MOP 6.00 Vitor Quintã
Cross-Border Industrial Zone on the rise
Yuexiu gets ‘yes’ for 70 pct of Chong Hing Bank Page 4
ICBC Macau’s Hengqin plan is still in pipeline Page 5
Number 459 Tuesday January 21, 2014
Editor-in-chief Tiago Azevedo
Govt offers only half investment CEM sought
April 19, 2013
ore Macau c o m p a n ie s a r e showing interest in setting up in the ZhuhaiM ac au C ross-B order Industrial Zone as rents soar elsewhere on the peninsula. Business leaders say the tight supply of labour and the surging cost of renting
office or commercial space in Macau are making businesses look elsewhere, and that the cross-border industrial zone seems a viable option. The president of the ZhuhaiM ac au C ross-B order Industrial Zone Chamber of Commerce, Jack Chan Wai Chi, said the proportion of
office and factory space in the zone that was vacant had shrunk to 50 percent now from 70 percent last year. Mr Chan, who ow ns a logistics company, told Business Daily that he expected more enterprises to move into the zone.
Home mortgages at eight-month low
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Mortgage lenders granted 2.97 billion patacas (US$371.8 million) in new loans to buy flats in November, a 7.2 percent reduction on October and down by 16.9 percent from a year earlier, according to the Monetary Authority of Macau. The value is the lowest since February when banks approved only 2.05 billion patacas of new residential mortgages, show the data released yesterday.
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Pan-democrats accuse ‘insiders’ of Taipa North carve up
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The New Macau Association has accused the government of collusion with politically connected people – including Chief Executive Fernando Chui Sai On’s brother – over the Taipa North urban development plan. “Chui Sai On is running for [a second term as] chief executive this year [so he] must come clean about what is happening,” said Jason Chao Teng Hei, the pan-democrat group’s president at a press conference yesterday. Page 2
Riding the rollercoaster Casino investors enjoy view – for now At the end of Friday trading in the United States, American depositary receipts of Macau casino developer Melco Crown Entertainment Ltd climbed 4.6 percent in its eighth straight week of gains, reaching a record high of US$44.97 (359.28 patacas). It’s gained 90 percent over the past six months. But history shows casino operator stocks can also retreat quickly, underlining their tendency to mirror closely their venues’ feeder markets. Page 6
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January 21, 2014 April 19, 2013
Taipa North urban plan to benefit politicians: pan-democrats The New Macau Association urges the chief executive to explain his brother’s interests in the undeveloped area Tony Lai
he New Macau Association has demanded that Chief Executive Fernando Chui Sai On explain what it suspects is government collusion with political figures, including Mr Chui’s brother, in drawing up the Taipa North urban development plan. The New Macau Association called yesterday for an explanation before the election of Macau’s chief executive for the next five years. Mr Chui is widely expected run for re-election. The association says it has obtained documents indicating that Cheong On Real Estate and Investment Ltd owns nearly 3,600 square metres of land next to Cheok Ka village on Taipa. It says the documents also indicate the appointment of two managers of Cheong On. They indicate that one of those appointed was the chief executive’s elder brother, Legislative Assembly member Chui Sai Cheong, and the other was Amber Li Jiaming, the president of HN Group Ltd, the association says. HN Group Ltd is linked to a former president of the assembly, Susana Chou Kei Jan. The New Macau Association says another member of the assembly, Executive Council member Chan Meng Kam, is Cheong On’s general manager. Association president Jason Chao
Teng Hei said: “Chui Sai On is running for chief executive this year. He must come clean about what is happening and why his brother is involved in this case.” A spokesperson for the chief executive said: “We are not very clear on the situation, so we will not make any comment.”
In a rush Amendments to the Taipa North urban development plan announced last month allow owners of land in the area to build developments 20 percent bigger than they were allowed to build before, and raise the limit on the height of developments to 90 metres. Critics have accused the government of rushing the amended plan through before the urban planning law comes into force in March. Mr Chao has another objection. He said Cheong On had bought 70 percent of its plot of land in 2007 for the “shocking” price of 206 million patacas (US$25.75 million) from “two traditional associations”. He said the plot had been designated for farm use at the time. “It suggests that some property developers … have had an insight into the government’s planning,” he said. “The urban planning of Taipa North is just a cover-up for all these
Taipa North’s urban plan shows 33 privately owned parcels of land that are undeveloped
acts of collusion between tycoons and high-ranking officials.” Mr Chao mocked the official line that the Taipa North plan would benefit the government, developers and residents alike. He said it would benefit senior officials, their friends and the traditional associations, while residents would be “the biggest losers”. Business Daily made two telephone
calls to Mr Chan yesterday, but they went unanswered. But in remarks to public broadcaster TDM, Mr Chan said he owns two plots in that area, but denied any collusion with the government. He did not mention the land plot owned by Cheong On. We also called the offices of Mr Chui Sai Cheong and Ms Li, but neither was immediately available to comment.
Home mortgages dip in November The banks lend less for housing as high prices keep buyers at bay Tiago Azevedo
or t gage lende rs granted 2.97 billion patacas (US$371.8 million) in new loans to buy homes in November, 7.2 percent less than in October and 16.9 percent less than a year earlier. The amount was the lowest since February, when banks approved only 2.05 billion patacas of new lending for housing, Monetary Authority of Macau data published yesterday show. Higher prices for housing, especially second-hand homes, kept buyers out of the market. Prices rose for the fourth month in a row in November, the Financial Services Bureau announced this month, as buyers paid more for secondhand flats. The average price of
housing was 85,331 patacas a square metre, 6 percent more than in October and nearly 30 percent more than a year earlier. The average price of second-hand housing rose for the third month in a row to 81,824 patacas per square metre. The number of homes sold was 798, five more than in October but 474 fewer than a year earlier. Sales of flats bought off the plan remained in a slump. Just 59 were sold. New rules on pre-sales have constricted the supply of unfinished flats. Mortgage lenders granted 126.2 million patacas in new loans to buy flats off the plan in November, 126.8 percent more than in October but
New mortgage lending in November was the second-lowest in any month last year
42.8 percent less than a year earlier. In May, before the new rules on pre-sales came into force, mortgage lenders granted
380.6 million patacas in loans to buy unfinished flats. Since June 1 the law has allowed the sale of unfinished flats only once the foundations
of the building that will contain them are completed, and each flat is registered with the government. Macau banks have approved no new mortgages for non-residents to buy homes off the plan since July. Banks granted 3.2 billion patacas worth of mortgages for offices and shops in November, 40 percent less than in October and 32.3 percent less than a year earlier. Estate agents believe housing and office prices will keep rising. Jones Lang LaSalle (Macau) Ltd forecast last week that the property market will “maintain substantial growth throughout 2014 amid robust gaming performance, sufficient capital flows in the market and strong demand”.
January 2014 April 19,21, 2013
Macau Companies gravitating to joint industrial zone The shortage of workers and high rents in Macau mean enterprises are looking elsewhere Stephanie Lai
ore Macau firms are showing interest in setting up shop in the Zhuhai-Macau CrossBorder Industrial Zone to reduce their costs. Business leaders say the tight supply of labour and the surging cost of renting office or commercial space in Macau are making businesses look elsewhere, and that the cross-border industrial zone seems a viable option. The president of the Zhuhai-Macau Cross-Border Industrial Zone Chamber of Commerce, Jack Chan Wai Chi, said the proportion of office and factory space in the zone that was vacant had shrunk to 50 percent now from 70 percent last year. Mr Chan, who owns a logistics company, told Business Daily that he expected more enterprises to move into the zone. “Since the second half of last year we have noticed a rise in inquiries from Macau companies showing interest in settling there,” he said. “Most of these companies are in the fields of e-commerce, logistics and product display, and in other trade businesses,” he said. “One reason for the increase is that local small and medium enterprises can no longer bear the rising pressure of shop and office rents in the city. And the tight grip on the labour supply under the current quota
in Macau had settled in the zone in 2012. That was the year that Macau restaurant operator Future Bright Holdings Ltd decided to develop its food processing centre in the zone. Mr Chan said about 100 companies operated in the cross-border industrial zone, 60 percent of them Macau enterprises. “The investment made in the zone by these 100 companies is about US$240 million [1.9 billion patacas],” he said.
About 100 companies operate in the cross-border industrial zone (Photo: Manuel Cardoso)
policy means their businesses have become hard to sustain in Macau,” Mr Chan said. “Since the second half of 2012 the Zhuhai authorities have been giving more publicity to their policy of subsidising rents and renovations, and to other benefits for companies working in the industrial zone,” he said. “And the border crossing into the zone is open round the clock.”
Glittering example The subsidies Mr Chan mentioned are
only for businesses in the product display industry and the meetings, incentives, conventions and exhibitions industry. Macau company Seng Fung Jewellery Co Ltd decided to move its headquarters into the cross-border industrial zone. It has rented offices and 30,000 square feet of space for product quality control. The company said it was doing market research and jewellery design there. “We settled in the industrial zone at the beginning of 2013,” Seng Fung general manager Lee Koi Ian told Business Daily.
Mr Lee said his company’s decision to move into the zone had been influenced by factors other than the incentives offered by Zhuhai or the high rents in Macau. “We moved here mainly to solve our human resources problems,” he said. “In Macau we cannot find qualified people that can work on jewellery design. And the labour quota policy in the city means that even if we have qualified people from the mainland that can work for us, we face many restrictions on hiring them.” Mr Chan said four wedding planning companies
Since the second half of last year we have noticed a rise in inquiries from Macau companies showing interest in settling there Jack Chan Wai Chi, Cross-Border Industrial Zone Chamber of Commerce president
Govt offers only half investment CEM wanted Some of electricity supplier’s requests weren’t ‘urgent’ or ‘economically efficient’ says administration Stephanie Lai
he government has approved a 2014 investment budget of 640 million patacas (US$80 million) for the city’s electricity supplier CEM – Companhia de Electricidade de Macau SA. It was about half of what the company had applied for, according to company and government documents. Of the money that was given, 74 percent of it, or 474 million patacas, is to be allotted for constructing and improving power transmission and distribution facilities.
Nearly 17 percent – about 100 million patacas – is for the maintenance and upgrade of the power generating and power dispatch system, said the Office for Development of Energy Sector in a press statement released yesterday. In August last year, the city’s sole power supplier applied for a 2014 investment budget of about 1.2 billion patacas to respond to a potential demand of over 800 megawatts this year. That would be a six percent year-on-year increase
according to the energy office – quoting CEM. “Not all items of the proposed investments in power distribution, power generating facilities or customer services are approved,” a spokesperson from the Office for Development of the Energy Sector told Business Daily yesterday, explaining why CEM didn’t get all it asked for. “We also assess the urgency of its proposed investments, and whether the investment project is economically
efficient,” added the person. The energy office also explained that keeping power supply costs stable for the consumer is a factor in the budget approval, but it did
not provide figures. CEM told Business Daily by telephone the proposed budget wouldn’t compromise the service offered to the public.
January 21, 2014
Yuexiu gets ‘yes’ for 70 pct of Chong Hing Trading arm of Guangzhou government nears end of 6-month courtship for HK family-owned bank Michael Grimes
uexiu Financial Holdings Ltd’s offer for family-run Hong Kong lender Chong Hing Bank Ltd has become unconditional. The mainland suitor said it had so far received ‘yes’ responses from stockholders owning 70.81 percent of the shares, according to a Hong Kong filing by the target bank. The news draws to an end a process that formally began on August 7 last year. At that time the bank announced it had been approached by “independent third parties” about an acquisition of interests. The lender’s shares were first suspended at 9am that day, before trading resumed at 9am the following day. Several other brief suspensions followed, as the deal played out. Yue Xiu Group, a trading arm for the government of Guangzhou, capital of China’s Guangdong province, had set a target of acquiring 75 percent of Chong Hing and had previously said it hoped to close the deal by early February. “…the offeror has received valid acceptances from CHB shareholders in respect of 308,016,087 CHB shares,” said the latest filing to the Hong Kong Stock Exchange.
Chong Hing’s Macau branch (Photo: Manuel Cardoso)
Last week the Hong Kong Monetary Authority approved a bid of HK$11.6 billion (US$1.5 billion) at HK$35.69 per share from Yuexiu Financial for the bank, which also has an operation in Macau . The offer price represented a 4.6 percent discount to the stock’s price prior to the most
recent trading suspension. The bank’s founding Liu family were offering a stake equal to about 51 percent of the company, according to earlier filings.
Banking milestone It would be the first acquisition of a Hong
Kong lender since 2009. Singapore’s Oversea-Chinese Banking Corp is currently in exclusive talks with Hong Kong’s Wing Hang Bank Ltd – which has 12 branches in Macau under the branding of its local unit Banco Weng Hang SA – about acquiring a majority stake there, but no deal has yet been confirmed.
A Yue Xiu Group takeover of Chong Hing would give the mainland entity a network of 53 branches and help its units seek funding outside mainland China. Chong Hing, founded in 1948, has 51 outlets in Hong Kong and one branch each in Macau and mainland China. Chong Hing’s Macau branch saw its 2012 profit fall by almost half from the previous year to just 705,300 patacas (US$88,200). However, its revenue rose by a quarter of 9.34 million patacas mostly because lending more than tripled to 240 million patacas. Despite Chong Hing’s small size, its Macau operation has helped the company to get a slice of the syndicated loans business from gaming operators. In January 2013 Chong Hing was announced as a participant in a US$1.4 billion syndicated loan for the construction of the US$2.9 billion Studio City, controlled by Melco Crown Entertainment Ltd. Chong Hing said on Friday it hoped to announce on February 4 a special dividend of HK$4.5195 per share, payable to shareholders registered at that date.
Stay in the finest hotels in Macau and read Business Daily news where it matters
Loss-making Milan Station still in takeover talks Secondhand luxury bag retailer warned in December of likely ‘substantial’ deficit for 2013
Milan Station in Rua de São Domingos
he controlling shareholder of secondhand luxury bag seller Milan Station Holdings Ltd says it is still in talks with an unnamed third party about a possible takeover. On December 18 the business warned it was likely to make a “significant loss for the year ending 31 December 2013” as compared to the corresponding year in 2012. “The expected loss is primarily attributable to the continuing slowdown in the retail market for luxury handbags and the weakened consumption sentiment of customers in 2013,” said the firm. Milan Station’s owner Perfect One Enterprises Ltd, holds 72.29 percent of the issued share capital. That’s
according to a November 20 filing with the Hong Kong Stock Exchange, which first revealed the possible deal. The holding company said in its latest filing: “…discussions with the potential purchaser in respect of the possible transaction are still ongoing… Perfect One has not reached any commitment nor entered into any legally binding agreement”. The group has 16 shops selling used handbags under the Milan Station and France Station brands in Hong Kong, mainland China and Macau and one discount outlet in Hong Kong. According to the firm’s 2013 interim report it has only one outlet in Macau – Milan Station in Rua de São Domingos. But that single site provided nearly 11 percent of the group’s HK$328.50 million (US$42.36 million) revenue in the six months to June 30. On June 27 last year the firm said in a filing it had signed a deal with M C Holdings Pte Ltd for the latter to run a franchise retail operation in Singapore. M.G.
January 21, 2014
ICBC Macau’s Hengqin I plan is still in pipeline The bank asked the mainland for permission to expand onto the island more than a year ago Tony Lai
ICBC Macau had been regarded as the frontrunner in the race among Macau’s banks to get a foothold on Hengqin (Photo: Manuel Cardoso)
Corporate iPad Air and iPad mini from CTM in late January Macau’s main telecoms company Companhia de Telecomunicações de Macau SARL (CTM) says it will offer customers iPad Air with WiFi and cellular services and iPad mini with Retina display – also with Wi-Fi and cellular services – from late January. It adds that CTM’s data plans for the products will allow customers to connect to its fast HSPA+ networks. China’s Citic Telecom International Holdings Ltd became CTM’s controlling shareholder in June with a 99 percent stake. CTM said last year that from July it would charge rival companies smaller fees for using its network. Existing customers would see their monthly charge for leasing CTM’s network drop by “an average of nearly 20 percent” while new corporate customers would enjoy a cut of at least 15 percent, chief executive Vandy Poon Fuk Hei said. CTM reduced its leased-line fees by between 10 percent and 40 percent in August 2010.
The Atrium completes major refurbishment Nuance-Watson (HK) Ltd has completed a four-and-a-half month refurbishment of The Atrium Department Store at The Venetian Macao Resort. It follows the company’s renewal of its lease at the prime location, with a contract through to 2017. In 2,000 square metres (21,500 sq feet) of space, The Atrium is one of the largest department stores in The Grand Canal Shoppes. NuanceWatson has gained an additional 67 sq m, bringing it closer to The Venetian Macao’s high traffic meeting point, the Great Hall. The store frontage has also been extended from 64 m to 67 m offering more visibility to passing shoppers. The store’s facelift was revealed at a ceremony on January 16. Nuance-Watson (HK) regional managing director Alessandra Piovesana was joined by general manager Alice Woo and finance controller Allan Yau. “We are very glad that we have successfully renewed our lease for another five years and also gained extra prime space,” said Ms Piovesana.
ndustrial and Commercial Bank of China (Macau) Ltd (ICBC Macau) says the mainland authorities are still considering its plan to get a foothold on Hengqin Island. Last week one of ICBC Macau’s competitors, Luso International Banking Ltd, got permission to open a representative office on Hengqin, which could be a step towards setting up a branch there. ICBC Macau bank applied to establish a presence on the island more than a year ago. The bank declined to say whether its plan faced any obstacle. It told Business Daily in writing simply that it was still “in the process of applying for approval to the mainland regulatory authorities”. ICBC Macau did not say whether it was seeking to set up a branch or a representative office. The bank’s parent company, Industrial and Commercial Bank of China Ltd, one of China’s big four state-owned banks, already has a branch on Hengqin. ICBC Macau had been regarded as the frontrunner in the race among Macau’s banks to get a foothold on Hengqin, having been the first to express interest in establishing a presence there. The ninth supplement to Macau’s Closer Economic Partnership Arrangement
with the mainland lowered the minimum assets a Macau bank must have before it may open a Hengqin branch to US$4 billion (32 billion patacas) from US$6 billion. ICBC Macau chief executive Shen Xiaoqi said in December 2012: “The Monetary Authority of Macau has already approved our application and the application has been delivered to the Guangdong Banking Regulatory Commission.” Mr Shen said his bank intended to “mainly provide the financial services required by Macau companies working on Hengqin”. But it was Luso International that turned out to be the first of Macau’s banks to get the green light to expand onto the island. The bank is a whollyowned subsidiary of the mainland’s Xiamen International Bank. Luso International has said its representative office on Hengqin will open on Friday. Two other Macau banks – Tai Fung Bank Ltd and Banco Nacional Ultramarino SA – have expressed interest in expanding onto Hengqin. Over 300 financial institutions, including banks and insurers, are authorised to do business on the island, according to the provincial government of Guangdong.
January 21, 2014 April 19, 2013
Go slowly, come back quickly Everything’s rosy in the Macau gaming garden – until it isn’t Michael Grimes
Macau’s gaming revenue has blossomed post-crisis
asino operator stocks can grow strongly and quickly, but they can also retreat quickly, underlining their tendency to exhibit a strong positive beta in relation to the economy or economies that feed players to their tables and slots.
Until 12 months ago, more cautious investors had used that potential for volatility as a reason for staying away from casino equities. But it’s possible a tipping point has now been reached whereby investors will mark money managers down for not getting
exposure to gaming, and in particular Asian-focused casino gaming. The addition of Sands China Ltd, the Macau unit of Las Vegas Sands Corp, and fellow Macau casino developer Galaxy Entertainment Group Ltd to the Hang Seng Index has arguably also added both respectability and stability to the sector, even leaving aside the fact they outperformed the underlying index by a combined 91 percent last year according to Morgan Stanley Research. Investment funds that mirror various indices are required to buy positions in benchmark-listed stock in order to rebalance their portfolios.
Honk if… The equity performance of mutual fund staples, such as carmakers, looks feeble compared to Macau gaming stocks. But people need to buy cars even in a recession. For cash buyers, it’s probably the best time to shop for one. Some governments will even pay you to do so. It’s unlikely governments will pay their citizens to lay down a casino bet, although the Macau authorities do give their permanent residents annual handouts – this year it’s 9,000 patacas (US$1,127) – and there are no strings on how they can spend it, unless they’re a public servant or police officer. Gamblers – even Chinese gamblers subsidised by their governments – can’t always be guaranteed to turn up at a casino in a downturn. When you add to the mix the tendency of casino operators in Asia to borrow large sums against current and future earnings to add extra capacity, it creates the ingredients for a bet that need not be purely one-way in favour of investors. That’s why since the global financial crisis of 2008, the banks have been keeping a lid on casino operators’ leveraging ratios, despite the runaway positive performance in Macau since 2011.
Melco Crown On Monday Bloomberg reported that Macau and Philippines casino developer Melco Crown Entertainment Ltd – which has its main listing on Nasdaq in New York – had experienced
a six-month rally that sent its stock to a record high. At the end of Friday trading in the United States, American depositary receipts of Hong Kong-based Melco Crown climbed 4.6 percent in its eighth straight week of gains, reaching a record high of US$44.97. It’s climbed 90 percent over the past six months. What the report didn’t mention is that – aside from a post-launch spike after Melco Crown’s shares listed at US$19.00 on Nasdaq on December 19, 2006, raising more than US$1.14 billion – the firm traded at below launch price until December 2012, according to data from Nasdaq. A combination of leveraging and global recession didn’t help. And Melco isn’t the only operator that’s suffered major mood swings in the recent past. MGM Mirage – the corporate forerunner to MGM Resorts International, currently a 51 percent investor in Macau casino developer MGM China Holdings Ltd – peaked at US$100 per share in 2007 before getting crushed by an over leveraged balance sheet during the credit crisis. Its US$8.5 billion CityCenter project, which opened in the middle of the worst U.S. recession for 80 years had something to do with that. On Friday U.S. time MGM Resorts closed at US$26.41 per share. Private equity firm Permira Advisers LLP’s US$842 million equity exposure to Galaxy Entertainment and its parent, Hong Kong-listed building materials business K. Wah, was purchased in November 2007 at HK$7.80 per share. It lost 94 percent of its value within a year of the deal, thanks to the global financial crisis in the autumn of 2008. Now it’s trading at nearly HK$83.00 per share in Hong Kong. Las Vegas Sands Corp was at the other end of the price spectrum from Galaxy in the mid-noughties, as a tried and tested Las Vegas casino operator. Its share price peaked at US$100 in October 2007, providing a market capitalisation of US$28 billion. Then yes – you guessed it – came the financial crisis, and by March 2009 it too had lost 94 percent of its value. LVS closed on Friday on Nasdaq at US$81.93, but it’s been quite a trip.
January 2014 April 19,21, 2013
Bloomberry sues Weidner firm to block share sale Philippine casino developer terminated GGAM’s management deal for Manila’s Solaire last year
hilippine gaming investor Bloomberry Resorts Corp – which in September said it was terminating a Manila casino management contract held by former Las Vegas Sands Corp executive Bill Weidner – is now suing to prevent Mr Weidner’s company Global Gaming Asset Management from selling its stake in Bloomberry. GGAM holds an 8.7 percent share in the Philippine conglomerate, which developed the US$1.2 billion (9.6
Solaire Resort & Casino in Manila
billion patacas) Solaire Resort & Casino opened by President Benigno Aquino in March last year. But the relationship between Bloomberry – led by local entrepreneur Enrique Razon – and GGAM, Solaire’s management at launch, soured. “They turned out to be a very expensive, glorified executive-search firm,” Mr Razon said in September after the split. GGAM responded at the time that Bloomberry’s claims had “no
factual or legal validity” and that the company was taking the issue to arbitration in Singapore. According to a Bloomberry filing to the Philippine Stock Exchange, GGAM had contracted to sell its shares in Bloomberry on January 15 “to approximately 50 institutional investors” and was poised to complete the sale by a cross transaction through the PSE. “These shares are subject of a counterclaim by BRHI [Bloomberry Resorts and Hotels Inc] and SPI [Sureste Properties Inc] in the arbitration case,” said the Bloomberry parent in a filing to the Philippine Stock Exchange. The operating subsidiaries of Bloomberry Resorts Corp have filed a petition with the Makati Regional Trial Court in Manila to prevent the completion of the sale. Business Daily was unable to get a comment from GGAM before press time. Mr Weidner was president and chief operating officer of LVS during its construction of Sands Macao, which opened in 2004, and the US$2.4 billion The Venetian Macao, which opened in August 2007. M.G.
Tam authorised to extend lottery monopoly Sociedade de Lotarias Wing Hing Lda is likely to have its monopoly right to run a Chinese lottery in Macau extended until December 31, 2014. The city’s Official Gazette yesterday said that Chief Executive Fernando Chui Sai On had delegated Francis Tam Pak Yuen, Secretary for Economy and Finance, to grant the extension, and “amend the concession contract”. Annual revenue for the lottery, known locally as Pa Ka Pio or Pacapio, has been around six million patacas (US$751,00) since 2007. Wing Hing has been signing one-year contracts consecutively since 2010. Its previous one expired at the end of last calendar year. Last year Wing Hing paid 500,000 patacas to the government for the one-year extension contract. The company continues operating while the concession renewal is being prepared. The Official Gazette listed SJM Holdings’ directors Angela Leong On Kei and Louis Ng Chi Sing in June 2011 as directors of Wing Hing. Wing Hing pays the government 23 percent of its revenue, plus five percent to the Macao Foundation.
January 21, 2014 April 19, 2013
Greater China Zhongsheng Group to raise HK$5.6 bln Chinese auto dealer Zhongsheng Group Holdings Ltd will raise up to HK$5.6 billion (US$722 million) by issuing new shares and a convertible bond to Jardine Strategic Holdings Ltd, Zhongsheng said. The combined share placement and convertible bond would represent 20 percent of Zhongsheng’s enlarged issued share capital if the bonds were fully converted, it said in a statement to the Hong Kong bourse. Zhongsheng, an investment holding company, said it would use proceeds to develop its dealership network and for working capital. Zhongsheng’s subsidiaries are engaged in the sale and service of motor vehicles.
China economic growth continues GDP expansion slows to 7.7 percent in the fourth quarter of last year
he mainland’s economic growth slowed in the fourth quarter as gains in factory output and investment spending eased last month, sapping momentum as a credit clampdown adds pressure on the outlook for this year. Gross domestic product rose 7.7 percent in the October-December period from a year earlier, the National Bureau of Statistics said yesterday in Beijing, compared with 7.8 percent in the third quarter. Any deeper slowdown would test leaders’ willingness to implement the broadest policy shifts since the 1990s and tackle debt-fuelled investment, after President Xi Jinping scrapped a goal of “relatively fast” growth in his first year in power. The world’s second-largest economy may expand at the weakest pace in almost a quarter century in 2014, a survey showed last month, as spending on infrastructure and factories moderates. “Growth momentum is clearly weakening,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “The slowdown became increasingly clear as the quarter progressed.” Expansion will decelerate this year, he said. The economy grew 1.8 percent from the previous quarter, compared with a 2 percent median estimate of economists and 2.2 percent in the July-September period. GDP expanded 7.7 percent in 2013, the statistics bureau said, the
KEY POINTS GDP expanded 7.7 pct in 2013 Economic growth at 14-year low Analysts expect growth rate to slow Financial risks a concern for investors
same pace as in 2012 and the slowest pace of growth since 1999. The economy is forecast to expand 7.4 percent this year, according to an analyst survey last month, the slowest pace since 1990. China’s economy will be stable in 2014, Ma Jiantang, head of the statistics bureau, said at a press briefing yesterday. The contribution to GDP from tertiary industries, which include services, exceeded secondary ones, mostly manufacturing, for the first time in 2013, Mr Ma said. The government’s policies and planning this year will focus on maintaining economic expansion in a “reasonable range,” Premier Li Keqiang told economists and business
China has been looking to reduce its reliance on investment-led growth
leaders last week, the official Xinhua News Agency reported on Friday. He indicated in July his “bottom line” for expansion was 7 percent. Industrial production rose 9.7 percent in December from a year
Shanghai’s stock index falls below 2,000 Investors concerned that IPOs may divert funds
hina’s stocks fell, dragging the Shanghai Composite Index below 2,000 for the first time in almost six months, as factory output and business spending slowed while concern grew that share sales will divert funds. The Shanghai Composite slumped 0.7 percent to 1,991.25 at the close, sliding below 2,000 for the first time since July 31. The ChiNext Index lost 1.6 percent before eight companies start trading in Shenzhen today, including five on the small-companies gauge. Industrial output and fixedasset investment trailed analyst projections, official data showed. “With the new IPOs and concerns about company earnings, there is room for further declines and we could see it hit 1,800 next,” said Xu Shengjun, analyst at Jianghai Securities Co. “It’s not going to rebound anytime soon.” The Hang Seng China Enterprises Index fell 1.4 percent. The H-shares
and Shanghai stock gauges are among the three-worst performing global indexes among 94 tracked by Bloomberg. The CSI 300 Index dropped 0.6 percent to 2,165.99. The Bloomberg China-US Equity Index lost 0.5 percent in New York on Friday. Hong Kong shares were knocked off a two-week high yesterday after data showed an easing in China’s pace of economic expansion in the last quarter. Chinese growth-sensitive sectors were the leading drags on the index, and a weak mainland market was another factor. The Hang Seng Index, which closed on Friday at its highest since January 2, ended down 0.9 percent at 22,929 points.
IPO outlook The Shanghai Composite posted a 0.4 percent decline last week, extending this year’s loss to 5.9
percent, amid concern slowing economic growth will curb profits and higher money-market rates will stifle lending. The Shanghai index rose above 2,000 in February 2009 after a 4 trillion yuan (US$661 billion) economic stimulus plan fuelled a bullmarket rally. It held above that level until September 2012, when concerns about share oversupply sparked a selloff. The securities regulator halted IPOs the next month, a postponement that lasted until November 2013. “For the time being, I don’t see any signs the index will gain strongly amid the new IPOs,” said Zeng Xianzhao, an analyst at Everbright Securities Co. Neway, an industrial valve maker that was the first IPO in more than 15 months, slumped 2.53 yuan to 22.81 yuan. It was among 52 companies approved by the securities regulator to sell shares after the end of the IPO freeze. Reuters/Bloomberg News
earlier, yesterday’s report showed. That compared with the 9.8 percent median forecast of analysts and a 10 percent gain in November. Retail sales rose 13.6 percent from a year earlier, matching a median estimate.
Citi expands yuan
iti said yesterday it had launched an automated yuan cross-border pooling solution for its clients in the China (Shanghai) Free Trade Zone, a move that could help multinational companies optimise their cash management and enhance capital efficiency. The solution enables companies to automatically sweep yuan between their onshore and offshore entities freely, without providing supporting documents or applying for approvals on a deal basis. Citi’s cross-border yuan sweeping solution was pioneered for Roche Holding AG, a leading European pharmaceutical company, which marks an important step in the ongoing financial development in the free trade zone. “We are using state-of-the-art global concentration platforms to address clients’ local and crossborder RMB needs, enabling them to capitalise on opportunities that evolving regulatory reforms bring,”
January 2014 April 19,21, 2013
Greater China Ma urges tighter control of local govt debt China needs to strengthen control of local government debt to head off risks because the foundation of China’s economic recovery has yet to be consolidated, the head of the statistics bureau said yesterday. “We must strengthen efforts to head off risks from local government debt and also step up efforts to eliminate outdated capacities in some industries,” Ma Jiantang (pictured) told reporters at a briefing on GDP data for the fourth quarter and 2013. He added that net exports subtracted 4.4 percent from 2013 GDP, while consumption contributed 50 percent and capital formation 54.4 percent.
Fixed-asset investment excluding rural households increased 19.6 percent in the January-to-December period from a year earlier, the report showed. That compared with the 20.6 percent pace in 2012.
Chinese leaders are trying to reduce the economy’s reliance on debt and mitigate risks of a financial crisis that could hinder the changes the ruling Communist Party pledged in November to implement. Data last week from the People’s Bank of China showed a record drop in second-half credit, following money-market cash crunches in June and December that underscored the difficulty of bringing credit under control. The central bank last week warned banks to tame the pace of lending. It also pledged to “clean up” localgovernment financing vehicles after the National Audit Office reported that local authorities’ debts including contingent liabilities swelled to a record 17.9 trillion yuan as of June. “The shadow banking risks have been exposed, so the key issue this year is whether we can control this problem,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. “This year exports will be better, consumption is solid, but investment will further slow down.” The banking regulator this month told lenders to publish data including off-balance-sheet assets and interbank liabilities as it steps up scrutiny of the shadow-finance industry amid increasing concerns that borrowers will default. Growth has been “fairly resilient,” Yao Wei, China economist at Societe Generale SA in Hong Kong, said in a Bloomberg Television interview. “It is more of the outlook that we worry about especially with the financial risk in the system. We have some trust products already in distress. If we get the first ever trust or bond default in China, what could be the implications for the economy?” Bloomberg News
services in Shanghai FTZ
Amol Gupte, Citi’s Asia Pacific head of Treasury and Trade Solutions, said in a statement. China launched the Shanghai free trade zone in late September and officials promised a far more open and streamlined environment for foreign firms to do business there, along with the relaxation of policies for a raft of service sectors. A batch of banks including Deutsche Bank AG, Citibank, DBS Group Holdings Ltd, Hang Seng Bank Ltd, HSBC Holdings Plc and Bank of East Asia Ltd have received approvals to start operations in the pilot zone. HSBC said last week it had offered
cross-border RMB sweeping service for Dover Corp, a manufacturer of diversified industrial products, to help it deploy funds more efficiently between its overseas and domestic affiliates. Beijing is stepping up efforts to open up domestic financial markets and lift the global status of its currency, aiming to reduce its reliance on the U.S. dollar as the world’s second-largest economy. With a slew of policies introduced to promote the “redback”, the yuan already overtook the euro to become the second-most used currency in trade finance, data from global transaction services organisation SWIFT showed. The pace is expected to accelerate. Shanghai Vice Mayor Tu Guangshao said at a financial forum last week that the central bank would roll out detailed policies to develop the free trade zone in the first quarter and material development is expected this year. Reuters
Peugeot backs cash injection by Dongfeng
SA Peugeot Citroen’s board has approved an outline deal to raise cash by selling stakes to China’s Dongfeng Motor Group Co Ltd and the French government, a source close to the matter said yesterday, as the troubled carmaker posted a further drop in global sales. According to the person, who declined to be identified because the talks were confidential, the supervisory board approved the draft deal terms at a meeting late on Sunday. “The possibility of a stake sale to the French state and Dongfeng has been agreed,” the source said. Peugeot is one of the carmakers worst hit by a six-year market slump in Europe that is only now beginning to abate, promising a gradual recovery from a two-decade low, with further losses for the industry in the near term. Peugeot, which yesterday posted a 4.9 percent sales decline to 2.82 million vehicles in 2013, declined to comment on the board meeting or planned capital increase. The company has said it needs a cash infusion to stay competitive in the medium term. Peugeot is expected to confirm next month that it burned through about 1.5 billion
euros (US$2 billion) in cash last year in addition to restructuring costs. Dongfeng, Peugeot’s partner in an existing Chinese joint venture, is in talks to purchase a significant stake in a 3 billion euro capital increase, with the French state taking a matching holding, sources with knowledge of the matter have said. According to French press reports, the founding Peugeot family was divided over the extent of its participation in the capital increase and the size of the stake sale to Dongfeng. But the board agreement now clears the way for Peugeot to finalise a deal in which Dongfeng and the French government would each acquire 14 percent stakes at a price between 7.50 and 8 euros per share, according to French newspaper Les Echos. The two-stage operation would be evenly split between a rights issue to existing shareholders and a subsequent issue of additional shares on the market, the report said. Dongfeng and the French state would each inject around 750 million euros, diluting the Peugeot family’s holding to a matching 14 percent from the current 25 percent.
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January 21, 2014 April 19, 2013
New home sales hit record high in 2013 Property market resisting Beijing’s efforts to cool it down
ew home sales in the mainland last year exceeded US$1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs. The value of new homes sold in 2013 rose 27 percent from 2012 to 6.8 trillion yuan (US$1.1 trillion), the National Bureau of Statistics said in a statement yesterday. New-home prices in D e c em ber climb ed 2 0 percent in Guangzhou and Shenzhen from a year earlier, and jumped 18 percent in Shanghai and 16 percent in Beijing, the bureau of statistics said on Saturday. “Clearly, the real estate market in China remains hot,” Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole CIB, said in an e-mailed reply yesterday. “Urbanisation and investment demand are leading to rising sales volumes, while prices continue to gain. China’s growth remains heavily dependent on the real estate market.” Premier Li Keqiang hasn’t imposed additional nationwide measures to cool the market since his predecessor Wen Jiabao stepped up a three-year campaign in March, ordering higher down payments and interest rates for second-home loans in cities with “excessive fast” price gains.
Instead, Mr Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November. Shenzhen, Shanghai and Guangzhou have all raised minimum down payments for second homes to 70 percent since November. “The effect of those measures was limited last year because in first-tier cities demand still outpaced supply,” Ding Shuang, a Hong Kong-based senior China economist with Citigroup Inc said in a phone interview.
Property reliance The value of new housing sales was 5.4 trillion yuan in 2012, an 11 percent gain from the previous year, according to the government data. Investment in homes, office buildings, malls and other real estate gained 20 percent to 8.6 trillion yuan last year from a year earlier, according to the statistics bureau data. New property construction rose 14 percent to 2 billion square metres (21.5 billion square feet). New-home sales volume rose 18 percent to 1.2 billion square metres, the government data showed. China’s existing-homes market is about one-third of new homes by sales, according
Home prices may increase about 5 pct this year, says Standard & Poor’s
US$1.1 trln Value of new homes sold in 2013
to Centaline Property Agency Ltd, because the nation only allowed private home ownership in 1998. The government doesn’t release
data on existing-home sales. Existing-home prices rose 20 percent in the capital Beijing last month from a year earlier and increased 14 percent in Shanghai, according to the January 18 data. Private figures also showed no sign of cooling in the property market. Home prices in December had the biggest year-on-year gain in 2013, increasing 12 percent, according to SouFun Holdings Ltd, China’s biggest real estate website owner. “There has been a misconception that China’s property curbs are aimed at cracking down on the market or squeezing sales,” said
David Hong, a Hong Kongbased property analyst at China Real Estate Information Corp, or CRIC, a property data and consulting firm. “The country’s economy, especially that of less affluent cities, is relying on the real estate industry.” First-tier cities, including Beijing and Shanghai, may impose further curbs if prices rise too fast, Standard & Poor’s Hong Kong-based analyst Bei Fu said on Friday. Home prices will increase about 5 percent this year from 2013, while home sales volume will jump about 10 percent, according to S&P. Reuters/Bloomberg News
Glorious Property plunges after buyout rejected Shareholders vote against offer to take company private
Zhang Zhirong owns 68.4 percent of Glorious Property
lorious Property Holdings Ltd fell by a record in Hong Kong trading after shareholders rejected an offer by Chinese billionaire Zhang Zhirong to take the company private. Glorious Property dropped as much as 30 percent, headed for the biggest decline since October 2, 2009. The stock was trading 26.90 percent lower to close at HK$1.25. The Hang Seng Index fell 0.9 percent. The company’s shares traded at less than half their net asset value before the offer, tracking a slide in China Rongsheng Heavy Industries Group Holdings Ltd after the shipyard co-founded by Mr Zhang sought a government bailout. Mr Zhang quit as chairman of both Glorious Property and Rongsheng in November 2012. “Glorious needs to speed up its asset disposal to improve its asset turnover and valuations,” Standard Chartered Plc Hong Kong-based analysts Andy So and Raymond Cheng wrote in a report after the buyout offer didn’t gain enough support at a meeting in Hong Kong on Friday. The offer lapsed after 62 investors voted against the plan and 58 holders voted in favour, according to a filing to the city’s stock exchange. Mr Zhang can’t make another bid for 12 months, except with regulatory
consent, the company said in the statement on January 17. Rongsheng shares rose as much as 3.8 percent and were 2.29 percent higher to close at HK$1.34. Mr Zhang, who owns 68.4 percent of Glorious Property, offered as much as HK$4.57 billion (US$589 million) for the developer, according to a November filing. He offered HK$1.80 a share for Glorious Property, 45 percent more than the then mostrecent price of HK$1.24, for all outstanding stock, the filing showed. Contracted sales by the developer, which has residential, office and retail projects in 12 Chinese cities, slumped 33 percent last year amid property curbs aimed at cooling China’s housing market. Developers, including Glorious Property, face rising default risks as funding options narrow, according to Standard & Poor’s. Glorious Property was the only listed developer with declining sales in China, hurt by a relatively high ratio of short-term loans and tight liquidity, Samson Man, an analyst at CMB International Capital Corp with a sell rating on the stock, wrote in a report yesterday. “The outlook will not improve until Glorious adjusts its pricing to the market conditions,” Mr Man said. Bloomberg News
January 2014 April 19,21, 2013
Thai default risk soars as funds pull billions Central bank likely to cut borrowing costs as protests hurt growth David Yong and Yumi Teso
Thai stocks – investors cutting their holdings
he risk of Thailand defaulting on its debt is the highest since August as anti-government protests prompt money managers to sell the nation’s assets. The cost of protecting the nation’s debt soared after investors including Wells Fargo Inc pulled more than US$4 billion from Thai stocks and bonds since October 31, as rallies clogged up Bangkok roads and clashes left nine dead with 550 injured. Pacific Investment Management Co, Goldman Sachs Group Inc and Kokusai Asset Management Co reduced debt holdings before protests first erupted in late October, regulatory filings show. “We sold the entire Thai position in our international bond fund through the end of last year,” Lauren Van Biljon, an analyst in London at Wells Fargo’s First International Advisors LLC unit, said in a telephone interview. “There seems to be a very wide gulf between the different political sides.” A resolution of the crisis has eluded Prime Minister Yingluck Shinawatra since she dissolved parliament in December and called a snap poll for February 2. Demonstrators want to remove her and end the influence of her brother, Thaksin Shinawatra, who was ousted by the army in 2006. Blasts rocked a protest site in Bangkok yesterday. The baht has slumped on bets the central bank will cut borrowing costs this week as the turmoil crimps growth, and amid speculation about a coup. “We have remained underweight on the baht since late last year as the prolonged political unrest hurt the currency outlook,” Tatsuya Higuchi, a money manager at Kokusai Asset in Tokyo, said in an interview. “There’s no fiscal support as the politics are in chaos. The only support they can provide under such a situation is monetary easing.” Kokusai, Japan’s biggest mutual fund manager with US$36 billion of assets, cut its Thai bond holdings last
year and will keep its existing stake for now, he said.
Default risk Credit-default swaps insuring Thai debt against non-payment for five years rose to 153 on January 14 in New York, the highest level since August 28, according to CMA prices. The spread has widened 44 basis points since anti-government protest broke out on October 31, compared with increases of 19 basis points for Indonesia and 17 basis points for the Philippines. The cost of protecting Thailand’s debt may reach 200, the highest since November 2011, from 150 on January 17, according to Nordea Markets, a unit of northern Europe’s biggest financial group, which had about 228 billion euros (US$310 billion) of assets under management as of September 30. “The upside risk to the CDS level is still pretty big, given the risk of military intervention,” Amy Zhuang, a senior Asian markets analyst in Copenhagen at Nordea, said. “The uncertainty is there, the turmoil is there. They are generally still calm but the risky and tricky parts haven’t fully played out at the moment.” Global funds have sold US$2.8 billion more local stocks than they bought and a net US$1.4 billion of bonds since October 31, data from the stock exchange and the Thai Bond Market Association show. The baht fell 5.2 percent in the period and touched 33.148 per dollar on January 6, the weakest since 2010, while the SET Index of domestic shares dropped 10 percent. The Bank of Thailand will lower its benchmark one-day repurchase rate to 2 percent from 2.25 percent tomorrow, according to 14 of 21 economists surveyed by Bloomberg News. Seven predict no change. The central bank delivered a surprise 25-basis point cut at its last meeting
on November 27. The monetary authority has lowered its 2014 growth projection to about 4 percent from 4.8 percent, saying the unrest will hurt investment and business confidence. Thailand’s finance ministry last week cut its forecast for the second time in a month, reducing it to 3.1 percent after cutting to 4 percent from 5.1 percent on December 26.
Bangkok blasts Ms Yingluck’s administration has endured more than two months of street demonstrations aimed at erasing her family’s political influence. Her brother’s allies won the past five elections. Sunday’s blasts occurred at Victory Monument, one of seven key districts that have been blockaded by demonstrators in the capital since January 13, according to the Bangkok Emergency Medical Centre. Violence over the past three days has killed one and wounded 67, the centre said on its website. The protesters led by former lawmaker Suthep Thaugsuban want Ms Yingluck to step down and allow an unelected council to reform the electoral system before holding a fresh vote. The main opposition Democrat Party will boycott the February 2 poll, its leader and former Prime Minister Abhisit Vejjajiva said on December 21.
Investors sold from Thai stocks and bonds since Oct 31
“Things are going from bad to worse,” Nicholas Spiro, managing director of investment consultancy Spiro Sovereign Strategy in London, said in an e-mail interview. “The risk of another military coup is growing given the bleak prospects for a negotiated solution,” he wrote, adding that “stability and democratic governance are being undermined at a particular inopportune time from a market standpoint.” For now, the blockades in Bangkok haven’t done enough damage to the economy to alter its sovereign rating, Steffen Dyck, an analyst at Moody’s Investors Service, said at a media briefing in Singapore. There are “very low” chances of a change to its ranking in the next 18 months, he said. Thailand is rated Baa1 by Moody’s and BBB+ by Standard & Poor’s and Fitch Ratings, their third-lowest investment grades.
Moody’s outlook “In terms of growth, I can’t see it dropping below 3 percent,” Mr Dyck said. “Manufacturing is still going on. We have seen some weakening in foreign reserves as protests intensified, but the stock market is much higher compared to instances in 2006 or 2008.” The political stalemate is costing Southeast Asia’s second-biggest economy as much as 1 billion baht (US$30 million) a day as tourism suffers, the University of Thai Chamber of Commerce estimated as Singapore Airlines Ltd, Cathay Pacific Airways Ltd and PT Garuda Indonesia reduced flights to Bangkok. “The biggest casualty of a further escalation in the crisis is Thailand’s economy, which has already slowed dramatically,” Mr Spiro said. “Tourism and infrastructure investment are increasingly at risk, putting pressure on the central bank to trim rates again to help shore up growth.” Bloomberg News
January 21, 2014 April 19, 2013
India may combine stock, Merger aims to boost oversight and prevent failures at exchanges
AirAsia prepares Japan discount airline AirAsia Bhd, Southeast Asia’s biggest budget carrier, is close to restarting plans for a Japanese unit after a partnership with ANA Holdings Inc unravelled in June, chief executive Tony Fernandes said. “Japan is a market we are very bullish on,” Mr Fernandes said in an interview in London. The Malaysia-based airline has lined up local partners and plans to commence service next year, the executive said. The carrier, with units in Indonesia, Thailand and the Philippines, expects to begin service with a new Indian venture in March as it aims to expand its regional reach. ANA, which took over AirAsia Japan Co after almost a year of operating because of a disagreement over strategy, has rebranded the unit Vanilla Air, leaving Mr Fernandes to reformulate plans. “We have had one year of free advice really,” Mr Fernandes said. “It’s a fantastic market.” The Japan enterprise will avoid Tokyo’s Narita airport to achieve lower costs, he said. The venture with ANA, Japan’s biggest airline, operated from Narita, where Mr Fernandes said the carrier should never have been. Operations from Japan will not begin until next year in part to allow AirAsia to focus on establishing its India unit in 2014, Mr Fernandes said. Indian government approval to have a lowcost airline in a once closed market of 1.2 billion people is “imminent” with flights slated for as soon as March. AirAsia will focus on secondary markets in India in order to minimise airport fees and other costs.
ndia is planning to combine the stock and commodities market regulators after a payment crisis led to the collapse of the nation’s biggest spot exchange, three people with direct knowledge of the matter said. The Finance Ministry is working on the proposal, the people said asking not to be identified as they were not authorised to talk to the media. The merger of the Securities and Exchange Board of India and the Forward Markets Commission will boost oversight of the nation’s US$2.8 trillion commodities market and prevent failures at exchanges, they said. Regulators globally are expanding scrutiny of markets from metals to currencies, tightening rules on capital buffers and cracking down on crimes from money laundering to interestrate rigging. A merger of the two regulators will be the biggest overhaul of commodity markets regulation and follows the suspension of trading on the National Spot Exchange Ltd, a platform for buying and selling everything from gold to sugar. “We need stronger regulatory oversight in commodities to protect small investors,” Andrew Holland, chief executive at Ambit Investment
Advisors Pvt, said in an interview. “If they can close the loop after the NSEL episode, investors will be fine.” Combining the stock, commodities and insurance regulators into one body is among proposals made by a panel appointed by the government to suggest financial sector reforms and remove overlaps in existing rules. The government may accept some of the recommendations, said two of the people.
We need stronger regulatory oversight in commodities to protect small investors Andrew Holland, Ambit Investment Advisors
‘Apples, oranges’ While Finance Minister Palaniappan Chidambaram on January 8 said the panel’s report was being examined, implementation of the plan need changes to the Sebi Act of 1992 and the Forward Contracts Regulation Act of 1952, under which the FMC was set up, the people said. The amendments may not happen before the general elections to be held by May, they said. Bringing the regulators together may not help enhance oversight of the commodities market, according to B.C. Khatua, former chairman of the FMC. “It is like combining apples with oranges and calling it one fruit,” he said in an interview. “The two markets are in different stages of development and the underlying assets for the commodities
Regulators expanding scrutiny of markets
BIDV share debut to boost market liquidity BHP to gain from rising coal exports BHP Billiton Ltd could show stronger-thanexpected quarterly production of Australian coal this week on the back of a trend of rising shipments from a key mining state. Data released yesterday show coal exports up sharply in the last financial year in New South Wales state, where BHP’s extensive coal operations include its Mt Arthur thermal mine, the largest production site in the state’s Hunter Valley. China buys just under a fifth of the state’s coal exports and is the second biggest customer behind Japan, according to the data. BHP reports December quarter production tomorrow, with analysts expecting overall flat coal output for the period. Glencore Xstrata Plc and Rio Tinto Group also mine coal in the state. Lower pricing and higher operating costs over the past two years have left coal as the weakest of the “four pillars” of BHP’s core business behind iron ore, petroleum and copper. “Finally, there is some good news, with demand for New South Wales coal rising significantly in China, contrary to some of the rhetoric we have been hearing that demand for coal is diminishing,” Stephen Galilee, chief executive of the New South Wales Minerals Council, said. “The data also shows demand for coal is growing steadily across all our main export markets.” Reuters
The benchmark VN Index rose 22 percent last year
ank for Investment and Development of Vietnam, the nation’s second-largest lender by assets, will begin trading on the local exchange this week as regulators seek to boost stock-market liquidity and make banks more transparent. BIDV, as the state-run lender is known, will list 2.81 billion shares on the Ho Chi Minh City Stock Exchange on Friday with an initial price of 18,700 dong (US$0.89) each, Tran Phuong, a senior executive vice president, said in an interview yesterday. The company won’t be
raising any new capital. BIDV’s listing may help boost the size and liquidity of Vietnam’s US$49 billion stock market, the best performer in Southeast Asia last year, said ACB Securities Co. The country is trying to mend a banking system burdened with the region’s highest level of bad debt, according to Fitch Ratings. “The listing will add more depth to the market and broaden the choices for investors,” said Attila Vajda, the head of institutional sales at ACB Securities. BIDV’s entry on the exchange “will
add some transparency,” he said. The benchmark VN Index rose 22 percent in 2013 as inflation eased, the government purchased bad loans from banks and investors speculated policymakers will reduce restrictions on foreign investors. “The market has been rallying thanks to the improvement on the macro environment and this is a suitable time for listing,” Mr Phuong said. Low trading volumes have discouraged some investors from buying Vietnam stocks. The daily average value of shares changing hands on the Ho Chi Minh exchange in the year through Friday was about 1.1 trillion dong (US$52.2 million), data compiled by Bloomberg show. BIDV sold a three percent stake in an initial public offering December 2011 and had planned to begin trading June 2012. The plan was delayed after a slide in the VN Index. In 2013, BIDV posted a pre-tax profit of about 5.2 trillion dong and is targeting at least 6 trillion dong this year, said Mr Phuong. The bank’s bad debt ratio will be curbed at maximum of 2.6 percent, compared with the estimated figure of 2.3 percent in 2013, he said. BIDV plans a dividend payout ratio of 8 percent to 9 percent in 2014, he added. Bloomberg News
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January 2014 April 19,21, 2013
commodities regulators markets are physical while those in the case of Sebi-regulated entities are financial instruments.” Finance ministry spokesman D.S. Malik declined to comment on the proposal. N. Hariharan, a Mumbaibased spokesman for the stock market regulator declined to comment and FMC chairman Ramesh Abhishek didn’t respond to two phone calls and an e-mail seeking comments. The government’s efforts to change the rules to make the FMC more powerful have failed in the past because of a lack of support among lawmakers. Sebi, which employees more than 600 people, can impose a fine of as much as 250 million rupees for violations including insider trading. Commodity traders can be imprisoned for one year and fined a minimum 1,000 rupees the first time they break rules, according to the FMC’s website. The FMC oversees 17 bourses with a staff of fewer than 100. “The FMC can take lessons from Sebi since the latter is a more advanced and modern regulator,” Sandeep Parekh, founder of Finsec Law Advisors Ltd and former executive director at the stocks market regulator, said. “Market oversight can be enhanced if the two share resources.” Bloomberg News
BOJ likely to expand stimulus ceiling Central bank may slow purchases to avoid exceeding annual target
he Bank of Japan is approaching the upper limit of its target for buying bonds, raising prospects it will need to expand the scope of its stimulus programme to support the economy before a tax increase. The BOJ bought 6.8 trillion yen (US$65 billion) of sovereign notes in December, the least since it boosted the programme to more than 7 trillion yen a month in April, data compiled by Totan Research Co show. The purchases may slow further to avoid exceeding the average annual target of a 50 trillion yen increase in the BOJ’s holdings for the year, according to Tokai Tokyo Securities Co and Totan. The holdings swelled by 50.3 trillion yen in the nine months through December 31. BOJ governor Haruhiko Kuroda could signal to the market that a slowdown doesn’t represent a scaling back of his accommodative policy or he could raise the holdings ceiling, according to Sumitomo Mitsui Banking Corp. The government’s plan to increase the sales tax to 8 percent in April
from 5 percent is forecast to trigger a 4.3 percent economic contraction in the second quarter. The 10-year sovereign bond yield was at 0.66 percent yesterday, compared with 2.82 percent in the U.S. “Investors think the BOJ is just taking a break and will increase buying when the effect of the sales-tax hike comes in,” said Tadashi Matsukawa, the head of fixed-income investment at PineBridge Investments Japan Co. “Japan’s yields are staying at these levels because of this assumption.”
Falling yield Mr Kuroda said last month that the pace of buying is “flexible” to achieve the holdings target. The amount of bonds that the BOJ has is more important than the monthly purchases, he told reporters. The 10-year yield slid for a fourth year in 2013, the longest stretch since 2002, even as inflation started to pick up from a two-year low in March. The yield will probably climb to 0.85 percent by December 31 after falling
Haruhiko Kuroda said the pace of buying is ‘flexible’
six basis points last year, the median estimate of economists shows in a Bloomberg News survey. A basis point is 0.01 percentage point. “The BOJ’s monthly purchases will decline to about 6.4 trillion yen,” Kazuhiko Sano, the chief bond strategist at Tokai Tokyo Securities, told reporters and institutional investors. “I don’t think the decreases would have a large impact on the market considering investors paid little attention to the decline that we saw in December.” The central bank will boost stimulus by the end of September, 80 percent of the 35 economists surveyed by Bloomberg last month estimated. “The amount the BOJ needs to buy this year is about 6.5 trillion yen a month” after taking into account its bond holdings that come due, Izuru Kato, the president of Totan, a Tokyobased research unit of money-market broker Tokyo Tanshi Co, wrote in a research note. “The BOJ is more likely to boost purchases should the decrease destabilise bond yields.” Bloomberg News
Australia bank valuations at pre-crisis high
ustralia’s largest banks are trading at the most expensive levels since before the global financial crisis on bets a mortgage lending recovery will allow them to increase dividend payouts. Shares of the so-called Four Pillar lenders led by Commonwealth Bank of Australia have rallied more than 30 percent since November 2011 when the central bank began the first of eight interest-rate cuts to bolster economic growth. The lenders trade at an average of 2.1 times the net value of their assets, the highest since 2007 and a 75 percent premium over the MSCI World Bank Index, data compiled by Bloomberg show. Investors are betting bank profits will increase – despite an economic slowdown following an end to the nation’s mining boom – as recordlow borrowing costs allow lenders to stoke demand for mortgages and boost dividend yields that are already the highest in the developed world. Australian banks account for six of the eight highest dividend yields in the 91-stock MSCI gauge, beating overseas rivals from HSBC Holdings Plc to Wells Fargo & Co, the data show. “The Australian banking sector is going to continue to show nice earnings growth,” Alex Tedder, a New York-based fund manager at American Century Investments, said. “Yields are still fairly high and you’ve got a good setup for creating sustained dividend growth that will continue.” The Reserve Bank of Australia has kept its cash rate target at an alltime low of 2.5 percent since August to bolster an economy hampered by a decline in mining exports amid a slowdown in China. Australian gross domestic product expanded by a slower-than-estimated 0.6 percent in the third quarter from the previous three months, government data showed on December 4. Growth in earnings per share for the S&P/ASX 200 Banks Index may slow to 5.1 percent next year from the 7.5 percent estimated for 2014 as lending for mining projects slows, according to analyst forecasts compiled by Bloomberg. Profit for the MSCI World Bank Index’s members may expand 30 percent this year and 9.5 percent in 2015, the data show. Bloomberg News
January 21, 2014 April 19, 2013
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January 2014 April 19,21, 2013
Who lost Thailand?
Leading reports from Asia’s best business newspapers Yuriko Koike
Japan’s former defence minister and national security adviser, currently a member of the National Diet
Bloomberry Resorts Corp has filed an urgent court petition to stop the sale by Global Gaming Philippines LLC of an 8.7-percent stake in the Razonled gaming firm. GGAM, the Las Vegas-based management firm that was earlier booted out of Bloomberry’s Solaire Resort & Casino, moved to unload last week 921.18 million shares in Bloomberry at a discounted price, prompting the gaming firm to seek a sixday trading suspension that started Thursday. Bloomberry cited the need to “clarify” the implication of the intended sale, given that the shares were the subject of its counterclaim against GGAM.
The Age Inflation in Australia rose strongly last month, on the back of seasonal drivers and a rise in tobacco prices, a private gauge has found. The TD Securities-Melbourne Institute inflation gauge for December found that CPI rose by 0.7 percent in December, after lifting by 0.2 percent in November. In the 12 months to December, the gauge rose by 2.7 percent to keep inflation within the Reserve Bank’s 2 percent to 3 percent target band. The trimmed mean, a measure of underlying inflation, grew by 0.4 percent for the month to take it to an annual rate of 2.9 percent.
Bangkok Post Anti-government protest leader Suthep Thaugsuban on Sunday evening vowed to raise the level of demonstrations by encouraging supporters in the provinces to shut down state agencies in their hometowns, starting this week with the southern region. He said daily gun and bomb attacks against the PRDC demonstrators had failed to scare the protesters and the more that violent incidents occurred, the more people would take to the streets to protest against the government.
Taipei Times Taiwanese are growing more conservative about housing prices this quarter, with cash and time deposits beating real estate as the most favoured investment option after government officials and academics voiced concerns about a housing bubble, a survey by Sinyi Realty Inc showed recently. Of the respondents polled in the survey, 33 percent expect housing prices to fall this quarter, a 4 percent rise from the 29 percent recorded last quarter, Sinyi Realty found. “The pessimism is likely to prevail through the Lunar New Year holiday next month, which is a traditional low season for the housing market,” Sinyi researcher Tseng Chin-der said.
hailand, Southeast Asia’s most developed and sophisticated economy, is teetering on the edge of the political abyss. Yet most of the rest of Asia appears to be averting its eyes from the country’s ongoing and increasingly anarchic unrest. That indifference is not only foolish; it is dangerous. Asia’s democracies now risk confronting the same harsh question that the United States faced when Mao Zedong marched into Beijing, and again when Ayatollah Ruhollah Khomeini ousted the Shah in Iran. Who, they will have to ask, lost Thailand? Much of the world is wondering how such a successful economy could allow its politics to spin out of control. What accounts for the armies of protesters – distinguished, gang-like, by the colour of their shirts – whose mutual antipathy often borders on nihilistic rage? The roots of the current unrest extend back more than a decade, to former Prime Minister Thaksin Shinawatra’s first electoral victory in 2001. Thaksin’s triumph did not represent the normal alternation in power that one finds in a democracy. Instead, his victory heralded the political rise of the country’s poor, long-silenced rural majority. Bangkok’s entrenched elite recoiled in alarm. But, instead of learning to compete with Thaksin for the votes of Thailand’s rural poor, the country’s urban elite (including the powerful military) sought to delegitimise his rule. When he was re-elected by an even larger majority, his government was overthrown, his political party was banned by the Supreme Court, and he was forced to flee the country after corruption charges against him led to a criminal conviction. Yet Thaksin’s supporters did not abandon him. When Thailand’s military returned to their barracks, many Thai
citizens voted for Thaksin at one remove, with his sister – Yingluck Shinawatra, a longtime executive at Thaksin’s communications firm – becoming Prime Minister, supported by a powerful parliamentary majority.
Diluting democracy For much of her term in office, Yingluck garnered praise for her pragmatism, and for seeking to ameliorate the antagonism of her opponents. But that praise and success appears to have bred a form of hubris. She proposed an amnesty law that would have not only pardoned opposition leaders, including Abhisit Vejjajiva, her predecessor as prime minister (who faces murder charges), but allowed her brother to return to the country. And, in defiance of a Supreme Court ruling, she sought a constitutional amendment that would make the Senate, whose members are appointed, an elected body. The opposition, sensing that its moment had arrived, launched a wave of street protests. Yingluck, in an effort to defuse the situation, called for a parliamentary election in February. But the opposition has rejected this and says that it will boycott the vote. It fears – rightly, most people suspect – that the Thaksin camp will be returned to power in any free and fair vote. So, in essence, what is happening in Thailand is an attempted nullification of democracy by the opposition and the country’s entrenched elite. Unable to compete successfully with Thaksin for votes, they now want to dilute Thai democracy in order to prevent the electorate from ever again choosing a government that goes against their will. If Thailand were an insignificant country with little geostrategic weight, its problems might not
matter as much as they do to the rest of Asia. But Thailand is Southeast Asia’s lynchpin economy. It is a key partner for Myanmar (Burma) as it makes its own political and economic transition, and it is a hub for trade with neighbouring Cambodia, Laos, and Vietnam.
Rising influence But the biggest reason that Thailand matters for Asia’s democracies is fierce competition for influence between a rising China and the democratic world. Until now, Thailand has been a firm member of the democratic camp. Its military is mostly trained by the United States; indeed, it was the key staging point for the U.S. during the Vietnam War. Likewise, Japan and India have long regarded Thailand as a democratic bulwark in a neighbourhood where some regimes – Cambodia and Laos – are firmly under China’s hegemonic sway. Indeed, its government
If Thailand were an insignificant country with little geostrategic weight, its problems might not matter as much as they do to the rest of Asia
has proved to be a strong supporter of Myanmar’s president, Thein Sein, as he seeks to free his country from China’s tight embrace. By standing aside as Thailand’s opposition and traditional elite seek to undermine the country’s democracy in the name of a permanent right to rule, Asia’s democracies risk driving some elements of the Thaksin camp into the arms of China, which would happily accept the role of patron to so potent a political force. But this need not happen. Thailand’s military has long and respectful ties not only with the U.S. military, but with officers in Japan as well. Thailand’s opposition politicians, many of whom were educated at top Western universities, may also be open to quiet advice that they are pushing things too far, not only putting Thailand’s stability at risk, but also jeopardising regional security. Just as, a decade ago, the West objected to the efforts of Turkey’s entrenched secular elite to rob Recep Tayyip Erdogan’s mildly Islamist AKP party of its democratic victory, it needs to speak clearly today in defence of Thai democracy. The opposition’s claim that it is acting in the interests of the world’s democracies needs to be rebutted. Thaksin may be no saint, and some constitutional reform will be needed if political reconciliation is to come about. But Thaksin’s governments, like that of his sister, have kept China at one remove from influence. That is the key strategic interest that is now at stake. Should Yingluck be ousted in a coup, or should the country’s democracy be hollowed out to preclude her return to power, the Shinawatras may be left with no choice but to seek support from Thailand’s giant neighbour to the north. If that happens, we will all know who lost Thailand. We did. © Project Syndicate
January 21, 2014 April 19, 2013
Closing Iran curbs uranium enrichment
Deutsche Bank posts surprise loss
Iran has begun curbing uranium enrichment under a deal which will also see international sanctions eased, the UN nuclear watchdog (IAEA) says. Earlier, centrifuges used for enrichment were disconnected at the Nantaz plant, Iranian TV reported. The move is part of a nuclear deal reached with the U.S., Russia, China and European powers last November. Iran should now be able to resume petrochemical and other exports, worth billions to its economy. “The IAEA inspectors in the Natanz plant are disconnecting cascades,” the head of Iran’s Atomic Energy Organisation, Ali Akbar Salehi, said.
Deutsche Bank AG has reported a surprise loss for the fourth quarter of 2013, after releasing its latest results before they were expected. Overall Deutsche said it posted a pre-tax loss of 1.15 billion euros (US$1.56 billion) for the final quarter of 2013. The bank said that litigation costs and restructuring had weighed heavily on its financial performance. Litigation costs mounted up to 528 million euros for the period, while revenue fell 16 percent. At the end of last week its shares closed down 3 percent in New York. In December 2013 it agreed to pay 1.4 billion euros to settle a lawsuit with the U.S. Federal Housing Finance Agency.
International group calls for end of dog-racing Greyhound imports have dropped notably, says ANIMA Tony Lai
nother international animal protection group has called for the end of greyhound racing in Macau when the exclusive concession of Macau (Yat Yuen) Canidrome Co Ltd expires next year. A press statement released by the Macau Society for the Protection of Animals (ANIMA) yesterday said the Asia for Animals Coalition discussed the issue in its international conference in Singapore last week. The coalition “approved… a recommendation to the Macau government for the closing of the track when the concession expires in December 2015,” the statement said. The Singapore conference gathered 100 organisations from
AB InBev buys back Oriental Brewery Deal with KKR valued at nearly US$6 bln, including debt
nheuser-Busch InBev SA, the world’s largest brewer, has agreed to buy South Korea’s Oriental Brewery Co Ltd (OB) for US$5.8 billion including debt, regaining ownership of a key Asian asset at a time of strong industry growth across the region. The sale by KKR & Co and Affinity Equity Partners represents Asia’s biggest ever private equity sale via M&A in dollar terms, rewarding them with returns of more than five times their investment. OB had total debt of US$922 million at end of 2012,
The contract of Macau (Yat Yuen) Canidrome ends in December 2015
according to the company’s latest available figures. With the deal, AB InBev gains not only a South Korean brewer that has rapidly grown to command 60 percent market share but also distribution channels for its own brands such as Budweiser and Stella Artois that have room to grow in an underdeveloped premium beer segment. “OB will strengthen our position in the fast-growing Asia Pacific region and will become a significant contributor to our Asia Pacific zone,” Carlos Brito, chief executive of AB InBev said in a statement. AB InBev also said it hopes to export OB brands more widely. The deal comes one week after Japan’s Suntory Holdings agreed to buy Beam Inc for US$13.6 billion, with the transactions underscoring rapid consolidation in the global liquor industry. Carlsberg, Heineken NV and SABMiller Plc have also struck deals in Asia over the past five years, lured by the region’s US$258 billion market that is growing twice as fast as the rest of the world. Belgium-based AB InBev sold Oriental Brewery in 2009 for US$1.8 billion to KKR, as part of its efforts to ease the debt burden incurred in the US$52 billion acquisition of
25 jurisdictions to advocate animal rights, the coalition website said. Canidrome, often criticised by animal right campaigners for putting down dogs that can no longer race, has recently come to the spotlight. The company announced this month on its website it has launched a programme for people to apply for adoption of retired greyhounds. The company, linked to gaming mogul Stanley Ho Hung Sun’s Sociedade de Turismo e Diversões de Macau SA, claimed one five-year-old dog has been adopted so far. But ANIMA says it has some doubts about the programme and claims that a veterinarian working for the Canidrome adopted the greyhound. The group also said yesterday that no special training is needed for the greyhounds to be adopted, contradicting an earlier statement from the Canidrome. But in a positive note ANIMA highlighted that greyhound imports from Australia have dropped to 10 dogs a month now from 30 before, following many months of campaigns targeting officials here and in Australia. Revenue from betting on greyhound racing has been falling since 2009 with last year’s figure at 178 million patacas (US$22.25 million), down by 13.2 percent from 2012, official data showed.
AB Inbev originally sold Oriental Brewery in 2009
U.S. beer maker Anheuser-Busch by InBev a year earlier. KKR agreed to pay about US$800 million in cash for OB and the rest in debt, later splitting the cash portion with Affinity roughly in half. AB InBev has a relatively small presence in Asia Pacific, with the region accounting for 14.3 percent of the 403 million hectoliters of beer it sold and 2.5 percent of its US$15.5 billion in earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2012.
AB InBev retained an option to buy back OB within five years from the date of the 2009 sale. The decision to strike a deal well before the deadline in July underscores the hot competition for brewing assets in the region. “The longer InBev waited, the more expensive it became and they also risked leaving room open for other suitors to knock at the door of the sellers,” said one person familiar with original deal said. Reuters