Macau Business Daily, Jan 13, 2015

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 706 Tuesday January 13, 2015 Year III

Technical hitch I t’s a question of legality. The Commercial Vehicles’ Owners Association says a taxi and mini-van hailing app contravenes the law. Because some travel agency vans are being used for the purpose.

The Association claims travel agencies cannot legally provide such on-call services. According to administrative regulations tourism agencies must state a clear travel purpose for their car dispatching service. Violators may be fined up to 10,000 patacas PAGE

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Prostitution ring busted Six alleged ringleaders have been arrested. Plus 96 ladies of the night.

Casino mogul Stanley Ho’s nephew Alan Ho has been led away in handcuffs.

Police say Hotel Lisboa staff and management facilitated sex for sale on the premises. The scam allegedly started in 2013, and involved more than MOP400 million

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Bank profits drop to record low in November Page 3

Junkets affected by ‘cheaper’ VIP clients Page 4

Gov’t loosens social housing income limit

HSI - Movers

Jewel in the Melco Crown

January 12

Name

Studio City opens its doors to the public in Q3. Complete with the highest ferris wheel in Asia, at 130 metres tall. It’s all part of the new paradigm. The cinematic-themed resort is chasing the non-gaming market. Although it needs to be funded by gaming . . .

Pages 6 & 7

%Day

Cheung Kong Holdings

14.74

Hutchison Whampoa Lt

12.53

Wharf Holdings Ltd/T.

2.78

Swire Pacific Ltd

1.55

Power Assets Holding

1.33

China Merchants Hold

-1.14

China Resources Ente

-1.38

Li & Fung Ltd

-1.50

China Shenhua Energy

-1.53

Galaxy Entertainment

-2.99

Source: Bloomberg

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www.macaubusinessdaily.com

I SSN 2226-8294

Keep e-calm Shanghai stocks are enjoying an extraordinary performance. But Chinese e-companies listed on foreign market exchanges aren’t cashing in. Analysts say they just need to be patient

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2 | Business Daily

January 13, 2015

Macau

Local smartphone taxi, mini-van hailing app incites legal doubts Possibly the city’s first taxi and mini-van hailing app – ‘Ryde 365’ – is inciting legal doubts over its dispatch of tourist agency vans, a commercial vehicles owners association claimed Stephanie Lai

sw.lai@macaubusinessdaily.com

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oubts hover over the legality of a local taxi and mini-van hailing smartphone application as the booking operator has been using tourist agency vans for on-call passenger pick-ups which are not part of the agencies’ daily business, the Macau Association of Owners of Toursim Rental Vehicles said.

A local free smartphone application, known as ‘Ryde 365’, provides an instant taxi and 7-passenger ‘limousine’ booking service, accompanied by optional credit card payment for the booking fees.

The application, according to the Ryde 365 operator, also allows passengers to add booking fees as incentives to get an order from a nearby driver faster.

‘These are fully insured and licensed commercial vehicles that will take you anywhere in Macau and nearby China cities for a fixed point-to-point price’, according to Ryde 365’s official website. ‘Price vary according to availability, your pick-up point and destination.

Our apps will confirm pricing before placing an order, and we will not charge your account until you have arrived at your destination’.

A starting charge of 60 patacas (US$7.5) applies for hailing a ‘7-passenger limousine’ - in fact, a tourist agency mini-van – while the most expensive rate for this ‘limousine’ trip within Macau hailed via the smartphone application was around 200 patacas, Business Daily learnt.

“I don’t think this smartphone application is legal because the local tourism agencies, as required by law, cannot purely provide an on-call pick-up service like that”, the director of the Macau Association of Owners of Tourism Rental Vehicles Ben Leng Sai Vai told Business Daily.

“For tourism agencies, they can take advance bookings to dispatch their cars to fetch their clients for a convention and exhibition, for instance, or other tourism activities”, Mr. Ben Leng added. “For running that service it also requires Macau Government

Tourist Office approval. The one from the [smartphone] application is actually already operating like an on-call taxi service but they are using a tourist van to render a service that’s not part of a regular [tourism] agency’s business scope”.

According to local administrative regulation No.42/2004, tourism agencies must state a clear travel purpose for their car dispatching service. If agencies are found to be violating the rule, a fine of 5,000 patacas to 10,000 patacas can apply.

Taxi dispatch In addition to hailing a mini-van from the smartphone application, the operator of Ryde 365 provides a taxi hailing service via the online booking. Unlike the order of the mini-vans, the starting charge of 60 patacas does not apply to the taxi hailing, and passengers will pay the taxi fare as calculated by the taxi metre, according to Ryde 365 staff.

Both Mr. Ben Leng and Macau Taxi Driver Mutual Association’s chairman Tony Kuok Leong Son told us that not many taxi drivers have worked under contract with the smartphone taxi hailing application.

“As I understood it, the smartphone application did not really draw a very enthusiastic response from taxi drivers,” Mr. Kuok said, noting that around only a dozen black taxis have tied up with the smartphone application service. Kuok’s association is a local labour union of black taxi drivers.

“As we heard from drivers, they’re only having a split of their booking fees on a monthly basis, where for each trip booked via the application, the [Ryde 365] operator pays them 20 patacas”, he said.

The smartphone application may not make taxi hailing here much easier as currently less than 3,000 taxi drivers work in the city’s 1,200 black taxis, a figure that does not meet the huge demand by Macau’s many visitors. As at the first 11 months of last year, the city welcomed nearly 29 million visitors.

PJ bust biggest prostitution ring since handover Six alleged ring leaders including Alan Reginald John Ho, nephew of Stanley Ho Hung Sun and executive director of Lisboa Hotel, along with 96 sex workers were taken to the Public Prosecutor’s Office for further investigation Joanne Kuai

joannekuai@macaubusinessdaily.com

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s the saying goes ‘a new broom sweeps clean’ - right after the new police force took office, Judiciary Police have busted the largest prostitution ring since the establishment of the Macau SAR. A total of 102 suspects involved in the case were sent to the Public Prosecutor’s Office yesterday morning.

Alan Ho, executive director of Lisboa Hotel, in handcuffs, was accompanied by two police officers. Police said they believed at least MOP400 million was involved in the case since the organisation started operation in 2013.

Judiciary Police held a special press conference on Sunday night, at which PJ spokesperson Choi Iat Peng said that the arrests were made on Saturday evening, with the six ring leaders comprising a local 68-year old male surnamed Ho who was a senior hotel executive, a 57-year old male Hongkonger surnamed Mak who worked as a senior manger in the

hotel’s security department, another senior manger from Macau aged 53 surnamed Lon, a 42-year old local man surnamed Pun, a 40-year old female senior manager surnamed Wang from the mainland, and a 32year old female receptionist surnamed

Qiao, also from the mainland.

Of the 96 sex workers, aged between 20 and 27, 95 are from mainland China and one from Vietnam. The police said that 20 of them entered Macau illegally, while another 10 were carrying fake IDs.

Some cash in yuan and Hong Kong dollars totalling MOP1 million were seized during the raid along with other evidence.

The spokesperson said that police were tipped off in April last year that senior executives in the hotel were allowing sex worker to solicit clients in the hotel’s ground floor area.

Mr. Choi added that upon investigation police learned that Ho had hired Wang as a senior manager of the hotel and assigned rooms to sex workers, for which the sex workers had to pay a 150,000 yuan yearly ‘entrance fee’ to work and another MOP10,000 per month as ‘protection fee’. The sex workers usually charged their clients MOP1,500 to MOP5,000 per session and could keep the money themselves.

Business Daily contacted SJM Holdings Ltd, where Alan Ho acts as a Management Committee member but the company declined to comment.

Business Daily | 3

January 13, 2015

Macau Bank profits drop to record low in November With the economy and gaming industry on the ropes, local banks are starting to feel the pain of the downturn. In November, financial institution profits totalled MOP721 million, the lowest level in 2014 and 30 per cent below the year’s average, official data reveals Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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he profits of local banks in November reached the lowest level of the first eleven months of 2014, a sign that the current plunge in gaming revenues is not only putting the economy on the path to its first recession in years but starting to take a toll on the financial system.

The data published yesterday by the Monetary Authority of Macau (AMCM) shows how the gaming crisis in Macau could be affecting the banking system as companies see their business cooling down and individuals postponing some buying decisions. Until now, the sector was growing healthily with credit and profits rising at double-digit rates every month. In November, however, momentum slowed.

The operating profit of Macau banks was MOP721 million in November, said AMCM. That’s not just the lowest figure recorded in all 2014 so far (Data for December is not yet available). It also reveals that banks here made 30 per cent less profits that month compared to the average of 2014 and took home MOP200 million less in results, according to Business Daily calculations. From

January to November, the monthly average profit of the banking system here was MOP931 million. Compared to October, the monthly November drop is even higher (MOP360 million) as banks here profited MOP1,082 million in the former month. The operating result is the profit excluding the previous year’s profits or losses, one-off events, taxes or interest.

Following the economy On a year-on-year basis, the slowdown of bank business is also evident. Profits in November were only 1.2 per cent higher than a year ago, an almost flat performance. In October, by contrast, profits went up by 19 per cent year-on-year.

However, it’s still too early to know if November was an exception or the beginning of a similar trend suffered by the gaming industry and the economy at large.

AMCM doesn’t yet have the data for credit and loans in November but if profits declined in that month it is likely both segments followed suit. The deceleration of the banking system was already happening in the last

leg of 2014. New commercial real estate loans dropped 28 per cent in October from a year ago, while deposits decreased 12 per cent from September.

Despite the slowdown in the fourth quarter of 2014, local banks will register a record year in profits. AMCM data shows that in accumulated terms the financial institutions here made MOP10.2 billion in operating profits between January and November of

last year. That’s already 33.5 per cent above what’s recorded for the same period in 2013 (MOP7.9 billion).

In the third quarter of 2014, Macau’s economy suffered its first decline in five years, with Gross Domestic Product (GDP) decreasing 2.1 per cent year-on-year due to the substantial drop in gaming revenues that represent more than half of the local economy.

4 | Business Daily

January 13, 2015

Macau Brands

Trends

More of Mobiado Raquel Dias newsdesk@macaubusinessdaily.com

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ou can say many things about a Mobiado phone but never that they are boring.

The brand from Canada has transformed the way a mobile phone can be seen and used. Rather than a utilitarian object, the phone is now a piece of jewellery or art. Like some watches, phones have become collectible.

Their latest endeavour is the Professional 3 X series showcasing an asymmetrical exotic wood – either Amboyna Burl or Olivewood— grip and an advanced battery cover mechanism. The frame is CNC machined from aircraft aluminium and then finished with a black anodised coating.

Large sapphire crystal plates are hand-painted with silver lettering and precision inset into the body. The battery cover displays three rubies and is accessible by Mobiado key, another way in which the brand changes your interaction with an everyday function. Rather than keeping things all digital, Mobiato introduces something of the mechanical world into their pieces.

The new model celebrates Mobiado’s 10th anniversary and, once again, blurs the lines between technology, engineering and art.

Junkets affected by ‘cheaper’ VIP clients The downfall of the junket business in Macau is not only a matter of shortage and more expensive credit. It’s also a problem of lower quality VIP clients that gamble less and pay much later, investors believe. Macau could lose half its VIP rooms introduced in the last three years. Junket volumes are down 44 per cent Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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t’s no news that junkets are one of the most affected groups in the current gaming crisis as the damage is coming from all sides. High rollers sidestepping Macau because of Beijing’s anti-graft campaign, credit shortage in China or the several crackdowns launched by authorities.

With no clients, no funding and a closer look by the authorities (from China to the US) some media are saying that the Macau junket model ‘is broken’.

If the lack of liquidity or the underperformance of the Chinese economy, however, are seen as major roles in the junket drama, investors are taking note of other factors playing a significant role. For example, the lower ‘quality’ of VIP players, meaning gamblers that bet less money and pay much later – with some not paying at all.

The first signs appeared when the almost perfect positive correlation between credit flow and junket revenues started to diverge.

‘Divergence between junket volume and credit growth suggests something

else at play’, wrote Wells Fargo in a recent note to clients. In the last 30 months, the correlation between credit and junket volume in Macau tracked by the US bank stayed at 78 per cent. The high figure means that credit and junket revenues go hand in hand and in the same direction: when credit improves, the junket business grows and vice versa.

Divorce But in December, junket volume ‘significantly underperformed’ credit flows. The latter have been dropping by a rate of 10 per cent since the Summer, while the former registered a record decline of 44 per cent last month. ‘We believe Xi Jinping’s visit, the continued corruption crackdown, and worsening junket liquidity are pressuring volumes’, Wells Fargo said.

But that’s not all. The US bank also underline that ‘our prior checks suggested the general quality of VIP players has declined’. With some casinos moving mass premium

gamblers to VIP rooms to avoid the smoking ban, these rooms are probably not exclusive to the high rollers anymore.

Business Daily reported recently that several junket companies are already selling property in Macau and this month Chinese media reported that 40 to 50 VIP rooms could shut their doors in the coming months.

Macau gaming operators introduced more than 100 new VIP rooms in the last three years. In other words, in the near future Macau could lose half of the VIP rooms it has created since 2012.

To Wells Fargo, this wave of shutdowns ‘could represent a spiral of bad debt and slower payment cycles. Fewer capital turns result in less capital in the system, which leads to lower loan and VIP volumes. Credit losses further impair junkets’ lending capacity and market volume’. Morgan Stanley estimates that the repayment period to junkets more than doubled in 2014 from 15 to more than 30 days, while smaller junkets have been driven out of business already.

Telecom Regulator: Universal data usage alert

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ll telecommunication operators in the city provide a service to customers with data usage alert as recently requested by authorities, said Hoi Chi Leong, Deputy Director of the Telecommunication Regulation Bureau when talking to Chinese newspaper Macau Daily.

The government has decided to renew the licence of the four mobile phone operators in the territory; namely, Companhia de Telecomunicações de Macau, S.A.R.L., Hutchison - Telefone (Macau), Limitada, Smartone – Comunicações Móveis, S.A. and da China Telecom (Macau) Limitada, until June 2023.

These companies - under the names CTM, 3, SmarTone and China Telecom - were mandated to inform clients about their quantity of mobile data usage and must detail their daily usage of data on receipts if clients request it starting from January. The telecommunication regulator said so far all operators have complied with the requirement.

Hoi Chi Leong said that with regard to methodology, such as when the alert would be sent to clients or how often they were sent, it is up to the operators. He said there should be a sense of competition instead of all being the same and giving the

impression that the four operators are in joint venture and monopolising the market. Customers can enquire from operators directly regarding the details.

Also, from April on, operators will have to provide a service that once the limit of the data usage plan has been reached it will only allow extra usage of data if the client confirms his or her willingness to do so. And in June, mobile operators are requested to provide information on data usage in real time. In the event of delay in providing such information, no extra costs may be charged to clients.

Business Daily | 5

January 13, 2015

Macau

Labour Law amendment passed A bill suggesting amending the cap on dismissal pay for workers when they are fired by their employers triggered a two-hour discussion in the plenary session of the Legislative Assembly yesterday evening before passing on its first reading Kam Leong

kamleong@macaubusinessdaily.com

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he Legislative Assembly passed the first reading of an amendment on the current Labour Relations Law, proposing to lift the cap on the monthly base of employers’ dismissal from the current MOP14,000 (US$1,750) to MOP20,000 patacas. However, the initiative triggered intense discussion among legislative members.

Federation of Trade Unions (AGOM) legislator Elle Lei Cheng said that the cap on the amount of dismissal compensation was unreasonable, claiming it should be cancelled as not every employer must pay compensation - only when they fire an employee without reason.

“Not every employee can receive this compensation. It depends on the employers [themselves]”, she said, claiming that the government should submit statistics on how much the hike in the compensation would affect local SMEs. The Labour Relations Law regulates that employers have to pay their employees severance pay if the employers terminate staff contracts without reasonable justification.

Meanwhile, the amount should be based on the employee’s monthly salary as well as the years the employee has worked for the company.

Another legislator, Kou Hoi In, claims that the industry perceives the

hike as being too high. In addition, he also said that the government’s suggestion of reviewing the amount every two years is not fair to employers.

He perceives that the review should only be conducted following the development of the economy rather than through legal regulations.

Legislator Chan Chak Mo, on the other hand, perceives that the hike may not affect the gaming corporations but the local SMEs, claiming they may not be able to afford the compensation for their employees if they have to close their businesses.

Secretary for Economy and Finance Lionel Leong Vai Tac, meanwhile, told legislators that the decision on the amount of the hike for dismissal compensation was made after balancing the benefits to the different sides. In addition, he indicated that cancelling or increasing the cap on compensation may result in negative effects for employees, such as those with higher salary or longer experience being fired first by employers.

The words of Secretary Leong attracted criticism from several legislators. Legislator Au Kam San commented that the perspective of the Secretary was a totally “strange comment”, claiming that employers are not likely to fire employees who have

Gov’t loosens social housing income limit

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he government has loosened the limit of income and assets for applications for social housing, for which the caps are increased by between 3.8 per cent and 4.6 per cent.

The hike, according to the Official Gazette released yesterday, came into force from January 1 of this year.

According to the Official Gazette, the limits for income and assets

have been raised to MOP9,340 and MOP201,800, respectively, for singlemember families.

For families with two and four members, the income limits range between MOP14,460 and MOP19,920 with the cap on assets for these families from MOP312,400 to MOP430,300.

In addition, the incomes of families with more than four members are limited between MOP21,500 and MOP26,760 while the value of their assets cannot surpass MOP464,00 to MOP578,100.

The previous hike on the limits of income and assets for social housing was in December 2013, when the amount of such caps were increased by 7.7 per cent compared to that of 2012.

K.L.

been working longer for them, or with more value, in an environment in which Macau is lacking human resources.

Another legislator from the AGOM, Kwan Tsui Hang, also claimed that the logic of Secretary Leong was unreasonable. She indicated that if such a statement by Mr. Leong is true then many employees with salaries higher than MOP14,000 would be concerned that they will get fired right after the first reading of the bill is passed. She also claimed that the government should not use the affordability of SMEs as excuses regarding the amount of compensation when there is no exact related data.

The discussion not only involved the above legislators. Song Pek Kei, José Coutinho, Antonio Ng Kuok Cheong, Fong Chi Keong, Lam Heong Sang, Melinda Chan Mei Yi, Tsui Wai Kwan,Ho Ion Sang, Leong Veng Chai, Zheng Anting and Mak Soi Kun also expressed their opinions on the compensation during the discussion.

In the end, legislators Chan Mei Yi and Kou Hoi In opposed the reading, while Fong Chi Keong abstained from voting.

The Legislative Assembly also passed the first reading of the bill suggesting amendments to the current Commercial Code to abolish bearer shares during the plenary session yesterday.

The bill suggests issues, transfers and holdings of bearer shares be prohibited following the implementation of the law while a ‘transitional period’ of six months would be given for current bearer shares holders to change their shares to inscribed ones.

Legislator Chui Sai Cheong expressed his concerns that the transitional period may be too short for current bearer shares holders.

Another legislator, Lionel Alberto Alves, meanwhile, said the government should be careful whether the implementation of the bill will conflict with other existing laws.

Secretary for Administration and Justice Sonia Chan Hoi Fan replied that the government will further study the issues raised by the two legislator after passing the first reading of the bill.

6 | Business Daily

January 13, 2015

Macau

Studio City packaged as mass market leisure destination The new resort of Melco Crown Entertainment will use non-gaming activities to attract the mass market, theoretically helping Macau diversify its economy. However, Lawrence Ho stressed that gaming funds are needed to finance the diversification João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he gaming industry is the territory’s primary source of revenue and that is not forecast to change in the near future. However, given the frequent political messages from the Central Government for the Special Administrative Region (SAR) to diversify its economy, speeches are increasingly non-gaming focused.

Yesterday, the presentation of the Melco Crown Entertainment project by co-Chairman Lawrence Ho was just such an example. The son of Stanley Ho did not mention the gaming aspect of the resort until he was asked about it.

“We built Studio City with a capacity for 500 gaming tables. But I have no idea how many we tables are going to get. That makes our faith in this market, and in the government, even more spectacular”, he said.

“Gaming tables will be authorised based on contribution in terms of nongaming activities and contribution to the promotion of Macau. Considering that 95 per cent of our facilities are non-gaming . . . our contribution to the promotion of Macau, which can be seen by the short movie directed

by Martin Scorsese . . . [makes us] confident that the government will allow us to run at least 400 gaming tables”, the Co-Chairman and Chief Executive Officer of Melco Crown Entertainment said.

“Studio City will represent Asia’s next generation of immersive, worldleading entertainment-driven gaming and leisure destination experiences, as we work to support Macau’s tourism development and diversification”, Ho stressed.

While Lawrence Ho’s speech was primarily focused on non-gaming he did not forget to mention the importance of gaming activities. “We have built these non-gaming facilities but in order to invest in non-gaming we need financing from gaming”, he explained.

While City of Dreams is more focused on the premium mass market segment, Studio City will allow the gaming operator to attract more mass market clients. “Around seven years ago, I said mass market would take over the gaming industry because of the emerging Chinese middle-class; that is the future”, he said. “People can cross Lotus Bridge and within 30 seconds they are at Studio City, which will allow us to tackle the mass and mass premium market”.

Melco Crown hiring up to 10,000 employees Last year, for the first time since the liberalisation of Macau’s gaming industry Gross Gaming Revenue shrunk (2.6 per cent year-on-year).

However, this will not result in layoffs, Mr. Ho claimed.

“For the record, City of Dreams was launched in 2008 during the financial crisis and at that time we did not lay off any of our employees because of it. In fact, we are planning from March on to hire from 8,000 to 10,000 employees for Studio City so how can we consider lay-offs?” he said.

The concerns of Mr. Ho are actually related to the need to find workers for his latest resort, mainly

during a time when Galaxy is also in the market for labour, as Phase II of Galaxy is expected to open mid-2015.

“Of course, we are worried about the rising costs of staff because everybody is hiring at this moment.

But we are not too worried because Melco Crown offers good conditions

to its workers and good career prospects”, he said, In spite of shrinking gross gaming revenue, Mr. Ho said, “Macau is still the best gaming market”. The CEO of Melco Crown also said that the decline of the VIP market is not benefiting anyone but is simply the market “rebalancing”.

Melco Crown considers HKSE delisting a non-event

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awrence Ho said yesterday that the decision to de-list Melco Crown from the Hong Kong Stock Exchange market was purely made for administrative reasons and that it was not connected to the Chinese crackdown on corruption.

“We have 99 per cent of our trading volume in the United States.

From the very beginning out primary listing has been on Nasdaq. And so the board of the company decided to focus on Nasdaq”, the Co-chairman explained about Melco Crown’s decision to de-list from the Hong Kong Stock Exchange.

After being asked whether the delisting was connected to the Chinese anti-graft crackdown Lawrence Ho Yau Lung denied it.

“I always thought the Hong Kong delisting plan would be a non-event.

I honestly do not know why it has

been this big deal. In addition to Macau, we are regulated in all the gaming authorities that Crown is a part of. That includes Las Vegas, Pennsylvania, New South Wales, Victoria… The delisting has nothing to do with the anti-corruption campaign in China and it is not connected at all to the slump in Macau gaming revenue”, he said.

“This change will not have an impact on our ongoing projects as they have already been fully financed”, Mr. Ho added.

In addition to opening Studio City this year, the company chaired

by Lawrence Ho and Australian billionaire James Packer will have the Grand Opening of City of Dreams Manila, in the Philippines, before the Chinese New Year. It is expected to start operating the 5th tower of City of Dreams in Macau by next year.

J.S.F.

Business Daily | 7

January 13, 2015

Macau

Studio City: Home to highest ferris wheel in Asia In order to tackle the mass market, Melco Crown is constructing the highest ferris wheel in Asia, named Golden Eye. In this non-gaming era, entertainment for families is the new winning card jsfilipe@macaubusinessdaily.com João Santos Filipe

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he cinematic-themed Studio City is Melco Crown’s new bet on non-gaming activities.

These days, entertainment for families is considered the trump card to target the mass market and compete with the dominating operator in this segment: Sands China. At the same time the company co-chaired by Lawrence Ho and James Packer expects the integrated resort to increase its capacity for premium mass market gamblers.

Aiming to ‘transport the visitor into a stunning cinematic world’, the building façade will incorporate Asia’s highest ferris wheel at a height of 130 metres. Melco Crown has tentatively named it ‘Golden Eye’, which, connecting two of the towers of the building, will become one of the most iconic of Macau’s landmarks.

The figure eight-shaped Ferris wheel was inspired by two asteroids shooting through Gotham City, hometown of the comic hero Batman.

The two towers of Studio City are named Celebrity Tower and Star Tower. The first targets the mass market while the second is more focused on the premium segment.

The resort will have approximately 1,600 rooms designed in Art Deco style.

The retail area will include a 300,000 square foot mall named Boulevard at Studio City. The area will be merchandised and managed

by Taubman Asia and is expected to have a ‘mix of the hottest fashion labels’, the company said.

Game on for mass market segment In terms of entertainment facilities, Melco Crown will have seven family-

oriented venues, including the ‘Golden Eye’. Studio City Entertainment is a 5,000-seat multi-purpose arena that will be managed by Global Spectrum that will host live concerts, theatrical and sports offerings. This is Melco Crown Entertainment’s ‘weapon’ to compete with Sands China and The Venetian in particular.

The Family Entertainment Centre will feature a 30,000 sq. foot space for kids which will have the most famous Warner Bros and DC comic characters. These include Tom and Jerry, Looney Tunes, Batman and Superman.

The collaboration with American studio Warner Bros. has also resulted in the ‘Batman Dark Flight’, a virtual reality experience whereby visitors follow Batman through the streets of Gotham.

The House of Magic will be an area where magic shows organised by the illusionist Franz Harary will be performed.

Lawrence Ho stressed that Studio City will help to promote the image of Macau worldwide and that Studio 8 is a key element in achieving this.

This area is a working TV studio that will host TV shows to be broadcast across the Asia region.

Recently, Pacha Nightclub has been Melco Crown’s bet in order to expand its offering in terms of nightlife. The franchise, headquartered in Spain and a fixture of Ibiza, is coming to town, having expanded to cities such as New York, Dubai, Buenos Aires and Sydney.

In addition to the entertainment centres, there will be 30 food and beverage centres, including the Cosmos Food Court, where customers can dine while watching holographic projections of space scenes.

Facts about Studio City Opening date: 3Q 2015 Project commencement: June 2011 Total cost: US$3.2 billion (MOP25.6 billion) Design and construction cost: US$2.3 billion (MOP18.4 billion) Project Ownership: 60 per cent – Melco Crown Entertainment; 40 per cent – New Cotai LLC – controlled by US companies Silver Point Capital LP and Oaktree Capital Management Gross construction area: 5,000,000 square feet / 463,000 square metres Number of employees to be hired: 8,000 to 10,000 Number of towers: 2 Number of phases: 2 Gaming tables capacity: 500 Hotel rooms: 1,600 Entertainment venues: 7 Ferris Wheel Height: 130 metres / 426.5 feet (Asia’s highest) Food and beverage venues: 30 Retail area: 300,000 square feet / 27,871 square metres

Di Caprio, de Niro ‘fight’ for role in Studio City Melco Crown has screened the trailer of ‘The Audition’, the short movie directed by Martin Scorsese promoting the integrated resort

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he unveiling ceremony of Studio City served as the premiere of the trailer of ‘The Audition’, the short movie promoting Melco Crown’s integrated resorts, starring Leonardo Di Caprio, Robert de Niro and Brad Pitt under the direction of veteran film director Martin Scorsese.

According to the sneak peak showed to the press, the action takes place inside Studio City casino with Leonardo Di Caprio and Robert de Niro auditioning for a role in one of Martin Scorsese’s movies.

The movie, helping promote Macau worldwide, will have its global premiere at the launch of Studio City, during the third quarter of the year, and there is a possibility that the

actors and director will be in Macau for it.

‘The Audition’ was produced by RatPac Entertainment’s Brett Ratner, who directed the blockbuster Red Dragon, X-Men and Rush Hour film franchise.

“This short film is a historic event because it is the first time ever to star such legendary actors as Robert de Niro, Leonardo Di Caprio and Brad Pitt in one film together”, Mr. Ratner said.

“The co-operation between Mr. Scorsese and the Melco Crown Entertainment brand is synergistic because of the fact that Mr. Scorsese directed the film Casino”, he added.

J.S.F

8 | Business Daily

January 13, 2015

Greater China

Less cash than expected with banks’ new rules Traders see the new regulations as targeting the growth of interbank deposits created by non-bank institutions

Exaggerated potential?

Lu Jianxin and Pete Sweeney

The People’s Bank of China (Shanghai branch pictured) has enlarged the deposit base for banks

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ew rules changing how Chinese banks measure their savings base have more to do with squeezing shadow banking than monetary easing, and will inject far less cash into the system than many believe, Chinese money traders say.

Zhu Haibin, economist at J.P. Morgan, wrote on Friday that as banks temporarily do not need to set aside reserves on the additional deposits, the rule change lowers the system LDR by about 500 basis points and “hence removes LDR binding constraint in bank lending.”

But others don’t expect the rule change to have much impact on lending.

The People’s Bank of China (PBOC) has enlarged the deposit base for banks by telling them to count in it their inter-bank deposits from non-bank financial institutions.

There’s a 75 percent loan-todeposit ratio (LDR) for banks. Thus,

making deposits larger, by definition, should let banks lend more.

Many see the PBOC move as a stimulus measure. Fitch Ratings said in a report last Tuesday that the change would enable banks to boost total credit by up to 6 trillion yuan (US$965 billion).

“Some analysts have exaggerated the potential effect of the central bank’s move because they only see half of the moon,” said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.

“The move is not a policy tool (to ease) but a reform to include deposits that should have been included in the LDR supervision long ago,” he said.

“That means the PBOC can follow up by including interbank loans into the LDR’s lending base to keep policy consistency.”

Lu was referring to widespread speculation that the rule adjustment was an attempt to simulate a major easing move, such as reducing the reserve ratio requirement (RRR) or cutting interest rates, by injecting cash into the system sideways, without flooding the market with more cash than it can digest.

To some analysts, the LDR ratio has not been a constraint on Chinese bank lending, so the broadened definition of deposits provides room for lending that banks won’t necessarily use.

The latest data issued by the China Banking Regulatory Commission shows that the daily average LDR of Chinese banks in the third quarter stood at only 66.8 percent, up slightly from 64.3 percent at the end of June.

“Most Chinese banks rarely lend up to the limit of the 75 percent of their deposits, let alone do so in the current environment of lacklustre cash calls thanks to slowing economic growth,” said a dealer at a major state-owned bank in Shanghai.

“The money some say is being freed up for lending has already been

Forex peak seen freeing PBOC’s hands China’s State Administration of Foreign Exchange in charge of day-to-day management of the stockpile has never released a breakdown of the reserves

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hina’s generation-long accumulation of foreignexchange reserves may be at an end, reshaping monetary policy and eroding a source of demand for U.S. Treasuries.

China’s stockpile, the world’s largest since 2006, will be US$3.5 trillion to US$4 trillion or lower at the end of 2015, according to 12 of 18 economists in a Bloomberg survey.

Eleven said the US$3.99 trillion posted on June 30 was the peak.

As it moves towards a more marketdriven economy, China has stopped regular foreign-currency purchases and is freeing up restrictions on the flow of money in and out of the country.

Fewer foreign-asset purchases lowers the need to print and then lock away the local currency, giving more room to spur an economy that grew last year at the slowest pace since 1990, according to economists’ projections.

China’s reserves as at December 31 were US$3.9 trillion, according to the median economist forecast ahead of data due this week.

In January 1979, when former paramount leader Deng Xiaoping visited the U.S., China had just

US$167 million foreign exchange reserves. By adopting an export-led growth model and a rigid currency policy that encouraged earning foreign cash, reserves expanded to US$140 billion in 1997, the year Deng died.

WTO entry The Asia Financial Crisis that began the same year reinforced the push to hoard greenbacks as a buffer to global turmoil. Since China’s entry into the World Trade Organization in 2001, trade surpluses and capital inflows have seen the PBOC intervene in currency markets to prevent sharp yuan gains.

For every dollar bought, the central bank has had to print local currency. To ensure such a liquidity surge didn’t spur too much inflation, it made banks set aside more and more money. The biggest banks today must set aside 20 percent of deposits in what is known as the reserverequirement ratio.

The People’s Bank of China may lower banks’ RRR by a cumulative 100 basis points in the first half, according

to economists’ forecasts in a Bloomberg survey from December 18-23.

Globally, the proportion of disclosed allocations invested in U.S. dollar assets increased to 62.3 percent in the third quarter of 2014, according to the International Monetary Fund’s report on the currency composition of official foreign exchange reserves, known as COFER. That was driven by dollar strength rather than increased allocations as

“reserve managers were swimming against the stronger USD tide,” Kevin Hebner, a foreign-exchange strategist at JPMorgan Chase & Co. in New York, wrote in a report this month.

Beyond 2015, “a glacial decline seems likely” as reserve managers diversify, he said.

PBOC Deputy Governor Yi Gang, who oversees China’s hoard, said in November 2013 that it no longer benefits the country to increase the

Business Daily | 9

January 13, 2015

Greater China Some analysts have exaggerated the potential effect of the central bank’s move because they only see half of the moon Lu Zhengwei chief economist Industrial Bank, Shanghai

Alibaba to buy stake in Indian online payment firm Jack Ma’s firms will hold between 30 percent and 40 pct of One97 after the investment

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in the markets for a while; it’s not like a fresh injection via an RRR cut.”

Fresh money would be provided by a central bank cut in the RRR, which J.P. Morgan’s Zhu and many other economists still think the PBOC will eventually make.

Traders see the new regulations as targeting the growth of interbank deposits created by non-bank institutions, in particular those from the securities industry, special purpose vehicles (SPVs), non-banking financial deposits as well as overseas deposits.

The crackdown makes sense, given signs new players - in particular brokerages - have exploited regulatory loopholes to expand their shadow banking business rapidly despite the regulatory crackdown.

Official measures are now seen underestimating the shadow sector by up to US$2.6 trillion.

Fitch said the new regulations would also increase the disclosure of shadow bank lending on the balance sheet and thus improve transparency.

“By recognising these exposures as loans, banks would also have to increase provisioning against nonperforming assets,” it said.

Reuters

stockpile and that appreciation of the yuan benefits more people in China than it hurts. Premier Li Keqiang said last month the reserves should support Chinese industries venturing overseas.

Past efforts in diversifying resulted in the bailout of state banks in the early 2000s and the creation of China Investment Corp. in 2007. Now, the cash pile is being used to help fund regional ambitions: Reserves will make up 65 percent of the Silk Road Fund, China Securities Journal reported this month, citing unidentified people.

Bloomberg News

The central bank has to find other sources to inject liquidity -- it has to cut the required reserves, it has to create more open-market tools Xi Junyang finance professor Shanghai University of Finance and Economics

hina’s Alibaba Group Holding sources told Reuters.

Ltd and its unit Alipay are Other investors of One97 include in advanced talks to buy a SAIF Partners, Intel Capital and SAP stake for about US$550 million in Ventures, according to its website.

India’s One97 Communications, Paytm has more than 20 million which owns an online payment registered users, it said. platform, sources directly involved The investment will be used to in the transaction said. expand Paytm services, with a view The investment by Alibaba, the to dominate the online payment world’s largest e-commerce company, business that is expected to grow is expected to be announced by rapidly in the next few years in India, the end of this month. It will be one source said.

Alibaba’s first significant investment The sources declined to be named in India’s rapidly growing online as talks for the deal are confidential. business segment.

Alibaba declined to comment. A Under the spokeswoman terms of the deal, for One97 said Alibaba and the company Alipay, China’s was in the top payment process of raising service provider money and controlled would make an

by Alibaba’s announcement executive once this chairman Jack was complete.

Ma, will hold Foreign between 30 investors percent and 40 including Japan’s pct of One97 after SoftBank Corp the investment, and Temasek India’s e-commerce the sources said.

Holdings Pvt Ltd industry growth One97 runs have invested Paytm, an billions of in five years e-commerce dollars in Indian Nomura forecast platform which e-commerce consumers can firms. access through In October, mobile apps.

SoftBank said One97 would it would invest issue fresh shares to Alibaba and about US$10 billion in the booming Alipay, which would result in the Indian sector and started with the holdings of existing shareholders, purchase of a US$627 million stake including founder Vijay Shekhar in online marketplace Snapdeal.

Reuters Sharma, being diluted, one of the

US$43 bln

Taiwan export value stable The value of Taiwan’s exports should remain stable or increase this year from last, the island’s finance minister said yesterday. Technology products make up the lion’s share of Taiwan’s exports.

The health of the island’s output machine is a leading indicator of demand for tech products worldwide. The release of the iPhone 6 from Apple was a major driver of Taiwan’s exports in 2014, as many of the gadget’s components are made

by Taiwanese companies.

Beijing pilots street lamp chargers Beijing has launched a pilot project to transform street lamps to serve as charging poles for electric cars. Eighty-eight highpressure sodium lamps on a road in Beijing’s Changping District have been converted into energy-saving LED lamps.

Eight charging poles have been installed and put into trial operation using the energy saved from the new LED lamps, said the Beijing Municipal Science and Technology Commission. The charging poles work day and night, alleviating charging demand for electric taxis and private cars in the area, said the commission.

Alibaba in talks with Incheon China’s Alibaba Group Holding Ltd is in talks with the South Korean city of Incheon for a 1 trillion won (about US$923 million) joint investment on a new business complex, the Dong-A Ilbo daily reported yesterday. The paper, without citing direct sources, said the complex would include a major shopping mall as well as a hotel and a logistics centre. Alibaba and Incheon would contribute equal funding for the complex, according to the report. Alibaba could not be immediately reached for comment, while an Incheon city spokeswoman said she was checking on the veracity of the report.

110 arrested for selling contaminated pork China has arrested more than 110 people, suspected of selling pork from pigs that died from disease, and confiscated more than 1,000 tonnes of contaminated pork in its latest crackdown on food safety violations.

The Ministry of Public Security said the people were part of a network made up of 11 groups who, since 2008, had been buying pigs that had died of illnesses from livestock farms at low prices. The meat was sold off to markets in 11 provinces, including Henan and Guangxi, or was processed into bacon or cooking oil for sale.

Cambodia dam begins operation A Chinese-constructed 338-megawatt Russei Chrum Krom River hydroelectric dam, Cambodia’ s largest hydropower station so far, commenced operation yesterday after it had been constructed for nearly five years. Cambodian Prime Minister Hun Sen and Chinese Ambassador to Cambodia Bu Jianguo jointly inaugurated the dam in Mondol Sima district of south-western Koh Kong province. The ceremony was also attended by some 1,500 government officials, local authorities and residents.

The project was developed by the giant power company China Huadian Corp for a cost of US$495 million under a contract of a 35-year build-operate-transfer with the Cambodian government.

10 | Business Daily

January 13, 2015

Greater China

U.S.-traded stocks set to gain in mainland catch-up Chinese Internet companies with U.S. listings retreated 7 percent since a September high Belinda Cao

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hinese technology companies listed abroad have been left out of the eight-month rally back in the mainland. That’s about to change, according to U.S. Global Investors Inc. and Krane Fund Advisors LLC. They predict Chinese stocks traded in the U.S. including Tencent Holdings Ltd. and Baidu Inc. will gain after the Shanghai Composite Index surged 53 percent last year.

The Bloomberg China-US Equity Index, which has about half of its members focused on web business, added 3 percent in 2014 to trade near the lowest valuation premium over mainland stocks since 2010. The A-share advance has been led by large financial and industrial companies, which benefit the most from steps taken to support waning growth in Asia’s largest economy.

“We are still in the early stages of a bull market and as it matures, you’ll see more broad-based rallies,” Xian Liang, a portfolio manager at U.S. Global Investors, said in a phone interview from San Antonio January 7. “Chinese government’s easing moves probably have just started, and we don’t think it’s one-off.” His firm manages US$1.2 billion in assets including a China Region Fund.

Chinese Internet companies with U.S. listings will catch up with their counterparts on the mainland after retreating 7 percent since a September high as some institutional investors diverted funds to local stocks for

higher returns. The Shanghai equities benchmark is set to rise 30 percent this year as policy makers reduce funding costs and push through reforms, China’s top-ranked research team said last week.

Premium decline Companies on the Bloomberg index of the most-actively traded Chinese stocks in New York are trading at about 15 times 12-month earnings, a 24 percent premium over the valuation of the Shanghai Composite, well below a five-year average premium of 52 percent, the data show. Mainland China’s industrial and financial companies jumped as much as 71 percent in the past four months amid government steps to relax restrictions on home purchases and lower borrowing costs.

Still, Shanghai’s world-beating performance over the past year, which has pushed its valuation to the highest level since May 2011, may be difficult to sustain, according to analysts from Bank of America Corp. to HSBC Holdings Plc. HSBC projected the index to end the year at 3,100, down 6 percent from last week’s closing level, while Bank of America’s estimate is an even lower 3,000.

Government reforms Shanghai equities are likely to keep gaining as the government strives to defuse risks in the financial sector,

Jack Ma (centre) surrounded on Alibaba’s IPO day in Wall Street

Huang Haizhou, managing director at CICC, said January 7. The nation is increasing curbs on local borrowings while facilitating investor access to mainland shares.

To sustain growth in Asia’s largest economy, China has carried out reforms to reduce its reliance on export while boosting consumption.

Policy makers have also taken steps to support small businesses while introducing private capital into the state-owned sector.

As investors learn about this reform agenda, one thing you can play is the catch-up of the offshore market to the onshore market Brendan Ahern managing director Krane Fund New York

“As investors learn about this reform agenda, one thing you can play is the catch-up of the offshore market to the onshore market,” Brendan Ahern, managing director at Krane Fund in New York, said by phone on January 9. “So the offshore growth companies are due for a big pickup here.”

Before its retreat started in September, the China-US gauge had surged to a three-year high as anticipation for the initial public offering of Alibaba Group Holding Ltd. helped attract international investors to the sector. The nation’s biggest e-commerce operator raised a record US$25 billion that month.

‘Rich valuation’ Acquisitions by the biggest Internet companies including Alibaba helped stoke the sector’s valuation, which is still “rich” even after the pullbacks in recent months, according to Eric Brock, a Boston-based portfolio manager at Clough Capital Partners.

“I don’t think we have the same rising tide or same tailwinds we had in 2014,” he wrote in e-mailed comments December 8.

Tencent, China’s second-biggest Internet company by market value, surged 15 percent last week in New York, following the smallest annual gain in three years. Baidu, owner of the biggest web search engine in China, has dropped 7.4 percent since the end of November.

JPMorgan Chase & Co. upgraded Tencent to overweight from neutral last week and Mizuho Securities Asia Ltd. called the stock its top Internet pick. Pacific Crest Securities said it is “most positive” on the biggest Internet companies.

The recent slump in the “new economy” stocks, including technology and health-care companies, is probably temporary, said Liang at U.S. Global Investors.

“If you look at the quality names, they are still secular growers,” he said. “Up to the first half of last year, they had been outperforming the old economy large-cap stocks by so much, so they are taking a breather.”

Bloomberg News

Business Daily | 11

January 13, 2015

Asia RBS weighing Asian corporate banking sale The bank has about 2,000 employees in the Asia-Pacific region that could be affected Richard Partington and Brian Fowler

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oyal Bank of Scotland Group is looking to put most of its Asian corporate banking business up for sale, according to a person with knowledge of the discussions.

Chief Executive Officer Ross McEwan, 57, held a series of meetings in Singapore yesterday considering ways to scale back the lender’s Asian business, said the person, who asked not to be identified because the meetings are private. A spokesman for RBS in London declined to comment. The lender said last month that it’s shutting its Japanese trading business.

Since taking over in 2013, McEwan has been selling units and cutting jobs outside of the U.K. as he seeks to focus on the bank’s domestic market to help reverse six straight annual losses. RBS took bids for its Coutts International private bank last month and raised US$3 billion in September by selling shares in its U.S. subsidiary, Citizens Financial Group Inc. The bank has about 2,000 employees in the AsiaPacific region that could be affected, said the person with knowledge of the matter.

RBS would probably keep

A RBS branch office

some operations in Singapore offering clients dollar, euro and yen fixed-income products, the person added.

Any buyer wanting to purchase RBS assets across the region would need to hold an Indian banking license, the person said. Another option being discussed is selling assets by country. No comment was immediately

RBS to increase its U.K. assets to 80 percent

available today from an RBS spokesman in Hong Kong.

10-country network RBS’s corporate and institutional banking division is led in the Asia-Pacific region by Pierre Ferland, who is responsible for a 10-country network offering clients foreign exchange,

interest rates, fixed income, debt capital markets and transaction services, according to the lender’s website.

The 80 percent taxpayerowned lender is selling assets outside of the U.K. to help boost capital as McEwan plans to return RBS to full private ownership. The bank last year dismissed most of its team overseeing debt capital markets in central and eastern Europe, Middle East and Africa amid a review of operations outside the U.K. RBS had 27 billion pounds (US$40.9 billion) of credit risk assets in the Asia-Pacific region at the end of June out of 551.6 billion pounds of assets globally, according to the most recent data made available by the bank in quarterly earnings reports.

McEwan said in February he wants RBS to increase its U.K. assets from 60 percent to 80 percent of its global business as part of his plan to shrink in scale while boosting profitability. The bank had 302.8 billion pounds of U.K. credit risk assets, or 55 percent of the total, at the end of June. North America was the next biggest region with 101.3 billion pounds.

Bloomberg News

Sri Lanka to have broad foreign policy for development President Sirisena reiterated his key campaign pledge to clamp down on corruption

S

ri Lanka’s newly-elected president Maithripala Sirisena addressing the nation said he would have a broad foreign policy to spur development.

Delivering his speech at the historically significant hill town of Kandy in central Sri Lanka, Sirisena who took oaths on Friday was keen to extend an olive branch to the international community.

Sirisena said he was ready to work with “all organizations” to improve the image of Sri Lanka. “Our government will work tirelessly to wipe out bribery and corruption in this country. I will not let the excesses of the past return.

Our country needs a humane man and not a king. I will dedicate my life to serving the people.”

Sirisena, who was a cabinet member under former President Mahinda Rajapaksa, crossed over to become the opposition’s presidential candidate in November. Since his victory he has appealed to other members of his predecessor’s party to do the same and assist in a 100day program aimed at trimming the

powers of the executive presidency.

“I appeal to all parties and members of parliament to think of what is best for this country and join with us to drive the country towards its expected aspirations. I hope everyone will heed my plea and join us.”

Another key campaign pledge that was reiterated was devolving power to Sri Lanka’s Tamil minority in the northern part of the country.

“For the sake of a strengthened democracy I pledge to reduce executive powers that put an unhealthy amount of corrosive power in the hands of one individual... I also promise to build peace and understanding between all communities of this country so that we can move forward as a united nation.”

Tamil and Muslim minority support that counted for about 20 percent of Sri Lanka’s 20.4 million population was considered to be a crucial factor in Sirisena’s win. He beat Rajapaksa, who had stayed a decade in power, by 450,000 odd votes in the hotlycontested election last Thursday.

Xinhua

New president Sirisena has a 100-day program aimed at trimming the powers of the executive presidency

12 | Business Daily

January 13, 2015

Asia Japan expects real wages to turn positive Japanese Economics Minister Akira Amari said yesterday he expects real wages to turn positive in the fiscal year starting April as the economy recovers from nearly two decades of mild deflation. Wage growth is crucial for the success of Prime Minister Shinzo Abe’s reflationary policies of monetary and fiscal stimulus to promote private-sector expansion. Inflation-adjusted “real” wages fell 4.3 percent year-on-year in November, down for the 17th straight month and marking the steepest decline in five years, as wages failed to keep pace with consumer price gains, weighing on private consumption.

Singapore’s business confidence index drops sharply Among the six indicators that measure the index, only three remained in the expansionary region

Myanmar president meets political forces Myanmar President U Thein Sein met some leaders of the country’s political forces here Monday morning for discussions on major domestic issues concerning peace and development. The meeting, attended by representatives from the government, parliament, the military, the Union Election Commission and political parties, is expected to focus on democratic reform, peace process, commencement of national reconsolidation-based dialogue, the 2015 general election and peaceful transition. The meeting is a follow-up of a five-party talks that took place on October 31, involving the government, parliament, political parties, the military and the Union Election Commission.

Australian job ads rise Newspapers advertisements and on the Internet rose for a seventh straight month in December to reach their highest in at least two years, a hopeful sign of a pick up in demand for labour. A survey by Australia and New Zealand Banking Group showed total job advertisements rose 1.8 percent to 140,521 per week on average in December.

Annual growth in ads accelerated to 11.4 percent, the fastest in two-anda-half years. Ads on the internet rose 1.8 percent in December, while those in newspapers showed a rare increase of 3 percent.

Modi to involve youth in development Indian Prime Minister Narendra Modi pledged on Monday to involve and integrate the youth in the country’s progress and development as he paid tributes to Hindu spiritual leader Swami Vivekananda on his 151st birth anniversary. “On his birth anniversary, I bow to Swami Vivekananda. He is a personal inspiration, whose thoughts and ideals have influenced me deeply.

Swami Vivekananda is revered as one of the most prolific thinkers and a guiding light who took India’s message to the entire world,” Modi tweeted.

T

he Business Optimism Index (BOI) in Singapore is projected to drop to a low level in the first quarter of 2015 amid global political headwinds and softer regional demand in external-oriented sectors, the Singapore Commercial Credit Bureau (SCCB) said yesterday.

BOI declined dramatically from +10.79 percentage points in the fourth quarter of 2014 to +1.11 in the latest first quarter this year, the second lowest since the first quarter of 2013, when BOI fell to -0.82 percentage point, the report showed.

On a year-on-year basis, BOI fell sharply from +13.13 percentage points in the first quarter of last year to +1.11 in 2015.

Among the six indicators which measure BOI, only three remained in the expansionary region, while in the previous quarter, five of them were in that region.

Volume of Sales, Net Profit and New Orders fell in the contractionary region in the first quarter, with volume of sales fell to -5.71 percentage points from +22.14, and net profit plummeted to -5.00 percentage points from +17.14, respectively.

New orders, which was the only

In line with the slow pace of global economic recovery, local business outlook continues to remain modest following the previous quarter’s decline in Business Optimism Index Audrey Chia CEO SCCB

one in the contractionary region in the previous quarter, improved slightly from -13.04 percentage points to -9.52 in the first quarter, due to a better performance of biomedical manufacturers.

In the meantime, Hiring sentiments, Selling Price and Inventory remained in the expansionary region.

“In line with the slow pace of global economic recovery, local business outlook continues to remain modest following the previous quarter’s decline in BOI. It is clear that global adverse developments have roiled business confidence as BOI slid further, hovering just above contractionary levels this quarter,” said SCCB CEO Audrey Chia.

Looking ahead, Chia said local firms were expected to upgrade their employees or machineries and capital equipment to keep their business productive.

The SCCB conducts the Business Expectations Surveys every quarter, with 200 businessmen in major industry sectors telling their expectation toward profits, sales, employment, new orders, inventories and selling prices.

Xinhua

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, Joanne Kuai 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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Business Daily | 13

January 13, 2015

Asia Foreign investors populate Indian e-property sites The need for long-term capital for start-ups makes India more attractive for foreign investors compared to China, where local money dominates

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ndian businessman Navin Bhartia’s Internet habits make him a dream customer for billionaire foreign media moguls like Rupert Murdoch.

The 45-year-old from Kolkata likes to buy homes online, sometimes without visiting them. In the last four years, he has bought five properties for 40 million rupees (US$641,900) on Proptiger.com, partly owned by Murdoch’s News Corp.

Foreign investors like Murdoch have already put more than US$200 million into portals that help people like Bhartia buy homes. Spurring the interest is Prime Minister Narendra Modi’s vow to provide a house to every Indian family by 2022 as the country’s growing army of Internet users embrace e-commerce.

“Scale and growth of businesses like (online retailer) Flipkart are a proxy that consumers in India are comfortable doing transactions on the Internet,” said Mukul Singhal, principal at India-China fund SAIF Partners, which has invested US$10 million in Proptiger. News Corp has a US$30 million stake.

India’s Internet legion, already bigger than Indonesia’s 250 million population and growing at an annual rate of more than 20 percent, has also lured property portal investment from the likes of Japanese telecoms-

Real estate in China is not so attractive to foreign investors

to-media firm SoftBank Corp. Last week Google Inc’s Google Capital unit invested an undisclosed sum in a site called Commonfloor.com.

The need for long-term capital for start-ups like Proptiger and Housing. com also makes India more attractive for foreign investors compared with China, where local money dominates, according to one investor, speaking on condition of anonymity.

Indian home buyers by tradition work with local brokers. But in a vast country with a property market already estimated by KPMG to be worth US$121 billion in 2013, the

Abe takes blow on agriculture reform Abe faces resistance from the farm lobby, which opposes free-trade concessions it views as damaging to the country’s aging farming population

P

rime Minister Shinzo Abe’s candidate lost a race for the governorship of rural Saga prefecture to a rival backed by the agriculture sector in a blow to his plans to shake up the industry.

Yoshinori Yamaguchi, backed by the Japanese Agricultural Cooperatives, beat Keisuke Hiwatashi, the candidate for Abe’s Liberal Democratic Party, by 182,795 to 143,720 in Sunday’s voting in Saga, a prefecture on the south-western main island of Kyushu with a population of about 800,000 people.

Abe said his landslide victory in lower house elections last month was a mandate to accelerate his economic policy, which includes introducing

Japanese producers of meat and milk are struggling as the Bank of Japan’s record stimulus pushed the yen to a seven-year low against the dollar

more competition in agriculture and pushing ahead with Japan’s entry into the Trans-Pacific Partnership, a 12-nation trade deal.

Disagreement over farm and auto tariffs between the U.S. and Japan, the two largest economies among the dozen TPP nations, is one of the biggest obstacles to a deal. U.S. meat and dairy producers are calling for more access to Japan’s markets, putting more pressure on Japanese producers.

Japanese producers of meat and milk are struggling as the Bank of Japan’s record stimulus pushed the yen to a seven-year low against the dollar last month, boosting the cost of imported livestock feed. Raw-milk output is poised to drop to the lowest in three decades as the numbers of both farmers and cows dwindle, increasing the need for imports, Yasuhiro Saito, the president of Fonterra Japan Ltd., a unit of New Zealand’s Fonterra Cooperative Group Ltd., the world’s top dairy exporter, said in December.

Abe’s ruling coalition won 325 seats in the legislative lower house in the December 14 vote, giving it a two-thirds majority. He won’t need to call another election until 2018, which may make him the country’s longestserving premier in four decades.

Bloomberg News

Internet offers people like businessman Bhartia the ability to compare house prices hundreds of kilometres away without leaving home.

Modi moves Prime Minister Modi has already sought to make an impact on India’s still largely unregulated property market by making the listing of real estate investment trusts easier. He has paved the way for more foreign investment in construction, and eased land acquisition rules.

“Real estate in India is very

messy. There is a lot of information arbitrage and asymmetry...no credible pricing data and that is why there is a strong case for technologybased solutions,” said SAIF Partners principal Singhal.

Driven by expectations that years of property market slowdown may come to an end soon, investment in property portals jumped five-fold to US$193 million last year, according to data from Venture Intelligence.

The research firm also expects India’s housing market to grow to US$158 billion by 2020.

Desperate to boost housing sales that have flagged as India’s economy stuttered in recent years, property developers are tying up with portals to push transactions online with special promotions.

Developer Tata Housing, part of the US$100 billion Tata group, in November sold homes worth more than 500 million rupees through a partnership with Housing. Buyers could see 3D models of the units, make a token payment online and complete the remaining purchase offline.

Such websites, which charge subscription fees or a percentage of the sales price, still account for a fraction of home sales in India. For investors like News Corp, though, the Internet logic is inescapable.

Reuters

14 | Business Daily

January 13, 2015

International QE could become part of ECB’s normal

How much pain still looms for US energy firms?

Analysts expect this year’s budgets to fall by a quarter, but many firms have yet to finalize plans

Bond-buying could become a normal part of the euro zone’s monetary policy framework, a senior official from the Bank of Finland said yesterday. “As inflation expectations diverge more strongly from the ECB’s monetary policy target, one cannot rule out that the euro system too would resort to means that resemble the quantitative easing by other central banks,” Tuomas Valimaki, head of the bank’s monetary policy and research department, said in a blog post.

London’s financial services wages up Workers who found new jobs in London’s financial services sector during 2014 secured an average 18 percent salary rise, reflecting increased demand for staff, data from recruiter Morgan McKinley showed yesterday. Pay data is politically and economically sensitive as Britain heads towards a general election in May and the Bank of England considers when to start raising interest rates, unchanged at 0.5 percent since March 2009. The salary jump in the City far outstrips pay growth for British workers in general, which has only recently shown signs of picking up.

U.S. considering loosening trucking curbs The U.S. Department of Transportation will soon be ready to consider lifting restrictions on Mexican trucking firms seeking to operate throughout the United States, Mexico’s Communications and Transport Ministry said yesterday.

Mexico and the United States have been locked in a long-running dispute over granting Mexican truckers unlimited access to the United States, and a bilateral accord in 2011 set in motion a pilot program to phase out existing restrictions.

Mexican transport associations say U.S. curbs mean most truckers cannot deliver goods throughout the United States.

W

ith nearly a quarter of U.S. energy shares’ value wiped out by oil’s six-month slide, investors are wondering if the sector has taken enough punishment and whether it is time to pile back in ahead of earnings reports later this month.

The broad energy S&P 1500 index gained more than 4 percent over the past month, suggesting many believe markets have already factored in the pain caused by oil prices tumbling by more than half since June below US$50 a barrel.

Yet since the start of this year, most energy stocks have given up some of those gains, revealing anxiety that some nasty surprises might still be lurking somewhere and that last month’s bounce may not last.

A closer look at valuations and interviews with a dozen of smaller firms ahead of fourth quarter results from their bigger, listed rivals, shows there are reasons to be nervous.

What small firms say is that the oil rout hit home faster and harder than most had expected.

Volkswagen says December sales up Germany’s Volkswagen said global December sales rose 2.7 percent to 881,000 vehicles as sales across VW’s multi-brand group rose on faster growth in China and Europe that outweighed falling sales in the United States and Latin America. VW, whose brands include luxury division Audi and sports car maker Porsche, increased full-year deliveries by 4.2 percent to 10.14 million autos, meeting a 2007 target four years earlier than originally planned.

The total also includes passenger cars, sports-utility vehicles, light commercial vans and heavy trucks.

Russian central bank interventions revealed The Russian central bank’s net currency interventions in 2014 amounted to US$76.13 billion and 5.41 billion euros, Interfax news agency reported, citing central bank data. Interventions in the month of December amounted to US$11.9 billion. The bank intervened heavily last year as the rouble slumped because of international sanctions imposed to Russia.

If you have no exposure this is a good time to step in Scott Wren, senior equity strategist, Wells Fargo Advisors

“Things have changed a lot quicker than I thought they would,” says Greg Doramus, sales manager at Orion Drilling in Corpus Christi, Texas, a small firm which leases 16 drilling rigs. He talks about falling rates, last-minute order cancellations and customers breaking leases.

The conventional wisdom is that hedging and long-term contracts would ensure that most energy firms

would only start feeling the full force of the downdraft this year.

“We have been cut from the work,” says Adam Marriott, president of Fandango Logistics, a small oil trucking firm in Salt Lake City. He says shipments have fallen by half since June when oil was fetching more than US$100 a barrel and his company had all the business it could handle.

Bigger firms are also feeling the sting.

Last week, a leading U.S. drilling contractor Helmerich & Payne reported that leasing rates for its high-tech rigs plunged 10 percent from the previous quarter, sending its shares 5 percent lower.

Downgrades and rallies The apparent disconnect between energy stocks’ recent recovery and the furious cuts in Wall Street’s earning estimates could also be a sign that the sector’s 24 percent plunge since June may not fully reflect how ugly it can still get.

Thomson Reuters data shows Wall Street brokerages slashed their fourth quarter estimates for energy firms by over 7 percent in the past 30 days.

They now predict earnings of S&P 500 energy firms to fall 20.7 percent in the fourth quarter and by 36.1 percent this quarter.

The price-to-earnings ratio based on estimates for the next 12 months for S&P 500 energy stocks is around 17, more than 16.3 for the whole S&P 500 index and above the sector’s 12.5 figure based on reported results, according to Thomson Reuters data.

This suggests that either investors bet on a rebound in oil analysts do not see or they risk getting disappointed when the results come out.

Yet several stocks have rallied in the past month. One striking example is Penn Virginia Corp, an exploration and production company, which soared by nearly 30 percent even as analysts cut their estimates by more than a third.

Short interest of nearly 30 percent suggests the rally might be in part fuelled by a “short squeeze” when sellers are forced to buy back the stock

when it starts rising to cut their losses.

Some analysts say though, many stocks have been sold off enough to offer good value.

Analysts who advocate buying energy stocks recommend big, highdividend paying companies, such as Exxon Mobil or Chevron. Both stocks have outperformed the sector during the six-month rout in which companies, such as Chesapeake Energy or Halliburton lost a third or more of their value.

Smaller firms are considered more risky, among them oilfield service companies exposed to spending cuts by exploration and production companies.

Risks and safe bets Investors got a taste how bets on “the worst might be over” scenario could go bad last month when Civeo Corp, a provider of temporary housing for the oil industry, issued a profit warning.

The stock has struggled since oil headed south, but investors were still shocked how hard the company got hit, sending its shares crashing by more than 50 percent in one day.

For sure, not all energy firms are equal.

Civeo represents scores of companies whose fortunes are tied to the shale oil boom that made the United States the world’s top producer, but also helped create a global supply glut that sent prices tumbling.

In such a market, the safest bets are pipeline companies like Kinder Morgan, whose shares have risen more than 16 percent in the last six months. Their business depends on traffic volumes, much like toll roads, and the U.S. government still forecasts production to rise this year.

Independent refiners and integrated oil majors such as Exxon Mobil that combine exploration with production, refining and distribution, are also expected to brave the storm fairly well.

Industry experts say larger, efficient and financially sound producers and services firms may also emerge as winners: taking over weaker rivals or gaining market share.

Reuters

Business Daily | 15

January 13, 2015

Opinion Business

wires

The adaptation imperative

Leading reports from Asia’s best business newspapers Achim Steiner

Executive Director of the United Nations Environment Programme (UNEP) and Under-Secretary-General of the United Nations

THE KOREA HERALD South Korea’s central bank is forecast to keep the base rate on hold in January as the government is drumming up support for structural reform over short-term policies to fuel growth in Asia’s fourthlargest economy, analysts said yesterday. A majority of 20 of 22 analysts surveyed

by Yonhap Infomax, the financial news arm of Yonhap News Agency, projected the Bank of Korea to keep the base rate unchanged at an upcoming policy meeting on Thursday. If the projection is on track, it will extend the BOK’s wait-and-see stance to a third straight month.

TAIPEI TIMES The nation’s two biggest textile manufacturers, Eclat Textile Co and Makalot Industrial Co, are expected to post robust performances this year due to growing orders from clients, analysts said last week. Taiwanese textile makers have focused on high-end functional fabrics and are good at completing small orders with a high level of variety, they said.

As global demand for high-end functional apparel is higher than for mid-priced products, analysts predicted that local companies will benefit from an industry trend toward more expensive premium products.

THE STRAITS TIMES Mobile telecommunication services provider Edition is looking to engage in financial services business in China. The catalyst-listed company said in an announcement yesterday that it has entered into a non-binding memorandum of understanding with an independent and unrelated third party to jointly set up a company in Singapore for the purpose. Edition said it is expected to hold 51 per cent of the joint venture, with the remaining 49 per cent held by the partner. No further details about the partner were given.

THE JAKARTA GLOBE Indonesian indigenous communities launched a project to encourage foreign tourism in ancestral forests to slow the advance of logging operations and palm oil plantations. The GreenIndonesia non-governmental organization, working with six indigenous groups, said the plan would ease poverty, reduce greenhouse gas emissions and diversify from traditional forest-based incomes such as weaving. The project was inspired by similar initiatives in the Amazon region of South America, she said at a tourism exhibition in Oslo.

Raymundus Remang, head of the Sui Utuk community in West Kalimantan, said the villagers would welcome more visitors.

I

n the run-up to the recent United Nations meeting on climate change in Lima, Peru, much of the world’s attention focused on how strongly countries would commit to a framework for cutting greenhouse-gas emissions.

Governments’ commitment to such a framework, after all, is vital to ensure that the agreement to be signed in Paris in December will keep global temperatures from rising more than 2º Celsius above pre-industrial levels.

The good news is that the Lima “Call for Climate Action” made sufficient progress to enable preparations for a comprehensive climate deal in Paris. But it also left many questions unresolved – a shortcoming that was reflected in discussions on adaptation.

Though the new emphasis on this important topic is welcome, how to deliver the funding, technology, and knowledge that countries, communities, and ecosystems need to adjust to climate change requires further articulation.

Even if we limit the rise in global temperatures, climate change is here to stay. Communities are already facing more extreme and frequent droughts, floods, and other weather events. These consequences will only intensify.

Yet the UN Environment Programme’s first adaptation report, released in Lima, showed that the world remains wholly unprepared to cover the costs of adaptation. And those costs will be far higher than was previously thought. According to the report, even if the temperature target is met, the cost of adaptation will reach 2-3 times the previously anticipated US$70-100 billion per year by 2050 (an increase of as much as fivefold is possible, though less likely).

If global temperatures exceed the two-degree ceiling significantly, adaptation costs could reach double the worst-case figures, placing a crippling burden on the world economy. If world leaders needed another compelling reason to reach a deal in Paris that keeps global temperatures below the target, this is it.

The burden of adjustment will be borne by everyone. But it will be heaviest for developing countries, least-developed countries, and Small Island Developing States.

Though international funding will be available, costs will fall largely to countries, with governments forced to divert scarce resources from development projects to adaptation initiatives.

To be sure, the world is making some progress toward addressing adaptation needs. Adaptation funding from public sources reached US$23-26 billion in 2012-2013. According to a recent assessment by the UN Framework Convention on Climate Change, global financial flows for mitigation and adaptation measures amounted to US$340650 billion in 2011-2012.

Furthermore, pledges at the Lima conference by Australia, Austria, Belgium, Colombia, Norway, and Peru bring the Green Climate Fund to nearly US$10.2 billion. And the impact of climate change is increasingly, though still inadequately, being factored into national and local budgets.

But much more financing will be needed to prevent a funding gap after 2020. The Green Climate Fund, for example, is supposed to reach US$100 billion per year – ten times higher than it is now – in the next five years.

Commitments on adaptation in the Paris agreement would go

a long way toward closing this gap. The international auctioning of emissions allowances and allowances in domestic emissionstrading schemes, a carbon tax, revenues from international transport, a surcharge on electricity transmission, and financial transaction taxes could generate as much as US$220 billion per year in additional revenues.

Of course, funding is not the only component of a successful adaptation strategy. As the adaptation report emphasizes, closing gaps in technology and knowledge is also crucial.

Many technologies that could help countries adapt to the consequences of climate change already exist. For example, by planting scientifically engineered crops that grow faster, farmers can harvest them before, say,

And the impact of climate change is increasingly, though still inadequately, being factored into national and local budgets

cyclone season, which will become increasingly violent as global temperatures rise.

But there remain significant barriers to adoption – barriers that governments should dismantle through a combination of incentives, regulatory reform, and institutional upgrading.

The benefits of such action would extend beyond increased climate resilience. Accelerating harvests would mean higher, more reliable production with less labour – a formula for stronger, more stable livelihoods. Policymakers should thus pursue integrated solutions that combine climatechange adaptation and mitigation with broader societal concerns, including development.

Knowledge would offer similarly monumental benefits. Science magazine recently published research suggesting that universal education, by giving populations the appropriate intellectual tools and skills they need, is the single most efficient mechanism for adapting to climate change and reducing fatalities associated with extreme weather events.

International support on adaptation – incorporating financing, technology, and knowledge – could go a long way toward advancing countries’ sustainabledevelopment aspirations. World leaders should recognize this – and establish adaptation as an integral part of the global climate-change agreement to be reached in Paris.

Some argue that the global economy cannot afford adaptation.

But, as the latest evidence shows, delaying action will mean higher costs later. If we truly want to build a sustainable, prosperous, and equitable future, we cannot afford to wait.

Project Syndicate

16 | Business Daily

January 13, 2015

Closing China’s 2014 auto sales beat 23 million units

Japan-China talks on maritime hotline resumed

China’s auto sales exceeded 23 million vehicles last year, an industry group said yesterday, but annual growth halved from 2013 as a weaker economy took its toll on the world’s biggest car market. Sales rose 6.9 percent, or 1.51 million vehicles, to 23.49 million, the China Association of Automobile Manufacturers (CAAM) said. That is short of an 8.3 percent growth target given by CAAM in July, itself a cut from an earlier forecast of 10 percent, Bloomberg News reported. In 2013, sales surged 13.9 percent to 21.98 million vehicles, helped by a recovery in Japanese brands.

Japan and China resumed talks yesterday about setting up a hotline to prevent sea clashes, following frequent sparring between ships from the two sides around disputed islands. The working-level talks, the first since 2012, were held in Tokyo, Kyodo News and Tokyo Broadcasting System reported. The Japanese government has not disclosed a detailed schedule for the talks.

Japan’s Prime Minister Shinzo Abe (pictured left) and Chinese President Xi Jinping (pictured right) agreed last November to ease tensions over the sovereignty of the uninhabited islands claimed by both nations.

Japan plans record budget to help economy While the sales tax has increased, the government has plans to reduce corporate taxes by 3.29 percentage points over two years Masaaki Iwamoto and Kyoko Shimodoi

J

apan plans a record budget for next fiscal year to support an economy that fell into recession after Prime Minister Shinzo Abe’s government increased the sales tax.

Government ministers and the ruling coalition parties approved the 96.34 trillion yen (US$814 billion) budget proposal for the 12 months starting April 1 at a meeting in Tokyo yesterday, Finance Minister Taro Aso told reporters.

Japan, fighting to rein in the world’s heaviest debt burden, will see tax revenue rise to the highest level in 24 years while new bond issuance declines to the lowest since 2008. Abe’s already boosted public works spending and support for small businesses through a supplementary budget for the current year.

“The budget will continue to grow each year as it gets increasingly difficult to curb social welfare spending due to Japan’s aging population,” said Kyohei Morita, chief Japan economist at Barclays Plc. “Given the risk that the economy will be hurt by a sudden decline in public works spending in the latter

Coupled with tax revisions for the next year, the budget will revive the economy while consolidating government finances Japan’s Finance Minister Taro Aso

half of 2015, the government might have to draft another extra budget.”

Tax revenue for next fiscal year is projected to rise to 54.53 trillion yen and cover 57 percent of the budget, up from 52 percent. New bond issuance will decline to 36.86 trillion yen, Aso said.

Economic contraction Gross domestic product contracted for two straight

Taro Aso, Japan’s Finance Minister quarters after the sales tax was increased three percentage points to 8 percent in April.

In response, the government deferred another planned bump in the levy and in December assembled a 3.5 trillion yen stimulus package and the supplementary budget.

Real gross domestic product should rebound, growing 1.5 percent next fiscal year, according to estimates released by the

Cabinet Office today. That follows a projected 0.5 percent contraction in the 12 months through March.

Abe’s Cabinet is scheduled to meet on January 14 to formally adopt the budget.

The government has yet to release a full breakdown of all planned expenditure.

China to launch first stock options in February

JD.com and Alibaba competition intensifies

C

C

hina’s JD.com has ratcheted up competition with Alibaba Group Holding through a US$1.55 billion deal with an online car sales portal, as the e-commerce giants gun for high-value markets like cars, tourism and homes.

Following over a year of fervent investment activity in China’s tech sector, niche e-commerce markets are now in vogue as targets, analysts say.

Taking stakes in specialists like Bitauto Holdings Ltd offers an avenue into big-ticket purchases which fall outside major e-commerce companies’ traditional focus of day-to-day goods.

Such tie-ups also lend smaller firms some of their bigger peers’ clout, directing potential customers their way from websites like those of JD.com and Alibaba.

“JD.com is trying to position itself as the goto e-commerce platform, and this could be an important category expansion for them,” said John Choi, a Hong Kong-based Internet analyst at Daiwa Capital Markets.

JD.com’s deal late last week was the company’s biggest ever.

hina will start trading its first stock options next month, according to the securities regulator, with state media saying Monday that the move could cause greater market volatility.

The Shanghai Stock Exchange will begin offering options on an exchange-traded fund from February 9, the China Securities Regulatory Commission (CSRC) said in a statement, which described the launch as a “trial”.

“The trial of stock options... is of great significance to promoting the healthy development and enhancing the global competitiveness of China’s capital markets,” it said in the statement late Friday.

But the move might bring more volatility, state media said, in a stock market dominated by retail investors.

“In the short term, it may intensify market volatility,” the National Business Daily said.

Separately, the 21st Century Business Herald said options would benefit the market in the long run by helping investors hedge against risk and discover value investing.

Reuters

AFP

“The budget deals appropriately with issues Japan faces, including the revitalization of regional economies and the improvement of social welfare,” said Aso.

Debt-to-GDP The government will meet its target for halving the ratio of the primary balance deficit to GDP next fiscal year, Aso said. This gauge is calculated by subtracting expenditures excluding interest payments from revenues without bond sales, and is a key measure for the Abe administration as it attempts to control debt.

In a fiscal reform plan released in 2013, the government said it also aimed to achieve a surplus in the primary balance in 2020.

Japan’s debt-to-GDP ratio is projected by the International Monetary Fund to swell to more than 245 percent in 2015.

Moody’s Investors Service cut Japan’s credit rating one level to A1 last month citing uncertainty over whether Japan could achieve its deficit reduction goals.

Bloomberg News

Li Ka-shing makes HKEx index rise

H

ong Kong’s key share index edged up on Monday, lifted by the business restructuring plan announced late on Friday by Li Kashing, Asia’s richest man.

Li plans to split his conglomerate into his two largest listed companies, one focusing on property and the other on telecoms, retail and energy.

Shares of one of the companies, Cheung Kong (Holdings) jumped 15 percent while the other, Hutchison Whampoa, surged 13 percent yesterday.

Among the most actively traded stocks on Hong Kong’s main board were Cypress Jade Agricultural Holdings Ltd, down 28.7 percent at HK$0.08, Bank Of China, down 1.1 percent at HK$4.39 and Unity Investment Holdings Ltd, up 2.0 percent at HK$0.05.

Chinese investment flowing from Shanghai into Hong Kong through the mutual market access pilot programme took up 0.87 billion yuan (US$140.28 million) of the 10.5 billion yuan daily quota.

Total trading volume of companies included in the HSI index was 1.4 billion shares.

Reuters