MOP 6.00 Vitor Quintã Deputy editor-in-chief Editor-in-chief Tiago Azevedo Number 372 Tuesday September 17, 2013 Year II www.macaubusinessdaily.com
Planned min wage too little say unions April 19, 2013
Guangdong moves for free-trade zone
u a n g d o n g province wants a regional free trade zone with Macau and Hong Kong. It has submitted the plan to Beijing, governor Zhu Xiaodan said at a briefing yesterday. The final decision will be up to the central government. Goods can be imported, manufactured and exported within China’s free trade zones without the intervention of customs authorities. The zones also enjoy preferential policies in foreign exchange and tax. Page 5
abour union interests – in the form of Ella Lei Cheng I – came out fighting yesterday for a minimum wage, above proposed rates, for cleaners and security staff. The fresh round of lobbying – before the newly elected Legislative Assembly even has a chance to sit – comes despite the Macau Federation of Trade Unions losing one of the two directly elected seats it had held prior to Sunday’s poll. Ms Lei – a veteran of the wage talks via the city’s Standing Committee for the Coordination of Social Affairs – now also speaks with the authority of a legislator. She was indirectly elected to a seat on the assembly to represent labour. She is the youngest of the 12 indirectly elected legislators, and one of only two women. More on page 2
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Leong forces recount, gaming lobby ups stakes
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The Legislative Assembly electoral ticket led by Angela Leong On Kei have asked the Election Commission for a vote recount yesterday. The candidacy blames a high number of void votes for missing out on a second seat. Her ticket fell 16 votes short of securing a second seat for her running partner Kent Wong Seng Hong. The last of the 14 directly elected seat went to Leong Veng Chai, the second candidate in José Pereira Coutinho’s ticket. “Our team of lawyers is already handling this issue [the appeal], and at this moment I have no further news to report,” Mr Wong told Business Daily over the phone. The government must brace itself for more lobbying from the Legislative Assembly on gaming policies after Sunday’s election, say political observers. Page 3
Dip in high-end passengers hurts Air Macau profits Page 2
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Casino boom creates jackpot for security tech
Buoyant market helps Hong Kong’s casino boats
Boutique cruise ship’s call may have encore A luxury, limited-berth cruise ship with a casino on board hopes to call in to Macau on March 14. SeaDream II would be the first international cruise vessel to do so in decades. Richard Jones, the operator’s spokesman, said it was looking for more than just Chinese gamblers as passengers. “We expect guests from the USA, Europe, Australia and Asia,” he said. A 13-day trip costs almost US$8,000 (63,892 patacas). Page 7
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September 17, 2013
Proposed minimum wage too low, union chief says Business opposition could stall the introduction of a minimum wage, Ella Lei argues Tony Lai
he government should consult the public about how it will calculate the minimum wage for cleaners and security guards, a trade union leader says. The Labour Affairs Bureau said in reply to an inquiry by Legislative Assembly member Ng Kuok Cheong that the government would publish this month a bill on the minimum wage for cleaners and security guards. The bureau said the government was proposing a minimum wage for cleaners and security guards of between 23 patacas (US$2.88) and 30 patacas an hour, after the Standing Committee for the Coordination of Social Affairs had discussed the matter. The labour representative on the committee, Ella Lei Cheng I of the Macau Federation of Trade Unions, said: “We suggested that the government hold a consultation on the factors and a formula for calculating the minimum wage.” Ms Lei told Business Daily: “The way the government came up with these figures is pretty simple.” She said 23 patacas an hour was the minimum wage for employees of the government’s cleaning and security contractors before a June increase and 30 patacas was the minimum wage in Hong Kong. Macau has no minimum wage for all workers. “The government has so far only promised to finish the preparatory work on the legislation by the end of this year,” said Ms Lei. “But it may take two years before the law is ready. Will it be still
reasonable for workers to be paid 30 patacas an hour by then?”
Business opposition Ms Lei asked the government to look at the minimum wage arrangements in other places. “What they do is to do the legislative work for the minimum wage framework while simultaneously setting indicators for picking the minimum wage level,” she said. “Once the bill has been passed, they can then set a figure based on the current situation using the indicators they have been working on.” She suggests that the government look at the subsistence income – an estimate of the amount of money needed to maintain the minimum standard of living – inflation and other variables, such as the size of households. The vice-president of the Macau Chamber of Commerce, Vong Kok Seng, who represents employers on the Standing Committee for the Coordination of Social Affairs, was not immediately available for comment yesterday. Ms Lei was elected unopposed in Sunday’s Legislative Assembly elections to represent the labour functional constituency. But the Macau Federation of Trade Unions lost a directly elected seat, meaning the federation will have only three seats in the new assembly. Ms Lei expects “great resistance” from the business sector to a minimum wage.
Macau has a minimum wage only for employees of the government’s cleaning and security contractors
“There has been opposition from the business sector from start to finish, despite a consensus in society,” she said. “But we will continue to
High-end slowdown hurts Air Macau profit Slower economic growth in mainland China means fewer business class passengers Tony Lai
he city’s sole carrier Air Macau Co Ltd saw a slower growth in high-end mainland Chinese passengers in the first half of this year, hurting its business, said chairman Zheng Yan. The number of mainland visitors coming to Macau is up so far this year but package tours rather than “the high-end passengers” are driving growth, he told media yesterday. This trend, linked to China’s slower macroeconomic growth, had affected the carrier’s business “to a certain extent”, said Mr Zheng. Speaking on the sidelines of an Air Macau public event, he did not disclose the exact proportion of high-end travellers
work hard.” She said the government’s stance would decide how long it took to institute a minimum wage.
as a component of the company’s passenger volume. Package tours represent a stable source of income for airlines. But they also bring in smaller amounts of money than regular scheduled passengers. Travel agents delivering bulk bookings generally negotiate lower prices with the airlines says Air Macau. Over 548,100 mainlanders arrived in Macau by air in the first seven months of this year, up by 28.6 percent from a year earlier, the latest official data show. The competition in the aviation industry was however “getting more intense”, Mr Zheng said. The half-year financial report of parent company and stateowned carrier Air China Ltd shows Air Macau’s revenue rose by 6.8 percent in the first half of this year to 1.25 billion yuan (1.61 billion patacas) from a year earlier. But Air Macau’s first-half profits dropped by 15.2 percent to 82 million yuan. Mr Zheng added that the summer has been “quite good” to the airline’s business, without disclosing any figures.
September 17, 2013 April 19, 2013
Leong candidates demand recount Angela Leong’s ticket links its failure to win two seats to the glut of spoiled ballots Stephanie Lai
he ticket of candidates led by Angela Leong On Kei has asked the Election Commission for a recount of the votes cast in the Legislative Assembly election. Ms Leong’s ticket fell 16 votes short of securing a second directly elected seat, which would have gone to her running partner, Kent Wong Seng Hong, a consultant to Melco Crown Entertainment Ltd. The last of the 14 directly elected seats went to Leong Veng Chai, the second candidate on José Pereira Coutinho’s ticket. “Our team of lawyers is already handling this issue, and at this moment I have no further news to report,” Mr Wong told Business Daily yesterday. “We will let everyone know the latest progress once we get more news.” Ms Leong and Mr Wong were among the many candidates that went to watch the final counting of votes yesterday afternoon. Another candidate on Ms Leong’s ticket, Hetzer Siu Yu Hong, told Business Daily that the candidates would meet soon to discuss the count. “We are already in contact with the Election Commission over the vote recount matter,” Mr Siu said. “And then we will know if a meeting will be convened with all the witnesses that watched the whole vote counting process.” Right after the preliminary results were announced early yesterday morning, Ms Leong, an executive
Angela Leong’s ticket fell 16 votes short of a second Legislative Assembly seat
director of SJM Holdings Ltd, said results were “not fair” and that she would “definitely appeal”.
Cause of puzzlement She said the law allowed for a recount if the difference between two tickets was less than 100 votes. The high number of spoiled ballots should be looked into, Ms Leong said. The preliminary election results showed that of the ballots cast, 146,453 were valid, 1,083 were blank and 4,345 spoiled.
Mr Siu said: “Over 4,000 null votes is really a high number.” He added: “And what also puzzled us is that some polling stations took a really long time to release the final result.” Business Daily was unable to get any comment from the Election Commission before we went to press. The chairman of the Election Commission, Judge Ip Son Sang told reporters early yesterday morning that the number of null votes was lower than in the 2009 elections but “still high”. He said the commission
Gaming lobby tipped to turn up heat after election boost Legislation meant to benefit ordinary people may face a rough passage, a political observer says Tony Lai
he government must brace for more lobbying from the Legislative Assembly on gaming policy after Sunday’s Legislative Assembly election, even though the assembly is not the arena where the renewal of gaming concessions will be decided, political observers say. More members with a gaming background means the assembly would “definitely impose more pressure on government policies, particularly in 2015,” said the coordinator of the Macau Polytechnic Institute’s public administration programme, Lou Shenghua. Secretary for the Economy and Finance Francis Tam Pak Yuen said in July that 2015 would be the proper time for the government and gaming companies to discuss how to renew
gaming concessions. The six gaming concessions and sub-concessions will expire between 2020 and 2022. A political scientist at the University of Macau, assistant professor Eilo Yu Wing Yat, said: “The discussion on the gaming licences will not be led by the assembly, though they can create some noise.” Mr Yu said the assembly had played only a limited role in the liberalisation of the gaming market and the awarding of gaming subconcessions 10 years ago. “It is still mainly about direct armwrestling between the government and the gaming companies, possibly with the participation of Beijing,” he said. In Sunday’s election the ticket
of candidates led by Chan Meng Kam – owner of the Hotel Golden Dragon, a satellite casino of SJM Holdings Ltd – got three seats in the new assembly, one more than it had in the old assembly. The second candidate on businessman Mak Soi Kun’s ticket, VIP gaming promoter Zheng Anting, also won a seat. The new assembly will convene on October 15.
Community spirit Mr Lou said that while the political balance in the assembly was unchanged, the business sector would have a stronger presence among the 14 directly elected members now that Angela Leong On Kei and Melinda Chan Mei Yi had retained their seats.
would find out why. Judge Ip said the voter turnout had been about 55 percent. In 2009 it was almost 60 percent. Mr Coutinho told reporters that he and his running mate, Mr Leong, were confident that their ticket would keep its second seat once all the counting was complete. They promised to endeavour to make the Legislative Assembly’s work more open and said they wish to have its deliberations televised. Mr Coutinho also reiterated his call for better conditions for civil servants.
Ms Leong is an executive director of SJM. Ms Chan’s husband is businessman David Chow Kam Fai, who owns casino operator Macau Legend Development Ltd. “Any future laws focusing on the middle class and grassroots could face bigger obstacles,” Mr Lou said. Mr Yu said: “The political groupings remain unchanged overall, and there is only a difference in the equilibrium among them, so I do not expect any big changes in the policymaking process.” He believes the results of Sunday’s election show people have less reason to demand political reform because of their “relatively better” economic situation. The surprising success of the tickets led by Mr Chan and Mr Mak shows that communities in Macau made up of people from various parts of the mainland are growing more important. Mr Chan is widely considered the leader of Macau’s Fujianese community. Mr Mak heads the Macau Jiangmen Communal Society. Mr Yu said their success was also linked to the growth in the number of employees of the gaming industry, who played an important part in the election. Official data show the gaming industry employed over 54,500 people at the end of June, 23.9 percent more than four years earlier.
September 17, 2013
Electronic eyes not just in the sky
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Security tech firms hit jackpot in Macau casino boom with thousands of cameras
Room for growth In the first half of this year the number of guests in Macau hotels rose by 16.9 percent relative to the same period last year, up from the 12.2 percent registered in 2012. These figures point to another year of significant growth. The main cause of this trend is the number of visitors from the mainland. In the first half the number of hotel guests from the mainland rose by 22.2 percent from a year earlier. The annual rate of growth registered then was over 5 percentage points lower. Nearly 3.1 million mainlanders stayed in hotels here in the first half, making up close to 60 percent of all hotel guests. For clarity, the chart omits mainlanders because there were so many of them that it would otherwise be hard to compare the numbers of hotel guests from other places.
After stagnating for a while, the number of guests from Hong Kong seems to be on the rise again: hotels put up 13.6 percent more in the first half than a year earlier. The number of guests from Taiwan rose by 23.9 percent, having risen by only 1.7 percent in the same period. The numbers of Japanese and Indians visiting Macau and the numbers staying in hotels here have been following downward trends. The number of hotel guests from Japan has kept falling, but the number from India shows signs of recovery. Hotels received 42 percent more Indians in the first half of this year. Macau remained the third-biggest source of hotel guests, even though the number of Macau people staying in hotels here fell by about 7 percent. An average of about 1,700 Macau residents stayed in hotels here each day.
File photo of a casino security camera
Increase in hotel guests in the past two years
ens of thousands of security cameras, including some of the most advanced commercially available, have been installed in Macau in the past five years, according to technology consultants interviewed by Reuters. Many thousands more are on order for the multi-billion-U.S. dollar Cotai casino resorts still in the planning or construction stages. “It’s big business. The camera market here has started to get very big … It’s probably the most demanding environment for a video surveillance system anywhere in the world,” said Craig Graham, Dallmeier International general manager for Asia. The firm is a German-Australian joint venture. “Some of these guys [Macau casino operators] have 700 tables and up to 1,000 slot machines, all
of which have to be monitored 24 hours a day, seven days a week,” points out Mr Graham. The more money that flows through Macau’s casinos – the equivalent of US$38 billion (304.14 billion patacas) last year – the more determined the cheats become say security experts. The baddies probe for signs of systemic weakness. Sometimes all it takes is some offthe-shelf gadgetry or inside help – or both. Police arrested a casino pit manager and junket employee in Macau in May after surveillance video allegedly caught them rigging a card shoe at a baccarat table in a VIP room. In August, police arrested a Macau croupier and five suspected conmen from Taiwan after watching the dealer pay out more chips than gamblers were entitled to during his shift.
This month, police arrested two local female dealers after staff monitoring closed-circuit TV caught them pocketing two gaming chips worth HK$100,000 (US$12,900) from a casino on Macau’s Peninsula. Two years ago, in the Philippines, a gang was caught using microcameras hidden up their sleeves to film the shuffle and relay the footage to accomplices who in turn informed them how to play. Something similar happened at the NagaWorld casino resort in Cambodia’s capital Phnom Penh. Dallmeier suggests it has about 20 percent of the video surveillance market in Macau’s gaming industry. Its clients include Sands China Ltd, a subsidiary of Las Vegas Sands Corp that has built four major casino resorts so far, and is spending around US$2.7 billion on a fifth – The Parisian – complete with a scaled version of the Eiffel Tower. There are around 100,000 cameras installed in Macau’s casinos, according to industry estimates, with room potentially for another 50,000 over the next five years. Companies declined to say how much the industry was worth. “It’s allowed firms such as ours who deal with cutting edge surveillance technology and video analytics to gain a good loyal customer base in Macau,” Mr Graham said. Bob Ruggles, a Macau-based Asia-Pacific business development manager for another supplier, Pelco, said Asian demand had “allowed us to push our products to the limit” of innovation. California-based Pelco is a unit of Schneider Electric PA. Mr Ruggles said casinos in Las Vegas had been slow to adapt to advances in digital technology, and some were still using video cassette recorder tape, in part because of the costs associated with replacing old analogue systems. “No one [in Macau] uses analogue anymore. Those days are gone,” he explained. M.G. with Reuters
LVS seeks to slash Suen’s trial costs by 90 pct Argues some expenses disallowed after an earlier trial in 2008 before a different judge
asino operator Las Vegas Sands Corp is seeking to cut 90 percent from the trial expenses claimed by Richard Suen, a Hong Kong-based former consultant for the firm in Macau, reports the Las Vegas Review-Journal. Mr Suen’s attorneys in the United States have presented a bill of nearly US$1.2 million (9.58 million patacas) for the out-of-pocket costs for the trial and its run-up. The tally includes translation of business documents from Chinese to English, and computer graphics to explain key concepts to the jury. Regardless of whether LVS succeeds or fails in cutting the costs
bill of the other side, the casino firm is expected to appeal against the trial verdict itself, adds the newspaper. After a six-week trial that ended in mid-May, a Clark County District Court jury awarded Mr Suen US$70 million for the work he said he did more than a decade ago to help LVS secure its highly profitable gaming sub-concession in Macau. Combined with interest dating back to the filing of the case in 2004, the total judgment had reached US$101.6 million as of May 27. Further interest is swelling the judgement by about US$8,400 a day reports the Nevada media outlet. LVS attorneys in court last
week said Mr Suen should get only US$168,000 costs. A two hourhearing on Thursday, U.S. time, was adjourned until September 25. District Judge Rob Bare – the trial judge in the case – questioned whether the costs should be set in a larger context. “Both sides did things you might not do in another type of case,” Judge Bare reportedly said, referring to the heavy use of technology and prominent attorneys from outside Nevada. “All of that taken together … clearly sent a message to the jury and to me … of doing this case essentially in a way that spared no expense.” M.G.
September 17, 2013
Guangdong moves for free-trade zone
Mr Zhu downplayed any potential competition between the two sites. The Guangdong-Hong KongMacau zone will be regional, compared with the international focus of Shanghai’s free-trade zone, he said. “We are still studying the details of this plan,” Mr Zhu said. “It will involve trade services, ease of investment and innovation in management to boost cooperation with Hong Kong banks.” Guangdong already hosts three special economic zones: Qianhai near Shenzhen, Hengqin Island and Nansha district in Guangzhou. Sources quoted by the official newspaper China Daily a fortnight ago said the new integrated zone would bundle these zones together and also include the Guangzhou airport’s economic development zone. Hengqin and Nansha have been singled out for cooperation between Guangdong and Macau. Goods can be imported, manufactured and exported within China’s free trade zones without the intervention of customs authorities, enjoying preferential policies in foreign exchange and tax. Mr Zhu said he exchanged views about the Guangdong free-trade zone with Hong Kong chief executive Leung Chun Ying and the area will take advantage of Hong Kong’s position as a financial hub to bolster regional economic growth. “Hong Kong needs to meet the opportunities and challenges brought by China opening up,” Mr Leung said at yesterday’s briefing. “As China further liberalises its markets to the international market, to Taiwan, we should actively participate.”
No competition with Shanghai free-trade zone, says province governor Vítor Quintã
Guangdong seeks closer ties with Macau and Hong Kong, says governor Zhu Xiaodan
Guangdong province committee has submitted a plan to set up a regional free trade zone with Macau and Hong Kong to Beijing, governor Zhu Xiaodan said at a briefing yesterday. The final decision
will be up to the central government. The State Council approved a Shanghai similar zone in July, billed as the nation’s first free-trade area on 29 square kilometres of land in China’s commercial hub.
New cooperation plan at Forum Macau meeting A new three-year plan for cooperation between China and the Portuguese countries will be signed during a high-level Forum Macau meeting to be held here in November. The fourth ministerial conference of the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Forum Macau) is scheduled for November 5 and 6, the forum said. The eight state-members will sign an action plan until 2016 that will set new goals and areas for economic and commercial cooperation, according to a press statement released yesterday. The conference will include a seminar on a US$1 billion (7.98 billion patacas) fund to help development cooperation projects in the Portuguese-speaking countries. Former Chinese premier Wen Jiabao unveiled the fund during the last Forum Macau ministerial conference in 2010. But the state-owned China Development Bank Corp – in charge of running the fund – only began accepting applications in April this year. The November meeting will be held under the motto ‘New Cycle, New Opportunities’. The 2010 conference was seen a step forward for Forum Macau, with five heads of states and prime ministers among the more than 1,500 senior officials and business leaders in attendance.
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September 17, 2013 April 19, 2013
Macau Brought to you by
Financial Monitor Downward path
Buoyant market helps Hong Kong’s casino boats They can’t compete with Macau casino facilities, but they do offer a complementary service
For most of the past decade Macau’s exports of goods have been declining. Between 2008 and 2012, exports fell by half. Textiles exports are the strongest example of the declining trend. Exports of clothing last year were onetenth of what they were five years earlier. The figures for the first seven months of this year suggest further decline. Clothing made up 50 percent of exports in 2009. Last year they made up about 10 percent. Exports of shoes, which started to decline earlier than textiles exports, seem to be recovering slightly. The proportion of exports that shoes make up doubled in the past few years. But this has had hardly any effect on the balance of trade. Last year shoes accounted for less than 1.5 percent of exports.
Casino ship MV Macau Success in Hong Kong harbour
Other goods make up growing shares of all exports. The proportion that machinery and parts made up last year was twice what it was in 2008. That was also the case for jewellery. The increase in the proportion of machinery and parts was the result of slow but steady growth. The same cannot be said for jewellery, as exports have varied widely in recent years. The most striking changes have been in exports of tobacco and alcoholic drinks. They more than doubled in the period under review, almost quadrupling the proportion of total exports they represent. Exports of watches have been relatively stable, but their share of the total fell to 2.3 percent from the peak of 5 percent reached in 2010. Bear in mind, however, that a good deal of the increases in exports apart from tobacco was due to increases in re-exports, not domestic exports. J.I.D. The content of this column is the work of Business Daily’s journalists.
Clothing as a proportion of exports this year to July
ustomers on the average eight casino boats that leave Hong Kong each night rose nine percent to 615,328 people in the first half of this year according to data gathered by Bloomberg News. It has been a boost for the operators of the vessels including Success Universe Group Ltd, a 49 percent shareholder in Macau’s Ponte 16 casino resort, and Genting Hong Kong Ltd, a joint venture partner in the Resorts World Manila casino property in the Philippines. “The cruise ship can be a good [Macau] substitute for mainland tourists,” said Hoffman Ma Ho Man, deputy chairman of Success Universe. The firm doubled profits from its casino ship to HK$2.15 million (US$277,000) in the first half of this year. Macau casino operators regard the boats as complementary to the industry and not direct competition. Macau attracted 14 million visits in the first half of this year. The casino vessels offer little in terms of dining and shopping and generate a fraction of the Macau casinos’ revenue. The latter generated approximately 304.14 billion patacas last year. Their impact “is minimal,” says Ambrose So Shu Fai, chief executive at SJM Holdings Ltd. “The pie is growing bigger and some money overflows there.” SJM has had the largest share of
gross revenue in Macau – and thus the largest of any casino operator in Asia – since it was spun out of Stanley Ho Hung Sun’s former casino monopoly Sociedade de Turismo e Diversões de Macau SA, following market liberalisation in 2002. There are however signs that a major increase on the demand side of the Macau equation has put a strain on the affordability of the city for some Chinese visitors. The surge in demand is linked to a range of structural changes. They include an expansion in the number of Chinese cities included in the mainland’s Individual Visit Scheme of visas for Chinese travelling to Macau.
The cruise ship can be a good [Macau] substitute for mainland tourists Hoffman Ma Ho Man, deputy chairman of Success Universe
There have also been improvements in transport such as the high-speed rail link to Guangzhou opened at the turn of the year. Another factor is the Macau government-imposed cap on the number of new gaming tables allowed in the market. The first two have helped to push up hotel prices, while the last one has pushed up minimum bet prices on live table games. Hotel rooms in Macau averaged the equivalent of US$175 a night in July, according to the government, while Bloomberg Industries estimates Las Vegas rates averaged US$108 last year. A room on a Hong Kong casino boat can cost as little as HK$400 (US$52). When mainland resident Li Yu wanted to take a gambling trip, she looked into Macau but found the hotels too expensive. So she booked a room on an overnight casino boat that sailed about an hour from Hong Kong into international waters before opening up its baccarat tables. “I don’t care about the food or other amenities, my sole purpose is to gamble,” said Mrs Li, a housewife from nearby Guangzhou who played into the early hours of the morning with about 70 others in the ship’s cramped casino. “It’s way cheaper than going to Macau.” M.G. with Bloomberg News
September 17, 2013 April 19, 2013
Boutique cruise ship’s call may have encore But first SeaDream Yacht Club must find a berth for its vessel Vítor Quintã
eaDream Yacht Club Ltd (SDYC), the operator of the first international cruise ship to call in Macau for decades, is already looking ahead to the ship’s next visit, which will depend on the success of its Asian debut. The cruise ship SeaDream II will call in Macau on March 14 as part of a 13-day cruise from Bangkok to Hong Kong, SDYC’s website says. SDYC’s Asia director for business and development, Richard Jones, believes the March visit will not be the ship’s last. “Depending on the success of our maiden call next March, we do hope to return to Asia and Macau in 2015/16,” Mr Jones told Business Daily in an e-mail. SDYC has two ships. They typically spend half the year cruising the Mediterranean the other half islandhopping across the Caribbean. “It is the first time that we are coming to Asia,” an SDYC spokesperson told Business Daily last week. Passengers can sign up to visit A-Ma Temple and venture out for a night in the casinos – even though the ship has
its own gaming facilities. The Pearl River Delta has a considerable market for gaming cruises. Ships with their own gaming facilities take gamblers into international waters, beyond the jurisdiction of the mainland, where casinos are illegal.
Shallow draught Mr Jones said SDYC was looking for more than just Chinese gamblers as passengers. “SDYC is an international small cruise line. We expect guests from the USA, Europe, Australia and Asia,” he said. The Marine and Water Bureau told Business Daily last week that it had received an application for the SeaDream II to call in Macau, but needed more information before it could approve the application. The bureau said it was the only application for a cruise ship to call that it had received. Mr Jones acknowledged that the SeaDream II’s call in Macau “is still not 100 percent confirmed as the local agent is working with the authorities
to find a bay for SeaDream II to use”. Macau has no terminal for cruise ships, but the Marine and Water Bureau has undertaken to provide vessels with anchorages and the necessary facilities. The Macau Government Tourist Office told Business Daily is was still waiting for that approval. “However, we welcome all tourism operators to create new itineraries and develop new tourist attractions or events for visitors to experience Macau,” the office said in an e-mailed reply. Unlike some giant modern cruise ships, the SeaDream II can navigate Macau’s shallow waters. “We appreciate the waters are very shallow. However, we should be able to port,” Mr Jones said. The SeaDream II carries up to 112 passengers and 95 crew, and displaces 4,300 tonnes. In contrast, the first cruise liner to berth at Hong Kong’s new Kai Tak Cruise Terminal in June carried about 3,000 passengers and displaced 138,279 tonnes. Hong Kong’s new terminal “will further attract travelers to the Pearl River Delta,” the tourism office said.
The SeaDream II displaces 4,300 tonnes and carries up to 112 passengers
Depending on the success of our maiden call next March, we do hope to return to Asia and Macau in 2015/16 Richard Jones, SeaDream Yacht Club Asia director for business and development
September 17, 2013 April 19, 2013
HK shares jump ahead on China Hang Seng Index up 16 percent from June low through last week Chong Hing jumps on sale report Chong Hing Bank Ltd, Hong Kong’s smallest family-run lender, jumped to the highest level since its market debut 19 years ago after Oriental Daily reported that the sale of a stake in the bank may be decided this week. Shares of the lender, in which the founding Liu family controls about 60 percent, jumped 10.26 percent to HK$31.70 in Hong Kong trading. Yue Xiu Group, the frontrunner to buy the family’s stake, is willing to increase its bid to 2.4 times the bank’s book value, Oriental Daily reported yesterday, without saying where it got the information. The trading arm of China’s Guangzhou city government is considering a bid, a person with knowledge of the matter said last month. Speculation that Chong Hing will be taken over has pushed the shares up by more than 120 percent since November 28, when Lau Wai Man was named the first chief executive from outside the Liu family. An offer of 2.4 times book value would price Chong Hing at about HK$17.7 billion, a premium of more than 30 percent to yesterday’s market capitalisation. Edith Chan, a Hong Kong-based spokeswoman at Chong Hing Bank, declined to comment on the report when contacted by Bloomberg News. The Yue Xiu office that handles foreign media inquiries had no immediate comment. In addition to Yue Xiu Group, Australia & New Zealand Banking Group Ltd and a lender with a Malaysian background are among as many as five bidders interested in Chong Hing, according to the Oriental Daily report. ANZ in 2008 lost out to China Merchants Bank Co Ltd in acquiring Wing Lung Bank Ltd, a deal that valued the family-run lender at 2.9 times book value, data compiled by Bloomberg show.
ong Kong stocks are beating every market in Asia as China’s economy strengthens, rebounding from the biggest drop among developed world shares in the first half. The Hang Seng Index surged 16 percent from its June 24 low through last week, outpacing the 14 percent climb for the Shanghai Composite Index, the next-biggest gain among Asian benchmark gauges in the period, data compiled by Bloomberg show. Even after the rally, Hong Kong’s index traded at 10.9 times estimated earnings on Friday, the lowest in global developed markets behind Israel. Chinese economic data that beat forecasts this quarter spurred Hong Kong stocks to reverse course after
posting an 8.2 percent loss in the six months through June. New credit almost doubled in August from July, easing concern that a lending crunch would curtail expansion in the world’s second-biggest economy, while equities rallied worldwide on signs growth is picking up. “A lot of economic data have come in to show China’s not going to have a hard landing,” said Jeffrey Shen, head of emerging markets at BlackRock Inc, the world’s largest asset manager. “Hong Kong is clearly the first place for international investors to put some money to work in China.” The Hang Seng China Enterprises Index, also known as the H-share index, last week entered a bull market
after climbing 20 percent from its June low, and the Hang Seng Index erased this year’s loss. The gauge of Chinese shares listed in the city traded at 7.8 times forecast profits last Friday, the lowest in Asia.
Relative value The Hang Seng Index jumped 1.5 percent yesterday after former Treasury Secretary Lawrence Summers withdrew his name from consideration to be chairman of the United States Federal Reserve. The H-share index also rose 1.6 percent. The MSCI Asia Pacific Index climbed 9.6 percent from its June low through September 13. Singapore’s Straits Times Index was the worst
Hong Kong shares go to first from worst
Banks to be allowed to issue preferred shares China is preparing to launch a pilot project allowing companies to issue preferred shares, setting no restrictions on which industries will be able to participate, as regulators move to diversify fundraising channels for Chinese companies. A spokesman for the China Securities Regulatory Commission (CSRC) told a regular news briefing that the regulator would support banks issuing preferred shares – a widely expected first step – but added that any “qualified” Chinese company from any industry would be able to apply. He did not make clear what constitutes a qualified company. Preferred shares are a class of equity that has preference over common stock when it comes to dividend payments and asset liquidation, but they ordinarily do not trade, carry no voting rights and do not dilute net profits attributable to other shareholders, and thus have limited impact on the interest of other investors State media have reported that regulators were considering implementing a preferred shares scheme, as the government begins to open new channels for companies facing tight financing conditions in China’s economic slowdown. The CSRC suspended approval of initial public offerings in late 2012 amid concerns they were diluting market valuations. Brokerages were also concerned that investors were losing interest in equities as a class given higher returns from real estate investment and wealth management products. But the government has quietly begun to allow listed companies to recapitalise through secondary issuances and private placements, as well as corporate bond issuance.
Impounded cruise ship released Bond paid after passengers flown home
Chinese cruise boat impounded in South Korea over a commercial dispute with another Chinese firm was due to be released and depart yesterday, an official at the South Korean port of Jeju told Reuters. Official Chinese media have reported that 1,119 passengers aboard the Henna have already been flown from the South Korean island of Jeju to China at the cruise operator’s expense following Friday’s seizure. Passengers were compensated for the inconvenience. An official at the Jeju provincial administration said the ship Henna would depart after HNA Tourism, the vessel’s owner, put up a 3 billion Korean won (US$2.76 million) bond to lift an order from a South Korean court to impound the ship on behalf of a Chinese creditor. At the time of its detention, the Henna was anchored off the Jeju Islands. The government there has issued multiple licences for foreignersonly casinos and relaxed the rules for inward visas issued to mainland Chinese tourists to try and attract new players. HNA Tourism is run by the HNA Group, which also owns Hainan Airlines among other subsidiaries. A spokesman
for HNA Tourism declined to comment on the report of the ship’s release. The creditor is Shagang Shipping Co Ltd, a Hong Hong-registered company that was previously related to mainland-listed Jiangsu Shagang Co Ltd but now operates independently. Shagang Shipping took action against HNA after it was awarded US$58 million against an HNA offshoot, Grand China Shipping (Hong Kong), following an arbitration hearing in London over outstanding lease payments on a 180,000 deadweight tonne iron ore and coal carrier leased to Grand China.
End of boom The ship was chartered at the height of the shipping boom, but Grand China stopped making lease payments after the shipping markets collapsed in late 2008. The decline in shipping rates has hit both Chinese shipbuilders and operators hard thanks to massive overcapacity. The HNA Group has had similar legal trouble over shipping payments in the past, as have other Chinese ship operators. In 2011, Greek and Norwegian shipping companies accused Grand China Logistics, another HNA Group
subsidiary, of withholding payments on chartered vessels, and in the same year China Cosco Holdings temporarily halted charter payments to force renegotiation of contracts it deemed overpriced. The arbitration award covered lease payments that Grand China should have paid up to the end of the charter. Claims have been pursued in the U.S. courts against Grand China Shipping (Hong Kong) with Grand China Logistics Holdings (Group), Grand China Shipping (Yantai) HNA Group and Ocean Container Trading (Hong Kong) all named as co-defendants among other HNA subsidiaries because they guaranteed
KEY POINTS Passengers flown home at company expense Ship seized on behalf of HK-based creditor Shagang Intl suing for US$58 million
September 17, 2013 April 19, 2013
Zhou urges private bank development
a rebound performer this quarter among 26 developed markets tracked by Bloomberg as investors pulled cash from Southeast Asia before an expected reduction in Fed stimulus this week. Tencent Holdings Ltd led gains on the Hang Seng Index since June 24. China’s No. 1 Internet company surged 50 percent as the government signalled a renewed push to boost the telecom industry. China Oilfield Services Ltd, an offshore energy contractor, rose 45 percent during the period to lead the H-share gauge higher after its first-half profit beat estimates. China’s industrial output expanded at the fastest pace in 17 months in August and exports rose more than expected, signs of an economic rebound after a twoquarter slump. Factory production rose 10.4 percent last month while overseas shipments gained 7.2 percent, beating the 5.5 percent estimate of analysts surveyed by Bloomberg. That data allayed concern that a government crackdown on speculative lending would stifle the economy. The Hang Seng Index lost 16 percent from May 20 through June 24 as money-market rates surged to records. “At the time, expectations for growth in the second half were declining to an extent that they may ultimately miss the government’s GDP growth target for 2013,” said Stephen Corry, a Hong Kongbased chief investment strategist at LGT Group. “This fear has not materialised.”
Shanghai Index to jump, says DeMark The Shanghai Composite Index is poised to extend gains as investors anticipate the Chinese economy will keep strengthening, said Tom DeMark, the developer of market-timing indicators who predicted the gauge’s rally from a four-year low in June. A correction this week is possible before the benchmark index of Chinese equities continues to rise to a level “much higher” than his last call of 2,323, said Mr DeMark, whose technical analysis is designed to identify market supply-and-demand imbalances for trading opportunities. The Shanghai index had rebounded 15 percent from a low reached June 27 through September 13, surging 6.6 percent in the past two weeks, the most since December. Chinese stocks swung between gains and losses yesterday. The CSI300 of the leading Shanghai and Shenzhen A-share listings ended down 0.4 percent at 2,478.4 points. The Shanghai Composite Index slipped 0.2 percent yesterday. “Current price activity is characteristic of a market which is dealing with a possible broad and major overriding shift in Chinese economics and fundamentals, which could favourably affect the index and translate into an extended move upside,” Mr DeMark said. “This does not preclude a modest correction or sideways movement over the next week.”
or indemnified debts incurred by Grand China Shipping (Hong Kong). Calls to Shagang Shipping for comment regarding the release of the ship were not answered. A statement from Shagang on Saturday describing
the cause of the conflict said it was concerned about the welfare of the passengers, but that Shagang would continue to pursue its claims against the HNA Group.
More than 1,100 passengers flown from Jeju to China
Head of the central bank says Beijing has to quicken reforms
hina needs to do more to develop private banks and make asset securitisation a standard practice as it tries to strengthen its financial system, central bank governor Zhou Xiaochuan wrote in an article on the official People’s Daily website. The report comes as Beijing moves to tap private capital to head off any need to bail out its banking system for a second time in as many decades, which many already see as inevitable. Another bailout would be considered a major failure of reform efforts over the past 10 years and would also risk further encouraging risky and wasteful investment by local governments if their current debts were written off. Mr Zhou argued China should accelerate efforts to open up the financial system so it was better able to cope with economic shocks, including by allowing more private-sector participation in the banking sector to create a level playing field between small and large financial institutions. China should make asset securitisation a regular part of its markets, he said, as it could help banks deal with bad loans and act as an alternative fundraising channel
to the shadow-banking sector, in particular high-yielding wealth management products. Asset-backed securities (ABS) can offer attractive returns and greater clarity on risks, at least in theory. ABS gained notoriety during the global financial crisis for the part they played in the U.S. subprime mortgage collapse, but most Chinese ABS are more simply structured. There are doubts that securitisation could scale up fast enough in China to challenge what Fitch Ratings says is a US$2 trillion market for wealth management products. Only about US$5 billion in securitised products are currently outstanding. Reuters
September 17, 2013 April 19, 2013
Beijing’s war on graft hits high-end pastries Sales of high-end mooncakes drop ahead of Mid-Autumn Festival Megha Rajagopalan
She declined to give her name. The Sofitel Wanda Hotel in Beijing, owned by Dalian Wanda Group Co Ltd and operated by Accor, said corporate customers were more likely to go for mid-range packages. “The atmosphere is more difficult and tough for selling mooncakes this year,” said Cedric Besler, the hotel’s manager. Mr Rein said private companies were also cutting back on conspicuous mooncake consumption because they did not want to be seen as being ostentatious. “Every day there’s another executive being hauled off and put in jail,” he said. “There’s a fear among both officials and businessmen right now. No one wants to be caught giving bribes.”
Sales of traditional mooncakes unscathed
old-encrusted mooncakes stuffed with shark’s fin are out of favour ahead of this week’s mid-autumn festival in China after a crackdown on corruption killed off demand for such lavish pastries – long used as a way to bribe officials. With more calories than a Big Mac, mooncakes are given as gifts to family, friends and employees during China’s Mid-Autumn Festival, which falls on September 19 this year. In recent years lavish varieties have popped up with jewellery-box style packaging, allowing cash, liquor or other goodies to be hidden in with the pastries. But an anti-corruption drive by President Xi Jinping has left the pricier treats languishing on the shelves, shopkeepers and analysts said, even as sales of more traditional lotus seed- and sesame paste-stuffed varieties were unhurt. “What has taken a deep dive is the high-end mooncakes more typically associated with corruption,” said Shaun Rein, managing director of China Market Research Group. The gilded age of mooncakes was last year, when pastries stuffed with gold flakes, shark’s fin and abalone made headlines. In rural Shanxi
What has taken a deep dive is the highend mooncakes more typically associated with corruption Shaun Rein, China Market Research Group
province, gold-filled variations sold for more than US$1,000, local newspapers reported. Mid-sized China Merchants Bank Co Ltd marketed mooncakes made of solid gold and silver, state media said. A spokesperson at the bank’s headquarters in Shenzhen could not be reached for comment but a manager at a branch in Beijing said she was not aware of any gold or silver cakes being sold this year. “It’s normal to exchange gifts but too much reciprocity has become a form of extravagance,” the People’s Daily, mouthpiece of the ruling Communist Party, wrote in a commentary last month about the holiday.
mooncake factory in Shanghai for two decades, adding sales had fallen 20 percent. Mr Qian said he adjusted his production goals when he heard about the crackdown, predicting demand for pricier pastries would fall. Demand for lower-cost cakes with traditional fillings had risen by 20 percent, he said. Luxury hotels said the most expensive mooncake sets they sell, often in lacquered or decorated boxes, were not doing well. A spokeswoman for China World Hotel, owned by Shangri-La Group, declined to discuss sales because “frankly it’s not a very positive topic”.
The crackdown on luxury mooncakes has also hurt a blackmarket for mooncake coupons. For convenience, workplaces often give employees coupons for expensive mooncakes in lieu of the cakes themselves. Those who dislike mooncakes sometimes sell the coupons to traders who hang out outside hotels and shopping malls. Those who do like mooncakes buy coupons at a discount from traders. Manufacturers sometimes also buy back coupons from traders in large batches. “Most mooncakes are God awful,” Mr Rein said. “People are scared of eating them because everyone knows how bad they are, and they could be years old if people keep re-gifting them.” A Shanghai based-coupon trader surnamed Xiong, who has been working the sidewalk opposite a Shanghai branch of the Hang Fa Lau dessert shop for a decade, said the windfall he counts on had declined from up to 2,000 yuan (US$330) a day to just a few hundred yuan. “There’s nothing I can do,” said Mr Xiong, who spends the rest of the year hawking cigarettes. Another trader, surnamed Pan, said profits were down 60 percent from a year earlier. “When Xi says something like this, the people he hurts are the ordinary folk,” Mr Xiong said. Reuters
Tax on cakes Excesses in past years had even prompted the government to ask officials and workers to pay income tax on mooncakes they received. “[This year] some government officials are less willing to accept a lavish or high-priced box of mooncakes, or in some cases, any mooncakes at all,” said Eric Carlson, a Beijing-based partner at law firm Covington & Burling and an anticorruption expert. Mr Carlson said he had heard that some government agencies had told mailroom staff to filter out mooncake packages before delivery. The Communist Party’s Central Commission for Discipline Inspection on Friday urged people to report cases of party members and government or state-owned enterprise officials spending public funds on gifts, banquets, travel and luxury goods during the Mid-Autumn Festival and the National Day holiday, which falls in early October. While China regularly announces anti-corruption campaigns, this one appears to have more bite than usual, although experts say only deep and difficult political reforms will make a real difference. “Political developments this year have had a definite impact on sales of high-end mooncakes,” said Qian Qiliang, who has run a state-owned
Beijing,ASEAN in talks on South China Sea A
code of conduct for handling disputes in the South China Sea should be discussed “gradually”, Beijing said after meetings with Southeast Asian nations, suggesting any agreement is still far off. The 10-member Association of Southeast Asian Nations (ASEAN) has been trying for more than a decade to secure agreement from China on a legally binding code of conduct. Beijing claims nearly all of the South China Sea, even waters approaching the coasts of neighbouring countries, and has resisted agreeing to the code, wary of giving any concessions that may weaken its claim. Tensions have mounted over
the waters in recent years, with the latest spat over concrete blocks the Philippines says China has placed on the disputed Scarborough Shoal. Senior officials from China and ASEAN held two days of talks over the weekend in the eastern Chinese city of Suzhou. “All parties at the meeting… have agreed to gradually widen consensus and narrow divergences… and continue to steadily push forward the agendas on a code of conduct,” the foreign ministry said in a statement posted late Sunday. A joint working group to carry out “concrete consultations” on the code was agreed, it added, giving no details or timetable. Competing claims to the sea have for decades stirred tension in the region and the waterway, which is believed to sit atop vast deposits of oil and natural gas, has long been seen as one of Asia’s potential military flashpoints. China has refused to upgrade a 2002 “declaration of conduct” into a legally binding code, instead preferring to negotiate individually with each country. AFP
September 17, 2013 April 19, 2013
South Korean workers returned five months after work was halted amid high political tension
Two Koreas reopen Kaesong complex North Korea gets boost as workers flood into industrial park
orth and South Korea reopened their jointly run industrial complex yesterday, reviving a lone symbol of economic cooperation five months after it was shuttered amid the North’s threats of pre-emptive nuclear attack. Thousands of North Korean workers were returning to the Kaesong zone, located north of the border. From the South, more than 500 trucks, vans and cars formed a bottleneck at a checkpoint at the heavily armed border, carrying supplies and company executives to the site to restart factories. More than 120 companies operate at Kaesong, including watchmaker Romanson Co, and Shinwon Corp, an apparel maker. “My heart’s in a flutter now that Kaesong is restarting,” Lee Mun-yong, who works for South Korean cellular phone parts maker Jaeyoung Solutec Co Ltd, said near the checkpoint. “North Korean workers are looking both relieved to have their jobs back and determined to work harder. The past five months have been a time of crisis for them.” North Korea pulled its 53,000 workers out of Kaesong in April, capping months of tensions after it conducted a third nuclear test in February and threatened preemptive attacks when the United Nations stepped up sanctions and the U.S. and South Korea held annual military drills. Kaesong has provided Kim Jong-un’s regime with much-needed hard currency and been a source of cheap labour for South Korean companies. “It would not have been easy for North Korea to give up Kaesong because it’s a valuable source of hard currency,” Choi Chang-ryul, a professor of liberal arts at Yong In University near Seoul and a political commentator, said by phone. At the border yesterday, a line of people formed at a currency exchange booth run by Woori Bank, changing South Korean won for U.S. dollars, the only currency that
can be used at Kaesong. Other South Korean workers shook hands and laughed as they chatted in groups inside the transit office. “I’m glad I’m finally returning after so many twists and turns,” said Shin Han-yong, president of Shinhan Trading, which produces fishing nets. “We didn’t get to fish at all this spring and summer, so to speak. But I held on to the hope that Kaesong would open again.”
Seeking growth Gross domestic product in North Korea increased 1.3 percent in 2012 after a 0.8 percent rise in 2011, according to calculations released by South Korea’s central bank in July. The North’s economy has contracted in four of the last seven years, the Bank of Korea data show. North Korea’s per capita income was about 1.37 million won (US$1,270) last year, or one-nineteenth of South Korea’s, according to the BOK estimates. Foreign trade, excluding commerce with the South, rose 7.1 percent to US$6.8 billion, with exports increasing 3.3 percent to US$2.9 billion and imports rising 10.2 percent to US$3.9 billion, the BOK said. The agreement to reopen Kaesong paved the way for a separate accord to revive reunions of families separated by the Korean War. The next round will be held at a mountain resort in North Korea between September 25-30. South Korean tours to the Mount Geumgang resort on the eastern c oast wer e a n o th er s y m b o l o f detente before being halted in 2008 when a North Korean guard shot and killed a South Korean visitor. Relations between the Koreas have improved in recent weeks, even as international concerns mount that the North may have reactivated its 5-megawatt nuclear reactor capable of producing one bomb’s worth of plutonium every year. In an effort to prevent any future closures, the North and South
have created a joint committee to oversee Kaesong and deal with any problems related to its operations. The South Korean co-chairman Kim Ki-woong said future committee talks would focus on ensuring that Kaesong becomes internationally competitive. “To reach this goal, there are still quite a few problems to resolve, even though the factory park itself has reopened,” Mr Kim said. Kaesong, on paper at least, has always been open to foreign investors although none have taken the plunge and set up business there.
Nissan to begin production in Myanmar J
apanese automaker Nissan Motor Co Ltd plans to begin producing small cars and trucks in Myanmar with its Malaysian partner as early as this year, the Nikkei business daily reported yesterday. Nissan Motor and Malaysia’s Tan Chong Motor Holdings Bhd will jointly produce several thousand small passenger cars and pickup trucks a year in the Southeast Asian country, the newspaper said without citing sources. Myanmar has been experiencing sharp growth in demand for cars since it began taking steps toward democracy in 2011, and used Japanese models are especially popular there. In a bid to tap the market, automakers have begun moving in,
A road show for foreign investors is scheduled to be held in Kaesong in October, but many experts question who would be attracted by a project jointly run by two countries that are still technically at war. “What foreign firm in their right mind would consider investing in Kaesong?” asked Aidan Foster-Carter, a noted Korea expert at Leeds University in Britain. “There are a myriad separate reasons to steer well clear,” he wrote in a commentary for the Wall Street Journal. Bloomberg News/AFP
with Japan’s Suzuki Motor Corp announcing the restart of production there earlier in the year and Ford Motor Co saying it would open a showroom. But Nissan would be the biggest carmaker so far to start production in the country, the Nikkei said, where huge import taxes and a United States investment ban aimed at the previous regime had meant vehicles were too expensive for most people. Car ownership was only around 2.36 million units as of last year in a country with a population of 63 million, meaning the market had much room to grow, the Nikkei said. A Tan Chong affiliate will likely construct an assembly plant that will finish cars using parts shipped from Nissan factories in Southeast Asia and elsewhere. Nissan was not immediately available to confirm the report in Japan, where it was a public holiday. Myanmar is one of the poorest countries in Asia after decades of economic mismanagement and isolation under army rule. But it has undertaken big economic and social reforms, sparking renewed interest in the country from business abroad. AFP
September 17, 2013 April 19, 2013
India August inflation rises As rupee pared its drop versus the dollar to 12.3 percent Kartik Goyal
ndian inflation unexpectedly accelerated to a six-month high in August as the rupee’s slide stoked import costs, adding pressure on central bank governor Raghuram Rajan to sustain efforts to support the currency. The wholesale-price index rose 6.1 percent from a year earlier, compared with July’s 5.79 percent climb, the Commerce Ministry said in New Delhi yesterday. The median estimate of 25 analysts in a Bloomberg News survey was for a 5.7 percent gain. Mr Rajan unveils his first monetary-policy decision this week after becoming governor on September 4 and inheriting interestrate increases from July aimed at aiding the currency. He’s pledged to contain inflation expectations and stepped up efforts to boost foreignexchange reserves, prompting a climb in the rupee that’s pared its drop versus the dollar in 2013 to 12.3 percent. “Monetary tightening can’t be reversed until we start seeing a consistent decline in inflationary pressures,” said Rupa Rege Nitsure, an economist at Bank of Baroda in Mumbai. “India has entered a
Food prices climbed 18.2 percent in August year-on-year
stagflationary phase.” The rupee, up 4.7 percent this month, pared gains after the release and was trading 1.2 percent stronger at 62.75 per dollar yesterday. The dollar weakened against major peers as former Treasury Secretary Lawrence Summers withdrew his bid to become U.S. Federal Reserve chairman. Mr Summers would have tightened policy more than Janet Yellen, who
is among the front-runners to replace Ben S. Bernanke, a Bloomberg Global Poll showed. India’s current-account gap and slowing economic growth left it vulnerable to the capital flight from emerging markets triggered by the prospect of reduced U.S. monetary stimulus. Prime Minister Manmohan Singh’s economic advisory body last week said the nation’s monetary
Singapore home sales rebound as new units sold Market to stabilise over the next few months
ingapore’s home sales rose in August as developers marketed more projects, rebounding from July when they slumped to the lowest since December 2009. Home sales increased 54 percent to 742 units last month, compared with 482 in July, according to data from the Urban Redevelopment Authority released today. Sales in August last year were 1,949 units. Sales are recovering after the government in June unveiled new rules governing how financial institutions grant property loans to individuals. Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a more than four-year campaign to curb speculation in Asia’s second-most expensive housing market, according to Knight Frank LLP and Citi Private Bank report. “We are seeing a gradual recovery after the July sales, which were a kneejerk reaction to the loan measures,” said Nicholas Mak, executive director
stance must continue until the rupee stabilises. Policy easing is possible subsequently if wholesale inflation moderates, it said. Every 10 percent decline in the rupee adds as much as 80 basis points to wholesale inflation, according to Nomura Holdings Inc. Food prices climbed 18.2 percent in August from a year earlier, with onion costs surging 245 percent, yesterday’s report showed. Fuel and power jumped 11.3 percent. Nonfood manufactured goods prices, a measure of core inflation, advanced 1.97 percent after a 2.33 percent gain in July, according to Bloomberg calculations based on the data.
at SLP International Property Consultants in Singapore. “Now the market is adjusting to the new loan rules and banks are speeding up the loan process.” The market will stabilise with sales in the range of 700 to 1,400 units a month over the next few months, Mr Mak said. Among the developers that began sales of their projects was Wing Tai Holdings Ltd, which marketed its condominium in the Tampines area, an eastern suburb of Singapore. It sold 218 units of 337 marketed last month, the data showed. RV Residences, offered by Allgreen Properties Ltd, in the central district sold 39 of 83 units sold, the data showed.
Loan framework The new loan framework requires that lenders take a borrower’s debt into consideration when granting property loans, the Monetary Authority of Singapore said on June 28. Home loans should not exceed
a total debt-servicing ratio of 60 percent and those that do will be considered imprudent, it said. The government tightened loanto-value limits for buyers seeking a second mortgage, referring to the amount they are allowed to borrow relative to the value of their properties. The cash down-payment will rise to 25 percent from 10 percent
The RBI raised two interest rates in July to increase shorter term borrowing costs and capped cash injections into the banking system, seeking to curb the supply of rupees. The benchmark repurchase rate was left unchanged after cuts earlier in 2013. Mr Rajan will keep it at 7.25 percent at the September 20 review, Standard Chartered Plc and Morgan Stanley said. The governor on September 4 announced a plan to provide concessional swaps for banks’ foreign-currency deposits, a move that will boost foreign reserves by US$10 billion, according to Bank of America Merrill Lynch. Mr Rajan delayed the September review to follow the Fed’s meeting. The U.S. monetary authority will probably trim its monthly bondbuying programme by US$10 billion
starting from the second loan, it said. The island-state’s private residential property price index rose 1 percent to 215.4 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter, according to data from the Urban Redevelopment Authority on July 26. Suburban home prices climbed 3.8 percent in the June quarter, compared with the 1.4 percent increase in the previous quarter, according to government data. Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built. Bloomberg News
Increase in sales of Singapore homes last month
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September 17, 2013 April 19, 2013
Asia to US$75 billion this week, a separate survey of economists showed. Mr Singh is striving to revive investment, tame price pressures and woo fund inflows before elections due by May. Slower expansion imperils the nation’s fight against poverty. A separate gauge of inflation based on consumer prices rose 9.52 percent last month from a year earlier. The government has raised taxes on gold imports and eased curbs on investment from abroad to bolster Asia’s No. 3 economy. It predicts the current-account gap will narrow to about US$70 billion in the fiscal year ending March 2014 from a record US$87.8 billion in the previous 12-month period. Bloomberg News
Monetary tightening can’t be reversed until we start seeing a consistent decline in inflationary pressures Rupa Rege Nitsure, Bank of Baroda
South Korea gathers data for rate probe S
Australia’s Abbott unveils cabinet Prime minister under fire after naming only one woman in cabinet
ustralian Prime Minister-elect Tony Abbott announced his Cabinet team to see through the coalition government’s first-term pledges, attracting criticism for including just one female member. Mathias Cormann, 42, was named finance minister and Andrew Robb, 62, was given the trade and investment portfolio in a ministerial line-up that largely preserves the roles senior Liberal-National lawmakers held in opposition. Foreign Affairs Minister Julie Bishop will be the only woman in the team. “This is the team to provide strong and stable government,” Mr Abbott told reporters in Canberra, saying that 15 members of the Cabinet have previous ministerial experience. Having won the September 7 election, Mr Abbott needs to navigate legislation through a Senate where the balance of power is held by the Greens until mid-2014, when it switches to a patchwork of minor centre-right parties. One of his main tasks will be edging the budget back toward a surplus at a time when economic growth is forecast to slow. Other members of the Cabinet, to be sworn in September 18, include: Joe Hockey as treasurer; Warren Truss as deputy prime minister and minister for infrastructure and regional development; Eric Abetz
Pakistan raises rate after IMF loan P
outh Korean antitrust agency officials collected documents from a financial industry group that sets benchmark rates amid a 14-month probe into borrowing costs, two people with knowledge of the matter said. Fair Trade Commission inspectors on Friday gathered data about certificate of deposit rates from a Seoul office of the Korea Financial Investment Association, whose members include brokerages and asset managers, the people said, asking not to be identified as they aren’t authorised to talk to media. South Korea in December introduced a new benchmark rate for bank lending as the investigation into potential collusion by lenders and brokerages to manipulate borrowing costs drew ire from customers and lawmakers. The FTC had begun looking into possible rigging of the 91-day CD cost, a key money-market rate in the nation, in July 2012. A spokesman for the Korea Financial Investment Association – which sets the CD rate twice a day based on submissions by 10 brokerages – declined to comment on the FTC visit and asked not to be named, citing the group’s policy. The FTC’s press official didn’t return five calls to his office.
akistan increased its benchmark interest rate for the first time in almost three years, shifting course after the International Monetary Fund approved a loan last week to help stabilise the nation’s struggling economy. The discount rate was increased to 9.5 percent from 9 percent, a sevenyear low, State Bank of Pakistan governor Yaseen Anwar said at a news conference in Karachi. The IMF called for a tighter monetary policy to contain inflation and rebuild reserves in approving a US$6.6 billion loan to help the South Asian nation avoid a balanceof-payments crisis. Prime Minister Nawaz Sharif’s four-month-old government is also struggling to end a Taliban insurgency and ease power shortages that have slowed growth in the US$231 billion economy. “Inflation has shot up,” Tariq Hussain Khan, research head at Pearl Securities Ltd, said before the decision. “You have to act fast on inflation if you want to achieve the fiscal deficit target.” Pakistan’s central bank had reduced the policy rate by 500 basis points since last raising it in November 2010, including a halfpercentage-point cut three months ago. Consumer prices rose 8.55 percent in August from a year earlier, which was fastest pace in 11 months.
as employment minister; George Brandis as attorney-general; and Barnaby Joyce as minister for agriculture. Abbott nominated Bronwyn Bishop, 70, to be speaker of parliament’s lower house. Mr Abbott said he was disappointed there was only one female Cabinet member and said Sophie Mirabella would have been included were she not in a close race to keep her parliamentary seat. Chris Bowen, the interim leader of the Labor party, said the government of Afghanistan had more women in its Cabinet, and criticised Mr Abbott for not representing key areas such as tourism with dedicated portfolios. Outgoing Prime Minister Kevin Rudd had six women in his Cabinet.
Budget surplus The coalition has won 90 seats in the 150-member lower house to Labor’s 55 with vote counting yet to be completed. With Mr Rudd resigning as Labor leader, Bill Shorten, a former unionist and party powerbroker, and Mr Rudd’s
former deputy, Anthony Albanese, face a ballot of party lawmakers and rank and file members to succeed him – a process that may take more than a month. Along with abolishing Labor’s carbon and mining levies, the new prime minister wants to lower the business-tax rate by 1.5 percentage points while funding a A$5.5 billion (US$5.1 billion) per year maternityleave programme that will give highly-paid new mothers up to A$75,000 over six months. Abbott plans to reduce the civil service by at least 12,000 positions and deliver a budget surplus of 1 percent of gross domestic product within a decade. The incoming administration has also pledged to lower subsidies for carmakers, slash red tape and cancel handouts to parents of school children. The Treasury last month forecast deeper budget deficits in the next three years and cut its growth estimate for 2013-14 to 2.5 percent from 2.75 percent seen in May. Unemployment will rise to an 11year high of 6.25 percent by mid2014, it said.
September 17, 2013 April 19, 2013
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1.2547 0.4157 0.3887 0.4212 0.5565 0.005 0.0026 -0.0245 1.4176 0.5334 0.7141 0.3642 0.5733 -1.3005 -0.7036 -0.0275 -0.0084 -0.5661 -0.4643 0.1137 0
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Leading reports from Asia’s best business newspapers
Yomiuri Shimbun The International Monetary Fund urged Japan to keep making fiscal reconstruction and structural reform efforts even after the planned consumption tax increase. The IMF positively evaluated the Japanese government’s fiscal consolidation plans such as an increase in the consumption tax and curbs to non-social security spending. “If recent policy actions prove successful, the budgetary outlook will improve somewhat,” the IMF said. But it said Japan’s “fiscal imbalance still remains high”.
Times of India Business confidence of India Inc. is the worst in more than four years and majority of the firms don’t plan fresh hiring and investments, an industry survey revealed. According to the Business Confidence Survey conducted by the Federation of Indian Chambers of Commerce and Industry, expectations with regard to major operational parameters, including sales, profits, investments, exports and employment, have taken a beating. The outlook with regard to sales, profits, exports remained subdued, with a majority of respondents anticipating no change from the current levels in the coming six months.
Inquirer Business The Philippine central bank may be preparing the market for a hike in interest rates to combat price pressures that have started to crop up, as suggested by its “hawkish” tone following its policy stance meeting last week. Financial giant Citi over the weekend warned that the Philippine economy could exit the socalled “sweet spot” anytime soon, after it greatly benefited from high growth rates and low inflation. The key overnight lending and borrowing rates were kept at their respective record lows of 3.5 percent and 5.5 percent last week.
Jakarta Globe Indonesia’s government is planning to introduce an electronic payment system to monitor the subsidised fuel consumption in the country, a move that could curb use to keep costs down. Susilo Siswoutomo, deputy minister at the Energy and Mineral Resources Ministry, said the government “is finalising” a new regulation that would make non-cash transactions of subsidised fuel eligible only by the use of a special card. That would allow the government to collect additional detail on consumption pattern, he said.
Five years of financial non-reform Anat Admati
Professor of finance and economics at the Stanford Graduate School of Business
ive years after the collapse of Lehman Brothers triggered the largest global financial crisis since the Great Depression, outsize banking sectors have left economies shattered in Ireland, Iceland, and Cyprus. Banks in Italy, Spain, and elsewhere are not lending enough. China’s credit binge is turning into a bust. In short, the world’s financial system remains dangerous and dysfunctional. Worse, despite years of debate, no consensus about the nature of the financial system’s problems – much less how to fix them – has emerged. And that appears to reflect the banks’ political power. For example, Vince Cable, the United Kingdom’s business secretary, recently accused Bank of England regulators – whom he called “capital Taliban” – of holding back the country’s economic recovery by imposing excessive burdens on banks. Cable appears to believe the banks’ lobbyists when they claim that lending and growth would suffer if banks were forced to “hold more capital”. Such claims by senior policymakers are hardly unique to the U.K.; but they are false and misleading. Bank capital is not cash reserves that must be “set aside”; it is unborrowed money that can be used to make loans. Simply put, lending and economic growth have suffered since 2007 because highly indebted financial institutions could not absorb their losses, not because of regulations that sought to reduce their indebtedness. The regulations in place when the crisis erupted were both inadequate and inadequately enforced, and the reforms proposed since then do little better. The proposed Basel III reforms, for example, would allow banks to fund up to 97 percent of their assets with borrowed money; some investments could be made entirely by borrowed funds.
distort weak banks’ behaviour – for example, by biasing them in favour of making loans to governments or investing in marketable securities over lending to businesses. Regulators too often tolerate, and sometimes support, weak banks, denying the reality of their dire condition. This is counterproductive.
Unfortunately, despite the enormous harm from the financial crisis, little has changed in the politics of banking
Zombie banks The perils of this approach should be obvious by now. When homeowners cannot pay their mortgages, they may lose their house, blighting the entire neighbourhood. The same is true of financial institutions, as the Lehman bankruptcy showed. Moreover, the effects of heavy borrowing are felt before borrowers default. Distressed or “underwater” homeowners do not invest much in maintenance or improvements. Similarly, weak banks with overhanging debts that prevent them from funding worthy investments are a drag on the economy. Flawed regulations further
Instead, regulators must take forceful steps to unwind zombie banks and compel viable banks to rely more on equity markets, where risk is traded and priced, to become stronger.
Lax regulation Banning payouts to shareholders and requiring banks to raise funds by selling new shares would bolster them without restricting their ability to lend. Banks that cannot sell their shares at any price may be too weak to survive without subsidies. Such banks are dysfunctional and must be unwound. If we want safer and healthier
banks, there can be no substitute for requiring banks to reduce their reliance on borrowing. As lenders, banks lose when borrowers default. Banks themselves, however, are the heaviest borrowers, routinely funding more than 90 percent – and sometimes more than 95 percent – of their investments by taking on debt. (By contrast, nonfinancial corporations rarely borrow more than 70 percent of their assets, and often much less, despite the absence of any regulation of their leverage ratios.) Cyprus illustrates the problem. Beginning in 2010, Cypriot banks invested some of their deposits in Greek government bonds, which promised interest rates of more than 10 percent – sometimes even 15 percent or 20 percent. As long as Greece paid these high rates, Cypriot banks could pay their depositors attractive rates, such as 4.5 percent, and thrive. Cypriot banks passed stress tests in July 2011. Yet, in early 2012, their Greek bonds lost 75 percent of their value. Because the banks made their investments with too little unborrowed money, they became insolvent. After being kept afloat for a year with help from the European Central Bank, the Cypriot banks were forced to face their losses. One was shut. Deposits over 100,000 euros (US$133,000) incurred losses. Eurozone taxpayers provided 10 billion euros in bailout funds. Remarkably, regulators had allowed Cypriot banks to engage in the practices that led to their troubles. Although investing in Greek bonds was risky – reflected in the high rates the bonds promised – the regulations ignored the possibility of a loss. While the upside of the risks played out, the banks’ profits benefited their shareholders and managers, politicians were happy, and the banks
grew enormously relative to the economy.
Demanding more The proposed Basel III regulations set wholly insufficient minimum capital requirements and maintain a failed approach to adjusting the requirements to risk. Within the eurozone, for example, banks can extend loans to any government using exclusively borrowed money. The French-Belgian bank Dexia, like Cypriot banks and many others since 2008, failed or were bailed out from losses on risky investments that regulators had considered safe. Regulations everywhere appear to be based on the false notion that banks should have “just enough” equity. Equity is not scarce for viable banks, and the “science” of complex risk weights and stress tests is a harmful illusion. Instead, regulation should seek to force banks’ investors to bear much more of their own risk, and thus to care much more about managing it, in order to limit the collateral damage of their excessive borrowing. Some say that banks are inherently special, because they allocate society’s savings and create liquidity. In fact, banks have become special mainly in their ability to get away with so much gambling at others’ expense. Nothing about financial intermediation justifies allowing banks to distort the economy and endanger the public as much as they do. Unfortunately, despite the enormous harm from the financial crisis, little has changed in the politics of banking. Too many politicians and regulators put their own interests and those of “their” banks ahead of their duty to protect taxpayers and citizens. We must demand better. © Project Syndicate
September 17, 2013
Closing China details plans for urban projects
Costa Concordia freed from rocks
China’s cabinet detailed plans yesterday to speed construction of urban infrastructure projects, in the latest move in Beijing’s plan to boost domestic demand by swelling the ranks of city dwellers. China has an ambitious plan to increase the numbers of urban residents as it seeks to restructure its economy away from credit and export growth to one where consumers provide the main impetus. The government will focus on projects ranging from underground sewage and household waste treatment to gas pipes and heating systems as well as public transport and power grid upgrades, to spur high quality urbanisation, the cabinet said on its website.
An unprecedented operation to right the Costa Concordia began yesterday off the Italian island of Giglio, where the cruise liner has been lying on its side since it capsized 20 months ago, killing 32 passengers. The parbuckling, or vertical rotation, is part of a removal plan costing about 600 million euros (US$802 million), according to Beniamino Maltese, chief financial officer of Carnival Corp’s Costa Crociere SpA Italian unit, which owns the ship. After the righting, the 114,500-ton ship will rest on underwater platforms, built under the hull using 18,000 tons of cement, for several months before being broken up.
Anoto signs China deal Anoto Group AB gained the most in more than seven months in Stockholm after the Swedish maker of pens that translate writing into a digital format signed a distribution agreement in China that also involves an order. The shares rose as much as 29 percent, the biggest intraday gain since February 1. Anoto’s stock has lost about half of its value this year. The company led the gainers in Stockholm. Anoto, based in Lund, signed a two-year, exclusive distribution agreement with TStudy China Co Ltd, the Swedish company said yesterday in a statement. The agreement will be reviewed after two years. TStudy develops interactive solutions for the education industry and has already won an order from China Publishing Group for the use of Anoto’s products. “China Publishing Group is the largest publisher in China and they intend to use digital pens to develop Chinese character writing and testing programs,” Anoto said in the statement. The agreement is for 100,000 pens over three years, Anoto said. Anoto said on September 6 it had secured a US$2 million (16 million patacas), short-term credit facility with Ewig Industries Macao Commercial Offshore Ltd. The loan is secured against product inventory and patents.
Tencent shares have risen 69 percent this year
Tencent market value tops US$100 bln Company approaches Facebook value amid China web explosion Lulu Yilun Chen
Election boost for gaming stocks Macau-related companies jumped in Hong Kong yesterday after the preliminary results of the Legislative Assembly election show more seats won by legislators linked to business and gaming sectors. Galaxy Entertainment Group Ltd, the casino operator controlled by billionaire Lui Che Woo, jumped 5.7 percent to a record high HK$55.35 (US$7.1). Sands China Ltd, a unit of billionaire Sheldon Adelson’s Las Vegas Sands Corp, climbed 3.2 percent to HK$47.75, leading the Hang Seng Index higher. Melco Crown Entertainment Ltd, the Macau venture between Australian billionaire James Packer and a son of casino mogul Stanley Ho Hung Sun, increased 4.8 percent to HK$83.55. “Macau stocks are responding very well” to the Legislative Assembly elections, Jackson Wong, vice president of Hong Kong-based brokerage Tanrich Securities Co, was quoted as saying by Bloomberg. “Since the legislative body was elected investors perceive it as more stable atmosphere in Macau.” Hong Kong stocks rose, with the benchmark index jumping the most in two weeks, after former Treasury secretary Lawrence Summers withdrew his name from consideration as chairman of the United States Federal Reserve. Mr Summers, a former Treasury secretary, would have tightened Fed policy more than Janet Yellen, who was his main rival to replace chairman Ben Bernanke, according to a Bloomberg Global Poll last week.
encent Holdings Ltd’s market value surpassed US$100 billion yesterday, less than a decade after going public, as the company capitalises on China’s explosion in using the Internet to chat and play games. Tencent rose 2.5 percent to HK$421.20 in Hong Kong, lifting its market value to HK$782.8 billion (US$101 billion). That put the company among the ranks of six others listed on Hong Kong’s benchmark index, including PetroChina Co Ltd and China Mobile Ltd, valued above that level. Tencent’s online games and instant messaging services lured customers accessing the Internet from mobile devices at a time when the number of China’s Web users surged almost sevenfold. Revenue at billionaire Pony Ma’s company has more than doubled in the past two years as China’s online game market is expected to reach 1.3 trillion yuan (US$212.4 billion) by 2016 from 66.2 billion yuan last year, according to Shanghai-based Internet consulting firm IResearch. “They were on the forefront
of the whole mobile shift,” Billy Leung, an analyst at RHB Research Institute Sdn in Hong Kong, said referring to the market value hitting US$100 billion. “It could help their branding globally.” Shenzhen-based Tencent, which went public in 2004, is the largest Internet company in Asia and has a market capitalisation greater than SoftBank Corp, McDonald’s Corp and Boeing Co. It trails a handful of technology companies worldwide, including Apple Inc, Google Inc, Microsoft Corp, Samsung Electronics Co Ltd and Facebook Inc.
Internet use China had 591 million Internet subscribers at the end of June, compared with 87 million at the end of June 2004, according to the China Internet Network Information Centre website. The number of people in China accessing the Internet via mobile devices rose 10 percent to 464 million by the end of June from six months earlier, according to the centre. That’s greater than the population of any other country
except India. Tencent shares have risen 69 percent this year, compared with the 2.6 percent gain in the Hang Seng index. The company’s rise has enriched the pockets of others, including largest shareholder Naspers Ltd, which owns about a third of the stock. The Chinese company was founded in November 1998, and its early services focused on e-mail, dating and online game services. Tencent raised more than HK$1.7 billion from an initial public offering in 2004. Tencent’s QQ instant messaging service had 818 million monthly active users at the end of June, and its WeChat service had 236 million. That compares with about 1 million instant-messaging accounts in 1999, according to its website. Mr Ma, China’s third-richest man, has a net worth of US$10.6 billion, according to the Bloomberg Billionaires Index. Tencent has been developing offerings for WeChat, known as Weixin in China, to compete with Alibaba Group Holding Ltd, the nation’s biggest e-commerce company. More than 84 percent of China’s Internet users regularly access instant messaging, making it the most popular online application in the country, followed by search engines with about 80 percent usage, according to data compiled by Bloomberg. “WeChat is a new growth driver, also the government is carrying out new policies to help boost technology growth,” Ricky Lai, an analyst at Guotai Junan International Holdings Ltd in Hong Kong, said by phone. “If Tencent can keep growing its user base, its momentum will last.” Bloomberg News
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