Macau Business Daily, Feb 24, 2015

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 735 Tuesday February 24, 2015 Year III

The Big Five I

t has the lion’s share of the market. Bank of China dominates in terms of deposits. With 42.4 pct of the total MOP805,761 million market. ICBC Macau (18.4 pct) places second followed

by Tai Fung Bank (9 pct). Luso International Banking (7 pct) comes in fourth and BNU (5.2 pct) fifth. Regarding public sector deposits, of all the money the Macau Gov’t saves in banks operating in Macau 42.6 pct is squirreled away with BOC PAGE

4

Moderate growth in CNY visitors

Union Gaming: CNY seasonality remains intact Page 5 Prada’s Asian sales fall 5pct, primarily in Macau & HK Page 6

There was an increase in Mainland Chinese visitors during the first three days of CNY. By nearly 7 pct Y-O-Y to 308,089 people.

But quite a slowdown from the 55.1 pct rise in the equivalent CNY period in 2014. Overall, the city welcomed 434,549 visitors in the period. Up 3.4 pct on last year.

Page

Beijing’s glare deepens crisis in Macau Page 7

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Just peachy

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Another budget carrier is on the horizon.

Japan’s Peach Aviation is mulling expansion to Macau. Making it the first low-cost carrier serving the Japan-Macau route. Currently, flag carrier Air Macau offers flights to Tokyo and Osaka. But not on a daily basis

Real estate breather

%Day

Tencent Holdings Ltd

3.77

MTR Corp Ltd

3.16

CITIC Ltd

1.82

China Resources Land

1.24

Wharf Holdings Ltd/T

1.09

China Shenhua Energy

-1.68

China Mobile Ltd

-1.96

Sands China Ltd

-2.01

CNOOC Ltd

-2.81

Galaxy Entertainment

-3.22

Source: Bloomberg

I SSN 2226-8294

Page 5

Local housing prices could drop. By as much as 20 pct this year. That’s according to the head of the Macau General Association of Real Estate.

Triggered, says Chong Sio Kin, by the slowdown in the gaming industry.

He’s also throwing cold water on Hengqin as an alternative investment.

But for very different reasons

Page

2

Short-term solution The Shanghai-Hong Kong link. It will allow short-term selling starting next month.

The daily volume of short positions on a stock would be capped at 1 pct. And at no more than 5 pct over 10 consecutive days

Page 9

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2 | Business Daily

February 24, 2015

Macau

Real Estate Association head: Housing prices to drop by 20pct President of the Macau General Association of Real Estate Chong Sio Kin says the slowdown in the gaming industry is triggering a drop in housing prices.

Meanwhile, he advised caution for residents considering investing in Hengqin Kam Leong

kamleong@macaubusinessdaily.com

H

ousing prices will drop by 20 per cent this year, affected by the slowdown in the gaming industry and if the government continues its price-control measures on the real estate market, the president of the Macau General Association of Real Estate, Chong Sio Kin, predicted in an interview with Chinese newspaper Jornal do Cidadao.

In the interview, the Association head said that the property market is undergoing an adjustment phase, and he perceives that housing prices may mirror the drop in gross gaming revenues.

In addition, he reckons that declining gaming revenue was also the chief factor behind slowing transactions in the market last year.

“Comparing the gross gaming revenue in January this year with that of December 2014, despite the decrease having narrowed, it’s just a matter of numbers,” the newspaper quoted Mr. Chong as saying. “In the short term, I don’t see any factors benefiting [the gaming industry and the property market] appearing.”

Since June last year, Macau gross gaming revenue has dropped for eight consecutive months. In 2014, the annual casino revenue even posted a historic decrease of 2.6 per cent year-on-year.

In the short term, I don’t see any factors benefiting [the gaming industry and the property market] appearing Chong Sio Kin, Macau General Association of Real Estate

Meanwhile, the number of housing transactions in 2014 slumped by 36 per cent yearon-year, amounting to only 7,218 transactions compared to the 11,306 transactions of 2013, despite the fact that housing prices had increased by 21 per cent year-onyear, costing MOP100,156 (US$12,519) per square metre.

Nevertheless, Mr. Chong said housing prices have actually decreased by 10 per cent recently, claiming purchasers now have more room to bargain for cheaper

prices.

In addition to residential flats, he indicated that the prices of shops, offices and industrial buildings was also decreasing, the exception being car parking spots, for which both the purchase price and rent remain high.

Hengqin investment caution Meanwhile, Mr. Chong told the newspaper that while housing in Hengqin is good for self-use it may not be good for investment at the moment.

“The continuous drop in gross gaming revenue has affected the market at a certain level. Meanwhile, the 24-hour border crossing policy and the [possible] implementation of allowing Macau vehicles with single plate numbers to enter Hengqin has amazed Macau residents in housing there,” he told the news outlet.

“Of course, there are no problems if [people] buy [the flats] for self-use.

However, if [they purchase] for investment, [they] should consider it cautiously,” he

claimed.

“Firstly, the development of Hengqin is still in the initial stages, with auxiliary facilities taking time to improve.

Secondly, the supply of housing in Hengqin is high, As such, it is difficult for the secondhand property market there to be active. Thirdly, the housing prices of Hengqin are presciently set, so it is hard for investors to gain profits quickly, added to the fact that there are different kinds of housing taxes,” Mr. Chong said, stressing purchasers should look before they leap.

Macau Property Opportunities Fund (MPO) buys luxury residence on Penha Hill The company was also granted an occupancy licence for ‘The Fountainside’ project and is expecting to cash in HK$147 million in final payments related to this investment João Santos Filipe

jsfilipe@macaubusinessdaily.com

M

acau Property Opportunities Fund (MOP) has acquired a luxury private residence on Penha Hill for HK$182.45 million (US$23.5 million), the company has announced. The property occupies 6,000 square feet and features three storeys and two basements.

“This strategic and highly complementary acquisition cements our positioning in the ultra-prime residential sector in Macau and is

expected to create further value for our shareholders”, the Chairman of the Fund, David Hinde, said of the acquisition.

The fund managed by Sniper Capital Limited bought the luxury house directly from a local vendor at the price of HK$28,000 (US$3,615) per square foot. According to the company, such a house will target one of the company’s preferred market segments for exclusive detached houses.

However, Macau Property Opportunities already has plans for the residence, which will be combined with another property of the fund also on Penha Hill.

“The property adjoins an existing house owned by MPO, and it is the company’s intention to combine both properties into a single ultra-luxury residence”, it was announced.

The two properties combined will occupy more than 10,000 square feet

of gross floor area and will account for close to 9 per cent of the fund portfolio value.

The fund also received good news related to its 80,000 square foot ‘The Fountainside’ project on Penha Hill.

After buying it in October 2006 for HK$62 million (US$8 million) and investing another HK$116 million (US$15 million) in redeveloping it, the fund had been granted an occupancy permit by the Land, Public Works and Transport Bureau of Macau.

Until now the fund has received deposits totaling HK$50 million (US$6 million) but it is expecting to receive final payments that will amount to HK$147 million (US$19 million) upon handover of the sold units.

Business Daily | 3

February 24, 2015

Macau

Fewer Mainland visitors Firework booths business loses sparkle this CNY in Chinese New Year

B

Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he number of Mainland Chinese visitors coming here during the first three days of Chinese New Year increased by nearly 7 per cent year-on-year to 308,089 people, slowing from the 55.1 per cent rise seen in the equivalent period of the Chinese New Year holiday in 2014, official data reveals.

For the Golden Week vacation of the Year of the Goat, which started on February 19 this year, the Macau Government Tourist

Office (MGTO) said that the city registered a total number of 434,549 visitors that came here during the first three days of the vacation, representing a year-on-year increase of 3.4 per cent – a much moderated growth when compared to the 36.5 per cent (at 420,400 visitors) seen in the first three days of the Chinese New Year holiday last year, which started on January 31.

For the February 19 to February 21 period this year, Macau saw a total of 308,089

Mainland Chinese visitors, which grew by a year-onyear 6.9 per cent. While for the first three days of the Chinese New Year holiday in 2014, the city received a total of about 288,000 Mainlander visitors, which represented a staggering year-on-year growth of 55.1 per cent, according to official data. MGTO Director Maria Helena de Senna Fernandes anticipated that the number of overall visitors coming here during the 7-day Chinese New Year vacation this year would grow by more than 5 per cent. For the same period last year, Macau received a total of 1.05 million visitors (up by a year-on-year 13 per cent), in which over 770,000 were from Mainland China.

The latest data from MGTO published yesterday shows that from February 19 to 22, the city received up to 609,217 inbound visitors, of whom 443,421 people or 73 per cent were from the Mainland.

ooth owners in the Firecrackers and Fireworks Zones claim that their business this Chinese New Year (CNY) has not gone as well as last year, with one owner even telling Chinese-language newspaper Jornal do Cidadao that an estimated loss of MOP200,000 (US$25,000) might be posted due to the decreasing number of customers and the rain.

Yesterday was the last day of the 6-day operation for the Firecrackers and Fireworks Zones in both Macau and Taipa that started last Wednesday for the celebration of CNY. A booth owner surnamed Wong told the Chinese newspaper on Monday that his business between the first and the third days of CNY (last Thursday to Saturday) was below expectations, indicating that the business on Monday was even worse following the sudden downpour.

According to Mr. Wong, the number of customers had decreased a lot compared to recent years, claiming that the maximum receipt only reached a few thousand patacas.

“I invested between MOP500,000 to MOP600,000, and didn’t expect to post a loss,” the newspaper quot-

ed Mr. Wong as saying. He estimated that he would lose around MOP200,000 at the end of the operation.

The sudden rain on Monday shocked most of booth owners.

They reported to Chinese media that the rain had flooded their booths, damaging their goods into the bargain.

Four booth owners told local broadcaster TDM Radio yesterday that the unexpected downpour on Monday had caused them to lose between MOP10,000 and MOP100,000.

One owner surnamed Chan told Chinese-language newspaper Macao Daily on Monday that the rain had damaged onethird of his goods, which were worth between MOP50,000 and MOP60,000.

The zones support a total of 15 booths, with eight firework booths and two snack booths in the Macau Zone and another five firework booths in the Taipa Zone.

According to the auction of the booths last December, the bidding prices rose by nearly 30 per cent, with one firecracker booth costing at least MOP140,000 and up to MOP190,000. In 2014 CNY, the most expensive booth cost only MOP157,000.

K.L.

4 | Business Daily

February 24, 2015

Macau

Bank of China biggest bank operating in Macau BOC, ICBC Macau, Tai Fung Bank and Luso International Banking are the big four in the territory according to Business Daily calculations. BNU places fifth in terms of market share of deposits João Santos Filipe

T

jsfilipe@macaubusinessdaily.com

B

ank of China is the largest bank operating in Macau in terms of deposits share, according to Business Daily calculations and the balance sheets published by the different institutions in the government’s Official Gazette.

At the end of last year, BOC had a total of MOP341,397 million in deposits considering current accounts, time deposits and public sector deposits. This represents 42.4 per cent of the total market or MOP805,761 million. In terms of the banking market, Industrial and Commercial Bank of China Macau (18.4 per cent) placed second and Tai Fung Bank (9

Position

per cent) third. Luso International Banking (7 per cent) comes in fourth and Banco Nacional Ultramarino (5.2 per cent) fifth.

In terms of the banks incorporated in Macau, ICBC Macau leads, followed

by Tai Fung Bank, Luso International Banking, BNU and OCBC Wing Hang Bank. BCM ranks sixth, Novo Banco Asia is seventh, and The Macau Chinese Bank eighth.

Considering all different types of deposits which Business Daily analyzed, the Bank of China is the leader in all of them. The Chinese Bank has MOP107,535 million (48.2 per cent) of the current accounts market, amounting to MOP222,879 million. In relation to time deposits, BOC totals MOP193,586 million (39.6 per cent) of the MOP488,343 million market. As for public sector deposits, the Macau Government is saving at BOC 42.6 per cent (MOP40,276 million) of the money it has deposited in banks operating in Macau (MOP94,539 million).

In the Macanese banking market, there are a total of MOP222,879 million and BOC is the favoured institution chosen to save the funds of people, companies and associations operating in the territory. In these types of deposits, ICBC Macau (15.6 per cent/MOP34,738 million) ranks second and Tai Fung Bank (9.9 per cent/MOP22,175 million) third. BNU (6.8 per cent/MOP15,162 million) and OCBC Wing Hang Bank (5.4 per cent/MOP12.074 million) are

Bank Name

fourth and fifth, respectively, and they close the top five.

Government savings As for time deposits, BOC (39.6 per cent) is followed by ICBC Macau, which has a market share of 20.8 per cent with a total of MOP101,393 million. Luso International’s strongest performance is registered in time deposits. The Bank that is a wholly-owned subsidiary of Xiamen International Bank is the third main player in the market with a share of 8.7 per cent and MOP42,708 million.

However, Luso International Bank is followed very closely by the bank founded in 1942 by Ho Yin, the father of the former Chief Executive of Macau, Edmund Ho. Tai Fung has a market share of 8.5 per cent of time deposits, which accounts for MOP41,731 million. The Macau Top 5 in terms of time deposits is closed by the offshore branch of the Portuguese bank BPI which has a market share of 3.7 per cent (MOP18,041 million).

The Portuguese institution has no other types of deposit and the money kept there is all in foreign currencies.

In relation to public money, the government saves its money mainly in BOC. However, in this respect BNU places second with 18 per cent (MOP17,051 million) of the funds of the government. ICBC Macau places third (13 per cent/MOP12,290 million) followed by Tai Fung (9.9 per cent/MOP9,326 million).

Current Accounts

Time Deposits

Public Sector Deposits

Total (million MOP)

1

Bank of China (Macau Branch)

107,535

193,586

40,276

341,397

2

ICBC Macau

34,738

101,393

12,290

148,421

3

Tai Fung Bank

22,175

41,731

9,326

73,232

4

Luso International Banking

8,927

42,708

4,540

56,175

5

Banco Nacional Ultramarino (BNU)

15,162

9,376

17,051

41,589

6

OCBC Wing Hang Bank (Macau Branch)

12,074

16,789

1,443

30,306

7

Banco BPI (Offshore Macau Branch)

-

18,014

-

18,014

8

Guangdong Development Bank (Macau Branch)

2,099

14,670

719

17,488

9

BCM Macau

5,855

8,232

1,159

15,246

10

Bank of Communications

690

7,279

5,513

13,482

11

Banco Comercial Português (Macau Branch)

915

9,873

632

11,420

12

China Construction Bank (Macau Branch)*

1,975

5,896

1,245

9,116

13

Caixa Geral de Depósitos (Offshore Macau Branch)

388

7,240

-

7,628

14

The Bank of East Asia (Macau Branch)

1,287

3,517

-

4,804

15

HSBC (Macau Branch)

1,285

1,748

-

3,033

16

Hang Seng Bank (Macau Branch)

2,076

724

-

2,800

17

DBS Bank - Hong Kong (Macau Branch)

1,250

954

-

2,204

18

Wing Lung Bank (Macau Branch)

164

1,982

-

2,146

19

Citibank N.A. (Macau Branch)

1,453

340

-

1,793

20

Bank Sinopac (Macau Branch)

702

895

-

1,597

21

Standard Chartered Bank (Macau Branch)

1,185

44

-

1,229

22

First Commercial Bank

71

632

-

703

23

Novo Banco Asia

47

96

345

488

24

CITIC Bank International (Macau Branch)

292

193

-

485

25

The Macau Chinese Bank

203

272

-

475

26

Hua Nan Commercial Bank

143

128

-

271

27

Chong Hing Bank (Macau Branch)

188

31

-

219

222,879

488,343

94,539

805,761

Total * Data from September 2014

Gongbei Tunnel slated for completion in 2016 he construction of one of the main segments of the ‘super project’ Hong KongZhuhai-Macau Bridge – the Gongbei Tunnel – is slated for completion by the end of 2016, according to Xinhua News Agency.

The state news agency reported that the 2.7km tunnel under the Gongbei Border Checkpoint which links Zhuhai and Macau will be the longest, and has the largest excavation area coastal highway tunnel.

Despite recent reports from Hong Kong that the completion date of the project may be delayed, the Mainland contractor of the project said that the construction of the bridge made a breakthrough on February 22 as preparation work of the tunnel adopting the technique of pipe-roofing had achieved success.

The Xinhua report also said that by January 2015 the principal construction of the bridge that is now undergoing had used 78 per cent of the investment amount.

Earlier this month, Hong Kong media reported that the neighbouring SAR’s Secretary for Transport and Housing, Anthony Cheung Bing-leung, said that he believes the construction of the Hong Kong Border, as well as the link to the Main Bridge, may not be finished by the end of 2016. The Secretary also said that “Hong Kong is not the only one encountering problems in the progress of the construction. Macau and Guangdong are facing the same challenges.”

The proposed Hong KongZhuhai-Macau Bridge, situated in the waters of Lingdingyang in the Pearl River Estuary, is a megasize sea crossing linking the three cities. It comprises a main bridge in Mainland waters together with boundary crossing facilities and link roads within the three places.

The functions of the bridge are to meet the demand of passenger and freight land transport between Hong Kong, the Mainland - particularly the region of the West Pearl River West - and Macao, to establish a new land transport link between the east and west banks of the Pearl River, in order to enhance the economic and sustainable development of the three places.

J.K.

Business Daily | 5

February 24, 2015

Macau Union Gaming: CNY Peach Aviation eyes Macau as new seasonality remains intact Gaming Research Macau flight destination Union investment analysts say they’ve noticed If the carrier’s plan is realised, it would represent the first low-cost carrier running a Japan-Macau route Stephanie Lai

sw.lai@macaubusinessdaily.com

a big increase in mass casino traffic and minimum bets are higher; in addition, they predict an uptick in VIP business soon Joanne Kuai

joannekuai@macaubuinessdaily.com

J

apan’s budget carrier Peach Aviation has expressed interest in targeting Macau as a new flight destination, as the city seeks to link itself to more mid-haul destinations this year, the local airport operator said.

The news was announced by airport operator Macau International Airport Co. Ltd. (CAM) in a statement on Sunday, following the attendance of its delegates at the Aviation Festival Asia 2015 from February 12-13.

At the event, the delegates of Peach Aviation, led by the carrier’s chief executive officer Shinichi Inoue, expressed interest to CAM in commencing a flight service between Japan and Macau.

Currently, the only airline in Macau that flies passengers between Japan and the city is the territory’s flag carrier Air Macau, whose flights to Tokyo and Osaka do not run on a daily basis.

The city’s neighbouring SAR, Hong Kong, an hour’s ferry ride from here, hosts several carriers running scheduled flights for Japan, including budget carriers HK Express, Vanilla Air and newcomer Jetstar Japan,

which is starting its first international service between Osaka and Hong Kong on February 28.

In the Sunday statement, CAM expressed the hope that Peach Aviation can realise the flight link to Macau this year. In January, the airport operator told Business Daily that its task for this year is to attract the launching of new flight routes connecting more mid-haul destinations, in particular with India and Indonesia.

Last year, 299,849 visitors from Japan came here, representing a 1 per cent year-on-year growth, data from the Statistics and Census Service reveals.

Outbound Macau residents travelling to Japan on package tours and individual visit packages last year attracted 27,100 people, representing 27 per cent year-on-year growth from the 21,400 travellers of the previous year, official data said. This is a more rapid growth seen when compared to the 7 per cent rise seen in outbound local residents last year, when about 1.5 million journeys were recorded by local residents travelling on package tours or an individual visit package offered by travel agencies here.

T

he growing number of visitors to Macau during the traditional holiday season – Chinese New Year – has made the gaming floors busier. According to Union Gaming Research Macau, the traditional seasonality trends remain intact and analysts see ‘a material uptick in mass market GGR [gross gaming revenue] on a sequential weekly basis.’

Union Gaming analysts said in a report released on Sunday that casino foot traffic grew markedly on Friday – the day after Chinese New Year – and again on Saturday. The analysts perceived that this is the first time that mass and premium mass casino floors have felt busy since October’s Golden Week during the National Day holiday and they also pointed out an increase in mass and premium mass minimum bets, which are ‘clearly up relative to the last many months and this has not deterred demand at all during the holiday period.’

‘This suggests that we should see a material uptick in mass market GGR on a sequential weekly basis […] this means that traditional seasonality trends remain intact despite the ongoing softness in general demand,’ the report reads.

Grant Govertsen and Felicity Chiang, analysts at Union Gaming, also expect the last 10 days of February “should tell a meaningful gross gaming revenue story”, since the mass market seasonality trends are intact they assume that VIP seasonality should also remain intact.

The Union Gaming team said “while impossible to gauge whether or not there will be material upside to consensus expectations of a gross gaming revenue decline of up to 40 per cent in February, we believe there is little risk to the downside (bad luck notwithstanding).”

According to the latest statistics form the Public Security Police, from February 19 (the first day of Chinese New Year) to February 22, there were a total of 609,217 visitors to Macau (including non-resident workers and students), a 3.2 per cent increase compared to the same period last year. Of these, 443,421 were from Mainland China, representing a 6.7 per cent increase year-on-year.

Union Gaming says visitation has increased materially on a sequential basis compared to weekly trends over the last many months, giving the analysts confidence that GGR expectations will be met or exceeded in February.

6 | Business Daily

February 24, 2015

Macau Brands

Trends

The All Star Shoe

Prada vows to watch costs after 2014 sales drop 1 pct Asian sales fell 5 percent, primarily in Hong Kong and Macau where market conditions deteriorated during the second half of the year

Raquel Dias newsdesk@macaubusinessdaily.com

I

’m still not sure why but ever since my grandmother got me my first pair of pink Converse sneakers when I was five (this was in the early 90’s, at the height of Converse fever) I never went a year without a new pair. I say I don’t know why because there’s nothing really special about them and I rarely get to wear sneakers anywhere these days. Yet, they always find a way back to my wardrobe and I always have a number of excuses to purchase a pair. As a lover of history, how could I possibly ignore a shoe that has languished largely untouched since 1917?

Yes, they were first produced in 1917 as the ‘All Star’, an attempt by Converse to capture the basketball shoe market. Chuck Taylor, a basketball player and shoe salesman for Converse, improved the shoe’s design and became the product’s spokesperson in the 1920s.

The company was purchased

by Nike in 2003 . . . but is still rocking. This time, the very classic rubber and canvas shoe has made not one, not two but three really great moves: 1. They made the first fully waterproof Converse All Star model. It comes in all red or all yellow options and, boy, do I wish I was 15 again…

2. They’ve designed the first Andy Warhol Converse, white for women and red for men.

With the Campbell’s soup cans… I mean…

3. Last but not least they haven’t forgotten that ladies like to feel tall and have a couple of great ‘hidden-heel’ options.

As you can see, there are a lot of reasons to chill, especially considering they’re definitely an inexpensive treat.

I

talian luxury fashion house Prada reported a 1 percent dip in annual revenue and said it would have to contain costs as growing retail sales in the Americas and Japan failed to offset declines in Greater China and Europe.

Revenues totalled 3.55 billion euros (US$4 billion, MOP32 billion) in the financial year ended January 31, just short of a forecast of 3.57 billion euros from top-rated analysts, according to Thomson Reuters SmartEstimate.

Chief Executive Patrizio Bertelli blamed a “more uncertain and complex” environment than anticipated for holding back Prada’s expansion and vowed to contain costs to protect profit margins.

“This situation has temporarily held up the group’s path of growth, but it will not affect our medium/ long-term growth objectives,” he said in a statement on Sunday.

The Milanese label will open fewer shops than planned in 2015. It had 594 directly operated shops as of January 31 after years of breakneck expansion since its stock-market listing in 2011.

Prada said its retail sales were broadly unchanged year-on-year at 2.98 billion euros, although it opened more than 50 new shops in the course of the financial year.

The group has stopped reporting same-store sales.

Prada said its Asian sales fell 5 percent, despite a positive exchange

We expect a re‑acceleration in retail same-store sales growth and greater operating leverage Thomas Chauvet, Citigroup Inc.

rate impact, with the fall originating primarily in Hong Kong and Macau where it said market conditions had deteriorated “significantly” during the second half of the year.

It also mentioned the different timing of the Chinese New Year, which this year falls in February, for slowing down sales in Greater China.

Prada shares jump Shares jumped in Hong Kong amid expectations same-store sales growth will speed up this year, after it reported a slight fall in full-year sales as fewer Chinese splurged on

US$2,950 handbags and other luxury products.

Prada shares rose as much as 4.5 percent and climbed 4 percent to HK$44.30, headed for the highest close in two weeks. The benchmark Hang Seng Index was little changed.

“We expect a re-acceleration in retail same-store sales growth and greater operating leverage,” Citigroup Inc. analysts led by Thomas Chauvet wrote in a note today, referring to outlets open at least a year and citing factors including more moderate space growth, signs of turnaround at the Miu Miu brand, the Prada brand’s repositioning in Japan and the U.S, and introduction of handbags with lower price points.

While the new handbags at lower price points “has not been enough to offset overall decline at the brand so far, this should be key for recovery in 2015,” Barclays Plc analysts led by Vineet Sharma wrote in a note today.

Sales grew 8 percent in both Japan and in the Americas at current exchange rates during the financial year 2014. They dropped 1 percent in Europe as tourists’ spending dropped and domestic demand weakened.

Prada will continue to focus on marketing and retail investments in the medium term, Chief Executive Officer Patrizio Bertelli said in the statement. The luxury brand is tentatively scheduled to announce its audited results on March 26, according to the statement.

Reuters, Bloomberg News

Business Daily | 7

February 24, 2015

Macau Wynn Macau considering special dividend payment Gaming operator Wynn Macau Limited has announced that a board meeting will be held on Wednesday March 4 to consider the distribution of a special dividend, according to a filing by the corporation with Hong Kong Stock Exchange yesterday morning. The company will also discuss its book closing dates and transact other business. During the fourth quarter of 2014, Wynn Macau posted net revenues of US$761.2 million (MOP6.08 billion), representing a slump of 32 per cent, contrasting with the US$1.12 billion that the operator posted during the same period in 2013.

Beijing’s glare deepens crisis in Macau February revenues are expected to fall 40 percent, and junket operators fear that it’ll take another seven years for Xi Jinping to leave before things go back to the “old days”

C

hina’s crackdown on corruption and conspicuous consumption is ever more visible in its impact on Macau, the world’s biggest gambling hub, which makes most of its money from the high rollers who are staying away to avoid Beijing’s scrutiny.

During a recent visit to four of the city’s glitziest casinos, VIP rooms were mostly desolate, with some shuttered and one boarded up, their tables covered with wood and white cloth.

At nearby pawn shops and jewellers, used by many gamblers to evade China’s strict currency controls, and at money remittance agents in the Chinese border city of Zhuhai, there are fewer customers about.

In February last year, operators of the Chinese-controlled enclave’s 35 casinos were riding high, their revenues for the month up 40 percent year on year. This year, February revenues are expected to fall 40 percent, having fallen in each of the previous eight months, too.

The trend is set to continue despite increasing numbers of Chinese tourists crossing the border during the Lunar New Year holidays.

“This is a very dangerous time,” said Johnny Fok, one of over 100 junket operators in Macau that extend credit to wealthy punters and arrange transport and accommodation.

“It seems President Xi [Jinping] really doesn’t want people to come and gamble any more... Maybe we have to wait seven more years, then, after Xi has left, and only then, we might have a chance for things to go back to the old days.”

China has beefed up its anticorruption monitoring network in Macau with staff from the Central Commission for Discipline Inspection and other agencies now permanently based in the local liaison office, according to a regulatory official and junket operators.

Fok’s business has slumped 70 percent in the past two months compared with a year earlier. Three of the top 10 junket companies have closed some of their VIP rooms in the last three months as Beijing’s anti-graft campaign bites.

More closures are expected.

“For the next three months China will continue to crack down on Macau,” said Lei Kuok Keong, a leader of Macau union Forefront of Macau Gaming, which represents junket workers and casino dealers.

“For VIP, it is more serious. Many more VIP rooms will shut.”

Phone betting, where a gambler in China calls a junket in Macau, and side betting, where gamblers bet several times the table stakes, has also tumbled due to increased scrutiny from Beijing, said Lei.

Mass-market hopes In an underground mall in Zhuhai, remittance agents, who help punters transfer money in and out of Macau, say banks are imposing tighter monitoring on large transactions, including on China’s state-backed debit and credit card UnionPay, with amounts of HK$100,000 (US$12,892) now requiring identity checks and verification.

KEY POINTS VIPs avoid Macau during Beijing corruption crackdown 60-70 percent of Macau casino revenues from high rollers Some casino VIP rooms closed, more closures expected Junket operators, pawnshops, jewellers also hit Casinos hope mass-market punters can fill the gap

That deters those wanting to remain anonymous.

Four shops had their shutters down around the old Lisboa casino, though most pawn and watch shops still offer illegal cash-back services, letting punters swipe their cards for fake jewellery purchases to get hard cash.

At the Blessing Watches and Jewellery outlet in the Venetian casino, a store manager said amounts well above permissible limits could still be swiped using UnionPay cards, though some transactions might be split into smaller amounts to reduce the risk of detection.

“We had a client who swiped HK$1 million three days ago,” he said.

Just across the casino floor, an electronic notice states that credit or debit cards issued by mainland China banks are not accepted at the counters where customers buy their chips.

Mass-market gamblers are still travelling to Macau, and casino executives hope they will make up for the fall in high rollers, but since VIP business typically makes up 60-70 percent of revenue, it is a big hole to fill.

There will also be a lot of extra space to fill, with two new casinos from Galaxy Entertainment and Melco Crown opening this year in Cotai, a strip of reclaimed land joining two of Macau’s islands.

The strip has more under construction, planned long before the slowdown struck; the base of a half-size Eiffel Tower replica sprouts from the ground of U.S. gambling kingpin Sheldon Adelson’s upcoming Parisian resort, and the emerging bronze facade of Steve Wynn’s new multi-billion-dollar casino will be fronted by a gondola and lake.

Credit Suisse analyst Kenneth Fong says the downside risks, which could include a full smoking ban, are more apparent than the upside.

Junket operator Fok scoffs at the idea that mass market gamblers could make up for the absent VIPs. “These small punters,” he said, gesturing towards the sparsely filled gaming hall, “what they spend is not even enough to pay the electricity bills.”

Reuters

8 | Business Daily

February 24, 2015

Gaming

Adelson presidential endorsement ‘a year away,’ aide says

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epublican megadonor Sheldon Adelson won’t get involved in the presidential primary contest until “well into 2016,” his top political adviser said in an interview.

“Any support of a presidential candidate is at least a year away,” the adviser, Andy Abboud, said.

What Adelson does matters.

The 81-year-old billionaire casino owner spent more money on the 2012 presidential race than anyone else in the country, and his every move is being closely watched for signs that he has a favorite this time around.

In 2012, Adelson and his family invested more than US$15 million in former House Speaker Newt Gingrich’s presidential aspirations through a super-PAC, keeping him competitive far longer than he would have been otherwise.

The Adelsons backed Mitt Romney after he won the nominating contest.

All told, the family put about US$93 million into super-PACs and campaigns during the cycle.

Abboud’s remarks came in response to questions about Sheldon and his wife Miriam Adelson’s participation in a March 3 fundraiser in Washington for South Carolina Senator Lindsey Graham’s presidential exploratory group, Security Through Strength.

They are listed as co-chairs of the event, which is set to follow the congressional address of Israeli Prime Minister Benjamin Netanyahu. The names on the invitation raised eyebrows, since some them are already committed to other presidential hopefuls.

In all, there are three dozen co-chairs, each of whom will give US$2,700 to the Graham group. Among them: Wayne Berman,

a lobbyist who will back Florida Senator Marco Rubio if he runs for president, and Seth Klarman, a Boston-based investor who last month hosted an event for New Jersey Governor Chris Christie. Berman said he is unequivocal in his support for Rubio and is giving to Graham’s group only because “he has been one of Israel’s staunchest allies, and I

appreciate that.”

Graham’s group will pocket at least US$100,000 from the event, its first Washington fundraiser. The senator was in Iowa on Thursday and Friday and has a visit to New Hampshire planned for this week, his political adviser Christian Ferry said in an interview.

According to the fundraiser

invitation, first obtained by Politico, Senators John McCain and Kelly Ayotte and former Senators John Kyl and Norm Coleman also will attend, as part of a policy panel. The panel will be moderated by Matt Brooks, executive director of the Republican Jewish Coalition, to which Adelson is a top donor.

Bloomberg

Caesars’s creditors Trump Entertainment creditors demand details of settle to ease bankruptcy exit internal investigation A

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aesars Entertainment Operating Co. should be forced to surrender to lower-ranking creditors more than 35,000 documents related to an internal probe of possible pre-bankruptcy misconduct by the casino company and affiliates, creditors said in a court filing.

Caesars has so far refused to share documents related to its continuing probe, according to a motion filed last week in federal court in Chicago.

“There are numerous pre-petition transactions that must be evaluated to determine whether they give rise to claims and causes of action that could be sources of recovery for creditors,” the committee of second-priority noteholders said in the filing.

Caesars began battling lower-ranking creditors months before the Las Vegas-based company

filed bankruptcy on Jan. 15. Caesars and its parent company, which is controlled by Apollo Global Management LLC and TPG Capital, shifted assets and refinanced debt in the years leading up to the bankruptcy.

Creditors say the goal was to create a “good Caesars” that would hold profitable casinos and other assets, and a “bad Caesars” that would be put into bankruptcy where debt could be extinguished.

Caesars has said in court papers that creditors shouldn’t be allowed to investigate disputed transactions until an examiner approved by a U.S. judge conducts an independent probe.

The company filed bankruptcy claiming it can’t repay about US$18 billion in debt, much of which is tied to a 2008 leveraged buyout engineered by Apollo and TPG. Bloomberg

panel representing Trump Entertainment Resorts Inc.’s unsecured creditors reached a deal to resolve disputes over a restructuring plan with the bankrupt casino company and lenders controlled by billionaire Carl Icahn.

The settlement “allows us to support the plan” and opens a path for Trump Entertainment to exit bankruptcy on schedule, Karen A. Giannelli, a lawyer for the committee of unsecured creditors, said in a phone interview.

Trump Entertainment filed for bankruptcy September 9, 2014 and shut the Trump Plaza days later, one of four Atlantic City casinos that closed last year as the New Jersey gambling hub was battered by competition from surrounding states.

The Trump Taj Mahal remains open after weathering multiple threatened closings and has secured financing from the Icahn group to keep running until the turnaround plan takes effect.

Under the plan, the Icahn lenders would get control of

the two casinos through a conversion of debt into equity in the reorganized company.

The unsecured creditors had opposed Trump Entertainment’s reorganization plan, backed by the Icahn lenders, because they would only get to split a US$1 million fund, for a recovery of less than 1 percent, according to court documents.

Fund triples “The most significant aspect is the US$1 million fund for unsecured creditors has been increased to US$3.5 million,” said Giannelli. The unsecured creditors will “stand down on all of the litigation” against the lenders and won’t seek to investigate them further, she said.

The unsecured creditor panel was seeking court permission to sue to invalidate some of the lender claims and increase its members’ recovery.

The committee had challenged the Icahn group’s claims to some of the Trump Entertainment assets,

specifically the “cage cash” used to pay gamblers’ winnings.

They argued the money wasn’t collateral for the group’s loans and therefore available to pay unsecured debts.

The settlement “doesn’t commit any individual member to support the plan,” Giannelli said, meaning Unite Here Local 54, the union representing Trump Entertainment workers, can still object on its own behalf.

During much of the restructuring process, the casino operator has been embroiled in a fight with the union after moving to terminate Unite Here’s labor deal. The bankruptcy court approved that request, and the union appealed seeking to have the ruling overturned.

The settlement doesn’t affect the appeal, Giannelli said.

Kristopher Hansen, a Trump Entertainment attorney, and Allan S. Brilliant, a lawyer for the Icahn lenders, didn’t immediately respond to e-mails seeking comment.

Bloomberg

Business Daily | 9

February 24, 2015

Greater China

Shanghai-Hong Kong link to allow short-selling from March The daily volume of short positions on a stock would be capped at 1 per cent, and at no more than 5 per cent over 10 consecutive days

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oreign investors will from next week be able to short sell select mainland Chinese shares via the Hong Kong-Shanghai trading link, the latest in a series of regulatory moves to open China’s markets to overseas capital.

The eligible shares are equivalent to nearly three-quarters of mainland stocks listed under the Stock Connect trading scheme, the Hong Kong Exchanges and Clearing Ltd (HKEx) said in a statement.

The daily volume of short positions on a stock would be capped at 1 percent, and at no more than 5 percent over 10 consecutive days, the statement said.

Despite the limits, traders said the new rules are likely to encourage hedge funds and other investors to use Stock Connect, which was launched in November and allows foreign investors to directly trade Shanghai shares from Hong Kong.

The trading curbs, as well as other outstanding technical hurdles, would have to be removed, however, if China wants to be included in the benchmark MSCI emerging market index, a move that would help attract hundreds of billion of dollars of investments from global index-tracking funds.

KEY POINTS Scheme to allow short-selling from Mar. 2 Investors see long-run benefit to move Traders say short-term impact limited by trading curbs

Jimmy Weng, who manages a US$60 million portfolio at hedge fund Genesis Capital Investment Limited, said he now envisaged increasing the fund’s exposure to mainland Chinese stocks, or A-shares, to up to 20 percent this year from zero last year.

“We didn’t participate in the A-share market last year because of the lack of hedging opportunities, and because it was more liquidity driven than fundamental,” Weng said. “But as there are more short sell

opportunities we’ll look at it more.”

Short-selling involves investors borrowing and selling shares they do not own, betting their price will fall, in the hope of repurchasing them at a lower price and making a profit. It also allows investors to better hedge their positions.

Traders said the impact of the short selling move would not be immediate, as the current weak volumes on Stock Connect constrain the amount of shares available for shorting.

The launch of Stock Connect is a key plank of Beijing’s strategy to bring long-term foreign investors into its equity markets to reduce volatility and improve corporate governance.

Daily trading volumes via the scheme, however, have remained lacklustre, due mainly to regulatory and technical hurdles that make the scheme unappealing to many institutional investors.

“Allowing short selling is another step towards potential inclusion in the MSCI indexes but in my view that is far outweighed by other concerns that funds still have,” said a desk analyst at a large foreign brokerage in Hong Kong.

Reuters

10 | Business Daily

February 24, 2015

Greater China Three Gorges project’s throughput up 13 pct China’s Three Gorges project has seen stable growth in throughput with over 10 million tonnes in January, up 13 percent from the same period last year, the Three Gorges Navigation Administration said on Monday. The project’s busy five-tier ship dock saw the passage of 4,324 vessels in January, the administration said. In 2014, the throughput of the Three Gorges Dam, the world’s largest hydropower project, reached a record high of 119 million tonnes with the passage of 44,458 vessels, up 12 percent year on year.

Economic transformation heading in right direction China has been engaged in enormous domestic economic transformation and Chinese leaders are doing pretty well on this, said former Australian Prime Minister Kevin Rudd. Leaders in China chose not to artificially inflate the growth rate when the transformation resulted in reduced growth rates as predicted, Rudd told Xinhua in an event held here to mark his arrival as the president of the newly established Asia Society Policy Institute.”The reduced growth rates” refers to the Chinese GDP growth rate of 7.4 percent in 2014 on a yearly basis, a record low since 1990, which spurred overseas concerns about the economic development of the world’s second largest economy.

China tops patent applications list in 2014 China had more invention patent applications than any other country in 2014 for the fourth year running, official data showed. The number of invention patent applications filed to the State Intellectual Property Office (SIPO) in 2014 stood at 928,000, up 12.5 percent from 2013, the SIPO said. The office authorized a total of 233,000 invention patents in the year, 163,000 of which were from Chinese applicants. By the end of 2014, China had 663,000 invention patents with high quality and market value, and the number of invention patents per 10,000 Chinese people reached 4.9, the SIPO said.

HK test laws to sanction mainland listed companies China Metal Recycling Holdings Ltd. accounting fraud case could become a landmark in the relationship between Hong Kong regulators and Chinese companies listed on the city’s bourse

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ong Kong’s securities regulator is set to take landmark legal action against China Metal Recycling Holdings Ltd in a court case that will test laws to sanction mainland Chinese companies listed in its market.

The Securities and Futures Commission (SFC) forced China Metal Recycling (CMR), which describes itself as China’s biggest recycler of scrap metal, into provisional liquidation in July 2013, alleging it had found evidence of accounting fraud. The action was the first time the regulator used a special provision of Hong Kong’s securities law, designed to protect investors, in the case of a listed company.

The SFC goes before the Hong Kong High Court to wind up CMR with the aim of recovering as much value as possible for shareholders and creditors.

“This is a critical test for the SFC,” said Michael Cheng, Asian Corporate Governance Association’s research director for China and Hong Kong.

“What the SFC has to demonstrate is that regardless of where a company is

incorporated, or where its assets are located, the regulator will go after it.”

Victory A victory for the SFC would represent a breakthrough in the watchdog’s policing of Chinese companies listed in its market by establishing for the first time its ability to force rogue listed companies into liquidation when it sees a public interest.

But a victory would also set the scene for a potentially tougher battle ahead - an attempt by Hong Kongappointed liquidators to secure CMR assets on the mainland.

The SFC and the courts have limited authority outside of Hong Kong, which means reaching beyond the territory’s borders to dismantle CMR Group, a Cayman Islands incorporated holding company, will be difficult. CMR has operations in Hong Kong and Macau, but its most valuable assets are in mainland China.

In an added complication for the SFC, the metal recycling company

The company, which is embroiled in an anti-graft probe, almost avoided becoming the first Chinese homebuilder to default on bonds in line with all Sunac shareholders’ interest,” Wu said by phone from Shenzhen on Feb. 21. “The interests of Kaisa creditors are also very important, and the best protection is Kaisa sustaining its operations.”

The second protocol to the agreement between China’s Hong Kong and Vietnam addressing double taxation and preventing fiscal evasion with respect to taxes on income has entered into force, a spokesman for the government of Hong Kong Special Administrative Region said. The second protocol was signed in January last year. It came into force on Jan. 8, 2015, after completion of ratification procedures on both sides and shall have effect in respect of Hong Kong tax for any year of assessment beginning on or after April 1, 2016.

Chinese auto parts maker Wanxiang Group will push back its planned relaunch of the defunct Fisker Karma hybrid sports car until mid-2016 and rebrand Fisker Automotive as Elux, two sources familiar with the plan said. Wanxiang, which acquired the assets of California-based Fisker Automotive a year ago in a U.S. bankruptcy auction, had hoped to revive the Karma this year. The revised version of the Karma will be renamed Elux Karma and the Fisker name will be dropped, said the sources, who asked not to be named because they were not authorized to speak for Wanxiang.

is subject to separate reorganisation and bankruptcy court proceedings in China.

The SFC declined to comment.

Calls and emails to CMR were not answered.

Mainland companies account for around 60 percent of Hong Kong

Kaisa creditors need to halt repayments

Hong Kong, Vietnam tax treaty protocol in force

Wanxiang to rebrand Fisker as Elux

Mainland companies account for around 60 percent of Hong Kong listings. A record 66 Chinese firms were listed on the Hong Kong market in 2014

Onshore, offshore

K

aisa Group Holdings Ltd.’s creditors need to allow suspension of payments to enable a debt agreement and avoid a bankruptcy that could wipe out their investments, said a manager hired by the company buying the Chinese homebuilder.

Meeting interest and principal obligations might derail debt restructuring talks because Kaisa can’t honor all payments, said Wu Jiesi, a restructuring manager appointed by Sunac China Holdings Ltd., the developer buying Kaisa. A “satisfactory” resolution of Kaisa’s debts is a precondition to completing the acquisition, he told Bloomberg News. Wu was hired in January as

Sunac’s chief M&A and restructuring officer.

Kaisa, which is embroiled in an anti-graft probe, missed a coupon payment in January on dollar bonds due in 2020. It avoided becoming the first Chinese homebuilder to default on such securities when it met the obligation at the end of a 30- day grace period earlier this month. Two more bond coupons come due on March 18 and March 19. Wu said decisions on any noteholder losses will be made only after a Deloitte & Touche LLP audit of Kaisa’s books and “there are many possibilities.”

“Sunac’s acquisition of Kaisa is a commercial action and needs to be

Sunac Chairman Sun Hongbin said in a Feb. 4 interview that even as he didn’t want creditors to suffer losses, he needs time and revisions to some debt terms, without specifying.

A “reasonable” deal with creditors should give Kaisa a sustainable debt structure along with the capability for healthy operation and payment of rearranged debts, Wu said.

Such a deal would strike a balance between Kaisa’s creditors, minority shareholders and Sunac, according to Wu. It would also treat onshore and offshore investors equally and be timely enough to avoid value destruction, he said.

“Wu definitely wants to protect Sunac shareholders while having discussions with creditors and the Shenzhen government, who might have an important role in the backdrop,” said Nicolas Chan, an analyst who focuses on special situations at Louis Capital Markets (Hong Kong) Ltd. “Sunac has the discretion to waive all conditions for the offer, including successful resolution of debt obligations. I’m optimistic about issues being resolved through further talks.”

Bloomberg

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February 24, 2015

Greater China

listings. A record 66 Chinese firms were listed on the Hong Kong market in 2014, Thomson Reuters data shows.

At least 20 Hong Kong stocks, most of which are mainland Chinese companies, are currently suspended

by Hong Kong stock exchange due to irregularities or investigations, a Reuters analysis of exchange announcements shows.

The SFC alleges that CMR overstated its financial position in its prospectus for a 2009 initial

public offering. The allegations were outlined in a high court judgement relating to the case that was handed down in November.

The SFC says around 38 percent, 64 percent and 90 percent of CMR’s gross profits for the years 2007, 2008 and 2009, respectively, were fictitious.

Lending scheme The SFC’s winding up petition, summarised in the November

judgement, alleged there is evidence CMR Chairman Jacky Chun Chi-wai was directly involved in the fraud and might have orchestrated it.

Chun has denied any wrongdoing.

A lawyer representing Chun said his client was not available for comment.

The November judgement shows that the SFC argued CMR created fake steel transactions between its wholly owned subsidiary Central Steel Macao and its top three suppliers to inflate revenues and profits. Central

Steel Macao could not be reached for comment.

Separately, transactions arranged

by CMR subsidiaries in China allowed the firms to access short-term borrowing, using bank acceptance bills, which they then allegedly used to finance a lending scheme, said a person familiar with the investigation, requesting anonymity because he is not authorised to speak to the media.

In April, 2014, Shanghai Pudong New Area People’s Court found that a CMR Shanghai subsidiary conducted fictitious transactions. The court said CMR Shanghai used “legal means to cover an illegal purpose” by arranging trade finance deals with a supplier designed to make “profits by money lending”.

In China, reorganisation and bankruptcy proceedings, brought by creditors against six separate CMR mainland subsidiaries, are under way.

CMR’s top creditors on the mainland include Bank of China Ltd and Industrial and Commercial Bank of China Ltd , which are pushing for a corporate reorganisation, court filings show.

Such proceedings may leave Hong Kong creditors with a long wait.

“Securing and realising CMR’s assets will not be a straight forward process,” said Cosimo Borrelli, founder of insolvency specialist Borrelli Walsh, appointed in Hong Kong as the provisional liquidator of CMR. “But the provisional liquidators will use their best endeavours to pursue all the available means to protect the interests of CMR’s stakeholders.”

Reuters

Taking on Qualcomm in China gives Ceva a boost

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eva Inc.’s bid to rebuild its battered chip design business by catering to Chinese customers is starting to pay off.

Not that the revenue has really started to pour in -- it’s yet to regain its 2011 peak -- but the company’s share price is soaring as investors bet that sales are on the rise.

The stock has climbed 52 percent since a low in October to US$19.20 in New York, close to the highest since July 2013.

For Ceva Chief Executive Officer Gideon Wertheizer, that rebound, which comes after a 63 percent sell-off since

2011, serves as something of a vote of confidence in his plan to carve out a niche taking on Qualcomm Inc. in China. While Qualcomm is the world’s largest mobile phone-chip maker, China’s market is bigger than any other in the world, giving Wertheizer an opportunity to sell to companies focused on low-end phones that he expects will take a growing slice of the business.

“We are in a trend to increase our market share, because we are expanding our share against incumbents like Qualcomm,” Wertheizer said by phone from Herzliya, Israel. “We still have a lot to

grow in the handset market, while they are mature.”

Qualcomm fined Ceva, whose market value has been cut in half to US$388 million from its 2011 peak, is rebuilding its share of the mobile-phone chip market after its fortunes collapsed alongside larger players like Finnish handset maker Nokia Oyj, and the exit of customers like Broadcom Corp. and ST-Ericsson. The company designs digital signal processors that power mobile phones, and licenses those designs to chip designers for an upfront fee. It also collects

royalties on the sale of phones later built off its plans.

Chinese chip designers like Spreadtrum Communications Inc. and MediaTek Inc. that use Ceva’s technology are poised to take market share from Qualcomm, which was slapped with a US$975 million fine this month by Chinese antitrust regulators, according to Barclays Plc and Wunderlich Securities Inc. “China is trying to develop an indigenous semiconductor capability and that’s good for Ceva because they’re licensing technology to a lot of those companies,” Matt Robison, a San Francisco-based analyst

with Wunderlich, said by phone Feb. 20.

Profit growth Ceva’s revenue rose 4 percent to US$50.8 million last year, the first increase since 2011, and net income is forecast to rise 8 percent in 2015. Five out of eight analysts recommend buying the shares, with an average return forecast of 20 percent over the next 12 months.

Wertheizer is also feeling optimistic because he’s diversifying beyond the mobile phone market. Ceva’s wireless communications technology is now being designed into chips for automated driver assistance systems, hearing aids and game consoles. Thirty-two of 36 license agreements last year were for applications outside of mobile phones, the company said on a Feb. 3 earnings call.

“The second part of the growth story is even more interesting” than handsets, said Joseph Wolf, an analyst with Barclays Plc in New York who has a buy rating on Ceva. “It’s always good for companies to have multiple streams of revenue.”

Still, revenue from these new applications won’t materialize until 2016 at the earliest, Wolf said.

Bloomberg

12 | Business Daily

February 24, 2015

Asia Asahi Kasei agrees to acquire Polypore Asahi Kasei Corp., a Japanese chemicals maker, agreed to acquire Polypore International Inc. to expand its battery separator business. Asahi Kasei will pay US$60.50 per share in cash, about 24 percent more than the 20-day average, in a deal that values Polypore at US$3.2 billion, Charlotte, North Carolina-based Polypore said in a statement. Asahi Kasei has plans to invest 1 trillion yen over five years to boost capacity and expand its battery materials businesses that benefit from growth in environmental protection and alternative energy, according to the company. The Japanese company said it will draw on cash reserves and new bridge loans to pay for the transaction.

Cambodia’s anti-graft chief to question ousted capital Cambodia’s Anti-Corruption Unit (ACU) chairman Om Yentieng said on Monday that he will question the ousted Phnom Penh Municipal Court director Aing Mealdey and his close aide Pich Prum Mony over alleged corruption. “I will question Aing Mealdey and Pich Prum Mony this week before launching operations to search for evidence,” he told reporters, adding that he had already questioned four people in the case. Aing Mealdey was officially removed from his position last Wednesday, a day after Prime Minister Hun Sen requested the Supreme Council of Magistracy to look into the court for irregularly releasing the parents of fugitive tycoon Thong Sarath, who is wanted for masterminding the murder of businessman Ing Meng Chue in November.

Singapore’s wholesale trade down 9.4 pct Domestic wholesale trade in Singapore contracted by 9.4 percent on quarter in the fourth quarter of 2014, due to a plunge in sales of petroleum and petroleum products, general wholesale trade as well as ship chandlers and bunkering, according to the latest report by the Department of Statistics. Excluding petroleum, domestic wholesale trade declined 3.8 percent, while after removing the price effect, overall domestic wholesale trade grew by 3.3 percent over the previous quarter.

Philippines calls for streamlining investment laws The Philippines’ Joint Foreign Chambers (JFC) is calling for the implementation of amendments to the Build-Operate-Transfer (BOT) Law by streamlining the mechanisms to improve the Public-Private-Partnership (PPP) Program. In a letter addressed to the Philippine Congress’s House Committee on Public Works and Highways, the JFC pointed out the need of the private sector’s recognition that massive investment infrastructure is needed to bolster the growth of the Philippine economy.

Are Modinomics for real?

Investors are expecting the first full-year budget of Prime Minister Narendra Modi to be the most important since India opened its economy in 1991.

The document is set to be released on Saturday

I

f Morgan Stanley is right, Prime Minister Narendra Modi’s first full-year budget on Saturday may be the most important since India opened its economy in 1991.

Expectations for Modi have been high since his party won India’s biggest mandate in 30 years last May. A disappointing interim budget in July, coupled with the failure to pass key legislation in parliament, have only raised the stakes.

“This government has been given the benefit of the doubt for a long time and investors have begun questioning whether anything has been happening on the ground,” said Rakesh Arora, head of research at Macquarie Capital Securities India Pvt. “The government will have to go the extra mile in the budget.”

Using a tradition passed down from the British, Finance Minister Arun Jaitley on Feb. 28 will stand and read the budget for the fiscal year starting on April 1. It’s only the second time in India’s history that it’s been unveiled on a Saturday, when local stock, bond and currency markets are

This government has been given the benefit of the doubt for a long time and investors have begun questioning whether anything has been happening on the ground Rakesh Arora, head of research at Macquarie Capital Securities India Pvt.

normally shut. Stock markets will be open during the budget speech.

Besides investors, central bank Governor Raghuram Rajan will be paying close attention. He’s linked further reductions in India’s benchmark interest rate to “high-quality fiscal consolidation” in addition to softer inflation. Last month’s unscheduled cut showed he’s not afraid to act before the next scheduled policy review on April 7.

Undoubtedly, India has a lot going for it at the moment. The country’s stocks and currency are among the world’s best performers in the past year; its economy is poised to become the fastest growing among major emerging markets as China slows; and oil’s slide has improved its public finances.

Still, the investment community wants more. While praising Modi’s probusiness approach since the election, it’s looking for concrete details on his plans to boost local manufacturing, improve infrastructure and cut back on food and fuel subsidies.

“The budget now matters more

Honda CEO Ito to step down, replaced by low-profile engineer

H

onda Motor Co Chief Executive Takanobu Ito will step down in late June after six years in the top post and be succeeded by Managing Officer Takahiro Hachigo, a low-profile engineer with global experience, the company said in a surprise announcement yesterday.

Japan’s No.3 automaker has hit a rough patch over the past year with quality problems that have led to multiple recalls of its popular Fit hybrid subcompact, which Ito conceded earlier this month could have been caused at least in part by an aggressive sales target.

Such self-inflicted setbacks had been compounded by multi-millionvehicle recalls to replace air bag inflators made by top supplier Takata Corp that have so far been linked to six deaths, all in Honda cars.

For the past three years, Ito, 61, a feisty former supercar engineer, has shaken up Honda’s decadesold, tightly-knit supply chain as the automaker sought to trim costs and

Honda Motor Co. President and Chief Executive Officer Takanobu Ito wipes sweat from his forehead while standing next to his successor Takahiro Hachigo

find more cutting-edge technologies.

That has predictably rankled local suppliers, and some retired Honda executives manoeuvred to have Ito

removed, sources have told Reuters.

“I think this move is an attempt

by Honda to tread a different course, with someone who upholds harmony,”

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Business Daily | 13

February 24, 2015

Asia

than ever,” Citigroup Inc.’s Rohini Malkani wrote in a Feb. 22 note. “The market will look for something to excite, differentiate.”

said Takaki Nakanishi, a veteran auto analyst and CEO of Nakanishi Research Institute.

A former senior Honda official said he was surprised by Monday’s announcement. Hachigo had been widely expected to join Honda’s board, but “like many inside Honda, I’d thought Ito was ready to continue as CEO at least for another term.”

The former official said he thought Ito’s resignation was his own decision.

Hachigo, who worked on the popular U.S. Odyssey minivan and CR-V crossover, would skip several ranks to become CEO after Honda’s annual shareholders’ meeting in late June. He joined the company in 1982 with a career spanning several countries including the United States, Britain and China. He is currently Vice President of Honda’s R&D arm in China.

Ito, 61, became CEO in 2009 as the auto industry was licking its wounds from a crushing global financial crisis. The ensuing years were no easier, as a disappointing launch of the Civic model caused many to question whether Honda had lost its edge. Natural disasters in Japan and Thailand also hit production and profits hard.

Ito will remain on the board and become an adviser to Honda.

Reuters

KEY POINTS

Here are eight numbers that will indicate whether Modi impresses or disappoints:

BUDGET DEFICIT PROJECTION India’s biggest money managers have said they’ll forgive Jaitley if he projects a wider shortfall than the 3.6 percent of gross domestic product targeted by the previous administration for the next fiscal year -- as long as the cash is used to fund roads and power plants rather than food and fuel subsidies. The government is aiming to hit a target of 4.1 percent of GDP in the year through March, which would be the lowest in seven years.

CAPITAL EXPENDITURE More funds for roads, bridges, highways and ports are crucial to spur an economy where private investment as a share of GDP is at the lowest in at least a decade.

Economists including Andrew Tilton at Goldman Sachs Group Inc. and Samiran Chakraborty at Standard Chartered Plc predict Modi will boost capital expenditure to at least 2 percent of GDP, up from about 1.8 percent in the previous budget.

That would signal a rise to 2.8 trillion rupees (US$45 billion) from 2.3 trillion in the previous budget.

While this is lower than the 2.4 percent of GDP budgeted after the 2008 global meltdown, the government may also offer state-run companies incentives to encourage them to spend their cash hoards.

Jaitley might also increase import taxes on crude oil to pay for more infrastructure spending, Chakraborty wrote in a Feb. 19 report.

SUBSIDIES Ito has pushed reforms to Honda’s supply chain Hachigo a surprise choice as CEO - insiders Over three decades, Hachigo has worked in US, UK, China

Food, fuel and fertilizer subsidies have risen to about 15 percent of total spending from 10 percent a decade ago, as the government looks to support living standards in a nation where 59 percent of the population lives on less than $2 a day.

Spending on subsidies will drop

to about 2.49 trillion rupees, or 1.7 percent of GDP, from 2.61 trillion, or 2 percent budgeted the previous year, UBS Group AG’s Ed Teather predicts. This is largely due to the 45 percent drop in Brent crude prices over the past year and the expansion of Modi’s program to reduce waste in the sale of subsidized goods through direct cash transfers to beneficiaries.

Although fuel and fertilizer spending is falling, those gains could be offset by increased food subsidy spending that is mandatory under a 2013 food security law, Teather said.

REVENUE PROJECTION Economists questioned Jaitley’s revenue projections in the interim budget in July, saying they looked unrealistic. And indeed, tax revenues grew just 7 percent by the end of December compared with the budgeted 20 percent increase, leaving the government 44 percent short of its full-year goal of 9.8 trillion rupees.

With the economy now recovering and lower oil prices allowing the government to raise taxes on fuel without stoking inflation, net collection from levies will increase in the coming fiscal year to 10.6 trillion rupees, Goldman Sachs predicts.

REVENUE DEFICIT Another number being looked at is the revenue deficit, which is the difference between collections and expenditure minus any debt. The shortfall is estimated at 3.78 trillion rupees for the year through March, with revenue expenditure at 1.57 trillion rupees.

Modi will probably cut this spending to 1.52 trillion rupees for the next 12 months, according to HSBC Holdings Plc’s Pranjul Bhandari.

Together with lower subsidies, this would result in a smaller revenue deficit, giving the government room to borrow more for capital expenditure.

MARKET BORROWING Yes Bank Ltd.’s Vivek Kumar sees net borrowing rising slightly to 4.7 trillion rupees from last year’s

4.6 trillion rupees, while Goldman Sachs and Morgan Stanley predict it will drop to 4.4 trillion rupees.

Gross borrowing will rise to 6.23 trillion rupees from 6 trillion rupees, according to Morgan Stanley. It predicts the government will also look to buy back debt or swap bonds maturing in the coming months with longer term maturities to rein in interest costs that now make up 24 percent of total spending.

BANKING Modi needs to inject at least 200 billion rupees of capital into Indian banks to prevent their credit profiles from deteriorating, according to the local unit of Fitch Ratings.

That compares with the 112 billion rupees Modi budgeted for the current year to prop up a sector battling the highest levels of stressed assets since at least 2001.

“We expect the government to bring about several changes in the banking space, with focus on asset recovery, roadmap for capital raising, among others,” said Soumya Kanti Ghosh, chief economic adviser at State Bank of India, the nation’s largest lender.

DIVESTMENT Unrealistic revenue projections have prompted governments into last-minute stake sales to meet deficit targets. Divestment forecasts for the next fiscal year vary from Morgan Stanley’s 375 billion rupees, Standard Chartered’s 430 billion rupees and Yes Bank’s 500 billion.

For the year through March 31, Jaitley had budgeted 584 billion, of which so far he’s raised about 243 billion. Anything more than this in the next year’s budget will raise questions about whether the target is achievable.

“An overambitious disinvestment plan at a time when energy companies and banks, the government’s main source of potential sales proceeds, are undergoing financial difficulties would score poorly,” Deutsche Bank AG’s Taimur Baig and Kaushik Das wrote in a Feb. 23 report.

Bloomberg

14 | Business Daily

February 24, 2015

International Moody’s downgrade politically motivated Russian Finance Minister said Saturday that Moody’s Investors Service’s downgrade of Russia’s credit rating was politically-motivated. “I suspect that the agency’s decision to lower the rating was based on political factors,” said Anton Siluanov.

Earlier Saturday, the international rating agency slashed Russia’s credit rating from Baa3 to Ba1, the junk status, citing the ongoing crisis in eastern Ukraine and the slump of global oil prices. “I believe that Moody’s rating is not just overly negative, but also based on an extremely pessimistic forecast,” the minister was quoted as saying by TASS news agency.

HSBC says CEO Gulliver paid taxes after opening Swiss account Gulliver was listed as the beneficial owner of an account at HSBC Suisse in the name of Worcester Equities Inc, a company registered in Panama, the Guardian reported

Azerbaijan devalues currency by 33.5 pct The Central Bank of Azerbaijan (CBA) depreciated the country’s currency Manat by 33.5 percent against the U.S. dollar on Saturday, the bank said in a statement.

The official exchange rate was previously 0.7862 Manat against 1 U.S. dollar and is now 1.05 Manat. According to the bank, the move was aimed at creating additional incentives to diversify the economy, boost the nation’s international competitiveness and export potential, ensure strategic stability of the balance of payments and international solvency of the country.

Kenya calls on German investors to tap potential Kenya on Sunday called on German business community to tap various investments in the East African nation.

Cabinet Secretary for Foreign Affairs and International Trade Amina Mohamed said Nairobi will be able to bridge gap in the bilateral trade, which is currently in favour of Germany, through the export of finished products. “I wish to urge German traders to increase their import of Kenya’s products such as coffee, tea, cut flower, fresh fruits and vegetables,” Mohamed told journalists during a joint news conference with visiting German Foreign Minister Walter-Frank Steinmeier. Some 100 German companies are operating in Kenya and both officials said the number is set to rise since Kenya is already an attractive market.

Largest U.S. refinery joins nationwide oil strike Workers at the largest refinery in the United States on Saturday joined a nationwide oil refinery strike as the union representing them pushes for a new contract that improves wages and safety. The United Steelworkers union, which represents about 30,000 workers at refineries, terminals, petrochemical plants and pipelines across the country, said the strike expanded at midnight Friday to include the largest refinery in the U.S., the Motiva Enterprises refinery in Port Arthur, Texas. The union said employees at two other refineries and a chemical plant in Louisiana also planned to strike at the end of Saturday.

Cuba, U.S. telecom firms to sign accord Cuba’s state-owned Telecommunications Company SC (ETECSA) and the U.S. IDT Domestic Telecom, INC. (IDT) had concluded talks for the signing of a Service Agreement for the Operation of International Telecommunications, which will allow direct interconnection between the United States and Cuba, a release of the Cuban enterprise said here Friday

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SBC Holdings Plc, struggling to contain a political storm over the bank’s facilitation of tax evasion through its Swiss unit, said Chief Executive Officer Stuart Gulliver paid taxes after setting up his own Swiss account and keeping his legal residence in Hong Kong.

The bank, reacting to an article in the Guardian late Sunday, said in an e-mailed statement that Gulliver opened the account in 1998 to hold bonus payments while working in Hong Kong. He paid Hong Kong taxes on the bonuses there, and since moving to the U.K. in 2003, he has paid U.K. taxes on his earnings globally, it said.

“Mr. Gulliver voluntarily declared his Swiss account to U.K. tax authorities for a number of years,” HSBC said, without specifying when that began. A company spokesman declined to elaborate. The bank is set to report earnings Monday in London.

HSBC has come under political fire after the publication of a report by the International Consortium of Investigative Journalists this month showed details of how its Swiss unit handled accounts for tax evaders and criminals in past years.

Gulliver, 55, offered the company’s “sincerest apologies” in full-page ads in British newspapers last week.

He said Europe’s largest lender has since toughened internal controls and cut some clients at the Swiss private bank.

Gulliver was listed as the beneficial owner of an account at HSBC Suisse in the name of Worcester Equities Inc, a company registered in Panama, the Guardian reported Sunday. His bonuses were paid through that entity until 2003, and the account had a balance of US$7.6 million in 2007, the newspaper said. While the publication detailed the account and his continuing use of Hong Kong as

U.S. Justice Department to resolve claims it enabled Latin American drug cartels to launder money.

Searching Offices

Mr. Gulliver voluntarily declared his Swiss account to U.K. tax authorities for a number of years

a residence, it didn’t accuse him of breaking laws.

Panamanian Company “The Swiss account was set up in 1998 in the name of a Panamanian company for reasons of confidentiality, and this had no other purpose and provided no tax or other advantage,” HSBC said in the statement. “Full tax was paid in Hong Kong on the bonus payments.”

Since leaving Hong Kong for the U.K. in 2003, Gulliver has paid U.K. taxes on his worldwide earnings, minus a credit for taxes paid in the Asian city, according to the bank. In 2011, he moved the CEO’s office to London “in the best interests of the company,” rather than keeping it in Hong Kong where he would have ceased being a U.K. tax resident, the bank said.

HSBC is among a handful of banks to face probes in recent years for their roles in a Swiss banking system that let depositors conceal identities, and in many cases dodge taxes or launder ill-gotten cash. In 2013, HSBC reached a $1.9 billion deferred-prosecution deal with the

The firm’s most recent woes stem from seven-year-old data stolen by Herve Falciani, a self-described whistle-blower. The informationtechnology worker pilfered client account details from HSBC’s Geneva office in 2008 and passed them to the French government. More detail about the data was released this month, prompting local authorities to search HSBC’s Geneva privatebanking office last week.

Chairman Douglas Flint is set to face questions on Wednesday at a U.K. Parliament hearing over his role as finance director when the bank was found helping customers avoid taxes.

The company has multiplied its compliance workforce to more than 7,000 from 1,500 four years ago and is spending as much as $1 billion each year to boost internal controls, Flint has estimated. Staff were hired to ferret out wrongdoing and introduce automated systems to detect suspicious transactions.

HSBC, which traces its roots to the Hongkong and Shanghai Banking Corp., was required by British regulators to move to London from Hong Kong more than two decades ago following its acquisition of Midland Bank Plc as part of a push westward. Gulliver had moved to Hong Kong in 1980, becoming a permanent legal resident along with his wife, an Australian.

“It should not be a surprise that Mr. Gulliver, who has spent the majority of his nearly 35-year career at HSBC in Hong Kong, has made his home there,” the bank said.

Bloomberg

Business Daily | 15

February 24, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The non-problem of Chinese currency manipulation

The Age Global developer and funds manager, Lend Lease has delivered profit after tax for the half year ended 31 December 2014 of US$315.6 million. Lend Lease Group chief executive and Managing Director, Steve McCann said Lend Lease had delivered a strong start to the 2015 year.

“Our US$40.4 billion global development pipeline, including a significant number of urban regeneration projects, continues to drive growth and earnings visibility for the Group. “The Australian and UK residential markets have remained strong. We increased our residential pre sold revenue

by US$2.2 billion, to US$3.6 billion, and settlements rose 11 per cent from the prior corresponding period,” said Mr McCann.

Taipei Times Tainan and Kaohsiung are to implement stricter water limitations on Thursday after water levels in the south of the nation hit an all-time low. The Water Resources Agency’s southern office warned that the region might even be put on third-phase water rationing if there is not more rain in the area soon. No major reservoirs in the region have collected enough water due to the dry spell that the nation has seen since October last year, the office said. Agency Deputy Director General Lai Bor-hsun visited the Zengwen Reservoir and the Gaoping River Dam in Dashu Township over the Lunar New Year period, and instructed the office to handle the drought with a conservative, but constructive approach.

The Korea Herald President Park Geun-hye will mark the start of her third year in office Wednesday overshadowed by political scandals, raging tax disputes and little progress on her pet policies of forging trust with North Korea and kicking off a “creative economy.” Analysts say that, already beset by talk of lame duck status, Park must focus on making her policies a reality this year. But contradictory tax policies and debates over constitutional reforms threaten to derail Park’s proposed economic restructuring reforms. Many of Park’s initiatives were initially welcomed by the public.

The Star Malaysian lenders are rolling out alternative growth strategies for their Islamic businesses, after a proposed three-way merger that would have created one of the world’s largest Islamic banks was scrapped last month. Weak economic conditions scuppered plans for a tie-up of Malaysia’s second-biggest lender CIMB Group Holdings Bhd with RHB Capital Bhd and Malaysia Building Society Bhd (MBSB). It would have created Southeast Asia’s fourth-largest bank with assets of US$190 billion.Those plans called for combining their Islamic businesses into a so-called mega Islamic bank, a concept which Malaysia had been promoting as a way to give the lenders a regional footprint and the ability to compete for bigger deals.

Jeffrey Frankel

Professor of Capital Formation and Growth at Harvard University

A

merica’s two political parties rarely agree, but one thing that unites them is their anger about “currency manipulation,” especially by China. Perhaps spurred by the recent appreciation of the dollar and the first signs that it is eroding net exports, congressional Democrats and Republicans are once again considering legislation to counter what they view as unfair currency undervaluation.

The proposed measures include countervailing duties against imports from offending countries, even though this would conflict with international trade rules.

This is the wrong approach. Even if one accepts that it is possible to identify currency manipulation, China no longer qualifies.

Under recent conditions, if China allowed the renminbi to float freely, without intervention, it would be more likely to depreciate than rise against the dollar, making it harder for US producers to compete in international markets.

But there is a more fundamental point: From an economic viewpoint, currency manipulation or unfair undervaluation are exceedingly hard to pin down conceptually. The renminbi’s slight depreciation against the dollar in 2014 is not evidence of it; many other currencies, most notably the yen and the euro, depreciated by far more last year.

As a result, the overall value of the renminbi was actually up slightly on an average basis.

The sine qua non of manipulation is currency-market intervention: selling the domestic currency and buying foreign currencies to keep the foreign-exchange value lower than it would otherwise be. To be sure, the People’s Bank of China (PBOC) did a lot of this over the last ten years. Capital inflows contributed to a large balance-of-payments surplus, and the authorities bought US dollars, thereby resisting upward pressure on the renminbi. The result was as an all-time record level of foreign exchange reserves, reaching $3.99 trillion

by July 2014.

But the situation has recently changed. In 2014, China’s capital flows reversed direction, showing substantial net capital outflows. As a result, the overall balance of payments turned negative in the second half of the year, and the PBOC actually intervened to dampen the renminbi’s depreciation. Foreign-exchange reserves fell to $3.84 trillion by January 2015.

There is no reason to think that this recent trend will reverse in the near future. The downward pressure on the renminbi relative to the dollar reflects the US economy’s relatively strong recovery, which has prompted the Federal Reserve to end a long period of monetary easing, and

China’s economic slowdown, which has prompted the PBOC to start a new period of monetary stimulus.

Similar economic fundamentals are also at work in other countries. Congressional proposals to include currency provisions in the Trans-Pacific Partnership, the mega-regional free-trade agreement currently in the final stage of negotiations, presumably target Japan (as China is not included in the TPP). Congress may also want to target the eurozone in coming negotiations on the Transatlantic Trade and Investment Partnership.

But it has been years since the Bank of Japan or the European Central Bank intervened in the foreign-exchange market. Indeed, at an unheralded G-7 ministers’ meeting two years ago, they agreed to a US Treasury proposal to refrain from unilateral foreign-exchange intervention.

Those who charge Japan or the eurozone with pursuing currency wars have in mind the renewed monetary stimulus implied by their central banks’ recent quantitative easing programs. But, as the US government knows well, countries with faltering economies cannot be asked to refrain from lowering interest rates just because the likely effects include currency depreciation.

Indeed, it was the US that had to explain to the world that monetary stimulus is not currency manipulation when it undertook quantitative easing in 2010. At the time, Brazilian Finance Minister Guido Mantega coined the phrase “currency wars” and accused the US of being the main aggressor. In fact, the US has not intervened in a major way in the currency market to sell dollars since the coordinated interventions associated with the Plaza Accord in 1985.

Other criteria besides currency-market intervention are used to ascertain whether a currency is deliberately undervalued or, in the words of the International Monetary Fund’s Articles of Agreement, “manipulated” for “unfair competitive advantage.”

One criterion is an inappropriately large trade or current-account surplus. Another is an inappropriately low real (inflation-adjusted) foreign-exchange value. But many countries have large trade surpluses or weak currencies. Usually it is difficult to say whether they are appropriate.

Ten years ago, the renminbi did seem to meet all of the criteria for undervaluation. But this is no longer the case. The renminbi’s real value rose from 2006 to 2013. The most recent pur-

chasing power statistics show the currency to be in a range that is normal for a country with per capita real income of around $10,000.

By contrast, the criterion on which the US Congress focuses – the bilateral trade balance – is irrelevant to economists (and to the IMF rules). It is true that China’s bilateral trade surplus with the US is as big as ever. But China also runs bilateral deficits with Saudi Arabia, Australia, and other exporters of oil and minerals, and with South Korea, from which it imports components that go into its manufactured exports.

Indeed, imported inputs account for roughly 95% of the value of a “Chinese” smartphone exported to the US; only 5% is Chinese value added. The point is that bilateral trade balances have little meaning.

Congress requires by law that the US Treasury report to it twice a year which countries are guilty of currency manipulation, with the bilateral trade balance specified as one of the criteria. But Congress should be careful what it wishes for. It would be ironic if China agreed to US demands to float the renminbi and the result was a depreciation that boosted its exporters’ international competitiveness.

Project Syndicate

16 | Business Daily

February 24, 2015

Closing Death toll in Bangladesh ferry accident rises to 65

Hang Seng Bank profits drop 43 pct

At least 65 people died in a ferry accident in a river in Bangladesh’s western Manikganj district on Sunday, after another 24 bodies were found, local media reported on Monday. Most of the new bodies were found after the ferry was lifted, local media quoted officials as saying. Forty-one bodies were recovered by rescuers late Sunday night. Rescuers were still searching the river for the missing. The ferry carrying around 150 people was found sank after it was hit by a cargo ship in the Padma River. Some of the passengers swam to safety. Deputy commissioner of Manikganj, Rashida Ferdousi, told Xinhua earlier that 20,000 taka (US$257 dollars) had been given to families of each dead person as grant for burial.

Hang Seng Bank Ltd., the Hong Kong lender controlled by HSBC Holdings Plc, posted a 43 percent drop in 2014 profit after a year-earlier result was boosted by an accounting gain for a stake in China’s Industrial Bank Co. Net income was HK$15.1 billion (US$1.95 billion), or HK$7.91 a share, down from HK$26.7 billion, or HK$13.95, the bank told Hong Kong’s stock exchange Monday. The earnings compared with the HK$15.5 billion average of seven analysts’ estimates compiled by Bloomberg.

HK “radicals” up ante in democracy push against China

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early three months after police cleared away the last of Hong Kong’s pro-democracy street protests, lingering anger is stoking a new front of radical activism that has turned shopping malls and university campuses into a fresh battleground.

While still relatively few in number, a cluster of outspoken groups have staged small but disruptive protests in recent weeks targeting mainland Chinese visitors - tapping a seam of grassroots resentment to call for greater Hong Kong nationalism and even independence from China.

More than 100 such activists descended on the New Town Plaza, a mega-mall a short train ride from the border, on a recent Sunday to harass the day-trippers who stream across daily to shop, eat and sight-see.

The mainlanders - 40.7 million of which visited the city of 7 million last year - spur the local economy, but also exasperate locals by clogging streets and emptying store shelves of cosmetics, baby formula and other essentials.

“Away with the locusts and barbarians,” read one banner as protesters roved through the bustling mall tailed by police.

“Go back to China,” protesters shouted at visitors, including an elderly Chinese woman who fled with her trolleyload of shopping. “We don’t want you!”

Shops were closed and police pepper-sprayed some activists amid chaotic scenes and made several arrests.

A pro-Beijing newspaper, Wen Wei Po, thundered that the “radicals”, some of whom waved a British colonial flag, were “inciting the foul culture of Hong Kong independence”.

The financial hub reverted from British to Chinese rule in 1997, under a “one country, two systems” formula that gives it substantial autonomy and freedoms, with universal suffrage promised as an “ultimate goal”.

The idea of Hong Kong independence is anathema to Beijing, which fears any separatist or sweeping democratic demands spilling into China to undermine its rule.

“Mao Zedong Harbour” The student-led “umbrella movement” that saw hundreds of thousands of people blockade major roads for 79 days last year in a

China’s C919 plane ready

push for full democracy, was one of the most overt challenges to the Communist Party’s grip on power since the Tiananmen Square protests that were bloodily suppressed in 1989.

The movement, named after the umbrellas used by protesters at early “Occupy Central” demonstrations to shield themselves from police pepper spray and batons, has given voice to a breed of younger activists taking increasingly provocative actions.

China’s Party mouthpiece, the People’s Daily, called on mainlanders to stand up to the “demonization” against Chinese shoppers, rather than to “remain passive and be silent”.

“We should rename Victoria

Harbour, Mao Zedong Harbour,” wrote one user on Weibo, China’s popular social media service that has bristled at the treatment of Chinese shoppers.

As activists push back against Beijing’s growing attempts to tighten control of Hong Kong on national security grounds -- some say the widening social divisions and groundswell of anti-China sentiment could weigh on its longer term prospects.

“If we don’t rectify the situation in 10 years...it will be the end of Hong Kong politically and economically,” said Elsie Leung, a former Hong Kong Justice Secretary and an advisor to China’s leaders.

Reuters

Japan’s Farm Minister resigns Hu Xiaolian moves to EXIM

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hina’s C919 large passenger aircraft will roll off assembly lines this year, the manufacturer announced yesterday. The Commercial Aircraft Corporation of China has completed basic assembly of the aircraft, the company said.

Earlier this month, the C919’s vertical fin and the back end of the rear fuselage were delivered to the state-owned aircraft maker from domestic manufacturers.

The company has secured orders for 450 C919 planes from 18 customers.

With 168-seat and 156-seat layouts, the C919 will compete with Boeing and Airbus in the medium-range aircraft sector. The C919’s first test flight is planned for this year.

China will become the world’s largest domestic aviation market in the next decade, an Airbus forecast said. The country will need more than 5,300 new passenger aircraft and freighters between 2014 and 2033, with a total market value of 820 billion U.S. dollars or 17 percent of total global demand, in the next 20 years, the forecast said.

Xinhua

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apanese Agriculture Minister Koya Nishikawa resigned after allegations of wrongdoing over political donations.

Nishikawa, who became farm minister in September, is likely to be replaced by Yoshimasa Hayashi, public broadcaster NHK said. Prime Minister Shinzo Abe said in a televised broadcast that he accepted Nishikawa’s resignation. Hayashi previously served as agriculture minister.

The resignation comes after two female minsters, Yuko Obuchi and Midori Matsushima, resigned in October last year over allegations of financial impropriety. Japan’s powerful farm lobby this month accepted a proposal by Abe’s ruling Liberal Democratic Party to deprive agricultural cooperatives of the power to audit local farming groups.

Abe has sought to weaken the politically powerful farm lobby’s influence on the industry as he tries to change the country’s farm policies, part of a broader push for structural reforms to spur economic growth. Japan is in negotiations with the U.S. over agricultural tariffs outlined in the Trans-Pacific Partnership trade deal.

Bloomberg

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he deputy governor of China’s central bank, Hu Xiaolian, has been appointed the chairwoman and Communist Party chief of policy lender The Export-Import Bank of China (EXIM), according to a statement posted on EXIM’s official website.

The move is part of a reshuffle of high-ranking personnel at the People’s Bank of China and is seen as routine in the country, where many senior bankers are also government officials.

In the statement dated Feb. 17, Hu chairs a meeting as EXIM’s chairwoman and Communist Party chief, in the first sign that the move had occurred. At the time of writing, Hu is still named as the PBOC’s deputy governor on its official website.

Hu, who is 57 this year, joined the central bank in 2004 as the assistant governor.

The move follows the appointment of the Bank of Shanghai’s former chairman Fan Yifei to the PBOC’s Communist Party committee, according to a central bank statement posted on February 15.

Reuters