Macau Business Daily, Jan 11, 2014

MOP 6.00 Closing editor: Alex Lee Publisher: Paulo A. Azevedo Number 558 Wednesday June 11, 2014 Year III

Decent Start

G

aming revenues in Macau increased 5 percent year-on-year in the first week of June. The casino industry has breathed a collective sigh of relief. For now. Analysts predict growth revenues for this month at anywhere from -2 to 7 percent, less than half the original consensus of a few weeks ago when the market pencilled in 14 percent

www.macaubusinessdaily.com

A private equity company is the most likely buyer of International Game Technology. The world’s largest gaming equipment provider has much to offer. But competitors may have to negotiate antitrust hurdles. IGT has hired Morgan Stanley to explore sale options, as shares climb 15 percent

%Day 2.62

China Petroleum & Ch

2.52

CNOOC Ltd

2.41

Ready to go

China Life Insurance

2.11

Hang Lung Propert

-0.41

Sun Hung Kai Propert

-0.65

Galaxy Entertainm

-1.50

Fledgling bus operator New Era starts July 1. The green bus service originally launched by bankrupt Reolian continues under New Era on a 3-year public concession term that expires on June 30, 2017

Sands China Ltd

-1.98

China Resources Land

-3.42

Source: Bloomberg

I SSN 2226-8294

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Brought to you by

It’s another goal. Celebrity footballer David Beckham is to open a Las Vegas restaurant called Beckham’s Bistro. In Macau, the Sands ambassador is planning to develop “dining, retail and leisure concepts” PAGE 8

Page 10

Name Tencent Holdings Ltd

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Dave’s diner

Inflation in China rose to 2.5 percent in May. The government appears to be on the way to reaching its stabilisation goal

June 10

3.02

PAGE 7

China lines up goal

HSI - Movers

Belle International

Page

IGT for sale

Brought to you by

Electronic escapade The Shanghai branch of Xiamen International Bank is being sued by Shanghai Huaye Iron & Steel Group. The parent bank of Macau’s Luso International Banking is accused of pre-emptively debiting a 160 million yuan loan guarantee deposited by the steelmaker Page 3

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June 11, 2014

Macau

Macau New Era operational July 1 Despite profit constraints imposed by the government, Macau New Era is taking over bankrupt Reolian’s green fleet to run a three-year service Stephanie Lai

sw.lai@macaubusinessdaily.com

S

tarting on July 1, new bus operator Macau New Era Public Bus Company Ltd will start running the green buses acquired from the bankrupted Reolian Public Transport Co Ltd on a 3-year public concession term that expires on June 30, 2017.

Daniel Fang Li Qun, general manager of Macau New Era - who formerly held the same position with existing bus operator Sociedade de Transportes Colectivos de Macau SARL (TCM) - said yesterday that the newly established company is planning to make a 190 million patacas (US$23.8 million) investment covering the takeover cost of the bankrupted Reolian’s assets, which includes its buses, as well as the purchase of new buses to support the company’s operation.

“We’re spending about 97 million patacas on taking over the assets of Reolian including its over 240 buses,” Mr. Fang said in a press conference yesterday afternoon following the signing of the concession contract with the government in the morning.

“In 2014, we’re planning to purchase at least 15 new big buses, and 5 other mini-buses that can serve routes like H1, which the elderly take more frequently,” the general manager of Macau New Era confided.

Bus operator TCM has 50 percent of shares in Macau New Era; and another transportation company, Serviços de Reparações Mecânicas Macau S.A.R.L., is another major shareholder of the new bus operator with 49.99 percent of share ownership.

THERE ARE THINGS WE DON’T DO

The rest of the shares in the new bus operator are owned by Companhia Industrial Nam Kwong Limitada, Macau New Era disclosed yesterday.

The major shareholder of Servicos de Reparacoes Mecanicas Macau S.A.R.L. is China Travel Service (Macao) Ltd, one of the whollyowned subsidiaries of the stateowned conglomerate Nam Kwong (Group) Company Ltd whose business spectrum spans fresh food supply, fuel and travel agency services in the city. The incumbent chairwoman of China Travel Service here, Ms. O Hoi Fan, also assumes the position of president of Macau New Era, Mr. Fang confirmed.

Profit constraints Despite Macau New Era gaining support from its well-financed parent company and possibly benefiting from better cost control of its fuel expenses compared to its fellow bus operator Transportes Urbanos de Macau SARL (Transmac), Fang admitted yesterday that Macau New Era will be operating under “huge pressure,” given the new public concession terms signed with the government, which has restrictive terms on the bus operator’s capacity to generate big profits.

As stipulated in the public concession contract, Macau New Era will follow a new payment plan for the bus operator wherein it will receive subsidies from the government for their operation as well as keeping fares that passengers pay.

Under the new business model

set up by the government, about 60 percent of the bus operator’s revenue will come from the government’s subsidies, while the rest will be from the fares passengers pay, Legal Affairs Bureau director André Cheong Weng Chon said yesterday.

The subsidies, which will approximate 17 million patacas to Macau New Era each month once it starts operating, is calculated per the deduction of the estimated operation costs from the fares revenue, which has taken reference from Reolian’s operation costs and the inflation level of the past two years.

The government has the authority to set a cap on the subsidies that it hands to bus operators: if the revenue generated by fares and other assets exceeds the bus operator’s expenses by 3 percent, the operator will have to return excess subsidies received to the government. Also, the adjustment of the subsidies is subjected to a halfyearly bus service quality assessment, Transport Bureau’s director Wong Wan noted in a separate press conference yesterday.

“The 3 percent cap can mean huge pressure, but we hope that we can fulfill the government’s expectations of the bus services, and we’ll try our best to improve it,” Mr. Fang remarked.

“As a new company, we considered two aspects; one is that we’d like to help the MSAR Government properly resolve the social impact induced

by Reolian’s bankruptcy [declared in October last year], and another aspect is that we are still confident

BUT WE DO•••

in the long-term development of the local bus service,” the Macau New Era general manager said.

The biggest challenge in the takeover process of Reolian’s operation is the driver recruitment issue, but Macau New Era would not launch an aggressive salary war to poach drivers from the other two bus operators, Transmac or TCM, Mr. Fang promised.

“Starting from July 1, we’ll have the basic salary [of Reolian drivers] raised by 5 percent, and we’ll also reestablish the central provident fund scheme for those drivers that got their contribution [from the bankrupted Reolian] disrupted,” he added.

Currently, the basic monthly salary of a Reolian driver is 12,000 to 14,000 patacas, Macau New Era’s deputy general manager Abel Kwok said.

“Also, we’ll be offering a bonus that equates to half of their monthly salary, and hope that we can attract the drivers to work for us under this remuneration term,” Fang noted.

“Macau really lacks drivers, and for this we learnt that you could have baited with big money to poach drivers from the other bus operators. . . .” said Fang. “But we’re not doing it because it could affect the operation of the other two bus companies.”

About 360 bus drivers currently serve Reolian, about 50 less than last year when the bus operator had a 410-driver team, Daniel Fang said.

But he insisted that he did not consider applying to the government to have imported labour work as bus drivers.

With Alex Lee

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June 11, 2014

Macau

Luso International’s parent bank sued Upon receiving Luso International Bank’s notice of claim, its parent Xiamen Int’l Bank in Shanghai debited a 160-mil yuan loan guarantee from Huaye Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he Shanghai branch of Xiamen International Bank, the parent bank of Macau’s Luso International Banking Ltd, is now being sued by Shanghai Huaye Iron & Steel Group Co Ltd, accusing the bank of not giving prior notice of debiting an amount of loan guarantees that the steel company had deposited, which were in the order of 160 million yuan (US$25.6 million).

There is no direct trade relationship between Shanghai Huaye Iron & Steel Group and Luso International Banking Ltd but the former is the third-party guarantor corporation for the Jiangsu-based fine steel production company Sutor Technology Group, Ltd, who had applied for loans from Luso International bank last year, mainland Chinese-language media report.

Shanghai Huaye Iron and Steel Group reportedly secured a loan totalling 159.66 million yuan for Sutor Technology Group in March last year, for which the loan term expired on March 25 this year.

Shanghai Huaye Iron and Steel Group had deposited the loan guarantees of the said amount in six accounts at the Shanghai branch of

Xiamen International Bank starting from last year.

But on March 17, before the loan term expired, the company discovered that the Shanghai branch of Xiamen International Bank had debited the whole of the 159.66 million yuan loan guarantee upon not receiving the monthly statement from the bank at the time; the company also claimed that the bank had not sent any written notice prior to the action.

Sources from the Xiamen International Bank, however, said that the debiting action was exercised upon receiving a notice of claim from its subsidiary Luso International Bank in Macau, for which Xiamen International Bank stressed that there was ‘no legal violation’ involved, mainland Chinese-language newspaper 21st Century Business Herald reports.

Endless disputes Business Daily has asked for more information regarding the notice of claim from Luso International Bank, but did not receive a reply by the time the story went to press.

As reports note, Shanghai Huaye

Iron and Steel Group filed a lawsuit against the Shanghai branch of Xiamen International Bank over its debiting action with the Pudong New Area People’s Court in Shanghai on May 30; the steel company has also sent a complaint about the issue to the Banking Regulatory Commission of Shanghai.

Luso International Banking Ltd was established in Macau in 1974, and became a subsidiary of Xiamen

International Bank in 1985 - at the time, also the first joint-venture bank in China.

In addition to the lawsuit filed against Xiamen International Bank, Shanghai Huaye Iron & Steel Group is actually tied up in another legal battle as it has been sued by the Shanghai branch of China Bohai Bank over a financing dispute. This particular case is due to have its first hearing on June 25.

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June 11, 2014

Macau Brought to you by

Billion dollar gamble The first week in June kicked off to a good start for the six casino operators with gross gaming revenue reaching MOP30.4 billion Sara Farr

HOSPITALITY

sarafarr@macaubusinessdaily.com

Odd figures A look at the statistics for MICE (Meetings, Incentive, Conferences, Exhibitions) events shows some curious features. Measured in terms of the total number of events per quarter, the best period was from the end of 2009 to the end of 2010, when figures varied around 350 events. Then, a significant drop happened, with figures falling to values around 250 events per quarter. Only in the last quarter of 2013 did the figure come closer to values similar to those seen in that ‘golden’ period. This evolution suggests a loss of attractiveness of the region for events, once the initial impetus was past, and a difficult recovery after that. But the most striking features come to the fore when we consider the total number of participants in events and, also, their average values.

G Overall, those numbers display a clear upward trend over the years represented here. But they also show a surprising variation from one quarter to the other. Just in the last 6 quarters, for instance, we see figures varying from about 130,000 to almost one million participants. In between, we have two quarters with figures over 200,000 participants; another one, over 300,000; and the remaining one, over 600,000.

There is certainly some seasonality in the sector, but these seem extreme variations for aggregate numbers. The most striking feature, however, is the variability in the average number of participants. The chart shows the variation in each quarter relative to the average in the period. As the plot highlights, they seem to vary wildly quarter-on-quarter. Why this might be is a matter that deserves further research from the administrative and academic bodies linked to this economic sector.

314,667

average number of participants in MICE events, per quarter, 2009Q1-2014Q1

ross gaming revenue increased an average of 5 percent between June 1 and June 8 over the same period last year with casinos here raking in around 30.4 billion patacas, according to estimates by analysts at Sterne, Agee & Leach, Inc. This constitutes a ‘decent start’ to the month, analyst David Bain said in a note to clients.

Tables alone accounted for 7.8 billion patacas of the total revenues registered in the first week of the month. These figures take into consideration the visitor arrivals increase of 17.9 percent due to the Dragon Boat Festival.

Analysts at banking firm Wells Fargo estimate that this month’s gross gaming revenue will range between 1 percent and 5 percent year-on-year based on checks up to June 8. ‘This assumes average daily rate tracks between 925 million patacas and 975 million patacas for the rest of the month,’ senior analyst Cameron McKnight said in a client note. The weekly average daily rate posted 1.03 billion patacas up to last Sunday, 6 percent below the year-to-date average despite encompassing two weekends. ‘We would expect levels of play for the rest of June to trend below this week’s result, given a normal weekday mix and the start of the World Cup,’ Mr. McKnight posited.

At Nomura Equity Research, analysts estimate that this month’s gross gaming revenue will increase between 3 percent and 7 percent over that of the same month last year. This

could see casinos rake in around 29 billion patacas to 30 billion patacas at the end of this month.

While the first eight days of the month fared well for casino operators here, Mr. Bain said that the outlook for gross gaming revenue in June is of between -2 percent and 3 percent. ‘We expect some gross gaming revenue headwinds from the World Cup, beginning June 12 and ending July 13,’ he said.

During the last World Cup in 2010, gross gaming revenues in Macau dropped 20 percent in June that year over that of the previous month. ‘If we were to assume June 2014 declines 20 percent from May 2014, June 2014 gross gaming revenues would end at -8 percent year-on-year,’ the brokerage analyst at Sterne, Agee, Leach, & Inc said.

Consensus lowered Nonetheless, analysts’ consensus on Macau casinos gross gaming revenue has been lowered to 11 percent from around 15 and 16 percent. This is primarily due to the decrease being driven by low-margin VIP gross gaming revenue, which accounts for 60 percent of the total revenue raked in by casinos. The mass-market segment is expected to continue to outperform consensus estimates.

‘We believe investor sentiment has braced for lower gross gaming revenue estimates driven by May’s final results and the VIP outlook, in general,’ Mr. Bain said.

MOP1.03 billion

Weekly average daily rate as at June 8

Nomura says that based on the first week in June, mass headcount remains strong, and mass revenues could be up 34 percent to 38 percent this month, while VIP revenues could be down between 6 percent and 10 percent year-on-year.

Meanwhile, Telsey Advisory Group (TAG) has revised its near term outlook on Macau to neutral.

‘We believe there are some near term issues that will challenge any near term recovery in the [Macau] story,’ analysts at TAG said. These include pressure on the VIP segment ‘because junkets’ ability to recycle capital has slowed,’ in addition to concerns that ‘the Chinese economy is likely the driving source behind this slowdown.’

Analysts at Telsey say they are also concerned with labour issues here; however, they do not expect ‘any progress on the labour issue until after the Chief Executive election, likely sometime in September.’

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June 11, 2014

Macau

Trade hinges on privileged doorway

T

he Portuguese Consul General to Macau says Macau is a ‘privileged’ doorway into China, but emphasised the need for businesspeople to invest in Portugal’s innovation and high-quality products.

“Macau is for Portugal a gateway into China, a trial for products of excellence produced in our country.

But we cannot forget about not just the quality but innovative products that companies are capable of creating,” Vitor Sereno is quoted by Portuguese news agency Lusa as saying.

Speaking on the sidelines of the commemorations of Portugal Day, Mr. Sereno said that Portuguese companies should not forget that mainland China is a “very broad market” in which a small order there can make a world of difference to Portugal as a nation.

“Similarly to what the Portuguese president [Cavaco Silva] said during his recent visit to China, a small order in the low teens could make a difference and we must bet on smaller [Chinese] markets, not just Beijing, Shanghai and Guangzhou. Because any small city in China has the same population as Portugal, and any order placed there will certainly impact the lives [of the Portuguese] and the Portuguese economy,” he is quoted as saying.

Mr. Sereno bets on “Macau for China” with the aim that Portuguese companies are given exposure “boosted by the prestige that the community has in Macau and its recognition for quality products.”

Vitor Sereno

“As we commemorate Portugal Day, we should emphasise once more that the Portuguese are renowned in Macau, renowned for their competence and spoken highly of for their contributions to the city’s development. And it is in this principal of quality skilled labour and products that we must invest, contributing at the same time to improving the Portuguese economy,” he said.

The Portuguese Consul also added that companies should look at the potential of the Macau Forum and see what cooperation opportunities there are, not only with mainland China but between China and other Portuguese-speaking countries.

Portugal Day is usually marked with a traditional pilgrimage to Portuguese poet Camoes’ grave in the morning and an evening reception,

which will include the presence of Macau Chief Executive Chui Sai On. This year, the Portuguese secretary of state, José Cesário, is in Macau representing his country.

An exhibition by local architect Carlos Marreiros was also inaugurated yesterday and the head of the Government Spokesperson’s Office Alexis Tam was commended the Order of Infante D. Henrique.

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June 11, 2014

Macau

UnionPay crackdown closes currency rule loophole

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he government plans to further restrict the use of China UnionPay Co.’s debit cards in casinos, curbing money flows to the world’s largest gambling hub by making it harder for gamblers to buy expensive items that they can subsequently exchange for cash.

The Macau Monetary Authority has ordered jewellery shops and pawnshops operating on casino floors to remove their UnionPay card terminals by July 1, according to the head of SJM Holdings Ltd., the city’s biggest casino operator. The banking regulator did not immediately reply to an e-mail or answer calls seeking confirmation. Casino stocks fell in Hong Kong trading.

“It has come to our knowledge that individual shops in the casinos have received such notification from the Macau Monetary Authority,” SJM chief executive officer Ambrose So said in an e-mail responding to a Bloomberg News enquiry. Mr. So said that the change would not affect SJM much because the company does not have any on-premise pawnshops, only watch and jewellery outlets.

The new planned change may slow Macau’s growth in casino revenue,

HK$5 million

High-rollers or VIP gamblers’ average wager per trip

which rose 20 percent in the first quarter to US$12.8 billion (102.4 billion patacas), about eight times that of the Las Vegas Strip. China has been cracking down on the use of handheld card-swipers in casino resorts over concerns that illegal funds are being taken out of the mainland into Macau.

Mainland tourists bypassing currency controls have helped fuel a decade-long boom in Macau, the only place in China where casinos are legal, operators and analysts say.

Macau police arrested 12 people in February and March following an investigation into the use of card-swiping devices by UnionPay, a mainland state-backed payment company. The crackdown is aimed at stopping gamblers from illegally using the devices in casinos to obtain cash for chips, police said in an e-mailed statement earlier.

Tighter liquidity “Restricting the use of UnionPay cards will tighten VIP liquidity,” Success Universe Group Ltd. deputy chairman Hoffman Ma said in an interview. Mr. Ma said he had been verbally told about the plan by the regulator. Success Universe owns a Macau casino called Ponte 16.

High-rollers or VIPs, gamblers who usually wager at least HK$5 million (US$645,000) per trip and contribute more than 60 percent of Macau’s casino revenue, rely on junket operators to arrange credit for them to gamble.

Tourists from mainland China, who accounted for 64 percent of Macau’s total visitors last year, can legally bring 20,000 yuan (US$3,205) when travelling across the border, and withdraw as much as 10,000 yuan a

day with each bank card from cash machines.

The proposed restriction “limits the amount of funds available to VIPs to the preset level of junket credit, while cutting off their options to obtain more funds during their trips,” Mr. Ma said.

Inconvenient cash

[The proposed restriction] limits the amount of funds available to VIPs to the preset level of junket credit while cutting off their options to obtain more funds during their trips Hoffman Ma, Success Universe deputy chairman

Restrictions on UnionPay use will make getting cash ‘less convenient’ for mass-market gamblers, who made up the majority of Macau’s 29.3 million annual visitors in 2013, as they will have to obtain cash either away from casino floors or completely outside, Macau-based analyst Grant Govertsen at Union Gaming Group, wrote in a note published yesterday.

Union Gaming cut the Macau gambling industry to hold because it ‘expects to see a string of negative headlines over the coming months,’ according to the note. Mr. Govertsen did not expand on anticipated UnionPay restrictions.

Deutsche Bank AG lowered Macau’s casino revenue growth estimate to 12 percent from 15 percent on VIP risks and downgraded SJM and Wynn Macau Ltd. to hold from buy, Hong Kong- based analyst Karen Tang wrote in a note published June 9.

Wynn Macau, Galaxy and Melco Crown did not reply to e-mails seeking comment. MGM China said ‘there is no UnionPay shop within MGM property.’

‘Sands China doesn’t see any potential negative impact coming from any regulatory changes regarding UnionPay,’ Cetin Tanisman, the company’s senior vice president of gaming operations, said in an e-mail.

Bloomberg

7

June 11, 2014

Macau

IGT exploring sale option IGT shares have increased 15 percent on potential sale rumours. Investors believe a financial company is the most likely buyer of the world’s largest gaming equipment provider as competitors could face antitrust hurdles

I

nternational Game Technology (IGT), a Las Vegas-based slot machine maker, has hired Morgan Stanley to explore a sale as the gaming industry pursues consolidation to combat slow growth, people familiar with the matter told Reuters on Monday.

The company makes popular slot machines in a variety of brands such as the television show ‘Wheel of Fortune’ and the movie ‘Avatar.’ The company branched out into social gaming with its 2012 acquisition of Double Down Interactive LLC, developer of the DoubleDown Casino on Facebook.

IGT has been working on a sale for more than two months and has attracted interest from other gaming companies and private equity firms, sources say.

News of the sale process sent the company’s stock 14.4 percent higher to $14.31 on Monday, giving the company a market value of more than $3.5 billion.

According to IGT’s website, customers include Stations Casinos, MGM Resorts International, and the Bellagio Resort and Casino.

IGT is hosting management presentations for prospective buyers at this time, the sources say, who asked not to be named because the matter is not yet in the public domain.

Representatives of IGT and Morgan Stanley declined to comment.

IGT decided to seek a buyer because the company’s stock has

lost 31 percent of its value due to the slow fundamentals in the gaming market. The declining value of the company could spoil some bidders’ appetite for the gaming equipment maker, some caution.

The sale process could also be challenged because of regulatory approvals needed for gaming mergers.

A deal could take more than a year to complete because of the need for international approvals, according to several people familiar with the matter.

A sale of IGT would follow several deals involving slot machine makers in the past year.

Last year, Bally Technologies purchased gaming equipment provider SHFL Entertainment for $1.3 billion, while lottery company Scientific Games bought slot machine maker WMS Industries for $1.5 billion.

Some potential buyers could face antitrust hurdles in pursuing IGT as a result of the consolidation that has already occurred. Gaming equipment makers such as Australia’s Aristocrat Leisure Limited, Japan’s Sega Sammy Holdings Inc and Konami Corp and US-based Bally Technologies already have a large presence in slot machines.

Private equity in front Private equity firms, meanwhile, could face a financing challenge stemming from a likely lengthy regulatory review, as banks funding a leveraged buyout would not be

able to indefinitely hold funds aside for a deal.

A potential private equity buyer might have to fund a deal ahead of the closing, increasing its cost of doing the deal, sources say.

According to the IGT website, the company maintains a network of 59 offices around the world including New Zealand, China, South Africa and Argentina.

In a note to clients, Wells Fargo said the deal could make more sense for a financial buyer, namely a company already licensed in gaming and attracted by IGT’s massive free cash flow generation estimated at around US300 million dollars. The US bank also reiterated that equity firms would have a strong view on how to extract value, fundamentally and strategically. ‘The prospect of a strategic buyer (competitor) is far less likely in our view, primarily due to resultant leverage,’ said Wells Fargo.

The bank’s analysts reminded readers that despite timing issues IGT’s product sales segment is ‘clearly in a state of structural decline,’ being probably one of the reasons for the projected sale. ‘The company could be thinking to spin off its gaming operations and product sales segments and be left with a growing social gaming company, notable special dividend, and a pristine balance sheet.’

IGT’s product sales segment, representing 42 percent of the company’s total revenue, is set to decrease 19 percent this year and

gaming operations (42 percent of revenue) will drop 8 percent according to Wells Fargo estimates. The most lucrative segment is the interactive, the revenues of which will grow 23 percent in 2014 to US$326 million but it only represents a marginal 15 percent of the overall revenue mix.

A.L. with Reuters

IGT POTENTIAL BUYERS (Wells Fargo) Bally Technologies The company is currently 4.5x leveraged and combined debt levels would be problematic IGT is currently 2.5x leveraged and a possible deal could increase leverage for Bally by 3 times Bally is currently focused on the SHFL integration A potential purchase would likely raise monopolistic concerns Removes a major competitive threat

Scientific Games Leverage concerns could be problematic SGMS focused on integrating WMS, seemingly difficult A potential purchase would likely raise monopolistic concerns Removes a major competitive threat

Aristocrat Leisure The company has a relatively large market cap ($2.9bn) Strong presence in Asia and Australia Removes a major competitive threat Executive leadership that formerly worked for IGT Leverage concerns could be problematic

Other equipment providers (Novomatic, GTECH, Konami) - unlikely Leverage concerns would be problematic due to their size IGT is currently 2.5x leveraged with roughly $1.7bn in debt Any buyer paying 20%-30% premium would likely be left with an overleveraged balance sheet in a challenging industry

Financial Buyers IGT is a great free cash flow story Could make strategic changes both in direction and via divestitures No economies of scale The licensing process would be both extremely lengthy and invasive, particularly for a company not used to the scrutiny of gaming boards Would be buying niche business in structural decline However, PE is licensed in some cases, which suggests an even smaller list of potential buyers, yet making this a viable prospect

Tech or Media Company There would be no economies of scale other than online The licensing process would be both extremely lengthy and invasive, particularly for a company not used to the scrutiny of gaming boards Would likely acquire for social gaming, content and consumer access Valuation likely appealing on a relative basis

8

June 11, 2014

Macau

Cotai pedestrian flyover ready next year

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Government to mull ‘family hostel’ concept

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he Macau Government is to study the feasibility of the ‘family hostel’ concept and will solicit opinions from citizens. The study includes an opinion poll as well as an analysis of relevant cases and laws in and beyond the region.

During the course of a month, from yesterday to

July 10, the government will conduct an opinion poll to more fully understand citizens’ stance towards the idea of a ‘family hostel’. The poll comprises online questionnaires and street surveys conducted concurrently. The content of the online questionnaire includes ways of establishment,

conditions, feasibility, districts and influence of the family hostel as well as complementary opinions and suggestions from citizens.

Street surveys will cover Macau Peninsula, Taipa and Coloane, with staff interviewing citizens in various neighbourhoods. After collecting public opinion,

Corporate

the Office will elaborate upon the details to society.

Local citizens are welcome to participate in the opinion poll and actively voice their views.

The final report will serve as a reference ahead of the Macau Special Administrative Region Government’s possible formulation of relevant policy on this issue.

he pedestrian flyover near the Istmo roundabout in Cotai is expected to be ready in the first quarter of next year, the local Portuguese radio station quotes the Infrastructure Development Office as saying. There is no official confirmation on whether the project has exceeded the initial budget of 140 million patacas. The radio station quotes Wong Sau Yan from the Office as saying that the project is not stalled. What is certain, he said, is that the pedestrian flyover will open to the public by March 2015, while the principal structural works are slated to be ready in the third quarter of this year.

According to the radio station, the flyover will have a radius of 62 metres and five entry and exit points fitted with elevators and escalators. The Infrastructure Development Office is quoted as saying that the flyover is aimed at linking Taipa Village with the new urban areas, and is designed to ease the movement of people and vehicles in Cotai.

Making a meal of football

CEM hosts energy-saving seminar Electricity utility supplier CEM recently hosted an ‘experiencesharing seminar on energysaving’ with the Office for the Energy Development Sector, in which representatives from the hotel industry exchanged opinions on best practices and experiences. Some 70 people attended the seminar in the Macau Science Centre. In his welcoming speech, CEM executive director Jorge Vieira said that the company has been organising the ‘Macau Energy Saving Competition’ since 2009. Over 50 million kWh of power has been saved during the past five years, of which the hotel category has saved more than 37 million kWh. Despite a growing number of tourists, the hospitality industry is managing to lower power consumption, proving that the industry is concerned about energy conservation, the company said. Four local hotel representative were present at the seminar. In addition, Mr. Vieira voiced his hope that participants in every category could make bigger achievements this year.

MGM Macau raises MOP201,500 for Orbis Participating in the ‘Orbis Raffle 2014,’ MGM Macau has raised 201,500 patacas for the flying eye hospital charity. This makes MGM Macau one of Orbis’ biggest corporate donors, the company said in a statement.

Kwong Yiu Ling, executive vice president of casino operations at MGM Macau, and Pang Kuok Wai, a company volunteer team member, presented a cheque for 201,500 patacas to Vivian Lo, director of development of Orbis Macau, and Carmen Tavares, assistant development manager of Orbis Macau.

The cheque presentation took place in MGM Macau’s property in the NAPE district.

The Golden Lion Team members participated in the ‘Orbis Raffle 2014’, which was welcomed with a positive response. The 201,500 patacas raised will go towards providing assistance to those suffering from eye diseases worldwide. The amount raised this year surpassed that of funds raised over the past five years.

D

avid Beckham is going to open a restaurant in Las Vegas. According to the British newspaper Daily Star, the eatery will be called Beckham’s Bistro.

“It’s got a good ring to it. It will be about dining. I am a foodie and dining is a big part of this,” the former English footballer said.

Beckham acts as a celebrity ambassador for Sands Corporation in the company’s Macau resort, where he is planning to develop “dining, retail and leisure concepts”.

He is preparing the same project for Sands’ resort in Singapore.

“David is 100 percent committed to working with the Sands Corp. and his views on dining and the immediate direction for restaurants in Vegas and further afield have been welcomed,” a source with Sands Corp. told the Daily Star.

Meanwhile, according to the British newspaper, the worldrenowned chef Gordon Ramsey is in ‘final discussions’ with Las Vegas Sands to open restaurants in Macau and Singapore.

9

June 11, 2014

Greater China

Natural gas ‘Golden Age’ arrives in China The energy analysis arm of the OECD said China was set to benefit from a boom in gas production

D

emand for natural gas is set to nearly double within five years in China but the emerging market giant will meet half that with domestic supplies, the International Energy Agency said yesterday.

In its latest medium-term forecasts for the natural gas sector, the IEA trimmed its five-year outlook for consumption by 0.2 points to an annual increase of 2.2 percent as European countries step up use of renewable energy.

However, it said demand for cleaner-burning natural gas was likely to grow in China as air quality

concerns prompted authorities to take measures to reduce pollution.

“Driven by booming demand, the ‘Golden Age’ of natural gas that is now firmly established in North America will expand to China over the next five years,” said the IEA. “The power, industrial and transport sectors will drive overall Chinese gas demand to 315 billion cubic meters in 2019, an increase of 90 percent over the forecast period.”

The energy analysis arm of the OECD group of advanced countries said China was also set to benefit from a boom in gas production.

“While China will remain a significant importer, half of its new gas demand will be met by domestic resources, most of them unconventional: Chinese production is set to grow by 65 percent, from 117 bcm (billion cubic metres) in 2013 to 193 bcm in 2019,” said the IEA. The IEA was somewhat cautious about the outlook overall for natural gas given efforts to switch to renewables, high prices for liquefied natural gas (LNG) supplies, and competition from other fuels such as coal.

That is of major concern as increased Asian demand for gas is expected to

be met mostly by LNG supplies, which the IEA forecasts to increase by 450 percent to reach 450 bcm in 2019.

AFP

65 pct 2013-2019 Chinese production growth forecast

Asia leads increase in wealth China leapfrogged Germany and Japan in the past five years to trail only the U.S. in a ranking of countries by private financial wealth

R

ich Chinese helped make Asia the fastestgrowing region for affluent families as the increase in global wealth accelerated last year, according to a study

by Boston Consulting Group.

Private wealth in the AsiaPacific region excluding Japan jumped 31 percent to US$37 trillion in 2013, supporting a 15 percent advance to US$152 trillion globally.

That outpaced the 8.7 percent worldwide growth in 2012 and provided a boost to companies that oversee funds for the rich, the Boston-based firm said in its 14th annual report on the subject.

“Wealth managers globally had another outstanding year of growth in 2013,” BCG said. “The Asia-Pacific region accounted for the strongest growth.”

China leapfrogged Germany and Japan in the past five years to trail only the U.S. in a ranking of countries by private financial wealth.

China’s US$22 trillion is

expected to increase more than 80 percent to US$40 trillion by 2018, while the U.S. may grow to US$54 trillion from US$46 trillion over the same period, BCG said.

Globally, stock-market gains averaged 21 percent in 2013, providing the primary driver of growth in private wealth, especially in North America, Europe and Japan, according to BCG. North America wealth gained 16 percent to US$50.3 trillion.

Millionaire households The number of millionaire households in the world jumped to 16.3 million in 2013 from 13.7 million in 2012, according to the report.

Emerging markets created new millionaires, even while a 5 percent decline in the MSCI Emerging Markets Index a benchmark of equities in regions such as Asia, Africa and Latin America negatively affected existing invested assets.

Luxury brands flood Chinese cities like in pictured Shin Kong Place Luxury shopping centre

Alongside China’s soaring growth, faster-growing countries include India, which may more than double private wealth assets to US$5 trillion by 2018, and Russia, where wealth may advance more than 80 percent to US$4 trillion.

The pace of growth in Latin American wealth was little changed compared with a year earlier after an increase of 11 percent to US$3.9 trillion. It’s expected to climb 8.8 percent a year until 2018, compared with an 11 percent

annual increase in the AsiaPacific region.

Over the next five years, North America, western Europe and Japan are all expected to lag behind the world’s average annual growth in wealth of 5.4 percent.

Private banking BCG expects rich households to have almost US$200 trillion worldwide by 2018, with the Asia-Pacific region contributing about half

of global growth. Assets from Asian millionaires will help Hong Kong and Singapore encroach on Switzerland as the world’s No. 1 offshore private-banking centre.

The Asian private banking division of Lombard Odier & Cie, Geneva’s oldest bank, is seeking to increase assets under management by as much as 20 percent a year by tapping millionaires from Hong Kong, Singapore, Japan and China, said Vincent Magnenat, the firm’s head of private banking for the region. The unit now manages US$8 billion in Asia, Magnenat said in an interview in Singapore last week.

In 2013, Swiss banks had US$2.3 trillion of cross-border assets, a 26 percent share of the global market. Average revenue per Swiss offshore banker was US$2.6 million, compared with US$1.6 million at onshore European wealth-management firms and companies in the AsiaPacific region.

Bloomberg News

10

June 11, 2014

Greater China Draghi confined

by China’s reserves European Central Bank President Mario Draghi’s plan to weaken the euro to aid exporters faces a US$4 trillion challenge: how to cope with China’s efforts to diversify reserve assets, most of which are now in dollars. The People’s Bank of China buys dollars to help stop the yuan strengthening and these purchases helped boost its currency reserves

by US$126 billion to a record US$3.948 trillion in the first quarter.

China holds about a third of the world’s international reserve assets excluding gold.

Xi urges independent innovation

President Xi Jinping stressed that the direction of China’s science and technology development is “innovation, innovation and innovation.” Xi made the remarks at the biennial conference of the country’s two top think tanks, the Chinese Academy of Sciences (CAS) and Chinese Academy of Engineering (CAE).

Monday’s conference was attended by more than 1,300 academicians from the two institutions, which advise the government and industries on key scientific and technological issues.

Li Keqiang, Liu Yunshan, and Zhang Gaoli, all members of the Standing Committee of the Political Bureau attended the conference.

Taipei, Shanghai sign cooperation Taipei and Shanghai on Monday signed four memoranda of cooperation on education, arts and district administration at a symposium on city development. Tu Guangshao, Shanghai’s deputy mayor, said that since the symposium was held in 2010, the two cities have carried out communication in municipal administration and development and learned experiences from each other.

At the symposium, the two sides also exchanged ideas on development of the creative industry as well as establishment of green and convenient city transportation.

Ministry reports corrupt officials Eight officials at the Ministry of Land and Resources, with the highest rank just under vice minister, have received disciplinary sanctions for corruption.

Three of the officials were dismissed from their posts, the ministry said in a statement on late Monday. Their corrupt practices included abuse of power, misuse of public funds and improper overseas travel, the statement said. It added that the ministry will boost its disciplinary inspection teams before the end of the month. The Chinese leadership launched a “mass line” campaign to curb decadence and fight corruption last June.

May inflation leaves room for The government has acted since April to steady growth through measures, characterising it as policy fine-tuning

C

hina’s consumer inflation edged up to a four-month high of 2.5 percent in May while factory price deflation eased, reinforcing signs of stabilisation in the economy.

Still, inflation remained well within the governments’ comfort zone, giving Beijing ample room to step up targeted policy support if necessary to ward off any threat of a sharp economic growth slowdown.

China’s consumer price index (CPI) rose 2.5 percent in May from a year earlier, quickening from a 1.8 percent rise in April. The number slightly exceeded market expectations of 2.4 percent, data from the National Bureau of Statistics showed yesterday.

Food prices rose 4.1 percent in May from a year earlier, quickening from April’s 2.3 percent rise, the data showed.

Month-on-month, consumer prices rose 0.1 percent versus a forecast for a 0.1 percent fall.

“The recovery of pork prices, together with last year’s low base, helped the faster price rises,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

“The comfortable inflation figure will provide sufficient room for the central bank to loosen its monetary policy in coming months to shore up the economy.”

The government has set an inflation target of around 3.5 percent this year.

China’s central bank recently cut the level of deposits for banks with sizeable lending to the farming sector and small firms - the latest step to spur growth.

The government has acted since April to steady growth through some focused measures, characterising it as policy fine-tuning.

Meanwhile, official manufacturing and service sector surveys showed improvement in May, adding to hopes that the economic soft

KEY POINTS May CPI +2.5 pct yr/yr, vs forecast +2.4 pct May PPI -1.4 pct yr/yr, vs forecast -1.5 pct May CPI +0.1 pct from April, vs f’cast -0.1 pct

Food prices rose 4.1 percent in May from a year earlier

patch was bottoming out.

Factory price deflation eases The producer price index (PPI) fell 1.4 percent in May from a year earlier - the 27th consecutive month of decline - versus a 2 percent fall in April and market expectations of a 1.5 percent drop.

“The PPI figure is in line with market consensus and provides more evidence of stabilisation in the economy,” said You Hongye, an analyst at Essence Securities in Beijing.

Yu Qiumei, a senior statistician at the National Bureau of Statistics, said easing factory price deflation in May indicated rising demand for industrial products. Month-on-month, producer prices still fell 0.1 percent.

Chinese manufacturers have struggled to cope with profit-eating price declines, adding to pressure on the government to take steps to reduce financing burdens on companies.

Chinese leaders have ruled out any large stimulus as the country is still nursing the hangover from the 4 trillion yuan (US$640 billion) stimulus implemented during the global crisis

CITIC Resources moves to secure Qingdao port metal A third-party firm is suspected of using single cargoes of metal multiple times to obtain financing

T

he firm said yesterday that metal it owns at Qingdao port may be affected by a probe into suspected fraud, the latest firm caught up in a scandal that has raised broader worries about the risks of metal financing in China.

The probe at the Chinese port, where a third-party firm is suspected of using single cargoes of metal multiple times to obtain financing, has also shaken markets amid fears the problems could extend to other ports and force a crackdown on using metal as collateral for finance.

The investigation into the status of aluminium and copper products stored at the world’s seventh-biggest port may hit the group, CITIC Resources said, sending its shares down by more than 5 percent to their lowest since May 30.

The firm said it has sought a court order in Qingdao to secure its metal assets.

CITIC Resources is the commodities trading unit of China’s biggest and oldest state-owned financial conglomerate company, CITIC Group Corp. Singapore sovereign wealth fund Temasek Holdings also holds an 11.46 percent in the unit.

“At present, the status of the investigation is unknown to the group,” chairman Kwok Peter Viem said in a filing to the Hong Kong stock exchange.

“Until the status of the investigation is clarified, the company is not able to accurately assess its impact on the group’s alumina and copper stored at Qingdao port or on the group itself,” Kwok added.

The group joins Standard Bank Group and a part-owned unit of Louis Dreyfus Corp, Singaporelisted GKE Corp., which warned last week of potential losses.

Standard Chartered has said

it is reviewing metals financing to a small number of companies in China while Citi Group said it would work closely with authorities, warehousing companies and clients to resolve any issues.

Pledging commodities to a bank, often using a warehouse receipt as proof of ownership, has become a popular way of raising finance in China, often to skirt restrictions on raising credit and helping drive up stockpiles at some ports.

But while the problems at Qingdao may be an isolated case, questions have begun to play on the minds of traders and bankers doing business in the world’s largest raw material importer into whether material they believe they own is secure.

Concerns over the events in Qingdao may push foreign banks to cut their commodity financing business in China, Goldman Sachs said in a note on June 9.

Reuters

11

June 11, 2014

Greater China

action

IPO market resumes

some focused

Three firms will list in Shanghai and four on the smaller Shenzhen exchange

T

he reopening of mainland China’s IPO market with seven new listings announced yesterday is good news for investors, although analysts said brokerages could be forced to slash their earnings forecasts after a four-month hiatus in activity.

The new offerings come after the China Securities Regulatory Commission (CSRC) said late on Monday it had given final approval to 10 firms seeking to list on the Shanghai or Shenzhen stock exchanges, giving an official green light to the IPO market which had been dormant since February.

While the new activity will be a relief for investors eager to put their money to work, it underlines concerns that mainland initial public offerings will fail to live up to expectations this year and brokers could be left to rue upbeat revenue forecasts.

The seven companies, which

include Guangdong Ellington Electronics Technology, Shanghai Beite Technology and Shanghai Lianming Machinery, aim to raise a total of about 16 billion yuan (US$2.57 billion), according to their prospectuses published yesterday.

Three will list in Shanghai and four on the smaller Shenzhen exchange.

The CSRC last month said it was planning about 100 new listings this year, which would take the expected 2014 tally to 150 or only half the

number forecast by consultants including PwC. “Lower-than-expected IPO volumes definitely will drag down revenue and earnings for brokers this year, versus previous forecasts,” Jian Li, an analyst with Macquarie Capital Securities in Hong Kong, said.

He said the revised IPO forecasts could wipe out 3 percent to 6 percent of brokerages’ predicted earnings this year.

Brokerages that focus on mainland China deals include CITIC Securities , Haitong Securities and Guosen Securities.

The CSRC let around 50 companies list in January and February, marking the end of a suspension of IPO approvals that began in late 2012 but was never officially confirmed.

Reuters

KEY POINTS in 2008-09, which resulted in piles of local government debt.

The statistical bureau is due to release data on industrial output, retail sales and fixed-asset investment on Friday. New loan and money supply data will be issued between June 10-15.

A Reuters poll found analysts expect annual economic growth to slow to 7.3 percent in the second quarter from 7.4 percent in the previous quarter, with full-year growth of 7.3 percent in 2014, the weakest in 24 years and below the government target of 7.5 percent.

Offerings come after CSRC gives final IPO approval to 10 firms Seven firms publish IPO prospectuses Three firms to list in Shanghai, four in Shenzhen Lull could mean US$650 million in lost revenue for investment banks Pictured Shenzhen Stock Exchange will list four companies

Reuters\

Small plane makers chase growth For plane makers the business jet market in Greater China offers the prospect of rampant growth

W

ith 100 years of aviation heritage, Piaggio Aero Industries SpA has only ever made planes in its native Italy.

Now the supplier of private aircraft for the Ferrari motor racing team is looking into a new joint venture far from home - manufacturing in China.

With the Ferrari family still owning a small stake, Piaggio Aero has talked to Chinese state companies and provincial government officials about setting up a joint venture to make planes, according to Giuliano Felten, its chief commercial officer.

If Piaggio Aero finds a partner, it will join a growing string of smaller aircraft makers who have drawn inspiration from the way global automakers teamed up with local partners over 20 years ago, eventually turning China into the world’s biggest auto market.

For plane makers from Cessna to Embraer, the business jet market in Greater China offers the prospect of rampant growth. Deliveries could top 2,400 over the next 20 years, worth more than US$65 billion and eight times the current fleet, according to Canadian aircraft maker Bombardier - a fraction of the US$257 billion expected in sales in North America over the same period, but still a major growth opportunity.

Piaggio Aero shares family roots with Milan-listed scooter maker Piaggio & Cie SpA, home of the Vespa, but is now 98 percent-owned

by Abu Dhabi investor Mubadala Development Co. Piero Ferrari, son of auto racing legend Enzo, owns the remainder.

Drawing aircraft makers to China fits with Beijing’s plans to make the country a major

manufacturing base for aircraft production, from small aircraft to fully fledged commercial planes that can compete with the likes of Airbus Group and Boeing Co. Yet

A Piaggio P-180 Avanti model

while China’s auto manufacturing base has expanded rapidly, its own automakers still struggle to compete with Western rivals.

Reuters

12

June 11, 2014

Asia

S.Korea’s data crossfire ICT exports declined. House loans grew faster

exports tumbled 12.9 percent from a year earlier to US$2.17 billion in May due to the sluggish growth in the global smartphone market and expanded production in overseas factories for cost cutting.

The country’s smartphone exports topped US$1 billion for five straight months in May, but the exports sank 27.9 percent in May from a year before.

Memory chip exports surged 21.6 percent on year to US$2.71 billion in May due to higher product prices, but shipments of system chips such as mobile application processor (AP) plunged 20.7 percent to US$1.66 billion due to weaker demand for smartphones.

Display panel exports fell 7.6 percent from a year earlier to US$2.31 billion in May amid the faltering demand from China and the sluggish global TV market. Digital TV exports slid 3.2 percent in May from a year earlier.

trillion in April as demand for home-backed loans became stronger during the spring house-moving season.

Housing transactions increased to 92,691 units in April from 89,394 a month earlier, according to data from the Ministry of Land, Infrastructure and Transport (MOLIT).

Mortgage loan growth accelerated to 3.4 trillion won in April from 2.3 trillion won in March, with other credit loan growing faster to 1.5 trillion won in April from 0.1 trillion won a month earlier.

Loans owed by households to banks increased 2.8 trillion won from a month earlier to 484.1 trillion won in April.

Loans extended by nonbank lenders, including mutual savings banks, credit unions, mutual finance companies and community credit cooperatives, expanded 2.2 trillion won to 211.5 trillion won in the cited period.

Xinhua

Loans grows S.Korean TV makers, as Samsung, are feeling the effects of faltering demand from China and the sluggish global TV market

I

nformation and telecommunications technology (ICT) exports reduced last month due to less working days, but the industry kept its surplus trend, contributing much to trade surplus in the overall industry, a government report yesterday.

The ICT exports declined 7.5 percent from a year earlier to US$14 billion in May after

rising 4.5 percent in the prior month, according to the Ministry of Trade, Industry and Energy (MOTIE).

The reduction was mainly attributed to less business days caused by the so-called golden week from the May 1 Labour day to May 6 Buddha’s Birthday.

The daily average exports in the ICT industry reached US$651 million in May,

almost the same as US$658 million a year ago.

For the first five months of 2014, the ICT exports reached US$69.9 billion, the largest over a five-month period in the country’s history.

Trade surplus in the sector came to US$7.25 billion in May, contributing to the surplus of US$5.35 billion for the overall industry.

By export item, handset

Central bank data showed yesterday household loans grew at a faster pace in April as housing transactions rose during the spring housemoving season.

Household loans extended by deposit-taking institutions, including banks and non-bank lenders, reached 695.5 trillion won (US$684.5 billion) as of the end of April, up 5 trillion won from a month earlier, according to the Bank of Korea (BOK).

The May growth was faster than an expansion of 2.4

N.Zealand tycoon mulls $5 bln sale A sale of SIG would underscore Hart’s efforts to trim the US$18 billion debt pile Soyoung Kim and Greg Roumeliotis

N

ew Zealand’s richest man, Graeme Hart, is exploring a sale of SIG Combibloc Group Ltd that could value the world’s second largest maker of drink cartons at around US$5 billion, according to people familiar with the matter.

Hart’s packaging conglomerate, Reynolds Group Holdings Ltd, has hired Goldman Sachs Group Inc. to explore alternatives for SIG, including a potential sale, the people said on Monday.

SIG, which Hart acquired

for US$2.3 billion in 2007, is in the early stages of preparing a sale process and is expected to attract interest mainly from private equity firms, the people added.

SIG has annual earnings before interest, tax, depreciation and amortization (EBITDA) of around US$500 million and may fetch close to 10 times that amount in a potential deal, the people said, asking not to be identified because the deliberations are private.

Representatives for

Reynolds and SIG did not immediately respond to requests for comment.

Goldman Sachs declined to comment.

A sale of SIG, which is based in Neuhausen am Rheinfall, Switzerland, would underscore Hart’s efforts to trim the US$18 billion debt pile his packaging empire has accumulated through leveraged buyouts. Those deals include the US$6 billion acquisition of Pactiv Corp, the maker of Hefty trash bags, in 2010, and the US$4.5 billion

SIG building in Neuhausen am Rheinfall (Switzerland)

US$651 million

May daily average exports for S.Korean ICT industry

SIG ranks second in global food and drink carton packaging sales, behind Sweden’s Tetra Laval international SA. The company has been grappling with lower sales and higher manufacturing and raw material costs, particularly for resin, according to a presentation on the Reynolds Group website. SIG’s adjusted EBITDA dropped by 12 percent in the first quarter of 2014 to US$111 million.

Reynolds Group’s total adjusted EBITDA was down 11 percent in the same period to US$531 million.

Reuters

takeover of plastic container producer Graham Packaging Co in 2011.

SIG manufactures aseptic carton packaging that allows juices, milk, soups and sauces to be stored for a long period of time without refrigeration. The company has around 5,100 employees in 40 countries.

US$500 million

SIG annual EBITDA

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13

June 11, 2014

Asia Bank of Japan headquarters

S.Korea draws net foreign inflows Foreigners were net investors of both South Korean stocks and bonds in May, but their level of investment halved from the seven-month high touched in April, the local financial regulator said yesterday. Offshore investors’ net inflows into South Korean financial markets in May stood at 2.26 trillion won (US$985 million) versus the 5.15 trillion won seen in April, the Financial Supervisory Service (FSS) said in a statement. The April figure was the highest since September last year. Foreigners boosted their bond holdings by 0.81 billion won in May.

JGBs mostly edge down slightly

BOJ may revise up view on overseas growth At a two-day rate review that ends on Friday, the BOJ is widely expected to maintain its monetary policy framework

T

he Bank of Japan is set to keep monetary policy steady on Friday and may slightly revise up its assessment on overseas growth, signalling confidence that the economy is on course to meet its inflation target next year without additional stimulus.

Surprisingly strong capital expenditure and growing signs that Japan is weathering a recent domestic sales tax hike have underscored the central bank’s view that the world’s third-largest economy will continue to recover on solid domestic demand.

Overseas headwinds also appear to be receding, BOJ officials say, pointing to a rise in China’s May exports and robust U.S. jobs data signalling the world’s biggest economy has emerged from a soft patch blamed largely on severe winter weather.

The BOJ may thus offer a slightly more upbeat view on overseas economies than last month, when it said that while the global economy is starting to recover, “lacklustre performances” were seen in some areas.

Any such upgrade would signal the BOJ’s hope that exports, the soft spot of an otherwise steady recovery, will soon emerge from the doldrums and

cushion the pain from the sales tax hike that took effect in April.

“The weak yen hasn’t boosted exports, so overseas economies need to grow more for Japanese shipments to pick up,” said Hideo Kumano, chief economist at Dai-ichi Life

KEY POINTS Board meets June 12-13, decision seen June 13 No policy action expected as BOJ confident on economy BOJ likely to maintain view on Japan economy, exports

Research Institute.

“The jobs data alleviated concerns about the U.S. economy and will help the BOJ make the case that overseas demand for Japanese goods will

gradually recover,” he said.

At a two-day rate review that ends on Friday, the BOJ is widely expected to maintain its monetary policy framework, under which it has pledged to increase base money by 60-70 trillion yen (US$586-US$683 billion) per year via aggressive asset purchases.

The central bank is set to keep intact its assessment that Japan’s economy will continue recovering moderately as a trend, although it faces a speed bump from the sales tax hike.

Despite the optimism on overseas growth, the BOJ is also seen maintaining its assessment that exports are “more or less flat” since there has been no clear signs of a pick-up.

Japan logged its fastest growth in two years in the first quarter thanks to surprisingly strong capital spending, in a fresh sign that the economy is in better shape to weather the hit from the sales tax hike.

While factory output and household spending slumped in April, consumer confidence rose for the first time in six months in May. Reuters

Pacific Brands picks Macquarie for review Pacific Brands debt will increase as much as 63 percent from last year

A

ustralia’s largest listed clothing manufacturer, appointed Macquarie Group Ltd. to conduct a strategic review after cutting its earnings forecast a fourth time this year. The shares plunged the most in almost four months.

Earnings before interest, taxes and one-time items will range from A$90 million (US$84 million) to A$93 million in the year ending June 30, Pacific Brands said yesterday. That would be as much as 26 percent less than the A$122 million posted last year. The stock fell as much as 12 percent, the biggest intraday drop since February 18, to 49.5 Australian cents.

Falling earnings raise the stakes for Chief Executive Officer John

Pollaers, who led the break-up and sale of Fosters Group Ltd., to stem five straight years of sales declines as retailers increase direct sourcing from overseas. Pacific Brands, the Australian distributor of Bonds underwear and Everlast sportswear, posted net losses of A$691 million over the five years, exceeding its current market value of about A$475 million.

“Challenging markets, declines in consumer sentiment and a warm autumn” mean profit margins are falling even with sales forecast to rise about 3 percent from a year earlier, the Melbourne-based company said today in a statement.

Debt will increase as much as 63 percent from last year to a range

of A$250 million to A$260 million, it said.

Reject Shop Ltd., an Australian discount department store chain that also cut its earnings forecast today, slumped as much as 13 percent to the lowest in almost 8 years.

Pacific Brands said it will provide an update on the review by Macquarie Capital during the full-year result announcement on August 26. It didn’t give further details.

The company will also take onetime costs of A$25 million to A$30 million in the half year ending June 30 to pay for restructuring that will reduce the role of the head office in the business, it said.

Bloomberg News

Japanese government bond prices mostly edged down yesterday, pushing up yields in the 9-year and longer zone. As expected, the Bank of Japan refrained from offering to buy JGBs under its massive purchase scheme, as it normally does when the Ministry of Finance conducts a JGB sale. The MOF carried out monthly 300 billion yen (US$2.93 billion) liquidity enhancement auction for off-the-run 20-year, 30-year and 40-year JGBs. Cash trading activity was limited to transactions among dealers, according to JGB market participants.

Australian job advertisements fall Australian job advertisements in newspapers and on the Internet fell 5.6 percent in May to end a fourmonth run of gains, a possible sign that businesses scaled back hiring plans in the face of a tough federal budget. A survey by Australia and New Zealand Banking Group showed total job advertisements fell to 127,790 per week on average in May, from 135,421 in April. Ads were down 3.0 percent on May last year. The jobless rate is seen ticking up to 5.9 percent from 5.8 percent in April.

S.Korea store sales snap 3-mth fall Sales at South Korea’s top departmentand discount-store chains both rose in May from a year earlier, finance ministry estimates showed yesterday, snapping a three-month run of losses and easing concerns about the strength of domestic demand. Combined sales at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co rose 2.0 percent last month from a year before, the ministry said in a report. Sales at major discount-store chains also climbed by a combined 1.7 percent in May from a year ago.

Philippine exports post slight growth in April Export revenues rose by a minimal 0.8 percent on year to US$4.54 billion in April, the local statistics agency said yesterday. The lackluster performance of the country’s export sector in April was due to the 2.5 percent year on year decline in export earnings from electronics, according to figures released by the Philippine Statistics Authority (PSA). Earnings from electronic products reached 1.81 billion U.S. dollars, accounting for 40 percent of total receipts in April. It remained as the country’s top export during the period.

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June 11, 2014

International U.S. energy selfsufficiency rate peaks The United States produced enough energy to satisfy 84 percent of its needs in 2013, a rapid climb from its historic low in 2005, according to a federal report. The country produced 81.7 quadrillion British thermal units of energy last year and consumed 97.5 quadrillion, the Energy Information Administration (EIA), the statistical arm of the Department of Energy said in the report released on Monday.

The country’s energy output rose 18 percent from 2005 to 2013, thanks to a boom in the unconventional shale sector. Meanwhile, its total energy consumption fell 2.7 percent during that period.

Canadian banks under scrutiny Even with the world’s soundest banks, Stephen Poloz is grabbing a microphone to warn about risks to Canada’s economy. The Bank of Canada governor, along with new Senior Deputy Governor Carolyn Wilkins, is taking the unprecedented step of holding a press conference June 12 after publishing the Financial System Review, a previously lowprofile report that documents threats to the country’s economy and banking system. By boosting the report’s visibility, Canada’s central bank is aligning itself with counterparts such as the Bank of England and European Central Bank.

U.K. industrial output shows optimism Industrial production rose for a third month in April, driving the annual increase to the biggest since 2011.

Output rose 0.4 percent from March, when it gained a revised 0.1 percent, the Office for National Statistics said today in London. That matched the median of 29 estimates in a Bloomberg survey.

From a year earlier, output surged 3 percent. Industry surveys indicate the economy continued to expand this quarter, with Markit Economics saying last week that its gauges show Britain is on track to grow 0.8 percent.

Metro workers might strike during World Cup The subway employees are seeking a 12.2 percent pay increase

Arena Corinthians (stadium pictured) metro stop could be closed during the World Cup opening

S

ao Paulo subway workers are threatening to restart a strike the day South America’s largest city hosts the World Cup’s opening soccer match.

The metro workers’ labour union will vote June 11 whether to renew the stoppage the next day, when Brazil plays Croatia in the first game of the tournament, it wrote in a statement on its website. The labour group demands workers who were fired during the protests get their jobs back, it wrote. “Nobody will be left behind,” according to the statement.

Three of the city’s five subway lines were partially shut down during the stoppage, including the station at the Arena Corinthians that will host the inaugural game. Police clashed with protesters during the strike and traffic jams paralyzed city streets as polls

show Brazilians growing increasingly sceptical about the upside of hosting the World Cup. The subway employees are seeking a 12.2 percent pay increase, according to a union statement published on Sunday. The union failed to reach

60 pct Brazilians oppose hosting the World Cup

Bloomberg News

Silenced vuvuzelas

FIFA made around US$3 billion from the 2010 World Cup. South Africa’s BNP Paribas chief says monetary losses were huge clients keep faith

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Retail clients of BNP Paribas are keeping faith in France’s biggest listed bank despite reports about a looming multi-billion fine from U.S. regulators, the head of French retail banking MarieClaire Capobianco told BFM Business TV yesterday. BNP Paribas may have to pay a fine of about US$10 billion for allegedly evading U.S. sanctions, sources have said. U.S. authorities are probing whether BNP evaded U.S. sanctions relating primarily to Sudan between 2002 and 2009, and whether it stripped out identifying information from wire transfers so they could pass through the U.S. financial system without raising red flags.

a deal during a meeting with state government authorities on Monday.

About 60 percent of Brazilians oppose hosting the World Cup because it diverts money away from public services, according to a Pew Research survey released June 3. Dissatisfaction with “things in Brazil today” rose to 72 percent, according to the survey, which polled 1,003 people from April 10-30 and had a margin of error of plus or minus 3.8 percentage points.

Professions from teachers to police officers in the past month have walked off the job demanding pay rises. Metro workers in Rio de Janeiro, which will host the final game of the month-long tournament, also are threatening to strike to demand better pay and improved working conditions, according to the union’s website.

outh Africa’s vuvuzelas will be quiet when the football World Cup kicks off in Sao Paulo on Thursday.

Four years after the tournament first came to Africa, many see the global event as a poisoned chalice for its host.

Diehard South African fans will no doubt tune in to the games in Brazil, but gone are the flags flying from car windows, the colourful hard hats, and those ubiquitous plastic trumpets.

Apart from nostalgia little is left of the optimism that swept the country, symbolised by a beaming Nelson Mandela taking to Soweto’s Soccer City pitch in a golf cart for the final.

“It really united a lot of people, and it brought a lot of excitement,” remembers informatics student Sihle Dube, 20.

That intangible unity meant a lot to a nation still grappling with centuries of racial segregation.

But it was short-lived.

“National unity, national pride that we had in the World Cup and everything else - I think that probably wore off about three years ago,” said political analyst Dale McKinley.

“A few months after the World Cup

there might have been that sense, but now the day-to-day realities take over.”

National team Bafana Bafana (The Boys) failed to qualify for Brazil, and the focus has shifted instead to the high costs of hosting the tournament and what South Africa got out of the deal.

The monuments to that memorable event still stand: five new stadiums, renovated airports, better roads, and the continent’s first high-speed rail transport, locally called the Gautrain.

But while South Africans footed the US$3.5 billion-bill, most people can’t access the impressive infrastructure and some of the stadiums are little more than white elephants.

The vast sums of money would have been better spent on schools or other development projects, said public management student Lerato Nxumalo.

“People from (poor) locations and the rural areas, they didn’t benefit at all,” she said.

“The benefits of the Word Cup are similar to the economy of South Africa, which is very unequal,” said McKinley.

The Gautrain ferries thousands of commuters daily between the capital Pretoria and commercial hub Johannesburg or on to OR Tambo

international airport.

Soccer City hosts high-profile international artists like Lady Gaga and Coldplay.

But all this only serves the country’s comparatively small middle class, said McKinley.

“The poor, the working class people, don’t benefit. They can’t even afford the Gautrain. In the context of the stadiums most people can’t afford the prices to get into the concerts,” he told AFP. Forty percent of households still live in townships, areas formerly reserved for blacks, which are characterised by underdevelopment and poor water and electricity services.

The prospect of a similar dubious legacy has already overshadowed the tournament in Brazil, where protesters have taken to the streets to question spending on stadiums despite so many others pressing social needs.

World football body FIFA made around US$3 billion (2.2 billion euros) from the 2010 World Cup. South Africa’s monetary losses were huge.

“Strip out the emotion of the event, and it’s clear that financially this left a nasty hangover,” the country’s Sunday Times noted recently.

AFP

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June 11, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Carbon majors and climate justice

THE STAR The controversial Johor Real Property and Housing Board Bill 2014 was passed by the State Legislative Assembly after 10 amendments were made to the original draft. The Bill was passed after all 38 Barisan Nasional representatives voted for it with the 18 Pakatan Rakyat assemblymen abstaining. Only 29 votes were needed to pass the Bill. Eight speakers – five from Barisan and three from Pakatan – debated the Bill for almost two and a half hours before it was passed. There were at least five attempts

by Pakatan assemblymen to delay passage of the Bill.

THANH NIEN NEWS Despite the limited short-term impact of growing tensions with China, Vietnam should accelerate economic reform to improve its competitiveness and reduce its dependence on its northern neighbour, according to the Hong Kong and Shanghai Banking Corporation Limited (HSBC).

Tourist arrivals from China will likely slow in June, and normalize in July, HSBC said in a report issued last week on Vietnam’s macroeconomic situation. Yearto-date, total tourist arrivals to Vietnam grew 26.1 percent.

Regarding FDI, worries remain over whether new investment will continue to flow in.

THE STRAITS TIMES The supply of new homes was pared down under the Government Land Sales (GLS) Programme for the second half of the year. A total of six residential sites, two mixed-use plots and one commercial parcel was put on the confirmed list, said the Urban Redevelopment Authority (URA) yesterday. Together, they can accommodate up to 3,900 private homes, including 1,500 executive condominium units.

These will be “located across all regions of Singapore,” said URA. This was down from the 4,600 new private homes that could be yielded from GLS land on the confirmed list for the first half of 2014.

Naderev (Yeb) Saño

Commissioner with the Philippines Climate Change Commission

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ONN – A groundbreaking study published last November revealed that the activities of a mere 90 producers of coal, oil and gas, and cement – dubbed the “carbon majors” – have led to 63% of all CO2 emissions since the Industrial Revolution.

The report was released just weeks after Typhoon Haiyan (or Yolanda as it was known locally) tore through the Tacloban region in the Philippines. With unprecedented wind speeds of 315 kilometres per hour, the storm killed 6,300 people, left four million homeless, and caused more than US$2 billion of damage.

Haiyan and its devastation became a rallying cry for delegates at the subsequent United Nations climate-change conference in Warsaw. In response, they agreed to establish an international mechanism to address climate-change-related “loss and damage,” to be applied in countries that are unable to adapt or protect themselves from the worst effects of global warming.

Those most vulnerable to climate change are often least responsible for its causes, and have the fewest resources to deal with its consequences.

Contrast this with the carbon majors, which have made huge fortunes from the fossil fuels that are largely responsible for climate change. In 2013, the combined profits of just four majors – Chevron, ExxonMobil, BP, and Shell – topped US$94 billion. This colossal return was possible only because these companies externalize their

products’ highest cost – the climate devastation borne by the poor and vulnerable.

It seems only fair and reasonable, therefore, that all fossil-fuel entities, but especially the carbon majors, pay a levy on each ton of coal, barrel of oil, or cubic meter of gas they produce to a new International Mechanism for Loss and Damage, which would help to fund efforts to address the worst effects of climate change. Furthermore, given that the effects of climate change today are the result of past emissions, the carbon majors should pay a historical levy, too.

If set initially at a relatively low US$2 per ton of carbon, these levies could raise US$50 billion annually, though the rate should increase each year.

The revenues could support vulnerable countries’ efforts to develop long term plans to deal with climate change, as well as finance pilot projects aimed at minimizing loss and damage, sharing information, and replicating best practices.

They could fund the monitoring and forecasting of slow-onset and extreme-weather events, enabling authorities and the public to prepare more effectively for an impending disaster. And the money could cover loss-and-damage risk premiums on individual, local, national, regional, or international insurance policies.

Governments would collect the levies from the carbon majors, perhaps when they collect royalties and other extractionrelated fees, and deposit the money with the international mechanism. If the new levy were added to existing fees,

Julie-Anne Richards

Manager of International Policy for the Australia-based Climate Justice Program and co-authored the report Carbon Majors Funding Loss and Damage

it would strengthen the price signal driving a shift away from fossil fuels and toward renewables.

This fossil-fuel levy would be entirely compatible with the norms established by the United Nations Framework Convention on Climate Change and with the “polluter pays” and “do no harm” principles of international law, according to which organizations are required to pay for the damage that they cause. Indeed, the arrangement would be similar to existing regimes, such as those covering

Even at today’s “low” level of climate change, the devastation is already all too real.

It is real for the Philippines citizens mourning relatives and trying to rebuild homes and lives.

THE PHNOM PENH POST HGB Group Co Ltd, the distributor for Mazda and Kia vehicles in Cambodia, was named yesterday as the country’s official Rolls-Royce dealer. At a news conference held at the Sofitel Phnom Penh hotel, Paul Harris, regional director for Rolls-Royce Motor Cars Asia, confirmed the luxury English vehicle brand would commence sales in Cambodia by the fourth quarter of this year from a newly built 465-square-metre showroom to be located on Street 217. The showroom will house Rolls-Royce’s Phantom, Wraith and Ghost models, with prices starting at about US$450,000.

Debris littering the streets of Tacloban City nearly a week after the typhoon Yolanda struck

oil-spill compensation or nuclear damage.

But paying the cost of one’s damage, though necessary, is far from sufficient. After all, a compensation levy should not imply that the carbon majors have effectively bought a right to pollute. We must also work to stop inflicting harm on the most vulnerable people (and on ourselves). When the world’s governments meet at the UN climate-change conference in Paris in 2015, they must agree on ways to phase out net greenhouse-gas emissions and stop burning fossil fuels by mid-century. According to Carbon Tracker, 80% of fossilfuel reserves must remain in the ground if we are to avoid catastrophic climate change.

Even at today’s “low” level of climate change, the devastation is already all too real. It is real for the Philippines citizens mourning relatives and trying to rebuild homes and lives; for the Pacific Islanders growing crops in containers, importing drinking water, and building sea walls to protect their islands from the encroaching ocean; and for hungry farmers in the Sahel.

And it is a growing reality for millions of other vulnerable people worldwide.

These people deserve the world’s support – not just moral support, but genuine help in the form of effective, properly funded mechanisms designed to prevent, or at least alleviate, the climaterelated hardships inflicted upon them by past and present industrialization. For the carbon majors, the time to pay up has arrived.

The Project Syndicate 2014

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June 11, 2014

Closing China’s auto production, sales down in May

Uniqlo hiking prices in sign Japan battling inflation Japan’s biggest clothing store chain will lift prices in its home market from next month - one of the most symbolic signs yet that the country is making strides in its battle to end 15 years of chronic deflation.

The price hikes of around 5 percent, which come on top of an increase in Japan’s sales tax in April, are aimed at shoring up profit margins amid a weaker yen and a global rise in cotton and wool prices.

Both sectors dropped in May from April, marking the second month-on-month decline in a row, new data yesterday. Last month, auto production dropped 4.4 percent from a month earlier to 1.98 million units, while sales declined 4.6 percent to 1.91 million units, the China Association of Automobile Manufacturers (CAAM) said in a statement on its website. On a year-onyear basis, production in May rose 11 percent and sales increased 8.5 percent, the CAAM said.

Japan to resume Antarctic whaling Though Japan abandoned its Antarctic hunt for this year, it immediately vowed to retool its research programme with an eye to resuming it as early as the 2015-2016 season Elaine Lies

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n embarrassing court ruling that halted Japan’s Antarctic whaling will actually help Tokyo take whales in the name of science, a top whaling official said just a day after the prime minister vowed to press for commercial whaling.

Tokyo’s decades-old and disputed “scientific whaling” programme suffered a blow in March when the International Court of Justice (ICJ), in a surprise ruling, ordered a halt to annual hunts in the Southern Ocean.

Though Japan abandoned its Antarctic hunt for this year, it immediately vowed to retool its research programme with an eye to resuming it as early as the 2015-2016 season, and eventually to resume commercial whaling as well.

It is carrying out a scaleddown version of its less known Northern Pacific hunt.

The court ruling was actually good for Japan by upholding the legal basis for whaling, said Joji Morishita, Japan’s commissioner to the International Whaling Commission (IWC).

“The assumption of the

A whale and a calf being loaded aboard a factory ship, the Nisshin Maru

court is that Japan could ... look at a new research plan,” Morishita told a news conference in Tokyo.

“And that it’s okay for Japan to propose a new plan which involves killing whales as long as it takes account of the reasoning and conclusions set by the ICJ at this time.”

Though anti-whaling

PBOC reserves cut modifies interest

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hina’s interest-rate swaps and interbank borrowing costs fell after the central bank announced details of a cut in lenders’ reserve requirements.

The People’s Bank of China said it will reduce the ratio by 0.5 percentage point for most city commercial banks, non-county level rural commercial lenders and rural cooperatives from June 16, according to a statement posted on its website late yesterday. That will result in an additional 70 billion to 80 billion yuan (US$11.2 billion to US$12.9 billion) in the financial system, China International Capital Corp. estimated in a research note yesterday.

“The cut targeted at smaller banks will help ease liquidity pressure in June as these institutions are usually the borrowers on the interbank market,” said Cao Yang, a Shanghai- based analyst at Shanghai Pudong Development Bank Co. “Because these banks’ lending services account for a relatively small proportion of the total lending, its impact on the overall financing cost may be limited.”

Bloomberg News

nations say the IWC should be acting to conserve whales, Japan and its allies argue that it was set up to manage whales as a resource, a stance Morishita said the court supported by saying the IWC’s purpose remains the same.

In consideration of the ruling, Japan did cut its

quota for the Pacific hunt, which extends from Japan’s coastline out into a broad swathe of the ocean to 210 from 380.

Japan has long maintained that most whale species are not endangered and began what it called scientific whaling in 1987, a year after an international moratorium

came into effect, despite growing global outrage, including from key allies such as the United States.

Prime Minister Shinzo Abe, himself hailing from one of Japan’s major whaling areas, told a parliamentary committee on Monday that Tokyo would press ahead with its whaling plans.

“We will carry out surveys on whales with the aim of reviving commercial whaling,” Abe said. “I will also make further efforts to gain international understanding.”

Though few Japanese now eat whale, the government argues that the meat is a part of Japanese food culture.

“Even if some country thinks that whales are special or sacred, as long as whales are sustainably utilised that view should not be forced on others,” Morishita said. “...If people in India tried to impose their way of treatment of cows on the rest of the world and tried to promote prohibiting of eating at McDonald’s or hamburgers, what would happen?”

Reuters

Singapore charges firm Turkey’s GDP grows over weapons-smuggling E ingapore on Tuesday filed criminal charges against a shipping firm based in the city-state accused of helping smuggle missiles and other military hardware from Cuba to North Korea.

The foreign and home affairs ministries said in a joint statement that the charges were filed against Chinpo Shipping Company Pte Ltd and a Singapore citizen identified as Tan Hui Tin. Chinpo Shipping transferred US$72,000 to a shipping company in Panama on July 8, 2013 in the knowledge the money could be used “to contribute to the nuclear-related, ballistic-missile-related, or other weapons of mass destruction-related programs or activities” of North Korea, according to the charge sheet.

The ministry joint statement said the Singapore Police Force had completed its investigation into Chinpo Shipping’s involvement, clearing the way for state prosecutors to lodge the charges.

Chinpo Shipping was also slapped with a second charge of conducting a remittance business without a licence.

conomy grew faster than expected in first quarter of 2014 at a rate of 4.3 percent yearon- year, official figures showed yesterday.

Turkey’s gross domestic product (GDP) reached 29.21 billion Turkish Liras (US$13.98 billion) at constant prices, an increase of 4.3 percent, in the first quarter, according to the Turkish Statistics Institute (TurkStat).

The growth in GDP showed rise of 1.7 percent in the first quarter over the previous quarter, said the Turkstat, adding that a fast growth in exports accompanied by a higher domestic demand and an increase in public investments were the main drivers of the first quarter’s 4.3 percent growth in GDP. Earlier in May, the Organization for Economic Cooperation and Development (OECD) slashed its 2014 growth forecast for Turkey from 3.8 percent to 2.8 percent.

The cut in growth prospects come amid looming fluctuations in emerging markets following a continuation in the U.S. Federal Reserve’s tapering of its monthly stimulus package.

The Turkish government said earlier it expects a 4 percent growth in the economy this year.

AFP

Xinhua

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