Macau Business Daily, Aug 13, 2014

MOP 6.00

In for a penny . . .

Number 603 Wednesday August 13, 2014

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

USJ touts Harry Potter wizardry to win Japan casino partners | Page 6

M

Year III

acau’s Monetary Authority is doing its sums. And not ruling out diversifying its investments. Singapore and Norway are reference points: but both have experienced wild stock fluctuations. AMCM will seek public consensus that returns are directly proportional to investment risk.

The yuan has been added to its portfolio and AMCM has engaged fund managers to steer investment Page

2

HSI - Movers August 12

www.macaubusinessdaily.com

Name

Back to basics

%Day

Lenovo Group Ltd

3.97

China Merchants Ho

1.94

COSCO Pacific Ltd

1.56

CITIC Pacific Ltd

1.33

PetroChina Co Ltd

1.14

HSBC Holdings PLC

-0.79

China Life Insurance

-0.87

Ping An Insurance G

-0.99

Li & Fung Ltd

-1.15

China Resources Po

-2.19

Source: Bloomberg

The Chief Executive election is upon us. The Electoral Affairs Commission has announced some guidelines.

Votes will be counted by hand. Survey results related to the election may not be publicly disseminated from August 16 to September 1. And there are no plans for a live broadcast of the Q&A. Unless the media request it

I SSN 2226-8294

Page 3

Brought to you by

CTM monopoly to end soon Palatial

properties A quarter of the Wynn Palace has already been paid for. Steve Wynn said his company has spent US$1.1 billion on the new Cotai project. Everything’s on schedule. For the Peninsula property and Taipa Page

5

IPOs safe bet CTM serves some 150,000 subscribers. Of these, 22,000 are using fibre optic technology. The company hopes for 100 percent coverage by the end of next year. Meanwhile, MTEL will enter the telco market in November. CTM’s fixed-line monopoly will face a severe challenge Page

3

Official curbing measures are in place. But companies going public this year have attracted massive speculation.

Every company listed since June has hit its maximum 10 percent daily limit Page

10

2014-8-13

2014-8-14

2014-8-15

25˚ 29˚

25˚ 31˚

26˚ 31˚

2

August 13, 2014

Macau

AMCM may invest more ‘advantageously’ Kam Leong kamleong@macaubusinessdaily.com

stock in the government’s investment portfolio of fiscal reserves currently accounts for around 10 percent

Anselmo Teng Lin Seng

T

he Monetary Authority of Macau (AMCM) is able to change its investment portfolio as well as invest more ‘advantageously’ if there is a consensus among the public that returns are in direct proportion to investment risk, said the chairman of the Authority, Anselmo Teng Lin Seng, at the plenary session of the Legislative Assembly yesterday.

Legislator Si Ka Lon said in his enquiry that the transparency of information from the Authority is low and that the public should have

the right to know all information about the city’s fiscal reserves, with the exception of what is clearly confidential. In addition, he queried when the Authority would increase its diversification of investment.

Mr. Teng replied that stock in the government’s investment portfolio of fiscal reserves currently accounts for around 10 percent. He believes that the portfolio will be more diversified in the future. However, taking Singapore and Norway as examples, he claimed that the two countries have

experienced a high proportion of stock fluctuations. Meanwhile, the reward rate for the Special Administrative Region has remained positive since the handover in 1999, despite having experienced two financial crises.

In addition, he said that the Authority added assets in Chinese yuan to its investment portfolio rather than just American and Hong Kong dollars. He also said that the Authority has recruited fund managers to assist with the investments.

In addition, Mr. Teng said on the

sidelines of the legislative meeting that the financial problems of Portuguese bank Banco Espirito Santo do Oriente (BESOR) have not affected Macau’s branch, according to local media TDM. He noted that the Authority has taken note of the related situation. He noticed that the central bank of Portugal has split the bank into two, with ‘better assets’ now held by new bank Novo Banco, to which the Macau branch belongs. The daily operations and capital safety of the Macau branch are not affected at all, according to Mr. Teng.

Corporate

No agreement on price of natural gas

Air Macau, CTM form celebratory partnership

T

In order to celebrate its 20th anniversary, Air Macau and CTM will jointly present a series of promotional offers to Macau residents and tourists, it was announced yesterday in a ceremony that included Chairman of CITIC Telecom International Holdings Xin Yue Jiang, CTM CEO Vandy Poon and the executive director of Air Macau, Fung Sio Weng, and vice president Yang Jian Hua. For the campaign, CTM will give away prepaid mobile SIM cards and cash vouchers valued up to 500,000 patacas. The campaign - running from August to October will include other prepaid SIM cards offers, one of which will be delivered on the inaugural flight from Tiajin to Macau, on September 6. Air tickets for Korea and iPhones will also be drawn.

“It’s always one of the most important operation policies of Air Macau to promote the cooperation with local companies in different fields and reach a win-win situation of enterprises and passengers,” the vice president of Air Macau said.

hree years away from the conclusion of the natural gas system in Macau, the government is still in negotiations with the only natural gas supplier in the territory, Sinosky, to fix a price to provide the service.

The initial contract, signed in 2007, determined that the natural gas system would be installed by 2017. However, so far the natural gas system is only available for the public housing in Seac Pai Vai and for the University of Macau campus in Hengqin. Since then the price for natural gas has doubled, the coordinator for the Office for the Development of the Energy Sector (GDSE), Arnaldo Santos, is quoted as saying by Portuguese news agency Lusa.

During a question-and-answer session in the Legislative Assembly, Arnaldo Santos said that an increase in the price of natural gas should not be paid for by the consumer.

“At this moment there is a temporary price. The updated price is already around double that of the price defined in 2007,” Santos is quoted as saying regarding the contract signed with Sinosky.

“We have to negotiate the new price with the concessionaire. We have no intention of making the people of Macau pay for the increase of the price of natural gas,” he added.

The price for natural gas was published last year in the Official

Gazette: consumers would pay 6.39 patacas per cubic metre and a fee of 20 patacas for the service provided by the companies responsible for the installation of the gas system.

Natural gas was first used in Macau for the production of electric power but the service was suspended in 2010.

As for public transportation, according to official data some 20 buses are fuelled by natural gas. The government admits the possibility of taxis being fuelled by gas but that will depend on building natural gas stations, which may be difficult as there are not many plots of land available in Macau.

Last Sunday, the coordinator of GDSE suggested that such stations could be built in the new reclaimed areas.

Last April, the government demanded Sinosky present a plan for the provision of natural gas in Macau in the long term, until 2021, following the initial presentation of an unsatisfactory plan.

In a press release in April, the GDSE explained that the contract proposal from Sinosky would not guarantee the safe and stable provision of natural gas in the long term. But there was also in the contract an omission in relation to the penalties to be paid by the company for interruptions in service. The parties were also in disagreement about the price of the gas.

3

August 13, 2014

Macau

Complete CTM fibre optic coverage by next year The city’s largest telco, CTM, says it is working to install 100 percent of buildings here with fibre optics, including low-rises, by the end of next year Stephanie Lai

sw.lai@macaubusinessdaily.com

T

elecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) said it would target having100 percent fibre optic coverage for the city’s buildings by the end of next year, while its sole competitor in the market of leased line service MTEL Telecommunication Company Ltd has reported “smooth progress” in setting up the fibre optic network for local households. “This year, we hope that we can reach 100 percent coverage of high-rise [residential and commercial] buildings,” CTM’s vice president of commercial Ebel Cham Pou I said when speaking to media yesterday. “For low-rise buildings, the 5-storey ones, the network set-up is more difficult but we hope that these can also be covered by the end of next year.”

The city’s largest telecom operator currently has over 150,000 Internet service subscribers, of which more than 22,000 are using fibre optic [technology], Ms. Cham said on the sidelines of a strategic partnership agreement signing ceremony held with Air Macau yesterday.

“We hope that by this year-end our [fibre optic service] clients can reach 30,000,” Ms. Cham said.

The telco’s vice president of commercial [business] added that 12 percent of CTM’s Internet network

now involves fibre optics, and that this proportion could further grow to 30 percent by next year when the telco could successfully meet its target of having a fuller fibre optic coverage of local households.

CTM is currently the sole operator in local fixed-line services but another operator, MTEL Telecommunication Company Ltd, is expected to start service in November, challenging CTM’s monopoly.

MTEL chairman and chief executive Michael Choi, who told Business Daily that it is seeing “smooth progress” in setting up the

underground fibre optic network, noted that the company’s service charges will always undercut those of CTM. The government issued a fixedline telecommunications licence to MTEL in June last year, and the company has 18 months to ensure its network covers 30 percent of Macau’s housholds.

Emerging challenge However, while MTEL is working to meet its landline coverage deadline, it still awaits approval from the government for its Internet service

provider (ISP) licence, having applied in early June last year.

If MTEL can successfully gain a licence to provide Internet access to households and businesses here within the coming months, the company would be the only one challenging CTM’s Internet service even though the market was liberalised in 2000.

Mr. Choi mentioned in a press briefing in June last year that the heavy leased line cost was the reason that the dozens of companies registered with the ISP licence remained dormant, and hence MTEL had to have its own network.

“We’re looking to open at least one shop by November or December this year,” Choi told Business Daily.

“And human resources [to staff the MTEL operation] now remains the biggest challenge for us.”

Facing the emerging competition with MTEL, CTM’s vice president of commercial [business] Ebel Cham noted that the company has not decided to make any major moves in adjusting Internet charges at the moment.

“Every year, we review our overall service charges, our service quality and discount plans,” said Ms. Cham.

“We have no plans to downwardly adjust the charges of the Internet service packages now but we do have different discount plans for our clients.”

Chief Executive election imminent The Chief Executive election is just around the corner, with more arrangements about it recently announced. The Electoral Affairs Commission will call out the candidate’s name when counting the votes.

In addition, various associations have confirmed that they cannot release any results of relevant surveys before September 2 Kam Leong

kamleong@macaubusinessdaily.com

T

he Electoral Affairs Commission of the Chief Executive said yesterday that for the coming election the vote count will be done the traditional way instead of using electronic ballots; in addition, it stressed that the public dissemination of any survey results related to the election will be prohibited from August 16 to September 1.

President of the Commission Song Man Lei said that considering the number of voters is not as large

as in the previous election of committee members, the Commission had decided to use the traditional way to calculate the ballots, by calling out the name of the candidate.

Meanwhile, Ms. Song said the Commission did not take the initiative to arrange for a live broadcast for the Q&A session of the candidate this Saturday; if the media think it is necessary, however, the Commission would comply with their request.

In the Q&A session, the only candidate in the election – the incumbent Chief Executive Fernando Chui Sai On - will introduce his electoral platform.

Ms. Song said that Commission members can register their questions for the candidate on the day of the Q&A session, while the candidate will answer all the questions drawn.

Currently, there is no limit on the number of questions, although each member will

only be allocated up to two minutes to ask.

In addition, Ms. Song stressed that any survey result regarding the CE election can only be released after September 1. She denied that this is a response to the referendum held by local associations. “I don’t agree that we’re targeting specific people or associations.

Such a law existed before, it is just that we didn’t emphasise it,” she said.

She added that anyone releasing the related results

during the period via any way, such as via the Internet, will be perceived as violating the regulations and be subject to criminal sanctions.

The guidelines for the CE election will be released soon, according to Ms. Song.

The guidelines, in addition to reminding relevant parties that surveys cannot be released during the election period, will cover the campaign period and address legal rules governing the election.

4

August 13, 2014

Macau Brought to you by

HOSPITALITY Bonanza for Agencies Macau visitors fall into what we might call two major categories. Those that arrange their itineraries independently, with or without the help of travel agencies, and those that come integrated on a packaged tour, run or supported by some local travel agency. The proportion of those that fall into the latter category has been rising in the period shown here. In this period, the proportion of visitors on packaged tours went up from values typically near or below one-quarter of the total number of visitors, to figures that were, in the latest quarters, close or above one-third of the total. Overall, the figure for the last quarter, 36.7 percent, represents a rise of 10 percentage points relative to the same period four years ago.

Three Asian countries – Vietnam, Korea and Thailand – display values for that indicator in excess of two-thirds and their shares have been rising; that is, the vast majority of visitors come on packaged tours. In the case of Korea and Thailand, the figures for the first half of 2014 compared with the same period in 2010 show that share rising by 17.5 and 26 percentage points, respectively.

We leave Vietnam aside as figures for the last quarter have not been published and the data set shows some inconsistencies.

Suitcase City F or the most part, a serviced apartment is like a hotel and much sought after because of its amenities, clubhouse and service included.

In Macau, Manhattan, Lot W in Ocean Gardens, Buckingham and The Waterside at One Central offer something akin to serviced apartments. The Waterside doesn’t label itself a serviced apartment, as their minimum lease is one year and, depending on the suite, prices vary.

For example, the Emerald Suites leases fetch between HK$150,000 to HK$250,000 monthly. Lot W, in Ocean Gardens, labels itself on its website as a serviced apartment, offering tenants the possibility of monthly rentals.

At some of these, requesting to stay for anything less than a month is considered ‘illegal lodging’ by the property management. Lot W, by the way, has a two-year waiting list.

Ronald Cheung Yat-fai, CEO of Midland Realty Macau, says many expats are looking for small serviced apartments.

“Quite a lot of expats or overseas workers in the top range level of management need to work in Macau; they need to live here for a period of time - a studio would be perfect for them,” he says. Most potential customers are expatriates, top management, that come to Macau for a certain period.

Realtors say that serviced apartments are not very typical in

Managing styles Taiwan is, however, the source of visitors for which bigger changes happened in the relative composition of visitors. In 2010, only a fifth of Taiwan visitors came on packages. The changes in air travel in the region, namely the direct flights to the mainland, mean many of the usual transit passengers stopped coming. As a result, the share of Taiwanese on packaged tours stood above three-quarters in the last semester.

Two countries, Japan and India, saw their shares decrease.

J.I.D.

30,650

daily visitors on packaged tours, Q2

W

ith the plethora of different international companies in Macau, each has its own approach to management whether they be Chinese, American, Portuguese or Japanese.

American companies are more result-oriented, while Portuguese firms emphasise the life-work balance and Chinese companies focus on traditional values. But company culture differences are becoming less evident with the hiring of locals.

Even in Macau, such differences may be apparent, depending on who is managing such companies.

“For instance, looking at Grand Lisboa Hotel and Hotel Lisboa, both are part of SJM, you see the same company with two different

management styles — Grand Lisboa is much more Western, while Hotel Lisboa is more Chinese,” says José Alves, MBA coordinator at the University of Saint Joseph.

In addition, communication style varies between each company. For instance, in an American or Chinese company, when writing emails the salutation might be missing or just start with a simple ‘Hi,’ whilst Portuguese firms are much more formal, usually opening with ‘Dear’.

Alex Lu, general manager of macauHR/Engage HK, says that American companies in Macau, generally speaking, are “more result oriented, aggressive, and with a fast-work pattern” when compared to other countries’ companies. But such companies have gradually

Macau and are fewer in number, the reason being that in order to provide a serviced apartment, the owner needs to own the whole building. In addition, the duration of each stay at such apartments is not “that flexible” under the current law, say realtors.

The law states that any accommodation provided to the public without a hotel operation licence in any individual apartment or premises not deemed a hotel or built for similar function is regarded as the provision of illegal accommodation, except when the accommodation provider and the party who stays in the premises have stable tenancy and a statement of declaration for housing tax purposes is submitted to the Financial Services Bureau.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.

become ‘localised’ by starting to hire locals or Hong Kong people for management level positions in recent years. As a result, the working culture has become “mixed”.

The same can’t be said of all companies, though. Portuguese companies in Macau, experts say, generally have a “more systematic management methodology,” emphasising “work-life balance”. At a Portuguese company, employer and employee have a close relationship, acting as friends.

Chinese firms in the territory, however, usually adopt several traditionally cultural characteristics.

Considering the territory’s proximity to mainland China, top management personnel in local Chinese firms often hold other key positions at headquarters.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.

5

August 13, 2014

Macau A quarter of Wynn Palace already paid off The group’s gaming revenues in Macau climbed 10 percent in the first half of the year with less tables. Wynn Macau was also exempted from paying US$55 million in taxes to the government here for the first six months Luis Goncalves

luis.goncalves@macuabusinessdaily.com

W

ynn Resorts has already spent a quarter of its total budget for Wynn Palace, its mega casino resort set to open its doors in Cotai during Chinese New Year 2016.

In a filing submitted to the Hong Kong Stock Exchange this week, the casino operator run by Steve Wynn, said that it had spent US$1.1 billion on the new casino in Cotai. The total project cost amounts to US$4 billion and includes all construction costs, capitalised interest, pre-opening expenses, land costs and financing fees.

Mr. Wynn told the Hong Kong Stock Exchange that it expects to open its resort on Cotai ‘in the first half of 2016.’

In its recent second quarter results conference call with investors last month, Wynn assured them that the project was on schedule. The US$4 billion investment in Wynn Palace will allow the group to double its tables in Macau and increase its number of rooms by 170 percent. The excess of capacity in Cotai is worrying some investors. “Because we have no control over it [other casinos’ opening dates] we don’t give any thought to it,” Mr. Wynn said. “The most important thing, first impressions matter, is to get the place off on the right foot.”

Tax exemptions The operator also revealed that it had spent US$12 million in renovation works on its Wynn Macau resort during the first six months of this year, namely the renovation of 27,000 square feet of casino space into new VIP rooms.

These works are set to be ready by Chinese New Year 2015.

In its filing, Wynn says it was exempt from paying a total of US$54.6 million in taxes to the Macau Government for the first half of this year and US$50.7 million for the first half of 2013. Wynn’s five-year tax exemption ends December 31, 2015.

In the first half of the year, Wynn Macau reported an increase of 9.8 percent in revenues year-on-

year to US$1,979 million, despite having reduced the number of tables available to 472 from 493 in the first half of 2013, the company announced. VIP revenues climbed 7 percent in the first half from a year ago, outperforming the mass-market revenues that jumped 7 percent.

Wynn also announced that its long-term debt increased to US$2.3 billion at the end of the first half of the year from US$1.5 billion.

S. Culture posts MOP300mln in revenue The group increased its revenues by 14.3 percent during the first months of the year despite an increase in staffing costs and a reduction in gross profit margin João Santos Filipe

jsfilipe@macaubusinessdaily.com

S

. Culture International Holding announced revenues of 300 million patacas for the first six months of the year, which represents a 14.3 percent increase year-on-year from 263 million patacas in 2013.

The increase in revenue was explained by the fact that the major brands under exclusive distribution agreements recorded positive performances, the company said.

‘Sales of Clarks footwear products increased by 15.0 percent. Sales of Josef Seibel footwear products maintained its promising growth rate of 7.2 percent, which is an encouraging performance indicator that reaffirms our strategy in introducing and cultivating quality brands in our target markets. Sales of The Flexx, Petite Jolie and Yokono footwear products also maintained growth

US$12 mln

Wynn Macau 1H renovation works

rates of 103.4 percent, 237.9 percent and 78.8percent, respectively,’ the results revealed.

At the end of June the group had two retail outlets in Macau, the same as last year, with 65 in Hong Kong (an increase of 13) and 47 in Taiwan (an increase of 2). From 2013 to 2014 the group opened its first retail outlet in Mainland China.

As for the operations in Macau there were no large scale changes in the group strategy. ‘The group maintained its scale of operations in Macau to reap the highest return with the current level of investment amid the robust and growing economy of Macau,’ the report added.

In spite of the increase in revenue, not all the news was good for the investors and shareholders of the group. Gross profit margin decreased from 65.9 percent in 2013 to 64.2 percent this year. This difference was explained ‘mainly due to deeper discount rates and more frequent promotional activities were employed in light of weak consumer sentiment.’

In addition, staffing costs increased from 18.9 percent of revenues (49.6 million patacas) in 2013 to 19 percent (57.2 million patacas) in the first six months of the year. ‘The increase in overall staff costs was mainly due to the increase in number of staff of the Group and the general increase of commissions, as part of salaries, which increased in line with sales made during the period,’ the group said.

6

August 13, 2014

Gaming

USJ touts Harry Potter wizardry to win Ja

U

SJ Co is counting on its cachet turning around a failing Universal Studios theme park in Japan to win a partnership with a foreign casino operator, as the country edges nearer to legalizing gambling resorts.

The operator of Osaka city’s 13-year-old Universal Studios Japan is in talks with MGM Resorts International, Caesars Entertainment Corp and Genting Bhd for a possible partnership to run a casino resort in the Asian nation, CEO Glenn Gumpel said in an interview.

“We have operational capacity, experience know-how, and I don’t think we would be stretched to participate in more than one” casino resort, Mr. Gumpel said at USJ’s headquarters located inside the park. “As a company, we would like to grow outside of the current confines of the theme park.”

Japanese Prime Minister Shinzo Abe’s ruling party is seeking to pass a law to legalize casinos in the parliamentary session starting autumn, as part of plans to boost tourism along with the Tokyo Olympics in 2020. Operators including MGM, Caesars and Las Vegas Sands Corp. have expressed interest to take part once the ban is lifted and pledged to spend billions of dollars to build a resort.

USJ joins Japanese companies such as Sega Sammy Holdings Inc., Konami Corp. and Dynam Japan Holdings Co. competing for

partnerships with casino operators in a market that could be Asia’s second largest after Macau and worth $40 billion a year as early as 2025. The company is hoping its experience operating a theme park and knowledge of marketing and entertainment will help it to stand out from other suitors.

Reclaimed land Osaka, a port city in western Japan, has been in talks with operators including Caesars and MGM for a 500 billion yen (US$4.9 billion, 39.2 billion patacas) resort, probably to be sited on a reclaimed island about 5 kilometres from USJ’s park. Other local governments including Tokyo, Yokohama, Hokkaido, Nagasaki and Okinawa have also expressed interest in hosting the resorts.

USJ is looking at Tokyo, Osaka and Okinawa for potential sites and would consider building a casino resort or a new theme park in Neo Park Okinawa, a nature park owned

by Nago City, according to Mr. Gumpel, who joined the operator in 1999.

The company could seek to relist on the Tokyo Stock Exchange as early as next summer as one of its financing options, and is also considering an overseas listing, the executive said on Aug. 7.

USJ had sales of 95.9 billion yen in the year ended March, an increase of 17 percent from a year

earlier, according to spokesman Johta Takahashi. Operating profit jumped 51 percent to a record 24.2 billion yen, he said.

Harry Potter USJ, which opened in 2001 as a joint venture between the city and a group of private companies, introduced movie-themed attractions based on Hollywood classics such as Back to the Future and Jaws. The company was listed in 2007 but was taken private by Goldman Sachs Group two years later as the park’s appeal faded and the number of visitors slumped.

The theme park has since recovered as new rides such as Space Fantasy were brought in, with visitor arrivals hitting 10.5 million last fiscal year, the second highest number since it opened.

A new Wizarding World of Harry Potter attraction, which opened last month at a cost of US$400 million, drew 870,000 visitors to the park in July, a record for the month.

USJ is also planning to expand beyond Japan to invest in the emerging markets of China and Indonesia, and is seeking a tie-up with Shenzhen-based theme park operator Overseas Chinese Town.

The company’s held talks with an Indonesian company for a theme park in Jakarta, capital of Southeast Asia’s most populous country, Mr. Gumpel said.

Bloomberg

7

August 13, 2014

Gaming

pan casino partners

Caesars posts wider quarterly loss on interest expenses C

aesars Entertainment Corp, the casino operator that’s battling creditors in court over debt restructuring, said its second-quarter loss more than doubled, in part because of higher interest expenses.

The net loss widened to US$466.4 million from US$212.2 million a year earlier, the company said yesterday in a statement. Revenue grew 3 percent to US$2.19 billion.

Caesars, with properties in Las Vegas that include Caesars Palace and Planet Hollywood, has had only one profitable year since 2008 as it has struggled to service US$23 billion of long-term debt incurred in a leverage buyout, amid a drop in gambling in the U.S. Industry-wide, revenue in Nevada has risen for two straight months, including a 14 percent gain in June from a year earlier.

Last quarter, Caesars’ interest costs rose by US$113.7 million.

Results in the period were also hurt by a “difficult operating environment” in Atlantic City and other regional markets, where revenue fell 8.3 percent, the company said.

Industry gambling revenue in Atlantic City fell 5.7 percent in June after an 8.2 percent drop in May. The gaming hub has been hurt by gambling competition in the U.S. Northeast and is experiencing the closure of a number of casinos, including Caesars’ Showboat.

No Qualified bidders for Revel in Atlantic City

C

aesars Entertainment Corp Chief Executive Officer Gary Loveman said no qualified bidders have emerged for the bankrupt Revel hotel and casino in Atlantic City, after an auction was postponed last week.

It “suggests that even at a de minimis price, people are finding it hard to imagine they can make money operating the Revel,” Mr. Loveman said on a conference call, without specifying where he got the information.

Stephen Cohen, an outside spokesman for Caesars, said that Mr. Loveman’s remarks were based on published accounts of efforts to auction the New Jersey property.

Harry Hurley, a host on WPG Talk Radio in Atlantic City, and an NBC station in Philadelphia reported earlier that no acceptable bids have been received, citing sources they didn’t identify.

Shrinking betting action in Atlantic City contributed to a doubling of Caesars’ quarterly loss, the Las Vegas-based company said in a

statement. Caesars, the largest U.S. owner of casinos in the U.S., posted a second-quarter deficit of US$466.4 million, citing higher interest costs and an 8.3 percent decline in revenue outside of Las Vegas, including the New Jersey resort city.

Caesars, owner of the namesake Caesars Palace and Planet Hollywood resorts, has its own debt problems.

The company is fighting creditors in court over its efforts to deal with $23 billion of debt from a 2008 leveraged buyout.

Lisa Johnson, a spokeswoman for Revel AC Inc, declined to comment on Mr. Loveman’s remarks. Chris Filiciello, chief of staff for Atlantic City Mayor Don Guardian, didn’t respond to a request for comment.

Revel has been in bankruptcy twice since it opened in 2012. The company last week postponed its auction until August 14, to analyse multiple bids, according to court documents filed in U.S. Bankruptcy Court in Camden, New Jersey. The company is expected to seek court approval of a sale after that date.

The company, based in Las Vegas, was taken private in a leveraged buyout in 2008 by Apollo Global Management LLC and TPG Capital.

Caesars sued more than 30 bondholders, including funds overseen by Appaloosa Management LP, Oaktree Capital Group Holdings LP and Elliott Management Corp, in New York, accusing of trying to impede a restructuring of its debt with “disruptive appearances before gaming regulators” and “a baseless default notice.”

Wilmington Savings Fund Society, a trustee for holders of some of Caesars’ 10 percent notes payable in 2018, simultaneously sued the company in Delaware Chancery Court in Wilmington, accusing it of fraudulently transferring assets as part of the restructuring and wasting assets.

8

August 13, 2014

Greater China PBOC to drain 20 bln yuan

China’s central bank will drain 20 billion yuan (US$3.25 billion) from the money markets through 14-day bond repurchase agreements yesterday, traders said. Maturing repos will inject a net 64 billion yuan into the banking system this week. The People’s Bank of China (PBOC) conducted a net drain of 20 billion yuan from the banking system last week.

The one billion oil tanker

Hong Kong Exchange Trade lobby

Morgan Stanley sees HK-SHG stock gaps vanish The planned tie-up will give foreign investors unprecedented access to the mainland market

T Two of China’s largest shipping firms are setting up a US$1.1 billion crude oil tanker joint venture with a view to build up the country’s fleet, as the world’s second-largest oil consumer seeks better control over its oil imports. State-backed firms China Merchants Energy Shipping Co Ltd and Sinotrans & CSC Holdings are forming a very large crude carrier (VLCC) joint venture, with the former providing US$566 million in assets, including nine VLCCs, for a 51 percent stake, and the latter pumping in US$544 million in cash.

Survey reveals public support for anti-graft

he days of paying different prices for the same stock in Hong Kong and Shanghai are numbered, according to Morgan Stanley.

Valuation gaps between duallisted shares will disappear as an exchange link between the two cities leads to the creation of a “one-China”

market, Jonathan Garner, the head of Asia and emerging-market strategy at Morgan Stanley, said in a Bloomberg Television interview in Hong Kong yesterday. Yuan-denominated A shares on the mainland are valued at a discount of about 7 percent versus Hong Kong counterparts, known as H shares, according to the Hang Seng

China AH Premium Index.

“We’re looking for A-H stock price convergence,” Garner said. Over time, the gaps “will effectively come down to zero,” he said.

While the Shanghai Composite Index has rebounded 11 percent since mid-March on speculation government stimulus will revive

Beijing cuts coal use The city has already started to close or relocate hundreds of factories and industrial plants

More than 95 percent of respondents to a survey by the China Youth Daily hope Chinese authorities can continue their campaign against corruption, according to results published in the newspaper yesterday. About 93 percent of the sample of 49,969 people said they are “paying attention” to the campaign, with 85 percent saying they are “paying close attention.” Only 2.7 percent said they “did not care.”

About 60.5 percent said the leadership’s anti-graft fight has boosted their confidence in China’s development, with 29.1 percent saying it had not had any boosting effect and 10.1 percent unsure.

China Airlines to connect NZ’s South Island Taiwan-based China Airlines is to begin flying into New Zealand’s South Island, offering major new opportunities for trade and travel, Christchurch Airport chiefs announced yesterday. China Airlines would operate three return flights a week between Christchurch and Taiwan via Sydney for an initial summer season from December 2 this year to March 1 next year, airport chief executive Malcolm Johns said in a statement. The service would offer an extra 24,000 seats between Christchurch-Sydney-Taipei, which would also open up other travel routes from the South Island via Sydney.

C

hina’s capital Beijing cut total coal consumption by 7 percent in the first half of 2014 as part of its efforts to tackle smog, the official Xinhua news agency reported, citing data from its environmental protection bureau.

Beijing is at the front line of a “war on pollution” declared by the central government earlier this year in a bid to head off public unrest about

the growing environmental costs of economic development.

The city has already started to close or relocate hundreds of factories and industrial plants. It will also raise vehicle fuel standards and is mulling the introduction of a London-style congestion charge.

To reduce coal consumption, it is in the process of shutting down all of its ageing coal-fired power plants

and replacing them with cleaner natural gas-fired capacity or with power delivered via the grid.

Based on last year’s coal consumption level of 19 million tonnes, the 7 percent cut would amount to around 1.33 million tonnes per year. Beijing has said previously that it plans to reduce total coal use by 2.6 million tonnes in 2014. By 2017, it aims to slash consumption

9

August 13, 2014

Greater China growth in the world’s second-largest economy, the gauge has lagged behind a 20 percent surge in the Hang Seng China Enterprises Index of H shares.

The planned tie-up, scheduled to start around October, will give foreign investors unprecedented access to the mainland market while opening a route for wealthy Chinese investors to buy Hong Kong stocks.

The Shanghai Composite dropped 0.2 percent at the midday break, while the Hang Seng China index retreated 0.1 percent. The Hang Seng China AH Premium Index slipped 0.6 percent to 92.64, signaling a widening gap between dual-listed stocks.

Bourses link The Shanghai measure had jumped to an eight-month high on Monday as a report showed inflation was subdued last month, giving policy makers more scope to ease policy.

Data tomorrow will probably show industrial output growth in July kept

If there were no funding threshold, the share of potential investors could expand to over 90 percent David Murphy and Lei Chen, CLSA analysts

pace with June’s 9.2 percent gain, which was the biggest for a single month since December, while growth in fixed-asset investment excluding rural households picked up to 17.4 percent in the first seven months, according to Bloomberg News surveys.

Valuation gaps between the two exchanges reached the widest since 2006 on July 23 as mainland investors exited the stock market and international money managers awaited details of the exchange tie-up.

A survey conducted by CLSA Asia-Pacific Markets of 401 mainland investors showed 77 percent of them aren’t interested in investing in Hong Kong stocks through the link. The biggest obstacle is the minimum account requirement of 500,000 yuan (US$81,222), CLSA analysts David Murphy and Lei Chen wrote in a report dated on Monday.

HSBC, AIA “Nearly half of them say the threshold is too high,” the analysts wrote. “If there were no funding threshold, the share of potential investors could expand to over 90 percent.”

While the system won’t be “perfect,” the exchanges are pushing forward because the tie-up will help open up China’s markets and boost Hong Kong’s role as a global financial hub, Charles Li, the chief executive officer of Hong Kong Exchanges & Clearing Ltd., wrote in a blog posting this week.

HSBC Holdings Plc. and billionaire Li Ka-Shing’s Cheung Kong Holdings Ltd. are two Hong Kong-traded companies attractive to mainland investors, CLSA and Morgan Stanley said.

Bloomberg News

Tibet forum with focus on development The forum seeks to gather opportunities and suggestions for Tibet’s future

A

round 100 representatives from around the world convened for the two-day forum on the development of Tibet yesterday.

The forum, hosted in the autonomous region’s capital, Lhasa, will see delegates from Britain, India, the United states and other countries pool collective experience to discuss development strategies for the region.

Jointly sponsored by the Information Office of China’ s State Council and the regional government of Tibet, the forum seeks to gather opportunities and suggestions for Tibet’s future.

The protection of Tibetan culture and environment will also be highlighted.

Leap-frog development is the basis for and key to solve all problems Tibet is facing and the region’ s sustainable development is at the core, Losang Jamcan, chairman of the Tibetan regional government, said during the opening ceremony.

“Tibet will never develop at the expense of its environment,” he said.

“To protect Tibet’ s environment is the biggest contribution we can make to the nation and even humankind.”

The chairman also vowed to maintain social stability and harmony, which he believes is a pre-condition for Tibet’ s leap-frog development.

Cui Yuying, vice head of the Information Office of China’ s State

Council, said there are many voices in the international community regarding Tibet’ s development.

According to Cui, some insist Tibet should remain primitive and any development of the region equals the annihilation of Tibetan culture and the region’s environment.

Over the past half century, Tibet has been on an irreversible path of development and civilization, which complies with the general trend of the development of the human society, Cui said. The rapid and sustainable development of Tibet within the socialist system, in a way that benefits the region’s 3 million people, is one of China’ s strategic objectives, Narasimhan Ram, chairman of India’ s Kasturi & Sons Limited, publisher of the country’s largest English newspaper The Hindu, said during the opening ceremony.

“Tibet has been visibly transformed by double-digit GDP growth over two decades without a break and has entered a new stage of development,” he said.

He believed the defining factors behind Tibet’ s overall development include massive financial and resource support provided by the Chinese government, its preferential policies for Tibet, rapid infrastructure development and the building of a comprehensive modern transportation system.

Reuters

Malaysia seeks stronger economic ties

1.33 million

This year marks the 40th anniversary of the establishment of diplomatic ties between Malaysia and China

tonnes per year of coal consumption cut to less than 10 million tonnes a year.

The Beijing environmental bureau said the city had cut total sulphur dioxide emissions by 5.43 percent over the first six months of the year.

It also took 176,000 substandard vehicles off the road over the period.

Previous data issued by the Ministry of Environmental Protection showed that concentrations of hazardous airborne particles known as PM2.5 in Beijing stood at 91.6 micrograms per cubic meter in the first half of the year, down 11.2 percent year on year but still more than twice as high as the recommended national standard of 35 mcg.

Much of the pollution that hits Beijing drifts in from the surrounding province of Hebei, a major heavy industrial region that was home to seven of China’s 10 most polluted cities in the first half of the year.

Under new plans to integrate Beijing with Hebei and the port city of Tianjin, the region will be treated as a “single entity” with unified industrial and emission standards.

Hebei said last week that it had cut total coal consumption by 7.53 million tonnes in the first half of 2014, amounting to just over half of its target of 15 million tonnes for the year.

Reuters

The park in Qinzhou has been doing very well, and our job in Malaysia now is to make sure that we develop the Malaysia-China Kuantan Industrial Park in the shortest possible time

Kuantan port

M

alaysia looks forward to closer economic ties with China by enhancing bilateral cooperation in various fields, Malaysian Minister of International Trade and Industry Mustapa Mohamed told Xinhua in a recent exclusive interview.

This year marks the 40th anniversary of the establishment of diplomatic ties between Malaysia and China, and Mustapa said the two countries have enjoyed very close political and economic ties in the past 40 years.

Forty years ago, there was hardly any trade or investment between the two countries, Mustapa said. “But now China is Malaysia’s biggest trading partner, while Malaysia is China’s biggest trading partner in ASEAN, and the trade volume in 2013 between

the two countries amounted to US$106 billion,” he added.

Mustapa said the two countries also have two sister industrial parks in the Chinese city of Qinzhou and Malaysia’s coastal resort of Kuantan. “The park in Qinzhou has been doing very well, and our job in Malaysia now is to make sure that we develop the Malaysia- China Kuantan Industrial Park in the shortest possible time,” he added.

Mustapa said no matter on trade, culture, education or tourism, the relations between Malaysia and China have become closer and closer, which are further cemented by the good ties between the two countries’ highest leadership.

“The prime minister of Malaysia has enjoyed very close ties with Chinese

Mustapa Mohamed, Malaysian Minister of International Trade and Industry

leaders in the last many years,” he said.

However, the minister believed that there are also many areas that the two countries can further promote.

“Investment is an area where we can further improve,” he said.

At present, Malaysia has more than US$6 billion of investment in China, while there has been only US$1 billion’ Chinese investment to Malaysia, Mustapa said, adding that they would like to see more investments coming from China.

Xinhua

10

August 13, 2014

Greater China

IPO fever turns stock market into winning lottery Every company that listed since June has seen their stock repeatedly hit the maximum 10 percent daily limit Lu Jianxin and Pete Sweeney

C

hina’s new equity listings are once again plagued by rampant speculation even as regulators limit the amount stocks can “pop” on the first day of trade and curb other unfair practices.

The casino-like atmosphere of the stock market highlights the complex task authorities have in weeding out speculation and nurturing mature investment behaviour. The China Securities Regulatory Commission (CSRC) has said it wants to let the market have a “decisive” role in pricing new issues in future.

Since initial public offerings resumed in January after a 14-month hiatus, the shares of companies have surged, some by nearly 400 percent in the course of a few weeks.

Investors granted the right to buy into an IPO by lottery virtually have a golden ticket to sure-fire profit at low risk.

“Punters speculate for the sake of speculation, without taking into consideration corporate earnings performance,” said a trader at a fund management firm, who cannot be quoted by name due to rules that ban fund managers from speaking to the media.

Every company that listed since June, when a second batch of approved IPOs debuted, has seen their stock repeatedly hit the maximum 10 percent daily limit, with most stocks doubling or tripling their IPO levels within a couple of weeks.

That distorts the operation of the stock market by causing money to pile out of existing shares, and also destabilises the money market by tying up massive amounts of cash in the escrow accounts institutions use to subscribe to IPOs.

Step backwards The feverish performance of IPOs has run counter to what the stock regulator has hoped for.

IPOs were frozen in late 2012 in part due to their tendency to rise by triple digits in a few weeks only to fall below their listing price and moulder there indefinitely.

That led to accusations that the market was rigged in favour of insiders, who could lock in quick profits and then leave ordinary shareholders holding the bag.

Latest regulations restrict the amount stocks can “pop” on debut and set guidelines on pricing. The proposed IPO price should line up against industry peers and not be out of sync with price-to-earnings (P/E) ratios of already listed peers, thereby discouraging fund managers from overpricing IPOs to benefit management teams and cornerstone stakeholders.

But tighter supervision and tougher rules have not deterred speculation. The 44-percent “limit up” applied to the first day of trade has made little difference - stocks continue to rise to stratospheric levels, only taking somewhat longer to do it.

Feitian Technologies Co Ltd has jumped as much as 340 percent from

Listing date

IPO price (yuan)

Lowest price (yuan)

Highest price (yuan)

Change up to Monday (%)

FEITIAN TECHNOLOGIES CO LTD

6/26/14

33.13

39.76

145.5

339.18

WUXI XUELANG ENVIRONMENTAL TECHNOLOGY CO LTD

6/26/14

14.73

17.68

59.45

303.6

SHANGHAI LIANMING MACHINERY CO LTD

6/30/14

9.93

11.92

37.07

273.31

ZHEJIANG SHAPUAISI PHARMACEUTICAL CO LTD

7/2/14

21.85

26.22

79.9

265.68

HUBEI FORBON TECHNOLOGY CO LTD

7/2/14

20.48

24.58

69.55

239.6

YUNNAN HONGXIANG YIXINTANG PHARMACEUTICAL CO LTD

7/2/14

12.2

14.64

41.43

239.59

SHANDONG LONGDA MEAT FOODSTUFF CO LTD

6/26/14

9.79

11.75

31

216.65

SUZHOU TA AND A ULTRA CLEAN TECHNOLOGY CO LTD

7/31/14

8.47

10.16

21.62

155.25

GUANGDONG TAICHENG PHARMACEUTICAL CO LTD

7/31/14

14

18.21

35.72

155.14

SINOMA ENERGY CONSERVATION LTD

7/31/14

3.46

4.15

8.82

154.91

KANGYUE TECHNOLOGY CO LTD

8/1/14

9.84

11.81

22.84

132.11

BEIJING SANLIAN HOPE SHIN-GOSEN TECHNICAL SERVICE CO LTD

8/1/14

30.66

36.79

71.12

131.96

SHENZHEN ABSEN OPTOELECTRONIC CO LTD

8/1/14

18.43

22.12

42.74

131.9

NANJING KANGNI MECHANICAL AND ELECTRICAL CO LTD

8/1/14

6.89

8.27

15.97

131.79

GUANGDONG ELLINGTON ELECTRONICS TECHNOLOGY CO LTD

7/1/14

15.31

18.37

33

115.55

CHONGQING CHUANYI AUTOMATION CO LTD

8/5/14

6.72

8.06

12.89

91.82

ANHUI GUOZHEN ENVIRONMENT PROTECTION TECHNOLOGY JOINT STOCK CO LTD

7/31/14

12.14

15.76

23.27

91.68

JIANGSU KING'S LUCK BREWERY JOINT-STOCK CO LTD

7/3/14

16.93

20.32

32.45

91.67

Company

its issue price since its listing on the Shenzhen Stock Exchange in June. Wuxi Xuelang Environmental Technology Co Ltd is up more than 300 percent.

Of about 20 companies listed since late June, all have more than doubled with the exception of one, without enough time to rise given the market’s 10-percent cap on daily gains.

This appears to have engendered a version of the “greater fool” investment strategy, in which investors buy shares not because they believe the shares should be highly valued, but on the assumption others will pay even higher valuations later.

In short, IPO fever has spread to a wider group of market participants.

“IPO reforms have so far been piecemeal,” said Xiao Shijun, analyst at Guodu Securities in Beijing.

“Unless a registration system is in place, allowing the market to decide IPO prices, and investors to bear risk themselves, those reforms will not solve fundamental problems or quell rampant speculation.”

Beijing has promised to implement a registration-based system for IPOs in the future, leaving it to the market to decide whether a new issue would be accepted or rejected and let investors bear the risk if IPO prices are high.

That will replace the existing approval system in which regulators decide which firms are qualified to list and when, as well as cap IPO prices using administrative guidance.

Such a system means that companies may need to wait for many years to list.

“Business opportunities are fleeting. I am really concerned that our capital-markets environment is ruining those chances for many good companies,” Ding Yanhui, chairman of Shenzhen Absen Optoelectronic, was quoted saying by IFR Asia.

His company began trading on the Shenzhen exchange after waiting for eight years to list.

Reuters

Shanghai Stock Exchange building

11

August 13, 2014

Asia

Australian business activity best in 4 years The Liberal National government of Tony Abbott announced an unpopular budget of cuts and tax increases in May

A

measure of Australian business conditions hit the highest in four years in July as firms reported a sharp pick up in sales and profitability, a promising start to the third quarter after a couple of disappointing months.

There was also upbeat news for household wealth as yesterday’s data showed growth in home prices topped 10 percent in the year to June, adding a massive A$492 billion (US$456 billion) to the value of Australia’s housing stock.

National Australia Bank’s survey of more than 400 firms showed its index of business conditions jumped 6 points to stand at +8 in July, the highest since early 2010.

Firms were also feeling more confident, with that index rising 3 points to +11 led by strength in home construction and retailing.

The survey’s measures of sales and profitability both climbed sharply, while there was a more modest improvement in employment. The pick up in activity also looked to have legs with the index of forward orders rising 4 points to +5, well above its longrun average.

The improvement would be welcome news to the Reserve Bank of Australia (RBA) which has held interest rates at record lows of 2.5 percent for an entire year to support the economy as a long boom in mining investment fades.

The central bank is a close watcher of the NAB survey, which has a good track record as a leading indicator of economic activity.

“Firms still appear unfazed by the Federal government’s ‘tough budget’, possibly taking comfort in the bounce back in consumer confidence,” said NAB’s chief economist, Alan Oster.

Australian Prime Minister Tony Abbott has been on in Holland on a trip since Monday

“A solid jump in business conditions and better forward orders is supporting the relatively optimistic position.”

The Liberal National government of Tony Abbott announced an unpopular budget of cuts and tax increases in May that took a heavy toll on consumer sentiment.

The mood has brightened since as many of the budget’s more controversial measures have been stalled in a divided senate.

Confidence also has been bolstered by steady appreciation

in home prices, long an obsession among Australians. The Australian Bureau of Statistics reported residential prices rose 1.8 percent in the second quarter, from the first when they increased by 1.5 percent.

That was the fifth straight quarter of strong gains and left prices up 10.1 percent on June last year.

The ABS estimated the total value of dwellings in Australia at almost A$5.2 trillion, more than three times the country’s annual gross domestic product (GDP).

Reuters

KEY POINTS Business activity, confidence jump in well-regarded survey Home prices climb 1.8 pct in Q2, up 10.1 pct for year Housing stock rises A$492 bln in value, supports spending power

Japan firms finally get pricing power

sales tax, seen as key to curbing Japan’s huge public debt.

High-end pricing power

Electronics makers are selling pricier TVs and PCs

J

apanese companies, long bedevilled by deflation, are finally starting to pass on higher costs to their customers just as the economy stumbles, potentially complicating decisions for Prime Minister Shinzo Abe and the central bank.

Early signs indicate that price rises and expectations of further inflation are building as a labour shortage and Abe’s stimulus policies allow companies to charge customers more.

Electronics makers are selling pricier TVs and PCs, a railway has jacked up some luxury fares by 20 percent, corporate sponsors are chipping in more prize money at sumo bouts and resorts in Hokkaido have stopped years of discounting.

Toyota Motor’s assembly workers make paint inspection for the new sport utility vehicle

But even as the psychology of 15 years of deflation appears to be changing, the economy likely contracted

sharply in the three months after a sales tax hike on April 1, and it might slip into recession this summer

as output and exports sink and consumption remains sluggish.

The promise of “Abenomics” has been that ultra-loose monetary policy and government spending would push up prices and company profits, in turn boosting wages and spending in a virtuous circle of sustained growth. An export rebound spurred by a weaker yen was supposed to cushion the blow from a drop in consumption after the tax increase, but that has not happened.

If Japan gets only the inflation without the growth, pressure will grow on the BOJ to add to its enormous asset purchases that sparked the rebound, while Abe will find it more difficult to sign off on a planned further increase in the

Data on today Wednesday is expected to show the economy shrank at a 7.1 percent annualised rate in the second quarter as the tax hike hit consumption, according to a Reuters poll.

The biggest drop since the global financial crisis would more than reverse the first quarter’s surge ahead of the tax rise.

Recent data showing the weakest factory output since 2011 and a second surprise monthly drop in exports forced economists to cut GDP forecasts and raised the possibility that the economy might not rebound much, if at all, this quarter.

Under pressure from Abe, companies have raised wages and bonuses but not enough to offset the tax increase and higher prices. Wages fell 3.8 percent in real terms in June from a year earlier, the 12th fall in a row.

Reuters

12

August 13, 2014

Asia Japan’s wholesale prices up 4.3 Japan’s wholesale prices in July rose 4.3 percent from the same period of last year, marking the 16th straight monthly increase, the Bank of Japan said yesterday. The index of corporate goods prices stood at 106.6 against the 2010 base of 100, the central bank said in a preliminary report, owing the rise mainly to higher energy costs.

On a month-to-month basis, the index was up 0.3 percent, almost in line with market forecasts. Prices for petroleum and coal products gained 11.9 percent from a year earlier amid higher crude oil prices.

GrainCorp appoints CEO Australia’s GrainCorp Ltd appointed an executive from U.S.-based agribusiness CHS as its new CEO yesterday, and said it did not expect former suitor Archer Daniel Midland Inc to return with a fresh bid in the near term. GrainCorp said Mark Palmquist, who currently oversees CHS’s international grain businesses, will take the helm at Australia’s largest grain handler on October 1. The appointment comes amid speculation that agribusiness giant ADM will return with a renewed offer for GrainCorp after its A$2.8 billion (US$2.6 billion) bid was rejected by Australia’s government last November on national interest grounds.

Philippine exports grow fastest rate Philippine export earnings expanded by 21.3 percent on year to US$5.44 billion in June on the back of higher shipments of electronic products, the local statistics agency said yesterday.

The Philippine Statistics Authority (PSA) said electronic products remained as the country’s top export, accounting for more than 40 percent of revenues during the period. PSA figures show that earnings from electronic products grew 10.7 percent on year to US$2.22 billion.

Revenues from goods classified as other manufactures jumped by 67.8 percent on year to US$538.67 million.

Other manufactures were the second top earner in June.

India hopes FX reserves cushion volatility Central bank hopes its record foreign exchange reserves will act as a cushion against rupee volatility when global interest rates start to climb, central bank chief Raghuram Rajan said. “I have no doubt that when interest rates start picking up in industrial countries, we will be tested. We will be tested by capital outflows,” Rajan said on the side-lines of a lecture.

India’s foreign exchange reserves of US$320.56 billion in the week to August 1 are close to surpassing a record high of US$320.785 billion in September 2011.

S.Korea to boost service sector The government said it hopes this and other measures unveiled yesterday will lift the contribution from the financial sector to 8.0 percent

S

outh Korea will double the daily price movement limit on stocks listed on the main board for the first time in nearly 16 years, as newly-appointed Finance Minister Choi Kyung-hwan spearheads an economic revival campaign.

Each stock listed on the Korea Exchange will be allowed to rise or fall by up to 30 percent from its previous closing price, compared with 15 percent at present, the government said in a joint statement from six ministries and one agency.

Officials at the Financial Services Commission (FSC), which is mainly in charge of changing the limit, said the timing would be confirmed as soon as possible after further discussions with academics and market participants.

The government said it hopes this and other measures unveiled yesterday will lift the contribution from the financial sector to 8.0 percent of the national total in 2017, from 6.7 percent recorded in 2012.

It would be the first change of the price movement limit since late 1998, when it was expanded from

Korean workers returned to work after a nine-day summer holiday

Tata Motors triples profit Consolidated revenue rose 38.2 percent to 646.83 billion rupees

S

trong sales of luxury Jaguar and Land Rover vehicles helped India’s Tata Motors triple its first-quarter net profit, more than making up for a drop in domestic sales.

India’s biggest automaker by revenue bought British carmaker Jaguar Land Rover (JLR) in 2008, and it has been propping up profits at its parent for the past few years - helped by strong sales growth in China, the world’s biggest auto market.

Jaguar’s and Land Rover’s retail sales in the April-June quarter rose 22 percent to 115,596 units from a year ago, while sales of its domestic trucks, buses and passenger vehicles declined by 28 percent to 110,612 units.

Operating margins at its JLR business rose to 20.3 percent from 15.8 percent a year ago, while margins at its Indian business fell to minus 2.8 percent from 2.3 percent.

Tata Motors, part of the US$100 billion Tata conglomerate, said consolidated net profit rose to 53.98 billion Indian rupees (US$882.31 million), the highest in nine quarters,

compared with 17.26 billion rupees a year ago.

Analysts had expected, on average, profit of 37.1 billion rupees, according to Thomson Reuters I/B/E/S. Consolidated revenue rose 38.2 percent to 646.83 billion rupees.

While Tata dominates the trucks and buses segment in India, its passenger cars have failed to lure customers away from local rival Maruti Suzuki Ltd and foreign competitors including Hyundai Motor Co and Honda Motor Co.

The company has struggled to banish an image that its cars are not cool because they are used as taxis and also due to the legacy of its ultra-cheap Nano, perceived as a poor man’s car.

India’s car industry is expected to grow by 5 to 10 percent this fiscal year, which started on April 1, an industry body said this month, as the new Narendra Modi-led government works to revive stalled reforms and boost consumer confidence.

Reuters

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

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

13

August 13, 2014

Asia KEY POINTS Daily stock trade limit to be changed to plus-minus 30 pct, from 15 pct First change in the movement since late 1998, but no timing set

12 percent during the height of a financial crisis, to make financial markets more capable of reflecting changing conditions.

“Changing the limit was talked about for some time, but I don’t know how much of an impact this will have on markets. Sentiment may improve on the fact that the authorities are moving to ease regulation,” said Moon Jung-hui, an economist at KB Investment & Securities in Seoul.

The FSC has yet to decide whether the limit will be raised in one move, or in steps. The changed limit will be applied to the biggest Korea Composite Stock Price Index (KOSPI) market first, then later to the junior KOSDAQ market.

In addition to the financial sector, the government also selected six service business areas for especially strong support - health and medical,

tourism and cultural content, education, logistics and software.

The support will focus on easing regulations rather than new government spending. For example, the government plans to prevent start-up businesses from dying out by providing mentoring services and networking resources.

Regulations on tourist visas will also be eased to boost the number of offshore visitors to the country’s medical facilities while incentives will be created to encourage smallto-medium sized businesses to list their companies on the country’s stock index.

The results may not be as exactly as the government expects them to be, but the public mood could improve as the government actively displays its willingness to change regulations and boost the economy, said Moon.

The new measures follow economic stimulus policy plans the government introduced late last month to jumpstart faltering domestic demand, including US$11 billion in additional public spending and an easing of mortgage rules.

The finance ministry expects South Korea’s economic growth to accelerate to 3.7 percent this year from 3.0 percent last year but is worried that downside severe risks remain while domestic demand is shrinking.

The government said the new measures announced yesterday would result in about 15 trillion won (US$14.6 billion) of investment flowing into domestic industries and the creation of about 180,000 jobs over the next three years.

Reuters

Singapore economy grows again The Singapore economy is expected to grow at a modest pace in 2014

T

he Singapore economy grew by 2.

4 percent on a year-on-year basis in the second quarter, moderating from the 4.8 percent growth in the previous quarter, the Ministry of Trade and Industry (MTI) said yesterday.

On a quarter-on-quarter seasonallyadjusted annualised basis, the economy expanded by 0.1 percent, slower than the 1.8 percent growth in the preceding quarter.

The manufacturing sector grew by 1.5 percent year-on-year in the second quarter, a sharp slowdown from the 9.9 percent expansion in the preceding quarter. The deceleration in growth was largely due to a contraction in electronics output and slower growth in transport engineering output.

The construction sector grew 4.4 percent compared to the 6.4 percent growth in the preceding quarter. The slowdown was driven mainly by a fall in private construction output, reflecting weaker private residential building works and a decline in private commercial and industrial building works.

The wholesale & retail trade sector grew by 1.7 percent while transportation & storage sector slowed to 2.0 percent on a year-on- year basis. Finance & insurance sector expanded by 5.5 percent, largely similar to the 5.7 percent growth recorded in the previous quarter.

1.5 pct manufacturing sector 2Q growth year-on-year Looking ahead, MTI said the Singapore economy is expected to grow at a modest pace in 2014. Externallyoriented sectors such as finance & insurance and wholesale trade are likely to support growth in the second half, in tandem with the modest pick-up in the global economy. Domesticallyoriented sectors such as business services and information & communications are also expected to remain resilient.

However, growth in some labourintensive segments such as retail and food services may be weighed down by labour constraints.

Taking these factors into consideration, MTI said the 2014 growth for the Singapore economy has been narrowed to 2.5 to 3.5 percent, from the earlier projection of 2 percent to 4 percent.

Xinhua

Indonesia ore ban to stay The government is monitoring the impact of its processing policy on commodity prices Fergus Jensen

I

ndonesia has no plans to wind back a sevenmonth old ban on exports of unprocessed nickel ore and bauxite that has led to billions of dollars in planned investments in smelters, top government officials said.

Indonesia - previously the world’s top exporter of nickel ore and a major bauxite producer - effectively halted all but processed metal shipments in January in an effort to force miners to build smelters, winning the country bigger returns from exports of its mineral resources.

Last month the government a l l ow ed a hand ful of firms producing partially processed minerals such as copper concentrate, including Freeport McMoRan Inc, to resume exports.

However, Indonesia’s chief economic minister Chairul Tanjung said the same rationale does not apply to unprocessed exports of nickel ore and bauxite.

“Nickel is different because if you are smelting in Indonesia the added value is much higher than copper,” Tanjung told Reuters in a recent interview.

“Because of that it’s a separate issue.”

The government also lacks the power to intervene on nickel and bauxite as the ban

Freeport mine in Indonesia

stemmed from a law passed by parliament in 2009, Tanjung said.

“There is no way for us to go against the law. The president could be impeached by parliament if we breach the law,” he said.

The January ban took a chunk out of Indonesia’s export revenues just as the country was grappling with a sizable trade deficit. It also put thousands out of work as mines shut, damaging the country’s attractiveness for investment.

However, Tanjung pointed to recent data from the country’s investment coordinating board that showed close to US$8 billion was being spent to build three alumina refineries and two ferronickel projects.

“This is creating investment in Indonesia,” he said. More projects were expected to follow, Tanjung said, which would help reduce the country’s trade and current account deficits.

Indonesia’s Coal and

Minerals Director General Sukhyar, who will remain in his current post under Indonesia’s incoming administration following last month’s election, said mining companies had been given five years notice of the changes.

Nickel pig iron smelters could be built for as little as US$10 million, ukhyar, who goes by one name, told Reuters.

There were currently 102 nickel smelter projects at various stages of development.

“It’s very promising,” he said.

Sukhyar also said the government was monitoring the impact of its processing policy on commodity prices.

A government study had found that nickel priced at around US$18,000 per tonne was ideal for the industry.

Nickel prices rose from levels below US$15,000 a tonne before the Indonesia ban, and are currently trading at just below US$18,500 a tonne.

Reuters

14

August 13, 2014

International

S. African central bank to the rescue The central bank’s package called for Abil to be split into a good bank, which will get the capital infusion, and a bad bank

France still world’s top tourist destination France kept its title as the world’s top tourist destination in 2013, drawing nearly 85 million visitors despite a lacklustre economic situation as Chinese interest intensified and North Americans surged back to the country. With its Mediterranean beaches and skiable mountain ranges, rich architectural heritage and tourist attractions ranging from Versailles to Euro Disney, France grew even more popular last year, welcoming 2 percent more visitors than in 2012. It kept its top ranking ahead of the United States, which drew 69.8 million visitors, and Spain, with 60.7 million.

Bankruptcy disrupting Detroit negotiations Detroit’s largest union said on Monday that the city’s historic bankruptcy proceedings have given the management of the water and sewer department opportunities to disrupt bargaining units and strip union members of job protections. The American Federation of State, County and Municipal Employees Michigan Council 25 filed a motion to clarify or lift an automatic court stay on litigation against Detroit during the bankruptcy process.

The state’s employment commission, which settles labour disputes, has decided against holding hearings regarding the city until after the bankruptcy process is concluded.

German prosecutors pursue Deutsche Bank CEO German prosecutors are seeking charges against Deutsche Bank co-CEO Juergen Fitschen and several former executives at the bank in connection with the longrunning Kirch bankruptcy case, legal sources said yesterday. Prosecutors have been investigating whether Fitschen, his predecessors Josef Ackermann and Rolf Breuer, and others gave misleading evidence in a civil suit, brought by heirs of the late media magnate Leo Kirch, which ended in February after 12 years of legal wrangling. A Munich court must now decide whether to accept the case and press charges, a decision expected to take several months.

Brazil’s opposition vows to reduce inflation Brazilian opposition candidate Aecio Neves said that if elected president he would adopt policies aimed at bringing the inflation rate back to the centre of an official target range of 4.5 percent by the end of the four-year presidency.

President Dilma Rousseff’s management of the economy has come under heavy criticism ahead of the election on Oct. 5, but while leading opinion polls show Neves narrowing the gap they still point toward a victory for the incumbent. Neves said in an interview with GloboNews TV that he would do what is necessary to keep prices in check.

A

s African Bank Investments Ltd. spiralled toward collapse, South Africa’s Reserve Bank fought to save lending to the nation’s poor, ultimately leaning on firms with more traditional clients to carry out the rescue.

Central Bank Governor Gill Marcus’s plan announced August 10 enlists underwriters including Barclays Africa Group Ltd., FirstRand Ltd. and fund administrator Public Investment Corp. for a 10 billion-rand (US$940 million) capital raising for Abil. The company provides loans at interest rates that can reach 60 percent annually to people who lack assets required to secure credit at other banks.

The rescue, after a week in which Abil’s stock plunged 95 percent, is needed to maintain banking services and credit to 3.2 million of the

country’s low-income citizens, Marcus said. The second-biggest African economy is battling 25 percent unemployment, rising inflation and strikes in the mining industry that have sapped investor confidence.

“Abil is an important symbol of the country’s ability to lend to poorer people,” Azar Jammine, chief economist at Econometrix, said yesterday in a phone interview from Johannesburg. “A lot of Abil’s book was lent out to the working class, and you don’t want that to implode.”

Poor people The central bank’s package called for Abil to be split into a good bank, which will get the capital infusion, and a bad bank, through which the central bank would take over bad loans for 7 billion rand. The

regulator also put the firm under creditor protection and imposed losses on senior bondholders.

Abil was created to lend to the country’s least-affluent citizens. Its loans range from 500 rand to 130,000 rand and can charge interest of as much as 5 percent a month on a rolling basis, according to the bank’s website.

“African Bank continues to be open for business,” Marcus told reporters in Pretoria on August 10.

“Clients must be able to access their finance and able to afford and use the loans that they get. Otherwise that simply disappears.”

Protracted strikes in the mining industry, where Abil has many customers, hurt the bank as workers either weren’t paid or lost their jobs. The lender’s Ellerine Holdings furniture unit sold fewer goods and suffered bigger losses during the strikes, with the retailer forced into a business rescue, akin to Chapter 11, after Abil severed funding to the subsidiary August 7.

Severe deterioration “There was severe deterioration in Abil’s target market with the ongoing strikes and the economy shrinking,” Kokkie Kooyman, the head of Cape Town-based Sanlam Global Investments, which has US$900 million under management, said in a phone interview on August 8. “All of it maybe never would have happened if it hadn’t been for the strikes.”

Nicolette Lloyd, 39, is among 8,000 Ellerine employees facing an uncertain future after 18 years with the company selling sofas and cabinets at an outlet in Pietermaritzburg, near the city of Durban. She’s just been informed that the store is set to close within the next 50 days.

Bloomberg News

IEA lowers outlook for oil demand As consumption in the second quarter was weak and because the International Monetary Fund had lowered its forecast for global economic growth

U

nsteady global economic growth is holding down oil demand and prices despite worries about conflict in key regions, the IEA said yesterday lowering its demand forecasts.

Some of the conflict factors, which could be expected to raise tension and prices on the oil market, might even work in the opposite direction, the agency said.

Tit-for-tat trade sanctions affecting Russia over the crisis in eastern Ukraine could end up depressing growth of the Russian economy and demand for oil, the IEA said.

Libya, where some oil facilities had resumed activity despite a high level of disruption in the country, was reportedly having difficulty funding

buyers for this renewed production on the market.

The IEA, the oil policy arm of the Organisation for Economic Cooperation and Development, cut back its forecast for the growth of demand of oil this year.

It said this was because consumption in the second quarter was weak and because the International Monetary Fund had lowered its forecast for global economic growth this year by 0.3 percentage points to 3.4 percent.

Lower economic growth means an easing of demand for energy, including oil, and the IEA also lowered its forecast for oil demand in 2015.

But a central thrust of its report was that, so far, potential risks for the oil market from conflict and tension in Iraq, over Gaza, in Libya, and

over Russia and eastern Ukraine was being more than countered by unspectacular growth of the global economy.

This was containing demand for oil and was therefore bearing down on prices.

“The global oil demand growth estimate for 2014 has been curtailed,” since last month to show a gain of 1.0 million barrels a day, down from 1.2 mbd foreseen in last month’s report, although the figures were skewed by adjustments of previous demand data.

Overall demand this year would be 92.7 mbd. In the second quarter of this year, the growth of demand of 700,000 barrels per day “fell to its lowest level since the first quarter of 2012.”

AFP

15

August 13, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THE TIMES OF INDIA

Argentina’s Griesafault Joseph E. Stiglitz Martin Guzman Nobel laureate in economics Postdoctoral research fellow at the Department of Economics

and University Professor at Columbia University

and Finance at Columbia University Business School

As part of key changes announced in Hindustan Unilever’s (HUL) management committee (MC), Hemant Bakshi, currently executive director — home and personal care (HPC), has been elevated as executive VP of Unilever Indonesia. The company has also split the HPC portfolio and promoted two young leaders to head these businesses and, as a result, bolstered the gender balance at the MC. Bakshi, 50, was the architect behind trebling HUL’s rural reach. An EVP at Unilever Indonesia is essentially the country head, which propels Bakshi into the league of Indian leaders heading either country or portfolio at Unilever.

THE KOREA HERALD South Korea will support the launch of for-profit foreign hospitals on Jejudo Island and other free economic areas in a bid to induce foreign investment in promising service sectors, the government said yesterday. The current daily stock price limit will be eased “in phases,” and a master plan will be drawn up by the end of this year to encourage the construction of world-class resort complex facilities, it said.

These steps were included in a list of deregulations and plans unveiled by the government to promote South Korea’s trade and investment in seven service sectors selected as promising.

THE STRAITS TIMES A drop in electronics shipments continued to weigh on Singapore’s exports in the second quarter, trade agency IE Singapore said.

Non-oil domestic exports from Singapore fell by 3.4 per cent in the April to June period over last year, extending a two-year-long decline. This follows a 1 per cent contraction in the first quarter of the year, IE Singapore said. Domestic exports of electronic products, which make up slightly more than a quarter of non-oil domestic exports, slid by 13.8 per cent in the second quarter over a year ago, after falling 12.8 per cent in the first quarter.

THE BANGKOK POST A new rail transport department has been suggested to support new rail development and set standards for safety, fares, staff and maintenance.

Chaiwat Thongkamkoon, deputy director-general of the Office of Transport and Traffic Policy and Planning, said the OTP would try to push the plan for completion while the National Council for Peace and Order (NCPO) remained in power, as it could quickly enact a law establishing the new department. The Transport Ministry is now considering a draft of this new department and will submit it to the NCPO for approval next year.

Argentina’s President, Cristina Fernandez, at the stock market

N

EW YORK – On July 30, Argentina’s creditors did not receive their semiannual payment on the bonds that were restructured after the country’s last default in 2001.

Argentina had deposited US$539 million in the Bank of New York Mellon a few days before. But the bank could not transfer the funds to the creditors: US federal judge Thomas Griesa had ordered that Argentina could not pay the creditors who had accepted its restructuring until it fully paid – including past interest – those who had rejected it.

It was the first time in history that a country was willing and able to pay its creditors, but was blocked by a judge from doing so. The media called it a default by Argentina, but the Twitter hash tag #Griesafault was much more accurate. Argentina has fulfilled its obligations to its citizens and to the creditors who accepted its restructuring. Griesa’s ruling, however, encourages usurious behaviour, threatens the functioning of international financial markets, and defies a basic tenet of modern capitalism: insolvent debtors need a fresh start.

Sovereign defaults are common events with many causes.

For Argentina, the path to its 2001 default started with the ballooning of its sovereign debt in the 1990s, which occurred alongside neoliberal “Washington Consensus” economic reforms that creditors believed would enrich the country. The experiment failed, and the country suffered a deep economic and social crisis, with a recession that lasted from 1998 to 2002. By the end, a record-high 57.5% of Argentinians were in poverty, and the unemployment rate skyrocketed to 20.8%.

Argentina restructured its debt

in two rounds of negotiations, in 2005 and 2010. More than 92% of creditors accepted the new deal, and received exchanged bonds and GDPindexed bonds. It worked out well for both Argentina and those who accepted the restructuring.

The economy soared, so the GDP-indexed bonds paid off handsomely.

But so-called vulture investors saw an opportunity to make even larger profits. The vultures were neither long-term investors in Argentina nor the optimists who believed that Washington Consensus policies would work.

They were simply speculators who swooped in after the 2001 default and bought up bonds for a fraction of their face value from panicky investors. They then sued Argentina to obtain 100% of that value. NML Capital, a subsidiary of the hedge fund Elliot Management, headed by Paul Singer, spent US$48 million on bonds in 2008; thanks to Griesa’s ruling, NML Capital should now receive US$832 million – a return of more than 1,600%.

The figures are so high in part because the vultures seek to earn past interest, which, for some securities, includes a country-risk premium – the higher interest rate offered when they were issued to offset the larger perceived probability of default. Griesa found that this was reasonable. Economically, though, it makes no sense.

When a country pays a risk premium on its debt, it means that default is a possibility. But if a court rules that a country always must repay the debt, there is no default risk to be compensated.

Repayment on Griesa’s terms would devastate Argentina’s economy. NML Capital and

When a country pays a risk premium on its debt, it means that default is a possibility. But if a court rules that a country always must repay the debt, there is no default risk to be compensated

the other vultures comprise just 1% of the creditors, but would receive a total of US$1.5 billion.

Other holdouts (6.6% of total creditors) would receive US$15 billion. And, because the debt restructuring stipulated that all of the creditors who accepted it could demand the same terms as holdouts receive, Argentina might be on the hook for US$140 billion more.

Every Argentine might thus owe more than US$3,500 – more than one-third of average annual per capita income. In the United

States, applying the equivalent proportion would mean forcing every citizen to pay roughly US$20,000 – all to line the pockets of some billionaires, intent on wringing the country dry.

What’s more, the existence of credit default swaps creates the possibility of further gains for the vultures. A CDS insures against a default, paying off if the bonds do not. They can yield substantial returns, regardless of whether the bonds are repaid – thus reducing their holders’ incentive to achieve an agreement.

In the run-up to July 30, the vultures conducted a scare campaign. A second default in 13 years would be a big setback for Argentina, they claimed, threatening the country’s fragile economy. But all of this presumed that financial markets would not distinguish between a default and a Griesafault.

Fortunately, they did: Interest rates for different categories of Argentine corporate loans have not reacted to the event.

In fact, borrowing costs on July 30 were lower than the average for the whole year.

Ultimately, though, the Griesafault will carry a high price – less for Argentina than for the global economy and countries needing access to foreign financing.

America will suffer, too. Its courts have been a travesty: As one observer pointed out, it was clear that Griesa never really fathomed the issue’s complexity. The US financial system, already practiced at exploiting poor Americans, has extended its efforts globally.

Sovereign borrowers will not – and should not – trust the fairness and competence of the US judiciary. The market for issuance of such bonds will move elsewhere.

The Project Syndicate 2014

16

August 13, 2014

Closing German investor sentiment hits 20-month low

Sinopec awarded Malaysia refinery contract

Investment sentiment in Germany fell to its lowest level in nearly two years in August amid concerns about the economic fallout from current global crises, a survey found yesterday.

The widely watched investor confidence index calculated by the ZEW economic institute fell by 18.5 points to 8.6 points in August, its lowest level since December 2012, it said in a statement. Analysts had been projecting a shallower drop to 18 points this month. “The decline in economic sentiment is likely connected to the on-going geopolitical tensions that have affected the German economy by now,” ZEW said.

Sinopec Engineering Group, a subsidiary of China’s biggest refiner Sinopec, has been awarded a refinery contract worth 1.33 billion U.S. dollars by Malaysian oil firm Petronas, Sinopec announced yesterday. It said in a statement that it has been contracted for the engineering, procurement, construction and commissioning of an oil refining and petrochemical integrated plant in Pengerang in the state of Johor. The core parts of the project include a 15-million tonnes/year crude oil atmospheric distillation unit and an 8.8-million tonnes/year residue hydro treating unit.

Banks targeted in Australian class action The lawsuit builds on the partial success of a previous case on bank fees against ANZ on behalf of 43,500 customers in the Federal Court of Australia

A

n “enormous” class action over credit card late fees charged by financial institutions, including Citibank and Westpac, on behalf on all their customers was filed in an Australian court yesterday.

The action -which could become Australia’s biggest consumer lawsuit- was filed by lawyers Maurice Blackburn against Westpac, Citibank, St. George, BankSA and ANZ in the New South Wales Supreme Court.

The open class proceedings mean that “all customers who have ever been charged a late fee, not just those that signed up to the original class actions”, could benefit if the lawsuit is successful, the firm said.

The class action, over what the claimants say are extravagant fees, could be worth millions of dollars and include hundreds of thousands of bank customers.

“We’re talking about an enormous action,” Maurice Blackburn’s class action practice head Andrew Watson said.

“If people are a bit like myself and not as careful about paying off their credit card, then they will be in the action and stand to benefit.”

Maurice Blackburn plans

to extend the action to cover American Express, the Commonwealth Bank, the National Australia Bank and BankWest.

The lawsuit builds on the partial success of a previous case on bank fees against ANZ on behalf of 43,500 customers in the Federal Court of Australia in February.

Lawyers for the claimants

If people are a bit like myself and not as careful about paying off their credit card, then they will be in the action and stand to benefit Andrew Watson Maurice Blackburn lawyers

allege that the fees charged by banks for late payments are excessive and do not reflect the true cost to the bank.

The fees differ, with some charging up to Aus$20. The February court ruling heard that the average cost to the bank of a late payment was only 35 cents.

The Federal Court found that ANZ’s late payment fees on credit cards were penalties and should be repaid. Claims on other charges, such as dishonour fees, were thrown out by the judge.

The total claim for the class action was Aus$57 million (US$53 million).

That decision is under appeal, but Watson said he is confident in the strength of the new lawsuit.

“We think we have a very strong case and that this course of action provides the best safeguard for the rights of all those consumers affected by late fees,” he said.

Bentham IMF Australia, a publicly listed company that is funding the proceedings, said the class action was the only effective way for customers to obtain compensation.

“It is clearly evident from this case that the class action regime in Australia -backed by litigation funding- is the

only genuinely effective vehicle to offer commercial redress to people that are subjected to corporate wrongdoing in

this way,” Bentham IMF’s James Middleweek said in a statement.

Citibank branch in Perth

China hikes non-residential natural gas prices

Vietnam’s imports from Hong Kong down

HKMA says banks’ exposure risks controllable

C

V

T

hina will increase the wholesale price of natural gas for non-residential use by 20.5 percent from September 1 to “guide the reasonable allocation” of resources, the top economic planner announced yesterday.

The price adjustment will only be based on the amount of natural gas industrial and commercial users consumed in 2012, while the price for newly added gas consumption since then will remain unchanged, according to the National Development and Reform Commission (NDRC).

Meanwhile, the natural gas price hike will be waived for the time being for fertilizer makers, a sector that is struggling currently, with the NDRC saying it will apply the price changes to fertilizer makers “at an appropriate time later.”

After the adjustment, the price of non-residential natural gas will rise by 0.4 yuan to 2.35 yuan (about 38.2 U.S. cents) per cubic meter at gas stations.

The latest hike comes after a similar 15.4-percent increase for non-residential gas consumers in July last year when the NDRC launched a new pricing mechanism.

Xinhua

AFP

ietnam saw a decrease of 9.7 percent year-onyear in imports from China’s Hong Kong in the first half of 2014, according to statistics from Vietnam Customs yesterday.

Vietnam’s Industry and Trade Information Centre (VITIC) under Ministry of Industry and Trade quoted Vietnam Customs yesterday as saying that during the period, Vietnam imported some US$478.09 million worth of products from Hong Kong.

Fabric topped the list of import items from Hong Kong during the six-month period with value of nearly US$121.45 million, down 34.94 percent year-on-year.

Imports of other materials for textile and footwear sector ranked second with nearly US$111.35 million worth of products, down 1.17 percent year-on-year, according to statistics of Vietnam Customs.

Imports of scrap metal stayed at third place with nearly US$63.57 million, up 22.72 percent year-on-year.

Revenue of the above three items accounted for some 62 percent of the total import value from Hong Kong during the period.

Xinhua

he risk related to the exposure of Hong Kong banks to mainland China is controllable, the chief executive of the city’s central bank said yesterday.

The growing exposure of Hong Kong banks to the mainland in recent years has grabbed headlines about their ability to handle credit risks against the backdrop of a slowing Chinese economy.

Rating agencies and supranational bodies such as the International Monetary Fund have openly voiced concern.

Long praised by investors for their sound risk management, Hong Kong’s mid-sized banks are increasingly becoming more exposed to any blow-up in default risk as they hunt for new opportunities in the mainland amid sluggish growth at home.

Data from the Hong Kong Monetary Authority show a sharp rise in cross-border business.

By the end of 2013, the exposure of Hong Kong banks to mainland corporate borrowers constituted a fifth of their total assets.

Under an extreme scenario presented by the IMF in May, if the default rate in the mainland banking system’s interbank obligations hits 80 percent, the losses would wipe out all the capital.

Reuters