Macau Business Daily, Mar 18, 2014

Year II

Number 498 Tuesday March 18, 2014

Publisher: Paulo A. Azevedo

MOP 6.00

business daily 1

Friday April 19, 2013

U-turn on cross-border car insurance

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et’s forget one motor insurance policy for dual-plate vehicles. The consensus now is that a U-turn is necessary. Macau and Mainland China want to issue their own policies, says the president of the Monetary Authority.

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GDP rolls double sixes

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www.macaubusinessdaily.com

conomists say that Q4 GDP set the most sizzling pace for 7 quarters. Due credit was given to the juggernaut performance of the resort-casinos, while expectations remain high for double digit growth this year. Q4 GDP expanded by 14.3 per cent ‘spurred by rising exports of services’, claims the Statistics and Census Service.

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Minimum wage still up for grabs Page 7

Stampede for subsidised flats Page 8

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The long urban march

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ropelled by the necessity of creating a domestic demand-led economy, Chinese leaders say urbanisation is the way to go. State media report that the leadership will introduce a total overhaul of transportation, residence-registration rules and encourage local governments to partake in growing the cities.

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9

%Day

Galaxy Entertain

4.36

China Resources Po

4.30

CITIC Pacific Ltd

2.40

Hang Lung Propert

1.99

Sands China Ltd

1.97

China Mengniu Dair

-1.96

China Overseas Lan

-2.11

Cosco Pacific Ltd

-2.67

Tencent Holdings

-3.10

New World Develop

-5.56

Source: Bloomberg

Govt. TV plan gets poor reception A tale of two cities

Secretary for Transport and Public Works Lau Si Lo discloses plan to roll out a wholly governmentowned TV station. Billed as a ‘temporary measure’, the Secretary claims the station would plug the gap while new concessions are thrashed out with industry players. The major companies concerned have voiced grave doubts.

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The sentencing of two high profile Hong Kong businessmen by a Macau court has resurrected talk of an extradition treaty between the two SARs. A Hong Kong law professor cites the different legal systems as a major hurdle to be negotiated but an international law expert says that invoking the U.N. Convention Against Corruption could be applied.

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March 18, 2014 Friday April 19, 2013

Macau

Political will, systems prevent Macau-Hong The sentencing of two Hong Kong businessmen here last week could serve as the impetus Different systems and lack of political will, so far, the main reasons, say legal experts Tony Lai

tony.lai@macaubusinessdaily.com

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olitical will and the different law systems practised by Macau and Hong Kong have so far prevented the materialisation of a bilateral extradition treaty, say legal experts.

But the recent sentencing of Hong Kong tycoon Joseph Lau Luen Hung and businessman Steven Lo Kit Sing could be a catalyst for both administrations to step up their work, although the treaty is unlikely to be retroactive, they add.

The governments of both jurisdictions say such an agreement is under discussion but is only in the initial stages, despite the intention to resolve this issue some 14 years ago.

The Hong Kong pair - both found guilty of bribery and money laundering by Macau’s Court of First Instance on Friday - can escape staying behind bars for five years and three months as long as they do not enter the city. This is due to the absence of any treaty between Macau and Hong Kong regarding the handing over of offenders.

The case can push an extradition agreement between the two SAR’s

An international law expert here, who preferred not to be named, said: “An extradition agreement is founded on the political wills of the jurisdictions to find ways of punishing people that are not in their place.”

“Hong Kong and Macau in the past may have never found the need to push for any such agreement,” the expert said. “But the case of [Joseph

Lau and] Steven Lo can be a push.”

The intention of a bilateral extradition agreement was first mooted during an official visit of then Hong Kong secretary for justice Elsie Leung Oi Sie to Macau in 2000.

The visit mentioned the establishment of legal cooperation between the two special administrative regions under China including extradition.

A spokesman for Macau’s Law Reform and International Law Bureau told Business Daily yesterday that the Macau side has had “initial contact” with its Hong Kong counterpart regarding this.

“But we have not talked about anything in detail,” he said. “It depends at last on the willingness of both sides, and we still need to schedule

more time for further contact.” He declined to comment further.

No date back Hong Kong newspaper South China Morning Post also quoted the Department of Justice there saying it was discussing the surrender of fugitive offenders with jurisdictions

Steven Lo protests his innocence

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ong Kong businessman Steven Lo Kitsing has publicly asserted that he is innocent after a court in Macau convicted him of bribery and money laundering.

Mr Lo, chairman of entertainment conglomerate BMA Investment Group Ltd, told a press conference in Hong Kong yesterday: “I have never committed any unlawful acts mentioned in the judgement.”

He also leapt to the defence of the man he was convicted of bribing, Ao Man Long.

Macau’s Court of First Instance found that Ao, when secretary for transport and public works, took a bribe of HK$20 million (US$2.56 million) in return for granting land near Macau International Airport for La Scala, a housing project, in 2005.

Ao was convicted previously and is now serving a prison sentence.

“Former secretary Ao Man Long never abused his authority to affect the land bidding result,” Mr Lo said.

The court convicted Mr Lo and co-accused Joseph

Lau Luen-hung, formerly chairman of property developer Chinese Estates Holdings Ltd, on Friday.

It sentenced each to five

years and three months in prison.

Mr Lo has appealed against his conviction. He said he would focus all his

efforts on his appeal.

Mr Lau has also appealed against his conviction.

He resigned as chairman, executive director and chief executive of Chinese Estates on Friday. His son, Lau Ming-wai, has replaced him as chairman.

Trading in Chinese Estates shares resumed at the Hong Kong Stock Exchange yesterday, having been suspended on Friday afternoon.

The price of the stock fell by 2.1 percent to close at HK$19.38. The Hang Seng Index lost 0.3 percent.

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March 2014 Friday 18, April 19, 2013

Macau

Kong extradition pact

crime

for a treaty - but unlikely to be retroactive.

Silent and cautious burglars

A more in common than either does with the mainland’s due to their common binding global human rights norms and absence of a death penalty, the report said.

Even should Macau and Hong Kong agree an extradition treaty in the future, it is unlikely to affect either Mr Lau – former chairman of listed developer Chinese Estates Holdings Ltd - or Mr Lo.

couple living in Rua dos Mercadores, Ed Kai Son, didn’t expect to arrive back home, after visiting relatives in the mainland, to find their apartment burgled.

Well, they didn’t notice at the beginning, as the intruders were cautious and only a tissue box next to the sofa appeared to be out of place. Last Friday evening, when one of them went to the bedroom closet, they finally discovered that money was missing and realised they had been the victims of a burglary. Some MOP5,700, HKD600 and RMB900 in cash had been purloined.

Nothing was found broken or damaged (door). Judiciary Police believe the thief had let himself into the apartment with locksmith tools.

L When there’s no agreement between the parties, Macau and Hong Kong could very well apply the United Nations Convention Against Corruption International law expert

including Macau.

Apart from political will, the differences in the justice systems – common law for Hong Kong and continental law for Macau – also impose obstacles on the extradition talks, the international law expert claimed.

“There are technical issues that have to be overcome… like there is

no death penalty or life imprisonment in Macau, while Hong Kong has life imprisonment,” the expert added.

The Hong Kong newspaper also cited Simon Young Ngai Man, a law professor at the University of Hong Kong, as identifying the justice system as a key hurdle.

Mr Young added, though, that the Hong Kong and Macau systems have

“These treaties usually only cover the future,” said the international law expert, meaning the enforcement of the treaty could not be retroactive.

But the expert added that in theory Macau could file a request to Hong Kong to surrender the offenders in spite of the absence of any treaty.

Macau has never done this before but there are some successful examples from other jurisdictions, the expert explained.

The two Hong Kong businessmen have already appealed the decision of the lower court here on Friday via their legal representatives, claiming innocence.

ast Saturday, another burglary case was reported from Rua da Ribeira do Patane, Ed. Kam Lei. The victim said her son was the last to enter the apartment at around 3am and that both doors were locked after he had returned home. Three hours later, her husband discovered that the apartment had been ransacked during their slumbers. Three golden statuettes, two watches, a diamond ring, two computers and various small objects plus cash was stolen for a total value of approximately MOP60,000. In the kitchen, the window and its protective steel deterrent were open and footprints evident.

Judiciary Police concluded that the thief had broken in by stepping on the window box under the window.

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lso last Saturday, police recorded a second burglary complaint. The male victim, living in Rua da Palmeira, Ed Lai Fat, recalled that when he woke up at 6:05am he found that both his apartment doors were open and some of his belongings were missing, including cell phone, HKD11,000, MOP2,400 and RMB3,500 in cash. Again, no sign of a break-in was evident and Judiciary Police surmised that the robbery was executed, once more, with appropriate stealth tools.

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n Sunday, at around 5:20pm, a man (the victim), accompanied by his friend, parked his car on Estrada Marginal do Hipódromo. Only eight minutes later, they discovered that the black bag left in the driver’s seat with HKD40,000 in cash inside had disappeared along with his credentials, two cell phones and two Rolls Royce keys for a total value of MOP50,000. The owner had locked the car before leaving and neither doors nor windows of the vehicle were damaged during the offence.

Convention against Corruption

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ven without an extradition treaty between the special regions, Macau and Hong Kong “could extradite” businessmen Joseph Lau and Steven Lo, convicted in the La Scala case. According to an international law expert contacted by Business Daily, an international treaty is currently applicable in the mainland as well as in both territories.

“When there’s no agreement between the parties, Macau and Hong Kong could very well apply the United Nations Convention Against Corruption – namely, its article 44 - to extradite convicted persons”, the expert explains.

Adopted in New York on 31st October 2003, the Convention Against Corruption has been in force in Macau

since February 2006. China notified the General Secretary of the United Nations that the treaty would be applicable to both jurisdictions. Within the treaty “there are mechanisms of judiciary cooperation that allows extradition”, the expert concludes.

Besides the treaty, other solutions could be sought: “request on a case by case basis based on the principle of reciprocity, dual criminality principle” or even the possibility of “Hong Kong enacting the sentence if it recognises its validity but decides not to surrender its residents”. As the expert puts it, “it’s again a question of political will more than the technicality of the legal framework”.

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March 18, 2014 Friday April 19, 2013

Macau

Government TV The cable television company and the Public Utilities Concern Association of Macau voice misgivings Stephanie Lai

sw.lai@macaubusinessdaily.co

The agreement signed between Macau Cable TV Co Ltd and antenna companies to relay free-to-air broadcasts expires on April 21.

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overnment’s role in the television market is again a topic for debate after Secretary for Transport and Public Works Lau Si Io disclosed that it intends to establish a company to relay free-to-air television broadcasts to households through the antenna company networks.

“After much consideration, we decided that we would establish a wholly owned company to relay the basic television channels,” Mr Lau told reporters on the sidelines of a Legislative Assembly debate.

The government regards the freeto-air television channels that Macau people usually watch as “basic” channels, officials say.

“We’ll use the existing format to relay the channels,” Mr Lau said.

He said the company was meant

to be a “temporary measure”.

He declined to say how much the company would cost to set up.

Most of Macau’s households get their free-to-air television from the 14 antenna companies, which pick up broadcasts on common antennas and relay them through their local networks of cables.

An agreement signed in August also allows the antenna companies to relay transmissions by Macau Cable TV Co Ltd, the city’s sole cable television company.

The government pays Macau Cable TV 980,000 patacas (US$122,700) a month in compensation for letting the antenna companies do so.

The purpose is to maintain uninterrupted public access to television transmissions.

But the agreement expires on April 21, when Macau Cable TV’s 15-year cable television concession is due to end – hence the need for a new arrangement.

Macau Cable TV and the Public Utilities Concern Association of Macau have expressed doubt about a government-owned company relaying free-to-air broadcasts.

New competitor “The government will use this format to lead the television market,” said a source in Macau Cable TV, who declined to be identified.

“And if they really establish a wholly owned company eventually, who will be responsible for monitoring its operations?” the source asked.

Backup plan Secretary for Transport and Public Works Lau Si Io has said the government will announce its terms for the renewal of Macau Cable TV Co Ltd’s cable television concession before April 21, when the concession is due to end.

Business Daily asked Macau Cable TV what the government’s terms were, but the company declined to comment.

Mr Lau said on Friday that the government had a back-up plan for keeping cable television going should the company fail to have its concession renewed. He did not elaborate.

The government has yet to say when it will invite bids to provide cable television.

“The government itself has become a competitor in the television market as it has to pay for the broadcast rights for basic television services, and its position is actually in competition with the local pay television service provider,” the source said.

“At the same time, the government sets the conditions and rules for the television market, which is actually not fair.”

Business Daily asked the Bureau of Telecommunications Regulation for details of the proposed company, but we had received no reply by the time we went to press.

The vice-president of Public Utilities Concern Association of Macau, Johnny Chan Veng Un, said: “We don’t know what the format of this government-owned company that will relay broadcasts will be, or how it will position itself when negotiating for the copyright to basic television services that it will relay.”

Mr Chan demanded that the government explain exactly which television channels it regards as “basic” channels.

Mr Lau told the Legislative Assembly in January that a non-profit organisation would take up the role of relaying free-to-air broadcasts to households through the antenna company networks.

But he said on Friday that it would be difficult to make such an arrangement, so the government had decided to establish a company to do the job instead.

Corporate Registrations open for 2014 Business Awards In line with its efforts to support the business sector and recognize successful entrepreneurs and researchers, the Charity Association of Macau Business Readers and De Ficção Multimedia Projects have announced the launch of the second edition of the Business Awards of Macau - an initiative that aims to celebrate the best of Macau.

Commenting on the initiative, Paulo A. Azevedo, Business Awards Chairman said, “We are pleased to renew our commitment to Macau by launching the second edition of the Business Awards of Macau, following on from the success of the first edition last year. The first event caught us by surprise, as we didn’t expect such a big number of participants from different sectors. Through this initiative, we were able to shed light on some successful businesses and role models in Macau.”

“The Business Awards programme has built a reputation for credibility and reliability, creating highly valued partnerships that we expect to prevail this year. The initiative will continue to recognize rising stars in Macau’s economy, as well as celebrate entrepreneurs and researchers that have made their mark,” Mr. Azevedo added.

This year’s Awards will be presented across ten categories: leadership, entrepreneur, young entrepreneur, new talent, most valuable brand, innovation, corporate social responsibility, environmental performance, small and medium enterprise and non‑profit organization.

The awards ceremony will be held in November, when the winners will be provided with an opportunity to network with other industry members. In addition, the Business Awards organizers have put together different sponsorship packages that offer high exposure for sponsors throughout the year via newspapers, magazines and Internet.

2013 winners

The Business Awards of Macau is today officially opened for entries. Companies and individuals can submit their application online without any cost at http://awardsmacau. com or can be nominated by a third party via the same online form.

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March 2014 Friday 18, April 19, 2013

Macau

Single insurance for dual-plate vehicles scrapped: govt One country, one single motor insurance policy for Guangdong and Macau proves a bridge too far, Monetary Authority says Stephanie Lai

sw.lai@macaubusinessdaily.com

Anselmo Teng

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ifferent legal requirements and regulatory policies for motor insurance on both sides of the border mean that the single insurance policy for motor vehicles with dual registration plates for Macau and Guangdong province would have to be scrapped, chairman of the Monetary Authority of Macau Anselmo Teng Lin Seng told the media yesterday.

Last April, the Guangdong Insurance Regulatory Commission suggested simplifying insurance for vehicles that frequently cross the border, saying that it would work if the Macau government permitted a single motor insurance policy valid in both places.

Currently, owners of vehicles with dual registration plates for Guangdong and Macau must have separate insurance cover for each place.

“Basically, the consensus between Macau and mainland China now is that each side should issue their own [motor] insurance policy,” Mr Anselmo Teng informed media at the sidelines of a spring cocktail reception yesterday.

“As the legal requirements and regulatory terms [for motor insurance] are different here and on the mainland, implementing our initial suggestion of the single motor insurance policy has been actually more complex,” said Mr Teng.

“The latest proposal is that a mainland resident can go to the insurance company that issues the motor insurance policy to him, which is valid in their jurisdiction,” he explained, “Under a cooperation mechanism between the mainland insurance companies and the ones here, the client can also obtain a motor insurance policy issued by the Macau companies.”

Mr Teng did not elaborate on the premium pricing for this latest proposal made by Guangdong and Macau administrations, only adding that he hoped the proposal would obtain final approval from the central government by mid-year.

The Monetary Authority chairman also noted that the simplified motor insurance policy would be piloted in Hengqin, having obtained Beijing’s approval.

In an interview with Business Daily in July last year, China Taiping

Insurance (Macau) Co Ltd, an insurer in charge of devising the single motor policy at that time, told the paper that the single policy would not save clients money as they would still have to pay for insurance coverage on each side of the border.

Alexander Hao Tak Seng, senior manager of China Taiping Insurance’s Macau branch, also said at the time that yuan-pataca exchange restrictions posed complications for the payment of premiums under the single policy.

The insurer added that the different requirements from the mainland and Macau on compulsory third-party insurance cover for vehicles had been another major obstacle in designing a single policy.

With Tony Lai

Revisions to Financial System Act ready in 3Q The Monetary Authority of Macau anticipates a revision to the city’s Financial System Act (FSA) can be ready in the third quarter of this year, said its president Anselmo Teng Lin Seng at the Authority’s cocktail reception yesterday. The amendments to the 1993 bill embrace “a lot of areas” - from the licensing of financial institutes, the management in the institutes and their source of funds, he added. The total assets of the banking system here crested 990.1 billion patacas (US$123.8 billion) last year, rising 24.4 percent from the previous year, while profits after tax grew 31.5 percent to 7.5 billion patacas.

The Monetary Authority head also briefly commented that the pataca, indirectly pegged to the US dollar, will suffer “little impact” from the People’s Bank of China’s decision to permit the yuan exchange rate to rise or fall 2 percent from a daily midpoint rate it sets each morning, a policy which took effect yesterday.

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Macau Brands

Trends

Louis Vuitton treading a new path to luxury?

Raquel Dias

newsdesk@macaubusinessdaily.com

W

hen it comes to luxury, Louis Vuitton is probably a benchmark. It has everything from prestige to longevity and quality. Since 1893 - 42 years after the establishment of the brand Louis Vuitton has employed the famous LV monogram.

Although one or two collections have escaped the trend, most of its prestigious pieces bear it. Curiously, it was first introduced to combat counterfeiting of the French boutique’s premium travel trunks.

Fast forward to 2014 and it appears that the tradition is fading. The company now says that luxury does not depend on logos and monograms but on real quality. It has gone all out to prove this by introducing exotic leathers and metallic finishes to the new pieces.

There are five new crocodile and alligator bags ranging in price from USD9,950 for the Rossmore to USD31,000 for the Deesse Crocodile Tote. The trend started last year, when the fashion house first introduced the Capucines Bag. Elegant and sleek, this too lacked the monogramed canvas.

Intriguingly, experts say that the move was made in a bid to respond to Hermès’ growing success with über luxurious handbags like the Birkin and the Kelly.

LV seemed to be missing a true contender.

Another possible factor is that, akin to Burberry’s fate a few years back, the number of counterfeited items has rendered the brand less desirable to those who could actually afford an original. Why get the real deal when everyone else has a knock-off? In other words, recognition might actually hurt the upscale brand.

Time will tell how the French fashion house will proceed but it seems unlikely we will lose the monogrammed canvas for good.

Largest GDP growth for almost two years The better-than-average gaming revenue of the fourth quarter helped boost the city’s economic growth in that period, as well as for the entire year, say economists Tony Lai

tony.lai@macaubusinessdaily.com

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he territory’s gross domestic product grew at the fastest pace for seven quarters in the October-December period, fuelled by more casino-generated revenue, say two economists.

They believe the city’s economic growth can maintain a double digit pace this year after growing by 11.9 percent in real terms last year.

Yesterday, the Statistics and Census Service announced that Macau’s GDP for last year’s fourth quarter expanded by 14.3 percent from the previous year in real terms, ‘which was spurred by rising exports of services’.

It was the largest quarterly growth since the first quarter of 2012, when GDP expanded by 18.1 percent.

“It is quite interesting as the result is now at the top range of our estimate for last year,” said Kwan Fung, associate professor of economics at the University of Macau. “I believe it is caused by the fluctuations of gaming revenue and tourist arrivals.”

17.1%

exports of gaming services expansion

The vice-president of the Macau Association of Economic Sciences, Jack Chang Chak Io, shares Mr Kwan’s view, commenting, “It is definitely due to the gaming revenue which reached a record high [of 36.48

billion patacas] in October last year.

So this propelled GDP in the fourth quarter and helped the figure reach double digits for the whole year.”

Official data reveals that the export of gaming services expanded by 17.1 percent from the previous year in the October-December period, also the fastest pace in seven quarters.

According to calculations based on data from the Gaming Inspection and Coordination Bureau, the city’s gross gaming revenue surged 23.9 percent year-on-year to 100.12 billion patacas (US$12.5 billion) in the fourth quarter. The increase in the first nine months of last year was only 16.7 percent.

Private investment will help fuel growth Jack Chang Chak Io, vice-president of the Macau Association of Economic Sciences

Stable growth The economic growth for the whole year of 2013 rose by 11.9 percent in real terms to 413.5 billion patacas, while per capita GDP rose 7.4 percent year-on-year to a new high of 697,503 patacas.

Apart from a 12.4-percent growth in gaming services for the entire year, the increase of 10 percent from the previous year in the export of tourism services also spiked the growth, said the statistics bureau.

Private investment also rose 27.3 percent last year but public investment suffered a drop of 48.1 percent in the same period, said the bureau. This was due to the completion of the new 10.2 billion patacas campus of the University of Macau on Hengqin Island in the first half of last year, it reasoned.

Mr Chang of the economic association believes this year’s pace of GDP can match last year’s, growing by double digits.

“There may still be some fluctuations in the gaming revenue over the mainland Chinese economy but private investment will help fuel growth as several mega resorts in Cotai will only be completed by 2016.

“Public investment can rebound this year if the government can confirm the route of the Macau section for the Light Rapid Transit project,” Mr Chang said. He refers to the project of the elevated railway whose operational date had been postponed from 2015 to 2016, with the construction for the Macau stretch still on hold.

Associate Professor Kwan said: “The growth will probably be around 10 to 11 percent this year unless there is any big change in policy that restricts the number of [mainland] tourists coming here.”

Mainland tourists accounted for over 63 percent of the 29.3 million visitors Macau received last year, official data says.

The Monetary Authority of Macau stated earlier this year in a report that it expects this year’s GDP to ‘sustain’ the pace of last year.

The net export of goods and services, including gaming, accounted for 60.9 percent of last year’s GDP, up from 58.2 percent in 2012, according to yesterday’s figures.

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March 2014 Friday 18, April 19, 2013

Macau

Minimum wage rate not set in stone The Legislative Assembly may argue to change the proposed rate of 28 patacas an hour, says Francis Tam Tony Lai

tony.lai@macaubusinessdaily.com

S

ecretary for the Economy and Finance Francis Tam Pak Yuen says it is up to the Legislative Assembly to try to change the minimum wage rate for cleaning and security staff, if it wishes.

Mr Tam told reporters yesterday that he expected a bill on the minimum wage, setting the rate at 28 patacas (US$3.51) an hour, to begin going through the legislative process next month.

“The bill will be sent to the Legislative Assembly for review and there will still be many chances for everyone to voice their opinions during the process,” he said.

Asked if he meant the wage rate could be changed, he replied: “Many opinions can be expressed during the legislative process.”

The government proposed the rate of 28 patacas an hour last month.

The proposal flew in the face of 98.8 percent of opinions collected in last year’s public consultation on the minimum wage, which were for a rate of 30 patacas an hour.

At present, only employees of the government’s cleaning and security contractors are entitled to

a minimum wage.

But the government supplements the earnings of the poorly paid to bring their income up to a minimum of 4,700 patacas a month.

The Executive Council issued yesterday a written statement saying the government will extend the income supplement scheme to the end of this year and increase the minimum income it guarantees to 5,000 patacas a month.

The government spent 23.97 million patacas on the scheme in the first three quarters of this year.

The average number of beneficiaries in each quarter was 1,603.

On another matter, Mr Tam said that if Macau got Guangdong to give it more land on Hengqin Island or in Nansha or Cuiheng, the land would be for enterprises that would diversify the city’s economy.

He said using the land for housing or social facilities was not in prospect.

Mr Tam also said that within one month the government would recommend to the authorities on Hengqin 30 of the 89 proposals it had received for investment in the 4.5 square km of the island set aside for Macau businesses.

Pay rise for civil servants

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he Executive Council has agreed to increase civil servants’ pay index from 70 patacas an index point to 74 patacas, representing a rise of 5.71 percent, the Council announced yesterday. If the suggested pay rise is approved by the Legislative Assembly, the government would have to allot 550 million patacas

(US$68.77 million) of budget to cover the pay rise this year, the Council noted. The 5.71 percent of civil service pay rise was proposed to the Council by the Civil Service Pay Committee, a local advisory organ that cites salary hikes in the private sector and the 2013 inflation rate of 5.5 percent as major factors for the adjustment.

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Macau Two more directors leaving Sands China board Sands China Ltd has announced that two more of its directors are leaving its board. The company says non-executive director William Lau Wong will retire after its annual general meeting, scheduled for May 30, due to other business commitments. It says non-executive director Jeffrey Howard Schwartz will resign at the same time also because he has other business commitments. Sands China had previously announced that non-executive director Irwin Siegel was retiring after the annual general meeting. The company has told the Hong Kong Stock Exchange that none of the three directors has any disagreement with the rest of the board. Sands China has meanwhile recommended the payment of a final dividend of HK$0.86 (US$0.111) per share for 2013, to be approved in the annual general meeting.

Tycoon Club high-limit salon opens in Grand Lisboa The Tycoon Club high-limit gaming salon has opened in SJM Holdings Ltd’s Grand Lisboa. SJM Holdings says the Tycoon Club, on the upper first floor of the casino, has 740 square metres of space, around 10 gaming tables and 30 slot machines. The company says the club has “a luxurious atmosphere” and a “dining lounge” with an array of amenities.

Henquin project percolating According to Macao Daily News, the chairman of Sino Perfect Investment Limited, David Chow, said that the Hengqin project will begin this month and is scheduled to hopefully finish in two years. The total investment budget will be less than 1.6 billion patacas, he added. Moreover, regarding the redevelopment of Macau Fisherman’s Wharf, “the construction of the first hotel will be completed by mid-July and is expected to open in August with the coordination of the Government,” Mr. Chow announced.

Pedro Passos Coelho, Portuguese Prime Minister

Tales of Macau Portuguese doing better without the Portuguese

T

here is rising interest throughout China in the Portuguese language with Macau turning into a centre of language teaching excellence due to the economic interests in Portuguese speaking countries, Professor Carmen Mendes told Lusa at the launch, in Portugal, of her book “Portugal, China and the business of Macau”.

Stressing that the interest “falls beyond any wish that Portugal might have” and with the country holding “no vote on the issue in any case,” Mendes said that the interest in the language was driven by China’s trade with countries such as Brazil, Mozambique and Angola.

Mendes described how this stretched well beyond the provision of language by official universities and schools with “many other private and state institutions” getting involved in the teaching of the language.

“The Portuguese language is

The Portuguese language is proliferating far more now in Macau than before Carmen Mendes, professor

proliferating far more now in Macau than before” the founding of the Special Administrative Region on the return of the territory to China at the turn of the century with Mendes saying the Portuguese cultural and historical legacy was secure “as long as the business interest in Portuguese speaking countries remained.”

Macau has served as the launch pad for Chinese trade in the aforementioned countries since 2003 when the China Forum was established with Mendes also stressing the tourism interest in preserving the Portuguese built heritage in the region.

During the launch on Friday of the Hong Kong University Press publication, the Vice Rector of the University of Coimbra, Joaquim Ramos de Carvalho, pointed out that there were now some 30 Portuguese language degrees being taught in Chinese universities.

Lusa

Subsidised flats 22 times oversubscribed T Taiwan aiming to keep Macau talent it educates Taiwan is taking measures to hang on to talented Macau graduates of its universities who stay on there to work, the island’s Central News Agency reports. The news agency quotes Taiwan’s Ministry of the Interior as saying the government will make it easier for Macau and Hong Kong graduates of the island’s universities that are working there to obtain permanent residency. At present, they must return to their home towns to work for two years before they can apply for permanent residency. The change in the rules is part of Taiwan’s effort to retain talented people, the ministry says.

he Housing Bureau received more than 42,000 applications to buy subsidised housing during the three months it allowed for applications, which ended yesterday.

But only 1,900 flats are on

offer, meaning each is 22 times oversubscribed.

The bureau said preliminary figures indicated that 60 percent of the applicants were households and the rest individuals.

The flats on offer have one, two or three bedrooms.

The bureau did not say when it would finish considering the applications and decide which applicants would be first in line.

Residents line up to submit the application form for the second-phase of the Home-Ownership Scheme housing

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Urban Revolution

Authorities are also targeting environmentally friendly growth, a serious issue for a nation that has been bogged down in pollution issues including toxic levels of smog, polluted waterways and socalled “cancer villages”. The 2014-20 urbanisation plan said it would improve water safety and air quality.

Authorities invest US$162 billion to redevelop shantytowns

G

overnment said it will invest more than 1 trillion yuan (US$162 billion) redeveloping shantytowns this year as the government detailed how it will boost its urban population to support growth.

More than 4.75 million households will be involved, state broadcaster China Central Television reported on Sunday, citing the housing ministry. China will build more transportation links, ease some residenceregistration rules and let local governments directly issue bonds, according to the urbanization plan for 2014 to 2020, issued by the ruling Communist Party and State Council.

The 2014-20 urbanisation plan released on Sunday aims to boost domestic consumption by increasing the proportion of urban residents among China’s population of almost 1.4 billion to 60 percent by 2020, up from 53.7 percent now. The U.S. proportion was 82 percent in 2011 and Japan’s was 91 percent, according to a joint report in 2012 by the World Bank and Development Research Center of the State Council.

Among the biggest obstacles to the planned relocation of several hundred million rural residents is the huge infrastructure development needed to accommodate the new wave of city dwellers as well as reform of the country’s

Municipal Bonds

High-speed train in Taizhou

“hukou” registration system.

This complex system of residency registration is a major sticking point because it controls the benefits that residents can enjoy. The system denies basic services to those who relocate without permission, fanning social unrest.

China’s leaders, however, will make it easier for rural migrants to obtain residency status in smaller cities, with the intention of helping to unlock the nation’s huge potential domestic demand.

Urban salaries are higher than rural incomes, meaning that a larger city-based population should have greater spending power.

“Domestic demand is the fundamental impetus for China’s development, and the greatest potential for expanding domestic demand lies in urbanisation,” state news agency Xinhua reported, citing the plan from China’s State Council, which added detail to previous announcements about the urbanisation drive.

The plan will create “huge” demand for investment in public infrastructure, with authorities seeking a substantial increase in social housing as well as the development of expanded urban underground transport networks by 2020.

Every city with more

60%

population will live in cities by 2020

than 200,000 residents will be covered by standard railways by 2020, the plan said, with high-speed services connecting cities with more than 500,000 residents.

The civil aviation network, meanwhile, will cover about 90 percent of the population.

China plans to set up a transparent financing mechanism for urban construction, allowing local governments to issue municipal bonds, according to the plan. The central government will also establish a management and rating system to increase the use of direct financing and consider establishing policy- financial institutions for both infrastructure and home construction, it said.

The urbanization plan will help promote regional development, upgrade industries and increase domestic demand, according to the text released by Xinhua.

Urbanization is important for accelerating the development of the service sector, which will create many jobs, it said.

Chinese leaders vowed in December to map out city clusters across the country’s central, western and northeastern regions and develop them into engines for growth as part of the nation’s urbanization strategy.

“Diverse and sustainable” funding mechanisms will be developed to finance policies, they said at an urbanization conference, according to a report on the meeting by Xinhua. Attention must also be paid to the environmental impact of such development, leaders said.

Reuters and Bloomberg News

UBS to invest in residential properties Housing sales fell 5 percent in first two months of this year

U

BS AG, Switzerland’s biggest bank, is raising a second fund that will invest in Chinese residential properties to meet demand that remains “extremely strong” even amid government curbs that are lowering returns.

The company is talking to existing investors for the U.S. dollar fund, which will focus on second-tier cities, said Trevor Cooke, the head of global real estate for Asia Pacific at UBS Global Asset Management (Australia)

Ltd. The bank’s first such fund, set up in 2008 with a US$300 million target and scheduled to be fully divested in 2016, potentially will yield “very close” to its targeted 20 percent return, he said.

China’s new home sales exceeded US$1 trillion for the first time in 2013 as Premier Li Keqiang refrained from adding nationwide property curbs.

Investors poured US$10.7 billion into new real estate funds in China last year, almost 80 percent more than a

year earlier, according to consultancy Zero2IPO Group.

After a “very detailed, forensic look at the residential market, particularly in second, third tier cities, we’ve come back feeling pretty confident there’s a very strong and compelling case” for a second fund, Cooke said in an interview March 12 in Beijing.

Housing sales fell 5 percent in the first two months of this year, after at least 10 cities stepped up local measures to calm the markets at the end of 2013 following double-digit price gains.

US$10.7 billion

Investment in real Estate funds in 2013

‘Very Attractive’

Buildings on construction at Dongsishitiao

While UBS is targeting a lower return between 16 percent and 18 percent for the new fund, compared with the first one, partly due to stronger competition, “that’s still a very attractive return,” Cooke said.

The government will curb demand for housing among investors and will regulate the property market “differently in different cities,” Li said at a press conference in Beijing on March 13. Shanghai, Shenzhen and Guangzhou, all among the four biggest so-called “first-tier” cities, all

raised the minimum down payment for second homes to 70 percent at the end of last year, following the precedence of Beijing. Some provincial capitals also tightened property measures.

UBS has already sold two projects from the first fund in Shenyang, capital of north-eastern province of Liaoning, and still holds the other four assets in the fund located in cities including Xi’an and Hangzhou, Cooke said.

Bloomberg News

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Greater China Twitter CEO to visit Shanghai Dick Costolo will meet Shanghai government officials, academics and students on his first visit to China, signalling Twitter’s interest in cracking a lucrative but thorny market with 600 million Internet users. Twitter, which has been blocked by Chinese censors since 2009, described the trip as a personal tour for Costolo, who is due to land at Shanghai’s Pudong International Airport on Monday and plans to spend three days in the business capital. He is not scheduled to visit Beijing but is scheduled to meet the Shanghai government.

Taiwan considers merging stock exchanges Taiwan’s finance regulators are planning to evaluate the merger of the island’s main stock exchange and three smaller exchanges, the head of the Financial Supervisory Commission said Monday. Chairman William Tseng said in a parliamentary session that an evaluation report would be completed in three months. No details were immediately available.

U.S. welcomes Chinese currency move The United States welcomed China’s recent decision to allow its currency’s value to vary more against the U.S. dollar, a Treasury spokesperson said on Sunday. U.S. Treasury Secretary Jack Lew spoke on Saturday evening by phone with Chinese vice-premier Wang Yang in a previously scheduled call, the spokesperson said. “Lew welcomed China’s recent announcement to widen the daily trading band for the renminbi against the U.S. dollar and emphasized the need for China to move towards a market-determined exchange rate”, the spokesperson said. China’s central bank eased its grip on the yuan on Saturday by doubling the daily trading range for the currency.

Giant Investment to buy online-game unit Giant Investment Ltd. said it would acquire Giant Interactive Group Inc., a China-based online-gaming developer, for US$3 billion and take it private. The US$12-a-share price is an 18.5 percent premium to Giant Interactive’s closing price of US$10.13 on November 22, before Giant Investment made its initial offer, the companies said in a statement. The price represents a 5.3 percent premium to Giant Interactive’s closing price of US$11.40 on March 14. Giant Interactive is the maker of the game “ZT Online.” Shares of Shanghai-based Giant Interactive have risen 81 percent in the past year.

National stocks decline in NY Chinese stocks trading in New York posted the biggest weekly decline since May 2012 amid concern that a slowdown in economic growth will curb corporate earnings and add to a jump in bad debts. The Bloomberg China-US Equity Index of the mosttraded Chinese stocks in the U.S. sank 7.1 percent to 96.43, the first decrease since the five-day period ending January 31. Home Inns & Hotels Management Inc., which runs China’s biggest budget hotel chain, slid 19 percent, while China Lodging Group Ltd. dropped the most since its 2010 initial public offering.

Zhuhai’s Allwinner defies chipmakers big shots Sales of unbranded tablets under US$150 to rise 36 percent this year

I

ntel and Qualcomm, the two largest U.S. chipmakers, are under threat in the fastest-growing part of the tablet market from a band of upstarts with names like Allwinner Technology Co. and Fuzhou Rockchip Electronics Co. that are little known outside southern China.

Allwinner became the No. 2 tabletprocessor maker behind Apple Inc. in 2012 as demand for cheaper tablets stoked sales of its low-cost chips, according to IDC. Qualcomm ranks third, while Intel comes in at No. 6, following Rockchip.

The Chinese chipmakers’ rapid rise has been fuelled by their quick response to a shift in the tablet market towards budget machines, which are providing many consumers in emerging regions with their first access to the Internet on a larger screen. The young companies have jumped on that trend by providing the devices’ manufacturers -many of them based around Shenzhenwith low-cost components based on ARM Holdings Plc designs, the same technology used by many of their more established rivals.

“It’s really thrown open the competitive stakes,” said Michael Palma, an analyst at market researcher IDC. “It’s a sizable chunk and it’s growing the fastest -so much of this market is going for this good-enough solution.”

The new entrants owe their rapid start to the availability of ARM’s technology, which dominates in chips for the tablet and phone industries.

They’ve also benefited from their access to chip foundries such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., which provide contract-based use of some of the most advanced production facilities.

Faster Growth Success at Allwinner, which was founded in 2007, and Rockchip, established in 2001, is being driven by increasing demand for inexpensive tablets in their home market, where some devices sell for as little as US$50, and in other developing economies.

Sales of tablets that retail for less than US$150 and don’t carry a brand

Allwinner chips

name will rise 36 percent this year, IDC estimates, driving a 22 percent increase in total tablet shipments. The market for tablet processors grew 32 percent in 2013 to US$3.6 billion, according to Strategy Analytics.

Local chipmakers benefit from

Yuan widening causes hedging The yuan in Hong Kong weakened 2 percent in the past month

T

he weakening of China’s currency had already caused investors to hedge yuan structured products estimated

by Morgan Stanley at US$150 billion before today’s widening of the trading band threatened even greater volatility.

The extra interest payments to lenders of yuan in one-year crosscurrency swaps slumped more than 1.5 percentage points in the past eight months to a two-year low of 1.02 percent on February 24, reflecting rising demand for dollars. The yuan in Hong Kong weakened 2 percent in the past month, Asia’s worst decline, to 6.1560 per US dollar. Holders of products called Target Redemption Forwards will suffer significant losses should it fall into the “danger zone” between 6.15 and 6.20, Morgan Stanley estimates.

More than 50,000 businesses ran into trouble five years ago when derivatives trades in China, South Korea, India, Indonesia, Brazil,

Mexico and Poland went sour as local currencies unexpectedly plummeted during the global financial crisis, causing at least US$30 billion of losses. Positions gone awry could add to the burden on companies and fund managers in an economy forecast to grow at its slowest in 24 years as the government cracks down on debtfuelled investment.

“Nobody is really sure of how

If the currency continues to weaken, you’ll see more hedging coming in Yii Hui Wongat, BNP Paribas strategist

Hong Kong Exchange Trade Lobby

much leverage there is,” said Yii Hui Wong, a strategist at BNP Paribas SA in Singapore. “If the currency continues to weaken, you’ll see more hedging coming in and cross-currency swap rates will remain depressed.”

Yuan Decline The yuan in Hong Kong reached 6.1722 per US dollar yesterday, the

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Greater China

32%

2013 market tablet processors growth to US$3.6 billion

their proximity to the device manufacturers because it bolsters their ability to anticipate and react to new features that are in demand, said Ben El-Baz, head of U.S. marketing for Allwinner.

“Shenzhen is really the electronics

products weakest since May 2013. Threemonth implied volatility, a measure of price swings, has jumped the most this year among 52 global currencies tracked by Bloomberg, and was at 3.86 percent. The cross-currency swap rate was at 1.29 percent, down from as high as 2.85 percent on June 20.

The weakness was sparked by the People’s Bank of China, which

hub for the world,” El-Baz said in a phone interview. “We are so close to the market that we’re able to come out with new solutions faster than our competitors. We can do it at lower cost.”

Four Times Allwinner accounted for 18.2 million of the 88.3 million tablet processors shipped in the fourth quarter of 2013, IDC said. That was more than three times what Santa Clara, California-based Intel, the world’s largest chipmaker, shipped in the same period. Rockchip sold 9 million.

The closely held Chinese companies’ ascent reflects the broader shift of consumer computing to mobile gadgets, away from Intelpowered personal computers sold by U.S. companies. While Apple, which designs its own chips, has bridged that transition, others such as HewlettPackard Co. and suppliers like Intel have failed to deliver products that have made an impression.

Intel Chief Executive Officer Brian Krzanich - who has made catching up in mobile computing a priority since taking over the company in May - said he’s aiming to quadruple tablet - chip sales to 40 million this year and processors from his company will make their way into devices costing less than $100. To speed adoption, Intel will provide tablet makers with subsidies -what it calls “contra revenue”- to make the cost of its chips competitive. That will cut into profitability this year.

Bloomberg News

weakened the yuan’s daily onshore fixing rate since January 15, seeking to end one-way appreciation bets. That prompted investors to reduce or hedge wagers on currency appreciation because of signs the world’s secondlargest economy will cool.

This year’s 7.5 percent economic expansion target is “flexible” and some financial product defaults may be unavoidable, Premier Li Keqiang told a press conference at the National People’s Congress on March 13, two days after PBOC Governor Zhou Xiaochuan said the yuan’s fluctuations are normal. The yuan will be able to trade as much as 2 percent on either side of the fixing from today, compared with 1 percent earlier, the PBOC said on March 15.

Morgan Stanley said in a February 26 report US$350 billion of Target Redemption Forwards have been sold since the start of 2013 and US$150 billion of products remain. Adam Gilmour, Citigroup Inc.’s head of Asian foreign exchange & derivatives sales, agrees with the estimate and said Chinese companies are the main holders.

TRF Slowdown Sales of structured products based on the offshore yuan shrank by about 80 percent on a weekly basis in the past month, Citigroup’s Gilmour said from Singapore. His banks’ sales fell from as much as US$500 million to US$700 million a week in January to about US$50 million currently, he said.

“Transaction flows have really dried up, from about US$2 billion a week in the first 6 weeks of this year to about a fifth of that at the moment,” said Gilmour, referring to the notional amount of the structures sold.

Bank of America Corp., UBS AG, JPMorgan Chase & Co. and Nomura Holdings Inc. all lowered their forecasts last week for economic growth in 2014.

Bloomberg News

Australia worried about Chinese investment Chinese investment is a sensitive issue in Australia

F

oreign investment in Australia’s housing market will be examined by a national parliamentary committee, its chair said Monday, following a study that said Chinese investors are squeezing out local buyers.

Kelly O’Dwyer said the House Standing Committee on Economics inquiry into affordable housing would probe the foreign investment framework to see whether it helps increase housing stock, and whether it is driving up prices.

“We know that the great Australian dream is to own your own home and we know that that’s pretty difficult -even with two incomes and lots of years of savings and a large mortgage,” O’Dwyer told ABC radio.

“So we want to make sure that we’re not making it even more difficult.”

Chinese investment is a sensitive issue in Australia, where rural politicians have argued against selling valuable farm and mineral land to foreigners, and there are indications of an influx in Chinese investors in housing.

Investment bank Credit Suisse this

month estimated that Chinese investors could pour Aus$40 billion (US$36 billion) into Australia’s residential property over the next seven years and this could push up prices in what is already one of the world’s most expensive housing markets.

In a report, Credit Suisse said Chinese buyers -who are restricted to buying only new homes- purchased 12 percent of new housing across Australia per year.

But they concentrated their buying in Sydney and Melbourne, acquiring 18 percent and 14 percent of new supply respectively, meaning they were a much more powerful force in those cities where home prices are climbing.

“The Reserve (central) Bank governor made some comments in the recent parliamentary oversight hearing of the Economics Committee, where he said all foreign investment does have an effect on prices,” O’Dwyer said.

“We want to know though whether or not the current laws and the current framework is being properly adhered to and whether it is a truly distorting impact.”

AFP

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Asia Vietnam power plants stop due to gas leaking Two power plants in southern Vietnam were shut down at the weekend due to a leaking valve on a gas pipeline, state-run Voice of Vietnam radio said yesterday.

The problem on the pipeline, owned by state oil and gas group Petrovietnam, took place on Saturday.

The power plants in Ca Mau province have a combined power capacity of 1,500 megawatts and supply about a tenth of the country’s electricity.

Following the shutdown, state utility Vietnam Electricity group had to source electricity from the fuel oilfired O Mon power plant in Can Tho city to ensure stable power supply to southern Vietnam, it said in a statement released on Sunday.

LG Chem acquires desalination innovator NanoH2O Inc., a manufacturer of reverse-osmosis membranes that purify seawater to drinking quality while lowering the cost of desalination, is being purchased by Seoul-based LG Chem Ltd. for US$200 million. The Southern California start-up, established in 2005 from research that stemmed from the University of California at Los Angeles, makes water potable from fresh, brackish and saltwater sources. The acquisition is expected to close next month, LG Chem said in a filing to the Korea Exchange on March 14. The purchase takes place amid a record drought from California to Southeast Asia and rising water scarcity issues.

Daewoo Shipbuilding wins US$316 contract The company said yesterday it has won a 339.3 billion won (US$316 million) order to build a liquefied natural gas (LNG) carrier for Russian state-owned shipper Sovcomflot.

A spokesman for the South Korean shipbuilder said the order is the first of 16 gas carriers that Daewoo agreed in July last year to reserve construction slots for future building, intended for use in Russia’s Yamal natural gas development project. Daewoo said the LNG carrier, which will be an icebreaker, is due to be delivered by June, 2016.

Coffee reserves reach record Coffee growers in Vietnam, the biggest producer of robusta beans used by Nestle SA, are holding record stockpiles as they curb sales amid speculation that drought will reduce next year’s harvest. Inventories reached 850,000 metric tons in the week ended March 7, the highest ever at this time of the year, according to the median of eight trader and shipper estimates compiled by Bloomberg.

Growers have sold 50 percent of the record 1.7 million-ton output in the year started October, compared with an average 60 percent in the past five years, the survey shows.

Twin deficit risk for The easing is part of Abe’s growth policy, known as Abenomics

J

apan’s Ministry of Finance is flagging the risk of twin current account and fiscal deficits for the first time in at least three decades, just as faster inflation threatens to drive up bond yields.

The shortfall in the broadest measure of trade widened almost fivefold in January from a year earlier and the ministry said in a March 10 paper that export deficits could eventually overwhelm income from overseas investments. Japan’s longterm yields will rise to 4 percent in the 12 months starting April 2020 from 0.7 percent in the current fiscal year, the Cabinet Office forecast in January, based on the assumption Prime Minister Shinzo Abe’s policies will end deflation and drive growth to above 3 percent on a nominal basis.

While Bank of Japan stimulus has weakened the yen by 7.2 percent in the past year against its peers, it hasn’t helped the nation’s overseas sales enough to offset swelling import costs.

Japan’s 10-year borrowing cost at 0.62 percent is the lowest globally as years of current account surpluses enable the nation to finance fiscal deficits without resorting to foreign capital.

“If a current account shortfall becomes the trend, Japan’s fiscal deficits will draw attention and threaten to spur a jump in yields amid capital flight,” said Hidenori Suezawa, an SMBC Nikko Securities Inc. analyst who is a member of a MOF advisory panel on government finances. “Such a

Japan’s Ministry of Finance

risk will increase from 2015 onwards.”

The record current account deficit in January at 1.6 trillion yen (US$15.8 billion) was driven by a 30 percent increase in imports from a year earlier that exceeded a 17 percent jump in exports, MOF data show. While the trade shortfall almost doubled to 2.35

trillion yen, incomes from overseas investments rose 8.6 percent to 1.34 trillion yen.

Monetary Easing The BOJ is buying an unprecedented amount of government bonds every

South Korea will rise interest rates The comments contrast with Goldman Sachs forecasts announcing rates cut

I

ncoming Bank of Korea Governor Lee Ju Yeol said South Korean households need to prepare for higher interest rates, bolstering analysts’ forecasts for an increase this year as inflation picks up.

“Even when the government asks the central bank to play a role in boosting the economy, the Bank of Korea should decide after considering price stability and all other aspects of the economy, such as financial stability, growth and employment,” Lee wrote in a document in response to questions by opposition Democratic Party lawmaker Kim Hyun Mee. The comments contrast with a call

by Goldman Sachs Group Inc. that the BOK will cut rates in coming months and indicate a central bank under Lee would be mindful of containing price pressures. With the BOK forecasting the fastest growth this year since 2010 and inflation rising into a target range, many economists foresee a rate increase by the fourth quarter.

“His comments are realistic and echo our view that at this level policy rates are too low,” said Wai Ho Leong, an economist at Barclays Plc in Singapore, forecasting a rate increase late in the third quarter or early in the fourth. “Whether it is a quarter later or a quarter sooner, it is like a visit to the dentist -an inevitability.”

South Korean government bonds fell after Lee’s comments. The yield on the 3.125 percent government notes due March 2019 rose two basis points to 3.14 percent as of 10:58 a.m. yesterday in Seoul, Korea Exchange Inc. prices show.

President Park Geun Hye nominated Lee to take over after Governor Kim Choong Soo’s term ends March 31. Lee Ju Yeol, 61, a former senior deputy governor with 35 years experience at the BOK, will face questions from ruling and opposition lawmakers on March 19, the first such grilling of a governor nominee in the BOK’s history. The lawmakers don’t have the power to block the appointment.

The BOK left its seven-day repurchase rate unchanged at 2.5 percent last week for a tenth straight month, in line with forecasts of all 18 economists surveyed by Bloomberg News.

Bloomberg News

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

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Asia

Japan

“Japan’s current account deficits have already become a trend,” said Masaaki Kanno, an ex-BOJ official and the chief Japan economist in Tokyo at JPMorgan Chase & Co. “The shortfalls are a consequence of the success of Abenomics.”

Japan has posted a current account surplus every year since 1981, enabling the nation to become the world’s largest creditor. It has accumulated overseas assets worth US$3.42 trillion on a net basis by the end of 2012, the most among the 28 countries tracked by the International Monetary Fund and compared with China’s US$1.74 trillion. Japan’s net international investment position was at 327.4 trillion yen at the end of last year, based on the Finance Ministry’s preliminary estimate.

IMF Estimates

month to support growth through lower borrowing costs, weakening the yen to as low as 105.44 per dollar on January 2, a level unseen since October 2008. The easing is part of Abe’s growth policy, known as Abenomics, that also includes fiscal outlay and business deregulation.

The nation will avoid a current account shortfall until at least 2018, with excess in the broadest measure of trade recovering to 1.7 percent of gross domestic product this year from 1.2 percent in 2013, the IMF estimates. That contrasts with the U.S., where the deficit is projected to widen to 3 percent in 2018 from 2.7 percent last year.

“We see very little chance of Japan’s current account surplus reversing to a deficit over the medium term and causing capital flight,” said Tomo Kinoshita, the Tokyo-based chief economist at Nomura Holdings Inc., Japan’s biggest brokerage. “On the contrary, if the government’s growth strategy succeeds, there should be more capital coming into Japan.”

Kinoshita expects the 10-year yield to rise to 0.82 percent by the end of the year.

Bloomberg News

DBS advances in private banking through acquisition Singapore bank runs Asia’s ninth‑largest private bank, with assets under management of US$46 billion at the end of 2012

D

BS Group Holdings Ltd., Southeast Asia’s biggest bank, agreed to buy Societe Generale SA’s Asian private banking business for US$220 million in an effort to build its wealth management operations in the region.

The transaction includes “selected parts” of the French bank’s trust business, Singapore-based DBS said in a statement today. It represents about 1.75 percent of the US$12.6 billion in assets managed by Societe Generale Private Banking Asia as of December 31, according to the statement.

The deal will spur DBS’s goal of becoming a leading wealth manager in Asia, increasing its high-net-worth assets under management by more than 20 percent, the bank said. The total wealth of millionaires in the AsiaPacific region may top that of their peers in North America as soon as next year, according to a September report by Cap Gemini SA and Royal Bank of Canada.

DBS will fund the transaction with cash and it’s not expected to have an impact on capital or earnings, it said.

The deal will give Societe Generale’s Asia clients access to DBS’s banking services. In turn, DBS customers will be able to tap the French lender’s

private banking and other services in Europe, the Singapore bank said.

DBS Chief Executive Officer Piyush Gupta said the agreement will “create value for high net worth customers from both banks and present employees with expanded career development opportunities.”

ABN Amro Gupta’s bank had been competing with Dutch lender ABN Amro Group NV for Societe Generale’s Asian private banking business, with the two companies making final offers in November, two people with knowledge of the matter said at the time.

DBS runs Asia’s ninth-largest private bank, with assets under management of US$46 billion at the end of 2012, according to a Private Banker International study published in October. UBS AG topped the list, and Societe Generale was 18th.

Asians with at least US$1 million in investable assets are expected to see their riches climb to US$15.9 trillion by 2015 from US$12 trillion in 2012, Cap Gemini and RBC wrote in their wealth report for the region in September.

Bloomberg News

Optimistic times for Indonesian shares Indonesia will hold legislative polls in April before the presidential vote three months later

I

ndonesian stocks will extend their bull-market rally as speculation increases that Joko Widodo will win this year’s presidential election and boost investment, said some of the country’s largest investors and brokerages.

The Jakarta Composite Index will rally another 7 percent to a record closing level of 5,225 this year after the Indonesian Democratic Party of Struggle nominated the Jakarta governor as its presidential candidate, according to PT CIMB Securities Indonesia, the second-largest brokerage.

Construction and healthcare shares may benefit most on anticipation Widodo would lift spending on welfare and infrastructure, said PT Manulife Aset Manajemen Indonesia, the No. 2 mutual fund manager.

Widodo’s nomination sparked the Jakarta index’s biggest rally since September and spurred foreign investors to plough more money into the nation’s stock market than at any other time in 10 months. Shares in Southeast Asia’s biggest economy have bucked a 6.4 percent decline in the MSCI Emerging Markets Index this year amid accelerating economic growth, a shrinking current

account deficit and betterthan-estimated earnings.

“There are hopes around the infrastructure agenda and whether he can push through much needed spending on that,” James Thom, a Singapore-based money manager at Aberdeen Asset Management Plc, which oversees about US$320 billion worldwide, said by phone today. “There is a whole range of sectors that can potentially benefit.”

Health Plan Widodo has made infrastructure development and streamlining tax collection centrepieces of his governance, boosting his support in the business community.

Since becoming governor in September 2012, he has begun construction of a monorail in the capital and pushed through the commencement of a metro train system, which had been delayed for years. Widodo said in January that he plans to increase Jakarta’s budget by 75 percent this year by moving tax collection online and raising oversight to tackle evasion. He is using the administration’s cash for a free health plan for more

than 3 million people, aimed at the capital’s poor.

Even before his candidacy was announced last week, Widodo, known as Jokowi, topped a January poll of likely presidential candidates by the Indonesian Survey Circle, ahead of the Golkar party’s Aburizal Bakrie and Gerindra’s Prabowo Subianto. Indonesia will hold legislative polls in April before the presidential vote three months later.

Rally Risks “The market considers him as the agent who can effectively build the infrastructure,” Erwan Teguh, an analyst at PT CIMB Securities, said by phone from Jakarta on March 14. “It would lead to immediate and tangible results that can be felt in the stock market.”

The rally may be shortlived if the economy loses momentum, said John Rachmat, the head of research at PT Mandiri Sekuritas.

Indonesia’s economic expansion may slow this year to between 5.5 percent and 5.8 percent, the least since 2009, as the government reins in the current-account deficit, Finance Minister Chatib Basri said on February 23.

Indonesian candidate Joko Widodo

China, Indonesia’s largest trading partner, reported the lowest industrial output for the January-February period since 2009 and the weakest retail sales growth in a decade.

“Purely relying on a political sweetener would not be enough to support the index to the bull-case scenario,” Rachmat said in a phone interview on March 14 from Jakarta.

The Jakarta Composite Index surged 3.2 percent on March 14 to 4,878.64,

extending the benchmark index’s increase from its August low to 23 percent.

Teguh’s year-end target for the index would surpass the alltime closing high of 5,214.98 set in May. The gauge has gained 14 percent this year, led by a 30 percent gain in the Jakarta Construction, Property, and Real Estate Index. Indonesia’s economy expanded 5.72 percent from a year earlier in the three months ended December 31.

Bloomberg News

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International Paris faces air controllers strike A strike today by air traffic controllers across France will result in a reduction of as many as 30 percent of flights at Paris’s airports, the civil aviation authority said. Several unions representing air traffic controllers at airports in Paris, Lyon, Marseille and Toulouse have called the one-day strike, the authority said in an e-mailed statement. At Paris’s Charles de Gaulle and Orly airports, 30 percent of flights will be cancelled, while at airports in Lyon, Marseille, Nice and Toulouse the reduction will be 20 percent, it said.

Serb Progressives prepare to form cabinet Serbia’s Progressive Party pledged to form a new government by May 1 after winning an outright parliamentary majority in an election on a pledge to fight graft, fix the economy and join the European Union by 2020. The party, led by Aleksandar Vucic, who forced the ballot two years earlier than scheduled, won 48.8 percent, more than polls predicted, for 157 of the chamber’s 250 seats, Serbia’s independent election monitor said yesterday. Prime Minister Ivica Dacic’s Socialist Party received 14 percent, for 45 seats, according to preliminary results.

Carlos Slim enters Brazil market Billionaire Carlos Slim is using a US$45 million acquisition to participate more formally in Brazil’s financial market, betting it’s the best way to replicate his Mexican bank’s business model in Latin America’s largest economy, his son said. Grupo Financiero Inbursa SAB, controlled by Slim, announced the agreement last week to buy Standard Bank Group Ltd.’s Brazilian unit as the South African company wound down the division’s operations. The idea is to use the unit as a platform to develop the bank under the same philosophy as Inbursa, said Marco Antonio Slim Domit.

Unemployment undermines Swedish government Multiple tax cuts have led to a poorer education and healthcare systems

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weden’s biggest blue collar union is preparing for a regime change after September elections and says it wants the next government to borrow more and raise taxes to save jobs.

Sweden, where unemployment is the highest in Scandinavia, should elect a Social Democratic-led coalition to ensure more is invested in education, elderly care, railways, roads and housing, Tobias Baudin, first vice president of the Swedish Trade Union Confederation, known as LO, said in a March 13 interview in Stockholm.

Scandinavia’s biggest economy “must start to invest in what creates jobs” to “reduce the mass unemployment that’s so devastating in so many ways,” said Baudin, whose union represents 1.5 million workers. He wants the next government to raise income taxes on high wage earners, he said.

LO is throwing its weight behind a campaign to remove the four-party Conservative-led government of Prime Minister Fredrik Reinfeldt in September 14 elections after it failed to live up to pledges to cut unemployment, Baudin said. Reinfeldt’s coalition is trailing by more than 15 percentage points in some polls amid voter concerns that multiple rounds of tax cuts since 2006 have led to a deterioration in education and healthcare standards.

The current government’s efforts to leave Swedish with more take-home pay have backfired in a nation where Social Democratic administrations have dominated since World War II, turning Sweden into a bastion of European welfare.

“Cutting unemployment is the best way to fund all the initiatives that must be taken,” Baudin said. “That

Tobias Baudin, Swedish Trade Union Confederation

will cost money so we’re absolutely not shutting any doors to future tax increases.”

Baudin also blames the central bank for Sweden’s high jobless rate, which Statistics Sweden estimates was 8.5 percent in February. In neighbouring Norway, unemployment was 2.9 percent last month. Even in Denmark, where a burst housing bubble has undermined consumer confidence, joblessness was 5.4 percent in January.

Adjusting for seasonal swings, Sweden’s jobless rate is 8.1 percent, compared with 6.7 percent when the government came to power in 2006.

Some of Sweden’s biggest companies, including Volvo AB and Electrolux AB, have cut thousands of jobs to stay competitive. The nation relies on exports to generate about half its total output.

Deflation Trap The central bank hasn’t cut interest rates far enough to revive Sweden’s labour market, according to Baudin.

The bank, which left its benchmark repo rate at 0.75 percent in February following a quarter-point cut in

December, argues it needs to balance policy to avoid fuelling a credit-driven housing bubble.

That goal “can’t come at the price that we have 400,000 unemployed in Sweden and that things get entrenched and we get deflation instead of inflation,” Baudin said. “That’s completely devastating.”

Though Sweden’s economy rebounded in the fourth quarter, growing 1.7 percent from the previous three-month period, consumer prices fell 0.2 percent in February from a year earlier.

Reinfeldt has lowered income taxes five times since coming to power in 2006. He’s also cut corporate taxes, reduced payroll taxes and abolished Sweden’s wealth levy. His minority government was blocked by parliament last year when it tried to cut levies placed on Swedes earning the highest salaries.

‘Sound Politics’ Baudin said that a Social Democratic coalition with support from the Left and Green parties will need to reconsider whether Sweden needs to stick to its budget target, which stipulates that governments must post an average surplus of 1 percent of gross domestic product over a business cycle.

The rule has been supported by the Social Democrats, which has criticized the current government for not meeting the target.

The election has become a contest over which side is the most fiscally responsible, with Finance Minister Anders Borg announcing last month that any new initiatives should be financed “krona by krona.”

Bloomberg News

Pentagon contracts receding

Denmark clos to currency intervention Contracts fell to the worst showing in 23 months For the first time in more than a year, Denmark’s central bank is close to purchasing kroner in an effort to defend its peg to the euro, according to Danske Bank A/S and Svenska Handelsbanken AB. The intervention would bring Denmark one step closer to exiting the negative interest rate regime that’s anchored money markets since July 2012. It also follows a depreciation of the kroner that’s deeper than in January 2013, when the bank last raised rates.

Vodafone expands its cable business The company has agreed to buy Spain’s largest cable operator Ono for 7.2 billion euros (US$10 billion), in the latest move by the British group to rebuild its European operations with a broadband offering. Vodafone said yesterday the deal would enable it to offer a combination of mobile and fixed-line telephony, pay-TV and broadband in one of its largest European markets, hit hard by fierce competition and the effects of a lengthy recession. The deal for private equity-owned Ono is Vodafone’s third purchase of a European fixed-broadband asset in two years.

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entagon contracts dropped 48 percent in February, extending a slump that has awards near the lowest level in almost two years.

The Defence Department announced contracts with a maximum value of US$12 billion last month, compared with US$23.1 billion a year earlier, according to data compiled

by Bloomberg. They fell to US$8.44 billion in January, the worst showing in at least 23 months.

Military officials “have sent a very clear message that they are going to be curtailing spending,” said Larry Allen, president of Allen Federal Business Partners, a consulting firm based in McLean, Virginia. “And when they do spend, they’re going to do so with a very close eye on price.”

The delay in enacting a permanent federal spending bill and snowstorms that closed the government also contributed to the low contract awards in both January and February, Allen said. “It takes a while, even after Congress acts, for everything to filter its way down to the individual accounts,” he said.

The government had been funded under a temporary spending bill that restricted new federal contracts and projects from mid-October through much of January. Those limits ended after President Barack Obama on January 17 signed a US$1.1 trillion measure funding the government through September 30.

While last month’s announced contracts declined from a year earlier, they rose 42 percent from January.

The Defence Department is required to announce contracts of at least US$6.5 million.

Last month’s largest award, a US$2.07 billion contract modification, went to Chicago-based Boeing Co. for 16 P-8A Poseidon aircraft. The Navy has set aside funds for the entire amount.

The February 25 award is in addition to 13 P-8As already delivered. The Navy eventually plans to buy 117 of the planes to replace its Lockheed Martin Corp. P-3 Orion aircraft.

“This contract reflects the success of the programme and enables us to

US$12 billion spending in February

continue delivering an advanced, costeffective maritime patrol aircraft,” Rick Heerdt, a Boeing vice president, said in a press release.

The third-largest agreement was a US$655.4 million Army contract to Waltham, Massachusetts-based Raytheon Co. for new fire units for a Patriot air- and missile-defence system in Kuwait. The contract was awarded under the government’s Foreign Military Sales programme.

Bloomberg News

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Opinion Business

wires

Leading reports from Asia’s best business newspapers

Good governance and economic performance

Phnom Penh Post Desperate ethnic minority villagers in Koh Kong province’s Areng Valley have blocked a road that was to be used to transport heavy machinery onto their lands to start construction of the highly controversial Stung Cheay Areng dam, according to villagers and officials. Three Chinese employees of dam concessionaire Sinohydro Corp, who were brought in to conduct assessments for the huge company, had to be escorted out of the area by military police over the weekend after being surrounded by villagers at a Sinohydro office.

Times of India The huge spurt in demand for hiring business jets in India has now prompted the world’s largest charter company to have a subsidiary here. Zurichbased VistaJet is in talks with some Indian charter firms and is aiming to have a JV functional within a year. It is going to bring the world’s most luxurious mid-size business jet — Bombardier’s Global 6000 — to the country. Only three top industrialists in India have placed order for this highend personal jet and one of them is expecting delivery for personal use soon.

China Daily China’s revised consumer rights law, which includes a seven-day cooling-off period during which shoppers can get a refund for online purchases, may push some small e-retailers out of business, said industry insiders. The revised law is expected to raise standards in the booming e-commerce sector. But giving customers the right to return purchases will mean higher costs for service and logistics, an extra burden for small online retailers. The revision to the Consumer Protection Law is the first change since the law was established 20 years ago.

Inquirer The World Bank continues to see the Philippine economy growing within the government’s targets for 2014 and 2015, despite the destruction caused by Super Typhoon “Yolanda” last year.

In a statement released on Monday, the World Bank said the Philippine government’s post-Yolanda reconstruction program—estimated at US$8 billion—would help reduce the typhoon’s negative impact on economic activity. This year, the World Bank sees the Philippine economy growing by 6.6 percent, followed by a stronger 6.9-percent expansion in 2015. These projections are slower than the country’s 7.2-percent expansion in 2013.

Kemal Dervis Former Minister of Economic Affairs of Turkey and former Administrator for the United Nations Development Program (UNDP), is Vice President of the Brookings Institution

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he debate about emerging countries’ growth prospects is now in full swing. Pessimists stress the feared reversal of private capital flows, owing to the US Federal Reserve’s tapering of its purchases of long-term assets, as well as the difficulties of so-called second- and third-generation structural reforms and the limits to “catch up” growth outside of manufacturing.

Optimists argue that the potential for rapid growth remains immense, owing to better macroeconomic fundamentals and the promise of best-practice technology spreading throughout the emerging world.

So who is right?

Recent events point once again to the importance of good governance and responsive political systems, a familiar topic in studies of long-term economic growth. Countries that appeared successful for a long time, such as Turkey or Thailand, suddenly seem to face obstacles related to governance and the ability to forge domestic political compromises. The resulting divisiveness and dysfunction are surely bigger threats than the Fed’s tapering.

It is the nature of governance that determines whether people deploy their talents and energy in pursuit of innovation, production, and job creation, or in rent seeking and lobbying for political protection. And here the contrast between Egypt and Tunisia may turn out to be an object lesson in what makes the difference between success and failure.

In Egypt, the old regime under Hosni Mubarak, having failed to democratize, collapsed in the face of massive protest.

A low-turnout election gave a plurality of the popular vote to the Muslim Brotherhood, which came to power alone and proceeded to ignore good governance and alienate all except its most fervent followers.

The Brotherhood’s approach to governance also explains the mess it made of the economy.

Instead of trying to build non-partisan and competent regulatory institutions, all positions were stacked with political followers.

Unfortunately, the military intervention last July gave rise to yet another regime that seems unable to build durable institutions that could foster political reconciliation and deliver inclusive growth.

Tunisia may give us an example of the opposite scenario: a real constitutional compromise supported by

an overwhelming majority (reflected in a 200-16 vote in the National Constituent Assembly). If that compromise holds, stability will take hold, markets will function, Tunisia will attract investment, and tourism will thrive again.

At the heart of the difference between the two cases is a vision of governance that makes such compromise possible. Such a vision presupposes an assurance that a winner-take-all system will not be established, as well as broad agreement that regulatory institutions should be reasonably non-partisan and staffed with competent professionals.

China’s long-lasting success is sometimes given as a counterexample to the importance of good governance for economic performance. The Chinese example certainly calls into question a strong correlation between multi-party democracy and economic growth.

Democracy is of course something valuable in itself and can be desired independently of its effect on economic growth. But, in the context of economic performance, it is important to emphasize that there is a huge difference between dictatorial regimes, where a single individual monopolizes all power – à la Mubarak or Syrian President Bashar alAssad – and China, where there has been competition and contestability within a large communist party. And it is the party, operating as a fairly inclusive and meritocratic institution, not an autocratic leader, that has governed in the post-Mao period.

Lack of reasonably independent regulation and competent public administration – or, worse, one-person dictatorships – lead inexorably to economic waste and inefficiency, and eventually to political

turmoil. This is true even in cases like Venezuela, where large oil revenues masked the underlying weakness for a while. In the complex global economy of the twenty-first century, sustained good economic performance requires a panoply of well-functioning institutions that do not fall within a single leader’s purview.

The Chinese example certainly calls into question a strong correlation between multi‑party democracy and economic growth

For example, successful economies require a reasonably independent central bank, and competent bank supervision that does not get dragged into short term politics. They also need

regulatory agencies in sectors such as telecommunications and energy that can pursue policies in accordance with broad goals established by the political process, but with appointees selected according to nonpartisan criteria who then exercise their authority in a way that fosters competition open to all.

When credit decisions, public procurement, construction contracts, and price determination reflect only short-term and purely political goals, good economic performance becomes impossible – even in countries with large natural-resource endowments. In countries with little or no such endowments – where innovation, competitive efficiency, and a focus on production rather than rents is all the more important – the lack of good governance will lead to failure more rapidly.

All of this implies that analysing the determinants of economic success is a subject not just for economists. Why do some societies achieve the compromises needed to sustain an independent judiciary and a modern regulatory framework – both necessary for an efficient modern economy – while others perpetuate a partisan, winner-take-all approach to governance that weakens public policy and erodes private-sector confidence?

The contrast is starkest in emerging countries, but differences also exist among the advanced economies.

Perhaps Germany’s ability to reach socio-political compromise – again demonstrated by the formation of a right-left coalition after the 2013 elections – has been more fundamental to its recent economic success than the details of the fiscal and structural policies it has pursued to achieve it.

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Closing Casinos to face 15 pct water fee hike: study

Crimea nationalises energy companies

A government-commissioned study suggests that special users like casinos and hotels pay 15 percent more for the water they use, the Marine and Water Affairs Bureau said yesterday in a press statement. For households, the study proposes a hike ranging between 1 percent and 6 percent depending on water consumption. The statement stressed, however, that 93 percent of the city’s households would only have to pay less than 3 patacas more each month under the new proposal. The bureau stressed it will still consider other factors before submitting its final recommendations.

The parliament of Ukraine’s Crimea voted yesterday to nationalise energy companies Chornomornaftohaz and Ukrtransgaz, according to a statement on the parliament’s website. Last week, a Crimean official said that the local authorities may sell the energy firm Chornomornaftohaz to a Russian company “such as Gazprom” once the region takes control of it. A Moscowbacked referendum in Crimea on Sunday showed overwhelming support for joining the Russian Federation.

Russia admits economy in crisis Darya Korsunskaya and Lidia Kelly

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ussia’s government acknowledged for the first time yesterday that the economy was in crisis, undermining earlier attempts by officials to suggest albeit weakening growth could weather sanctions over Ukraine.

Moscow markets wait to see the full scale of western measures over the seizure of Ukraine’s Crimea and support of its referendum to join Russia, after losing billions of dollars in recent weeks in state and corporate money.

For weeks, Russian officials have said the confrontation between Moscow and the West over Ukraine that threatens economic sanctions and asset freezes would “weigh on the economy”.

Although not speaking directly about the impact from the conflict, Deputy Economy Minister Sergei Belyakov said yesterday the economy was in trouble.

“The economic situation shows clear signs of a crisis,” Belyakov told a local business conference.

European officials have said they are determined to hit Russia for its actions in

Crimea, imposing sanctions including travel bans and asset freezes on those responsible. The United States was expected to take

Euro zone inflation drops

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similar steps.

Many economists expect Russia to enter recession and most have rushed to slash their growth forecasts as a result of

the worst showdown between Russia and the West since the fall of the Berlin Wall.

“Domestic demand is set to halt on the uncertainty

shock and tighter financial conditions, likely dipping the economy into a recession over the second and third quarter of 2014,” Vladimir Kolychev and Daria Isakova, economists from VTB Capital wrote in a note yesterday.

“We are lowering our fullyear growth outlook to 0.0 percent, and see downside risks if uncertainty remains elevated for a protracted period and/or severe sanctions are imposed.”

The Economy Ministry’s most recent estimates, issued before the escalation of the Ukrainian crisis, envisage the economy expanding by around 2 percent this year.

Economists have warned ever since President Vladimir Putin declared on March 3 a right to invade Ukraine to defend the Russian-speaking population that the price Moscow will pay for its decisions will be hefty.

The rouble-denominated MICEX index has lost more than US$66 billion in market capitalisation and the central bank has spent more than UX$16 billion of its reserves to defend the rouble. Only last week, MICEX lost 7.6 percent and the dollardenominated RTS more than 8 percent.

In a matter of a few weeks Russia has gone from being perceived as one of the more resilient emerging markets to one of the most vulnerable developing countries, analysts said.

Reuters

Renault and Nissan to step up integration

Macau gaming growth 12-15 pct, estimate

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W

uro zone annual inflation dropped back in February to the level that triggered a surprise cut in interest rates in November, revised data showed yesterday, underlining deflation risks in the bloc.

The year-on-year inflation rate in the 18 countries sharing the euro was 0.7 percent in February against 0.8 percent in January, the European Union’s statistics office Eurostat said.

The reading was the joint-lowest in four years and a touch below the initial February estimate of 0.8 percent. The annual inflation print last fell to 0.7 percent in October - a decline that persuaded the European Central Bank to cut its key interest rate to a record low of 0.25 percent the following month.

The ECB, which targets inflation at close to but below 2 percent, considers the risk of euro zone deflation as “quite limited”, its president Mario Draghi said last Thursday. The bank left borrowing costs unchanged at its most recent meeting on March 6.

armakers Renault SA and Nissan Motor Co announced moves to combine key operations under a new team of managers, the boldest step yet taken in their 15 year-old alliance.

Carlos Ghosn, who heads both car makers as chief executive, said it had taken this long for the corporate mindsets to evolve to allow a “peaceful and consensual” integration, but added that the car brands would remain separate and a full merger would be problematic.

The world’s fourth-biggest car grouping by sales has already been jointly purchasing some components and developing common vehicle architectures to cut costs, but it must boost economies of scale to compete with giants like Volkswagen AG. Under the latest move which formalises plans sketched out in January the two companies will combine operations in four areas - manufacturing and logistics, research and development, purchasing, and human resources - as part of an effort to save at least 4.3 billion euros (US$6 billion) by 2016.

Reuters

Reuters

ells Fargo lowered Macau March growth estimates, after 16 days in March, to 12 pct -15 pct from 13pct – 18 pct, according to a note released yesterday. Even if remaining positive on the longer term, analyst Cameron McKnight said “2014 could be choppy due to a potential slowdown in VIP driven by decelerating credit growth and a softer macro environment”. Wells Fargo puts Las Vegas Sands (22.2%) ahead of Galaxy (21.6%), leaving SJM (20.8%) for the first time in third place in terms of market share.

David Bain, analyst for Sterne, Agee & Leach, also released yesterday his estimates, with gaming monthly growth of 14 pct to 17 pct. The year on year growth is estimated to be 18 percent.

Market share numbers are exactly the same, with the top three gaming operators ahead of the remaining three: MPEL (13.6%), Wynn (11.7%) and MGM (10.1%).