Strengthened against shocks

‘Individual economic sectors’ of the MSAR will need to be kept under ‘continuous close surveillance’ as well has having ‘enhanced prudence in supervisory management, in order to prevent unexpected economic turbulence,’ according to a report published by the Monetary Authority of Macau

The report comes at a time when the MSAR has recorded ‘economic recovery’, notably demonstrated through the return of year-on-year increases in gross gaming revenues, contributing to an overall increase in the city’s direct tax on gaming. Meanwhile, the city’s other sectors have seen a ‘reversal of external capital flows or large variations in foreign assets’.
During the first quarter of this year, the net outflow of foreign direct investment in the local real estate sector ‘persisted’, notes the authority.
The report finds that ‘the net amount of Macau properties disposed by non-residents totalled MOP5.4 billion in the first half-year of 2017, compared to a disposal of MOP2.2 billion in the same period last year’. In addition, ‘non-residents’ purchases from Macau residents were MOP1.2 billion, but their sales to Macau residents recorded a much larger amount of MOP6.2 billion in the first half of 2017’.

Trying to find a balance

‘The Macau economy is highly open, export-oriented and lacks an established capital market for domestic fund placements,’ notes the AMCM, pointing out that for local residents ‘investment in securities issued abroad and traded in overseas stock markets has inevitably become one of the major channels for applications of [their] surplus fund.’
However, there was a decrease registered between 2015 and 2016 as ‘decreases in external securities investment of the public sector, including the Macau SAR’s provisional portfolio,’ resulted in ‘the non-bank sector account[ing] for MOP7.3 billion of total portfolio investment outflows in 2016, whereas the banking sector represented the rest of MOP28.4 billion of total portfolio investment outflows’.
In the first half of 2017, the net foreign assets held in Macau’s banks rose by MOP32.7 billion, period-to-period. This was on the back of portfolio investment rising by MOP19.7 billion, and loans, currency and deposits increasing by MOP55.6 billion, ‘due to an increase of MOP9.3 billion in non-resident deposits as well as the notable expansion of MOP64.8 billion in non-resident loans in the local banking system,’ notes the report.
Regarding the MSAR’s non-banking sectors, ‘there was a net capital inflow of MOP13.9 billion from external banks,’ as compared to net capital inflow of MOP300 million in the first half of 2016.
In total, ‘As Macau’s private and public sectors have maintained sufficient positions of net foreign assets, the SAR will continue to be a net capital exporter to the rest of the world, which strengthens its ability to withstand external shocks under extreme risk events,’ states the authority.