc. is leading the deal. The most recent investment is arranged near mid-December 2014.

Technology, Media & Telecommunications

South Korea: SK Telecom and Samsung cooperate on 5G network

Source: Light Reading, 20 October 2014


SK Telecom announced that the company and Samsung Electronics would work together to lead 5G network on October 20, 2014. The joint research on 5G network technology and service development is started according to the MOU signed by two companies. The companies has agreed to work together on sharing 5G vision with standardization groups and technology forums, defining and selecting frequency band suitable for implementation of 5G technology, conducting R&D and experiment on enabling technologies and developing services of 5G and IoT.

SK Telecom plans to define and develop detailed key performance indicators for the next generation network to lead 5G technological evolutions through the joint research. SK Telecom is planning to develop different immersive services available anytime and anywhere based on giga-bit level data rates to ensure a differentiated customer experience over 5G network, including AR (Augmented Reality)/ VR (Virtual Reality), tele-presence and realistic service. The company also plans to develop Advanced-IoT technology to enable hyper-connected service, which can connect all objects and humans for interaction without limitation of time and place.

Singapore: New cyber security centre set up to defend smart nation systems

Source: The Straits Times, 23 October 2014

The new CyberSecurity Research Centre will be lead by the Institute for Infocomm Research (I2R) and Singapore Technologies Electronics' subsidiary ST Electronics Info-Security and will study and develop capabilities in cyber forensics and mobile security to complement existing cyber security efforts. The Infocomm Development Authority (IDA) has announced plans to install up to 1,000 sensors across Singapore by the end of 2015, which can be in the form of computer chips or surveillance cameras.

The sensors will support various government projects including increasing surveillance in Little India and Geylang as well as better monitoring the risk of the Singapore River flooding as part of Singapore's Smart Nation Platform. Since the infrastructure will be shared by various agencies, the system is expected to lead to substantial savings. I2R has also announced plans of work with the Housing Board, Singapore Power and Narada to develop storage systems for renewable energy.

Japan: Tokyo future-tech expo displays advanced inventions

Source: The Japan Times, 25 October 2014

Digital Content Expo 2014, which displays technologies that engage multiple senses, such as virtual reality eyewear and wearable robotics, is held at the National Museum of Emerging Science and Innovation in Koto Ward. The exhibit includes a wearable device that takes photos at one’s happiest moments by analyzing one’s brainwaves as well as eyewear that allows people to virtually touch 3-D renderings of anime characters. Television companies and other media firms have realized that visual perception has its limits while high-tech industry relies too much on visuals.

During the exhibitions, university students played a significant role. The students from the University of Tokyo displayed an invention called AgIC Print, which allows people to design an electronic circuit board cheaply with a printer and without in-depth technical knowledge. A pen with ink containing nanoparticles of silver is involved in the applications of AgIC Print, which can be used to draw circuit boards by hand. At the same time, the students from the Tokyo Institute of Technology introduced an invention called AquaFall Display, which uses water and mist to create visual images.