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The Star Online: Business

China retailers ride on junket format
Corporates want more transparency and stability in banking sector
Malaysia's blue chips start May in the red

Posted: 01 May 2013 06:24 PM PDT

SHANGHAI: With flagging sales in their mainland stores and increasingly price savvy consumers, luxury companies are taking a leaf out of casinos' play books by offering junkets to wealthy Chinese clients eager to splurge in their Hong Kong stores.

For companies like PPR and LVMH, who have spent the past few years building stores across China, the shift toward overseas spending is forcing them to adapt their strategy in China to the tune of: if you can't beat them join them.

"Luxury companies' results for Q1 certainly suggest that sales to Chinese consumers outside of China continue to grow faster than sales to Chinese consumers within China," said Vincent Liu, managing director of Boston Consulting Group in Hong Kong.

He said about a third of luxury sales from handbags and shoes to cosmetics to Chinese take place in China versus a third in Hong Kong or Macau and a third in the rest of the world.

Luxury goods in mainland China can be anywhere between 30%-40% more expensive than in Hong Kong due to luxury and import taxes as well as pricing strategies.

"Their real stores are in Hong Kong or Paris. Their Chinese stores are just store fronts," said Renee Hartmann, co-founder of consultancy China Luxury Advisors.

Upmarket brands are increasingly holding private events in Beijing or Shanghai for an exclusive clientele events where they pay deposits on items in the mainland and then are flown on an all-inclusive trip to Hong Kong to complete the purchase.

This not only helps manage relationships with wealthy clients, it also functions as an expensive marketing scheme. Industry experts compare this to tactics used by gambling firms to lure high-rollers to casinos by flying them in using private jets and putting them up in five-star hotels.

"For their real VIP customers, they do whatever they think is necessary," said Torsten Stocker, head of Monitor Deloitte's China consumer section. "You see the same with high-end gambling where people get flown to the casinos in Macau or Singapore."

China's new leader Xi Jinping earlier this year announced a crackdown on corruption and urged the political elite to refrain from flashy displays of wealth. This has had a negative impact on the practice of "gifting" where executives or officials are given luxury items in return for favours. This shift is forcing luxury brands to re-evaluate the role of their China stores and overseas stores.

"They are thinking less about Where do I open my next few stores', How can I speed up my expansion' but more, What role do the stores in China play, what roles do the stores overseas play and how many stores in China do I really need?' That's a different way of thinking than maybe two to three years ago," Stocker said.

LVMH, the world's No.1 luxury goods group, said this month that demand in China in the past nine to 10 months had been flattish due to a weakening in economic growth and a government crackdown on gifts for favours. Price increases in Europe have made shopping in Paris and Milan less attractive for tourists from Asia, but it still remains a top desination for Chinese luxury spenders.

LVMH said earlier this year it had put the brakes on Louis Vuitton's global expansion.

The impact from the anti-corruption measures have also hit watchmakers and jewelers. They too are taking to the "junket" format as a way to facilitate the overseas spending. - Reuters

Corporates want more transparency and stability in banking sector

Posted: 01 May 2013 06:15 PM PDT

PETALING JAYA: Banks have been encouraged to up the ante in areas such as transparency, stability and financial performance, as corporate executives are increasingly becoming more interested in understanding banks' risk profiles as well as the stability of the banks that they work with.

As more Malaysian businesses expand beyond the border, corporates are beginning to question the stability and financial performance of their banking partners in keeping up with this growth.

According to a survey conducted by Ernst & Young (E&Y), the single largest disparity between client expectation and bank performance has to do with the lack of transparency on key risk parameters.

E&Y partner of financial services Chan Hooi Lam said the report offered relevant lessons to Malaysian and other Asian banks on how to improve their core offerings and relationship with corporate clients.

The survey, "Successful corporate banking: Focus on the fundamentals", measured responses from chief financial officers, treasurers and senior financial executives from 20 of the largest global corporations across nine industries and 11 countries.

Two-thirds of those surveyed thought that their banks' position and transparency on risk, liquidity and capital, and portfolio concentration weree important but only a quarter of those surveyed said their banks were willing to share this information.

More than half of the corporate executives indicated that while they were highly satisfied with the service their banks provided, they questioned their banks' ability to meet several key performance criteria.

The criteria and discussion of the survey focused on several key performance categories, which included service and products, cost, location, technology and innovation, and post-financial-crisis stability.

According to the survey, banks fell short of corporates' expectations on 11 out of the 16 criteria. The key areas were transparency, stability and financial performance, innovative services and products, service and product quality, ability to customise offerings, market coverage, and cost of services.

The after-effects of the global financial crisis and the ongoing challenges faced by the eurozone have forced corporations to focus on the stability of core banks, said E&Y lead global banking analyst Steven Lewis.

"Counter party risk and exposure from core banks have become heightened concerns for large corporates and as a result, we predict that banks will have to be more transparent about their risk profiles," he said.

Corporate banking clients also recommended that banks concentrate on the intangible aspects of relationship management.

"A key takeaway here is listening. If you truly understand a client's needs and wants, then you can more consistently deliver a high-quality product or service. It is important for banks to demonstrate commitment and attentiveness to its corporate clients. And this holds true throughout good and bad economic cycles," Chan added.

More than half of the respondents said that the greatest challenge in working with banks was the lack of consistency and quality of services across geographies.

The second and third challenges were outdated processes and systems, and bureaucracy and inflexibility.

"Corporates expect top-tier banks to come to the table with a certain depth and breadth of products and services. They look to the banks as thinking partners' who provide them relevant solutions they can implement across their businesses.

"The challenge for banks will be making sure their local teams are communicating, aligning compensation and rewards to extract the best work, and reducing personnel turnover to ensure consistency in capacity and service quality wherever they do business," Chan said.

Malaysia's blue chips start May in the red

Posted: 01 May 2013 06:15 PM PDT

Published: Thursday May 2, 2013 MYT 9:16:00 AM

KUALA LUMPUR: Malaysia's FBM KLCI, which rose to an all-time high of 1,717.65 on Tuesday, fell in early trade following the weaker regional markets and the overnight fall on Wall Street.

At 9am, the KLCI was down 2.64 points to 1,715.01. Turnover was 7.20 million shares valued at RM13.23mil. There were 43 gainers, 39 losers and 67 counters unchanged.

Hwang DBS Vickers Research (HDBSVR) said it the KLCI was expected to retreat from the resistance hurdle of 1,720 ahead.

It said key US indices fell 0.9% overnight. This followed the US Federal Open Market Committee meeting which revealed that the policymakers would continue their bond-buying programme with an option to either increase or decrease the amount depending on the economic condition.

At Bursa Malaysia, BAT fell 32 sen to RM63 in thin trade while Genting Bhd lost 12 sen to RM10.38 and HL Bank slipped six sen to RM14.40.

FGV, SapuraKencana Petroleum and CIMB fell four sen each to RM4.58, RM3.14 and RM7.70 respectively.

MAS was the most active with 1.29 million shares done, up one sen to 33 sen as it traded ex-rights. AirAsia added one sen to RM2.94.

Nestle rose the most, up 20 sen to RM62 while Maybank added three sen to RM9.65.

Kredit: www.thestar.com.my

Rabu, 1 Mei 2013