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Land premium rise could boost property costs Home prices ‘extremely high’ residents say

Deputy editor-in-chief

Vitor Quintã

No ‘Macau land’ for Macau singles

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April 19, 2013

Year II

Number 435 Friday December 13, 2013

Editor-in-chief Tiago Azevedo

Legal disputes are haunting home rent market More on pages 2 & 3

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Hang Seng Index 23320

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ingle people would not qualify to buy flats under a scheme to reserve some homes for residents‑only, admit the authors. Academics from the University of Macau were asked by the government to propose a scheme whereby locals

are not priced out of the local housing market by outside investors. But the plan, popularly known by legislators and the media as ‘Macau land for Macau people’ – will not be a cureall, say the policy advisors. The most urgent requirement is to help families.

Iau Teng Pio, a law professor and a researcher for the initiative, said: “It is undeniable there are housing needs for the singles and [the government] has to take care of them…But our land resources are limited so we currently rule them out.”

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Water tariff up for all users next year

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he government would raise water supply charges for all users in the city in the first half of 2014, Susana Wong Soi Man, director of the Maritime and Water Affairs Bureau, told media yesterday. The decision comes as the water import cost is set to rise by 10.6 percent in 2014, she said on the sidelines of a meeting between Macao Water Supply Company Ltd and

its customer liaison group. Casinos, hotels, saunas, golf courses and construction firms, which the bureau refers to as special users, will pay close to the full increase in import cost, Ms Wong noted. In contrast the charges for households and small commercial users would be increased only “slightly”, she said while stressing the rate will only be decided next year.

%Day

GALAXY ENTERTAIN

2.76

HUTCHISON WHAMPO

1.76

SANDS CHINA LTD

1.47

KUNLUN ENERGY CO

1.39

HANG LUNG PROPER

1.20

BELLE INTERNATIO

-1.78

CHINA MERCHANT

-2.43

CHINA SHENHUA-H

-2.44

CHINA RES LAND

-3.27

LI & FUNG LTD

-4.73

Source: Bloomberg

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Page 6

Casino investors keep options open into 2014

Mike Leven speaker at Japan Gaming Congress

Trade with Guangzhou surges this year

Reports yesterday that there’s been increased activity in so-called ‘put options’ in the city’s gaming stocks, doesn’t mean the sky is about to fall in on Macau. But it could be indicative of investor uncertainty. “People could be taking some money off the table while still playing with the growth story,” said Michael Liang, chief investment officer at Foundation Asset Management (HK) Ltd.

Clarion Events is to hold a gaming conference in Japan with a major industry speaker the week before Global Gaming Expo Asia 2014 in Macau. G2E Asia is co-organised by rival events firm Reed Exhibitions and the American Gaming Association. But a source at Clarion stressed to Business Daily that the timing was not meant to be a spoiler for Reed’s event.

Trade volume between Macau and Guangzhou city is up by nearly twothirds so far this year, outshining the overall trade pace between the territory and mainland China. The figure reached US$413 million (3.3 billion patacas) in the first three quarters of this year, rising by over 62 percent from a year earlier, the Chinese-language Guangzhou Daily newspaper reported, quoting official data.

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December 13, 2013

Macau

Land premium rise could jolt home prices upward

takes into account where the land leased is, what it will be used for, the construction area and the construction costs. Land premiums were last increased in November 2011. The average premium for land intended for buildings with more than seven floors increased by 93 percent, and the average premium for land intended for low-rise buildings increased by half. The average premium for land intended for commercial or office buildings or for hotels increased by about one-third. Legislative Assembly member Ho Ion Sang and some of his colleagues in the assembly have repeatedly said land premiums are too low, considering the rapid pace of the city’s development.

The next increase in land premiums will be higher than 2011’s, an official says Tony Lai

tony.lai@macaubusinessdaily.com

Any upward adjustment in land premiums will only increase development costs for developers Chong Siu Kin, Real Estate Association president The method of calculating land premiums was last changed in November 2011

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evelopers will soon have to pay the government more for land leases, perhaps countering any government effort to curb the rise in housing prices, Real Estate Association of Macau president Chong Siu Kin says. “Any upward adjustment in land premiums will only increase development costs for developers,” Mr Chong told Business Daily. He said developers would

pass the increase in land premiums on to home buyers, “as long as their profit targets are at stake”. He said that could mean another rise in housing prices. “It is still too early to say whether there will be a rise,” he said. “But the price will definitely not fall, owing to market sentiment.” Mr Chong acknowledged that land premiums accounted for only a “small portion” of development costs, and

that construction materials and labour accounted for the greatest portion. The deputy director of the Land, Public Works and Transport Bureau, Shin Chung Low Kam Hong, said late on Wednesday that his bureau was revising the method of calculating land premiums. Mr Shin said at a public event that the bureau hoped to report to Secretary for Transport and Public Works Lau Si Io next month.

“The future rise in land premiums will be significantly larger than last time, more in line with actual conditions in the market,” Mr Shin said. The increase will take into account “the surges in property prices in recent years”, he said. He gave no details.

Too low The present method of calculating land premiums

While Mr Chong expects the next increase in land premiums to be greater than the last, he said: “The government’s evaluation of the market is usually about 80 percent of the real market conditions.” Financial Services Bureau data show the average price of housing was 80,412 patacas (US$10,052) a square metre in October, almost twice as much as two years earlier.

Legal disputes haunt home rental Most disputes happen because homeowners do not know the rules, lawyers say Stephanie Lai

sw.lai@macaubusinessdaily.com

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ost legal disputes involving home lease are caused by owners’ lack of knowledge of Macau’s laws, not by flaws in the law, lawyers said in a forum yesterday. The main reasons are homeowners that fail to send the tenants advanced notice to end the contract or tenants that have unpaid rents. “In many cases, owners don’t remember that they have to send a notice … ahead of the lease contract termination,” said Inês Lei Wai Chong, one of the speakers at the forum and a lawyer. “As a result the lease term is renewed automatically. In that situation some owners even tried to cut the power and water [supply] or sought to occupy the flat,” she told Business Daily.

We should speed up the legal procedures to settle the rental dispute cases Inês Lei Wai Chong, lawyer

According to the Civil Code, the owner or the tenant must terminate a property contract 90 days or 180 days in advance, depending on the lease duration. Liu Ut Heng, a lawyer, and Ung Choi Kun, president of the Association of Property Agents and Realty Developers of Macau, said unpaid rent is another major issue. Ms Lei agreed. “There are cases in which the tenants are accused of owing rent and they just run away from the flat not paying anything,” the lawyer said. The owners must then face “a lot of time and trouble” in court to end the contract, she said. Under rental regulations, if the tenant is not willing to return the flat the owner can only get it back through

legal action. This legal procedure could take one to two years, Ms Lei said in the forum. Some of the property agents present at the forum suggested tenants that fail to pay rents should pay heavier compensation to the owners. The forum also discussed whether or not the city needed to draft a rental law. Macau has no specific law to regulate rents, but there are some provisions included in the Civil Code. Ms Lei believes the existing rental regulations offer comprehensive protection for the rights of both the owners and the tenants. “However we should speed up the legal procedures to settle the rental dispute cases, for instance, by shortening the time for respond” to charges, she suggested.


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December 13, 2013 April 19, 2013

Macau

Reserved housing may omit singles The reserved housing scheme would have little effect on the private market, a study suggests Tony Lai

tony.lai@macaubusinessdaily.com

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wo of the three options proposed for a scheme to reserve homes in parts of the city for Macau residents would exclude single-person households. The options proposed are the results of a study by the University of Macau of ways to put the slogan “Macau land for Macau people” into action. The university disclosed the results of its study yesterday. They indicate that none of the options would have much effect on the red-hot market for private housing. Each option envisages a different degree of government intervention in the housing market. Two would require buyers of reserved homes to be permanent residents that had not been homeowners for a period of time, and to be members of households comprising at least two people. One of the University of Macau researchers, law professor Iau Teng Pio, explained the exclusion of singleperson households. “It is undeniable there are housing needs for singles, and [the government] has to take care of them,” Mr Iau said. “But our land resources are limited so we currently rule them out,” he said. “The government may have other considerations during the public consultation.” The government is expected to solicit public opinion on the scheme in the first quarter of next year, once the results of another study, by the Macao Polytechnic Institute, have been published. A coordinator of the University of Macau’s study, Lin Guangzhi, said: “Housing on ‘Macau land for Macau people’ means flats built on leased private land under the government’s guidance, with the main target market being Macau permanent residents.”

The government is considering reserving flats in some areas for Macau residents

Another of the university’s researchers, economist Joey Lao Chi Ngai, said that in future housing prices “could easily go up but hardly go down”.

Limited resources Mr Lao said the sandwich class needed protection. “So we need to set up a safety net,” he said. Mr Lao said the scheme would “basically have no impact” on the market for private housing. “The ‘Macau land for Macau people’ scheme serves only as a supplement to public housing,” he said. He said “limited land resources” restricted where such housing could be built, and that it would take years to build it. “Time will not allow for a large supply to be pumped into the market.” Mr Lao said official data showed Macau had over 200,000 flats and that

about 40,000 were in public housing. Two options for the scheme would use idle or repossessed land and the five areas of land newly reclaimed from the sea for reserved housing. The third option would also use land “ acquired through regional cooperation”. One option would restrict eligibility for ownership according to the income and assets of the prospective buyer. But the restrictions would be “more flexible” than the restrictions on eligibility for ordinary subsidised housing. Each option envisages widely different prices for reserved housing. Prices could be somewhere between the prices of public and private housing, or 70 percent to 80 percent of private housing prices, or private market prices. Two options envisage the homes being “slightly larger” than flats in public housing. Construction could be left to the

It is undeniable there are housing needs for singles, and [the government] has to take care of them Iau Teng Pio, University of Macau researcher government, to developers or to publicprivate partnerships. Two options would ban the resale of the flats within five or 10 years of their purchase. The flats could be resold only to Macau residents. One option would allow the owners to let their flats.

Home prices ‘extremely high,’ residents say

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our in five residents fear the city’s home prices are now out of their reach but more than half still wants to buy a flat in the future, a survey claims. The University of Macau found that over 80.7 percent of 3,022 respondents described the home price as “extremely high” while a further 16.3 percent think it is “quite high”. The telephone survey was carried out in June as part of a study on the possibility of restricting home sales in certain locations for Macau permanent residents. More than seven in 10 respondents believe the price will climb further in the next five years. Nearly a quarter fear there will be a “huge increase”. Latest data from the Financial Service Bureau show the average home

price was at 80,412 patacas (US$10,052) in October, almost twice as much as two years earlier. Soaring home prices have apparently failed to dampen hou sin g de m a n d fr o m residents even though most of them live in self-owned flats, the study suggests. Nearly 19 percent of the residents said they “will surely buy” a flat in the next two or three years while 38.1 percent said they “may buy” a home. The survey depicts 85.5 percent of the respondents as living in self-owned flats. About 87 percent of those were private homes while the rest were public flats. However, over two-thirds of the residents live in a flat with less than 800 square feet while about 61 percent of all respondents share a home with four people or more. T.L.

Residents are still looking to buy flats despite soaring costs: survey


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December 13, 2013

Macau

Between a BlackRock and a bear place Macau gaming investors considering their options as they mull sector’s prospects for 2014 Michael Grimes

michael.grimes@macaubusinessdaily.com

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ny investor currently trying to divine the direction of the Macau casino industry for 2014 is facing some mixed signals. On the one hand, the prospects for sustained revenue growth in Macau in the medium- to long-term have prompted two of the world’s biggest investment institutions – BlackRock Inc and Pacific Investment Management Co LLC (commonly known as PIMCO) – to seek exposure respectively to Macau gaming equities and Macau gaming bonds. On the other hand, there are the situational pressures created by other styles of investment management. Some investors are not necessarily looking to go ‘long’ in Macau but are instead seeking to allocate capital as efficiently as possible in order to maximise growth, and are agnostic about where they place it. So when Bloomberg reported yesterday that there’s been increased activity in so-called ‘put options’ in Macau gaming stocks, it doesn’t mean the sky is about to fall in on Macau. But it could be indicative of investor uncertainty. Put options can be a way for investors to give ‘two cheers’ to a stock or sector instead of three. They are often used as a hedging tool at a time of bearish market sentiment, to protect profits

Investors considering options

that have already made in a stock, given that they lock in a certain selling price for the asset. “People could be taking some money off the table while still playing with the growth story,” said Michael Liang, chief investment officer at Foundation Asset Management (HK) Ltd, referring to the increased trade in Macau put options. “You’re locking in some of the capital gain by simply buying some puts.” There’s been some concern among investors in the past fortnight of a

possible deceleration in the Macau market that that might be indicative of something more than mere seasonal volatility. Spending on gaming in Macau is likely to rise by between 13 percent to 16 percent this month from a year earlier, according to Victor Yip, a Hong Kong-based analyst at UOB-Kay Hian Holdings Ltd. That compares with increases of 21 percent in November and 20 percent in December 2012.

Next year Market consensus seems to be hovering at around 15 percent year-on-year growth for Macau gaming revenue in 2014, on concerns that it will be hard to maintain this year’s expansion given the high revenue base and absence of new casino openings next year. But as Business Daily reported on Wednesday, Deutsche Bank thinks the advent of a new segment of high stakes cash bet baccarat player in the so-called ‘premium mass’ segment –

which the bank refers to as ‘Super Premium’ – will help the market to achieve 20 percent revenue expansion in 2014. All 14 of the most popular Sands China Ltd stock option contracts were bearish, according to data compiled by Bloomberg. Puts expiring in February with an exercise price of HK$52.50 (US$6.77) had the largest open interest. Their ‘strike’ (price at which they can be sold) was reported yesterday as being 14 percent below the stock’s closing price in Hong Kong on Wednesday. Sands China has produced a 92.35 percent return in the past year, compared to three percent growth for Hong Kong’s benchmark Hang Seng Index. “If you look at the share performance it’s been rallying,” said UOB’s Victor Yip, referring to Sands China. “It’s fair to say at this valuation, and with lack of more positive news to come out, people are likely to take a break and switch to other sectors,” he added. With Bloomberg News

Casino Louis XIII foundations ‘ready by May’

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he foundations for boutique Macau casino project Louis XIII are “expected to be completed by April or May next year” said Tom Lau Ko Yuen, deputy chairman of the developer Louis XIII Holdings Ltd. Mr Lau was speaking at a special general meeting of the firm held at the Mandarin Oriental, Hong Kong, on Wednesday. At the meeting shareholders voted to approve a new fund raising exercise for the approximately US$1.06 billion (8.47 billion patacas) project. Under it, Ontario Teachers’ Pension Plan Board – one of the existing investors in the project – has agreed to subscribe to HK$299,942,350 (US$38.7 million) worth of convertible bonds that can be turned into shares later. The convertible bonds have a zero coupon and a maturity date of February 5, 2025. The conversion price for the bonds is HK$8.23 per share – the same as the placement price of up to 17,172,000 specific mandate shares also being placed in the fund raising exercise.

The aim there is to raise a maximum aggregate of HK$141.33 million. Construction of the casino resort, located on the Cotai-Coloane border, should be finished by the second quarter of 2016, said Mr Lau. He added the developer would “have enough capital” by then to finish the project. Union Gaming Research Macau – which has been covering the stock since August – said in a note in November it expected that talks between a mainland bank and Louis XIII for a project loan would be quickly concluded and enable the scheme to be fully funded. Another Union Gaming Group unit – Union Gaming Advisors – is acting as U.S. consultant on the latest convertible bond and mandate shares exercise. Walter Power, Louis XIII Holdings’ chief executive, said after Wednesday’s meeting that the company would “focus on the Macau development in the future” and had no intention of exploring other markets at present. M.G./T.L.


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December 13, 2013

Macau

Mike Leven speaker at first Japan Gaming Congress Tokyo event will be week before Global Gaming Expo Asia 2014, held in Macau Michael Grimes

michael.grimes@macaubusinessdaily.com

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larion Events is to hold a gaming conference in Japan with a major industry speaker the week before Global Gaming Expo Asia 2014 in Macau. G2E Asia is co-organised by rival events firm Reed Exhibitions and the American Gaming Association. But a source at Clarion stressed to Business Daily that the timing was not meant to be a spoiler for Reed’s event. “Our Japan Gaming Congress is timely given that a bill to legalise casinos has just been presented to the Japanese parliament,” said the Clarion source. “If people are already in the region for the Japan Gaming Congress, they may well want to stay on for G2E Asia.” The timing had been linked in part to the availability of the main speaker, the person added. Japan Gaming Congress is to be held in Tokyo on May 14, 15 and 16. G2E Asia 2014 will be at CotaiExpo at The Venetian Macao on May 20, 21 and 22.

The Tokyo event will feature Michael Leven, president and chief operating officer of Las Vegas Sands Corp as main speaker. Earlier this month lawmakers from Japan’s governing Liberal Democratic Party submitted to the Japanese parliament – the Diet – a bill to legalise casinos, bringing closer the advent of what some analysts believe could become the second biggest Asian casino market after Macau and its 304.14 billion patacas (US$38 billion) generated last year. Sheldson Adelson, chairman of LVS, said in the firm’s third quarter earnings call in October: “…activity levels in Japan have increased and we are pursuing the potential for IR [integrated resort] development in this promising market, with great enthusiasm.” George Tanasijevich, chief executive of LVS’s Marina Bay Sands resort in Singapore, told Bloomberg News in September, referring to Japan: “There are specific

locations we have been focusing on.” He declined to name the sites. “With the [Japanese] Diet likely to vote on the [casino] bill in the second quarter of 2014 the Congress will offer a unique opportunity for delegates to join key government officials, operators and legal experts,” said Kate Chambers, portfolio director at Clarion Events, in a prepared statement. Japan has long been touted as an attractive gaming market with a large and relatively rich population base and good air connections and short travel times to neighbouring markets such as northern China. The country may generate US$10 billion revenue a year if it opens up, Union Gaming Group LLC estimated recently. Sceptics on the operations side of the industry say that Japan – with its distinct culture and low penetration of English language skills – is likely to focus its casino offer mainly on domestic players.

Michael Leven, president of Las Vegas Sands Corpw


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December 13, 2013 April 19, 2013

Macau Brought to you by

HOSPITALITY Gaming value piles up

Water rates to increase for everyone next year The increase will be greatest for casinos, hotels and builders Stephanie Lai

sw.lai@macaubusinessdaily.com

Gaming industry revenue grew by over 60 percent in the past two calendar years. Two-thirds of the growth was in 2011, when the industry’s annual revenue jumped to about 270 billion patacas (US$33.81 billion) from about 190 billion patacas the year before. The gaming industry’s main costs – purchases of goods and services and general operating costs – rose at rates slower than the rate of growth in revenue. So the industry’s gross value added increased by just over 42 percent. Labour costs, which rose by just under 16 percent, were the slowest-rising. So the industry’s income after wages and tax are deducted increased by a remarkable 45 percent. Susana Wong says households will pay ‘slightly’ more for their water

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Last year the annual rate of growth in the gaming industry’s gross value added slowed to 13.5 percent as costs rose faster than revenue. General operating costs rose by 23.5 percent and labour costs rose by 16.7 percent. So the annual rate of growth in the industry’s income after wages and tax slowed to 20 percent. Since 2010 tax has eaten up a fairly stable proportion of the gaming industry’s annual revenue: between 36 percent and 37 percent. Wages have been a steadily shrinking burden on the industry. As a proportion of annual revenue, wages shrank to 4.7 percent last year. As a proportion of annual gross value added, they shrank to 7.8 percent.

64.5 %

Rise in gaming value added, 2010-2012

THERE ARE THINGS WE DON’T DO

he government will charge all consumers more for their water, starting sometime in the first half of next year, Maritime and Water Affairs Bureau director Susana Wong Soi Man told reporters yesterday. Ms Wong, speaking on the sidelines of a meeting of Macao Water Supply Co Ltd and its customer liaison group, said the increase would be a consequence of next year’s rise of 10.6 percent in the cost of importing water. She said the increase in water rates would be greatest for what her bureau calls special users: casinos, hotels, saunas, golf courses and construction companies. Water rates for households and small commercial users would increase only “slightly”. Ms Wong said the government would set the precise tariff next year. “Our water supply cost is increasing, and we hope that in the

first half of next year we will come up with a tariff adjustment scheme for all users,” she said. Macau has agreed to pay Guangdong 2.29 yuan (3.01 patacas) a cubic metre for the water that the province supplies, starting next year. Currently the city pays 2.07 yuan. “The principle of ‘use more, pay more’ will still apply,” Ms Wong said. In 2011 the government began charging households three different rates for their water, depending on how much they consume. The rate is 4.35 patacas (US$0.54) a cubic metre for households that consume the least and 5.27 patacas for households that consume the most. Special users pay 5.80 patacas per cubic metre. Ms Wong said the government’s subsidies for water consumption would amount to 110 million patacas this year. She said the government would

begin gradually reducing its subsidy for water consumption by special users. Macao Water executive director Felix Fan Xiao Jun said his company’s finances had improved since the government approved in June an increase of 5.92 percent in the amount of water bill collections the company gets to keep. But Mr Fan said it would be a challenge for Macao Water to hang on to its employees and to make big investments in infrastructure in the next 10 years. The company is expanding the reservoir on the peninsula, and is planning a new treatment plant on Coloane and a new pipeline from Guangdong. Macao Water also intends to lay more mains from the peninsula to Taipa and to newly reclaimed land. “All these big projects require an investment of over 1 billion patacas,” Mr Fan said. “To secure our water supply in response to the growing demand from the city – especially from Cotai, where hotels are under construction – we have to enhance our infrastructure input,” he said. “And this is one of the main reasons why we are asking for a rise in our service charge.” Mr Fan said Macao Water was compiling a report on water rate increases, which it would deliver to the government this year or early next year.

Telecoms make half of revenue from handsets

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he city’s communication sector made the most of visitors’ shopping trips last year, with almost half of its revenue coming from sales of handsets and tablets, official data show. An annual survey released by the Statistics and Census Service yesterday shows the sector’s revenue growing by 21 percent to 7.09 billion patacas (US$887.8 million) in 2012. Sales of smartphones and tablets accounted for 46.4 percent of the total, growing by almost two thirds from the previous year. In just two years sales of communications equipment jumped from 692.3 million patacas to 3.29 billion patacas in 2012, mostly due to visitor spending. Mainland Chinese visitors in

particular like to buy smartphones here because there is no sales tax. Based on official data, Business Daily estimates that visitors spent about 1.6 billion patacas in cellular phones and electrical equipment here last year.

BUT WE DO•••

Macau had 31 communications companies by the end of last year but the sales boom has passed by most of them. Five companies account for 97 percent of the sector’s revenue. The Statistics and Census Service does not identify those firms but they are likely to include Macau’s three mobile telecommunications operators. The city’s biggest telecommunications operator, Companhia de Telecomunicações de Macau SARL (CTM), made more than half of its revenue from handset sales last year. The sector became less profitable, however, with expenses growing faster than revenue. Spending rose by over a third to 5.52 billion patacas last year, as smartphones became more expensive. V.Q.

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December 13, 2013 April 19, 2013

Macau

Trade with Guangzhou surges this year Macau, Guangdong capital sign cooperation deals on MICE and tourism Tony Lai

tony.lai@macaubusinessdaily.com

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rade volume between Macau and Guangzhou city is up by nearly two-thirds so far this year, outshining the overall trade pace between the territory and mainland China. The figure reached US$413 million (3.3 billion patacas) in the first three quarters of this year, rising by over 62 percent from a year earlier, the Guangzhou Daily newspaper reported, quoting official data. The official data was presented in a meeting of the taskforce for Macau-Guangzhou cooperation on Wednesday. In contrast the trade between Macau and the mainland rose by 12.6 percent to over 10.57 billion patacas in the January-September period, according to data from the Statistics and Census Service. By the end of September Macau enterprises had invested in 328 projects in the capital of Guangdong province, the mainland’s largest economic powerhouse.

Macau firms have used over US$622 million in the investments, the newspaper reported. The two sides pledged to “further strengthen” cooperation on trade and conventions and exhibitions, said a press statement released by the cabinet of Secretary for Economy and Finance Francis Tam Pak Yuen, who attended the meeting. Macau and Guangzhou also agreed to further develop joint tourism

Corporate Delta Powerboats seals Macau yacht deal Delta Powerboats has announced it recently sealed the deal for a Delta 40 yacht with a buyer from Macau but the Swedish brand believes the best is yet to come. “We are excited about the momentum Delta Powerboats is gaining in this region, more and more boat lovers are expressing interest in our boats,” said Tee TzerYu, the company general manager for Asia Pacific, in a statement. Yachting is no new sport to boat lovers here, with the third edition of the Macau International Yacht Import and Export Fair held last month. Part of the yacht exhibition was for the first time held in the Macau Yacht Club’s marina in Ilha Verde. The rest occupied 20,000 square metres of the Venetian Macao. The sole representative and seller of Delta Powerboats in the Asia Pacific region, Hong Kong-based Navinode Ltd, was one of the exhibitors at the fair.

Steady growth for airport service quality Passengers using the Macau International Airport were happier with the services provided there in the third quarter of this year, a survey says. According to the Macau International Airport Co Ltd (CAM) the passenger satisfaction levels registered signs of growth for the fourth quarter running. They hit a score of 4.16 points with 5 the highest satisfaction level, representing a 4 percent increase from the previous three months, the airport operator said in a statement. The biggest improvement came from the Business/Executive Lounges and Restaurant services, which were “fine tuned” in the third quarter, CAM said. Satisfaction with the ground accessibility was also higher, thanks to the relocation of the taxi stand to its permanent location after works for the Light Rapid Transit railway, the company said. The Macau airport first joined the Airport Services Quality Survey hosted by Airport Council International in 2010.

products to better use Guangdong’s ‘144-hour visa’, said the statement. The Guangdong province allows foreign visitors in tour groups to Hong Kong and Macau to visit the province as well during six days without any additional visa. Macau and Guangzhou signed four cooperation pacts in the meeting, including an agreement to explore the Portuguese-speaking countries’ markets, according to the statement.

Telecom complaints soar in August

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lmost one in three complaints filed by consumers in August involved telecommunication devices or services, the Consumer Council said in its latest newsletter. In August the council received 158 complaints, down from 173 a year earlier, according to the newsletter published this week. However the number of complaints over telecommunication equipment or services hit 46, accounting for almost a third of all cases. A year ago, this type of complaints took up 20 percent of the total. Most telecommunication complaints concern smartphone malfunction, repair services or tariff disputes, the council said in October. Mainland visitors like to buy smartphones here because there is no sales tax. Communication equipment sales rose by 28 percent to 890 million patacas (US$111.4 million) in the first three quarters of this year, official data show. The president of the Consumer Council, Wong Hon Neng, said last week the council was working on amendments to the consumer protection law, which was enacted in 1988. V.Q.


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December 13, 2013 April 19, 2013

Greater China Shenzhen finds H7N9 ‘flu virus in markets The risk of sporadic human infection is high after three samples collected from live-poultry markets in the southern city of Shenzhen tested positive for the H7N9 avian influenza virus, the Chinese government said. The Guangdong province health authority examined 70 samples from 13 live poultry markets in Shenzhen, it said in a statement. Shenzhen is an hour’s train ride from downtown Hong Kong and a popular day-trip destination for shopping and dining. Hong Kong has stepped up surveillance of travellers with fever after finding two cases of a new strain of bird ‘flu that killed at least 45 people in China. The first case is a 36-year-old Indonesian woman who travelled to Shenzhen to buy and slaughter a chicken, and the second is an 80-yearold man who was hospitalised in Shenzhen last month before moving to Hong Kong. Samples that tested positive for the virus were found in two live poultry markets, the Guangdong health authority said. One sample came from chicken feces, one from a defeathering machine and the third from a chopping block, according to the statement. The novel avian influenza strain is often lethal to humans, though it doesn’t transmit easily from person to person.

Han’s Laser buys Israel’s Nextec Han’s Laser Technology Co, a Chinese supplier to Apple Inc, bought Israel’s Nextec Technologies to expand in the market for laser measurement devices used in the auto and aircraft industries. Gao Yunfeng, president of Shenzhen-based Han’s Laser, said the company paid a “few million U.S. dollars” for privately-held Nextec, without elaborating further. Danny Shacham, president of Nextec, declined to comment by phone. Chinese companies are expanding abroad amid slower growth at home. Bright Food Group Co, the dairy and consumer-products group backed by the Shanghai government, said in September it’s considering acquiring Israel’s Tnuva Food Industries Ltd. China’s outbound investment jumped 20 percent to US$69.5 billion in the first 10 months of the year, Ministry of Commerce data showed last month. Overseas investment may reach US$100 billion this year and exceed foreign direct investment in the near future, Commerce Minister Gao Hucheng was cited by the People’s Daily as saying in November.

Cinda sold 5.3 billion shares to raise US$2.5 billion

Cinda off to flying start in Hong Kong Shares in Chinese bad bank jump more than 20 pct on debut Elzio Barreto

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hares in China Cinda Asset Management Co Ltd surged as much as a third in their trading debut yesterday, marking a major success for China’s first listing of a bad debt management firm and boding well for other potential IPOs in the sector. Brightening up an otherwise dim IPO market for Hong Kong this year, Cinda has raised US$2.5 billion – an

amount set to grow to nearly US$2.9 billion, with sources familiar with the matter saying the stellar demand virtually guaranteed the exercising of an overallotment option. Keen to bet that soured loans will be a growth industry in China as the economy slows, 10 cornerstone investors put in a combined US$1.1 billion in the IPO, including Oaktree Capital

Management Ltd, the world’s largest distressed debt investor, and Och-Ziff Capital Management Group LLC. While Cinda has its critics, some of whom worry about the opaqueness of its bad loan pricing, the presence of such global marquee investors boosted sentiment. The retail portion generated more than 161 times demand than the shares on offer,

Guangdong to auction carbon permits next week Government may withhold free permits in emissions scheme Yuan forwards drop for second day Yuan forwards fell after the central bank weakened the daily fixing for the first time in five days amid concern about capital outflows as the U.S. prepares to taper its stimulus. The People’s Bank of China cut the yuan’s reference rate by 0.02 percent to 6.1115 per dollar yesterday, after raising it to the strongest since July 2005 yesterday. A budget accord forged by U.S. lawmakers, which will ease automatic spending cuts, came as an improving jobs market spurred speculation the Federal Reserve will pare its monthly bond purchases next week. “Concern over tapering, and hence capital outflows, are weighing on emerging-market assets including the yuan,” said Bruce Yam, a foreign-exchange strategist at Sun Hung Kai Forex in Hong Kong. “Investors are also waiting for China’s guidance on the economic outlook for next year.” The onshore yuan closed at 6.0711 per dollar in Shanghai, little changed from Wednesday’s 6.0717, China Foreign Exchange Trade System prices show. The currency touched 6.0703 on Tuesday, the strongest level since the government unified the market and official exchange rates at the end of 1993. The spot rate can trade a maximum 1 percent on either side of the fixing.

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uangdong province has warned emitters that unless they bid for carbon permits in government auctions at a regulated minimum price, they will not receive any free permits under the nation’s fourth emissions trading scheme, sources said. China, the world’s biggest emitter of greenhouse gases, is launching seven pilot carbon markets ahead of a nationwide scheme later this decade as a key measure to cut its emissions per unit of GDP to 40-45 percent below 2005 levels by 2020. Emissions trading is new to China, and most observers expect a bumpy ride before the government finds a formula that works, but Guangdong’s strategy is unprecedented in carbon markets. The move could boost demand at auctions but undermine the market. The province will hold its first auction of 3 million carbon permits on Monday and launch secondary trading of CO2 allowances three days later in what will be the world’s second biggest emissions trading scheme. But the 240 companies covered

by Guangdong’s emissions market – including state power companies Datang, Huaneng and Shenhua – have been told they must make successful bids in this or future auctions, according to several independent sources.

For those that don’t, the government will hold back free permits, potentially a huge economic blow as the free emissions licences are expected to make up 97 percent of what companies need to comply with the scheme.

Regulating demand

If the government is relying on this policy to drive demand in the primary market… it will undermine the carbon market and the policy goal Craig Hart, Renmin University

The Guangdong Development and Reform Commission (DRC), the government body running the carbon trading scheme, did not respond to questions from Reuters. If the policy is meant for the long term, the DRC risks undermining the scheme by taking demand out of the market, demoting the value of companies buying their extra requirements from the secondary market, according to Craig Hart, an associate professor at Renmin University’s School of Environment and Natural Resources in Beijing. “The requirements could serve to consolidate trades and aid price discovery in the near term, but they should not be used to regulate demand,” Mr Hart said.


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Greater China KEY POINTS Cinda’s shares surge as much as 34 pct Bodes well for peer Huarong, next in line Raising money to finance new bad debt purchases

resulting in that allocation being lifted to 20 percent from 5 percent. One of four asset management companies that Beijing established in 1999 to absorb toxic assets held by China’s four biggest banks, Cinda, which took on the debts of China Construction Bank, is the most profitable. Peer Huarong Asset Management Corp is next in line to go public and is currently seeking to raise up to US$2 billion from pre-IPO investors, ahead of a listing next year, sources have said. Bad loans at Chinese banks could rise by between 70 billion yuan (US$11.5 billion) and 100 billion yuan in 2013 partly due to delinquency risks from industries plagued by overcapacity, according to an annual report by the China Banking Association. Cinda shares soared as high as HK$4.79, but later pared gains to close at HK$4.50, up 25.7 percent from its IPO price of HK$3.58 and valuing the company at around US$21 billion. “I am selling Cinda into the rally and taking some profit,” said Alex Wong, Ample Finance’s director of asset management.

The offering was the largest in Asia-Pacific excluding Japan since the US$3.6 billion listing by People’s Insurance Group of China Co Ltd (PICC) in November 2012. The shares had jumped more than 17 percent in gray market trading on Wednesday, which pointed to a strong start, but yesterday’s debut surpassed even the most bullish of estimates from traders.

Profits and debts Cinda said in its IPO prospectus that profit attributable to equity holders jumped 36 percent in the six months to June to 4.06 billion yuan (US$666 million) from a year earlier. Yesterday’s jump would raise Cinda’s price to book ratio to 1.66 times for 2013, while Hong Konglisted banks trade at a P/B of 1.2 times, according to Thomson Reuters data. But the debt manager’s borrowing has also risen twenty-fold in the last three years to 161 billion yuan (US$26.5 billion) as of end-October as Cinda scooped up distressed assets from the likes of real estate projects, cement makers, miners and coal companies. “When we manage bad loans we adopt a cautious attitude,” Cinda chairman Hou Jian Hang said at a news conference in Hong Kong, seeking to ease concerns about the debt pile. “We make provisions according to the business needs.” The borrowings expose the company to risk factors including short- and long-term interest rate hikes and also underline how dependent Cinda would be on the Finance Ministry, its biggest shareholder, and other lenders to rollover its borrowings should it need more time to pay back debt. “In the long run we do have some reservations on the business model,” said Tony Chu, a portfolio manager at RS Investments. “It’s quite interesting. There’s opportunity and also risk.” Reuters

Samsung has 13 manufacturing sites in China

Samsung shifts plants to protect profit margins As China economic growth priced many workers out of low-end jobs

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amsung Electronics Co Ltd built the world’s largest smartphone business by tapping China’s cheap and abundant workforce. Not for much longer: it’s shifting output to Vietnam to secure even lower wages and defend profit margins as growth in sales of highend handsets slows. By the time a new US$2 billion plant reaches full production in 2015, China’s communist neighbour will be making more than 40 percent of the phones that generate the majority of Samsung’s operating profit. The South Koreabased company’s second handset factory in Vietnam is due to begin operations in February, according to a November 22 statement on the local government’s website. Samsung surged past Apple Inc to the top of the mobile-phone industry by offering cutting-edge devices for more than US$900 to basic models costing less than US$150. With demand sagging in the mostprofitable top end and Chinese rivals driving prices lower, Samsung is joining technology companies such as Nokia Oyj and Intel Corp to be drawn to Vietnamese wages that are

about a third those in China. “The trend of companies shifting to Vietnam from China will likely accelerate for at least two to three years, largely because of China’s higher labour costs,” said Lee Jungsoon, who leads a business-incubation team of the Korea Trade-Investment Promotion Agency in Ho Chi Minh City. “Vietnam is really aggressive in fostering industries now.” Samsung’s new plant is expected to make 120 million handsets a year by 2015, said two people familiar with the company’s plans, who asked not to be identified because the matter is private. That would double the current output from the country and compares with the 400 million global total Samsung shipped last year. In an e-mailed response to questions, the company declined to comment. With about one-third of the global smartphone market, Samsung may eventually produce as many as 80 percent of its handsets in Vietnam, said Lee Seung-woo, an analyst at IBK Securities Co in Seoul who has been tracking the company for more than a decade. Bloomberg News

China – launching seven pilot carbon markets

“If the government is relying on this policy to drive demand in the primary market… it will undermine the carbon market and the policy goal,” he said. The plan and the minimum price could also discourage speculative traders from using the auctions to take long positions on bets the carbon prices will rise. Sources speaking on condition of anonymity said the DRC move was likely made to ensure there would be demand at the auctions.

The DRC has also issued regulations demanding a minimum 60 yuan (US$9.88) per permit at the auctions, an unpopular decision among scheme participants, who think that’s too high. Forcing companies to buy permits at the auctions is likely to raise prices and increase government revenue, one source said. A total of 29 million permits are to be sold in auctions before June next year, generating at least US$287 million. Reuters

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December 13, 2013 April 19, 2013

Greater China

Bitcoin arbitrage ends as Alibaba punters avoid capital controls to extend More arbitrageurs step in as bitcoin grows in popularity US$8 bln loan Gabriel Wildau

E-commerce giant buying more time for IPO

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libaba Group Holding Ltd said it is seeking to extend the draw-down period of an US$8 billion loan from January next year, a move people familiar with the e-commerce company’s plans said would buy it more time to launch an IPO. The original expiry date of the draw-down period on the loan was January 30 of next year, according to the deal terms. Alibaba wants to extend that to December 31, 2014, sources familiar with the discussions said. “We have plenty of cash on the balance sheet and there is no need to draw down at this time, so we are extending the availability of funds to maintain flexibility,” the company said, without specifying a new date. Alibaba said the funds will be used for corporate purposes. It has already used US$5 billion from the loan facility to refinance its debt. The US$8 billion loan is a key part of Alibaba’s IPO plan, and the extension to the end of next year signals that the public float is remains a long way off. China’s biggest e-commerce firm has struggled to reach an agreement with Hong Kong regulators over a partnership structure it hopes to use as part of an initial public offering (IPO), a deal that expected to be worth about US$15 billion and which may take place next year. Public comments by its founder Jack Ma and a statement from the Hong Kong Stock Exchange in recent months, however, have raised the possibility of a Hong Kong listing. The company has yet to outline a date or venue for the IPO. Under an agreement with its second biggest shareholder Yahoo Inc, Alibaba has incentives to complete an IPO before December 2015. All 22 lenders involved with the loan must agree to the extension. The banks have until December 20 to respond to the extension request, and those responding in favour before today will get an “early bird” fee of US$50,000 from the company if the move succeeds. Reuters

Alibaba has already drawn down US$5 bln of the loan

Chinese capital controls boosted price of local bitcoins

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he price gap between bitcoins trading in Chinese yuan and those sold for other currencies has evaporated in recent days, highlighting the porous nature of China’s capital controls. Chinese bitcoin chat rooms buzzed last month as investors noticed that the digital currency as sold on China’s biggest exchange was more expensive, in dollar terms, than bitcoins traded abroad using dollars, creating a tempting arbitrage play. Traders could earn profits by buying bitcoins using U.S. dollars on a foreign exchange such as Mt. Gox, reselling them for yuan at the higher price on BTC China, the main local exchange, and finally converting the yuan back to dollars. “Insane bitcoin. If you’ve got dollars, hurry and do arbitrage,” a user called ‘foxtree’ wrote on Weibo, a Twitter-like micro-blogging platform, on November 19, the day the gap peaked at more than 30 percent. A key driver of the price gap was China’s capital controls, which make it difficult for speculators to swap yuan proceeds from the sale of highpriced Chinese bitcoins into dollars. “Certainly a portion of the premium on BTC China was a result of the fact that any coins sold would be in RMB, which isn’t the most portable currency,” said Zennon Kapron, head of Kapronasia, a Hong Kong-based finance and technology consultancy, using an alternate term for the Chinese currency. “So if you did trade that market, getting your money back into another currency is more difficult,” he said. In recent days, however, the spread between bitcoins as priced

in yuan and those priced in dollars has disappeared. An announcement by China’s central bank last week forbidding commercial banks from dealing in bitcoin also contributed to the price decline on BTC China.

Rapid evolution But analysts say the price convergence also reflects the rapid evolution of the bitcoin market, which began with technology enthusiasts but quickly expanded to include those with the financial know-how to evade China’s strict capital controls. A 27-year-old e-commerce professional from the east coast city of Xiamen, who goes by the screen name ‘King,’ is typical of early-wave amateur punters. He told Reuters that he used RChange, an online currency exchange and payment service based

KEY POINTS Spread between RMB and USD-traded bitcoin evaporated Savvy punters find ways to obtain foreign cash Wenzhou speculators seen pouring into bitcoin market

in the Seychelles, to exchange yuan for commercially-operated electronic currencies such as OKPay and EgoPay, which are accepted by several international bitcoin exchanges. But because such currencies carry hefty charges, this method is only profitable when the bitcoin spread is very wide. Recently, as bitcoin has grown in popularity, more sophisticated arbitrageurs have stepped in. Early this month, Chinese media began reporting that investors from Wenzhou, the east coastal city known for its entrepreneurial and speculative zeal, were piling into bitcoin. Wenzhou’s famously tight-knit, business-savvy global diaspora has given rise to the adage “Wherever there’s a market, there are Wenzhou people” and offers Wenzhou investors ready access to foreign currency. Some bitcoin speculators are also likely resorting to other tried-andtrue methods for skirting China’s capital controls. The most common is falsified trade invoices, which disguise movements of speculative cash as payments for goods and services. Indeed, unexpectedly strong export growth in November reignited suspicions that official data had been inflated by fake invoicing. Those suspicions centred on the conversion of dollars to yuan in order to profit from appreciation of the Chinese currency. But the same technique has been used to move funds in the other direction. A Shanghai-based fixed income fund manager dismissed capital controls as a barrier to shifting money around. “All of my clients have plenty of money offshore already,” he said. Reuters


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December 13, 2013 April 19, 2013

Asia

Filipino remittances to buoy peso

BOK holds rate as yen threatens exports

Money sent home accounts for about 10 percent of the Philippine economy Yumi Teso and Clarissa Batino

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he Philippine peso is set to rebound from a three-month low as remittances from 10 million overseas workers in the runup to Christmas offset some of the damage done by one of the nation’s deadliest storms ever. A 2.2 percent slide since the start of November pushed the peso’s 14-day relative-strength index above 70 this week for the first time since August, a sign of a possible turnaround. The currency also breached its Bollinger band as it dropped to 44.345 per dollar on December 10, the weakest level since September 9. “The peso seems to be oversold at this point and, looking at the trading patterns, there’s a good chance of seeing a rebound,” Minoru Shioiri, a Tokyo-based manager in the credit and foreign-exchange trading division at Mitsubishi UFJ Morgan Stanley Securities Co, said. Money sent home by Filipino workers accounts for about 10 percent of the country’s economy and may support the peso after losses last month caused by Typhoon Haiyan, which killed almost 6,000 people. The currency had been strengthening, recovering from a three-year low reached in August amid the fastest economic growth in Southeast Asia. Workers’ remittances increased 5.8 percent over the first nine months

of this year to US$16.5 billion, official data show. December had the highest total for each of the past three years, with payments reaching a record US$1.97 billion in December 2012. Together with the US$12.3 million received from foreign donors in the wake of the typhoon, the money flowing into the country is damping the effects of global funds pulling US$43 million from Philippine stocks this month, partly on expectations the U.S. will soon reduce monetary  stimulus. “It may be a bit of a surprise to see the peso weakening at a time of strong remittances and supposedly a lot of foreign aid after the typhoon,” Roland Avante, the president of Philippine Business Bank, said in a phone interview. “It’s hard to say whether we’re seeing the end of the selloff even at those oversold levels. These levels should be attractive already to start buying the peso.”

Bollinger breach The peso may also be buoyed by the central bank’s signal that it’s ready to intervene in the currency market to stem excessive swings in the exchange rate. Bangko Sentral ng Pilipinas Governor Amando Tetangco said that policymakers are “closely monitoring

developments” and will step in as needed to curb volatility. After the peso’s daily trading range breached the upper end of its Bollinger band in late August, the currency went on to climb to 43.01 by September 23, from 44.76 on August 29, the lowest level since September 2010. Developed by John Bollinger in the 1980s, the bands are used by technical analysts to identify the turning point in an asset’s trajectory. The limits represent two standard deviations from the 20-day moving average, implying that the likelihood of a currency moving outside the band is small. The peso gained 6.8 percent last year, the best performance since 2007, and touched a five-year high of 40.55 per dollar in the first quarter as economic growth gathered pace and President Aquino reined in the budget deficit. The shortfall declined to US$2.5 billion in the first 10 months of this year, from a record US$7.1 billion in 2010, and the nation won investmentgrade status from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings for the first time this year. Philippine gross domestic product grew at least 7 percent in each of the last five quarters.

US$16.5 bln

Workers’ remittances in the first nine months of 2013

Bloomberg News

Kim Choong-soo says the economy is doing well despite the yen’s depreciation

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he Bank of Korea kept its benchmark interest rate unchanged, with near 14-year-low inflation giving it room to support a rebound in Asia’s fourthbiggest economy as a declining yen threatens exports. Governor Kim Choong-soo and his board held the seven-day repurchase rate at 2.5 percent, the same level since a cut in May, the central bank said in a statement yesterday. Policymakers are grappling with a won that rose to its highest against the yen since 2008 this week, threatening to hurt South Korean exporters’ competitiveness against Japanese companies. Outbound shipments gained less than economists forecast in November and Finance Minister Hyun Oh-seok said last week that authorities are watching the won’s moves against the Japanese currency. “The weak yen can weigh on many South Korean exporters as Japan is a key rival in global markets,” said HI Investment & Securities’ Seoul-based chief economist Park Sang-hyun. “If Japan opts for more aggressive monetary stimulus and the yen falls much further, it would chill growth, forcing the BOK into further easing.” The won gained 20 percent against the yen this year, hitting the highest since 2008 on December 10, according to data compiled by Bloomberg. “Apart from the steel, electronics, and auto industries, the economy as a whole is coping fine” with the falling Japanese currency, Mr Kim said to reporters after the policy decision. “I am not in a position to comment on how far the yen will reach, but there will be a limit and we need to monitor this and find ways to cope.” South Korea’s exports rose 0.2 percent in November from a year earlier, slowing from a 7.2 percent increase the previous month on weaker demand in Indonesia and other Asian countries. The consensus forecast was for a 3 percent gain. Consumer prices climbed 0.9 percent in November from a year earlier after a 0.7 percent increase in October that was the smallest gain since July 1999. Inflation has stayed below the central bank’s target range of 2.5 percent to 3.5 percent since May 2012. Bloomberg News


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December 13, 2013

Asia Ex-Thai PM Abhisit indicted for murder Former Thai prime minister Abhisit Vejjajiva was indicted for murder yesterday in connection with a deadly military crackdown on mass opposition protests in Bangkok three years ago, prosecutors said. The move comes as fresh political turmoil rocks the Thai capital, with protesters backed by Mr Abhisit’s opposition party seeking to oust Prime Minister Yingluck Shinawatra and rid the kingdom of the influence of her brother, deposed former leader Thaksin. “We have indicted him [Abhisit],” Nanthasak Poonsuk, a spokesman for the attorney general’s office, told AFP outside the Bangkok court where the closed-door hearing was held.

Foreigners add most Japan stocks ever Environment getting better ‘to take on more risk’, analyst says

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oreigners are boosting holdings of Japanese stocks by the most on record, putting more at stake for overseas investors as Prime Minister Shinzo Abe seeks to revive the world’s third-largest economy. Buyers from outside Japan pumped 12.9 trillion yen (US$125 billion) into the nation’s stocks this year through November, Tokyo Stock Exchange data show, as the Topix index climbed 45 percent to lead developed markets. The inflows surpassed the previous highest total in 2005, which preceded a 1.9 percent increase for the Topix the following year. Mr Abe’s policies to lift wages, weaken the yen and boost profits will push shares higher in 2014, according to Wayne Bowers at Chicago-based Northern Trust Corp, which oversees US$803 billion. Since Japan’s premier asked investors on the floor of the New York Stock Exchange on September 25 to “buy my Abenomics,” the Topix has returned about half the rally for the Standard & Poor’s 500 Index. “There isn’t any lack of commitment from Abe to keep going and keep pushing this,” Mr Bowers, chief executive for Europe, the Middle East Africa and Asia Pacific at Northern Trust, said in an interview. “You don’t need a significant amount of underlying

US$125 bln

Overseas buyers bought of Japanese stocks in the first 11 months

Topix index has climbed 45 pct this year through November

growth to see another move up in equity-market performance.” Since Mr Abe was elected on December 16 last year, his programme of fiscal stimulus, monetary easing and economic reforms known as Abenomics helped weaken the yen

23 percent against the dollar and lift the Topix 56 percent.

Foreign flows Investors from outside Japan bought 2.3 trillion yen more shares

than they sold on the Tokyo and Nagoya securities exchanges in November, the Tokyo Stock Exchange’s latest data show. That was the tenth month this year that foreign investors were net buyers of Japanese stocks, compared to

S.Korea to cut nuclear power reliance But new plants likely needed to prevent blackouts

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outh Korea is looking to scale back plans to rely on nuclear power, but growing energy demand and the shutdown of ageing reactors mean it will still likely need to build new nuclear-fired plants in the next two decades. Asia’s fourth-largest economy has been under pressure to curb its usage of nuclear power after a scandal forced the shut down of some reactors that had received replacement parts using fake safety certificates. The government had planned to increase reliance on nuclear

power to 41 percent of power generation by 2030, but a draft policy revision is now targeting 29 percent by 2035, the least stringent reduction recommended by a public advisory  group. One anti-nuclear group criticised the proposed target, saying it still amounted to a policy of expansion because it would still require additional reactors. The energy ministry said in a statement unveiling the draft of its policy revision that nuclear power still has a role to play in South Korea

and that it would not be drastically slashing or expanding capacity. “If the government is going to keep its nuclear power proportion at 29 percent by 2035… we would need an additional six to eight nuclear power plants,” Roh Dong-seok, a research fellow at state-funded Korea Energy Economics Institute, said. “The exact number of the units would be decided by how many of the existing nuclear reactors can still operate by then.” The ministry statement did not specify how many nuclear reactors

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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December 13, 2013

Asia Indonesia holds rate as trade improves Indonesia’s central bank kept its benchmark reference rate unchanged at 7.50 percent yesterday, as the country’s trade balance has returned to a small surplus and inflation is moderating. The central bank also maintained the deposit facility rate and lending facility rate at 5.75 percent and 7.50 percent, respectively. Bank Indonesia has lifted its reference rate a total of 175 basis points since June to restore market confidence in the G20 economy due to a sharp fall in the rupiah. The rupiah is Asia’s worst-performing currency and has fallen nearly 20 percent to the dollar this year.

just one month of net purchases by both domestic individuals and local financial institutions, the data show. November net purchases were the highest since April. Foreign investors were net buyers every month during 2005 as thenPrime Minister Junichiro Koizumi battled resistance from his own party and won a snap election in pursuit of postal reforms that proponents said would help revitalise the economy. The Topix increased 44 percent during the year, a gain only topped on three occasions since 1953. Yoshihisa Okamoto, the Tokyobased head of equity research at Mizuho Asset Management Co, said the Topix will climb to 1,750 by the end of next year. That’s a 40 percent advance from Wednesday’s close and the most bullish forecast of six analysts surveyed by Bloomberg, whose average estimate is for a 19 percent increase. “The vigour seen from foreign investors into Japanese stocks is also changing the behaviour of domestic investors,” Mr Okamoto said. “Domestic investors, including public-pension funds, are changing their attitude toward the stock market. The environment is getting better to take on more risk.” Earnings jumped last quarter to about 5.5 trillion yen at more than 1,280 of Japan’s largest listed nonfinancial firms. Sentiment among large manufacturers is the strongest since the early stages of the global credit crisis in 2007, according to the latest reading of the quarterly Tankan index. Bloomberg News

would be needed by 2035, and ministry officials declined to comment. South Korea currently has 23 nuclear reactors, which produce about a third of its electricity, and it plans to add 11 more, with five already under construction. Under the previous plan for nuclear power to make up 41 percent of power supply, South Korea would have needed to add as many as 20 additional reactors, according to industry data. And that would not take into account the 13 units – more than half the current total – that will face expiry of their operating licences by 2035.

UBS enters Australian property with A$10 bln Bank partnering with the country’s largest closely held builder

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BS AG, Switzerland’s biggest bank, is entering Australia’s property market to invest as much as A$10 billion (US$9 billion) over the next five years through a joint venture with a local developer. The bank, which now only holds property shares in the country, is partnering with Australia’s largest closely held builder Grocon Pty to beat a rush of global capital that’s seeking a home in its real estate market, said Trevor Cooke, Sydney-based head of Asia-Pacific real estate at UBS. “There’s significant competition in Australia from pools of capital for access to investment-grade stock,” Mr Cooke said by telephone yesterday. “The best way to offer our clients realistic solutions is to partner with an originator. The Asia Pacific as a whole is a strategic priority and Australia is one of the most attractive markets in the region.” Investor demand for Australian property is climbing, driven by relatively higher yields, and as home prices in the nation’s biggest cities reach records each month. Australia was among the three most active Asia-Pacific markets for commercial property transactions in the three months to September 30, after Japan and China, data from CBRE Group Inc show. Home

RBNZ signals 2014 rate increases N

ew Zealand’s central bank stepped up its inflationfighting rhetoric and signalled it will start raising interest rates in the first half of next year as

Home prices in biggest cities reaching new highs

prices across the nation’s biggest cities jumped 8.3 percent this year to November 30, according to the RP Data-Rismark home value index. UBS manages US$8 billion of retail and industrial property in Japan through a joint venture with Mitsubishi Corp, and partners with Chinese developer Gemdale Corp in a residential development fund on the mainland, Mr Cooke said. UBS Grocon Real Estate will select investments both from the Melbournebased builder’s A$2 billion of current

and planned projects, and from other sources depending on investor demand, Mr Cooke said. It will set up separate accounts and “club-style” vehicles that have a maximum of five institutions, rather than traditional funds open to multiple investors, he said. The partnership will begin by focusing on prime office properties for more conservative investors, and residential developments to cater to those seeking higher returns, he added.

the economy strengthens, sending the currency higher. “The bank will increase the official cash rate as needed in order to keep future average inflation near the 2 percent target midpoint,” Reserve Bank of New Zealand governor Graeme Wheeler said in statement yesterday after leaving the benchmark at a record-low 2.5 percent. In October, he said increases “will likely be required” in 2014. New Zealand is set to become one of the first developed nations to begin raising borrowing costs as accelerating economic growth

and a housing boom stoke price pressures. Given the outlook for faster inflation, “it is becoming unnecessary to maintain the current degree of monetary stimulus,” the central bank said yesterday. “The implication is they start raising in March, and we feel comfortable with that,” said Stephen Toplis, head of research at Bank of New Zealand Ltd in Wellington. “The RBNZ has taken on board the stronger activity readings from the domestic economy and that’s entirely appropriate.”

U.S. firm had infringed on three of Samsung’s mobile patents. The lawsuit was part of the tech giants’ global courtroom battle dating to 2011, when Apple first sued Samsung for copying the look and feel of its iconic iPhone and iPad. A judge at the Seoul Central District Court said Apple products such as the iPhone 4S, iPhone 5 and iPad2 did not violate Samsung patents on short message display methods and messaging grouping features. The court ruled against a sale ban on the products and threw out Samsung’s claim for 100 million won

(US$95,100) in damages. “We are glad the Korean court joined others around the world in standing up for real innovation and rejecting Samsung’s ridiculous claims,” Apple Korea spokesman Steve Park said. Samsung said it would thoroughly review the ruling before deciding to whether to appeal. “As Apple has continued to infringe our patented mobile technologies, we will continue to take the measures necessary to protect our intellectual property rights,” Samsung said in a  statement.

Bloomberg News

Reuters

Reuters

KEY POINTS Draft policy considering smallest cuts to 29 pct Nuclear was to make up 41 pct of power by 2030 Govt did not specify how many reactors needed

Apple scores legal victory over Samsung S

amsung Electronics Co Ltd yesterday lost its bid to ban sales of Apple Inc’s older iPhone and iPad in South Korea after a court dismissed a lawsuit claiming the

Reuters


14 14

December 13, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 65.3

97.6

64.5

97.4

63.7

97.2

29.50 29.05 28.60

Max 65.25

average 64.697

Max 62.6

Min 62.95

average 62.054

last 65.2

Min 60.8

last 62.3

28.15

62.9

Max 97.6

average 97.333

PRICE

average 28.970

Min 27.7

last 29.4

27.70

34.8

62.15

25.3

34.2

61.70

25.0

33.6

61.25

24.7

33.0

60.80

Max 25.55

average 25.131

DAY %

YTD %

(H) 52W

Min 24.5

last 25.55

(L) 52W

97.5

0.061586624

4.62495976

107.9400024

85.45999908

BRENT CRUDE FUTR Jan14

109.84

0.127620784

5.180503687

113.3099976

96.13999939

GASOLINE RBOB FUT Jan14

266.74

0.236744204

5.206279088

287.259984

243.1999922

GAS OIL FUT (ICE) Jan14

933.25

0.080428954

3.694444444

968

838.75

4.365

0.645607563

7.777777778

4.825000286

3.464999914

302.26

0.046339203

1.392103586

320.0099945

278.0799866

1255.31

0.008

-24.5815

1723.45

1180.57

NATURAL GAS FUTR Jan14 NY Harb ULSD Fut Jan14 Gold Spot $/Oz Silver Spot $/Oz

20.2949

-0.034

-32.5975

33.765

18.2208

Platinum Spot $/Oz

1386.63

0.0902

-8.6391

1742.8

1294.18

Palladium Spot $/Oz

736.29

-0.0801

5.2354

786.5

629.75

LME ALUMINUM 3MO ($)

1817

0.776483638

-12.34925229

2184

1736.25

LME COPPER 3MO ($)

7220

0.852074312

-8.964821586

8346

6602

LME ZINC

1965

0.769230769

-5.528846154

2230

1811.75

14030

0.71787509

-17.76084408

18770

13205

15.5

0.161550889

0.551410963

16.80999947

14.91500092

3MO ($)

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

438.75

-0.113830393

-28.0147662

640

418.5

WHEAT FUTURE(CBT) Mar14

642.5

0.27311744

-22.75323114

887.5

635

SOYBEAN FUTURE Jan14

1333

-0.818452381

1.833460657

1406

1169

COFFEE 'C' FUTURE Mar14

109.7

-0.498866213

-31.5871531

172.25

104.1499939

16.5

-0.060569352

-19.82507289

20.71999931

16.44999886

Mar14

SUGAR #11 (WORLD) Mar14 COTTON NO.2 FUTR Mar14

24.4

82.37

-0.145472178

3.727490241

90.61000061

76.65000153

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

Max 34.65

average 33.845

Min 32.45

last 34.55

32.4

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9043 1.6406 0.8871 1.379 102.79 7.9863 7.7537 6.0714 61.545 32.073 1.2527 29.631 44.088 12045 92.958 1.22331 0.84054 8.3698 11.0127 141.75 1.03

-0.6919 0.0671 0.0225 0.1743 -0.2627 0.0013 0.0064 0.0082 -0.4753 -0.0405 -0.1517 -0.0945 0.0386 -0.4483 0.4325 -0.152 -0.1166 -0.2449 -0.1852 -0.4374 -0.0097

-12.8638 1.4219 3.1902 4.5489 -16.237 -0.0388 -0.04 2.6221 -10.6426 -4.655 -2.4986 -2.0182 -6.9928 -18.6966 -3.9061 -1.294 -2.9886 -1.8196 -4.3795 -19.8801 -0.0097

1.0599 1.6466 0.9839 1.3832 103.74 8.0111 7.7664 6.2546 68.845 32.48 1.2862 30.228 44.82 12075 105.433 1.265 0.88151 8.4957 11.0434 142.17 1.032

0.8848 1.4814 0.884 1.2746 82.8 7.9818 7.7499 6.0681 52.89 28.56 1.2168 28.913 40.54 9603 86.41 1.2064 0.80682 7.8281 10.195 107.89 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.37

0

38.73015

5.12

3.04

2097823

16.62

1.094891

55.76382

17.38

10.08

3640111

AMAX INTERNATION

1.86

-2.105263

32.85715

2.12

0.75

10143050

BOC HONG KONG HO

24.65

-1.202405

2.282156

28

22.85

17063038 1952000

CENTURY LEGEND

NAME

Max 29.5

25.6

WTI CRUDE FUTURE Jan14

CORN FUTURE

97.0

Currency Exchange Rates

NAME

METALS

last 97.6

62.60

Commodities ENERGY

Min 97.05

0.5

2.040816

88.67926

0.68

0.26

6.97

-1.134752

16.36061

7.28

4.5

15000

CHINA OVERSEAS

22.65

0.443459

-1.948054

25.6

17.7

13556202

CHINESE ESTATES

22.95

-0.4338395

104.0808

23.8

9.853

52000

CHOW TAI FOOK JE

11.74

0.5136986

-5.627006

13.4

7.44

5170700

EMPEROR ENTERTAI

4.12

0

117.9894

4.66

1.65

2141000

3.8

1.876676

213.5246

3.96

1.142

2389308

65.2

2.758077

114.827

65.25

28.45

12248580 763169

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

15843.53

-0.8113626

20.90477

16174.51

12883.89

NASDAQ COMPOSITE INDEX

US

4003.813

-1.395817

32.59794

4081.784

2951.036

FTSE 100 INDEX

GB

6479.38

-0.4354828

9.860776

6875.62

5873.43

HANG SENG BK

124.4

-0.08032129

4.802025

132.8

110.6

DAX INDEX

GE

9032.19

-0.4948712

18.65118

9424.83

7418.36

HOPEWELL HLDGS

25.6

-0.1949318

-23.00752

35.3

23.2

756065

NIKKEI 225

JN

15341.82

-1.116593

47.58591

15942.6

9565.95

HSBC HLDGS PLC

82.55

-0.3019324

1.537512

90.7

77.85

14888863

HANG SENG INDEX

HK

23218.12

-0.5146918

2.476944

24111.55078

19426.35938

HUTCHISON TELE H

2.59

-2.631579

-27.24719

4.66

2.58

8138000

CSI 300 INDEX

CH

2410.015

-0.1138943

-4.476384

2791.303

2023.171

LUK FOOK HLDGS I

28.2

1.621622

15.57377

31.5

16.88

948000

MELCO INTL DEVEL

27.7

1.094891

207.4362

28.2

8.37

4222482

TAIWAN TAIEX INDEX

TA

8361.33

-0.8589279

8.595755

8501.769531

7491.52

MGM CHINA HOLDIN

29.4

3.339192

121.4142

30

13.127

8551725

KOSPI INDEX

SK

1967.93

-0.5075911

-1.458151

2063.28

1770.53

MIDLAND HOLDINGS

3.36

0

-9.18919

4.29

2.68

1780000

NEPTUNE GROUP

0.33

4.761905

117.1053

0.4

0.131

95130000

NEW WORLD DEV

9.98

0.2008032

-16.97172

15.12

9.9

6869170

SANDS CHINA LTD

62.3

1.465798

83.50515

63.85

32.85

8911938

FUTURE BRIGHT GALAXY ENTERTAIN

S&P/ASX 200 INDEX

AU

5062.516

-0.8176324

8.8959

5457.3

4569.4

JAKARTA COMPOSITE INDEX

ID

4232.82

-0.9111737

-1.94286

5251.296

3837.735

FTSE Bursa Malaysia KLCI

MA

1835.62

-0.3907055

8.684096

1846.92

1597

SHUN HO RESOURCE

1.57

0

12.14286

1.92

1.33

0

NZX ALL INDEX

NZ

991.738

0.283132

12.43519

1048.998

858.253

SHUN TAK HOLDING

4.44

0

5.966586

4.8

3.27

2591752

PHILIPPINES ALL SHARE IX

PH

3539.48

-1.909444

-4.312

4571.4

3440.12

SJM HOLDINGS LTD

25.55

2.40481

43.96266

28

16.919

5984008

7.66

-5.432099

-45.59659

14.46

7.64

6940066

WYNN MACAU LTD

34.55

6.471495

64.91646

35.3

19

8138774

ASIA ENTERTAINME

N/A

N/A

N/A

N/A

N/A

0

-1.482372

64.99665

78.03

43.57

289893 42000

SMARTONE TELECOM

Euromoney Dragon 300 Index Sin

SI

595.51

-0.91

-4.12

NA

NA

STOCK EXCH OF THAI INDEX

TH

1362.07

-0.5316391

-2.14523

1649.77

1260.08

HO CHI MINH STOCK INDEX

VN

506.92

0.3186163

22.52435

533.15

386.46

BALLY TECHNOLOGI

73.77

Laos Composite Index

LO

1229.02

0.3330775

1.173061

1455.82

1196.44

BOC HONG KONG HO

3.18

-4.504505

3.583064

3.6

2.99

GALAXY ENTERTAIN

8.21

-0.2430134

106.801

8.28

3.69

3054

INTL GAME TECH

17.6

-0.9009009

24.20607

21.2

13.58

3259631

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

JONES LANG LASAL

99.14

-2.450064

18.10817

102.14

80.86

430287

LAS VEGAS SANDS

76.51

-0.07835967

65.74957

77.7

44.444

4761376

MELCO CROWN-ADR

37.41

-0.7429026

122.1496

38.35

15.66

2233074

MGM CHINA HOLDIN

3.71

2.203857

111.9647

3.88

1.7503

300

MGM RESORTS INTE

20.59

-1.294343

76.89003

21.2

11.01

11086178

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.25

-0.9146341

42.69306

3.6

2.1692

6100

WYNN RESORTS LTD

180.7

-0.2484129

63.58594

183.44

106.966

1603076

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.2

1.003344

16574881

CHINA UNICOM HON

13.68

1.333333

22775492

ALUMINUM CORP-H

3.61

0

15433022

CITIC PACIFIC

10.12

0.1980198

6468988

BANK OF CHINA-H

3.15

1.286174

329406866

BANK OF COMMUN-H

5.87

0.8591065

37793438

29

0.1727116

14.5

BANK EAST ASIA BELLE INTERNATIO

NAME

CLP HLDGS LTD

NAME

PRICE

DAY %

64.4

0.625

2568679

SANDS CHINA LTD

28.75

-0.1736111

6213954

SINO LAND CO

14.28

0.990099

7686664

SUN HUNG KAI PRO

109.1

1.018519

8616634

93

-0.4815409

2456828

265.6

1.45149

2048509

23.9

0

2206357

10

0.8064516

5926157

52.75

1.05364

3208615

POWER ASSETS HOL

65.6

0

1561243

CNOOC LTD

16.32

0.4926108

46287676

1260442

COSCO PAC LTD

11.76

0

3138217

SWIRE PACIFIC-A

0

7192500

ESPRIT HLDGS

12.44

-0.48

4211743

TENCENT HOLDINGS

24

0.2087683

10140777

HANG LUNG PROPER

26.55

-0.1879699

7812341

TINGYI HLDG CO

CATHAY PAC AIR

13.78

0.2911208

3140232

HANG SENG BK

119.7

0.167364

1690249

WANT WANT CHINA

CHEUNG KONG

114.9

1.23348

3918568

HENDERSON LAND D

57

2.059087

5880582

WHARF HLDG

75.55

0.1325381

701703

20

1.112235

6329376

125.6

3.54493

9625332

76.5 -0.06531679

9291476

BOC HONG KONG HO

CHINA COAL ENE-H

7.7

-0.1297017

40174849

CHINA CONST BA-H

5.87

1.206897

202072100

CHINA LIFE INS-H

22.9

0.4385965

30126882

CHINA MERCHANT

25.6

0.3921569

4209584

CHINA MOBILE

HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC

85.45

1.064459

16569813

HUTCHISON WHAMPO

CHINA OVERSEAS

20.2

-0.2469136

19374736

IND & COMM BK-H

CHINA PETROLEU-H

8.36

0.9661836

101198904

CHINA RES ENTERP

25.2

0.8

77.35

1.243455

6697663

5.17

1.372549

317570965

LI & FUNG LTD

12.84

-0.9259259

17517410

4219717

MTR CORP

29.85

1.530612

4880670

MOVERS

16

33

23799.45

LOW

23194.79

CHINA RES LAND

17.16

1.179245

6849146

NEW WORLD DEV

12.98

1.564945

12528960

52W (H) 24111.55078

CHINA RES POWER

16.08

-0.618047

7490964

PETROCHINA CO-H

10.94

-1.263538

64234127

(L) 19426.35938

CHINA SHENHUA-H

33.35

-0.1497006

11160228

PING AN INSURA-H

63.35

1.198083

8338502

1 23800

INDEX 23218.12 HIGH

VOLUME

23190

10-December

12-December


15 15

December 13, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Inquirer Business Philippine exports grew in October as improving global economic conditions fuelled higher demand even for nonessentials like electronics, which remained the country’s key export product. Sales of Philippine-made goods to offshore markets during the month brought the 10-month exports growth to positive territory after the decline in the first nine months. The National Statistics Office reported that exports amounted to US$5.03 billion in October, up year-onyear by 14 percent. Total export earnings from January to October reached US$45.09 billion, up 1.3 percent from a year ago.

Times of India India’s gold and silver imports declined 80.55 percent to US$1.05 billion in November after a slew of measures taken by the government to curb inbound shipments of the metal, aimed at narrowing the current account deficit. Imports of gold and silver in November 2012 stood at US$5.4 billion. Total merchandise imports last month also declined, helping to narrow the trade deficit to US$9.21 billion, the secondlowest level in this financial year. The current account deficit touched a historic high of 4.8 percent of GDP and was mainly attributed to high imports of gold and petroleum.

Taipei Times Taiwan’s Financial Supervisory Commission (FSC) is demanding an explanation from local banks over underpricing allegations linked to their recent underwriting of Formosa bonds, or yuandenominated bonds sold in Taiwan. “We are investigating allegations of unfair competition and may take action against unruly players if necessary,” FSC secretarygeneral Lin Tung Liang said. On Monday it was revealed that the commission received information that two staterun banks allegedly lowered underwriting fees and coupon rates in an attempt to facilitate sales of Formosa bonds.

Wall Street Journal Chinese officials are exploring ways to curb smoking as deaths mount and medical costs rise, an effort that has generated one proposal to take apart the nation’s vast and politically connected government-run tobacco monopoly. China’s legislators will accelerate efforts to enact a national regulation banning smoking in public places in China, said Yang Jie, deputy director of Tobacco Control Office for the Chinese Centre for Disease Control and Prevention. Mr Yang said the State Council is currently planning the regulation, which is expected to be enacted next year.

The German scapegoat Daniel Gros

C

Director of the Centre for European Policy Studies

ould Germany, which accounts for 1 percent of the world’s population and less than 5 percent of its GDP, actually be responsible for the sorry state of the global economy? The U.S. Treasury Department started the chorus with a report on currency manipulators that criticised Germany’s current-account surplus. The European Commission added its voice last month, when it published its scorecard on macroeconomic imbalances and called for an in-depth analysis of the German  surplus. The emphasis on Germany seems much more justified within the context of Europe. But, even there, Germany represents less than 30 percent of eurozone GDP (and less than one-quarter of output in the EU as a whole). Germany is important but not  dominant. This focus on Germany also overlooks the fact that the country represents just the tip of a Teutonic iceberg: All northern European countries with a Germanic language are running a currentaccount  surplus. Indeed, the Netherlands, Switzerland, Sweden, and Norway are all running surpluses that are larger as a proportion of GDP than  Germany’s. These small countries’ combined annual external surplus is more than US$250 billion, slightly more than that of Germany alone. Moreover, their surpluses have been more persistent than those of Germany: ten

years ago, Germany had a current-account deficit, while its linguistic kin were already running surpluses of a similar size as today. Over the last decade, this group of small countries has recorded a cumulative surplus larger than even that of China. Are all of these countries guilty of mercantilist policies? Have all of them engaged in competitive wage restraint?

Little impact Much of the facile policy advice provided to correct the German surplus seems misguided when one examines the persistent surpluses of this diverse group of countries.

Beating up on Germany alone appears to be the wrong way to get results

Some, like Germany, are in the eurozone (the Netherlands); others have pegged their currency to the euro unilaterally (Switzerland), while still others maintain a floating exchange rate  (Sweden).

Within the eurozone, the counterpart to the German surpluses used to be the deficits of the peripheral countries (mostly Spain, but also Portugal and Greece). This is no longer the case. Today, the counterpart to Teutonic excess saving is “Anglo-Saxon” dissaving: most English-language countries are running currentaccount deficits (and have been doing so for some time). Together, the sum of the current-account deficits of the United States, the United Kingdom, and major Commonwealth countries amounts to more than US$800 billion, or roughly 60 percent of the global total of all external deficits. It is not surprising that national policymakers (and media) in major Anglophone countries are complaining about the German surplus. But action by Germany alone will have little impact on these countries’ fortunes, because their deficits are much larger. The key question is who would benefit if Germany started to import more. The peripheral eurozone countries account for only about 10 percentof German imports, compared to almost 40 percent for the other surplus countries in northern Europe. Stronger domestic demand in Germany would thus benefit these other surplus countries (with low unemployment) four times more than the peripheral countries (with much higher unemployment). Other countries with a structural surplus, including Russia, China, and Japan, would also benefit more from

stronger German demand than Spain or Greece would.

Joint effort The discussion of the German surplus thus confuses the issues in two ways. First, though the German economy and its surplus loom large in the context of Europe, an adjustment by Germany alone would benefit the eurozone periphery rather little. Second, in the global context, adjustment by Germany alone would benefit many countries only a little, while other surplus countries would benefit disproportionally. Adjustment by all northern European countries would have double the impact of any expansion of demand by Germany alone, owing to the high degree of integration among the “Teutonic”  countries. This applies to both the European and global contexts. Coordination within the eurozone (for example, through the excessiveimbalance procedure, which might now be applied to Germany) seems largely insufficient if the aim is to help the peripheral countries. At the global level, the Anglophone deficit countries, too, would benefit much more if all of northern Europe increased its domestic  demand. Germany has been an attractive target for external-deficit countries in Europe and beyond. But beating up on Germany alone appears to be the wrong way to get results. © Project Syndicate


16 16

December 13, 2013 April 19, 2013

Closing Yeung ‘not credible’: HK prosecutor

Japan approves US$53 bln extra budget

Carson Yeung Ka Sing (pictured), owner of Birmingham City Football Club, was an unimpressive witness during his trial for money laundering, Hong Kong prosecutors said. “His evidence was completely lacking in credibility,” stated government barrister John Reading SC yesterday, in closing arguments at the end of a 53-day trial. Mr Yeung wasn’t able to show that his wealth came from stock trading, Mr Reading added. Mr Yeung has pleaded not guilty to five charges of laundering HK$721.3 million (US$93 million) from parties including Macau junket operator Neptune and securities firms over a seven-year period to 2007.

Japanese Prime Minister Shinzo Abe’s cabinet approved yesterday a US$53 billion extra budget for the current fiscal year to fund stimulus steps announced last week aimed at offsetting the blow from a planned increase in the national sales tax. The size of the supplementary budget comes to 5.46 trillion yen (US$53.3 billion), following a 13.1 trillion yen extra budget compiled in January to stimulate the economy, according to the Ministry of Finance. “Our major objective is to achieve both rebuilding public finances and revitalising the economy. OECD and G20 countries are moving in this direction,” Finance Minister Taro Aso (pictured) said.

Beijing to liberalise M&A policy: official China’s chief security regulator will liberalise rules governing mergers and acquisitions (M&A) of listed companies, and encourage the use of preferred shares and M&A funds for investments, the official Shanghai Securities News reported, quoting an official. The move is part of a wider drive to restructure Chinese industries while simultaneously restoring confidence in equity markets prior to the scheduled resumption of IPOs in early 2014. The report quoted comments made at a conference by Lu Zefeng, the China Securities Regulatory Commission’s (CSRC) deputy director of public offering supervision, saying that China would reform M&A and company restructuring regulations to make them more market-oriented. The report quoted Mr Lu as saying that the CSRC will look to make transactions more transparent, reduce administrative approvals required for M&A and cooperate with other ministries to improve the way M&A transactions are taxed. Mr Lu said that the CSRC would also encourage innovation in funding mechanisms for M&A, including the development of M&A investment funds and the usage of preferred shares. China has seen mergers and acquisitions (M&As) in domestic stock markets surge this year, with 137 deals worth US$40.6 billion announced between January and early November, according to Thomson Reuters data, as companies struggled to raise funds given the unofficial freeze on IPOs in China, which began in November of 2012.

EU reaches landmark deal on failed banks Compromise brings forward date senior creditors must face losses

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ondholders and large depositors in a failing European bank face losses from the start of 2016, European Union negotiators agreed, in a deal to spare taxpayers from further bailouts. The law, if approved by EU ministers, will make losses for senior bondholders and large savers a permanent feature of the bloc’s response to banking crises and mark another milestone in the reform of an industry that triggered economic turmoil. It signals a hardening of approach and follows in the vein of the tough treatment earlier this year of big depositors in Cyprus. That country’s bailout broke a taboo that savers should be spared when a bank is in trouble. The agreement to accelerate the introduction of the regime by

two years to January 1, 2016 was reached between lawmakers from the European Parliament and negotiators representing EU countries. It now goes to EU ministers for approval next week. Michel Barnier, the European commissioner in charge of writing the law, said it was a “big step” to ensure that “taxpayers are no longer in the front line to pay for banks’ mistakes”. If given the green light, it will lay down clear rules for closing a bank in any of the 28 countries in the EU, ensuring that it is not only shareholders and governments who have to foot the bill. It provides an important building block for a wider reform dubbed banking union in the smaller 17-member eurozone, which will see

the European Central Bank police the sector in tandem with a new agency to shut weak lenders. The prospect of the new law, which officials had long postponed for fear that it would exacerbate investor nerves and bank borrowing, has yet to curb enthusiasm for bank bonds. Nor has it prompted large savers to move their cash to safe havens. But there is a lot of money potentially at stake and economists fear that some investors may take fright at the earlier rules. Banks across the 17 countries in the euro zone have 860 billion euros (US$1.2 trillion) of unsecured bonds, with German banks accounting for almost 200 billion euros, according to Thomson Reuters data. Reuters

Peugeot profit faces US$1.5 bln hit

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HK trader to compensate investors A former Morgan Stanley banker convicted of insider trading will have to pay more than 290 investors a total of HK$23.9 million (US$3.08 million) they lost out on, a Hong Kong court ordered yesterday in an unprecedented legal ruling. Du Jun (pictured), a former banker for Morgan Stanley Asia Ltd, was ordered by Hong Kong’s Court of First Instance to make the payment for using inside information when he traded shares in CITIC Resources Holdings Ltd in 2007. The case marks the first time in Hong Kong that the Securities and Futures Commission (SFC) has successfully managed to win a court order forcing an individual insider trader to pay investors money they lost out on as a result of trading with him or her. It also contrasts with the approach taken by most other regulators, including the United States and Britain, which tend to levy fines for insider trading that go into government coffers rather than returning money to investors. “This case sends a clear message that the consequences of wrongdoing, including the costs of restoration or remediation, should be met by wrongdoers and not be borne by innocent investors or the market,” the SFC’s enforcement head Mark Steward said in a statement. Reuters

rench carmaker PSA Peugeot Citroen unveiled a 1.1 billion euro (US$1.52 billion) writedown at its ailing overseas operations and won General Motors Co backing for a tie-up with China’s Dongfeng Motor Group Co Ltd. Peugeot and GM also lowered savings goals for their scaled-down alliance yesterday, as the Parisbased carmaker acknowledged it was pursuing a deal with Dongfeng Motor Group underpinned by a capital increase. Peugeot, one of the carmakers worst hit by the Europe’s economic slump, is cutting jobs and plant capacity to try to halt losses within two years. Peugeot shares fell as much as 8.4 percent on the writedown and after a source told Reuters the company’s board had approved a draft deal including a 3.5 billion euro capital increase at a 40 percent discount. The impairment, following a similar 4.7 billion euro hit on 2012 earnings, reflects weaker currencies and sales outlooks in Russia and Latin America, chief financial officer JeanBaptiste de Chatillon told reporters. Peugeot’s plant in Kaluga, Russia is among production investments “whose book value is no longer covered by future cash flows”, Mr Chatillon said on a conference call. “This will impact group operating income.”

Peugeot’s manufacturing division recorded a 510 million euro operating loss in the first half, before oneoff adjustments. The company nonetheless reiterated its 2013 goal of halving last year’s negative 3 billion euro operating cash flow. Discussions with Dongfeng are at “preliminary stage”, with no guarantee that they will conclude successfully, Peugeot said in a separate statement

yesterday. “There is no agreement on the terms of a potential operation.” But according to a source familiar with the matter, the carmaker’s board agreed on Tuesday to enter final negotiations on an outline deal that would see the French state and Dongfeng take matching 20 percent Peugeot stakes, in a capital hike priced below 7 euros per share. Reuters


Macau business daily, Dec 13