Number 438 Wednesday December 18, 2013
Editor-in-chief Tiago Azevedo
Lazard, Sniper 1 double down on property fund
April 19, 2013
Mocha gets nod to ‘rehome’ two slot parlours Page 3
Beijing eases Macau-to-mainland investment rules T
he central government is to make it easier for Macau entrepreneurs to make direct yuan-denominated investments in the mainland next year. The move includes a reduction in red tape and shorter approval times. Vong Kok Seng, vice-president of the board of directors at Macau Chamber of Commerce, has welcomed the decision. It was made by China’s Ministry of Commerce on Monday.
Legislators to debate flawed bus system Page 16
The ministry said in a statement on its website it will scrap extra approval procedures for investors seeking to set up, buy or merge companies in the mainland, or to increase investments they have already made there. Currently, all foreign direct investment deals in China must seek the ministry’s approval on a case-by-case basis. Investment transactions denominated in yuan previously needed special clearance. More on page 3
Euro cars rule city – first time since 1999 D
espite the U.S. dollar – the indirect peg for Macau’s currency – falling in October to its lowest level in eight months against the euro, European cars have been outselling their Japanese rivals on a per unit basis here this year. It’s the first time since the handover from Portuguese administration in 1999 that the market share race has been won by the Europeans says the Macau Motor Traders Association. One reason may be that three out of ten private cars sold in Macau this year have been high-end models costing between HK$300,000 and HK$500,000 says the trade body. The association’s preliminary data show pricier European wheels accounting for half of the private cars sold in the first 11 months this year, or more than 4,500 vehicles. Page 2
Wynn cleared to pursue casino in Massachusetts
Taiwan mainland enterprise zone ‘may’ include casino
Nearly half firms struggle to find IT staff here
Investigators working for the Massachusetts Gaming Commission in the United States say they have “not discovered any disqualifying factors” to prevent Wynn Resorts Ltd from proceeding with its application for a casino licence in the city of Everett in the state. But the report also mentioned that Macau’s data laws appeared to be a barrier to finding out more about Wynn Macau’s VIP gaming promoter partners.
Taiwan’s ‘Taoyuan Aerotropolis’ – a commercial park next to Taipei’s Taoyuan International Airport – is to reserve areas for socalled integrated resorts and they “may include” casinos, a press conference in Macau heard. A firm owned by the Taiwan government that’s behind the development project said there would be five square kilometres of enterprise zones for finance, cultural and creative business and logistics.
Nearly half of businesses polled “found difficulties in recruiting IT professionals” in the past year, says a survey released by Macau New Technologies Incubator Centre. A total of 46 percent among the 101 enterprises asked, gave that response – up from 43 percent in 2012. The Incubator Centre – known as Manetic – is part of the government’s initiative to help diversify the economy beyond gaming and tourism.
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December 18, 2013
European cars take lion’s share of sales Half of the cars sold in Macau are now European as people’s spending power grows Tony Lai
he more expensive European makes of car are for the first time outselling Japanese brands in Macau as the city’s wealth increases, the Macau Motor Traders Association says. But the association says that now Macau people have more money to splurge on motor vehicles, they are less inclined to spend it on motorcycles. Preliminary data gathered by the association show over 4,500 European cars were sold here in the first 11 months this year, accounting for half of the private cars sold. “This is the first year that European cars have had the biggest market share here,” said association president Patrick Tse Ka Ming. European makes had about 45 percent of the car market last year. “European car sales have grown a lot in the past three or four years, reflecting the surge in the spending power of Macau residents,” Mr Tse told Business Daily. Mr Tse said a European car usually cost at least HK$300,000 (US$38,696). Cars are usually priced here in Hong Kong dollars. The median earnings of Macau residents were 15,000 patacas (US$1,875) a month in the third quarter of this year, 50 percent more than four years earlier, official data show. Mr Tse said sales of cars costing between HK$300,000 and HK$500,000 had grown particularly fast this year. He estimates that three out of 10 private cars sold this year were in this price range. He said some high-end marques such as Rolls-Royce, and Japanese vehicles capable of carrying seven occupants had been in demand this year. The value of sales of motor vehicles
European car sales have grown a lot in the past three or four years, reflecting the surge in the spending power of Macau residents Patrick Tse Ka Ming, Macau Motor Traders Association president
A European car usually costs at least HK$300,000 in Macau
of all types increased to 3.97 billion patacas last year, 30 percent more than in 2011, official data show.
Bikes left behind Mr Tse believes growth in the volume of sales of motor vehicles will be the same this year as last year. Japanese makes of motor vehicle used to predominate in Macau, having about 80 percent of the market. So far this year Japanese brands have had 45 percent of the market. South Korean makes have had 5 percent. “Sales of Japanese cars have actually grown this year because of the weakness of the yen,” Mr Tse said.
The Japanese government’s economic stimulus measures have weakened the yen. HK$1 bought 13.29 yen on Monday, 22.3 percent more than a year earlier. But Mr Tse said the pace of growth in sales of Japanese cars had been slower than the pace of growth in sales of European cars. The Macau Motor Traders Association data show dealers sold over 9,000 private cars in the first 11 months of this year, about 13 percent more than in the equivalent period of last year. Dealers sold about 8,200 motorcycles, 2.4 percent more, as sales of motorbikes recovered slightly
from a slump last year. Last year sales of motorcycles fell by 10 percent to 8,595, the fewest since 2005. Mr Tse attributes the weaker demand for motorcycles to road conditions and the perception that motorbikes are a more dangerous form of transport than other motor vehicles. “Another reason is the wealth of residents,” Mr Tse said. “If you have more money you will surely opt for a private car rather than a motorcycle.” At the end of October over 92,000 private cars and over 118,300 motorbikes were on the road in Macau, official data show.
Lazard, Sniper double down on property fund One day after fund was named the best performer by U.K. lobby group Vítor Quintã
roperty developer Sniper Capital and Lazard Asset Management LLC have increased their stakes in the Macau Property Opportunities Fund a day after the fund was singled out for its fast return. Asset management firm Lazard increased its stake in the fund from 14 percent to 18 percent on Thursday, media reported. Those shares came from investment management firm Invesco Ltd, which netted around 36 million pounds (468.6 million patacas) from cutting its holding in the fund from 27 percent to just 6 percent. That same day Sniper Investments
Ltd – a firm connected to Sniper Capital Ltd, which manages the London-listed fund – acquired 500,000 shares in the company. Sniper Investments and Sniper Capital directors Tom Ashworth and Martin Tacon now have 11.14 percent of the fund’s capital, the fund said in a statement. The operations came just a day after the United Kingdom’s Association of Investment Companies said the fund was the best performer of the funds run by more than 300 member companies. The Macau Property Opportunities Fund, with a portfolio of US$475 million (3.79 billion patacas), had a
return of 85 percent in the 12 months ended November, the investment industry lobby group said. The fund’s share price has grown fourfold over the past five years. The Macau Property Opportunities Fund develops and invests in commercial and residential property in the Pearl River Delta region. Its investments include The Waterside, lease-only apartments in One Central, The Fountainside residential complex, and a retail project near Senado Square. The fund has pocketed 392 million yuan (511.2 million patacas) from the sale of two Zhuhai properties in August.
The Macau Property Opportunities Fund manages The Fountainside residential complex
December 18, 2013 April 19, 2013
Mainland opening wider to investments in yuan Business leader says this heralds a larger effort by the mainland to cut red tape Vítor Quintã
he central government will make it easier for Macau investors to make direct investments in the mainland in yuan next year, in its latest effort to widen the use of the currency. Macau Chamber of Commerce vice-president Vong Kok Seng said this could reduce the time it takes to make new investments. The Ministry of Commerce announced on Monday that it will loosen its controls on direct investment in the mainland by outsiders holding yuan. The ministry’s website says it will reduce the number of steps investors have to take to get official approval to set up, buy or merge companies in the mainland, or to increase investments they have already made there. At present each and every foreign direct investment in the mainland must have the ministry’s approval. Investments made in yuan undergo extra scrutiny. But from January 1 investments made in yuan will no longer have to clear the extra hurdles. These hurdles include a requirement that outsiders say where they got their yuan, and additional paperwork for investments worth over 300 million yuan (395 million patacas). Mr Vong told Business Daily that these checks were not enough to scare off Macau investors.
The Ministry of Commerce will sweep aside extra hurdles that investors must clear
Macau were growing fast, although the city did not yet have “enormous amounts” of yuan. Macau banks held 72.64 billion yuan in yuan deposits at the end of October, 16.6 percent more than a month earlier, official data show. Mr Vong said the use here of yuan was growing, especially for trade with the mainland. The value of cross-border trade settled in yuan was 120.92 billion yuan in the first 10 months of this year, 57.6 percent more than in the equivalent period of last year. The Ministry of Commerce said outsiders would still be barred from using yuan to invest in mainland securities and financial derivatives, or to make entrusted loans. The central government is trying to get outsiders holding yuan to invest in the mainland as part of its effort to make the yuan an international currency. Beijing began allowing direct investment in the mainland by outsiders holding yuan in October 2011. Data from the People’s Bank of China, the central bank, show such investment amounted to 280.2 billion yuan last year. Deutsche Bank forecast last week that the value of cross-border trade settled in yuan would rise to 6 trillion yuan next year, accounting for nearly one-fifth of the value of the mainland’s trade. With Reuters and Xinhua
“They don’t look at it like that. If a project is worthwhile, I think investors will be interested anyway,” he said. Even so, he said the ministry’s announcement was good news for outside investors because the controls to be loosened were timeconsuming. Mr Vong said the loosening of controls was “a good sign for the future” because it was part of a larger effort by the mainland authorities to reduce red tape. The loosening of controls could give fresh impetus to new Macau
investment in the mainland, which has slumped.
Currency of choice In the first 10 months of this year the Ministry of Commerce approved investment in the mainland by Macau investors amounting to US$420 million (3.35 billion patacas), 9.5 percent less than in the equivalent period of last year, official data show. The slump in new investment is not due to any lack of capital. Mr Vong said yuan deposits in
KEY POINTS Laborious checks to be scrapped Macau investment falls in 2013 Yuan trade settlement on the rise
Mocha gets nod to ‘rehome’ two slot parlours But still searching for a new location for closed Mocha Lan Kwai Fong Stephanie Lai
ocha Clubs, a unit of Melco Crown Entertainment Ltd that runs slot machine parlours in Macau, wants to relocate its closed Mocha Lan Kwai Fong to another hotel, Mocha Clubs president Constance Hsu Ching Hui told media yesterday. That Mocha site and two others – Mocha Marina Plaza, in ZAPE, and Mocha Hotel Taipa Best Western – shut down with effect from November 26. It was in compliance with an administrative regulation gazetted a year ago that required gaming facilities to move away from residential areas. Ms Hsu confirmed yesterday that the government had already approved alternative locations for the latter two slot parlour operations. “As reports have noted before, Mocha Marina Plaza was relocated to Centro Commercial Kuong Fat [in Rua de Pequim],” said Ms Hsu. “The operation will definitely start
only after Chinese New Year [in 2014],” she said on the sidelines of another event. “For Mocha Hotel Taipa Best Western, it was already relocated to opposite Ponte 16 recently,” she added, but didn’t specify where when quizzed further. “But for Mocha Lan Kwai Fong, we are still unable to find a proper site for relocation,” she added. “The search has been very difficult, but our main target will be to search for a site inside hotels, because in hotels there are established facilities and we also want to provide hotel guests and tourists more entertainment facilities.” Under the administrative regulation, slot parlours must be located in either a five-star hotel, a non-residential building located within a 500 metres radius of a casino, or a resort that is not situated in a densely populated area. The Mocha Clubs president did not
Constance Hsu, president of Mocha Clubs
respond to questions on the number of slot machines and the floor design for the two sites that have already found alternative premises. Business Daily telephoned the
regulator, the Gaming Inspection and Coordination Bureau, seeking more information on the relocated sites, but was unable to make contact with any official prior to press time.
December 18, 2013
Wynn cleared to pursue Massachusetts casino But investigators get scant cooperation from firm’s Macau VIP gaming promoter partners Michael Grimes
Prior to the interviews, “investigators requested that Wynn Macau provide the application that each junket promoter had submitted to DICJ [the local regulator the Gaming Inspection and Coordination Bureau] prior to their licensing,” said the report. “Wynn Macau General Counsel, Jay Schall cited an issue with the Macau Data Protection Act and that DICJ would not authorise Wynn Macau’s release of this material to investigators, therefore investigators were not allowed to view the applications,” the paper added. Both Wynn and Macau market rival Las Vegas Sands Corp have previously been fined in Macau for releasing some of their data to third parties without official permission, although the fines were not in themselves prohibitively large.
The city of Everett, Massachusetts
nvestigators working for the Massachusetts Gaming Commission in the United States say they have “not discovered any disqualifying factors” to prevent Wynn Resorts Ltd from proceeding with its application for a casino licence in the city of Everett in the state. The inquiry by New Jersey law and consulting firm Michael & Carroll included background checks on Wynn’s founder and chairman Steve Wynn, and
his fellow directors and found no issues of concern. But the report also mentioned that Macau’s data laws appeared to be a barrier to finding out more about Wynn Macau’s VIP gaming promoter partners – known generally in Macau as ‘junkets’. Macau junkets are a topic of debate in regulatory circles in the U.S. because of concerns about money laundering and alleged involvement of Chinese organised crime
groups known as triads. Members of the Massachusetts review team – which included retired agents from the Federal Bureau of Investigation, from the state police, gaming finance experts and gaming attorneys – also travelled to Macau in June and August. They conducted interviews with 11 of the 14 VIP operators providing credit to high rollers that were then working with Wynn Macau (there are now 12 according to the report).
The Massachusetts report said several of Wynn Macau’s own background investigations on its Macau gaming promoters “identified persons of questionable reputation having some type of association within the junkets operating out of several VIP rooms at Wynn Macau,” but that Wynn’s own corporate security had been unable to identify any formal relationship or involvement in day to day operations of the VIP room by these parties, and it could not act based simply on “innuendo”. Linda Chen was interviewed in her role as Wynn Macau Ltd chief operating officer and president and international marketing. She was asked
about two particular people and whether they had any involvement with junkets at Wynn Macau. Their names and some of her answer was edited out of the version released to the public, but she indicated they were “customers” (her word) and in the words of the report, had “no involvement in any of Wynn Macau’s junkets”. The dossier pointed out that this appeared to contradict an interview investigators conducted in June with former Wynn Macau chief financial officer Scott Peterson, who described the two people as “owners” of a particular junket. Steve Wynn was also asked about the matter in September. According to the report he said the group in question was a public traded company and that “for all I know, I think maybe [X] and [Y] have some shares in that company”. Gaming promoters interviewed by the inquiry team were asked about their shareholders, beneficiaries and backers but they declined to disclose details, citing confidentiality. The representative of one Macau gaming promoter was described as displaying “belligerent, arrogant and disrespectful behaviour” during an interview. The report stated: “Several minutes into the interview, the gaming promoter asked ‘Can I leave?’ The gaming promoter was informed that the investigators had more questions but that ‘no one was making them stay’. At this point the gaming promoter terminated the interview and abruptly left the room,” added the report.
MGM’s Macau earnings aid credit profile U.S. parent borrowing at lower interest than some better-rated firms
GM Resorts International – 51 percent owner of Macau casino developer MGM China Holdings Ltd – is borrowing at the same yields granted to issuers with credit ratings at least two levels higher suggests research from Bloomberg. MGM sold US$500 million (3.99 billion patacas) of 5.25 percent, sixand-a-quarter-year notes on Monday, United States time. The yield offered was more than a percentage point below the interest paid by other B-rated issuers for similar-maturity bonds, according to data compiled by the research house. The cost to protect MGM Resorts’ debt against default fell to the lowest level since 2007. Despite MGM having the most venues on the Las Vegas Strip, a full third of its group consolidated revenue comes from Macau, said Kim Noland, an analyst at debt researcher GimmeCredit LLC, in a November report. MGM China paid US$613 million in dividends in 2013 and US$400 million in 2012, according to a November 7 regulatory filing. “The company’s credit profile is benefiting from the consolidation of MGM China because of the special dividends it has been using to send cash upstream to the parent,”
said Brian Miller, a Bloomberg Industries analyst. “Their market exposure to the Las Vegas Strip and Macau has been beneficial relative to other gaming companies that might be more broadly diversified,” stated Michael Paladino, a credit analyst at Fitch Ratings in New York. “Over the next few years, you could see their credit rating moving back up to the BB category,” he added. MGM’s group-wide leverage, or the ratio of total debt to adjusted earnings before interest, taxes, depreciation and amortisation, slid to 6.6 times at the end of the third quarter from eight times earlier this year. EBITDA recorded a 14 percent increase to US$1.98 billion, Bloomberg Industries data show. MGM’s Macau unit posted revenue growth of 22 percent in the third quarter to US$808 million, said Grant Bowie, chief executive of MGM China during an earnings call on October 31. A new resort on Cotai is due to open in “early 2016” according to management. The CityCenter project in Las Vegas, which cost US$8.5 billion to build, was almost derailed as the global credit crisis limited construction funding and forced the company to
use high-coupon debt. In December 2012, the company refinanced US$5.25 billion in debt, with interest expense falling to US$929 million in the 12 months ended September 30 from US$1.12 billion in all of 2012. Long-term
obligations dropped to US$13 billion. The group is expected to be profitable on a net basis in 2014 after posting losses in four of the five preceding years, according to analysts surveyed by Bloomberg. M.G. with Bloomberg News
December 18, 2013
Taiwan special area may include casino Gaming may eventually become part of what Taoyuan Aerotropolis has to offer Stephanie Lai
aiwan’s Taoyuan Aerotropolis will have areas reserved for resorts that may include casinos, the governmentowned company behind the project says. Taoyuan Aerotropolis, in the north of the island, will have various enterprise zones. Some zones will be for financial, logistics and cultural and creative businesses. Taoyuan Aerotropolis Corp general manager Lee Wei Feng told a conference here yesterday that one zone would be for meetings and exhibitions, e-commerce, integrated resorts and entertainment. “We are planning to have 150 hectares to 200 hectares in this enterprise zone for the development of integrated resorts, which may include gaming elements,” Mr Lee said. He acknowledged that casinos were not yet legal in Taiwan. “So in the initial phase we are planning for non-gaming development
Taoyuan Aerotropolis is meant to compete with Shanghai’s free trade zone, Lee Wei Feng says
first,” he said. Taiwan’s Legislative Yuan, or parliament, has been debating a bill to legalise casinos proposed by members belonging to governing party, the Kuomintang. Mr Lee said a monorail now under construction would serve the zone.
The Taoyuan Aerotropolis project includes urban development covering 25 square kilometres, a third runway for Taoyuan airport and two urban railway lines. The Taiwan railway authorities said this year that the monorail would be ready by the end of 2015 and
be connected to the railway networks serving Taipei and the island at large. The Taoyuan Aerotropolis project is due to be finished by 2021. Officials said yesterday the local government in Taoyuan was drawing up tax breaks for investors in a special
economic zone in Taoyuan Aerotropolis. Mr Lee said his company would like tax breaks to be offered to investors in the project’s enterprise zones. “These tax breaks will be at least similar to the Shanghai Free Trade Zone’s, because we are actually in competition,” he said. Speaking to Business Daily on the sidelines of yesterday’s conference, Mr Lee said the tax break rules would be drawn up by the middle of next year. He expressed confidence that Taoyuan Aerotropolis would allow Taiwan to complete strongly with Hong Kong and Singapore for logistics business in the Asia-Pacific region. “We have two advantages. One is that we have more land for development,” he said. “Another is that we have strong backing from the information technology business, and the strongest semiconductor and optoelectronics industries.”
December 18, 2013 April 19, 2013
Dore sees new profit in micro lending
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Logical step for business already familiar with cross-border finance says analyst
Event horizon Developing the meetings, incentives, conventions and exhibitions (MICE) industry is a government priority. The most immediate effect of government encouragement has been to increase the number of companies in the industry. The industry had 33 companies this year, having had 10 in 2007. The growth of the industry last year was puzzling. The number of MICE companies increased by seven but the number of people the industry employed decreased by about 3 percent. So the average MICE company workforce, which had been expanding continuously since 2007, shrank to 3.9 employees from 5.2. In small companies the gain or loss of one employee makes a big difference, but last year’s contraction seems to have been an abrupt reversal of the trend.
VIP still more than 60 percent of Macau gaming revenue
D The contraction of the average MICE company workforce last year may have been due to the downturn in the industry in 2011, when its combined revenue fell by over one-third. But the industry’s equally strong recovery last year seems to have had no effect on the number of people it employs. Indexes of the MICE industry’s growth since 2007 show that steady growth stopped in 2011. And they show some contradictory signs last year. A strong recovery in the industry’s combined revenue and a slight decrease in its combined workforce contrast with a decline in average revenue per company and steep rise in the revenue per employee. There are insufficient published data to explain this. J.I.D.
Rise in MICE industry revenue, 2012
ore Holdings Ltd – an investor in the Macau casino VIP business – said in its long-form interim results for the six months to September 30 it has quickly developed a collateralised cross-border loans business after gaining a 51 percent stake in a mainland pawn shop operation. The deal for control of Guangdong Lido Pawnshop Co Ltd and its sister firm Guangzhou City Yuenqian Investment Consultancy Ltd was done in July. Dore said in October it had obtained the remaining 49 percent of the business, which is being held by a new unit called Ability Wealth Holdings Ltd. “Within a short period after the acquisition of Ability Wealth Group, the group had secured a number of substantial lending contracts and achieved an aggregate loans receivable of approximately HK$98,221,000 [US$12.7 million],” said the latest filing. That moneylending generated revenue of HK$3.54 million – implying an aggregated annualised interest rate on the principal amounts loaned of around 3.6 percent. It was via real estate-backed loans, pawning of personal property and provision of “consultancy” services
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Dore, which said in November it plans to change its name to Sino Credit Holdings Ltd, added in the full interim results, that faced with “intense competition” in Macau gaming following the opening of more casinos and VIP rooms, it was “seeking investment opportunities to diversify the business of the group and to broaden the revenue base”. Industry analysts spoken to by Business Daily said that following the consolidation trend of the junket industry seen in Macau in recent years – with a small number of often Hong Kong-listed businesses acquiring rights to profit streams in smaller junket operations, and casino operators raising the minimum
monthly rolling chip volume required to qualify as a VIP room operator – some smaller operations have moved more into cross-border micro lending. “Some of them were doing this already, or using third parties with a mainland lending licence to do it for them,” one analyst told Business Daily. “Acquiring a mainland micro lender and then absorbing it into a Hong Kong-listed junket business is a logical step either for vertical integration in support of the existing business or for diversification and new growth. Why pay someone else for organising the lending when you can do it yourself via acquisition?” the person added. Bloomberg News reported in July that mainland entrepreneur Jack Ma Yun’s Alibaba Group Holding Ltd – which has a mainland micro loans business with advances averaging 40,000 yuan (52,614 patacas) per transaction – charges borrowers an average annualised interest rate of 6.7 percent. Interest charged by a microcredit firm in Guangzhou run by Joe Zhang, a former deputy head of China investment banking at UBS AG in Hong Kong, was about 24 percent, added Bloomberg.
added the filing. That’s nearly three times the amount Dore could theoretically make from commission on rolling chip sales in VIP rooms. Junket commission is supposedly capped at 1.25 percent, but many junkets now operate on a profit share system, which is more volatile than chip commission but potentially more profitable when house win rates for baccarat are above theoretical average.
December 18, 2013 April 19, 2013
Nearly half firms struggle to find IT staff Survey sponsor Manetic says situation likely to worsen in 2014 without fresh initiatives Tony Lai
early half of businesses polled “found difficulties in recruiting IT professionals” in the past year, says a survey released by Macau New Technologies Incubator Centre.
A total of 46 percent among the 101 enterprises asked gave that response – up from 43 percent in 2012. The Incubator Centre – known as Manetic – is part of the government’s
Corporate Matt Hurst appointed VP at Tiger Resorts Matt Hurst has been appointed executive vice president for casino operations and marketing at Manilabased Tiger Resort, Leisure & Entertainment Inc. After five years as vice president of gaming machines at City of Dreams overseeing all gaming machines and dealer operated electronic terminals, Mr Hurst is moving to the Philippines. The executive will oversee all casino operations, including gambling tables and slots, and marketing at Manila Bay Resorts, a US$2 billion (16 billion patacas) casino resort. The project backed by Japan’s Kazuo Okada will have 2,000 hotel rooms, 500 gaming tables and 3,000 slots. Mr Hurst has spent the last decade in Macau, since the opening of the gambling industry here to outside operators. He helped open Sands Macao, the city’s first Las Vegas-style casino. The New Zealand executive later spent three years working as director of slots for Wynn Macau.
Tom Ford opens retail store here Luxury fashion brand Tom Ford has launched a new menswear store on Saturday here, as part of an expansion streak in Asia. Located at One Central Macau, this retail space will be one of five new Tom Ford locations launching in China and Macau this month and the next. The brand is also opening men’s units in Beijing and in Shenyang, capital of Liaoning province, as well as dual-gender shops in Beijing and Chengdu, capital of Sichuan province. The company expects to have 95 Tom Ford stores operating by the end of the year, of 14 of which in Asia, including mainland China, Japan, South Korea and Hong Kong. United States designer Tom Ford gained international fame for his turnaround of the Gucci fashion house, where he was creative director from 1994 to 2004. In April 2005, Mr Ford announced the creation of the his own brand.
initiative to diversify the economy beyond gaming and tourism. Gilbert Chan, executive director of Manetic, expects the shortage “could further worsen” in the future as “almost every firm in every industry” requires IT professionals. Attracting a major IT company such as the United States-based Google Inc to the city could help develop Macau’s IT skills and capability said Mr Chan. Although gaming and tourism need IT services like all modern businesses, he suggested the current focus on those sectors made it harder for other sectors to develop. “If Macau is like Silicon Valley [in the U.S.] many people will come to [work in Macau] and many youths would be willing to join the industry,” he said. Mr Chan didn’t refer to the city’s current restrictions on labour importation. “[The] Macau market may be small but the gaming industry here also grows to such an enormous
scale over [because of] the mainland access,” he said. Macau has “potential” to attract IT giants such as Google but the city should have more “preferential policies” and “better infrastructure”, he added. José Chan Fai Man, head of the Computer Service Centre at the Macau Polytechnic Institute, suggested the IT infrastructure standard in the city lags behind other places like Hong Kong, given that Macau lacks a large centre for data processing, handling and storage. Adam Iao, president of the Macau Computer Society, added in the press conference announcing the survey results, that developing an IT industry could also “improve the competitive edge for Macau” against other jurisdictions, and “continue Macau’s sustainable development.” The survey indicated that monthly salaries of most junior operationallevel staff in the IT sector were between 15,000 patacas (US$1,875) and 20,000 patacas. The median earnings of the employed residents here were 15,000 patacas by the third quarter, official data said. But José Chan said such salary levels were still low, “not reflecting enough the professionalism of the sector”. He also called for a local system of accreditation for IT qualifications so that clear skills-based pay scales could be created for the sector. More vocational training courses offered to train workers could be short-term solutions for the shortage, he added. Manetic, the Polytechnic Institute and the Computer Society carried out the survey online in September by polling 101 firms from the government sector, public utilities and gaming firms.
December 18, 2013 April 19, 2013
Greater China Taiwan delays listing of Chinese stocks Taiwan has postponed listings of Chinese companies on the local stock market that had been planned for this year due to complexity involved in bilateral regulations and tax collection. Taiwan’s Financial Supervisory Commission (FSC) chairman William Tseng said the FSC has slowed down the progress of launching “T-shares,” or shares of companies which are more than 30 percent owned by a mainland firm, the Commercial Times newspaper reported. Mr Tseng did not say how long it would be delayed, though he added that task teams from the FSC and its Chinese counterpart would start talks to hammer out details for the listings.
Geely Auto, BNP in financing venture Geely Automobile Holdings Ltd, whose parent bought Volvo Cars in 2010, will set up a financing venture with BNP Paribas SA’s personal finance unit as it joins rivals in China in providing funding for car buyers. Geely will contribute 80 percent of the joint venture’s 900 million yuan (US$148 million) in registered capital, with BNP Paribas contributing the balance, according to a Hong Kong Stock Exchange filing. Most Chinese automakers have or are planning to set up vehicle-financing units, Geely said, adding that providing financing will help the company promote sales of Volvo passenger vehicles.
InterDigital to skip meeting over patents InterDigital Inc chief executive William Merritt said the Chinese government is threatening his company over its bid to collect patent royalties from phonemaker Huawei Technologies Co. China’s antitrust agency said it “couldn’t guarantee the safety of people” sent to a meeting scheduled for today, Mr Merritt told Bloomberg. InterDigital sent a letter to the Chinese officials saying they wouldn’t attend the meeting because of the threats. InterDigital filed an infringement complaint against Huawei and other handset manufacturers at the U.S. International Trade Commission. The U.S. agency is scheduled to issue a final decision tomorrow.
Fake forex trades reach US$2.5b: SAFE China’s probe into the use of foreign currency speculation disguised as trade finance has found some US$2.5 billion of irregular financing by 112 companies in the first 11 months of the year, the foreign exchange regulator said. Of the companies, 41 are facing administrative sanctions while 12 are under investigation on suspicion of breaking the law, the State Administration of Foreign Exchange (SAFE) said in the statement. A practice of disguising currency speculation as trade had inflated China’s official export data earlier in the year, making the country’s trade picture look better than it actually was.
Beijing’s Treasury hold Demand for Treasuries up as foreign currency reserves jumped in Daniel Kruger
hina, the largest foreign creditor to the U.S., increased its ownership of Treasuries in October to almost the record level reached in July 2011 after the U.S. Federal Reserve unexpectedly opted not to slow bond buying. Holdings rose US$10.7 billion, or 0.8 percent, to US$1.304 trillion, according to Treasury Department data released on Monday U.S. time. China held a record US$1.314 trillion in July 2011. Total foreign holdings of Treasuries rose US$600 million, or 0.01 percent, in October to US$5.65 trillion. Fed officials surprised traders and roiled markets across the globe on September 18 by maintaining US$85 billion in monthly purchases. Policymakers won’t start curtailing quantitative easing this week either, according to 66 percent of economists surveyed by Bloomberg. China’s demand for Treasuries rose as foreign currency reserves jumped 4.7 percent in the July-September period and the People’s Bank of China sought to keep the yuan within its managed trading range. “As money enters that country, that gets turned into intervention, and that intervention gets turned into Treasuries,” said John Briggs, a U.S. government bond strategist at RBS Securities Inc in Stamford, Connecticut, one of 21 primary dealers that trade with the Fed. “When they didn’t taper a lot of pressure came off of those markets and some money flowed into emerging markets, including China.”
The yuan has appreciated 2.6 pct against the greenback this year
Luxury sales slow as gift-givers pull back Spending on high-end goods grows at slowest pace since 2000
hina’s luxury spending grew this year at the slowest pace since at least 2000 as more shoppers travelled abroad and the government’s anti-corruption efforts curbed purchases, consultant Bain & Co. said. Spending in luxury goods is estimated to have increased about 2 percent in 2013, compared with 7 percent last year, the Boston, Massachusetts-based company said in a report released yesterday. Growth in 2014 will be at a pace similar to this year, it said. Demand for luxury items from Swiss watches and expensive liquor have slumped since President Xi Jinping ordered officials to cut down on lavish spending and stepped up investigations into graft. Kering SA’s Gucci sales fell in the third quarter and LVMH Moet Hennessy Louis Vuitton SA saw softening demand in perfume and cosmetics during the period amid a slowing economy and a shift to overseas purchases. “China’s luxury market has quickly changed from land-grab to slow, steady strategic focus,” said Bruno Lannes, Bain’s Shanghai-based partner and lead author of the study. “The mindset among global brands here is changing
The mindset among global brands here is changing from ‘where do we find growth’ to ‘how do we create growth Bruno Lannes, Bain’s Shanghai-based partner
from ‘where do we find growth’ to ‘how do we create growth.’” China’s crackdown on extravagance and its anti-corruption campaign had a “large” impact on gifting, one of the major growth engines of the industry, and that hit sales of watches and menswear the most this year, Bain said. Sales of luxury timepieces declined by 11 percent in 2013, it said. Swiss watch exports, including those
from Cie. Financiere Richemont SA and Swatch Group AG, to China dropped 14 percent in the first 10 months of the year, data from the Federation of Swiss Watch Industry show.
Overseas purchases Chinese shoppers now buy more than two-thirds of their luxury items overseas, a move that has led to a slowdown in store traffic and openings on the mainland, according to the Bain report. Chinese consumers, who last year overtook shoppers in the U.S. to become the world’s biggest buyers of personal luxury items, account for 29 percent of global purchases, Bain said. Female shoppers in the world’s mostpopulous nation are starting to increase their spending power and influence, with womenswear and shoe categories growing between eight percent to 10 percent this year, Bain said. The study showed new store openings by 20 brands tracked by Bain fell by one-third this year to about 100 new outlets, with the focus now on renovation and operational improvement for domestic shoppers. Bloomberg News
December 18, 2013 April 19, 2013
dings near record
Tencent’s Ma becomes China’s second-richest
the third quarter
China held of U.S. Treasuries in October
China’s yuan traded at 6.0712 per dollar in Shanghai yesterday, from 6.0715 on Monday, China Foreign Exchange Trade System prices show. The currency has appreciated 2.6 percent against the greenback this year and touched a 20-year high of 6.0703 on December 10.
Borrowing limit U.S. government securities held by overseas investors have increased 1.4 percent this year, on track for the slowest rise since the Treasury began releasing full-year data in 2001. Foreign holdings rose even as U.S. lawmakers faced an impasse on the spending and borrowing limits that lasted until a day before the Treasury’s statutory borrowing limit was reached on October 17. “It was some pent-up buying post shutdown resolution,” said Shyam
Rajan, an interest-rate strategist in New York at Bank of America Corp, a primary dealer. “People wanted to buy after the no-taper decision, but probably didn’t go all-in because they had the debt ceiling and shutdown to be resolved.” Treasuries held in custody for foreign central banks by the Fed have climbed 1.9 percent, or US$54.8 billion, in the eight weeks since October 16, central bank data show. Japan, the second largest foreign lender to the U.S., reduced its holdings of U.S. government debt for the first time since June by US$3.7 billion, or 0.3 percent, to US$1.17 trillion. China has increased its holdings 6.9 percent this year through October and is on track for the biggest gain since its stake in Treasuries rose 30 percent in 2010. PBOC deputy governor Yi Gang said last month that it’s no longer in the nation’s interest to increase its foreign-exchange reserves. The holdings are the world’s largest and surged US$166 billion in the third quarter to a record US$3.66 trillion. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading limit, PBOC governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined at a November Communist Party meeting. The exchange rate is allowed to diverge a maximum 1 percent from the central bank’s daily fixing, which was set at 6.1108 per dollar yesterday.
a Huateng, chairman of Asia’s largest Internet company Tencent Holdings Ltd, overtook property tycoon Wang Jianlin to become China’s secondrichest man, according to the Bloomberg Billionaires Index. Mr Ma has a net worth of US$12.1 billion, surpassing Mr Wang by US$100 million, according to the daily index. Tencent shares have soared 90 percent this year in Hong Kong trading, compared with a 2.5 percent increase in the benchmark Hang Seng Index. Mr Ma, 42, is benefiting from Tencent’s development of mobile Internet games and services, especially WeChat, an instant messaging and social networking app known as Weixin in China. More than 84 percent of China’s Internet users regularly access instant messaging, making it the most popular online application, surpassing search engines, according to data compiled by Bloomberg. “We view Tencent has the makings of a great long stock and expect significant growth from its mobile Internet business,” said You Na, a Hong Kong-based analyst at ICBC International. The majority of Mr Ma’s wealth is derived from his more than 10 percent stake in Tencent. He controls the Shenzhen-based company through Advanced Data Services, a British Virgin Islands investment entity. Shares of Tencent have leaped 6,000 percent since its initial public offering.
Migrants able to register Rates to have upside bias when freed: Zhou households in cities by 2020: official
illions of Chinese migrants will be allowed to register their households in cities where they live by 2020, a senior public security official said, as part of China’s plans to push urbanisation as it restructures its economy. China’s household registration – or hukou – system currently blocks migrant workers and their families from access to education and social welfare if they are not living in their home villages or towns. But at the same time China wants more rural people to settle in the cities as part of an ambitious 10-year economic and social restructuring plan. The leadership sees urbanisation as key to its plans to have consumer demand drive economic growth. Under the new proposal, qualified migrants will be able to register households at their habitual residence, though it will not be compulsory, Huang Ming, Vice Minister of Public Security, told the official Xinhua news agency in an interview published yesterday.
“We will let local governments study differentiated household registration policies based on their local situations,” Mr Huang was quoted as saying. Qualified migrants would be those meeting conditions including being in regular employment, he said. Millions of migrant workers from the countryside and smaller towns work in China’s big cities, often in low-paid manual work, but lack access to education, health and other services tied to the system. Last month, China’s leaders unveiled a reform agenda for the next decade, pledging to push forward household registration reforms by lifting registration restrictions in towns and small cities. Mr Huang also noted difficulties in quickening the reform of household registration, including vested interests, differences in regional social and economic conditions and differing expectations among migrants. Reuters
hina’s borrowing costs will have a tendency to rise once controls on interests rates are lifted due to buoyant demand for funds, the central bank governor Zhou Xiaochuan said. Mr Zhou said in an interview with Caijing magazine that elevated interest rates will be a “unique trait” of China’s economy as rapid development in the world’s second-largest growth engine keeps borrowing costs high. “The future point of equilibrium for the price of credit will be decided by total supply and total demand,” Mr Zhou was quoted as saying in the financial magazine. “Relatively speaking, the total demand for credit in China at present is biased towards the large side… Under such a circumstance, the point of equilibrium for the price of credit will be biased upwards.” Interest rates in China are managed by the government, which tells banks how much to lend and how much to pay savers for their deposits, in part to protect the profits of commercial banks. But the government says it is determined to eliminate
PBOC cautious over financial liberalisation, says Zhou Xiaochuan
state control over the level of rates to address criticisms that official interference with the cost of funding distorts the economy and encourages an inefficient use of funds. As such, interest rate liberalisation is among the priorities for China’s government as it tries to remake the economy in its boldest reform effort in 30 years. Mr Zhou said that while the People’s Bank of China will focus on preserving financial stability during or after a crisis, it will during normal times rely on competition to
get financial organisations to improve their services. China’s latest plans to change its economic strategy also stresses the need for local governments to take responsibility for debts they have incurred, Mr Zhou said, while possibly allowing them to use new channels to raise funds. He said China would proceed with plans to free its capital account, but would at the same time take precautions to control risks arising from financial liberalisation. Reuters
December 18, 2013 April 19, 2013
Kunlun Energy chairman resigns as Beijing widens probe Chairman said to be detained after government investigation
he chairman of Kunlun Energy Co, the gas distribution arm of China National Petroleum Corp, quit amid a widening government anti-
corruption campaign that claimed his predecessor four months earlier. Wen Qingshan quit with immediate effect as both chairman and director of the
CNPC and PetroChina at the centre of one of the biggest corruption probes in years
company due to personal matters, Kunlun Energy said in a statement to the Hong Kong Stock Exchange. Kunlun suspended its shares following a report in China’s Caixin magazine on Monday that Mr Wen is helping in a government graft probe. Mr Wen was taken into custody to assist with an investigation, said the person with knowledge of the matter, who asked not to be identified as he wasn’t authorised to speak publicly about it. Mr Wen’s detention follows government investigations into five other officials at CNPC, China’s largest energy company. Four senior managers at CNPC’s listed unit, PetroChina Co Ltd, were removed from their posts in August after corruption allegations, while former chairman Jiang Jiemin was dismissed as head of the state assets regulator and is under investigation, the official Xinhua news agency
said in September. China’s new leaders have pledged to tackle graft, which President Xi Jinping has said threatens the communist party’s 64-year grip on power. Zhou Yongkang, the former head of China’s security apparatus and a party member with ties to the oil industry, is being investigated for corruption, the New York Times reported on Monday, citing people with political ties to senior officials. Mr Wen was promoted to CNPC’s chief accountant in July, and elected as chairman of Hong Kong-listed Kunlun Energy after former chairman Li Hualin resigned in August amid the investigation.
Diminish trust “This is a vivid example that CNPC’s corruption may be rotten to its core, as it’s rarely seen in such cases that a newly picked chairman is taken down after merely a
few months,” said Shi Yan, an analyst with UOB-Kay Hian Ltd in Shanghai. If Mr Wen is directly implicated in graft, it would diminish trust in promotions from CNPC’s inner circle, Ms Shi said. Three calls to Kunlun Energy’s Hong Kong headquarters went unanswered. Three calls to CNPC’s Beijingbased spokesman Li Runsheng also went unanswered. Kunlun fell 3.1 percent to HK$14.18 on Monday. Mr Xi’s anti-corruption campaign has focused on people with links to Mr Zhou, who was a supporter of Bo Xilai, the ousted Politburo member sentenced in September to life in prison for corruption. Former PetroChina chairman Mr Jiang and Mr Zhou were top executives who served together at an oilfield in eastern China from 198990, according to their official biographies. Mr Jiang was also chairman of CNPC until earlier this year and Mr Zhou led the company in the 1990s as general manager. Hua Bangsong, the chairman of PetroChina supplier Wison Engineering Services Co, is also assisting the authorities in their investigation, the company said in September. Bloomberg News
AerCap’s deal with AIG builds leasing rival to GE After group led by Chinese investors failed to deliver US$4.2 billion
erCap Holdings NV agreed to buy International Lease Finance Corp from American International Group Inc for US$5.4 billion to create an aircraft lessor rivalling General Electric Co’s Gecas unit for size. AerCap will pay U.S. insurer AIG US$3 billion in cash and the balance in stock, taking control of a 40-year-old business that helped create a leasing industry now accounting for 40 percent of the US$100 billion spent globally on new airliners each year. Combining with ILFC, already the second-largest leasing company, more than triples the AerCap fleet to almost 1,400 planes, about 300 short of the GE total. AerCap, which secured the deal after Chinese bidders missed
deadlines, also gains early delivery slots for the latest Boeing Co. 787s and Airbus SAS A320neos and A350s, for which it can charge top rental fees. “We’re creating the industry leader here,” Aengus Kelly, chief executive of AerCap, said on an analyst call. “The order book is the jewel in the crown. Given the associated delays with those planes, especially the 787, the pricing and the delivery slots are unbeatable.” The deal, which includes 97.6 million AerCap shares and is set to close in the second quarter, gives the Dutch lessor control of the merged business, with AIG holding 46 percent. The combined company will have 1,329 aircraft, according a slide presentation, with total assets
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AIG selling aircraft leasing wing to focus on insurance
of US$41 billion. Gecas, as GE Capital Aviation Services is known, said by e-mail it owned or managed more than 1,630 planes at the end of the third quarter and had assets of US$47 billion, providing no further comment. “We are going to be on a very similar level,” Mr Kelly said. The new business has 385 planes on order, mainly via ILFC, AerCap said, with contracts for 77 787 Dreamliners, 29 A350 wide-bodies and 155 reengined A320neo single-aisle aircraft. “We see this is a positive development for the sector,” said John Higgins, president of Dublinbased lessor Avolon Aerospace Leasing Ltd. “Having an industry participant as big as ILFC out there with uncertainty about where they’d sit was casting a shadow, even in terms of asset valuations.” AIG turned to AerCap after a group led by P3 Investments Ltd of Hong
AerCap will pay for aircraft-leasing business
Kong failed to deliver US$4.2 billion it had agreed to pay for an 80 percent stake. The insurer, saved from collapse by a 2008 bailout that reached US$182 billion, has been seeking to narrow its focus as regulatory watchdogs increase their scrutiny of large financial firms. Reuters
December 18, 2013 April 19, 2013
Australia reveals deepening budget shortfall Deficit for financial year to grow to A$47 billion Treasurer Joe Hockey staring at debt ‘mountain’ as economy slows
ust three months in power, Australia’s Liberal National government has abandoned all thought of returning to a budget surplus and predicted deficits for the next decade without spending cuts, heralding sober times ahead for the resource-rich country. As subpar economic growth and a cooling mining boom carve a hole in government finances, Treasurer Joe Hockey warned that Australia had to climb a “challenging fiscal and economic mountain”. “Returning the budget to sustainable surpluses will not be achieved by piecemeal savings here and there. It will require a sustained and fundamental structural overhaul of expenditure,” said Mr Hockey as he announced the country’s third-
largest deficit on record. The Coalition government now expects a shortfall of A$47 billion (US$42 billion) for the year through June 2014, up from a previous forecast of A$30.1 billion made only four months ago. The gap would narrow only slowly to A$33.89 billion in 2014/15, A$24 billion the year after and still be at A$17.7 billion in 2016/17. “It highlights the scale of the funding challenge ahead,” said SuLin Ong, a senior economist at RBC Capital Markets. “It’s not a debt path you would want to remain on, so there’s going to have to be a tough conversation on what amount of austerity lies ahead.” The scope for drastic spending cuts or tax increases is limited by
KEY POINTS Budget deficit blows out to A$47 bln for 2013/14 Revenues drained by sluggish growth, fading mining boom Investors unperturbed by debt, but tough fiscal task ahead
the sluggish economy, which grew 2.3 percent in the year to September. Mr Hockey forecast growth of 2.5 percent in both 2013/14 and
2014/15, short of the 3.25-3.5 percent pace considered “normal” in a country that has not suffered a recession for 22 years.
Still low The Reserve Bank of Australia has done what it can to support growth by cutting interest rates to a historic low of 2.5 percent, but has appeared reluctant to ease any further for fear of stoking a speculative bubble in house prices. Some of the deterioration in the budget bottom line is due to steps taken by the new government, in particular a plan to gift A$8.8 billion to the RBA to help rebuild its reserves. It has also scrapped revenueraising plans including fringe benefits on car leases and taxing high pension incomes. Economists had expected a significant deterioration in the fiscal position, with Tony Abbott’s conservative government likely to “front-load” revenue shortfalls and spending to improve the outlook for later years. Indeed, the market reaction was slight yesterday in part because Australia’s debt position is relatively benign compared with its developedworld peers. Even though debt is expected to peak above A$400 billion, that would be less than 30 percent of Australia’s A$1.5 trillion of annual gross domestic product. A potentially messy battle over raising the debt ceiling was also avoided when the government and the Greens party joined to abolish the ceiling entirely. While the budget has bled red ink for months now, there has been scant sign of alarm from offshore investors. Foreigners bought a net A$15 billion of government debt in the three months to September, the biggest increase since early 2012. Australia remains one of only a handful of countries that still boasts a triple A credit rating, making its debt especially attractive to foreign central banks and sovereign wealth funds. Reuters
Japan boosts military spending Cabinet approved new national security strategy widely seen as aimed at China
apan will buy drones, amphibious vehicles and vertical take-off aircraft to boost defences around its remote islands amid a growing territorial dispute with China. The government will also consider obtaining the means to counter ballistic missiles at the point of launch, according to new security plans which sets total five-year defence spending of 24.67 trillion yen (US$239 billion), up about 1 trillion yen on the previous five-year plan. Japanese Prime Minister Shinzo Abe’s cabinet endorsed two defence plans yesterday alongside its first National Security Strategy amid a deepening dispute with China and unease over North Korea’s nuclear threat. The plans are the latest step in Mr Abe’s efforts to promote a more active security stance at a time of rising tension with China over
a chain of uninhabited islands claimed by both countries. “This shows our foreign and security policy with great clarity and transparency to the people of Japan and to the world,” Mr Abe told reporters after the cabinet decision. “Based on cooperation with other countries, we want to make greater contributions than in the past to the peace and security of international society.”
Marine force Japan will set up a marines-style force to deal with any island incursions, equipping it with 17 tiltrotor aircraft and 52 amphibious vehicles, as well as three surveillance drones, according to documents given to reporters in advance. Tiltrotor aircraft, such as the Osprey, jointly produced by Bell Helicopter Textron
Inc and Boeing Co, can take off and land like a helicopter and travel long distances at high speed like a fixed-wing plane. Their deployment to U.S. bases in Japan last year sparked protests because of a series of crashes. Japan will also boost its ballistic missile defences by buying two more ships equipped with Aegis radar tracking technology, produced by Lockheed Martin, adding to its existing six. Even with the increased budget, the US$239 billion Japan will spend on defence over the five-year period will be dwarfed by China, which had US$120 billion in military spending this year. ‘‘All of this is fairly limited giving the extent of the Chinese problem,’’ said Robert Dujarric, director of the Institute of Contemporary Asian Studies at Temple in Tokyo. ‘‘I’m sure what
Shinzo Abe wants Japan to adopt a more proactive security strategy
Beijing will do is to try to portray Japan as aggressive, militaristic, the usual stuff, but that’s really uncorrelated with the reality.” The strategy also makes clear Japan will revise its restrictions on arms exports. While Japan loosened a
four-decade, self-imposed ban on weapons exports in 2011 to allow it to cooperate on international arms development projects, its weapons industry is still largely domestic, meaning costs remain high. Bloomberg News
December 18, 2013
Asia S.Korea economy to grow 3.9 pct in 2014 South Korea will likely maintain its 2014 economic growth forecast unchanged at 3.9 percent, a senior finance ministry official said yesterday, suggesting that the government remains confident about the economy’s recovery. The finance ministry official, who declined to be identified, told Reuters that the government would likely announce forecasts for a current account surplus of about US$46 billion and annual jobs growth of 420,000 for next year. South Korea’s economy has been gathering momentum in recent months as exports and consumer sentiment improve gradually.
Indonesia to discuss ore ban amid Government to ban exports of mineral ores after January 12 Yoga Rusmana and Eko Listiyorini
ndonesia is drawing up a government regulation that will lay out details of how a planned ban on mineral-ore shipments will be implemented next month, with the cabinet scheduled to review the issue later this week. The rules, including the treatment of FreeportMcMoRan Copper & Gold Inc’s local operations, are still being prepared, Coordinating Minister for the Economy Hatta Rajasa told reporters in Jakarta after ministers met to discuss how the curb will work in practice. The cabinet will discuss the matter tomorrow, according to Industry Minister M.S. Hidayat, who attended yesterday’s gathering with Rajasa, Finance Minister Chatib Basri and Energy and Mineral Resources Minister Jero Wacik. The world’s largest mined nickel producer wants to boost value of commodities
shipments by promoting domestic processing and will ban exports of mineral ores after January 12. While the curb was endorsed without concessions by parliament earlier this month, spurring a rally in metals prices, companies including Freeport are seeking clarity about its precise implementation. The Indonesian Chamber of Commerce and Industry said as many as 800,000 jobs may be at risk from the ban. “Details on implementation are still being prepared, it will be in the form of a government regulation, that’s still being discussed,” Mr Rajasa said. “The government will follow the Mining Law about domestic processing. That’s the most important part of the law that on January 12, 2014 will be imposed.” Three-month nickel rose 0.4 percent to US$14,080 a metric ton on the London Metal Exchange early
yesterday in London. The price rallied to US$14,227 on December 12, the highest level since November 6.
Barclays forecast Nickel offers the best opportunity among base metals for gains in early 2014 as Indonesia halts exports, according to Barclays Plc, backing this year’s worst performer. Freeport-McMoRan, owner of the Grasberg mine in Papua, said last week that it intends to abide by the terms of its contract of work, which allows it to operate the copper and gold mine and export metal concentrate. Still, Bachrul Chairi, director general of foreign trade at the Trade Ministry, said in a text message last week that the prohibition applied to all companies, including Freeport, and concentrates may not be shipped.
Indonesia aiming to boost value of commodities shipments
Singapore Exchange plans steel derivatives launch Hopes to tap rising steel demand in Southeast Asia
he Singapore Exchange (SGX) plans to launch steel futures and swap contracts early next year, hoping to cash in on rising consumption of the alloy in Southeast Asia. SGX is trying to open up the Asian steel derivatives market by taking on rebar futures in Shanghai, currently the world’s most liquid steel futures, but which are not open to foreign investors unless they are registered locally. The SGX contracts would add more steel derivatives to a largely illiquid global suite outside China, and their success would depend on whether traders from the world’s
biggest steel consumer and producer use them or not. Outside China, one of the mosttraded steel contracts is CME Group’s U.S. Midwest hot-rolled coil futures. Launched in 2008, its volume had only reached 55,714 contracts between January and October this year, according to the CME’s website. Volume on the most-active rebar contract on the Shanghai Futures Exchange topped 300 million lots last year, based on Reuters data. “The real test will be if the Chinese guys get involved,” said a broker in Singapore, adding he expected banks and trading houses using the
CME product to be drawn to the SGX contracts. The China rebar contract is used as a proxy for hedging all steel exposure in the mainland, and the SGX effort is aimed at rivalling that, the broker added. SGX, which clears around 90 percent of the world’s iron ore swaps, is planning to launch its hot-rolled coil (HRC) steel futures and swaps for the Southeast Asian region in the first quarter of next year, pending regulatory approval. “These products will address the need for price risk management in response to the rising seaborne steel trades flowing from North Asia to
ASEAN,” SGX said in response to a Reuters query. Steel imports from China into Southeast Asia hit 11 million tonnes in 2012, accounting for 24 percent of the region’s total imports, according to the South East Asia Iron and Steel Institute. Imports from China grew at a compound annual growth rate of 55 percent from 2009 to 2012, the institute said. “We’ve been asking for the product, we’re very interested in it. We think it will have a similar profile to the iron ore swaps market in terms of how that developed,” said a London-based physical steel trader. Reuters
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December 18, 2013
Asia NZ to prosecute banks over swaps sales Three of New Zealand’s major banks are being taken to court for allegedly misrepresenting interest rate swaps sold to farmers eight years ago, the country’s consumer watchdog said yesterday. The Commerce Commission said it would start legal action against the ANZ Bank, ASB Bank, and Westpac Banking Corp for alleged breaches of fair trading laws when they marketed and sold interest rate swaps to rural customers from 2005. “We have advised the banks of our views that swaps were misrepresented to rural customers,” Commission chairman Mark Berry said in a statement.
The government will follow the Mining Law about domestic processing Hatta Rajasa, Indonesia’s economy minister
“We intend to honour and abide by our contract of work, which allows the company to export concentrates and to promote economically feasible downstream investments,” Phoenix-based Freeport said
Asia hedge-fund managers expect higher pay
in the statement. The company ships the material under long-term agreements to international smelters and “will continue to honour these contracts,” it said. Indonesia produced 460,000 tons of nickel from mines in 2012, accounting for 21 percent of global mined supply, according Bloomberg calculations based on data from the International Nickel Study Group. Southeast Asia’s largest economy also produces bauxite, copper and iron ore. The lower house of representatives, the government and mining entrepreneurs need to find a solution on the impact from the planned curb, according to Natsir Mansyur, a deputy chairman at the Indonesian Chamber of Commerce and Industry. The curb may also affect communities near mines, he said yesterday. Bloomberg News
ore Asia hedge-fund industry employees are expecting increases in bonuses this year as they delivered returns, a survey by executive recruitment firm Heidrick & Struggles International Inc showed. The share of respondents anticipating their bonuses to increase climbed to 48 percent in a survey carried out in September by the Chicagobased executive recruitment firm, up from 45 percent in last year’s poll. By contrast, those anticipating a decline in their bonuses shrank to 11 percent from about 25 percent last year. The survey’s findings highlight growing optimism among Asia’s hedge funds, which are heading for their strongest annual growth since 2009. The Eurekahedge Asian Hedge Fund Index has risen 15 percent this year, compared with a 7.2 percent gain by the Singapore-based data provider’s global gauge and the MSCI Asia-Pacific Index’s 9.8 percent advance.
“The sentiment has returned and the expectations are high,” Lisa Wong, head of hedge funds for Asia, said. “That will continue into 2014 as long as the industry keeps generating solid returns.” After several years of hiring staff at below market compensation, hedge funds are now finding that new employees are less willing to accept salaries they perceive to be low, the survey showed. The share of respondents reporting an increase in their base salary was 40 percent this year, unchanged from last year’s survey, it showed. The increases are skewed in favour of junior analysts and execution traders whose salaries have been worst affected over the past few years, according to the survey. Hedge-fund clients added US$53.2 billion to the industry globally in the first nine months of the year, compared with US$34.4 billion for all of 2012, according to Chicago-based Hedge Fund Research Inc. Bloomberg News
India to keep gold import curbs No plans to relax restrictions despite easing trade gap, official says Siddesh Mayenkar and Manoj Kumar
ndia will keep a tight leash on gold imports despite a recent improvement in its trade deficit and lobbying by a bullion industry struggling with high premiums and a supply crunch. The government is worried the trade gap could worsen again and the currency could weaken as the U.S. Federal Reserve looks set to start tapering its economic stimulus soon. “There is no proposal to relax restrictions on gold imports as of now,” said a top finance ministry official who is part of the team deciding on gold import restrictions. He declined to be named as he is not authorised to speak to the media. “The question has not arisen as a U.S. decision on tapering its monetary stimulus could come at any time [and] that could have severe implications for the rupee.” The Indian rupee hit a record low in late August on concerns over funding of the record trade gap, and capital outflows prompted by the Fed signalling that it would soon begin rolling back its
US$85 billion monthly bond purchases. The Indian government and the central bank issued a series of curbs on imports of gold – the secondmost expensive item on India’s import bill – hoping to ease the pressure on the currency. The import duty on gold was hiked to a record 10 percent, and import quantity was tied to sagging exports, leaving the market short on supplies. Gold imports dropped to 24 tonnes in October from a record 162 tonnes in May, helping ease the current account deficit (CAD). The rupee has also recovered about 10 percent from its record lows. That has prompted the gold industry in India to lobby the government on rolling back its tough rules. “Now since the CAD is under control, we are asking them to remove the 80/20 rule because any curbs will not help the industry,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation, which represents more than 300,000 jewellers. The 80/20 rule dictates that 20
percent of all gold imports have to be re-exported. “We are also asking the government to reduce import duty to 2 percent as smuggling has increased,” Mr Soni said. Stung by the tough rules imposed this year, Indian dealers and individual customers have been fanning out across Asia to buy gold and sneak it back into the country.
But some analysts said the rules should remain in place. “We should not be going for an easing of restrictions on gold imports at this point in time. I would wait to see if gold imports decline on a sustainable basis,” said Madan Sabnavis, chief economist at local ratings agency CARE Ratings. Reuters
December 18, 2013 April 19, 2013
Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 70.40 69.95 69.50 69.05
BRENT CRUDE FUTR Feb14
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36.70 36.35 36.00 35.65
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Currency Exchange Rates
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
0.8937 1.6318 0.8866 1.3774 102.95 7.9855 7.7529 6.0711 61.93 32.107 1.2567 29.669 44.2 12138 92.011 1.22113 0.84408 8.3637 10.9984 141.8 1.03
0.0448 0.0552 -0.0338 -0.0073 0.1554 0.005 0.0103 0.0181 -0.2907 -0.2087 -0.0477 -0.0034 -0.1018 -0.2719 0.0989 -0.0221 0.0675 -0.1901 0.0236 0.1693 0
-13.8851 0.8778 3.2484 4.4276 -16.3672 -0.0288 -0.0297 2.6272 -11.1981 -4.756 -2.8089 -2.1437 -7.2285 -19.3195 -2.917 -1.1178 -3.3954 -1.748 -4.2552 -19.9083 -0.0097
1.0599 1.6466 0.9839 1.3832 103.92 8.0111 7.7664 6.2492 68.845 32.48 1.2862 30.228 44.82 12141 105.433 1.265 0.88151 8.4957 11.0434 142.83 1.032
0.8848 1.4814 0.884 1.2746 83.64 7.9818 7.7499 6.0681 52.89 28.56 1.2168 28.913 40.54 9603 86.41 1.2064 0.80817 7.8281 10.195 110.03 1.0289
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December 18, 2013 April 19, 2013
Leading reports from Asia’s best business newspapers
Special Economic Adviser to Japanese Prime Minister Shinzo Abe, is Professor of Economics at Yale University
Indonesia’s government is laying the groundwork for the next administration to ensure a steady stream of investment into the country amid expectation of the U.S. Fed’s tapering of stimulus measures. Finance Minister Chatib Basri said the government was working on a mechanism to provide tax allowances to companies investing in intermediary goods production, research and development by July next year. Officials are looking to put brakes in domestic demand in an effort to reduce the current-account deficit, expected to reach US$31 billion this year.
Yomiuri Shimbun Business sentiment among Japanese small and midsize companies improved in the three months to December, with the diffusion index of the Bank of Japan’s quarterly Tankan survey turning positive, the Bank of Japan said. It is the first time in about 22 years that the index among small and midsize manufacturers and non-manufacturers has entered the positive territory together. The results of the survey show business sentiment among large companies also improved. The index improved for the fourth straight quarter and was at the highest level since December 2007.
Times of India India’s overall M&A activity has been muted this year. Deal activity declined to its lowest in three years to US$28 billion in 2013, latest industry data showed. India sits among the top five destinations for M&A transactions. “Themes that drove inbound M&A this year include continued interest in the Indian consumer and healthcare sectors, stake enhancement by multinationals in their listed subsidiaries and rebound of large investments by private equity firms,” said Ravi Kapoor, head-corporate and investment banking, Citi India.
Korea Herald South Korea’s producer prices declined for the 14th straight month in November as oil prices fell and the local currency appreciated against the U.S. dollar, the central bank said. The producer price index, a barometer of future consumer inflation, slid 0.9 percent in November from a year earlier, compared with a 1.4 percent on-year decline in October, according to the Bank of Korea. On an annual growth basis, the producer prices have fallen every month since October 2012, when they fell 0.5 percent on‑year.
t has been almost a year since Prime Minister Shinzo Abe launched his plan to lift Japan’s economy out of two decades of deflation and recession. How has “Abenomics” fared so far? Answering this question requires breaking Abenomics down into its three components – massive monetary easing, expansionary fiscal policy, and a long-term growth strategy – which Abe, referring to the tale of Motonari Mori, a sixteenthcentury daimyo (feudal lord), calls the “three arrows”. According to legend, Mori instructed each of his three sons to snap an arrow in half. After they had succeeded, he told them to tie three arrows together, and break the whole bundle at once; none was able to do it. Like Mori’s three arrows, the three arrows of Abenomics are supposed to reinforce each other. But Mori’s arrows were bound together in parallel, whereas Abe’s policy arrows are connected through underlying structural relationships. While the first and second arrows aim to transform Japan’s actual growth path, the third operates on the economy’s potential growth path, which assumes the optimal use of all available resources and technologies. Since Abenomics was launched, the “deflation gap” (the difference between actual and potential output) has dropped from roughly
three percentage points to below 1.5. This implies that, while the first two arrows are helping to improve Japan’s actual growth path, the third arrow has yet to do much for potential growth. In fact, since Abe’s first arrow took flight, Japan’s stock market has soared with it, recording an unprecedented 40 percent annual gain, while the yen has depreciated against the dollar by 20 percent, boosting Japanese firms’ export competitiveness. Moreover, credit growth has accelerated and asset prices have risen – trends that will encourage consumption by triggering the wealth effect (when people spend more because they feel richer). And monetary expansion is also having a positive impact on the labour market: the unemployment rate has fallen to 4 percent, and the job-toapplicant ratio is nearing parity.
Uncertain details With real GDP growth around 4 percent in the first half of the year (though it did fall below 2 percent in the third quarter), the first arrow has already hit the bull’s eye – a performance worthy of an A+. The second arrow entails a sharp increase in short-term fiscal expenditure, especially investment in infrastructure projects. While those who, like me, adhere to the MundellFleming framework (according to which fiscal stimulus will be offset by the resulting increase
in capital inflows, currency appreciation, and reduced export competitiveness) do not stress the impact of flexible fiscal policy, Keynesians take it very seriously. On the assumption that faster growth will neutralise any threat to debt sustainability, the second arrow receives a B. When the first and second arrows lift actual growth above potential growth, monetary expansion will no longer be able to produce substantial GDP or employment gains. That is when the third arrow, which aims to boost Japan’s potential growth through structural change (including increased private investment, technological innovation, improved trade
The third arrow of Abenomics cannot yet be fairly assessed. While its impact has so far been lacking, it certainly cannot be deemed a failure…
links, and reformed corporatetax policy), will become far more important. Abe has set out the vision behind his long-term growth plan. “Japan is a country that challenges, that is open, and that innovates,” he says. But many of the details of his strategy remain uncertain. Japan’s long-time approach to industrial policy, in which the Ministry of International Trade and Industry provided support and subsidies for selected industries, helping them to compete in world markets, is now obsolete (indeed, MITI’s role was taken over by the Ministry of Economy, Trade, and Industry in 2001). When Japanese firms operate at the frontier of industry, bureaucrats cannot choose the winners. Given this, the government’s role should be confined to areas where externalities exist, such as carbon-emissions reduction. Unfortunately, a new, clearly defined approach to industrial policy is still missing. In fact, descriptions of some third-arrow projects seem to be based on little more than wishful thinking, with new technology or know-how apparently expected simply to fall into Japan’s lap. A more effective approach would entail achievable, concrete goals like relaxing labour- and financial-market regulations, reducing corporate income taxes, liberalising trade by joining the Trans-Pacific Partnership, and perhaps easing immigration policy. The problem is that bureaucrats like the power that regulation affords them. Indeed, deregulation would require them to put their country’s long-term interests above their own short-term interests – a choice that they have so far resisted. To paraphrase John F. Kennedy, it is time for Japan’s leaders to ask not what their country can do for its government, but what the government can undo for its country. In this context, the third arrow of Abenomics cannot yet be fairly assessed. While its impact has so far been lacking, it certainly cannot be deemed a failure, with Japan’s top leaders still working tirelessly to build the needed momentum. The most appropriate grade is therefore an “E” for effort. One hopes that it is an effort that proves adequate to overcome bureaucratic resistance to deregulation in the coming year. With an A+, a B, and an “E,” Abenomics’s first-year report card reflects important progress, providing plenty of reason for enthusiasm. It even spells its originator’s name. © Project Syndicate
December 18, 2013 April 19, 2013
Closing Beijing urges Macau to raise welfare spending Genting to spend up to US$4b in Las Vegas Chinese Premier Li Keqiang urged the Macau government to “move forward and increase the welfare spending” in its policies. In a meeting with Macau’s Chief Executive Fernando Chui Sai On, Mr Li praised the government for the city’s development and its achievement. Mr Chui said after the meeting that Macau would “focus” on establishing the three new business centres bridging the mainland and Portuguese-speaking countries. The chief executive is in Beijing to report on the government’s work this year and explain the measures included in the Policy Address for 2014. Mr Chui is set to meet with Chinese President Xi Jinping this afternoon.
Genting Bhd, Southeast Asia’s largest gaming and leisure group, will spend US$3 billion to US$4 billion developing an unfinished resort on the Las Vegas strip, its chief executive said yesterday. Genting bought the resort from Boyd Gaming Corp earlier this year for US$350 million, in its first push into the U.S. gambling market. “We are looking at US$3-4 billion in total if we get approval for a casino licence [in Las Vegas],” chief executive Lim Kok Thay (pictured) told reporters. Mr Lim was speaking after the launch of Genting’s US$400 million project to build a theme park with Twenty-First Century Fox Inc for its hilltop casino in Malaysia.
Legislators to debate troubled bus system
Portugal passes bailout review
Assembly also approves salary hike for CE and top officials Tony Lai
he Legislative Assembly will request government officials to attend a plenary meeting to discuss the city’s controversial system for public buses.. Legislators however declined to form what’s known as a special commission to carry out an in-depth hearing. Legislator José Pereira Coutinho proposed the plenary debate jointly with Leong Veng Chai, in a motion overwhelmingly approved by assembly members. Mr Coutinho said it was the assembly’s duty to discuss the matter in order to “guarantee the public interest” after the hardhitting report by the Commission Against Corruption. The watchdog released a report
last month calling the bus system introduced in August 2011 “illegal”. It said the bus operations had to be run as a concession not under the service provider contract being used. Assembly member Kwan Tsui Hang suggested a debate is needed to better supervise the use of public money. The assembly approved the debate plan, with a clear majority but vetoed the motion proposed by Ng Kuok Cheong and Au Kam San, which called for a formal hearing on the same topic. Hearings allow the assembly to form a commission and to summon government officials to provide details and documents. “It is not the right time,” said
legislator Kou Hoi In, adding it’s better to have the debate first. Yesterday, legislators also approved the first reading of a bill to increase the salaries of the Chief Executive and major officials, as well as a draft law on benefits for retired top officials. This includes government officials, the heads of the Commission Against Corruption and the Commission of Audit, as well as the heads of the Macau Customs and of the Unitary Police Service. Mr Au tried to shelve the salary discussion saying the administration had not provided enough information to justify the salary hike. But his attempt was in vain as most legislators voted in favour of both bills.
PBOC may ban firms from clearing bitcoin C hinese central bank officials told third-party payment service providers to stop offering clearing services to online bitcoin exchanges, according to China Business News, which is affiliated with the Shanghai government. Companies currently offering services must end services by the Chinese New Year, a weeklong holiday that begins on January 31, the newspaper cited Zhou Jinhuang, deputy director of payment clearance at the People’s Bank of China, as saying at a meeting with more than 10 third-party payment service providers. China’s central bank regulated the virtual currency for the first time on December 5 by banning financial institutions and payment providers from conducting transactions in the virtual currency. Mr Zhou was cited as saying by China Business News that the rules would be “strictly enforced” “The PBOC statement on December 5 was somewhat vague and there is more clarity now,” Zennon Kapron, managing director of financial consultancy Kapronasia, said in an interview. “The way it’s reading now is that after the Chinese
Bitcoin – prices falling in the mainland market
New Year, you won’t be able to get your money off the platforms.” The PBOC’s news department didn’t immediately comment on the bitcoin report. Two calls to Li Yue, director general of the central bank’s payment and settlement department, were unanswered. Bitcoin prices on BTC China, China’s largest exchange, plunged to as low as 3,251 yuan (US$535) yesterday before rebounding to 4,155 yuan later in the day. The drop in prices was triggered by concern that PBOC officials may visit lenders next to enforce the ban against bitcoin settlement, Mr Kapron said. The
number of banks and payment providers that can transact bitcoin has shrunk since the ban was announced, he said. Bitcoin prices on the CoinDesk index jumped as much as 11 times since October, prompting former U.S. Federal Reserve chairman Alan Greenspan to call the market a “bubble”. Speculation that authorities in China may halt trading in bitcoin surfaced after police arrested three people on suspicion of stealing money from investors through a fake online exchange. Bloomberg News
Portugal’s international lenders have approved the country’s progress in the latest review of its bailout, pushing the eurozone member closer to a smooth exit from the lending programme in mid-2014. Portugal emerged from its deepest downturn since the 1970s in the second quarter and has begun to win back investor confidence as it prepares to return to financing itself in markets next year after the three-year bailout. “The lenders agreed that our targets were met and our objectives are within reach,” Finance Minister Maria Luis Albuquerque told a news briefing. “It was a very smooth evaluation … that envisages the end of the bailout programme on the agreed date” in mid-2014, she added. Economists say the country is likely to be able to leave its bailout but may need some kind of precautionary loan from creditors before standing on its own two feet. Lisbon carried out a bond swap this month which drew strong investor demand. Portugal’s ‘troika’ of creditors – the European Commission, the European Central Bank and the International Monetary Fund – said the economy was improving. “Further signs of recovery have emerged since the last review,” the lenders said in a statement. “Growth is broadly in line with projections, while unemployment has fallen by more than expected.” Portugal would follow Ireland, which last week became the first bailed-out eurozone member to complete its lending programme. The biggest threats to Lisbon exiting its bailout are potential decisions by the country’s constitutional court that could challenge austerity measures adopted under the bailout. The three lenders said the government had identified alternative measures if the court shoots any measures down. “Such [alternative] measures, however, could heighten risks to growth and employment and reduce the prospects for a sustained return to financial markets,” they said. ECB president Mario Draghi said Portugal’s track record was improving. “Up to now, the track record has been very satisfactory and the authorities continue to show strong commitment to the programme’s quantitative targets,” Mr Draghi told the European Parliament. “Incoming data on macro and fiscal variables clearly indicate that the situation is improving.” He said it was too early to “express forecasts” on Portugal’s exit from its bailout. “On the transition period, there will be a programme adapted to the situation at that period of time and we have to see what sort of shape this programme will have,” Mr Draghi said. But Finance Minister Albuquerque and Deputy Prime Minister Paulo Portas said there were no plans for alternative measures. “We see no reason to presume that there will be negative decisions from the constitutional court,” Ms Albuquerque said. Portas said the “evaluation was positive” and Lisbon was likely to meet this year’s budget deficit target of 5.5 percent of gross domestic product. Mr Portas also said the country would meet its fiscal targets until the end of the programme regardless of any upsets by the court. Reuters