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Number 355 Friday August 23, 2013
Editor-in-chief Tiago Azevedo
Tourist office kicked out – for more shops
April 19, 2013
he body promoting Macau’s tourism industry and produce to the world has to quit its display centre in a prime downtown spot – because the landlord wants to make more money from shops. Restaurant operator Future Bright Holdings Ltd – controlled by Chan
Chak Mo, a member of the Legislative Assembly – is increasing the annual rent on the historic building near the Ruins of St Paul’s by 248 percent. It will leap from HK$14 million (US$1.8 million) to HK$48 million. Macau Government Tourist Office told Business Daily by e-mail it was
“about to begin the related moving arrangement” for the ‘Made in Macau’ product centre – before the lease ends on December 31. “ Th e p rop ert y ow n er w an t s t o attract some international names in retailing..,” estate agent Centaline Macau told us. More on page 2
Trade surplus shrinks after investment
Brought to you by Zung Fu Motors (Macau) Limited
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Macau’s international trade surplus shrank by almost twothirds last year as the government’s fiscal reserve spent on assets abroad. The balance-of-payments surplus was 30.1 billion patacas (US$3.8 billion) last year, narrowing from 81.6 billion patacas in 2011, according to the Monetary Authority of Macau’s preliminary estimates. A 98.9 billion-patacas fiscal reserve was set up for the city in February. Page 3
And on your left – the lovely Barra Tourists are to be tempted away from Senado Square, the Ruins of St Paul’s and casinos – to Barra, Macau Tower and even the northern districts of Macau peninsula – under an ambitious government plan for new walking trails to ease crowding in popular areas. Separately, the Institute for Tourism Studies has asked the government to use the soon-to-be vacated Taipa campus of the University of Macau. Page 4
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‘Debtors blacklist’ takes down some info
Air quality falls to 3-year low – again
The brains behind the website naming and shaming Macau casino gamblers for alleged bad debts has taken down telephone numbers and addresses of those blacklisted. He has also removed details of the size of the alleged debt and ‘bounty’ information inviting viewers to shop them to creditors. Photographs and names of the ‘debtors’ remain online. Charlie Choi Kei Ian denied taking some personal information offline because of official pressure. Page 5
The outdoor roadside concentration of very fine polluting particles in Macau – the kind most damaging to human health – rocketed to 180 micrograms per cubic metre on Wednesday evening and peaked again at around 110 micrograms cu. m. at 11am yesterday. Wednesday’s peak was 7.2 times higher than the exposure level regarded as safe by the World Health Organization for any 24-hour period. Page 7
August 23, 2013
Future Bright is seeking to triple its income from letting a building in a prime tourist area (Photo: Manuel Cardoso)
Future Bright to drive govt away from prime spot The company will end the tourist office’s lease of a building near the Ruins of St Paul’s Tony Lai
estaurant operator Future Bright Holdings Ltd will not renew the Macau Government Tourist Office’s lease of a building near the Ruins of St Paul’s because the company wishes to triple the income it gets from
letting the premises. Future Bright’s interim earnings report, released this week, says the government’s lease of the six-storey commercial building will expire this year. The report says the company will
Scholar charged with fraud over gaming seminar A
professor at a Macau higher-education institution allegedly committed document forgery and fraud involving government subsidies, the Commission Against Corruption announced yesterday. The scholar is also the head of a research association that got subsidies from several public bodies – including Macau Foundation and the Social Affairs Bureau – to organise a gaming seminar in the second half of last year. The association managed to get sponsorship from five gaming operators worth 300,000 patacas (US$37,600), the graft watchdog said. The seminar got a combined backing of over 730,000 patacas, much more than the expenses of 470,000 patacas, the statement adds. But the association president “lied,” says the commission, by
claiming that the gaming operators had only backed the event with 60,000 patacas. That way he managed to avoid returning the difference, 240,000 patacas, to the government. The scholar kept the money to himself, the watchdog said. The case has been transferred to the Public Prosecutions Office, which will decide on whether or not to charge the researcher with fraud and document forgery. According to the Official Gazette, the only association that received money from Macau Foundation and Social Affairs Bureau to organise a gaming seminar in the second half of last year was the Asia Pacific Association for Gambling Studies. Business Daily makes no suggestion that this association or its directors are implicated in this case. V.Q.
then let the building to unidentified “outside parties”. Managing director Chan Chak Mo said his company had hired Hong Kong estate agents Centaline Property Agency Ltd and its Macau branch to scour the globe for new tenants. Asked why Future Bright was not renewing the tourist office’s lease, Mr Chan told Business Daily: “It is probably due to rental issues.” Mr Chan, who is a member of the Legislative Assembly, declined to say any more. The tourist office told Business Daily in an e-mailed reply that it is “about to begin the related moving arrangement” of the display centre for ‘made in Macau’ products located the building, before the lease ends on December 31. Centaline said in a press release that Future Bright was seeking a monthly rent of HK$170 (US$21.80) per square foot, or HK$4 million for the whole building, which has 21,968 square feet of floor space. That would mean an annual rent of HK$48 million. Future Bright’s interim report says the government now pays HK$14 million a year. Centaline Macau senior regional sales director Roy Ho told Business Daily: “The property owner wants to attract some international names in retailing as the new tenants, or names that could cater to tourists in that area.” Macau had over 14.1 million tourists in the first half of this year, 4.2 percent more than a year earlier, official data show. Mr Ho said the owner wished for a new lease lasting between
four and six years. “We hope to lease the whole building to one tenant, but it is acceptable to lease floors to different tenants separately,” he said. Future Bright’s interim report says the company may keep at least one floor for its own use as the flagship outlet for its souvenir food products. Mr Chan said: “It is a mere intention. We still have to see the offer by the new tenants.” His company aims to tap the market for souvenir food products, and will begin trial production runs this year. Mr Ho said the increase in the rent for the building simply reflected the market for commercial property. “There must be a price difference between the old lease and the new lease based on market conditions,” he said. “The price the owner is asking is actually not high compared with the prices in other central premises.” According to Centaline, an international retailer of cosmetics recently rented a shop with 1,800 square feet of floor space near Senado Square for HK$1.4 million a month, or HK$777 per square foot. Centaline did not identify the retailer. But Business Daily knows that the retailer is Sa Sa International Holdings Ltd. The premises the company is renting were previously occupied by a branch of the Starbucks chain of coffee shops. Mr Ho said shop rents were linked to the city’s economic growth. He believes rents will be steady in the near future because the economy is growing more slowly.
August 23, 2013 April 19, 2013
BoP surplus shrivels as reserve invests abroad But spending by visitors keeps the economy in the black Vítor Quintã
he surplus that Macau’s economy had in its dealings with the rest of the world shrank by almost two-thirds last year as the government’s fiscal reserve splurged on assets abroad. The balance-of-payments surplus was 30.1 billion patacas (US$3.8 billion) last year, narrowing from 81.6 billion patacas in 2011, according to the Monetary Authority of Macau’s preliminary estimates. The Monetary Authority said yesterday that the establishment in February of the fiscal reserve, with 98.9 billion patacas in it, had been the main cause of the contraction. The authority said there had been a reallocation of assets as the fiscal reserve was carved out of the foreign exchange reserves. It said the fiscal reserve had then invested its funds, so there had been a “rapid accumulation of foreign assets”. The fiscal reserve caused the net outflow in the financial account to surge to 106.8 billion patacas last year from 13.2 billion patacas in 2011. If it had not been for the fiscal reserve, Macau would have had a surplus in its financial account for the first time in four years. Macau received 33.1 billion
patacas more in foreign direct investment than it invested abroad itself last year, the difference having been 12.9 billion patacas in 2011. There was a net outflow of 3.9 billion patacas spent by Macau private investors on stocks and bonds abroad, the net outflow having been 15.1 billion patacas in 2011. The Monetary Authority figures do not indicate whether the net outflow dwindled because Macau investors spent less abroad or because outside investors spent more on Macau securities.
Large but invisible There was a net inflow of 487.7 million patacas invested in financial derivatives – bets on where underlying bonds or credit are going. It was the first net inflow for five years. The money that visitors spent in Macau last year, mainly in casinos, more than offset both the financial account net outflow and the trade deficit. The Monetary Authority said Macau had a large surplus in invisible trade due to strong exports of travel services, which increased the surplus in the services account by 17 percent to 275.3 billion patacas.
It said spending by visitors had combined with strong domestic demand to increase the value of
merchandise imports by 14 percent to 81.3 billion patacas. The value of merchandise exports rose by 24.1 percent to 11.1 billion patacas. Although exports grew faster than imports, the value of imports was so much greater that the merchandise trade deficit grew by 12.7 percent to 70.3 billion patacas. The outflow of income that outsiders got from direct investment and loans made in Macau increased by 10.6 percent to 44 billion patacas. As the number of migrant workers employed in Macau increased, the deficit in transfer payments – mostly remittances sent home by migrant workers – more than doubled to 9.1 billion patacas.
KEY POINTS Fiscal reserve invests in assets abroad Visitor spending fuels demand for imports Foreign direct investment increases Outside investors make more income
Mainland roaming charges reduced City’s telecom operators announce second tariff cut in six months Stephanie Lai
tarting today, the city’s three telecommunication operators are reducing roaming charges for voice calls and text messages between mainland China and Macau, the Bureau of Telecommunications Regulation announced yesterday. The lower tariffs will benefit Macau mobile service users visiting the mainland but also mainland Chinese users visiting the territory. Companhia de Telecomunicações de Macau SARL (CTM) is cutting the cost of voice calls and SMS tariffs by up to 32 percent and 57 percent respectively. Hutchison Telephone (Macau) Co Ltd, branded as ‘3’, also announced a decrease of up to 14.4 percent in its roaming voice-call tariff while the SMS cost reduction could reach 20 percent. Business Daily did not receive a detailed tariff adjustment from SmarTone Communications (Macau) Ltd before press time. But the telecom regulator noted that the roaming cost reduction
implemented by each company this time around would be no less than 13 percent. It is the second roaming tariff adjustment this year. The last one was in late February. At the time mobile service users were granted a reduction of between 11 percent and 24 percent. The bureau said in a press statement yesterday it would continue to push for further reduction of mainland-Macau roaming service charges in the future “in order to satisfy local consumers’ needs”. In an e-mailed reply to Business Daily, the bureau confirmed that no roaming charges are applied for services provided by Macau telecom operators in the Hengqin campus of University of Macau, as the campus site is under Macau’s jurisdiction. Private contracts – including for public utilities – made in the territory will be valid on the Hengqin Island campus as well, the government said in November.
Macau mobile service users will pay less money for roaming services
August 23, 2013
Tourist trails need time to make an impact: IFT head
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Tourism office to launch mobile app, videos to promote walking trails
Rising tide The majority of maritime routes to Macau involve Hong Kong. With the demise of the route to Tuen Mun, that involves sailing to the “traditional” piers, that is, Hong Kong Island, Kowloon and Hong Kong International Airport. Macau’s other maritime links are to the mainland: Shenzhen, Shekou and Wanchai. The proportion of trips to these three ports compared to all ports has increased by four percentage points between 2010 and the middle of this year.
In the same period, trips from Shekou to either the Outer Harbour Ferry Terminal or the Pac On Terminal in Taipa represented about 6.7 percent of all sailings to Macau. Considering Shekou is a terminal serving Shenzhen airport, the number of sailings are comparable to the number of connections with Hong Kong International Airport. Most of the sea traffic from the mainland takes place between the Inner Harbour and Wanchai. It is a short hop that operates in the morning and part of the afternoon. The route, and type of passenger onboard, is more typical of a border crossing by land rather than a sea connection. A few other routes were tried and abandoned in the past few years. The most obvious was to Tuen Mun, which operated for less than one year. Ferries did not operate on the route last year and the total number of trips did not reach 1,000 sailings.
t will take time for the four new walking routes proposed by the government to divert tourists from the city’s heartland to make a difference, said the president of the Institute for Tourism Studies (IFT), Fanny Vong Chuk Kwan, yesterday. But the new measure is a step in the “a right direction,” she added. The Macau Government Tourist Office said on Wednesday they would launch four new tourist trails covering the Macau peninsula before the mainland’s seven-day National Day vacation, starting on October 1. The trails stretch from the downtown to Barra, Macau Tower and even to the northern district. “Actually we had made such a suggestion to the government before (…) to promote more sightseeing routes to tourists, and divert them from the hot spots to the less visited places in which they may also feel interested,” said Ms Vong on the sidelines of the IFT orientation ceremony. She said the less visited places, like the northern district of Macau, may not necessarily be unappealing. “Through some of our previous studies, the tourists may be unaware of other places as they just heard of a few names,” she said. “But if we now strengthen the promotion of the
less visited spots, you can’t rule out the tourists being drawn into those.” “It takes time” to change the situation, she added. Maria Helena de Senna Fernandes, the tourism office director, said on the same occasion: “We will make some videos about these four routes to better promote the route, as well as to provide convenience for tourists.” She said they would also promote these routes for visiting delegations, as well as encourage tourism agencies to include them on their itineraries. Ms S en n a F er n a n d e s h o p e s to have more details available next month and to launch a promotional mobile application “as soon as possible”. Asked why the routes only focus on the Macau peninsula, the director replied: “We right now want to relieve the heavy [visitor] traffic in the central area of the peninsula. Our next step will be about Taipa (…) and Coloane.” She expects “a slight rise” in the number of visitors during the upcoming National Day holidays. Last year the city saw a 9-percent year-on-year increase in travellers to over 954,000 in the early October holidays.
Share of sailings to Macau originating in the mainland this year Less visited sights might be interesting nonetheless, says Fanny Vong
No news on Taipa campus bid The Institute for Tourism Studies has asked the government to use the Taipa campus of the University of Macau but received no reply so far, said the institute president, Fanny Vong Chuk Kwan yesterday. “But our application was more like introducing our situation to the relevant public bodies,” she stressed. The existing institute campus might be cramped but that will not impact its plan to recruit students, Ms Vong said. “We emphasise quality not quantity,” she said, adding the institute has 418 new students the coming academic year. The University of Macau will start relocating to its new campus on Hengqin Island next month and will only keep part of the Taipa campus. Secretary for Social Affairs and Culture Cheong U said in May they would only decide the usage of the Taipa site after the University of Macau is fully relocated. T.L.
August 23, 2013
‘Debtors blacklist’ boss takes down some site info But ‘Wonderful World’ still shows faces, names of alleged casino cheaters – and it works, says website executive Stephanie Lai
he brains behind the website naming and shaming Macau casino gamblers for alleged bad debts has taken down telephone numbers and addresses of those blacklisted. He has also removed details of the size of the alleged debt and ‘bounty’ information inviting viewers to shop them to creditors. Photographs and names of the ‘debtors’ remain online. Website operator Charlie Choi Kei Ian denied to Business Daily any suggestion he had taken some personal information offline because of pressure from the police. “The local police did not request us to take down the website so far,” said Mr Choi. “And we also do not know what they are investigating,” he added. But Judiciary Police spokesman Choi Iat Peng told Business Daily yesterday: “It appears that the website has violated the local privacy ordinances as it discloses some personal data like telephone numbers
Victor Cheung tops absent legislator list B
usinessman Victor Cheung Lup Kwan was again the most absent of all Legislative Assembly members in the year that ended on August 15, data from the Legislative Assembly show. The assembly’s activity report says Mr Cheung, an indirectly-elected legislator, only attended 28 out of 45 assembly sessions and 10 out of 59 committee meetings. He attended just 36.5 percent of all sessions and meetings, according to Business Daily calculations, down from 45.9 percent in the previous term. Mr Cheung was also one of two legislators that made no intervention
and names.” He stated the force is “still investigating” whether the blacklist breached Macau’s criminal laws. “This is the first time that we encountered a case like this,” he added. The dual-language ChineseEnglish website known in English as ‘Wonderful World’ has been featuring a blacklist with about 70 people for about two months. The website operator said he “was not concerned with any legal risks,” namely the possible violation of privacy laws. “I do not think there are any [legal] risks for the blacklist. What are these risks exactly?” Mr Choi said over the phone.
‘It works’ The ‘Wonderful World’ website is hosted by a Singapore server says the Judiciary Police. The force told Business Daily it “cannot disclose”
during an assembly session. The other was assembly president Lau Cheok Va. Lawyer Leonel Alves, another indirectly-elected legislator, made no inquiries to the government but he attended twice as many sessions and committee meeting as Mr Cheung. The overall attendance rate of the 29 legislators was 93.8 percent for the assembly sessions and 86.8 percent for committee meetings, similar to the previous legislative year. The assembly members made in total 216 inquiries and 504 oral and written questions to the government, slightly down from the 2011/2012 term. In the past four years, the assembly approved 57 bills. The government withdrew two laws on the city’s tax regime and renewal of the old neighbourhoods. Keeping the assembly open during the January-July period this year cost 63.3 million patacas (US$7.9 million), a year-on-year rise of 13.1 percent. T.L.
what action if any, it may request from the Singapore authorities. “A majority of the gambling debts of these debtors were made in Macau,” the website boss Mr Choi told us. “But in many cases both the debtors and the creditors are not from Macau.” The debtors’ information is “wholly provided” by the gambling creditors, added Mr Choi. He could not confirm if the debtors had been gambling in VIP rooms or on mass gaming floors, or what form of credit the debtors had obtained. On Tuesday, an advertisement on the Chinese version of the website said the blacklist was the “best publicity platform” to “help chase debts for the gaming sector” and “exercises a deterrent effect on cheaters”. The notice has since been changed.
It now says that “Wonderful World is not a debt-collecting company, (…) [it] just provides a platform free-of-conditions for people bullied by cheaters”. “We will contact the Judiciary Police to see what we should do to follow up on the investigation,” said Mr Choi. “We are willing to face any [legal] consequences that come after the investigation.” “We do not receive any service charge or commission from the creditors for posting the profiles,” said Mr Choi. About HK$30 million (US$3.8 million) in gambling debt incurred in Macau has been “successfully collected” by the creditors after posting the debtors’ information on the blacklist, he stressed. “The open disclosure did work in recovering debts” from about 10 gambling cases, said Mr Choi.
August 23, 2013 April 19, 2013
Macau Brought to you by
Financial Monitor Credit boost Loans issued by the banks have more than doubled from about 92 billion patacas (US$11.5 billion) in 2008 to almost 200 billion patacas last year. A significant proportion of loans were directed to three industry sectors that, together with gambling, have been driving growth since the casino monopoly ended – hotels and restaurants, commerce and construction. Combined, they have absorbed about 30 percent of loans in the past five years. Including loans for housing, that share increases to about twothirds of all loans issued.
Canada orders alleged triad boss deported Lai Tong Sang’s lawyer hinted at a Federal Court appeal
he alleged boss of Macau’s Shui Fong triad has been ordered deported from Canada, it was announced on Wednesday. Canada’s Immigration and Refugee Board ruled last week that Lai Tong Sang should never have been allowed into the country nearly 17 years ago and ordered his removal, citing his ties to organised crime. The order was only publicised now. Mr Lai’s lawyer Peter Chapman told local media, however, that the decision will be appealed. Mr Chapman declined to answer questions on his client’s whereabouts. Mr Lai has been sighted in Macau. The board in its ruling said that Canadian officials had failed properly to check his background when
admitting Mr Lai into the country, and said it found compelling evidence of his crime links and involvement in a 1990s deadly turf war between Shui Fong, also known as Wo On Lok, and rival 14K triad. A year after arriving in Vancouver in westernmost Canada in October 1996, Mr Lai’s home was peppered with bullets in a drive-by shooting, which Canadian police wiretaps showed was ordered by a 14K leader. Police gave evidence at Mr Lai’s immigration hearing in February that a HK$1 million (US$132,000) contract had been taken out on his life. All the while, the board heard, Mr Lai refused to cooperate with Canadian police, fearing it would expose his criminal gang ties.
Mr Lai was also taped receiving briefings from overseas lieutenants “about the progress of the gang war” for control of Macau’s casino industry before the 1999 handover. Mr Lai in his defence chalked it all up to hearsay. He participated in his February admissibility hearing by telephone from Macau. A spokeswoman for the Canada Border Services Agency confirmed to media there that a deportation order has been issued and that individuals removed under such orders are permanently barred from returning to Canada. The Immigration and Refugee Board ruled that the rest of Mr Lai’s family is permitted to stay in Vancouver. T.A. with AFP
Century Legend profit slides First half fall despite 10-pct rise in revenue
Most loans have gone towards commerce and housing. Credit issued to these activities has tripled in the past five years. In relative terms, loans for commerce grew the quickest, from about 6.5 billion patacas in 2008 to more than 20 billion patacas last year. Home loans grew the most in absolute terms, from less than 26 billion patacas to more than 83 billion patacas during the period of this analysis. In the first third of the year, loans for housing represented about 38 percent of all credit issued. And since 2009, loans for housing have exceeded credit for the three other activities listed earlier. Manufacturing is an interesting case study. This activity’s demise is reflected in the loans it receives. Although still significant –loans amounted to almost 7.7 billion patacas in March – the share is declining. Expressed as a percentage of all loans, its share has halved in the past five years from 6.4 percent to 3.2 percent. J.I.D. The content of this column is the work of Business Daily’s journalists.
MOP 83.2 bln
Value of housing loans issued between January and the end of March
The downtown Holiday Inn, Macau – former Century Legend interest
entury Legend (Holdings) Ltd, an investor in Macau and Hong Kong property and the operator – via an indirect subsidiary – of a licensed loans business in Hong Kong, saw a 16 percent slide in profit in the first half of 2013 despite a year-on-year rise in revenue. Group profit was just over HK$10.97 million (US$1.41 million) in the first six months, compared to HK$13.04 million a year earlier. That was despite a near-10 percent rise in revenue to HK$15.43 million to June 30, compared to HK$14.04 million in
the same period a year earlier. The main factors contributing to the downturn in performance were a HK$2.20 million loss on revaluation of available-for-sale financial assets, and a tax bill of HK$564 million – two-and-a-half times higher than for the prior 2012 period. Diluted earnings per share attributable to the owners of the company amounted to 3.10 HK cents compared to 3.73 HK cents in the first half 2012. In January 2008, Century Legend disposed of a 25 percent interest in
Holiday Inn, Macau, a 28-storey hotel property in Rua de Pequim in downtown Macau. Part of the property is leased to Macau casino concessionaire Sociedade de Jogos de Macau, SA, for operation of the Macau Diamond Casino. At that time Longnex Ltd, a Hong Kong-registered company, was responsible for the hotel’s operation. Longnex was entitled to receive from SJM a percentage of revenue generated from the mass gaming facilities and a fixed rent from the VIP rooms. M.G.
August 23, 2013 April 19, 2013
Thermal haze Air quality plummets to three-year low for second time in 2013 Michael Grimes
he outdoor roadside concentration of very fine polluting particles in Macau – the kind most damaging to human health – rocketed to 180 micrograms per cubic metre on Wednesday evening and peaked again at around 110 micrograms cu. m. at 11am yesterday. Wednesday’s peak was 7.2 times higher than the exposure level regarded as safe by the World Health Organization for any 24hour period. The recommended maximum annual mean exposure to the fine particles – known as PM2.5 – is 10 micrograms cu. m. “Current conditions are linked to wind moving air from the north to the south,” Sandra Choi Man Cheng, a forecaster at the Meteorological and Geophysical Bureau told Business Daily, indicating most of the pollution was coming from mainland China. The Macau numbers are based on samples taken by measuring devices around the city managed by the bureau. Ms Choi said people with cardiac or respiratory diseases are advised to reduce physical exercise and outdoor activities. That advice applies during
periods where the city’s Air Quality Index – a general record of pollutant concentrations above a baseline of 100 – rises to between 101 and 200. The roadside AQI yesterday peaked at 155, defined by the bureau as ‘bad’. Levels in ‘high density residential areas’ – i.e., most of Macau – hit 150, while ambient air quality topped out at 140. Wednesday’s PM2.5 peak matched the levels seen in mid-April. At that time Macau’s AQI was the worst it had been since March 2010, when the index reached 329 in the north of the city, a level classified as “severe”, when even healthy people feel discomfort.
Tiny, deadly PM2.5 refers to particulate matter of 2.5 micrometres in size or smaller. That’s about 25 times smaller than a human hair. The particles are toxic organic compounds and so-called heavy metals including mercury, cadmium, lead and chromium that are harmful to human health. Vehicle emissions, burning plants and smelting and processing metals
Wish you weren’t here – the sight greeting Macau visitors today
typically create them, says WHO. Such materials are different from the coarser PM10 particles normally associated with smoke from factories and power stations. WHO adds that PM2.5 are more dangerous than larger particles because “when inhaled, they may reach the peripheral regions of the bronchioles, and interfere with gas exchange inside the lungs”. Neighbouring Hong Kong’s air pollution index reached “very high” yesterday measuring 168 at roadside monitoring stations in the Central business district as of 11am.
“The polluters are the trucks and the buses,” said Jens-Erik Olsen, chairman of the European Chamber of Commerce in Hong Kong. “We have asked the government to take immediate action on roadside pollution in Hong Kong for years. It is a disgrace,” he added. In February 2012 China’s governing State Council – alarmed by soaring air pollution in urban areas – passed revised air quality standards which include indices for PM2.5 and ozone over a period of eight hours. With Bloomberg News
August 23, 2013 April 19, 2013
China PMI hints at more stable econ HSBC manufacturing gauge hits four-month high
Chinese manufacturing index unexpectedly expanded in August from an 11-month low, adding to signs the world’s second-biggest economy is strengthening after a two-quarter slowdown. The preliminary reading of 50.1 for a Purchasing Managers’ Index released yesterday by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July. The number exceeded all 16 estimates in a Bloomberg News survey and was the first reading since April above the 50 mark that divides contraction from expansion. A sub-index measuring new orders rose to a four-month high of 50.5 in August from 46.6 in July. But the sub-index on new export orders edged lower in a reminder of weak global demand. Domestic demand fuelled the gain after Premier Li Keqiang rolled out measures to support growth, including tax breaks for small businesses and an increase in railway investment. An index of export orders slid at a faster pace, indicating limits on the boost that China can expect from overseas orders as the U.S. Federal Reserve considers winding back stimulus. “Domestic demand is strong enough to support 7.5 percent growth in 2013,” said Ken Peng, senior economist at BNP Paribas SA in Beijing. “Almost all of China’s economic data since July has shown improvements and suggests a rebound is underway.”
Missed target Mr Li has unveiled measures to support growth after a two-quarter
The government has announced targeted measures to support the economy
slowdown. China will reach the government’s 7.5 percent growth target this year and maintain that pace in 2014, a Bloomberg News survey of economists indicates. HSBC’s PMI “confirms that the economy has stabilised in the short term and downside risks for the second half have declined,” said Zhang Zhiwei, chief China economist for Nomura Holdings Inc in Hong Kong. Mr Zhang sees “upside risks” to his forecast of 7.4 percent growth this quarter. The report adds to better-thanestimated gains in industrial output and imports in July, which improved
the nation’s outlook even as Mr Li grapples with containing financial risks after a credit boom. The State Council last month ordered the first nationwide audit of government debt in two years. HSBC’s survey, known as the Flash PMI is based on about 85 percent to 90 percent of responses to surveys sent to more than 420 manufacturers. The final reading is due September 2.
Official survey The National Bureau of Statistics and China Federation of Logistics
and Purchasing will release their own survey of purchasing managers on September 1. The gauge’s July reading unexpectedly strengthened to 50.3 from 50.1 the previous month. The biggest contribution to the gain in yesterday’s PMI reading was from production and new orders, said Yao Wei, China economist at Societe Generale SA in Hong Kong. “Domestic demand is being driven by recovery in the property sector” while government support for infrastructure will start to show an effect in the next two months, she said. “The problem is whether such
Bo took US$3.6 mln in bribes: prosecutor Former senior Chinese official denies bribery, corruption charges
ormer Politburo member Bo Xilai took bribes worth 21.8 million yuan (US$3.6 million), some via his wife and son Bo Guagua, according to charges read out in court in China’s most politically charged case in three decades. Mr Bo, who is charged with bribery, abuse of power and embezzlement, also oversaw the transfer of 5 million yuan for family expenses from 2002 to 2005, according to the indictment, released on the Weibo microblog account of the Jinan Intermediate People’s Court where the trial got under way yesterday. The bribery claims were the first in a list of allegations against Mr Bo, a former commerce minister and Chongqing party secretary, whose trial has followed a pattern in which Chinese political defendants are turned over to the courts only after they’re purged by party leaders. With a guilty verdict not in doubt, Mr Bo awaits news of the severity of his punishment, said Randy Peerenboom, a law professor at La
Trobe University in Melbourne. “There’s definitely been some kind of agreement between all the parties concerned about what is supposed to happen,” Mr Peerenboom said by phone. “Guilt is a foregone conclusion and the sentence is most likely already agreed. The only real question is whether Bo Xilai is prepared to go along with the script.” In a sign that may not happen, Bo denied taking a 1.1 million yuan bribe from Dalian businessman Tang Xiaolin, according to a transcript released on the court’s microblog account.
Fair verdict “I hope the judge will deliver a reasonable and fair verdict based on Chinese law,” Mr Bo said earlier, according to the court. Mr Bo’s trial, closed to foreign media, drew a heavy police presence. Officials released two pictures from inside the court that showed Mr Bo, dressed in a white shirt and dark
Bo Xilai stands trial inside the Jinan Intermediate People’s Court
pants, his hair cut short, between two policemen wearing light-blue shirts and white gloves. “Bo Xilai’s mood was stable and his health was normal during the hearing,” court spokesman Liu Yanjie said at a briefing following the morning session. Mr Bo faces bribery and corruption charges dating back to his time as mayor of Dalian in the 1990s, while an abuse of power charge is linked
to the murder of British businessman Neil Heywood in Chongqing in 2011 when he was party secretary there. Mr Bo’s wife Gu Kailai was convicted and given a suspended death sentence last year over Heywood’s death. Mr Bo remains popular among some Chinese leftists for his campaign in Chongqing to revive Mao Zedong-era songs and slogans. Protesters gathered near the court to show their support for him and wave portraits of Mao.
August 23, 2013 April 19, 2013
nomy stimulus is sustainable,” she said. “We are still relying on investment for growth and there will be downside risks beyond the third quarter.” Investors are looking ahead to a meeting later this year where the Communist Party’s new leaders may unveil a blueprint for policy measures to sustain growth in coming years as higher labour costs and a shrinking working-age population weigh on the pace of expansion. Signs that China is strengthening may help to counter investor pessimism about emerging economies that has been fuelled by the Fed’s indications that it will rein in stimulus. Minutes from a July 3031 Fed gathering showed officials were “broadly comfortable” with chairman Ben S. Bernanke’s plan to start reducing bond buying later this year, with a few saying tapering might be needed soon. Bloomberg News/Reuters
KEY POINTS Aug HSBC flash PMI rises to 50.1 New orders sub-index hits four-month high of 50.5 Upbeat PMI points to steadying growth in Q3
Beijing to join global crackdown on tax evasion Stella Dawson
hina has agreed to join the international effort by the Group of 20 leading economies to combat tax evasion by signing an agreement to share tax records, the OECD said. China’s decision means that all G20 countries now have agreed to cooperate on tax avoidance, a priority set by global leaders to address the causes of the 2007-2009 financial crisis and to help combat corruption. The Organisation for Economic Cooperation and Development (OECD), the global economic policy forum, said that Chinese Tax Commissioner Wang Jun will sign the
convention on Mutual Administrative Assistance in Tax Matters in Paris next week. China recently has ramped up its efforts to crack down on corruption in the world’s second-largest economy, arresting public officials on bribery charges, banning their elaborate expense-account dinners and investigating corporate activities. Tax avoidance is frequently linked to corruption. Illicit funds, earned from crime, corruption and tax evasion, often are moved out a country via tax havens and by using shell companies. Sharing tax information can be an important tool in helping to track these funds. Global Financial Integrity, a financial watchdog group, has estimated that more money flows out of China from illicit financial activity than any other developing country. Its latest report estimates the losses between 2000 and 2011 at US$3.79 trillion. China has yet to join the OECD’s A n ti - B r i b er y C o n v e n t i o n , t h e international standard for how to combat graft of public officials in foreign business transactions. Drago Kos, the OECD’s incoming anti-graft chief, said in a Thomson Reuters Foundation interview that getting the biggest developing economies on board will be a priority for his tenure.
Three men charged in May to appear in court today
His verdict will be the culmination of a political crisis that began with his ouster as Chongqing party secretary and roiled the Communist Party in the middle of a once-a-decade leadership transition. The country hasn’t seen such a politically fraught trial since chairman Mao Zedong’s wife Jiang Qing was prosecuted in 1980 for her role in the Cultural Revolution. Bloomberg News
Everbright Securities Co Ltd, the brokerage that roiled China’s stock market last week with erroneous buy orders, said Xu Haoming resigned as president four days after regulators announced a probe into the company. Shares in the brokerage were suspended from trading for yesterday’s afternoon session in Shanghai and will resume today, the company said in a statement to the city’s stock exchange. Chairman Yuan Changqing will become acting president as the company seeks to allay investors’ concern and stem an 18 percent drop in its shares this week. The China Securities Regulatory Commission on August 18 banned Everbright from proprietary trading for three months following the error, which the watchdog described as unprecedented. Everbright estimated that it lost 194 million yuan (US$32 million) on the trades, based on August 16 closing prices, and said the figure may change. Everbright’s strategic investment department, which oversees trades using the firm’s own money, made 23.4 billion yuan of incorrect buy orders on August 16, causing a 6 percentagepoint swing in the Shanghai Composite Index.
H.K. Mercantile bourse ‘victim’ of false papers: Cheung arry Cheung, the chairman and largest shareholder of Hong Kong’s failed commodities exchange, said the bourse is a victim after receiving false financial documents. “We have been victims in all of this,” Mr Cheung said by phone yesterday. “We were provided with documents we did not know were false.” Police have arrested nine and charged four in connection with the case. Hong Kong Mercantile Exchange surrendered its trading licence in May after failing to attract sufficient revenue to support its operations. Ong Shen Kuo, who sent Mr Cheung a false proof of funds for US$516 million, was a middle man who didn’t know it was fake, his lawyer told a Hong Kong court yesterday. Mr Ong sent the document in hopes of helping to broker a fundraising deal on behalf of Mr Cheung, Mr Ong’s lawyer Kevin Egan said yesterday. Mr Cheung, who resigned on May 24 from all his public service positions including Hong Kong’s executive council, declined to comment on the specific case involving Mr Ong. “It’s unfortunate that every time this is mentioned we get dragged in,” he said. “We had nothing to do with it other than being provided with the false documents.” The Securities and Futures Commission said on May 21 it found “serious” suspected irregularities in the exchange’s financial affairs and referred the case to the police. Three men who were first charged on May 24 with having false papers
Everbright Securities president quits
China-bound milk powder halted in May: Fonterra New Zealand’s Fonterra Cooperative Group Ltd, the world’s biggest dairy exporter caught up in a contamination scandal earlier this month, said yesterday it was forced to withdraw 42 tonnes of milk powder bound for China because of high nitrite levels. The high nitrite was first brought up by the official China Daily in late July, raising new questions about the safety of Fonterra’s products and its manufacturing and testing standards. Fonterra had to apologise this month for a milk powder contamination scare in China after finding bacteria that could cause food poisoning in some products. The company said yesterday a shipment of powder had been halted at the Chinese border in May after tests showed nitrite levels higher than allowed in China, although it had been approved for export after testing in New Zealand. Excessively high nitrite levels can potentially be toxic. “[The level was] within specifications for us but when the product got to China, it tested high,” a company spokesman told Reuters, adding that Fonterra had been in full control of the affected product and that none of it had reached the retail supply chain.
Baidu expands mobile search Barry Cheung, chairman of Hong Kong Mercantile Exchange
including letters related to a US$460 million check and US$11 million of funds are scheduled to appear in court today. Mr Cheung had previously said those three men weren’t current or former employees of the commodities bourse and declined to comment further. HKMEx began trading gold futures in May 2011 and silver contracts in July that year, both denominated in U.S. dollars. Trading revenues were not enough to support operating expenses and resulted in it failing to meet the required regulatory financial conditions, the exchange said in a May 18 statement. Bloomberg News
Baidu Inc, owner of China’s largest search engine, is expanding with mobile applications that don’t need to be downloaded as it competes with Tencent Holdings Ltd for users in the world’s biggest smartphone market. Mobile users can access so called “lite apps” for transportation, travel and entertainment information through Baidu’s search program on smartphones, Li Mingyuan, a vice president, said yesterday in Beijing. Baidu is also offering mobile payment services for developers to commercialize their applications, he said. Baidu is trying to navigate a shift from desktop computing, where it manages 82 percent of the nation’s searches, to mobile devices. The company last month agreed to pay US$1.85 billion for the 91 Wireless third-party app store in its biggest announced acquisition to capture the nation’s more than 464 million users who access the Internet from mobile devices. “We are pushing the development of China’s Internet ecosystem,” said Li Mingyuan. “We hope by promoting ‘lite’ apps to help developers integrate mobile and cloud systems.” The company’s app store has had 69 million downloads every day as its open platform attracts 700,000 developers, chairman Robin Li said at the conference.
August 23, 2013 April 19, 2013
Bitcoin spawns China virtual IPOs More investors lured by opportunities as U.S. scrutiny deepens Lulu Yilun Chen
Value of one Bitcoin as of Thursday
he Bitcoin craze is catching on in China. Sun Minjie is a 28-year-old Internet worker who lives in Beijing. Eager to profit from growing demand for the digital currency, Mr Sun has invested more than US$3,000 in a company called 796 Xchange Ltd, an online exchange for trading stocks and other financial instruments related to Bitcoin, where initial public offerings are also being held. He’s part of a small but growing group of investors in China who have put the country into contention with the U.S. as the biggest downloader of the virtual money that’s being used to buy a growing range of goods and services online. While intensified scrutiny by U.S. regulators casts doubt on the currency’s future there, China’s Bitcoin industry is expanding. “What’s worrisome is that a lot of people could be just treating it as a speculative investment,” said Peter Pak, head of trading of BOCI Securities Ltd in Hong Kong. “In China, the stock market, property and bond market are all not so good, so people get really excited when they hear of a new investment that generates high returns.” Mr Sun’s outlay of about 28 Bitcoins – or US$3,108 – for more
KEY POINTS China’s Bitcoin industry expanding Lack of regulation behind expansion More companies trading shares in the virtual market About 11.5 million Bitcoins in circulation
than 400 shares in 796 Xchange has returned about 46 percent since the stock’s August 1 debut on the company’s own website. The benchmark Shanghai Composite Index has only gained about 2 percent during the same period.
‘Expensive to crack’ Bitcoin is similar to other currencies – say, the Mexican peso – except it’s not controlled by any government and the total number is capped at about 21 million coins. Computer users can “mine” them by solving mathematical puzzles – uncovering the hidden series of letters and numbers that matches up with security keys specified by the computer programmers who invented Bitcoin in 2009. As more are mined, the puzzles get harder, and therefore more expensive to crack. Mr Sun turned to shares of Bitcoin companies after initially trying to mine the currency crunching algorithms on souped-up PCs at his office and home. He gave up after a month, concluding that his computers weren’t up to the task. “Simple desktops can no longer dig them up,” he said. There are about 11.5 million Bitcoins in circulation, according to Blockchain.info, which tracks the virtual currency. At Thursday’s price of about US$121, there’s still US$1.15 billion to unearth. The inherent scarcity of Bitcoin that was intended to help secure its value has also attracted early investors – Cameron and Tyler Winklevoss, the twins known for their claim to have co-founded Facebook Inc, own about 1 percent of the currency in issue.
Bigger drills Prices have been volatile, with the value of one Bitcoin varying from US$84 to US$266 in the span of one week in April, according to Tokyobased Mt. Gox, the largest exchange that allows Bitcoin to be traded for
dollars, euros and other currencies. More advanced miners use specially designed gadgets that cost as much as 86 Bitcoins, about US$10,407, in order to mine the digital currency. Labcoin, managed by Hong Kong-based ITec-Pro Ltd, also began trading its shares this month in a virtual market. The seller of virtualmining equipment had a market value of 20,000 Bitcoins, or about US$2.4 million. Another company that sold shares is Myminer, which operates “mining farms” in China, where it says the low cost of power to run computers gives it an edge. BTC Garden, a Shenzhenbased Bitcoin miner, withdrew its IPO this month, citing a dispute with an investor. Hong Kong-incorporated 796 Xchange offers an online stock market for Bitcoin companies, as well as futures, financing and IPO services, all priced in Bitcoins, according to its website.
Regulatory probe BTCChina.com, China’s most popular Bitcoin exchange, lets traders to use the payment systems of more established companies. That includes Tencent Holdings Ltd, the nation’s biggest Internet company, and Alipay, an affiliate of Alibaba Group Holding Ltd, the No. 1 e-commerce company. Other Bitcoin trading platforms popular in China include FXBTC.com and Btctrade.com. China briefly overtook the U.S. in monthly downloads of Bitcoins in May, and now ranks second, according to SourceForge. In the U.S., the Securities and Exchange Commission sued a Texas man over claims he operated a Bitcoin Ponzi scheme. New York’s Department of Financial Services this month sent subpoenas to 22 digitalcurrency companies to determine whether new regulations should be adopted, according to a person familiar with the matter.
The lack of regulation, which has drawn scrutiny from U.S. regulators, is why Bitcoins are taking off in China, where the government controls the flow of money overseas and keeps a tight rein on what it views as undesirable behaviour. “The advantage for Chinese users to use Bitcoin is freedom, people can do something without any official authority,” said Patrick Lin, system administrator of Erights.net and owner of about 1,500 Bitcoins. Mr Lin said he’s sticking to the currency itself, rather than IPOs, in part because of weak regulation. “The Bitcoin world is just like the Wild West – no law, but opportunity and risk,” he said. The China Securities Regulatory Commission didn’t respond to a faxed query on whether it’s looking at new rules regarding Bitcoin. So long as it remains small, the industry may continue to fly below the radar screen of a Chinese government more preoccupied with a faltering economy and social stability. “If the circulation of Bitcoins is still confined to a small circle of people, it won’t be something on the Chinese authority’s priority list,” said Edward Au, co-head of Deloitte China’s public-offering group. “They already have too much to cope with.” Bloomberg News
What’s worrisome is that a lot of people could be just treating it as a speculative investment Peter Pak, BOCI Securities Ltd
August 23, 2013 April 19, 2013
India’s richest man loses US$5.6b as rupee stumbles Indonesia, Malaysia, Thailand FX hit multi-year lows
ukesh Ambani, India’s richest man, is the biggest loser among the country’s billionaires as the rupee’s slump to record lows erased 24 percent of his fortune. The chairman of Reliance Industries Ltd, operator of the world’s biggest oil refinery complex, has lost US$5.6 billion of his wealth since May 1, as the rupee’s plunge accelerated. The 56-year-old is left with a net worth of US$17.5 billion, according to the Bloomberg Billionaires Index. The Indian rupee is the worstperforming major currency in the world in the past month, coming under pressure as international investors sold emerging-market assets amid concern the U.S. will pare its US$85 billion monthly stimulus. The value of holdings by India’s billionaires are worth less in dollars as the rupee declined and foreign investors sold shares in large-cap companies, said Munesh Khanna, a senior partner at Grant Thornton LLP in Mumbai. “There is irrationality; the rupee is weak and will go down further,” Mr Khanna said. “Foreign institutional investors are invested in the largercap companies and are pulling out money from India. That is putting a lot of pressure on those companies.” International investors have sold a net US$3 billion of Indian stocks since June 3, according to the nation’s
Mukesh Ambani, chairman of Reliance Industries
Securities & Exchange Board. The S&P BSE Sensex (SENSEX) index declined 1.9 percent to 17,905.91 on Wednesday, extending its four-day
Malaysia deputy PM calls for safety checks on Genting route Follows crash that killed 37 tourists returning to capital from Genting Highlands Michael Grimes
he bus that plunged down a ravine killing 37 foreign and domestic tourists in Malaysia’s worst road accident on record was not operated by casino property Resorts World Genting, the venue’s operator said. Genting Malaysia Berhad expressed “sadness” over the accident, but stressed in a statement that it does not run the bus line involved. The Resorts World Genting property – originally known as Genting Highlands – opened a casino in the remote location in 1971 on a three-month gaming licence. It has been renewed by the Malaysian authorities
Fed minutes hinted that the U.S. was on course to begin tapering stimulus as early as next month. “Unless growth signals emerge in the next few quarters, FIIs [foreign institutional investors] will continue to pare down Indian equities, which will weigh on the rupee,” said Deven Choksey, managing director of KR Choksey Securities.
on a rolling basis ever since. The property is about 55 kilometres (34 miles) and an hour’s drive from the capital Kuala Lumpur. The casino and amusement park draw about 20 million visitors a year. The site is undergoing a five-year, three billion ringgit (US$937 million) redevelopment that will include construction of a Twentieth Century Fox theme park set to open in 2016. Malaysia’s Deputy Prime Minister Muhyiddin Yassin – speaking to journalists during an official visit to Thailand – called for greater attention to safety on the Genting route. “The Genting Highlands
drop to 7.6 percent, the most since July 2009. The Indian rupee fell past 65 to the dollar to a record low yesterday, after
road is a very important route used by many tourists on a daily basis, thus the enforcement of all relevant laws must be given priority to ensure it remains safe,” Malaysian English-language newspaper The Star quoted him saying. The road under scrutiny is notoriously steep and winding and has seen several accidents in recent years. Two Indian tourists died and 22 people were hurt when a bus overturned last year. Seventeen people died in 1996 when their bus veered off the road. According to The Star, the bus in Wednesday’s crash had been on a blacklist with the country’s Road Transport Department prior to its journey to Genting Highlands. No reason was given for the listing. There was some suggestion from officials that the bus – en route from Genting Highlands to the capital – was overloaded at the time it fell 70 metres (230-foot) down a hillside. The driver was among the dead, so investigators will be relying on testimony from the 16 survivors to help them understand what happened. Those who perished included 14 Malaysians, a Korean, one Nepalese, and a Bangladeshi-born Canadian passport-holder, said a health ministry official. With AFP
Anil Ambani, the younger brother of Mukesh, has lost 17 percent, or US$1.3 billion, of his net worth since May. Anil Ambani, 54, has a fortune of US$6.3 billion and is the country’s eighth-richest man, according to the Bloomberg ranking. The majority of his wealth is derived from stakes in publicly traded companies, including Reliance Communications Ltd, India’s third-largest mobile-phone company by market value. Reliance Communications reported earlier this month firstquarter profit that missed analysts’ estimates after finance costs increased because of the rupee’s weakness against the dollar. Net income fell 33 percent to 1.08 billion rupees (US$16.7 million) in the three months ended June from a year earlier, its 15th drop in profit in 16 quarters. “Companies with large foreigncurrency debt will feel the pressure and their valuations will come down,” Mr Khanna said. Currencies in Indonesia, Malaysia and Thailand all hit multi-year lows yesterday on concerns that the Fed’s scaling back of stimulus would lead to further capital outflows from emerging markets, which have benefited for the last two years from waves of cheap money printed by Western central banks.
Fortescue holds back on rail stake sale A
ustralia’s Fortescue Metals Group Ltd, shored up by soaring iron ore output and deep cost cuts, has scrapped a September deadline for selling a stake in its port and rail business, spurning offers it has received so far. The world No.4 iron ore miner has nearly completed a US$9 billion expansion to triple its output and booked a 67 percent rise in halfyear profit yesterday which beat forecasts. It rewarded shareholders with a much bigger dividend than expected, armed with strong cash flows which it also plans to use to start paying down US$10 billion in debt. Fortescue put a minority stake in its port and rail business, The Pilbara Infrastructure (TPI), up for sale last December with the aim of raising around US$3 billion to pay down debt after
a scare last year when iron ore prices sank to a threeyear low. The iron ore rail line would be the first to be open to outside investors, and has solid growth prospects as other miners would pay to use the line rather than build their own. The minority stake attracted strong interest, with Fortescue’s advisers scouring the world for potential bidders, but following an iron ore price recovery, the urgency to sell eased. “We’ve had significant interest from global infrastructure investors and that has generated significant offers. However to date they have not met our objectives for value and terms,” chief executive Nev Power told reporters. “It’s not shelved. We’re in discussions with parties right now,” he said. “We don’t expect to see anything in the September quarter but we haven’t set a date on it.” Fortescue’s net profit rose to US$1.75 billion for the year to June from US$1.56 billion a year earlier. Reuters
August 23, 2013 April 19, 2013
Asian buyers keen on Australian debt Japan, Malaysia and Taiwan funds warm to Aussie bonds
A Philippine stocks tumble most in five years Philippine stocks slumped, with the benchmark index posting its biggest intraday retreat since October 2008, as local markets resumed trading after a three-day closure. The Philippine Stock Exchange Index declined 6 percent to 6,136.73 in Manila, the lowest close since June 26, after tumbling as much as 6.9 percent. The country’s stock exchange was closed and trading of currencies and debt was halted this week because of floods in Manila and a public holiday on Wednesday. The peso weakened 1.1 percent to 44.15 per dollar, heading for the lowest close since Feb. 1, 2011, while government bond yields rose to a one-month high. Philippine central bank governor Amando Tetangco said yesterday he expected volatility in local markets and that policy makers may act to minimise swings in the exchange rate. “This drop looks very significant but considering we have been shut in the past three days we are just playing catch-up with global markets,” said Rico Gomez, a money manager in Manila at Rizal Commercial Banking Corp. “So far, this is just indicative of Asian markets’ reaction to global developments and concerns that the U.S. will start to taper stimulus.” The combination of Indonesia’s record current-account gap, Thailand’s economic contraction and increased speculation that the Federal Reserve will pare stimulus spurred foreigners to sell US$909 million of shares in the two Southeast Asian nations this week. Investors first began pulling money out of Thai, Indonesian and Philippine stocks three months ago after Fed chairman Ben S. Bernanke signalled on May 22 he may reduce bond buying that spurred capital inflows into emerging markets. There will be “some spike” in borrowing costs amid speculation the Fed will reduce stimulus, Philippine Treasurer Rosalia de Leon told reporters yesterday.
sian investors are increasingly taking a shine to Australian bonds to diversify their portfolios in a move that could support the falling Australian dollar but also complicate central bank efforts to stimulate the slowing economy. Last week, Japanese government data showed local investors buying foreign bonds had risen to US$16.5 billion in the week of August 5, the highest in three years. A detailed breakdown was not available but brokers say some of that money has been going to Australia, with some Japanese fixed-income funds investing in Australian dollar bonds for the first time. “It may suggest the [Japanese] government’s encouragement is contributing to a shift in focus in Japan towards investment offshore,” said Greg Gibbs, a strategist at Royal Bank of Scotland Group Plc in Singapore. With 10-year Japanese government bonds yielding less than 1 percent, it is no wonder investors are attracted to Australian 10-year sovereign debt paying around 4 percent.
Australian firms with lowerrated debt have also been successful in attracting foreign investors. Borrowers have extended their Australian dollar bond roadshows to Asia, an unusual move for a region that typically buys U.S. dollar or euro-denominated debt. Regulated electricity company SP AusNet, Melbourne Airport and property firm Lend Lease all met investors in Hong Kong, Singapore and Japan ahead of their bond sales. And the results paid off. Alastair Watson, treasury manager at SP AusNet, said that Asian buyers took up more than half of the A$430 million BBB-plus notes it sold this year and that Japanese fund managers and life insurers were big buyers. While Hong Kong and Singapore investors accounted for most of the Asian participation, bankers noted signs of emerging appetite from Malaysia. Taiwanese investors, especially commercial banks, have also started showing an interest in Australian debt as they look to slowly expand their portfolios. In all, participation from Asian investors in Australian dollar non-
government bonds ranged between 30 percent and 50 percent in recent months, up from 20 percent in the last few years, according to National Australia Bank Ltd (NAB) estimates. “Only a few years back, the closest Australian issuers came to Asia was typically flying over the region on the way to the U.S. market,” said Brad Scott, head of corporate bond origination at NAB. “Now its becoming more a destination in itself and a port of call for issuers looking to diversify their investor base.” As a result of this support from Asian investors, some bond offers were increased, allocations to investors reduced and pricing lowered from their initial levels. Part of the appeal comes from Australia’s relatively strong economy and high cash rate compared with its rich-world peers. “With the instability we have seen in Europe, a large number of investors have expanded their geographic horizon to include stronger and more stable economies like Australia,” summarises Ed Waters, executive director at ANZ Debt Capital Markets. Reuters
Japan manufacturers’ optimism hits 3-year high Weak yen pushes up some exporters’ earnings
S.Korea household credit growth hits 9-month high South Korea’s annual household credit growth expanded at the quickest pace in nine months over the second quarter, central bank data showed yesterday, hinting at a turnaround in domestic consumption. Household credit in the April-June period was up 5.5 percent on an annual basis at 980 trillion won (US$877 billion), versus a revised 5.1 percent gain three months before, the Bank of Korea said. It was the fastest growth since a 5.6 percent annual rise in household credit seen at the end of the third quarter of 2012, and the first acceleration after the rate of household credit growth slowed for seven consecutive quarters. The measure includes borrowings from financial institutions and purchases on credit and is not adjusted for seasonal patterns or inflation. Households borrowing money for real estate mainly drove the gain as South Koreans took advantage of tax cuts that expired at endJune, the Bank of Korea said. South Korea’s household debt burden has eased considerably since mid-2011, when the credit growth rate shot to over 9 percent, as continuous economic crises sapped consumer confidence and reduced borrowing levels.
Automakers cautious on emerging markets
apanese manufacturers’ optimism improved to the highest level in three years, a Reuters poll showed, as a weak yen boosted earnings for exporters of textiles, chemicals, steel and other metals. The index of sentiment derived from a monthly Reuters survey of manufacturers rose by 3 points to plus 16 in August, which matched the level it was at in November 2010. A positive readings shows optimists outnumbered pessimists. The index is expected to rise again to plus 18 in November in the Reuters survey, which is strongly correlated with a closely watched quarterly Bank of Japan tankan survey.
Makers of cars and electronics, however, were less upbeat due to worries about slowing growth in emerging markets, highlighting the risk overseas economies pose to Prime Minister Shinzo Abe’s reflationary policies. “Sales are doing much better than we initially anticipated,” one chemicals maker said in the August 2-9 poll of 400 big and medium-sized firms, of which 276 responded. The service sector gauge also rose 5 points in August from the previous month to plus 23. This marked the highest level since April 2007 due to a housing boom and increased corporate spending on IT services. The index is expected to improve
further to plus 29 in November. The BOJ’s tankan issued on July 1 showed manufacturers’ sentiment turned positive in April-June for the first time in nearly two years and was seen rising further on the feel-good mood generated by Mr Abe’s policies, intended to end 15 years of deflation, spur hiring and improve wages. The BOJ will release its next tankan survey on October 1. The central bank kept monetary policy steady earlier this month and left its economic assessment unchanged as board members wanted more time to measure the strength of capital expenditure. Reuters
August 23, 2013 April 19, 2013
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0.9014 1.5583 0.9242 1.3358 98.42 7.9882 7.7555 6.1213 65.185 32.04 1.2827 30.03 44.165 11003 88.714 1.23447 0.85718 8.1759 10.6714 131.47 1.03
-0.1551 -0.5235 -0.4544 -0.2241 -0.9449 -0.01 -0.009 0.0441 -1.7642 -0.6554 -0.4366 -0.303 -0.4415 -2.0722 -0.7834 -0.222 -0.294 0.3437 0.209 -0.715 0
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1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3597 65.56 32.17 1.2862 30.228 44.2 11148 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032
0.8848 1.4814 0.9022 1.2431 77.13 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.78768 7.8281 9.9347 97.89 1.0289
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August 23, 2013 April 19, 2013
Classifieds Mountain Villa For Sale in Koh-Samui Price: HK$ 16 million
3 x King Bed en-Suites, 1 x King Bed basement Suite, 2 x 2 Single Bed, Spacious Living area and fully furnished kitchen, Swimming pool - children / adult, 2 levels Maid’s quarter, Fully Furnished, Balcony, Terrace / Patio, 2 x Outside Salas, Barbecue, 2 x Parking Spaces, 7-seater SUV included. Contact Ms Chan - Sarah@clever-cloggs.com.hk Tel: 2861-3317
FOR SALE - ONE GRANTAI Tower 3; Flat 10K.
Luxury hilltop flat, fully air conditioned, 3 bedrooms, 2 full bathrooms, maid’s room, fully equipped kitchen , living room, dining area, and 2 balconies with stunning Cotai Strip and sea views. Facilities include: health club, swimming pool, tennis, play area, and much more. 2320 sq. ft. selling price: HK$ 7,950/sq. ft. Contact: Steven Kahn (852) 2541 7775 Monday - Friday 11am - 6pm
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Great opportunity Loft in Downtown 2 + 1 bedrooms, 2 living rooms and garden 140 sq metres with Mezzanine Price: HKD 12 million firstname.lastname@example.org
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August 23, 2013 April 19, 2013
Financial inclusion now
Leading reports from Asia’s best business newspapers
Zeti Akhtar Aziz
Governor of Bank Negara Malaysia (the central bank) since 2000
Luxury residential property prices in the Indonesian capital increased the most among nine major Asian cities monitored by global property consultancy Jones Lang LaSalle. In a statement, the property group said Jakarta outperformed Beijing, Hong Kong, Shanghai, Singapore, Bangkok, Kuala Lumpur, Manila and Mumbai, as it saw a 9 percent increase in the capital values of luxury residential properties in the first quarter compared to the previous quarter. On a yearly basis, the growth was even higher, at 34 percent – well ahead of the other cities.
Korea Herald North Korea accepted Seoul’s proposal to hold talks to arrange family reunions for people separated by the Korean War at the neutral border village of Panmunjom. The move will allow the two sides to meet today so they can work out details for family reunions to take place on or around the Chuseok holiday on September 19. Chuseok is equivalent to Thanksgiving and is celebrated in both Koreas. Pyongyang also called for working-level talks to start as soon as possible on the resumption of tours to the Mount Kumgang resort that has been closed for five years.
Bangkok Post The Stock Exchange of Thailand (SET) requested an investigation into whether some gold futures brokers have taken up the role of a futures exchange by illicitly trading orders by themselves instead of sending orders to trade on the Thailand Futures Exchange. People familiar with the stock market said the SET submitted the information to the Securities and Exchange Commission, requesting that it help to investigate trading activities in the futures market. The SET looked into the matter following a sharp drop in gold futures trading orders.
The Star Malaysia Airlines (MAS) is on track to become profitable by end-2014, as its turnaround plan gains traction and receives the backing of its unions, according to group chief executive Ahmad Jauhari Yahya. “It is gaining momentum and going in the right direction. We are generating positive cashflow now. We want to build sustainable profits, hopefully, by the end of 2014. There is still a lot to do,” he said at an update briefing on its business plan introduced in late-2011. He said it now had a cash balance of 5.5 billion ringgit (US$1.7 billion).
aking the financial system accessible to the world’s poorest people can unlock their economic potential, improve their lives, and benefit the wider economy. So it is no surprise that financial inclusion of the poor has become an important component of public policymaking. Central banks and regulators worldwide are taking the lead in making financial inclusion a priority, in addition to their traditional mandates of maintaining monetary and financial stability. Financial inclusion is about providing an opportunity for the world’s 2.5 billion unbanked and financially underserved to participate in the formal financial system, thereby helping to lift them out of poverty and enter the economic mainstream. Greater financial inclusiveness promises a more cohesive society and more balanced growth and development. Moreover, financial systems themselves stand to benefit from becoming more comprehensive and progressive. The additional consumers participating in the formal financial system will strengthen national economies and, in turn, enrich the global economy. Indeed, as developing countries move toward middleincome status, financial inclusion is a key component of continued progress. In countries with high levels of financial exclusion, consumers are left to rely on unregulated informal services. These inferior substitutes often imply exorbitant costs for borrowers – and financing that is usually too short term for productive investment activity. Moreover, the lack of consumer protection and regulatory and supervisory frameworks exposes informal activities to vulnerabilities that can harm borrowers and
jeopardise financial stability. Increasing the availability of formal financial services to those who have long been denied them requires establishing a balanced regulatory framework. Oppressive, blanket regulation, which may be necessary in complex and unpredictable financial markets, may not be relevant in a rural community – or, worse, it may stifle efforts to promote financial inclusion. Indeed, proportionality is an important aspect of regulation, enabling prudential measures that, rather than exceed or underestimate, are commensurate with the risks that need to be addressed. Little wonder, then, that high levels of exclusion in developing and emerging countries have prompted policy makers to embrace proportionate regulation, thereby gaining the flexibility to encourage innovation in the provision of financial services while preserving financial stability. Bangladesh, for example,
Financial inclusion is about providing an opportunity for the world’s 2.5 billion unbanked and financially underserved to participate in the formal financial system
has adapted its financial regulations for microfinance institutions. This has helped to catalyse the growth of sustainable microfinancing to local women-owned enterprises. Kenya’s “test and learn” approach to regulation has unleashed the potential of mobile-phonebased financial-service delivery through M-PESA, which offers consumers a safe and convenient alternative to cash.
Inclusive network There are many other examples of successful implementation of proportionate regulation that have resulted in greater financial inclusion without compromising financial stability. In Malaysia, agent-banking regulation (which safeguards consumers’ interests while supporting financial institutions’ business models) has led to the expansion of branchless banking to reach previously unserved rural areas. Similarly, Mexico’s “tiered” approach to financial access – according to which requirements for opening bank accounts are proportionate to risk, with low-value accounts subject to higher transaction restrictions – has expanded access to basic accounts, while mitigating the risk of money laundering. And Pakistan and Indonesia, by basing capital requirements for microfinance institutions on the size of the population that they expect to serve, are enabling these institutions to serve distinct market niches sustainably. Policy makers in many countries have recently been considering the role of financial standard-setting bodies (SSBs) in advancing financial inclusion. In particular, they are focusing on the specific challenges
that arise when applying supervisory standards in a developing country that is pursuing financial stability and inclusion. Although global standards supposedly reflect the principles of proportionality, they provide insufficient guidance for the national regulators, banking institutions, and financialsector assessors who are trying to apply them effectively in diverse environments. This lack of contextual clarity has led to excessively conservative interpretations of the regulations – and thus to the creation of unintended barriers to financial inclusion. Addressing this will require input from policy makers with practical experience applying international standards, particularly in emerging economies. At the same time, in order to ensure continued progress toward financial inclusion, representatives from developing and emerging economies must play a greater role in shaping future standards. The Alliance for Financial Inclusion, a network of central bankers and financial policy makers from more than 80 developing countries, is already contributing to more effective and proportionate global regulation by facilitating increased engagement with SSBs. This September, Malaysia’s central bank will advance the process by hosting AFI’s Global Policy Forum. Such collaborative efforts among developing countries ultimately foster closer cooperation between them and their developed counterparts. This will lead to better outcomes for the global financial system, the global real economy, and, most important, the people who have been excluded from both for far too long. © Project Syndicate
August 23, 2013
Closing PetroChina says H1 profit up 5.6 pct
Govt approves free trade zone for Shanghai
PetroChina Co Ltd yesterday said firsthalf net profit increased 5.6 percent, citing a boost from policy reforms, which helped narrow losses for its refining and chemical businesses. The country’s largest listed oil company said in a filing to the Hong Kong Stock Exchange it recorded a net profit of 65.52 billion yuan (US$10.70 billion) for the first six months of 2013, compared to 62.02 billion yuan for the first half of 2012. Revenue rose 5.2 percent to 1.10 trillion yuan, compared with 1.05 trillion yuan in the same period last year. “The group successfully reduced losses of the refining and chemicals segment,” company chairman Zhou Jiping said in the statement.
China has approved an “experimental” free trade zone in its commercial hub Shanghai as it tries to promote economic reforms, the government said yesterday. The State Council recently approved the zone after giving the preliminary go-ahead in July, the commerce ministry said in a statement. It said the government would later give details of what would be allowed in the free trade zone, which will combine four existing development zones in Shanghai. Shanghai already has bonded areas, which allow companies to import goods without paying tax unless they enter China for sale in the domestic market.
Euro zone growth hits 26-month high Private sector growing faster than thought
usiness activity across the euro zone has picked up this month at a faster pace than expected, surveys showed yesterday, led by Germany as it benefited from growing demand for its exports. Survey compiler Markit’s Flash Composite Purchasing Managers’ Index (PMI) bounced to 51.7 from last month’s 50.5. It was the highest reading since June 2011 and beat all predictions in a Reuters poll whose median forecast was for 50.9. Readings above 50 signify expansion in activity. While growth accelerated in the euro zone’s biggest economy, it was a different story in France, the bloc’s No.2 economy, which saw business fall as its economy went into a summer lull. But Markit said the composite PMI, which surveys thousands of companies across the region and is used as an indicator of growth, pointed to a 0.2-0.3 percent economic expansion in the current quarter. “It’s looking good. If the euro zone is picking up then that bodes well for the global economy. The wobble in France is a bit of a worry, but hopefully that will be corrected,” said Chris Williamson, Markit’s chief economist.
Growth returned to the region’s dominant service sector – the services PMI rose above the 50 mark for the first time since the start of last year, coming in at 51.0 after 49.8 in July. Similarly, growth quickened among manufacturers, whose PMI rose to a 26-month high of 51.3 from 50.3. Both PMIs beat the median expectation in a Reuters poll and the services index came in above the most optimistic forecast. The manufacturing output index, which feeds into the composite PMI, bounced to a 27-month high of 53.4 from 52.3. An earlier flash composite PMI from Germany showed the growth rate was the fastest in seven months but in France activity declined across the board. Support from Germany and France, the 17-nation bloc’s two biggest economies, helped it escape from its longest recession on record last quarter, expanding a better-than-expected but still modest 0.3 percent. The problem faced by the European Central Bank in trying to stimulate growth – as it has been for some years – is still the heavily indebted south. But Mr
China’s banks taking next step in rate reform To issue billions of yuan in negotiable certificates of deposit
hina’s top banks are expected to win approval for the issuance of tens of billions of yuan in negotiable certificates of deposit (NCD) as early as next month, in another step towards developing market-determined interest rates. NCDs would enable banks to access large amounts of funds at relatively stable costs, providing some alternative to borrowing from
the inter-bank market, where the cost of funds can be volatile, as seen in June when a liquidity squeeze briefly sent short-term money market rates to nearly 30 percent. Bank of China Ltd, the Industrial & Commercial Bank of China Ltd, Agricultural Bank of China Ltd, China Construction Bank Corp and Bank of Communications Ltd, have submitted their plans for NCDS to the central bank, people familiar
Stronger German exports helped euro zone activity to expand in August
Williamson said manufacturing and services activity was improving in the periphery. New business in the bloc increased for the first time in just over two years, and the composite sub-index rose to 50.5 from 49.7, supported by orders coming in for manufactured goods from abroad at their fastest rate since May 2011. Despite the upturn, expectations
among services firms dipped from July’s 16-month high and manufacturers reduced their workforce at a faster pace than last month. “The job shedding in part reflects the need to keep costs down and remain competitive, but there is still some uncertainty about the outlook,” Mr Williamson said.
with the development told Reuters. The NCD, or large denomination certificates of deposit tradable on the interbank market, would be offered with maturities from three to six months and be priced with a premium over the Shanghai interbank offered rate (SHIBOR), the sources said. Each bank is planning an NCD issuance of more than 10 billion yuan (US$1.63 billion), one of the sources said. The likely face value of single certificates was unknown. “The instrument could be rolled out soon, which not only opens up a liquidity channel for banks but also pushes forward interest rate reforms by gradually loosening controls on deposit rates,” said a source close to the banking regulator. The People’s Bank of China could give its approval as early as September, according to the sources, who all requested anonymity due to sensitivity over the issue.
The central bank, under the helm of reform-minded Zhou Xiaochuan, has been trying to promote the role of the SHIBOR as the benchmark for short-term borrowing costs. The PBOC has been following a step-by-step approach in liberalising interest rates, shifting its focus on loosening controls on bank deposit rates after it freed up bank lending rates in July. Last month’s decision to remove the floor on bank lending rates was seen as a largely symbolic prelude to removing caps on deposit rates, a much more difficult task that will take time. Interest rate reforms are part of a broader effort of China’s new leadership to steer the world’s secondlargest economy towards a growth model that relies more on domestic consumption and gradually scale back controls and directives and allow market forces to play a greater role.