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Vitor Quintã

MOP 6.00

Demand greatest1 for hotel, MICE staff, study finds

April 19, 2013

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Legislators want to review govt budget every quarter

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Test flunking casinos told ‘slash smoking areas by 10pct’ T

he 16 gaming venues that failed a second round of air quality tests in their smoking zones will each have to reduce those areas by 10 percent – possibly by January – Health Bureau director Lei Chin Ion said yesterday. Half of them are satellite casinos

licensed by Sociedade de Jogos de Macau SA. Angela Leong On Kei, executive director of SJM, said the age of those properties contributed to them failing and called for a full smoking ban. But a surprise on the list was

Galaxy Entertainment Group Ltd’s StarWorld Macau which only opened in October 2006 at a cost of HK$2.5 billion. Seven of Melco Crown Entertainment Ltd’s slot venues known as Mocha Clubs were also on the hit list. More on pages 2 & 3

Year II

Number 410 Friday November 8, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Man-made island for ‘superbridge’ ready soon

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No hint of dividends as Galaxy rains Q3 cash

Worker import ban a bar to city’s progress: Chow

Macau casino developer Galaxy Entertainment Group Ltd said its profits rose 24 percent in the third quarter. Adjusted EBITDA increased to HK$3.2 billion the company added in its filing to Hong Kong Stock Exchange yesterday. But there was no hint of any immediate plans to issue dividends. In March vice chairman Francis Lui Yiu Tung, said Galaxy preferred to offer investors long-term value by reinvesting its cash balances. Page 2

A statutory ban on the import of certain types of workers would be a “joke” said local hotel and casino entrepreneur David Chow Kam Fai yesterday. Several labour groups last month urged the government to pass a law banning non-residents from working as casino dealers or professional drivers. “This [proposed] legislative ban is a joke … and [it would be] negative for Macau’s development,” said Mr Chow. Page 5

Price of NAPE shops higher than downtown ones: agency A shop in the NAPE district is already more expensive on a per square foot basis than shops in the prime tourist destinations in downtown Macau peninsula, Ricacorp (Macau) Properties Ltd said yesterday. The agency records show that the most expensive deal involved a few shop spaces in west NAPE, close to several casinos. The commercial units sold for more than 200,000 patacas (US$25,049) per square foot. Page 6

%Day

LENOVO GROUP LTD

2.14

WANT WANT CHINA

1.26

SWIRE PACIFIC-A

0.77

CHINA OVERSEAS

0.43

CHINA SHENHUA-H

0.42

HENGAN INTL

-1.63

BANK OF COMMUN-H

-1.80

CHINA RES ENTERP

-2.59

BELLE INTERNATIO

-2.68

CHINA RES POWER

-2.73

Source: Bloomberg

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November 8, 2013

Macau

Rich countries more likely to flout shell company rules

Test flunking casinos to But have grace period until undetermined Vítor Quintã

vitorquinta@macaubusinessdaily.com

Academics found nearly half of replies from service providers failed to ask ‘applicants’ for proper ID

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esearch from the United States and Australia suggests international rules that require proof of identity from anyone forming a shell company are ineffective. The team from three universities sent more than 7,400 email solicitations to more than 3,700 corporate service providers that make and sell shell companies in 182 countries. “Nearly half (48 percent) of all replies received did not ask for proper identification, and 22 percent did not ask for any identity documents at all to form a shell company,” says the research paper ‘Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies’. It was written by academics from the University of Texas at Austin and Brigham Young University – in the U.S. – and Griffith University in Queensland, Australia, and published last month. Shell companies are commonly used by investors in Macau to hold

property and shares offshore. But shell companies that cannot be linked to specific owners have been identified by governments and state security agencies as potential sources of laundering money, giving and receiving bribes, busting sanctions, evading taxes, and financing terrorism. The researchers found however that corporate service firms in poorer or developing countries were more likely to be compliant with the identification rules than equivalent firms in rich countries. “Against the conventional policy wisdom, those selling shell companies from tax havens were significantly more likely to comply with the rules than providers in OECD [Organisation for Economic Cooperation and Development] countries like the United States and Britain. Another surprise was that providers in poorer, developing countries were also more compliant with global standards than those in rich, developed nations,” say the authors. M.G.

T

he 16 gaming venues that failed a second round of air quality tests in their smoking zones will each have to reduce those areas by 10 percent, Health Bureau director Lei Chin Ion said yesterday. Gaming operators have 30 days to present their plans for implementing the changes. They will also be required to improve air quality throughout the whole of the relevant properties, the official told a press conference. The Health Bureau, the Gaming Inspection and Coordination Bureau and the Land, Public Works and Transport Bureau will then review the plans. “We will do it as quickly as possible but it could involve a lot of work, namely in moving [gaming] tables and equipment introduced to separate smoking from non-smoking areas,” Mr Lei said. In some venues that could even mean “changing the whole casino structure,” he added. “The reduction could be implemented by January 2014,” the official suggested. If gaming operators fail to deliver

Kam Pek casino one of 16 venues to fail smoking zon

No hint of dividends yet as Galaxy Casino firm’s Q3 profit up 24 pct on strong EBITDA but prefers to pay down debt Michael Grimes

michael.grimes@macaubusinessdaily.com

M

acau casino developer Galaxy Entertainment Group Ltd reduced in the third quarter its current borrowing levels – even as it spends money on the second phase of its HK$19.6 billion (US$2.5 billion) Galaxy Macau resort on Cotai, due to open in mid-2015. The reduction in leveraging was possible thanks largely to the free cash flow generated from its existing operations. The group’s cash on hand as of September 30 was HK$14.4 billion while net cash stood at HK$7.7 billion. StarWorld Macau on Macau peninsula produced its best ever quarterly adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) said the firm, while Galaxy Macau phase one on Cotai recorded a ninth consecutive quarter of adjusted EBITDA growth. Galaxy said in the highlights of its unaudited third-quarter results that profit jumped 24 percent during the period. Adjusted EBITDA increased to HK$3.2 billion for the three months ended September, the company added in its filing to Hong Kong Stock Exchange yesterday.

The number beat the HK$3.11 billion average estimate from seven analysts compiled by Bloomberg. EBITDA is a measure favoured by investors for comparing the performance of companies in the same sector when shorn of major overheads, which can vary significantly from firm to firm.

Table games Galaxy’s group revenue rose 16 percent to HK$16.3 billion. VIP turnover – the volume of rolling bets made by high-stakes gamblers – at Galaxy Macau, the company’s Cotai flagship property, climbed 10 percent to HK$191 billion. Mass gaming revenue, a different indicator of performance based on the gross wagered, jumped 11 percent to HK$7 billion. VIP turnover at StarWorld Macau rose 15 percent. Mass gaming revenue climbed eight percent. The phase two expansion at the existing Galaxy Macau resort, will add as many as 500 gaming tables and 1,300 rooms from the JW Marriott and Ritz-Carlton hotel brands. Galaxy has said it plans to spend as much as HK$60

StarWorld Macau – all time record quarterly EBITDA


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November 8, 2013 April 19, 2013

Macau

ld ‘slash smoking areas by 10pct’ date – possibly in January – to make changes

Failing casinos Golden Dragon StarWorld 7x Mocha Clubs

the reduction plans, all smoking areas in the 16 failing casinos and slot parlours will be cancelled, Mr Lei pledged. The operators were informed in September of the government’s decision to reduce their smoking areas by 10 percent, he said, adding some of them appealed. The health bureau took some time to go through all the appeals and that is why the results were not released in July as originally planned, the director said.

Clear the air

ne air quality checks

On Wednesday the cabinet of Chief Executive Fernando Chui Sai On said the results of the casino air quality checks would be out “in due course”. Twenty-four hours later bureaucrats sprang into action. Speaking at a press conference announced just one hour in advance, Mr Lei declined to comment on whether Mr Chui’s remarks had an impact on the decision to release the results a day later. The health bureau will continue

rains cash

to inspect all casino smoking areas and the director promised: “Next time around we will not need so much time to release the results”. Most of the casinos that failed the tests are run under the licence of Sociedade de Jogos de Macau (SJM) SA. Angela Leong On Kei, executive director of SJM Holdings Ltd, parent-company of SJM SA, said their casinos were “too old” to meet the requirements. She described the smoking area reduction as “redundant” and “a waste of money,” while once again calling for a full smoking ban inside gaming areas. Mr Lei gave no details on what would happen if air quality at the 16 venues failed to improve. “A second reduction [in the size of smoking areas] would be decided according to how things stand at that time,” Mr Lei said. But he did warn that reducing the size of smoking areas by 10 percent could do more harm than good. “The area will be smaller but the number of smokers will not decrease

Jimei Emperor Palace Lan Kwai Fong Vip Legend Kam Pek Diamond Grandview

so in the end the air quality will be even worse,” the official explained. On the other hand, if the air quality improves to the point where it meets the government standards casinos will be able to recover the smoking areas that were cut down, he added. The bureau is still testing the air quality in the smoking areas located in VIP gaming rooms. “There is a huge number of VIP rooms,” Mr Lei said. He said there is still no timetable for release of the data on VIP room air quality.

Iao Kun delays HK listing to 2014 Nasdaq-quoted Macau junket room investor currently trading at 45 percent discount to launch Michael Grimes

michael.grimes@macaubusinessdaily.com

HK$910 mln StarWorld adjusted EBITDA in Q3

billion to begin the third and fourth phases of the project as early as the end of this year and start operations from 2016 through to 2018. DS Kim, a Hong Kongbased analyst at BNP Paribas, says Galaxy Entertainment controls the largest undeveloped land bank in Macau. It “would enable the company to quadruple its footprint with Galaxy Macau expansions,” he adds. In July 2013, GEG completed the HK$3.25 billion purchase of the Grand Waldo complex, a casino hotel next door to Galaxy Macau already operating on Galaxy’s gaming licence. “We continue to work on exciting renovation plans and we anticipate to be able to share those plans in early

2014,” said the company in a press release accompanying the third quarter highlights. The firm said it pre-paid HK$3.5 billion of debt in the third quarter, enabling it to reduce borrowings “by approximately 35 percent” from HK$10.3 billion to HK$6.7 billion as of September 30. It plans to pre-pay HK$2.9 billion of debt during the current quarter. It said in yesterday’s filing that would “reduce borrowings by approximately 44 percent” from HK$6.7 billion to HK$3.8 billion. The filing gave no indication that the firm plans soon to give shareholder dividends. At a press conference in March to discuss its 2012 results, Francis Lui Yiu Tung, the company’s vice chairman, mentioned it would not be issuing a dividend at that stage, preferring to offer investors long-term value by reinvesting its cash balances into phases three and four of Galaxy Macau. Galaxy shares fell 0.35 percent to HK$57.40 by the close of Hong Kong trading yesterday. The stock has risen 90 percent this year, eclipsing the one percent gain from the benchmark Hang Seng Index. With Bloomberg News

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acau casino junket investor Iao Kun Group Holding Co Ltd – formerly known as Asia Entertainment & Resources Ltd – says its bid for dual listing in Hong Kong will be delayed until next year. The company “is currently seeking to engage a new sponsor with a more established market recognition and greater experience in such listing applications”, said Iao Kun in a press release. It expects to appoint the new sponsor before the end of November and “a further announcement will be issued in due course,” it said. Iao Kun said that owing to a recent change in the listing application rules of the Hong Kong Stock Exchange, a minimum of two months must elapse between the appointment of a new sponsor and any listing. “The company remains fully committed to the dual listing exercise despite the unanticipated delay in the timetable and will continue to dedicate the requisite level of resources towards achieving this exercise,” added the VIP room investor. Iao Kun said in a statement

Le Royal Arc Casino

filed with the Nasdaq in New York in September that an initial delay in the dual listing was due to the sudden death of the original sponsor’s principal. The Hong Kong exercise is expected to be what’s known as a ‘listing by introduction’. This is the same method used by Nasdaq-listed Macau casino developer Melco Crown Entertainment Ltd when it made a dual

listing in Hong Kong in December 2011. In such a process, a company that has shares issued on another exchange can – subject to local regulatory approval – list its shares in Hong Kong without raising new funds or issuing new shares. AERL – as it was then known – had an initial public offering on Nasdaq on August 15, 2008, with a launch priced at US$6.00 (47.90 patacas at current rates) per share. At the close of business on Wednesday New York time, Iao Kun was trading at US$3.31 per share – a 45 percent discount to its launch, but 1.85 percent up on the day. Iao Kun is entitled to receive all of the profits of the VIP gaming promoters from five Macau VIP rooms. They are at: Galaxy Entertainment Group Ltd’s StarWorld Hotel & Casino and Galaxy Macau on Cotai; at Sands China Ltd’s Sands Cotai Central; at Melco Crown’s City of Dreams on Cotai, and at the Sociedade de Jogos de Macau SA-licensed Le Royal Arc Casino on Macau peninsula.


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November 8, 2013

Macau Brought to you by

HOSPITALITY Buses hit the brakes In the first nine months of this year almost 374,000 buses crossed into Macau, 6.6 percent more than a year earlier. The thirdquarter data suggest that the growth is slowing. The figures deserve more attention than they usually get, considering how congested the road traffic here is. Unlike freight, which can be transported when the roads are less crowded, passengers tend to come and go during the peak hours, and the passenger vehicles carrying them go to parts of the city that trucks do not frequent.

Finding workers is difficult for some industries that must depend on the Macau labour force

Demand greatest for hotel, MICE recruits, study finds 11 Q1 11 Q2 11 Q3 11 Q4 12 Q1 12 Q2

12 Q3 12 Q4 13 Q1 13 Q2 13 Q3

Most passenger vehicles use the Gongbei border crossing. A comparatively insignificant number use the Cotai border crossing. The chart does not show the use of the border crossing in the Zhuhai-Macau Cross-Border Industrial Park, as people that work there are the only passengers supposed to use it. The number of buses and light vehicles (which include cars) crossing the border has been rising steadily since the beginning of 2011. But the more recent data show a trend toward the number levelling off or even falling slightly – which points to a slowing of growth. In the third quarter of this year the number was just 1 percent higher than a year earlier. In the first quarter it was 12.5 percent higher, and in the second it was 7 percent higher. This slowing first became obvious in the fourth quarter of last year. If this trend is maintained in the fourth quarter of this year, the annual rate of growth will probably be noticeably slower this year than the 8.6 percent recorded last year.

6.6 %

Annual increase in buses entering Macau in the first 9 months

THERE ARE THINGS WE DON’T DO

Most students in tertiary education would like to become civil servants once they graduate Stephanie Lai

sw.lai@macaubusinessdaily.com

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he hotel industry and the meetings and exhibitions industry will be the sectors most in need of graduate recruits between now and 2015, a Tertiary Education Services Office report says. The office’s human resources report is based on surveys of the occupations that students in higher education wish to pursue, and of the demand for graduates in various sectors of the economy. The survey of students had 1,841 respondents. The survey of demand for graduates looked at the hotel industry, the meetings, incentives, conventions and exhibitions (MICE) sector, the information technology industry, and the nursing, school teaching and social work professions. The Tertiary Education Services Office report says that between now and 2015 the MICE and the hotel industries will together need at least 7,125 graduate recruits, including recruits to fill accounting and IT positions. But the report says that between now and 2015 only 1,939 students will graduate with degrees appropriate for

employment in these fields, meaning supply will fall short of demand by 72.8 percent. The supply of potential recruits for the information technology industry and the teaching and nursing professions will also fall short of demand. The information technology industry may need 987 recruits, but only 616 students will graduate with appropriate degrees. Schools and kindergartens will need at least 1,406 teachers, but only 802 students will graduate in the coming two years. The supply of recruits for the social work profession should be more than sufficient. The profession will need 228 recruits and 297 students will graduate with appropriate degrees, the report says.

Iron rice bowls The Policy Research Office, a government think-tank, said in May that it estimated Macau would require 40,000 more workers by 2016. The head of the Policy Research Office, Lao Pun Lap, said more labour

BUT WE DO•••

would be needed as the city pursued its goal of becoming a world-class draw for tourists. The Tertiary Education Services Office report says 73 percent of the students surveyed said they would like to become civil servants when they graduated. The second-most popular choice of preferred occupation was a career in finance or insurance and the thirdmost popular was a career in teaching. Only 27 percent of the students said they would like to work in the gaming industry. A similar proportion said they would like to work in the hotel industry or the MICE industry. Most said they would like to work in Macau. The survey detected a rise in the number of students that would like to land a job instead of pursuing postgraduate studies. Nearly 70 percent said they would look for work as soon as they graduated. Research done last year found 60 percent of students in higher education wished to get straight down to work at making a living once they graduated.

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5

November 8, 2013

Macau

Tug-of-war for bosses, staff over migrants restrictions Proposed law to ban migrants from working as dealers ‘a joke’, says David Chow Tony Lai

tony.lai@macaubusinessdaily.com

Representatives from 40 business chambers called for more flexibility on imported labour

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ozens of businessmen led by David Chow Kam Fai stepped up yesterday against requests from workers’ groups to pass a law to ban non-residents from working as casino dealers or drivers. Mr Chow’s Federal General Commercial Association of Macau Small and Medium Enterprises held a press conference with 40 business chambers. They called on the government to revoke all restrictions on imported labour. “This [proposed] legislative ban is a joke … and [it would be] negative for Macau’s development,” said Mr

Chow. “If they [the workers] cannot find a job, come to my company because I need workers as well.” Several labour groups, including the Macau Fede­ration of Trade Unions, last month urged the government to pass a law banning outside staff from working as casino dealers or drivers. Thousands of residents took to the streets on October 11 in protest. Residents need to have higher goals than working as dealers, said Mr Chow, a casino operator who said his own target was to one day own a gaming licence here. Mr Chow currently runs Pharaoh’s

Tourism boom helps retail SMEs mushroom Growing role of Macau investors in setting up new companies Vítor Quintã

vitorquinta@macaubusinessdaily.com

M

acau’s economic fabric continues to swell as the number of new companies hit an all-time record in the third quarter of this year, official data show. Most new firms were small and medium enterprises (SMEs) working in the wholesale and retail sector and in business services, the Statistics and Census Service said yesterday. Investors incorporated 1,147 new companies in Macau in the third quarter of this year, more than in any quarter since records began, official data show. The Statistics and Census Service began publishing data on company incorporation in 2001. The old record had been set in the second quarter of this year, when 1,146 new companies were created. With tourism booming, the number of new firms set up in the wholesale and retail sector and in the hotel and restaurant business both hit new record highs of 423 and

52 respectively. There was also an all-time record of 293 new companies providing business services, which include building management and security companies. The data released yesterday also hints at a growing role for small and medium enterprises in Macau’s economy. Even though the number of new firms increased by 155 year-onyear, their combined capital fell by a fifth to just 129 million patacas (US$16.1 million). Over two-thirds of the new companies, or 794, had registered capital below 50,000 patacas. In addition, Macau investors accounted for 69 percent of the capital of the new firms – the highest percentage in two years. The number of companies dissolved in the third quarter was 121. At the end of September Macau had 42,674 registered companies.

Palace casino and Babylon casino under the gaming licence of Sociedade de Jogos de Macau SA. “We only have over 400,000 residents to serve 30 million visitors a year,” he said. “We can definitely afford 100,000 more imported workers or even twice what we have now with so many upcoming resorts,” he said. By the end of September there were

over 130,800 imported workers in Macau while the labour force stood at more than 364,300, official data show. Representatives from areas like retail, food and beverage, transportation and conventions warned that labour shortage will lead to their demise and a downgrade in the tourism services offered. Andy Wu Keng Kuong, president of the Macau Travel Industry Council, said: “The migrant workers policy should be more open. Some companies now have to wait for nine months to get imported labour. By then the companies will have already closed due to lack of workers.” “The growth in the local labour force does not match up with the demand from industries here,” said Frederick Yip Wing Fat, president of the Macau Association of Retailers and Tourism Services. The labour shortage will force employees to work for longer hours, with no time to improve their skills and climb up the social ladder, he said. The food and beverage sector still lacks 5,000 employees, particularly in management, Ieong Weng Seng, president of the Association of Macau Catering SMEs, estimated. Companies are losing three workers for each one they manage to recruit, he added. “The remaining workers have to share the extra workload and their morale is affected, leading to a worsening of the services offered,” he said. Mr Chow believes the discussion over labour has become “politicised”. “Soon I will need to work two hours a day at my daughter’s store because she cannot hire workers,” he said.


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November 8, 2013 April 19, 2013

Macau

Price of NAPE shops higher than downtown shops: agency Nearby casinos drive up price of NAPE shops to all-time record Stephanie Lai

sw.lai@macaubusinessdaily.com

T

o buy a shop in the NAPE district is already more expensive than in the prime tourist destinations in downtown Macau peninsula, Ricacorp (Macau) Properties Ltd said yesterday. The agency records show that the most expensive deal involved a few shop spaces in west NAPE, closer to casinos, sold for more than 200,000 patacas (US$25,049) per square foot. “These few cases involve shops with about 1,000 square feet, where buyers or lessees run pawnshop business or retails of preserved seafood,” said Melvin Leung Ming Fai, Ricacorp regional director. “In these past two years the rise in the selling price of NAPE shops has grown more rapidly,” he told a press briefing. “Now some of the most expensive deals have already exceeded the price level in the prime shopping destinations in downtown Macau,”

It is becoming more expensive to keep pawnshops close to NAPE casinos

Mr Leung added. The selling price of shops near L’Arc Macau and StarWorld casinos ranges from 80,000 patacas to 100,000

patacas per square foot, a level similar to the Senado shopping area. In the third quarter, the average selling price of shops in east NAPE –

further away from the casinos – was at 35,000 patacas per square foot, the agency noted. “The high shop selling price in NAPE did deter some buyers and businesses,” said the agency’s marketing officer Minnie O. “But so far we have yet to see a high vacancy rate.” Transactions of shops and industrial spaces in the third quarter are expected to fall by 28 percent from the previous quarter to about 460, the agency predicted using government statistics. The slowdown is due to a rise in the transaction costs, mainly due to the effect of the special stamp duty imposed on sales of shops, offices and parking lots in October last year, Mr Leung said. Shop owners have “remained aggressive in quoting a selling price, as they were aware of the limited supply in the market,” said Mr Leung. “That made deals harder to close.” The agency expects home sales to remain flat, with just around 2,000 deals closed in the fourth quarter, because the only available supply will be big-sized luxury flats in One Oasis and some projects in Areia Preta. Supply will not meet demand for first-time homebuyers or those looking to change flats, said the agency’s managing director Jane Liu Zee Ka. Government statistics show there were only 1,908 home sales recorded in the third quarter, involving 7.74 billion patacas.

Estuary bridge artificial island ready this month The Hong Kong-Zhuhai-Macau Bridge will open as scheduled in 2016, an official says Vítor Quintã

vitorquinta@macaubusinessdaily.com

W

ork on the manmade island where the western end of the Hong Kong-ZhuhaiMacau Bridge will land will be finished this month, according to the bridge authority’s executive director, Wei Dongqing. The Hong Kong Standard quoted Mr Wei as saying the reclamation work was estimated to cost 2.3 billion yuan (3 billion patacas), which was within the budget. Macau is to pay about onethird of the bill. The artificial island was originally due to be completed last year. Mr Wei told a press conference on Wednesday that the next step would be to “start infrastructure work on the island, including establishing a border crossing for Zhuhai and Macau”. An area with 72 hectares on the south side of the island will be handed over to the Macau authorities to build the Macau border crossing, the Infrastructure Development Office told Business Daily yesterday. The Macau border crossing was budgeted at 800 million yuan. “It should be finished in the same schedule as the opening of the Hong Kong-Zhuhai-

Macau Bridge,” the office added in an e-mailed reply. Mr Wei said construction of the bridge, which will be nearly 50 km long, was going well and that the bridge would open as scheduled in 2016. Union Gaming Research Macau said in a note to investors last December that it was concerned that the bridge might not open in 2016. The Hong Kong Labour Department suspended one of the contractors after a temporary platform at the Hong Kong end collapsed in October last year, killing one worker and injuring 14. The suspension was lifted in January. Mr Wei acknowledged that not all the work on the bridge has gone smoothly. “Many new technologies are being used in its construction that required applications for patents. This brought some difficulties,” he said.

Multi-destination tours The press conference was held on Hengqin Island. The chairman of the Hong Kong Travel Industry Council, Michael Wu Siu Ying, told the press conference that the Chimelong International

Work on the man-made island in Zhuhai began in December 2009 (Photo: Manuel Cardoso)

Ocean Resort and its Ocean Kingdom theme park on Hengqin could mean that more people would take tours that took them to more than one place in the Pearl River Delta. Mr Wu said many mainlanders went on fourday package tours that took them to Hong Kong, Macau and Zhuhai. “The theme park would provide a new place for visitors to enjoy,” he said.

In the first eight months of this year only 500,699 visitors to Macau, or 8.6 percent of all package tourists, came here on tours that also took them to the mainland, official data show. The first phase of Ocean Kingdom is meant open by November 20, when the theme park is due to hold the first Chinese International Circus Festival. But Credit Suisse said in a note to investors on Tuesday

that a lot construction work was still going on, and that the Chimelong resort would open in several phases. Credit Suisse does not believe the resort will entice many more people to visit Macau, at least in the first half of next year. Mr Wu of the Hong Kong Travel Industry Council said the resort would have no effect on the number of Macau visitors going to Hong Kong.


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November 8, 2013 April 19, 2013

Macau

Legislators want to review govt budget every quarter Some wish to know more about spending on projects that take several years Tony Lai

tony.lai@macaubusinessdaily.com

T

he government should report to the legislature on its spending more frequently – perhaps every three months – a Legislative Assembly committee thinks. The assembly’s Second Standing Committee met yesterday for the first time since the elections in September to review the government’s report on last year’s budget. Committee chairman Chan Chak Mo told reporters afterwards that some members thought the report had come too late, considering that nearly a year had passed. “Some suggested that the government inform the assembly about budget execution – even though it may not be audited or detailed – every half-year or every quarter,” Mr Chan said. A few other members were worried that reporting more frequently would “cause confusion” because the data

Chan Chak Mo says the government should explain why its spending has grown

would not be definitive, he said. He said his committee needed further discussion of the frequency with the government. The government made a mid-year report on its budget execution in August. But the assembly had no time to

discuss the report because the elections were looming. The committee expressed concern about the lack of details of capital spending on projects that take more than one year. Mr Chan said the capital spending plan contained 26

projects expected to cost over 100 million patacas (US$12.5 million). He said such projects usually took several years and that detailed reports on spending on them over the years were needed. “But the report talks only

about what happened last year,” he said. Mr Chan’s committee also wishes to know why government spending is growing. He said the members wondered whether the growth was pegged to economic growth or inflation. “But there has been no answer from the government,” he said. Mr Chan said members of the assembly hoped amendments to the budget law would solve this problem. Secretary for Economy and Finance Francis Tam Pak Yuen said last month that he hoped the “major directions” of the amendments could be put in writing this year and a bill drafted next year. The government spent 54 billion patacas last year, nearly 20 percent more than in 2011. The economy grew by 9.9 percent last year. The government spent less than two-thirds of what it had budgeted to spend. Mr Chan said members of the assembly were concerned about the government’s failure to spend what it planned to spend, which had been a “continuous” problem. He said delays in big infrastructure and housing construction projects were among the main causes of the problem. “It is difficult for the government to get a grip,” he said. Mr Chan’s committee and government officials will meet next week to discuss the budget report.


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November 8, 2013 April 19, 2013

Greater China

Taiwan, Singapore sign major trade deal

HK seeks more women workers Hong Kong is seeking to attract more homemakers into the workforce as an ageing population threatens to curb economic growth. More than half a million women homemakers in the city are between the ages of 30 and 59, representing a “huge potential,” Florence Hui, the undersecretary for home affairs, said. Female labourforce participation in Hong Kong has stalled at under 50 percent in the past decade. “The ageing population and the low fertility rate are giving rise to a population deficit which means that we have to make it possible for women to go and participate,” Anna Wu, chairman of the HK Mandatory Provident Fund Schemes Authority, said.

Agreement could facilitate entry to the Trans-Pacific Partnership, president Ma says Cindy Wang

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aiwan signed its biggest trade deal yet with a country that has diplomatic ties with Beijing, as the island tries to integrate its economy with the rest of Asia’s and to diversify economic allies beyond China. A free-trade agreement with Singapore, Taiwan’s fifth-biggest trade partner, was inked yesterday in the city-state after two years of talks, according to Taiwan’s Ministry of Economic Affairs. The deal covers trade in goods and services, investment and government procurement, the ministry said. Taiwan President Ma Ying Jeou is trying to catch up with the regional economic integration embraced by its Asian neighbours such as South Korea. China didn’t interfere with Taiwan’s first free-trade agreement with a developed economy, New Zealand, signalling the mainland’s tolerance for deals with other nations. “Relations across the Taiwan Strait are improving and Chinese authorities are quite ready for Taiwan to get some international space,” said Joseph Cheng, a political science professor at the City University of Hong Kong. China reached a wide-ranging agreement for economic cooperation with Taiwan in 2010. A further substantive pact opening up service sectors like banking and hospitals was signed in June and awaits legislative review. According to Mr Ma, the deal with Singapore would facilitate Taiwan’s entry to the Trans-Pacific Partnership, which Taiwan wants to join by 2020. The TPP is currently under negotiation among 12 countries including the U.S. and Japan.

Fair arrangements “We are seriously lagging relative to our trade competitors, including South Korea, Singapore, and Japan,” Mr Ma said in an interview on July 25. “We must act fast to catch up with the regional trend.” Yesterday’s deal was signed between the Singapore Trade Office in Taipei

Shanghai La Chapelle eyes US$600 mln IPO

US$1.55 bln

Value of Taiwanese exports to Singapore in September and the Taipei Representative Office in Singapore. The agreement refers to Taiwan as the “Separate Customs Territory of Taiwan, Penghu, Jinmen, and Matsu,” its moniker in the World Trade Organisation. The Singapore deal may boost exports out of Taiwan to the city-state. Taiwan exported US$1.55 billion of goods to Singapore in September, or about 6.2 percent of the value of all goods shipped overseas. “Taiwan is wise for moving ahead like this,” Derek Scissors, a Washingtonbased research fellow at the American Enterprise Institute, said. “China has more weight than necessary in the Taiwan trade portfolio and Taipei should diversify.”

Taiwan’s foreign-reserves income halved since 2008 T he income return on Taiwan’s foreign-exchange reserves, the world’s sixth-largest stockpile, halved since 2008 as more than US$3 trillion of debt purchases by the Federal Reserve drove U.S. Treasury yields to record lows. The holdings, which totalled a record US$415.6 billion at the end of October, delivered interest returns of 2.8 percent to 3.8 percent in the last five years, down from about 6.7 percent six years ago, according to Hsueh Ling, co-convener of the Legislative Yuan’s Finance

Committee, citing a presentation she saw during a visit to the central bank this week. Taiwan owned US$183.6 billion of Treasuries at the end of August, making it the third-biggest foreign holder of the securities, according to U.S. government data. China had US$1.27 trillion and Japan US$1.15 trillion. The rate on benchmark 10year U.S. Treasuries fell 167 basis points in the past six years to 2.64 percent, as the Fed bought government bonds to lower

Exports account for about twothirds of Taiwan’s gross domestic product, and goods bound for China and Hong Kong represent about 40 percent of shipments.

Diplomatic allies The island has free-trade deals with diplomatic allies such as Panama, Nicaragua, Guatemala, Honduras and El Salvador, according to Chen Shen Yen, a research fellow at the Institute of International Relations at Taiwan’s National Chengchi University. These nations recognise Taiwan’s Republic of China government rather than the People’s Republic of China government seated in Beijing. The New Zealand agreement and a deal with Singapore would help Taiwan negotiate similar deals with Asean nations, Yen said. Taiwan is studying potential deals with the Philippines and India, and plans to start a study on a similar pact with Israel, the economic affairs ministry said in September. “Taiwan can negotiate with other countries without mainland interference as long as China has already struck a trade agreement,” Mr Scissors said. “Serious talks with India, for example, would therefore see Chinese opposition. But Indonesia might not.”

Shanghai La Chapelle Fashion Co Ltd, a Chinese apparel retailer, filed for Hong Kong stock exchange approval for an initial public offering that could raise about US$600 million, two people with knowledge of the matter said. The company plans to start the share sale in the next few months, said one of the people, who asked not to be identified because the information is private. Founded in 2001, Shanghai La Chapelle sells fashion brands including La Chapelle Sport, 7.Modifier and Candie’s, according to its website. The company has more than 500 stores in cities including Beijing, Shanghai, Tianjin and Suzhou, one of the people said.

China National Gold weighs mine investment China National Gold Group Corp is considering investing in mines owned by Robert Friedland’s Ivanhoe Mines Ltd, including the Platreef project in South Africa, a person with knowledge of the situation said. China’s largest gold producer values the Platreef platinum and copper mine at about US$1 billion, said the person. China National Gold has also looked at other Ivanhoe projects located in the Democratic Republic of Congo and Gabon, though prefers more developed countries, the person said. No terms for a purchase of the Platreef mine have been finalised, and the company could instead consider buying a stake in Ivanhoe, the person added.

Bloomberg News

borrowing costs and spur growth. “Taiwan doesn’t have a sovereign wealth fund and the central bank can only buy fixed-income assets, so though U.S. Treasuries aren’t great, at least there’s no default risk,” said Scott Cheng, a Taipeibased economist at Bank SinoPac. “The central bank also has to buy back U.S. dollars in the market to intervene and absorb foreign currency, owing to Taiwan’s large trade surplus.” The monetary authority has sold the local dollar on most days since March 2012, according to traders who asked not to be identified. Taiwan’s dollar has declined 1.3 percent this year to NT$29.407 against its U.S. counterpart. The island posted a trade surplus of US$2.35 billion in September. Bloomberg News

Lenovo profit surges 36 percent Lenovo Group Ltd, the world’s largest maker of personal computers, reported second-quarter profit rose 36 percent after increasing its share of the global markets for PCs and smartphones. Net income climbed to US$219.7 million in the three months ended September, from US$162 million a year earlier, Lenovo said in a statement yesterday. Lenovo posted the biggest gain in shipments among the world’s topfive PC vendors during the period as the industry experienced a 7.6 percent drop amid weak consumer sentiment for traditional computers, researcher IDC reported last month. Revenue rose 13 percent to US$9.77 billion.


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Greater China

Suntech sinks on liquidation Solar company takes step towards final wind-down

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untech Power Holdings Co Ltd, once the world’s largest maker of solar panels, filed for provisional liquidation, signalling that it may go out of business after years of steep declines in panel prices. The company led Chinese stocks in New York lower after filing for a provisional liquidation. Suntech’s shares fell as much as 23 percent to US$1.15 on the New York Stock Exchange on Wednesday. “We do think this is the end for Suntech,” Raymond James analyst Ryan Berney told Reuters. Suntech filed for provisional liquidation in the Cayman Islands, where it is incorporated. A provisional liquidation is an emergency procedure that a company can apply for only after a petition to wind up has been presented at court. Suntech also said it would consider pursuing a Chapter 15 filing in the United States that would allow U.S. courts to recognise a foreign bankruptcy as the main proceeding and block creditors from seizing U.S. assets. A group of Suntech creditors in the United States filed a Chapter 7 involuntary bankruptcy petition against the company in October. Suntech has said it will contest the attempt to wind up the company. In a Chapter 7 bankruptcy, a trustee is

Suntech’s unit was forced into bankruptcy in March

appointed to oversee the sale of assets to raise money to repay creditors. “The idea is to reach a deal through the Cayman proceedings and [Suntech] would try to enforce that in the U.S. through a Chapter 15 and

Hutchison faces EU probe into bid for Ireland’s O2 H utchison Whampoa Ltd faces an in-depth probe by European Union regulators examining its bid for Telefonica SA’s Irish unit, a deal that would combine two of Ireland’s four mobile-phone operators. The European Commission will rule on the deal by March 24, it said in an e-mailed statement. The sale may reduce options for companies seeking to market services under their own brands using networks provided by mobile operators and hamper smaller rival Eircom Group, the antitrust watchdog said. “The transaction would combine two of the four mobile networks in Ireland and create a player of similar size to the currently largest operator, Vodafone,” the EU said in the statement. Billionaire Li Ka Shing’s Hutchison agreed in June to buy O2, Ireland’s No. 2 mobile operator, for as much as 850 million euros (US$1.15 billion). The deal would combine O2 with Hutchison’s Three Ireland, the thirdlargest wireless carrier. Three Ireland chief executive Robert Finnegan said in June that he expected the EU to open a longer probe into the deal. The transaction “will be good for competition and consumers in Ireland” and Three is “confident that the merger will be approved by the commission,” it said in an e-mailed statement. O2 Ireland referred requests for comment to Three. Hutchison, the biggest Asian investor in European wireless assets, had to make concessions to EU regulators last year before it won approval to take over Orange

Li Ka Shing’s Hutchison to pay US$1.15 bln for O2

in Austria, a transaction that also reduced the number of phone operators. It had to offer radio spectrum and network access to rivals to alleviate antitrust concerns. The EU’s initial investigation into the Irish deal indicated that shrinking the number of operators to three from four may increase the likelihood that the companies would coordinate their behaviour and increase prices, the Brussels- based authority said in the statement. Hutchison will pay 780 million euros in cash and an additional 70 million euros upon meeting certain performance targets, the companies said earlier this year. The deal will increase Hutchison’s customers in Ireland to about 2 million and its wireless market share to 37.5 percent, the Hong Kong-based company said. Bloomberg News

use that to dismiss the involuntary bankruptcy,” said Ken Coleman, a partner at law firm Allen & Overy LLP. Mr Coleman is not involved in the Suntech case. Suntech’s stock was trading at

about US$86 nearly six years ago, before the prolonged downturn in the solar industry. Rapid capacity expansion by Chinese manufacturers from around 2008 created a global glut of panels just as countries in Europe, traditionally the largest solar market, withdrew subsidies to consumers. The subsequent fall in prices forced many producers to shutter production. Shunfeng Photovoltaic International Ltd agreed last week to buy Suntech’s main manufacturing unit, Wuxi Suntech, for US$492 million, leaving Suntech with few assets. Wuxi Suntech was dragged into bankruptcy proceedings by Chinese creditors in March, days after Suntech defaulted on a principal payment on US$541 million of convertible bonds. The Wuxi, China-based company said its restructuring will include the exchange of outstanding debt into its equity. “Shunfeng is buying essentially all of Suntech’s production capacity and technology portfolio, apparently leaving the U.S.-listed holding company a quasi-empty shell,” Mr Berney said. After the sale of its main manufacturing unit, Suntech is left with little more than its U.S. sales and distribution business and an investment company that owns solar power plants in Italy. Some of those plants are under investigation in Italy for illegally availing state subsidies. Reuters


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Greater China

Leaders to reveal reform credentials in special meeting Policy-making summit to start with the economy on an upswing Kevin Yao

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hinese leaders will start a four-day secret meeting tomorrow to set a reform agenda for the next decade as they try to steer the giant economy towards more sustainable growth after three decades of breakneck expansion. President Xi Jinping and Premier Li Keqiang must unleash new growth drivers as the world’s second-largest economy loses steam burdened by industrial overcapacity, piles of debt and soaring house prices. The message from Beijing could not be clearer: China needs to shift to a more balanced economy that is socially and environmentally sustainable. That was the conclusion of a key Communist Party meeting a decade ago, yet what followed was more of the same: rapid investment-led expansion, which turned China into the world’s no.2 economy, but left it laden with debt, environmental damage and excess capacity. The meeting will show just how committed the new leadership is to reform after formally coming to power in March. Economic reforms will dominate the closed-door meeting of the 205-member Central Committee of China’s ruling Communist Party. Little if any news will be released during the secret gathering, although traditionally official news agency Xinhua releases a long dispatch on the last day. Analysts said some social and political issues could be tackled, but Western-style political reform is not on the agenda. Yu Zhengsheng, the fourthranked member in the elite Politburo Standing Committee of the Communist Party, said last month the meeting would deliver “unprecedented” economic and societal reforms.

Analysts caution against high expectations as stability remains the watchword for the leadership, even amid media reports top policymakers could take bold steps to deal with entrenched vested interests, such as state monopolies.

Expected reforms The government has pledged to allow market forces to play a bigger role in setting the price of capital, energy and land, and to cut red-tape. That suggests the biggest changes may be fresh measures to free up interest rates and fiscal changes to allow local governments to manage their debt better and move away from a reliance on land sales for revenues. The meeting may also decide to loosen the household registration system, which prevents migrant workers and their families from getting access to education and social welfare outside of their home villages. The system is seen as an impediment to persuading more people to live in urban areas, a trend the government wants to encourage to boost consumption. The leaders may also push land reforms to allow farmers to sell land when they leave their villages. Currently, they cannot sell their land freely and many do not leave their farms for fear it will be grabbed by local governments for development. “Reforms will speed up but won’t be very quick,” said Xu Hongcai, senior economist at China Centre for International Economic Exchanges, a government thinktank in Beijing. “All the reforms are intertwined and it’s hard for one to go forward very quickly.” Historically, third plenums in China have served as a springboard for key economic reforms. New leaderships usually spend the first few months in office getting familiar with issues, building consensus before unveiling policy initiatives. Former leader Deng Xiaoping launched historic reforms to open the economy to the outside world at a third plenum in 1978. It was followed by a third plenum in

KEY POINTS Meeting seen as springboard for economic change New rules expected for environment, family planning Leaders may want to break-up some monopolies State corporate giants may have wings clipped

1993 that endorsed the “socialist” market economy, paving the way for sweeping reforms spearheaded by the-then Premier Zhu Rongji, which led to China’s entry into the World Trade Organisation. But the third plenum under Hu Jintao and Wen Jiabao – Mr Xi and Mr Li’s predecessors – in 2003 failed to yield key reforms. In 2008, they unveiled a 4 trillion yuan (US$656 billion) stimulus package, which fuelled a property frenzy and saddled local governments with over 10 trillion yuan in debt that the economy is still trying to absorb today.

High stakes Beijing has pledged to steer the economy away from a dependence on investment and exports to one driven more by consumption, services and innovation, which they consider more sustainable. Chinese leaders are acutely aware of what is at stake as years of high growth, based largely on manufacturing, come to an end. Having been the factory to the world, they want to avoid the socalled middle-income trap, where wealth creation stagnates as market share is lost to lower-cost competitors and achieving high-income status stays out of reach. The World Bank says China’s

per capita GDP was US$6,188 last year, compared with US$22,590 in South Korea, US$36,796 in Hong Kong and US$51,709 in Singapore – countries that avoided the middleincome trap. “Market power may have more influence on reform. If you don’t want to reform the system, then you won’t be able to compete in the global market,” said Zhao Xijun, deputy head of the Finance and Securities Institute at Renmin University in Beijing. “The new leaders don’t say they don’t pay attention to growth, but the new priority is the stability of growth rather than a high growth rate,” Mr Zhao said. China needs average annual economic growth of 7 percent to reach its goal of doubling its 2010 per capita GDP by 2020. Mr Li said this week China needs growth of 7.2 percent to keep a lid on unemployment. China’s economy is sagging towards its slackest pace of expansion in 23 years this year, at 7.5 percent, reflecting sluggish exports growth and a deliberate attempt to slow activity down so Beijing can carry out economic changes. Signs of sustained strength in the economy may give Mr Xi and Mr Li more confidence in tackling reforms. At the same time, excessive credit growth, rising local-government debt and weaker export momentum may cap a stronger recovery from a twoquarter slowdown. There are growing signs that Beijing may take some steps to clip the wings of state corporate giants, whose dominance was strengthened at the cost of private firms by Beijing’s forceful response to the global financial crisis. The official China Securities Journal said last week that Chinese leaders could discuss increased supervision for stateowned firms and the break-up of some monopolies to encourage competition at the plenum. “State firm reforms will come sooner or later. The problems will get bigger if you don’t deal with them now,” said Mr Xu.

Market power may have more influence on reform. If you don’t want to reform the system, then you won’t be able to compete in the global market Zhao Xijun, Renmin University

Chinese leaders have shown greater tolerance for slower economic growth

Reuters


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Asia

Myanmar to grow 6.8 pct next year: World Bank Jared Ferrie

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authority, that he would seek to encourage foreign banks to move to a wholly-owned subsidiary structure, giving them greater ability to expand in return for increased regulatory oversight of their local operations. His changes mirror moves by Prime Minister Manmohan Singh’s government to open sectors from aviation to retail to increased foreign investment as India’s economy grows at near the slowest pace in a decade. India has 26 state-run banks – led by SBI – accounting for 76 percent of outstanding loans as of March 31, according to the central bank. The country’s 20 private lenders, including ICICI, held 19 percent of the loan market, while 43 foreign banks accounted for the rest. In 2004, the government raised the limit for foreign direct investment in India’s non-state banks to 74 percent and began allowing overseas banks that met certain criteria to set up wholly owned units. Now the central bank says it will consider allowing the local subsidiaries of foreign banks to buy as much as 74 percent of privatesector banks. India’s largest nonstate lenders include Mumbai-based ICICI Bank Ltd, HDFC Bank Ltd and Yes Bank Ltd. Loosening the branch restrictions is an effort to lure banks that may be concerned about losing control of their local operations if they set up a subsidiary, said Vishal Narnolia, a Mumbai-based analyst at SMC Global Securities Ltd.

yanmar’s economy is set to grow an estimated 6.8 percent next year, placing it among Southeast Asia’s fastest growing economies, the World Bank said yesterday. Expansion would be driven by energy and commodities exports, foreign investment, services and construction and growth would exceed the 6.5 percent achieved in the fiscal year that ended on March 31, the lender said. “It’s not just a historical trend,” Khwima Nthara, the bank’s senior country economist, told Reuters, referring to the growth forecast, which outpaces the average annual expansion of 5.1 percent expected for the region this year and the next. “This is very much attributable to the new wave of reforms.” Despite abundant resources, a population of about 60 million and a land mass the size of Britain and France combined, Myanmar’s economy is one Asia’s smallest and least developed, hurt by fiscal mismanagement and Western sanctions, most of which have now been suspended. That has allowed a reformist, civilian-led government that took office in March 2011 to focus on attracting foreign investment, creating jobs and boosting infrastructure. Foreign direct investment in Myanmar had risen to US$2.7 billion in 2012/13 from US$1.9 billion in 2011/12, the World Bank said in its first report since resuming operations in Myanmar in January. Most of that investment went into the country’s energy, garment, information technology and food and beverages sectors, the lender added. Myanmar does not compile data for calendar years and few independent economists trusted official data provided by the former regime, which was sometimes cited in double digits. Myanmar’s investment commission says US$54 million of foreign investment flowed in in September, mostly destined for the manufacturing, agriculture, mining, and hotels and tourism sectors that are expected to drive future growth. The World Bank said it was most concerned about inflation, which rose to 7.3 percent in August, fuelled by higher costs for housing and food, particularly rice. Inflation needed to be kept under control as the majority of the population could suffer, Mr Nthara said, adding, “It’s certainly a worrying trend. Inflation hits the poor most.”

Bloomberg News

Reuters

Foreign lenders allowed to open branches ‘anywhere in the country’

India reveals shake-up of foreign bank rules RBI move makes it easier for lenders to open branches Anto Antony

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ndia paved the way for foreign banks led by Citigroup Inc and HSBC Holdings Plc to open more branches by introducing guidelines that would put them on almost equal footing with local rivals such as State Bank of India. The overseas banks can set up wholly owned subsidiaries with a minimum capital of 5 billion rupees (US$80 million) and a capital adequacy ratio of 10 percent, the Reserve Bank of India said in a statement. These locally incorporated units would be permitted to open branches “anywhere in the country at par with Indian banks,” it said. Opening up the nation’s banking system to foreign lenders in the most sweeping changes since 2004 may boost RBI governor Raghuram Rajan’s efforts to spur competition and revive the economy. The rules will ease the way for overseas firms including DBS Group Holdings Ltd to expand in a market where 65 percent of the population don’t have access to bank accounts. “A large market always piques interest, and more so for underpenetrated markets,” Ismael Pili, head of Asia bank research at Macquarie Group Ltd in Hong Kong, wrote in an e- mail before the RBI statement. “India certainly fits that bill with its huge population base.” DBS, Southeast Asia’s largest bank, is ready to act as soon as the limits are lifted, Vijit Yadav, chief operating officer of the lender’s Indian operations, said in an interview in Mumbai on October

7. The group, which has opened 12 Indian branches since 1995, “is bullish” on the new model and aims to add 50 outlets within three years of getting permission, Mr Yadav said.

Limited openings India had previously limited foreign banks operating within its borders to opening a combined 12 new branches a year. New Yorkbased Citigroup and London-based

US$80 mln

Capital needed for overseas banks to set up wholly owned subsidiaries

HSBC haven’t opened an outlet in the nation since 2010. The two lenders operate just 93 of India’s more than 92,000 branches, central bank data show. Mr Rajan said on September 4, when he took over at the monetary


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Asia Australia full-time jobs slump in Oct Australian employers cut full-time workers in October by the most in more than a year, sending the local dollar lower as traders increased bets the central bank will keep interest rates at a record low. The number of full-time jobs declined by 27,900, the statistics bureau said in Sydney yesterday, the most since June 2012. The total number of people employed rose by 1,100, as part-time employment increased by 28,900. The jobless rate held at a revised 5.7 percent.

Petronas sells unit to Japanese firms The petrochemicals arm of Malaysia’s state oil firm Petroliam Nasional Bhd (Petronas) will sell its stake in Vietnam’s Phu My Plastics and Chemical Co Ltd to Japan’s Asahi Glass Co Ltd and Mitsubishi Corp. Petronas Chemicals Group Bhd said in a stock exchange statement the divestment of 93.1 percent of the unit was part of a plan to discontinue its vinyl business and strengthen its asset portfolio. Petronas Chemicals did not disclose the financial details of the transaction but said the sale would be completed by the second quarter of 2014.

Buyout opportunities seen in Vietnam imbalances As leaders try to reverse the slowest growth since 1999

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ranklin Templeton Investments’ venture in Vietnam said the time is right for buyout firms to invest in the country as it expects monetary and fiscal reforms to take effect over the next three to five years. Low valuations, constrained bank lending and an improved corporate landscape mean private-equity investors have an opportunity to buy companies in the Southeast Asian country before the economy picks up again, said Avinash Satwalekar, chief executive of Vietcombank Fund Management, Templeton’s venture with Joint-Stock Commercial Bank for Foreign Trade of Vietnam. “The best time to make investments is when the water is murky,” Mr Satwalekar, 39, said in an interview in Singapore yesterday. “When its gets clear, that’s when everybody can make investments.” Vietnamese leaders are trying to reverse the slowest growth since at least 1999 as the highest level

of bad debt in Southeast Asia deterred lending and hurt business expansion. Prime Minister Nguyen Tan Dung forecasts growth will rise to 5.8 percent next year while his government prioritises curbing inflation and banks’ liquidity has improved, he told lawmakers at a legislation session last month. The economy will expand slightly less than 5.5 percent this year, the government said this month. Officials expect a slight increase in credit growth to as much as 14 percent next year while an asset management company may buy as much as 150 trillion dong (US$7.1 billion) of banks’ bad debt by the end of 2014.

Left behind The central bank cut a policy rate in July to support growth, after it devalued the currency the previous month to improve the balance of payments. “Monetary and fiscal policymakers

Mirvac to buy mall, Melbourne offices Mirvac Group, Australia’s thirdbiggest diversified property trust by market value, said it will spend A$552 million (US$526 million) to buy the Harbourside Shopping Centre in Sydney and two office buildings in Melbourne. Mirvac will acquire the shopping mall in Sydney’s Darling Harbour on the western edge of the city centre for A$252 million, the company said in a statement yesterday. The three purchases are debt funded, boosting the company’s gearing ratio to 27.7 percent from 23.6 percent at the end of June, it said.

Medini plans US$800 mln IPO Government-linked township developer Medini Iskandar Malaysia Sdn Bhd hopes to raise 2.5 billion ringgit (US$800 million) in an initial public offering early next year. The IPO, reported by The Star newspaper, would be the country’s largest since palm oil giant Felda Global Ventures Holdings Bhd raised US$3.25 billion in June 2012. Medini oversees a special economic zone in the heart of the ambitious Iskandar development project in southern Johor province. Medini has said its site has an expected gross development value of more than US$21 billion over 20 years.

Vietnam – the cheapest equities market in Southeast Asia

have created a very benign environment for investors, but I am still waiting for those policies to take effect,” Mr Satwalekar said. “If you wait for that trigger, you run the risk of being left behind and then playing catch up.” Mr Satwalekar declined to give specifics on fundraising, citing U.S. regulations. His favourite sectors are agriculture, retail, education and food and beverage, he said. “Our typical deal size is between US$5 and US$15 million,” Mr Satwalekar said. “We are not focusing on the bigger firms as those are largely state-owned.” Vietnam’s benchmark VN Index is trading at 12.7 reported earnings, making it the cheapest equities market in Southeast Asia, according to data compiled by Bloomberg. While stock investors have pushed the gauge 21 percent higher this year, the biggest gain in Asia excluding Japan, buyout funds aren’t rushing in yet, according to Ernst & Young LLP. “I wouldn’t say private equity in Vietnam is a flood yet,” Luke Pais, Asean private equity leader at Ernst & Young consultancy, said in an interview. “People are still waiting and watching. But certainly the number of deals has increased and people are spending more time looking at that market.” Buyout firms have spent US$287 million on stakes in five transactions this year, according to Preqin Ltd, a London-based research firm. That’s the highest number of deals in five years and biggest amount since at least 2006, it said. Bloomberg News

SoftBank eyes games, music to boost revenue S oftBank Corp, the Japanese wireless carrier involved in more than a dozen deals the past year, wants to acquire makers of games, music and videos as it tries to generate more revenue from smartphone users. SoftBank plans to offer exclusive and prioritised content to differentiate itself from rivals selling Apple Inc’s iPhone and other high-end handsets, Yoshimitsu Goto, general manager for finance, said in an interview yesterday. NTT Docomo Inc, Japan’s largest mobile carrier, began offering the iPhone in September to keep pace with SoftBank and KDDI Corp. “Strong content helps to increase subscribers,” said Tomoaki

Kawasaki, an analyst at Iwai Cosmo Holdings Inc in Tokyo. “Smartphones and tablets are replacing specialised game machines so some gamers may use SoftBank mobiles if it has strong content. It’s the same for music and videos.” SoftBank said last month that sales will reach more than 6 trillion yen (US$61 billion) in the year ending in March, and it reiterated an earlier projection for annual operating income of at least 1 trillion yen. That revenue is helping SoftBank underwrite acquisitions. “We have to consider boosting content offerings,” Mr Goto said in Tokyo. “Acquisitions are among the

most important strategies for us.” The company is not negotiating a deal currently, he said. SoftBank plans to keep its stake in Alibaba Group Holding Ltd if China’s largest e-commerce company proceeds with the IPO. The carrier holds about 37 percent of Alibaba. “Alibaba is among the most important companies in our group, so our plan is to hold the stake for a long period of time,” Mr Goto said. “What’s important for us as a shareholder in Alibaba is that the company continues increasing its enterprise value. An IPO is just a passing point to do that.” Reuters

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Asia

Japan Exchange, Nikkei to start new index New index composed of companies with high appeal for investors, firms say Anna Kitanaka and Yoshiaki Nohara

for investors,” according to the statement. “The new index will promote the appeal of Japanese corporations domestically and abroad, while encouraging continued improvement of corporate value.”

GPIF investment

New gauge will have 400 shares

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apan Exchange Group Inc, operator of the world’s secondbiggest equity market, will create an index with Nikkei Inc that selects members based on return on equity, in a bid to highlight the nation’s best stocks. The bourse operator and Nikkei, which also runs the Nikkei 225 Stock Average, will compile the measure from January 6,

F&N bondholders potential barrier to spin off

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raser & Neave Ltd may learn whether bondholders will allow the company to amend the terms on S$808.25 million (US$650 million) of debt so it can spin off its property unit without triggering a default. The beverages and property conglomerate, controlled by Thai billionaire Charoen Sirivadhanabhakdi, asked debt holders to waive certain default clauses and allow the company to buy back the securities on or before June 30, 2014 for a fee, according to October 28 announcements to the Singapore stock exchange. The company offered to pay 100 cents on the dollar and a fee worth half of the note’s coupon and

according to a statement on Japan Exchange’s website. The gauge will have 400 shares, with 386 Tokyo Stock Exchange first section companies, one from the second section, two from the TSE Mothers market and 11 from Jasdaq. Stocks will include Japan Tobacco Inc and Toyota Motor Corp as well as Rakuten Inc and GungHo Online Entertainment Inc, the bourse said.

the accrued interest on the date that Fraser & Neave can call the securities, the documents show. Failure to secure a positive vote may upset F&N’s plans to carve off its real estate division via a Singapore listing later this year. The 130 year-old conglomerate is seeking to separate that division from its other operations including its beverages and publishing units to focus on each units’ individual expansion strategies after the S$13.8 billion takeover by Thailand’s richest man. “We have considered all options, and decided that this would be the most consistent and fair approach for us to adopt,” said Jennifer Yu, a Singapore-based investor relations manager at F&N. “We are grateful for and appreciate the support of our lenders.” The terms are below market levels for F&N’s higher coupon bonds, according to three investors in the S$108 million 5.5 percent notes due 2016, who all intend to vote against the proposal. Bloomberg News

Eligibility for the JPX-Nikkei Index 400 is based on quantitative criteria such as return on equity, operating profit and market value, as well as qualitative aspects such as having at least two independent outside directors and providing earnings disclosure in English, the statement said. “The new index will be composed of companies with high appeal

Suntory Beverage lowers profit forecast

S

untory Beverage & Food Ltd, the soft-drink maker that raised US$4 billion in Japan’s largest initial public offering this year, cut its profit projection on more competition, marketing costs and Europe’s economic slump. Net income will probably be 31 billion yen (US$314 million) for the year ending December, lower than its previous forecast of 35 billion yen, the Suntory Holdings Ltd unit said in a statement to Tokyo’s stock exchange. The beverage company, which gets about 30 percent of its revenue from overseas markets, is accelerating its expansion outside of Japan as an ageing

Japan’s Government Pension Investment Fund, the world’s biggest manager of retirement savings with 121 trillion yen (US$1.24 trillion), will invest in the new index as part of plans to boost allocations to growth stocks, the Nikkei newspaper reported on October 5, without citing anyone. “As the new gauge may become the benchmark for GPIF, it will certainly be a driving factor in the market tomorrow,” said Kenji Shiomura, a Tokyo-based senior strategist at Daiwa Securities Group Inc, Japan’s second-largest brokerage. “But we don’t know how much the fund will invest or when it will actually move.” The new index has outperformed the broader Topix index in four of the past seven years, according to data compiled by the bourse and Nikkei Inc. The measure rose 42 percent this year through August, compared to a 44 percent gain for the Topix, the statement showed. “The market will surely react to this new measure and shares included in it will be bought,” Daiwa’s Mr Shiomura said. “The impact will be big especially for emerging shares outside the Topix that made the cut.” Bloomberg News

population limits domestic growth. In Europe, where it gets 13 percent of its sales, it faces surging unemployment and weakening growth. The company’s profit jumped 57 percent in the nine months ended September to 24.5 billion yen, it said in the statement. Sales climbed 12 percent to 837 billion yen. Tokyo-based Suntory Beverage agreed in September to pay 1.35 billion pounds (US$2.2 billion) to buy the Lucozade and Ribena drink brands from GlaxoSmithKline Plc as it seeks to reduce its reliance on its domestic market. Sales rose 3.5 percent to 542 billion yen in Japan during the ninemonth period, while they climbed 32 percent to 295.2 billion yen in its overseas business, according to the statement. The Japanese beverage group bought France-based Orangina Schweppes Group for 300 billion yen in 2009 and paid 600 million euros in the same year for New Zealand’s Frucor Beverages Group. Reuters


14 14

November 8, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange)

Max 58.05

average 57.814

Min 57.4

58.2

90.90

58.0

90.55

57.8

90.20

57.6

89.85

27.2

57.4

Last 57.4

Max 90.9

average 90.275

Min 89.5

Last 90.45

55.40 55.15 54.90 54.65

Max 55.3

average 55.018

Min 54.55

Last 54.55

54.40

Max 26.1

average 25.8

Commodities PRICE

DAY %

YTD %

(H) 52W

94.7

-0.105485232

1.424440398

109.6999969

85.51999664

BRENT CRUDE FUTR Dec13

104.69

-0.522614975

-0.114492892

114.4399948

95.95999908

GASOLINE RBOB FUT Dec13

254.17

-0.247252747

-0.106115391

290.3199911

241.5999889

GAS OIL FUT (ICE) Dec13

892.75

-0.970604548

-0.970604548

973

837

3.496

-0.057175529

-11.44883485

4.744000435

3.378999949

NY Harb ULSD Fut Dec13

286.32

-0.2230276

-4.045041724

321.1599827

276.4999866

Gold Spot $/Oz

1316.2

-0.1903

-20.9233

1754.46

1180.57

Silver Spot $/Oz

21.764

-0.8673

-27.7184

34.3838

18.2208

Platinum Spot $/Oz

1464.6

0.2087

-3.5019

1742.8

1294.18

Palladium Spot $/Oz

758.95

0.3504

8.4741

786.5

604

1822

0.220022002

-12.10805596

2184

1758

LME ALUMINUM 3MO ($) LME COPPER 3MO ($)

7115

-0.642368384

-10.28874039

8346

6602

LME ZINC

1913

-0.494148244

-8.028846154

2230

1811.75

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan14 CORN FUTURE

Dec13

WHEAT FUTURE(CBT) Dec13 SOYBEAN FUTURE Jan14

14110

-1.638201464

-17.2919109

18770

13205

15.37

-0.032520325

-0.291923451

16.80999947

14.91500092

420.75

-0.118694362

-29.84576907

647

420.25

654.5

0.191350938

-20.25586354

913

635.5

1256.25

0.099601594

-4.029793736

1406

1169

COFFEE 'C' FUTURE Dec13

101.5

-1.884968584

-35.12304251

172.0999908

101

SUGAR #11 (WORLD) Mar14

17.95

-0.828729282

-12.77939747

20.71999931

16.69999886

COTTON NO.2 FUTR Dec13

76.85

-0.285454781

-2.400304801

93.72000122

74.34999847

World Stock Markets - Indices NAME

Last 25.65

(L) 52W

WTI CRUDE FUTURE Dec13

NATURAL GAS FUTR Dec13

METALS

Min 25.6

89.50

27.1

Max 27.2

average 27.139

Min 27.05

27.0

Last 27.05

26.1

29.9

26.0

29.8

25.9

29.7

25.8

29.6

25.7

29.5

25.6

Max 29.9

average 29.604

Min 29.45

Last 29.45

29.4

Currency Exchange Rates

NAME ENERGY

27.3

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

15746.88

0.8237815

20.16722

15750.29

12471.49

NASDAQ COMPOSITE INDEX

US

3931.946

-0.2009714

30.21786

3966.71

2810.8

14.03148

6875.62

5605.589844

FTSE 100 INDEX

GB

6725.36

-0.2422241

DAX INDEX

GE

9046.4

0.06116668

18.83784

9070.17

6950.53

NIKKEI 225

JN

14228.44

-0.7593475

36.87537

15942.6

8619.45

HANG SENG INDEX

HK

22881.03

-0.6767826

0.9891432

23944.74

19426.35938

CSI 300 INDEX

CH

2340.552

-0.5530327

-7.229622

2791.303

2023.171

TAIWAN TAIEX INDEX

TA

8283.71

0.02100949

7.587635

8476.63

7061.87

KOSPI INDEX

SK

2004.04

-0.4782313

0.3500158

2063.28

1770.53

COUNTRY MAJOR

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

ASIA PACIFIC

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9488 1.6085 0.9119 1.3518 98.72 7.9841 7.7516 6.0915 62.535 31.3 1.2421 29.422 43.215 11397 93.665 1.23275 0.84041 8.2366 10.7927 133.45 1.03

-0.4825 -0.1056 0.0219 0.074 -0.1114 0.0013 0.0013 0.0345 -0.2159 -0.1118 0 0.0782 0.1666 0.1141 0.3747 -0.0633 -0.1844 -0.176 -0.076 -0.1948 0

-8.5758 -0.5626 0.3838 2.4867 -12.7836 -0.0113 -0.0129 2.2835 -12.0572 -2.3003 -1.6665 -1.3221 -5.114 -14.0739 -4.6314 -2.0499 -2.9735 -0.2319 -2.4303 -14.897 -0.0097

1.0599 1.6381 0.9839 1.3832 103.74 8.0111 7.7664 6.2566 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 11.0434 135.51 1.032

0.8848 1.4814 0.8891 1.2662 79.08 7.9818 7.7498 6.0773 52.89 28.56 1.2168 28.913 40.54 9590 81.971 1.20302 0.79607 7.8281 10.1113 100.33 1.0289

Macau Related Stocks NAME ARISTOCRAT LEISU CROWN RESORTS LT

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.96

2.479339

16.97

1.616766

VOLUME CRNCY

57.46031

5.12

2.56

1358838

59.04405

17.38

9.75

1406802

AMAX HOLDINGS LT

1.14

-1.724138

-18.57143

1.72

0.75

624000

BOC HONG KONG HO

24.65

-1.202405

2.282156

28

22.85

6711765 1112000

CENTURY LEGEND

0.45

2.272727

69.81133

0.56

0.24

CHEUK NANG HLDGS

7.22

0.8379888

20.53423

7.28

4.1

189000

CHINA OVERSEAS

23.2

0.4329004

0.4328988

25.6

17.7

8127796

CHINESE ESTATES

21.1

-1.860465

87.6298

22.25

9.543

84000

CHOW TAI FOOK JE

12.54

0

0.8038619

13.4

7.44

2239800

EMPEROR ENTERTAI FUTURE BRIGHT GALAXY ENTERTAIN

4.1

0.9852217

116.9312

4.66

1.48

575000

3.25

0.619195

168.146

3.41

1.103

1018999

57.4

-0.3472222

89.12685

63.75

27

6189514

125.6

-1.180173

5.812977

132.8

110.6

1530342

HOPEWELL HLDGS

25.7

0.5870841

-22.70677

35.3

23.2

742753

HSBC HLDGS PLC

85.85

-0.8660508

5.596552

90.7

73.55

9797228

HUTCHISON TELE H

3.4

-0.2932551

-4.49438

4.66

3.12

1446690

LUK FOOK HLDGS I

27.3

0

11.88525

30.05

16.88

2364000

MELCO INTL DEVEL

24.85

0.4040404

175.8047

25.75

7.46

5568300

MGM CHINA HOLDIN

27.05

0.1851852

103.7162

30

12.236

1554000

MIDLAND HOLDINGS

3.2

1.910828

-13.51351

4.29

2.68

2890000

NEPTUNE GROUP

0.32

0

110.5263

0.4

0.131

159330000

NEW WORLD DEV

10.68

-0.3731343

-11.14809

15.12

9.98

10048081

SANDS CHINA LTD

54.55

-0.6375228

60.67746

60.5

29.35

6641786

HANG SENG BK

AU

5422.036

-0.2165886

16.62926

5457.3

4334.3

ID

4486.559

0.8269884

3.935242

5251.296

3837.735

FTSE Bursa Malaysia KLCI

MA

1804.92

0.1037132

6.866402

1826.22

1590.67

SHUN HO RESOURCE

1.62

0

15.71429

1.92

1.19

4000

NZX ALL INDEX

NZ

1036.986

-0.4315013

17.56504

1048.998

853.452

SHUN TAK HOLDING

4.49

0.2232143

7.159903

4.8

3.12

1765505

PHILIPPINES ALL SHARE IX

PH

3917.99

-0.3879743

5.920822

4571.4

3440.12

SJM HOLDINGS LTD

25.65

-0.3883495

44.52611

28

16.762

5008442

10

0.2004008

-28.97727

16.2

9.97

2731521

WYNN MACAU LTD

29.45

-1.008403

40.57279

32.6

19

4198847

ASIA ENTERTAINME

3.96

0

N/A

N/A

N/A

69409

78.03

43.16

437705 10709

S&P/ASX 200 INDEX JAKARTA COMPOSITE INDEX

SMARTONE TELECOM

Euromoney Dragon 300 Index Sin

SI

625.3

0.03

0.68

NA

NA

STOCK EXCH OF THAI INDEX

TH

1431.28

-0.2571482

2.827008

1649.77

1260.08

HO CHI MINH STOCK INDEX

VN

499.86

-0.5293322

20.81792

533.15

374.15

BALLY TECHNOLOGI

72.89

-0.4914676

63.02841

Laos Composite Index

LO

1305.31

0

7.453266

1455.82

1103.88

BOC HONG KONG HO

3.27

3.154574

6.51466

3.6

2.99

GALAXY ENTERTAIN

7.48

0

88.4131

8.11

3.468

15705

INTL GAME TECH

19.61

4.419595

38.39097

21.2

12.37

6680167

JONES LANG LASAL

93.62

0.1604793

11.53204

101.46

72.56

206181

LAS VEGAS SANDS

70.53

1.132779

52.79463

73.49

37.8353

3499363

MELCO CROWN-ADR

35.01

3.36581

107.8979

37

13.43

3510976

MGM CHINA HOLDIN

3.53

2.318841

101.6807

3.88

1.703

300

MGM RESORTS INTE

19.1

-0.2610966

64.08934

20.98

9.15

6301666

SHFL ENTERTAINME

23.19

-0.08616975

59.93103

23.25

12.35

266192

SJM HOLDINGS LTD

3.35

2.446483

47.08362

3.6

2.1396

2117

164.38

-0.496368

46.12855

173.38

103.34

1270966

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

38.4

-0.6468305

12695481

CHINA UNICOM HON

11.94

-0.1672241

20345539

ALUMINUM CORP-H

2.85

0.3521127

10479674

CITIC PACIFIC

10.72

-0.7407407

4874254

SANDS CHINA LTD

BANK OF CHINA-H

3.55

-1.114206

182376698

SINO LAND CO

BANK OF COMMUN-H

5.47

-1.795332

31934762

BANK EAST ASIA

33.3

-0.4484305

1247720

10.18

-2.676864

20345545

BELLE INTERNATIO

NAME

CLP HLDGS LTD

61.7

-0.1618123

1992789

CNOOC LTD

15.44

-0.3870968

37213028

COSCO PAC LTD

11.28

-0.8787346

2363263

ESPRIT HLDGS

14.32

0.280112

14058989

BOC HONG KONG HO

24.65

-1.202405

6711765

HANG LUNG PROPER

CATHAY PAC AIR

15.04

-0.660502

2390258

HANG SENG BK

CHEUNG KONG

HENDERSON LAND D

120.3

-0.9876543

2243677

CHINA COAL ENE-H

4.75

-1.041667

18764453

CHINA CONST BA-H

5.93

-1.001669

185215853

CHINA LIFE INS-H

20.7

-1.193317

20232175

CHINA MERCHANT

27.4

-0.3636364

1984203

CHINA MOBILE

81.3

0.06153846

10461264

CHINA OVERSEAS

23.2

0.4329004

8127796

CHINA PETROLEU-H

6.36

-1.242236

61906741

CHINA RES ENTERP

26.35

-2.5878

PRICE

POWER ASSETS HOL

DAY %

63.2 -0.07905138

VOLUME 2271700

54.55

-0.6375228

6641786

10.7

-0.1865672

3365511

SUN HUNG KAI PRO

101.5

-0.4901961

3926483

SWIRE PACIFIC-A

91.05

0.7747648

1839841

TENCENT HOLDINGS

407.4

-1.116505

2933923

25.8

-0.1934236

2767875

TINGYI HLDG CO

21.95

-1.569507

6540614

125.6

-1.180173

1530342

WANT WANT CHINA

11.28

1.256732

11837113

WHARF HLDG

63.75

0.07849294

2785267

45.1

-0.9879254

4183617

HENGAN INTL

90.45

-1.631321

1706959

HONG KG CHINA GS

18.04

-0.2212389

5680271

HONG KONG EXCHNG

124.6

-1.032566

2185315

HSBC HLDGS PLC

85.85

-0.8660508

9797228

HUTCHISON WHAMPO

95.25

-0.1572327

2974561

5.27

-0.9398496

162898706

LI & FUNG LTD

10.68

-0.3731343

15346340

2122200

MTR CORP

29.55

-1.5

2025153

IND & COMM BK-H

NAME

CHINA RES LAND

21.45

-0.6944444

3374044

NEW WORLD DEV

10.68

-0.3731343

10048081

CHINA RES POWER

19.26

-2.727273

6722999

PETROCHINA CO-H

8.63

-0.461361

68296369

CHINA SHENHUA-H

24

0.41841

15975305

PING AN INSURA-H

60.95

-0.4084967

7487644

MOVERS

7

43

23320

INDEX 22881.03 HIGH

23313.61

LOW

22839.82

0

52W (H) 23944.74 (L) 19426.35938

22830

5-November

7-November


15 15

November 8, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Taipei Times The Taiwan Institute of Economic Research downgraded its forecast for the nation’s annual GDP growth to 1.93 percent from the 2.52 percent it forecast in July, citing declining exports and low private investment. The institute forecast that exports and imports this year will report a 0.94 percent increase and 0.87 percent decline respectively, down from the 3.93 percent and 1.74 percent growth it forecast in July. “Taiwan was heavily affected by the global economy,” Gordon Sun, director of the institute’s economic forecasting centre, said.

China Daily China’s central bank said that it will continue its hands-off stance on the money market, as it maintains a “stable” monetary policy that facilitates the nation’s essential structural reforms. The central bank “will neither loosen nor tighten liquidity [but] will conduct fine-tuning in response to market changes”, said the People’s Bank of China in a quarterly monetary policy report it posted on its website. The announcement came after Premier Li Keqiang warned against further expansion of already loose monetary policies.

Financial Review Australia’s federal government will dump tax initiatives worth more than A$2.4 billion (US$2.27 billion), including fringe benefits tax, superannuation pension earnings and a proposed cap on self education related expenses as it “draws a line in the sand” under a total of 96 tax changes announced but not yet legislated. Treasurer Joe Hockey and assistant treasurer Arthur Sinodinos outlined the government’s plans at a press conference in Sydney on Wednesday, insisting the government was still proceeding with changes to thin capitalisation rules.

The Star Mah Sing Group Bhd will be launching its fifth township d e v e l o p m e n t p roject in Iskandar Malaysia, which is also the company’s biggest township project in the country in the second half of 2014. “The township project with a gross development value of 5 billion ringgits [US$1.57 billion] will keep us busy for 8-10 years,’’ deputy chief operating officer Chai Kow Sin said. “Our new township will cater to housing needs of workers in the Tanjung Langsat petrochemical hub and Pengerang Integrated Petroleum Complex,’’ he added.

Europe’s elusive growth consensus Jean Pisani-Ferry

Professor at the Hertie School of Governance in Berlin and serves as the French government’s Commissioner General for Policy Planning

I

n most European countries, GDP per capita is currently lower than it was six years ago. In some cases, like Greece, Italy, and Ireland, it is more than 10 percent lower. Even in Germany, where it is higher, average growth over the last six years has been anaemic. It is hard to overestimate the adverse consequences of this state of affairs. The European Union has lost six million jobs since 2008. Many younger people who have entered the labour force in recent years have been unable to find a job corresponding to their skills and are bound to pay a price for it throughout their careers. Governments have been struggling with the impossible task of balancing their books despite dwindling revenues. And, worst of all, companies have begun discounting Europe in their investment plans, paving the way for a permanent loss of aggregate momentum. In such a situation, growth ought to be at the top of the policy agenda. But, while the EU and national governments pay lip service to it, they have not devised an effective economicrevitalisation strategy. In the eurozone, the hope is that calmer sovereigndebt markets, slower fiscal adjustment, and supportive monetary policy by the European Central Bank will help trigger a sustained recovery. This may be the case, but the recovery that is now expected will not suffice to offset the adverse consequences of the last six years. The productivity gains that failed to materialise during this period are lost forever: many people who have experienced long-term unemployment or have left the labour force are unlikely to return to work, and Europe will be lucky if productivity growth accelerates somewhat and approaches pre-crisis trends – better than nothing, but hardly satisfactory. Things are completely different in the United States, where growth is on everyone’s agenda: the Federal Reserve is targeting an employment rate below 6.5 percent, and companies have used the recession as an opportunity to reorganise and become more efficient. The lasting adverse effects of the 2008 shock are likely to be much smaller there than in Europe.

Lack of agreement So, why is Europe not doing more to return to growth?

European leaders would probably say, first, that they have been forced to address more urgent matters since the Greek crisis erupted in 2010. But, while it is true that much policy attention has been devoted to fighting financial fires, this is not a sufficient answer: since the summer of 2012, when ECB President Mario Draghi convinced markets that the eurozone would not break up, Europe has had enough breathing space to address the growth imperative, but has barely done so. The second explanation is that there is agreement on the goal but not on the means. Again, there is some truth to this. Keynesians argue that Europe would grow if only policy were focused on generating aggregate demand; they blame precipitous fiscal consolidation and insufficiently aggressive monetary easing for the loss of momentum.

To end the current stalemate … Europe needs a new ‘compact’ that addresses simultaneously the demand shortfall, impediments to productivity gains and the quality of growth

Their opponents, by contrast, see structural weaknesses and internal imbalances as the major impediment to growth; for supply-siders, it is the slow pace of economic and social reforms that is to blame. This lack of consensus on the nature of the problem arguably hinders agreement on a solution. But, again, this is not an entirely convincing explanation.

Growth desire Disagreements such as this have arisen before – and not only in Europe. Given sufficient will, there could be ample room for compromise. As the Nobel laureate economist Paul Samuelson famously said, the reason we have two eyes is to keep one on supply and the other on demand. A deeper, more worrying explanation is that Europe does not have a strong desire

for growth. In fact, some have become convinced that, given the environmental consequences, economic growth does more harm than good and that the crisis should be regarded as an opportunity to shift to a more frugal economy. The growth agenda, according to this view, is a Trojan horse for ecological neglect – for example, through more business-friendly environmental regulation or shale-gas exploration. Others perceive calls for growth as a pretext to weaken employment protection or accept greater income inequality. They fear that, rather than delivering the promised benefits, painful reforms would tilt the distribution of power and income in favour of employers. Environmentalists and labour advocates have a point when they insist that growth should not be the ultimate goal of economic policy. They are right

to point out that its quality – in terms of preservation of the environment, work conditions, or income distribution – matters, too. They are even right to be suspicious that an overriding emphasis on growth could be used as an excuse for questionable social choices. But they are wrong to conclude that their own interests would be better served by neglecting growth. Stagnation is not a solution to any problem; on the contrary, it entails serious risks. What steady-state advocates forget is that stagnating or declining incomes would heighten resistance to higher taxes on fossil fuels and delay investment in green technologies (and thus the transition to new industries and the creation of better jobs). Moreover, lack of growth would almost certainly result in the end of the vaunted

European social model. The welfare state is sustainable only if revenues grow in line with spending needs; protracted stagnation would inevitably result in it being dismantled piece by piece. In the end, the economic outcome envisaged by the growth sceptics would undermine the very goals they are fighting for. To end the current stalemate and unlock its economic potential, Europe needs a new “compact” (to use the current jargon) that addresses simultaneously the demand shortfall, impediments to productivity gains, and the quality of growth. Designing and implementing such a package is far from impossible – several elements are already available. What is lacking is a political platform on which Europe’s necessary growth conversation could take shape. It is urgently needed. © Project Syndicate


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November 8, 2013 April 19, 2013

Closing Twitter IPO raises US$1.82 bln

Malaysia holds policy rate

Twitter Inc raised US$1.82 billion in its initial public offering, seizing on surging investor demand to price at a more expensive valuation than rival Facebook Inc. Twitter sold 70 million shares at US$26 each. The pricing puts the onus on Twitter, which started trading yesterday on the New York Stock Exchange, to deliver on its promises of fast growth after earlier pitching shares as low as US$17. Twitter has attracted 230 million users since starting seven years ago, but is yet to make a profit. Its losses for the third quarter of 2013 increased to US$64.6 million, from US$21.6 million a year earlier.

Malaysia’s central bank left its key interest rate unchanged at 3 percent yesterday as expected, but warned that it expects inflation to edge up over the coming months driven by domestic cost pressures. However, Bank Negara Malaysia’s monetary policy committee said in a statement that the outlook for inflation is expected to be tempered by a host of factors including stable external prices as well improvements in food production and distribution. Annual inflation accelerated to 2.6 percent in September, a 20-month high, due to a hike in petrol prices as the government cut fuel subsidies.

Indonesia must accept slower growth: minister Top priority is to solve current account deficit, Basri says

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ndonesia’s top priority is to halt a widening current account deficit even if does mean deliberately slowing Southeast Asia’s largest economy, the finance minister said yesterday. The former emerging market star has looked one of the most vulnerable to expected tapering in U.S. monetary stimulus and a sharp rise in its current account deficit in the second quarter helped sap investor enthusiasm, hitting the rupiah harder than any other currency in Asia. It has fallen more than 15 percent so far this year. “The government should address the issue of this current account deficit. That will be the first priority,” Finance Minister Chatib Basri told an investment conference. The government is planning to introduce a second package of measures by the end of the year to bolster foreign investment and ease consumer demand for imports. The first, announced in August, included planned measures to open more sectors to outside investors. “How Indonesia navigates through this current situation? The first thing is we have to come up with macroeconomic policies in which we have to accept slower growth.”

Economy to grow 5.6 percent this year, says Chatib Basri

Mr Basri said he was “quite happy” with government data on Wednesday that showed annual growth in the third quarter at 5.62 percent, the slowest in nearly four years. He said he believed gross domestic product would hover near 5.5-

5.6 percent in the fourth quarter, translating into full-year growth of 5.6 percent. The full-year estimate would be the slowest since 2009. Analysts warned, however, that the government should not be too complacent with slowing

economic growth. “It’s not a bad idea to address the current account problem. In fact, it may be necessary,” said Gundy Cahyadi, an analyst with DBS Bank. “But sustaining GDP growth momentum is also crucial. The last thing the government would want to see is a sharp plunge in consumer confidence that could potentially be even harder to revive.” Mr Basri expected the current account deficit to narrow to around 3.3-3.5 percent of GDP in the third quarter and ease further by the end of the year. Indonesia is considering a number of reforms to attract foreign investment, including making the judicial system more transparent for insolvency and small claims cases, said Mahendra Siregar, chairman of the Indonesia Investment Coordinating Board, at the same investment conference. He said he hoped the government would by month-end release its amended “negative investment list” of sectors, in which foreign investors are either barred or restricted. The list, which has existed for decades, limits foreign involvement in areas deemed sensitive. Reuters

EU banks face hefty fines over rate rigging

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Rabobank among lenders that are likely to be fined

number of finance firms, including Royal Bank of Scotland Group Plc and Rabobank Groep face billions of euros in fines next month from European Union regulators for colluding on global benchmark interest rates, reinforcing Brussels’ hard line on the sector after the financial crisis. EU antitrust chief Joaquin Almunia is set to unveil a record fine of at least 1.5 billion euros (US$2.03 billion) on six banks, including Barclays Plc and RBS, for rigging the yen Libor interest rate benchmark, a banking source said. In addition to the yen Libor fines, likely to be the biggest so far from Brussels, Mr Almunia will also penalise another group of banks for operating as a cartel in a separate case involving the rigging of the Euribor bench-

mark interest rate, reported by Reuters on Tuesday. Fines in the two cases could run to billions of euros. The fines will add to the spiralling cost to banks for cleaning up past misdeeds. Globally this is expected to reach about US$125 billion if JP Morgan Chase & Co agrees a US$13 billion deal with the U.S. authorities over mortgages. This earnings season, banks set aside more money for the rising cost of fines, lawsuits and compensation. Authorities in the United States, Britain and elsewhere have so far fined UBS AG, RBS, Barclays, Rabobank and ICAP Plc US$3.7 billion for manipulating rates. Seven individuals face criminal charges. The London inter-bank offered rate (Libor) and its European cousin (Euribor) are used to price hundreds of

trillions of dollars in assets, from Spanish mortgages to derivatives. A settlement with the EU over cartel allegations would require the banks to admit liability, potentially paving the way for lawsuits from investors and others who believe they have lost money because of the rates manipulation. Under the Libor settlement, the world’s top interdealer broker, ICAP, and Dutch cooperative bank Rabobank are among those that will be fined, the person said. The names of the other two financial institutions were not immediately clear. Mr Almunia wants to hand out the fines by the end of the year, reinforcing his reputation for cracking down hard on banks’ wrongdoings since the financial crisis struck five years ago. Reuters


Macau Business Daily, November 8, 2013