MOP 6.00 Vitor Quintã Deputy editor-in-chief
igher holiday tour fees linked to a new mainland law next month, will put some Chinese trippers off Macau, suggest several holiday industry executives.
They expect a double-digit fall year-onyear from October until the end of the year in the number of package tours. The Macau Government Tourist Office said it was “closely monitoring” the
tourist inflow to see whether there will be a significant decline. The reason is a tourism law coming into force in the People’s Republic next month. It includes a ban on sharp or controversial practices including so-called “zero-fare” group tours. Mainland tourists to Macau and Hong Kong have complained they were forced to shop during tours originally advertised as either cheap or free of charge. Andy Wu Keng Kuong, president of the Macau Travel Industry Council told Business Daily: “…it will not be surprising if the number of package tour visits decline [year-on-year] by some 10 percent in October.” More on page 4
Number 367 Tuesday September 10, 2013
Editor-in-chief Tiago Azevedo
Package tours hit by new rules
April 19, 2013
New candidates, familiar pledges
SJM joins hunt for Japan casino Macau casino operator SJM Holdings Ltd has confirmed it is interested in developing a casino resort in Japan. The firm has previously been speculatively linked with a possible Japan bid, but its aspiration was confirmed in an interview given by SJM’s chief executive Ambrose So Shu Fai to Bloomberg News. “We can bring technical knowhow to a local partner in Japan,” said Mr So. Page 6
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Incumbent legislators, all of whom are expected to keep their seats, lead almost half of the 20 electoral tickets for Sunday’s Legislative Assembly election. With housing being among the Macau population’s most pressing concerns, the political programmes of all re-election hopefuls are calling for more public housing units. Many candidates are also supporting the “Macau land for Macau residents” policy, under which new homes in some areas would be made available only to permanent residents. Even though an urban regulation revamp was completed in the last legislative term, many of the promises made by legislators during the 2009 election remain unfulfilled. That’s mainly because it’s the government – led by the chief executive – that’s in charge of public policy, and not the legislators. With two more seats up for grabs in the upcoming direct election, the number of electoral tickets is also the highest ever, 20, thanks to several bids from grassroots labour groups. Pages 2 & 3
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Old district revamp ‘needs’ tax breaks Developers and owners looking to renew old buildings should be exempt from stamp duty and inheritance tax, said Leong Keng Seng, head of the old neighbourhoods’ renewal advisory committee. It would help them overcome legal and administrative difficulties, he said. The current law requires all the owners of units in a residential building to agree to a redevelopment, even when prompted by serious structural problems. Page 7
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September 10, 2013
Incumbent legislators S trot out old promises Few surprises are in store in Sunday’s Legislative Assembly elections, as all the members seeking re-election are expected to keep their seats Stephanie Lai
Nova União para Desenvolvimento de Macau (New Union for Macau Development), led by Angela Leong On Kei Casino operator SJM Holdings Ltd executive director Angela Leong is running for the third time, with her usual emphasis on better welfare for casino workers and responsible gaming. Her political programme now includes helping small and medium enterprises. Ms Leong’s ticket is urging the government to negotiate with the Zhuhai government to reserve land across the border on Hengqin Island for housing for gaming workers, whether resident workers or migrant workers. The aim is to ease the upward pressure on rents in Macau. “We believe that there is a chance for us to put forward this measure in the assembly, given that Ms Leong has connections with developers,” the third candidate on the ticket, Daniel Fok Chi Chiu, chairman of the Sociedade de Jogos de Macau Workers Association, told Business Daily. Ms Leong is again calling for a ban on smoking everywhere in casinos to protect the health of gaming employees. The ticket is hoping to win a second seat, which would go to Kent Wong Seng Hong, a consultant to Melco Crown Entertainment Ltd.
Associação de Novo Macau Democrático (New Macau Association), led by Au Kam San Veteran assembly member Au Kam San of the New Macau Association joins two 22-year-olds, Sou Ka Hou and Lei Cheong Hou, on this ticket. Mr Au’s running mates in the last elections, New Macau Association leaders Jason Chao Teng Hei and Scott Chiang Meng Hin, lead the association’s third ticket this time round. Mr Au is campaigning under the association’s old slogan: “Combat corruption, fight for democracy, secure livelihoods.” He is known as an outspoken advocate of universal suffrage and direct elections. But last year’s political reforms dashed his hopes. The reforms failed to change fundamentally the structure of the assembly – adding two directly elected and two indirectly elected seats – or the way the chief executive is elected. In 2009 Mr Au’s ticket called for the assembly to be granted the power to oversee government spending on infrastructure projects. But his efforts were frustrated. The New Macau Association ticket is calling for residents to be given priority in the labour market, better public transport and a ban on smoking everywhere in casinos.
União para o Desenvolvimento (Union for Development), led by Kwan Tsui Hang Macau Federation of Trade Unions vicepresident Kwan Tsui Hang is putting forward a political programme similar to her ticket’s programme in 2009. The ticket promises to give priority in the labour market to residents, to fight for a law on trade unions and collective bargaining rights, and to press for better public housing. Ms Kwan dropped her 2009 running mate, Lee Chong Cheng, after he was involved in a public controversy last year over the use of government grants by an association he heads. The federation has put up a single ticket, but aims to win two directly elected seats. The second would go to schoolteacher Lam Lon Wai. The federation is guaranteed two indirectly elected seats. Its vice-president, Ella Lei Cheng I and sitting member Lam Heong Sang, are the only candidates for the labour
itting members of the Legislative Assembly lead almost half of the 20 tickets of candidates for directly elected seats in Sunday’s elections. All the sitting members contesting the elections are expected to be returned to their seats. The political programmes of all the re-election hopefuls respond to popular concern about housing by calling for more public housing. Many candidates follow the “Macau land for Macau people” slogan, calling for new homes in some areas to be reserved for permanent residents. The outgoing assembly passed much legislation on urban development, but successful candidates in the last elections, in 2009, have failed to keep many of their election promises.
functional constituency’s seats. The federation was criticised for its support for the government’s proposals for political reform last year. Ms Kwan has promised to try to improve the electoral system in the years to come, especially the method of filling the indirectly elected seats. But she defends the assembly’s present structure. She told a press conference last week that in the absence of a second chamber the present structure kept “a balance among voices in the assembly”.
União de Macau-Guangdong (Macau-Guangdong Union), led by Mak Soi Kun Property developer Mak Soi Kun is seeking reelection along with his lieutenant, Zheng Anting. Mr Mak’s ticket is known for its connections with interests in Guangdong. In the outgoing assembly Mr Mak became known for his heavy emphasis on the need for a professional qualification system, particularly for engineers. In his ticket’s political programme in 2009, Mr Mak pushed for “an independent unit to aid local small and medium enterprises”. Little was heard of this idea in the outgoing assembly. Mr Mak has been criticised for handing out gifts through the Macau Jiangmen Communal Society, which he heads. Reports in other news media say the association has given members 300 patacas (US$37.50) each to help them cope with inflation. Mr Mak has denied any wrongdoing. Mr Mak is calling for better public transport and a better way of consulting the public about the government’s intentions. His ticket emphasises the need for a way of holding top officials accountable for their actions.
Nova Esperança (New Hope), led by José Pereira Coutinho Macau Civil Servants Association president Mr Coutinho is seeking re-election. Former prison guard Leong Veng Chai is the second candidate on his ticket. Mr Coutinho is known as a defender of the rights and welfare of civil servants. He has also repeatedly called for the chief executive to be elected by universal suffrage, and for more directly elected seats in the assembly. As he promised in the political programmes he put forward in previous elections, Mr Coutinho was active in the outgoing assembly in pressing the government on matters affecting quality of life, such as public housing and the monopolies of Macau’s supply of fresh food. In this respect his political agenda was similar to those of assembly members belonging to traditional associations and New Macau Association. In the months before the outgoing assembly was dissolved, Mr Coutinho submitted a number of bills on matters ranging from domestic violence to animal welfare. The assembly rejected all of them. His programme for the new assembly includes pressing for rent controls. He is calling for the government’s cash handouts to become a permanent measure. He is proposing that the amount given to permanent residents be increased to 12,000 patacas next year from 8,000 patacas now.
Aliança Pr’a Mudança (Alliance for Change), led by Melinda Chan Mei Yi Melinda Chan Mei Yi was the last candidate to be directly elected in 2009. She chairs the Sin Meng Charity Association. She made her political debut after her husband, David Chow Kam Fai, the head of casino operator Macau Legend Development Ltd, relinquished
September 10, 2013 April 19, 2013
Macau the directly elected seat in the assembly that he had held since 1996. In the outgoing assembly Ms Chan pressed the government on social welfare and health. Most of the candidates on her ticket are involved in health and social welfare. But the second candidate on the ticket is again Wu Kam Hon, who heads the Macau Federal Commercial Association of Convention and Exhibition Industry, and the third is Macau Travel Industry Council president Andy Wu Keng Kuong. Ms Chan promises to fight for the rights and welfare of workers in all industries. “I don’t want people to talk about gaming because of my husband. That’s why, over the years, I haven’t mentioned gaming in the assembly,” Ms Chan said in a televised debate. “As a legislator, I can’t be helping only one single sector.” Ms Chan promises to push to make domestic violence a crime that anyone can report, not just the victims. She supports the idea of a trade union law and an early review of the ban on smoking indoors.
Fierce contest for two extra assembly seats Young voters that yearn for social change will be the key group to fight for, observers say Stephanie Lai
Associação dos Cidadãos Unidos de Macau (Macau Citizens United Association), led by Chan Meng Kam Supermarket operator Chan Meng Kam, widely considered the leader of the Fujanese community in Macau, is seeking re-election with a new running mate, Si Ka Lon. Mr Si is a strong contender to take the seat occupied by Mr Chan’s previous running mate, property developer Ung Choi Kun, who has retired from politics. Mr Chan’s ticket is the biggest of the 20 contesting the directly elected seats, having 14 candidates – the most allowed by law. Mr Chan is a member of the Executive Council and the owner of the Golden Dragon Casino. His political programme is aimed at voters at the grassroots, promising to tackle inflation, end monopolies of public concessions and improve public housing. He is calling on the government to set up a “publicly owned gaming company that all Macau residents would have a stake in”. In an interview with Business Daily in July, Mr Chan said a licence should be given to a company ultimately owned by Macau residents, to be run by one of the present gaming concessionaires or a new one. He denied that the idea was an election gimmick. His ticket is now putting more emphasis on the accountability of government officials than it did in 2009. He says he will urge “useless officials to step down”.
União Promotora para o Progresso (Union for the Promotion of Progress), led by Ho Ion Sang Ho Ion Sang heads the ticket that represents the General Union of Neighbourhood Associations, or Kai Fong. The second candidate on the ticket is the vicedirector of the Women’s General Association, Wong Kit Cheng. The Kai Fong has run a large network of community services for years. It has strong ties with the pro-Beijing Women’s General Association and associations of Chinese settled abroad. In the outgoing Legislative Assembly Mr Ho pressed the government on housing and social welfare. His ticket’s political programme follows the “Macau land for Macau people” slogan. The programme urges speedier redevelopment of old districts of the city. A bill on the rejuvenation of old districts has been in the works since 2005. The outgoing assembly failed to pass the bill before it was dissolved. The Kai Fong and the Women’s General Association both portray themselves as champions of women’s rights and children’s rights, and of family-friendly policies. Their ticket has refrained from backing calls to make domestic violence a crime that anyone can report, not just the victims, saying that helping families stay together is more important.
Associação de Próspero Macau Democrático (Democratic Prosperous Macao Association), led by Ng Kuok Cheong (bottom) and Paul Chan Wai Chi Ng Kuok Cheong, who has been an assembly member since the days of Portuguese rule, joins fellow-member Paul Chan Wai Chi on this ticket, one of three that the New Macau Association has put up. The pro-democracy association is aiming to get four seats in the new assembly. The association has struggled to gain support for its proposals to have the chief executive elected by universal suffrage and to have more directly elected seats in the assembly. As in past elections, Mr Ng’s ticket wants the assembly to be given the right to debate and vote on the granting of all public concessions. The ticket demands that the assembly be given the right to approve or reject the budgets for government infrastructure projects costing over 40 million patacas. Mr Ng says this amount is based on the cost of the most expensive projects in the government’s budget for capital spending. He says his ticket follows the “Macau land for Macau people” slogan. The ticket says it will urge the government to consider allowing tenants in public housing for rent to own their homes eventually.
ith two more seats up for grabs in the upcoming direct election, the number of electoral tickets is also the highest ever, 20, thanks to several bids from grassroots labour groups. With the incumbent legislators expected to retain their spot, the competition is strongest for the new seats added by last year’s political reforms, political analysts reckon. Second-time candidates Agnes Lam Iok Fong, Kuan Vai Lam, Jason Chao Teng Hei, Kent Wong Seng Hong and veteran contender Paul Pun Chi Meng are the main competitors, analysts added. Mr Chao, president of New Macau Association, leads ticket number two ‘New Macau Liberals’ with four other candidates, all younger than 30. Two of the candidates are members of the gaming workers’ activist group Forefront of the Macao Gaming. New Macau Association launched three electoral tickets in the hope of gaining four seats. “It is a good strategy because Au [Kam San], unlike Ng Kuok Cheong, can hardly help to win two seats,” Bruce Kwong Kam Kwan, assistant professor of politics and public administration at University of Macau, told Business Daily. “So Jason [Chao] can try to use his image and specific age group to obtain a fourth seat for his association,” Mr Kwan added. Public policy experts Eilo Yu Wing Yat and Larry So Man Yum believe New Macau Association’s strategy is very risky. “It is really hard to say how the strategy might work out eventually on the voting day,” said Mr Yu, assistant professor at University of Macau’s department of government and public administration. “It is possible that voters eventually just give their votes to the most promising candidates, and the [third] additional ticket may not get as many votes as they wanted,” Mr Yu added.
Fierce competition The tickets led by University of Macau professor Agnes Lam – ‘Civic Watch’ – and first-time candidate Kou Ngon Fong – Breakthrough Action – are also on the running. Their focus on social justice and democratic development can appeal to young voters, academics noted. There are 277,000 registered voters, about 28,500 more than in 2009. Almost 19 percent are younger than 30. The number of voters aged between 18 to 24 is roughly about 10,000 people and they could play a big role in the election outcome, scholars stressed. “But the higher proportion of young voters does not necessarily guarantee that a candidate like Jason Chao will have a particular edge,” said Mr Yu. “It is true that young people also complain against the government
a lot, especially over housing, and there have been more young people shouting out their discontent these days,” he said. “But on the overall Macau’s society is still dominated by conservative voices.” “In addition, some associations have pushed their young members to register as voters, with the aim of having them support those associations,” said Mr Yu. “So it is hard to assess how big the winning chances are for Jason Chao.” Agnes Lam’s Civic Watch has tried to target independent professionals, namely by launching a political programme calling for a more democratic political system. The ticket led by developer Kuan Vai Lam also mentions promoting democracy in his programme but the focus goes mostly to livelihood issues and responsible gaming. “For sure Agnes Lam and Jason Chao will be fighting for the same group of target voters: young professionals that believe in democratic changes,” said Mr So, a Macau Polytechnic Institute professor and political commentator. “Mr Kuan’s group is not so much in direct competition,” said Mr So. “It is more likely that Mr Kuan will be gaining votes from people that like the traditional [associations’] proposals.”
Grassroots lure Mr Pun, the secretary-general of Catholic charity Caritas, is running for a fourth time. His ticket is likely to achieve a similar number of votes as in previous terms, which would leave the social worker far from reaching a seat, both Mr Yu and Mr So reckon. Mr Pun’s team got 2,334 votes in the 2009 legislative election, out of a total of 141,797 valid votes. “The people that Mr Pun know at work, such as the social workers and charity groups, will always be the same voters that support him,” Mr So reckons. “So Mr Pun’s voting base is pretty stable and will not change much this time.” There are five grassroots labour groups trying to steal votes from traditional associations like the Federation of Trade Unions. The two tickets led by Lee Kin Yun and Lei Man Chao are placing particular emphasis on more democracy elements. But the other groups generally share a focus on protecting resident workers employment and dealing with livelihood issues.
September 10, 2013
Hard sell banned under new tour rules Possible 10 pct dip in package tours once ‘zero fare’ groups banned by mainland authorities Tony Lai
igher holiday tour fees, caused by the implementation of a new mainland law next month, will put some Chinese trippers off Macau, suggest several holiday industry executives. They expect a double-digit fall year-on-year from October until the end of the year in the number of package tours. The Macau Government Tourist Office said they are “closely monitoring” the tourist inflow to see whether there will be a significant decline. The reason is a tourism law coming into force in the People’s Republic next month. It includes a ban on sharp or controversial practices including so-called “zero-fare” group tours. There have been cases of tourists to Macau and Hong Kong complaining they were forced to shop during tours originally advertised as either cheap or free of charge. It emerged last week that a bogus guide in Hong Kong is facing a possible jail sentence after using the identity of a licensed guide on a tour where a mainland tourist died following an argument. In Macau the police have been called on several occasions after scuffles broke out between tour leaders and visitors in disputes over shopping stops or attempts to charge for entry to casinos when no such door charge exists. Andy Wu Keng Kuong, president of the Macau Travel Industry Council, believes the tour rule changes will bring “temporary pain” to the sector here. “Some mainlanders will definitely hesitate to travel for some time when they see such a surge in tour fares, such as from 3,000 yuan to 4,000 yuan,” he told Business Daily. “They probably need some time, likely the remainder of the year, to adapt to this new pricing scheme,” he added. “It is difficult to evaluate the impact now but it will not be
surprising if the number of package tour visits decline [year-on-year] for some 10 percent in October,” claimed Mr Wu. Maria Helena de Senna Fernandes, head of the Macau tourism bureau, said: “After talks with the China National Tourism Administration, we both think it is better for the longterm tourism development, though there may be a temporary pain.” “It is more important to let tourists visiting Macau enjoy the standard services than to maintain the quantity [of visitors],” she said on the sidelines of a public event yesterday. The new law will not allow travel agencies to organise package tours at “an unreasonably low price”. It also bars hidden charges. Agencies additionally are not allowed to insist tourists to shop at particular places, says the new law. Any violations of the new code could lead to fines of up to 300,000 yuan (388,247 patacas) and revocation of a tour agency’s licence.
Price hikes It is recently reported that such change will bring up the fares of mainland tours to Macau and Hong Kong by between 30 percent and 70 percent next month from now. State-controlled newspaper People’s Daily recently reported that one particular five-day tour from Beijing to Macau and Hong Kong will charge 6,760 yuan per person from October 4 compared with 3,960 yuan for the same trip starting on September 25 – a difference of 70 percent. Business Daily asked four travel agencies across the border in Guangdong province about the tour fare hikes, but all of them said October prices will not be published until next week. But an agent surnamed Chen at GZL International Travel Service Ltd said the fare next month would be up by half from the current
price. Customers currently pay 1,700 yuan for a four-day tour from Guangdong to the two special administrative regions. “It is partly related to the holiday season of National Day starting at October 1 but the new price also includes other expenses like tourist guide fees that we charged separately before,” said Mr Chen. Cheong Chi Man, vice-president of Macau Travel Agency Association, said the hike particularly hit lowprice shopping tours relying on shop commissions when visitors spend money in outlets. The price for sightseeing tours remains stable, he told Business Daily. “Regardless of the [nature of the] tours and the law, the visitors will just spend a similar amount of money, but now the official price is higher,” he said. Mr Cheong thinks the decrease in tour visitors will be “within 5 percent to 10 percent”.
Mainland boost Latest official data show the city received more than 4.6 million package visits in the first half of 2013 – an increase of 12.9 percent year-onyear. Mainland trippers accounted for 3.5 million of the package visitors – more than 75 percent of all package tourists. Package tours accounted for about one-third of the 14.1 million visitors to the city in the first half of this year, government data suggest. Mr Wu declined to estimate the overall visitor figures for the remaining months but he is still upbeat regarding October’s Golden Week. He explained: “The National Day Golden Week is usually dominated by the mainlanders travelling under [the] individual visit scheme rather than package tours, so I believe there can still be reasonable increase in the number [of visitors].” Ms Senna Fernandes expects the number of visitors during the National Day holidays to be similar
KEY POINTS ‘Zero fare’ tours to be banned by mainland Tour fares could rise 70 pct Possible 10 pct fall y-o-y in package tours Individual Visit Scheme tourism likely to increase
to last year. She added they would carry out inspections to ensure the sector follows regulations and the new law. They will also keep in touch with other government departments, namely to avoid new scenes of overcrowding at Macau’s border crossings, she said. Last year during the October holiday the city saw a nine-percent year-on-year increase in travellers to more than 954,000. “The travel agencies here or on the mainland will definitely promote more tourism products for individual visit scheme [visitors] than before,” said Mr Cheong, adding the city’s overall tourism market would remain stable. But Mr Wu is less bullish. “Despite the apparent hike in the fare price, it is still cheaper to travel under tour groups than [on an] individual basis as travel agencies can get beneficial prices for accommodation and restaurants.” “Mainlanders also usually come here in tour groups for the first time, being unfamiliar with the city, while more will then travel as individuals in the second visits and onwards,” said the tour council president. With Michael Grimes
No pressure – new rules for package tours
September 10, 2013
Lack of evidence lets illegal inns dodge fines Govt admits to difficulties in catching masterminds behind illegal accommodation Tony Lai
t has proven difficult to get enough evidence to convict operators of illegal inns, the Macau Government Tourist Office says. Office director Maria Helena de Senna Fernandes admitted there are only “a few cases” that have led to penalties being imposed, after units allegedly providing illegal accommodation were sealed. “Even though we crack down on these units, we still need to investigate who are the operators behind them – some can be identified at the scene but some we need time to find out,” she said yesterday. Official data show the office investigated 1,795 premises since the law on unlicensed accommodation came into force three years ago. The government sealed 377 units until last month and launched 383 sanction proceedings against offenders. Speaking on the sidelines of a Global Tourism Economy Forum press conference, Ms Senna Fernandes added they are still
Tourist walking trails will be ready before National Day, Ms Senna Fernandes says
looking at a recent case involving high-end project One Grantai. The official declined to comment on whether or not the illegal accommodation law needs to be revised.
The tourism office “is prepared” to curb any irregularities by carrying out more inspections during the coming Chinese National Day holidays next month, she said. Additionally, details on the four
walking trails aimed at diverting tourists from downtown Macau will be released later this month, before the holiday visitor inflow, Ms Senna Fernandes said.
Mainland reliance The city’s reliance on mainland Chinese tourists is its current main “limitation”, said Pansy Ho Chiu King, co-chair of MGM China Holdings Ltd and managing director of Shun Tak Holdings Ltd. “But the [mainland] market is evolving as there are different segments today out of that market,” the daughter of gaming tycoon Stanley Ho Hung Sun quickly added. “There are [Chinese] travellers who will be also interested in exploring other tourism offerings [beside gaming], which is exactly an area we must work on,” she said in yesterday’s press conference. Latest official data show the city received 16.7 million visitors in the first seven months of this year, with the mainland market accounting for 63.2 percent. Ms Ho said Macau is now “in the midst of a most advantageous situation” due to the growing integration with neighbouring cities brought on by the developing infrastructure network. The Hong Kong-Zhuhai-Macau Bridge is due to open in 2016, and is expected to shorten some road travel times around the Pearl River Delta region. The second edition of the world tourism forum will be held here next week with the focus on “Regenerate our Economies: Invest in Travel and Tourism”.
September 10, 2013 April 19, 2013
SJM joins hunt for Japan casino Other Macau ops previously linked to potential market encouraged by ‘Abenomics’, Olympics
We can bring technical know-how to a local partner in Japan Ambrose So, CEO of SJM Holdings
JM Holdings Ltd, founded by former Macau casino monopolist Stanley Ho Hung Sun, has confirmed it is interested in developing a casino resort in Japan. The firm has previously been speculatively linked with a possible Japan bid, but its interest was confirmed in an interview given by SJM’s chief executive Ambrose So Shu Fai to Bloomberg News. “We can bring technical knowhow to a local partner in Japan,” said Mr So, adding that the company would prefer Osaka to Tokyo as the Japanese capital city is already too crowded and doesn’t offer much land for large development. Earlier this year, SJM conducted on-site studies in Taiwan’s Penghu and Kinmen, he also told Bloomberg. The outlying island chains close to mainland China have been identified by Taiwan as possible sites for casino resorts. Tokyo’s selection – on Saturday Buenos Aires time – as host for the 2020 summer Olympic Games comes at a time when Japan’s current Prime Minister Shinzo Abe appears determined to implement real structural reforms in Japan’s economy. Taken together, the two factors appear to have to boosted international investors’ confidence that Japan’s parliament will pass the long-awaited necessary legislation both to legalise casino resorts and to regulate them. Takeshi Iwaya, a lawmaker from the governing Liberal Democratic Party and who heads a group set up to promote casino legislation, said in June he intends to submit a bill this autumn. Japan is likely to pass an enabling law in October or November on the principle of allowing casinos, added Jay Defibaugh, an analyst at CLSA Asia-Pacific Markets in Tokyo and his colleague Aaron Fischer, head
of Asian Consumer and Gaming Research based in Hong Kong. The specific details about sites and operators will probably come later they suggest. That would set the stage for Japanese casino resorts to open by 2019 or 2020, the analysts said in a report earlier this year. They suggest casinos would generate about US$10 billion (79.9 billion patacas) a year with two resorts – one in Tokyo and one in Osaka. Sceptics point out many previous lawmaker-proclaimed deadlines on casino legislation have come and gone without any action.
Renewed effort Two other Macau investors – Las Vegas Sands Corp, MGM Resorts International – previously linked to Japan in company statements, also confirmed to Bloomberg they are scouting sites there. “There are specific locations we have been focusing on,” George Tanasijevich, chief executive of LVS’ Singapore operation, told Bloomberg by e-mail. He declined to name the sites. MGM Resorts says it is also preparing to team up with a consortium of Japan-based companies to prepare for a possible bid should casino resorts be legalised according to an e-mail to Bloomberg from Ed Bowers, the Las Vegas-based company’s senior vice president for hospitality. “We have been meeting with various potential local partners,” Mr Bowers said, without identifying any. “What you’ve seen since the Abe administration has come in is they have put strong leadership on these issues,” added Mr Tanasijevich. “I feel quite optimistic about it.” Macau operator Wynn Resorts Ltd and its sub-concessionaire Melco Crown Entertainment Ltd
have also been linked with Japan. Wynn’s previously mooted potential local partner, Japanese pachinko entrepreneur Kazuo Okada – had a terminal falling out last year with the company and its chairman Steve Wynn. Other casino operators mentioned as possible Japan licensees or joint venture operators are Malaysia’s Genting Bhd and Las Vegas-based Caesars Entertainment Corp. Japanese firm Dynam Japan Holdings Co Ltd is going to run a pachinko hall at Macau Fisherman’s Wharf starting next year, the company said last month. The venture with Macau Legend Development Ltd, of businessman David Chow Kam Fai, could be the first step in a future joint bid for a gaming licence in Japan, said Union Gaming Research Macau analyst Grant Govertsen.
Local partners Potential local partners for international casino operators include trading companies such as Mitsui & Co, Mitsubishi Corp and Itochu Corp and gaming machine makers Sega
KEY POINTS SJM CEO says firm interested in Japan Prefers Osaka over Tokyo Other Macau ops renewing efforts Casinos encouraged by Abe reform spirit
Sammy Holdings Inc and Konami Corp. The trading companies have project-finance experience and real estate development connections, while the game makers have helped develop casino projects and technology outside of Japan. Sega Sammy, a video game and pachinko machine company, is reportedly developing a casino resort near South Korea’s Incheon airport with Seoul-based Paradise Group. Tokyo-based Sega Sammy amassed cash and readily liquid assets totalling 176.5 billion yen (US$1.77 billion) as of the end of last fiscal year, the highest fiscal year-end figure in at least eight years, according to data compiled by Bloomberg. Konami, which also produces arcade games and gambling machines, has also boosted gambling equipment and systems to about 13 percent of revenue as of the quarter ended in June, compared with seven percent in the quarter ended June 2009. Tokyo and Osaka have been the two cities most frequently mentioned as favourites to host such a resort or resorts. The selection of Tokyo by the International Olympic Committee appears to have made it the favourite for a first gaming resort. But given the world-class transport infrastructure in the country, including the highspeed Shinkansen or ‘bullet train’ network, a resort could potentially be at some distance from Tokyo and still benefit from the extra tourists expected in Japan for the 2020 games. According to Japan Railways Group, the 512-kilometre (318-mile) journey from Tokyo to Osaka takes two hours, 25 minutes. MGM Resorts, Wynn and LVS are scheduled to make presentations at a conference Las Vegas-based research house Union Gaming Group is hosting from September 17 to 19 in Tokyo. M.G. with Bloomberg News
September 10, 2013 April 19, 2013
Urban rejuvenation tax breaks mooted Stamp duty and other costs discourage redevelopers, a government adviser says Stephanie Lai
roperty developers and owners that wish to redevelop old buildings should be exempt from stamp duty and inheritance tax, says the head of the committee that advises the government on the rejuvenation of old districts, Leong Keng Seng. Mr Leong said exemption would give developers and owners more courage to face the daunting legal difficulties of redevelopment. The law requires the owners of all flats in a residential building to agree to any redevelopment, even if grave structural problems make redevelopment necessary. “In Macau there are over 2,200 residential buildings aged 30 or older, usually with seven storeys or fewer, that lack proper management and have many structural problems,” Mr Leong told reporters after a meeting of the advisory committee. Mr Leong is a member of the General Union of Neighbourhood Associations, which helps coordinate projects such as the redevelopment of the Fok Leng building in San Kio. “It had 28 households in total. You had to group the owners into one legal entity and apply to the Land, Public
The law requires owners of all flats in a residential building to agree to any redevelopment
Works and Transport Bureau for permission to reconstruct,” he said. He said taxation was an important matter. The owners transfer ownership of the property to a developer through housing presale contracts, on which the developer has to pay stamp duty and fees to register the property with the government. Once redevelopment work is
New Japanese interest in Ponte 16 Success Universe, JV partner at Inner Harbour casino resort, sells indirect stake to SBI Holdings Michael Grimes
Japanese investment firm has exercised a five-year old option to take an indirect stake in Macau casino investor Success Universe Group Ltd. The amount involved is HK$130 million (US$16.8 million). Last week, Success Universe said in another filing to the Hong Kong Stock Exchange that it had spent approximately HK$219.12 million to buy back an indirect stake held for several years by another Japanese investor – pachinko hall operator Maruhan Corp. The new investor is SBI Macau, a local unit of Tokyo-based and -listed SBI Holdings Inc. SBI’s activities include financial securities, banking, insurance, housing loans, foreign exchange and financial media. Under a share and purchase agreement originally made in July 2008, SBI – via SBI Macau – will buy a stake in Success Universe from Jumbo Favor, an indirect wholly owned subsidiary of the firm. Success Universe, a 49 percent investor in the Ponte 16 casino resort next door to Macau’s Inner Harbour, recorded a profit of HK$68.08 million in the six months to June 30, on turnover that actually fell
2.3 percent. Another Japanese firm – pachinko hall operator Dynam Japan Holdings Co Ltd – in July took a US$35 million (280 million patacas) stake in gaming services provider Macau Legend Development Ltd, which operates the Pharaoh’s Palace Casino and the Babylon Casino. It does so under a gaming licence from Sociedade de Jogos de Macau SA. The latter also provides Ponte 16’s licence. Late last month Dynam said it planned to run a pachinko operation at Macau Fisherman’s Wharf – a waterside development on the city’s peninsula controlled by Macau Legend, although Business Daily understands the regulatory details are still being discussed with the city’s regulator, the Gaming Coordination and Inspection Bureau. Japanese firms have recently shown a renewed interest in Macau gaming investments. Several analysts have attributed that both to a more adventurous approach to overseas investment inspired by the current Japanese Prime Minister Shinzo Abe, and a desire to gain experience of casino management in case casinos are legalised in Japan and licences come up for bid or auction.
finished, the owners must pay special stamp duty at the rate of 20 percent when they get their new flats. In some cases the owners also have to pay inheritance tax. Mr Leong said giving relief from all this taxation could prove to be a real incentive to redevelop. “We had cases where, for a single unit, the taxes involved could amount to 200,000 patacas (US$25,000) to
300,000 patacas,” he said. “This is a serious issue that the advisory committee should consider.” The General Union of Neighbourhood Associations said in a written submission to the advisory committee that allowing developers to build taller buildings “can generate profit and offset the construction costs for the homeowners”. The head of the Land, Public Works and Transport Bureau’s urban planning department, Lao Iong, acknowledged that taxation was an issue, but said more debate was needed before any changes could be made. Mr Lao told Business Daily that the advisory committee would also have to discuss whether to allow only the majority of the owners of space in a building, instead of the all owners, to approve any redevelopment. He said it was unclear whether the lapsed bill on the rejuvenation of old districts would be submitted to the new Legislative Assembly. The outgoing assembly dropped the bill last month because it needed changes to bring it into line with land, urban planning and cultural heritage protection legislation.
September 10, 2013 April 19, 2013
Benign inflation adds to recovery hopes
Police raid Shanghai casino
Data offer fresh hope of solid second-half growth
uted inflation data yesterday added to a run of August figures suggesting the protracted slowdown in China’s economy may be bottoming out, helped by targeted support measures and signs of improved export demand. A steady consumer inflation rate also gives the People’s Bank of China some room to manoeuvre in response to any shock that might arise as the U.S. Federal Reserve starts to taper its monetary stimulus. However, any sharp policy shifts in the world’s second-largest economy seem unlikely amid concerns about rising property prices and after efforts to curtail unregulated lending. “There is no sign of any shift in monetary policy,” said Jerry Hu, an economist at Shanghai Securities Co Ltd, who saw stable consumer prices in the months ahead. “I think monetary conditions will become tighter, probably through a combination of quantitative tightening and low interest rates.” Consumer prices rose 2.6 percent in August from a year earlier, the National Bureau of Statistics said, in line with market expectations and July’s 2.7 percent rise. Month-onmonth, prices were up 0.5 percent, slightly stronger than a forecast rise of 0.4 percent.
Producer prices fell an annual 1.6 percent, less than both a market forecast of 1.8 percent and a fall of 2.3 percent in July. While factorygate deflation has now lasted for 18 months, the pace of decline has steadily eased from a peak of 3.6 percent in September 2012. “The trend of stabilisation in the economy is becoming clearer,” Yu Qiumei, a senior statistician at the bureau, said in a statement. There are increasing signs that China’s economy is finding its feet after slowing in nine of the past 10 quarters, with other data already out for August showing some strength. Exports rose more than expected, helped by improving demand in major markets, and manufacturing surveys suggested capital spending and industrial output have gathered steam in response to government steps to spur investment and promises to push through reforms. As recently as a month ago, investors had worried that China was slipping into a deeper-than-expected downturn, especially after its money market was hit by an unprecedented cash crunch in June as the central bank sought to curtail credit growth. But policy makers have stepped in with a series of measures aimed at stabilising the economy, including quickening railway investment and
public housing construction and introducing policies to help smaller companies with financing needs. Data for industrial output, fixed asset and retail sales due today is expected to increase confidence a sharp slowdown has been avoided. Vice Finance Minister Zhu Guangyao has said there was no need for government stimulus and growth could instead be supported through structural adjustments. For its part, the central bank has kept policy stable since the start of this year, with some fine-tuning to support the slowing economy while heading off inflation risks. For now, a major uncertainty is how investors will respond if the U.S. Federal Reserve does begin trimming its stimulus later this month. Some see a risk that a clutch of big developing economies are vulnerable to capital outflows. “Gi ven the weeken d tr ade performance, we think China’s economy is stabilising, but a sustained upside trend is still uncertain,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai. “The moderation in August imports reflected still weak domestic demand, and we should not underestimate the impact of tapering of U.S. monetary stimulus.” Reuters
The consumer-price index rose in August
Minhang district police have arrested more than 60 gamblers and employees after raiding an underground casino that was taking at least 1 million yuan (US$163,385) in bets each day, the state-run Global Times reported yesterday. Police found out about the illegal casino after receiving a tip from Shanghai Television Station, which was working on an exposé about the establishment, the Shanghai Public Security Bureau said over the weekend, according to the newspaper. The casino had been operating in secret out of a commercial building for several months. According to Global Times, a Shanghai TV news reporter conducted an undercover investigation of the casino for the report. On the first floor, there was sparsely populated arcade with more than a dozen video gambling machines, according to the report. The second floor, however, was packed with cash-clenching gamblers betting on table games such as baccarat. Police officers raided the casino on Thursday evening and uncovered a VIP room on the third floor that was only accessible by a secret stairwell, police said. The stairwell was behind a keypadlocked door at the end of a passage hidden by a mirrored wall. Gamblers in the VIP room played at 1,000-yuan minimum bet tables. There was no upper limit on the betting, police said.
Huishan dairy seeks US$1.3 bln in HK IPO China Huishan Dairy Holdings Co, the milk producer backed by billionaire Cheng Yu Tung, is seeking as much as US$1.3 billion in an initial public offering in Hong Kong, said two people with knowledge of the matter. Huishan Dairy plans to offer 3.8 billion shares at HK$2.28 to HK$2.67 apiece, said the people, who asked not to be identified because the information is private. The company, based in Shenyang city in northeast China, plans to take orders this week and start trading on September 27, they said. The IPO is Hong Kong’s biggest since Sinopec Engineering Group Co raised US$1.8 billion in May, according to data compiled by Bloomberg. Companies have raised US$5.9 billion through initial sales in Hong Kong this year, more than double the proceeds for the same period of 2012, the data show. The price range values Huishan Dairy at 14.4 to 17 times estimated 2014 earnings, they said. A Hong Kong-based external spokeswoman for Huishan Dairy could not immediately comment on the IPO plan.
HK launches electric bus
China charges Ding in railway graft case C
hina charged a well-known businesswoman, who has ties to a disgraced former railways minister, with bribery and illegal business activities yesterday, state media reported. Ding Shumiao, helped 23 businesses win railway construction contracts and funnelled 49 million
yuan (US$8 million) worth of kickbacks to former railways minister Liu Zhijun, the official China Daily said, citing Beijing prosecutors. She also “offered sexual favours to Liu by arranging an unidentified number of women for him”, the paper said. There was no immediate comment from either Ms Ding or her family about the report. The China Daily report said Ms Ding also intervened in bidding for dozens of railway contracts through her relationships with ministry staff and engaged in illegal business operations valued at 178.8 billion yuan. It appeared to be yet another example of the graft on which China’s ruling Communist Party
has been cracking down. President Xi Jinping has said graft threatens the party’s survival. Ms Ding, 58, had humble beginnings as an egg seller but over three decades built a business empire with interests in the coal business as well as China’s high-speed rail system. Officials began an inquiry into her business when an auditing authority found a state-owned enterprise paid nearly 100 million yuan to her company, the China Daily reported. After a high-profile trial this summer, Mr Liu received a suspended death sentence, a uniquely Chinese punishment that usually amounts to life in prison, for taking bribes and steering contracts to associates. AFP
Hong Kong’s first battery-powered public bus took to the streets yesterday as part of a drive against the city’s choking pollution. Chief executive Leung Chun Ying has pledged to make pollution one of his top priorities during his five-year term, with an official report saying it was the “greatest daily health risk” to the city’s residents. The new single decker bus revealed yesterday was manufactured by Chinese automaker BYD Co and is powered by lithium iron phosphate batteries that take three hours to charge and give the vehicle a range of about 180 kilometres (110 miles). The same company produced the southern Chinese city’s first electric taxis, which were launched in May. Secretary for the Environment Wong Kam Shing said the government was investing HK$180 million (US$23 million) in the pilot scheme over the next year, helping to subsidise the purchase of 36 electric buses that will be run by private companies. “The long term goal is towards zero emissions along the roadside,” he told a press conference, without giving a timeframe for the expansion of the pilot scheme,” he said. “We need to do it step by step.” Kowloon Motor Bus, the largest operator involved in the trial scheme, said it would take time and money if it was going to transform its fleet of 3,800 buses, with each battery-run vehicle costing about HK$5 million.
September 10, 2013 April 19, 2013
PetroChina says report of more probes ‘inaccurate’ Local media reported detention of five executives Anne Marie Roantree and Chen Aizhu
PetroChina embroiled in major corruption investigation
hares in Chinese oil producer PetroChina Co Ltd rose as much as 1.7 percent when they resumed trade yesterday, after the
company said a newspaper report that more of its executives were being investigated was inaccurate. The China Business News said
Longer wait for residency permits irk foreign firms New rules could hamper travel for foreign executives
oreign executives in China are upset at a new rule that allows authorities to hold passports for up to 15 working days when processing and renewing residency permits, saying it could disrupt essential business travel within China and abroad. The changes are evidence to those who argue China is becoming a harder place to do business, especially following a wave of antitrust investigations that some executives contend have singled out foreign firms. The increased processing time from five working days had prompted a “flood” of complaints from the expatriate community, said Gary Chodorow, a Beijingbased immigration lawyer at Hong Law Offices. “What concerns companies is profit. When people are grounded they are not doing business. They are not making money,” he said. The new rules took effect on July 1. Chinese officials have said they aim to deal with the rising flow of foreigners coming to China and to protect national security and social order. The Ministry of Public Security handles residency applications, which are renewed annually. Mr Chodorow said the new rules could hamper travel for foreign executives who oversee offices throughout Asia, especially as cities such as Beijing and Shanghai have encouraged
multinationals to establish AsiaPacific headquarters there. Foreigners are required to show passports when travelling by train or plane within China, and for registering at hotels. Mr Chodorow said he didn’t believe the government was using the policy to encourage the hiring of more Chinese executives at foreign firms or to make life difficult for multinationals. “I think it is possible that the concerns of the business community were not anticipated,” he said. In late August, Qu Yunhai, the deputy director for the Ministry of Public Security’s Bureau of Exit and Entry Administration, said 15 working days was the maximum authorities would hold passports. He told a news conference individuals could ask for their passports for emergency travel, although it was unclear how that would work outside normal office hours. “The current issue with the 15day wait is that it is too long. For many people living here that need to travel, it is too big of an impediment,” said Adam Dunnett, secretary general of the European Union Chamber of Commerce in China. “There is always something that falls through the cracks or there isn’t an obvious solution for or that somebody didn’t think of. That’s the reason why consultation is helpful ahead of time.” Reuters
five executives, including vice president Sun Longde and director Wang Guoliang, had been detained, citing an unidentified source within the company. PetroChina is embroiled in a major corruption investigation but it said the report was inaccurate, adding that both Mr Sun and Mr Wang continued to work as usual. The shares were suspended from the morning session. They rose to as high as HK$8.85, up 1.7 percent, before closing at HK$8.81. “The fundamentals of the business are likely to see very limited impact. However, the uncertainty and the potential for a lengthy legal process to unfold is likely to be a near-term overhang on the stock performance,” Andy Meng, an analyst at Morgan Stanley, said in a note. Shares in PetroChina, one of the world’s most valuable oil companies, were also suspended for a day on August 27. Since then, the government has said five former senior executives at
PetroChina and its parent, China National Petroleum Corporation (CNPC), were being investigated. That included Jiang Jiemin, the former chairman of both entities. The four others are former CNPC vice president Wang Yongchun and three former executives at PetroChina – vice president Ran Xinquan, chief geologist Wang Daofu and board secretary Li Hualin, who was also a vice president of CNPC. Hong Kong-listed Wison Engineering Services Co Ltd, a major PetroChina customer, said earlier this month its chairman and controlling shareholder, Hua Bangsong, was assisting authorities in an unspecified investigation. The investigations come amid an anti-corruption campaign by Chinese President Xi Jinping. Local media reports have said the PetroChina probe appears to be targeting people who worked in the late 1980s at the Shengli field, the country’s second-largest oil field by output and located in China’s eastern Shandong province. Mr Jiang, the highest-ranking official named in the probe, started with the company at Shengli and rose to prominence with the support of Zhou Yongkang, China’s former domestic security chief, who stepped down last year from the elite Politburo Standing Committee. Sources have told Reuters that Mr Zhou, who spent years working in the oil industry, is helping authorities in a corruption probe but contrary to some media reports is not currently the target of the investigation. Reuters
September 10, 2013 April 19, 2013
Ping An Bank to sell shares to parent Lender seeks to bolster balance sheet, speed up branch expansion Share sale awaiting regulatory approval, Ping An said
ing An Bank Co Ltd, the least-capitalised among China’s 17 publicly traded lenders, plans to sell 14.8 billion yuan (US$2.4 billion) of stock to its controlling shareholder to bolster its financial strength. Ping An Insurance Group Co of China Ltd will buy about 1.32 billion shares at 11.17 yuan each in a private placement, the Shenzhen- based insurer said in an exchange filing. The subscription price is about 1.3 percent higher than Ping An Bank’s September 5 closing value. The sale, smaller than an earlier announced plan, adds to a round of fundraising by Chinese lenders, which have announced equity and bond sales this year seeking as much as 327 billion yuan as capital rules tighten. Ping An Bank is seeking to
Chong Hing Bank remains in sale talks C
hong Hing Bank Ltd said its controlling shareholder is still holding talks to sell a stake in the lender. The owner of Liu Chong Hing Investment Ltd, the bank’s parent company, “remains in dialogue with certain independent third parties” regarding a possible sale, the companies said in a joint statement yesterday. Liu Chong Hing is controlled by the bank’s founding Liu family. The announcement follows a statement last month that a buyer had approached the owners. Takeover speculation has mounted since November, when Lau Wai Man was named the first chief executive of the
bolster its balance sheet and speed up branch expansion to cope with growing competition from rivals. “The new plan is less than the market expected and not enough to completely relieve Ping An Bank’s capital shortage,” said Tang Yayun, a Shanghai-based analyst at Northeast Securities Co, who rates the stock a buy. “It needs to sell more debt to boost supplementary capital, or retain more earnings to meet the new rules.” The bank’s shareholders in September 2011 approved a plan to raise 20 billion yuan by selling shares to Ping An Insurance. The authorisation was extended for a year in 2012 and expired this month. Banking shares surged in Shanghai yesterday after Money Week reported that the securities
bank from outside the family, which controls about 60 percent of the lender. Shares of Chong Hing Bank have doubled to HK$29.50 since his November 28 appointment. A bid for the family’s stake in Chong Hing Bank could be HK$40 a share, or about 2.3 times book value, Oriental Daily News reported last month. The controlling shareholder “has not reached any commitment nor entered into any agreements” on a sale and will provide monthly updates until there is a decision on whether to make an offer or not, according to yesterday’s statement. Bloomberg News
Value of stock Ping An Bank plans to sell to controlling shareholder
regulator has held meetings with banks on allowing them to sell preferred shares. Agricultural Bank of China Ltd and Shanghai Pudong Development Bank Co may be the first to issue the securities, the report said. Ping An Bank rose 9.97 percent, the biggest intraday advance in more than three weeks, closing at 12.13 yuan in Shenzhen. Ping An Insurance gained 5.14 percent to 37.61 yuan in Shanghai. The share sale is awaiting r eg u l a to r y a p p r o v al , P i n g A n Insurance said. The transaction will help the bank boost its capital adequacy ratios to meet “increasingly strict” capital requirements from the China Banking Regulatory Commission, the Shenzhen-based lender said in a separate statement. It will also help the bank handle risk in a fast-changing domestic and external economic environment, Ping An Bank said. Ping An Insurance is buying the new shares to accelerate growth in its banking business, and to improve cross-selling between its insurance, banking and investment arms, China’s second-biggest insurer said. The stake held by the company and
its affiliates would rise to 59 percent from about 52 percent. China Merchants Bank Co, the nation’s sixth-largest lender by market value, said on September 4 it raised 27.5 billion yuan in the Shanghai portion of a rights offer, paving the way for it to complete the world’s third-largest share sale this year. The share sale would help improve the bank’s capital adequacy ratio to 9.97 percent at the end of the year, according to Ping An Insurance, which cited unidentified market analysts. The lender’s core capital adequacy ratio may increase to 8.83 percent, the parent company said. Ping An Bank said it targets a minimum capital adequacy ratio of 10.5 percent between 2013 and 2016, with a core tier-1 ratio of 8.5 percent at least. Its capital adequacy ratio fell to 8.78 percent as of June 30, and its core tier-1 ratio stood at 7.29 percent. Both measures ranked the lowest among the nation’s listed lenders.
Capital rules Under capital rules that took effect in China on January 1, nonsystemically important lenders such as Ping An Bank must have a minimum core tier-1 ratio of 5.5 percent, a tier-1 ratio of 6.5 percent and a total ratio of 8.5 percent by the end of 2013. Those levels will rise by 0.4 percentage point a year for the following five years. The deal will need the approval of Ping An Bank shareholders and regulators including the CBRC and China Insurance Regulatory Commission. Ping An Insurance will finance the buyout using internal capital and would be restricted from transferring the new shares for three years. Ping An Bank shareholders approved a plan in May to issue no more than 50 billion yuan of Tier-2 debt in the next three years, which will further boost its capital ratios, Ping An Insurance said in an e-mailed statement. Bloomberg News
September 10, 2013 April 19, 2013
Nagacorp bets on Russia resort Cambodia casino operator agrees to invest US$350 mln
ong Kong-listed NagaCorp Ltd became the second industry player to take a punt on a Russia entertainment zone not far from Beijing, agreeing to invest US$350 million (HK$2.7 billion) to build a casino, hotel and exhibition venue. The gaming operator said it agreed to develop a hotel and casino resort complex in the Primorye Region of Russia, under the name ‘Primorsky’ Entertainment Resort City. The authorities expect about 12 million people to visit the region – located next to China’s northeastern Heilongjiang province and to North Korea – once the casino operations begin to ramp up. The company will establish a subsidiary, which will then “apply for a casino permit pursuant to the federal laws of Russia,” it said. But it warned the project might not ultimately be realised “as the project remains conditional”.
NagaCorp, which is aiming to fund the project using equity and/ or debt, said the complex will have 100 gaming tables, 500 electronic machines, a large theatre facility to accommodate 2,000 people as well as entertainment offerings. Hotel suite homes will be part of the resort that aims to accommodate some 20,000 people. The company is working with government officials to let foreign purchasers of the apartment suites obtain visas, it said in the statement. Directors of the company anticipate that the process of obtaining all necessary permits for the construction may take “one to two years”. “The casino hotel complex would not begin operations before 2018,” Nagacorp said. Vladivostok, better known for its oil and gas pipelines, is trying to lure investors with a very low gambling tax compared to established markets. The only gaming tax is a monthly tax of approximately US$4,200 per
Nagacorp holds the sole licence to run casinos in Cambodia
gaming table and a monthly gaming tax of approximately US$250 per gaming machine, Nagacorp said. Macau casino developer Lawrence Ho Yau Lung pledged to
invest US$700 million (5.59 billion patacas) in a gaming resort there and on Friday signed the deal with the Primorye region administration. T.A. with Reuters
Japan GDP revision boosts sales tax calls Second-quarter growth was 3.8 percent, up from 2.6 percent Leika Kihara
“done deal,” putting the focus on how much stimulus policy makers will apply to offset the blow to consumption and growth. But Mr Abe, who has the final say on whether to proceed, is considered to be more cautious about raising the tax for fear of derailing a budding economic recovery and hurting the chance of beating deflation – which is among his top policy priorities. Etsuro Honda, an adviser to Mr Abe and a vocal opponent of the tax hike plan, warned that raising the sales tax now could destroy a golden opportunity to end years of price declines. “Japan is in the process of exiting deflation but is not out of it yet. The economy isn’t back in an autonomous recovery phase,” he told Reuters yesterday.
Economy growing faster than previously estimated
apan’s economy expanded much faster than initially expected in the second quarter, adding to growing signs of a solid recovery taking hold and fortifying the case for Prime Minister Shinzo Abe to proceed with a planned sales tax hike next year. The upbeat data came hours after Tokyo won its bid to host the 2020 Summer Olympics, which policy makers hailed as another tailwind propelling the world’s third-largest economy out of years of grinding deflation. A marked improvement in capital expenditure led to an upward revision in April-June gross domestic product (GDP) to an annualised 3.8 percent expansion from a preliminary 2.6 percent, data from the Cabinet Office showed yesterday. The third straight quarter of increase, which roughly matched the median market forecast, underscored the strength of Japan’s recovery and
boosted the chance the government will proceed with a two-staged hike in the sales tax. “Companies are replacing old equipment, which led to the large upward revision to GDP,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. “This means the government can raise the sales tax as scheduled.” Bank lending rose 2 percent in the year to August with lending by major banks marking the fastest increase in more than four years, separate data showed, suggesting that the improving outlook is spurring more borrowing for fresh investment.
Deflation worries Japan emerged from recession in 2012 and data for much of this year has shown the benefits of Mr Abe’s reflationary policies and the Bank of Japan’s aggressive monetary stimulus. The second-quarter GDP follows
an annualised 4.1 percent expansion in the first three months of this year, driven in large part by strong consumer spending. Corporate capital spending, which had been seen as soft in an otherwise robust economy, was revised up to a 1.3 percent rise from the preliminary 0.1 percent decline, marking the first increase in six quarters. The government has cited revised GDP as among key factors in deciding whether to go ahead with lifting the sales tax to 8 percent from 5 percent next April, and to 10 percent in 2015 – a step seen as crucial in fixing Japan’s tattered finances. Tokyo’s Nikkei stock average hit a five-week high on euphoria over Japan hosting the Olympics games, which was estimated to have an economic impact of more than 3 trillion yen and create 15,000 jobs. Analysts from Fujitsu Research Institute to UBS AG said a sales tax increase in April is now a
Revised GDP data positive, Amari says An upward revision to secondquarter gross domestic product was a positive sign that supports the Japanese government’s plan to increase the sales tax, Economics Minister Akira Amari said yesterday. Mr Amari told reporters that, if the government proceeds with the sales tax hike as scheduled, it should take steps to make sure that growth remains on track. He reiterated that Prime Minister Shinzo Abe will make the final decision on the sales tax increase in early October.
September 10, 2013 April 19, 2013
Xyec picks Singapore for historic IPO Drops Tokyo listing to raise funds from global investors elsewhere Tomoko Yamazaki and Komaki Ito
yec Holdings Co, the first Japanese company to debut only in Singapore, plans to expand its information technology business in Southeast Asia through acquisitions and by hiring local talent. The company plans to raise a couple of million dollars in an initial public offering and start trading on Singapore’s Catalist board for smaller enterprises on September 18, chief executive Manabu Kobayashi said. Tokyo-based Xyec is in talks with two Singaporean companies in the information technology industry about possible deals, he said, declining to elaborate because the talks are private. Xyec, which provides engineering and information technology services such as software development to manufacturers including a unit of Toyota Motor Corp, chose Singapore over Japan because of Southeast Asia’s growth potential compared with declining demand and shrinking population at home. It targets total sales growth of more than 50 percent
to 10 billion yen (US$100 million) in the next two years, with 10 percent of that total to come from the region, Mr Kobayashi said. “We want to make Singapore the base of our Asean expansion,” Mr Kobayashi, 48, said, referring to the 10-member Association of Southeast Asian Nations. “We want to increase our regional presence and capture good talent that we may not be able to get if we remained in Japan, given the size of our company.” Xyec will be the first Japanese company to have the primary exchange for trading of its shares in Singapore, according to its chief executive. Xyec will be the first Japanese company to list on SGX’s Catalist board, according to the bourse.
Regional hub “Listing abroad would lead to increased presence in the region as well as credibility, making it easier for the company to find staff,” Tamami Ota, a Tokyo-based economist at
Vingroup delays share sale on ‘difficult market’ V ingroup Joint Stock Co, Vietnam’s largest shopping mall owner, is putting on hold plans to sell shares and have them traded in Singapore as foreign investors pull capital out of emerging markets. The Hanoi-based company is also delaying an international bond sale, Le Thi Thu Thuy, Vingroup’s chief executive, said in an interview. Vingroup said in April it planned to sell as many as 150 million shares and have them traded on the bourse operated by Singapore Exchange Ltd this year. “The whole market has been quite difficult, and doing a Vietnam deal is not easy,” she said. “There has been a lot of outflow from the emerging markets.” Foreign investors have sold US$8.9 billion in stocks so far this year in Thailand, Indonesia and South Korea amid speculation that the U.S. Federal Reserve will reduce monetary stimulus,
according to data compiled by Bloomberg. Companies throughout Asia have delayed IPO plans this year, including a unit of Noble Group Ltd, the region’s biggest commodity supplier. Global Telecommunications Infrastructure Trust, the undersea cable unit of Reliance Communications Ltd, said in July it will delay a US$1 billion share sale in Singapore, and machinery maker Sany Heavy Industry Co postponed a US$2 billion share sale in Hong Kong. Ms Thuy didn’t rule out
We want to make Singapore the base of our Asean expansion Manabu Kobayash, Xyec’s chief executive
Daiwa Institute of Research Ltd, said. “It would make it easier to raise funds in the local currency as well.” Singapore Exchange Ltd, Southeast Asia’s biggest bourse, has attracted foreign companies as it aspires to become the region’s financial gateway. There were 302 non-Singaporean companies traded on SGX out of 782 companies as
a listing later this year. “We still have a few more months to go,” she said. “We have to watch the market. We’ll see.” Vingroup announced in May that Warburg Pincus LLC, the private-equity owner of Neiman Marcus Group Inc, is leading a consortium to invest as much as US$325 million in the company. Joseph Gagnon, a Warburg Pincus managing director, joined Vingroup’s board in June. Vingroup opened Vincom Mega Mall Royal City in Hanoi, one of Asia’s largest underground malls, in late July. During the three-day National Day weekend that ended Monday, the mall attracted about 100,000 visitors each day, Ms Thuy said. “Its success has been beyond our expectations,” she said. Bloomberg News
of August and nine of them were Japanese, according to SGX. All the other Japanese companies are also listed in Japan. Xyec chose Singapore over Japan because of the attraction of raising funds from global investors and globally consistent regulation of additional share sales, which it might undertake for expansion, Mr Kobayashi said. The company plans to open an office in Singapore by the end of March 2014, which will become the headquarters for business in the region outside Japan, he said. Not all agree that listing overseas before your home market is a wise tactic. “Listing requirements are famously strict in Japan, but if you’re listed and want to expand overseas, there’s no reason to drop your Tokyo listing,” Nicholas Smith, the Japan strategist at CLSA Asia-Pacific Markets in Tokyo, said. “You don’t want to lose your Japanese sticky capital: just do a follow-on offering for overseas investors.” Bloomberg News
South Korea probes foreign brokerages S
outh Korean financial regulators are reviewing three foreign brokerages including Goldman Sachs Group Inc’s local unit for possible breach of domestic capital markets regulations, a source at one of the regulators said. The Financial Supervisory Service (FSS) is investigating whether Goldman Sachs sold foreign bonds in the domestic market through its Hong Kong unit, which does not have any licence to sell such products directly in South Korea, the source told Reuters yesterday. The source declined to be identified due to the sensitivity of the subject and because the probe is still ongoing. The FSS said on Sunday that it was reviewing three foreign brokerages, without identifying them in its brief statement. The regulator is investigating their business practices to see if they are
following domestic capital markets regulations, according to the statement. Goldman Sachs representatives in Seoul declined to comment. Regulators are focusing their review on Goldman’s sale of Malaysian statebacked securities to domestic investors including Korea Investment Corp, the country’s sovereign wealth fund, according to the source. The local operations of Credit Suisse Group AG and Royal Bank of Scotland Plc are the other two foreign brokerages being investigated, the source said. Credit Suisse and RBS were not immediately available for comment. The FSS is planning an industrywide investigation into derivative product sales. The probe began in late August and is expected to last for another week or so, according to the source. Reuters
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September 10, 2013 April 19, 2013
Malaysian Air recovery offers bet on govt exit Profit next year would end three years of losses
alaysian Airline System Bhd offers a bargain investment for traders willing to bet on a sale, as a turnaround stokes calls for the government to exit its stake. Malaysian Air fell to an all-time low this year amid competition from budget airline AirAsia Bhd.
Now the company is projected to post its first profit in four years in 2014 on record revenue, according to analysts’ estimates compiled by Bloomberg. With the carrier on the mend, the government may seek to shed its majority ownership by selling
Malaysian Air projected to post profit in 2014
New Australia govt keeps AAA ratings Rating agencies expect similar fiscal strategy
nternational credit agencies Standard & Poor’s and Moody’s yesterday kept Australia’s sovereign rating at AAA after the conservatives won power, saying they expected little change to the fiscal framework. S&P’s said its ratings were not immediately affected by the change of government. “The ratings on Australia reflect the country’s significant fiscal and monetary flexibility, economic resilience, and public policy stability,” it said in a statement. “We expect the new government to pursue a broadly similar fiscal strategy to the previous government, targeting narrowing budget deficits over time.” Moody’s Investors Service also said Australia’s AAA sovereign rating would not change after Tony Abbott, who heads a centre-right Liberal National coalition, won elections on Saturday, ending six years of Labor rule. “Moody’s AAA rating of the Australian government is based on the long-standing fiscal policy framework that results in balanced budgets or surpluses and low government debt in relation to other highly rated sovereigns,” it said. It added that the current string of modest deficits stemmed from conditions during and after the global financial crisis and not any overall change towards deficits and debt.
“This fiscal policy framework has been in place during governments led by both Labor and the [Liberal National] coalition parties,” it said. “We believe that the return to power of a coalition government will not result in changes to the framework and, therefore, that the government will continue to record only small deficits before eventually returning to surplus.” Moody’s said while economic growth may remain “somewhat subdued” during 2013, it expected some pick-up in 2014, which would help the new government manage its budgetary balance. S&P’s said it expected spending on infrastructure projects and a new paid parental leave scheme as promised by Mr Abbott, but this would be broadly offset by savings, particularly cuts to bureaucracy and an unwinding of Labor policies which delivered household benefits. “We expect the new government to shortly commission a review of government finances, which may pave the way for further spending cuts,” it said. Australia, which survived the financial crisis without dipping into recession, remains one of a small group of nations that still have the coveted AAA rating from all three ratings agencies, which also includes Fitch. AFP
or breaking up the US$1.6 billion airline, said Malayan Banking Bhd. Among those calling for a sale are former Premier Mahathir Mohamad, who oversaw Malaysian Air’s initial public offering in 1985, and the executive – now a minister – who previously returned the carrier to profit in 2006. While the government may wait for the airline’s shares to recover before seeking buyers, RHB Research Institute Sdn said potential acquirers include local billionaire Syed Mokhtar Al-Bukhary, who last year persuaded officials to sell him the national carmaker. “Selling parts of the company is definitely viable,” said Ang Kok Heng, chief investment officer at Phillip Capital Management Sdn in Kuala Lumpur. “They must show some results before people are confident to buy.” Former Malaysian Air managing director Idris Jala, who is now a minister in the office of current Premier Najib Razak, last month said the government should stay out of the airline business, sending the stock up 7.9 percent the next day. Mr Idris returned the company to profit on a quarterly basis in 2006. The state’s 69 percent stake in
the carrier is held by investment division Khazanah Nasional Bhd.
Spinoff options Mr Mahathir, Malaysia’s longestserving leader, backed the idea of a sale, telling state news service Bernama that a private owner would work harder to avoid losses than the government. Several groups have submitted takeover offers, The Star newspaper said last month. Malaysian Air is forecast to generate net income of 88 million ringgit (US$26 million) next year from sales of 15.6 billion ringgit, according to analysts’ forecasts compiled by Bloomberg. After an estimated loss this year, a profit in 2014 would end a three-year, cumulative loss of 3.4 billion ringgit, the data show. “It will make more sense for Khazanah to sell at that time,” once the company has restored profitability, said Jerry Lee, an analyst at RHB Research in Kuala Lumpur. “By that time, the share price has rallied. MAS are doing the right thing with their turnaround.” Malaysian Air’s engineering and maintenance business could fetch a valuation as high as 1.98 billion ringgit, and the airport terminal services unit could be valued at 1.07 billion ringgit, according to estimates from Mohshin Aziz, a Kuala Lumpur-based analyst at Maybank. The airline’s low-cost rural service Firefly could be worth as much as 1.78 billion ringgit on the stock market, he said. Bloomberg News
September 10, 2013 April 19, 2013
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September 10, 2013 April 19, 2013
The post-crisis global wires economy in three words Business
Leading reports from Asia’s best business newspapers
Jakarta Globe The government hopes to raise 8 trillion rupiah (US$712 billion) from selling bonds and bills from various tenors next week, in hopes of raising funds to partially plug the country’s budget deficit. The nation has been selling rupiah and dollardenominated bonds in recent years, and the actual figure of the bond sale will depend on market demand next week. The budget shortfall is estimated to reach 2.38 percent of gross domestic product this year.
Inquirer Business The Philippines will likely post the strongest growth in labour force in Asia over the next decade and hit its demographic peak at 2085, American investment bank BofA Merrill Lynch said. It is thus seen an “opportune time for the Philippines, and other countries with similarly favourable demographics, to capitalise on their abundant labour resources and lower costs to attract greater foreign direct investments,” said a Merrill Lynch research dated August 23.
The Age The number of home loans approved in Australia has risen for the seventh month in a row, showing the housing sector continues to strengthen. There were 52,204 approvals in July, compared to 50,983 approvals in June – a rise of 2.4 percent, the Australian Bureau of Statistics said. JP Morgan economist Ben Jarman said that although the figures came in stronger than expected, the rise was being driven by investors rather than first-home buyers, who typically take out bigger loans.
Thanh Nien Daily The Vietnam General Federation of Labour wants the minimum wage hiked by a third next year to cover 75 percent to 84 percent of workers’ basic living needs. The minimum wage is now 1.65 million dong (US$78) to 2.35 million dong a month, depending on the location. But the average cost of living is estimated to be 1.928 million dong for individuals and 3.278 million dong for those with children, according to data compiled by the federation. The federation urged the National Wage Council to hike the minimum wage by either 24-36 percent or by 21-32 percent next year.
Professor of Economics at Université Paris-Dauphine
ive years have passed since the collapse of the American investment bank Lehman Brothers triggered financial mayhem and marked the onset of the Great Recession. Though the dust may not have fully settled, three catchwords sum up what we have learned so far – and what remains to be done. The first word that comes to mind is resilience. Five years ago, many feared a repetition of the Great Depression of the 1930’s. Indeed, as Barry Eichengreen and Kevin O’Rourke have shown, the collapse of world industrial production in 2008-2009 initially tracked that of 19291930 very well. The fall in world trade volume and equity indices was even faster. Fortunately, the historical paths subsequently diverged. Five years after the 1929 crash, the world was still in depression and trade had contracted sharply. Today, the United States is still going through its worst employment recession since World War II, and Europe’s GDP has not returned to pre-crisis levels, but global output has grown 15 percent since 2008, and world trade is up more than 12 percent. The world avoided a Great Depression II mainly because there was no global financial crisis this time. What occurred in 2008 was a U.S. crisis that contaminated Europe, because the two financial systems were almost completely integrated. The rest of the world, however, was largely immune. China and other emerging countries were hit by a severe demand shock that affected their exports, but not by the financial turmoil. On the contrary, the value of U.S. government bonds that China and others held rose in response to the drop in interest rates.
of emerging and developing countries was redrawing the global economic map. But this was thought to be a gradual, long-term trend. In reality, what was supposed to take one or two decades took just five years. A simple statistic illustrates the point: in 2007, the advanced countries accounted for almost three-quarters of the G-20’s combined GDP. By 2012, their share had fallen to 63 percent. The combination of growth differentials and high oil and raw-materials prices has resulted in a massive shift in the distribution of world income. Furthermore, all advanced countries have experienced rapid deterioration in their public finances. Whereas ten years ago public-debt crises were considered a plague that afflicts developing countries, the malady is now the advanced economies’ curse. According to the International Monetary Fund, the average debt/GDP ratio at the end
Redrawing the map Another reason for the rebound was the well-timed response engineered in 2009 by the G-20. For the first time, emerging and developing countries participated in a coordinated reflation effort, and, alongside their advancedcountry counterparts, promised to resist trade protectionism. The recovery soon demonstrated that the global economy had more than one engine. This gave the U.S. economy time to heal, and even made it possible for Europe to experience its own crisis without triggering a generalised downturn. The second word that characterises the last five years is acceleration. In 2008, everyone knew that the rise
Everyone knew that the rise of emerging countries was redrawing the economic map … but what was supposed to take one or two decades took just five years
of 2012 was 110 percent in the advanced countries, but just 35 percent for emerging countries and 42 percent for low-income countries. Of course, such statistics can be misleading. The U.S. and Europe still enjoy the services of a vast capital stock – machines, buildings, and public infrastructure built over decades or even centuries. Furthermore, immaterial capital increasingly matters, too: U.S. authorities recently revised GDP upward by US$400 billion after recognising that research and development spending should be categorised as investment. Emerging countries may be growing faster, but their per capita capital stock still does not match that of advanced countries (in fact, this is precisely what development is largely about).
Major challenge Nonetheless, global politics is one field in which relative income changes and the poor state of rich countries’ public finances matter. When the U.S. and Europe threatened to withdraw financial support from Egypt in order to influence the behaviour of the country’s military leadership, they soon realised that Saudi Arabia and other Gulf states could be much more convincing, because they had much deeper pockets. This leads to the third catchword of the last five years: rebalancing. Globalisation 1.0 was built around U.S. consumers and Chinese producers. The next phase should be built around consumers and producers the world over. According to projections by Homi Kharas and Geoffrey Gertz of the Brookings Institution, there now are 700 million more people with US$10-100 per day to spend than there were in 2003. Moreover, what they call the global middle class is expected
to grow by another 1.3 billion over the next ten years. So there is obvious potential for a major rebalancing toward consumption-led growth in the emerging and developing world. This new phase of globalisation portends major benefits for the global economy. Instead of the somewhat one-sided trade pattern of the last two decades, it means greater well-being for households in developing countries and opportunities for more producers in the advanced economies. At the same time, consumption habits will need to change everywhere: the middle class cannot triple in size and continue to rely on the same energy- and carbon-intensive spending patterns. But we are not there yet. Partly owing to government stimulus measures, China’s growth since 2008 has been driven more by investment than by consumption, which has impeded the economy’s muchneeded demand rebalancing. Economic performance has been sustained by a partly artificial investment boom, which is now petering out – raising concerns about China’s ability to maintain sufficiently rapid growth. And demand is still much too energy- and carbon-intensive. So a transition remains to be managed, and recent foreign-exchange turmoil in several emerging countries indicates that it is bound to be a delicate one. The resilience that the world economy has shown since 2008 provides reason to rejoice, and the acceleration of changes in the global balance of economic and financial strength is reason to reflect. But the remaining challenge of rebalancing demand (in both quantitative and qualitative terms) remains a major one. Until progress toward meeting it is further advanced, it will be too early to claim victory. © Project Syndicate
September 10, 2013
Closing Taipa to get columbarium next year
Thailand to scrap luxury-goods tax
A public columbarium in Taipa will be ready next year, according to yesterday’s Official Gazette. The Civic and Municipal Affairs Bureau will pay Enterprising Development Engineering & Construction Co Ltd 17.1 million patacas (US$2.1 million) to build a columbarium in Estrada da Ponta da Cabrita, near the airport. The contractor will have six months to complete the work, the bureau’s website says. Shun Tak Holdings Ltd opened a private columbarium, Taipa Hills Memorial Garden, in 2011. Over 3,900 niches of the 40,000 niches available have already been sold, the company said last month.
Thailand’s government said it will scrap import duties on luxury watches, clothes and cosmetics to help the country compete with Hong Kong and Singapore for wealthy travellers from markets including China. The duty on some luxury goods will be cut to zero from 30 percent by the end of the year, Permanent Secretary for Finance Areepong Bhoocha-Oom told reporters. The government expects tourist arrivals to surge 18 percent to 26.4 million this year, helping to counter a slump in exports and domestic consumption that may cause the economy to grow as little as 3.8 percent.
GSK sells Lucozade, Ribena for US$2.11 bln Japan’s Suntory takes over high-profile drinks brands
Ribena went on sale in the 1930s, while Lucozade dates back to 1927
apan’s Suntory Beverage & Food Ltd is to buy GlaxoSmithKline Plc’s Lucozade and Ribena brands for 1.35 billion pounds (US$2.11 billion) to help it expand
into new markets. The acquisition, announced by the companies yesterday, had been widely anticipated since people close to the process said last week that Suntory
BlackRock predicts deeper emerging-markets rout Asian economies among the hardest hit
all Street’s biggest firms are predicting intensifying bond losses in emerging markets, where borrowing costs have already soared to the highest in more than four years versus U.S. corporate debt, as the Federal Reserve considers curtailing record stimulus. “We’re not yet convinced that we’ve seen the worst in terms of flows out of emerging markets,” Jeffrey Rosenberg, the chief investment
strategist in fixed-income at New York-based BlackRock Inc, the world’s largest asset manager, said in a telephone interview, expressing his own views. “We see a lot of valuation change but we see the potential for even more valuation change.” Investors have yanked US$22.1 billion from emerging-market bond funds since the end of April, almost five times the amount pulled from U.S. corporate credit, according to
was in advanced talks on a deal that would pre-empt an auction of the iconic British drinks. Japan’s second-largest drinks maker has plenty of cash after an initial public offering in June that raised US$4 billion. It was always seen as the most likely buyer for the brands after GSK announced plans in April for their disposal. Lucozade and Ribena are wellloved in Britain but lack global reach, especially in the big emerging markets that are becoming the focus of the British drugmaker’s consumer health business. For Suntory, however, they offer a growth opportunity to counter sluggish demand at home. Suntory bought the Orangina Schweppes drinks brand for more than US$3 billion in 2009, giving it a significant presence in France and Spain. By acquiring a new business with a focus on Britain, Suntory said it expected to further grow sales. The purchase also allows the Japanese group to extend its reach into countries where GSK already operates, such as Nigeria and Malaysia. Suntory Beverage has said it plans to acquire companies in Southeast Asia, Middle East, Africa and Latin America to help double sales to 2 trillion yen by 2020. The Tokyobased company derived about 31 percent of revenue from overseas
EPFR Global. That’s pushed the extra yield that buyers now demand to own dollardenominated emerging-market debt instead of U.S. company notes to 1.4 percentage points, about the most since December 2008. Borrowing costs are soaring from record lows reached in January as speculation deepens that the Fed will curtail its so-called quantitative easing as soon as this month, signalling an end to the flood of cheap money that propped up asset prices from India to China and Indonesia. The exodus from developing nations began after Fed Chairman Ben S. Bernanke told Congress on May 22 that the central bank could scale back the pace of its US$85 billion of purchases of mortgage bonds and Treasuries if the U.S. economy showed
markets last year, compared with 25 percent in 2011, according to data compiled by Bloomberg.
High multiple Despite being on the market for around 80 years, Lucozade, an energy drink, and Ribena, a liquid concentrate marketed toward children, have combined annual sales of just over 500 million pounds a year. That puts the transaction on a multiple of 2.7 times revenue – at the high end of recent soft drinks deals. “Since it’s already a known brand, they’re not going to have a problem putting it on the shelf,” said Mikihiko Yamato, deputy head of research in Tokyo at JI Asia, referring to Lucozade. “Suntory may want to start a new category within the energy drinks market,” said Mr Yamato, who doesn’t cover the company. Suntory, which is better known for its beer and Yamazaki whisky, said the deal would have a limited effect on 2013 results and it was “currently examining the effect it will have on the performance outlook for the following business year and onward”. The sale is expected to be completed by the end of the year, subject to regulatory approvals. For GSK, it will yield net proceeds of around 1.3 billion pounds – after tax, fees and costs – that will be used to reduce debt and for general corporate purposes. The net gain will be excluded from 2013 core operating profit and earnings per share. A GSK spokesman said Suntory’s bid was also attractive because it would protect jobs in Britain. Some 700 employees will transfer to the Japanese group. The GSK spokesman said there was expected to be very little, if any, impact on jobs as a result of the sale. Reuters/Bloomberg News
sustained improvement. Emerging-market debt has lost 7.9 percent since the end of April, versus a 5.1 percent decline on U.S. corporates, Bank of America Merrill Lynch index data show. While an expansion in the world’s biggest economy is accelerating, growth in China is projected to slow to 7.5 percent this year from as high as 14.2 percent in 2007, according to 53 economists surveyed by Bloomberg. “Given the likelihood of further rate volatility and an uncertain emerging-markets growth outlook, we maintain our defensive view” on corporates from developing countries, analysts led by Eric Beinstein in New York at JPMorgan Chase & Co, the world’s largest underwriter of corporate bonds, wrote in a September 5 report. Bloomberg News