Macau Business Daily, July, 4th, 2014

MOP 6.00 Closing editor: Sara Farr Year III

Number 575 Friday July 4, 2014

Publisher: Paulo A. Azevedo

Home sweet home

H

ome transactions plummeted almost 50 percent in the first five months of the year. Less stock and 5,000-plus agents means more competition. Some are turning to more lucrative commercial deals. Or the overthe-border and overseas markets to boost sales and commissions

www.macaubusinessdaily.com

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6

Mass-market is the message

Transparency transgressions

Mass-market revenues could increase 34 percent by year-end. Meanwhile, the VIP segment could tank 17 percent. Analysts at Credit Suisse forecast strong growth for 2015 in the order of 27 percent

The property market here is far from transparent.

So says Jones Lang LaSalle. Its latest report downgrades Macau to 71 out of 102 countries and regions. Macau’s transparency level, now ‘low,’ is only marginally better than that of ‘opaque’ Myanmar and Mongolia

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2

Page 7

DICJ defines smoking areas Page 2

Macau Legend: Mass market driving gaming revenue Page 2

Franchising good opportunity for young entrepreneurs Page 3

Maturing economy

HSI - Movers July 3

Name

Yesterday’s Chinese services sector data and Wednesday’s industry index growth seem to indicate the economy is stabilising Page

9

%Day

China Resources Lan

2.23

China Overseas Land

1.74

Tencent Holdings Ltd

1.55

Hong Kong Exchange

1.29

New World Develop

1.10

Henderson Land Dev

-1.28

Want Want China Ho

-3.38

Bank of Communicat

-4.36

China Shenhua Ener

-5.21

Li & Fung Ltd

More movement

-10.46

Source: Bloomberg

I SSN 2226-8294

Passenger movements at Macau International Airport are up. MIA posted a 10 percent increase in the first half of the year. Some 2.6 million travellers chose the airport as their main point of arrival or departure from the SAR Page 4

Brought to you by

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2014-7-06

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July 4, 2014

Macau Mass-market GGR to grow 34 pct this year Credit Suisse analysts expect mass-market gross gaming revenue to increase by 34 percent, while gross gaming revenue is predicted to increase by 11 percent during 2014 Alex Lee

alex.lee@macaubusinessdaily.com

Fog surrounding smoking area definition clears I

ndependent rooms or spaces well-delineated by physical or architectural barriers on the main floors are two of the rules that casino operators must adhere to if they wish to have a VIP room or a restricted access area where smoking is permitted.

In a joint note released yesterday, the government and the Gaming Inspection and Coordination Bureau (DICJ) listed the conditions a gaming room must meet in order for smoking to be permitted, namely in the VIP area.

Smoking is forbidden on all mass market gaming floors, except in restricted access areas, where only gamblers authorised by casinos may enter and play.

The VIP definition was one the major sticking points pending the smoking ban law in Macau.

According to DICJ, gamblers who want to access these rooms must produce a membership card issued by the casino operator obtained through loyalty programmes or a marketing initiative, while the rolling chips must be distinct from the ones used on the mass gaming floors. Inside these restricted areas, gamblers may smoke at slot machines and gaming tables, with the latter equipped with a ventilation system or an air curtain for the benefit of the croupier.

Macau Legend: Mass market driving gaming revenue T

M

acau’s mass-market gross gaming revenue is expected to climb by 34 percent this year and 27 percent by the following year, according to a gaming industry report by Credit Suisse.

The Swiss-based bank’s analysts Kenneth Fong and Isis Wong defined 2014 as ‘a tale of two halves,’ as they believe that Macau revenues hit the bottom in June and now it is time for a recovery. ‘With fundamentals stabilising, expectations remaining low and valuation undemanding, the gaming sector could re-rate from here into the second half of the year,’ they wrote in the report.

That notwithstanding, Credit Suisse estimates a drop of 17 percent year-on-year in the VIP segment during the first half of the current year based on a lower chip volume, which is estimated to have decreased by 10 percent year-on-year.

However, a recovery in VIP revenue is expected for the third quarter of the year as the ‘major capital outflow from withdrawal has ended and junkets’ confidence gradually rebuilds.’

Revenue to grow 11 pct in 2014 As for the gross gaming revenue for 2014, Credit Suisse analysts forecast it will grow around 11 percent yearon-year. The report says that in order to achieve such a percentage, gross gaming revenue will have to grow 10 percent year-on-year during the second half of the year.

In June, gross gaming revenues dropped 3.7 percent year-onyear, although ‘slightly better than market’s expectations.’ Before June it was predicted that revenues would drop by 5 percent.

The World Cup, in Brazil, is estimated to have caused a 10 percent drop month-on-moth in mass revenue, as gamblers favour pubs

to watch the matches or spend their money on sports betting.

‘By segment, we estimate that mass revenue grew approximately 27 percent in June, or was down 10 percent month-on-month from May. This is consistent with the drop of 10 percent month-on-month trend we saw in June 2010 [FIFA World Cup in South Africa]’ the report reads.

However, the confidence that Macau’s gaming industry is going to recover following a soft June is based on the fact that for analysts the initial decline in casino revenues has also stabilised.

‘After the initial decline as the World Cup started, the weekly revenue seems to have stabilised at around 850 million patacas per day and recovered to 881 million patacas towards the last week of June. This could be a sign that the revenue may have seen the worst,’ they wrote.

For July, the report forecasts gaming revenue growth will range from -5 percent to 0 percent. The football tournament is still expected to affect casino revenues during the first 13 days of the month.

MGM, Melco Crown earning market share According to Credit Suisse, MGM China Holdings Ltd and Melco Crown Entertainment Group were the winners last month in terms of market share. Both gained around 1.3 percent share since May at the expense of Sands China Holdings Ltd. The company founded by Sheldon Adelson lost around 3 percent of market share during June.

As for VIP rolling volume, Sands China was the biggest loser, down 2 percent since May. Melco Crown, however, gained most with an increase of 1.5 percent month-on-month.

he year-on-year fall of 3.7 percent in June’s gross gaming revenue was subject to the influence of the World Cup as well as Beijing’s anti-graft policy, which impacted VIP gaming business. This is according to Carl Tong Ka Wing of local casino operator Macau Legend Development Ltd, who made the remark to media following an extraordinary general meeting yesterday.

Despite mainland China’s anticorruption policy influence on VIP gaming revenue, Mr. Tong said it

should not greatly impact Macau Legend as the company’s gaming revenue primarily derives from the mass market segment, which is performing strongly.

VIP gaming revenue occupied 9.96 percent of Macau Legend’s total revenue from gaming at nearly HK$1.28 billion (US$165 million) for 2013, the company’s annual report noted, and was generated by the company’s VIP rooms in Pharaoh’s Palace Casino.

S.L.

business as usual

King Keong

Pedro Cortés newsdesk@macaubusinessdaily.com

H

e’s back and – true to his name Keong (強) – with strength!

It really is exhilarating how Macau, in the middle of 2014, panders to a member of the Legislative Assembly appointed by the Chief Executive who can utter what Mr. Fong Chi Keong did earlier this week.

For those who were more focused on the World Cup – I really understand and fully second the motion – Mr. Fong made a statement along the lines: “I asked a security person how he could survive on MOP4,000.00 per month, and the answer was that he had no alternative. It is an option that he took. There are persons that like to dally, eat a piece of bread a day, and they are satisfied. The Government should assist such persons.”

Does the CE agree with this view? I want to believe that he does not and thus the first step to be taken should be the summary dismissal of Mr. Fong upon the direct orders of Mr. Chui.

One must assume that the humidity has a strong capacity for changing people’s behaviour; yes, that must be it – I’m sure that these types of statement are influenced by the changes in climate. The real ones. Not those changes in the political environment that we feel in the air and that hopefully will remain unchanged until September or, who knows, until 2019.

This is, at least, the people’s will or, if we want to go back to Mr. Fong’s first name, Chi (志 or ‘aspiration’).

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July 4, 2014

Macau

Franchise forum fosters entrepreneurial spirit Starting one’s first business as a franchise in Macau may be a good option for young locals, according to different entrepreneurs Kam Leong

newsdesk@macaubusinessdaily.com

important because of ‘the milesimal’ – 999 out of 1,000 stores will disappear while only one will remain to the end, according to Hong Kong branding designer Tommy Li. When considering a franchise business, entrepreneurs should evaluate the ‘seven Ps’, primarily ‘product’, ‘price’, ‘place’, ‘promotion’, ‘people’, ‘process’ and ‘physical evidence’, according to Albert Kong from Singapore. He also said that young people should not only look at profits but “create something that has great impact in good ways.”

Franchise forum

T

here are advantages for young people wanting to set up their own business by means of a franchise; at least according to a number of businesspeople who attended a franchising forum yesterday.

Eleven entrepreneurs from seven different countries and regions gathered in a forum to share their own experiences in the franchise business as well as introducing the advantages for young people eager to begin their business by joining chain operations.

The forum was a kick-off activity held by The Macao Franchise Expo (MFE) 2014, which opens today.

Panel discussions responded to the theme ‘Young Entrepreneurs – Seizing Business Opportunities in Chain and Franchise Operations.’

Japanese entrepreneur Kyo Ito said that “young people should take advantage of the franchise business to achieve great success,” while local entrepreneur Cheang Chi Hou, who runs the Taiwanese drinks brand Comebuy in Macau, agrees that there are many advantages for young

people opting for a franchise business, especially here in Macau.

“For people who don’t have any experience in business, the parent company can always provide a lot of professional techniques for chain stores to apply to their own business.

They can also help you with training and maintaining your product standards. This can help beginners fit in the industry faster and easier,” said Mr. Cheang.

He mentioned that Macau has a good business environment for developing the franchise business, given the great amount of consumers from inside and outside the territory.

António Godinho, vice president of the Portuguese Franchise Association, describes the city as “a jumping off point to success.” He said that Macau can be a trade platform for many countries, from mainland China to elsewhere around Macau. In addition, the Portuguese language can help Macau stretch its existing advantages to places like Brazil, Europe and Africa. He also noted that the most

difficult task in the franchise business was to find an appropriate partner.

Set off from Macau For local brands trying to expand their business via a franchise, Andy Szeto, from the cultural and creative industry, believes small and mediumsized enterprises (SMEs) have to strengthen their brand-building to enhance their competitive advantages via imported brands. He added that culture and creative elements can help local brands do this.

Another element to stress the recognition of ‘local brands’ was raised by Diago Chan, whose company operates around 500 chain boutiques in mainland China, “Macau companies have to grab opportunities to cooperate with international brands. Meanwhile, they should also learn from these international brands’ professional management and experiences then apply them to their own brands.”

Creating a strong image is also

Speakers at yesterday’s forum comprised entrepreneurs from Portugal, Italy, Japan, Taiwan, Singapore, Hong Kong and Macau. The forum targeted young entrepreneurs in order to keep in line with market developments, according to Echo Chan, executive director of the Macau Trade and Investment Promotion Institute. “As a matter of fact, many young entrepreneurs and small and medium-sized enterprises are joining the franchising business,” she said.

The MFE 2014 will run for three days, to July 6, at The Venetian. This is the sixth year of the event, which has attracted around 170 franchisors, chain operators and branded products from different fields such as retail, service, food and beverage from 14 different countries and cities.

Last year, MFE 2013 attracted 160 chain, franchise and licensing exhibitors from 15 countries or cities.

It recorded more than 17,000 visitors in its 3-day event, conducted from more than 200 exhibition booths, according to its official website.

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July 4, 2014

Macau

Capture Success boards M.V. Success Universe Sara Farr

sarafarr@macaubusinessdaily.com

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Airport passenger numbers up 10 pct Around 2.6 million travellers used Macau International Airport during the first half of the year. This summer, the number of flights to South Korea and Taiwan will be increased and is expected to grow in the second half of the year Alex Lee

alex.lee@macaubusinessdaily.com

T

he number of passengers using Macau International Airport increased by 10 percent year-on-year during the first half of 2014. The data was announced yesterday by CAM – Sociedade do Aeroporto Internacional de Macau, the management company of Macau International Airport.

As at June 30, MIA recorded over 2.6 million passenger movements, while by the same day of the previous year that number was 2.3 million.

The daily average passenger movement in the Special Administrative Region’s airport reached 14,500, totalling over 430,000 passengers per month. This is an increase of 9 percent compared to the same period of 2013, when it was roughly 13,195 per day and an average of 395,850 per month.

Aircraft movements recorded an increase during the first six months of the year. Compared to last year, there was an 8 percent increase at over 25,000 per month. In 2013, the number of aircraft departing and arriving at MIA was 24,000 a month between January and June. As for monthly movements, on average some 4,200 aircraft used MIA in 2014, an increase of 5 percent compared to the same period in 2013 (4,000).

in routes connecting Macau with mainland China, while South East Asian routes recorded a slower growth but remained on a positive trajectory.

For this summer, it was announced that airlines are preparing to offer more holiday destination options for travellers. According to CAM, in the first months of the second half of the year additional routes to Taiwan and South Korea will be offered.

Also, on June 18 the civil aviation authorities of Macau and the Philippines signed a new memorandum to increase the seating capacity for carriers flying the Macau-Manila route from 4,500 seats to 7,020, enabling greater flight frequencies.

In the charter flights segment, a route to Okinawa, in Japan, will be added. The company faces this choice as preparation ‘for future scheduled flight operations in Macau.’

Last year, MIA registered over 5 million passengers and over 48,000 aircraft movements. If the trend established in the first half of the year is maintained to the end of December around 5.2 million passengers will have used the Special Administrative Region’s airport.

Main routes keep on rolling During the first half of the year, the biggest passenger number increase was recorded with travellers going to or coming from Taiwan. There was a 25 percent growth on this route.

There was a 9 percent increase

14,500

daily average passenger movement

apture Success Ltd is to purchase Success Universe Ltd’s 55 percent interest in casino ship M.V. Macau Success for HK$93 million.

Success Universe announced the memorandum of acquisition in a filing with the Hong Kong Stock Exchange after trading hours Wednesday. Under this MOA, Capture Success will pay 10 percent of the purchasing price as a deposit upon signing the agreement, while the remaining HK$83.7 million ‘shall be paid upon completion of the MOA,’ the filing reads.

The cruise ship is expected to be delivered between July 15 and August 31.

The principal activity of Capture Success Ltd is cruise ship leasing, according to the filing.

Success Universe Group Ltd is a 49 percent investor in the Ponte 16 casino resort in the city’s Inner Harbour district. Capture Success Ltd is an indirect non-wholly owned subsidiary of Success Universe, of which the latter holds 55 percent of

its issued share capital.

M.V. Macau Success is a ninedeck cruise ship based in Hong Kong. The ship features a casino and a number of entertainment facilities, with more than 200 passenger rooms that can accommodate more than 660 passengers. The cruise operates daily from Hong Kong to international waters, and returns to Hong Kong the next day.

In 2012, M.V. Macau Success recorded a 16 percent rise in turnover, to HK$80.4 million.

Success Universe recorded a profit for last year on turnover that fell 3 percent. The company made a profit of approximately HK$12.25 million (US$1.53 million) for the year ended December 31, 2013 compared to a loss of nearly HK$37.98 million the previous year, according to the group’s annual report released at the end of March.

Turnover was about HK$1.58 billion, decreasing some 3 percent from the HK$1.63 billion of the year prior.

Amax extends Vanuatu casino purchase deal M

acau junket investor Amax Holdings Ltd has extended a deal to purchase major interests in a company to operate a gaming business in the Republic of Vanuatu, the company said in a filing with the Hong Kong Stock Exchange.

The company, linked to veteran local junket operator Ng Man Sun, ‘entered into a non-legally binding letter of intent’ to buy a 60 percent stake in a firm called Forenzia Ltd on March 18.

According to the filing, the proposed acquisition ‘is subject to further negotiation of its terms.’ The date, which once was March 31, 2014, has

now been extended until July 31, 2014.

Forenzia held ‘an interactive gaming licence from the Ministry of Finance and Economic Development of the Republic of Vanuatu for a term of 15 years to conduct interactive gaming business,’ according to a company filing in March. That same filing did not disclose the amount of the possible transaction.

In addition to the Pacific island off the east coast of Australia, Amax also revealed in previous filings last year that it plans to operate a casino in the Turkish Republic of Northern Cyprus in the Mediterranean.

S.F.

Corporate Mandarin Oriental welcomes Michelin-starred guest chef José Avillez of the Michelin-starred restaurant Belcanto in Lisbon, Portugal will be in Macau from July 25 to 28 as a guest chef at Vida Rica Restaurant in the Mandarin Oriental. José Avillez is renowned for haute cuisine that combines the traditional and avant-garde whilst maintaining authentic Portuguese flavours.

While here, chef Avillez will prepare a six-course degustation dinner featuring Port wine, three-way olives and foie gras crusted with roasted hazelnut, as well as his signature dishes. These include slow cooked golden free range chicken egg with mushroom and black truffle jus and Sao Jorge Island’s cheese sauce, sea bass cooked in fragrant seafood broth and seaweed, and a special ‘Mandarin’ dessert. A four and five-course lunch will also be available. Featured dishes include Portuguese shredded cod fish with fried potatoes, scrambled egg and tantalising olives, plus egg tart mille feuille with cinnamon ice cream.

To chef Avillez cooking is a passion. Early in 2011, he left Tavares and set out to establish his own gastronomic business, Belcanto, which opened at the beginning of 2012 and won him another Michelin star within a year of opening.

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July 4, 2014

Macau Brought to you by

Diminishing home transactions intensify agents’ trade Agencies are sizing up big lump-sum trades in shops, offices and overseas properties as local home stocks dry up

HOSPITALITY

Stephanie Lai

sw.lai@macaubusinessdaily.com

Steady guests By definition, same-day visitors come and go in the same day. That means they hardly make use of the city’s lodging facilities. Conversely, most overnight visitors to Macau stay in local hotels.

That is one of the reasons why so much effort is made to persuade visitors to extend their average stay. One should be aware, however, that some overnight visitors also fail to show up in hotel guest statistics. That is the case with many visitors from Hong Kong or the neighbouring areas in Guangdong province, who may stay overnight in casinos or other kinds of entertainment facility, only to return to their point of origin in the early hours of the morning. That may also be the case with transit passengers, and those who use nonconventional lodging facilities. Overnight visitors coming from farther way are more likely to check into hotels, and that will be the case for the vast majority of them.

A great proportion of overnight visitors from Japan, South Korea and India - three major sources outside the Greater China area indeed stay in hotels. The combined number of guests from those countries grew after the international crisis, but seems to have stabilised recently. Their combined total, in the last four full years, stood slightly above 2 million guests.

The figures for the first four months of the current year suggest this will be an average year.

This is primarily the result of two contradictory trends. Whilst the number of guests from South Korea has been rising steadily those from Japan declined in 2013, moving the country to second slot among the three countries, a trend that the first months of this year seems to confirm.

1,390

average number of South Korean guests staying at Macau hotels, January to April

W

hile facing intensified competition amongst peers for the limited number of properties available for sale in the city, estate agents here are relying more on the rental market and the sales of shops and offices, as well as expanding overseas property sales, Macau-based agency Greatest Properties Ltd revealed in an interview.

Compared to a year ago, the monthly home transactions in the city have registered a decline for the first half of this year, inviting more intense competition amongst the numerous property agencies here fighting to clinch a transaction, chief executive officer of local agency Greatest Properties Ming Yu told Business Daily.

“Last year, we still saw a monthly average of about 1,000 market-wide home transactions, but in recent months this figure has been much lower,” said Mr. Yu. “With the 5,000 or so licensed estate agents we have in the city now, basically an average of about 8 agents are competing for every deal, which has been intensifying competition in the sector.”

As at June 20, the Housing Bureau had issued a total of 5,151 property agent licenses, of which 4,539 are provisional, the latest official figures show.

Mr. Yu, who originally worked for Hong Kong-based Centaline Property Agency Ltd’s local branch when he first came to Macau in 2004, later established Greatest Properties with a local partner in 2009. Now there are 12 branches of Greatest Properties in the city with about 80 realtors, with the company looking to recruit at least ten more and open up one more branch in Zhuhai.

The fall in home transactions seen in the past year has been triggered by a set of property curbing measures implemented since October, 2012, in which the government ordered restrictions on mortgage lending for both residents and non-residents. In addition, it extended the application of the special stamp duty to shops, offices and car parks.

Meanwhile, the property agencies here are experiencing a reshuffle in the market as major Hong Kongbased agencies like Centaline expand their presence in Macau, starting last year. The traditional small-scale estate agencies have faced operational challenges since the government implemented its first-ever estate agent law in June last year, in which a set of qualification criteria were imposed on those wishing to practice the trade.

Nevertheless, Mr. Yu believes that medium-scale estate agencies

Greatest Properties Ltd’s CEO Ming Yu (Left) and COO Rosanna Kong

similar to his have been enjoying a satisfactory income in the past two years. Greatest Properties, for instance, has seen an average of 30 percent increase in its commission revenues in this period thanks to a boost from the rising proportion of sales of shops and offices.

43pct drop in Jan-May home transactions y-o-y “We still see a rise in our revenue despite the fall of home transactions [since the property curb measures were introduced],” Mr. Yu said. “Actually, the sales of shops and offices have occupied a rising proportion in the business of agencies here. And the value of shop sales for a deal is over tens of millions [of patacas] now.

The commissions derived from them are substantial; home sales cannot compare.”

Rental support The realtor added that the general commission rate that agencies are charging here now is one percent of the property transaction cost. Greatest Properties agents receive a starting commission rate of 25 percent per successful deal. Business Daily learned that the starting commission rate realtors who work for Hong Kongbased agencies can get from a successful

transaction is 10 to 15 percent.

Yu’s Greatest Properties, however, may have to scale down its earlier target of being able to generate 70 million patacas (US$8.8 million) in commissions income for this year, as the property transactions from the first six months this year have declined. His company earned 50 million patacas in income from commissions in 2013.

Altogether, some 3,647 home transactions were recorded for the first five months of this year, a fall of about 43 percent from the 6,353 transactions in the same period last year, Financial Services Bureau data shows. The average home price for the January-May period this year, however, was 102,173 patacas per square metre, a 20 percent jump compared to about 85,000 patacas per square metre a year ago.

“Now, many agents are competing to sell the same property in the local market; the number of home transactions cannot really increase the size of agencies working now.” said Mr. Yu. “The reason the sector can still survive is that the rental business occupies a huge proportion of the trade. And the official figure of the city having nearly 150,000 imported labour also means that there’ll be growing demand for homes that can further boost their business.”

Although more than half of the revenue that Greatest Properties earns is from the sale of second-hand homes in the city, the company said it was also seeking to source more overseas properties to keep up its trade.

“What we’d like to do now is to attract local buyers to home properties in Zhuhai, while also bringing Zhuhai buyers to the properties here,” Mr. Yu said. “For local buyers, we would focus on off-plan sales.”

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July 4, 2014

Macau

Property market: Through a glass darkly The level of transparency in Macau’s real estate market has been downgraded from medium to low by Jones Lang LaSalle. Information about property companies here is non-existent and Macau sits today in 71st place out of 102 countries worldwide. In 2010, Macau ranked 44th most transparent market in the world together with South Korea; four years later, it is deemed to be more opaque than Zambia, Colombia and the poorest regions of Russia Alex Lee

Alex.lee@macaubusinessdaily.com

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acau’s property market is getting more opaque as the years roll by because the real estate policies implemented here are not transparent and business-friendly enough to attract investors compared to improvements made by regional competitors like China and South East Asia in general, a Jones Lang LaSalle (JLL) report claimed this week.

A lack of or poorly detailed information about the market, companies and agents plus weak regulation are all factors that continue to penalise Macau in terms of transparency, despite the boom in Macau’s real estate, the prices of which almost double on an annual basis. Consequently, Macau is dropping heavily in the worldwide transparency rankings.

According to JLL’s Real Estate Transparency Index, Macau occupies 71st place, the lowest third in a ranking of 102 markets surveyed all over the world. The level of transparency in Macau for the property sector is now considered ‘low.’ In the Asia Pacific region, the territory only performed better than Myanmar and Mongolia, whose markets are adjudged ‘opaque.’

18

places Macau has dropped in 2014 transparency ranking

in Macau (the report also evaluates the regulatory and legal environment, transaction process, investment process and market fundamentals).

The governance level of the real estate firms here is among the worst in the world, with poor accounting standards and financial statements delivered without detail, published infrequently and most of the time simply nonexistent. Companies here also do not adhere to the best corporate governance practices and managers’ compensation is obscure.

JLL stated that since 2012 some 80 percent of the markets surveyed demonstrated improvements (Macau included). But Asia has been ‘unspectacular.’

For the first time, the region was unable to propel any country into the Global Top 10, despite the competition for the most transparent market in Asia intensifying, with Singapore moving ahead of Hong Kong, ‘where cooling measures have compromised transparency levels,’ says the report.

In 2014, the top most transparent real estate markets in the world were the United Kingdom, United States and Australia, with Myanmar, Senegal and Libya deemed the most opaque.

Falling to pieces Despite having a government sitting on the second highest surplus in the world (only behind Kuwait) and the 4th highest worldwide GDP per capita (beating Switzerland) or being considered by rating agencies as a safer place to invest in than Japan or France, the transparency of the real estate sector here is

now worse than in Zambia, the least developed regions of Russia, Vietnam or Colombia.

Categorised as a ‘semitransparent’ market since 2008, Jll relegated Macau to a ‘low-transparency’ zone in 2014, following its fall in the rankings over the last four years. On a score ranging from 0 (best) to 5

(worst) points, Macau scored 3.56. In 2010 (JLL’s index is published every two years) the real estate market here was considered 44th most transparent in the world, on a par with countries like South Korea or the most developed regions of mainland China.

In 2012, it dropped to 53rd position and this year lost

Transparency in Macau getting darker Real Estate Global Transparency Index (JLL) Year

Ranking

Score

Level of Transparency

2014

71

3.65

Low Transparency

2012

53

3.27

Semi transparent

2010

44

3.13

Semi transparent

Source: JLL

18 places to 71st. In 2008, Macau was one of the Top 20 improvers worldwide in terms of property market transparency.

“The transparency of the Macau property market has improved with new regulations like the agency and pre-sale scheme law launched in the last few years.

However, more cities have improved their real estate policies faster than Macau city,” Alvin Mak of JLL Macau told Business Daily.

Measures to regulate real estate agents’ activity or the prohibition of property companies selling flats or offices before the foundations are ready were examples of a push to improve the market in Macau. It has not been enough, however, compared to other locations like China, and most of South East Asia.

Bad practices Where Macau really underperforms is in the availability of information about property companies

The Transparency of the Macau property market has improved with new regulations like the agency and pre-sale scheme law launched in the last few years. However, more cities have improved their real estate policies faster than Macau city Alvin Mak, JLL Macau

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July 4, 2014

Gaming

Caesars’ debt negotiations complicated The United States casino operator’s net amount of outstanding contracts increased to US$2.14 billion by mid-June. Earlier this year, Caesars and Malaysia’s Genting were eyeing casino licences in New York

C

aesars Entertainment Corp’s ability to negotiate a debt exchange that keeps it out of bankruptcy is being complicated by a surge in credit-default swaps that would be profitable if the casino operator defaults.

The net amount of outstanding contracts on Caesars debt surged to US$2.14 billion (17.12 billion patacas) on June 13, the most since November 2008, according to Depository Trust & Clearing Corp. data compiled by Bloomberg.

Outstanding derivatives have climbed 50 percent from a year ago as prices on shorter-dated swaps surged, indicating traders are putting on more wagers that the company will fail within 12 months.

The derivatives, which can be used to hedge against losses or to speculate on creditworthiness, may be a sign that some bondholders are also buying contracts and may profit more from a default than avoiding one. Caesars, taken private in 2008

by Apollo Global Management LLC and TPG Capital for US$30.7 billion, has been clashing with its creditors in a saga that may presage a broader restructuring of its unsustainable debt load.

“It makes it harder for Caesars to coerce an exchange on their terms,” Chris Snow, an analyst at debt-research firm CreditSights Inc. in New York, said in a telephone interview. “You can be short the company through the CDS, and not be interested in a proactive restructuring of the debt that benefits the company.”

‘Held hostage’ Investors who want to protect Caesars debt from default for a year

Speculators who hold credit default swaps have incentives to make claims of default.

Those incentives are impediments to rational transactions Stephen Cohen, Caesars’ Teneo Holdings LLC spokesman

had to pay 32.8 percentage points upfront on June 25, compared with 5.75 percentage points in May, according to data compiled by CMA, which is owned by McGraw Hill Financial Inc. and compiles prices quoted by dealers in the privately negotiated market. That means it costs US$3.28 million initially to protect

US$10 million of debt for a year.

Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.

We won’t “be held hostage by speculators betting against the longterm health of the enterprise,” Stephen Cohen, a spokesman for Caesars at Teneo Holdings LLC in New York, said in an e-mail. “Speculators who hold credit default swaps have incentives to make claims of default. Those incentives are impediments to rational transactions. We have done dozens of deals with responsible creditors who want to see the company succeed.”

Public offering Caesars’ US$1.5 billion of 9 percent first-lien notes due 2020 traded at 84 cents on the dollar yesterday to yield 13.1 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Caesars sold in May a 5 percent stake in Caesars Entertainment Operating Co., its largest and mostindebted subsidiary, to outside investors for $6 million.

The company said that allowed it to remove a guarantee on about $14 billion of the operating unit’s debt, a move analysts said weakens creditors’ negotiating power in a restructuring because they no longer have a claim on the parent company’s assets. Caesars also transferred assets, including the Bally’s, Quad and Cromwell casinohotels in Las Vegas, to an affiliate.

Default notice Two separate creditor groups have objected to the company’s

actions, with one sending Caesars a notice of default on June 5. Those bondholders include David Tepper’s Appaloosa Management LP, Oaktree Capital Group LLC and Canyon Capital Advisors LLC, a person with knowledge of the default notice who was not authorized to speak publicly said last month.

A first-lien group of creditors has also sent a letter alleging improper transfer of assets, according to an April 4 regulatory filing. That set is represented by Kramer Levin Naftalis & Frankel LLP, according to another person with knowledge of the matter, who asked not to be identified, citing lack of authorization to speak publicly.

Phillipa Yule, a spokeswoman for Kramer Levin, declined to comment.

Caesars completed an initial public offering in 2010, raising $16.3 million that gave the company a market value of $1.13 billion.

The company, which reported a widening US$386.4 million loss for the three months through March, has been grappling with its debt load with U.S. consumers restraining discretionary spending since its buyout.

The International Swaps and Derivatives Association, a group of banks and investors that governs the CDS market, hasn’t been called on to rule on a potential credit event.

“Caesars is thinking it is coming from a position of strength because there’s no parent guarantee anymore,” Alex Bumazhny, an analyst at Fitch Ratings, said in a telephone interview.

“But some of the creditors I would guess are less fearful of a bankruptcy situation.”

Bloomberg

9

July 4, 2014

Greater China

Services sector booms Government data on the services sector released earlier in the day also point to continued strong expansion

Nanjing Road in Shanghai. One of the busiest commercial spots in China

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ctivity in China’s services sector expanded at its fastest pace in 15 months in June, a private survey showed yesterday, reinforcing signs that the broader economy is stabilising.

The services purchasing managers’ index (PMI) compiled by HSBC/Markit rebounded to 53.1 in June from 50.7 in May, well above the 50-point level that demarcates expansion in activity from contraction.

“The expansion in the service sector reinforces the recovery seen in the manufacturing sector, and signalled a broad-based improvement over the month,” said Qu Hongbin, chief economist for China at HSBC.

The expansion in the service sector reinforces the recovery seen in the manufacturing sector, and signalled a broad-based improvement over the month Qu Hongbin, chief economist for China at HSBC

“We think the economy is slowly turning around, and expect the recovery to remain supported by accommodative policies on both the fiscal and monetary fronts over the coming months,” he added.

In a sign that the domestic economy is regaining some internal strength, a sub-index measuring new business jumped to 53.8 in June, the strongest expansion since January 2013.

Government data on the services sector released earlier in the day also pointed to continued strong expansion, though the pace of growth dipped slightly to 55 for June from 55.5 in May. The findings follow upbeat readings from similar factory activity surveys earlier in the week which offered signs

that the world’s secondlargest economy is steadying as a flurry of government stimulus measures start to kick in.

Beijing has stepped up policy support in recent months to give a lift to economic growth, which dipped to a 18-month low in the first quarter.

Such measures include targeted reserve requirement cuts for some banks, quicker fiscal disbursements and hastening construction of railways and public housing projects.

“We should especially note the evident rebound in services businesses related to manufacturing activities,” Cai Jin, a vice president at the China Federation of Logistics and Purchasing -which

compiles the official PMIsaid in a statement on the agency’s official microblog Weibo account.

“New orders from commodity retailers showed a big rebound, indicating that the stabilising growth momentum in the factory sector is filtering into the services industry.”

Yesterday’s HSBC/ Markit survey showed firms in the services sector were generally optimistic about the 12-month business outlook. A sub-index gauging their sentiment picked up slightly in June from May’s 11-month low, though the reading remained weak in the context of historical data.

Stronger orders and the improving business outlook prompted services firms to hire more workers last month, as indicated by the employment sub-index, which rose to a three-month high.

Official data also showed companies remained confident, despite a slowdown in new order growth.

The services sector, which accounted for 45 percent of China’s gross domestic product in 2012 and roughly half of all jobs in the country, is expected to post steady growth in coming years as the economy matures.

However, some economists warn the economic recovery still appears patchy, with a cooling property market, sluggish exports and high local government debt levels remaining as key risks.

Reuters

Special pollution tribunal created The tribunal will hear cases involving air, water and land pollution and the protection of mineral and natural resources such as forests and rivers

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hina’s Supreme Court has set up a special tribunal to deal with environmental cases, it said yesterday as Beijing pushes a green agenda with public discontent over pollution rising.

Three decades of rapid and unfettered industrial expansion have taken a heavy toll on the county’s environment, and Communist leaders have been concerned by an increasing number of angry protests over the issue.

Recent studies have shown that roughly two-thirds of China’s soil is estimated to be polluted, and that 60 percent of underground water is too contaminated to drink. Meanwhile residents of cities such as Beijing and Shanghai are regularly confronted with hazardous smog levels.

Premier Li Keqiang announced in March that Beijing was “declaring war” against pollution, and a series of measures have been announced, but questions remain over enforcement.

The tribunal -which will have

Polluted zone on Yangtze river banks

60 pct underground water too contaminated to drink local equivalents- will hear cases involving air, water and land pollution and the protection of mineral and natural resources such as forests and rivers, Sun Jungong, spokesman of the Supreme People’s Court, said at a briefing.

Its establishment “will have positive and profound impact on... protecting the people’s environment rights and interests... preventing further deterioration of the environment and improving China’s international image concerning environment protection,” he told reporters.

The move followed an April

amendment to China’s environmental protection law -the first in 25 yearsimposing tougher penalties and pledging that violators will be “named and shamed”.

But holding polluters legally accountable has proved difficult in a country where local governments are often focused on driving growth.

“There are indeed some problems

in the acceptance, trial and enforcing of (environment) cases,” Zheng Xuelin, chief of the environment tribunal of the Supreme Court, told reporters.

Fewer than 30,000 environment cases a year were accepted by Chinese courts from 2011 to 2013, said Zheng, out of an average 11 million total cases annually.

AFP

10

July 4, 2014

Greater China Maersk saw it’s merger options reduced after Ministry of Commerce denial

China, ROK trade volume up 2.8 pct Trade between China and the Republic of Korea (ROK) amounted to 709.65 billion yuan (US$115.24 billion) in the first five months of 2014, up 2.8 percent from the same period last year, customs data showed yesterday. In the January-May period, exports to the ROK rose 6.6 percent from a year ago to 250.99 billion yuan, while imports edged up 0.8 percent to 458.66 billion yuan, according to the General Administration of Customs (GAC).

The trade deficit between the two countries retreated 5.4 percent year on year to 207.67 billion yuan.

IPO market may bottom out in H2 2014 Chinese Initial Public Offering (IPO) volume and value may see a considerable rise later this year after lacklustre performance in the first six months, according to a report released by PricewaterhouseCoopers (PwC).

PwC expected around 100 companies to be listed in the second half of 2014, which would raise 70 to 120 billion yuan (US$11 to US$19 billion).

The Shanghai Main Board will attract about 20 listings while the Shenzhen SME Board could host nearly 80 IPOs, PwC said yesterday.

Second biggest hydro plant completed China’s Xiluodu hydropower station, the country’s second largest in terms of capacity, went into full operation this week after its 18th and final generating unit was completed, the project operator said in a notice on Wednesday. The Xiluodu facility, built by the state-owned China Three Gorges Project Corporation (CTGPC) on the upstream segment of the Yangtze river in the southwestern Chinese provinces of Yunnan and Sichuan, has a total generating capacity of 13.86 gigawatts (GW), second only to the Three Gorges Project itself. CTGPC said the project would produce an average of 57 billion kilowatt-hours per year.

PBOC does 10 bln yuan repos China’s central bank will drain 10 billion yuan (US$1.61 billion) from the money markets through 28-day bond repurchase agreements on Thursday, traders said, meaning it will inject a net 55 billion yuan into the market this week. The People’s Bank of China (PBOC) conducted a net injection of 12 billion yuan into the market last week.

Premier Li says downward pressure still exists China’s Premier said downward pressure still existed despite operating within a reasonable range and some leading indicators demonstrating a positive trend. China’s factory activity hit multi-month highs in June, official and private surveys showed on Monday, reinforcing signs that the world’s second-largest economy is steadying as the government steps up policy support. Li gave no figures or details and few direct quotes in the comments on the Chinese government’s official website, but also addressed the disconnection between government finances and the difficulty of business getting financing.

Golden age for antitrust lawyers With global M&A volumes reaching US$1.75 trillion in the six months to June lawyers who can help companies steer a deal past China’s anti-trust regime have become hot property

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hina’s increasing regulatory influence over international mergers and acquisitions has helped to create the hottest new commodity in its legal industry: antitrust lawyers.

Six years ago, China did not even have a legal system for regulating the impact of M&A on competition.

Today, it’s Ministry of Commerce biggest wildcard for dealmakers trying to get a major cross-border deal past anti-trust regulators.

The ministry’s decision last month

to reject Danish shipping group A.P. Moller-Maersk’s planned alliance with Swiss and French rivals came as a “big surprise” to Maersk Chief Executive Nils Smedegaard Anderson, whose team had been in close contact with the regulator until days earlier.

That rejection, on grounds that it was not in the interest of Chinese consumers, was the first time the regulator had blocked a tie-up that involved no company from China.

With global M&A volumes reaching US$1.75 trillion in the six months to

June, 75 percent higher than a year ago according to Thomson Reuters data, lawyers who can help companies steer a deal past China’s anti-trust regime have become hot property.

International law firms such as Linklaters and Mayer Brown JSM have recently bolstered their teams, while Norton Rose Fulbright and King & Wood Mallesons say they are looking to expand their China competition practices.

“From last year, I really feel like spring has come,” said Zhaofeng

Potential fraud at petrochemicals The Tianjin case appears much smaller, but illustrates the breadth

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hinese petrochemical imports have become the latest commodity financing tool to come under investigation for possible fraud, highlighting the risks from the widespread use of raw materials as collateral to raise loans and skirt credit restrictions.

Commodity financing deals in China, which Goldman Sachs has estimated to be worth as much as US$160 billion, have come under close scrutiny after an alleged metal financing fraud at Qingdao Port, a huge trading hub in eastern China.

Now police in northern China are investigating another suspected fraud at Tianjin Port near Beijing, police and trade sources said, involving “mixed aromatics”, a refinery product commonly used for blending petrol.

The use of commodities, from traditional copper sheets to perishables such as soybeans and rubber, to raise finance has been increasingly popular in recent years as Chinese policymakers have sought to tamp down rapid credit growth.

That has added to the build-up of credit in the so-called shadow banking system - trillions of dollars in nonbank lending that is seen by analysts as one of the key risks to China’s economy - and also increased the potential for fraud.

In Qingdao, China’s third-largest port, police are investigating whether a private metals trader, Decheng Mining, had duplicated warehouse receipts so that a cargo of metal could be used multiple times to obtain financing.

US$160 billion

Commodity financing deals in China

The concerns raised by that investigation have forced banks and trading houses to consider new controls in the country’s massive commodity financing business, which traders say could lead to the drying up of credit for all but large firms and state-owned companies.

Mixed aromatics The Tianjin case appears much smaller, but illustrates the breadth of the use of industrial materials in financing.

A local unit of state-run PetroChina’s trading arm Chinaoil, paid more than 40 million yuan (US$6.45 million) for about 4,000 tonnes of mixed aromatics stored at a tank in the city, according to a Chinaoil source and another trader who frequently does business with the firm.

But when Chinaoil, which is not

suspected of any wrongdoing, went to take delivery of the cargo around midMay it found it had been impounded by the authorities.

The case, involving a private Chinese fuel company and a trader

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July 4, 2014

Greater China

It is a turning point.

It will afford more growth opportunities for domestic consumption and the service sector Chen Zhiwu, finance professor, Yale University

Zhou, counsel at Taylor Wessing in Beijing. “At the beginning, headhunters wouldn’t call you because there were too few jobs, but now they call you all the time.”

While recruitment of competition

lawyers has been growing since China introduced anti-trust law in 2008, head-hunters say there has been a sharp uptick in the past year, even for foreign law firms that are shrinking in other practice areas.

Janet Chan, manager of the legal division at recruiter Michael Page, said she had seen a 20 percent increase in demand for anti-trust attorneys over the past 12 to 18 months.

The Maersk decision is set to raise that demand further since the alliance had been approved by U.S. and European regulators. China’s contrary ruling made “people pay attention”, said John Hickin, antitrust partner at Mayer Brown JSM in Hong Kong.

A string of large cross-border deals are expected to need approval from the Ministry of Commerce, known as MOFCOM, which is typically required when the combined companies’ annual sales in China exceed 400 million yuan (US$64.4 million).

These include U.S. conglomerate General Electric’s US$16.9 billion bid for the energy business of French engineer Alstom, a deal that has already been revised to deal with the French government’s concerns over jobs.

U.S. medical device maker Medtronic Inc’s US$43 billion purchase of Dublin-based rival Covidien Plc will need MOFCOM approval at a time when Beijing is focused on trying to bring down costs in its domestic healthcare sector.

Aside from M&A, joint ventures in China may also need MOFCOM approval. They have also soared with the estimated value of alliances formed in China up 277 percent in 2013 from 2012, according to Thomson Reuters data.

Reuters

in Tianjin of the use of industrial materials in financing Probed Tianjin port

Taxes to spark electricity price rise There will be a new market-oriented pricing mechanism in which the prices for coal and electricity will move in tandem

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he prices for coal, electricity and other resources in China are expected to rise as a result of the upcoming reform of the resource tax, the finance ministry’s head researcher yesterday.

“Despite controversies and difficulties, the reform of the resource tax has been put on this year’s work agenda. Let’s wait and see,” Jia Kang, head of the Research Institute for Fiscal Science of the Ministry of Finance (MOF), wrote in an article published in the Shanghai Securities News.

The expert took coal as an example.

According to the new taxation rules, the resource tax on coal, which Jia presumed would be around 5 percent of the coal sales value, would replace the current tax based on output volumes.

This might increase the tax on each ton of coal to the tens of yuan, nearly ten times higher than the current tax, Jia said.

As for complaints from coal companies that they may not be able to cope with the higher tax, leading to industry-wide losses, Jia said the added taxes would not solely fall on companies, but be distributed along the whole industrial chain.

There will be a new market-oriented pricing mechanism in which the prices for coal and electricity will move in tandem, he said.

Companies and ordinary people are not happy with the smog, but whenever

Despite controversies and difficulties, the reform of the resource tax has been put on this year’s work agenda Jia Kang, head of the Research Institute for Fiscal Science of the Ministry of Finance

they hear that resource prices will rise as a result of policies to tackle the problem, they find it unacceptable, he said.

It is not only the task of the government to reduce energy consumption and smog, but companies and ordinary people must also share the responsibility, he added.

The expert also said the government, when pushing forward resource tax reform, should take into consideration the ability of companies to bear the extra burden, and increase subsistence allowances accordingly for low-income residents.

Xinhua

Central bank official highlights HK dependency Beijing has recently accelerated the pace to expand its currency’s footprint beyond Hong Kong and Asia by setting up new yuan clearing banks in Europe

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suspected of contract fraud, is now under police investigation, according to two police sources and traders.

“Chinaoil went to the police after realizing that the 4,000 tonnes bought could not be delivered,”

said the Chinaoil source, which has direct knowledge of the case.

Chinaoil officials and a PetroChina spokesman did not respond to calls or text messages seeking comment.

Reuters

ong Kong’s offshore yuan business is an “ever-growing slice of cake”, but if it doesn’t want to eat it, that’s its own problem, a People’s Bank of China official said, when asked about a protest movement calling for democracy in the territory and threatening to disrupt its financial district.

The city accounts for 53 percent of global offshore yuan business, but if Hong Kong “does not want to eat it”, it’s the city’s own business, said Guo Jianwei, deputy director-general at the monetary policy department of China’s central bank.

He added that his comments to finance journal Caixin and other media in Beijing were in response to a question about the impact of Occupy Central, a group that organised an unofficial referendum on democracy in Hong Kong. Guo confirmed his comments to Reuters yesterday.

The movement has threatened to lock down the Central business district of Hong Kong, home to some of Asia’s biggest companies and banks, as part of its campaign to demand greater democracy in elections for the city’s leader in 2017.

Other market watchers said Hong Kong’s role as the dominant offshore

yuan centre cannot be replaced as China must rely on it to test pilot programmes to open up the domestic market to foreign investors.

“Hong Kong remains the first choice when China tests more relaxation of cross-border fund flows under the capital account given risk is controllable here,” said Ngan Kim Man, head of RMB business strategy and planning at Hang Seng Bank.

China will balance risks and rewards when it reforms its financial market, and Hong Kong is a good springboard for China to expand its pilot schemes worldwide, Ngan added.

Beijing has recently accelerated the pace to expand its currency’s footprint beyond Hong Kong and Asia by setting up new yuan clearing banks in Europe.

Reuters

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July 4, 2014

Asia Samsung Display to build Vietnam plant A subsidiary of South Korea’s Samsung Electronics Co Ltd said yesterday it received approval to build a US$1 billion display module assembly plant in Vietnam, its first production facility in the country. A Samsung Display Co Ltd spokesman said the company plans to start production at the plant, to be built in Bac Ninh province, some time in 2015.

Exact production capacity or types of displays to be handled at the facility have yet to be decided, he said.

Australian new vehicle sales bounce Sales of new vehicles in Australia rebounded strongly in June as demand for sports utilities remained red hot, a potential sign that consumer demand improved after a soft patch in May. The Australian Federal Chamber of Automotive Industries’ VFACTS report showed sales of 118,309 - up 25.2 percent on May. June is typically a strong month as dealers cut prices for the end of the Australian financial year, but even after adjusting for those seasonal factors sales were still up a healthy 7.3 percent.

Aquino permits San Miguel appeal

Philippine President Benigno Aquino has unexpectedly granted San Miguel Corp 30 days to appeal against its disqualification from bidding for a major road project, throwing the government’s tender policy into disarray. The conglomerate was barred last month from bidding for the Philippines’ biggest public-private partnership deal to date - one worth an estimated 35.4 billion pesos (US$811 million) - by a special committee of the Public Works department, which cited discrepancies in documents related to funding for the project. In an order dated June 30 and seen by Reuters, the presidential palace granted San Miguel’s request for a review of its case.

Australia believes G20 not willing to improve environment Australia, this year’s G20 chair, sees little consensus among the Group of 20 leading economies to take major new steps on climate change, senior official Heather Smith said on Wednesday. Smith, the personal representative or G20 sherpa of Australian Prime Minister Tony Abbott, is helping shape the agenda for November’s G20 summit in Brisbane, and spoke of the importance of finding agreement across the group.

Consumer survey shows Thai economy’s improving trend The consumer confidence index of the University of the Thai Chamber of Commerce rose to 75.1 in June, from 70.7 in May

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university’s index of consumer confidence in Thailand jumped in June, pointing to a possible improvement in domestic demand after the army took power and promised to revitalise a stumbling economy.

The consumer confidence index of the University of the Thai Chamber of Commerce rose to 75.1 in June, from 70.7 in May. The latest reading is the highest since October. Through April, the index fell 13 straight months, and from November, political tensions were a major factor in the steady decline, as protests and unrest hurt tourism and demand.

The June survey is the first that covers a full month following the May 22 coup the military said was necessary to restore order and get the economy moving. The previous survey - which showed the index rising to 70.7 from 67.8 - was conducted right after the coup.

“The confidence index clearly improved in June as the political situation was more stable and people believed the military government’s measures would help revive the

A street food seller pushes her cart into position, Bangkok

Indian services growth hits 17-month high A similar business survey on Tuesday showed Indian manufacturing activity grew at its fastest pace for four months in June

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ctivity in India’s services sector grew at its fastest pace in well over a year in June as new business poured in, adding to signs of a pick-up in the economy even as inflation remains high, a survey showed yesterday.

The HSBC Services Purchasing Managers’ Index, compiled by Markit, jumped to a 17-month high of 54.4 in June from 50.2 in May. That was the biggest one-month rise in the index in four years. Before May, the services PMI had been stuck below 50, which divides growth from contraction, for almost a year.

The data supports growing optimism among Indian firms that the new government led by Prime Minister Narendra Modi will push through reforms after years of policy paralysis.

India’s benchmark BSE Sensex equity index has been hitting record highs on hopes that those reforms will be psuhed through by the majority government, India’s first in three decades.

“After months of subdued activity, the Modi wave has struck the service

An Indian vendor arranges vegetables at a market in Mumbai

sector and lifted growth to a 17-month high,” said Frederic Neumann, cohead of Asian Economic Research at HSBC. “New business flows and stronger business sentiment supported the rise.

As we move along, faster reforms due to political stability should fuel the momentum.”

The new orders sub-index jumped to 54.3 in June, the highest since February last year.

The PMI data also showed input

prices rose at the fastest pace in five months, but firms passed only a small portion of those costs to consumers.

“Be sure to expect bumps along the way, as tensions in the Middle East and the absence of monsoon clouds play spoil sport,” Neumann added.

The RBI has hiked rates three times since Raghuram Rajan took over as governor last September to tackle high inflation, even as economic growth slowed to decade-lows.

Reuters

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July 4, 2014

Asia KEY POINTS University’s index at highest level since October Military govt’s moves are reviving confidence Spending in provinces still weak, economic problems remain

economy,” Thanavath Phonvichai, an economics professor at the university told a briefing. “People are happy, so we believe spending on expensive goods such as cars and houses will return,” he said.

Thanavath said that next year, “if there is not any problem, consumer confidence is expected to rise.”

Southeast Asia’s second-largest economy shrank 2.1 percent in January-March from the previous three months. Exports, which account for more than half of the Thai economy, have long been weak.

Some economists say growth won’t pick up significantly until exports do.

Economic malaise Government economic data for June, other than for inflation, hasn’t been reported yet. May data remained weak. Exports were 2.14 percent lower than a year earlier, according to

the Commerce Ministry, and factory output - down for 14 straight months - declined 4.1 percent.

Analysts believe the military’s intervention may have put a floor under the country’s deteriorating conditions and shored up consumer confidence by defusing the threat of an escalation in political violence, but mending its deep-rooted political and economic malaise will take time.

The Bank of Thailand (BOT) recently slashed its 2014 economic growth forecast by nearly half to 1.5 percent, but it predicted growth of more than 1 percent in April-June from the previous three months, meaning there would not be a technical recession.

For next year, the central bank raised its growth estimate to 5.5 percent because political tensions have eased and there is a functioning government. In 2013, Thailand’s economy expanded 2.9 percent.

In line with the university survey’s finding, some Bangkok residents say are more optimistic about the economy.

“Sales are quite good,” said Jintana Saetiew, a 52-year-old street vendor who sells beverages. “I’m selling 20-30 percent more, compared with during the unrest. I hope things will get better and better.”

The junta quickly paid about 92 billion baht (US$2.8 billion) owned to hundreds of thousands of farmers under a controversial rice-buying scheme. It has outlined economic measures such as price caps on fuel and loan guarantee to help small firms to help get the economy going.

Reuters

N. Zealand pushes multinationals global tax plan The BEPS Action Plan would be presented to finance ministers at a meeting of the G20 in September

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he New Zealand government will be pushing for international efforts to fight tax avoidance by large multinational companies after the OECD (Organization for Economic Co-operation and Development) group of developed nations made the first moves to close down loopholes last week, Revenue Minister Todd McClay said yesterday.

The seven recommendations from the OECD’s Committee of Fiscal Affairs showed global commitment to a solution to stop base erosion and profit shifting (BEPS), the practice of multinational firms of reporting overseas incomes in low tax jurisdictions, McClay said in a statement.

The BEPS Action Plan was on track for delivering the first seven recommendations this year, he said.

“There is no simple solution to BEPS. The problem is that current international tax rules cannot effectively deal with highly mobile multinational operations working across different jurisdictions, so BEPS is only going to be solved through international cooperation,” said McClay.

“New Zealand’s domestic tax laws are very strong in this area and include thin capitalization rules, taxation of passive income of controlled foreign companies and a series of anti-arbitrage rules. These rules help to limit the ability of companies to shelter income.”

New Zealand would also be attending the G20 summit in Brisbane later this year where it would be involved with discussions around the tax implications of BEPS and “the rapidly digitizing world economy,” he said.

“Our representatives at the OECD and G20 will continue to be deeply involved because New Zealand is committed to developing and being part of a strong global response,” McClay said.

The announcement came the same day it was reported that Google Inc., which made US$15.42 billion globally in the quarter ending March, reported an after-tax loss of more than NZ$60,000 (US$52,599) in New Zealand last year on revenues of NZ$10.13 million (US$8.88 million).

Xinhua

RBA rebalancing overvalues Australian dollar Stevens emphasised that the bank had not given any thought to when it might raise rates, while policy was very accommodative

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ustralia’s economic rebalancing away from the mining boom is still in its early stages, a top central banker said yesterday, while cautioning investors they were underestimating the risk of sharp fall in the local dollar.

The warning on the currency from Reserve Bank of Australia (RBA) Governor Glenn Stevens had the desired impact - knocking the local dollar down half a U.S. cent to US$0.9380.

Investors also took Stevens’s comments as reinforcing the outlook for rates staying at record lows, and perhaps even nudging open the door for another cut if needed.

“The Governor has delivered his clearest statement yet that superlow interest rates are likely to be part of the economic landscape over the medium term,” said Savanth Sebastian, an economist at CommSec. Markets now put the chance of a cut in the 2.5 percent cash rate by year end at around 50-50, a shift that was encouraged by a disappointing reading on retail sales.

The Australian Bureau of Statistics reported sales fell 0.5 percent in May, the biggest drop in a year and confounding forecasts of a

The Governor has delivered his clearest statement yet that super-low interest rates are likely to be part of the economic landscape over the medium term Savanth Sebastian, economist at CommSec

Reserve Bank of Australia headquarters

steady outcome.

Speaking in Hobart, Stevens noted encouraging signs that low rates were working to support consumer demand, home building, employment and non-mining investment.

“But these signs remain early ones,” said Stevens.

“There is quite some way to go yet before the episode is completed.”

The central bank has already gone almost 11 months without changing rates and continues to predict

that the outlook is for more stability ahead.

Stevens emphasised that the bank had not given any thought to when it might raise rates and that while policy was very accommodative, it still had “ammunition” on rates given they were still well above zero.

Overvalued by any measure One reason for the caution was the historically high level of the Australian dollar, which Stevens said was “overvalued” given falls in prices for the country’s major commodity exports.

“We think that investors are underestimating the likelihood of a significant fall in the Australian dollar at some point,” said Stevens, while also claiming that the bank was not actively trying to talk the currency lower.

The strong currency has been a thorn in the side of trade-exposed industries for months, forcing cost cutting and job shedding in some sectors.

On the brighter side, Stevens played down the impact of the Liberal-National government’s unpopular May budget, arguing it was unlikely to have a material affect on the economy for the next year or so.

Reuters

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July 4, 2014

International UK service sector grows in June Britain’s services industry expanded steadily in June, a business survey showed yesterday, suggesting the economy grew robustly throughout the first half of 2014 and possibly pointing to an interest rate hike within the year. The Markit/CIPS services purchasing managers’ index (PMI) came in at 57.7 in June, down from 58.6 in May and marking a threemonth low but holding far above the 50 line denoting growth. The headline figure was below a consensus forecast of 58.3 in a Reuters survey. Business expectations in the sector were at a seven-month low.

GDF Suez signs power and water deal French utility GDF Suez said it signed a 25-year water and power contract with the Abu Dhabi Water and Electricity Company as it seeks to capitalise on growing demand in the region. The Mirfa project will be built at a cost of about US$1.5 billion and will involve the acquisition of certain water and power facilities, the development, design, engineering and construction of new power and water facilities, and the operation of the plant, GDF Suez said.

GDF Suez has five power and water plants in operation in the UAE.

South Africa’s PMI dips South Africa’s private sector contracted slightly in June, a survey showed yesterday, reflecting the impact of a protracted strike in the mining sector. The HSBC Purchasing Managers’ Index (PMI) edged down to 49.5 in June from 49.7 in May, pointing to a further deterioration in operating conditions for local firms.

The index has now come in below 50 for three consecutive months and averaged 49.5 in the second quarter of 2014. South Africa’s economy shrank in the first three months of the year after a 20-week platinum strike.

Swedish crown rate cut The Swedish National Bank cut its reference lending rate by half a percentage point to 0.25 percent yesterday to counteract inflation that remains weak despite an improving economy. “Inflation is lower than expected and it is now assessed that underlying inflationary pressures are clearly lower than assessed in April,” the bank said in a statement. The “repo” rate is now at a historic low point first reached in July 2009, during the global economic crisis. Economists had expected a smaller cut, from the former level of 0.75 percent to 0.50 percent.

Venezuela postpones airfare exchange rate adjustment Authorities have postponed an exchange rate adjustment for airfares that was supposed to take place July 1, an official said. According to Humberto Figuera, president of the Airlines Association of Venezuela, the government notified the International Air Transport Association that it won’t be adjusting fares to keep with its national currency exchange system, known as SICAD II, in which a U.S. dollar is currently exchanged at around 50 bolivars. Since the beginning of the year, international airlines ticket sales have been calculated at an average rate resulting from a weekly auction.

High immigration in Chile eases jobs market The number of people obtaining temporary or permanent residency visas rose to 158,128 in 2013

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mmigration into Chile leaped 24 percent last year as Latin America’s wealthiest country attracted workers from countries such as Peru, Colombia and Spain, easing pressure on wages as the jobless rate fell.

The number of people obtaining temporary or permanent residency visas rose to 158,128 in 2013 from 127,362 the year before, according to a report by the Immigration Department.

Peruvians accounted for 57,818 of the new arrivals, while Colombians represented 30,137 and Spaniards 5,739, almost double the year before.

The influx of foreigners accounted for much of the 183,240 increase in the workforce last year, helping to keep wage growth to 5.5 percent over the 12 months, said Hermann Gonzalez, an economist in the local unit of Spain’s Banco Bilbao Vizcaya Argentaria SA. “Immigration contributed to economic growth until last year, when there was a high demand for workers,” Gonzalez said by phone yesterday. “They helped stop wage increases, which could have been higher without them.”

The annual inflation rate fell to a low of 0.9 percent in May of last year, even after the economy expanded 4.9 percent in the first quarter from the year earlier. Inflation accelerated to 4.7 percent in May as the central bank cut interest rates and the peso weakened.

Jobless threat With economic growth now slowing, immigration may feed into rising unemployment, especially in the construction and retail industries, Gonzalez said.

Unemployment fell to a low of 5.7 percent in the second half of last year from 9.7 percent at the end of 2009, before climbing to 6.3 percent in the three months through May. The jobless rate rose as economic growth slowed to 2.6 percent in the first quarter.

Central bank President Rodrigo Vergara said on June 4 that even if there is no significant deterioration in the labour market yet, unemployment is likely to rise in the next few quarters.

While immigration has been dominated by Peru in the past decade, Bolivians and Colombians are now playing a larger role. Chile is also attracting more people from the developed world, such as the

Immigration contributed to economic growth until last year, when there was a high demand for workers Hermann Gonzalez economist at BBVA

U.S., with 3,756 people last year, and Spain.

The exact impact on the workforce is hard to gauge, as there are no figures in the report on how many of the immigrants are dependents. Students are not a significant share, according to the report.

Wealth appeal Chile is attracting immigrants after becoming Latin America’s wealthiest nation, with an income per capita, based on purchasing power parity, of US$19,887, according to the International Monetary Fund. That compares with US$11,735 in Peru and US$11,730 in Colombia.

The Latin American nation is also attracting immigration from southern Europe, which has been mired in economic recession.

The jump in immigration comes as Chile’s population growth slows, compared with its Latin American neighbours. The country had a birth rate per 1,000 people of 14.1 in 2012, according to the World Health Organization, compared with 20 in Peru, 19.1 in Colombia and 16.9 in Argentina.

Bloomberg News

Eurozone business growth slows The headline PMI for the euro zone’s service industry fell to 52.8 from 53.2, also in line with an earlier flash reading and above the 50 mark that signifies growth

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usiness expanded at the slowest rate in six months in June, a survey showed yesterday, but new orders poured in at the fastest pace in over three years, suggesting growth will accelerate in the second half of the year.

Activity in France, the bloc’s secondbiggest economy, shrank at the fastest rate in four months and even in Germany, the backbone of the common currency area, the pace of growth eased.

Markit’s Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the region and seen as a good indicator of growth, was in line with

a preliminary reading of 52.8, down from May’s 53.5.

The headline PMI for the euro zone’s service industry fell to 52.8 from 53.2, also in line with an earlier flash reading and above the 50 mark that signifies growth.

“At first glance, June’s PMI survey results make grim reading and raise worries that the euro area’s recovery is already fading,” said Chris Williamson, chief economist at Markit.

“Dig a little deeper, however, and there are grounds for optimism. With new orders rising at the fastest rate for three years, the pace of economic growth should also pick up again as we

move into the second half of the year.”

A composite sub-index covering new orders jumped to 53.1 from 52.6, its highest reading since May 2011. But some of that business was generated by firms cutting prices again.

A PMI measuring output prices in the service industry was below the break-even level for the 31st month, coming in at 49.2 although that was the highest reading since March 2012.

The data will be disappointing reading for the European Central Bank’s Governing Council members, who are expected to have made no change to monetary policy.

Reuters

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July 4, 2014

Opinion Business

wires

Piketty with Chinese characteristics

Leading reports from Asia’s best business newspapers

PHILSTAR Sixty international brands plan to enter the Philippine market given the country’s strong economic growth and growing population, the Philippine Franchise Association (PFA) said. In a press conference yesterday, PFA chairman emeritus Samie Lim said 60 international brands are interested to find local firms that they could partner with to serve as holders of their master franchise here. The international brands want to enter the Philippine market as they see opportunities here. “Why are they coming here? We have a 100 million population and the population is young.

Andrew Sheng Xiao Geng

UNEP Advisory Council on Sustainable Finance Director of Research at the Fung Global Institute

Xi’an is an example of dramatic growth speed in China

VIETNAM NEWS Bio-fuel will be sold in all cities and provinces of Viet Nam next year, though it has been difficult meeting the government’s schedule, said a Ministry of Industry and Trade (MoIT) official.

During an online dialogue on promoting consumption and the use of bio-fuel E5, Deputy Minister of Industry and Trade Cao Quoc Hung said large petrol dealers, including Petrolimex and PVOil, have prepared facilities for selling 5 per cent bio-ethanol (E5) fuel in seven provinces and cities beginning in 2014.

THE STRAITS TIMES Companies from Singapore are making inroads into China’s northeast province of Liaoning, according to trade promotion agency International Enterprise (IE) Singapore. The agency has helped four Singapore firms - Ascott Residence Trust, Crestar Education Group, MapleTree and Q&M Dental Group - to expand their presence in the province, it said in a statement yesterday.

IE Singapore noted that as China steers its economic growth model towards greater domestic consumption, there has been a progressive shift in Liaoning’s economic landscape to focus more on the services sector.

THE KOREA HERALD The largest-ever Chinese business delegation, composed of more than 200 Chinese CEOs, will visit Korea yesterday with Chinese President Xi Jinping. “The 250-member delegation includes star Chinese business gurus, including Alibaba founder Jack Ma, Huawei Technologies president Ren Zhengfei and Baidu CEO Lobin Lee,” the Korea Chamber of Commerce and Industry said in a press release. Based on the scale of the delegation, industry sources said a number of investment and corporate cooperation pacts will be signed during Xi’s visit to Korea.

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ONG KONG – In his bestselling book Capital in the TwentyFirst Century, Thomas Piketty argues that capitalism aggravates inequality through several mechanisms, all of which are based on the notion that r (the return on capital) falls less quickly than g (growth in income). While debate about Piketty’s work has focused largely on the advanced economies, this fundamental concept fits China’s recent experience, and thus merits closer examination.

Of course, a large share of China’s population has gained from three decades of unprecedentedly rapid GDP growth. The fixedcapital investments that have formed the basis of China’s growth model largely have benefited the entire economy; infrastructure improvements, for example, have enabled the rural poor to increase their productivity and incomes.

As the investment rate rose to almost half of GDP, the share of consumption fell to as little as a third. The government, recognizing the need to rebalance growth, began to raise the minimum wage in 2011 at nearly double the rate of real GDP growth, ensuring that the average household had more disposable income to spend.

But property prices have risen faster than wages and profits in manufacturing, causing the return on capital for a select few real-estate owners to grow faster than China’s GDP. The same group has also benefited from the leverage implied by strong credit growth. As a result, China’s top 1% income earners are accumulating wealth significantly faster than their counterparts in the rest of the world – and far faster than the average Chinese.

In fact, while the rise of China and other emerging economies has reduced inequality among

In fact, while the rise of China and other emerging economies has reduced inequality among countries, domestic inequality has risen almost everywhere. The Piketty framework highlights several drivers of this trend

countries, domestic inequality has risen almost everywhere.

The Piketty framework highlights several drivers of this trend.

For starters, by lowering trade and investment barriers, globalization has created a sort of winner-take-all environment, in which the most technologically advanced actors have gained market share through economies of scale. In particular, as the global economy moves toward knowledge-based value creation, a few innovators

in global branding, hightechnology, and creative industries win big, with the global boom in tech stocks augmenting their gains.

The resulting concentration of revenue, wealth, and power undermines systemic stability by creating toobig-to-fail entities, while hampering smaller players’ ability to compete. The global financial system reinforces this concentration, with negative real interest rates promoting financial repression on household savings. Given that banks prefer lending to larger enterprises and borrowers with collateral, small and medium-size enterprises struggle to gain access to credit and capital.

Another problem is that the low interest rates generated by advanced-country central banks’ unconventional monetary policies have led to the “decapitalization” of long-term pension funds, thereby reducing the flow of retirement income into the economy. In many emerging economies, including China, widespread fear of insufficient retirement income is fuelling high household saving rates.

Economists largely agree that this trend toward inequality is unsustainable, but they differ on how to curb it. Those on the right argue for more market-based innovation to create wealth, while those on the left argue for more state intervention.

In fact, both approaches have a role to play, particularly in China, where the government is pursuing a more marketoriented growth strategy but retains considerable control over many aspects of the economy. China needs to strike a balance between policy-supported stability and market-driven progress.

In particular, policy and institutional factors have led to the under-pricing of key resources, generating significant risk. The vast

workforce has driven down the price of labour, impeding the transition to a high-income, domestic-consumption-driven growth model. Similarly, failure to account for environmental externalities has contributed to the under-pricing of natural resources like coal, fuelling excessive resource consumption and creating a serious pollution problem.

Moreover, policies aimed at stabilizing the exchange rate and keeping interest rates low have caused capital and risk to become undervalued in large projects. And local governments’ effort to finance development by selling land to investors at artificially low prices has spurred massive investment in real-estate development, causing property prices to rise at unsustainably high rates. Given property’s role as the main form of collateral for bank loans, financial risk has risen sharply.

The government is now attempting to mitigate the risks that investors and local governments have assumed by allowing more interest- and exchange-rate flexibility. But the transition must be handled carefully to ensure that property prices do not plummet, which would increase the ratio of non-performing loans – and possibly even trigger a major financial crisis.

In order to ensure long-term social stability, China must promote inclusive wealth creation, for example, by establishing strong incentives for innovation. The rise of hightech companies like Huawei, Tencent, and Alibaba is a step in the right direction, though the fact that the most successful Chinese tech companies are listed overseas, and are thus not available to mainland investors, is problematic. Regulations and exchange controls prevent the retail sector from benefiting from new wealth creation.

Another challenge lies in the decline in the Shanghai Stock Exchange Composite Index from its 2007 peak of 6,000 to around 2,000 today. With financial assets failing to bring adequate dividends or capital appreciation, many investors have switched to real estate as a hedge against inflation.

China’s leaders are already working to guide the transition to a growth model driven by domestic consumption and higher-value-added production.

But the challenge is more complex than that. The new model – with the help of market forces, where and when appropriate – seeks to ensure that wealth is created sustainably and shared widely.

To succeed would fulfil the Chinese Dream. Failure would mean that inequality would continue to fester worldwide.

The Project Syndicate 2014

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July 4, 2014

Closing China and South Korea agree on yuan-won trading Hong Kong’s residential sales climb in June Leaders of China and South Korea agreed yesterday on a series of steps aimed at spurring offshore use of the yuan and investment in Chinese capital markets, Seoul’s finance ministry and central bank said. China agreed to award an 80 billion yuan (US$12.88 billion) licence for South Korea to invest in Chinese capital markets, help launch the direct trading of the yuan-won pair and establish a yuanclearing system in South Korea. The renminbi qualified foreign institutional investor licence allows the holder to invest renminbi funds within Chinese capital markets.

The number of sale and purchase agreements for residential units in June in Hong Kong was 5,960, up 13.1 percent on May and 59.4 percent year-on-year, the city’s Land Registry announced yesterday. The total consideration for residential sale and purchase agreements was HK$33.9 billion (about US$4.37 billion), 6.3 percent more than May and 81.2 percent more than June 2013. The registry received 7,404 sale and purchase agreements for all building units in the month, up 9.1 percent on May and 60.4 percent yearon-year. The total consideration for these agreements was HK$48 billion.

Swiss Re will buy Chinese Sun Alliance Swiss Re is expanding in faster-growing markets such as China Swiss Re headquarters in Zurich

It plans to invest US$3 billion of excess capital by next year to grow its business and “a good bit” could be spent in high growth markets, Chief Financial Officer David Cole told reporters on a conference call.

“That doesn’t mean we are going to turn down opportunities in developed markets,” Cole said. Swiss Re will look at ways to return money to shareholders if it can’t invest the capital at a return-on-equity of 11 percent, he said.

RSA strategy

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he world’s second-biggest reinsurer, agreed to buy a Chinese unit of the U.K.’s RSA Insurance Group Plc as it shifts capital to regions with higher premium growth prospects.

The company, based in Zurich, is buying Sun Alliance Insurance (China) Ltd. for 71 million pounds (US$122 million), according to a statement today. The acquisition, which is subject to regulatory approval, will enable Swiss Re to offer corporate insurance directly from mainland China.

Swiss Re is expanding in fastergrowing markets such as China,

Indonesia and Brazil to increase the portion of premiums from those regions to between 20 percent to 25 percent by 2015 from 18 percent last year, it said.

The company last year bought a stake in New China Life Insurance Co. for about US$493 million, and a holding in Brazilian insurer Sul America SA for US$334 million.

In October, it invested as much as US$425 million in Hong Kong billionaire Richard Li’s FWD Group.

“Growing wealth and increasing urbanization are key drivers for a continuing demand” for insurance and reinsurance products in “high

growth markets,” Swiss Re said in the statement. “With the overall outlook for these markets remaining intact, the growth rate for premiums is expected to stay at around 8 percent per year.”

That’s more than double the 3 percent premium growth rate foreseen in mature markets from 2013 to 2020, according to a presentation on the company’s website.

Shares rise Swiss Re said it’s “confident” it will reach a return-on-equity goal of 10 percent to 12 percent by 2015.

RSA, which also owns businesses in Hong Kong, Singapore and India, is selling non-core assets to bolster capital after three profit warnings in the fourth quarter and an accounting scandal in Ireland. It sold a Canadian insurance broker to Arthur J. Gallagher & Co. in May and disposed of its eastern European units to PZU SA in April.

“We are continuing to evaluate further non-core disposals, some of which we expect to agree during 2014,” Chief Executive Officer Stephen Hester said in a statement.

The British insurer is looking to raise at least 300 million pounds from asset sales outside of its “core markets” of the U.K., Ireland, Canada, Scandinavia and Latin America in 2014, it said in February.

Bloomberg News

Power cuts in Greece amid HK’s retail Food prices fall as grains lead decline anti-privatisation strike sales down

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orld food prices fell for a third month in June as the cost of grains and vegetable oils slumped amid expectations for rising supply, the UN’s Food & Agriculture Organization said.

An index of 55 food items dropped 1.8 percent to 206 points from a restated 209.8 points in May, the Rome-based United Nations agency wrote in an online report today. World food prices are down 2.8 percent from a year earlier.

Corn futures fell 8.7 percent last month in Chicago amid an outlook for record production in the U.S., the biggest grower. Wheat futures fell 7.9 percent as production in Europe is expected to climb.

“Last month’s decline, which was the third in succession, was largely the result of a marked drop in cereal and vegetable- oil prices, following further improvements in global production prospects,” the FAO wrote.

In a separate report, the UN agency raised its outlook for 2014-15 harvests of wheat, rice and coarse grains such as corn and barley.

Bloomberg News

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reece faced nationwide power cuts yesterday as a rolling strike began against government plans to break up the country’s main electricity provider.

State power distribution operator DEDDIE said one-hour cuts would be imposed from midday in various parts of the mainland as 13 production plants of the Public Power Corporation went offline.

PPC unionists have announced rolling 48-hour strikes against plans to break up the company by 2015 under privatisation efforts linked to the country’s economic rescue.

The liberalisation of Greece’s energy market, which has been dominated by state-controlled PPC for decades, is a key requirement for continued loan support from the country’s international creditors, the European Union and International Monetary Fund.

The new, scaled-down private company would control a 30-percent share of PPC’s extensive production resources including lignite mines and hydroelectric, natural gas and lignite-fired electricity generation plants.

The Greek state has also pledged to divest 17 percent of PPC shares by the end of 2015 from its portfolio of over 51 percent. Pension funds hold another 3.8 percent.

AFP

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ong Kong’s value of total retail sales in May, provisionally estimated at HK$39 billion (about US$5.03 billion), dropped 4.1 percent over a year earlier, the Census and Statistics Department announced yesterday.

The revised estimate of the value of total retail sales in April fell 9.9 percent over the same period a year earlier. For the first five months of 2014, total retail sales declined 0.2 percent in value over the same period a year earlier.

After netting out the effect of price changes over the same period, the volume of total retail sales in May dipped 4.7 percent over a year earlier. The revised estimate of the volume of total retail sales in April dropped 9.6 percent over the same period a year earlier. For the first five months of 2014, total retail sales rose 0.1 percent in volume over the same period a year earlier.

A government spokesman said that looking ahead, the still favourable job and income conditions should provide some support to local consumer sentiment.

Xinhua