Macau Business Daily, Nov 7, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 662 Friday November 7, 2014

Macau pension above world average

O

Year III

ur elderly are doing O.K. The Social Security Fund released an actuarial report on advancepension payouts yesterday. Prompted by resident grumbling, good news has emerged. The report indicates that the amount of advance-pension paid out in Macau is actually more than that of 11 other countries and cities. Higher than Japan, the U.S. and Canada. Only three of the surveyed jurisdictions pay advance pensions. Currently, the pension can reach 3,180 patacas each month PAGE

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Cash is king There’s a cold wind blowing. Some engaged in the VIP gaming business have begun disposing of luxury flats. Prices have been discounted at about 10 percent. The gaming industry slowdown has not overtly impacted the local property market, agents say

Page 5

Chow Tai Fook now Greenheart majority shareholder Page 2

Shrinking VIP segment drags down Iao Kun Page 2

HSI - Movers

Building by numbers

November 6

Name

Massive numbers. Massive projects. Massive expectations.

‘Cotai 2.0’ has all the makings. Union Gaming says the largest 10 projects are on schedule. While some could miss topping off by a quarter or two. The total investment represents half of Macau’s GDP

www.macaubusinessdaily.com

Page 6 & 7

A matter of trust

Page 8

China Mobile Ltd

1.41

China Unicom Hong Ko

1.24

CNOOC Ltd

0.86

Want Want China Hol

0.78

AIA Group Ltd

0.58

Hang Lung Properties

-1.71

Li & Fung Ltd

-2.06

Galaxy Entertainment

-3.24

Sands China Ltd

-4.64

Lenovo Group Ltd

-5.11

Source: Bloomberg

Global recipe

The Asian Infrastructure Investment Bank. Created with little fanfare, and a lack of big names. Australia, however, has announced it is interested in joining the institution. If trust in its structure and function can be shored up, that is

%Day

Red Bull gives you wings. So says the energy drink slogan. The Austrian company is happy enough with local can sales. And prospects are good. But it wants to spread those wings into the world of sport and entertainment here.

Just like it does all around the world

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I SSN 2226-8294

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November 7, 2014

Macau opinion

HK$5 billion extra for HZM Bridge portals

On living heritage

José I. Duarte Economist

M

H

ong Kong’s Secretary for Transport and Housing Anthony Cheung Bing Leung announced yesterday that an estimated additional HK$5 billion (US$645 million) will be “inevitable” for the HK$30.4 billion project reclaiming and developing an artificial island off Lantau, which will house immigration facilities for the Hong Kong-ZhuhaiMacau Bridge.

In a statement released yesterday, the Hong Kong Government explained that the surge in construction workers’ wages and cost of construction materials, etc. mean a budget increase,

for which funding approval must be obtained from the public works subcommittee and finance committee of the Legislative Council.

The Hong Kong Government announced late 2017 as the expected date for the works completion of the new island – a year behind the target date - while clarifying that the 2017 date refers to the traffic control and surveillance system, not the commissioning of the Bridge per se.

The 29.6 km-long bridge is expected to be completed in 2016.

For the Macau section of the bridge, the Infrastructure Development Office

Shrinking VIP segment drags down Iao Kun The junket operator is feeling the effects of the plummeting VIP segment in Macau, suffering a drop of 27 percent year-on-year in October. Nevertheless, for the first ten months of 2014 it has recorded a 5 percent increase João Santos Filipe

jsfilipe@macaubusinessdaily.com

I

ao Kun Group registered a drop of 27 percent year-on-year in October from US$1.51 billion (MOP$12 billion) to US$1.10 billion (MOP8.9 billion) in rolling chip turnover. The results of the junket operator are following the trend of Macau gross gaming revenues which last month plummeted 23.2 percent year-on-year from MOP36.5 billion to MOP28 billion.

Rolling chip turnover accounts for the aggregate amount of nonnegotiable chips VIP players purchase.

The commissions that casinos pay to junkets are calculated based on the number of non-negotiable chips purchased by VIP players.

These results announced by the company come as no surprise because while the mass-market segment in the Macau gaming industry is expanding the VIP segment has been falling precipitously.

However, when looking at the period between January and October,

Iao Kun is still recording positive results with a 5 percent year-on-year increase. In the first ten months of 2014 the company posted a rolling chip turnover of US$14.84 billion (MOP118.5 billion), while last year it achieved US$14.19 billion (MOP113.3 billion).

In terms of the results from the beginning of the year to October, Iao Kun is performing better than the overall gaming industry of Macau.

In the first ten months of the year GGR in Macau grew 2.3 percent yearon-year from MOP297.1 billion to MOP304 billion.

Iao Kun’s VIP rooms mainly cater to high stakes baccarat. This game accounts for roughly 88 percent of total Macau casino winnings. The Macau-based gaming promoter has five VIP rooms in the Special Administrative Region that are located in StarWorld Hotel, Galaxy Macau, Sands Cotai Central, City of Dreams and Royal Arc Casino.

could not confirm to us yesterday the latest estimate of the total budget allocated to the bridge and the artificial island where the bridge will land, just across from Areia Preta in Macau Peninsula north.

The Office did confirm that it is keeping its budget for Macau’s contribution to the principal part of the bridge at 1.98 billion yuan, around 15 percent of the total 15.73 billion yuan (US$324 million) that the three governments of Hong Kong, mainland China and Macau will split.

S.L.

Chow Tai Fook now Greenheart majority shareholder

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how Tai Fook Enterprises Ltd, controlled by tycoon Cheng Yu-tung, has bought 496 million shares of Greenheart GP for US$44.65 million (MOP356 million), raising its stake in the log and timber firm to 62.82 percent, based on a filing with the Hong Kong Stock Exchange.

The acquisition will enable Chow Tai Fook to take over the shares once held by Emerald Plantation Holdings Ltd, which last traded for HK$0.90. The HK$0.70 per share paid by Chow Tai Fook represents a discount of 22 percent.

Greenheart, which sells logs and timber products, was told in July that its then controlling shareholder Emerald Plantation wanted to offload its stake in the company. A number of investors since then have shown interest in acquiring the shares.

Greenheart Group is a limited liability company incorporated in Bermuda. The company currently owns renewable softwood plantations in New Zealand plus certified hardwood concessions and other interests in Suriname, South America.

Chow Tai Fook Enterprises is the majority shareholder of listed company New World Development Co Ltd and NWS Holdings Ltd. Chow Tai Fook Jewellery Group Ltd, an affiliate of Chow Tai Fook Enterprises, is also a listed company.

acau is proud of its heritage, tangible and intangible - and, in particular, of its several buildings, classified as World Heritage. They are a significant and for the most part visible symbols of the city’s legacy. Issues concerning their preservation and the protection of the surrounding areas are relevant matters that regularly come to the fore of public debate. Many of these issues are similar to those arising in other sites around the world.

Certainly, each case is unique, and each local reality is different from all the others. There is always some degree of singularity in every location or social setting. However, there are general considerations that are somehow shared everywhere, and concerns that affect everyone.

They should, in a way, be part of our collective awareness and, fully assimilated in the public debate, frame all applicable regulations and related decisions.

An often neglected aspect of these matters pertains to the role of the local community and its interaction with its tangible heritage - namely, the importance of preserving the social and cultural settings that give meaning and add value to that heritage. Sometimes, we may be forgiven for feeling that some common understanding and broad agreement on some basic issues are still missing here. Let’s clarify what we mean, using as reference UNESCO’s World Heritage Convention and ICOMOS’s Xi’an Declaration on the conservation of sites.

UNESCO’s convention underlines that countries should provide adequate protection for heritage sites, including the adoption of policies ‘giving cultural and natural heritage a function in the life of the community’. Moreover, it is considered ‘essential’ that the ‘active participation of the population concerned’ is obtained.

The Xi’an declaration, for its part, makes even more abundantly clear that the heritage setting includes interaction with the ‘past or present social or spiritual practices, customs, traditional knowledge, use or activities and other forms of intangible cultural heritage aspects that created and form the space’, including ‘the current and dynamic cultural, social and economic context’.

Further, it states that heritage sites ‘also derive their significance and distinctive character from their meaningful relationships with their physical, visual, spiritual and other cultural context and settings’.

So, as Macau becomes unaffordable for a rising number of its residents, and one hears casual talk about the possibility of large chunks of the population moving to neighbouring areas, and as the network of small and neighbourhood businesses collapses under the weight of labour market strains and real estate costs, let’s also ponder what it means for the city’s heritage.

Intangible values will vanish with the demise of the social structures that underpin them. And what meaning will be left for historical sites without the populations that are historically and culturally linked to them?

It is not just that transient residents and the visitors passing by do not know the history of those buildings and their surroundings: most importantly, it is that those buildings and their surroundings were not part of their life story. They may still be fragments making up the face of the city but they will no more be a part of its identity. They are there to be looked at, not to be lived as essential foundations of our collective life - like empty boxes, to be filled with fake stories and artificial memories. Facades can be copied – according to taste, they may even be considered better than the original. But the associated social relations and the sense of belonging and being, in some way unique, are the outcome of a singular historical narrative that time has constructed. They cannot be reproduced - and once dismantled are gone forever. That’s what death means. The body may still be there but the spirit has departed. What was intended as the protection of our common heritage will end up as a vigil for its corpse.

Shouldn’t someone feel accountable for that?

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November 7, 2014

Macau

Actuarial Report: Macau has world’s highest advance-pension After residents complained that the amount of advance-pension is less than that of the original pension, an actuarial report on the issue indicates that the current amount of advance-pension in Macau actually tops that of the rest of the world already Kam Leong

kamleong@macaubusinessdaily.com

T

he Social Security Fund announced the actuarial report on advance-pension yesterday, which indicates that the amount of the current advance-pension, equivalent to 75 percent of the original pension each month, is already a privilege compared to that of other countries, claiming the percentage should actually be 72 percent following actuarial calculation. Nevertheless, the head of the Fund, Ip Peng Kun, said that the government will retain the current percentage.

The government department said it had delegated Tower Watsons Hong Kong, a professional services company, to compile the report, following complaints that the total amount of advance-pension is less than that of the original pension based on current calculations, presupposing the elderly can live to be 80 years of age. Currently, the pension

can reach 3,180 patacas each month.

The company’s general manager of risk and financial services for Mainland China and Taiwan, Yvonne Sin Yee-Mum, said Macau has better benefits regarding its advance-pension system. She compared Macau with 11 countries or cities, of which only three permit citizens to draw their pension in advance.

According to Ms. Sin, the amount of advance-pension in Macau is higher than in Japan, the United States or Canada, where the advance-pension is discounted by 30 percent of the original pension. In addition, Macau is the only jurisdiction that will adjust the amount of advance-pension back to the same as that of the original pension when a citizen reaches 80 years old.

In point of fact, the report indicates that the appropriate percentage for the advance-pension should be three

percent lower than the current rate.

Ms. Sin explained this is because of the actuarial calculation included as well as the probability of surviving plus refinancing rate, claiming the public cannot assume all elderly persons will pass away at exactly 80 years old.

Meanwhile, Mr. Ip announced that the government will not change the current percentage of advancepension in the current stage in order not to confuse residents; the age for receiving a pension remains at 65 years old.

Mr. Ip said the pension is like an insurance which requires opportunity cost. As such, he thinks that it is unrealistic to compare the amounts of the advance-pension to the original one, indicating residents will get different amounts of pension eventually, depending upon their age of survival per the few examples he had elaborated upon.

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November 7, 2014

Macau Brought to you by

HOSPITALITY Individual trips The total number of visitors to Macau increased by 6.1 percent in the third quarter of this year compared to the same period last year.

This figure consolidates the trend apparent in previous months. The current growth for the year, up to September, is 2.4 percentage points above the corresponding one in 2013.

That confirms the resumption of growth seen last year, following the stall observed in 2012.

China is the main provider of visitors and given its size almost inevitably the main source of growth in absolute terms. Current figures show that China’s growth, in this year, is also running increasingly more above the average. In the first nine months of the year, the number of Chinese visitors went up by about 13.5 percent. If we look into the records for same-day visitors, the figures are even higher, nudging 17.2 percent.

The same figure for the country is currently 12 percent. Interestingly, for most of 2012 and early 2103 the homologous growth rates actually occupied negative territory.

Red Bull targeting entertainment in Macau The Austrian company takes wing like no other energetic drink does in Macau. But now Red Bull is focused on organising promotional events as it does in other parts of the world. Ricardo Torrão, responsible for sales, and Anette Hyttemoen, field marketing manager, talk to Business Daily João Santos Filipe

jsfilipe@macaubusinessdaily.com

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Guangdong and Fujian weigh heavily on the Chinese figures, as the two provinces together account for about half of the Chinese visitors. However, in the current year, so far, Guangdong growth has trailed the national figure by almost 5 percentage points. In relative terms, although a stronger relative increase was posted in the case of Fujian, the number of visitors rose only marginally above the average. Growth sources are diversifying somewhat. Most remarkable, then, is the growth in visitors with individual visas. They swelled this year, up to September, by more than 20 percent in the case of Guangdong and just a tad below 40 percent in the case of Fujian.

7.4 %

Rise in visitors, Jan-Sep 2014, on previous year

ed Bull sells more than 400,000 cans of Red Bull in Macau every year and the brand is well known in the territory. However, since last year the Austrian brand has set up a marketing department in the city and is focused on expanding its entertainment promotion activities.

“We want the people in Macau to be aware that Red Bull is not only a drink product but a brand that is highly involved in the best events in the world and connected to the best athletes and musicians”, said Musketeer Ricardo Torrão, (the term used by the brand to define the person responsible for sales).

“Worldwide, this is already known but in Macau and Asia this idea has not yet matured”.

The Austria-based company organises worldwide events such as international air races series, motorbikes competitions, live music shows and so on. In the long term the goal is to bring some of these events to Macau, despite the bureaucratic difficulties.

“We are considering all the possibilities that we would like to bring to Macau. But there are a lot of constraints by the government [regarding] outdoors activities”, Torrão explained. “The government demands so many licences for closing one road or the air space . . . ” the Field

Marketing Manager of the brand, Anette Hyttemoen, added.

“The Macau Government is focused on increasing non-gaming events. Red Bull organises the best events worldwide that are non-gaming related. We believe that we can help the city diversify its economy and bring different tourists with such activities as outdoors live music and shows”, she said.

Next year, the brand will launch two events: a 5-side tournament and a go-karting competition for amateurs.

On-premise dominance As for can sales, Red Bull is well positioned in the market for energy drinks. The silver and blue cans occupy the largest market share for on-premise sales. This means places where the product is sold for immediate consumption such as casinos, pubs and cafes.

“At the moment, our brand in Macau is dominant in 99 percent of the on-premise market. We’re selling more than 400,000 cans per year in this market. In every casino and pub they are selling Red Bull with the silver and blue can. Only, Casino Lisboa is selling the Thai Red Bull [Krating Daeng]”, Torrão said. “But we are keen on being the main energy drink there, as well”.

The Macau market supports Red Bull, the Austrian-based brand, and Thai Red Bull, which has a golden can and is only sold in Asia. The latter was the inspiration for the first but the companies are independent.

“It is in casinos and pubs that we are making the largest share of our sales, the revenue comes from there.

For instance, VIP rooms are offering our product for free to players, and you can easily find Red Bull cans in hotel rooms, mini bars and the pubs here”, Hyttemoen added.

In terms of the off-premise segment, such as grocery stores and gas stations, sales are more even.

“In Macau, the off-premise segment we’re competing with non-energy drinks, sports drinks like Gatorade and Lucozade. Although these drinks are caffeine free, in Macau people consider them as energy drinks”, Hyttemoen said. “This is very different to Europe and America, where such drinks are not competing with us”.

As for the future, Red Bull is bullish on its prospects for Macau as the on-premise segment will increase with the casino expansion from next year on.

“It’s going to be good for Red Bull. We already have agreements with gaming operators and so we’re going to have our product in the new places”, Torrão said.

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November 7, 2014

Macau VIP gaming promoters dispose of luxury flats Clients engaged in the VIP gaming business have begun disposing of luxury flats at discounted prices, although the gaming industry slowdown has not overtly impacted the local property market, agents say Stephanie Lai

sw.lai@macaubusinessdaily.com

P

roperty agents have noted a recent cooling down in property investment sentiment in Macau with cases of VIP gaming promoters offloading their luxury flats at discounted prices to cash up. The gaming industry experienced its fifth month of consecutive decline in gross gaming revenue in October. Macau’s Secretary of Economy and Finance, Francis Tam Pak Yuen, remarked last month that a recovery in the city’s casino revenue can only be expected in the second half of next year. Ricacorp (Macau) Properties Ltd and Greatest Properties Ltd told Business Daily that they have observed “a few” cases of VIP gaming promoters offloading their luxury flats – mostly secondhand unfurnished flats in Cotai and the northern Macau

Peninsula - with some offering up to 10 percent discount on the sale price.

“It’s true that we did have some clients from the VIP gaming business selling off their flats to help cover part of their losses in their trade but this is not really a widespread trend now as we have only observed a few cases,” said Greatest Properties’ chief executive officer Yu Ming.

“These are the clients that offer a cut of 5 to 10 percent of their 10 million patacas (US$1.25 million) to 20 million patacas-worth of luxury flats for selling out,” he said. “If gaming revenue continue to dip, transactions of the luxury flats are likely to be directly impacted.”

Macau’s gross gaming revenue for last month fell 23.2 percent year-on-year to 28.03 billion patacas,

the steepest drop registered since the government started publishing monthly results in 2005. The combined factors of the anti-graft drive in mainland China, reduced liquidity of the Chinese economy and fewer transit visas available for VIP players have weighed on gaming revenue growth, investment analysts say.

Both Ricacorp and Greatest Properties say the investment mood in the city’s property market has cooled down recently in light of the drop seen in gaming revenue but they reckon that the gaming industry slowdown alone does not constitute the strongest impact on property sales.

“The investment mood in property has been affected by the gaming slowdown but in the local property market, which is very much supported by users, it’s more a factor

of the economic conditions of the city at large and their affordability that affects sales here,” said Mr. Yu. Macau is experiencing a continuous decline in property transactions because of the lack of newly built flats and weak second-hand home sales; in October the city may see only around 250 transactions – the fewest in a month in a decade, managing director of Ricacorp Macau Jane Liu Zee Ka said. If Ms. Liu surmises correctly, property transactions here would see a sharp fall of 68 percent compared to October last year.

“We also expect an 8-10 percent decline in the average home price here for October when compared to the highest level this year [in April at 131,589 patacas per square metre],” said Ms Jane Liu. “But the property

price here in the long term is still on a growth track, as it will be stimulated by the opening of new Cotai projects in 2016-2017 along with the completion of the Hong Kong-Zhuhai-Macau Bridge.”

The becalmed local property trade can also be attributed to the heated sales of Hengqin homes to residents here, and a shortening of the mortgage repayment period that makes buyers more observant, estate agencies remarked.

“From off-plan sales of the residential project ‘Sea of Dreams’ in Hengqin, you can see that Macau buyers occupy almost 80 percent,” said Mr. Yu. “The recent heated home sales in Hengqin have absorbed many local buyers, with half of them purely purchasing for residence and the others for investment purposes.”

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November 7, 2014

Macau UPDATE

Game of Thrones

The race for the leadership of the world’s gaming mecca is on. The biggest casino operators are putting on the ground massive numbers, massive projects and have massive expectations of what is labelled ‘Cotai 2.0’. Union Gaming says the largest 10 projects are on schedule, while some could miss the timeframe by a quarter or two. The total investment represents half of Macau’s GDP Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

I

t’s commonplace to say there’s a before and after for everything. For Macau and its gaming industry, the turning point is 2017 and Cotai 2.0, as it is known here, referring to the upcoming casino resorts that will open their doors within the next two years. The multibillion projects will reshape the face of the Macau casino industry and will more than double its size for what is already the world’s gaming mecca. Just when you think it couldn’t get bigger, it does.

The Cotai 2.0 race involves eight companies building 10 mega-projects

42,222

Total numbers of rooms available in 2017

featuring casinos, hotels, shopping malls and numerous other amenities with themes ranging from cinema (Studio City) to fashion (Louis XIII) to 18th Century Chinese porcelain vases (Wynn Palace).

The numbers are massive. In the next three years, casino operators will invest a total of US$22billion in new properties and extensions of current ones. The figure doesn’t take into account the millions spent on renovations for the existing resorts.

The amount represents almost half of Macau’s GDP (US$53 billion).

Wynn Macau is putting US$4 billion into its Wynn Palace, SJM more than US$3.9 billion for Lisboa Palace, while MGM, Sands China and Melco Crown are expected to spend over US$2.5 billion.

The Cotai ‘extravaganza’ will more than double the size of the gaming sector in Macau with the ardent hope of attracting a few more million tourists and gamblers, mainly from mainland China, of which it currently only captures 1 percent

of the population. Macau receives an average of 30 million tourists per year.

On time… almost According to a Union Gaming update on the pipeline of casinos here, by the end of 2017 Macau will have increased the number of hotel rooms by 51 percent, the number of tables by 62 percent and slot machines by 65 percent.

US$ 22.5bln Investment for Cotai 2.0

Compared to what’s available today, the 10 casino resorts will add to the market an extra 15,000 rooms, 4,000 gaming tables and 8,000 slots.

The US$100 billion market that investors believe Macau will be in 2020 is based on revenues generated by 42,000 hotel rooms, 9,200 tables and 21,000 slots.

The foundations of phase 2 of the world’s gaming mecca are already built and investors believe it will open doors per the predicted schedule. Only a few delays are expected. ‘As of today, we believe most projects remain on track with respect to management’s previously communicated guidance, although some could still slip by a quarter or two’, wrote Union Gaming this week.

With gaming revenues falling for the fifth straight month in October and the largest segment (VIP) plummeting 30 percent, investors and casino companies are expecting Cotai 2.0 to refuel the Macau success story and put the industry on the path to double digit growth.

Construction photos courtesy of Union Gaming

Project | Timing | Cost US$Million

Galaxy Phase 2 | Mid-2015 | US$Million 2,500

Macau Studio City | Late 2015 | US$Million 2,900

St . Regis (Sands Cotai Central) | Mid-2015 | US$Million 725

Parisian | Late 2015 / Early 2016 | US$Million 2,500

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November 7, 2014

Macau The second wave of Macau casinos (2014-2017) Project

Timing

Operator

Slots

Tables

Rooms

Cost (US$Million)

Galaxy Phase 2

Mid 2015

Galaxy

1,000

500

1,350

2,500

St . Regis (Sands Cotai Central )

Mid 2015

Sands China

na

na

400

725

Macau Studio City

Late 2015

Melco Crown

1,200

400

2,000

2,900

Parisian

Late 2015 / Early 2016

Sands China

1,500

500

3,000

2,500

Wynn Palace

Early 2016

Wynn Macau

1,300

500

1,700

4,000

MGM Cotai

Mid / Late 2016

MGM China

2,500

500

1,600

2,900

Fisherman’s Wharf

Stages 2014-2017

Macau Legend / SJM

na

350

1,272

1,000

Louis XIII

Mid 2016

TBD

75

66

200

1,100

City of Dreams 5th Hotel Tower

Early / Mid 2017

Melco Crown

na

na

800

1,000

Lisboa Palace

Mid / Late 2017

SJM

1,000

700

2,000

3,900

Total Future Supply

8,575

3,516

14,322

22,525

Today’s Supply

13,232

5,700

27,900

Supply in 2017

21,807

9,216

42,222

Increase vs today

65%

62%

51%

Construction photos courtesy of Union Gaming

Source: Union Gaming

MGM Cotai | Mid / Late 2016 | US$Million 2,900

Wynn Palace | Early 2016 | US$Million 4,000

Louis XIII | Mid-2016 | US$Million 1,100

Fisherman’s Wharf | Stages 2014-2017 | US$Million 1,000

COD 5th Hotel Tower | Early / Mid 2017 | US$Million 1,000

Lisboa Palace | Mid / Late 2017 | US$Million 3,900

8

November 7, 2014

Greater China

Australia mulls joining AIIB Beijing has maintained it is open to more countries joining new bank with the MOU signatories expected to negotiate its specifics in the coming months

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ustralia said it was keen to join an Asian infrastructure lender seen as a counterweight to Western-backed international development banks, but said changes to its set-up were needed.

China and 20 other countries last month put their names to a memorandum of understanding (MOU) to establish the Chinese-driven Asian Infrastructure Investment Bank (AIIB) at a ceremony in Beijing.

The institution, reportedly to be based in Beijing, is expected to have initial capital of US$50 billion to address the region’s burgeoning demand for transportation, dams, ports and other facilities, officials say.

But precise details about the bank, including governance and transparency issues, remain elusive and big economies such as the United States and Japan, as well as Australia, turned down an initial request to join.

Australian Prime Minister Tony Abbott told The Australian newspaper he would encourage other nations to back the bank once it was clear it was a “genuine bank” rather than an arm of just one country’s foreign policy.

“We haven’t decided not to join.

We would like to join but we want to join a multilateral institution, but not one that is basically owned and operated by China,” he said ahead of the APEC summit in Beijing.

“We’ve provided input into the governance. Because the MOU had

Official picture of the AIIB memorandum of understanding signature session

already been the subject of intensive negotiation it wasn’t possible for them to much revise the MOU prior to that initial date. But we’re certainly hoping to have further discussions.”

“If the MOU can be further adjusted... that makes it absolutely crystal clear that this will have the governance and transparency arrangements that other entities such as the World Bank have -- well, not only will we be happy to join but we’d expect that others like Japan

and Korea and the United States would also join,” he added.

“And we’d certainly be encouraging them to do so.”

China’s rise to become the world’s second-largest economy has been accompanied by a desire to play a greater role in global organisations such as the International Monetary Fund, the World Bank and the Asian Development Bank, which have been dominated by Europe, the United States and Japan.

Beijing has maintained it is open to more countries joining new bank with the MOU signatories expected to negotiate its specifics in the coming months.

World Bank President Jim Yong Kim said in July that estimates for infrastructure needs in developing countries were at least US$1 trillion annually, far beyond the current capacity of his institution and private investment to handle.

AFP

Measures unveiled to support imports China aims to improve the national reserve system on resources

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hina’s cabinet issued detailed measures yesterday to support imports of high-tech equipment, resource products and consumer goods, in its latest efforts to support the cooling Chinese economy.

The government will encourage banks to expand credit support for imports of high-tech equipment and key components to promote

industrial upgrading, according to a statement published on the central government’s website, www.gov.cn.

The government also will rally local firms to speed up overseas investment, develop offshore energy resources and ship strategic resources back to China to help stabilise supply of energy and other resources.

China aims to improve the national reserve system

on resources and support enterprises to establish their own commercial reserves, the cabinet said.

To spur imports of consumer goods, the government will speed up the process of signing quarantine agreements with relevant countries on aquatic products, fruits, beef and mutton, it said without elaborating.

The latest step to boost imports will help restructure the economy, rebalance trade and “make good use” of the country’s massive foreign exchange reserves, the cabinet said.

China’s imports jumped 7 percent in September from a year ago, though analysts warned the unexpectedly buoyant imports could be due to one-off factors.

Reuters

9

November 7, 2014

Greater China APEC forum to push official anti-corruption statement Beijing proposed the initiative that has been backed by United States

A

n anti-corruption statement will be included in outcome documents of the on-going Asia-Pacific Economic Cooperation (APEC) meetings, an APEC official said yesterday.

Alan Bollard, executive director of the APEC Secretariat, said the Beijing Statement on Anti-corruption has been proposed not only by the leadership of China “but also from the United States.”

Bollard said at a news briefing that the statement will result in the establishment of a group “which could get the enforcement agencies together across the APEC region and allow them to pass on the information on particular cases with one another.”

“This is necessary for us to track cases across borders within the APEC

region and even to follow up and recover assets if they are illegally moved,” Bollard said.

This year, China intensified efforts in its anti-corruption campaign to snag crooked officials who have absconded overseas.

Chinese Foreign Minister Wang Yi said on October 2 that China stands ready to enhance cooperation with the U.S. side in criminal manhunt and illicit-money recovery.

APEC is an important economic forum in the Asia Pacific with 21 member economies including China, the United States, Japan and Australia.

Police authorities of Australia said last month they are cooperating with the Chinese authorities in hunting down corrupt Chinese officials who fled and settled in Australia.

澳 門 特 別 行 政 區 政 府 Governo da Região Administrativa Especial de Macau 澳 門 格 蘭 披 治 大 賽 車 委 員 會 Comissão do Grande Prémio de Macau

Barrier Gates Closing Schedule for the Macau Grand Prix The 61st Macau Grand Prix will be held from November 13 to 16 this year. This major international motorsport event attracts thousands of visitors to Macau each year. The event plays an important role in the promotion of the local tourism industry, as well as enhancing the image of Macau as an international city. To a great extent, the success of the Grand Prix depends on the support and cooperation of the local residents.

To minimize disruption to traffic due to the closure of some roads, the Macau Grand Prix Committee has increased the number of the barrier gates along the circuit this year, to a total of 127. However, due to certain constraints, some roads will remain closed throughout the event. The Committee seeks the understanding of motorists and asks for attention to be given the closing schedule for all barrier gates, as well as to respect the temporary signage and instructions from the Traffic Authorities.

10th November (Mon) Time

10：00

Street

Location

Est. de Cacilhas

Exit from the garages of Cheng Pek Kok (Approx.60m) Exit from the garages of Edifício Seng Vo e do Edifício Jubilee Court (Approx.110m) Exit from the garage of Hotel Grand Lapa Entrance and exit from the World Trade Center

Av. da Amizade

Xinhua

Av. da Amizade Est. de Cacilhas Est. D. Maria II

Lenovo post slower sales growth

15：00

The company says growth is slowing as the domestic market matures and consumer preferences change for big-screen phones

L

enovo Group Ltd. posted the slowest sales growth in six quarters as it was overtaken in the global smartphone market by Chinese competitor Xiaomi Corp.

Revenue rose 7.2 percent to US$10.5 billion in the three months ended September, the world’s biggest personal-computer maker said in a statement yesterday. That missed the US$11.3 billion average of analysts’ estimates and was the smallest increase since the quarter ending in March 2013. The shares fell.

Chief Executive Officer Yang Yuanqing is trying to combat a shrinking PC market and slowing growth in China with new products and acquisitions, including the lowend server unit of International Business Machines Corp. Lenovo last month also completed the US$2.91 billion purchase of Motorola Mobility from Google Inc. after being passed in domestic and international smartphone sales by Xiaomi.

The “China smartphone market is no longer the hypergrowth market,” the company said in a statement.

The China smartphone market is no longer the hypergrowth market Lenovo’s statement

Lenovo’s second-quarter net income rose 19 percent to US$262.1 million, compared with US$259.8 million average of 12 analysts’ estimates compiled by Bloomberg.

Lenovo also said Jerry Yang, the co-founder of Yahoo! Inc., will become a director of the company, which has headquarters in Beijing and Morrisville, North Carolina.

Lenovo, Xiaomi and other Chinese producers have packed high-end features into cheaper smartphones to drive growth in their home market, the world’s biggest.

Growth is slowing as the domestic market matures and consumer preferences change for big-screen phones that are closer in size to tablet computers, Lenovo said.

“There are continuous changes in the consumer demands and market sentiments across form factors and screen sizes,” the company said.

Lenovo boosted global smartphone shipments by 38 percent in the quarter to 16.9 million units, ranking it fourth behind Samsung Electronics Co., Apple Inc. and Xiaomi, researcher IDC said October 29. The figures didn’t include sales of Motorola devices.

The addition of Motorola, which was completed after the end of the quarter, would have lifted Lenovo to third place, according to IDC figures.

While industry wide global PC shipments fell 0.5 percent in the three months that ended in September, Lenovo posted an 11.4 percent increase, researcher Gartner Inc. reported last month. Lenovo’s share of the market expanded to 19.8 percent from 17.7 percent a year earlier. Hewlett-Packard Co. was in second place with 17.9 percent, up from 17.1 percent.

Bloomberg News

Depósito de Pólvora Exit from the garage of Correios de Macau

Access Limited Access

No Access

Construction site

Rua dos Pescadores

Exit from Macau Water Corner near the Casino Oceanus (Av. da Amizade - Avenida do Dr. Rodrigo Rodrigues) Exit from (former) Casino Macau Palace

Av. da Amizade

Entrance to the Mobil gas station

Limited Access

Exit from the garage of the Chong Tou San Chong Garden From the flyover near the Reservoir to Hoi Fu Garden

Est. de Cacilhas

11th November (Tue) Time

Street

Location

Access

Est. dos Parses

Exit from the garage of the Monetary Authority of Macao

No Access

Rua de Nagasaki (PJ) Av. da Amizade Corner next to the Hotel Landmark Plaza (Av. da Amizade- Alameda Dr. Carlos d’Assumpção) Est. de Fereira do Amaral (upper top of the pavement behind Av. Ramal dos Hou Kong School) Mouros Exit from work shop 20：00

15：00

Limited Access

No Access

12th November (Wed) Time 10：00

15：00 19：00 20：00

Street

Location

Av. da Amizade

Amizade Bridge– exit to Av. de Amizade (100m)

Est. de S. Francisco

Exit from the garage of the Public Security Forces Affairs Bureau

Av. Ramal dos Mouros

Exit of the Reservoir overpass to Baguio Court

Est. D. Maria II Est. de Cacilhas

Main entrance of CEM Entrance to the opening of Seaview Garden

Access No Access Limited Access No Access

Closing times and locations of the barrier gates on 13th - 16th November: Ø All barrier gates installed at the access to any public road will be closed from 03:00 until the end of the races every day.

The Committee seeks the understanding of motorists for the inconvenience caused by the construction, as well as to respect the temporary signage and instructions from the Traffic Authorities. For further information, please call: 2872 8482.

10

November 7, 2014

Greater China

Yuan business to expand with a clearing bank in America Beijing is stepping up efforts to promote its currency beyond Hong Kong Michelle Chen

T

he global journey of the Chinese currency is set to enter a new stage with the first yuan clearing bank in the Americas, to be launched in Canada soon, boding well for the growth of a yuan deposit pool and investor participation there.

Canada is expected to finalise the creation of a yuan clearing centre, sources familiar with the government’s talks with Chinese officials told Reuters on Tuesday, following the set-up of the first yuan hub in the Middle East this week.

Toronto and Vancouver have been jostling to host it, but Toronto is believed to have edged past its West Coast rival in the race.

An announcement will be made during Prime Minister Stephen Harper’s trip to China later this week.

“It’s good for trade, it’s good for business, so I’m very hopeful, we’ve been very

supportive of the idea since it was first floated,” Bank of Canada Governor Stephen Poloz said about possible yuan trading arrangements in the country.

A yuan clearing bank helps reduce transaction costs, facilitate trade settlement and reduce currency risk. It also attracts yuan funds to accumulate in a country and paves the way for more financial products denominated in the currency.

Canada is not new to the offshore yuan market. The province of British Columbia completed its second offshore yuan debt issuance worth 3 billion yuan (US$490.9 million) last Wednesday, which, similar to the first issuance last year, saw strong demand from central banks.

The high-quality bonds not only provide investors in the Americas with a channel for exposure to the Chinese currency, but helps the yuan gain more acceptance

as a reserve currency by foreign governments and institutions.

Its neighbour has also seen yuan usage increasing thanks to its close trade relationship with China.

Standard Chartered included New York’s yuan business, such as foreign exchange turnover and international payments, in its Renminbi Globalisation Index at the beginning of the year to show

its rising importance.

The United States’ yuan payments increased by 327 percent in April from a year earlier, ranking it third in the world in terms of yuan payments value, excluding China and Hong Kong, according to global transaction services organisation SWIFT. No figures are available for Canada, but market participants believe the

country is likely to have bigger potential in terms of becoming another offshore centre, compared with the world’s largest economy.

“Canada has more potential in the short term as the U.S. does not want the dominant status of its dollar to be challenged, which is what the Chinese currency is trying to achieve,” said a Chinese asset manager in Hong Kong.

Beijing is stepping up efforts to promote its currency beyond Hong Kong by assigning clearing banks to more and more countries to facilitate trade transactions and investment denominated in the “redback”.

In the past two years, a total of eight financial hubs have been granted yuan clearing banks, including Taiwan, Singapore, London, Frankfurt, Paris, Luxembourg, Seoul and Qatar.

Reuters

11

November 7, 2014

Asia

Asia FX sentiment deteriorates Pessimism spreads following Bank of Japan’s unexpected easing of monetary policy on October 31 Jongwoo Cheon

KEY POINTS Won short position largest since May 2012 Ringgit bearish bets highest since August 2013 Rupee long positions largest since early June South Korea’s President Park Geun-hye (pictured) and senior officials have expressed concerns over the weakening yen

S

entiment toward most emerging Asian currencies deteriorated in the last two weeks with short positions on South Korea’s won swelling to the largest in two and a half years, a Reuters poll showed yesterday, amid a strong dollar and a slowing Chinese economy.

Bearish bets on the won rose to the highest since May 2012, according to a survey of 15 currency strategists and traders conducted from Tuesday to yesterday.

Views on the currency turned pessimistic as the yen hit a sevenyear low after the Bank of Japan on October 31 unexpectedly eased monetary policy. The stimulus

prompted expectations that South Korea’s central bank would cut its policy interest rate further.

The won touched a 14-month low against the dollar yesterday after media quoted Vice Finance Minister Joo Hyung-hwan as saying that the government will manage the currency to make it move in line with weakening yen.

South Korea’s President Park Geun-hye and senior officials have expressed concerns over the weakening yen. South Korean and Japanese companies compete for a similar group of products such as cars on major markets around the world.

Sentiment on most other emerging

Rupiah sees bullish bets, first in 3 months Asian currencies also worsened as the dollar stayed around a 4-1/2year high against a basket of major currencies.

Short positions in the ringgit rose to their largest since August last year.

The Malaysian currency hit a nine-month low as central bank data showed foreign investors cut holdings in the country’s bonds in September. Offshore funds also sold the currency amid concerns that lower commodity prices would hurt economic fundamentals of the major palm oil exporter.

Long positions in the Chinese yuan slightly eased, while views on the Singapore dollar, the Taiwan dollar,

the Philippine peso and the Thai baht turned bearish.

The Indian rupee and the Indonesian rupiah resisted the pessimism on hopes of economic reforms and more capital inflows from investors searching for higher yields. Bullish bets on the rupee rose to the largest since early June.

The Indian currency has benefited from strong capital inflows backed by easing inflation, a rating outlook upgrade by Standard & Poor’s and the government’s reform policies.

The rupiah saw small long positions for first time since midAugust on hopes of cuts in fuel subsidies to improve Indonesia’s fiscal balance.

The Reuters survey is focused on what analysts believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3.

A score of plus 3 indicates the market is significantly long U.S. dollars. The figures included positions held through non-deliverable forwards (NDFs).

Reuters

Philippines banks’ capital adequacy ratio beefed up The BSP said the increase in capital buffers is a product of the banks’ capital raising activities and earnings gained during the second quarter

P

hilippine universal and commercial banks hiked their capitalization in the second quarter amid stricter regulations on capital buffers against potential losses, the local central bank said yesterday.

The Bangko Sentral ng Pilipinas (Philippine central bank or BSP) said big banks’ capital adequacy ratio (CAR) settled at 15.94 percent on solo basis and at 16.66 percent on consolidated basis as of end-June. Both figures are higher than the end-March ratios of 15.45 percent on solo basis and 16.35 percent on consolidated basis.

The end-June figures are also well-above the BSP’s required 10- percent CAR for big banks.

“The strengthening of the industry’s capital base remains driven by Common Equity Tier (CET) 1 which represents the highest quality of bank capital,” the BSP said in a statement.

The CET1 ratios of the big banks stood at 13.74 percent of risk- weighted assets on solo basis and 14.48 percent

The strengthening of the industry’s capital base remains driven by Common Equity Tier (CET) 1 which represents the highest quality of bank capital Bangko Sentral ng Pilipinas’ statement The Bangko Sentral ng Pilipinas headquarters in Manila

on consolidated basis. Their Tier 1 ratios, meanwhile, reached 13.96 percent on solo basis and 14.65 percent on consolidated basis.

The BSP said the increase in capital buffers is a product of the banks’ capital raising activities and earnings gained

during the second quarter.

“The CAR figures of the industry indicate that (big banks) continue to maintain adequate buffer against unexpected losses that may arise in times of stress,” the BSP said.

The Philippines

implemented stricter rules on capital under international Basel III standards at the start of the year.

Under Basel III, debt securities issued by banks, which qualified as a lower kind of capital that could augment their CARs under

previous rules, were no longer recognized by regulators. The new rules prescribed that if banks want to continue issuing debt securities, these notes need to have loss-absorbency features to make them act more like real equity capital.

Xinhua

12

November 7, 2014

Asia S. Korea to track weakened yen South Korea said yesterday it will manage its currency to move in line with the yen, which has fallen sharply since the Bank of Japan decided to extend its massive stimulus programme, putting competitors under increased price pressure. The yen-tracking plan was revealed by Vice Finance Minister Joo Hyung-hwan at a National Assembly budget sub-committee session on next year’s budget, the financial news arm of South Korea’s Yonhap News Agency said. The yen/ won rate is traded through the US dollar, not directly.

Cambodian PM warns on food safety Cambodian Prime Minister Hun Sen has urged all concerned authorities to take firm measures to ensure food safety and hygiene in order to improve people’s health. “I’d like to appeal to all ministries, institutions and authorities working on food safety to increase cooperation to ensure that imported food and locally-made products have high safety and good quality,” he said in a message to mark the 1st National Nutrition Day yesterday. He said food safety was essential to prevent dangers to the citizens, especially to prevent children from diseases that could lead to malnutrition.

Hyundai and Kia to improve fuel economy Hyundai Motor and its affiliate Kia Motors said yesterday they aim to raise the average fuel economy of their vehicles by 25 percent by 2020 to meet emissions regulations in South Korea, the United States and Europe.

The announcement came after the South Korean duo on Monday agreed to pay US$350 million in penalties to the U.S. government for overstating fuel economy ratings. At home, they have also struggled to fend off imported rivals which have surged in popularity thanks to their fuel-efficient, diesel-powered engines.

S.K. cancels F-16 upgrade deal The U.S. government on Wednesday said it had cancelled, at the request of South Korea, early work by the U.S. unit of Britain’s BAE Systems on upgrades for 134 F-16 fighter jets after a spike in the projected US$1.7 billion cost of the arms deal.

The unusual move, announced by the Pentagon’s Defence Security Cooperation Agency, paves the way for South Korea to pursue a similar upgrade deal with Lockheed Martin Corp, the warplanes’ original manufacturer. Sources familiar with the matter said preliminary talks between South Korea and Lockheed would begin yesterday.

Thai consumer confidence up A sharp decline in global oil prices was seen lowering transport costs and giving consumers more to spend, but domestic demand is likely to be constrained by high household debt

C

onsumer confidence in Thailand picked up in October after a drop in September, a university survey showed, on optimism about government stimulus measures and improved exports as the junta tries to get the economy back on track.

The consumer confidence index of the University of the Thai Chamber of Commerce increased to 80.1 in October from 79.2 in September, when it slipped for the first time since a coup on May 22 ended months of political unrest.

Private consumption, which makes up half of the economy, is a pivotal growth engine in Thailand, so getting Thais to spend is crucial for reaching official growth forecast targets.

Last month, the junta announced a plan to spend 364 billion baht (US$11.2 billion) to help revive the

economy and return it to growth of 4-5 percent next year. The plan is for repairing schools, hospitals and irrigation systems to create jobs as well as for paying farmers.

“The confidence trend should be positive and continue improving but that depends on government spending. People now feel the future

KEY POINTS Govt stimulus, improved exports, lower oil prices lift sentiment Falling commodity prices, high living costs are negative factors Army seized power on May 22 to end months of political unrest

Energy prices lead to Kuroda’s easing The minutes offered no hints of the BOJ’s surprise decision on October 31 to expand its government debt purchases Stanley White

S

ome Bank of Japan policymakers said inflation could dip below 1 percent due to falling energy prices at a meeting in early October, which helps explain why governor Haruhiko Kuroda chose to expand monetary stimulus in a tightly split decision last week.

A few members also expressed concern that inflation could be slowing due to a lack of momentum in consumer spending, minutes of the central bank’s October 6-7 meeting showed yesterday.

Most members agreed that inflation is likely to pick up again as the output gap improves, which could be the reason why four of the BOJ’s nine board members voted against last Friday’s shock decision to ease policy further.

The minutes offered no hints of the BOJ’s surprise decision on October 31 to expand its government debt purchases, but they do show more

KEY POINTS BOJ surprised investors with extra easing on Oct. 31 Board was split in 5-4 vote on easing Oct. 6-7 minutes show concerns about slowing inflation concern about the price outlook in the short term.

“Some members noted that, depending on developments in energy prices, the year-on-year rate of increase in CPI might temporarily fall below 1 percent,” the minutes said.

At the October 6-7 meeting, the BOJ

left its quantitative easing programme unchanged despite lingering weakness after a sales tax increase in April.

At a subsequent meeting on October 31, the BOJ stunned global investors by increasing its government debt and risk asset purchases in a tightly split 5-4 vote that raised questions about whether factions on the board could hamper future policy decisions.

Many economists took the extra easing as a stark admission that the BOJ’s attempt to guide consumer inflation to around 2 percent sometime next fiscal year is not going well.

Kuroda had previously stated that there was no chance inflation will fall below 1 percent, excluding the impact of a sales tax hike in April.

However, a large decline in oil prices made Kuroda’s prediction increasingly unlikely, which could have swayed some members on the board.

Reuters

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

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13

November 7, 2014

Asia economy will definitely get better but they don’t know when,” Thanavath Phonvichai, an economics professor at the university that conducted the confidence survey, told a new conference. He added tourism should revive at the year-end.

However, Thanavath said falling commodity prices and high living costs were still negative factors.

Economists were less confident on the outlook, citing several risk factors confronting the economy.

“Consumer confidence may have increased, but domestic consumption may see sustained drags from declining farm income, and elevated debt levels,” said Barnabas Gan, economist of OCBC Bank in Singapore. “Overall, the

slow recovery in both domestic and external demand is an immediate headwind growth risk to Thailand at this juncture,” he said.

The confidence index began falling months before Thailand entered a period of political turmoil in late 2013, and that crisis battered activity and tourism.

Through April, the index fell for 13 consecutive months before rising between May and August, reflecting rebounding confidence after the junta seized power to restore stability.

But the good-sentiment seems to be fading, with recent economic data largely disappointing and economic recovery slowing.

Southeast Asia’s second-largest economy avoided a technical recession in April-June but still shrank 0.1 percent in the first half due to political unrest and poor exports.

Although consumers are still wary about spending, some large retailers are posting profits. Big C Supercenter reported a 14 percent rise in thirdquarter net profit.

“Although the Thai economy has generally been improving, the third quarter of the year did not present a V-shaped recovery as some had expected,” the company said in a statement.

Despite an unexpected rise in September, exports, which are equal to more than 60 percent of the economy, have long been weak due to tepid global demand and lower commodity prices. Consumption, meanwhile, is capped by high household debt levels, now at around 83 percent of GDP. Reuters

Australian jobs rebound While solid on the surface, the jobs survey has been plagued with so many problems in recent months that investors have lost confidence in the series

A

ustralian employment rebounded in October to keep the jobless rate steady at 6.2 percent, though lingering concerns about the reliability of the data still led investors to sell the local dollar to four-year lows.

Yesterday’s figures from the Australian Bureau of Statistics estimated employment rose 24,100 in October, recovering from a revised 23,700 drop the previous month.

Encouragingly, all the gains came in full-time jobs which climbed 33,400.

The central bank releases its quarterly outlook for the economy and policy today and the market will be keen to see how it characterises the drop in the currency.

A sustained fall would only reinforce market expectations that interest rates would not be cut again, though a hike is still seen as a distant prospect.

The RBA this week left rates at 2.5 percent for a 14th straight policy meeting and reiterated its steady policy outlook. Interest rate futures imply only a small chance of a move right out to 2016, which would be the longest policy pause in modern times.

While low rates have boosted home building and consumer wealth, the jury is still out on whether they alone will be enough to offset the drag from falling investment in the mining sector as a decade-long boom winds down.

Gauging the true state of the economy has been made all the harder by statistical problems afflicting the labour data which has forced the ABS to restate months of numbers and adopt a whole new method of seasonal adjustment.

The net result had been to nudge up the jobless rate and make employment seem softer than previously reported.

That contrasted with other indicators of labour demand including vacancies and business surveys, which pointed to some improvement in recent months and left analysts bemused about the true situation.

“Just about every leading indicator suggests that we’re at a turning point around now,” said CBA’s Blythe.

“But clearly there will be some suspicion about the reliability of these numbers for a while as we all digest recent changes.”

Reuters

Mongolia in stasis after premier ousted Thirty-six lawmakers in Mongolia’s 76-seat Great Hural voted against Altankhuyag in a no-confidence motion, with 30 against.

Michael Kohn

R

esource-rich Mongolia will have as long as a month in political limbo following the ouster of the former Prime Minister Altankhuyag Norov on Wednesday after a collapse in foreign investment.

The ruling Democratic Party has 30 days to find a permanent replacement, Oyungerel Tsedevdamba, a government lawmaker said by phone. Deputy Prime Minister Terbishdagva Dendev is acting as prime minister until a replacement is named.

Whoever takes over faces slowing growth, a sliding currency and a need to resolve a dispute over further development at Rio Tinto Group’s Oyu Tolgoi copper and gold mine that has contributed to the nation’s slump.

“What happens next is critical,” said Sam Spring, president of Kincora Copper Ltd., a Vancouver-based miner with operations in Mongolia, adding that “considerable uncertainty” will remain until the cabinet is re-established.

Thirty-six lawmakers in Mongolia’s 76-seat Great Hural voted against

A ltankhuyag i n a n o confidence motion, with 30 against. Altankhuyag had faced mounting pressure as economic growth slumped from about 17 percent in 2011.

Saikhanbileg Chimed, acting cabinet secretary, is the leading candidate to replace Altankhuyag, political commentator TV talk show host Jargalsaikhan “De Facto” Dambadarjaa said by phone.

Growth slipped to an annualized 7 percent in

the nine months of this year from 12.8 percent last year.

Foreign investment fell to US$647.5 million in the nine months through September from US$3.82 billion in the same period in 2012.

The World Bank last month cut Mongolia’s growth forecast for this year to 6.3 percent from the 9.5 percent projected in July.

Rio deadlock The deadlock over the underground expansion

at Oyu Tolgoi, which the company projects will account for about a third of Mongolia’s gross national product once at full capacity, began last year after Rio Tinto raised cost estimates for the project.

Illtud Harri, a spokesman for Rio Tinto, declined to comment on the noconfidence vote or its implications for Oyu Tolgoi.

The vote will create “further nervousness among investors,” said Munkhdul Badral, head of market

intelligence firm Cover Mongolia.

The Democratic Party won parliamentary elections in June 2012 on pledges to crack down on corruption, improve infrastructure and devolve greater spending powers to local communities.

Vancouver-based Rio Tinto Unit Turquoise Hill Resources Ltd., which holds 66 percent of Oyu Tolgoi, fell 3.2 percent to C$3.60 at the close yesterday in Toronto.

Bloomberg News

14

November 7, 2014

International Ex-Ferrari president is new Alitalia head Ferrari’s former long-time chairman Luca Di Montezemolo has been chosen to head up Italy’s national carrier Alitalia, Italian media reported yesterday. The decision was taken during a board meeting on Wednesday. Etihad Airways -- which signed a deal in August to save the troubled Italian airline from bankruptcy -- will see its chief executive James Hogan also become Alitalia’s vice president, the reports said without citing a source. The Italian flagship carrier refused to comment.

Montezemolo was ousted from his role as president of flashy sports brand Ferrari in September after 23 years amid a strategy clash with the board.

Peru central bank head forgoes raise The head of Peru’s central bank decided not to take a pay raise, aiming to diffuse tension with the government after President criticized his 6 percent hike in a rare public rebuke. The central bank said that its president, Julio Velarde, would not accept the salary increase his board recently granted all bank employees after two years of flat wages. Humala, a former left-leaning military officer who turned to the right after assuming office in 2011, scolded Velarde for the pay hike because he was already the highest-paid public official in Peru.

Repsol’s profit surges Spanish oil firm Repsol posted a 41 percent rise in underlying third-quarter net profits yesterday, boosted by a sharp improvement in refining margins, lower financial costs and a recovery in production in Libya. The cash-rich group is pursuing a US$10 billion acquisition drive to take advantage of lower valuations for U.S. shale assets and to eventually fill a gap left by the 2012 seizure of its Argentine business. While the move would cut the group’s heavy exposure to conflict-ridden regions such as Libya and Venezuela, it could also help protect it from any takeover bid from bigger international competitors.

Brazil Senate votes to cut budget rigor The Brazilian Senate approved a bill on Wednesday that lowers the debt burden of states and municipalities, opening the way for regional governments to spend more at a time of growing concern about the country’s fiscal health. The bill, which was supported by government lawmakers as well as the opposition, will add pressure on newly re-elected President Dilma Rousseff, who has promised to rein in public spending, slow inflation and limit the country’s rising debt burden to regain the trust of investors.

Adecco revenue growth slows Adecco, the world’s biggest staffing firm by sales, posted a sharper than expected slowdown in third-quarter revenue growth, hurt by a weak performance in France and Germany where the economic outlook has darkened. Much of Europe, which accounts for about 60 percent of Adecco’s revenue, is struggling to maintain economic growth at the moment, with a recent survey showing euro zone business activity grew at a sluggish rate in October. Bleaker growth prospects prompted some companies to take on fewer part-time staff, Adecco said.

EU’s new economic chief Moscovici vows ‘change’ He said Jean-Claude Juncker’s new European Commission had to balance strict budgets with the need to invest to create jobs and growth

T

he EU’s new top team must be a “commission of change” in order to boost the stalling economy, the bloc’s economics chief Pierre Moscovici told AFP in an interview, signalling a departure from years of austerity.

The former French finance minister, who in just a few days time must decide whether to order Paris and Rome to cut back on spending, said he did not see his job as being a “budget supervisor.”

“This commission must be a commission of change,” Moscovici told AFP at the Berlaymont building, the European Commission’s huge glassand-steel headquarters in Brussels.

He insisted he would not give any special treatment to France, which last month submitted a budget plan with a deficit way over the tight EU limit of 3.0 percent, putting the country at risk of Brussels demanding more action.

“It’s difficult for a Frenchman.

I’m not a masochist,” he said.

Moscovici, whose appointment raised eyebrows because of his own record presiding over the French deficit, compared his approach with his Finnish predecessor Olli Rehn, known as a strict fiscal disciplinarian.

“It’s not about abandoning a strict budget, it’s not about abandoning the rules.”

“But it’s about adding a strict budget as an element of stability in a dynamic economy which is lacking from the EU, and which is vital if we don’t want the EU to be in the doldrums with low growth, low inflation and high unemployment.”

On his second day in the job on Tuesday, Moscovici found himself

Moscovici (pictured) underscored the importance of a 300-billion-euro (US$380 billion) investment plan that Juncker has vowed to unveil at a summit of European leaders before Christmas

unveiling a grim set of EU economic forecasts which slashed growth in the eurozone, raising global fears just two years after a nearly catastrophic debt crisis.

Moscovici underscored the importance of a 300-billion-euro (US$380 billion) investment plan that Juncker has vowed to unveil at a summit of European leaders before Christmas.

Juncker has given no details about the plan, but Moscovici said it should be the “cornerstone” on which the new commission is built and that the funds should be new.

“It must be new money, not necessarily fresh, but new, extra. If it is not, it will look like a trick, recycling, or it will be a flop,” Moscovici said.

He said it should also include a

mixture of public and private funding.

Moscovici said his first trip abroad in the new job would be to bailed-out Greece and Cyprus, amid concerns over a plan by Athens to leave its international assistance scheme at the end of the year.

“I will go to Greece in November because it is necessary to offer these countries opportunities,” he said.

“Not without rules, not without discipline, not without effort, but opportunities, little by little, because we are in another phase, the priorities are different.

He said the “idea of a credit line was in the air, the idea of a backup programme”, but would not give further details.

AFP

U.K. industrial output rises more than forecast Industrial production is still 9.5 percent below its pre-recession peak Jennifer Ryan

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.K. industrial production rose more than economists forecast in September as oil and transport output bounced back from summer shutdowns.

Output rose 0.6 percent compared with a drop of 0.1 percent in August, the Office for National Statistics said yesterday in London. The median estimate of 30 economists in a Bloomberg News survey was for a gain of 0.4 percent. Manufacturing production rose 0.4 percent, also more than estimated.

In the third quarter, industrial production rose 0.2 percent compared with a previous estimate by the ONS of a 0.5 percent gain. The downward revision will have a minimal impact -- less than 0.1 percentage point -- on the estimate for total third-quarter

gross domestic product growth since the category comprises less than 15 percent of activity in the economy.

Governor Mark Carney’s Monetary Policy Committee will yesterday probably announce that it will leave the key interest rate unchanged at 0.5 percent, according to all 51 economists in a Bloomberg News survey. Weaker growth in Europe and softer U.K. data support the case for no change.

Industrial production is still 9.5 percent below its pre-recession peak in the first quarter of 2008.

Manufacturing is 4.1 percent below its peak.

From a year earlier, total production rose 1.5 percent and factory output gained 2.9 percent.

Oil and natural gas output drove

the pickup in production in September, gaining 5.2 percent. This represents a bounce back from August, when output shrank 2.5 percent as the Buzzard oil field closed for almost four weeks.

Seven of 13 categories in manufacturing posted gains, led by a 3 percent gain in the production of transport equipment. Within this, output of motor vehicles and trailers jumped 4.2 percent and added 0.2 percentage points to total production.

In the previous month this category dropped 5.5 percent due to extended summer closures.

The downward revision to thirdquarter production growth reflects revisions to power generation including electricity and gas in July and August, the ONS said.

Bloomberg News

15

November 7, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

A growth pact for America Glenn Hubbard

Former Chairman of the Council of Economic Advisers under President George W. Bush, is Dean of Columbia Business School

BANGKOK POST The central bank’s Monetary Policy Committee (MPC) will revise down its economic growth and export forecasts for this year and next due to a tepid domestic recovery, declining export growth and global economic uncertainty. Mathee Supapongse, an assistant governor of the Bank of Thailand and secretary of the MPC, said subpar economic growth this year along with emerging signs of lower-than-expected growth next year albeit somewhat improved were grounds to lower the 2014 and 2015 forecasts for GDP and exports. The Bank of Thailand earlier forecast GDP growth of 1.5% this year.

THE STRAITS TIMES The Building and Construction Authority (BCA) announced new requirements under what is known as the building control (buildability and productivity) regulations yesterday. These new requirements on the use of labour-efficient construction methods and building design come in the bid to raise construction productivity, as outlined in the Budget 2014, said the BCA. As of last Saturday, projects are required to meet higher minimum buildable design and constructability standards, use prefabricated and standardised components, and use high-impact productive technologies for projects under the Government Land Sales (GLS) programme.

THE TIMES OF INDIA Days before Prime Minister Narendra Modi’s visit to Varanasi, the government decided to pump in around Rs 900 crore in reviving 23 unlicensed district central cooperative banks, of which 16 are in Uttar Pradesh. In all, Rs 2,375 crore will be infused to revive 23 district central cooperative banks (DCCBs) in four states, which will chip in with a tad under Rs 1,500 crore. The Centre will provide Rs 673 crore and NABARD Rs 238 crore, the government said in a statement after a Cabinet meeting.

THE PHNOM PENH POST The Cambodian government is considering opening up the country’s off-shore oil reserves to a public bidding process amid lacking investor interest in the offshore sites.

Meng Saktheara, secretary of state at the Ministry of Mines and Energy, told the Post yesterday that the government was considering a range of options to drum up interest in five of Cambodia’s six oil blocks in the Gulf of Thailand.

According to Saktheara, the first round of the pilot public bidding process could commence as early as next year.

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merica, once again, will have a divided government, with the Democrats holding the White House, and the Republicans controlling both houses of Congress. But that does not necessarily mean that the final two years of Barack Obama’s presidency need to be defined by stalemate and mutual recrimination.

The electorate’s desire for change and fear of continuing slow growth, which pushed the Republicans to their victory in this week’s mid-term congressional election, will invariably prompt discussion about new policy options designed to raise growth, employment, and incomes. Of course, America’s experience with divided government can leave one pessimistic about the two parties’ ability to compromise; but, as Mexico recently demonstrated when its three big parties agreed on a market-oriented “Pact for Mexico,” even bitterly opposed political parties can overcome their suspicions to embrace needed reforms.

The list of potential policy actions that could benefit the United States – trade liberalization, comprehensive regulatory reform, and immigration and education reform, among others – is long. But only two policies are particularly promising for such a “Pact for America”: federal infrastructure spending and corporate-tax reform.

Enactment of these reforms would generate a win for each side – and for both.

But such a bipartisan consensus requires removing both the left and the right’s ideological blinders, at least temporarily.

On the left, a preoccupation with Keynesian stimulus reflects a misunderstanding of both the availability of measures (shovel-ready projects) and their desirability (whether they will meaningfully change the expectations of households and businesses). Indeed, to

counteract the mind-set forged in the recent financial crisis, spending measures will need to be longer-lasting if they are to raise expectations of future growth and thus stimulate current investment and hiring.

The right, for its part, must rethink its obsession with temporary tax cuts for households or businesses. The impact of such cuts on aggregate demand is almost always modest, and they are poorly suited for shifting expectations for recovery and growth in the post-financial-crisis downturn.

Politics complicates matters further, because the exclusively short-term focus on the fiscal impact of spending and revenues clashes with policies whose benefits accumulate over time. While such benefits may not appear to be “stimulus,” their mounting effect better serves the objective of raising expectations of future demand and growth.

But the concerns of serious people, whether on the left or the right, are not so different.

Will economic growth accelerate sufficiently to boost job and income growth? Can the barriers that exclude many Americans from recovery and future prosperity be removed?

Federal infrastructure spending and corporate-tax reform should top the list of policies capable of attracting bipartisan agreement, because they promise significant long-term productivity, income, and employment gains, while also supporting short-term growth. A commitment to a multi-year federal infrastructure-spending program, for example, could increase demand, private investment, and employment, even though projects may not be immediately available. And such a program, normally proposed by Democrats, can and should be crafted to secure Republican support as well.

To that end, an infrastructure

Given their policy objectives, conservatives should support a well‑crafted federal infrastructure program, and liberals should support corporate‑tax reform

program should give states and localities a key role in selecting the projects to be funded, and these governmental units should have “skin in the game” by funding part of the costs. Policymakers should also give serious consideration to regulatory reforms that would reduce the expense of new projects and assure their timely completion.

An infrastructure program oriented in this way – as opposed to a grab bag of politically expedient shovel-ready projects – should be able to muster conservative support. And, done properly, federally funded infrastructure projects should provide substantial benefits to lower-income Americans. Better transport infrastructure, for example, would not only create

jobs, but would also reduce the costs of commuting to work.

Corporate-tax reform also offers a good opportunity for bipartisan agreement, especially given that Obama and congressional leaders of both parties have expressed interest. While gains from fundamental tax reform – say, replacing the current tax system with a broad-based consumption tax – are large, on the order of 0.5-1 percentage point per year of economic growth for a decade, corporate-tax reform would also boost growth.

Reducing the tax rate for companies substantially, while eliminating targeted business-tax preferences and broadening the corporate-tax base, would increase both investment and workers’ wages. Allowing multinational companies to repatriate overseas profits without paying additional US tax would also bolster investment and job creation at home.

Given that recent research shows that much of the burden of corporate taxation is borne by workers in the form of lower wages, Democrats should embrace tax reform as a way to support income growth.

One could add to such a reform further support for low-income Americans by increasing the Earned Income Tax Credit for single workers.

Given their policy objectives, conservatives should support a well-crafted federal infrastructure program, and liberals should support corporate-tax reform. But changes in the political process would help move matters ahead. Because the payoffs from infrastructure spending and tax reform do not fit neatly within the fiveyear or ten-year budget window used by America’s fiscal scorekeepers, measuring more completely the benefits from such policies is vital to attracting political support.

Moreover, any increase in spending on infrastructure or any revenue loss from tax reform should be offset elsewhere. For example, future growth in Social Security benefits or the home-mortgage-interest tax deduction could be scaled back for more affluent individuals, as progressive indexation, proposed by conservatives in the US, and the adjustment of mortgage-interest tax deductions in the United Kingdom, started during the Thatcher administration, attest.

Clearly, the economy is Americans’ top concern. Its leaders must respond with a policy agenda focused on reviving growth now and sustaining it in the future. But that can happen only if enough legislators in both parties, and the president, remove their intellectual and political blinders and reach the long-term compromises needed to create jobs and increase incomes. The time for a Pact for America has arrived.

Project Syndicate

16

November 7, 2014

Closing Modi likely to induct 10 more ministers

Japan will contribute to early TPP trade deal

Indian PM Narendra Modi (pictured first from left side) is likely to expand his cabinet on Sunday, sources said yesterday. There are now 45 ministers in the cabinet, and more than six ministers are holding more than one portfolio, including Arun Jaitely, who is charge of both the key ministries of finance and defence. It is reported that Modi is expected to induct as many as 10 new ministers, and Chief Minister of Goa state Manohar Parrikar could be chosen as the new defence minister. The swearing-in ceremony of the new ministers is likely to take place on Sunday evening..

Japan will make efforts to break a deadlock in a proposed Asia-Pacific regional trade deal ahead of a key weekend meeting of trade ministers, Prime Minister Shinzo Abe said yesterday. Saturday’s meeting in Beijing “will be important for an early conclusion” of the multilateral Trans-Pacific Partnership trade talks, Abe (pictured right side to the U.S. president) told a meeting of Japanese cabinet ministers on the subject. “Japan will actively contribute to an early conclusion,” he said. The 12-nation talks have snagged as Japan and the United States, by far the biggest economies in the group, are deadlocked in bilateral talks..

China’s data to show economy still listless A tepid performance in October would point to a further loss of momentum

A

deluge of China data over the coming week is likely to show a persistent cool down in the world’s second-largest economy as domestic demand softens, reinforcing views that authorities may need to do more to fight slackening growth.

A tepid performance in October would point to a further loss of momentum in the world’s secondlargest economy as it heads into the fourth quarter, putting Beijing’s official target of around 7.5 percent for 2014 at greater risk.

Fixed-asset investment, an important driver of growth, likely grew at its slowest pace in nearly 13 years between January and October, rising 15.9 percent in that period from a year ago, a Reuters poll of 22 economists showed.

That would mark a deceleration from 16.1 percent in JanuarySeptember and would be a level not seen since December 2001, as a slowdown in China’s housing market, tighter credit conditions and subdued domestic demand drag on the broader economy.

Official and private surveys of factory and service sector activity earlier this week showed demand at home and abroad continued to cool last month and the labour market remained under stress, while adding to fears that many companies are being starved of credit as banks grow more reluctant to lend.

Reflecting lacklustre domestic demand, China’s import growth probably eased to 5.5 percent in October from a year earlier, after an unexpectedly buoyant 7 percent expansion in September.

Construction sector is one of the main worries of Chinese authorities

Export growth also likely cooled to 10.6 percent on an annual basis in October, down from 15.3 percent in September.

Highlighting sluggish demand, producer deflation was expected to have persisted for the 32nd consecutive month in October, with the producer price index seen falling 2 percent, sapping corporate confidence and making companies more reluctant to invest.

Annual consumer inflation is seen at 1.6 percent in October, steady from September and way below the annual government target of 3.5 percent, the poll showed.

Inflation cooled more than expected in September to the weakest since

January 2010, adding to investors’ fears of global deflationary pressures.

Credit conditions may remain challenging, with growth in credit and money supply expected to have flagged.

The amount of new loans disbursed by banks was estimated to have fallen to 650 billion yuan (US$106 billion) last month, from September’s 857.2 billion yuan.

The M2 money supply is seen up 12.9 percent in October compared to a year ago, unchanged from September.

Two of China’s top banks reported the biggest quarterly increase in bad loan levels in two years in thirdquarter results posted last month, while deposits in the overall banking

Melco Crown Q3 net revenue Asia trade pact at ‘top of the agenda’ drops 10pct

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elco Crown Entertainment Ltd posted a 10 percent decrease in net revenues for the third quarter of the year to US$1.1 billion from US$1.3 billion a year earlier.

The company said in a statement released last night and filed with the Hong Kong Stock Exchange that the decline in net revenue “was primarily attributable to lower group-wide rolling chip revenues, partially offset by improved group-wide mass market table games revenues.” Adjusted property EBITDA was US$305.7 million for the third quarter of 2014, also a 10 percent decrease year-on-year. Lawrence Ho, co-chairman and CEO of Melco Crown, said “despite a challenging rolling chip environment in Macau, driven by a strong performance in our mass market operations at City of Dreams in Macau.”

“City of Dreams continued to gain market share in the mass table games segment in Macau, with the property’s mass market table games revenues in the third quarter of 2014 increasing 24 percent on a year-over-year basis, outpacing the market which grew 16.2 percent during the same period,” he added.

system shrank for the first time on record, further limiting their ability to lend.

There may be some signs of resilience in the October readings, however.

Economists expect factory output likely grew 8 percent in October, unchanged from September’s growth and off a six-year low of 6.9 percent hit in August.

Retail sales were seen growing 11.6 percent in October from a year earlier, unchanged from September.

China’s annual economic growth slowed to 7.3 percent in the third quarter, the weakest pace since the global financial crisis.

Reuters

Smartphone screen market booming

S

enior officials from the Asia-Pacific Economic Cooperation (APEC) region have agreed to launch a “strategic study” on a trade pact backed by Beijing, the forum’s top official said yesterday.

The study on the Free Trade Area of the AsiaPacific (FTAAP) concept will last around two years, said Alan Bollard, APEC’s executive director.

The deal remains at the “top of the agenda”, he said, dismissing suggestions that slow progress on it was a blow to Beijing, but he added: “This is not an opening of negotiations.”

The study will have to be approved by ministers and heads of government at the Leaders’ Week meeting in Beijing, said Bollard, a former head of New Zealand’s central bank.

The notion of a far-reaching trade pact such as FTAAP, first raised in 2006 by APEC leaders, has increasingly been pushed by China.

But it faces competition from a narrower TransPacific Partnership (TPP) plan championed by Washington, which does not include China.

AFP

J

apanese display maker Sharp Corp, a supplier to Apple, said its shipments of screens to Chinese smartphone makers may exceed its target for the fiscal year to next March as it expands its business to new models.

Norikazu Hohshi, head of Sharp’s device business, said yesterday that the company would be shipping screens to 15 Chinese smartphone manufacturers this fiscal year and that it was in talks to supply screens for 25 new Chinese models, with shipments to begin as early as the January-March quarter.

The recent rise of Chinese smartphone manufacturers such as Xiaomi Technology Co Ltd helped to boost Sharp’s shipments of small and mid-sized liquid crystal displays by around 50 percent in the six months to end-September, to US$1 billion.

The company forecasts the business will bring in US$2 billion in revenue for the full year to next March.

Worries have mounted about softening prices of LCD screens for Chinese smartphones.

Reuters