Macau Business Daily, Oct 24, 2014

I

t’s been quite a 15 years. But now the Secretary for Economy and Finance is stepping down. At the end of the year. Francis Tam Pak Yuen said he’ll talk about his tenure “at a more appropriate time”. He declined to comment on who his successor might be. But said the CE would appoint “a capable and experienced candidate”. Mr. Tam said the upcoming reshuffle of Secretaries would not affect current legislation works, including his portfolio Page

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MOP 6.00 Year III

Number 652 Friday October 24, 2014

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

Tam calls it a day

24-hour border crossing soon

MACA hits the right note in protecting artists Page 4

It’s highly likely. MacauHengqin border crossings could be round the clock by year-end. A senior Hengqin government official says they are wrapping up preparatory works. And bidding is on for Macau enterprises in the cultural and creative field wanting a slice of the Hengqin dream.

Entry price for bids is close to MOP310 million.

L’Occitane net sales up 9pct in H1 Page 4

Portugal banking on Macau and China markets Page 6

Page 5

HSI - Movers

Factories fuel economy

October 23

Name

The manufacturing purchasing managers’ index has reached 50.4. Beating forecasts. And extending a three-month increase trend.

But the data escorting the index mirrors an economic environment full of doubts

Delightful dilemma Macau may welcome 32 million visitors this year. Considerably overshooting MGTO estimates. Some 23.5 million visitors arrived in the first 9 months. The territory, however, is becoming over dependent upon Mainland Chinese visitors.

Who now account for almost 70 percent of tourists. While the Hong Kong, Taiwan and S.E. Asia base falls away

Page 8

Page 2

%Day

Want Want China Hol

1.55

Bank of Communicatio

1.44

Swire Pacific Ltd

0.88

China Merchants Hold

0.62

Industrial & Commerc

0.60

Henderson Land Devel

-1.12

COSCO Pacific Ltd

-1.34

CNOOC Ltd

-1.58

China Mobile Ltd

-3.19

China Unicom Hong Ko

-3.53

Source: Bloomberg

www.macaubusinessdaily.com

MIF kicks off

I SSN 2226-8294

Be there or be square. The 19th Macau International Trade and Investment Fair has attracted participants and exhibitors from over 50 countries. At least 142 local enterprises are supporting the four-day event

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October 24, 2014

Macau

Macau to top 32mln tourists in 2014 In the first nine months of the year, 23.5 million tourists arrived in Macau.

Eight million more are expected to the end of December, surpassing government expectations Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

M

acau could receive some 32 million tourists this year, two million more than predicted by authorities as the number of mainland Chinese visitors continues to increase by two digits and exponentially faster than other nationalities.

The tourism industry here is also becoming increasingly dependent upon the Chinese inflow, which now accounts for almost 70 percent of all visitors, signalling the need to diversify.

Every month, Macau beats its latest all-time record in terms of tourist arrivals, with September no exception.

According to the Statistics and Census Service (DSEC), some 2.5 million people

13.3pct increase in mainland visitor numbers 1Q-3Q year-on-year

visited Macau last month, with half of them (1.24 million) same-day visitors.

On average, tourists stayed one day in Macau.

In addition to a record September, the year-to-date figure is going through the roof. Between January and September this year, Macau processed 23.5 million visitor arrivals. That’s 7.4 percent more compared to the same period in 2013 (21.9 million people) and an extra 1.6 million visitors from a year ago.

Th e Di r ecto r o f th e Macau Government Tourist Office (MGTO), Maria Helena de Senna Fernandes, said recently that she’s expecting 30 million tourists this year.

With just over two months to go, the 30 million tourist barrier is expected by authorities to be breached.

Million and millions In the last quarter of 2013, more than 7.4 million people

visited Macau, official data reveals. If this figure increases by 7 percent (the growth rate registered in the first three quarters of the year) then some 8 million more visitors could arrive in the territory by the end of the year. If this trend is confirmed, then in total, Macau visitation could reach 31.5 million for 2014.

Not only a record but also 1.5 million over government projections. In 2013, the number of tourist arrivals totalled 29.3 million.

Tam: Declining gaming revenue need not impact economy The Secretary of Economy and Finance said the city’s economy has not been greatly impacted by declining gaming revenue as its tourism business is going from strength to strength Stephanie Lai

sw.lai@macaubusinessdaily.com

S

ecretary of Economy and Finance Francis Tam Pak Yuen said yesterday that Macau’s gross gaming revenue could drop further year-on-year in October, against the backdrop of September’s decline.

The city’s gross gaming revenue last month declined 11.7 percent year-on-year to MOP25.6 billion, information from the Gaming Inspection and Coordination Bureau shows.

“It’s nearly a 12 percent drop in September gaming revenues, and we expect the decline will be steeper in October,” Mr. Tam told media on the sidelines of the opening of the 19th Macau International Trade & Investment Fair (MIF) yesterday.

Macau casino revenue this month could drop 20 percent to 23 percent

from a year earlier because of China’s anti-corruption drive, a pull-back in credit and a softening housing market, Cameron McKnight, an analyst at Wells Fargo Securities, LLC said in a note to clients this week.

Despite the slowdown of the gaming industry, the Secretary expressed optimism about the local economy, saying that the growing number of visitors has increased business for hotels, shops and restaurants.

“We estimate that this trend [of declining gaming revenue] may last from now to the first half of next year,” said Mr. Tam. “The gaming revenue has already been declining for the past four months but there’s been no drop in visitor arrivals. In August, we had 3 million tourists coming here. Now, visitors are not coming here only for gambling; but

they are staying in the hotels here, dining out and shopping.”

Noting that Macau saw revenues of over MOP100 billion last year from its retail, hotels and catering sectors combined, Mr. Tam said that the strong growth seen in these nongaming service sectors was evidence that they are supporting the stable growth of the city’s economy.

“If you define diversifying the local economy as having the sectors of conventions and exhibitions (MICE), cultural and creative business as well as that for traditional Chinese medicine all growing strong, we still have a long way to go,” he said.

“But if the goal is put as ‘our economy does not suffer from a huge impact when there is declining revenue’, we’ve already seen this happening,” the Secretary noted.

Macau’s tourism industry is booming but it’s also becoming dependent upon a single group: mainlanders.

In the first three quarters of the year, tourists from China accounted for 67.2 percent of the total versus 63.7 percent in the same period last year. In one year, the number of mainlanders visiting Macau increased by 2 million.

But if the interest in Macau is growing among the Chinese, it is decreasing in its other two big markets: Hong Kong and Taiwan.

Tourists from Hong Kong declined 5.2 percent in the first nine months of 2014 compared to a year ago. Those from Taiwan dropped by 1.7 percent.

Mainland China, Hong Kong and Taiwan account for 92 percent of all Macau’s visitations. Other smaller but important generators of tourists to Macau are also in the red. Visitors from Indonesia, Malaysia, the Philippines and Thailand decreased by 7.3 percent, 9.3 percent, 5.2 percent and 25.9 percent, respectively, in the first nine months.

Challenges to Macau water supply

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ith the start of the low water flow period, the Pearl River Water Resources Commission of China (PRWRC) recently announced that the safety of the water supply to Macau and Zhuhai is facing challenges due to increasing water demands by both cities. There is already a shortage of water supply to Zhuhai apartment blocks, according to Chinese newspaper Macao Daily.

Although, the dams for the four main reservoirs for the Xijiang River are 98 percent filled - enough to deal with the low flow period - authorities have started studying resources scheduling to improve the water supply system to Macau and Zhuhai.

In addition, authorities said that water levels in the south and north reservoirs had dropped significantly compared to the same period last year.

As such, reservoir supplies may not be sufficient.

Authorities predict that the daily water usage of Macau and Zhuhai will exceed 900,000 cubic metres this winter and spring, while the daily demands of water for these two cities will total around 1.8 million cubic metres.

K.L.

3

October 24, 2014

Macau

Francis Tam to step down

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rancis Tam Pak Yuen hinted that he would no longer be the Secretary for Economy and Finance once Chief Executive Chui Sai On’s first term in office ends in December. The Secretary, who has been a key government figure for the past 15 years, made the announcement yesterday.

“At more appropriate times, if need be, I can talk a bit on the review of my 15 years [in office],” Mr. Tam said on the sidelines of the Macau Trade and Investment Fair (MIF) yesterday. “But I’m not doing it today.”

The 65-year-old Secretary is the top official driving economic policy here since the handover from Portuguese administration in 1999.

Unlike his peer Secretaries governing the various public affairs domains, he hails from the manufacturing and logistics sector and was not an employee of the city’s civil service.

However, Mr. Tam refused to comment further on who his successor might be, noting that the Chief Executive would choose a “capable and experienced candidate.”

Lionel Leong Vai Tac, a wellknown businessman here and an Executive Council member, is rumoured to be one of the likely candidates to take over the post.

When asked if the rumour was true, Mr. Leong, who also attended the trade and investment fair yesterday, refused to comment on the issue, saying that he would be “willing

[I am] willing to take on whatever post assigned that could contribute to both Macau and China Lionel Leong Vai Tac, businessman and Executive Council member

Francis Tam

to take on whatever post assigned that could contribute to both Macau and China”.

Concessionaire issue One of the biggest challenges Mr. Chui and his administration face

during his second term in office is the renewal of casino concession licences, which are up for discussion next year. Mr. Tam said that the upcoming reshuffle of Secretaries would not affect current legislation works, including the realm of economy and finance.

The Secretary added that the government would settle all the basic principles of amending the budget framework law within this year before entering the legislation process next year, an agenda that conforms to the government’s schedule.

The government will also consider more involvement in the Legislative Assembly in reviewing the budget plan as part of the amendment of the budget framework law, Mr. Tam said. The amendment of the budget framework law seeks to enhance the transparency of budgeting here through listing all the budgeted expenditures on major infrastructure projects and investment plans.

S.L.

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October 24, 2014

Macau

Exhibitors business-matching at MIF Exhibitors from various countries and regions at the 19th Macau International Trade and Investment Fair are not only seeking business opportunities in the SAR but in mainland China Joanne Kuai

joannekuai@macaubusinessdaily.com

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he 19th Macau International Trade and Investment Fair kicked off yesterday. Among the forums hosted by industry leaders, protocol signings between governments, and business matching sessions for enterprises, the Fair itself also features over 1,900 exhibition booths, occupying 30,000 square metres.

One of the highlights of this year’s edition is the Latin America Pavilion and a Latin American Business and Investment Series hosted by the Macau Association for the Promotion of Exchange between Asia Pacific and Latin America (MAPEAL).

The Commercial Consul of the Embassy of the Republic of Costa Rica in the People’s Republic of China, Jose Pablo Rodriguez, said the country has around 4,500 different products to export. To Macau and MIF, they have brought food specialties such as organic chocolate, fine coffee and gourmet tuna, as well as fancy cigars, primarily because of the territory’s booming hotel and casino industry.

Jose Pablo Rodriguez, representing the trade commission of Costa Rica, told Business Daily that they don’t usually join this kind of fair, usually being onlookers rather than real investors.

But they took a chance this year.

“Macau’s a very important market in terms of the connection with Latin America. There’s already some acceptance of Latin America here and people are more used to our culture,” he said. “We thought it could be a very good point of entry to Macau [en route] to the China market, as well as reaching Hong Kong and Taiwan.”

Made in China A section featuring electronic technology products from Shenzhen City in neighbouring Guangdong Province is another highlight this

year. As the hi-tech industry has become one of the pillars of Shenzhen’s development, the Economic, Trade and Information Commission of Shenzhen Municipality is leading a delegation representing Shenzhen IT enterprises at the MIF 2014.

Myron Mai, sales director of the Shenzhen Nuolijia Digital Technology CoLtd, said they had brought mainly electronic devices such as mobile phones and tablets to showcase at this year’s MIF. Myron Mai told Business Daily that the company is an active participant in this kind of fair.

They’ve just finished another display at the Hong Kong Electronics Fair.

He said that they are at the Macau MIF to seek opportunities for export to Portuguese-speaking countries. But he said the first day of the Fair welcomed less people than he was expecting, the facilities were unsatisfactory as they could not access the Internet via the wi-fi network provided by the organisers and there was a lack of indicators and signs. Mr. Mai said he hoped that there would be a better turn out of people in the following days of the Fair.

Participants from over 50 countries and regions are attending this year’s MIF. Until now, some of these countries have never been represented at the conference. Over 142 Macau enterprises have also registered.

MACA hits the right note in protecting artists

L’Occitane net sales up 9pct in H1

The Macau Association of Composers, Authors and Publishers has signed an agreement with Sands China that will support Macau artists by increasing their source of income

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João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he Macau Association of Composers, Authors and Publishers (MACA) yesterday signed an agreement with Sands China. The ceremony took place during the first day of the Macau International Trade and Investment Fair (MIF) at The Venetian.

Although the agreement was confidential, a representative of MACA explained to Business Daily how this would affect authors, composers and writers in Macau.

“Our public performance licence agreement covers both local and international music repertoire. The royalties collected will be distributed

back to the music creators, according to the music usage reports provided by Sands”, the spokesperson of MACA told Business Daily of the deal. “Through this, the music creators (including composers, authors and publishers in Macau) will have a source of income”, she said.

Besides the financial aspect, MACA believes that the agreement will be important in demonstrating to people that it is important to respect music copyright.

“This is indeed an important agreement for MACA as signing the agreement not only demonstrates Sands China’s support of the development of Macao’s local creative

industry but also protects the copyright of both local and international artists”, the MACA representative noted. “It shows that Macao has made another important step towards the appropriate protection of music copyright”.

The date of the signing of the agreement was also chosen in order to raise the awareness of such copyright.

“We selected this date because MIF is widely covered by the press. We think it will be a good opportunity to raise public awareness on the appropriate protection of music copyright and emphasise the importance of obtaining a licence before using music”, the spokesperson said.

rench skincare retailer L’Occitane SA has posted a year-on-year increase of 8.9 percent in its net sales, amounting to £485.9 million (HK$6.03 billion/US$777 million) for the six months ended September 30, according to a filing with the Hong Kong Stock Exchange yesterday afternoon.

The filing shows that if calculated at constant exchange rate, the group had generated an increase of 11.9 percent in its net sales. ‘The uncertainties of the economic environment and foreign currency effects continued to impact the sales results of the group,’ it reads.

According to the group, 72.8 percent of its net sales are from sell-out sales, amounting to some £354 million, an increase of 8 percent year-on-year, or 11.6 percent at constant exchange rate. This growth was contributed by both comparable stores and non-comparable stores, the company said in the filing.

In addition, same-store

sales recorded a growth of 6.1 percent while its online retail channel jumped 34.7 percent year-on-year, at constant exchange rates.

Meanwhile, the group’s stores in Hong Kong and Macau, including both brands L’Occitane and Melvita that feature organic skincare products, registered a growth of 11.2 percent in net sales, amounting to nearly £55 million during the first half of the financial year, compared to £46 million during the same period last year.

Moreover, the retailer said that its stores in Hong Kong and Macau had recorded the highest sales growth at constant exchange rates vis-a-vis Brazil, mainland China and Russia among other countries, in terms of geographical areas.

The French-based retailer has skincare stores around the world, including France, Hong Kong and Macau, China, Taiwan, Japan, the United Kingdom, United States, Brazil, Russia and Luxembourg.

K.L.

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October 24, 2014

Macau

Macau-Hengqin 24-hour border crossing likely this year The Hengqin government is also weighing starting work on the Macau LRT link to the island by year-end Stephanie Lai

sw.lai@macaubusinessdaily.com

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top Hengqin official has informed media that the 24hour border crossing between Macau and the island will likely take place by the end of this year, while the government there is preparing to have the border infrastructure ready for the round-the-clock operation.

“We’re very confident that we can see a 24-hour border crossing between Hengqin and Macau by the end of this year,” said the director-general of the Hengqin Administrative Committee, Mr. Niu Jing. “Now we are carrying out round-the-clock preparations to have the infrastructure ready at the border to accommodate the 24-hour crossing.”

Mr. Niu said a two-storey provisional immigration portal was being constructed on the north side of the Hengqin border. The Hengqin government is building a provisional checkpoint as they are expanding the Hengqin border with plans to add a ‘transport hub’ around it – namely, an area that can accommodate bus and taxi stations and a gateway to the Guangzhou-Zhuhai Intercity Railway.

The Hengqin official also noted that they are almost ready to start the construction works on Macau’s Light Rapid Transit (LRT) link to the island, once the extension of the Guangzhou-Zhuhai Intercity Railway there is underway.

“By this year-end or the first half of next year at the latest, we can start building the Macau LRT extension into Hengqin,” said Mr. Niu. “The Macau link has to go parallel with our own intercity railway extension project, of which the construction is

in full flight now. We expect that this intercity railway extension project will be completed by 2016-2017.”

The extension of GuangzhouZhuhai Intercity Railway will connect the Gongbei border of Zhuhai to the east side of Hengqin Island, where the railway will pass through Shizhimen and end at Chimelong resort and theme park.

Talking to Chief Executive Fernando Chui Sai On in a closeddoor meeting yesterday, the chairman of Guangdong Chimelong Group, Su Zhi Gang, said that the easier border crossing could facilitate both Macau and Hengqin’s [ambition] to become a “world-class” gaming and tourism destination.

Mr. Su briefed Mr Chui in the meeting that the second phase of his

Hengqin bids open for local cultural and creative industry

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nother parcel of land in the Guangdong-Macao Cooperation Industrial Park in Hengqin is listed in the Zhuhai Public Resources Trading Centre and opened its tender exclusively for Macau enterprises to bid at a base price of 238 million yuan (MOP310.7 million) if they are interested in launching their cultural and creative business in the related area of the park.

The land is the seventh parcel that the mainland authority has granted to Macau enterprises in the industrial park. Occupying a total of 56,900 square metres, it is zoned for cultural and creative industry use only.

According to the announcement of the authority, the land can be used for offices for 40 years and venues for the cultural and creative

industry for 50 years. Meanwhile, the gross building area of offices cannot surpass 50 percent of the total area, while that of the culture and creative constructions cannot be less than 50 percent of the total. The successful bidder may only apply to sell 50 percent of its cultural and creative constructions after the establishment of the projects for five years.

The land is located in the Zhongxin Gou Valley of the industrial park, with the land value per unit floor some 1,820 yuan per square metre..

Governments generally impose restrictions on plot ratio as a way of controlling the density of the population in that site.

All interested Macau enterprises can bid for the land online but are not allowed to place their bids with other companies or in personal names.

K.L.

Chimelong project in Hengqin would be completed by the beginning of next year, with the hotel rooms available increasing to 5,000.

The Guangdong Chimelong Group executive added that since the opening

of the first phase of Chimelong amusement park and resort complex at the beginning of this year, the group had already welcomed more than 6 million tourists to their Hengqin property.

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October 24, 2014

Macau

Portugal banking on Macau and China markets

Brought to you by

Portugal Global-Trade and Investment Agency (AICEP) has signed a protocol with the Macao Chamber of Commerce, seen as a ‘win-win’ situation for Macau, China and Portugal

HOSPITALITY

João Santos Filipe

jsfilipe@macaubusinessdaily.com

Part-competitors Tourists and residents have distinctive buying patterns, spending their money on quite different goods and services. There are, however, some goods and services for which they naturally compete. The additional demand pressure exerted by visitors’ shopping patterns is likely to show up in the prices paid by locals. The local statistics provide figures for changes in both domestic consumer prices and tourist prices. Comparisons must be done carefully, as the methods and periods of data collection differ. Moreover, the categories of goods considered are distinct and even where they overlap the correspondence is limited. That notwithstanding, a few of these categories are close enough to suggest that some insight may be obtained when comparing the respective changes over time. The table below is the result of several necessary transformations to make the figures comparable. Some categories of the Consumer Price Index were combined and the corresponding figure estimated using thee original weights in the index.

The CPI values for the third quarter of this year were also estimated based on the corresponding monthly figures. Estimates are identified by an asterisk. Then, both series were re-based to the same period, the third quarter of 2010.

Overall, tourist prices have risen faster than domestic prices. In the four years shown, the cumulative gap reached 9.2 percentage points. That is the outcome, mainly, of big rises in lodging costs for visitors, as they represent visitors’ top type of expenditure.

The gap is even bigger in clothing and footwear, where it reaches more than 18 percentage points. That suggests a significant degree of segmentation for the types of goods typically sold to visitors and residents. In other, more closely related types of expenditure, where both types of customers compete more intensely, the gap is neatly smaller.

J.I.D.

35.2%

TPI rise, Q3, 2010-4

P

ortugal is betting on Macau and China markets, like it is betting on the rest of the world.

Small economies like Portugal’s have to expand to overseas markets, the president of the Portugal Global-Trade and Investment Agency (AICEP), Miguel Frasquilho, explained to news agency Lusa.

AICEP and Macau Chamber of Commerce signed a cooperation protocol last Wednesday. Miguel Frasquilho said that this protocol would strengthen the relations between Portugal, Macau and China.

“The protocol is a win-win situation for everybody. Macau will

win because it can establish itself as a platform between China and the Portuguese-speaking countries.

Portugal can also be a special partner because of its strategic location and because it’s a country of the European Union that’s also part of the Community of the Portuguese-Speaking Countries”, he explained.

“Every party involved will benefit from such a protocol that will increase the commercial ties and the investment between Portugal, Macau and People’s Republic of China”, he added.

The leader of the Portugal Global-

Trade and Investment Agency also commented on the current state of the Portuguese economy.

“If a little economy like Portugal’s fails to turn its attention to foreign markets and fails to take opportunities it will not grow. That’s exactly what we do not want to happen”, Mr. Frasquilho told Lusa.

The president of AICEP also said that Portugal is trying to grow its economy in order to create more wealth and jobs. He stressed, however, that the task demands investment and a more international economy.

He also highlighted the fact that such steps are being taken.

Fake employment agents jailed

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woman has been sentenced to eight years and six months in jail for fraud. She allegedly swindled over MOP2 million from 14 people and four employment agencies in Nepal by acting as an employment agent in Macau, cheating them of commission fees, according to Chinese media outlet Macau Daily.

The case indicated that since September 2009, the 45-year-old woman had lied to people from mainland China, the Philippines and Nepal, claiming she could arrange for them to work at local hotels or other places, swindling service charges and money from them for document procedures.

The ruling was announced by the Court of First Instance in tandem with a verdict on the woman’s partner who used to be a clerk in the Public Prosecutor’s Office. The man, aged 41, acted as a middleman and fed the victims with fake information. He was sentenced to six years behind bars.

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October 24, 2014

Gaming

Atlantic City spiral seen in sale’s junk-like yield: Muni Credit

A number of casinos closed this year, including Trump Plaza, Caesar’s Showboat, Revel and Atlantic Club. Trump Taj Mahal may shut next month, leaving Atlantic City with seven casinos

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nvestors demanded yields typical of junk-rated debt to buy investmentgrade bonds backed by luxury taxes in Atlantic City in a sign of the cost of the seaside community’s downward financial spiral.

New Jersey’s Casino Reinvestment Development Authority, created in 1984 to spur economic development and job creation in the resort town, issued US$241 million of debt yesterday that had investment grades from four credit raters, data compiled

by Bloomberg show. Bonds maturing in November 2044 priced to yield 4.69 percent, compared with 3.97 percent for a benchmark index of similarly rated bonds, the data show.

The extra yield shows investors’ unease with buying bonds backed by levies on hotel rooms, alcoholic beverages and entertainment in the onetime East Coast gambling capital that’s set to lose as many as five casinos this year. Moody’s Investors Service dropped the locality to junk in July because of dependence on the gambling industry.

“There’s a pretty substantial amount of spread there for the rating,” said Paul Brennan, who runs a US$288 million New Jersey muni fund at Nuveen Asset Management in Chicago. “The crucial component that’s got people uncomfortable is the city has seen four casinos close. A lot of investors are going to shy away without popping the hood.”

Casino closings Atlantic City was a decaying resort until New Jersey legalized casino gambling there in 1976. Revenue peaked above US$5 billion in 2006, and the community of about 40,000 saw casino- generated funds decline to US$2.9 billion in 2013. The take is down a further 6.4 percent this year.

Trump Plaza, Caesar’s Entertainment Corp.’s Showboat, Revel and the Atlantic Club, all battered by out-of-state competition, closed this year. Trump Taj Mahal may shut next month, leaving the city with seven casinos.

Even with the casino industry’s decline, the taxes backing the bond offering have proved resilient, Fitch Ratings said in an October 8 report that graded the debt BBB+, three steps above junk. The revenue stream grew an average of 6.1 percent annually from 2004 to 2013 and collections through July were up 5.9 percent from last year’s pace, Fitch said.

The revenue consists of a 9 percent tax on hotel rooms and ticket purchases at theaters and other entertainment venues, and a 3 percent levy on alcoholic beverages.

Hotel taxes make up 73 percent of the collections.

The crucial component that’s got people uncomfortable is the city has seen four casinos close. A lot of investors are going to shy away without popping the hood Paul Brennan Nuveen Asset Managemen

Yield seekers Elaine Zamansky, a spokeswoman for the casino reinvestment authority, referred questions to the state treasurer’s office.

“Investors are seeking yield and the bonds are backed by a strong revenue stream,” Joseph Perone, a treasury spokesman, said by telephone yesterday. The authority’s involvement “is a positive step for the seaside resort as it tries to remake itself and become a more appealing venue in the convention and exhibition industry.”

New Jersey collects the taxes and the money then flows to a fund held by a trustee for bondholders, according to Fitch.

“Given the recent casino closures we did several stress tests and lots of cuts of the revenue source,” Marcy Block, a Fitch analyst, said

on Tuesday. “There is some thought that some of those paying customers are going to be absorbed by the other casinos.”

The safeguards failed to sway investors. The 4.69 percent yield on the development agency’s 30-year debt compared with a 4.8 percent rate on speculative-grade bonds with a similar maturity sold this month for charter schools in Arizona.

Confidence plan Nuveen considered buying the debt either for its New Jersey fund or its US$10.3 billion high-yield fund, Brennan said. Given the association with Atlantic City and New Jersey, which has the second-lowest Moody’s

rating among states, funds focused on junk debt may be the primary buyers, he said.

“Even though the ratings are pretty decent, there’s a lot of yield in this transaction,” Brennan said. “The issuer knows what the expectations are.”

Proceeds will refinance debt, fund improvements to the Atlantic City Convention Center and Boardwalk Hall, and pay a legal settlement related to a tax credit from 14 years ago.

About US$60 million will finance the settlement, while US$90 million will fund projects, according to Moody’s.

The agency is empowered to “maintain public confidence in the casino gaming industry as a unique tool of urban redevelopment,” according to offering documents.

Third string Confidence has waned since the city dropped to the third- largest U.S. gambling market after Nevada and Pennsylvania.

Revel, the shuttered casino and hotel that opened in 2012, was the city’s second-largest taxpayer.

Brookfield Property Partners LP, which won the bidding for the property, said it plans to reopen it.

The purchase is supportive amid a negative outlook for gaming in Atlantic City, according to Fitch. The luxury-tax revenue could withstand annual declines of 2.5 percent while still covering debt service, the company said.

“The uncertainty with this transaction is all these customers that were at these casinos, bought drinks and went to concerts, will they come back and stay at other hotels and go to other casinos?” Brennan said.

“That’s going to be the big issue.”

Bloomberg

8

October 24, 2014

Greater China Shenzhen sells municipal bonds China’s Shanghai city government auctioned a total of 4.2 billion yuan (US$686.55 million) of five-, seven- and 10-year municipal bonds at yields of 3.63 percent, 3.79 percent and 3.81 percent, respectively, traders said yesterday. It is the last time this year that a Chinese local government will issue bonds directly, without the Finance Ministry acting as a proxy. China announced in May that it would allow local governments to issue U.S.-style municipal bonds for the first time in an experiment to straighten out its messy state budget, and start the clean-up of its massive local-government debt problem.

PMI edges up in October While exports have recently shown signs of picking up, the property market and investment continue to cool and many companies are being pinched by tighter credit Koh Gui Qing and Jake Spring

CICC says chairman resigns

KEY POINTS

China International Capital Corp (CICC) said yesterday its Chairman Jin Liqun resigned from his post and will be replaced by the head of the country’s sovereign wealth fund. China Investment Corporation’s current Chairman and Chief Executive Ding Xuedong has been appointed as the new CICC chairman, the investment bank said in a statement. Reuters reported last week Jin would quit this year to take up a position at Asia Infrastructure Investment Bank (AIIB), a regional development bank being set up by Beijing.

Factory activity reading rises to 3-month high of 50.4 Weaker sub-indices point to continuing subdued growth Export and domestic orders rise but at slower pace Analysts say more stimulus needed, differ on extent

Alibaba moves to tap mobile security sector E-commerce superstar Alibaba Group has waded into the mobile security sector, unveiling a security application and a mobile security platform. The app, Ali Money Shield, serves to protect the safety of online transactions for mobile shoppers by safeguarding accounts and text messages, and filtering out fishing websites.

The security platform, Ali Ju’anquan, aims to track unwanted codes and scan vulnerability for app developers. The move marks Alibaba’s latest attempt to further tap the mobile Internet market.

New-energy buses in Beijing Chinese authorities released a plan requiring the heavily polluted cities of Beijing, Tianjin, and Hebei Province to put more new-energy buses on the road to cut pollution. China aims to promote the use of 20,222 new-energy cars in the region’s public transport system from 2014 to 2015, according to the plan jointly released by seven departments, including the Ministry of Industry and Information Technology and National Development and Reform Commission.

By the end of 2015, new-energy vehicles should take no less than 16 percent of the total buses in those regions, the plan said. The number of charging posts is estimated to reach 19,657.

Chinese, Austrian FMs hold talks Chinese Foreign Minister Wang Yi and his Austrian counterpart Sebastian Kurz held talks on bilateral ties in Beijing. Wang said the two sides should further strengthen cooperation in areas including trade, investment, manufacturing, environmental protection, tourism and sports, so as to promote a stable and sound development of bilateral ties. Kurz echoed Wang saying the new Austrian government attached high importance to relations with China. Kurz said Austria will further expand substantial cooperation with China and enhance bilateral personnel and youth exchanges.

It is also ready to discuss with China on further measures of visa facilitation.

C

hina’s vast factory sector grew a shade faster in October as firms drew more foreign and domestic orders, a private survey showed on yesterday, though analysts said the figure does not point to a fourth-quarter turnaround for the cooling economy.

The flash HSBC/Markit manufacturing purchasing managers’ index (PMI) edged up to a threemonth high of 50.4 from a final reading of 50.2 in September, and just a hair’s breadth from the 50.3 reading forecast by analysts.

However, while the headline number looked slightly better, manufacturing activity remained subdued and details pointed to continued weakness on a number of fronts.

Growth in new orders at home and abroad slowed in October and producer prices fell, pushing factory inflation to a seven-month low and highlighting still-soft domestic demand.

The level of output in factories also fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis.

“The sub-indices do not show good momentum,” said Shuang Ding, an economist at Citi in Hong Kong.

“Both the production sub-index and the new order sub-index dropped.

Those are more relevant in terms of industry production and forwardlooking activity.”

Ding also cautioned that final HSBC/Markit PMI readings have come in lower than the initial flash reading in recent months.

China’s economy appears likely to miss the government’s 7.5 percent growth target this year and hit a trough not seen since 1990. Thirdquarter growth of 7.3 percent reported on Tuesday was the weakest since the global financial crisis.

Most analysts believe authorities will continue to roll out modest support measures in coming months to bolster activity, but they are

divided over whether policymakers will take more aggressive action such as across-the-board interest rate cuts unless conditions threaten to sharply deteriorate.

“While the manufacturing sector likely stabilised in October, the economy continues to show signs of insufficient effective demand,” said Hongbin Qu, chief economist for China at HSBC. “This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead,” Qu said.

Economists at ANZ, who maintained their full-year growth forecast of 7.2 percent, have a stronger view.

“With domestic demand remaining soft and disinflationary risks on the rise, we maintain our forecast of two, 25-basis-point cuts in benchmark market interest rates, one in the fourth quarter of 2014 and one in the first quarter of 2015,” they said in a note, arguing such a move was needed to bring financing costs down more forcefully.

A sagging housing market, sluggish domestic demand and erratic exports have dampened Chinese activity this year.

While exports have recently shown signs of picking up, the property market and investment continue to cool and many companies are being pinched by tighter credit.

Weak inflation and capacity utilisation also point to an economy that still has far too much excess capacity.

Indeed, Reuters data showed that the wobbly economy has prompted Chinese companies to freeze expansion plans and cut their investment by the most since the global crisis as they hunker down for more austere days ahead.

For Beijing, employment is key Chinese officials have indicated they would be willing to tolerate slightly slower growth as long as the jobs market continues to hold up,

which would argue against the need for the central bank to take more forceful measures such as rate cuts.

Keeping the labour market healthy is a top policy priority for Chinese leaders, who fear that widespread unemployment could stir social unrest.

The flash PMI employment subindex, although still indicating a contraction for the 11th straight month, posted a substantial improvement that was largely responsible for the higher headline figure, said Julian Evans-Pritchard, an economist at Capital Economics, in a research note. “ T he b r e ak d o wn s u g g es t s that although healthy export demand continues to support the manufacturing sector, cooling domestic demand remains a drag,” Evans-Pritchard said.

“Nonetheless, we think that healthy employment and wage growth, along with concerns over mounting credit risks, mean that policymakers will avoid rolling out significant stimulus in response to the continued slowdown.”

There have been no reports of major layoffs, although some firms, particularly state-owned companies, may be reluctant to be seen shedding staff. The HSBC survey tends to focus more on small and mid-sized companies.

Bottoming out?

While growth is unlikely to accelerate in the fourth quarter, the flash PMI indicates it may at least be levelling off, some analysts said.

“If the flash PMI is right, then October is going to be almost the same as September, slightly better that would be industrial production growth of about 8 percent - which suggests that at least it’s not getting worse, that growth has stabilized at this quite subdued level,” said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong.

Reuters

9

October 24, 2014

Greater China

Online financing squeezes midsize bank profits S queezed between cutthroat competition from online financing firms and rising funding costs, China’s midsize banks are falling out of investors’ favour as they increasingly lag behind the country’s top five lenders.

While margins generated from lending have remained broadly stable at the larger banks, they have shrunk considerably for the secondtier lenders like China Everbright Bank and China Merchants Bank over the past six months, a Reuters data analysis shows.

And like some of their European peers, those smaller lenders are also lagging behind the big banks in terms of balance sheet strength, analysts say, a factor that is likely to be highlighted in the banking sector’s thirdquarter earnings.

China’s five biggest banks are Industrial and Commercial Bank of China Ltd (ICBC), China Construction Bank Corp (CCB), Agricultural Bank of China Ltd , Bank of China (BoC) and Bank of Communications Co Ltd. Chinese banks’ net interest margins (NIMs), or the gap between what the lenders pay out for deposits and rake in from loans, have come under pressure from aggressive competition from online financing firms such as

e-commerce group Alibaba’s Yuebao platform.

This is particularly a problem for smaller banks, which have to pay more to fund themselves as their regulatory capital ratio - a measure of balance sheet strength - is on average 1.5 percentage points weaker than that seen at the larger players.

The average net interest

KEY POINTS Data show worsening interest margins for smaller banks China Construction Bank opens 3Q earnings season on Thursday

Second-tier lenders, also known as joint stock banks, have, on average, a market capitalisation of less than 300 billion yuan, significantly smaller than the big five lenders

margin for China’s top five banks, has remained stable at around 2.6 percent over the last year.

In contrast, the next seven banks saw this key indicator of profitability drop to 1.86 percent in the second quarter from levels previously comparable to the big banks.

The margins are seen falling further in the third-quarter.

To counter the profit

squeeze, investors say secondtier lenders may look to innovate by embracing online finance.

The big five banks also benefit from closer ties to the country’s top stateowned companies, known as SOEs. Lending to these conglomerates is considered much safer because of implicit government guarantees.

Reuters

Xiaomi move user data for expansion purposes The migration matches in reverse Apple Inc’s move earlier this year to store Chinese user data with China Telecom Corp Gerry Shih

F

ast-growing Chinese smartphone maker Xiaom i Inc . said yesterday it is migrating some data on non-Chinese customers away from its servers in Beijing due to performance and privacy considerations.

Data belonging to the privately owned company’s non-Chinese users will be moved in several phases to Amazon Inc. servers in the United States and data centres in Singapore, Xiaomi vice president Hugo Barra said in a Wednesday blog post on Google Plus.

The migration matches in reverse Apple Inc’s move

earlier this year to store Chinese user data with China Telecom Corp, the first time the iPhone maker has kept user data on the Chinese mainland.

User privacy remains a key issue for Xiaomi as it eyes overseas expansion, having risen in the three years since it was founded to become the top smartphone vendor in China, according to industry analysts. It has already faced several privacy controversies, including accusations from international security researchers and a government agency in Taiwan that it funnels unauthorized user data back to its servers in Beijing.

Apart from privacy, Barra also said the moving data to overseas servers has significantly boosted speed in markets such as Singapore, India and Malaysia. Xiaomi is targeting India and Brazil as its next big markets.

Technology companies typically keep data centres physically close to their user base to maximize service speeds, but the question of where to situate them has sometimes been politically wrought. Companies such as Google Inc., for instance, have chosen to store user data off mainland Chinese soil over concerns about privacy and the need to comply with

Hugo Barra in the times when he was a vice president of Google’s Android division

Chinese censorship laws.

Moving data offshore “better equips us to maintain high privacy standards and comply with local data protection regulations,” Barra wrote. “This is a very high priority for Xiaomi as we expand into new markets over the next few years.”

Barra’s post came days after the Chinese web monitoring group Greatfire.org accused Chinese governmentaffiliated hackers of seeking to obtain Chinese Apple users’

personal data - an accusation which the government has strongly denied. Apple Chief Executive Tim Cook discussed information security with a top Chinese official while visiting Beijing this week, according to Chinese state media.

Barra said Xiaomi will also begin using Akamai Technologies Inc’s content delivery service, which in the past has served clients ranging from Apple to Netflix Inc. Reuters

10

October 24, 2014

Greater China

Legal framework of carbon market takes shape The Chinese market is expected to be the world’s biggest, responsible for around 10 percent of the world’s total carbon emissions from the outset Kathy Chen and Stian Reklev

C

hina is planning hefty fines for companies that fail to comply with the rules of its national carbon trading market but has yet to decide how to set emission caps for big polluters, according to a draft government document seen by Reuters.

The world’s biggest emitter of greenhouse gases plans to launch a national emissions trading scheme in 2016 in a bid to reduce its impact on climate change and make its economy less reliant on polluting fossil fuels.

Under the scheme, big emitters such as coal plants and factories will be given a cap on their CO2 emissions.

If they emit more than they have permits for, they must buy additional permits in the market.

China’s top economic planning agency, the National Development and Reform Commission (NDRC), has drawn up a draft law that would provide the legal backbone for the scheme.

The draft, which does not take a position on several key issues, such as how many CO2 permits will be handed out under the scheme, has been distributed to a handful of ministries for comment. A final version will be sent to the State Council, China’s cabinet, for approval in November.

The NDRC did not respond to Reuters questions about the draft bill.

In most of China’s seven existing pilot markets, companies that fail to comply with the rules get fixed fines - or no fine at all, as in the Tianjin

market - but the national scheme will potentially be tougher.

“For each tonne of CO2 that companies fail to surrender permits to cover for, they will be fined 300 yuan (US$49). For overdue payments, an additional charge of 3 percent will be added daily,” the draft said.

According to the draft, the main responsibility for implementing the national market will rest with the NDRC. The agency will draw up rules deciding how many permits companies can get, but local authorities would have the power to adjust the number of permits downwards.

Provincial governments can also add more sectors of economic activity to the scheme than advised by the NDRC, it said.

Annual review Unlike carbon markets elsewhere, the NDRC draft proposed that the government should be able to adjust permit levels issued to each company and in the overall programme on an annual basis.

In most CO2 schemes the authorities draw up multi-year plans that give participating firms longterm certainty as to how much CO2 they will be able to emit.

The NDRC proposal would allow China to avoid situations such as the one in the European Union, where an ever-increasing surplus in permits since 2008 has cut demand, pushing

the price down, with the regulatory body unable to interfere.

But some say issuing caps for only a year at a time might have negative consequences as well.

“Without more certainty in these caps, a variety of adverse outcomes may occur, ranging from stunted appetite for trading to a lack of longterm price signals,” Resources for the Future, a U.S.-based think tank, said in a report on the Chinese pilot markets released this week.

Under the current proposal, most permits would be handed out free initially, with a gradually increasing share sold by the government.

According to the draft, the law seeks to ensure the quality of emissions data, proposing that local governments double-check at least 5 percent of company emission reports each year, even after they have been verified by independent auditors.

For each tonne of CO2 that companies fail to surrender permits to cover for, they will be fined 300 yuan (US$49).

For overdue payments, an additional charge of 3 percent will be added daily Carbon market regulation draft

Reuters

Forex regulator not worried about capital outflows Some analysts said the decline suggested speculative “hot money” outflows from China amid increased market jitters

C

hina’s foreign currency regulator is not concerned by signs of forex outflows, the country’s State Administration of Foreign Exchange (SAFE) said yesterday, saying a recent decline in forex reserves is in line with China’s policy goals.

However, China is closely monitoring the impact of any changes in U.S. monetary policy, and has detected signs of increased volatility in cross-border flows, the spokesperson told a news conference in Beijing.

The remarks were made by Guan Tao, head of the department of international payments at SAFE, who added that SAFE will develop derivative instruments to help companies better hedge against two-way volatility in the yuan exchange rate.

China’s foreign exchange reserves, the world’s largest, fell slightly to

US$3.89 trillion at the end of September from US$3.99 trillion at the end of June, central bank data showed.

Some analysts said the decline

suggested speculative “hot money” outflows from China amid increased market jitters about whether the world’s second-largest economy may

be at risk of a sharper slowdown.

China’s vast factory sector grew a shade faster in October as firms drew more foreign and domestic orders, a private survey showed earlier yesterday, but analysts say the modest expansion does not indicate a turnaround for the cooling Chinese economy.

Guan attributed the decline in forex reserves to the rise of the dollar against other currencies.

He also said that the central bank was gradually ceasing intervention in the forex market.

The yuan has been on a steady uptrend since late May but remains down year-to-date after the currency slumped early in the year, which many traders said was due to central bank behind-the-scenes manipulation targeting speculators.

Reuters

11

October 24, 2014

Asia

Japan coal power push hits U.S. resistance The friction with Washington comes as Japanese Prime Minister Shinzo Abe looks to triple infrastructure exports to about 30 trillion yen

Singapore’s CPI eased in September Food inflation was higher at 3.0 percent compared to 2.9 percent a month before

T T

he United States has challenged the Japanese government over moves to ramp up exports of coal-fired power technology and to offer cheap loans to lure buyers, according to a U.S. source with direct knowledge of the matter.

Japan’s shipments of the equipment soared to nearly US$8 billion last year as it looks to boost infrastructure exports, defying U.S. calls for developed nations to stop investment in foreign coal projects to curb greenhouse gas emissions.

While the issue is unlikely to blow up into a major dispute, it could taint the two allies’ typically close relationship on energy and comes ahead of a November gathering of the Organization for Economic Cooperation and Development where members are expected to discuss coalfired power funding.

U.S. officials have told Japan, one of a handful of industrialised economies that still allows unrestricted financing of overseas coal projects by state-backed lenders, that it should only back coal plant construction that includes so-called carbon capture technology, said the source, who declined to be identified due to the sensitivity of the matter.

Japan has been exporting equipment that cuts carbon dioxide output by burning coal more efficiently, but that does not go as far as more expensive technology designed to capture around 90 percent of carbon dioxide emissions that is slowly being introduced on a commercial scale in North America.

The source said the dispute had taken place quietly and Japanese

KEY POINTS U.S. has challenged Japan coal-fired plant exports Japan pushing to triple infrastructure exports by 2020 Says its coal technology much cleaner than many alternatives

officials had politely rebuffed the criticisms.

Coal burning technology that runs turbines at higher temperatures and pressures can reduce carbon emissions by up to about 50 percent, according to the International Energy Agency.

Obama wants sales to end The friction with Washington comes as Japanese Prime Minister Shinzo Abe looks to triple infrastructure exports to about 30 trillion yen (US$280 billion) by 2020 after decades of stagnation at home.

Japanese exports of power station equipment, including turbines for coal plants, rose 55 percent in the year through March to US$7.8 billion from the previous 12 months, according to industry body the Japan Machinery Centre for Trade and Investment.

In his Climate Action Plan

launched last year, President Barack Obama said the United States would limit investment in foreign coal-fired projects and urged others to do the same.

The United Kingdom and several European nations have also cut state funding for coal plants, meaning a raft of major western economies have banned their export credit agencies from providing backing to most overseas coal-fired plant developments. Germany said last month it would limit such financing.

In contrast, the Japan Bank for International Cooperation (JBIC) is the world’s biggest public investor in coal projects, providing US$11.9 billion finance from 2007 to 2013 for coal developments overseas, according to environmental group the Natural Resources Defense Council.

That figure mainly comprises JBIC investment in coal-fired plants, but also coal mines.

JBIC said in September that it would provide around US$900 million in finance for a coal-fired power plant project in Morocco, and extended a more than US$200 million credit line for Vietnam Electricity in July to purchase Japanese equipment for a coal-fired power station.

Another state-backed agency, the Japan International Cooperation Agency, provided 41.5 billion yen (US$380 million) in loans for Bangladesh’s Matarbari coal-fired power plant in June and a 1.73 billion yen loan to a project in Indonesia last year. They were the first credits from the development agency in at least four years.

Japanese Prime Minister Shinzo Abe (3-L) delivers a speech during a meeting with US business mission members led by US Commerce Secretary Penny Pritzker (4-R, first row) at Abe’s official residence in Tokyo, Japan, 20 October 2014

Reuters

he Consumer Price Index in Singapore rose 0.6 percent on-year in September, on account of a smaller increase in services costs and a further decline in accommodation cost and private transport cost, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint statement yesterday.

Services inflation slowed to 1.7 percent in September from 2.1 percent in the preceding month, mainly due to the moderation in the increase in medical and dental treatment fees, which reflects the impact of enhanced medical subsidies, including the Pioneer Generation Package.

1.7 pct September services inflation

Private road transport cost was lower by 2.8 percent, after falling by 2.9 percent in August, reflecting the more moderate decline in COE premiums relative to a year ago. COE (certificate of entitlement) refers to a certificate of car ownership which is required for anyone who wants to own a car in Singapore and available through open bidding.

Food inflation was higher at 3.0 percent compared to 2.9 percent a month before, mainly due to a steeper increase in the prices of prepared meals.

Accommodation cost fell by 0.6 percent, extending the 0.2 percent decline in August, as a result of the soft housing rental market.

Core inflation, which excludes the costs of accommodation and private road transport, edged down to 1.9 percent year-on-year in September, largely on account of the enhanced medical subsidies which caused a oneoff reduction in the level of healthcare services cost.

MAS said CPI-All Items inflation should stay subdued for the rest of this year and throughout 2015, amid the expected increase in the supply of COEs and newly-completed housing units. It is expected ease to below 0.5 percent in the fourth quarter of 2014. For the whole year, CPI-All Items inflation is projected to come in at 11.5 percent in 2014 and 0.51.5 percent in 2015.

Xinhua

12

October 24, 2014

Asia

Sri Lanka set for populist budget ahead of snap polls

While Sri Lanka has posted impressive annual growth rates of around eight percent in the years since the end of the fighting, observers say few people have reaped the benefit of the peace dividend

Amal Jayasinghe

V

eteran Sri Lankan President M ahinda R ajapak se is expected to unveil a populist budget today hoping to shore up sagging electoral support ahead of a troubled bid to win a third term.

Rajapakse, who is also finance minister, has advanced the budget for 2015 by a month to give his government more time to implement widely predicted tax cuts and public sector pay rises ahead of snap elections in January.

Analysts say Rajapakse, who oversaw the crushing of the Tamil Tiger rebel movement in 2009, has a new fight on his hands to cling onto power with gratitude among voters over the end of the war having faded.

His information minister let slip on Monday that Rajapakse will seek a third term in January, two years ahead of schedule, after recent local elections underlined a steady drop in support for the main ruling United People’s Freedom Alliance (UPFA) party.

And analysts say the 68-yearold president’s allies appear to have persuaded Rajapakse that his chances of re-election would only have worsened if he held back from seeking a fresh mandate.

“People loved him too much after the war victory,” said political commentator and author Victor Ivan.

“The expectations were high.

Gradually, that love has evaporated.”

While Sri Lanka has posted impressive annual growth rates of around eight percent in the years since the end of the fighting, observers say few people have reaped the benefit of the peace dividend.

The once-sleepy capital Colombo is a hive of activity as work to expand the port and build hotels and highrises goes on around the clock. Major highways are sprouting across the island to end the isolation of rural areas.

The once-sleepy capital Colombo is a hive of activity as work to expand the port and build hotels and high-rises goes on around the clock

But complaints abound that infrastructure projects have served to mainly line the pockets of ruling party cronies and Chinese companies who carry out the work, rarely employing locals.

While the overall jobless rate is around four percent, youth unemployment is as high as 20 percent.

Murtaza Jafferjee, head of the Sri Lanka-based stockbroker JB Securities, said the government was likely to bump up public sector salaries in an attempt to persuade civil servants to remain loyal to the UPFA.

Sri Lanka has 1.2 million public sector workers, a huge percentage of the workforce in a country with an overall population of 20 million.

Appeasement budget “It would be a budget that would appease as many constituencies as possible,” Jafferjee told AFP. Although it did just manage to keep control of the council, the UPFA’s performance in last month’s election in the southeastern Uva province was its worst performance since Rajapakse

came to power in 2005.

While there are no reliable opinion polls, a partner in the ruling coalition, Technology Minister Champika Ranawaka, has said that up to a million voters may have dumped the UPFA and that it “wouldn’t be easy” for Rajapakse to win again.

Basking in the afterglow of victory over the Tigers, Rajapakse won the 2010 presidential election by a landslide and then rewrote the constitution, giving himself more powers.

AFP

N.Z. inflation gives RBNZ scope to prolong rate pause Non-tradable inflation was underpinned by increases in land taxes

N

ew Zealand inflation in the third quarter slowed more than economists and the central bank forecast, giving Governor Graeme Wheeler scope to keep borrowing costs unchanged for longer. The currency fell.

The consumers price index rose 1 percent in the third quarter from a year earlier, after increasing 1.6 percent in the previous period, Statistics New Zealand said in

Wellington today. That’s less than the 1.3 percent expected by the Reserve Bank of New Zealand and the 1.2 percent median forecast.

Benign inflation signals that Wheeler can keep the official cash rate unchanged at 3.5 percent after four increases between March and July this year. There is about an 80 percent chance of the benchmark being unchanged or lower by June, according to swaps data compiled

by Bloomberg.

Wheeler on September 11 signalled an extended rate pause to assess how a previously strong currency, falling commodity prices and his earlier tightening would affect the economy. The RBNZ lowered its inflation outlook, predicting it won’t reach the midpoint of its 1 percentto-3 percent target range until the second half of 2016, a year later than it projected in June.

New Zealand’s currency has slumped 9 percent in the past three months after Wheeler said its level was unjustified and unsustainable.

While the depreciation makes imports more expensive, this upward pressure has been offset by falls in commodity prices and deflationary pressure globally, said Toplis.

Wheeler was the first central banker from a developed nation to raise official interest rates this year

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13

October 24, 2014

Asia

IMF urges Japan to go ahead with tax hike next year The comments from the IMF official come amid growing concerns in Japan over whether the world’s third-largest economy can withstand the blow from a further tax hike

J

apan should go ahead with a second sales tax hike next year in order to maintain credibility of its fiscal framework, an International Monetary Fund official said yesterday.

“Going ahead with the tax (hike) is very important,” said Roberto Guimaraes-Filho, deputy division chief of the Regional Studies Division at the IMF’s Asia Pacific Department.

Speaking at a seminar, the official said the IMF expects Japan’s economy to grow by an annualised 3.4 percent in July-September, rebounding from the deepest slump since the 2009 global financial crisis in the previous quarter after April’s tax hike.

Japan’s national sales tax rose to

8 percent from 5 percent in April and the government is due to decide by year-end whether to proceed with a second tax increase to 10 percent next year.

The IMF forecast Japan’s growth at 0.9 percent this year, which is above its estimated potential. The official said while the economic outlook is solid in the near-term, Japan should rebuild fiscal buffers to counter negative shocks in the future.

“It’s really about having a fiscal framework that is credible so that down the road if you have shocks, you can use fiscal policy instrument in a sort of credible fashion to cushion a blow from any adverse shock,” he said.

The official also stressed the need for the Bank of Japan to continue with its current easing stance to meet its price goal.

The BOJ deployed an intense burst of stimulus last April, pledging to bring inflation to 2 percent in roughly two years via aggressive asset purchases.

“Continuation of these policies in Japan is important to make sure that inflation expectations are indeed consistent with the target that BOJ has, so as to avoid any sort of communication issues,” Guimaraes-Filho said.

Many private economists are sceptical that the BOJ will meet its inflation target and see it easing policy further.

Reuters

POSCO posts highest profit in five quarters The industry has been struggling with over-capacity and sluggish demand in China

S

outh Korean steelmaker POSCO posted its highest operating profit in five quarters yesterday, as lower raw materials costs helped support margins during a period of weak steel prices.

The world’s sixth-biggest steelmaker by output also said it expected steel demand to rise “slightly” in the current quarter from the previous quarter, citing an improving automobile industry and seasonal demand.

The industry has been struggling with over-capacity and sluggish demand in China, the world’s biggest producer and consumer of steel, as economic growth there slows.

Chinese growth is at its slowest since the 2008/9 global financial crisis, exacerbating concern about China’s impact on global growth.

China’s woes have also led to iron ore prices falling to five-year lows this year as supplies of the primary steelmaking material build up.

POSCO said operating profit in the July to September quarter totalled 635 billion won (US$601.66 million) from 443 billion won in the same period a year earlier. The result compared with a 601 billion won mean estimate of 22 analysts polled by Reuters.

Sales fell 2 percent to 7.29 trillion won, the steelmaker said in

a statement.

POSCO has been trying to shed non-core assets to reduce debt and boost its balance sheet since Chairman and Chief Executive Kwon Oh-joon took office in March, although no major deal has been done.

“POSCO will be able to achieve a meaningful earnings recovery only if steel prices rise,” analyst Jeon Seung-hun at KDB Daewoo Securities said ahead of the earnings release. “But there will be a question mark over global economic recovery unless China launches economic stimulus measures.”

Honda recalls new Fit hybrid Honda Motor Co said it would call back the new Fit hybrid subcompact model for the fifth time in less than a year in Japan, issuing a recall yesterday of two defects that cover 425,825 cars in Japan. Apologising for the repeated repairs, Japan’s third-biggest automaker said Chief Executive Takanobu Ito and other executives would reduce their salary by 10 to 20 percent for three months, and assign an executive to oversee quality improvements. The latest recall, which covers some Fit and Vezel hybrids, as well as some gasoline-version Fits and N-WGN models, would cost an estimated US$53 million.

Park says weak yen “a challenge” South Korean President Park Geun-hye yesterday again raised the yen’s weakness as a challenge for South Korea’s economy, the second time this month she has specifically addressed the currency issue. “Rival economies are accelerating their chase (to win against South Korea) amid the rapidly changing external environment, including the yen’s weakness,” the president’s office quoted her saying. It is rare for the president to comment directly on a specific currency but it was the second time this month that she mentioned the yen. On October 6 she said the weak yen could hurt local export industries.

Hyundai considering dividend hike Hyundai Motor is considering raising its dividend sharply and introducing an interim dividend, President Lee Wonhee said yesterday, in an apparent bid to appease investors angered by its recent US$10 billion deal to buy a Seoul property. Lee, who is also chief financial officer, was speaking after the automaker reported its third quarter earnings.

He did not elaborate. Last month, a consortium led by Hyundai Motor bid US$10 billion for a plot of land in Seoul’s high-end Gangnam district to house its headquarters.

Reuters

Philippines keeps key rates unchanged From a year ago, non-tradables prices rose 2.5 percent, less than the 2.8 percent gain projected by the RBNZ. Tradables prices, which are influenced by currency movements, gained 0.1 percent from the second quarter. Vegetable and gasoline prices rose while groceries and new cars were cheaper, today’s report showed.

From a year ago, tradables prices fell 1 percent. The RBNZ forecast a 0.6 percent decline.

Bloomberg News

Reserve Bank of New Zealand headquarters

after holding them at a record-low 2.5 percent for three years to help revive the economy. He next reviews interest rates on October 30.

Non-tradable Consumer prices rose 0.3 percent from the second quarter, according to Statistics New Zealand. That’s less than the 0.5 percent expected by economists. Quarterly inflation was fanned by housing costs while

prices for furniture, appliances and communications declined, the agency said.

Non-tradable inflation, a core measure of prices not influenced by the currency and fuel, was underpinned by increases in land taxes, rents and the cost of building new homes.

The gauge rose 0.5 percent in the quarter from the previous three months. The gains were offset by lower telecommunications costs and cheaper bread.

The Philippine central bank kept its benchmark interest rate steady at 4.0 percent yesterday, as anticipated, with inflation expected to remain relatively stable in the near-term. It also left the rate on its short-term special deposit account (SDAs) on hold at 2.5 percent to allow previous policy actions to work their way through the economy. Nine of 11 economists polled by Reuters expected the central bank to keep the main policy rate unchanged. Eight forecast no change in the SDA rate. The policy-making Monetary Board holds a rate-setting meeting every six weeks.

It next meets on December 11.

Hynix says The risk profile is tilting capex at high toward a prolonged 4 trln won level pause and later resumption of OCR hikes Mark Smith senior economist ANZ Bank New Zealand Ltd.

SK Hynix said yesterday that 2014 capital expenditures will likely be at the high 4 trillion won (US$3.79 billion) level and will likely rise further in 2015. SK Hynix said some of the expenditure growth this year and next year will be due to investments for a new production line being added in South Korea. The company spent about 3.6 trillion won in capital expenditures in 2013.

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October 24, 2014

International Tesco scraps profit outlook Tesco reported a bigger than expected hole in its accounts yesterday after finding mistakes in booking income had gone back further than initially thought, forcing Britain’s biggest grocer to scrap its fullyear profit outlook. Tesco, which has lost 20 percent of its market value this month after the accounting mis-statement compounded three earlier profit warnings, scrapped the outlook as its second-quarter underlying domestic sales fell 5.5 percent. Tesco shares dropped sharply at the open, down 4.5 percent in the first minutes of trading.

Eurozone business growth unexpectedly gains pace The composite output price index slumped to 47.1 from 48.5, its lowest reading since February 2010 Jonathan Cable

Nokia reports strong profits

Will the figures weaken deflation fears for EU central bank governor Mario Drahi?

Finland’s Nokia beat market expectations as it reported strong third-quarter profit growth and lifted the profitability outlook for its core network gear unit on the back of large network roll-outs in North America and China. Despite concerns over lower-margin deals in China, Nokia’s network unit showed a core operating profit margin of 13.5 percent, up from 11.0 percent in the second quarter and topping analysts’ average forecast of 9.9 percent in a Reuters poll.

Gulf airlines target Italy Having shuttled millions of travellers through their plush home bases, rival Gulf airlines are now battling over an Italian market which they see as ripe for expansion and key to driving traffic on to long-haul routes. The tussle will add to the pressure on established European carriers who are already losing out on short-haul routes to upstart budget airlines. Italy is Europe’s fourth largest travel market, one of the world’s top tourist destinations and its thriving fashion and leather industry underpin demand for business travel.

Russia postpones ruling on Bashneft A Russian court decided yesterday to postpone to next week a hearing on a move to wrest control of an oil company from oligarch Vladimir Yevtushenkov, a case that has deepened investors’ fears the Kremlin wants to reclaim prized assets. Russian prosecutors filed the suit last month to regain state ownership of Bashneft, saying there had been alleged violations in the privatisation and subsequent sale of the oil producer to Russian oil-to-telecoms conglomerate Sistema in 2009. Yesterday, the judge at the Moscow Arbitration Court ruled in favour of the prosecutors.

Buffett copycats risk a pounding It’s not been a good time for Warren Buffett wannabes. Sharp drops in many of the stocks owned by Buffett’s Berkshire Hathaway in recent weeks hit the sprawling conglomerate’s equity portfolio hard.

The loss on seven of those holdings alone totals more than US$5 billion provided Berkshire’s stakes have remained the same since June 30, the last date for which they were disclosed. In particular, Berkshire’s been stung by large holdings in IBM and long-time Buffett favourite Coca-Cola, both of which tumbled after disappointing third-quarter results.

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uro zone businesses performed much better than anyone expected this month but did so by slashing prices again, and optimism about the future fell to its lowest level in over a year, surveys showed yesterday.

The growth data will provide some relief for the European Central Bank but news that firms cut prices for the 31st month, and at the steepest rate than in almost five years, will stoke fears of deflation in the region.

Markit’s Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies across the region and seen as a good indicator of growth, rose to 52.2, above all forecasts in a Reuters poll.

The poll had predicted a fall to 51.7 from September’s headline reading of 52.0 and October marks the 16th month the index has been above the 50 level that separates growth from contraction.

“The overall headline number

has risen but there are signs that it is going to start deteriorating again.

Most worrying is the decline in new orders,” said Chris Williamson, chief economist at data collator Markit.

Inflation slipped to its lowest for five years in September, official data showed last week, and the latest PMIs will do little to allay fears that deflation - which hit five peripheral euro zone countries last month - will spread.

The composite output price index slumped to 47.1 from 48.5, its lowest reading since February 2010.

Markit said the PMIs point to a 0.2 percent expansion of GDP in the current quarter, with risks to the downside. A Reuters poll last week also predicted 0.2 percent growth.

German rebound Earlier data from Germany showed activity increased in both the manufacturing and services

industries, boosted by resurgent growth among factories that was far better than anyone expected in a Reuters poll. The services PMI was weaker than predicted.

Germany’s economy, Europe’s largest, contracted for the first time in over a year in the second quarter while France’s, the bloc’s second biggest, flat lined as it did in the first three months of the year.

The latest flash PMI from France showed services activity shrank for a second month - and slightly more than expected - while the manufacturing industry contracted far more than even the most pessimistic economist polled by Reuters had predicted.

Still, services firms across the euro zone, which dominate the bloc’s economy, increased activity at the same pace as in September.

The services PMI was unchanged at 52.4, better than the Reuters poll forecast for a fall to 52.0.

Despite that upturn firms were less optimistic about the year ahead.

The business expectations index fell to 56.2 from 59.3, its lowest reading since June last year.

Manufacturing firms also performed better than expected.

The sector’s PMI was 50.7 versus a forecast for a fall to 49.9 from September’s 50.3.

An index measuring output, which feeds into the composite PMI, jumped to 51.9 from 51.0. But November may not be as strong as new orders fell for a second month with the related sub-index unchanged at 49.3.

Reuters

Exporters fail on pledge to curb bribery The non-governmental organisation urged exporting countries to take a tougher stance on bribery

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ig exporting nations are breaking their pledge to fight corruption in global trade, with more than half of the countries that have signed an anti-bribery convention failing to implement it, a report by Transparency International (TI) showed yesterday.

The Berlin-based anti-corruption watchdog named Japan, the Netherlands, Greece, Russia and Brazil as among the worst offenders.

Corruption in trade is undermining global development as contracts don’t go to the best suppliers, prices are being inflated to cover bribe payments, environmental requirements are not being enforced and taxes are not being collected, it said.

To tackle this problem, the Parisbased Organisation for Economic Cooperation and Development (OECD) adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions in 1997.

Widely seen as an important instrument in the drive to curb

global corruption, the treaty requires the 41 signatory countries to make foreign bribery a crime for which individuals and enterprises can be made responsible.

These countries are responsible for around two-thirds of global exports and almost 90 per cent of total foreign direct investment outflows.

However, 22 signatories have done little or nothing to enforce the treaty, said TI’s annual report on the issue.

Among those with little or no enforcement were Japan, the Netherlands, South Korea, Russia, Spain, Belgium, Mexico, Brazil, Ireland, Poland, Turkey, Denmark, Czech Republic, Luxembourg, Chile and Israel, said TI. It said others, including France, Sweden, South Africa and New Zealand, were only enforcing the convention in a “limited” way.

In its assessment, the group said only four OECD countries were actively enforcing the anti-bribery convention: the United States, Germany, Great Britain and Switzerland.

KEY POINTS Transparency International says OECD convention largely ignored More than half of signatory countries do little or nothing Bribery in trade damages global growth and development

TI called on laggard countries to provide adequate support, including staffing and funding for enforcement and said rigorous OECD monitoring was essential. It also recommended that the OECD meet officials in countries with substantial foreign bribery.

Reuters

15

October 24, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THE PHNOM PENH POST With construction on the second phase of a new cargo terminal at the Phnom Penh Autonomous Port (PPAP) set to begin in 2016, officials are now looking for ways to finance the project. Hei Bavy, director general for PPAP, said the US$20 million expansion will see the existing cargo terminal increase its handling capacity from 150,000 shipping containers to more than 300,000 by 2017. PPAP is allegedly looking at two sources to fund the expansion including a loan from the Chinese government, which funded the first US$28 million phase of the port’s development.

European Commission President Jose Manuel Barroso delivers his last speech as President at the European Parliament in Strasbourg, France, 21 October 2014. Barroso is due to leave the job this month after 10 years at the helm of the bloc’s executive

Europe’s essential unity

THE JAKARTA GLOBE Visi Media Asia, the media holding company of Bakrie Group, plans to raise US$100 million from a bond sale in the second quarter of next year. Visis Media’s corporate secretary Neil Tobing said on Wednesday that the company is waiting for additional signs of stability in the political and economic situation before proceeding with the plan to sell the bonds. The proceeds from the bonds will be used to pay half of its US$220 million debt from Credit Suisse. Visi Media plans to sell a part of its stake in Intermedia Capital, which controls free-to-air television station ANTV.

PHILSTAR The research arm of Metropolitan Bank and Trust Co. has retained its full-year forecast for Philippine economic growth at six percent amid the expected pickup in government spending in the second half. “Research still expects full-year average GDP (gross domestic product) growth to come in to at least six percent amid expectations that construction will post faster growth in the second half of the year as infrastructure spending picks up,” according to the bank’s Economic Weather Report published. For next year, Metrobank Research expects higher public and infrastructure spending to boost growth.

THE JAPAN NEWS Sony Corp. has decided on a plan to fundamentally overhaul its global strategy for its smartphone business by exiting the market for lowpriced devices in China, Central and South America, and other developing countries, sources said. The electronics giant will aim to improve profitability through targeted investments in high-priced devices for sale in Japan, the United States and Europe, the sources said. A turnaround in Sony’s smartphone strategy will likely be determined by the success of the management restructuring at the company, which has been performing poorly.

O

José Manuel Barroso

President of the European Commission

ver the past ten years, the European Union has endured a series of unprecedented crises, the likes of which we are unlikely to see again. But other, no less daunting challenges lie ahead, and we would do well to remember the lessons learned along the way.

One lesson is that unity is not an option; it is a condition sine qua non of the EU’s economic prosperity and political relevance. It is remarkable that since 2004, when I became President of the European Commission, the EU’s membership has nearly doubled, from 15 countries then to 28 now.

There have been no defections.

From 2004 to 2014, we enlarged both the EU and the eurozone. Most important, we have kept Europe united.

I fought hard for that unity, particularly when defending, often against the odds, Greece’s continued membership in the eurozone, as well as when arguing against splitting the eurozone, as some people proposed. The Commission remained attentive not only to the dramatic impact of a “Grexit” on Greece, but also to its possible financial, economic, and political cascade effects.

Unlike others, we never lost sight of the systemic effects of decisions across the eurozone or the EU. The EU is already an economic and political reality. This requires solidarity and responsibility – in particular, solidarity from the Union’s more prosperous countries and responsibility on the part of those countries in need of reform. The Commission has been equally firm in demanding both.

The same logic applies to another core concern that I faced throughout my decade at the Commission: the need to deepen the eurozone while maintaining the integrity of the EU as a whole. This will remain a critical issue in the near future, if only because

of the uncertainty surrounding the United Kingdom’s status in our Union.

Allowing for flexibility while avoiding fragmentation is now a well-established approach within the EU. But it was not always so. Some have long advocated establishing a completely separate institutional framework for the eurozone.

I remain convinced that multi-speed European cooperation has become a necessity, but that a multi-tier Europe must be avoided at all costs.

While integration must deepen further, especially in the eurozone, this can and should be done in a way that preserves the integrity of Europe’s single market. Fortunately, this logic has been widely accepted, as demonstrated by the decision that the European Council’s next president, despite being from a country (Poland) that is not yet in the eurozone, will nonetheless preside over eurozone summits.

A second lesson we learned is that openness to the world is an asset, not a liability. That thinking – which needs to be reaffirmed and politically supported – underpinned our active trade agenda. Indeed, it put the EU at the forefront of efforts to liberalize and regulate international trade, enabling us to reap the full benefits of globalization.

This is not just about Europe’s economic wealth, but also about its political relevance on the global stage. One presupposes the other, requiring

vigorous defence of the EU’s interests and views in bilateral relationships with strategic partners and in multilateral fora, such as the United Nations, the World Trade Organization, the G-20 and the G-8/G-7. If the EU as a whole engages internationally, it can help to shape the international order.

Our current engagement in Ukraine is a case in point, as were our efforts to lead a global response to the 2008-2009 financial crisis, namely by collectively resisting the allure of protectionism.

It was on the EU’s initiative that the world acted in a concerted and convincing way by establishing the G-20 Leaders’ Summit, comprising heads of state or government.

Since then, the G-20 has become the premier forum for economic policy coordination among its members, giving concrete form to many of the ideas – for example, on a framework for balanced and sustainable growth, on financial regulation and supervision, and on action against tax evasion and fraud – that the EU proposed. The emergence of the G-20 has transformed the global system, and certainly helped to prevent the realization of worst-case scenarios in the aftermath of the crisis.

The third lesson is that making Europe stronger – institutionally, politically, and economically – demands continued reform.

Credibly delivering on important EU-level reforms enabled Europe to put the most existential phase of the crisis behind it.

The system of economic gov-

Allowing for flexibility while avoiding fragmentation is now a wellestablished approach within the EU. But it was not always so

ernance that we put in place guarantees that EU members put their public finances in order, increase their competitiveness, and tackle their macroeconomic imbalances. We created the instruments needed to assist distressed countries, and the ensuing adjustment programs are delivering results.

In short, we seized the momentum of the crisis to provide a structural response to the challenges we faced, in particular by establishing a European banking union. Step by step, despite strong resistance, we have changed the rules that govern financial institutions, the institutions that oversee banking operations, and the mechanisms to coordinate resolution of failed banks.

Taken together, the reforms adopted since the start of the crisis have changed the way that Europe’s economies and financial sector are legislated, supervised, and regulated. The framework has been created.

Now we need to implement it fully.

But we also need to go further in advancing structural reforms at the national level.

We can see that the countries that have done the most in this respect now have better economic prospects. We must not relax these efforts. After all, the economic crisis has not yet been fully overcome. We must not take for granted the progress that has been made.

Political decisions matter – and mistakes have consequences.

At the end of a ten-year rollercoaster ride as Commission President, I can confidently declare that Europe has shown great resilience. We have shown that the forces of integration are stronger than the forces of fragmentation.

Despite all of the challenges we had to face – indeed, partly because of them – Europe remains united and open, and is now stronger and better able to face globalization.

Project Syndicate

16

October 24, 2014

Closing HKeX signs deal aimed at LME Asia expansion

China and ASEAN to discuss ocean Code of Conduct

Hong Kong Exchanges and Clearing (HKeX) has signed a preliminary deal with China Merchant Group companies aimed at expanding LME warehouses in Asia and developing new products and services for the Asian market. HKeX has been under pressure to boost earnings ever since it bought the London Metal Exchange (LME) in 2012 for US$2.2 billion. To this end, it has long planned to steer the LME into mainland China, the world’s biggest metals market.

HKeX representatives, including Chief Executive Charles Li, are in London this week for LME Week, the global metals industry’s largest annual gathering.

Chinese Vice Foreign Minister Liu Zhenmin and Southeast Asian diplomats will gather in Bangkok to discuss the formulation of a Code of Conduct (COC) in the South China Sea. China and the Association of Southeast Asian Nations (ASEAN) will hold the 8th Senior Officials’ Meeting on the Implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC) in Thailand from October 28 to 29. The parties will discuss the comprehensive and effective implementation of the DOC, promoting practical maritime cooperation and formulation of a COC within the framework of the DOC.

UBS searches for millionaires in Mong Kok This month, UBS had its first major client event in Kowloon, 50 years after the firm started operating in Hong Kong

U

BS AG is seeking to bolster its position as the largest manager of private wealth in Asia by looking for millionaires in an unlikely place: the lowerincome part of Hong Kong.

Switzerland’s largest bank is searching for clients in Kowloon, a name derived from the Cantonese translation for “nine dragons,” and the New Territories, said Amy Lo, the Hong Kong and Greater China head for UBS’s wealth unit.

While average incomes are 27 percent lower on the north side of Victoria Harbour than on Hong Kong Island, the business people include toy, electronic and plastics entrepreneurs who like being closer to their factories in mainland China. UBS is targeting as many as 25,000 such individuals who each have at least US$1 million in cash and liquid assets, according to Lo. “A lot of these people are baby boomers who are going through transitions in their lives and need succession planning,” Lo said in a phone interview on October 20.

As part of efforts to tap this wealth, Zurich-based UBS added 100 client advisers in Hong Kong in the first eight

A panorama of Kowloon city

months of this year, taking its total to more than 400, Lo said.

Tourist attractions UBS has 1,150 advisers in the Asia-Pacific region, more than double the 470 at Credit Suisse Group AG, the region’s third-biggest manager of wealth assets.

Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, had 1,216

Philippine Customs revenue up

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advisers globally at the end of June, corporate filings show.

While Hong Kong Island boasts attractions such as The Peak and the spectacular architecture of the Bank of China Tower, Kowloon is known for shopping spots for mainland tourists and the densely populated streets of Mong Kok. Part of Kowloon was once home to a walled city famed for lawlessness and gangsters.

The income disparities that may be fuelling the student-led protests are evident in Kowloon and the New Territories, where households earned a median monthly income of HK$22,131 (US$2,853) in 2013, compared with the island’s HK$30,150, government data show. In the poorest districts of Sham Shui Po and Kwun Tong, earnings were less than HK$18,000 a month.

Still, the number of high net-worth entrepreneurs in Kowloon and the New Territories about equals the figure for the island, the traditional base for the wealthy elite, according to estimates provided by Lo. UBS wants to boost its share of the KowloonNew Territories market to more than 10 percent from the current single-digit percentage, Lo said.

Most Hong Kong residents live north of the harbour: 5.98 million people, or about 82 percent of the total population, were projected to be living in that area as of June, according to a government study last year. The territory, a former British colony, may be home to as many as 100,000 high net-worth individuals, Lo said.

This month, UBS had its first major client event in Kowloon, 50 years after the firm started operating in Hong Kong out of a suite in a Hilton Hotel, Lo said.

While Kowloon-based entrepreneurs use bank lending services, they are less familiar with wealth management and privatebanking products, Lo said.

Bloomberg News

China state firms’ profit growth slows

New Japan minister hit by S&M bar scandal

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J

he Philippine Bureau of Customs (BOC) said yesterday that its collections rose by 27.2 percent on year to a record 32.87 billion pesos (US$734.04 million) in September.

BOC said its September collections were its highest-ever single- month collections. The agency attributed this to the continuous improvements in valuation and an increase in the volume of imported goods during the period.

Volume of imports in September grew 15.7 percent, driven by the growth in imports of petroleum products, motor vehicles, iron and steel products and electrical machinery and equipment.

BOC said inward shipments of these products accounted for 72 percent of total customs revenue.

BOC’s September revenue, however, fell short of its target of 34.56 billion pesos (US$771.79 million) for the period. This was mainly due to the failure of the Port of Manila and the Manila International Container Port to hit their goals.

From January to September, total revenue collections of the BOC reached 265.78 billion pesos (US$5.93 billion), 18 percent higher than the level posted in the same period last year

rofit growth of China state-owned firms slowed in the first nine months of 2014, adding to signs of fragility in the world’s second-largest economy as factories struggle to cope with falling prices and sluggish demand.

State-owned non-financial companies made combined profits of 1.85 trillion yuan (US$302.38 billion) between January and September, up 5.9 percent from the first nine months of 2013, the Ministry of Finance said yesterday.

That slowed from a rise of 8 percent in yearon-year profits in the January-August period. The increase was also below the 10.5 percent rise seen in January-September 2013 from the same period of the previous year.

Data this week showed China’s annual economic growth slowed to 7.3 percent in the third quarter - the weakest pace since the depths of the global financial crisis, and down from 7.5 percent in the previous quarter.

Meanwhile, China’s producer price index (PPI) fell 1.8 percent in September from a year earlier, its 31st consecutive monthly decline, highlighting increasing strains on companies.

Xinhua

Reuters

apan was stung yesterday by its third political scandal in a week after the country’s new industry minister -- whose predecessor resigned in disgrace over misspending -- admitted that his underlings had spent office cash at a sex bar.

The new revelations deal another serious blow to the administration of Prime Minister Shinzo Abe which was already facing a public backlash over its bid to turn Japan’s shuttered nuclear reactors back on and its stalling plans to revive the economy.

As news of the sex-bar scandal broke Thursday, industry minister Yoichi Miyazawa, a Harvard graduate and former top bureaucrat in the finance ministry, distanced himself from the affair, saying he wasn’t present at the sex club in the city of Hiroshima.

But he acknowledged that some staff at his political office had billed 18,230 yen (US$170) as entertainment expenses during a visit in September 2010, Jiji Press news agency said.

“I came to know of that through a media report, and it was true,” Miyazawa told reporters in Tokyo yesterday.

AFP