Macau Business Daily, Nov 25, 2014

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 674 Tuesday November 25, 2014

Retailers optimistic about Q4 M

Year III

acau retailers are optimistic about Q4. Some 27 percent are even anticipating increased sales compared to Q3. Quite a contrast. Retail sales in Q3 dropped 3 percent. But optimism has returned. Two-thirds predict stable prices in Q4. While a quarter anticipate an increase. Chinese food products, footwear and household appliances were the items that flew off the shelves fastest in the last quarter PAGE China Star sells land near Lan Kwai Fong

Chinese visitors up 20 percent

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MGTO pays MOP3 million for kiosks in HK PAGE 5

More mainlanders are favouring Macau. Some 20 percent more Chinese tourists arrived in October. That’s 1.82 million visitations. Or 70 percent of all visitors. Meanwhile –except for Singapore and India – both short-haul and long-haul visitor statistics declined

PAGE 2

Macau Pass on to a winner

A bit more effort

A customised Macau Pass for tourists. All will be revealed next month. The special cards mean convenience for tourists plus discounts.

Stella Lei, head of Macau Pass Consumer Business, said their business model means they have to be increasingly creative

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www.macaubusinessdaily.com

Sing Hou seeks HK listing

3

Macau signs tax info-sharing agreement with US PAGE 2

Brought to you by

HSI - Movers November 24

Chan Meng Kam is not happy. Air Macau is failing in its responsibility, the legislator says. The sole franchised airline based in Macau should break new ground and establish an airline network. Despite the city signing agreements for bilateral flights with 48 countries, the company has only routes to seven, Mr. Kam said

PAGE 2

Name

%Day

China Overseas Land

11.03

China Resources Land

10.36

China Life Insurance

8.48

China Resources Powe

5.64

Ping An Insurance Gr

5.45

Hong Kong & China Ga

0.00

Power Assets Holding

-0.14

Belle International

-0.21

China Mengniu Dairy

-0.48

Tingyi Cayman Island

-1.18

Source: Bloomberg

It’s catching. Yet another local VIP gaming operator is seeking a listing. The Hong Kong Stock Exchange remains attractive. Despite dramatically slowing gaming revenues in Macau in recent months

I SSN 2226-8294

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Clean cut

Brought to you by

Friday’s PBOC interest rate cut came as a surprise. Provoking all kinds of reaction in the financial system. Gurus say the move will shrink shadow banking and curb bad loans

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2014-11-27

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November 25, 2014

Macau Legislator accuses Air Macau of complacency

Visitors increase by 11 percent in October

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While tourist arrivals from most other sources dropped in October, Mainlanders stayed loyal, and will probably remain the dominant tourist force in the city. Last month, tourists from the Mainland accounted for nearly 70 percent of the total number, soaring by 20 percent year-on-year Kam Leong

kamleong@macaubusinessdaily.com

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isitor arrivals continued to grow in October, up some 11 percent year-on-year.

The growth, however, was credited primarily to mainlanders whose interest in Macau shows no signs of waning. Other traditional major tourist sources - namely, Taiwan, Hong Kong and Southeast Asia posted declines in visits to the city, as did long-haul markets such as North America and Europe.

According to the Statistics and Census Service (DSEC) total tourist arrivals in October exceeded 2.65 million, of which 1.82 billion - 69 percent - derived from Mainland China. The number of mainland tourists in the month soared by more than 20 percent year-on-year, driven by the consecutive long holidays of National Day and the Chung Yeung Festival.

In addition, tourists from South Korea and Japan also registered growth last month, up by 16.8 and 2.4 percent year-on-year, amounting to 465,583 and 249,920 tourists, respectively.

Meanwhile, despite the tourist arrivals from Hong Kong and Taiwan still occupying the second and third biggest proportions of the total - amounting to 5.37 million and 805,978 visitors - visitation dropped last month.

20 pct Growth in the number of tourists from Mainland According to the data, tourists from Hong Kong dropped by 6.4 percent year-on-year in October while those from Taiwan declined 11.4 percent year-on-year.

For other Asian countries, visitors from Southeast Asia - namely, Indonesia, the Philippines, Malaysia, Thailand and Vietnam - all posted declines in the month, down 13.6 percent, 1.9 percent, 20.3 percent, 33.2 percent and 22.8 percent yearon-year, respectively.

Although those from Singapore and India jumped by some 31.5 percent and 12.9 percent year-onyear, the total number of tourists from these regions reached only 32,562.

In addition, the data shows that most major long-haul tourist markets experienced declines of between 3 and more than 13 percent year-onyear in terms of visitor arrivals to

Macau last month. These markets primarily include the U.S., Australia, Canada, the United Kingdom and France.

On the other hand, in the first ten months of the year total visitor arrivals to Macau exceeded 26 million, up 7.7 percent compared to the same period last year. Over 17.6 million were from Mainland China.

esponding to legislator Chan Meng Kam’s interpellation claiming that Air Macau had not positively fulfilled its responsibility as the only franchised airline based in Macau, the Civil Aviation Authority claimed that the opening of the local aviation market is a definite direction for sustaining the development of the aviation industry but noted that it would depend on the market whether the city could attract more flight carriers.

Mr. Chan complained in his written enquiry that Air Macau did not make effective use of its franchised right – such as breaking new ground for the air transport market or establishing a network of airlines.

The legislator indicated that Macau could have launched flights between a total of 57 waypoints in Mainland China but only 21 routes have commenced. In addition, he claimed that flights between only seven Asian countries – for a total of 13 cities – have been launched, despite the city signing agreements for bilateral flights with 48 countries. He questioned how the government will deal with the aviation franchising right when that of Air Macau expires in 2020.

The Authority responded that the franchising system in the industry does not affect the development of the airline’s network. The director of the Authority, Chan Weng Hong, stressed to the legislator that the launching of new routes is determined by the market itself, claiming that any operators interested in launching flights between Macau and other cities can apply to the authorities of the cities.

In addition, he said that the number of flights operated by Air Macau meets the requirements of the franchising contract with the government, indicating that the airline actually currently accounts for the greatest percentage in the local market - 39.2 percent - servicing 22 of 36 waypoints between Macau.

K.L.

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@ : signature@macaubusiness.com tel : +853 2833 1258

welcome

Macau to sign tax-sharing information agreement with U.S.

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he Chief Executive of Macau’s Government, Fernando Chui Sai On, has authorised the Secretary for Economy and Finance, Francis Tam Pak Yuen, to sign a memorandum of understanding with the United States of America for the sharing of tax information.

The agreement will be signed with the Financial Crimes Enforcement Network and seeks to combat and repress money laundering and terrorism financing crimes, according to information published yesterday

in Macau’s Official Gazette.

However, representatives of the Financial Intelligence Office can also ink this memorandum, as is explained in the executive order signed by the leader of Macau on 12 November.

So far, there are already twelve agreements of this kind with the countries of China, Portugal, Hong Kong, South Korea, Indonesia, Philippines, Thailand, Japan, Malaysia, Singapore, Fiji and Australia.

excellence

Gov’t extends Airport’s wastewater treatment

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he Macau Government is allocating a total of MOP8.48 million for this year and next for wastewater treatment systems and maintenance for Taipa and the Airport.

The notice published in yesterday’s Official Gazette says the wastewater treatment systems and maintenance service has been awarded to joint venture Waterleau – Beijing GSS. Waterleau Macau Lda is a subsidiary of Belgium’s Waterleau Global Water Technology NV. According to the Official Gazette, the amount will be paid in two instalments. This year, the consortium

will receive a total of MOP4.6 million from the Macau Government, and in 2015 some MOP3.9 million.

Last year, the Financial Services Bureau (DSF) confirmed that disgraced former Secretary Ao Man Long’s 20 percent stake in Waterleau had been transferred to the government.

At the time of the trial, the Court of Final Appeal said that the shares were a bribe given to Ao to ensure that Waterleau Macau’s Belgian parent company, Waterleau Global Water Technology NV, won contracts for wastewater treatment plants in Coloane.

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November 25, 2014

Macau Flag fall 17 patacas from December 14 Taxi fares will officially increase from December 14, the Official Gazette announced yesterday. Approved by Chief Executive Fernando Chui Sai On, fares for the first 1,600 metres of taxi service will be increased from the current 15 patacas to 17 patacas, with fares for every subsequent 260 metres increased to 2 patacas from 1.5 patacas.

In addition, the fare for a taxi waiting during service at the request of a passenger will also increase from 1.5 patacas per minute to 2 patacas. Taxi fares last increased in July 2012.

Retailers optimistic about 4Q The value of retail sales totalled MOP15.82 billion in the third quarter of this year, down three percent compared to revised second quarter figures.

Joanne Kuai

joanenkuai@macaubusinessdaily.com

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etailers are optimistic about sales for the fourth quarter of 2014, with 27 percent expecting sales volume to increase from the third quarter. Just over half of retailers, some 54 percent of the total, expect prices to remain the same, while 19 percent expect sales volume to decline, according to the lastest data from the Statistics and Census Service (DSEC).

This is in striking contrast to their opinions for the third quarter, where

48 percent said they had noticed a decrease in sales volume.

Concurrently, about 66 percent predict stable retail prices, 26 percent expect an increase, while 8 percent predict a decrease.

In respect of the other comments of the retailers, about 52 percent stated that sales volume in the third quarter of 2014 had increased or held stable over the previous quarter, down 1 percentage point compared to the corresponding figure

in the second quarter of 2014, while 48 percent reported a decrease in sales volume. In terms of retail price, about 63 percent reported stable prices, 18 percent stated an increase and 19 percent a decrease.

Moreover, about 71percent of retailers said that the stock level remained stable compared to the third quarter of 2013, while 18% indicated that stock levels had decreased.

DSEC’s data also shows that the value of retail

sales for the third quarter decreased 1 percent yearon-year.

Retail sales of watches, clocks and jewellery totalled MOP4.11 billion in the third quarter, which topped the list and accounted for 26 percent of the total. It was followed by retail sales of goods in department stores, which accounted for 17 percent, and leather goods that accounted for 9 percent.

A marked decrease, however, can be observed in the sales of these sectors:

watches, clocks and jewellery, which registered around MOP4 billion in sales, dropped 15 percent compared to the same period last year, while leather goods dropped 12 percent.

There is some good news for the sales of Chinese food products for the third quarter, which rocketed 45 percent. Other sectors seeing a significant increase include footwear at 39 percent increase and household appliances at 28 percent.

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November 25, 2014

Macau Brands

Trends

Still Missing Raquel Dias newsdesk@macaubusinessdaily.com

M

any moons ago, back in 1990, if you lived in Macau you just had to go to Hong Kong. You might have hated it (you would, as you have no idea how it was to take the ferry back then) but you just had to do it. Because prior to ‘93 getting anything in town was hard. Espressos were watery and good yogurt was nowhere to be found. If you were European, shopping for clothes was not a piece of cake (speaking of, the only bakery in town was Maxim’s). So I grew accustomed to weekends in the Big City, and hotels in Hong Kong were cheap. We would go to restaurants and window-shop through the huge Hong Kong shopping malls, where clothes came in our sizes. I would go to Toys R Us and my parents would go to bookshops.

Fast forward to 2014 and a lot has changed. The big hotels and casinos have given Macau a cosmopolitan feeling. It is no longer a city that provides only very high fashion or very cheap clothing. The mid-range market is growing. But there are a few things that remain hard to find.

Forgetting for a moment the still non-existent bookstores, there’s no decent place to purchase homewear. Sure, you could go to Zara Home and buy items at 50% inflated price. The shop looks good, smells better and carries seafood cutlery, but that 50%...

What about furniture? It’s all good if you want traditional Chinese décor. Twenty years of living here and I frankly cannot stand another colorful spin on the otherwise traditional Chinese mantle (same goes for all those pretty boxes and Mahjong sets). The only alternative seems to be Made in China bookshelves or going on a shopping binge at IKEA in Hong Kong. I for one would like to stop this trend of going to Hong Kong just because there’re things missing in Macau’s market. We already have a Marks & Spencer; would it be too much to ask to have an IKEA? Muji perhaps? Also and because Christmas is nearly here - would it kill Amazon to ship things to Macau other than our beloved books?

Macau Pass to launch special tourist cards Having chalked up a record one million transactions (excluding bus use) in a single month in September, Macau Pass continues to expand its business scope by launching a customised package card for tourists in December Joanne Kuai

joannekuai@macaubusinessdaily.com

I

n September, Macua Pass SA reached a notable milestone – more than one million payments (excluding payment on buses) in a single month made through the stored value cards in Macau, representing a 40 percent increase on the same period last year.

Macau Pass has issued more than 1.4 million stored value cards altogether, and more than 2,000 terminals currently accept the service around the SAR, including buses, convenience stores, supermarkets, restaurants, vending machines, car parks, clubhouses in residential buildings, campus sites, government sports facilities and many other places.

Leaving bus fare payment aside, the four major business sectors that the card is used in are supermarkets, convenience stores, food and beverage (F&B), and car parks. In particular, Macau Pass has seen a dramatic increase in F&B and car park transactions.

“Macau Pass use in supermarkets and convenience stores has basically reached saturation point. But in local restaurants and eateries, since our cooperation with the most popular F&B application ‘iFoodMacau’ in launching a promotional programme called ‘iFood Macau Pass’ in February this year, more than 30 restaurants have joined hands with us”, said Stella Lei, head of the Consumer Business Department of MacauPass.

Ms. Lei told Business Daily that customers using Macau Pass to make payments at the restaurants mentioned above can enjoy a five percent discount; in 2015, the company will launch more business plans involving small and medium sized F&B enterprises, with more than one hundred restaurants slated to join the programme.

In addition, 19 car parks in SAR

Macau Pass doesn’t gain as much government support as the other stored value card companies somewhere else do. Macau Pass is privately owned and it’s running a low-margin model on its own.

We have to diversify our business and be creative to make a profit.

Stella Lei, head of the Consumer Business Department of MacauPass

accept Macau Pass as an option for payment, six of which started the service last month. Ms. Lei said it was environmentally friendly as less paper receipts were printed, was timesaving, and enhanced efficiency for car park management companies.

New Service A customised Macau Pass for tourists will be launched next month.

The special cards will enable tourists to make bus fare payments and enjoy

discounts as some local restaurants and other tourism related offers would be included in the card, said Ms. Lei. More details will be disclosed on 1 December.

“Macau Pass doesn’t gain as much government support as the other stored value card companies somewhere else do. For example, in 2003, the Hong Kong Government took the initiative to launch a service using Octopus Cards [Hong Kong’s stored value smart card] for parking payments on meters,” said Ms. Lai. “Macau Pass is privately owned and it’s running a low-margin model on its own. We have to diversify our business and be creative to make a profit.”

The government’s Official Gazette issued yesterday revealed that Macau Pass has been granted a contract to continue providing the bus fare payment service until 2018. The government is paying a total of around MOP57.41 million for the service.

Macau Pass SA’s profit for 2013 plunged from nearly MOP3.16 million in 2012 to only MOP5,935, despite the company enjoying a 13 percent rise in revenues.

Deputy General Manager David Lao said the decline was primarily due to a big investment the company had made to launch a mobile payment project enabling people to use their mobile phones as Macau Pass cards.

Mr. Lao told Business Daily that the process was hindered by the government’s supervisory department being concerned about the security of this payment method but Macau Pass has not given up the possibility. In the auto-load adding value function it has launched in collaboration with OCBC Wing Hang Bank, from next month people can start enquiring about their account balance via their Macau Pass mobile application.

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November 25, 2014

Macau MGTO pays MOP3 million for Hong Kong kiosks The Government of Macau will pay MOP3 million to Apex Integrated Marketing Solutions Company Limited for this entity to run Macau’s tourism kiosks in Hong Kong, it was announced yesterday in Macau’s Official Gazette.

The money will be paid out of the Tourism Fund budget for 2015, which is under the scope of the Macau Government Tourist Office (MGTO). This fund seeks to promote Macau as a quality destination for tourists.

In addition to these kiosks, MGTO also has 18 public relations representatives in mainland China, Japan, South Korea, the Philippines, the United States, Australia, the United Kingdom, France and Portugal.

Apex Integrated Marketing Solutions Company Limited is based in Hong Kong.

China Star Entertainment disposing of land near Lan Kwai Fong The Hong Kong-listed casino services company has announced the disposal of four plots of land near the Lan Kwai Fong Hotel, a property housing gaming facilities that it is also being sold off Stephanie Lai

sw.lai@macaubusinessdaily.com

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ong Kong-listed gaming services firm China Star Entertainment Ltd, which had suspended trading its shares since November 3 and only resumed yesterday, said it was planning to dispose of four plots of land near the Lan Kwai Fong Hotel at an initial consideration at HK$2.23 billion (US$287.5 million).

According to China Star Entertainment’s Friday filing, it has entered into a legally binding letter of intent with a purchaser to sell the four plots adjacent to Lan Kwai Fong Hotel, Macau Polytechnic Institute, Forum de Macao and Golden Lotus Square. The property leasehold rights of the four plots are held by a British Virgin Island-incorporated company called Triumph Top Ltd, a subsidiary of China Star Entertainment.

The purchaser of the land deal is Bestmix Holdings Ltd, 51 percent of which is held

by Hong Kong-listed property development company CSI Properties Ltd.

China Star Entertainment estimates it will realise a gain of HK$1.65 billion from the disposal of the four plots.

The proposed disposal deal has yet to be approved at a special general meeting of China Star Entertainment.

China Star Entertainment’s stock climbed 23 percent at the close of trading yesterday at HK$0.144. The company resumed trading at 9:00 am yesterday morning following three weeks of suspended trading.

The company’s Friday filing also stated an additional consideration of HK$1.93 billion payable by the purchaser to apply in a scenario where the Macau Government grants the right of development over the four plots within 48 months following the date of the letter of intent being signed by the would-be purchaser.

Through a subsidiary, China Star Entertainment had acquired the four plots of land from Sociedade de Turismo e Diversoes de Macau, S.A. (STDM) in 2010 for HK$550 million.

The casino services firm originally intended to develop the four plots of land as a single parcel to build a luxury residential and commercial complex.

However, the lack of a go-ahead from the local government has contributed to the reason the plots remain undeveloped, China Star Entertainment said in its Friday filing.

‘Given that the location of the properties is adjacent to Macao Polytechnic Institute

and several tourist spots, Forum de Macao, Grand Prix Museum, Wine Museum and Golden Lotus Square, and is a couple of blocks away from Macau Fisherman’s Wharf and Sands Casino, it is believed that the Macau Government requires a longer time to study the impact of the proposed development of the properties of the combined sites on traffic, environment and cultural heritage in the surrounding area, before the grant of an approval,’ the filing noted.

In this latest announcement from China Star Entertainment, the company also mentioned the disposal of Lan Kwai Fong to an independent third party at an agreed price of HK$3.75 billion, although the deal is still subject to formal documentation.

The casino services firm did not elaborate on what will happen to the gaming operation inside Lan Kwai Fong Hotel, as the property still houses gaming facilities operating under the licence of Sociedade de Jogos de Macau S.A. (SJM).

VIP promoter Sing Hou Entertainment seeks listing in HK Yet another local VIP gaming operator is seeking to list on the Hong Kong Stock Exchange amid a gaming slowdown that has gripped Macau in recent months

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ocal VIP gaming promoter Sing Hou Entertainment Group Ltd is seeking to list in Hong Kong in order to expand its client base and market share, despite the gaming industry here slowing dramatically in recent months.

Sing Hou Entertainment, which operates a VIP gaming room in StarWorld Macau casino, said that Galaxy Casino S.A. has been its sole customer for the three years ended December 31, 2013, according to Sing Hou’s application proof in draft form that is publicised on the Hong Kong stock exchange.

Sing Hou Entertainment, which eyes a listing for the business

expansion of its VIP room and is expanding its network, also mentioned in the document that it planned to reduce its reliance on Galaxy by conducting gaming promotion business in new VIP rooms to be established in other casino operators’ premises.

According to the application document, prior to splitting with its host casino, Sing Hou Entertainment’s VIP gaming generated 331 million patacas (US$42.2 million) revenue last year, a decline of 1.8 per cent compared to the previous year and an even sharper drop of 16 per cent vis-a-vis 2011.

Market-wide, VIP gaming revenue

here as of last year was 238.5 billion patacas; the figure recorded for the first three quarters of this year 166.5 billion patacas - underscores the slowdown in the VIP gaming segment that has seen a continual drop in revenue in recent quarters.

Sing Hou noted in its listing application document the continual decline in profits over the past three years: the gaming promoter’s profit for last year was HK$36.08 million, a drop of 7.4 per cent compared to 2012 and a 51 per cent decline from the 2011 profit figure.

The company said that the total expenses for the Hong Kong listing would approximate HK$23 million,

of which some HK$9.7 million are expected to be charged to the profit or loss of the company for the year ended December 31, 2014.

While noting that the antigraft drive in mainland China has adversely affected the VIP gaming promotion business in Macau, Sing Hou Entertainment is not the only local VIP gaming promoter seeking to list in Hong Kong.

Junket operator Iao Kun Group, already a NASDAQ-listed company, submitted an application in late June this year applying to list shares on the main board of the Hong Kong Stock Exchange by way of introduction.

S.L.

6

November 25, 2014

Gaming

Chow Tai Fook to build casino in Incheon

C

how Tai Fook Enterprises has signed a letter of intent with the Mayor of Incheon, Yoo Jeong Bok, to develop an integrated resort in Yeongjongdo, the Korea Herald newspaper has reported. The letter was signed on 16th November and involves an investment of US$1

billion (MOP8 billion) in the Korean City.

“The participation of Choi Tai Fook Enterprises in the development of Yeongjongdo will give a green light to the realisation of the island’s dream of advancing to become a Las Vegas of Asia”, Lee Yoo Hyung,

a member of the Incheon Free Economic Zone (IFEZ) office told the newspaper. “The reason why casino developers, both foreign and domestic, are turning to Yeongjongdo is because of the rising number of Chinese visitors who have strong purchasing power”.

The number of Chinese tourists visiting South Korea hit a record high of 4.68 million in the first nine months of this year, a 50 per cent increase from the same period a year ago, according to The Korea Tourism Organisation.

Chow Tai Fook Enterprises is owned by honorary Chairman Cheng Yu Yung, the fifth richest man in Hong Kong (net worth MOP213.9 billion).

The Hong Kong-based group, which also operates jewellery retail shops in Macau, has a diversified business portfolio, ranging from property development to communications.

South Korea trumps Japan as gaming bill dies

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outh Korea looks like the consolation prize as Japan’s US$15 billion casino dream fades, a setback for companies such as Las Vegas Sands Corp that envisioned a new gaming hub rivalling Las Vegas in 2020.

A bill that would have legalised casino gambling died when Japanese Prime Minister Shinzo Abe dissolved parliament on Friday to call a snap election. That means lawmakers cannot pass regulatory legislation next year, making it highly unlikely any casinos will be ready in time to profit from tourists arriving for Japan’s 2020 summer Olympics.

Sources involved in helping negotiate the bill’s passage through parliament said it was unclear whether the legislation would even pass next year because the budget and defence are likely to dominate parliamentary debate.

“It’s challenging but not impossible,” said pro-casino lobbyist Satoshi Okabe, head of ad agency Dentsu’s integrated resorts and tourism business.

Others were less optimistic about a bill passing next year, saying it may not even make it to debate for a while.

Developing new markets is important for casino companies as China’s corruption crackdown and a slowing economy curb revenues in Macau, the world’s biggest gaming hub. October revenues in Macau fell 23 percent, the largest monthly drop on record.

Japan is seen as the biggest unclaimed prize, a market that research firm Union Gaming estimated would generate US$15 billion in annual revenues, more than double what Las Vegas recorded last year.

South Korea, by contrast, generated US$2.4 billion in casino revenues last year, less than half of Vegas revenues and just 6 percent of Macau’s take.

That tally will grow as new casinos open. The main draw is Chinese tourism. Arrivals in South Korea from China rose about 53 percent last year, with some tourists signing on for triple packages that include cosmetic surgery, shopping and gambling.

“South Korea’s already got the gaming industry infrastructure,” said Ben Lee, managing partner at IGamiX Management & Consulting Ltd, a Macau-based gaming consultancy.

“At least they’re familiar and don’t have to go through the initial stages like Japan.”

South Korea’s first gamingand-entertainment integrated resort, Paradise City, broke ground on Thursday and is expected to open in 2017. Joint venture partners Paradise Co Ltd and Sega

World’s biggest hotel on hold as Aquis drops Cairns casino bid

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quis Group, the developer that’s planning to build the world’s largest hotel in the tropical Australian city of Cairns, has put the project on hold after a related casino takeover fell through.

Aquis ‘will be undertaking a strategic review of its plans and development timetable over the coming months,’ the developer said in a regulatory statement today.

Its related offer for Cairns’ Reef

Casino Trust hasn’t received all the regulatory approvals it needs and ‘will likely lapse’ November 28, Aquis said.

Aquis, controlled by Hong Kong developer Tony Fung, has lodged plans to spend A$8.15 billion (US$7.1 billion) building a casino resort with 7,500 hotel rooms, an 18-hole golf course, and water park on a former sugarcane farm north of Cairns. The government of Queensland State has said it will approve as many as three new casinos,

Sammy Holdings Inc plan to invest about 1.3 trillion won (US$1.17 billion).

Hong Kong-based Chow Tai Fook Enterprises, owned by Hong Kong tycoon Cheng Yu Tung, has signed a letter of intent to invest more than US$1 billion in a resort in Incheon where Paradise City and U.S.-based Caesars Entertainment Corp are building.

Sands wants in, too.

CEO Sheldon Adelson said last month he was visiting South Korea as part of an Asia trip with stops in Macau and Japan, and boasted of designing “the most iconic building in the world” in South Korea to house a casino and entertainment complex.

He did not specify a location but Sands’ head of global development,

including the Aquis project, in a bid to attract Asian tourists.

The Reef Casino takeover ‘was always important to Aquis’ overall financial and investment plans,’ the bidder said in today’s statement.

While it may consider a new bid for the Trust next year, ‘there is no certainty any such transaction would eventuate’, Aquis said.

Last November, Aquis Casino Acquisitions Pty offered A$214 million to take over Reef Casino Trust, receiving the backing of the company’s two largest shareholders, Accor SA and Casinos Austria AG. The bidder held about 83 percent of Reef Casino shares on November 22,

George Tanasijevich, was quoted

by South Korea’s Yonhap news agency as saying the firm was interested in Seoul.

Indeed, South Korea was mentioned 14 times during a Sands analyst call in October, according to a transcript from Thomson Reuters’ Street Events. During the previous quarterly call in July, when Japan’s gambling prospects looked more promising, Korea came up only twice.

Adelson sees one big obstacle: South Korea will allow only foreigners to gamble at large resorts. Locals are allowed to play in only one casino, which generates more revenue than the other 16 casinos combined.

Adelson has been vocal about wanting to see that changed.

“We’re not interested in foreignersonly resorts,” he said.

Reuters

according to a statement.

Aquis has been told by Queensland’s Office of Liquor and Gaming Regulation that it wasn’t possible to grant all approvals by November 28, when the takeover for Reef Casino is due to lapse. The Office didn’t give Aquis a date when the approvals would be granted, the bidder said. It would work with the Office ‘to progress its probity enquiries’ and try to complete them as soon as possible.

Another related takeover, of Casino Canberra, should take place at a reduced price of A$6 million before December 25, Aquis said.

Bloomberg

8

November 25, 2014

Gaming

Isolated Revel leaves Atlantic City energy exposed A

bout US$119 million of municipal debt for a power plant serving the shuttered Revel Casino in Atlantic City may be approaching default after Brookfield Property Partners LP dropped a plan to buy the resort.

Investors, including Capital Group Cos, Van Eck Global and BlackRock Inc, are scheduled to receive a US$6.9 million interest payment on December 1, data compiled by Bloomberg show. The New Jersey Economic Development Authority issued the unrated bonds in April 2011 for ACR Energy Partners LLC, which used the funds to build a facility to keep the lights on and the air conditioners running at Revel, its sole customer.

The energy provider said in September that it may have to file for bankruptcy itself, as Revel did in June. In court documents last week, ACR said it had received about US$5 million from Revel since the casino’s bankruptcy. ACR estimated that it would have around US$11 million of claims by the end of November, according to the transcript from an October 14 hearing. ACR was also due almost US$11 million before Revel filed.

“It looks like bondholders were tying their fortunes to the casino, and that was an unfortunate bet,” said Matt Fabian, a managing director at

Concord, Massachusetts-based research firm Municipal Market Advisors.

Unrated risk Unrated bonds account for the most defaults in the US$3.7 trillion municipal market because they’re usually tied to risky industrialdevelopment projects. ACR’s securities show how the downward spiral of Atlantic City, the onetime East Coast gambling capital that was cut to junk by Moody’s Investors Service this year, is enveloping a widening swath of the market.

“Prospective purchasers of the Bonds should make an investment decision based on their assessment of the ability of Revel to operate the hotel and casino and to generate sufficient revenues to meet its obligations,” according to offering documents.

“If the Resort, including the hotel and casino, or the retail shops cease operations, or if they are transferred to ownership other than Revel, there is no assurance that there will be a need for the energy produced by the Project Facility or that subsequent owners will not obtain required energy elsewhere,” the statement said.

Toronto-based Brookfield, which won court approval to buy the resort for US$110 million last month, withdrew last week because it couldn’t

cut electricity payments, according to two people with knowledge of the matter who weren’t authorized to speak publicly and asked not to be identified.

Revel contract Revel had a contract to buy power and other utility services for about US$3 million a month from ACR, a joint venture between South Jersey Industries Inc. and DCO Energy LLC. Dan Lockwood, a spokesman for South Jersey Industries, said ACR had no involvement in talks between Brookfield and bondholders. Revel is the only user of the power plant, he said.

Frank DiCola, chairman of Mays Landing, New Jersey-based DCO, and Chief Financial Officer Michael Jingoli didn’t respond to voicemail messages.

The development authority was a conduit for the financing, so bondholders assume the risk from the deal, not the state, Virginia Pellerin, a spokeswoman, said in an e-mail.

45 Cents The deal had two parts: taxable debt paying 12 percent and tax-free securities paying 10.5 percent. The taxable bonds, maturing in December 2030, last traded October 2 at 45 cents on the dollar, Bloomberg data show.

It was the first trade since March 27, when the securities changed hands at 92 cents on the dollar.

ACR last paid interest to bondholders on June 1, according to financial statements. Lockwood declined to comment on whether the company has enough money to meet its Dec. 1 obligation, or how much it has in reserves, citing pending litigation and bankruptcy proceedings.

Units of Capital Group, based in Los Angeles, California, owned about US$15 million of the taxable debt and US$13 million of the taxexempt securities as of September 30, Bloomberg data show. Chuck Freadhoff, a spokesman, declined to make anyone available to comment.

New York-based Van Eck held US$4 million of the tax-free debt, which is subject to the alternative minimum tax, in its high-yield exchange-traded fund, HYD, as of November 20, the data show. Jim Colby, who helps manage the US$1.4

billion fund, said he didn’t have enough information to comment.

BlackRock Holdings BlackRock, the world’s largest money manager, owned US$3.6 million of the tax-exempt bonds as of Sept. 30, Bloomberg data show.

Walter O’Connor, who runs the New York-based company’s high-yield muni fund, wasn’t available for comment, said Katherine Ewert, a spokeswoman.

While some creditors were fighting in court over sale proceeds that didn’t yet exist, a lawyer for bondholder trustee Bank of New York Mellon Corp., Bradley O’Neill, said that the Brookfield deal “may not occur,” court transcripts show.

“If that doesn’t occur, then ACR really is exposed,” O’Neill, with Kramer Levin Naftalis & Frankel LLP, said at an Oct. 14 hearing.

“And if it doesn’t close, then ACR is left holding the bag.”

Stuart Brown, an attorney representing ACR at DLA Piper LLP, said at the hearing that the company wanted to negotiate a settlement with the casino and other creditors and that ACR might not recover all it was owed.

“ACR Energy isn’t going to bang its table” demanding 100 cents on the dollar, he said.

Casino plan Brown, who’s based in Wilmington, Delaware, didn’t return calls and e-mails. Stephen Zide, an attorney in New York at Kramer Levin who represents BNY Mellon, said he couldn’t comment and referred questions to Amy Caton at Kramer Levin. Caton didn’t respond to calls or e-mails.

Brookfield, which owns the Atlantis resort in the Bahamas, had planned to reopen Revel as a casino. The company outbid Florida developer Glenn Straub, who later challenged the auction process. The property, built at a cost of US$2.4 billion, closed in September.

Stuart Moskovitz, an attorney for Straub, said November 20 that it was too early to say if his client would maintain his offer for Revel. The developer will continue to appeal the auction.

Bloomberg

10

November 25, 2014

Greater China

Slowing economy helps trim shadow banking Bankers’ acceptances have contracted as a result of the manufacturing slowdown and tighter regulations

Real estate was the destination of an important amount of shadow bank loans

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bid by China to rein in its “shadow banking” activity is producing results, thanks to slowing economic growth and tighter regulation.

But some success for a policy drive to curb risky lending is not all good news for Beijing, as smaller companies may face even bigger struggles to find funding. A cut in interest rates, announced by Beijing on Friday, is unlikely to help them much.

Shadow banking includes offbalance-sheet forms of bank finance plus lending by non-traditional institutions, all of which is less regulated than formal lending and thus considered riskier.

At the end of 2013, China had the world’s third-largest shadow banking

sector, according to the Financial Stability Board, a task force set up by the G20 economies. It estimated that Chinese assets of “other financial intermediaries” than traditional ones were then just under US$3 trillion.

In the three months ended September 30, the shadow banking portion of what China calls total social financing - a broad measure of liquidity in the economy - contracted for the first time on a quarterly basis since the 2008/09 financial crisis.

Loans extended by trust companies fell by roughly 100 billion yuan (US$16.33 billion). Bankers’ acceptances, a short-term method of financing regularly used by manufacturers, dropped 668.3 billion yuan, according to Reuters calculations

based on central bank data.

October lending data, released on November 14, showed further contractions in these types of shadow banking.

Bankers’ acceptances and trust loans “fall into categories that have been squeezed by tightening regulations in the last few months, so it’s an on-going trend,” said Donna Kwok, an economist at UBS in Hong Kong.

Trusts have grown more risk averse as regulations tighten, hampering growth. Rules issued in April by the China Banking Regulatory Commission (CBRC) hold officers personally accountable for irresponsible lending and requires shareholders to inject capital and liquidity when necessary.

Changed regulations Cissy Sun, a risk manager at Anxin Trust Co Ltd, said the industry has been hit by regulations prohibiting trusts from using pooled funding.

Previously, funds a trust collected from investors buying different products were packaged into loans for a property developer or other borrower.

Trust companies have cut investment in property as its profitability has fallen, she said.

China’s house prices suffered their biggest annual decline in nearly four years in October.

Making loans to sectors other than real estate will be slowed by the need to learn a different set of industry regulations, Sun said.

China’s factory output growth hit

We can’t just say ‘no’ to shadow banks, because to some extent, they satisfy some financing demands of a diversified economy Hu Xiaolian central bank vice governor

a six-year low in August, rebounding only slightly since then. In half-year reports, Chinese banks said nonperforming loans for manufacturing increased.

Small is not beautiful Lending to small and mediumsized manufacturers has been tightened due to worries about defaults, according to a banker who oversees issuance of acceptance notes for a big Chinese bank.

Bankers acceptances used to be short-term tools for commercial banks to shore up deposits to meet targets. But in 2011, China’s banking regulator changed accounting rules, so cash collected via acceptances could no longer boost deposits.

As a result, acceptances fell from favour, according to bankers.

For Beijing, curbing risky forms of lending might undercut a stated goal of expanding lending to small and medium-sized enterprises (SMEs).

Major banks often avoid lending to smaller companies, preferring to have state-owned enterprises as borrowers.

However, the government recognizes that innovative SMEs will be drivers of the economy and a primary source for job growth in the future.

Reuters

Nasdaq bets on ETFs joining HK-SHG link Charles Li, the chief executive officer of Hong Kong Exchanges & Clearing Ltd., has said China’s capital-markets regulator may widen the range of assets permitted to trade over the link Eduard Gismatullin

N

asdaq OMX Group Inc. is betting that Chinese authorities will let investors buy exchange-traded funds (ETF) over the new link between Hong Kong and Shanghai.

The New York-based exchange operator is partnering with fund managers in Hong Kong as it prepares for a future phase of the link to include

ETFs, the company’s vice president for global indexes, Robert Hughes, said. BMO Global Asset Management (Asia) Ltd., a subsidiary of Bank of Montreal, debuted two Hong Konglisted ETFs that track Nasdaq indexes on November 13.

The exchange link, which opened a week ago, gives foreign investors unprecedented access to China’s US$4.2 trillion equity market. A spokeswoman for the China Securities Regulatory Commission declined to say whether the organization would expand the range of assets available through the program. She asked not to be identified, citing internal policy. Ernest Kong, a spokesman for Hong Kong’s Securities and Futures Commission, also declined to comment.

International investors bought the maximum amount of Shanghailisted shares permitted to them on the

I fully expect that in the near future ETFs will be part of it. It would become a very interesting destination for ETF providers that have global businesses Robert Hughes Nasdaq OMX Group vice president for global indexes

connect’s opening day. Since then, flows have fallen far short of the quota as concerns about execution risks and ownership of purchased assets deterred fund managers, according to Nick Ronalds, the managing director for equities at the Asia Securities Industry & Financial Markets Association, a trade association for the biggest investors and brokers.

International investors are limited to daily purchases of 13 billion yuan (US$2.1 billion) of mainland shares, while mainland traders can buy as much as 10.5 billion yuan in Hong Kong.

“The big investors are still waiting to see how it plays out when the dust settles,” said Mark Konyn, who helps oversee US$92 billion as the chief executive officer of Cathay Conning Asset Management Ltd. in Hong Kong.

Bloomberg News

11

November 25, 2014

Greater China Interest rate swaps drop China’s benchmark interest rate swap lost 28 basis points yesterday after the central bank surprisingly cut loan interest rates late Friday. The fiveyear IRS contract was quoted at 3.04 percent yesterday, down sharply from 3.32 percent at Friday’s close. Other benchmark money rates and bond yields also declined during the morning session as investors look to lower costs for credit going forward.

Yuan/won trading starts on Dec 1 South Korea plans to start direct yuan/ won trading on December 1, sources with direct knowledge of the matter told Reuters yesterday. December 1 will be slightly ahead of an earlier plan, as South Korea strives to emerge as an international hub for growing yuan business. “The direct trading is scheduled to begin on December 1 after successful preparation work including mock trading,” the person knowledgeable about the plans said. Another source confirmed it. Finance ministry officials declined to confirm the schedule.

Growth trend means more opportunities for Canada The rapid growth of China’s middle class means more opportunities for Canadian business, Canadian Minister of International Trade Ed Fast said. The minister made remarks at the opening ceremony of the second CanadaChina Investment Summit. There are tremendous investment opportunities for Chinese companies in Canada and for Canadian ones in China after the Canadian government approved in September a bilateral investment promotion and protection deal and the agreed establishment of North America’s first offshore Renminbi clearing centre in Canada earlier this month, he said.

Dalian Wanda plans more than 150 hotels Developer group plans to build more than 150 premium hotels around the world by 2018 in an expansion of its luxury hotel business, state news agency Xinhua said. The announcement comes as Dalian Wanda Commercial Properties, a subsidiary of Dalian Wanda Group, plans to raise up to US$6 billion in a Hong Kong initial public offering this year. The targeted overseas markets for the new hotels include Europe, the United States and Australia, Xinhua said, citing the group. The group was founded in 1988 and operates in commercial property, luxury hotels, culture and tourism and department stores.

Philippines convicts Chinese ‘poachers’ A Philippine court yesterday found nine Chinese fishermen guilty of poaching and environmental crimes for fishing in disputed waters, in a case that has strained relations with China. The nine, arrested in May, were fined US$100,000 each for poaching with an additional 120,000 pesos (US$2,730) fine for catching an endangered species, prosecutor Allen Ross Rodriguez said in the town of Puerto Princesa on Palawan island. Filipino police said they found hundreds of sea turtles -- a protected species -- on board the fishermen’s 15-tonne vessel when they arrested the group at Half Moon Shoal.

PBOC headquarters in Beijing

Bad loan jump targeted by surprise PBOC rate cut Banks are relying on rising profits to handle delinquent debts

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hina’s first interest-rate cut since 2012 is prompting investors to bet on further monetary easing as policy makers react to the biggest jump in bad loans in nine years.

Non-performing loans surged 10 percent last quarter, the most since 2005, as the property market slumped and the economy slowed. New-home prices declined in October in 67 of 70 major cities, while housing sales slumped 10 percent in the first 10 months from a year earlier, official data showed last week. The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, slumped 20 basis points today to 2.92 percent.

“The rate cut reduces corporate burdens on debt obligations and chances of widespread default on bad loans,” Liao Jin, a Guangzhoubased analyst at Guangfa Fund Management Co., which overseas US$23 billion in assets globally, said in a phone interview yesterday. “More rate reductions will follow.”

The People’s Bank of China last week reduced the one-year lending rate by 40 basis points to 5.6 percent, more than the 25 basis point cut in the deposit rate, which will reduce mortgage costs. JPMorgan Chase & Co., Barclays Plc., Bank of America Corp. and UBS AG all said the PBOC will act again with the world’s secondlargest economy on track to record its weakest annual growth since 1990.

Guangfa forecast there will be more reductions in interest rates or bank reserve-requirement ratios.

Economy, LGFVs Data released this month showed the economy’s slowdown deepening even after the central bank’s selective easing pumped 769.5 billion yuan (US$126 billion) into money markets since September. Factory production rose 7.7 percent from a year earlier.

Consumer prices increased 1.6 percent, while producer prices slumped 2.2 percent.

China should adopt a moderately loose fiscal policy next year, cut interest rates again and lower the reserve ratio at an “appropriate” time, Securities Times yesterday cited Ma Xiaohe, deputy head of the Academy of Macroeconomic Research of the National Development and Reform Commission, as saying.

The signal is that the authorities really are intent on boosting growth Tim Condon Head of Asia research, ING Group

The rate cut will also ease the burden on local-government financing vehicles, whose liabilities grew 67 percent from the end of 2010 to 17.9 trillion yuan as of June last year, according to a state audit. China Lianhe Credit Rating Co., a Fitch joint venture, says it can’t rule out LGFV defaults. The PBOC’s targeted easing was focused on the rural economy and smaller enterprises.

“Targeted easing doesn’t match funding demands in the real economy,” Xu Gao, an economist at Everbright Securities Co. in Beijing, said in a November 21 phone interview.

“What actually had greater funding needs were LGFVs and property.

These are not within areas supported by targeted easing, so there was a mismatch. Those that needed funds still couldn’t get them and those that got funds didn’t want them.”

Soured loans Five-year AAA bank bonds slumped last week, widening their yield spread over the sovereign to 1.18 percentage points from a fiveyear low of 1 percentage point on November 14.

The yield on China Construction Bank’s 2019 notes fell three basis points to 2.96 percent yesterday after rising to 2.99 percent from an all-time low of 2.87 percent on October 16, data compiled by Bloomberg show.

A slumping property market and rising corporate debt raise risks in

the banking industry, Standard & Poor’s said on November 19.

The PBOC’s cash injections into selected banks failed to spur a pickup in lending. Aggregate financing in October was 662.7 billion yuan, down from 1.05 trillion yuan in September. New yuan loans were 548.3 billion yuan, down from 857.2 billion, official data show. The China Banking Regulatory Commission said nonperforming loans rose 72.5 billion yuan in the third quarter from the previous three months to 766.9 billion yuan.

Slowdown bites Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets, said net income rose 7.7 percent last quarter to 72.4 billion yuan, even as it reported the biggest jump in bad loans since at least 2006.

Bad debts in China are underestimated and the worst is yet to come as the economy slows, Philip Groves, founder of Chicago- based hedge fund DAC Management LLC focusing on distressed credit, said on Nov. 19. Sinosteel Corp., a stateowned mining company, reported financial difficulties in September.

Zhejiang Xingrun Real Estate Co. collapsed in March. The government is cracking down on shadow banking, in which lenders shift financing activity off their balance sheet.

Stress signs Weaker lenders have shown more signs of stress. The yield on one-year bank bonds rated AA jumped 23 basis points last week to 4.63 percent on November 20, widening its spread over the sovereign to 1.41 percentage points from 1.26 points a week ago.

Liquidity in the interbank money market has tightened ahead of share sales. The seven-day repurchase rate rose 30 basis points last week to 3.5 percent, the highest since September 2. Nanjing Port Group Co. canceled a planned 200 million yuan bond sale, citing market volatility.

“We know that there were significant injections in October and they didn’t really seem to bear much fruit,” Tim Condon, head of Asia research at ING Groep NV in Singapore, said in a November 21 phone interview.

Bloomberg News

12

November 25, 2014

Asia HCM City to see USD trade surplus Vietnam’s southern economic hub Ho Chi Minh (HCM) City is forecast to record a trade surplus of US$1.3 billion in the first 11 months of this year, the city’s statistics office said yesterday.

In the reviewed period, the city gained US$29.23 billion dollars from exports, up 8.5 percent year on year, while it disbursed US$27.93 billion, up 8.2 percent.

Main exports with high earnings included garments and textiles with US$4.54 billion, computers, electronic items and appliances, US$2.4 billion, footwear, US$1.84 billion, and rice, US$1.16 billion.

S.Korea trade terms improve South Korea’s trade terms improved for two months in a row as import prices fell at a steeper pace than export ones amid lower global oil prices, central bank data showed yesterday. The net termsof-trade index for goods, which gauges how many goods can be imported with a unit export, rose 1.3 percent in October from a year earlier after gaining 0.7 percent in September, according to the Bank of Korea (BOK). The index stood at 90.46 in October, which means the country can import 90.46 goods with unit-export proceeds.

Hyundai, Kia lift sales target

Hyundai Motor and Kia Motors yesterday raised their target for 2014 global sales to at least 8 million vehicles on a better-than-expected performance in emerging markets and China. The automakers had earlier set a global sales target of 7.86 million vehicles for this year. The South Korean duo, which together ranks fifth in global vehicles sales, said in a statement the 8 million vehicle target would be a 6 percent increase from last year’s sales.

Aussie senator quits mining magnate’s party Outspoken Australian Senator Jacqui Lambie quit the political party headed by mining magnate Clive Palmer yesterday to become an independent, potentially affecting the government’s ability to pass legislation. Lambie resigned from the Palmer United Party, which holds the balance of power in parliament, after a dispute over pay for the military and has said she will not support any government legislation until the pay offer is reviewed.

Lambie, who represents the state of Tasmania, was removed from her position as deputy leader of the party last week and was barred from all parliamentary party meetings as the row escalated.

Fuel prices to put Indonesia auto sales on slower path In the long-term, the change should strengthen the Indonesian economy, now growing at its slowest pace in five years. In the short-run, it may impact auto sales

I

ndonesia’s petrol-price hike could put the brakes on the speed at which consumers in Southeast Asia’s biggest auto market buy cars and switch to four-wheels from two.

Next year “car sales probably won’t grow,” said Leonardo Henry Gavaza, a senior research manager at Bahana Securities. “Motorbike sales will be more resilient.”

Growth rates have been declining since 2010’s stunning 58 percent rise. January-October saw only a 1.8 percent increase for a year earlier, reflecting how annual economic growth has slipped to 5 percent.

Jongkie Sugiarto, co-chairman of Indonesia’s automotive association Gaikindo, said most people will find the higher fuel price affordable though some could be “thinking twice” about buying a car.

One factor crimping sales next year will be that right after prices were raised, the central bank its policy rate 25 basis points to 7.75 percent, the highest since March 2009, to contain on inflation expectations. It was first time Indonesia’s benchmark rate changed in a year.

Nearly all buyers of cars and motorbikes use credit, so financing for them becomes expensive with higher interest rates.

Fitch Ratings has said some Indonesians will “delay their cars purchases” and choose more affordable motorcycles due to higher fuel prices.

But it said any impact on sales following subsidy cuts “is likely to be temporary and the risk profiles of auto players likely will

President Joko Widodo last week cut subsidies and raised gasoline prices more than 30 percent to open the way for budget and other reforms

not be materially impaired”.

Fitch noted that in the 12 months after then-President Susilo Bambang Yudhoyono in 2005 raised fuel prices by 88 percent, car sales plunged 43 percent compared with the preceding year. Motorbike sales fell 12 percent.

When the government raised prices in 2013, car sales grew by 7 percent the next year and motorbike sales 11 percent. Growth in car sales “reflected the introduction of low-cost green cars in 2013 and price discounting by auto retailers”, said Fitch.

Low-cost, small-engine cars such as Toyota’s Agya have sold well, accounting for 13.9 percent of October sales, according to Gaikindo.

Fewer than 4 percent of Indonesia’s 240 million people own cars. While

BHP targets deeper cost cuts BHP expects to reap savings of at least US$4 billion by June 2017

B

HP Billiton stepped up its costcutting plans yesterday as the world’s biggest miner battles a sharp slide in iron ore, coal and oil prices, and said the unloved assets it is spinning off are still making money despite the rout.

Chief Executive Andrew Mackenzie said BHP’s priority was to maintain a solid A credit rating, hold or increase its dividend and invest in growth projects, ahead of returning capital to shareholders through special dividends or share buybacks.

“Given the underlying volatility we will only return excess cash once it’s accumulated on the balance sheet, so that any program has a high degree of certainty of being completed,” he

told an investor briefing in Sydney.

BHP expects to reap savings of at least US$4 billion by June 2017, up from an earlier forecast for US$3.5 billion, adding to US$6.6 billion in costs culled over the past two years, Mackenzie said.

The company also trimmed its forecast for capital spending by 4 percent to US$14.2 billion for the current financial year and said capital spending in the 2016 financial year would fall to US$13 billion, helped by plans to spin off its aluminium, manganese and silver units into a separate company in mid-2015.

BHP disappointed investors in August when it did not announce a capital return, holding back as it saw

the middle-class has been expanding, there are still millions of Indonesians who cannot afford a car.

One is Muhammad Rahman, a 20-year-old university student who is in the market for a new motorbike in spite of the fuel-price increase.

The hike is having an impact on his thinking, though, as he’s putting higher priority on fuel efficiency than flashiness.

That’s less than a dollar, but it can make a difference to Rahman and many Indonesians whose pockets aren’t deep.

Gavaza of Bahana Securities predicts 3 percent growth for bikes in 2015. Such sales rose 9.6 percent in 2013 and were up 3.5 percent the first 10 months this year, the Indonesian Motorcycle Industry Association says.

Reuters

prices of its key commodities tumbling.

The global miner was in better shape than its peers, thanks to its strategy and a strong balance sheet that is helping it weather a weak commodities market, Mackenzie said.

Its biggest business, iron ore, has suffered from a 48 percent plunge in prices this year, largely due to BHP and rivals Rio Tinto and Fortescue Metals Group flooding the market with low-cost ore.

At the same time, prices for two of its other major commodities, coal and oil, have also plunged, with coal at 5-1/2-year lows and oil near fouryear lows.

To help boost its profitability, BHP is on track to spin off its smaller aluminium, manganese and silver assets and some coal and nickel assets into a separate company next year, so it can focus on its iron ore, copper, coal and petroleum businesses.

Mackenzie said despite the rout, the spin-off company’s businesses were still cash positive.

Reuters

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13

November 25, 2014

Asia

Conflict and candlelight: Myanmar’s energy conundrum Myanmar has promised access to electricity for 50 percent of its population by 2020 and for all by 2030 Nan Tin Htwe

70 pct Myanmar’s population without access to electrical power

A string of major dams is planned along the Salween River to supply power to Myanmar. Deploying dams has proved to be very controversial however

W

hen a village in the conflicttorn hills of eastern Myanmar was asked to pay authorities more than US$10,000 to plug into an electricity grid, families put themselves in debt to find the cash.

Ten months later children there are still squinting over their homework by candlelight and dinners are cooked on open fires as the work to connect their homes to power lies unfinished, beset by delays and bureaucracy.

Roughly 70 percent of Myanmar’s population still does not have access to power, so the once pariah state, which already relies on hydropower to generate half of its electricity, is again turning to its rivers in new plans to harness energy from dams.

But as it rushes to plug the power gap, activists warn of worsening tensions in ethnic minority border areas, where such projects have long brought bloodshed and upheaval -- but little energy.

Back in Saw La Yar Koo village, eastern Kayah state, residents are losing patience. Sitting under the soot-blacked ceiling of her living room in the faltering glow of the cooking fire, 24-year-old Pi Rar feels cheated.

“If we had electricity, we could cook with it, could use computers and the children could study at night.

I attended a computer course but I couldn’t practise at home without power,” she said.

On the dusty track outside her house, where farmers drive bullock past simple wooden stilt homes, a gleaming transformer sits idly after

villagers say cash-strapped authorities asked each family to stump up another US$350 to install electricity.

“I had to borrow half of the 80,000 kyats (the initial payment of US$80) from a moneylender... They (local authorities) say we have to pay more to connect the cables to the houses,” Pi Rar told AFP. The costs are likely to push this corn-farming village into further debt just as it hopes to reap the rewards of a tentative peace deal in the state after years of bloody civil war.

‘Conflict multipliers’ Myanmar has promised access to electricity for 50 percent of its population by 2020 and for all by 2030, as it clambers to reduce poverty and remain viable for the businesses piling into the former junta-ruled land.

Hydropower looks set to dominate.

A string of major dams is planned along the Salween River, which courses from China down through the mountainous territories of eastern Myanmar’s many ethnic minorities.

But reliance on dams is deeply controversial as many projects stand in areas wracked by ethnic conflict where troops and landmines have often been deployed to guard large infrastructure projects against rebel attack.

Kayah activists fear Lawpita, Myanmar’s first hydropower project, could be the bloody blue-print for the country’s future dams.

Thousands were displaced by the

project, which now provides around a quarter of the country’s hydropower capacity, and activists say a spike in soldiers stirred conflict and incidents of forced labour, land confiscation and sexual violence.

Dams are “conflict multipliers, which are not very helpful” as the country struggles to negotiate an end to more than half a century of civil wars in its ethnic borderlands, said Elliot Brennan, research fellow at the Institute for Security and Development Policy.

He said planned projects, including one in Kayah and a massive dam upstream in southern Shan state by the Chinese Three Gorges company, largely feed the demand for energy in China’s Yunnan province.

What electricity does stay in Myanmar has long been unevenly distributed.

Energy is routinely siphoned from resource rich minority areas to power the cities of Yangon, Mandalay and Naypyidaw in the heartland of Myanmar’s Bamar majority.

This has caused deep resentment.

“What we have in our state -- we should have a share. But electricity from Kayah goes to other places. Most government projects are like that,” said Burma Rivers Network researcher Mi Reh.

Rising energy demand In a surprise snub to long-term ally Beijing, President Thein Sein

suspended the Chinese-backed US$3.6 billion Myitsone dam in northern Kachin state in 2011 after strong environmental concerns from the public, as clashes also broke out with local rebels over the project, ending a 17-year ceasefire.

Yet Beijing and Myanmar recently agreed to establish an electricity cooperation committee to keep future projects on track, as part of deals from China worth around US$7.8 billion.

For now even Myanmar’s main cities are beset by power cuts, prompting several waves of candlelit street protests since the end of military rule in 2011.

In Kayah much of the energy comes from Lawpita, but local electricity authorities admit that while the dam provides 210 megawatts to the national grid, it gets just 15MW. Unsurprisingly, torches and solar panels are still hot sellers at Demoso market, where people from the hilly region near Pi Rar’s village flock to shop.

Teens in punk rock t-shirts swagger past the statuesque women of the Padaung tribe, their necks ringed with tall brass coils, as Nay Soe sells his solar panels for up to 100,000 kyat (US$100).

He has noticed a slight slowdown in sales as reforms in recent years brought an uptick in energy access, but does not believe new state schemes will put him out of business any time soon.

“It won’t be within the next 20 years,” he said.

AFP

14

November 25, 2014

International Canadian buyout firm Onex to buy SIG Canadian buyout firm Onex Corp said it would buy Swiss packaging group SIG Combibloc Group AG for up to 3.57 billion euros (US$4.43 billion). An additional payment of up to 175 million euros will be payable based on the financial performance of SIG in 2015 and 2016, the private equity firm said. The deal is expected to close in the first quarter of 2015, subject to regulatory approvals, Onex said. Reuters reported earlier this month that Onex, Canada’s largest listed private equity firm, was leading the bidding for SIG Combibloc, citing sources.

Telefonica in talks to sell O2 to BT

Spain’s Telefonica could sell its UK mobile operator O2 to British Telecom in return for a 20 percent stake in BT as part of a “strategic alliance” to strengthen the pair, Spanish website El Confidencial reported on Monday.

“According to various sources, the talks between Telefonica and British Telecom are advanced although no final deal has been reached”, said the website.

A spokesman at Telefonica declined to comment on the report. No one at BT was immediately available for comment.

Draghi to receive final reality check Economists forecast data on November 28 will show consumer-price growth matching the weakest since 2009

M

ario Draghi is about to find out just how urgent his call for action has become.

One week after the European Central Bank president vowed to revive inflation “as fast as possible,” policy makers will receive a glimpse on just how feeble cost pressures are now in the euro region. Economists forecast data on November 28 will show consumer-price growth matching the weakest since 2009.

That would add to the drumroll for a stimulus debate at the December 4 meeting as panels of officials study possible new measures and prepare to cut their economic outlook. While Draghi has stoked pressure toward sovereign-bond buying, colleagues from Germany to the Netherlands are unconvinced quantitative easing is warranted, and his vice president suggested at the weekend that the ECB might hold off until next year.

“The stakes are high and the risks are asymmetric,” said Frederik

Ducrozet, an economist at Credit Agricole in Paris. “A drop in inflation, even a small one, could push the ECB to do something more in December.

On the other hand if there is an upside surprise, that buys them time.”

Inflation data for November are forecast to show a dip to 0.3 percent from 0.4 percent, while economic confidence is seen declining and October unemployment staying at 11.5 percent, according to economists surveyed by Bloomberg News before those reports this week.

Inflation target The inflation rate has held below half the ECB’s target of just below 2 percent for the past year, spurring interest-rate cuts as well as programs of long-term bank loans and covered- bond buying, with purchases of asset-backed securities starting last week.

Draghi will speak in Helsinki on November 27, a final opportunity to

Russian banks’ profits lower Russian banks may earn 10 percent less profit in 2014 than last year, the central bank’s First Deputy Chairman Alexei Simanovsky told a news conference yesterday. External markets are largely closed for Russian banks and companies, some of which - including top banks Sberbank and VTB - are under Western sanctions over Moscow’s role in the Ukraine crisis. Banks’ profits and margins are also under pressure because they have to serve increased domestic demand for loans, while their sources of capital and liquidity are limited.

Draghi explicitly cited government bond buying as a policy tool earlier last week

signal his intentions for policy next week after a series of public comments seeming to prepare the ground for fresh stimulus. The latest of those was on November 21 in Frankfurt.

The ECB president also explicitly cited government bond buying as a policy tool earlier last week. “Unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds,” he said in Brussels November 17.

Quantitative easing The next day, Dutch central bank chief Klaas Knot said that he is “rather skeptical” of QE. Bundesbank President Jens Weidmann and ECB Executive Board member Sabine Lautenschlaeger, a former Bundesbank official, are among other policy makers who have signalled opposition to such a move.

ECB Vice President Vitor Constancio, speaking in Florence on November 22, suggested officials are in no rush to act immediately as existing measures start to take effect.

“In the first quarter of next year, we have to assess if indeed the programs are contributing to a pace of increase of our balance sheet that is compatible with the sort of expectation that we have,” he said. “If not, then we have to consider other options.”

Goldman Sachs Group Inc.’s Dirk Schumacher said on November 21 that it’s more likely than not that ECB will announce a sovereign QE program in the first half of next year. Goldman previously saw 1-in-3 odds of the ECB conducting large-scale sovereign debt purchases.

Bloomberg News

German business confidence rises after seven months

Thousands of German companies are seeing business hit Sisi heads to Rome

by European Union sanctions imposed on Russia because on first European visit of its involvement in a conflict in Ukraine Stefan Riecher

G Egyptian President Abdel Fattah al-Sisi left for Rome yesterday on his first European trip since ousting his Islamist predecessor and overseeing a crackdown that has killed hundreds. Sisi, who was then army chief, ousted president Mohamed Morsi, the country’s first freely elected leader, in July 2013, prompting a wave of deadly violence between security forces and Morsi’s supporters that drew rebukes from Europe and the United States. But boosted by its increasingly central role in combating Islamist militancy, Egypt has come in from the cold since Sisi won a presidential election in May.

erman business confidence unexpectedly rose for the first time in seven months after Europe’s largest economy returned to growth.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, advanced to 104.7 in November from 103.2 in October.

Economists predicted a decline to 103, according to the median of 41 estimates in a Bloomberg survey.

German gross domestic product increased 0.1 percent in the three months through September after a contraction in the previous quarter, and investor sentiment climbed for the first time in 11 months in November. Even so, the pace of the recovery remains sluggish and the

Bundesbank has said the economy will lack momentum at least until the end of the year.

“We see some stabilization but I don’t see any reason for enthusiasm,” said Jens-Oliver Niklasch, a fixedincome strategist at Landesbank Baden Baden-Wuerttemberg in Stuttgart.

“Well-known risks to the economy such as the crisis in the Ukraine haven’t really receded.”

Thousands of German companies are seeing business hit by European Union sanctions imposed on Russia because of its involvement in a conflict in Ukraine. Zeppelin GmbH, a German machinery provider, says it faces a sales decline of about 40 percent in the two eastern European countries.

German manufacturing and

services expanded at the slowest pace in 16 months in November. The economy is symptomatic of the muted revival in the euro area as a whole, which saw growth of 0.2 percent last quarter.

European Central Bank President Mario Draghi said last week that policy makers will add stimulus to the region if needed to boost consumer prices and spur growth. In a flurry of activity since June, the Frankfurt-based ECB has cut interest rates, offered long-term loans to banks and bought covered bonds and asset-backed securities.

“We will do what we must to raise inflation and inflation expectations as fast as possible,” Draghi said on November 21.

Bloomberg News

15

November 25, 2014

Opinion Business

wires

India’s economic hotspots

Leading reports from Asia’s best business newspapers Anu Madgavkar Rakesh Mohan

GLOBAL TIMES

Senior fellow with the McKinsey Global Institute India’s Executive Director at the IMF

Industrial and Commercial Bank of China (ICBC) signed a pact with the Los Angeles city government to promote cross-border yuan trade and set up an offshore renminbi centre in California, the bank said on Saturday. The move to create an offshore yuan centre in the largest state in the US would lay the foundations for greater yuan trade with China, ICBC said in a statement.

The agreement comes at a time when many other countries and regions are ahead of the US in establishing cross-border trade in yuan.

THE STAR The RON95 petrol prices could be maintained or revised down by about 5 sen to 10 sen at the current global crude oil prices as the government puts in place a managed float which will take effect on December 1.

CIMB Economic Research said this will have a benign direct impact on overall inflation, but this might possibly change if oil prices continue to decline. “If oil prices decline further, this would help defray the spike in inflation as a result of the GST’s implementation,” it said.

THE PHNOM PENH POST Chinese officials have called on Cambodia to increase fruit exports amid an expected rise in domestic demand for fresh produce fuelled by online sales. Feng Bo, deputy major of Ping Xiang city of Guangxi province, last week said fruit imports from ASEAN nations must increase from an estimated 1 million tonnes per year to accommodate increasing sales of fruit online via websites such as Alibaba.

“One website is already selling fruit online and there are more websites going to start... In 2013, online fruit sales in China totalled around US$81 million,” Feng Bo said.

THE JAKARTA POST State oil and gas company PT Pertamina says it will guarantee the availability of 3-kilogram liquefied petroleum gas (LPG) canisters in border areas, as a demonstration of the country’s support for the existence of the Unitary State of the Republic of Indonesia (NKRI) in its borders. In a recent visit to one of the country’s outermost islands, Sebatik island in North Kalimantan, Pertamina marketing and business director Hanung Budya said all Indonesian citizens living within the country’s borders had the right to adequate access to energy.

India’s Prime Minister Narendra Modi

I

ndia’s economy could soon be on the move again. The new government is re-establishing fiscal discipline and energizing the bureaucracy, fuelling optimism that rising business confidence will re-activate investment, particularly in infrastructure. But India’s overall growth prospects conceal a patchwork of economic opportunities that exist within states, districts, cities, and even towns – opportunities that companies can uncover only with careful research.

India’s economic data are promising. Annual average GDP growth is forecast to range from 6.4% to 7.7% until 2025. This compares favourably with last year’s 4.7% rate, and is close to the 7.7% average recorded in the decade up to 2012. Moreover, it contrasts sharply with the expectations of secular stagnation in the developed world. This acceleration would place India among the world’s fastest-growing large economies and increase the number of Indian consumers who can afford discretionary items from 27 million in 2012 to 89 million in 2025.

But the potential is far from uniform. According to a new report, more than half of India’s GDP growth between now and 2025 will come from just eight states (Gujarat, Haryana, Himachal Pradesh, Kerala, Maharashtra, Tamil Nadu, Andhra Pradesh, and Uttarakhand), home to just 31% of the country’s population. Along with four dynamic city-states (New Delhi, Goa, Chandigarh, and Pondicherry), these states will be home to 50 million consumers, or 57% of the country’s middle-class

households.

Indeed, per capita GDP in India’s highest-performing regions could grow to twice the national level. This reflects several factors, including rapid urbanization, sustained investment in skills and infrastructure, and a shift from agriculture to industries such as automotive components, petrochemicals, pharmaceuticals, financial, and IT-enabled services.

By 2025, the economies of these regions will resemble those of middle-income countries. Maharashtra’s consumer market of 128 million will wield purchasing power similar to that now seen in Brazil. New Delhi’s 22 million people will boast living standards similar to today’s Russia.

Slightly less dramatically, though still significant, per capita GDP in Chhattisgarh, Odisha, West Bengal, Rajasthan, and Madhya Pradesh, based on current trends, is forecast to reach 0.71.2 times the national average by 2025, swelling the number of middle-class consumers fourfold, to 16 million. By contrast, the weakest-performing states, including Bihar, Uttar Pradesh, and Jharkhand, with per capita GDP of under 0.7 times India’s average, will struggle with low incomes and high population growth, unless they improve their governance and investment trajectory significantly.

But investors seeking the best growth opportunities will have to search beyond states’ headline figures and scrutinize India’s districts more closely, especially urban clusters and their hinterlands. We have identified 49 such high-growth clusters, located in 183 districts nationwide.

In 2012, these areas accounted for half of India’s population, 70% of its GDP, and 71% of consumers. They are also home to 250 of India’s 450 cities with populations above 100,000.

Interestingly, one-third of these clusters can be found in states that have delivered low to medium economic performance, or are located close to smaller, lesser-known towns in better-performing states. The Nellore cluster in Andhra Pradesh, for example, has paddy, tobacco, groundnut, mango, and sug-

Investors seeking the best growth opportunities will have to search beyond states’ headline figures and scrutinize India’s districts more closely, especially urban clusters and their hinterlands

arcane farms. The Bikaner cluster in Rajasthan is rich in oilseed and the quarrying and production of Makarana marble and limestone. The more diversified Aurangabad cluster, in Maharashtra, is home to some of India’s largest seed companies, an active automotive, pharmaceutical, and sugar-manufacturing industry, and a tourism hub that includes the Ajanta and Ellora caves.

The location of these lesser-known clusters underscores the point that investors, seeking low-cost real estate and a skilled workforce, should look more carefully at India’s economic geography when deciding where to place their operations.

These locations could eventually become knowledge-based industry or services hubs, similar to those of large Indian cities such as Bengaluru, Hyderabad, and Pune – only cheaper.

As they continue to develop, India’s dynamic economic clusters will themselves need to invest in modern sanitation and water systems, education and health, airports, railways, and road links.

As such, they offer investors opportunities in many sectors, including consumer goods, financial services, housing, and infrastructure.

Given their structural advantages – including proximity to large urban centres for some – these clusters could generate some of the best returns on investment anywhere in India. Companies hoping to catch India’s next growth wave might want to consider areas that seldom feature on investment lists, but that might offer better value than marquee destinations.

Project Syndicate

16

November 25, 2014

Closing Palace Museum to have free visit days

U.S. seeks to step up India trade talks

The Palace Museum in Beijing will waive the entry fee for certain Chinese residents, it announced yesterday. Chinese teachers, students, soldiers, police, medical staff and volunteers will be able to visit the museum for free on the first Wednesday of each month from December 2014 to April 2015.

The initiative aims to foster interest from these key groups of society in the popular ancient Chinese palace during the museum’s quieter months, while at the same time reducing the hordes of tourists during high season. Those eligible must pre book online 10 days before their visit.

The United States wants to step up its trade dialogue with India, Trade Representative Michael Froman (pictured) said yesterday, after the resolution of a global trade dispute paved the way for President Barack Obama to visit India. Direct contacts between Obama and Prime Minister Narendra Modi this month helped to end a deadlock that had prevented the World Trade Organization from implementing a US$1 trillion package of reforms to global customs rules. Froman urged progress on key areas of U.S. concern such as intellectual property rights on pharmaceuticals and Hollywood movies.

Deposits war among China’s banks to yield no big winners Bank deposits overall have been falling due to competition from online money-market funds that offer higher investment returns Engen Tham

S

maller Chinese banks that have raised deposit rates higher than their large rivals may be rewarded with a short-term inflow of money, but are unlikely to break the trend of investors parking cash in big banks and high-yielding “shadow bank” products.

At least eight small- and mid-sized lenders raised their one-year deposit rates to the 3.3 percent maximum on Saturday after the central bank unexpectedly cut interest rates for the first time in over two years to help support the economy.

Mid-sized banks are suffering more than big lenders from soured loans and a profit slowdown, and are keen to maintain their deposits.

“Smaller banks have more difficulty getting deposits,” said Edmond Law, a banking analyst at UOB Kay Hian (Hong Kong) Ltd. “The key is, the large banks have enough deposits, so they have no urgency to do so.”

Some of the country’s top banks, such as Industrial and Commercial Bank of

Smaller banks have more difficulty getting deposits.

The key is, the large banks have enough deposits, so they have no urgency to do so China Ltd, have only lifted their key deposit rate to 3 percent, giving smaller peers an opening.

But analysts said that will only bring short-term relief, until the larger rivals eventually follow suit.

The eight lenders that have lifted their deposit rates to the maximum level are Bank of Jiangsu,Bank of Nanjing , Bank of Suzhou, Bank of Ningbo, Zijin Agricultural Bank, Ping An Bank, Evergrowing Bank and the Chaozhou Commercial Bank.

Smaller and mid-sized lenders could potentially bring more competition to China’s banking sector, which is dominated by a state-owned “big four”. But they are finding it hard to compete with the burgeoning shadow finance industry.

Increased competition The banks’ rise in deposit rates will do little to change this trend as yield differentials remain significant, analysts said. For example, Yu’e Bao, an internet investment

Edmond Law, UOB Kay Hian, banking analyst

product offered by Alibaba Group Holding Ltd, offers an annualised return of 4.07 percent.

“Yu’e Bao’s interest is much higher than at banks, so even with the rate increase, movement from Yu’e Bao to banks is not really possible,” said Jiahe Chen, chief

strategist at Cinda Securities.

China’s wealth management sector has exploded in recent years, hitting around 12.8 trillion yuan (US$2.06 trillion) around 11 percent of bank deposits - by the end of May, state media reported.

Another factor working against greater competition for deposits, some analysts say, has been the lack of a deposit guarantee scheme.

China has said it will roll out an insurance system that will cover deposits of up to 500,000 yuan (US$81,492), as a move towards a marketoriented interest rate regime could put depositors at risk.

For many depositors, however, such considerations are secondary, as they have long believed the state would ultimately bail-out struggling lenders.

“I’m considering changing from a state-owned bank to a smaller one just for the interest,” said a 32-year-old IT worker, who gave only his surname, Wang. “The credit risk in smaller banks is okay for me.”

Reuters

Philippine customs revenue up Tibetan dam begins operation Bluestar to buy REC Solar

T

C

C

he Philippine Bureau of Customs (BOC) said yesterday that its collections expanded by 22.6 percent on year to a record 34.16 billion pesos (US$759.17 million) in October.

BOC said it set a new record for the highest-ever single-month collection in October. The agency recorded increases in its revenues for the 10th straight month.

The agency said the hike in its collections was driven by the continued growth in the volume and value of imports. “A survey in consumer demand and clearing-out of shipments at the ports propelled a 31.8 percent increase in import volume,” the BOC said in a statement.

Also, BOC said improvements in its processes and continued reforms drove a 34.4 percent hike in the valuation of goods and a 30.17 percent hike in duties and taxes collected. BOC’s October revenues, however, fell short of its goal.Among the biggest ports in the country, only those in the provinces of Subic and Batangas in northern Philippines met and exceeded their targets for October.

hina has begun generating electricity from Tibet’s biggest ever hydropower project, state-run media reported, the latest dam development on Himalayan rivers that has prompted concern in neighbouring India.

The first generating unit of the 9.6 billion yuan (US$1.6 billion) Zangmu Hydropower Station, which stands more than 3,300 metres above sea level. The dam on the Yarlung Zangbo river -- known as the Brahmaputra in India, where it is a major waterway -- will be 116 metres (381 feet) high when completed next year, according to reports.

It will have a total generating capacity of 510,000 kilowatts, Xinhua said, making it the largest dam ever built on the Tibetan plateau. “The hydropower station will solve Tibet’s power shortage, especially in the winter,” Xinhua quoted an official from the Tibet Electric Power Co. as saying.

India has previously expressed concern about damming the Brahmaputra, one of the largest Himalayan rivers and a lifeline to some of India’s remote, farm-dependent north-eastern states.

hina National Bluestar has agreed to buy solar panel maker REC Solar for 4.34 billion Norwegian crowns (US$640 million), planning to combine it with another Norwegian asset it picked up in 2011.

Bluestar said yesterday it would pay a 15.9 percent premium to the stock’s last close in a deal unanimously recommended by REC Solar’s board of directors and would combine it with its solar grade silicon maker Elkem.

The deal comes nearly a year and a half after REC spun off its solar panel arm, moving its headquarters to Singapore from Norway and effectively putting the company up for sale.

Struggling with high costs and cut price competition from China, REC Solar moved its production from Norway, one of the most expensive countries in the world, setting up its operating headquarters in Singapore.

REC Solar has continued to struggle with weak markets and poor margins this year and its thirdquarter sales and profit both fell sharply.

Xinhua

AFP

Reuters