Macau Business Daily, March 31, 2014

Year II

Number 507 Monday March 31, 2014

Publisher: Paulo A. Azevedo

MOP 6.00

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Friday April 19, 2013

Bar to progress

Interview The calibre of local Bachelor’s Degree law graduates is declining.

And some judges are not that good, either, claims local high profile lawyer Manuela António. The longtime Macau resident tells Business Daily that while gaming operators represent a good source of revenue there are “many other important areas” of business.

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Red to black Last year was way better for Success Universe. The company improved Ponte 16 earnings and reduced losses in its mainland sports lottery interests.

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6&7

Construction slowdown hits profits

February was a good month for Macau exports Page 4

Number 1 Macau is low cost Jetstar Pacific’s first international destination. The Vietnamese carrier locks its radar on the city’s minimal competition and the potential of the Pearl River Delta market.

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NAPE: 210 flats sold in just 48 hours Page 9

The tight labour market has slowed the construction of two large-scale home projects. Developer Polytec Asset Holdings did the maths and says earnings might have plunged a massive HK$10 billion.

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Brought to you by

HSI - Movers March 28

Name

%Day

China Resources Ent

7.35

Tingyi Cayman Isl

4.73

China Merchants H

4.31

Hengan Internat

4.23

China Shenhua Energ

3.03

Hutchison Whampoa

-0.86

BOC Hong Kong Hold

-1.14

Cathay Pacific Airw

-1.49

Want Want China H

-2.21

CITIC Pacific Ltd

-4.76

Source: Bloomberg

Ring-a-ding MTEL hopes to start ringing fixed lines in November. And says it will always be cheaper then CTM. The sound of MTEL promises were still in the air when CTM counter-attacked. Tomorrow, the company will lower leased-line charges by up to 21 percent.

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Making a killing

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Melco International Development Ltd revenues surged by almost a quarter and approved a semi-annual dividend. Wynn Macau also announced good news: casino revenues grew 10.6 percent and profit climbs to HK$7.7 billion.

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2014-4-1

2014-4-2

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18˚ 21˚

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March 31, 2014 Friday April 19, 2013

Macau

Time to share Melco International approves new dividend policy

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mid a strong surge in profits, Melco International Development Ltd – a 33.55 percent shareholder in Macau casino operator Melco Crown Entertainment Ltd (MPEL) – has announced that it intends to provide its shareholders with semi-annual dividends, the company noted in its 2013 results filing to the Hong Kong Stock Exchange on Friday.

Melco’s profit attributable to stakeholders surged 42.3 percent to HK$1.597 billion for 2013, as compared to the approximately HK$1.122 billion of the previous year. The company’s revenue also rose by 24.8 percent from nearly HK$147 million to HK$183 million.

The surge in Melco’s profit is from its core gaming business run by Melco

Crown Entertainment, which saw net revenue and adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) grow by 24.7 percent and 39.9 percent to US$5.1 billion, and nearly US$1.29 billion in the past year under improved mass table games gross gaming revenue together with growth in rolling chip volumes.

In the filing, Melco noted that it intends to provide its shareholders with semi-annual dividends in an aggregate amount per year of approximately 20 percent of the company’s annual consolidated net income attributable to shareholders.

“In view of the strong business performance and cash flow, both Melco and Melco Crown Entertainment have approved the adoption of a

Pay day Wynn Macau profit climbs 20 pct to HK$7.7 billion

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ynn Macau, Ltd has announced that the profit attributable to stakeholders for 2013 is nearly HK$7.701 billion (US$992.7 million), nearly 20 percent more than the approximately HK$6.44 billion of 2012.

The company’s adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped from nearly HK$7.738 billion in 2012 to HK$8.867 billion last year.

Wynn Macau’s total operating revenues increased by 10.2 percent from

HK$28.5 billion in 2012 to HK$31.3 billion in 2013, which is “primarily due to higher gaming volume in the VIP casino and higher win percentage in the VIP casino and mass casino during 2013 compared to 2012”.

Casino revenues for last year, which occupied 94.2 percent of total operating revenue, increased 10.6 percent from HK$26.7 billion in 2012 to HK$29.5 billion last year.

The company’s non-gaming revenue, generated by hotel room bookings, food and beverage business

Macau’s ‘33’ T The president of Macau’s small parliament has defended the improvement of the quality of his colleagues’ interpellations

he Legislative Assembly (AL) president believes that Macau’s Basic Law (SAR’s mini-constitution) should be “deeply studied” if the town wants to adopt universal suffrage.

While a public consultation on the subject is underway in Hong Kong, in Macau all the interpretations of the Basic Law are still required.

Unlike Macau, the Hong Kong Basic Law anticipates the existence in the near future of the democratic election process.

In an interview with Radio Macau, the leader of the local legislators said a possible increase in the membership of the Assembly is a matter for the government to

new dividend policy, with a view to distributing surplus capital while at the same time maintaining suitable flexibility to support our current and future growth plans, ultimately driving long-term shareholder value,” chairman and chief executive officer of Melco Lawrence Ho was quoted in the press release on Melco’s 2013 performance.

Melco’s basic earnings per share attributable to stakeholders rose to HK$1.04 compared to HK$0.85 per share for 2012.

The company also proposed a final dividend of 20.8 HK cents per share.

The dividend, in an aggregate amount of HK$319.6 million, represents about 20 percent of the company’s annual consolidated net income attributable to shareholders for 2013.

The dividend payout is more than 60 percent of the company’s dividend income to be received in April 2014 from Melco Crown Entertainment Ltd as a special dividend.

The firm also noted that its gearing ratio was 10 percent as at December 31, 2013; the ratio was 5 percent in the previous year.

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and retail, reached nearly HK$1.805 billion for 2013, 3.4 percent more than the HK$1.746 billion of the previous year.

Wynn Macau’s basic earnings per share is HK$1.48 for the year, a rise of HK$1.24 from the previous 12 months.

The board of the company has proposed a final dividend of HK$0.98 per share for the year ended December 31, 2013, which has yet to be approved by the annual general meeting. The final dividend is expected to be paid on June 6.

The board has also re-designated Allan Zeman from independent nonexecutive director of Wynn Macau to non-executive director of the company with effect from March 29. Mr Zeman is the chairman of Lan Kwai Fong Holdings Ltd and Hong Kong’s Ocean Park.

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solve. However, when compared to the 70 legislators incumbent in Hong Kong, Macau’s 33 “is not a low percentage”. In his opinion, the limited space the members have at their disposal in the local parliament would, in turn, create a limitation to the possible increase in its numbers.

To Mr. Ho, the quality of the interpellations could be better. “We see that many of them were not written by the legislators but by their advisors; there’s plenty of room to improve”, he said.

The AL president denies that the number of legislators defending the business sector is too high. “It is not; it’s normal and stable”, he said.

The Japanese attraction

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he chairman of MGM expects to open an integrated casino resort in Japan “by the 2020 Tokyo Olympics”.

In an interview with Investor’s Business Daily, James Murren acknowledged the “complicated process” that the Japanese authorities have ahead of them but was confident in succeeding because “we have knowledge and information on all of the issues that have to be addressed when considering expanding into integrated resorts, including cultural, social and developmental issues”, he said.

James Murren said he is willing to work with Japanese partners and “to target the creation of performing arts centres, arenas, restaurants and retail stores”.

Japan’s ruling Liberal Democratic Party submitted a bill in December 2013 to parliament advocating the legalisation of casinos in Japan.

Lawmakers are expected to debate the bill next month.

Most of Macau’s gaming operators have already announced their sincere interest in investing in the country.

Coloane property ownership legalised

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he Macau Administration has announced five more land concession requests regarding Vila de Coloane land. The detailed plan of the town village of Coloane Village was implemented in August 2009 and the Order Granting Lots of Vila de Coloane in October 2009. Both plans favour old residents against public bids trying to consolidate their legal position on the land they always lived on. Officials have received a total of 24 applications claiming land in this area. Now, five more property grants have been approved under these conditions, mainly located in Beco do Campo, Rua do Meio, Calçada da Pedra and Rua de San Lei. The government is still studying 10 petitions. This measure, according to the Public Works and Transport Bureau (DSSOPT) intends to “safeguard the rights and interests of the residents of Coloane”.

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Macau Blink at the stars – It’s Earth Hour!

Macau joined the Earth Hour initiative last Saturday. Following the global initiative to reduce as much power consumption as possible for an hour all over the world, the Macau skyline darkened from 8:30pm to 9:30pm local time. The occasion was marked by numerous companies in Macau.

From loss to profit Success Universe profits on improved Ponte 16 earnings and sees reduced losses in sports lottery business in China Stephanie Lai

sw.lai@macaubusinessdaily.com

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uccess Universe Group Ltd – a 49 percent investor in the Ponte 16 casino resort in the city’s Inner Harbour district - recorded a profit for last year on turnover that fell 3 percent, the company announced in its annual results filing with the Hong Kong Stock Exchange.

The company made a profit of approximately HK$12.25 million (US$1.53 million) for the year ended December 31, 2013, compared to a loss of nearly HK$37.98 million in the previous year, it stated on Friday.

Turnover was about HK$1.58 billion, decreasing some 3 percent from the HK$1.63 billion of the year prior. Diluted earnings per share were 0.42 HK cents, compared to a loss per

share of 0.83 HK cents a year earlier.

Upon the improved results, the company remarked that Ponte 16 has continued to be the major growth driver with “rapid increase in gaming revenue arising from the mass market and greater guest spending” at the property, bringing an adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of about HK$387.3 million –19 percent more than the previous year.

Ponte 16 opened in 2008. As at the end of December last year, the casino had 109 gaming tables, of which 84 were mass gaming tables, 9 were highlimit mass-market tables and 16 were VIP tables according to the filing.

The other portion of Ponte 16 is controlled by Macau casino concessionaire Sociedade de Jogos de Macau SA via its 51 percent holding.

SJM also supplies the casino licence for the property.

Buying partner’s stakes In May last year, Japanese pachinko hall operator Maruhan Corporation sold its 10.2 percent interest in World Fortune Ltd, a then indirect non-wholly owned subsidiary of Success Universe, together with shareholder’s loans provided by Maruhan to World Fortune.

The acquisition of interest in World Fortune was conducted through Success Universe’s indirect

non-wholly owned subsidiary Golden Sun Profits Ltd, at a purchase price of about HK$219.12 million: it comprised about HK$109.56 million in cash, with the remainder via the allotment of 550,546,025 new ordinary shares in Success Universe.

Following the completion of the World Fortune acquisition, Success Universe made a one-off gain of approximately HK$83.4 million on “de-recognition of a long term payable”. This accounting term usually refers to situations where a business liability is discharged, cancelled or expires.

Success Universe’s lottery business in mainland China, which started in late 2012, contributed to a turnover of approximately HK$70.6 million in 2013, a jump from the HK$10.7 million of the previous year. The loss in the lottery business segment has been reduced from HK$21.9 million in 2012 to about HK$13.4 million.

The company offers sports lottery sales in the mainland through a joint venture company, and has sales networks in Jiangxi, Qinghai and Heilongjiang province.

The company said it will further expand its sports lottery sales to other provinces in China, and tap into the welfare lottery business.

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Macau ICBC Macau’s lending rises by 28 pct in 2013 Industrial and Commercial Bank of China (Macau) Ltd’s chief executive, Jiang Yisheng, has said the bank grew sustainably last year. Mr Jiang said during the bank’s reception to local media that ICBC Macau’s lending had been 28 percent higher at the end of last year than a year earlier. He said 0.06 percent of its loans had been non-performing. The bank’s assets were 20 percent greater and its deposits 21 percent greater. Mr Jiang gave no further information about the bank’s performance last year.

Macau first stop for Jetstar Pacific The Vietnamese low-cost airline builds its northeast Asian bridgehead where the market looks most promising Tony Lai

tony.lai@macaubusinessdaily.com

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he first international services of Jetstar Pacific Airlines are to Macau because the Vietnamese low-cost carrier sees little competition and huge potential in this corner of the Pearl River Delta market.

On Friday Jetstar Pacific began flying to Macau from Hanoi once a day and from the central Vietnamese city of Da Nang twice a day.

Jetstar Pacific’s director for Greater China, Apotter Zhang, told Business Daily after a ceremony to mark the start of the airline’s services to Macau: “Macau is actually a huge market, but the perceptions of Macau by many people are still stuck in the past.”

Jetstar Pacific is run by Jetstar Pacific Airlines Joint Stock Aviation Co. The biggest shareholders in the company are government-owned Vietnam Airlines and the Qantas Airways Ltd group of Australia.

Until Friday Jetstar Pacific was a purely domestic airline.

But since Vietnam Airlines bought 66.9 percent of Jetstar Pacific in 2012, the controlling shareholder has pushed the low-cost carrier to tap the northeast Asian market, particularly the Greater China market.

“We have done a lot of market

research, and found Macau, situated conveniently in the Pearl River Delta, has a large pool of customers,” Mr Zhang said.

Matching ambitions He said his airline aimed to serve visitors to Macau and was confident that the market was there.

The airline’s flights to and from Macau were almost fully booked, he said.

Official data show Macau had 29.3 million visitors last year, 63 percent of them mainlanders.

In the first two months of this year 67 percent of visitors were mainlanders.

Exports rose in February The value of domestic exports was 15 percent higher in February than a year earlier, but it may have been an exceptional month Tony Lai

tony.lai@macaubusinessdaily.com

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reater demand from Hong Kong and the European Union made export growth last month the strongest for two years, official data show.

The Statistics and Census Service announced on Friday that the value of domestic exports was 121.7 million patacas (US$15.2 million) in February, 15 percent more than a year earlier.

The annual rate of growth was the fastest in any month since February 2012.

In each of the preceding four months domestic exports had declined

from a year earlier.

Together, domestic exports and re-exports – goods shipped in and out of Macau with no value added to them here – were worth 721.1 million patacas, 25 percent more than a year earlier.

Imports were worth about 6 billion patacas, 10 percent more.

That meant last month’s merchandise trade deficit was 5.35 billion patacas, 8 percent more.

Stronger demand from Hong Kong and the EU propelled the surge in exports.

Exports to Hong Kong, Macau’s

No data are available showing how many visiting mainlanders are on their way to or from Vietnam.

Mr Zhang said his airline also chose Macau as the destination of its first services to Greater China because competition for landing and take-off slots here was light.

“It is easier to get good slots here, considering we are only just starting international services,” he said, “as the airport here is less busy.”

Last year Macau International Airport handled about 5 million passengers, while Hong Kong International Airport handled 59.9 million and Guangzhou Baiyun International Airport 52.4 million.

Jetstar Pacific’s ambitions match those of Macau International Airport Co Ltd. The airport operator said this year it aimed to increase the number of international services to Macau to 18 this year from 12 now.

Mr Zhang expressed confidence that his airline’s fares are competitive.

A return ticket from Hanoi or Da Nang costs about 1,000 patacas (US$125), excluding tax.

Air Macau flies to Hanoi twice a week and to Da Nang four times

main export market, grew by 43.7 percent to 453.1 million patacas.

Exports to the EU grew by 57.4 percent to 19.2 million patacas.

The statistics service did not distinguish between domestic exports and re-exports to these places.

Exports of telecommunication equipment grew to 79.7 million patacas from 37.4 million patacas.

But February may have been exceptional. The vice-president of the Macau Importers and Exporters Association, Leong Kam Hong, said last month: “As the local manufacturing sector continues to contract, domestic exports face a downward trend.”

Mr Leong said the sluggishness of the global economic recovery and uncertainty about what will happen to the mainland economy might curb domestic exports.

In the first two months of this year exports were worth 1.66 billion patacas, 5 percent more than a year earlier.

The value of domestic exports rose by 2 percent to 292.8 million patacas.

The value of imports rose by 18 percent to 14.84 billion patacas.

Imports of gold jewellery grew by 70 percent to 2.19 billion patacas.

Imports of watches grew by 86 percent to 1.45 billion patacas.

a week.

Vietnam Airlines flies to Macau from Da Nang twice a week.

Mr Zhang said Jetstar Pacific aimed to start more international services in the near future.

Vietnamese newspaper Tuoi Tre quoted Jetstar Pacific’s general director, Le Hong Ha, as saying the airline would begin flying to Bangkok, Singapore and Hong Kong after it had expanded its fleet of aircraft. The airline now flies five Boeing 737s and two Airbus A320s.

Mr Zhang has a personal reason for gratification that Macau is the destination of Jetstar Pacific’s first international services.

“I am a Macau resident and Macau is my home,” he said.

MOP1,000 Approximate return fare to Macau on Jetstar Pacific

Crime committed by croupiers rises 34 pct in 2013

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roupiers allegedly committed 75 crimes last year, 34 percent more than the year before, the Portuguese-language Jornal Tribuna de Macau reports. The newspaper, citing Judiciary Police data, says 50 croupiers were involved in the crimes. In most cases the crime was peculation, allegedly committed by 31 croupiers. In 12 cases the crime was theft, with six croupiers involved.

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MTEL promises never to be undersold The telco hopes to have fixed-line subscribers’ phones ringing in November Tony Lai

tony.lai@macaubusinessdaily.com

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TEL Telecommunication Co Ltd has promised always to keep its charges for fixed-line telephone services lower than rival Companhia de Telecomunicações de Macau SARL’s (CTM’s) charges.

MTEL chairman and chief executive Michael Choi said that his company would begin collecting subscribers to its fixed-line and internet services in November.

The very next day CTM said it would cut its charges for local leasedline services on April 1.

CTM last cut its charges for leasedline services half a year ago.

The government gave MTEL a licence to offer fixed-line services last June, breaking CTM’s longstanding monopoly.

MTEL has yet to begin running any fixed-line services because it is still laying cables.

Mr Choi told reporters on Friday his company’s network was now within reach of 16 percent of households and other potential subscribers.

“We estimate we will be ready by October or November, if everything goes smoothly,” he said.

By then MTEL’s network would be within reach of about 30 percent of potential subscribers, he said.

One of the conditions of MTEL’s licence is that it must charge no more than 70 percent what CTM charged for leased-line services in 2011.

Mr Choi acknowledged that CTM itself may now charge less than 70 percent of what it charged in 2011.

Mr Choi said: “We can promise the public that our tariff will always be more favourable.”

Satisfying speed On Saturday the Bureau of Telecommunications Regulation announced that CTM would lower its local leased-line charges by between 3 percent and 21 percent on April 1.

MTEL can relay free-to-air TV

Michael Choi

The bureau said the cumulative effect of the forthcoming and previous reductions would be that subscribers would pay up to 26 percent less than they did before.

CTM cut its charges for international leased-line services by up to 42 percent last year.

MTEL has yet to apply to the government for an internet service licence, but Mr Choi is confident that the company will have a licence by November, so it can begin collecting subscribers.

CTM is Macau’s sole internet service provider at present.

Mr Choi said MTEL intended to offer households data transfer speeds of up to 200 Mbps.

“Right now people usually apply for speeds like 2 Mbps or 10 Mbps only, but we will offer more to satisfy their needs,” he said.

He said his company’s network would have the capacity to cope

with growth in internet usage for the next 50 years.

Mr Choi said MTEL had plans for two main servers on the peninsula and 21 ancillary servers all over the city.

He declined to confirm how much MTEL would invest. Last year he said it might eventually invest over 1 billion patacas (US$125 million).

KEY POINTS MTEL promises to be the cheapest Expects fixed-line services in November Means to cover 30 pct of the city by then

MTEL Telecommunication Co Ltd is capable of relaying free-to-air television transmissions if the government tells it to, according to the company’s chairman and chief executive, Michael Choi.

Mr Choi said on Friday that MTEL’s fixed-line telephony licence mandated that it reserve bandwidth to relay transmissions for the government free of charge.

“Our contract says if the government needs us to do this we must oblige, so we are now waiting for instructions from the government,” he said.

MTEL and six antenna companies signed in January an agreement for MTEL to relay transmissions to the antenna companies.

But the government announced later it would set up a company of its own to relay free-to-air television transmissions to households through the antenna company networks after April 21, when Macau Cable TV Co Ltd’s exclusive concession to provide cable television expires.

Most households receive Macau Cable TV transmissions through the antenna company networks, but this arrangement will cease on April 21.

Mr Choi said MTEL did not rule out bidding for a cable television licence after Macau Cable TV’s exclusive concession ends.

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Quality of university law courses Lawyer Manuela António

Brought to you by

HOSPITALITY Mainland plus Visitors from Mainland China represent, and have almost always represented, the majority of visitors coming to Macau. Since the beginning of 2009, with the exception of a few months, mainlanders have consistently accounted for more than half of total visitors.

Most of those ‘atypical’ months happened in 2009 proper, the year when the effects of the international crisis were felt here with greater intensity. In the last three years, the share of China in the total number of visitors has oscillated around an average of almost 60.8 percent. That proportion is usually even larger in the case of same-day visitors. On the other hand, same-day visitors constitute, as a rule, the majority of visitors. Still, in the same period, they amounted, on average, to 52.4 percent of the total.

The quality of Bachelor’s Degrees in law is declining despite sterling efforts and as a result there are many poorly prepared professionals working in Macau.

In an interview with Business Daily during the inauguration of her new and revamped office lawyer Manuela António proclaimed that the Portuguese market is a better source of lawyers than Macau’s, primarily because it is bigger and there are three very good universities catering to the discipline.

She says that the suspension of the protocol between the Macao Lawyers Association and the Portuguese Lawyers Bar was important to re-thinking the entry of professionals in the territory. It is now important to lift it, she says, as there is a need to hire more professionals from the Iberian Peninsula Luciana Leitão leitao.luciana@mcaubusiness.com

Photos by Manuel Cardoso

firms in Macau that are not even lawyers. At this point, the problem is that there are several offices in which the owners are not even lawyers and that will continue even if they’re operating in a partnership. Many people in Macau claim to be lawyers but they’re not.

So, if this new law is approved, won’t that change?

It will continue to exist and the Macao Lawyers Association is making an effort to prevent such situations but it’s not easy. Before, there were offices working like commercial firms and now, before authorising the opening of a new lawyer’s office, the Association will confirm the legality.

It won’t solve the problem: if anything, it can even make it worse. Since there will be more general partnerships, it will be harder to control.

The future of the law

The chart represents the monthly number of same-day visitors since January 2011.

The overall pattern is neatly shaped by the flows of visitors from the mainland. In the period shown, their share stood at about 61.6 percent. Hong Kong visitors followed at a distant second place. They amounted to a quarter of the total. In the case of sameday visitors, if we add the number of arrivals from Hong Kong and Taiwan, we find that travellers from Greater China amount to more than 90 percent of all visitors. The share of all other countries and regions of origin has declined slowly and is becoming more volatile. The fist two months suggest another year of growth in the number of same-day visitors, which suggests that the talk about limiting the access of tourists and restricting the number of visas that can be obtained by Chinese citizens is not producing visible effects.

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17.1 %

increase in the number of mainland same-day visitors in Jan/Feb, on previous year

Why have you decided to restructure and move your office?

All the lawyers have individual offices, with natural light; the corridors allow in light from outside. All of them have a view and all have everything they need in their own office. We now have big meeting rooms that enable us to organise internal seminars, and eventually invite other colleagues not only to offer some training to trainees but for the lawyers themselves.

It was also a breath of fresh air for an office that was 28 years old and located in one of the older buildings of Macau. We now have a pretty complete law library. We did a total IT revamp - we now have a database of clients, legal opinions and court decisions. It also allows us to hold meetings more frequently and we now have a system in which every matter is debated by several lawyers - some even by all of them - and today we are better equipped to do that.

Thinking about the firm plans for the future, will you adopt the general partnership format if the draft is approved?

It’s a possibility, even though, in practical terms, we’re already operating like that. I try to distribute the revenues we receive.

I don’t do anything without their opinion. Nothing is decided in this new office without them.

I don’t feel the fact that we are a general partnership will change anything. At this point, lawyers’ offices are not that profitable they were once but now there are many more offices and there is big competition. I don’t think that if the lawyers are part of a general partnership they will gain more

than what they’re gaining now.

It doesn’t mean that if the law is approved we cannot re-think our position. If the lawyers [from the office] feel more comfortable with the general partnership, I don’t exclude that possibility.

Where do you stand in this general partnership debate that has been dividing lawyers for many years already?

The old and already established law offices don’t need to grow but there are new firms that need to be in partnerships to be able to get some investors and to convince people to stay in their offices. It’s also a bit of an imitation of the Anglo Saxon system.

The Continental system, which is ours, is a bit anti-general partnership because they believe lawyers should be close to the people and clients must know the lawyers. The Anglo Saxon legal system is more distant from the client. With the number of lawyers that each firm in Macau has, it’s perfectly compatible with a nongeneral partnership structure.

Here, the bigger offices have between 15 to 20 people.

Also, I believe lawyers should be fully culpable. In partnerships, there is a tendency for limited liability. That is a big mistake because I believe lawyers should all be fully liable - and we’re now fully liable, which assures the people that work with us, the clients, that the lawyer is fully culpable.

Some of the offices in Macau function more like a commercial company. By creating such a regime, aren’t we avoiding such behaviour?

There are certain bosses of law

How do you see the practice of law in Macau in the future?

It’s complex. There are many more challenges and demands but supply is increasing more than demand. There’s a tendency to have many offices without clients or, at least, without enough clients.

There’s a tendency for unfair and dangerous competition.

I don’t think that if lawyers are part of a general partnership that they’ll gain more than what they are gaining now

People think because a certain office charges less and because the lawyers are Chinese that there will be equal quality but in many situations that is not the case. In this profession, a mistake may be hopeless. It’s important that the lawyers have that notion, that it is important to be technically competent but also that someone has moral values and is a person above suspicion.

I’m afraid of the exponential increase in lawyers. There are almost as many trainees as lawyers. In the short term, the number of lawyers will double. That’s good but it’s also dangerous. The Association

You will remember.

@ : signature@macaubusiness.com tel : +853 2833 1258

welcome

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Macau

declining, has been making a great effort, and I completely agree with the examinations for trainees and lawyers.

The quality of a law degree, despite the efforts of the main Faculty of Law (University of Macau), is decreasing. Many of the people who are completing their Bachelor’s Degree today are substandard. The Bachelor’s Degree in law from the Macau University of Science and Technology (MUST) is not suitable. People that finish this course are not ready to be legal advisors, lawyers or judges in Macau. I have had trainees from MUST and they were all, practically all, invited to leave.

They will not become good legal advisors, much less good lawyers or judges.

There’s a need to make an increasing effort in the training and in the exams to become lawyers and, afterwards, in bilingual skills. Being a linguist means having an excellent ability to speak Portuguese as well as Chinese. The Chinese who are not able to speak Portuguese will never be good lawyers, because the origin of law in Macau is Continental; it took centuries to be created and people need to know what its roots.

Like countries need history, law also needs history to be interpreted, constructed and developed. So, people need to know Portuguese if they want to be good legal advisors in the next 50 years.

So, Portuguese lawyers are not at risk of disappearing as we approach 2049?

To be able to have law in Macau capable of matching this incredible development, it needs to be well applied and, for that to happen you need to know Portuguese.

Judges, legal advisors and lawyers that know Portuguese are indispensable - and better yet, if they also know Chinese.

We need to study every day and to demonstrate that there are enough capable people in Macau and; when there aren’t, we need to go get them - we need more Portuguese in every area - like Americans, Australians and Chinese - to help Macau.

Not even in 2001, when Peter Ho, Ricardo Sá Carneiro and Gonçalo Pinheiro Torres left your office?

No, no, on the contrary. When someone challenges me, there is no chance in the world I’m not going to fight it.

I’m a tiger [Chinese zodiac] and the tiger doesn’t need to show its teeth and claws to anyone because it’s a tiger. If someone challenges it, then the tiger fights back. It only showed that they were not needed.

Is it important for Portuguese lawyers to learn Chinese?

Yes, without a doubt. It’s important we understand how people think and it makes translations easier. The way the language is structured and how we express ourselves shows how people think and if they don’t understand law, they may not be able to understand completely what people mean. So, if we know the language, we can know if the translations are accurate or not. Translators don’t do it on purpose - they do it because they think something is not important when it really is.

Considering you mention the need to import more Portuguese, does it make sense to suspend the protocol between the Macao Lawyer’s Association and the Portuguese Bar Association (from Portugal)?

The suspension makes sense because Macau has changed. It has more people knowing law, more lawyers coming from local universities and there were lawyers coming from Portugal that maybe weren’t the lawyers that Macau needed.

The suspension is needed in order to re-think the system but it needs to come back in force soon. It’s on the agenda of the next general assembly of the Macao Lawyer’s Association this week. One of the points of discussion will be the renegotiation and the re-entry in force of the agreement. It is important to have people from Portugal coming in but we want the lawyers we need to come from Portugal. Macau has never closed its doors to anyone but it cannot welcome everyone.

Do you believe the suspension will be lifted within this year?

Yes, I believe so.

We used to have very good judges.

Only the best ones would come here before the handover.

Then, we started having very good, good and bad judges

What led to this suspension?

Many lawyers were arriving here without having their futures assured.

They would be drawn to work on their own. Some came here but were not needed.

The legal community of Macau believes that there was unfair competition - lawyers coming from Portugal were stealing local lawyers’ opportunities. Lawyers were arriving without an adjustment period that included the necessary time to adjust to legislation.

It makes sense to suspend, change certain rules and tighten up a bit but there’s no doubt that the base for recruitment there is much better than here. There’s a need to reach equilibrium between those

that are coming in and those that are already here.

Non-qualified professionals You mentioned that the quality of the local Bachelor’s Degree in law is decreasing. As a result, do you believe the quality of the professionals practising law in the territory is also decreasing?

There’s an effort to maintain the quality [of the courses] but the quality has been decreasing. We still have people with a Bachelor’s Degree in law that shouldn’t have it.

In Portugal, there’s also that problem but we don’t bring those to Macau.

We only recruit people coming from three universities in Portugal [Catholic University, University of Lisbon, New University of Lisbon].

There are judges and prosecutors from the University of Macau of very high calibre but there are some that haven’t any quality. The same with the lawyers - but with the lawyers there’s a market selection that you don’t have with the judges.

There are many judges whose decisions have been revoked and nothing happens to them. There are court decisions revoked because they’re technically bad.

Doesn’t that frustrate you, working as a lawyer in Macau?

Sometimes it does. There are court decisions that are really bad. In Portugal, you also have them.

Is it more notorious here?

Yes. We used to have very good judges. Only the best ones would come here before the handover.

Then, we started having very good, good and bad judges.

Throughout the years you have been practising law in Macau, have you ever thought of returning to Portugal?

No, no.

Is there a tendency for bilingual lawyers?

There is, even though the Chinese language is very hard.

We have young Portuguese people working in our offices doing their internships here that usually speak many languages. So, they’re usually eager to learn Chinese, too.

Being bilingual – having an equal ability to speak Portuguese and Chinese - is very hard to achieve but, at least, to have people that have a certain degree of knowledge of both languages, I think that will happen in the future.

There are more and more law offices in Macau competing for clients. Would you say that having one of the gaming concessionaires as a client is the key to fighting the competition?

No, there are many other important areas. There are some important firms that have no operator as a client. It’s an important source of revenue for a firm but most of all it’s an important source of experiences as it allows you to dedicate to several areas.

For many years, we had no operator as a client. It’s very important to have local clients, as it’s important to have international clients; in fact, one of our goals is to connect with the rest of Asia, China, Angola, Mozambique, Brazil. Practising law in Macau is getting more international. Sometimes, being a lawyer for an operator can even prevent one from having clients.

It prevents you from having clients because of a conflict of interest?

We often have to refuse clients because of conflicts of interest.

This happens almost every month. The gaming junkets sector is very important but we’re not able to retain them as we are lawyers for one of the operators.

Do you believe establishing general partnerships will avoid lawyers within the same company falling into potential conflict of interest situations?

It’ll be the same. The problem of the conflict of interest is once again related to the ethical conscience of the lawyer - with general partnerships, you don’t avoid or favour that.

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Macau Labour squeeze biting, stalling home projects Developer Polytec Asset says earnings may be affected by up to HK$10 billion as two pre-sales home projects here are on hold Tony Lai

tony.lai@macaubusinessdaily.com

T

he tight labour market here has slowed the construction progress of two large-scale home projects in the Areia Preta district, says a prominent developer.

Developer Polytec Asset Holdings Ltd said in a latest filing to Hong Kong Stock Exchange that their earnings could be affected by as much as HK$10 billion (US$1.28 billion) annually because the pre-sales of two projects can only resume by the end of next year at the earliest.

The company holds an 80-percent interest in both Pearl Horizon and Lotes T+T1, in Areia Preta.

Polytec Asset said in the filing that construction for the Lotes T+T1 started in the fourth quarter of last year while the works for Pearl Horizon only started this quarter.

But the constructions might take a long time. “[The] Group expects that the projects can only be completed in four-five years’ time due to a shortage of labour in Macau and substantial time is required for construction of two such sizable development projects,” the filing said.

Local constructors and developers bemoan the shortage of construction workers, particularly on the ongoing mega Cotai resorts. Public

works like the Light Rapid Transit railway also require large numbers of construction workers.

They have been asking for more swift approval of non-resident workers from the government, while local labour groups like the Macau Federation of Trade Unions accuse the companies of abusing imported labour quotas.

Official figures reveal that there were 40,500 workers - residents and non-residents – employed in the construction sector at year-end, while more than 26,200 imported labour quotas were granted to construction companies.

Earnings slashed Polytec Asset also cautioned that its earnings are only “expected to improve substantially following the completion of the two projects” in Areia Preta.

The developer fetched over HK$10 billion (US$1.28 billion) annually in the 2012-2013 period from the pre-sales of the two projects, it said.

But the new law regulating the pre-sales of unfinished homes which came into force last June has put the two projects’ pre-sales on hold.

HK$50.1 million

Polytec’s earnings from rentals in Macau Square in 2013

The law mandates that pre-sales are legal only if the foundations of the development that will support them are complete and each flat is registered with the government.

The foundations of the two projects, however, can only be completed in two years after the start of construction, said Polytec Asset, which means the foundations will only be ready by the fourth quarter of 2015 by the earliest.

Polytec Asset did not say yesterday how many flats have already been pre-sold in the two projects.

According to the Land, Public Works and Transport Bureau, 260 out of 1,818 flats were pre-sold in

the Lotes T+T1 complex by the end of April last year. Over 2,000 flats in the 5,220-home Pearl Horizon project had been sold by the same period.

Polytec Asset also owns 50 percent of Macau Square, an office and commercial building in the city centre.

The company’s earnings from rentals in Macau Square last year were HK$50.1 million, 15.5 percent more than a year earlier, the company said in the filing.

Its overall profits last year plunged to HK$32.9 million, against HK$290.6 million in 2012, as its oil production in Kazakhstan was suspended.

business daily 99

March 2014 Friday 31, April 19, 2013

Macau

Investors feast on Carat Buyers swiftly gobble up first batch of off-plan flats offered in NAPE project Tony Lai

S

tate-owned developer China Overseas Land and Investment Ltd pre-sold in just two days all 210 flats it has offered in the Carat, its upmarket housing project in the NAPE area.

A written statement issued by China Overseas Land says the company sold the flats, the first in the Carat to be put on the market, for HK$2.3 billion (US$294.9 million).

The flats sold will range in size from 654 square feet to 1,770 square feet, but most will be studio flats.

Each was sold for between 13,000 patacas and 17,000 patacas per square foot.

The prices fetched are at least

HK$2.3 bln

Chinese Overseas Land’s takings from sale of 210 flats in the Carat

one-third higher than the average price of homes sold off the plan in January, which was 9,733.10 patacas a square foot.

Estate agents are unsurprised by the premium. They expect potential buyers to respond enthusiastically to the Carat project despite the price of the flats there and the prospect of interest rates rising.

“The imbalance in housing supply and demand here is severe and persistent,” said HKP Estate Agency (Macau) Ltd district sales director Marco Wong Kwok Ki. “The market for sales of off-plan homes was pretty quiet this year, before this launch, and the market also does not expect any more presales of homes in big projects soon, so buyers rush to snap up whatever is available,” Mr Wong said.

Sales of unfinished flats have slumped since a law governing presales came into force.

Financial Services Bureau data show 85 flats were sold off the plan in January.

The number sold off-plan last May was 721.

Since June the law has allowed the sale of unfinished flats only once the foundations of the building that will support them are complete and each flat is registered with the government.

Money out, money in Mr Wong said many of the buyers of flats in the Carat, which is near the Macau Cultural Centre, intended to let them.

“The rental market in the NAPE area has always been strong as there are many casinos nearby, such as the MGM Macau, Sands Macao and

Photo: China Overseas Land

tony.lai@macaubusinessdaily.com

Wynn Macau,” Mr Wong said.

“Tenants there can afford higher rents for flats, and they also particularly favour studio flats, which are the salient feature of this project.”

China Overseas Land says it will soon put a second batch of flats in the Carat up for sale, but has not said how many. Once finished, the development will contain 414 flats.

Estate agents expect the company to offer the second batch of flats for prices of between 5 percent 10 percent higher than the prices paid for the first batch.

China Overseas Land has a subsidiary, China Overseas Property.

The managing director of China Overseas Property, Tony Yau Wai Kwong, said in January that his company expected the Carat to be completed in the third quarter of next year.

China Overseas Land has another project nearby, called the Paragon.

Tenants there can afford higher rents for flats, and they also particularly favour studio flats, which are the salient feature of this project Marco Wong Kwok Ki , HKP Estate Agency (Macau) Ltd district sales director

Reolian: Court says ‘yes’ to time extension Business Daily scoop confirmed. The government has 3 months to finalise the deal with the new investor that this newspaper identified last Friday as TCM Alex Lee

alex.lee@macaubusinessdaily.com

T

he court has already approved the 3-month extension in the Reolian saga that the government requested. The decision was publicly announced yesterday through the government’s media website, 48 hours after this newspaper predicted that this would be the likely decision, since an investor has already been identified.

Business Daily broke the news on March 26th that the government was seeking a time extension. The business model to be discussed with an investor interested in taking over Reolian assets and to operate its routes - plus the changes in the contract as a result of strong criticism by the Commission

Against Corruption - were the main reasons behind the request.

Last Friday, this newspaper already identified the interested investor as being none other than TCM, one of the existing bus operators. And the proposal to create another company that will absorb Reolian, instead of being TCM directly – meaning that the three operators will continue to be the solution. According to our sources, “it would be too complicated to have one absorbing the other, since they have different operational methods, salaries and so on”.

To be clarified in the next episodes is who exactly will be the entity directly behind the new company:

TCM, state-owned conglomerate Nam Kwong (Group) Company, which announced the acquisition of TCM in January 2012, or its subsidiary China Travel Service (Macao) Ltd, under which the transaction was completed. Another possibility could be through another of Nam Kwong’s transportation companies, Zhuhai Jiuzhou Travel and Transport.

In its press release, the government only says that it will demand from the new company that it get the adjudication to maintain all existing salaries and perks for Reolian workers. Something the investor has already promised to do, says the government.

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March 31, 2014 Friday April 19, 2013

Greater China Anti-graft rules for urbanization China has unveiled plans to tackle corruption and abuse of power in the real estate sector, state media said, as it tries to smooth the way for the mass migration of millions of Chinese into cities from the countryside. The anti-graft plans are part of an urbanisation programme designed to underpin a restructuring of China’s economy, the world’s second largest, away from exports towards one based mainly on domestic consumer demand. Corruption is rife in China, particularly within the state administration where many officials and their dependants have grown rich by abusing their authority.

HK JPMorgan office searched Hong Kong’s anti-corruption agency searched a JPMorgan Chase & Co. office in the city amid a U.S. investigation into the bank’s hiring practices, according to two people with knowledge of the matter. The Independent Commission Against Corruption seized computer records and documents after searching the office of Fang Fang, the company’s outgoing chief executive officer for China investment banking, said the people, who asked not to be identified because the investigation is confidential. The New Yorkbased bank announced Fang’s resignation March 24. JPMorgan has employed him for more than 12 years.

GM to retire Opel from China General Motors Co. will pull Opel from China next year after failing to gain traction in the market over the last two decades and will invest in Europe to boost the German car brand’s sales in its home region. Opel, which has been in China since 1993, never grew beyond a lowvolume, niche player in the country, accounting for less than 1 percent of GM’s sales in the market last year. The marque will spend 245 million euros (US$337 million) to add two models at the main Ruesselsheim factory in the coming years.

Xi plays down military expansion President Xi Jinping defended the build-up of China’s armed forces, saying that the nation will never seek “hegemony or expansion” in the Asia-Pacific region even as it steps up its diplomatic and military presence. In a speech in Berlin, Xi called on nations to seek “mutual understanding” with China, which he said has pursued a foreign policy of peace. “We will not provoke trouble ourselves, but we do not fear trouble provoked by others,” Xi said in response to a question following the address sponsored by the Koerber Foundation.

Shenhua annual profit drops China Shenhua Energy Co Ltd , the country’s largest coal producer, posted a 9.3 percent fall in 2013 net profit, roughly in line with forecasts, as coal prices slid amid a slowing domestic economy. The state-run coal mining giant, which also owns power plants, railways and ports, said its net profit reached 45.1 billion yuan (US$7.3 billion) last year, versus restated earnings of 49.7 billion yuan in 2012. The results compared with a consensus forecast of 43.4 billion yuan in a Thomson Reuters poll of 28 analysts.

Biggest corruption case results in major seizures Confiscation of assets from Zhou’s circle appears to show that President Xi Jinping is tackling graft at the highest levels

C

hinese authorities have seized assets worth at least 90 billion yuan (US$14.5 billion) from family members and associates of retired domestic security tsar Zhou Yongkang, who is at the centre of China’s biggest corruption scandal in more than six decades, two sources said.

More than 300 of Zhou’s relatives, political allies, protégés and staff have also been taken into custody or questioned in the past four months, the sources, who have been briefed on the investigation, told Reuters.

The sheer size of the asset seizures and the scale of the investigations into the people around Zhou -both unreported until now- make the corruption probe unprecedented in modern China and would appear to show that President Xi Jinping is tackling graft at the highest levels.

But it may also be driven partly by political payback after Zhou angered leaders such as Xi by opposing the ouster of former high-flying politician Bo Xilai, who was jailed for life in September for corruption and abuse of power.

Zhou, 71, has been under virtual house arrest since authorities began formally investigating him late last year. He is the most senior Chinese politician to be ensnared in a corruption

KEY POINTS Investigation into Zhou Yongkang has broadened in past four months Relatives and associates have had bank accounts frozen Bonds, apartments, cars, paintings, cash and gold seized Most seized assets not in Zhou’s name More than 300 relatives, allies, staff detained or questioned

investigation since the Communist Party swept to power in 1949.

“It’s the ugliest in the history of the New China,” said one of the sources, who has ties to the leadership, requesting anonymity to avoid repercussions for speaking to the foreign media about elite politics.

The government has yet to make any official statement about Zhou or the case against him and it has not been possible to contact Zhou, his family, associates or staff for comment. It is not clear if any of them have lawyers.

Xi ordered a task force formed in late November or early December to look into accusations against Zhou, sources have previously told Reuters. They have not said what the allegations were except that they were related to violating party discipline, official jargon for corruption.

A third source with ties to the leadership said Zhou had refused to cooperate with investigators, insisting he was the victim of a power struggle.

“Zhou Yongkang is tough and claims it’s political persecution,” the source said.

Zhou rose through the ranks of China’s oil and gas sector before joining the elite Politburo Standing Committee in 2007, where as domestic

Xi confirms nation’s neutral stance on Ukraine The Chinese leader’s first visit to Germany saw the signature of 140 billion euros-worth of business deals

P

resident Xi Jinping said on Friday China would not take sides with the West or Russia over Ukraine, disappointing any hopes Beijing might add its weight to international pressure on Moscow for annexing Crimea.

“China does not have any private interests in the Ukraine question,” Xi told a news conference with German Chancellor Angela Merkel. “All parties involved should work for a political and diplomatic solution to the conflict.”

China has adopted a cautious response to the Ukraine crisis, not wanting to alienate its ally Russia or make comment directly on a referendum in which Crimea voted to join Russia, lest it set a precedent for restive regions of its own such as Tibet.

In an U.N. Security Council vote earlier this month on a draft resolution to condemn the Moscow-backed referendum in Crimea, China’s abstention effectively isolated Russia.

“If I were Russia, I would not be satisfied with the number of votes in favour of Russia,” said Merkel, who despite her country’s close trade ties with Moscow and heavy reliance on Russia gas exports has backed European Union and U.S. sanctions.

The chancellor, who has tried to

use her influence on Russia President Vladimir Putin to de-escalate the crisis, called the U.N. vote a clear sign “that the international community is not very happy with what Russia has done”.

China has signalled understanding for Russia’s position, saying what is happening “has historical reasons”.

Chinese state media has also expressed sympathy for Moscow.

Delicate diplomacy But China has also said it wants to develop “friendly cooperation” with Ukraine. Its foreign ministry said this week Beijing would play a “constructive role” on international financial aid for Ukraine, though it stopped short of saying whether Beijing would participate directly.

“We support the constructive efforts the international community has made to de-escalate the situation and are open to any concepts which serve to calm the situation and to bring about a political solution,” Xi said in Berlin.

“The Chinese side always respects the principles of international relations and non-intervention in the internal business of other states,” he said.

The Chinese leader’s first visit to Germany since becoming president

last year saw the signature of business deals that will add to bilateral trade that was worth about 140 billion euros last year.

But business considerations did not prevent Merkel from publicly raising China’s patchy record on human rights and free speech with the visiting president.

“Broad and free expression of opinion is of course a very important element to promote the creativity of a society, be it in research, culture or civil society,” said the chancellor.

KEY POINTS President Xi says Beijing has no private interests in Ukraine China also ready to give financial aid to Ukraine Visit results in several business deals for Germany

business daily 11 11

March 2014 Friday 31, April 19, 2013

Greater China

OCBC closer to Wing Hang Bank O

Zhou Yongkang in a visit to United States as Minister of Public Safety

security chief his budget exceeded defence spending. He retired in 2012 and was last seen at an alumni event at the China University of Petroleum on October 1.

Bonds, villas, cars, liquor, gold The first two sources said prosecutors and the party’s anti-corruption watchdog had frozen bank accounts with deposits totalling 37 billion yuan and seized domestic and overseas bonds with a combined value of 51 billion yuan after raiding homes in Beijing, Shanghai and five provinces.

Investigators had also confiscated about 300 apartments and villas worth around 1.7 billion yuan, antiques

There was no official comment on reports that Xi might visit a monument to the Holocaust in Berlin during his visit. China likes to contrast Germany’s profound atonement for its World War Two atrocities with what it sees as Japan’s reluctance to do so.

Ties between the Asian rivals took a turn for the worse in December last year when Prime Minister Shinzo Abe

and contemporary paintings with a market value of 1 billion yuan and more than 60 vehicles, the sources added. Other items seized included expensive liquor, gold, silver and cash in local and foreign currencies.

The seized assets belonged to those in custody, the sources said, without saying how many people in total had been detained compared to just questioned. Most of the assets were not in Zhou’s name, they added.

According to the sources, the seized assets had a combined value of at least 90 billion yuan, although it was unclear what share of that total was ill gotten and would be turned over to the state.

Reuters

visited a Tokyo shrine China sees as a symbol of Japan’s militaristic past because it honours wartime leaders and millions of war dead.

But Xi did use a speech in Berlin on Friday evening to recall Japan’s wartime invasion of the Chinese city of Nanjing and say that such atrocities “are still fresh in our memory”.

Reuters

versea-Chinese Banking Corp. is nearing an agreement to acquire Wing Hang Bank Ltd., Hong Kong’s second-largest family-run bank, after securing preliminary approval from the city’s banking regulator, according to people familiar with the matter.

The purchase of Wing Hang, which has a market value of HK$37.8 billion (US$4.9 billion), could be announced as soon as early next week, the people said yesterday, asking not to be identified because the details are private. A deal would value Wing Hang at about 1.9 times book value, according to one of the people.

Based on last year’s book, that multiple would value Wing Hang at about HK$41.2 billion in Hong Kong’s largest banking takeover since 2001, data compiled by Bloomberg show. OCBC, which entered exclusive talks with Wing Hang’s largest shareholders last year, said last week it held “informal discussions” with the Hong Kong Monetary Authority ahead of the potential offer.

The valuation would be a “fairly steep price, and it’s not easy to make it accretive,” Kenneth Ng, a Singapore-based analyst at CIMBGK Securities Pte, said by phone.

“At this price, the winners will be the selling shareholders.”

Southeast Asia’s second-largest lender is seeking to gain a foothold in the Chinese banking hub as the city’s role in cross-border financing expands. The transaction would follow Yue Xiu Group’s US$1.5 billion offer to buy a majority stake

in family- owned Chong Hing Bank Ltd., which was approved by the HKMA on January 9.

Pearl river delta

Shares of Wing Hang rose as much as 9.3 percent yesterday, the most in more than six months, before being suspended pending an announcement under Hong Kong’s takeovers code.

OCBC shares fell 1.1 percent before being suspended from trading in Singapore.

Singapore-based OCBC said last month it would extend exclusive talks on a possible offer through March 31.

Koh Ching Ching, a spokeswoman for OCBC, declined to comment. The HKMA said in an e-mailed statement it doesn’t comment on matters relating to individual institutions.

Cherry Yung, a Hong Kong- based spokeswoman for Wing Hang, declined to comment and referred to the lender’s previous announcement.

Bloomberg News

US$4.9 billion Wing Hang market value

Frankfurt welcomes RMB The agreement will make it easier for investors and companies in Europe and China to issue and own bonds

T

Chancellor Angela Merkel shake hands with Chinese President Xi Jinping after their meeting at the chancellery in Berlin

he central banks of Germany and China signed an agreement on Friday to facilitate transactions in the Chinese currency in Frankfurt, the Bundesbank said, making Germany’s financial capital the first hub for such payments in Europe.

The Bundesbank and the People’s Bank of China signed a memorandum of understanding during Chinese President Xi Jinping’s state visit to Germany on Friday, ahead of a similar agreement between China and Britain expected today.

“This will make it much easier for the German real economy to clear and settle payments denominated in renminbi, marking a major step forward in intensifying Germany’s economic relations with China,” Bundesbank board member CarlLudwig Thiele said.

The agreement will make it easier for investors and companies in Europe and China to issue and own bonds, shares and funds and to pay bills or list companies in each other’s regions.

Up to now, transactions in China’s currency, the renminbi or yuan, have been impractical for all but very large European companies that are able to involve China’s central bank in a deal, because the renminbi is not freely convertible.

The two central banks agreed to cooperate more closely in clearing and settlement arrangements of renminbi

RMB will be more easily accessible for Frankfurt stock exchange traders

payments, and they laid the groundwork to establish a clearing bank.

In a separate statement, German stock market operator Deutsche Boerse said it extended its cooperation with Bank of China to develop the financial infrastructure for the deal and to support the renminbi’s internationalization by promoting Frankfurt as the European offshore centre for the currency.

Reuters

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March 31, 2014 Friday April 19, 2013

Asia

Thailand’s unrest clouds ASEAN investment plans

the country’s credit rating, which all three major rating agencies currently have on a stable rating of BBB+/Baa1, in the investment grade category.

Some corporates in Southeast Asia are generally overlooking Thailand in favour of the faster-growing markets of Myanmar and Cambodia, as well as further afield in Asia.

Singapore’s Oversea-Chinese Banking Corp., Southeast Asia’s second largest lender, said that despite a fall in valuations in Thailand, it has little appetite to make any acquisitions there at present.

Thailand’s troubles are hurting its investment numbers. In the first two months of 2014, pledges from foreign investors were 43 percent lower than a year earlier - and those from Japanese investors were down 63 percent.

However, some portfolio investors still see opportunities. The US$12 billion Templeton Asian Growth Fund, run by emerging-markets investor Mark Mobius, increased its allocation for Thailand to 27.12 percent in February, up from 24.7 percent at the start of the year, according to data from Lipper.

Country’s troubles are hurting its investment numbers

C

ontinuing political uncertainty, derailed infrastructure plans and sliding domestic demand are making big Thai companies look more keenly at investing elsewhere in the neighbourhood rather than in Southeast Asia’s secondlargest economy.

At the Reuters ASEAN Summit, two of the country’s largest companies, Siam Cement PCL and Charoen Pokphand (CP) Foods PCL, outlined growth strategies that are now firmly focused outside their home country.

“We are investing more in ASEAN and less in Thailand, where we focus on high value-added products,” Siam Cement chief executive Kan Trakulhoon said during an interview in Reuters Bangkok office on Thursday.

CP Foods told the summit how it is targeting 75 percent of company revenue to come from foreign operations within the next five years, up from 65 percent currently.

“Growth in emerging countries will surpass the domestic market,” said chief executive Adirek Sripratak, noting his company plans to expand in nearby Philippines and Vietnam.

On Friday, there was another piece of gloomy data on the Thai economy, as factory output fell for the 11th straight month in February, by 4.4 percent compared with a Reuters poll forecast for a 3.5 percent drop.

For months, the outlook for growth has worsened even though officials hope exports -which account for about 60 percent of the economy- will rise and lift the economy this year.

The central bank recently cut its 2014 economic growth forecast to 2.7 percent, compared with 4.8 percent last October, just before antigovernment protesters took to the

Reuters

Thai protesters demand reforms before next election

streets to seek the removal of Prime Minister Yingluck Shinawatra.

A decision earlier this month by the Constitutional Court to annul the result of the February 2 general election has plunged the country into political limbo, raising fears that the economy will struggle to pick up speed anytime soon.

“If political crisis is prolonged, Thai cement demand is likely to be negative,” said Siam Cement’s Kan, who runs the country’s largest industrial conglomerate.

That political uncertainty has been weighing on foreigners who invest in Thai securities. A March 14 research

note from Nomura showed foreigners have been net sellers of Thai equities this year, with net sales of US$837 million.

Indonesia and Philippines by contrast have seen net purchases by foreigners of US$1.01 billion and US$171 million, respectively, so far in 2014.

“If I look across the region, I would say there are better prospects than Thailand right now until we get some sort of resolution to the political overhang that remains there,” Andrew Swan, head of Asian equities at the world’s biggest money manager BlackRock Inc, said in a summit interview in Hong Kong on Wednesday.

Political unrest could also threaten

If I look across the region, I would say there are better prospects than Thailand right now until we get some sort of resolution to the political overhang that remains there Andrew Swan, BlackRock head of Asian equities

Sri Lanka to raise taxes

“W

e are working on a 5 percent deficit,” P.B. Jayasundera, the treasury secretary and the main technocrat in President Mahinda Rajapaksa’s government, told Reuters in an interview. “We haven’t revised the 5.2 percent target. But we feel comfortable.”

A 5 percent deficit would be the lowest since 1977. Sri Lanka hit its deficit target of 5.8 percent last year by cutting capital spending to 5.8 percent of GDP from an expected 6.1 percent.

Revenue for last year was estimated at 13.6 percent of GDP, less than an originally expected 14.5 percent. In its 2014 budget, the government introduced new taxes on banks and

retail goods. It now expects revenue of 14.5 percent of GDP this year.

The International Monetary Fund has repeatedly expressed concern over Sri Lanka’s low tax revenues. It asked Sri Lankan authorities to increase revenue instead of cutting capital expenditure or public investment, including spending on health and education, to achieve reach deficit target.

“Public investment will not be a victim,” Jayasundera said.

“Incrementally, the public investments should go up.”

The treasury secretary said the shortfalls that have depleted tax revenues have been now addressed and tax administration has also been improved. Under-invoicing in motor vehicle imports, cement, steel and

President Mahinda Rajapaksa at the World Economic Forum session in Jordan on May 15, 2009

palm oil resulted in lost revenue in the past, he said.

“This is huge leakage in the government revenue. We have arrested this,” the treasury secretary said.

The government will now tax imported vehicles based on the manufacturer’s value instead of the value quoted by the seller. It has also imposed an additional 10 percent tax on vehicle registrations for vehicles

imported under special permits for state workers.

Sri Lanka expects its US$67 billion economy to grow 7.8 percent this year from 7.3 percent last year.

The government has already reduced key interest rates to multi-year lows to boost expansion. But private-sector credit growth has still been sluggish, despite the lower interest rates.

Reuters

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Asia NZ Green Party plans investment bank The Party is working on plans for an investment bank that would provide capital for new energy projects, co-leader Russel Norman says. The idea is modelled on the U.K. Green Investment Bank and Australia’s Clean Energy Finance Corp., Norman said in an interview on TV3’s The Nation. The Greens will push for the proposal after the September 20 election if they are in a position to form a government in conjunction with the Labour Party, he said. “That kind of idea is critical to the development of a smarter, green economy,” Norman said.

First bond in Australia in 3 years Barclays Plc, the U.K.’s second-largest bank by assets, raised A$1.3 billion (US$1.2 billion) with its first sale of bonds in Australia in more than three years. The British lender’s local branch sold A$700 million of floating-rate notes and A$600 million of fixed-rate securities maturing in April 2019, Barclays said. The five-year bonds were priced to yield 110 basis points more than swap rates, 5 basis points less than initial guidance. “We have quite a big operation in Australia,” said Ken Wei Wong, the Singaporebased head of Barclays’s bond syndicate in Asia.

Baht marks biggest weekly loss Thailand’s baht had the biggest weekly loss in more than a month on concern delays in forming a new government will deepen an economic slowdown. The currency fell for a second week, paring a quarterly advance, after the Constitutional Court ruled on March 21 that last month’s general election was invalid and the Election Commission said the same day it may be at least three months before a new vote can be held. The caretaker status of Prime Minister Yingluck Shinawatra’s administration limits borrowing, hampering its ability to spur expansion.

Tetangco says peso enduring doubts The Philippine central bank said the peso is withstanding doubts over the strength of the country’s current-account surplus, and that the currency has been affected more by external developments. “The reports have actually not affected sentiment on the peso in any significant way,” Governor Amando Tetangco said in an interview on Bloomberg Television. “The peso has been reacting more to global developments,” he said, adding that the currency will continue to take its cues from overseas movements, and signaled that the monetary authority is ready to take steps to curb volatility if needed.

Mizuho must face rate-rigging lawsuit The firm is among about 20 banks that must face an investor lawsuit for manipulating benchmark interest rates. U.S. judge said that the investor, who alleges losses from short positions on euroyen Tibor futures contracts, could proceed with his claim under the Commodity Exchange Act for price manipulation and aiding and abetting. The investor, Jeffrey Laydon, who seeks to represent other investors in a group lawsuit, or class action, said in an amended complaint last year that the banks conspired to fix the euroyen Tokyo interbank and the London interbank offered rates for the yen.

State Bank of Vietnam rectified policies to bolster economy

Vietnam reduces speed Vietnam’s policy makers are trying to bolster an economy that the World Bank estimates will grow 5.4 percent this year

C

ountry’s growth slowed in the first quarter as the government failed to spur lending to businesses as banks struggled with bad debt.

Gross domestic product rose 4.96 percent in the first three months from the same period a year earlier, the General Statistics Office said in a release in Hanoi. That compares with a previously reported 6.04 percent pace in the last quarter of 2013 and the median estimate of 5.2 percent in a Bloomberg survey of seven economists.

Vietnam’s policy makers are trying to bolster an economy that the World Bank estimates will grow 5.4 percent this year, slower than a government target of 5.8 percent, and a seventh straight year of growth below 7 percent. The central bank last week cut its policy rates and said it is stepping up efforts to create more favourable conditions for foreign investors, including a plan to auction bad-debt assets of banks.

“The economy is still very sluggish and facing challenges including weak domestic demand and slow bank lending,” said Nguyen Tri Hieu, a

Hanoi-based economist at Ocean Commercial Joint-Stock Bank. “It’s hard for banks to accelerate credit growth now due to the burden of bad debt,” he said, adding that exports are a “bright spot” that will drive a recovery.

Rate cuts The State Bank of Vietnam last weeks lowered its discount rate to 4.5 percent from 5 percent and the refinancing rate to 6.5 percent from 7 percent. It reduced the repurchase rate to 5 percent from 5.5 percent.

Lending dropped 1.05 percent as of March 13 from the end of 2013, according to the central bank, and the number of business closures rose 12 percent as of end-February from a year earlier. The government targets credit growth of 12 percent to 14 percent this year.

Prime Minister Nguyen Tan Dung last month asked the monetary authority to step up measures to lower lending rates, as the highest level of bad debt among Southeast Asia’s biggest economies curbed lending.

Moody’s Investors Service estimates

bad debt comprised at least 15 percent of total loans, an assessment disputed by the central bank, which said nonperforming loans had dropped to 3.63 percent at the end of 2013.

Exports rose 14 percent in the first quarter from the same period a year earlier, while imports climbed 12 percent, data showed. Disbursed foreign investment rose 5.6 percent to US$2.85 billion in the first quarter from a year earlier, data showed yesterday.

Fitch Ratings in January revised its outlook on the nation to positive, saying there has been an improvement in macroeconomic stability and that the economy has begun to recover.

Inflation this month eased to 4.39 percent from a year earlier, the slowest pace since November 2009.

Growth quickened in the first quarter compared to a 4.76 percent pace in the same period last year.

Industry, which accounted for about 36 percent of GDP, grew 4.9 percent from the same period a year earlier, data showed. Services, which made up 47 percent of GDP, expanded 6 percent.

Bloomberg News

Indonesia’s copper will flow again I

ndonesia has reached a deal over export taxes with U.S. mining company Freeport-McMoRan Copper & Gold Inc., allowing nearly US$4 billion worth of annual copper shipments to resume as early as next month.

Freeport and fellow U.S. miner Newmont Mining Corp have halted copper concentrate shipments since January, refusing to pay an escalating export tax that they say breaches their contracts.

The export tax was introduced as part of a series of mining rules, which include a mineral ore export ban, to force companies to build smelters and process raw materials in Indonesia.

“We have solved the problem,” Deputy Finance Minister Bambang Brodjonegoro said at the Reuters ASEAN Summit. “We will link the

export tax, which is more like an export fee, on to the progress of the smelter development.”

To win a tax reprieve, Freeport agreed to pay the government a 5 percent security bond to build a smelter and sign supply agreements with smelter-building companies, Brodjonegoro said.

The final government regulation is expected to be published in the next few weeks, allowing Freeport to resume exports by the end of next month, he said, from the world’s fifthlargest copper mine in remote Papua.

“We are continuing to work with government officials to seek a resolution to these matters as soon as practicable so that normal operations can resume without adverse impacts to our workforce, the local community and

our customers,” Freeport spokesman Eric Kinneberg said in an email.

Shares of Freeport were 2.4 percent higher at US$32.44 on the New York Stock Exchange.

Any mining company that takes action similar to Freeport’s will also be given a reprieve from the tax, which is set at 20 to 25 percent this year and rises to as much as 60 percent by the second half of 2016.

Newmont, which owns the smaller Batu Hijau copper-gold mine in Indonesia, did not immediately respond to a request for comment.

Earlier on Thursday, a trade ministry official said it had approved Freeport’s export certification but that it would still need approvals from the mining and finance ministries.

Reuters

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International Adelson and the price of politics He was the biggest spender in the 2012 presidential election investing about US$93 million along with his wife

T Erdogan tests his popularity Millions of Turks voted yesterday in municipal elections that will test the popularity of Prime Minister Recep Tayyip Erdogan, hurt by allegations of corruption and autocratic rule. Erdogan says a victory for his Justice and Development Party, or AKP, will show the nation is more interested in improvements to the economy, health care and transport that his government has brought than in a scandal concocted by political enemies.

The opposition says a shrink in Erdogan’s vote will mark the beginning of the end of his 12-year rule.

US energy company on brink of bankruptcy Energy Future Holdings is widely expected to file for bankruptcy in the coming days, the victim of a recordbreaking buyout that piled it with debt just as prices for its electricity plunged. The former TXU Corp owes more than US$40 billion, and if a deal cannot be struck with creditors by the end of today, the owner of 14 power plants is expected to file one of the biggest Chapter 11 bankruptcies in history soon afterward. Ultimately, Energy Future’s businesses are likely to be broken up and transferred to its creditors.

hree Republican governors eyeing the White House, including embattled New Jersey Governor Chris Christie, were in Las Vegas yesterday to court Sheldon Adelson, a billionaire casino owner who could give any of their eventual campaigns a major financial boost.

The governors met one-on-one with Adelson, 80, and addressed a conference of the Republican Jewish Coalition, an advocacy group that counts him as a board member and benefactor. More than 400 of the coalition’s top donors and those seeking support from them gathered this weekend at Adelson’s convention center-hotel-casino complex, part of his international Las Vegas Sands Corp.

Adelson is the 10th richest person in the world, according to the Bloomberg Billionaires Index, amassing his US$36.9 billion as owner of the world’s largest casino company.

He also was the biggest spender in the 2012 presidential election, investing about US$93 million along with his wife, Miriam Adelson.

The couple first helped former U.S. House Speaker Newt Gingrich’s bid for the Republican nomination by pumping US$19 million into a super-political action committee that backed him. When he lost to Mitt Romney, the Adelsons shifted their giving to the former Massachusetts governor while also donating to groups that backed Republican House and Senate candidates.

“Sheldon’s a generous guy and he can attract a lot of players who want to come and hang out with him, and then they collectively attract a number of potential candidates,” Gingrich said March 28 in an interview with the National Journal.

Gingrich also criticized an “election process that radically favours billionaires and is discriminating against the middle class,” and said campaignfinance laws should be reformed to give candidates, not super-PACs, access to bigger donations. Donors may give candidates up to US$2,600 per election, while super-PACs can raise and spend unlimited sums.

Court decision The 2010 U.S. Supreme Court decision in the Citizens United case and subsequent court rulings and regulatory actions have empowered outside groups such as super-PACs to play a larger role in campaigns.

So far for the 2014 elections, Adelson and his wife have given about US$181,000 to Republican candidates and party committees, according to the Center for Responsive Politics, a campaign finance tracker in Washington.

Adelson recently began lobbying for a federal ban on online gaming, saying it’s a moral issue to keep children from gambling. The topic didn’t come up in yesterday’s speeches. The casino mogul’s

most pressing issue, he has said in previous interviews, is U.S. support for Israel.

John Bolton, former ambassador to the United Nations and another possible 2016 presidential contender, also spoke to the conference yesterday and lambasted President Barack Obama’s foreign policy as one of “drift, decline and defeatism.”

“The perception is that American influence has declined,” he said. Peace negotiations between Palestine and Israel are “fraudulent” and “worse than a waste of time,” he said.

Adelson missed the remarks by Walker and Bolton. He was escorted to his front-and-centre seat as Christie was speaking from the podium.

Christie told his listeners that the U.S. must return to its “active, vigorous role in the world.”

Lesson learned In a brief question-and-answer session with Christie, Brooks asked what lessons he had learned from the scandal in which aides and allies disrupted traffic on a bridge leading to New York in retribution for a Democratic mayor’s refusal to endorse his re-election.

“It is always confidence-shaking and disappointing when people that you trust let you down,” Christie said.

“As a leader of an organization, you’re ultimately responsible for that.”

Bloomberg News

Austria approves Telekom Austria-Slim pact Austrian state holding company OIAG’s board authorised management on Friday to negotiate pooling the state’s Telekom Austria stake with that of Carlos Slim’s America Movil, OIAG said in a statement. An accord would mean the partners would have to vote in unison on major issues and would protect Austria’s influence even with a smaller stake, while allowing Slim to raise his nearly 27 percent stake above the OIAG’s 28 percent. It would also trigger a mandatory offer for Telekom Austria shares by putting the partners’ combined stake above the 30 percent threshold.

Cuba passes foreign investment law Cuba’s National Assembly approved a new foreign investment law on Saturday that aims to bring badly needed capital to the communist economy by offering steep tax cuts and promising a climate of investment security. The assembly voted unanimously in a special session to approve the law, official media reported.

It will become valid within 90 days. The new law halves the profits tax from 30 to 15 percent and exempts investors from paying it for eight years, though it also appears to withhold many of the tax benefits from companies that are 100 percent foreign-owned.

Sheldon Adelson caricature on 2012 Republican support

S&P urges Brazil to speed up

B

razil’s credit rating could come under pressure again if its economy continues to grow at a slow pace during the next five years or so, analysts with Standard & Poor’s said after the ratings agency downgraded the country to near junk status this week.

Although S&P has stressed that Brazil’s investment grade is not at risk for now, the analysts warned about declining expectations for growth in Latin America’s largest economy.

“It’s impressive how the consensus about trend growth in Brazil is coming down slowly and nobody realizes how problematic that is,” S&P analyst Sebastian Briozzo told Reuters on

the side-lines of a meeting hosted by the Inter-American Development Bank in a resort 47 miles (75 km) north of Salvador. “If you grow at 2 percent for five years, let’s see how sustainable that is.”

Brazil’s potential growth, or the rate at which its economy is able to expand without stoking inflation, was believed to be running at more than 4 percent just four years ago. Now, many economists estimate it is fewer than 3 percent.

Slower growth “makes everything more difficult” as it eats into government revenues, reducing the

room for policies to stimulate the economy or react to shocks, Briozzo said. In the case of Brazil, large fixed expenses related to debt, wages, and pension payments add to the problem.

“Lack of flexibility is crucial for us. We don’t see prospects for it to get better,” said Briozzo, citing one of the key reasons why S&P decided to cut the country’s credit rating to BBB-minus earlier this week.

While he said the fiscal side was clearly the “weak link” in Brazil, S&P also based its decision on “mixed policy signals” from the government on how to improve its fiscal performance ahead of October’s presidential elections.

In the long run, Brazil’s growth prospects will depend on meaningful tax and pension reforms that S&P considers unlikely to happen in the medium term, Briozzo said.

“You have to debate those reforms for three years and the discussion is not there,” he said.

Reuters

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Opinion Business

wires

Self-Insurance or Self-Destruction?

Leading reports from Asia’s best business newspapers

The Japan News The government has selected six areas as national strategic special zones, where regulations will be eased to create what it calls the world’s most business-friendly environment. The designated zones are the Tokyo area, covering Tokyo and Kanagawa Prefecture as well as Narita, Chiba Prefecture; the Kansai area, covering Osaka, Kyoto and Hyogo prefectures; Niigata; Yabu, Hyogo Prefecture; Fukuoka; and Okinawa Prefecture. The selection was made Friday by a government panel chaired by Prime Minister Shinzo Abe. In April, the government intends to obtain Cabinet approval for the designations based on the National Strategic Special Zones Law.

The Korea Herald Uncertainty is lingering over whether President Park Geunhye’s proposals to bolster humanitarian aid to North Korea and bilateral exchanges will lead to a turnaround in the strained ties, given high military tensions and mutual distrust.

After Park’s announcement of the proposals on Friday in Dresden, Germany, Seoul is poised to hold consultations among related government agencies to formulate a plan to put them into practice. But Pyongyang has yet to officially respond to the proposals.

Financial Review The head of the government’s financial system inquiry, David Murray, has warned that superannuation trustees may not be canvassing advice broadly enough, as he questioned whether there is scope to direct superannuation investment to infrastructure. “We have to think carefully whether you can direct investments in the superannuation industry, or just allow the trustees and the beneficiaries acting together to determine where they’d like to invest,” he said.

The New Zealand Herald A “trusted” chief financial officer has been accused of stealing more than US$100,000 from a company founded by millionaire entrepreneur Bill Buckley. Buckley Systems provides 90 per cent of the world’s silicon chips, which are used in almost all electronic equipment. Stephen Howe of Forrest Hill is charged with using a Buckley Systems computer three times to dishonestly obtain the company’s money. Ten further charges relate to using invoices from Howe’s company, JT Management. The offending is alleged to have taken place between August 2010 and March this year. Howe’s lawyer Todd Simmonds told the Herald on Sunday the police alleged his client had dishonestly taken more than US$277,000.

Gene Frieda Gene Frieda is a global strategist for Moore Europe Capital Management.

T

hough the US Federal Reserve is turning a blind eye to the spill over effects of its monetary policy, the rest of the world is worrying about the impact that capital-flow reversals will have on emerging economies. Will the foreign reserves that these countries have built up in recent years prove adequate to protect their financial systems, as liquidity flows back toward developed economies?

The short answer is no, because excessive selfinsurance ultimately does more harm than good. In order to break the destabilizing cycle of short-term capital flows and excessive accumulation of foreign reserves, the International Monetary Fund, with broad support from the G-20, must devise new rules regarding monetary-policy spill overs.

Severe crises leave an imprint on a nation’s psyche. In the late 1990’s, the currency and banking crises that ravaged Asian economies led the affected countries’ leaders to a simple conclusion: no amount of insurance was too much. Although the introduction of floating exchange rates removed the incentive to borrow in a foreign currency (and thus the need for self-insurance), the political humiliation of losing sovereignty to the IMF – if only temporarily – was so devastating that the economic costs of building a massive foreign-currency war chest seemed worthwhile. But these countries’ leaders failed to grasp the full consequences.

Foreign-exchange reserve accumulation depresses the exchange rate, ostensibly as a smoothing device.

But stronger emerging-

market currencies in the 2000’s would likely have led to earlier rebalancing toward domestic demand.

And if these countries had recycled a smaller stock of foreign reserves into US Treasuries, agency bonds, and subprime securities, US interest rates would likely have remained higher, emerging-market currentaccount surpluses would have declined earlier, and advancedeconomy deficits would have contracted, thereby restoring some semblance of equilibrium. But, of course, that is not what happened – to the detriment of global financial stability.

Furthermore, the accumulation of self-insurance can beget competition similar to an arms race. Whether to prevent the appearance of inadequate insurance or to avoid losing export share, sizable interventions in currency markets became widely accepted among Asia’s emerging economies as a natural response to large capital inflows – directly contradicting these countries’ commitments to floating exchange rates.

Given that persistent currency intervention reduced volatility, it encouraged ever-larger capital inflows, under the presumption of less risk. At the same time, the currencies of countries that chose not to intervene became targets of speculative inflows, owing to the expectation that they would appreciate.

In other words, spill-overs occurred not only between advanced and emerging economies, but also among emerging economies.

Nonetheless, countries like South Africa and Mexico

–both of which chose to forego intervention– did better, in many ways, than their intervention-happy counterparts. Both suffered little financial fallout from the currency weakness that followed the Fed’s

The introduction of floating exchange rates removed the incentive to borrow in a foreign currency (and thus the need for self-insurance)

announcement last May that it would “taper” its purchases of long-term assets. Truly floating exchange rates generally served their purposes: removing the incentive to accumulate external debt, encouraging flexibility within the real economy, and promoting the development of deep and liquid capital markets.

Another consequence of self-insurance is rooted in the ostensibly laudable goal of preserving national sovereignty. Specifically, governments may be tempted, especially around election

time, to use self-insurance as a substitute for adjustment, rather than to help cushion the impact of a shock or support economic rebalancing.

The alternative – “renting” insurance from multilateral bodies like the IMF – would demand fulfilment of certain reform obligations.

The fact is that emerging economies’ self-insurance policies, like the Fed’s ultraloose monetary policy, fuel a reflexive feedback loop.

While any suggestion that countries cede monetarypolicy independence would be foolhardy, some rules are clearly needed to limit spillovers – rules that should come from a revamped IMF, with the US Congress demonstrating its support through a long-overdue quota increase.

Specifically, the IMF should be responsible for assessing spill-overs and mobilizing liquidity support for vulnerable economies accordingly, either through central-bank currency-swap lines or IMF liquidity facilities. Such multilateral insurance would lessen the need for selfinsurance, without impinging on countries’ sovereignty.

To be sure, such rules would not insulate economies entirely from monetarypolicy spill-overs, which are an inescapable element of an economy’s adjustment process. But they would help to mitigate the kind of tail risks that have plagued the financial system over the last two decades. Only with a well-defined mechanism for managing spill-overs can the vicious cycle of capital-flow volatility and excessive selfinsurance accumulation finally be broken.

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Closing CCB profit beats estimate on margins

Myanmar’s first census since 1983

China Construction Bank Corp., the nation’s second-largest lender by market value, posted profit growth that beat expectations as lending margins widened. Net income increased 9 percent to 38.2 billion yuan (US$6.1 billion) for the three months through December from 35 billion yuan a year earlier, based on full-year figures released by the Beijing-based lender yesterday. Net income rose 11 percent in 2013 to 214.7 billion yuan.

Tens of thousands of census-takers fanned out across Myanmar yesterday to gather data for a rare snapshot of the former juntaruled nation that is already stoking sectarian tensions. Groups of school teachers and local officials began the 12-day population survey -- the first since 1983 -- travelling from house to house in an ambitious drive aimed at counting everyone across the povertystricken nation.

Multibillion dollar merger OCBC said to have won Hong Kong regulator’s nod for Wing Hang purchase Jonathan Browning, Elffie Chew and Zijing Wu

owned Chong Hing Bank Ltd., which was approved by the HKMA on Jan. 9.

Pearl River Delta

O

versea-Chinese Banking Corp. is nearing an agreement to acquire Wing Hang Bank Ltd., Hong Kong’s second-largest family-run bank, after securing preliminary approval from the city’s banking regulator, according to people familiar with the matter.

Wing Hang would give OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China. The purchase, which has a market value of HK$37.8 billion (US$4.9 billion), could be announced as soon as early next week, the people

said, asking not to be identified because the details are private. A deal would value Wing Hang at about 1.9 times book value, according to one of the people.

Based on last year’s book, that multiple would value Wing Hang at about HK$41.2 billion in Hong Kong’s largest banking takeover since 2001, data compiled by Bloomberg show. OCBC, which entered exclusive talks with Wing Hang’s largest shareholders last year, said last week it held “informal discussions” with the Hong Kong Monetary Authority

ahead of the potential offer.

The valuation would be a “fairly steep price, and it’s not easy to make it accretive,” Kenneth Ng, a Singapore-based analyst at CIMB-GK Securities Pte, said by phone. “At this price, the winners will be the selling shareholders.”

Southeast Asia’s second-largest lender is seeking to gain a foothold in the Chinese banking hub as the city’s role in cross- border financing expands. The transaction would follow Yue Xiu Group’s US$1.5 billion offer to buy a majority stake in family-

Singapore-based OCBC said last month it would extend exclusive talks on a possible offer through March 31. Koh Ching Ching, a spokeswoman for OCBC, declined to comment. The HKMA said in an e-mailed statement it doesn’t comment on matters relating to individual institutions. Cherry Yung, a Hong Kong-based spokeswoman for Wing Hang, declined to comment and referred to the lender’s previous announcement.

Wing Hang said Sept. 16 that its shareholders were in talks to sell their stake. Chairman Patrick Fung’s family, its affiliates and Bank of New York Mellon Corp. together hold about 45 percent of the shares, which would require a buyout bid, the bank said in a filing to the Hong Kong stock exchange that day.

Hong Kong lenders are proving attractive to mainland companies seeking expansion abroad and foreign firms eyeing the Chinese market.

OCBC’s larger hometown rival, DBS Group Holdings Ltd., acquired Hong Kong’s Dao Heng Bank Ltd. for HK$41.8 billion in 2001.

Bloomberg News

Portuguese bank in trouble

Taiwan protest draws 100,000

Philippines sues China

Portuguese Socialist (opposition) MEP Ana Gomes warned that troubled Portuguese bank Banif could be expelled from European and North American markets if it accepts capital injections from Equatorial Guinea, a country that id banned from most of the main financial markets.

“If it is shown that Portuguese banks such as Banif or any others are vehicles for laundering capital from Equatorial Guinea, they could be outlawed in The USA or even in Europe”, she said at a public hearing in Lisbon into human right breaches in the African country.

Equatorial–Guinea’s governors and diplomats cannot currently hold bank accounts in the USA and there are various law suits going through the courts in Europe, she added.

In early February, Banif announced it had a memorandum of understanding with Equatorial Guinea to work together in the banking sector and that could lead to a state-owned enterprise from the African country entering the bank’s capital structure.

More than 100,000 Taiwanese marched in Taipei yesterday to protest a trade deal with China, challenging President Ma Ying-jeou’s plan to improve economic relations between the political rivals.

As many as 350,000 people joined the rally, “more than we expected,” said Chen Weiting, a leader of students against the pact. The National Police Agency estimated there were 116,000 demonstrators as of 4 p.m. Protesters gathered outside the presidential office a day after Ma rejected demands to withdraw an agreement to open Taiwan’s service industries to competitors from China.

“China doesn’t respect what Taiwan wants, and this trade deal will help it get more control over us,” said Justin Hsu, 27, a factory worker who travelled from Kaohsiung in western Taiwan to join the march.

Thousands of protesters clashed with riot police last week after storming the cabinet compound for the first time in Taiwan’s history.

The Philippines challenged China’s claims to much of the South China Sea at a United Nations tribunal yesterday, seeking to check its neighbour’s push for control of disputed waters rich in oil, gas and fish.

The Southeast Asian nation asked the UN’s Permanent Court of Arbitration in The Hague to uphold its right to exploit waters within its 200-nautical mile exclusive economic zone under the United Nations Convention on the Law of the Sea. The arbitration pleading, almost 4,000 pages long, was submitted electronically today.

“It is about defending what is legitimately ours,” Foreign Affairs Secretary Albert del Rosario said at a briefing in Manila. “It is about guaranteeing freedom of navigation for all nations.

It is about helping preserve regional peace, security and stability.”

The Philippines lacks the military muscle to thwart China, which has a defence budget 47 times that of the Philippines.

Lusa

Bloomberg

Bloomberg