Macau Business Daily, Sept 22, 2014

MOP 6.00 Closing editor: Luis Gonçålves Publisher: Paulo A. Azevedo Number 630 Monday September 22, 2014 Year III

False start

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llergies, heavy dust, fallen trees, little food and damaged toilets. It’s not yet been a month. But cracks are appearing in the publicity campaign façade. The brand new MOP10 billion campus of the University of Macau in Hengqin is scoring low marks with students. Complaints range from poor construction to hygiene to security issues. Students told Business Daily that the move was too soon. Macau’s higher education poster child needs a makeover, they say

www.macaubusinessdaily.com

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Fast lane Good news for Macau drivers. Insurance industry representatives from Macau and Guangdong inked an agreement on Friday.

Owners of vehicles with Macau registration plates can purchase a single cross-border motor insurance policy. Either in Macau or in Hengqin Island. The parties just await approval on the new driving policy

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Hard Landing

Steve Wynn arrives in Macau tomorrow

More rain on Macau’s parade. Deutsche Bank says gaming revenues in Q4 will drop 15 percent. Or three times more than the summer average. The VIP segment is likely to fall 30 percent.

While October is set to be the year’s worst month, with revenues tanking some 20 percent

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HSI - Movers September 19

Name

Chui Sai On was in Beijing this weekend.

He was officially appointed 4th Chief Executive of Macau. He said he expects China’s government to give the green light on a 24h border crossing. The Gongbei crossing is most likely, hopefully in December

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More workers needed

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Open Sesame!

Friday’s IPO made Jack Ma the richest man in China. Although Li Ka-shing hangs on to his Asian crown. Alibaba became the most successful IPO on the NYSE, propelling it to a privileged place among IT rivals

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Crowne Plaza to recruit 215 workers PAGE 4

24h border crossing in December?

Lack of local resources is in the news again.

This time, Air Macau’s chairman made a pointed reference to the issue. He cites it as one of the major new challenges facing the company. And an obstacle to more solid growth in the years ahead for Macau’s flagship carrier

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%Day

Sands China Ltd

3.60

Galaxy Entertainmen

3.01

AIA Group Ltd

2.40

Tencent Holdings Ltd

1.87

China Mobile Ltd

1.80

Hengan Internationa

-1.67

China Resources Pow

-1.72

Tingyi Cayman Island

-1.84

China Unicom Hong K

-1.86

China Mengniu Dairy

-1.96

Source: Bloomberg

Interview

Florence Lam, Director of Iao Hin Gallery: Still no art market in Macau Iao Hin Gallery is currently nurturing Macau’s art market.

Director Florence Lam says this means developing its commercial aspects, too. Despite the support of the government, the market is in its infancy. She says there’s a chasm separating the number of exhibitions and potential buyers. It’s all about word of mouth, she tells Business Daily; that, plus education and throwing in a few surprises

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September 22, 2014

Macau

Guangdong and Macau ink cross-border motor insurance pact Owners of locally-registered vehicles can purchase cross-border motor insurance as soon as authorities allow them to drive freely in Hengqin Stephanie Lai

sw.lai@macaubusinessdaily.com

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nsurance industry representatives from Macau and Guangdong inked an agreement on Friday that would allow owners of vehicles with registration plates for Macau to purchase a single cross-border motor insurance policy in either Macau or Hengqin in Zhuhai.

Under the special motor insurance policy agreement, signed by Macau Insurers’ Association and its mainland counterpart, Guangdong Association of Insurance Industry, owners of locally registered vehicles can notify their insurance companies in the city to arrange for claims with their mainland partner insurance firm should they have a car accident in Hengqin.

“Now the [insurance] mechanism has already been set, local residents can purchase this cross-border insurance plan from the insurance companies here as soon as the mainland government announces that Macau-registered vehicles can travel freely in Hengqin,” a board member of the Monetary Authority of Macau, António José Félix Pontes, informed media on

the sidelines of the pact inking on Friday.

Assistant to the director of Hengqin Administrative Committee, Mr. Zhu Run Ming, told media on the same occasion that the Guangdong and Macau government have yet to confirm when the Macau-licensed cars can run freely on Hengqin island.

As noted by Mr. Pontes, of the 12 local insurance institutions selling motor insurance plans at least half have already applied to the Monetary Authority here to offer the cross-border motor insurance plan.

Although the new plan is set to save local vehicle owners the trouble of having to purchase motor insurance from the mainland and Macau separately, the single motor insurance plan designed to benefit locally-registered car owners does not necessarily save them money as they still have to pay two premiums for cover for any accidents they may be involved in here or in Hengqin, a source familiar with the new insurance product told Business Daily.

Government hopeful of 24-hour border crossing soon

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hilst attending the 20th anniversary of Air Macau, Fernando Chui Sai On talked about the 24-hour crossing at the Gongbei border gate. The Chief Executive said that he is confident that the extension of crossing time will be approved as soon as possible.

“We are expecting Beijing’s approval. But the Central Government is willing to allow 24-hour border crossing mainly at the Gongbei border gate”, he told journalists. “The sooner this decision is taken the better but we’re confident that it may be [decided] by the end of the year”, he added.

“We also want to make it possible for the time to cross the border to be reduced. If operators have to provide accommodation for their workers then it will help reduce the time . . .

During the campaign I said that we wished that gaming operators would be responsible for the accommodation of their workers. That’s something we’re still working on”, he said.

Chui Sai On departed for Beijing to receive the appointment from the State Council today as 4th Chief Executive of the MSAR. According to the Basic Law, the MSAR Chief Executive-inwaiting is responsible for nominating the principal officials to the central authority. Mr. Chui told media before departing for Beijing yesterday that he would begin the officials’ nominating works after receiving the letter of appointment from the State Council as the SAR’s 4th Chief Executive.

J.S.F.

2014-2015 Free Seasonal Influenza Vaccination Programme In line with the recommendations of the World Health Organization, starting today, the Health Bureau will offer free seasonal influenza vaccination for the following high-risk populations with details as follows: Eligible Groups People between the age of 6 months and less than 18 years

People aged 60 or above

Detailed Arrangement Children who have not attended nursery school or persons not studying in Macao should be vaccinated at Health Centres, vaccination point of Kiang Wu Hospital, Outpatient Department of MUST Hospital or Workers’ Clinic.

For Macao residents from 6 months to less than 3 years who neither attend nursery school nor study in Macao, the vaccination will start from 27th October 2014 after quadrivalent influenza vaccines become available.

To be vaccinated at Health Centres, vaccination point of Kiang Wu Hospital, Outpatient Department of MUST Hospital or Workers’ Clinic.

Patients with chronic cardiovascular, pulmonary, metabolic, renal or immunocompromised diseases

Patients being followed-up in Conde de São Januário General Hospital shall receive vaccination with prescription by their attending physician; others may visit Health Centre for vaccination.

Health care workers

Governmental and non-governmental medical organizations with relatively large number of staff to get vaccinated themselves, with vaccines offered by the Health Bureau. Other medical professionals holding valid Macao SAR Resident Identity Card, Health Bureau patient card and Health Bureau licence renewal receipt can be vaccinated at Health Centre.

Residents and staff of residential institutions

Personnel of Health Centres will visit the institutes to provide vaccination services according to the information provided by the Social Welfare Institute.

Others for whom vaccination is considered necessary by the Health Bureau

After the Health Bureau has contacted respective entities for name lists, vaccination will be arranged by Health Centres.

Children, students, teachers and staff members of local nursery schools, kindergartens, primary and secondary schools

Personnel of Health Centres will visit nurseries/schools to provide mass vaccination services.

1) 2)

Children in nursery schools, pupils, teachers and staff members of kindergartens, primary and secondary schools who failed to join the mass vaccination may, starting 1st December 2014, get vaccination at Health Centres, vaccination point of Kiang Wu Hospital, Outpatient Department of MUST Hospital or Workers’ Clinic.

All eligible persons should hold a valid identity document issued by the Macao SAR and a Health Bureau patient card; for those who do not have a patient card, please contact a Health Centre for application.

Community organizations such as community centres and elderly homes may contact Health Centres, mass vaccination will be arranged accordingly when human resources condition permits.

Aside from the above mentioned specific groups, members of the public who wish to reinforce their immunity against influenza are advised to consult their private doctors for prescription and vaccination.

Due to the frequent mutation and antigenic drift of influenza viruses, the vaccination should be repeated every year to maintain adequate immunity.

Health Bureau, 22nd September 2014.

One-speed public housing construction

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he Secretary for Transport and Public Works, Lau Si Io, said last Friday on the sidelines of the 20th anniversary of Air Macau, that speeding up public housing was also dependent upon contractors.

“When we finished the 19,000 public housing [units] project we started to work on other projects and are doing our best. However, there are also problems which are related to the contractors involved in public housing”, he said when pressed on whether the government was planning to speed up the construction of more public housing. “We have plans for public housing in the short, medium and long term”, he said.

The secretary was also asked

about the new claimed territories in Macau and Zone A, which will support 32,000 flats, of which 28,000 will be earmarked for public housing.

“We have our goals defined in relation to it and we’re going to work very hard in order to accomplish such goals”, he said.

As for the public consultation on the new Subsidised Housing Law, Lau Si Io said that it was giving the government the information it needed.

“The public consultation is going well and with this consultation we got the information we needed.

We will decide, as always, with the population’s opinion in mind”, he said.

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September 22, 2014

Macau

Hengqin campus: Allergies, heavy dust, fallen trees, little food and damaged toilets It has not yet been a month since the new campus of the University of Macau in Hengqin swung into full operation. Yet, students’ complaints about the new campus have been spreading. Business Daily talked to three students who doubt the campus is really ready Kam Leong

kammleong@macaubusinessdaily.com

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t a cost of more than MOP10 billion, the Hengqin campus of the University of Macau (UM) became fully operational from August 25, at the start of the new academic year. However, since then, problems at the university have been emerging, primarily regarding the construction and facilities, not to mention security issues.

“I’d prefer to stay in the old campus for one more year, just to wait for the constructions of the new campus and its auxiliary facilities to be totally ready,” Ms. Lee, a UM sophomore, told Business Daily.

The new campus, which occupies some ten times more land than the old campus, was officially handed over to Macau last July. The original estimate was that the project would be completed by end-2012 and would be fully operational last year.

Although the campus is now fully operational, part of the construction is still ongoing.

“You can see a lot of sand on the road and heavy dust because a lot of the construction and renovation has not been finished,” said a junior surnamed Wong.

Recently, local Chinese media MASTV revealed that the content of formaldehyde in the rooms in the Residential Colleges (RCs) of the campus exceeded 2.35 times the standard, causing some students to suffer allergies.

Once the issue was reported, the University also expressed its concerns about the issue, claiming that the University would appoint an independent organization - the Institute for Development and Quality - to test the air quality of the rooms

in the Residential Colleges. “If the Air Quality Index is lower than the standard, we will temporarily arrange for individual students to [use] other rooms,” the University wrote in an announcement to its students and staff.

Our interviewees all said that the formaldehyde did not affect them too much, yet they still expressed their worries about the issue. “One of my classmates’ face went all red after a few days of living in the dorm, now she has to wear masks as prevention,” Ms. Lee claimed.

Living there The Residential Colleges dormitories are actually one of the hyped up features of the new UM campus. According to its official website, each RC can provide between 400 to 500 accommodation places for students and academic staff.

Currently, there are eight RCs on the campus.

“The only thing I can do now is to keep all the wardrobes open [to vent the formaldehyde],” another senior student at UM, Mr. Kan, told us.

“Frankly speaking, I really see living here harming my personal safety,” Ms. Lee claimed, who stays overnight on the campus on average four days a week, “You can see trees falling down everywhere in the campus.”

“Even the big trees,” Ms. Wong said although her interview was conducted separately from Ms. Lee’s.

However, unlike Ms. Lee, she was not worried about her safety but thinks that the accommodation environment is not worth MOP12,500 a year.

In fact, following the recent

typhoon many of the university students uploaded images of the situation on the campus, showing collapsed ceilings, fallen trees and broken glass windows.

Like Ms. Lee, Ms. Wong said that she would rather “climb up the hill for another year” - referring to the old campus located on a hilliock in Taipa.

“The first day I checked into my dormitory, I could see an obvious flaw on my wall,” Ms. Wong complained.

Meanwhile, Ms. Lee concurred, saying, “My friend told me that there was an obvious crack in the toilet in her dormitory on the first day.”

Although the MOP12,500 cost covers students’ 15 meals per week, they seem very dissatisfied with the Residential College arrangements.

According to the three interviewees living in searate RCs, Mr. Kan’s RC offer them the choice of eight dishes, while Ms. Wong and Ms. Lee can only get three and two dishes every meal, respectively.

“Why do we pay the same amount of money, but the treatment is so different?” Ms. Lee asked.

Much to improve “The hygiene [standards] do fall below those of the old campus,” Mr. Kan believes, saying that the public toilets in the dormitories and teaching buildings are obviously not as clean as before.

“I think the biggest problem is the lack of human resources,” he said.

“After all, although the size of the new campus is ten times that of the old one, I don’t think the number of staff has increased by 10 times.”

Another problem that these students are concern about is security, given the size of the campus, especially at night.

“There are very few security guards checking around the campus,” Mr. Kan said, telling us that the street light during the nighttime was very dim. Meanwhile, Ms. Wong claimed that parts of the street lighting in front of her RC had broken down following last week’s typhoon.

Business Daily tried to approach the University of Macau regarding the above issues for comment and the reason for the substantial delay of the operation of the new campus but there was no reply from UM before this story went to press.

The new campus According to a report filed by the Commission of Audit last January, the Infrastructure Development Office (GDI) proposed in 2010 that all the building works including the design of the new campus would total MOP5.8 billion. ‘However, in March 2012, the total investment in the new campus already exceeded MOP10.2 billion,’ the Commission wrote in its report slamming the overrun.

GDI told Business Daily last Friday that the total construction cost of the new campus was 7.8 billion patacas, excluding project consulting, monitoring and subterranean tunnel.

In 2009, the government signed a lease for land in Hengqin Island, part of Macau’s neighboring city, in order to build the new campus for UM. Costing 1.2 billion patacas, the lease will expire on December 20, 2049.

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September 22, 2014

Macau

Melco International records 53pct profit increase in 1H

Prada first-half net profit down 20 pct

The parent company of Melco Crown Entertainment amassed almost HK$900 million in profits up to June, with revenues up 5 percent

Prada’s first half sales in Greater China have been dragged down by a weak performance in Hong Kong despite the mainland and Macau posting growth

Sara Farr

sarafarr@macaubusinessdaily.com

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elco International Development Ltd – a Hong Kong-listed investor and partner in Macau casino developer Melco Crown Entertainment Ltd (MCE) – posted revenues of HK$89.6 million in the first half of the year, up 5.1 percent over the HK$94.4 million recorded in the same period a year earlier, the company announced in its interim report filed with the Hong Kong Stock Exchange.

For the period between January and the end of June, Melco International posted a profit of HK$885.5 million, up from HK$579.4 million, representing a 52.8 percent increase from that of a year earlier.

During the six months period ended June 30, 2014, the group recorded a net cash inflow of HK$970.2 million compared with HK$7.9 million in the same period a year earlier, according to the filing. In addition, at the end of the first half of the year, Melco International’s cash and cash equivalents totalled HK$1.18 billion, up from HK$202.5 million over that of the first six months of 2013. ‘The gearing ratio, expressed as a percentage of total borrowings over shareholders’ funds, was at a satisfactory level of 9 percent [at the end of June],’ the filing reads.

This same ratio was 10 percent at the end of December 2013. The group also declared a final dividend of 20.8 Hong Kong cents per share during the first six months of the year, totalling HK$324.9 million. These were in respect to the year ended December 31, 2013. “Subsequent to the end of the current interim period, the directors of the company have determined that an interim dividend of 11.6 Hong Kong cents per share, totalling HK$181.2 million will be paid to the shareholders of the company,” the group said in the filing.

The group’s subsidiary here – Melco Crown Entertainment Ltd – continues to be the primary driver of Melco International’s profitability.

The group is gearing up for the preparation work for its fifth and final tower at City of Dreams, slated to open in early 2017, and its Studio City project ‘remains on track to be the next standalone integrated property to open in Macau in mid2015,’ according to the company’s interim report.

While its Philippine property, City of Dreams Manila, is due to open

later this year, its Russian project in Primorye region is scheduled to open in the fourth quarter of the year.

In addition, the group has signed a memorandum of understanding with Veremonte Espana S.L.U. to participate in the Barcelona World Project as a casino operator there.

‘The group is well positioned to diversify outside of Macau,’ the filing adds.

MelcoLot takes HK$20.8mln hit in H1 MelcoLot Limited, of which the group holds 40.65 percent, reported a loss of HK$20.8 million for the first six months of the year, compared to a HK$6.7 million loss year-on-year. The reasons cited for the first half-year loss include a decrease in revenue, net foreign exchange loss of HK$7 million, 29 percent in employee benefits cost increase, and a finance cost decrease of approximately 14 percent. Revenues also declined by 28 percent to HK$22.5 million for the first six months of the year.

MelcoLot is primarily engaged in the provision of lottery-related technologies in both of mainland China’s state-run lottery operators – China Welfare Lottery Issuance Centre and China Sports Lottery Administration Centre (CSLA).

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talian fashion house Prada SpA’s net profit dropped by a year-onyear 20.6 percent to 244.8 million euros (MOP2.5 billion) for the six months ended July 31 amid a weaker sales performance in Asia Pacific and Europe, the two most important markets for the group.

First-half net retail sales for the group in the Asia Pacific market – including mainland China, Hong Kong and Macau - totalled 561.8 million euros, down 2 percent compared to a year ago due to weak performances in Hong Kong, South Korea and Singapore. Prada reported the result on Friday. Of Prada’s global retail sales reported at 1.44 billion euros, the Asia Pacific market occupied nearly 40 percent, followed by Europe with some 33 percent.

The fashion house said that retail channels in Greater China had generated first-half net sales of 388.1 million euros as a result of ‘double-digit paces of growth in China and Macau’ at constant exchange rates. However, when scaled at current exchange rates, Prada’s Greater China retail performance in the period actually dropped nearly 1.8 percent.

The first half EBITDA of Prada amounted to 492.8 million euros, down 10.6 percent when compared to the same period last year. The dilution of EBITDA was the reduced profitability registered at gross margin level, Prada noted in its reuslts, which were subject to the negative impact of exchange rate fluctuations and the higher incidence of selling expenses following the group’s retail network expansion.

In the group’s interim results, the fashion house said that it expected that the results of the second half of this year will be ‘broadly in line’ with the first half, while its margins will continue to be under pressure despite some minor improvements deriving from the group’s cost-cutting actions.

The high-end fashion group markets Prada, Miu Miu, Church’s and Car Shoe.

S.L.

Crowne Plaza Macau to recruit 215 staff

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rowne Plaza Macau, scheduled to open in the fourth quarter of this year, plans to recruit 215 full-time staff, the hotel’s general manager Dominque Berhouet told local Chinese-language newspaper Macao Daily News. Saying that the low unemployment rate in Macau remains the biggest challenge in running this new city hotel, Mr. Berhouet noted that it will host two recruitment fair sessions in the coming month in the hope of attracting more local employees.

A member of the InterContinental Hotels Group, Crowne Plaza Macau, situated at the Residencia in Areia Preta, is positioned to attract high‑end business travellers, Mr. Berhouet told the newspaper.

The location at the Residencia is just minutes from the busy immigration checkpoint at the Border Gate, and is also opposite the artificial island, where the Hong Kong-Zhuhai-Macau Bridge will make landfall.

S.L.

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September 22, 2014

Macau

Air Macau highlights lack of local resources The Macau company has celebrated its 20th anniversary; in his speech, the Chairman of the Board of Directors, Zheng Yan, explained that one of the challenges for the company is the lack of local resources in Macau João Santos Filipe

jsfilipe@macaubusinessdaily.com

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ir Macau celebrated its 20th anniversary last Friday in the Sheraton Hotel, where the Chairman of the Board of Directors, Zheng Yan, stressed that one of the challenges for the coming years is the lack of local resources in Macau.

“Air Macau faces several new challenges of an increasingly competitive market and the lack of local resources market”, Zheng Yan said. “We deeply recognise that Air Macau’s development depends on the development of Macau. Air Macau’s prosperity will also depend largely on Macau’s prosperity, he added.

The Chief Executive of Macau, Chui Sai On, the Vice Chairperson of the Chinese People’s Political Consultant Conference, Edmund Ho Hau Wah, the Secretary for Transport and Public Works

of Macau, Lau Si Io, and the Executive Director of Air Macau and MGM China, Pansy Ho, among others, attended the event.

However, during the celebrations of the 20th

anniversary, Zheng Yan did not forget to mention the tough times the company faced in 2008 when it risked bankruptcy.

“During the fiscal year of 2008, operating revenue

Air China posts 55pct plunge in profits Sara Farr

sarafarr@macaubusinessdaily.com

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ir China Ltd has posted a RMB510 million (MOP662.9 million, US$83 million) profit for the first half of the year, down 55.4 percent from the same period a year earlier.

This was primarily because the airline faced ‘a complex and volatile economic environment both internationally and domestically,’ the company said in its interim report filed with the Hong Kong Stock Exchange on Friday. Nonetheless, Air China’s chairman Cai Jianjiang said that his airline had “proactively met [the] challenges by continuously pushing forward several strategic priorities and adjusting operational and sales tactics in a timely fashion.”

Passenger and cargo transport business recorded an operating profit of RMB2.3 billion for January to June, up 64.3 percent from the corresponding period a year earlier.

However, Air China posted a net exchange loss of RMB721 million.

“The exchange rate volatility of the renminbi against the US dollar was the primary factor that led to the overall decline of our first half results,” Mr. Cai said in the interim report.

The number of flights to and from Air China’s Macau, Hong Kong and Taiwan segment totalled 17,416, up 9.9 percent from that of the same period a year earlier. In addition, revenue per passenger kilometre

(RPK) – a measure of the volume of passengers carried by an airline – for this segment also increased 16.4 percent to 3.4 billion. Overall RPK was 75.1 billion, representing a 10.5 percent increase from the first six months of 2013.

There was also an increase in demand for domestic travel around mainland China; in particular, the central, western and northeastern parts of the country, which continued to grow at a faster pace than the eastern region. “Enthusiasm for outbound travel remained high and the market for international passengers continued to be strong, although some regions and aviation routes faced increased operating pressures,” Mr. Cai said.

Air China holds 66.9 percent equity interest in the SAR’s flagship carrier Air Macau, which registered a turnover of RMB1.34 billion for the first half of the year, a slight increase of 1.8 percent on the same period a year ago. Of this, RMB1.3 billion accounted for air traffic revenue, a 27.8 percent increase year-on-year.

In addition, Air Macau posted RMB21 million profit for the first six months of the year, a 72 percent drop over that of a year ago.

Air China also holds equity in Shenzhen Airlines, Beijing Airlines, Dalian Airlines, Air China Inner Mongolia, Cathay Pacific Airways, Shandong Airlines and Tibet Airlines.

slumped significantly and recorded enormous losses; Air Macau was facing the threat of bankruptcy then”, he said.

“With the unwavering support rendered by the Government of Macau and major shareholder

China National Aviation Corporation, Air Macau has successfully performed capital injection and two times capital restructuring. Through their effective measures, it has not only revamped our overall operational situation but established a concrete foundation for Air Macau’s future development”, he explained.

Air Macau’s Chairman also praised the National 12th Five-Year Plan development by the Central Government and how it had succeed in enabling Macau to progress.

“In recent year, Macau has experienced great economic growth, especially with the implementation of the National 12th Five-Year Plan to promote Macau as a world tourism and leisure centre; this has offered remarkable development opportunities for Air Macau”, he said.

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September 22, 2014

Macau Brought to you by

HOSPITALITY Travels in Asia Given the intensity of economic exchanges, it is likely that some trips between Macau and the other three regions in Greater China will involve some kind of business purpose. We don’t have sufficiently detailed data to account for such differences and to determine exactly how leisure travel patterns are evolving, or how much overlap there is between leisure and business travel.

However, the issue is likely to be less of a problem for other major destinations in Asia such as Japan, South Korea and the five top South-East Asian countries. We can reasonably assume most of these trips are made for leisure purposes. Their share in the total number of trips made has been decreasing but that result stems mainly from the strong rise in travel to Greater China. They still represent a significant share of the total – about 14 percent in the first seven months of the current year – and the absolute figures have been actually growing. The chart compares the total number of trips arranged by travel agencies for local residents between January and July in 2010 and 2014.

Three features become immediately clear. First, there was a significant growth in the total number of trips, which reached 64 percent in the periods observed. Second, the growth is concentrated in three countries – South Korea, where figures went up more than 2.5 times, and Singapore and Malaysia, both showing increases in excess of 77.5 percent.

Third, the other figures are mostly unchanged (Japan) or refer to a much fewer number of trips (Thailand, Vietnam, Philippines). The latter figures are likely to reflect the ease with which travellers can organise their own trips through other channels.

4,543

residents’ trips to S. Korea, monthly average, Jan-Jul 2014

Despite the potential, there’s still no art market in Macau, says gallery owner In an interview with Business Daily, the director of Iao Hin Gallery, Florence Lam, says that currently they’re nurturing the market in order to develop art into a business. Despite the support of the government and the favourable environment, the expert believes that the art market in Macau is still very much in its infancy. Florence Lam also underlines the gap between the number of exhibitions and potential buyers in the territory, meaning concerted efforts have to be made in terms of marketing, public relations and customer service Luciana Leitão leitao.luciana@macaubusiness.com

Photo by Manuel Cardoso

Is there an art market in Macau?

That’s hard to answer. From the perspective of a commercial business, sometimes you have to create that market. The market may not yet exist but there is potential to build and nurture that market.

And that’s what we’re doing.

Why is there only a potential market?

Many people think the government is behind this industry and it’s always good when you have government support because the government can create the macro environment suitable for the industry. The second point is that through our operations in the past two years as a gallery we believe there is potential.

Have you noticed an increase in the number of collectors visiting Iao Hin to buy art over the past two years?

Most of the buyers, I wouldn’t call them collectors yet; there are professional collectors in Macau but our customers are not professional collectors.

They are buyers interested in art or nice, tasteful things. Probably, there are professional collectors, with the economy and the new wealth, but those collectors may not be after the art we are presenting. They may be after some antique or other form of art, not necessarily the contemporary art we’re doing.

The buyers that we’re trying to get are expatriates; they’ve been in Macau for many years, they’re settled in Macau, they have reached a certain stage in life and most of the time they are more educated, more able to comprehend what we are selling.

What’s the difference between buyers and professional collectors?

Professional collectors collect sensibly, so they have a strategy and they know what they want.

That’s the way I perceive it; they understand the art market, they know the artists, they will try

to find out much information to justify the purchase. These types of collectors are quite different from the buyers that we have at the moment. Buyers, when they look at a painting, they think it’s nice and they can afford it, it’s nice to have it in the house and they don’t think about collecting sensibly any work from this artist. Collectors usually collect work from different stages of one artist or one particular style of art work.

How about the local Chinese population; are they buying art?

The local Chinese are a little bit slow at the moment but we’re trying to make the connection; for example, casino executives or in the gambling industry. But then still a lot of time they are not the traditional Chinese. They’ve lived abroad, they’re open-minded and they’re intellectually able to perceive what we’re going to tell them.

Difficult business Iao Hin is one of the very few art galleries in Macau. Is it still a difficult business in Macau?

It is difficult.

Going back to the question about whether the market exists, it’s not there yet but we’re nurturing the market. Nowadays, they’re talking about how to make local art into an industry; there must be a commercial component so that you can convert art into a business.

And we are there, involved in this conversion.

There are always many exhibitions around Macau — there’s always an opening for an exhibition. But then there seems to be a gap with the general public or the buyers or the people willing to buy. That’s where we are now; we’re at the stage of creating or nurturing a market, so that you can call it an industry.

We’re in the process of converting local art into a business, so the market is not there but we’re trying to build it.

The market may not exist yet but there’s potential to build and nurture that market

Why does that gap between the existing exhibitions and potential buyers exist?

There’s a gap because those exhibitions are very high in [terms of] artistic level and there’s always someone very professional curating the exhibition: but it’s so artistic that it stays at the artistic level.

To eliminate such a gap, should there be different types of exhibition or, instead, should the responsible entities be educating potential buyers?

Both. The other organisations related to the arts are doing what they’re supposed to do, there’s nothing wrong with them. But when everybody, including the government, is talking about an industry there must be a commercial component in all the activities that you do, including marketing, public relations, customer service, everything - the way you brand yourself.

The events You mentioned that Iao Hin has been organising exhibitions and events to nurture this art market.

What kind of events have you organised so far?

7

September 22, 2014

Macau

We had a Jacques Le Nantec exhibition, a French sculptor residing in Macau. It was really an honour to work with this artist because he has been quiet for the last 10 years just because he didn’t find anyone that would be good to represent him. So, it was really an honour that he felt the relationship we had established was comfortable and the trust was there for the cooperation to happen. So, we had the bronze sculpture exhibition, which was very well received in terms of number of visitors and general interest, although maybe not in terms of sales. Sales aside, it created attention for the gallery and it shows we are able to build relationships - even with artists that have a strong personality and are more independent.

After Jacques, we had Pedro Besugo. It was his second show, but once again, through Pedro Besugo, we were able to make the connection with a particular community in Macau. Pedro is a Portuguese artist, just travelling in Macau, with no intent to stay.

Through Pedro, it delivered that impact of drawing attention.

Through the opening and the [exhibition-goers] visiting the show, we were able again to expand our network and our connections. In a small place like Macau, connection is quite important. Word of mouth works better than spending money on advertising or any method of marketing. The gallery business is very much a people business.

Talking about selling art, the key point is building that relationship, knowing your customer; we rely a lot on building relationships, and that’s one of our assets at the moment.

mean that in artistic terms he’s not good. He may be very good but it might just be that this kind of image is not the art we want to show.

We’re in the process of converting local art into a business, so the market is not there but we’re trying to build it

But you intend to also organise other types of event, such as an art auction event?

That’s still a thought to implement.

We’re not ready to [organise] it yet but we think it’s possible. It’s one of the ways to nurture the market, to get people interested in art, to make it fun. It can be fun, a way to socialise. People go to openings for social reasons; you don’t have to go to buy art. The people we’re targeting are not professional collectors, they come here because they feel good.

What are your criteria for choosing the artists that you showcase in your gallery?

There are no criteria — it’s absolute instinct. Once again, the same as our customers, our choice is very much based on human feelings. You look at examples of artwork and you think ‘That’s exactly what I want to show to my customers, to share with my friends’. Sometimes, if we turn an artist down it doesn’t necessarily

More local artists Do you preferably target locallybased artists or not necessarily?

No. One thing to highlight is that all we’re doing right now is for the good of the local artists, that’s behind everything that we do. We try to bring one overseas artist and the next show will be a local and then another overseas and another local. Sometimes, in the same show we try to put overseas with local artists. The reason why we bring the overseas artists is to have that clash, to have that excitement.

People are used to, especially the exhibition-goers, the same style of art but we bring the overseas artists to create an excitement.

Sometimes, we’re using that as leverage to create the market, so people will start listening to you when you tell them about local artists. Get them interested in art in general first. You have to break the ice, you try to have something exciting first, so that they listen to you when you tell them about local artists. That’s the reason why we have to bring the foreign artists, to make art interesting art, before they look at the local ones.

Have you seen an evolution in the work of local artists over the past two years?

I don’t have the qualifications to judge the status of local artists. In artistic terms, I’m not qualified to say that. But I see many young artists emerging and they have this enthusiasm, and they still have this persistence that they

have to pursue their artistic career.

But because of the overall macro situation of the art, they stay in this sort of stagnant water, so they do exhibition after exhibition after exhibition, and they might have a teaching job. We want to create something new.

Has business been good for Iao Hin gallery over the past two years?

There’s a steady growth, good enough to keep going, but it’s not easy. It’s been difficult. The team is very small. The effort that we’ve been putting into the business is enormous, so it’s a steady growth and we’re expanding through word of mouth, we’re getting better contacts. And this unique group of people who are following us and watching closely what we’re going to do next, that’s a good sign. It’s definitely growing as a gallery in terms of the artist’s work — in terms of the artists contacting us, in terms of the database and the quality of the database. But there’s still a lot of work [to do], the market is not stable, it’s right at the beginning, but it’s good enough to keep going.

Iao Hin currently has two venues.

Are you thinking of opening a third?

No. From a business perspective, it’s not possible to open a third one and it’s not wise. We are just building up here, as a location in Rua da Tercena, in the old part of Macau, and then we have an industrial building that takes a lot of resources to convert into a presentable showroom. We don’t have a fixed budget, so we just have to focus on the locations that we have and it’s enough for now for the scale of the business. I don’t see why we have to expand.

8

September 22, 2014

Macau

Steve Wynn in Macau tomorrow

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merican gaming mogul Steve Wynn arrives in Macau tomorrow, where he will hold a seminar at the new campus of the University of Macau.

In a seminar on the current and future impact of tourism in Macau, he will address students and professors from the Faculty of Business Administration of the University of Macau tomorrow afternoon.

Wynn Macau already has two hotels here – Wynn and Encore – and is preparing for another on Cotai, where all gaming operators either have or are on the verge of opening a property.

The new property – Wynn Palace - is a US$4 billion investment project slated to open in mid-2016.

Wynn Palace will include 1,700 rooms, a dozen restaurants, a spa,

shopping area and a nightclub as well as a convention and exhibition area. Mr. Wynn said his newest property would also focus on generating revenue from its nongaming segment.

Last year, Macau welcomed 29 million visitors, and in the first eight months of the year gaming revenues reached MOP250.4 billion, an 8.1 percent increase compared to that of a year ago.

In the month of August alone, casinos raked in MOP28.9 billion, a 6.1 percent drop year-on-year, marking the third straight month of decline in revenues after a 3.6 percent drop in June and a 3.7 percent fall in July. Nevertheless, in August Wynn ranked fifth amongst gaming operators here with a market share of 10 percent.

Wynn Resorts has already spent a quarter of its total budget for Wynn Palace. In its recent second quarter results conference call with investors in July, Mr. 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.”

Public approves of ‘cabby sting operation’

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ransport Bureau director Wong Wan revealed that the Bureau had received some 110 opinions from the public consultation reviewing current taxi regulations.

The director said when attending a radio show of local media outlet TDM – Macau Forum – that the public approve of extending the supervision of taxi drivers and do not oppose introducing the ‘sting operation’ in the amendments. However, some members of the public requested the Bureau to elaborate more on the details of in-cab radio recording and law enforcement officials, the director revealed, claiming that the means the officials use to collect evidence [of taxi drivers breaking the laws], such as in-cab radio, must be strictly monitored to balance privacy with fair enforcement.

9

September 22, 2014

Gaming

Gaming revenues Government: Strict checks to drop 15 pct in 4Q on smoking areas Deutsche Bank has revised down even further its recent estimation of a 7 to12 percent decrease in revenues for the last three months of the year. VIP segment is to fall 30 percent in 4Q and October is likely to be the year’s worst month with revenues diving 18 percent, the bank predicts Luís Gonçalves

Luis.goncalves@macaubusinessdaily.com

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hen you think it couldn’t get worse, it does. And fast. The remaining months of the year are poised to be painful for the gaming industry in Macau, especially for its stocks. Investors are revising their estimations for the next quarter almost every week and always in the same direction - down. From flat revenue growth to low single-digit drop to high-single digit decrease and now into a double-digit decline. All this in less than two months.

Deutsche Bank has decided to revise down its estimations for Macau’s gaming industry. They now predict that casino revenues in the fourth quarter will decrease here by 15 percent compared to a year ago, down from a recent estimate of a 7 to 12 percent decline.

The German bank says the market consensus on Macau – that expects a single digit drop in 4Q and low single digit growth for all 2014 – is too optimistic given current trends and some upcoming events whose impact is ‘harder to quantify’; namely, the smoking ban in October, a visit

by China’s president Xi Jinping in December and some recent negative headlines from media that could affect the morale of gamblers and investors alike.

The 15 percent drop in gaming revenue for 4Q advanced by Deutsche Bank implies soft growth by the mass segment of 10 percent year-on-year and a decline of 29 percent in gains coming from high-rollers. The report also states that it is expecting VIP

players to be responsible for 54 percent of all gaming revenues in Macau with the rest (46%) coming from mass tables. ‘While the evolving mix is certainly favourable for margins, we hesitate to get overly optimistic given the fixed cost base and promotional nature of mass when thinking about operator margin expansion’, wrote the gaming analysts from the Germany’s biggest bank.

The ride for casino operators in the last three months of the year is likely to be bumpy, with stocks listed in Hong Kong suffering the most. Deutsche Bank says gaming revenues in Macau will plummet – on a year-on-year basis - by 18 percent in October, 12 percent in November and 15 percent in December.

Deutsche Bank likes to use a twoyear stack comparison when looking through Macau’s figures but even adopting this approach the slowdown is evident. Gaming revenues in the fourth quarter compared to the same period in 2012 will increase by 9 percent. That’s an underperformance compared to the previous quarter. In the first quarter, revenues went up 35 percent (compared to 2012), in the second quarter 21 percent and in the third they are likely to go up 11 percent.

Deutsche Banks now expects that gaming revenues in Macau for all 2014 will stay flat (a marginal decline of 0.4 percent) compared to last year.

For 2015, revenues are expected to recover with a growth of 2.6 percent pushed by the start of new openings in Cotai that – hopefully - will bring more gamblers as well as capacity to Macau.

Ultimate Gaming quits N.J. following partner’s bankruptcy

U

ltimate Gaming, the first company to legally offer online poker in the U.S., is quitting the New Jersey market following the bankruptcy of Trump Taj Mahal, its land-based casino partner in Atlantic City.

The unit of closely held Station Casinos LLC, which is based in Las Vegas, has terminated its online gaming agreement with the casino ‘due to multiple breaches’ after it filed for Chapter 11 protection, according to an e-mailed statement today. Ultimate Gaming said it will continue to offer online poker in Nevada.

New Jersey legalised Internet gambling last year in an effort to create new revenue and marketing opportunities for casino owners.

Under the agreement, online operators were required to keep their computer servers in an Atlantic City casino.

Since then, online gambling revenue has failed to meet expectations and five of the city’s 12 casinos have closed or said they will close this year.

Atlantic city has also been hurt in recent years by increased competition in neighbouring states.

Trump Entertainment Resorts Inc., the casino company founded

by Donald Trump and the parent of Trump Taj Mahal, filed for bankruptcy court protection on September 9. The company said it may have to close Trump Taj Mahal in November.

Station Casinos, led by Las Vegas’s Fertitta family, was the first to offer online poker in Nevada last year.

Bloomberg

T

he government said last week that it would make its checks of the smoking areas on the mass gaming floors in casinos strict.

Last Thursday evening, the Health Bureau released a press statement regarding the local labour unions’ complaint about casinos converting part of their mass gaming floors to high limit areas. The Bureau stressed that it would strictly follow the related regulations when conducting the acceptance check with the Gaming Inspection and Coordination Bureau (DICJ), the Land, Public Works and Transport Bureau and the Fire Service Bureau.

‘From October 6, if casino smoking rooms on mass gaming floors cannot meet the regulations, then such mass gaming area will be completely banned from smoking until its smoking rooms pass the acceptance check and [gain]

the approval of the Bureau, while the smoking area in VIP areas will also have to meet the regulations,” the Bureau wrote.

The Bureau press release indicated that DICJ has a clear definition of what constitutes VIP rooms and mass gaming floors in casinos. In addition, it requires a physical separation between the smoking area and non-smoking area.

Last week, local labour union Macau Gaming Enterprises Staff Association accused several casinos - namely, those in Venetian Macau, Sands Cotai Central, StarWorld Hotel and Wynn Macau – of exploiting a loophole in the new law by establishing high limit areas on mass gaming floors in order to soften the impact of the new regulation – banning smoking on mass gaming floors. MGM Macau was also complained about by its workers on the same issue.

10

September 22, 2014

China

A hand-out picture provided by the New York Stock Exchange (NYSE) shows executive chairman Jack Ma (inner circle, 2-L) joined by Alibaba executives and NYSE CEO Tom Farley (inner circle, R)

Alibaba accomplishes massive demand in market debut The pricing of the IPO on Thursday initially raised US$21.8 billion for Alibaba

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bout 100 people gathered outside the New York Stock Exchange at Wall and Broad Streets, many of them Chinese tourists with cameras, and they cheered and snapped photos when Ma exited the building with the kung fu star Jet Li It was an auspicious debut for the Chinese e-commerce company, which was founded by Jack Ma in his apartment in 1999 and now accounts for 80 percent of online sales in China.

The stock opened at US$92.70 shortly before noon and quickly rose to a high of US$99.70, before paring gains to close at US$93.89. Some 271 million shares changed hands, more than double the turnover on Twitter Inc.’s first day last year, although still short of volume for the General Motors Co and Facebook Inc. IPOs. “This is the most anticipated event I’ve ever seen in my 20-year career on the floor of the NYSE,” said Mark Otto, partner with J. Streicher & Co, who trades on the NYSE floor. “I think today’s move is sustainable: The company is profitable, unlike some of its competitors, and it is a way for traders to tap into the Chinese growth story.”

The pricing of the IPO on Thursday initially raised US$21.8 billion for Alibaba. Scott Cutler, head of the New York Stock Exchange’s global listing business, told CNBC that underwriters would exercise their option for an additional 48 million shares, to bring the IPO’s size to about US$25 billion,

making it the largest initial public offering in history.

But a source close to the matter said the underwriters would make a final decision on whether to exercise the option over the next week or two, based on how the shares trade over the next few sessions.

Alibaba is nearly unknown to most Americans but is ubiquitous in China.

The company, which operates China’s largest Internet shopping destination, Taobao, and retail site Tmall.com, earned US$3.7 billion in the 12 months ended March 31, 2014, up about US$2 billion from the prior 12-month period.

At its closing share price on Friday, Alibaba has a market value of US$231 billion, exceeding the combined market capitalizations of Amazon and eBay, the two leading U.S. e-commerce companies.

Alibaba is valued at 39 times its estimated earnings per share for its current fiscal year, which ends in March.

That is right in line with Facebook’s valuation of 39 times forward earnings but nowhere near the lofty valuation of Amazon.com’s multiple of 264, according to Thomson Reuters Starmine data.

Stock’s future Ma, a former English teacher who is now the company’s executive chairman, boasts a personal fortune of more than US$14 billion on paper, vaulting him into the ranks of such tech billionaires

This is the most anticipated event I’ve ever seen in my 20‑year career on the floor of the NYSE Mark Otto, J. Streicher & Co trader

as Bill Gates and Jeff Bezos. The deal is also expected to make millionaires out of a substantial chunk of Alibaba’s managers, software engineers and other staff.

The rise in the stock exceeds the average gain by new IPOs on U.S. exchanges of late. In the second quarter, the average first-day gain was 9.2 percent, according to Renaissance Capital IPO Intelligence. Underwriters usually aim for a gain of 10 percent to 15 percent on the first day.

Twitter last year saw its shares surge 73 percent on their first trading day.

Demand was intense among retail investors. J.J. Kinahan, chief market strategist at retail brokerage TD Amer-

itrade Holding Corp, said the company received customer orders amounting to about 70 percent of what it saw for Facebook and about three times the customer orders it had for Twitter’s IPO. Assuming underwriters elect to sell additional shares, the company’s initial public offering will become the largest in history, surpassing listings by Agricultural Bank of China Ltd.’s in 2010 and by ICBC, another Chinese lender, in 2006.

What happened in Hong Kong Alibaba Group’s orange banners were festooned around the exchange, with its logo on NYSE computer screens.

Ma watched several long-time customers ring the opening bell at 9:30 a.m.

“I don’t want disappointed shareholders, I want to make sure they make money,” Ma said of the pricing, on CNBC, adding that he worries most about keeping customers happy.

Similar euphoria greeted Alibaba. com when its stock debuted on the stock exchange in Hong Kong in November 2007 on the eve of the global financial crisis. The stock more than tripled on day one, but five years later Ma delisted the company at the IPO price after failing to impress investors.

The NYSE held extensive tests ahead of the hotly anticipated offering to ensure it would be able to handle heavy trading volume.

Reuters

11

September 22, 2014

China SoftBank opens Alibaba’s 500-billion yen cave Toru Fujioka Japan’s SoftBank Corp. forecast a gain of about 500 billion yen (US$4.6 billion) from Alibaba Group Holding Ltd.’s listing on the New York Stock Exchange.

SoftBank, the biggest shareholder in the Chinese e-commerce company, plans to book the gain in the sixmonth period ending September 30, the company said in a statement in Tokyo.

Alibaba, whose rise has mirrored China’s economic emergence, became one of the most valuable companies traded in the U.S. after its shares surged 38 percent to US$93.89 apiece in their debut.

Alibaba’s IPO is a step toward global expansion, Masayoshi Son, chairman and chief executive officer of SoftBank, said on Bloomberg Television’s “Market Makers.”

SoftBank didn’t plan to sell shares and will have a 32.4 percent stake after the offering, according to the prospectus.

SoftBank said it will announce the precise size of the gain once it’s verified. The windfall was generated by the issuance of new Alibaba shares and conversion of convertible shares into ordinary stock as the listing took place, SoftBank said.

Bloomberg News

Jack Ma (C), the founder and executive chairman of Alibaba, rings a ceremonial bell on the floor of the New York Stock Exchange (NYSE) during the first trading of shares

Employees of Chinese online commerce company Alibaba pose within a framed sign at Alibaba offices in Hangzhou City of Zhejiang province

Alibaba vs the US vanguard Alibaba Group Holdings Ltd shares surged by as much as 47 percent in their first day of trading on Friday as investors snapped up shares in what is likely to rank as the largest initial public offering in history.

The IPO, which vaulted Alibaba founder Jack Ma into the ranks of tech billionaires like Bill Gates and Jeff

Bezos, sets the stage for the Chinese e-commerce juggernaut to expand in the United States, Europe and Asia.

Alibaba’s closed price of US$93.98 gave the company a market cap of US$231 billion.

The following is a comparison with major U.S. Internet and e-commerce rivals:

Alibaba

Facebook

Google

US$8.4 bln*

US$7.87 bln

US$59.83 bln

52%

55%

19%

279 mln

1.3 bln

N/A

US$30.32*

US$2.14

N/A

20,884

6,337

47,756

US$231 bln

US$200.2 bln

US$401.3 bln

Alibaba

Amazon

eBay

US$8.4 bln*

US$74.45 bln

US$59.83 bln

52%

22%

14%

279 mln

237 mln

128 mln**

Revenue per user

US$30.32*

US$125

US$314.14

Gross merch. value

US$296 bln

US$121 bln

US$83.33 bln

20,884

117,300

33,500

US$231 bln

US$150.2 bln

US$65.41 bln

2013 revenue 2013 revenue growth Users Revenue per user Workforce Market value

2013 revenue 2013 revenue growth Users

Workforce Market value

Note: Alibaba’s figures are drawn from its IPO prospectus and market data. Data from other companies came from official filings or analysts’ estimates. * Alibaba results for the 12 months ended March 31, 2014. All other companies use 2013 calendar year. ** Excludes PayPal users, many of which are also eBay customers.

Reuters

About 1,000 sellers of Aliexpress get together in a meeting organized by Alibaba Group in Yiwu City of Zhejiang Province. AliExpress is another one of Alibaba’s e-commerce platforms for marketing wholesale products at factory prices

A picture made available on 17 September 2014 shows Chinese student Duan Peng running online shops on Alibaba is on duty in front of the computer, answering customers questions while having lunch in the School of Entrepreneurship of Yiwu Industrial and Commercial College Yiwu city, Zhejiang Province

One of Alibaba’s brand-name retail sites, Tmall shop, owner Meng Lili is putting the kids to bed while attending to customers online, as a banner featuring Alibaba’s founder Jack Ma is seen outside, in Wantou Village, Binzhou City of Shandong Province

12

September 22, 2014

Asia

India’s jet-set tycoons crash

NZ PM credits handling of economy Some of the best-known tycoons are surprisingly crumbling New Zealand Prime Minister John Key YESTERDAY said his steady handling of the fragile economy was the “overwhelming” reason for the centre-right National Party’s historic third election victory. “They saw the economic direction we wanted to continue to take the country in and the things we have achieved over the last six years,” he said, pledging to hold the same steady economic line. It was important for the party to remain grounded and not succumb to “arrogance”, he said.

Last chance to conclude TPP negotiations Singapore Prime Minister Lee Hsien Loong said on Saturday that this year would be the last chance for the ambitious Trans-Pacific Partnership (TPP) negotiations to be concluded. “If we don’t fulfill our promise this year, it will be running into the American presidential elections in two years’ time. I think there’s...further delays of an indefinite nature,” the prime minister told business leaders, government officials and diplomats at the Singapore Summit. He said that the countries will have a lot to lose given that it is an ambitious pact that brings together the different economies.

Carmakers into real estate bid Hyundai Motor and two listed affiliates did not seek board clearance for the size of their record US$10 billion bid for a plot of land in Seoul, more than triple its appraised value, four board members of the companies told Reuters. Thursday’s winning bid for the land sent shares in Hyundai Motor, Kia Motors and Hyundai Mobis plunging, wiping out US$8 billion in shareholder value, and sparked howls of protest from investors, rekindling worries about corporate governance at South Korea’s conglomerates, or chaebol.

Sunway to list construction unit

by Q2 2015 Malaysian property developer Sunway Bhd is looking to list its construction arm on the Malaysian bourse by the second quarter of 2015, according to a stock exchange filing on Friday.

The spin off and proposed listing on the main market of Bursa Securities will enable both entities to focus on growing its respective businesses of property development and construction, Sunway said. Sunway plans to inject its wholly-owned unit Sunway Construction into Sunway Construction Group (SCG) Bhd, which will list its entire issued and paid-up share capital of US$80.1 million comprising of 1,292.9 million shares on Bursa.

Aditya Phatak

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hey were famed for their jet-set lifestyles and the names of their companies were emblazoned on airplanes, Formula One cars and the shirtfronts of cricket teams.

But now the debt-laden empires of three of India’s best-known tycoons -Vijay Mallya, Subrata Roy and T. Venkattram Reddy- are crumbling before their eyes, downfalls that observers say stem from a climate of weak regulation and deference to conspicuous wealth.

Some of India’s most successful businesses, such as the family-run Tata and Reliance conglomerates, have been led for years by men with little appetite for publicity and who prefer to operate in the shadows.

But Kingfisher boss Mallya and Sahara supremo Roy came to epitomise a new breed of tycoon, unafraid of trumpeting their achievements when they started making a name for themselves in the early 2000s.

Mallya -the self-styled “King of Good Times”- became something of an icon as he turned the United Breweries Group which he inherited from his father into one of the world’s largest spirit makers.

As his core business flourished, Mallya branched out by launching the Kingfisher airline, named after his company’s best-known beer. His profile rose further when he acquired a stake in the Force India F1 team and ownership of the Royal Challengers Bangalore cricket team.

Selling hotels for bail But as the Indian economy began to slow sharply at the turn of the decade, with the aviation industry becoming one of the sectors to be worst hit, Mallya’s fortunes nosedived too.

After selling the liquor business to Diageo in a bid to shore up his airline, Mallya looked on helplessly as Kingfisher continued to haemorrhage cash. The airline never took to the skies again after a pilots’ strike over unpaid wages in 2012.

Having run out of patience over Mallya’s failure to clear debts said to be in excess of US$60 million, the United Bank of India this month declared him a “wilful defaulter”, making it nigh impossible to access fresh loans.

All too often, the banks are dazzled by the halo of personal fortunes Vishwas Utagi, campaigner for banking regulation

While Mallya is fighting to keep his properties from creditors, Roy is trying to sell his portfolio of luxury hotels -including New York’s Plaza Hotel and the Grosvenor House in London- to raise the US$1.6 billion he needs to secure bail from Delhi’s Tihar Prison.

While he has several media interests, including a Hindi TV

S. Korea finmin wants harmony on expansionary policy The Bank of Korea cut its policy interest rate by 25 basis points to 2.25 percent in August, a decision seen as influenced by Choi

S

outh Korea’s finance minister said he is pursuing expansionary fiscal policy to lift economic growth to about 4 percent next year, and said it would be best if the central bank adopted a similar policy stance.

In Cairns for a Group of 20 meeting of financial officials from leading economies, Choi Kyung-hwan also urged major countries to avoid the “timidity trap” of failing to deliver decisive action to counter sluggish growth.

“I am of the view that globally the major economies have to implement more active policies to promote growth,” Choi told Reuters in an interview on Saturday.

“We are now seeing low growth and low prices throughout the world, and we have to try and overcome such a situation.”

Since being appointed finance minister in June, Choi has repeatedly warned of the risk that South Korea could fall into a long, Japan-style slump and has introduced multi-billion-dollar

South Korean Finance Minister Choi Kyung‑hwan (R) meets with Christine Lagarde, managing director of the International Monetary Fund (IMF), in Cairns, Australia

stimulus measures.

“The Korean monetary authorities have recently undertaken a rate cut to be in line with the government’s expansionary fiscal policy,” Choi said.

“They should also keep closely monitoring the economic circumstances and... it would be best if we could have harmony between the expansionary fiscal policy and monetary policy.”

The Bank of Korea cut its policy interest rate by 25 basis points to

2.25 percent in August, a decision seen as influenced by Choi. It kept the rate unchanged at the September 12 meeting but investors and analysts see a considerable chance of a further cut as early as next month.

Choi plans a 5.7 percent increase in government spending to help spark activity in Asia’s fourth-largest economy. Recent data has shown domestic demand picking up, partly thanks to recent stimulus, with money supply growth accelerating and retail sales improving.

The Korean won has risen to near its strongest level in six years against the yen, and businesses have said the currency’s strength has hit their competitiveness and weakened export earnings.

Choi was hopeful of securing more emerging market representation on the Financial Stability Board, a key regulatory body, at the G20 leaders’ summit in November.

Reuters

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13

September 22, 2014

Asia

to earth

channel and newspaper, Roy’s profile was heightened by his co-ownership with Mallya of Force India and involvement in cricket.

As well as sponsoring the national side, Sahara set up a Pune-based franchise to enter the glitzy Indian Premier League (IPL).

The team’s expulsion from the IPL at the end of last year’s tournament in a dispute over finances hinted that all was not well.

Things dramatically worsened in March when Roy was detained after failing to meet a demand by regulators to pay back millions of small savers the US$3.2 billion that Sahara raised via an illegal bond scheme.

Palatial splendour While Roy owns homes modelled on the White House and Buckingham Palace, Reddy’s penchant is for luxury cars with a fleet which reportedly included a Rolls Royce Phantom.

He also couldn’t resist the glamour of the IPL, buying the Deccan Chargers franchise before it went bust in 2012.

While Roy’s fortune was selfmade, Reddy and his brother T. Vinayak Ravi Reddy inherited the ownership of the Deccan Chronicle from their father.

The Hyderabad newspaper’s prestige enabled them to draw loans for riskier ventures including a chain of bookstores and a chartered jet company.

Even if the cricket team is no longer sucking money, the Reddys are struggling to keep the wolf from the door and lenders have already seized several of their properties.

Tamal Bandyopadhyay, author of a book on Sahara, said a weak regulatory framework enabled tycoons to build up debts that should never have been allowed.

“Mallya is a case of overstretching and over-leveraging, while Roy is the case of exploiting regulatory arbitrage or the loopholes in regulation,” Bandyopadhyay told AFP. Utagi, a retired bank worker who is vice president of the All India Bank Employees’ Association, said there were too many “pliable people” in the industry who face little comeback if money they lend is not repaid.

“When it comes to credit appraisals for corporates, the rules are more often honoured in the breach than the observance,” he said.

Bandyopadhyay said the ambitions of Indian tycoons were rarely held in check as they were “surrounded by sycophants”.

“That makes it very difficult for them to stay in touch with reality,” he added.

AFP

S.Korea exports, imports jump The robust export and import performance, if sustained through the rest of the month, would be an important boost to the Korean economy

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outh Korean exports and imports from September 1-20 rose by nearly 10 percent each from the comparable period last year, official data showed yesterday, an encouraging sign for the Korean and global economies.

South Korean exports for the period rose 9.5 percent to US$29.748 billion and imports also grew by 9.5 percent to reach US$30.202 billion, according to data from the Korea Customs Service.

South Korea, the world’s seventhlargest exporter, publishes foreign trade data every 10 days. The figures are closely watched by investors around the world because Korea has one of the broadest networks of trading partners in the world.

The robust export and import performance, if sustained through the rest of the month, would be an important boost to the Korean economy after other recent indicators showed that domestic demand was regaining some momentum.

South Korea’s monthly exports last posted growth of more than 9 percent in January 2013, with year-on-year changes in overseas shipments ranging

from a fall of 8.6 percent to a rise of 8.9 percent in the months since then.

In 2014, exports grew an average of 2.5 percent each month over the year before as China’s slowdown more than offset the recovery in demand from the United States, while purchases

by European customers were uneven.

Yesterday’s data came a day after South Korea’s finance minister told Reuters the economy would probably recover from weakness seen in the second quarter due mainly to a slump in domestic consumption and investment.

South Korea’s economy, the world’s fourth-largest, slowed to quarterly growth of 0.5 percent in the April-June period -the weakest in nearly two years- after a deadly ferry sinking that killed more than 300 people hit a range of domestic businesses.

The customs agency did not provide details such as figures by market or industry. China is South Korea’s largest export market, taking in a quarter of its smaller neighbour’s global exports, followed by the United States and the European Union.

Nissan defections reignite questions about future CEO The current chief executive, 60-year old Carlos Gosh, has only said that the decision was up to shareholders

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string of defections by top Nissan executives is reigniting longstanding questions about who will succeed chief executive Carlos Ghosn, the man widely credited with reinventing Japan’s number-two automaker.

Speculation about Nissan’s future hit a fever pitch earlier this month after the resignation of Andy Palmer, a widely respected Ghosn lieutenant.

We’ve been as successful as any manufacturer has to attract top talent to the organisation Jeff Kuhlman, Nissan’s vice president of global communications

Carlos Gosh, Nissan’s CEO

That followed the July departure of Johan De Nysschen, who led Nissan’s Infiniti luxury brand, to become the head of General Motors’ Cadillac unit, while Carlos Tavares quit the Renault-Nissan alliance last year to run French rival PSA Peugeot Citroen.

The resignations brought into focus renewed concerns about who Ghosn would install at the top when he decides to step down from Nissan and his dual role as head of Renault, following a management reorganisation last year.

Nissan -which makes the Altima sedan, X-Trail SUV and Leaf electric vehicle- has aggressively lured top talent under Ghosn, who came to Nissan in 1999 as chief operating officer.

He was dispatched by Renault after the French firm

Reuters

took a stake in the Japanese automaker which was then on the brink of bankruptcy.

Nicknamed “Le Cost Killer”, Ghosn, one of a handful of foreigners to lead a Japanese firm, embarked on aggressive cost cutting and won kudos for resuscitating the company’s battered balance sheet.

Nissan is unique among most Japanese firms, including rival Toyota, where executives are usually promoted internally, and tend to stay for life, said Barclays auto analyst Tatsuo Yoshida, a former Nissan employee.

The company shrugged off the departures, and pointed to the hiring this month of Renault executive Philippe Klein -who had previous stints with Nissan- to replace Palmer as chief planning officer.

It also brought on BMW executive Roland Kruger as head of Infiniti, which has struggled against other top-end brands including Mercedes and Toyota’s Lexus brand.

A source, who asked not to be named, said Ghosn has a succession plan but won’t make it public to avoid creating “distractions” at the company.

But Nissan’s chief was likely to stay on until at least 2017 in a bid to put his stamp on an ambitious business plan dubbed Power 88.

The plan aims to hit an 8.0-percent global market share and 8.0-percent operating profit, up from 5.7 percent and 5.0 percent in the first quarter, respectively.

AFP

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September 22, 2014

International France wants to resolve unfair patent boxes France and other countries within the Group of 20 are pushing for an agreement to stop the unfair use of tax breaks, known as “patent boxes”, used to encourage innovative firms, Finance Minister Michel Sapin said yesterday at a G20 meeting in Cairns.

“Patent box” are tax breaks on profits generated from patented research, and have become a popular instrument used by countries to attract pioneering firms.

Critics say some governments use them to unfairly poach such companies, and obtain lucrative future tax revenue from them.

Head of Germany’s central bank criticises ECB stimulus plan The comments come at a difficult time for the ECB, just days after an offer of cheap credit to banks fell flat

The longer (these) two big countries do not create the conditions for growth and stability, the longer weakness in the euro zone will continue and with it the pressure on monetary policy

Nigeria pledges aid for power companies Nigeria’s oil minister announced a 213 billion naira (US$1.3 billion) bail-out package for power companies on Saturday, nearly a year after the sector was privatised.

Despite holding the world’s ninth largest gas reserves, Nigeria only produces a tenth of the amount of electricity as South Africa for a population three times the size, and in an effort to end decades of debilitating power shortages President Goodluck Jonathan handed ownership of the moribund state electricity company to private buyers last November.

Mexico set to achieve growth goal The Mexican economy is on track to achieve the government’s growth forecast of 2.7 percent for 2014, deputy finance minister Fernando Aportela said on Saturday. Aportela said the latest data for new jobs, industrial output and automotive production supported the government’s forecast, which some analysts have described as optimistic.

“When you look at the indicators of the Mexican economy, they show a recovery that is consistent with the 2.7 percent forecast for 2014,” he told Reuters on the sidelines of a G20 meeting of finance ministers and central bankers in Cairns.

U.S. court tosses out Argentina’s bond case A U.S. appeals court on Friday dismissed an appeal by Citigroup Inc. and Argentina of a judge’s order blocking the bank from processing payments on US$8.4 billion in bonds issued under the country’s local laws following its 2002 default.

The 2nd U.S. Circuit Court of Appeals in New York, in a brief order, declined to find it had jurisdiction because the order Citigroup and Argentina appealed was a “clarification, not a modification” of a prior decision by U.S. District Judge Thomas Griesa.

Brazilian agency corrects inequality statistic One day after announcing that income inequality increased in Brazil last year, the Brazilian statistics institute IBGE said on Friday it had miscalculated and issued a new number reversing the trend. The correction is good news for President Dilma Rousseff, who is campaigning for re-election next month on her leftist government’s record of improving social conditions in Brazil, but it left others wondering what was behind the revision.

The IBGE’s annual households study released on Thursday said wrongly the Gini coefficient, a measure of income inequality, rose from 0.496 in 2012 to 0.498 in 2013.

Jean Weidmann

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he head of Germany’s Bundesbank has criticised the European Central Bank’s (ECB) recent cut in borrowing costs and its pledge to buy repackaged debt, saying they took pressure off governments to implement needed reforms.

Jens Weidmann told Der Spiegel magazine that the moves went beyond previous attempts to encourage banks to lend more, and could free banks of risk at the cost of the taxpayer.

“In my view the recent decisions by the ECB Council (are) a fundamental change of course and a drastic change for the ECB’s monetary policy,” he said in an interview published on Sunday.

“No matter how you think about the content of the decisions, the majority of the ECB Council members are signalling with it that monetary policy is ready to go very far and to enter new territory.”

Though this is not the first such criticism of the ECB from Germany’s influential central bank, the forthright tone underscores the challenges for the ECB should it ever need to extend its programme of asset purchases to government bonds.

Jens Weidmann, head of Germany’s Bundesbank The comments come at a difficult time for the ECB, just days after an offer of cheap credit to banks fell flat, calling into question a central plank in its plans to shore up the euro zone’s flagging economy.

While economic recovery is in full swing in the United States and the central bank there has started to withdraw support, the ECB has stepped up efforts to unblock lending to firms and boost growth, for example by buying repackaged loans.

As part of its stimulus, the ECB plans to buy tranches of low-risk asset-backed securities (ABS). The central bank said it would also buy riskier tranches if governments guaranteed them, but that idea was swiftly rejected by France and Germany.

Weidmann warned that depending on the exact design of the plan, “banks could be freed of risks at the cost of taxpayers”, arguing that therefore it was key that no “significant risks of individual banks of countries should be taken on.”

The ECB should only buy assets with little risk, Weidmann said, but doubted

there was enough volume of those on the market to reach the proposed targets.

Previous rounds of cheap ECB loans for banks and borrowing costs close to zero have done little to boost lending to companies, with much of the money instead spent on government bonds.

Critics fear a similar fate for the new scheme.

Some banks were reluctant to participate in the first round of cheap credit on Thursday, possibly for fear that it could single them out as struggling just weeks before the results of an ECB-led asset quality review (AQR) and stress tests.

Weidmann reiterated he saw the likelihood of deflation as “very low”.

Asked about France and Italy, Weidmann said the euro zone would not emerge from its troubles while the two countries did not implement tough structural reforms.

Reuters

Lew limiting overseas benefits law almost ready The OECD and G-20 economies are working on plans for a global exchange of information to stop tax-avoidance strategies

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.S. Treasury Secretary Jacob J. Lew said the department is finishing work to limit the benefits companies gain from moving their addresses overseas even if his action won’t be enough to stop the practice known as inversion.

Lew, speaking to reporters today after a meeting of the Group of 20 finance ministers and central bankers in Cairns, Australia, reiterated that while the Obama administration wants to revamp the broader U.S. corporate tax code, “there is one loophole that should be shut down immediately - inversions.”

“With the pace of these deals on the rise and no clear sign of when Congress will have legislation in place, Treasury is completing its work on administrative action to use our existing authority to limit the economic benefits of inversion,” Lew said. “Administrative action cannot shut the door completely, and Congress will still need to act.”

Official portrait of Jacob Lew

The Organization for Economic Cooperation and Development and G-20 economies are working on plans for a global exchange of information to stop tax-avoidance strategies used by

companies such as Google Inc., Apple Inc. and Yahoo! Inc. Multinational companies hold an estimated US$2 trillion in low-tax jurisdictions, OECD Secretary General Angel Gurria told reporters on Saturday.

In an inversion, U.S. companies reduce taxes by moving their addresses abroad.

Finance chiefs and central bankers meeting in Cairns said following their meeting that low interest rates are contributing to a potential build-up of excessive risk in financial markets, even as monetary stimulus is needed to bolster uneven global growth.

Lew said there was an “intensified call” among the group’s members to boost domestic demand in Europe and praised what he said was progress the officials made toward “eliminating the risk that any firm is too big to fail by coming to a broad consensus” on total loss-absorption capacity of large global banks.

Bloomberg News

15

September 22, 2014

Opinion Business

wires

Remaking the money market

Leading reports from Asia’s best business newspapers

THE JAPAN NEWS

Mark Roe

Professor at Harvard Law School, is an expert on securities law and financial markets

Citibank Japan has narrowed down candidates to buy its retail banking business to four Japanese banks, including Sumitomo Mitsui Banking Corp., Sumitomo Mitsui Trust Bank and Shinsei Bank. The four candidates survived the first round of auction conducted by the unit of U.S. financial giant Citigroup Inc. on September 12. Citibank Japan will choose a winning bidder by the year-end through a second round of auction, the sources said. Citibank Japan has decided to sell the retail banking business after earnings at the division deteriorated due to protracted low interest rates in Japan.

THE NEW ZEALAND HERALD Insurers won’t play ball with insurance comparison sites that operate successfully in other markets around the world. In Britain, 90 per cent of customers have used one to get quotes on general insurance policies, a PricewaterhouseCoopers survey showed. The sites have reduced the costs of insurance premiums there and insurers’ margins have come under pressure. But attempts by former Vero chief executive Roger Bell and Richard Conway to launch a site in New Zealand have failed because New Zealand’s main insurers are not willing to share their information.

THE KOREA HERALD Thomas Piketty, whose treatise on economic equality has taken the international economic community by storm, raised the need for property renewal in South Korea where massive wealth is often inherited among a few, select conglomerate clans.

“You cannot have the same families forever. There is a serious issue of how you renew the property structure,” the French economist said in an interview Friday with Yonhap News Agency in Seoul. “It’s important to avoid extreme reproduction of inequality in the same family,” he said.

PHILSTAR Construction is expected to pick up in the second half following a slowdown in the first six months of the year, the research arm of Metropolitan Bank and Trust Co. said. “Even with the slow construction in the first half, expect new private construction activity to pick up albeit still at a slow pace in the second half as rehabilitation efforts gain momentum and given the low base come fourth quarter,” said Metrobank research analyst Mabellene Reynaldo. Latest government data showed new construction projects grew 5.3 percent to P69.9 billion in the second quarter.

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ast month, at a US Federal Reserve Bank conference on the money market, officials lamented the market’s enduring fragility. Indeed, six years after a run on the money market nearly brought the United States – indeed, global – financial system to its knees, critical risks that underpinned that crisis still have not been brought under control.

At its core, the money market serves the need of a firm or non-profit institution to store cash that it can access on a moment’s notice. A university, for example, must set aside a portion of students’ tuition payments to cover unexpected expenses. But the sum is larger than US$250,000 – the maximum that the government insures in a single account. Seeking more security for its cash, the university may turn to US Treasury bonds.

The process is simple. The university deposits the money in a bank for a short period – often just one day – with the bank providing a US Treasury bond as collateral. If the bank does not return the cash the next day, the university can sell the bond, keep the cash it is owed, and return any excess to the bank. It is almost as safe as a government-insured bank deposit.

If only universities engaged in such practices, the money market would not have grown large enough to damage the economy so deeply in 2008 and 2009.

But large businesses waiting to invest excess cash make the same types of cash deposits with banks – millions of dollars at a time – owing to the same unwillingness to rely solely on a bank’s promise to safeguard anything over US$250,000.

Moreover, ordinary savers use their cash to buy shares in moneymarket funds, which lend that

cash to financial institutions, getting long-term US Treasury bonds as collateral and promises of next-day repayment. And hedge funds park the cash that they receive from investors in the money market while waiting for promising long-term investments to arise.

In short, the money market is not just a few institutions managing a few billion dollars of cash. It is a massive multitrillion-dollar market. Indeed, it was a US$4 trillion market just before the financial crisis, with its reduction to less than US$3 trillion during the crisis disrupting real economic activity.

But the money market’s size is not the only reason for its fragility. Another problem is that banks are not the only institutions managing it.

The key to making moneymarket transactions work is the borrower’s ownership of a Treasury bond that it can offer to the “depositor” as collateral.

Given this, any sufficiently large institution with such bonds can imitate the bank’s lending role – and many non-bank institutions do, often obscured from the watchful eye of regulators. The money market thus extends well beyond the regulated banking system into so-called “shadow banking.”

The final problem is that such thinly capitalized non-banks do not just offer solid US Treasury obligations as collateral; they also provide weaker securities, such as aggregations of mortgages.

These securities are not US obligations, carry no government guarantee, and do not retain their intrinsic value in a crisis.

When a crisis erupts and lenders cannot return the cash, “depositors” prepare to sell the collateral. But while prices for US government bonds can withstand a largescale sell-off, those for mortgage

The money market’s size is not the only reason for its fragility. Another problem is that banks are not the only institutions managing it

bonds cannot – especially if, as during the recent financial crisis, the housing market is weakened. The prospect of that sell-off put the solvency of many financial institutions at risk, leading the US government to bail out the money market, the mortgage-bond market, and the infamous Fannie Mae and Freddie Mac, which backed many of the mortgage securities.

There are three ways to make the money market safer. The first is to make the institutions providing the quasi-money safer by increasing their capital. The second is to limit the total size of unregulated transactions that any one institution can conduct.

The third is to allow this kind of lending only against rock-solid

collateral, such as Treasury bonds – not mortgage-backed securities, which can lose value quickly during a crisis, requiring a government bailout. The government should decide up front which types of collateral it will guarantee in a crisis, instead of being backed into a corner when markets, institutions, and collateral that it never pledged to support are on the brink of collapse.

Money-market institutions cannot be counted on to take these systemic safety-oriented steps themselves. The transactions are too profitable in ordinary economic times, and they know that, if another crisis arises, the government will again be compelled to support the market and shore up weakened financial institutions.

It is therefore up to policymakers to reduce the financial risk that the money market generates.

But the prevalence of shadow banking institutions, which do not hold traditional bank charters and are not subject to bank regulation, complicates such efforts.

A full solution would focus on preventing all institutions from offering weaker forms of collateral. As Ed Morrison, Christopher Sontchi, and I proposed at the end of last month’s Fed conference, US regulators must change the rules to prohibit mortgage-backed and other weak securities from being used so extensively in the money market, unless the government decides up front to back them fully. The weaker collateral could be used elsewhere – just not for parking money overnight.

For that, safer securities should be required.

If US policymakers adopt this approach, the tone of the Fed’s next money market conference could be much more optimistic.

Project Syndicate 2014

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September 22, 2014

Closing Nuclear power essential for Japan’s new minister

Britain’s Labour party promises higher minimum wage

Japan would find it difficult to formulate an energy policy without nuclear power given its lack of energy resources and the high cost of utilities for companies and households, the country’s new trade minister said yesterday.

Yuko Obuchi, the daughter of a former Prime Minister Keizo Obuchi, was appointed minister of economy, trade and industry (METI) earlier this month. It is expected that she will help prepare public opinion for the resumption of operations at nuclear power plants that were suspended in the wake of the tsunami-triggered nuclear disaster in March 2011.

The leader of Britain’s opposition Labour party promised yesterday to raise the national minimum wage to at least £8 (10 euros, US$13) an hour if it wins the general election in May. Ed Miliband (pictured) made the pledge as he opened Labour’s final annual conference before the vote. Labour has argued for months that ordinary people have not yet seen the benefits of the return of economic growth after the recession, amid spending cuts and stagnant wages. The minimum wage for workers over the age of 21 is currently £6.31.

G20 close to goal despite Europe There was surprisingly little said about China’s slowdown, at least publicly

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he Group of 20 leading nations say they are tantalisingly close to adding an extra US$2 trillion to the global economy and creating millions of new jobs, but Europe’s extended stagnation remains a major stumbling block.

The finance ministers and central bank chiefs gathered in the Australian city of Cairns claimed progress on fireproofing the world’s financial system and on closing tax loopholes exploited by giant multinationals.

Almost 1,000 measures had been proposed that would boost global growth by 1.8 percent by 2018, nearing the ambitious goal of 2 percentage points adopted back in February.

A common concern was the risk of Europe’s economic malaise pulling others down.

U.S. Treasury Secretary Jack Lew cited “philosophical” differences with some of his counterparts in Europe, especially on the need for near-term stimulus.

“The concern that I have is that if the efforts to boost demand are deferred for too long, there’s a risk that the headwinds get stronger and what Europe needs is some more tailwinds in the economy,” said Lew. That was not an argument that found favour with German Finance Minister

KEY POINTS G20 says almost on track to add 2 pct to global growth Calls for Europe to do more to lift growth in near term Germany cautious on expansionary policy, warns of bubbles G20 leaders to meet in Brisbane in November Delegates pose for the official group photo at the G20 Finance Ministers and Central Bank Governors meeting in Cairns, Australia, 20 September 2014

Wolfgang Schaeuble who emphasised the need for structural reforms and strict budget controls.

The proposals to lift global growth will now go for formal approval at the summit of G20 leaders in Brisbane in November.

Chief among them was a global initiative aimed at increasing private investment in infrastructure, a particular hobby horse of the Australians who head the G20 this year.

China gets a pass While Europe’s failings were front and centre, there

was surprisingly little said about China’s slowdown, at least publicly. That struck some as odd given the Asian giant was just behind the United States in the size of its economy.

“Our basic point on the aspirational growth target is that with China slowing down in a structural sense... it will be exceedingly difficult to hit that (2 percent) number, given China’s massive arithmetic impact,” said Huw McKay, a senior international economist at Westpac.

China’s finance chief, Lou Jiwei, noted that stimulus measures also brought

problems such as excess capacity, environmental pollution and growing local government debt, just the latest sign that any policy easing there would be limited.

The risks that super-loose monetary policy could inflate asset bubbles was also much discussed by the G20, along with the need for the U.S. Federal Reserve to avoid spooking markets as it winds down its quantitative easing campaign.

The Fed is widely expected to end its asset-buying program in October and to start raising interest rates next year, a marked contrast

to the European Central Bank and the Bank of Japan where even more easing might be needed.

Regulators are looking at increasing the size of the capital buffer that the world’s top banks need to hold to reduce the risk of a repeat of the global financial crisis.

European Central Bank Governing Council member Christian Noyer said a buffer of about 16 percent of riskweighted assets was realistic but had not been finalised. A figure would be announced at the leaders summit, he said.

Microsoft delays launch Official warns rebound of its Xbox One console in China of undesirable work style

China will not alter policy because of one indicator

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C

icrosoft Corp has delayed the launch of its Xbox One game console in China, which had been set for release on Tuesday, but the world’s biggest software company said it would be released by the end of the year.

Microsoft did not give a reason for the delay in a statement yesterday.

The delay is the latest in a series of setbacks for Microsoft in China, where it is under investigation for suspected anti-trust violations related to the Windows operating system and Microsoft Office.

The Chinese government lifted a 2000 ban on gaming consoles earlier this year. Microsoft had reached a deal with Chinese internet TV set-top box maker BesTV New Media Co Ltd to form a joint venture to manufacture the consoles in Shanghai’s Free Trade Zone a year ago.

The Xbox One console will cost 3,699 yuan (US$602.37) without the Kinect motion detection system and 4,299 yuan (US$700) with Kinect, Microsoft said in July.

Reuters

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senior official has warned that the Communist Party of China should be cautious against rebounding of undesirable work style targeted by the “mass-line” campaign which is coming to an end. The “mass-line” campaign was launched in June last year to boost ties between CPC officials and the public, while cleaning up undesirable work styles such as formalism, bureaucracy, hedonism and extravagance.

The campaign is now in the most crucial stage and Party members should maintain strict standards, said Liu Yunshan, a member of the Standing Committee of the Political Bureau of the CPC Central Committee. The ultimate result of the campaign is subject to the people’s evaluation. Only the people’s satisfaction rather than Party members’ self-evaluation means a pass, he told a meeting on Saturday. What people worry about most is a resurgence of old problems and what they expect is continuing improvements, he said.

Measures proven to be effective should become long-term mechanism. Promises made by officials to correct their mistakes must be absolutely fulfilled, he urged.

Xinhua

Reuters

hina will not dramatically alter its economic policy because of any one economic indicator, Finance Minister Lou Jiwei said yesterday, in remarks that came days after many economists lowered growth forecasts having seen the latest set of weak data. Lou made the comments at a meeting of finance ministers and central bank governors from the G20 countries in Australia, according to a statement from the People’s Bank of China, China’s central bank. “China will not make major policy adjustments due to a change in any one economic indicator,” he said.

Economists dialled back their growth forecasts last week after data showed factory output grew at its weakest pace in nearly six years in August.

China’s total social financing aggregate, a broad measure of lending in the economy, was the weakest in nearly six years, data showed earlier this month, indicating credit levels were far below average.

China cannot rely on government spending to increase infrastructure investment, Lou added.

Reuters