Macau Business Daily, May 28, 2014

MOP 6.00 Closing editor: Alex Lee Publisher: Paulo A. Azevedo Number 548 Wednesday May 28, 2014 Year III

No withdrawal M

ore than 7,000 protesters besieged the Legislative Assembly yesterday. They demanded the controversial compensation bill for outgoing principal officials be withdrawn. Legislators have cancelled the final voting. But the government has refused to scrap the bill

www.macaubusinessdaily.com

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Please, behave

Macau icon passes away

Hong Kong is considering implementing limitations on tourist arrivals as locals are getting fed up. Mainlanders’ habits are irking Hong Kongers to the extent that economic benefits are not compensating for their well-being

He was one of Macau’s most renowned entrepreneurs and a senior political advisor to the Central Government. On Monday evening, Ma Man Kei passed away at the age of 95. Long an influential figure in Macau, he ‘will always be in the memory of the SAR’, eulogised the Chief Executive Chui Sai On Page 5

Expectations high

Casino Lite

Investors are predicting a strong May with casino revenues expected to jump 15 percent year-on-year, a ‘helpful’ event for gaming stocks, says Sterne Agee.

Some casinos are unable to install airport-style smoking lounges on their mass gaming floors. The Health Bureau says that means no smoking from October 6, although it’s business as usual for VIP rooms

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HSI - Movers May 27

Name

%Day

Lenovo Group Ltd

1.35

Bus bonanza

Swire Pacific Ltd

1.26

Hutchison Whampoa

1.19

COSCO Pacific Ltd

1.15

Bus companies can keep bus fares as well as receiving

China Unicom Hong K

1.05

Belle International

-2.18

China Resources Po

-2.39

China Mengniu Dairy

-2.44

China Resources Ent

-2.61

Wharf Holdings Ltd

-3.45

government subsidies in the new public concession contract, the government said.

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Healthy wine sales

Source: Bloomberg

In an interview with Business Daily, Banny Wine Cellar CEO Bandy Choi says that the wine market here is expanding. More players are plunging in. Portuguese wine is the favourite tipple for the economically-minded. But mainlanders spend big on French

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May 28, 2014

Macau Official compensation bill stopped in its tracks Legislators have approved the cancellation of final voting on a controversial official compensation bill; thousands of protestors besieged the Legislative Assembly premises yesterday demanding the CE withdraw the bill Tony Lai

tony.lai@macaubusinessdaily.com

T

he Legislative Assembly has approved a motion to cancel final voting on a controversial bill awarding generous compensation to outgoing principal officials, besieged by several thousand protestors outside the building demanding the bill be scrapped.

The cabinet of Chief Executive Fernando Chui Sai On said in a press statement after the voting that the Administration will continue to listen to the public on the bill. But it did not say the bill would be withdrawn.

Ho Iat Seng, the Assembly president, said that no timeline has been set for the Assembly committee to discuss the bill again. Online group Macau Conscience organised a siege of the Assembly yesterday afternoon, attended by thousands of people with numerous placards reading ‘Withdrawal’ and ‘Scrap the bill, Chui Sai On.’ The organiser announced that over 7,000 protestors had turned up yesterday but more people rushed to the site to voice their discontent after work. The calls, however, failed to

impress the legislators, who vetoed a motion tabled by pan-democrat legislator Ng Kuok Cheong requesting the Assembly urge Mr Chui to scrap the bill.

Nevertheless, Assembly members unanimously approved a motion tabled

by Mr Chui to ‘cancel the final reading and voting’ of the bill yesterday. The Chief Executive tabled such a motion on Monday after thousands of people - 20,000 people, organiser Macau

Conscience claimed versus the official figure of 7,000 – poured onto the streets on Sunday disputing the bill.

The Sunday protest was widely dubbed the largest protest in the territory since the 1999 handover.

The bill backfired as it states outgoing officials like the Chief Executive and government secretaries are entitled to a monthly subsidy of about 70 percent of their monthly salary until they find a new paid job. It also

gives one-off compensation to officials, as well as granting the Chief Executive immunity from prosecution during his or her tenure, which has been criticised by the public as ‘greedy’.

Mr Ho said yesterday that the bill has now been pushed back to the Assembly committee for further scrutiny, which will not start until the administration submits a revised version of the bill.

“If the government had conducted a public

consultation before submitting a revised version, there is not much difference from [withdrawing this bill and] submitting a new one,” he said, adding only that the government has the authority to scrap the bill.

The government and the Assembly “both learned a lesson” that they should listen to the public, Mr Ho said, adding that there is, however, a necessity to establish a welfare mechanism for outgoing officials.

But pan-democrat legislators Mr Ng and Au Kam San, as well as Assembly members Jose Pereira Coutinho, urged Mr Chui to withdraw the bill. Jason Chao Teng Hei, a member of Macau Conscience, said that they have yet to plan what further move they will take following today’s siege.

Several legislators like Melinda Chan Mei Yi held Secretary for Public Administration and Justice Florinda Chan responsible for the outburst this time, for not listening to the public. Some protestors threw bottles at legislators’ cars when they left yesterday.

Smoking lounge concept grounded for some casinos Two gaming venues give up the idea of installing smoking lounges as they are unable to comply with the necessary conditions, the Health Bureau confirms Tony Lai

tony.lai@macaubusinessdaily.com

T

he Health Bureau has confirmed that some casinos have relinquished the idea of installing airport-style smoking lounges as they

do not have the necessary “conditions” to comply on their mass gaming floors.

Lei Chin Ion, the Bureau’s director, also told the media on the sidelines of a

Legislative Assembly session that VIP rooms are initially defined as private rooms with a membership mechanism.

“Some gaming venues have already submitted draft proposals for setting up smoking lounges on their mass floors for a preliminary review . . . It will shorten the time of review for their official proposals in the future,” said Mr Lei, who did not specify the number of venues referred to.

The current regulation, implemented since the beginning of last year, permits gaming venues to install smoking areas of no more than half their floor space including gaming equipment such as gaming tables.

The Health Bureau announced this month that smoking will be banned on the mass gaming floors of

all casinos effective October 6, except for operators who install smoking lounges without gaming equipment on the floor. The current rules still apply to VIP rooms.

“As far as I know, two casinos have said that they have no conditions on their premises to set up the smoking lounges. So, after October 6 smoking will be banned on their mass floors,” Mr Lei said.

Gaming analysts have said that they expect that the full smoking ban on mass gaming floors will have a limited impact on the territory’s gaming revenue, which expanded by 17.5 percent to 133.52 billion patacas (US$16.69 billion) in the first four months. Gaming executive and legislator Angela Leong On Kei said earlier this month that she

wants the government to issue more operational details such as the definition of mass gaming floors and VIP rooms.

Mr Lei responded yesterday: “Mass [gaming] floors are areas open to the public while VIP floors are separated like [individual] rooms with a mechanism of membership [for entry].”

He did not specifically answer whether the premium mass gaming sector – a segment of growing importance for gaming companies with higher profit margins than the VIP segment - will be covered by the mass gaming floor smoking ban. He only added that the gaming regulator, the Gaming Inspection and Coordination Bureau, will offer more concrete definitions on mass gaming floors, VIP floors and premium mass at a later date.

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May 28, 2014

Macau

May revenue growth propelling gaming stocks Investors are predicting a strong May with casino revenues expected to hike 15 percent year-on-year. A ‘helpful’ event for gaming stocks, says Sterne Agee. Visitor arrivals from Hong Kong increased for the first time in April since September 2013 Alex Lee

Alex.lee@macaubusinessdaily.com

A

nalysts believe that the robust gaming revenues expected for May in Macau will be ‘helpful’ in starting a recovery in casino stocks having lost almost 25 percent of their value in the last three months due to scandals involving junkets and illegal money transfers using UnionPay cards.

In a client note yesterday, brokerage Sterne Agee predicted that gross gaming revenues this month will grow between 12 to 17 percent. As at May 25, gross revenues totalled 26.3 billion patacas; the historical May rate growth is around 15 percent yearon-year, meaning a May total of 34 billion patacas in revenues, including tables and slots.

‘Given current investor scepticism (and focus) on Macau’s short-term results,

but overall acknowledgement of its longer-term secular attributes, we believe last week’s GGR checks will be helpful for Macau stocks”, wrote Sterne Agee analyst David Bain.

Last week, daily gross gaming revenues climbed to 1.03 million patacas, 12 percent more than the average of the previous week (920 million patacas). In the first week of May, daily revenues topped 1.03 billion patacas.

The brokerage also stated that breaking the billionpataca daily mark seems ‘to have emerged as an investor psychological hurdle’.

‘While weekly results can easily be influenced by hold/ win-rate, as well as many issues that we would consider to be more distractionary and thus not necessarily proving of a fundamental read-through

to the market or individual stocks, we believe last week’s results bode well given current investor scrutiny on short-term results”, said Sterne Agee.

Hong Kong factor One of the highlights of this month was data revealing that Hong Kong visitor arrivals to Macau rose 9 percent in April from a year ago, the first year-on-year increase since September 2013. The trend was influenced by calendar changes as Easter holidays occurred this year in April as opposed to March last year.

Hong Kong tourists represent 20 percent of the visitor total in Macau, with mainlanders accounting for a 66 percent share. In April, the number of visitors to Macau climbed 10 percent, while in the January-

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April period, it rose 9 percent, more than a 2 percent jump from the same period last year and 2013 total.

‘We believe visitation is emerging as an increasingly important indicator to the

health/growth of Macau as the Island [sic] becomes more reliant on mass gaming revenue (and less reliant on VIP), as well as ahead of significant supply increases”, emphasised Sterne Agee.

There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life.

Those people and their actions are our inspiration.

•••

info@goldfishmacau.com +853 2833 1258

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May 28, 2014

Macau

Intense rivalry amidst slower life insurance growth Gross premiums in the life insurance sector expanded by 12.1 percent in 1Q, when China Life Macau reclaimed the crown from AIA Macau Tony Lai

tony.lai@macaubusinessdaily.com

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ompetition among the life insurers here has flared up amid slower growth in income for the sector, official figures suggest. The latest data unveiled by the Monetary Authority of Macau (AMCM) shows that the gross premium income recorded by life insurers here hit 1.44 billion patacas in the first three months, up 12.1 percent from the previous year.

The pace decelerated from an increase of 16.1 percent in the preceding quarter and a growth of 54.7 percent in the first quarter of last year.

But the competition among the 11 life insurers has intensified. The Macau branch of China Life Insurance (Overseas) Co Ltd has overtaken American International Assurance Co (Bermuda) Ltd’s Macau branch as market leader once more in terms of market share.

China Life Macau, a branch under mainland state-owned China Life Insurance (Group) Co, took in 530.87 million patacas in life premiums in this year’s first quarter, accounting for 36.9 percent of the market. This is up from 26.3 percent of presence in the market for the 12

months ended December 31.

AIA falling The market share of AIA Macau dropped from 36.9 percent in last year to 32.5 percent, or 467.31 million patacas, in the January-March period.

The Macau branches of MassMutual Asia Ltd and AXA China Region Ins Co (Bermuda) Ltd also went headto-head.

Mass Mutual Asia Macau rose to third place in terms of market share in the life insurance market, replacing AXA Macau in the first quarter. The former took in 22.3 percent more of life premiums in the first quarter to 110.3 million patacas whilst AXA Macau’s premiums stood flat at 107.69 million patacas. Meanwhile, the Macau nonlife insurance market experienced faster growth, government figures show. The premiums raked in by 12 non-life insurers here hit 565.39 million patacas in the first quarter, rising 25.9 percent year-on-year.

China Taiping Insurance (Macau) Co Ltd, a subsidiary of state-owned China Taiping Insurance Group Ltd, maintained its grip to lead the pack of non-life insurers.

Corporate MGM Macau goes eco-friendly MGM Macau has taken up a string of environmentally friendly measures by adding a hybrid vehicle to its limousine fleet and replacing its shuttle buses with lower carbon emission vehicles.

The new S400 Hybrid is MercedesBenz’s first production hybrid. It uses next-generation lithium ion battery technology, which facilitates efficient charging and discharging.

This results in lower emissions and better fuel efficiency, thus making a direct, positive impact on the environment of Macau. In addition, the replacement shuttle buses are equipped with an extra battery to provide air-conditioning and internal lighting, even when the engine is idling. “Promoting environmental sustainability is at the heart of what we do as an environmentally responsible organisation that is passionate about going green and helping save the environment,” MGM Macau’s CEO Grant Bowie said, adding that “a green business is a better business.”

Biggest Special Olympics golf tournament tees off today at Caesars Golf Macau Over one hundred players, coaches and guardians swing into action today in the biggest Special Olympics golf tournament on the planet, on the rolling greens of Caesars Golf course, in Coloane.

Now in its third edition, the Special Olympics Golf Masters sees the return of South African Olympic champion Thomas Lugg and three new participating countries: Switzerland, Spain and Zimbabwe.

After arriving late Monday, all the teams yesterday watched the premier of ‘Zero Handicap’, a one-hour documentary produced by the event organisers, the Charity Association of Macau Business Readers.

“We’ll show the documentary at different festivals; not because we’re trying to land any cinema awards - far from it - but because we do think this event is really meaningful and is succeeding in sharing experiences, knowledge and emotions between the teams, between individuals and civil society as well as volunteers, patrons and guardians,” Association president Paulo A. Azevedo said.

The tournament director, Stefan Kuehn, emphasised the fact that the tournament is transcending sports barriers, declaring “This is way more than just a sports event, it’s a fraternal event and starting this year it’s also a cultural event”. The organisers are especially pleased to announce the attendance of Mrs. Tali Kornhauser who - in addition

to her role as Vice President of the Special Olympics Israel - is an accomplished artist who will commit to canvas some very special art works during the week revolving round the beauty of golf, hope, love, dreams and happiness.

Prior to touring the city, all the teams heard from major sponsors like MGM China and Melco Crown Entertainment, who restated their commitment to receiving the international players with the hospitality Macau is renowned for. And Caesars Golf is ready as well, once more, to welcome the event “as we did in the past and will continue to do so as we’re here to support the town and its development”, said Li Wei, the club’s General Manager.

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May 28, 2014

Macau

Ma Man Kei passes away at 95 The renowned and widely respected political advisor was vice chairman of the 8th, 9th, 10th and 11th National Committee of the CPPCC

M

acau’s renowned entrepreneur and senior political advisor to the Central Government, Ma Man Kei, passed away on Monday night at the age of 95.

Mr Ma was one of the most influential Chinese figures in Macau under the Portuguese administration.

According to Chinese news agency Xinhua, Mr Ma succumbed to illness. He was a distinguished social activist, patriot and close friend of China’s Communist Party, the news agency adds. Mr Ma was also the vice chairman of the eighth, ninth, tenth and eleventh National Committee of the Chinese People’s Political Consultative Conference (CPPCC). In addition, Mr Ma conducted duties as permanent president of the Macau Chamber of Commerce and chairman of the Chinese Literature Foundation.

The ‘patriotic’ businessman had been hospitalised in the People’s Liberation Army General Hospital for heart problems since 2002.

During the tenth anniversary of Macau’s handover to China in 2009 the then-president of the CPPCC, Jia Qingling, visited Mr Ma in the hospital in Beijing.

At the time, pictures were published of both men talking and shaking hands.

In 2007, health concerns for Mr Ma prompted both Chinese premier Hu Jintao and then-Chief Executive of Macau Edmund Ho Ha Wah to visit the businessman at his hospital bed.

Ma Man Kei was usually compared to the late Hong

Kong businessman Henry Fok Ying-tung, and was known for carrying much needed goods into mainland China during the Japanese invasion of World War II. In times of war, Mr Ma earned the respect of the leaders of the China’s Communist Party, including Deng Xiaoping, with whom he met on several occasions during the 1970s and 1980s.

Ma Man Kei was born in Nanhai in Guangdong province in 1919. In this province that borders Macau and Hong Kong, he learned the ‘secrets’ of the food trade and took over his father’s business when he passed away at a young age. Towards the end of the 1930s, Mr Ma opened his first business in Hong Kong. A decade later he moved to Macau, where he expanded his business and launched a number of charity organisations.

Having good political

affiliations both in Macau and mainland China, Mr Ma was well-known by both countries’ leaders. He also contributed towards the development of Macau with his enterprises, as well as cementing relations between China and Portugal.

The Handover Having witnessed Macau’s handover to China, which meant the end of the Portuguese administration here, Ma Man Kei spoke highly of the Special Administrative Region’s development governed by Edmund Ho Hau Wah, Macau’s first Chief Executive following the handover.

A friend of Ho Yin, who was also a businessman and leader of the Chinese community and Edmund Ho Hau Wah’s father, Ma Man Kei was awarded the Lotus Flower Medal in 2002

for his role in the territory’s development.

In his social and political life, other than having been a member of the Macau Chamber of Commerce and a legislator in the Legislative Assembly, Mr Ma served as vice-president of the Macau SAR Preparatory Committee.

He was also the president of the Kiang Wu Hospital Charitable Association, director of Pui

Tou secondary school, as well as a consultant for the Macau Chinese Education Association and vice-director of the Chinese universities in Jinan and Shaoguan.

At the time of choosing Macau’s first Chief Executive, Ma Man Kei was part of the selection committee, having been the vice-president of the committee in charge of drafting the SAR’s Basic Law.

Chu Sai On: ‘Ma Man Kei will always be in the memory of the SAR’

‘M

a Man Kei will always be in the memory of the SAR for everything he offered to Macau’, Chui Sai On, Macau Chief Executive, wrote in a letter to Ma Man Kei’s family. The Chinese entrepreneur and politician died on Monday night aged 95 years old. ‘It was with a deep consternation that we heard the news about the death of Mr. Ma Man Kei’, he wrote.

‘On behalf of the Government of the Special Administrative Region of Macau I pay my tribute and I address my condolences to his family’, he added.

In the letter sent yesterday Chui Sai On praises Ma Man Kei’s efforts in the different

areas he was involved in. ‘In almost every crucial moment in the history of Macau, Ma Man Key assumed bravely and with intelligence his responsibilities. He managed to resolve different crises and conflicts, making a great contribution to Macau’s social progress as well as to the welfare of the people of Macau’.

The Chief Executive also highlighted that Ma Man Kei, who passed away in Beijing, was throughout his life ‘a man in love with traditional Chinese culture’, mentioning his poetry, stating it reflects a very strong patriotic feeling.

‘We miss him. He was a reference and an example’, Chui Sai On wrote.

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May 28, 2014

Macau

Gov’t rolls out new payment plan for bus operators Bus companies can keep bus fares as well as receiving government subsidies in the new public concession contract, according to government plans Tony Lai

tony.lai@macaubusinessdaily.com

T

he new mechanism of bus services will be a hybrid of two modes – bus operators will receive subsidies from the government as well as keeping the bus fares passengers pay, according to the government’s latest plan. But authorities are still keeping mum on the identity of the company that will take over the operations of bankrupt Reolian Public Transport Co Ltd. The latest official comment came yesterday following a meeting between a special committee of the Legislative Assembly and officials, discussing the disposition of Reolian services.

The government has temporarily taken over Reolian’s services and assets - until June 30 - after the company announced bankruptcy in October; in the meantime, it is continuing to look for a new operator.

Wong Wan, director of the Transport Bureau, told the media after the closed-door meeting that the government will sign a public concession instead of public service contract with the unidentified firm.

The change was prompted by a strongly worded report released by the Commission Against Corruption last year that it is ‘illegal’ to sign public service contracts.

In addition to amending the nature of the contract, there will be a change in how

the bus company is paid from now, Mr Wong noted.

He said: “In this mechanism, the bus operator can get all the bus fares it has collected [from the passengers] but such fares are not much as students and the elderly only have to pay a small amount . . . This is not enough for the bus operator to retain normal operations . . . so the government will provide a certain amount of subsidy to [the firm].”

For the current bus service mechanism implemented since 2011, bus companies do not keep the bus fare but get a service charge from the

government. Prior to 2011, bus companies received all the bus fares but no payments from the administration.

Better, more Legislator Ho Ion Sang, who chairs the Assembly’s special committee, told media after the meeting that a hybrid of the two modes can give the government better control of the frequency of buses with the cautious use of public money. Mr Wong also said that there will be a cap on the amount of subsidy the government pays, while the figure will also be pegged to

the quality of service the bus company provides.

“The company is entitled to room for more [subsidies] if it scores high in the [service] assessment like 80 or 90 marks [out of 100] . . . while the amount will be reduced if it fails,” he said. The assessment will be conducted on a halfyearly basis.

He did not go into specifics on the figures, saying only that the reduction in subsidy can “make the operator feel pinched in its operation”.

He stressed that this new proposed payment mode can “encourage” the bus operator

to improve its services while the government will not spend more than the current mechanism.

The official added that they will work with the existing two bus operators - Transportes Urbanos de Macau SARL (Transmac) and Transmac and Sociedade de Transportes Colectivos de Macau SARL (TCM) – to adopt this new mode.

But the officials, Mr Wong and his boss Secretary for Transport and Public Works Lau Si Io, are still not releasing the identity of the new firm slated to take over Reolian’s services and assets, including staff and buses.

Mr Lau only told media yesterday that the government is “at the final stage of discussion” with the company, a newly established firm with shareholders experienced in local transportation operations.

He added, however, that the administration had not ruled out contacting other companies. Business Daily has previously reported that TCM and its state-owned conglomerate parent Nam Kwong (Group) Co Ltd have expressed interest in taking over the bus firm.

There are “challenges” in the discussion with the company, said he, adding that the administration has “back-up proposals” if no deal can be finalised by June 30.

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May 28, 2014

Macau

Wine market expanding at healthy pace Banny Wine Cellar has been a retail seller for the past decade and expects demand to grow in high-end products, CEO Bandy Choi tells Business Daily Alex Lee

alex.lee@macaubusinessdaily.com

B

anny Wine Cellar has been in business in Macau for 10 years now. Speaking to Business Daily, the company’s CEO Bandy Choi said that the wine market here is expanding and more players are plunging in. Although Mr Choi expects demand to grow especially in 2016 when more Cotai hotels and casinos open, he conceded that most of the company’s profits come from low-end products.

“There are lots of new players in Macau. But Banny Wine Cellar is competitive because it has achieved a very good reputation. Our clients trust our services and products”, Choi said, adding that prices also play an important role in the company’s success. “We’re very competitive as well because of our prices. We have a very strong relationship with our suppliers and so we can buy very good wines at cheap prices.”

The wine retail company is well established in Macau and it also has branches in Hong Kong and China.

“I don’t have the exact numbers. But I believe that as for market share we are within the top three wine retail sellers in Macau. And I think that we’re not the third”, the CEO said.

Ten years into the business, Mr Choi says he is considering expanding into mainland China. “The challenge now is to maintain our reputation while expanding. So we need to be very professional, do our best and offer our clients the best service available in the wine retail market”, he said. But Banny Wine Cellar is in no rush to expand and not looking for a franchise opportunity. “It’s important to be more known for the quality of our products and services than for wide distribution. We want to be a strong brand worldwide and that requires high-standard quality”, Mr Choi said.

Retail products can make the difference between wine companies, he continued, which is why he travels around the world to find new wines.

“Market exploration is one of the most important parts of the business. We do a lot of research in the market even now, after ten years in business.

I can say that every year I visit places such as France, Germany and Italy looking for new wines and new trends to introduce to Macau”.

Profit in the masses The wine retail business in Macau primarily focuses on two kinds of client: tourists and locals who enjoy a good wine. Their demands, however, are different. “Visitors from mainland China are usually looking for highend products. The price of these kinds of bottles of wine ranges from 10,000 to 32,000 patacas,” Mr Choi explained. Local clients, on the other hand, seek cheaper wines costing anything from 30 to 100 patacas.

“These are the most popular wines for Macau residents”, he said.

The wine market is expected to continue to flourish in the future, with the new wave of casinos scheduled to open in 2016 likely increasing demand. “As more casinos are built we expect demand to grow for highend products. We’re prepared for that and we have a lot of quantity to offer in the next years for this

We do a lot of research in the market even now, after ten years in business. I can say that every year I visit places such as France, Germany and Italy looking for new wines and new trends to introduce to Macau

kind of customer. But the mass market is also expected to grow, as more tourists will visit the city”, Mr. Choi added.

As for big clients in the casino and hotel industries, Banny Wine Cellar works with MGM Macau and Galaxy Entertainment Group.

However, these do not account for the larger share of the sales volume of the company. “They’re very important for us and our relationship is very profitable for both parties. But hotels have other channels to be serviced.

We’re more focused on retail sales, and so we don’t invest in salesmen to go after these kinds of clients. Often, they come to our shops looking for certain wines that are not so easy to find in the market”, Mr Choi said.

Contrary to what one might expect, cheaper wines are more profitable for retail sellers. Bandy Choi explained that for the most part “our profit comes from the most popular wines that are not the most expensive. Actually, they’re the cheapest but the profit margins are higher and can reach five percent.

As for the high-end wine it has a bigger value but the profit is around two or three percent”.

Portuguese wines popular Fourteen years after the handover, Portuguese wines are still the most sold in the mass market. However, French wines have made a name for themselves. “People come to visit Macau and they really want to have Portuguese wine. It’s the most requested in the mass market.

Also, Portuguese wines have a large demand because they’re cheap and the quality is very good. French wines are the second most requested”, Mr Choi said.

But if the price of Portuguese wines makes them more popular it is also a disadvantage for high-end products as people look for more expensive goods.

“French wines are by far the most requested in high-end products. In this market, Portuguese wines are not so requested as their prices generally are not so high and so people won’t buy them”, Choi added.

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May 28, 2014

Macau Belle profits RMB5, 127 million

Brought to you by

B HOSPITALITY Bigger spenders The most recent figures for visitors’ expenditure confirm a long-standing feature: mainland visitors are by far the biggest spenders. In the last three years, their average spending swung between 22 percent and 30 percent above the overall average. However, the figure for the first quarter shows a small, and unusual, decrease in mainlanders’ spending per capita. Its amount decreased, when compared with the same period last year, by a bit more than 4 percent to 2,543 patacas.

Still, that value represents a rise of 37.5 percent in their average spending since the same quarter in 2010. But mainlanders’ share in total spending is so big that overall growth recorded in the period was down by 7 percentage points. It fell from 8.4 percent last year to about 1.4 percent this year.

Visitors from Hong Kong, the second major source of visitors, posted a small gain of about 2 percent but their average spending is much lower. It stood at 883 patacas in the first quarter. Moreover, the growth in their spending since 2010 was also much more modest, standing at 8.2 percent.

Tai Fung Bank profits soar in 2013 Its last year’s profits after tax soared by more than 45 percent to 665.85 million patacas, outperforming rivals.

China Guangfa Bank gained 27 percent more in 2013

elle International Holding Limited achieved a profit of RMB5,127 million (MOP6,638 million) in the last fourteen months.

The company notched up a small increase in its profits, reaching RMB5,109 (MOP6,614 million) in 2012/13.

According to a Belle report, the net profit of the company rose 1 percent from RMB5,110 million (MOP6,616 million) in the period from January 2012 to February 2013 to RMB5,160 million (MOP6,680 million) in the period from January 2013 to February 2014. The reason for the company presenting a fourteen-month report is due to the fact that it has changed its financial year-end date to February instead of December.

China’s biggest footwear retailer by market value operates mainly in Mainland China, Hong Kong and Macau and had a revenue of RMB1,323 million (MOP1,721 million) in the regions of Hong Kong and Macau. The revenue was RMB1,217 million (MOP1,575 million) in 2012/13. Most of the company revenue comes from Mainland China (RMB41,374 million; MOP53,567 million).

During the same period, Belle paid RMB10.6 million (MOP13.7 million) in income tax to the Macau coffers.

Tony Lai

tony.lai@macaubusinessdaily.com

T Spending by visitors from other major sources, such as Taiwan, Japan and South East Asia, has also risen steadily in the period observed here. Taiwanese visitors’ expenditure went up by 15.4 percent, the fastest rise among those regions shown on the chart. Japan and SEA posted smaller rises, at 11 percent and 5.3 percent, respectively. Since 2010, the biggest rise was recorded by the Taiwanese, which almost tripled their average spending.

Part of the explanation lies in the fact that the number of same-day visitors, who spend less, keeps decreasing relative to the number of overnighters.

J.I.D.

10.5 %

Q1 rise in total spending by visitors, on previous year

ai Fung Bank Ltd, founded by prominent businessman Ho Yin, saw its profits surge by nearly half last year due to the robust local economy.

In its annual result of 2013 published in local newspapers yesterday Tai Fung said its profits before tax surged by 47.2 percent year-on-year to 743 million patacas (US$92.86 million) last year. After tax the bank’s profit still reached 665.85 million patacas last year, up by 45.3 percent, the bank said. Tai Fung’s performance outperformed most of its rivals last year during a period that the local banking sector, according to the Monetary Authority of Macau, saw a 35 percent rise in profits to a record high of 8.4 billion patacas.

The bank did not mention any particular reasons for its robust growth, merely stating in the report: ‘The financial industry benefited from the environment of a stable development in the Macau economy in 2013.’

‘The increases in loans and deposits, as well as other major business indicators, also reached an historic high in 2013,’ the note added.

Deposits in the bank totaled over 51.94 billion patacas by the end of last year, increasing by 13 percent from the previous year, whilst its

assets amounted to 69.7 billion patacas by year-end, rising 23.8 percent year-on-year. The bank’s major shareholder is Bank of China Ltd, whose Macau branch last week reported a rise of 37 percent in its profits after tax to 3.3 billion patacas last year.

China Guangfa profits up 27 percent The Macau branch of China Guangfa Bank yesterday also said that its net profit last year jumped by 27 percent from a year earlier to an historic high of 101.82 million patacas. The local branch of the mainland commercial bank said in its annual report published in local newspapers yesterday that the rise last year was pushed by ‘its strengthening services in financing Macau constructions’, as well as seeking expansion in offering services to non-Macau customers.

Looking ahead to the future, Tai Fung Bank said in the statement that the slow recovery of the global economy and the slowdown of the mainland’s economic growth could pose ‘challenges’ for the sector.

Ip Sio Kai, deputy general manager of BOC Macau, also said in a business seminar in February that the lack of financing channels for Macau banks could limit growth here.

Unemployment rate steady at 1.7pct

M

acau’s unemployment rate remained unchanged at 1.7 percent between the months of February and April, as did the underemployment rate at 0.4 percent compared with the first quarter of the year.

The latest official data from the Statistics and Census Service show that the total labour force stood at 387,500, up 0.3 percentage points to 73.6 percent from the January to March period. In addition, total employment increased by 3,100 to 381,000, with the construction sector creating most of the new jobs.

This sector saw a 3.8 percent increase in jobs to 45,600. There were only 6,400 registered unemployed people in Macau, a number similar to that of the previous period. Of these 7.2 percent were first-job seekers, down 0.4 percentage points.

The labour participation rate, however, increased by 1.8 percentage points between February and April, over the same period last year, while the unemployment rate dropped slightly by 0.2 percentage points and the underemployment rate also dropped by 0.4 percentage points over that of last year.

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May 28, 2014

Greater China Alibaba headquarters in Hangzhou

Alibaba IPO’s weak and strong points Chinese affiliates of the largest U.S. accounting firms have been barred from leading audits of U.S.-listed companies

I

t’s easy to get caught up in the glossy numbers within Alibaba Group Holding Ltd.’s IPO prospectus: 44 percent profit margins, 72 percent revenue growth, and 231 million active buyers last year.

Beyond page 19 of the document, though, lies a stark reminder that investing in a Chinese company -especially one as sprawling as Alibaba- is also a wager on how well it can get along with Beijing. The company may raise as much as US$20 billion in its initial public offering later this year, 100 times more than the average Chinese IPO in the U.S. Alibaba owes some thanks to government policies that have enabled its ascent, and a successful U.S. listing will highlight Alibaba’s value to China. At the same time, the government could alter Alibaba’s contract with U.S. shareholders, censor its platforms and restrict the payment service that’s vital to its business -any of which could impact its value to investors.

“As an investor, you’re placing a bet on management’s ability to negotiate what is happening on every day of the week,” said Duncan Clark, chairman of BDA China Ltd., a Beijing-based consultant to technology companies.

“The management is going to be the shock absorber that navigates the big risks.”

China support Ashley Zandy, a spokeswoman for Alibaba, declined to comment on the company’s IPO. China has a stake in the success of Alibaba and its peers. More than 10 million people are employed in the nation’s e-commerce sector, a survey by the Ministry of Human Resources and Social Security, posted on Alibaba’s blog, shows.

Government policies -in particular bans on foreign companies from Twitter Inc. to Google Inc.’s YouTube- have bolstered domestic companies. Alibaba has investments in Chinese messaging and video services. Moreover, Alibaba’s growth over the last 15 years has mirrored China’s, amid a wave of economic liberalization.

“Anything that harms Alibaba has a direct impact on the reputations of everyone in the industry,” said Joseph Foudy, a professor of Asian studies at New York University’s Stern School of Business. “That doesn’t mean they won’t do it, it just means that decision

will be taken at the highest level, where they’re tremendously proud of Alibaba.”

Worst case While it is common for companies to outline the worst-case scenarios in IPO filings, some of the risks Alibaba raises are already affecting Chinese companies traded in the U.S. Chinese affiliates of the largest U.S. accounting firms have been barred from leading audits of U.S.-listed companies. The ban came after they refused to hand the Securities and Exchange Commission documents relating to Chinese operations because doing so is prohibited under Chinese law.

While Alibaba’s auditor -the Hong Kong affiliate of PricewaterhouseCoopers LLC- isn’t subject to the ban because it’s not based in mainland China, it could still be affected. If PwC can’t properly inspect Alibaba’s mainland-China operations, the company will need to find a new auditor or, in the worst case, pull the IPO, according to the prospectus.

Alipay is so central to payment and it’s why Jack decided to put it back into domestic shareholding -to insulate it effectively.

A lot hangs on Alipay Duncan Clark, BDA China chairman

Jack Ma (pictured) isolated Alipay service payment from Alibaba structure in order to comply with Chinese foreign ownership rules

accounting firms, that would reduce the enthusiasm to some extent and increase the risk, which would equate to the stock price eventually.”

‘More fraud’ PwC’s work also isn’t fully inspected by the independent Public Company Accounting Oversight Board -an agency created by Congress to oversee audits- due to restrictions from the Chinese government, the filing shows.

China’s censorship of media is also already impacting U.S.- listed companies, whose shares sank in April after China closed 110 websites as part of a crackdown on pornography.

Alibaba is liable for content on its platforms that is deemed to be “socially destabilizing, obscene, defamatory, libellous or otherwise unlawful.” according to the prospectus. The company’s expansion outside of e-commerce -to video content, and messaging in particular- means it faces the issue on several fronts.

Alipay’s importance

“At best, it’s uncertain; at worst, you have a real downside with the SEC ban,” said Brian Fox, the Nashvillebased president of Confirmation. com, a maker of technology used by accounting firms to find fraud.

“If they can’t have one of the top

Meanwhile, Alibaba’s payments affiliate, called Alipay, faces tightening government oversight and anything that limits transactions on Alibaba’s platforms could impact growth. The business had been planning to offer virtual credit cards until China’s central bank blocked their issuance in March.

Alibaba says its position as a “trusted platform” depends on

Alipay, which processes more than three-quarters of all transactions on Alibaba’s Chinese online marketplaces. In 2010, Alibaba transferred ownership of Alipay to a company controlled by company founder Jack Ma, a move that it said was necessary because of Chinese restrictions on foreign ownership.

“Alipay is so central to payment and it’s why Jack decided to put it back into domestic shareholding -to insulate it effectively,” BDA China’s Clark said, referring to Ma. “A lot hangs on Alipay.”

Like many Chinese companies, Alibaba will rely on a legal structure known as a variable interest entity, or VIE, required by the Chinese government for certain industries. The VIE gives overseas investors exposure to gains and losses through contracts rather than direct ownership.

While Alibaba gets most of its revenue from wholly foreign-owned enterprises, it could be impacted if China revokes its VIE license, the filing shows.

In many investors’ minds, the chance for returns in Chinese e-commerce, outweighs the risks, according to JMP Group Inc.’s Carter Mack.

Other Chinese Internet companies to list shares in the U.S., including Alibaba’s rival JD.com Inc., have had tremendous success despite carrying many of the same risks. JD.com raised US$1.78 billion last week, pricing its shares above the marketed range, and the stock rose 10 percent on debut.

Bloomberg News

10

May 28, 2014

Greater China Foreign companies pay top salaries Employees in China’s foreign-invested companies earned more than any other group last year, according to new survey results released yesterday. The (NBS) said in a statement on its website that foreign companies paid an average annual salary of 61,694 yuan (US$10,001) to their employees in 2013, topping all other types of companies. State-owned companies paid the second highest at 56,728 yuan, while companies with investment from Hong Kong, Macau and Taiwan paid 49,683 yuan to employees, the statement showed. The NBS tracked 870,000 companies in 16 sectors for the survey. The average salary of all tracked companies was 45,676 yuan.

Hong Kong mulls limiting Total arrivals jumped 12 percent last year, the fourth consecutive bolstering retailers and landlords Billy Chan, Moxy Ying and Vinicy Chan

H

ong Kong may limit tourist arrivals as an influx of Chinese visitors stokes discontent, Chief Executive Leung Chun-ying said.

The city may need measures to “slow the gains in tourist arrivals or stop increases, or cut visitors,” Leung

told reporters in Hong Kong today.

“We’re making studies and will seek feedback.”

Public discontent in Hong Kong has given rise to street protests as mainland tourists pour into the city, snapping up homes, designer handbags and daily necessities.

Limiting arrivals in response could crimp the city’s retail sales, about a third of which were accounted for by Chinese visitors in 2013.

“This may send a wrong signal to the general public in China that Hong Kong is no longer welcoming them,” Raymond Yeung, a senior economist

Shunfeng plans share sale China’s Shunfeng Photovoltaic International Ltd, a solar cell maker and solar power station operator, plans to issue HK$6 billion (US$775 million) worth of new shares, seeking funds to build more solar power stations.

Shunfeng plans to sell up to 600 million new shares, representing 28.2 percent of its existing share capital, at up to HK$10 apiece, it said in a filing to the Hong Kong bourse. The issue price represents a 8.9 percent discount to the stock’s previous close.

COSL’s oil exploration enters second phase China Oilfield Services Limited (COSL) completed the first phase of oil drilling and exploration off Zhongjian Island of the country’s Xisha Islands yesterday, the company said in a statement. According to a plan made by its client, the exploration operation has moved to another site for its second phase work, the COSL said. The company said it has acquired related geological data during the first phase of exploration. The operation, carried out by the HYSY981 drilling platform managed by COSL, started on May 2 and is expected to be completed by mid-August.

Huangshan hosts dialogue on World Heritage protection

An international dialogue on the use of space technologies in world heritage protection kicked off yesterday at China’s Mount Huangshan, a UNESCO natural and cultural heritage site and global geopark. Representatives of UNESCO-designated places, including World Heritage Sites, Biosphere Reserves and UNESCO-affiliated Global Geoparks, gathered together for the first time for a four-day dialogue in Huangshan, Anhui Province.

The dialogue was aimed at boosting communication and cooperation among UNESCO-designated places, and enhancing protection, management and sustainable development of these places through space technologies, said Hong Tianhua, secretary-general of the dialogue’s organizing committee.

Shoes retailer Belle affected by mild growth Retailers like conglomerate China Resources Enterprise have reported the softer economy is already taking its toll Donny Kwok

C

hina’s biggest shoe retailer Belle International Holdings Ltd said it expects sluggish growth in the world’s second-largest economy to weigh on its earnings for the next two years after profit edged up just 1 percent in its latest fiscal year.

As fierce competition in stores and online makes life tougher for China retailers, Belle is counting on robust sales of popular global sportswear brands like Nike and Adidas to cushion a more subdued performance by the shoes it makes itself that still generate most of its profit.

Chief Executive Sheng Baijiao said Belle expects strong brand recognition to help lift same-store sportswear sales by a high-single digit percentage this fiscal year, compared with 6 percent last year. Sales at its footwear division, including affordable in-house brands like Staccato and Tata targeted at younger Chinese women, should rise by a low single-digit percentage, compared with 0.6 percent last year.

“We see some improvement in our same-store sales in March-May quarter as compared to the previous quarter, but (footwear business) in not out of the woods yet,” said Sheng,

KEY POINTS Fierce competition in store and online weighs on retailers Robust sportswear sales to outpace footwear division Net profit rose just 1 percent in fiscal year ended Feb

in charge of the largest footwear retailer in China by market value.

Speaking to reporters in Hong Kong, Sheng said the company may slow down its store opening pace in the current fiscal year in wake of the weak sentiment.

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May 28, 2014

Greater China

tourist arrivals

Taiwan’s biggest pension fund diversifies

year of double-digit gains,

The pension is attracting global fund managers such as PIMCO and State Street at Australia & New Zealand Banking Group Ltd., said by phone today. “If the government decides to impose a quota on mainland visitors, the impact would be beyond the service sector.”

Protesters marched through Hong Kong streets earlier this year demanding the government curb visitors from the mainland, who accounted for 75 percent, or 40.7 million, of the city’s 54.3 million tourist arrivals in 2013.

Total arrivals jumped 12 percent last year, the fourth consecutive year of double-digit gains, bolstering retailers and landlords including Wharf Holdings Ltd. and Luk Fook Holdings Ltd. Tourists from the mainland accounted for 34 percent of Hong Kong’s retail sales last year, according to a May 8 research note from Bank of America Corp.’s Merrill Lynch & Co. Mainland Chinese visitor spending accounts for almost 50 percent of Harbour City and about 35 to 40 percent of Time Square’s sales, Karl Choi, an analyst at the bank, wrote in a research note published yesterday.

“The impact will be huge if government cuts visitors at the moment, as Hong Kong’s retail market has already worsened this year,” Wong Wai Sheung, chairman of Luk Fook,

said by phone yesterday. “It would be hard for retailers to survive if that happens.”

Retailers like conglomerate China Resources Enterprise have reported the softer economy is already taking its toll. Some are locked in price wars that are slicing into profit margins, while a rapid expansion of department store space and a surge in online retail have diluted foot traffic in Chinese stores.

With a network of nearly 20,000 stores strung across China, Belle reported net profit rose 1 percent to 5.16 billion yuan (US$827 million) for the 14 months ended February,

compared with 5.11 billion yuan in a comparable 14-month period ended February 2013.

Belle, worth US$9 billion by market value, changed its financial year-end date to the end of February from December earlier this year. For the 14 months revenue at Belle rose 10 percent to 43.06 billion yuan, up from 39.13 billion yuan in the 14 months ended February 2013.

“The macroeconomic outlook for the next two years is not optimistic,” Sheng Baijiao said in a filing to the Hong Kong bourse late on Monday.

“The consumer retail market is expected to be under continued pressure due to weak consumer sentiment.”

Licensed sportswear sales accounted for about 39 percent of Belle’s total revenue. Belle has said that Nike and Adidas -which together make up 90 percent of the division’s sales- have much better brand recognition in China, as well as a more extensive product offering, than second-tier clients such as French retail group Kering SA’s Puma sports brand and Nike’s Converse sneakers.

In the footwear division, Sheng said he expects operating profit margins to remain stable at about 22 to 24 percent.

The business is more profitable than the higher-priced licensed sportswear sales because Belle can book all revenue and profit from sales of most of the brands in the footwear unit itself. The division does include some licensed international footwear brands, like Hush Puppies and Clarks.

Shares of Belle were down 1.9 percent in Hong Kong, while the benchmark Hang Seng Index was off 0.04 percent. The stock, which fell nearly 50 percent last year, has dropped about 9 percent so far this year.

Wrong timing The Hong Kong government said earlier this year the city may have more than 70 million tourist arrivals in 2017. Tourism accounted for 4.5 percent of the city’s economy in 2011, according to a paper Leung discussed with a committee on Monday.

“I don’t think it’s good timing to implement such changes now,” Alison Law, head of regional consumer research at Daiwa Securities Capital Markets, said by phone today.

Hong Kong’s retail sales grew 6.8 percent in the last quarter of 2013, the slowest since the July-to-September quarter of 2012. Sales of jewellery, watches and clocks, and valuable gifts fell by 8.9 percent in March from a year earlier.

“Sales of jewelry and watches have already dropped and domestic consumption is also weak,” Law added. “It doesn’t make sense to restrict tourist arrivals.”

Katherine Yu, a spokeswoman at the Hong Kong Retail Management Association, declined to comment.

Bloomberg News

Reuters

T

aiwan’s biggest pension fund has been doing better in recent years than the largest pension fund in the United States and seeks to keep its edge by boosting investments in alternative products and domestic equities.

The government-controlled Labour Funds, with T$2.5 trillion (US$83.3 billion) in assets, will put an additional T$110 billion into alternative investments in 2015 from T$50 billion now, director general Huang Chao-hsi of the Bureau of Labour Funds said yesterday.

“Alternative investment is the way to go for our future strategy,” Huang told Reuters. “We have done extensive research, which showed returns generated by alternatives are much better than equities.”

Alternative investments include stocks, REITS, hedge funds, private equity funds, commodities and energy products, he said.

The fund has posted an average annual return of 3 percent over a five-year period from 2009, while the California Public Employees’ Retirement System (Calpers) had a 1 percent return for the same period from 2008, the director general said, adding that it expects a 4

percent return this year.

The U.S. pension fund is the industry’s role model, Huang said, noting that the 2008 financial crisis and a global market rout in 2011 however dragged down previously double-digit average annual returns.

Taiwan’s Labour Fund has generated a 24.8 percent return out of the US$1.25 billion invested in alternatives since 2012. It is planning to allocate 8 percent of funds to alternatives in 2015, more than 6 percent this year and 4.2 percent in 2013, he said.

Mandates The fast-growing pension fund, which has more than T$200 billion of fresh money coming in each year as employers are required by law to set aside 6 percent of their employees’ salaries on a monthly basis, is attracting global fund managers such as PIMCO and State Street to compete for mandates.

The fund will also look at investing in Taiwan stocks. Some 25 percent, or T$600 billion (US$19.94 billion), of funds are invested in the domestic stock market, Huang said.

Reuters

Foxconn to buy Taiwan telco stake The deal comes as Foxconn, the world’s largest contract manufacturer of electronic goods, is branching out into new areas Faith Hung and Michael Gold

A

pple Inc supplier Foxconn Technology Group will buy a stake in Taiwanese mobile telecoms operator Asia Pacific Telecom for NT$11.6 billion ($390 million) in a deal that would expand its presence in Taiwan’s fledgling 4G telecoms market.

Foxconn, which is listed on the Taiwan stock market under the name Hon Hai Precision Industry Co Ltd, would pay NT$20 a share for 582.9 million shares in Asia Pacific via a private placement, both companies said in stock exchange filings yesterday.

Asia Pacific and a unit of Foxconn are then expected to merge fully via a share swap, pending agreement on terms, by June 20.

The deal comes as Foxconn, the world’s largest contract manufacturer of electronic goods, is branching out into new areas including software and cloud computing, in addition to 4G services.

Foxconn has previously won one of the licenses to operate part of Taiwan’s 4G spectrum, which is expected to begin service later this year.

“The deal should definitely benefit Hon Hai as they move into 4G, though it could be as long as seven years before they see any real profit from

KEY POINTS Foxconn to purchase NT$11.6 billion stake in Asia Pacific Telecom Move comes amid Apple supplier’s entry into 4G market Deal good for Foxconn in long term – analyst their entry into the field,” said Fubon Securities analyst Arthur Liao.

Earlier this month, Asia Pacific had said it would soon decide soon on a merger with either Foxconn or Chinese noodles maker Ting Hsin International.

Foxconn will purchase Asia Pacific under its subsidiary company Ambit Microsystems, the unit responsible for its future 4G deployment, the stock exchange statement said. Ambit will be dissolved and new company will operate under the name Asia Pacific Telecom.

Reuters

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May 28, 2014

Asia Philippines’ March imports up Imports in March rose 9.6 percent from a year earlier, the statistics agency said yesterday. Top imports in March were mineral fuels, lubricants and related materials, accounting for 23.6 percent of total. Mineral fuel imports climbed an annual 23.3 percent to US$1.28 billion during the month. The country had a trade deficit of US$146 million in March, bringing the trade gap in the first quarter to US$1.85 billion. Based on the new revised data, the Philippines had a trade deficit of US$5.71 billion in 2013, much lower than the previously reported deficit of US$7.85 billion.

Officials have set an economic growth target of 6.5-7.5 percent this year, after growth of 7.2 percent in 2013.

Bank of Japan eyes stimulus Kuroda has become more vocal about the need for government

T

he Bank of Japan has begun shifting its focus from supporting growth to ways of phasing out its massive stimulus, taking first tentative steps towards a potentially momentous move for the world economy.

Current and former central bankers familiar with internal discussions say an informal debate is under way on how to prepare for an exit from the BOJ’s 13-month-old “quantitative and qualitative monetary easing.”

The stimulus is a centrepiece of

S.K. think tank lowers CB growth forecast South Korea’s top government think tank maintained its forecast for this year’s economic growth at a lower level than the central bank’s projection - while cutting this year’s inflation forecast. The Korea Development Institute (KDI) yesterday forecast Asia’s fourth-largest economy would grow by 3.7 percent this year, up from last year’s actual 3.0 percent but unchanged from its previous projection in November. The Bank of Korea in April raised its forecast for this year’s economic growth to 4.0 percent from the previous 3.8 percent, citing changes in its method of calculating gross domestic product.

Prime Minister Shinzo Abe’s campaign to end two decades of deflation and fitful growth, and BOJ Governor Haruhiko Kuroda has vowed to keep cheap cash flowing until his 2 percent inflation target is in plain sight.

But with inflation now past the half-way mark and signs that the economy has weathered last month’s sales tax increase, Japanese central bankers are already thinking about the next chapter.

First of all, Kuroda and his team are keen to avoid market confusion

and volatility that the U.S. Federal Reserve triggered in May 2013 when it first signalled the possible “tapering” of its extraordinary stimulus.

With the BOJ churning out 6070 trillion yen per year($589-687 billion), withdrawal symptoms could be similarly acute and the lesson for the BOJ is that signalling a tapering too soon or being too specific could backfire.

With that in mind, the BOJ has no plans to trim the stimulus or publicly suggest the eventual drawdown any

KEY POINTS BOJ hopes to switch to supporting role of Abe’s reforms BOJ board divided on how long to keep stimulus BOJ may clarify later this year conditions for tapering Exit far off, debate may heat up if inflation nears 2 pct

Japan foreign assets hit record Net external assets rose to a record 325 trillion yen (US$3.2 trillion) as of the end of last year as a weak yen boosted the value of overseas holdings, making the country the world’s biggest creditor nation for 23 years in a row, the finance ministry said. The value of net assets held by the Japanese government, businesses and individuals exceeded the previous year’s 296 trillion yen, which was a record under comparable data going back to 1996, ministry officials said.

Japan’s net external assets were more than 1.5 times those held by China.

N.Zealand pending on dairy industry evolution New Zealand’s dairy farmers are bracing for a sharp drop in earnings as milk prices fall back from record levels this coming dairy season - a headache for a highly indebted industry that also threatens to slow economic growth and pressure the New Zealand dollar. Soaring Chinese demand for milk powder has seen farmers supplying the Fonterra dairy cooperative, the world’s top dairy exporter, earn more than NZ$8.00 per kilogram of milk solids for the season winding down this month, the highest since the co-op was established in 2001.

Peso and ringgit upside down The baht weakened 0.6 percent in May as global funds pulled US$1.7 billion from Thai equities and debt

T

he Philippine peso and Malaysian ringgit have gone to first from worst in Southeast Asia, as authorities hint at interest-rate increases and investors seek havens from Thailand’s military coup.

The peso has advanced 2.1 percent in May, while the ringgit gained 1.7 percent, after inflation exceeded benchmark borrowing costs since December amid the fastest economic growth in the region. The currencies were Southeast Asia’s worst in the first quarter. The baht weakened 0.6 percent in May as global funds pulled US$1.7 billion from Thai equities and debt.

Kokusai Asset Management Co. expects the ringgit and peso to gain as investors pull funds from Thailand, where a military coup has increased chances of a rate cut to spur growth.

Deutsche Bank AG and Credit Suisse Group AG recommend buying the two currencies after Bank Negara Malaysia

The currencies are getting support from the perception that the two central banks are probably slightly ahead of the rest of Asia in terms of normalization, or tightening monetary policy Guan Yi Low, investment director, Eastspring Investments, Singapore

said monetary policy may be adjusted to check financial imbalances and Bangko Sentral ng Pilipinas signalled a readiness to curb inflation.

“The currencies are getting support from the perception that the two central banks are probably slightly ahead of the rest of Asia in terms of normalization, or tightening monetary policy,” Guan Yi Low, who helps oversee about US$100 billion as investment director at Eastspring Investments in Singapore, said by telephone on Monday.

The Philippines has kept its overnight borrowing rate at a record low of 3.5 percent since October 2012, while consumer prices rose 4.1 percent in April from a year earlier. Malaysia has held its key policy rate at 3 percent since May 2011 even as inflation reached 3.5 percent in March, the highest in almost three years, before easing to 3.4 percent last month.

Eight of 10 analysts surveyed by Bloomberg predict the Philippine central bank will raise its policy rate by at least 25 basis points, or 0.25 percentage point, in the third quarter, and eight out of 11 in a separate poll expect a similar increase in Malaysia.

Philippine policy makers raised lenders’ reserve requirements twice this year and next meet on June 19. Bank Negara’s next review is on July 10.

Bloomberg News

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

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May 28, 2014

Asia

exit structural reforms time soon, say those familiar with the internal debate.

But whereas weeks or months ago that debate would center on the potential need for more easing, now there is a strong sense within the BOJ board that the stimulus so far has worked well and the next step, albeit distant, could be policy tightening, not further easing.

Deputy Governor Kikuo Iwata underscored that shift, reminding markets that the 2 percent inflation goal worked both ways.

“The BOJ’s current policy intends to prevent not just deflation but inflation from well exceeding 2 percent, such as to 4 percent or 5 percent, for a medium- to long-term period,” Iwata told a seminar on Monday.

Hideo Hayakawa, a former top BOJ economist who maintains close contacts with those inside, says the central bank needs to clarify what will it do after the battle with deflation is won.

“If 2 percent inflation comes into sight, the BOJ should taper its asset purchases,” Hayakawa, a senior executive fellow at private thinktank Fujitsu Research Institute, told a Reuters Investment Summit last week.

In public, Kuroda has become more vocal about the need for government structural reforms, which shows he wants the BOJ to shift from boosting economic demand to playing a supporting role as Abe promises deregulation to boost Japan’s growth potential.

Keen to shore up public confidence in the BOJ’s inflation goal, Kuroda regularly brushes off questions about an exit strategy saying the focus should remain on battling deflation.

There is no hard deadline for curtailing asset purchases and Kuroda keeps reminding investors that the BOJ will not hesitate to ease further if economic recovery appears at risk.

But central bankers are now expressing more confidence in their policy and if the economy keeps improving the debate will intensify about how long the BOJ should maintain its stimulus after it reaches the two-year mark in April 2015.

Right now, there is no agreement yet among the nine policy board members on that.

Reuters

S.Korea household credit up, confidence down The composite consumer sentiment index (CCSI) fell to 105 in May from 108 in April

S

outh Korea’s annual household credit growth reached its highest in two years during the January-March period, central bank data showed yesterday, but the growth was mainly attributed to a decline in loans in the first quarter of 2013.

Household credit at the end of March, including loans and other credit owed by South Korean households, was up 6.4 percent year-on-year as credit rose 3.4 trillion won to 1,024.8 trillion won (US$1.00 trillion), the Bank of Korea’s preliminary data showed.

It was up from a 6.0 percent gain three months prior and the quickest rise since a 7.1 percent incline seen in the first quarter of 2012. Household credit fell 0.9 trillion won in the first quarter of 2013 resulting in the bump seen in January-March this year.

A central bank official said loans taken out in the first quarter are usually modest, a result of year-end holiday bonuses and fewer housing transactions because of cold weather.

Household borrowing during the January-March period in 2013 was especially low due to the expiry of tax cuts at end-2012 that resulted in a

surge of borrowing during the fourth quarter of 2012, the official said.

On the other hand, composite consumer sentiment index in May slipped to its lowest in eight months, dampening hopes for a firm recovery in domestic consumption in Asia’s fourth-largest economy, central bank data showed yesterday.

The composite consumer sentiment index (CCSI) fell to 105 in May from 108 in April, a survey by the Bank of Korea showed. May’s number was the lowest level since a reading of 102 seen in September last year.

A reading above 100 indicates that consumers who expect economic and living conditions to improve in the coming month outnumber those who expect them to worsen.

The index has remained above 100 since December 2012, but has been slowly crawling down from a near 3-year high seen in January.

Policymakers have said domestic spending is expected to contribute more to economic growth in South Korea this year compared to the past, but so far consumption has been off to a wobbly start.

Reuters

Modi modifies cabinet and names Jaitley finance minister Modi’s cabinet was sworn in last night before more than 3,000 guests, including Pakistani Prime Minister Nawaz Sharif Andrew MacAskill and Unni Krishnan

N

arendra Modi reduced India’s cabinet to the smallest in 16 years in what he called an “unprecedented” overhaul of the nation’s top decisionmaking body as he officially became prime minister.

Modi will be in charge of “all important policy issues” and any unallocated portfolios, the president’s office said in a statement today. Arun Jaitley, named both finance and defence minister, said today his priorities include restoring economic growth, containing inflation and fiscal consolidation.

“The mandate which our government has received has an inbuilt hope in it,” Jaitley told reporters in televised comments upon taking office. “I’m sure that a political change itself sends a strong signal to the global community as well as domestic investors.”

Modi has vowed to reduce the size of India’s government to revive Asia’s third-biggest economy after winning a parliamentary majority in the nation for the first time in 30 years. He faces the challenge

of reducing the region’s second- fastest inflation and pushing through a backlog of stalled projects valued at more than US$200 billion.

“A smaller cabinet is a good thing because it will streamline decision making,” said A.S. Narang, professor of political science at the New Delhi-based Indira Gandhi National Open University.

“In the past there have been multiple authorities and clashes between different departments.”

Sharif attends Modi’s cabinet was sworn in last night before more than 3,000 guests, including Pakistani Prime Minister Nawaz Sharif and other regional leaders, in front of the presidential palace in New Delhi. This was the smallest cabinet since the Bharatiya Janata Party’s last prime minister Atal Bihari Vajpayee inducted 21 cabinet ministers in 1998.

Sushma Swaraj became foreign minister and Rajnath Singh will head the home ministry, according to the

Arun Jaitley will be in charge of both finance and defence Ministries

statement. Harsh Vardhan will take over the health ministry, Nitin Gadkari will run the roads, shipping and highways ministry and D.V. Sadananda Gowda will head the railways ministry.

Narendra Singh Tomar will be in charge of the mines, steel and labour ministries.

In a statement released shortly after he was sworn in, Modi said the nation of 1.2 billion people delivered a mandate for economic development stability and good governance. His Bharatiya Janata Party won a parliamentary majority,

the first time a single party has done so in India in three decades.

‘Glorious future’ “Together we will script a glorious future for India,” Modi said in a statement posted on his website.

“Let us dream of a strong, developed and inclusive India that actively engages with the global community to strengthen the cause of world peace and development.”

India’s president Pranab Mukherjee swore in 23 cabinet ministers on Monday,

down from 34 under the last government of former Prime Minister Manmohan Singh in 2009. During the campaign Modi promoted a message of “minimum government, maximum governance.”

Modi vowed to work for the nation’s poor in a May 20 address to BJP lawmakers.

His campaign resonated with voters as well as investors, with the benchmark stock index rising to a record high and the rupee strengthening.

His policies over the next few months will have significant implications for the nation’s credit rating, Standard & Poor’s said May 16. The company had said it might downgrade Asia’s third-biggest economy to junk status if the next government is unable to revive growth and improve public finances.

“The Modi era begins with high hopes,” said Satish Misra, a political analyst at the Observer Research Foundation in New Delhi.

“There is no scope for an excuse for him after getting a huge mandate to run the country.”

Bloomberg News

14

May 28, 2014

International French opposition boss quits over funding scandal

Kenya ready to defend shilling The governor said the current level of foreign exchange reserves gave the bank sufficient muscle to tackle what he called “temporary shocks” Richard Lough

K The leader of France’s embattled main opposition UMP party quit yesterday after shock claims that invoices for former president Nicolas Sarkozy’s election campaign were billed as party expenses. Several heavyweights of the centre-right party, including Sarkozy’s former prime minister Francois Fillon, demanded Cope’s resignation following the latest twist in a corruption scandal engulfing him and a PR firm owned by his associates. Cope, who had so far shunned calls for his ouster, agreed to step down from June 15, UMP officials said.

Tesco says ends talks on Turkish business UK-based retailer Tesco Plc has ended talks with third parties over “potential options” for its struggling business in Turkey without a deal, it said yesterday, a new setback for Chief Executive Philip Clarke as he seeks to rein in global expansion to focus on reviving its business at home. Tesco and the company’s Turkish subsidiary Tesco Kipa, which it bought in 2003 and now operates 191 stores, made the announcement in brief statements yesterday. Shares in Tesco Kipa fell 9.5 percent to 1.34 Turkish lira (US$0.64), valuing the company at around 1.78 billion lira (US$856 million).

Novatek sees no access to EU pipelines The head of Novatek, Russia’s largest independent gas producer, sees no chance of winning the right to export gas via pipelines to Europe in the near term despite getting government approval to ship super-cooled gas out of Russia last year. In 2013, privately owned Novatek and state-controlled Rosneft were granted the right to ship liquefied natural gas (LNG) out of Russia, breaking the monopoly of state-controlled Gazprom. Gazprom also exclusively ships gas to Europe, a right currently being challenged by its rivals.

Greenpeace protesters board arctic drilling rig Activists from environmental group Greenpeace have climbed aboard an oil drilling rig in the Norwegian Arctic yesterday, trying to stop Statoil’s exploration plans in one of the world’s northernmost prospects, the group said yesterday. Oil firms are drilling further north in Norway than ever before as the Arctic ice retreats and recent regulation changes let firms work in areas where winter ice was common just decades ago. The move comes just weeks after Greenpeace tried unsuccessfully in Rotterdam to block the delivery of Russia’s first oil from its Prirazlomanaya oil platform in the Arctic Pechora Sea.

enya’s central bank has signalled its intent to defend the ailing shilling by selling dollars and says it has deep enough foreign reserves to cushion the currency against shocks.

The shilling has been on the back foot this year, hurt by lower than expected dollar inflows into the tourism and tea sectors. More recently, a spate of bombings has added to worries that if a slump in tourism continues and deepens it could shave a percentage point or more off growth, economists say.

The Central Bank of Kenya has persistently drained liquidity to shore up the currency in 2014, but on Friday it acted more aggressively, selling an undisclosed amount of dollars.

Two commercial banks on Monday confirmed the sale. “(The bank) gave the message that they’re willing to cap the shilling at these levels,” said Nahashon Mungai, a trader at Kenya Commercial Bank.

On Friday the shilling fell through the psychologically important 88 per dollar barrier to its lowest in 2 1/2 years, before the bank’s actions hauled it back. On Monday, banks priced the shilling at 87.85/95 at the market close, a touch weaker than Friday.

Central Bank of Kenya Governor Njuguna Ndung’u blamed seasonal pressures, including the payment of corporate dividends to foreign shareholders for volatility in the currency over the past two weeks. He made no mention of the slowdown in tourism, an important source of foreign exchange.

The governor said the current level of foreign exchange reserves of US$6.24 billion, equivalent to 4.4 months of import cover, gave the bank sufficient muscle to tackle what he called “temporary shocks”. “(The bank) stands ready to provide further support to minimise the volatility

of the exchange rate,” Ndung’u said in a statement on Monday.

Proceeds from a planned debut Eurobond issue before the close of the fiscal year on June 30 would raise reserves higher still, and the shilling could appreciate, Ndung’u said.

Security problems The central bank does not reveal the size of its hard currency sales or purchases. A second trader called Friday’s sale a “sizeable amount” to move the currency by 30 cents.

“They hit all the banks with quite large amounts,” said I&M bank trader Abhinav Mathur.

The prospect of further sales of hard currency meant investors were now reluctant to break the 88 level again, Mathur said.

Even so, both traders forecast the shilling could weaken further this week as routine end-month dollar demand from corporate clients kicked in and with the government widely seen to be struggling to contain militant attacks.

The Somali Islamist militant group al Shabaab said last week it was “shifting its war” onto Kenyan soil. Tourists have left in droves, and travel agencies report cancellations following travel warnings

by Britain, the United States and others.

“It does help to see that the central bank is willing to intervene and intervene in a strong manner,” said Mungai. “But security concerns and (dollar) demand will keep the shilling on the back foot.”

In January, the Kenyan Treasury estimated the economy, the biggest in East Africa, would expand by 5.8 percent this year, after a 4.7 percent expansion last year. But the government delayed announcing its official forecast last month, saying it needed more time for consultations.

The shilling is expected to trade in a range of 87.80 and 88.20 in the coming sessions.

The central bank governor’s comments had little impact on Nairobi’s stock market, where the benchmark NSE-20 Share Index closed down 0.5 percent on Monday at 4,899.92 points.

Reuters

Kenya’s central bank headquarters

Lagarde says industry delays banking reforms While the task of reforming banks is complex, progress is also being held back by “fierce industry pushback” Huw Jones

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rogress in completing banking reforms to plug gaps highlighted by the 2007-09 financial crisis is too slow and is being hampered by fierce industry lobbying, the International Monetary Fund said yesterday.

IMF Managing Director Christine Lagarde said banks were holding more capital now than they did in the run-up to the financial crisis when taxpayers had to shore up the sector.

“The bad news is that progress is still too slow, and the finish line is still too far off,” Lagarde told a conference on economic inclusion in London.

While the task of reforming banks is complex, progress is also being held back by “fierce industry pushback” and fatigue that is bound to set in

at this point in a long race, she said.

“A big gap is that the too-big-tofail problem has not yet been solved,” Lagarde said, referring to the belief in markets that governments will still step in to rescue the biggest banks to avoid the mayhem seen when Lehman Brothers collapsed in 2008.

The IMF estimated that the implicit subsidy or cheaper funding costs from being too big to fail amounted to about US$70 billion in the United States and up to US$300 billion in the euro zone.

Mark Carney, chairman of the Financial Stability Board, a regulatory task force for the Group of 20 economies (G20), has said he wants the too-big-to-fail phenomenon “cracked by Christmas” but faces challenges in Europe and Asia.

Lagarde also called for regulators across the world to agree a framework for winding down big banks in trouble.

“This is a hole in the financial architecture right now, and it calls for countries to put the global good of financial stability ahead of their parochial concerns,” Lagarde said.

After the bruising experience of the financial crisis, trust among international regulators is still not high enough as some countries continue to take extra initiatives on bank capital to keep local taxpayers off the hook.

The FSB is worried that such measures, like the Federal Reserve’s plans for extra capital requirements on foreign lenders in the United States, will split capital markets.

Reuters

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May 28, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THANH NIEN NEWS

Why Bill Gates gets it wrong

Jeffrey D. Sachs

Professor of Sustainable Development Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University

Vietnam and South Korea wrapped up their fifth round of bilateral negotiations on the Free Trade Agreement (FTA) Friday; the two countries seek to conclude their negotiations by the end of this year. During the four-day conference in Seoul, the two countries held in-depth discussions on a wide range of topics, including tariffs, investment, customs, sanitary and phytosanitary (SPS), technical barriers to trade ( TBT) and cooperation. The Vietnamese delegation also joined attended group discussions on competition, e-commerce and intellectual property. Vietnam proposed that South Korea give appropriate consideration to its key export products.

MYANMAR TIMES Foreign partners in a planned Yangon stock exchange say they expect four or five companies to be ready by the scheduled launch in October 2015. The comments come amid speculation that the launch is likely to be pushed back from 2015 because of delays in putting the regulatory framework in place and training enough qualified staff to run the exchange. Shigeto Inami, managing director of Myanmar Securities Exchange Centre, which is working jointly with Daiwa International to establish the stock exchange, said he thought that 10-30 companies would list soon after the exchange launches.

THE STAR Oil prices rose in Asian trade yesterday over concerns that a dramatic escalation in the Ukraine crisis could potentially cause a disruption in gas supply and send energy prices soaring, analysts said. US benchmark, West Texas Intermediate (WTI) for delivery in July, rose two cents to US$104.37 in late-morning trade while Brent North Sea crude for July delivery rose 23 cents to US$110.55 per barrel. A fierce battle erupted in the rebel-held eastern belt of Ukraine Monday, just hours after president-elect Petro Poroshenko vowed he would not let the country become another Somalia.

JAKARTA GLOBE Billionaire Anthoni Salim’s First Pacific is seeking to buy sugar companies in the Philippines to expand its footprint in Southeast Asia and tap opportunities from a free-trade agreement in the region.

Pressure for sugar companies to become more competitive — and consolidate — is growing ahead of a reduction in regional sugar tariffs next year, First Pacific Chief Executive Officer Manuel Pangilinan said in an interview in Manila, without identifying possible targets.

The margins of Philippine sugar refiners are being squeezed because of their productions costs, creating opportunities for companies that can bring greater efficiency.

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EW YORK – In his review of Nina Munk’s error-filled and outof-date book, Bill Gates oddly abandons the rigorous approach to measurement and evaluation that defines his foundation’s invaluable work.

He simply accepts Munk’s assertion that the Millennium Villages Project – an ongoing development project across more than 20 African countries – has failed. In fact, it is flourishing.

This credulousness is puzzling.

Munk’s book covers only a sliver of the first half of a tenyear project, and only two of 12 villages. And she never “lived for extended periods in the Millennium Villages.”

Munk spent an average of around six days per year – around 36 days over six years – actually visiting the villages, and usually at a stretch of 2-3 days. Moreover, she came to the story as a reporter for the magazine Vanity Fair, with no training or experience in public health, agronomy, economics, or African development.

Worse, Munk’s observations frequently seem to have been, at the very least, greatly exaggerated for narrative effect. Does Bill Gates really believe that I advocated specific crops without worrying about whether there was a market for them, or that I failed to consider national taxation in my on-going advice to government leaders?

Moreover, the agricultural strategies and choices in the MVP have been led by African agronomists, some of the very best in Africa – often working hand in hand with Bill’s own agricultural staff in the Alliance for a Green Revolution in Africa (AGRA).

Bill will be happy to know that the MVP will be properly and professionally evaluated next year – on time at its conclusion (and at the end of the Millennium Development Goals in 2015). The assessment will be based on the very considerable data that have been collected over the past decade, and on extensive new survey data that will be collected in 2015. Moreover, the evaluation will include comparisons with areas surrounding the Millennium Villages. In fact, I hope that the Bill & Melinda Gates Foundation will help to carry out the detailed, independently supervised survey work needed for a full evaluation of this complex project.

Let me provide some more good news, based on the detailed data on community health delivery, morbidity (disease), and mortality that the MVP collects each month.

Mortality rates are down sharply in the Millennium Villages. In fact, the current evidence, to be examined in greater detail next year, suggests that the bold goal of reducing under-five mortality rates to below 30 deaths per 1,000 births has been achieved or is within reach by 2015, and at a remarkably low cost to the health system.

Recently, one of the Gates Foundation’s senior staff members visited the Millennium Village site in northern Nigeria. Afterwards, he confirmed to me personally that he and his team were deeply impressed by what they saw of the Millennium Village health system in operation.

So let me take this opportunity to reiterate a challenge that I have posed to Bill. He

Governments across the region have taken over US$100 million in financing from the Islamic Development Bank to scale up the MVP concepts themselves

can pick any district in rural Africa, and our team will work with the local communities using the Millennium Village health approach to reduce the under-five mortality rate to below 30/1,000 – a rate characteristic of many middleincome countries – at an annual health-sector cost of just US$60 per person. And we will do it in five years or less. That success, I believe, would help Bill and others to recognize the remarkable value of investing in low-cost rural health systems that follow the design principles of the Millennium Village Project.

Finally, given concerns, shared

by Bill, about the MVP’s sustainability and scalability, it is no small matter that

host governments are strong advocates of the approach.

These governments’ leaders have seen the Millennium Villages day in and day out over almost a decade. They are putting their own money and policies behind expanded implementation of the MVP’s guiding concepts.

For example, Nigeria has used the MVP concepts for national-scale delivery of health and education services in all 774 of the country’s Local Government Areas. Governments across the region have taken over US$100 million in financing from the Islamic Development Bank to scale up the MVP concepts themselves. Around a dozen countries are now starting or have approached the Millennium Village Project to help them start their own Millennium Villages. And the Pan African Youth Leadership Network, Africa’s own young people, recently visited the Millennium Village in Senegal, and requested the support of the MVP to expand the Millennium Village Project’s techniques and strategies in their home countries and regions.

This spread of the Millennium Village approach throughout Africa shows that African political and community leaders consider the MVP’s methods, strategies, and systems to be highly useful in combating poverty in rural Africa. Nina Munk’s book is out of date and misses the mark. I invite Bill Gates to visit one or more Millennium Village sites on an upcoming trip to Africa to see first hand why the approach is of such practical interest across the continent.

The Project Syndicate 2014

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May 28, 2014

Closing New bridge to link China with DPRK

Lloyds launches TSB share sale

Construction on a new bridge over a river separating China and the Democratic People’s Republic of Korea (DPRK) has started, authorities of northeast China’s Jilin Province said yesterday. With a total investment of 137 million yuan (US$21.93 million), the 804.7-meter new Tumen River bridge is expected to open in 2015 or 2016 as a new route for bilateral trade, authorities said. The old Tumen River bridge has not been repaired for many years and is facing safety risks. However, the old bridge will not be dismantled and will be kept as a scenic spot.

Lloyds Banking Group expects to float about 25 percent of its TSB business on the London Stock Exchange next month, it said yesterday, kicking off a process regulators hope will create a vibrant challenger to Britain’s dominant high-street lenders. The number of shares being sold in the initial offer is at the bottom end of expectations and banking industry sources said last week they expect them to be priced at less than TSB’s book value of 1.5 billion pounds (US$2.5 billion), meaning Lloyds will make a loss on the sale of the 200-year old brand.

Soy industry sees rays of hope, but glut persists Importers in China, which buys nearly two-thirds of soybeans traded in the world, defaulted on at least 500,000 tonnes of soybean cargoes Naveen Thukral and Niu Shuping

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emand for soybeans in China could pick up following defaults on cargoes in April, but it will take several months for processors to come out of the red with near record imports and overflowing silos keeping a lid on prices.

Rising prices for pork and poultry products have buoyed hopes of better margins for crushing soybeans, which are often used to make animal feed ingredient soymeal.

Importers in China, which buys nearly two-third of soybeans traded in the world, defaulted on at least 500,000 tonnes of soybean cargoes, the biggest in a decade, as buyers struggled to get credit amid losses in processing beans.

Signs that China’s appetite for soybeans is recovering could add fuel to a rally in benchmark Chicago futures, which jumped to a 10-month high last week on the back of tight U.S. supplies and strong demand.

“It will take some time before things get back to normal,” said one Singapore-based senior executive at a global trading company which supplies

beans to China.

“They are still looking at huge arrivals and buyers have no choice but to accept these boats,” he said, declining to be identified as he was not authorised to speak with media.

China’s soybean imports in May and June could climb to near record highs of 6 to 7 million tonnes a month after January-April purchases jumped 41.2 percent from a year ago to 21.85 million tonnes.

That would bring totals in the first half of 2014 to around 34 million tonnes, 26-percent higher than a year ago, traders and industry officials said.

The surge in imports came as demand from the livestock industry slowed amid falling pork and poultry prices. But pork prices have been picking up on the back of government stockpiling, while appetite for chicken and eggs looks set to grow as memories of a bird flu outbreak fade.

China’s soybean stocks at major ports have climbed to 6.8 million tonnes, according to consultancy Shanghai JC Intelligence (JCI), just

U.S. Office of War Information advertisement during WWII

shy of an all-time peak of 7 million tonnes and more than 4 million tonnes at the end of 2013.

Soymeal stockpiles with crushers also hit a two-year high of nearly 2

State Grid solicits social capital

Myanmar may let foreign banks operate

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million tonnes in early-May, nearly double the same period last year.

More meat Losses in processing beans have already narrowed to about US$30 a tonne from US$80-US$100 a tonne in April.

“China’s imports in May and June could be close to 7 million tonnes per month, but meal prices have not collapsed even with expectations of such large imports,” said one trade source in Beijing, who declined to be named due to company policy.

“There has been a short-term slowdown, but in the long-term large breeding farms need more meal which will lead to higher demand.”

China is forecast to import 72 million tonnes of soybeans in the year to September, 2015 up from an estimated 68.5 million tonnes this year, according to U.S. Department of Agriculture estimates, as the country’s growing middle class shifts to a high-protein meat diet.

Soymeal prices in Dalian’s cash market this week rose to their highest since early February, recovering from a near two-year low hit in March.

Government stockpiling has helped push up pork prices, which the National Bureau of Statistics said climbed 7.3-7.7 percent last week to 23.69-23.52 yuan a kg, adding to gains of more than 3 percent in the first week of May. Meanwhile, commerce ministry data showed Chinese egg prices last week rose to their highest since October.

In a bid to beat the sluggish soymeal demand at home, Chinese crushers have been boosting exports to remain afloat.

The country’s soymeal exports rose 45 percent in the first four months of the year to 652,834 tonnes.

Reuters

South African economy shrinks S

hina’s State Grid Corporation yesterday announced it will open two business sectors to social capital amid the government’s call to actively develop a diversified ownership economy.

The opening of two sectors, distributed power grids and charging facilities for electric automobiles, will allow social capital to invest in, construct and operate projects in the areas, the first such move by the monopoly State Grid.

Company Spokeswoman Wang Yanfang said the move will give full play to the market in resource allocation and promote new energy development.

The company estimated the market value of the two sectors will reach 200 billion yuan (US$32.4) by 2020 and drive GDP growth by 780 billion yuan.

Developing a mixed ownership economy to give more opportunities to private and social capital has been high on the government reform agenda this year.

Non-state capital will be allowed to participate in a number of projects in areas such as banking, oil, electricity, railways, telecommunications, resources development and public utilities, according to the government work report earlier this year.

ome foreign banks may be allowed to operate in Myanmar later this year although initially they will only be allowed to have branches in certain areas and offer a limited range of products, government and banking sources said yesterday.

“The president last week formed a committee to choose five to 10 out of about 40 foreign banks who have opened representative offices in our country,” a senior government official involved in the plans told Reuters yesterday.

“We plan to select suitable ones soonest and give them a limited licence so that they can start operations before the end of this year,” he added.

Led by central bank governor Kyaw Kyaw Maung, the committee comprises senior government officials including the deputy finance minister, deputy attorney general and central bank deputy governors.

Myanmar is going through a period of dramatic reform after a military government stepped aside in 2011. Western governments have dropped or suspended sanctions, allowing foreign firms to move into what is practically a virgin market for many products.

outh Africa’s economy shrank in the first quarter of the year, in the worst performance recorded since the global recession five years ago, official data showed yesterday.

Statistics South Africa reported the economy contracted by 0.6 percent, a stunning reversal for Africa’s most advanced economy amid a rapid boom elsewhere in the continent.

The worse-than-expected data comes during the first full day on the job for South African finance minister Nhlanhla Nene.

The 55-year-old was sworn in as South Africa’s first black finance minister on Monday.

The contraction was blamed on a slump in mining activity due to a platinum strike now in its fifth month and a significant drop in manufacturing.

“This makes for grim reading,” said Razia Khan, Africa’s regional head of research for Standard Chartered Bank.

“Mining, hit by protracted industrial unrest, fell almost 25 percent on an annualised basis.

Manufacturing was down 4.4 percent.”

Shortly after the news the rand fell almost one percent against the dollar, which was much worse than economists had predicted. In the last quarter of 2013 the economy grew 3.8 percent.

Xinhua

Reuters

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