Macau business daily, 2015 Jun 26

Closing editor: Luís Gonçalves

MOP 6.00

Long term returns Where to put it? Local residents are becoming increasingly long term investors. Last year, Macau residents invested more in long-term debt securities at the expense of equity securities. The first accounted for 57.4 pct of total residents’ investment

Year IV

Number 822 Friday June 26, 2015

Publisher: Paulo A. Azevedo

Page 6

Team Work

Time for reflection. If Macau wishes to remain a competitive gaming mecca, that is. So says GEG vice chairman Francis Lui. Careful examination and more consultations affecting the casino industry are vital, he says. By gov’t, community and all other stakeholders, the Galaxy Entertainment Group head said in an exclusive interview to De Ficção Multimedia Projects (which owns Business Daily, Macau Business and Business Intelligence). Major infrastructure delays are hampering sector growth and visitor flow. Regardless, the GEG boss believes they’ve got the mix right with Galaxy Phase II Page

5

Sam Woo Construction’s Macau revenue dips 11.2 per cent Page 4 MGTO director appointed to PATA Board Page 4 Opinion: Henqin’s Lesson

by Pedro Cortés Page 4

Back to square one?

Now publicly aired, the community has insisted on the details. The Chief Executive has ordered the Commission Against Corruption to start an investigation. Regarding the 16 plots of land that the government originally intended to repossess but ‘let go’. The majority of the plots belong to high profile movers and shakers in Macau’s business circles

Guangdong gambler wins HK$5.7 million in Grand Lisboa Page 6 Brought to you by

Page 3

Palliative injection Open market operations. Yesterday, China’s central bank released 35 billion yuan into the money market. The injection came as small and medium banks see increasing demand for short-term capital. This, amid mid-year financial supervision assessment pressure and large-cap stock issuance

Page 8

HSI - Movers June 25

Hard Landing

Name

Prices more than quintupled over six years. But residential prices are heading for their first downturn since 2008. Macau Home prices are predicted to drop 15 per cent this year. Some high end units like One Central Residences have already taken a hit of up to 26 pct

Page 7

www.macaubusinessdaily.com

Cross-Border Cooperation

Banking on bigger business Banco Nacional Ultramarino (BNU) has partnered with Bank of China (BOC) Macau branch to enhance business co-operation. And play to Macau’s advantage as a ‘platform’ between China and the Portuguese-speaking countries.

BNU CEO Pedro Cardoso stresses opportunities can be further explored by BNU. Especially as China is growing its international business base

Page 2

%Day

China Mengniu Dairy C

+1.65

Tingyi Cayman Islands

+1.12

Hang Lung Properties

+1.05

China Unicom Hong Ko

+0.96

AIA Group Ltd

+0.76

Galaxy Entertainment

-1.91

China Life Insurance C

-2.14

Want Want China Hol

-2.53

Lenovo Group Ltd

-3.36

Bank of China Ltd

-5.70

Source: Bloomberg

I SSN 2226-8294

2015-6-26

2015-6-27

2015-6-28

26˚ 30˚

27˚ 31˚

27˚ 32˚

2 | Business Daily

June 26, 2015

Macau

BNU and BOC sign protocol to enhance Macau’s role as platform

Via the global network of Caixa Geral de Depósitos (CGD), the parent company of BNU, and Bank of China, a platform of information and communication channels will be created to share market information on China and Portuguese‑speaking Countries, as well as promoting cross-referrals of business opportunities and strengthening co-operation for settlement and credit related business

Joanne Kuai

joannekuai@macaubusinessdaily.com

China and Portuguese-speaking countries,” said Pedro Cardoso, CEO of BNU. “This is a very good opportunity because as you know Bank of China has a very strong network in China and also quite a good international platform in other countries. But in the Portuguese-speaking countries, our banking group (CGD) has a unique position – we are in seven Portuguese-speaking countries, in five of which we are market leader.

So, joining these two forces together, we have the ideal team to win this challenge, to make sure that Macau can effectively promote and do a lot of cross -referral type of business, based on this complementary strength.”

Advantage

The signing of the protocol by Ronald Kan, Executive Director of BNU (Low, left) and Ip Sio Kai, Deputy General Manager of BOC Macau (low, right) witnessed by Pedro Cardoso, Chief Executive Officer (Up, left) of BNU and Ye Yixin, General Manager of BOC Macau (Up, right)

B

anco Nacional Ultramarino (BNU) signed a co-operation agreement with Bank of China (BOC) Macau Branch yesterday seeking to enhance business cooperation and play to Macau’s advantage as a ‘platform’ between China and the Portuguese-speaking countries.

Via the global network of Caixa Geral de Depósitos (CGD), the parent company of BNU, and Bank

of China, a platform of information and communication channels will be created to share market information on China and Portuguese-speaking Countries. It is to promote crossreferrals of business opportunities and also to strengthen the co-operation for settlement and credit related business.

“This co-operation agreement with Bank of China has one big objective, which is to promote Macau as a platform for co-operation between

The CEO of BNU stressed the group’s global presence. Pedro Cardoso said he believes opportunities can be further explored as China is growing its business internationally as well.

“We are in 23 countries all over the world. We are in some of the most important business partners of China.

For instance, we are in France – we are the second largest foreign bank in France. We have a reasonable branch network in Spain. We have 110 branches in Spain. We are in countries like the United States, the UK, South Africa and so on,” said Mr. Cardoso.

The CEO of the financial institution also indicated the challenges of Macau as some hoped the SAR would become a financial centre but he believe the city has its own advantages.

“I think that Macau’s financial sector has some good opportunities but we have to look carefully into this matter because as you know very nearby Macau we have a very strong financial centre, which is Hong Kong. So, we cannot copy that model because otherwise we will be completed outnumbered. And we cannot win against this competition.

But I think there are specific areas in Macau that we can do much better in, in terms of the financial sector,” he said.

Hengqin branch

BNU is expecting to open its Hengqin Branch in the beginning of the second half of next year. Pedro Cardoso said they’ve applied to the Macau authorities and are awaiting approval. After that, they will apply to the central government of China for a final decision. However, the expected new branch would offer basic banking services to begin with.

“We will start our operations there with a very basic banking approach because basically what we want to do is to provide a service to our customer base. We have thousands of customers that have business in Mainland China, particularly in Guangdong Province.

They require very basic type of service, like loans, guarantees, deposits. cards and so on,” said Mr. Cardoso. “Our expectation is for us to focus on those basic products first and then after we will see what comes next”.

Corporate

New Scarlet Pearl Casino Resort contract for Aristocrat

Aristocrat has won a major allencompassing systems solutions contract from Scarlet Pearl Casino Resort in D’Iberville, Miss.

Aristocrat will deploy its entire Oasis 360 solution that includes its full Casino Management System, Professional Services, SpeedMedia, Oasis ONE LINK (bonusing, progressives and poker frenzy), Table Management System and Oasis HALO™ Loyalty (core software, kiosks,

mobile app and promotions), subject to regulatory approvals.

“We have carefully designed our entire resort – from the casino to the guest rooms to the golf course – all with a player’s comfort in mind. When we were presented with Aristocrat’s exemplary system solutions, we knew it was the right choice to enhance our players’ experience across the resort,” said CEO Denise Barton.

CTM supports 7th Home & Household Products Expo and 8th Computer & Digital Products Expo The 7th Home & Household Products Expo and 8th Computer & Digital Products Expo will be held at The Venetian Macao Cotai Expo Hall B from today until 28 June. Apart from promoting the activity via its service network during the exhibition CTM will set up a sales booth where an array of telecom services and products will be offered at discounted prices.

In the 3-day exhibition, residents will enjoy various exclusive offers of telecom services and products at the CTM Booth, located at D1 & D2, where subscribers to a smart phone plan will be eligible to enjoy a MOP300 discount on the handset price, as well as double data usage up to 10GB for an extra MOP68

Business Daily | 3

June 26, 2015

Macau

CCAC to put 16 plots of land under microscope The Commission Against Corruption has started an investigation according to the Chief Executive’s instruction into the 16 plots of land that the government intended to repossess but ‘let go’ Joanne Kuai

joannekuai@macaubusinessdaily.com

T

he Commission Against Corruption (CCAC) issued a press release yesterday, saying that it is launching an investigation into 16 land concessions, according to the Chief Executive’s instruction.

After looking into concession contracts in the Official Gazette, Business Daily has reported that some parcels are related to Macau’s major business names, including Stanley Ho’s families as well as various legislators.

Chief Executive Chui Sai On said he understands the rising concern of residents about how the government handles ‘idle land’, especially regarding the 16 plots from a list of 48 parcels that the government planned to reclaim but later deemed ‘non-recoverable’, particularly with regard to their locations, size and the reasons behind ‘letting go’.

When talking to reporters in Jiangman in Guangdong yesterday Chui Sai On said the purpose of reclaiming idle land is to find space to develop public housing or for public use.

He said that the Land, Public Works and Transport Bureau (DSSOPT) has undertaken a lot of work with regards to idle land in reclaiming the parcels that

were not properly developed or had missing investment plans or unpaid premiums in accordance with the Land Law.

Lots of problems

The Chief Executive further indicated that the new government has a lot of problems to solve, of which land is one. Chui Sai On added that the Secretary for Transport and Public Works, Raimundo Rosario, will set up a task force to deal with the practical issues when executing the new Land Law, such as following up on land concessions that are about to expire.

Furthermore, Chui said that the Secretary will continue to cooperate and lead his team to introduce and release more information

on relevant issues to the Legislative Assembly ‘s Committee on Land and Public Concessions.

CCAC said if any violation of law or regulation has been found during the investigation, further actions will be taken in accordance with the law. The investigative body also vows to review the legality and reasonability of the administrative procedures and provide improvement advice if in need. CCAC indicated that when the investigation finishes, the results will be handed to the Chief Executive and released to the public.

Regarding the five plots of land opposite Macau International Airport where the high-end residential project La Scalla was to be developed, Chui Sai On said he has received the notification from the court but the other party had 10 days to appeal after the Court of Second Instance’s verdict. He said that the current verdict is not the final verdict yet and that the government could only wait for the legal procedures and follow relevant regulations.

When the final verdict arrives, the government will release further information to the media. The Chief Executive reiterated that if the land can be reclaimed it will be prioritised for public use in answer to residents’ request.

Venetian Macao 17-19 November 2015

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Reach out to casinos, integrated resorts, regulators and gaming affiliated businesses.

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14/08/2014 15:22

4 | Business Daily

June 26, 2015

Macau opinion

Hengqin’s Lesson

Sam Woo Construction’s local revenue dips 11.2 per cent The contractor managed to balance the slowdown in the MSAR with its operations in Hong Kong, with profits jumping 73 pct João Santos Filipe

jsfilipe@macaubusinessdaily.com

Pedro Cortés

Lawyer cortes@macau.ctm.net

D

uring the last six months, I had the opportunity to visit Hengqin Island three times and my understanding is that the Central Government’s original idea shows long-term vision that is sometimes lacking in the local authorities.

Hengqin’s projected development is a kind of strong father-son smessage: “See, kiddo, this is true diversification. Watch us or you’ll soon be absorbed.”

The future is now. Every week when we cross the bridge we see the huge expansion that is taking place across the river. More than the construction works, for those who had the opportunity to see the plans, what must be highlighted is the sustainable projects that encompass green buildings to roads that will not need to be opened every week, as the underground structures will permit them to function differently from what happens in Macau when we see the water concessionaire, then the electricity utility opening holes and more holes throughout the streets at a greater speed than rats can accomplish in a hayfield.

A true miracle may occur in the coming years. We may have real integrated resorts, traditional Chinese medicine centres, commercial hubs and, of course, cultural activities.

The Convention Centre is world class. It has two auditoriums that would make some Macau decision makers blush.

The district is described as a ‘A new landmark of China’s reform and opening to the outside world’ with incentives in place for the investors and other entities that are willing to take this train.

For those who live in Macau it is also seen as a way of cooling the real estate market, as it will allegedly be possible to live there and drive through the roads of the island.

It might be considered by some as the first step towards the full integration of Macau with the Mainland that will formally and legally take place on 20 December 2049, when the transition period stated in the Joint Declaration and the Basic Law will come to an end.

I see it more as a way of showing the people that govern Macau a lesson on how to plan a city for the future.

Hopefully, the lesson is absorbed and Macau may learn good governance practices and what constitutes diversification. Economic diversification is about more than opening cultural creative centres (which are, of course, important). It is about opening the city to the world and making it more than a gaming mecca. It is, for instance, making it easier for the SMEs to hire qualified people and not rejecting applications because today there is a thunderstorm.

Macau should have been about more than gaming and casinos. Yes, MICE exists. Yes, Bon Jovi is coming to town. But what about major international events that would put Macau even more on the map? And I am not talking about the great Pacquiao fights but international sports and cultural events, international conventions and seminars that would widen the blurred vision we have in this blessed 30 square kilometers of land.

Hopefully, we are still on time to not fail the exam.

T

he revenue of contractor Sam Woo Constructions in Macau dropped to HK$404.3 million in the fiscal year ended March 2015 from HK$455.4 million in the previous year, the company announced in a filing with the Hong Kong Stock Exchange.

In terms of profits the company announced an increase of 73 per cent year-on-year to HK$219.2 million from HK$127.1 million. This result was achieved due to its Hong Kong operations. If on the one side revenue in Macau dipped 11.2 per cent year-onyear, on the other revenue in Hong Kong increased almost 12-fold to HK$446.4 million from HK$37.4 million.

Overall, the company achieved HK$851.3 million revenue from HK$492.7 million, an increase of 73 per cent.

In spite of the slowdown in the Macau market the company, whose core business involves foundation works and ancillary services, is still very optimistic about the future because of the Hong Kong market and the housing policy of the region.

‘With the affirmative housing policy and supply targets announced by the HKSAR Government to curb the over-heated residential market due to accumulated property supply shortages, prospects for the

MGTO director appointed to PATA Board

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aria Helena de Senna Fernandes has been appointed to the Executive Board of the Pacific Asia Travel Association (PATA) as a non-voting member. The decision to appoint the Director of the Macau Government Tourist Office (MGTO) was taken during the PATA Executive Board meeting in Bangkok, Thailand on June 19.

Stewart Moore, Chief Executive Officer of the company Earth Check, was also appointed to the board.

In addition to the first nomination, Maria Helena de Senna Fernandes was appointed chairman of the PATA Nominating Committee.

“The addition of both Helena and Stewart add great experience and diversity to an already highly

construction market are widely considered to be good based on the increasing number of new construction projects’, the board explained to shareholders.

During the fiscal year ended March 2015 Sam Woo finalised the piling works of a hotel casino complex and a hotel tower in Cotai, which were not specified. Concerning major projects in Macau, the Hong Kong-based contractor is also engaged in the piling works of a ‘composite development project’ in the reclaimed Areia Preta area in the northern district of the Macau Peninsula, which is expected to be completed by next year.

engaged and knowledgeable PATA Executive Board. I look forward to working with both of the them to further expand the Association’s activities in the responsible development of travel and tourism to, from and within the Asia Pacific region”, PATA Chairman Kevin Murphy said of the changes to the board.

However, this was not the only good news for Macau tourism. The Director of MGTO revealed on Wednesday that she expects the city’s hotel occupancy rate to improve in the coming months. In April, the general hotel occupancy rate stood at 79.8 per cent.

J.S.F.

Business Daily | 5

June 26, 2015

Macau

Francis Lui: Gov’t, community effort to overcome gaming sector challenges Some policy headwinds that are challenging the gaming sector now, such as the smoking ban, need more rethinking from the government and community regarding the impact it could cause while the city is still in the throes of the gaming slump, the vice chairman of Galaxy Entertainment Lui said in an exclusive interview Stephanie Lai, Paulo A. Azevedo and Luís Andrade de Sá newsdesk@macaubusinessdaily.com Photos: Cheong Kam Ka

F

or Macau to remain a competitive gaming jurisdiction, a careful examination and more expression of opinions of the city’s policies affecting the casino industry is needed from both the government and the community, the vice chairman of Galaxy Entertainment Group Ltd., Francis Lui Yiu Tung, told De Ficção Multimedia Projects (which owns Business Daily, Macau Business and Business Intelligence) in an interview.

The city’s gross gaming revenue dropped 37.1 per cent year-on-year in May to about MOP20.35 billion (US$2.55 billion), making it the 12th consecutive month of gaming revenue decline; meanwhile, it meant that the accumulated gross gaming revenue of the first five months this year stood at 37.1 per cent lower than the same period last year at MOP104.29 billion, data from the Gaming Inspection and Co-ordination Bureau (DICJ) shows.

Amid the gaming slump, the VIP gaming business segment – which made up approximately 58 per cent of the market-wide gaming revenue in the first quarter - has continued to suffer the toughest hit as unfavourable policy factors such as China’s antigraft drive continue.

“Over a longer period of time, VIP [gaming] will change to a different model. But to let it drop 50 per cent, everybody will have the responsibility to look at it and see what we can do to smooth out the curve such that everyone will have a little bit more time to adapt to the new norm,” Mr. Lui told us in an exclusive interview.

“So I continue to pledge here to every stakeholder in the community – whether it’s the government, the operator, junket or labour union - I think there’s just a need to understand the situation and work as a team, such that we will be able to go through

this cycle without actually hurting too much,” Mr. Lui said.

Smoking Ban

The Galaxy Entertainment boss cited an example of the smoking ban policy that is going to be introduced to the casinos here, saying that more consideration by the government and public is needed before a full smoking ban is imposed on the city’s casinos.

The full smoking ban policy also entails a condition that the casinos should all abandon their smoking lounges – even though they have already been established on the casinos’ mass gaming floors, the Secretary for Social Affairs and Culture Alexis Tam has told media on previous occasions this year. This suggestion will be part of the smoking regime amendment that is soon to be delivered to the Legislative Assembly before the end of this month.

“If you look at it realistically, is it the right thing to be doing?”

Mr Lui asked. “We’ve kept saying that the health of our staff is of utmost importance. This is when the government comes out with the smoking act, and we say yes and go along with it. We are not insisting that smoking be allowed on gaming floors, but somehow if we have a solution where we don’t hurt the health of the staff, could we actually be able to consider it?”

“We’re talking about a big casino industry, and here regional competition is going to steal our customers away from us. So this is why I still feel the other segments of the community have to realise it,” he added. “This is not just us hurting.”

The gaming empire boss believes that a comprehensive survey that looked into the reactions of all stakeholders in the industry over the

smoking ban policy – including from customers – is still missing to support the stance of a complete smoking ban to be imposed on the casinos here, and the likely impact it could cause.

“It [the smoking ban] might not be the only thing hurting the business now, but certainly it starts to have an impact,” Mr. Lui remarked, “I think the key is that you have to look at customer sentiment and anticipate what could happen if a complete smoking ban is here – this is what we’re trying to tell the government.”

Positive outlook

The sluggish development and completion delays of the city’s transport infrastructure, including the Light Rapid Transit (LRT) system and the Pac On ferry terminal, are

I think the key is that you have to look at customer sentiment and anticipate what could happen if a complete smoking ban is here – this is what we’re trying to tell the government Francis Lui, vice chairman of Galaxy Entertainment

also posing unfavourable factors to the sector’s growth and visitor flow.

“It’s a much bigger question that the MSAR Government and central government would have to realise regarding public spending. It’s something they have to deal with and do it right so that the whole industry, the whole economy will be able to move,” Francis Lui remarked.

“We have confidence in the new administration that they can quickly deliver better results for us.”

Despite the policy headwinds and continuous gaming slump seen here, the Galaxy Entertainment boss said he is still upbeat on the prospects of the casino industry here.

“From here on I feel more positive because Galaxy [Phase II] has opened.

I think the new product in a certain way will continue to improve the overall market sentiment of Macau,” Mr. Lui said, “We feel that we have the right product for the right market now.”

The HK$19.6 billion Galaxy Macau Phase II project, comprising the luxury hotels Ritz-Carlton and JW Marriott, opened on May 27 – when the company finally received permission from the government for 150 new gaming tables. The project opened on the same date as the neighbouring property Broadway Macau – an entertainment complex that is designed to be family oriented with the 3,000-seat Broadway Theatre and 38 mass gaming tables.

“Phase II is more about nongaming; it’s about mass market and the business model is different therefore it’s going to take some more time to catch up,” he added. “You don’t expect Phase II, with its gaming and non-gaming [parts], ramping up as quickly as we did with Phase 1 with 16 VIP rooms.”

6 | Business Daily

June 26, 2015

Macau Guangdong gambler wins HK$5.7 million in Grand Lisboa

On 16 June, a 37-year old male visitor from Guangdong got a Royal Flush at the Caribbean Stud Poker table on the second floor of Grand Lisboa winning the progressive jackpot of HK$5,750,110, SJM said in a press release.

Grand Lisboa offers over 420 gaming tables including Baccarat, Caribbean Stud Poker, Sic Bo, Casino War, Blackjack, 3 Card Baccarat, Roulette and Wheel of Fortune. The venue also accommodates more than 780 slot machines located throughout the casino.

Local residents investing more in long-term debt securities Macau residents’ investment in securities issued by non-residents amounted to MOP399.1 billion in 2014.

During the year, residents invested more in long-term debts securities at the expense of equities

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acau residents are investing more in long-term debt securities at the expense of equity securities, according to the Co-ordinated Portfolio Investment Survey 2014 published yesterday by the Monetary Authority of Macau (AMCM).

At the end of last year, investment by Macau residents in securities issued by non-residents – excluding MSAR’s foreign exchange reserves – amounted to MOP399.1 bil-

lion, an increase of 2.3 per cent year-on-year.

Long-term debt securities represented 57.4 per cent of the total investment of residents, while in 2013 they represented 52.3 per cent.

In one year equity securities dropped to 38.8 per cent in 2014 (MOP155 billion) from 43.9 per cent. Meanwhile, in terms of percentage shortterm debts securities remains unchanged and account for 3.8 per cent of Macau resi-

dents’ portfolio investment.

Geographical Mainland China is the most popular market to invest in securities issued by external entities. With a market value of MOP192.9 billion, investments by the motherland amounted to 48.3 per cent.

Hong Kong (18.3 per cent), Cayman Islands (6.3 per cent), the United States (5.7 per cent) and Luxembourg (3.6 per cent) are the other preferred places.

Mainland China is able to attract more of the investment in terms of long-term debt securities (66.3 per cent), ahead of Hong Kong (6 per cent), and short-term debt securities (85.5 per cent), followed by the neighbouring SAR (7.9 per cent).

However, when it comes to equity securities, Hong Kong is the favourite market, taking 37.6 per cent of the share.

Mainland China is the second-preferred place to invest

in equities with a slice of 18.2 per cent.

From the portfolio investment, the banking sector accounted for 13.1 per cent (MOP52.5 billion), while individuals, government and non-bank enterprises generated 86.9 per cent (MOP346.7 billion) of the investment.

Banking institutions are responsible for 93.8 per cent of the investments in shortterm debt securities, which the survey explains by the ‘abundant liquidity’ of the sector. On the other side, banks are only responsible for 0.3 per cent of the equity securities investment, which is explained by the ‘stringent banking regulations’.

Regarding non-bank entities’ investments, the majority of Macau residents chose to manage their investment portfolios through banking institutions, despite the fact that in 2014 two licensed securities firms were operating in the region.

J.S.F.

Business Daily | 7

June 26, 2015

Macau Birmingham International signs exclusivity agreement

Birmingham International Holdings has entered into an exclusivity agreement with Trillion Trophy Asia for the sale of the company, which controls the English football team Birmingham City Football Club. The agreement was signed on June 19 and revealed yesterday to the Hong Kong Stock Exchange. The contract has an extension of 24 months and during this period the receivers are not allowed to negotiate with third parties regarding the sale of the company. Meanwhile, trading in the shares of the company will remain suspended.

City slump is spreading from the gambling tables to the property market

The home market is dominated by Macau residents, with non-local buyers making up just 2 per cent of total transactions last year, according to Savills.

That compares with Mainland Chinese and foreigners accounting for 13 per cent of purchases in 2011 amid the casino boom and before the government imposed extra taxes to rein in home prices.

After more than quintupling over six years, residential prices are heading for their first year of decline since 2008.

Home prices may drop 15 per cent this year

Luring buyers

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acau’s six-year lucky streak has come to an end. That’s become evident not just at the baccarat tables but at real estate agencies, too.

After more than quintupling over six years, residential prices are heading for their first year of decline since 2008, mirroring a gambling revenue slump in the world’s largest casino hub. Home prices may drop 15 per cent this year, real estate broker Jones Lang LaSalle Inc. forecasts.

Homeowners - mostly local residents who have been enriched

by Macau’s casino boom - have been selling properties at lower prices as the drying up of highstakes gambling ripples through the city’s economy. Residential prices will remain under pressure as gaming revenue shows few signs of recovery, falling for the 12th consecutive month in May. “We don’t see any upturn in Macau’s gaming industry in the

near term, so I don’t see residential prices going back up,” said Gregory Ku, managing director for JLL in Macau. “Most economic figures are dropping by various degrees.”

Transaction volumes fell in the first quarter to the lowest in six years, according to Macau’s statistics and census bureau. Luxury residential values have been the hardest hit, dropping 13.4 per cent this year, almost double the pace of decline for mass market homes.

For example, prices fell as much as 26 per cent at One Central Residences, high-end serviced apartments located next to casinos owned by MGM China Holdings Ltd. and Wynn Macau Ltd., according to Franco Liu, Macau head of Savills Plc. “Those in the casino industry are concentrated in the luxury home segment,” Liu said. “They’ve made lots of money in the past and spent it on properties or cars. These past few months, the drop is more significant

because they’re offloading some of their investments.”

Worst month

China President Xi Jinping’s drive to eradicate corruption plus a slowing economy has kept high rollers away, dragging down the city’s economic output 24.5 per cent in the first quarter.

Gross gaming revenue in June may drop as much as 38 per cent from a year earlier, which would mark the worst month in five years, JPMorgan Chase & Co. analyst DS Kim said in a June 23 note. For the full year, gaming receipts are expected to slump by about a fifth.

Macau’s low unemployment rate and strong incomes will likely help put a floor under price declines, Savills’s Liu said. The city’s jobless rate has stood at a record low of 1.7 per cent for more than a year, one of the lowest in Asia. Gross domestic product per capita ranks fourth globally behind Luxembourg, Norway and Qatar, according to The World Bank.

Investors are returning with the latest sale of Shun Tak Holdings Ltd.’s Nova Park, according to Midland Holdings Ltd. The Hong Kong-based developer is luring buyers with a plan that allows them to pay for the apartments over 28 months, including a 25 per cent down payment.

Tom Ashworth, principal of Sniper Capital Ltd., expects housing prices to recover next year as new resorts begin to open, drawing more visitors and bringing in more foreign workers.

Sniper Capital manages London-listed Macau Property Opportunities Fund Ltd., which has about $550 million of assets in the city, including luxury residence The Fountainside.

“The current pullback is healthy and welcomed,” Ashworth said. “Longterm drivers of property values - population growth, rising incomes, scarcity of land and a tight housing supply - remain firmly in place.”

Whether prices rebound next year might ultimately depend on Xi’s determination to root out graft and curb ostentatious display of wealth by officials.

“No-one is predicting casino revenue will rebound and rise in the short term,” Liu of Savills said. “And I can’t see President Xi will stop the anti-corruption campaign for at least the rest of the year.”

Bloomberg

8 | Business Daily

June 26, 2015

Greater China

U.S. talks stress positives but fail to n

State Councillor Yang Jiechi said the two countries should work together on cybersecurit

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he United States and China sought to stress the positives in their relationship after three days of high-level talks, but failed to narrow differences on the most contentious issues of cyber and maritime security.

U.S. Treasury Secretary Jack Lew said both sides had committed to work more towards a Bilateral Investment Treaty already seven years in the making and said China had pledged to limit intervention in currency markets. It also pledged to further liberalize exchange rates, open capital markets and expand access to foreign financial service firms.

The two countries also stressed cooperation in combating climate change, their shared concerns about Iran and North Korea's nuclear programs, the fight against Islamist militancy, and support for global development.

However, in what both termed "candid" and "frank" exchanges at their annual Strategic and Economic Dialogue, they restated divergent positions on China's pursuit of territorial claims in the South China Sea and on cybersecurity, the principal causes of deteriorating trust between the world's two largest economies.

U.S. Secretary of State John Kerry told reporters the United States remained "deeply concerned"

US Secretary of State John Kerry (R) and US Treasury Secretary Jack Lew (2-R) shake hands with State Councilor of China Yang Jiechi (L) and Vice Premier of China Wang Yang (2-L) at the conclusion of the 2015 US-China Strategic and Economic Dialogue

about cyber incursions, which have included massive attacks on U.S. government computers that U.S. officials have blamed on Chinese hackers.

He said it also had "a strong national interest" in freedom of navigation and over flight - a reference to concerns that China might one day declare an exclusion zone around reefs it has been building up in the South China Sea.

China's top diplomat, State Councillor Yang Jiechi, said the two countries should work together on cybersecurity and called on Washington to be "impartial and objective" when it came to the South China Sea. He said China had stressed its "firm determination" to safeguard its sovereignty and urged the United States to respect this.

However, Yang Jiechi added:

Money rates fall after surprise central bank cash injection The central bank also set the yield on its seven-day reverse repos at 2.7 percent Lu Jianxin and Pete Sweeney

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hinese money market rates dropped yesterday after the central bank injected cash into the market for the first time since mid April and said it would moderately increase short-term liquidity.

The decision to resume injecting funds via reverse bond repurchase agreements after a nine-week hiatus shows the bank is moving proactively to offset rising seasonal cash demand as companies prepare to file their first-half financial reports.

Fears of tighter liquidity have been aggravated by a slew of initial public

stock offerings (IPOs), which have caused cash to escrow.

Those two factors were blamed for setting off a dramatic stock market crash the previous week, where benchmark indexes plunged over 13 percent, though stocks have clawed back some of those losses this week.

The volume weighted average yield for the benchmark seven-day repo rate fell to 2.81 percent, down 3 basis points (bps) from Wednesday’s close, while the 14-day rate fell 19 bps to 3.57 percent.

Money rates are typically under pressure toward the end of the quarter, and in particular at the end of the first half, when banks and corporates stock up on cash to burnish their balance sheets.

In addition, large batches of IPOs have from time to time frozen a large amount of short-term liquidity.

China’s securities regulator said late on Wednesday it had approved a new batch of 28 IPOs after 24 firms just finished subscriptions this week and last.

In response, the People’s Bank of China (PBOC) injected 35 billion yuan (US$5.64 billion) into the market through seven-day reverse bond repurchase agreements yesterday, its first open market operation since mid-April.

The central bank also set the yield on its seven-day reverse repos at 2.7 percent, down sharply from 3.5 percent in April but about in line with the currency market rates.

The recurring problem of cash squeezes at the end of the first half looks to be addressed by China’s cabinet, the State Council, which on Wednesday recommended abolishing the loan-to-deposit ratio for commercial banks.

Reuters

"Navigation freedom in the South China Sea is guaranteed. We do believe that there will not be any issue or problem with navigational freedom in future. We hope the U.S. can be impartial and objective to serve peace and stability in this region."

Obama urges china to ease tensions

President Barack Obama met Yang and other Chinese officials earlier

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Greater China

narrow differences

ty

I think what you saw was ascending relationship with great clarity about the things on which we’re going to cooperate.

Even as there is some disagreement about how to approach one, or two, or three issues John Kerry, U.S. Secretary of State

and raised concerns about China's "cyber and maritime behaviour" as well as its currency, technology and investment policies. He urged China "to take concrete steps to lower tensions," the White House said.

Obama's policy of pivoting U.S. resources to Asia in response to China's rapid rise got a welcome boost on Wednesday, when the Senate passed legislation vital to speed passage of a 12-nation Trans-

Pacific Partnership (TPP) trade deal under negotiation after a six-week congressional battle.

Kerry sought to play down any notion of what many analysts see as a rapidly deteriorating U.S. relationship with China.

Lew said the United States would keep pressing China to move to a market-determined exchange rate, even after Beijing's commitment at the talks to intervene in currency markets only in "disorderly market conditions."

Beijing told Washington last year it would refrain from intervention when possible and Lew said this year's commitment was a more explicit statement of what this meant. He said the true test would come if the yuan came under pressure to appreciate.

Lew said the two sides had committed to exchanging new "negative lists" - those areas that will remain out of bounds under a future investment treaty - in early September.

He stressed there was still a long way to go on negotiations and if the talks were a nine-inning baseball game, "we're in the first few innings."

However, a scheduled visit to Washington in September by China's President Xi Jinping for talks with Obama should focus efforts to make progress on the negative lists, Lew said.

Reuters

U.S. regulator freezes Chinese CEO assets This is the second time this year the SEC has investigated trading of U.S‑listed stocks by Chinese residents

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he U.S. securities regulator has obtained a court order to freeze the assets of a Chinese online gaming CEO over what it described as “suspicious” trading activity ahead of a US$10 billion deal

by U.S.-listed Qihoo 360 Technology Co Ltd. In a statement on Tuesday, the Securities and Exchange Commission (SEC) said Guangzhou-based Luo Haijian made more than US$1 million trading options in Qihoo ahead of the news last week that the Chinese tech company had received a buyout offer at a 16.6 percent premium to its June 16 closing price.

In a New York court filing, the SEC says 33-year old Luo, who is the chief executive of 4399 Co Ltd, bet Qihoo’s stock price would rise in the short term by purchasing US$700,000 of “out of the money” call options through a U.S. brokerage account prior to the buyout announcement.

Qihoo received the buyout offer on June 17 from a consortium led by its chairman and CEO Hongyi Zhou, adding the mobile security software maker to a long list of Chinese tech companies that have received offers to

drop their New York listings and head back home. Qihoo’s stock opened 9 percent higher on the news.

Luo subsequently sold all his call options and asked his broker to transfer US$600,000 of his proceeds to a Singapore bank account, the complaint says.

Luo, who had no prior history of trading Qihoo securities using the U.S brokerage account opened in March, traded the options “while in possession of material, non-public information, concerning the buyout offer,” the SEC complaint alleges.

Luo could not be immediately reached for comment.

The court order freezes assets in Luo’s brokerage account and prohibits him from destroying any evidence. The SEC is seeking a final judgment ordering Luo to disgorge his gains with interest and penalties, the SEC said.

In April, the regulator charged two Beijing residents with insider trading, alleging they profited by purchasing call options on Chinese internet company 58.com ahead of its merger with rival ganji.com.

Reuters

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Greater China

China Life markets first notes under nation’s new solvency rules Insurers have been taking advantage of the nation’s stock market boom to offset worsening bond returns Lianting Tu

It’s necessary for China to have a more comprehensive regulatory system to meet its increasing risk profiles for insurers

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hina’s largest life insurer is marketing the first capital securities under the nation’s new solvency regime amid a push for companies to boost risk buffers.

China Life Insurance Co. began meeting with investors in Hong Kong, Singapore and London on Monday and is offering the bonds to yield about 4.375 percent, people familiar with the matter said.

The debentures, which have a 60-year tenor, are expected to be classified as core Tier 2, a type of capital under China’s recently outlined Risk Oriented Solvency System.

Companies in the world’s fastest-growing major insurance industry have been ploughing mounting premiums into ever riskier investments such as shadow banking products as corporate and government bond yields slide. In February, new guidelines were mooted in a bid to force insurers to raise capital that provides a cushion commensurate with their risk.

“It’s a significant change for China to move away from a simple size-based regulatory model to a riskbased regulatory regime,” said Connie Wong, the head of insurance ratings for the Asia-

Pacific region at Standard & Poor’s in Singapore.

The new regulations will likely encourage sales of securities that would rank behind policy holders and other general creditors in the event of a default, according to a Moody’s Investors Service report in June.

‘Symbolic move’

China Life’s proposed notes can be redeemed after five years, according to an offering circular obtained

by Bloomberg. Unlike some other long-dated securities, they won’t include any step-up in interest, which

Connie Wong, head of insurance ratings, AsiaPacific region, Standard & Poor’s, Singapore

generally encourages early redemption. According to Moody’s, coupons on such instruments can be deferred if an issuer’s solvency ratio drops below 100 percent.

“China Life’s issue will be more of a symbolic move to set a structure for a new capital instrument for China’s insurance industry,” Sally Yim, a senior credit officer at the ratings company in Hong Kong, said June 23.

McDonald's plans to sell Taiwan stores to franchise operator The company has close to 20,000 part-time and full-time staff in Taiwan Adam Jourdan

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cDonald's Corp said it is aiming to sell all of its 413 Taiwan-based stores to a franchise operator, as the U.S. fastfood chain looks to cut costs globally and turn around its flagging China business.

The move could help comfort investors who were sceptical and wanted specific details after McDonald's new CEO Steve Easterbrook announced a revamp plan in May that included reorganizing business units and selling outlets to franchisees.

"McDonald's has decided to search for suitable candidates to become its developmental licensee in Taiwan," the company said in a statement sent

Stock and equity fund holdings rose to 14.5 percent of total investments at the end of April, up from 11 percent at the end of 2014, data from the China Insurance Regulatory Commission show. Trust product holdings jumped 95 percent in the first half of 2014.

Chinese insurers’ “risk appetite has gotten higher,” S&P’s Wong said. Portfolios are manageable for now but it could become an issue if they get larger and risk management controls don’t expand at the same pace, she said.

Insurance penetration

Authorities in China are urging people to take out insurance for the first time and plan to increase penetration to 5 percent by 2020 from about 3 percent currently. Such growth, albeit from a low base, will also raise the industry’s capital requirements.

“Chinese insurers are likely to need to raise more capital in the next 18 to 24 months to support premium growth,” Moody’s Yim said. The nation’s life insurance industry may grow at 10 percent annually while property and casualty insurance should expand 10 to 15 percent over the next few years, she said.

China Life may price its notes as early as today, the people familiar said.

Bloomberg News

to Reuters yesterday. It added the model would enable "faster local decision-making, quicker learning, and restaurant growth".

A China-based spokeswoman for the company said the burger chain was looking for a single entity to oversee all of the Taiwan stores. She declined to comment further on the move.

The U.S. chain relies heavily on franchises in more mature markets such as the United States, but traditionally has focused on selfoperated stores in China. It has said previously it is trying to increase the proportion of franchised stores there.

McDonald's, which has close to 20,000 part-time and full-time staff in Taiwan, is also looking to bounce back from a food-safety scare that hit business in China and the wider region last year.

China's fast-food market was worth 798 billion yuan (US$128.53 billion) last year, according to market research firm Euromonitor. Yum Brands Inc's KFC chain had around 5.1 percent of the market, ahead of McDonald's share of 2.6 percent.

CEO Easterbrook has said McDonald's will sell 3,500 restaurants to franchisees by 2018, taking global franchisee ownership to 90 percent from 81 percent now.

Reuters

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Asia

Aussie property crackdown stumbles Australia’s Treasurer Joe Hockey plans bigger fines and jail time for foreigners buying houses that flout restrictions Angus Whitley and Narayanan Somasundaram

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urging Chinese demand for Australian homes is dwarfing efforts to root out illegal buyers as the government struggles to avert a backlash against unaffordable housing.

Since announcing a crackdown on unlawful home purchases in February, the government has forced only one foreigner to sell up. Chinese already buy almost a quarter of new homes in Sydney and their outlay will more than double to A$60 billion (US$46 billion) in the six years to 2020, according to Credit Suisse Group AG. “Forget the anti-corruption,” said Ray Chan, managing director of Sydney-based Henson Properties, which sells homes almost exclusively to Chinese. “A lot of money is coming through.”

Amid concern that offshore demand is pricing locals out of the market, Treasurer Joe Hockey plans bigger fines and jail time for those flouting restrictions. Yet more than six months after a parliamentary inquiry called for a national register of the citizenship of buyers, the database is still a work in progress -- leaving officials with no firm grasp of the scale of overseas purchases.

“Current data on foreign investment in property is inadequate, making policy evaluations very difficult,” Kelly O’Dwyer, the lawmaker who chaired the 2014 inquiry, said in an e-mailed reply to questions.

A fresh inquiry into home ownership holds its first public hearing on Friday, just as Treasury warns of a bubble in the Sydney market.

‘Crazy’ market

Home values in the nation’s biggest city have jumped 40 percent in three

Australia haven’t sold their homes as required.

Homes for children

If local demand tapers away because of economic conditions there will still be some degree of support from overseas markets, particularly China Martin North, principal, Digital Finance Analytics, Sydney

years, while the median house price is now A$900,000, according to CoreLogic Inc. The central bank governor said this month that elements of the Sydney market had gone crazy.

Overseas buyers are largely limited by Australian law to new homes and need approval from the Foreign Investment Review Board.

Temporary residents can buy new or existing properties with the board’s approval, but must sell them when they leave the country.

Last year’s inquiry also recommended existing rules should be better policed. The government suspects many buyers no longer in

Many Chinese fund home purchases for their children who’ve settled in Australia, according to Henson Properties founder Chan, who was born in Shanghai and established the firm in 1984 after emigrating.

“Their wealth is building up so fast in China,” Chan said in an interview at his office near Sydney’s Chinatown, recalling one client who tried to put an A$800,000 apartment on his credit card. He expects prices to rise for at least another three years.

Joseph Zaja, managing director of Ausin Group, which offers Australian real estate to buyers in China, expects his company’s sales to double this year to about 2,500 properties, fetching an average of A$650,000 apiece.

At the current rate of supply, Chinese demand would take out 20 percent of new homes nationwide in 2020, up from 15 percent now, Credit Suisse analysts led by Hasan Tevfik in Sydney said in a report last month.

A severe economic downturn in Australia may take the edge off demand, but the key factor is likely to be the strength of the Australian dollar, Tevfik said by phone. “Anything that makes us less attractive compared to Vancouver, San Francisco or Auckland is going to count against us,” he said.

Chinese demand may not be enough to underpin the market if Australia’s economy worsens, according to Martin North, principal at Digital Finance Analytics in Sydney. As Australia enters its 25th year without recession, growth is

slowing, firms plan to cut investment by the most on record and wages are stagnant.

Tapering demand

“If local demand tapers away because of economic conditions there will still be some degree of support from overseas markets, particularly China,” said North, whose research firm has partnered with JPMorgan Chase & Co. to produce mortgage reports for more than 10 years. “If the prospect of continued capital growth eases, then it is likely the buoyant overseas demand will also fall.”

From December, the government will charge foreigners an application fee of at least A$5,000 to buy homes, as it seeks to fund stronger enforcement. Those who flout the rules may be forced to sell, be fined as much 25 percent of the value of the property or face three years in jail.

Sydney mansion

Hockey has announced just one divestment order -- forcing a firm owned by billionaire Hui Ka Yan’s Evergrande Real Estate Group Ltd. to sell a A$39 million mansion overlooking Sydney harbour.

Authorities are investigating 195 cases.

With the most recent data showing FIRB approved more than 23,000 residential real estate purchases by foreigners in the year ended June 2014, Hockey’s crackdown will do little to ease pressure on home prices, said John Warhurst, a political analyst at the Australian National University in Canberra.

“It’s more of a symbolic gesture than a really hard policy,” he said.

Bloomberg News

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Asia

South Korea draws up US$13 billion budget boost The government forecast growth this year could reach 3.1 percent but only with the help of the supplementary budget Christine Kim

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outh Korea announced a financial package of more than 15 trillion won (US$13 billion) yesterday, including a supplementary budget, designed to boost growth as a deadly outbreak of the MERS virus adds pressure on the already shaky economy.

Finance Minister Choi Kyung-hwan said although there were concerns a supplementary budget could hurt fiscal soundness, it would be better for the economy longterm.

“We were contemplating a supplementary budget to make up for tax revenue shortfall as global growth had been very weak from the start of the year.

Then MERS happened and we had to do it,” said Finance Minister Choi.

A finance ministry director told Reuters much of the funding for the supplementary

South Korean Finance Minister Choi Kyung-hwan

budget would come from sales of short-term treasury bonds. The government aims to present a finalised supplementary budget by early July.

Choi told a news conference earlier he was concerned growth will lag below 1 percent in the second quarter and that such low growth could continue.

The finance ministry said earlier this week the Middle East Respiratory Syndrome outbreak could take 0.2 to 0.3 percentage points off economic growth. MERS affected 180 patients and 29 had died from the virus as yesterday.

Fear of contracting MERS has kept South Koreans’ wallets shut, and sales at department

and discount stores in the first week of June showed doubledigit declines in the previous two weeks, compared to average sales, finance ministry data showed.

Choi said MERS has affected the economy much faster than last year’s Sewol ferry sinking that killed more than 300 aboard and brought down GDP by 0.2 percentage points as it darkened the public mood.

More help needed?

An expansionary stance will be kept for monetary policy to ensure recovery continues, the finance ministry said. The key borrowing rate in South Korea currently stands at a record low 1.50 percent after the Bank of Korea last cut interest rates in June.

Some analysts suggested another rate cut should follow

to give the economy further support.

The government forecast growth this year could reach 3.1 percent but only with the help of the supplementary budget. Inflation for 2015 was revised down to 0.7 percent.

Data out earlier in the day showed consumer sentiment in June fell to its lowest since late 2012.

“Part of this (finance package) will be to offset an expected shortfall in tax revenue, so the boost to local demand may not be as big as the headlines imply. Still, every little bit helps,” Frederic Neumann, co-head of Asian Economic Research at HSBC, said in a note.

Neumann sees another rate cut in the third quarter, which would also help keep the strength of the won against the dollar in check - useful given a current account surplus expected to reach US$94 billion this year, up from US$82 billion forecast earlier.

ANZ Research economists Raymond Yeung and Louis Lam said the stimulus drive should be more aggressive: “A size of 20 to 25 trillion won, equivalent to 1.5 percent of GDP, is required to make a meaningful impact, recalling that the supplementary budget (to support growth) was 17 trillion won in 2013. With MERS in 2015, the package should have been larger.”

Reuters

N. Korea’s ‘landmark’ airport terminal to open on July 1 It opens one of the world’s least-visited countries with few scheduled flights to Pyongyang, mostly from Beijing and Moscow

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orth Korea’s showcase new airport terminal, which had to be partly demolished and rebuilt at leader Kim Jong-Un’s whim, is to open on July 1, state media said yesterday.

Kim called for a grand opening of the new Terminal 2 at Pyongyang International Airport on a tour accompanied by his wife Ri Sol-Ju and sister Kim Yo-Jong as well as senior party officials, the Korean Central News Agency (KCNA) said.

He also enjoyed a bird’s eye view of the terminal, which KCNA described as a “landmark of the Songun (military-first) era”, from his plane.

But the facility, reserved for international civilian flights, risks being virtually empty after it opens as Pyongyang has just a trickle of scheduled foreign flights.

On his tour, Kim told workers and officials he was “very satisfied to see the terminal well built in harmony with modern aesthetic taste and national character”, KCNA reported.

Kim also called for the construction of a high-speed railway and a motorway between Pyongyang and the airport, some 24km northwest of the capital,

and the beautification of surrounding areas.

Kim gave “detailed” instructions on holding a “splendid ceremony for its inauguration on July 1” and the start of passenger services.

KCNA said Kim had visited the construction site several times, issuing instructions and deploying troops for its construction.

He was thought to have

An undated composite picture released by the Rodong Sinmun, the newspaper of the North Korea ruling Workers party, on 25 June 2015 shows the newly built terminal of Pyongyang International Airport in Pyongyang

visited the terminal, the cost of which was not reported, on Wednesday.

Cheong Seong-Chang of the Sejong Institute in Seoul said on Wednesday that in heavily-militarised North Korea, soldiers are widely used in civic construction projects.

Kim has mobilised twice as many as soldiers as his father Kim JongIl, the North’s late leader, deploying some 200,000 soldiers -- one out of every five active servicemen -- to construction sites nationwide, including the airport terminal, resorts, public buildings and apartments.

But in November last year, Kim stopped work on the terminal after inspecting the site. He reproached workers for failing to carry out an earlier order from July that the project should reflect North Korea’s “Juche” (self-

reliance) philosophy and national identify.

Kim said there were “deviations in the interior layout including halls for check-in and departure”, KCNA reported last November.

Parts of these facilities had to be rebuilt.

When the new terminal opens, the airport’s existing terminal is expected to be used only for the country’s few domestic routes.

Kim ordered construction of the new terminal in July 2012 because the existing terminal was considered too small and shabby compared with foreign rivals.

The new terminal is six times larger than the old one, but it remains unclear how North Korea will be able to generate the passenger numbers that would justify its construction.

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

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Asia

India reduces crude imports from Saudi Arabia A glut of African cargoes has emerged as the U.S. shale boom cuts American demand and accelerated as OPEC keeps output high Nidhi Verma

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audi Arabia lost its spot last month as India’s top oil supplier to Nigeria for the first time in at least four years, according to ship tracking data compiled by Reuters, as the world’s top crude exporter struggles to maintain market share in Asia.

The Middle East country’s failure to maintain its position in some markets comes despite it leading a strategy by the Organization of the Petroleum Exporting Countries (OPEC) to keep output high to drive out competitors.

In India, refiners have been switching out of long-term contracts with Middle East suppliers in favour of spot purchases, often African oil.

The share of African oil, mainly from Nigeria and Angola, jumped to 26 percent of India’s total imports in May, up from around 15.5 percent in April and the highest in more than four years, according to tracking data on tanker arrivals.

At the same time, the Middle East share fell to 54 percent in May from 61 percent, with Saudi Arabia supplying

some 732,400 barrels per day (bpd) compared with Nigeria’s 745,200 bpd.

The shift comes as the gap between the international benchmark Brent and the Middle East price marker narrows.

The premium for Nigerian crude over Brent has plummeted in recent months, making it more attractive.

Reliance Industries got about a quarter of its oil in May from Africa, the highest in at least three years.

Indian Oil Corp aims to get 70 percent of its oil needs through term volumes compared to 80 percent last year, including a deal with Kuwait halved to 100,000 bpd.

Another refiner, Bharat Petroleum Corp, plans to cut its dependence on term contracts to 75 percent this fiscal year from 82 percent a year ago, according to a source.

Head of refinery operations at Hindustan Petroleum Corp, B. K. Namdeo, said purchases of West African oil make sense when Brent’s premium over the Middle East price marker, known as Dubai swaps, is less than US$2 per barrel.

KEY POINTS Africa supplied 26 pct of May India imports vs April’s 15.5 pct Middle East oil share fell to 54 pct from 61 percent Indian refiners switch to cheaper African crudes via spot market

The spread has mostly hovered below that since oil prices crashed in the second half of last year and hit its lowest in two months this week at US$1.32.

KBC Energy’s Haq estimates West African oil’s share to India could average as much as 25 percent this year.

Reuters

Australia state kicks off US$10 bln energy sale Interest could also come from State Grid Corp of China with HSBC advising

A

ustralia’s New South Wales state kicked off its muchanticipated A$13 billion (US$10 billion) energy sale yesterday, with keen interest expected from Canadian and Australian pension funds as well as Chinese state-owned enterprises.

State treasurer Gladys Berejiklian said the country’s most populous state will give potential bidders until July 14 to register their interest to buy 49 percent of power transmission company TransGrid.

Combined with stakes in two state-owned electricity distribution networks, the sale - collectively known

as “poles and wires” - is expected to be Australia’s biggest privatisation.

The proceeds are earmarked to fund a host of major infrastructure projects.

“The poles and wires transaction will unlock A$20 billion which will be invested into new roads, rail, hospitals and schools, new sports and cultural facilities, and vital water infrastructure in our regions,” Ms Berejiklian said.

The TransGrid stake alone could fetch at least A$6.4 billion (US$4.9 billion) with leverage levels of up to 90 percent given the steady income stream and monopolistic nature of the company according to banking

sources involved in the process.

The sources were not authorised to speak publicly due to the sensitive nature of the sale.

Potential bidders include Australian Super bidding with Canada Pension Plan Investment Board, and Austrian plastics and fertiliser maker Borealis with Goldman Sachs and Morgan Stanley as financial advisers, according to investment industry sources familiar with the sale.

Other possible bidders are a consortium led by Hastings Funds Management, Cheung Kong Group’s Spark Infrastructure, Abu Dhabi Investment Company, Kuwait Investment Authority’s Wren House Infrastructure and Canada’s Caisse de depot et placement du Quebec, with JP Morgan and RBC Capital advising, the sources have told Reuters.

Other possible bidders are Macquarie Group’s Macquarie Infrastructure and Real Assets Fund as well as a consortium comprising China Southern Grid and Global Infrastructure Partners, an unlisted infrastructure fund run by former Credit Suisse bankers.

Interest could also come from State Grid Corp of China with HSBC advising, according to the sources, who added that they expect consolidation among the bidding consortia given the crowded field.

Deutsche Bank and UBS are advising New South Wales on the sale.

Reuters

Modi launches housing for all schemes in India Indian Prime Minister Narendra Modi yesterday launched three ambitious schemes, including developing smart cities and housing for all. “Every person dreams of having his or her own home. It is not just about a roof and four walls, it is much beyond that. Owning a home is very important, it results in self motivation. A poor man buys a house it gives him dreams, hopes,” Modi said at a function in the national capital.

Housing for all is the Indian government’s flagship program that aims at providing a house for all Indians.

EU ban on AirAsia Philippines lifted The European Commission has lifted a ban on the Philippine unit of Malaysia’s AirAsia offering services to European Union (EU) member countries, an executive of the airline said yesterday. The lifting of the ban which was imposed in 2010 comes as a rare spot of good news for the AirAsia group, which is currently under a cloud after a report questioning the Malaysian company’s accounts sent its share price tumbling.

With the lifting of the ban, the local AirAsia unit could launch a European service in the next three to five years.

S.Korea extends FX borrowing levy Finance ministry said yesterday an existing levy on foreign exchange borrowings by banks will now also be imposed on securities firms, creditors and insurance companies starting July 1. Non-bank institutions with a monthly average of more than US$10 million in outstanding debt will be subject to the amended levy, while the levy will be imposed on all banks as before. Before the amendment, banks were required to pay levies that varied depending on the duration of the overseas debt they had acquired.

Toshiba may add more outside directors The firm wants to help prevent a recurrence of accounting irregularities that are currently under investigation, the company’s CEO said yesterday.

Toshiba has not been able to close its books for the year that ended in March because of the probe, with profits likely overstated by around 54 billion yen (US$436 million) in recent years. It has also skipped its year-end dividend. Chief Executive Hisao Tanaka told a shareholders’ meeting that, while a third-party committee was still examining the extent and cause of the accounting problems, the company was eyeing ways to improve oversight.

20 Thai provinces affected by drought A drought crisis continues to affect 20 provinces in Thailand, despite improvement reported in 20 others, the Department of Disaster Prevention and Mitigation (DDPM) said yesterday. Water shortages are still affecting more than 7,000 communities in 20 provinces, most of which are located in the upper part of the kingdom and some in the east, according to DDPM Director-General Chatchai Promlert. Provincial authorities and the army have strained to provide assistance to drought-hit areas, with water being delivered to villages for household consumption and farming activities, Chatchai said.

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June 26, 2015

International Medvedev says can change list of banned Western imports Russian Prime Minister Dmitry Medvedev said yesterday a list of banned products from Western countries could be changed according to the state of relations with the European Union and other countries. Medvedev told a government meeting he had approved an order by President Vladimir Putin to extend a ban on food imports from the West by one year, a response to the EU’s decision to extend sanctions on Russia over its role in the Ukraine crisis. The list of banned products, which include fruit, vegetables, meat, poultry, fish, milk and dairy products.

Britain to privatise its ‘green’ bank Conservative government yesterday said it planned to privatise its ‘green’ investment bank set up three years ago to financially support environmentally-friendly infrastructure. Finance minister George Osborne said the money raised from selling shares in the bank would be used to reduce the country’s national debt. “In 2012 we set up the Green Investment Bank (GIB) to support important investment in the UK’s green infrastructure and since then it’s gone from strength to strength,” Chancellor of the Exchequer Osborne said in a statement.

Gazprom has funds to build first Turkish line Russia’s top gas producer, Gazprom, has enough funds to build the first line of the planned Turkish Stream gas pipeline under the bed of the Black Sea, Chief Financial Officer Andrei Kruglov said yesterday. He told a news conference Gazprom had yet to decide whether to build the first line, which will have a capacity of 15.75 billion cubic metres a year, with partners or alone.

Cameron’s renegotiation will be tough Belgium has said EU-wide talks on Prime Minister David Cameron’s plan to renegotiate Britain’s relationship with the European Union are likely to be difficult and that his desire to exclude London from the bloc’s aim of ever closer union is problematic. Belgium issued the warning as Cameron prepared to pitch his plans to a summit in Brussels yesterday as leaders of the 28-member bloc grapple with an influx of migrants and the prospect of a Greek default.

“Europe is something ... you work on altogether and you try to achieve something altogether,” Belgian Finance Minister said.

Ukraine heading for September debt moratorium Ukraine is likely to pay all bond coupons falling due over the summer but a US$500 million maturity in September could mark a halt to debt repayments if a restructuring deal has not been reached by then. War-ravaged and on International Monetary Fund life support, Ukraine has threatened to suspend payments if bondholders fail to accept demands for a 40 percent write-down, or “haircut”, in the face value of its sovereign bonds. September’s US$500 million payout will be a major challenge for a country with less than US$10 billion of hard currency reserves.

Brazil leader’s credibility tested as she woos United States investment

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he economy is sliding into recession, her popularity has hit rock bottom, her party’s treasurer is behind bars for alleged corruption and her enemies want to impeach her.

When she visits New York on Monday, President Dilma Rousseff will have a tough time convincing Wall Street her weakened government can pull Brazil out of a stall and save the once-booming nation’s investmentgrade credit rating.

Many doubt her willingness to go to the mat against anti-austerity forces in her own leftist Workers’ Party to rein in the country’s gaping fiscal deficit.

While many U.S. companies are still betting on Brazil’s long-term growth prospects given the huge potential for the nation of 200 million, short-term financial investors are more wary.

Rousseff needs to publicly embrace as her own the fiscal adjustment plan of Finance Minister Joaquim Levy, because the market is still pricing in a probability of backtracking, or worse, that Levy could be fired, investors said.

Rousseff, whose popularity has been hammered by a bribery scandal engulfing state-run oil company Petrobras, may face pressure to further shake up her team as unemployment rises and target-breaking inflation persists.

Rousseff will meet President Barack Obama at the White House on Tuesday and then fly west to visit Google Inc. and see top executives of other Silicon Valley companies such as Apple Inc. and Facebook Inc., for which Brazil represents the second-largest market by users.

Business leaders hope Rousseff’s trip will open up the untapped potential for trade and investment between the hemisphere’s two largest economies by restoring high-level ties frozen in 2013 following revelations leaked by former NSA analyst Edward

China overtook the United States as Brazil’s top trade partner in 2009 but only buys commodities. Xi Jinping with Dilma Rousseff in their last meeting

She will be greeted with a healthy amount of scepticism. I hope difficult questions are asked Paul DeNoon, senior debt portfolio manager, AllianceBernstein, New York

Snowden that the United States spied on Rousseff and other Brazilians.

New chapter

Rousseff has good reasons to turn the page on the NSA eavesdropping incident and seek closer U.S. relations

South African banks’ bad debt to increase Labour conflicts, energy supply disruptions and poor governance in the public sector were the “key” wounds that could be remedied to help economy Renee Bonorchis

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outh African banks face increased bad-debt levels and costs because of the country’s “own goals,” including power cuts and the threat of a ratings downgrade, according to the head of First National Bank (FNB), Jacques Celliers.

“What we mustn’t see is a downgrade, so everyone must do their part to not get this country into a downgrade,” Celliers, 43, said Wednesday in an interview at Bloomberg’s Johannesburg offices.

“If we can just reduce the own goals, then it would be very good.”

Standard & Poor’s cut the nation’s credit rating to the lowest investment-grade level in June last year and Fitch Ratings has it on a negative outlook as a power shortage constrains Africa’s most industrialized economy. Downgrades would mean higher funding costs for banks, while consumers are bracing for an increase in interest rates as inflation accelerates, adding to the strain from

as she tries to kick-start the economy: the United States is Brazil’s fifthlargest export market and the only one where Brazilian exports grew last year, by 8.9 percent.

The United States is the main market for Brazil’s manufactured goods, from software to passenger jets, and its best hope for the capital and technology it needs to innovate, boost growth and employment, and modernize its deficient infrastructure.

U.S. oil companies are keen to get a crack at Brazil’s huge offshore deposits known as the subsalt region, especially if a proposal before the Brazilian Congress succeeds in reducing the current mandatory 30 percent stake and sole operator role for Petrobras.

Political-military talks will resume for the first time in two years, opening the way to increased defence and security cooperation that will foster closer ties between the two countries’ aerospace and defence industries.

Reuters

higher taxes, power cuts and rising electricity prices. Fuel costs are rising for motorists after a dip caused by a drop in the price of oil.

FNB, as it’s known, is the consumer banking unit of FirstRand Ltd., Africa’s biggest bank by value.

Celliers’ comments echo the views of Goldman Sachs Group Inc., which said in December South African growth was slowing partly due to “self-inflicted” wounds.

Indian expansion

Colin Coleman, a partner at Goldman Sachs, said labour conflicts, energy supply disruptions and poor governance in the public sector were the “key” wounds that could be remedied.

While South Africa is mired in slow growth, estimated by the International Monetary Fund at 2 percent this year and 2.1 percent in 2016, FNB is opening its first branch in Guernsey next week and examining ways to expand in India and Africa, Celliers said.

“We had such a windfall on the one side with the fuel price, but then the lights don’t go on,” he said. “But we’re quite bullish. We’re on the front foot.

We’re in a good space in the business.

We’re very busy, and it’s good busy.”

Bloomberg News

Business Daily | 15

June 26, 2015

Opinion Business

wires

Is financial repression here to stay?

Leading reports from Asia’s best business newspapers

THE KOREA HERALD More than three out of five companies in South Korea have expressed support for the country’s participation in a U.S.-led regional free trade deal, known as the Trans-Pacific Partnership, citing a possible hike in exports, a survey showed yesterday. The TPP is a multilateral free trade pact over which negotiation currently involves 12 countries including the U.S., Japan, Australia and Canada, which accounted for about 40 percent of the global economy. South Korea expressed interest in participating in TPP in late 2013 but has not yet made an official decision on participation.

THE PHNOM PENH POST Cambodia’s largest bank, Acleda Bank, announced yesterday that it was infusing US$40 million to add to its current capital of US$226 million, as it looks to expand domestic and foreign operations and keep up with the rising demand for credit in the Kingdom. In Channy, president and group managing director at Acleda, said this round of capital increase will finance branch expansions locally and internationally and the deployment of their electronic banking infrastructure.

“And we plan to open around 260 offices and increase staff numbers by 11,642 employees,” he said.

PHILSTAR The Philippines has the potential to become a preferred training hub by multinational companies due to its English-speaking and skilled workforce, the Department of Trade and Industry (DTI) said. Trade Undersecretary Ponciano Manalo Jr. told reporters more companies are looking at the Philippines as the location for their training facilities because Filipinos can speak English well and can easily be trained. “The Philippines is beginning to be looked at as a training hub or training centre,” he said. Among the companies interested in making the Philippines its training hub is aircraft manufacturer Airbus.

TAIPEI TIMES Taiwan Power Co yesterday urged large consumers of electricity to join its new “demand bidding” program, under which it “buys back” power from big users capable of reducing their energy consumption. The state-run utility, which launched the program last month, is asking big power users to “bid” on how much power they can forgo on a particular day and at what price per kilowatt-hour (kWh). The utility paid as much as NT$9.5 per kWh to program participants for their electricity over the past week, when the supply of electricity was tight due to spiralling demand amid high temperatures, Taipower president Chu Wen-chen said.

Howard Davies

Former Chairman of Britain’s Financial Services Authority, Deputy Governor of the Bank of England, and Director of the London School of Economics

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here are several definitions of financial repression – and the repressors and the repressed tend to see things differently. But what financial repression usually involves is keeping interest rates below their natural market level, to the benefit of borrowers at the expense of savers. The borrowers are often governments, and in many emerging economies the state has funded its extravagances by paying bank depositors derisory rates of interest.

But in the last seven years, since central banks in developed countries pushed down their base rates almost to zero, we have seen a First-World version of financial repression. A recent research report from the insurer Swiss Re describes who has won and lost as a result, and questions the sustainability of the policies pursued by institutions such as the United States Federal Reserve, the European Central Bank, and the Bank of England.

The report’s argument is that while the stated motivation for ultra-loose monetary policy might be to guard against deflation and promote economic growth at a time when demand is weak, low interest rates also help governments fund their debt very cheaply. Moreover, as we enter the eighth year of aggressive easing, unintended consequences are starting to appear – notably asset-price bubbles, increasing economic inequality (as wealthier investors able to hold equities benefit at the expense of small savers), and the risk of higher inflation in the future.

The jury may be out on the last point, but the first two are well established. Many countries now have over-heated property and equity markets; in the US, the S&P 500 index since 2009 has closely tracked

Central banks accept that their policies have led to distortions in financial markets

the expansion of the Fed’s balance sheet. As a result, priceearnings (P/E) ratios, which reflect investors’ enthusiasm for equities, are now high by historical standards (Swiss Re has a Financial Market Excess index, which has returned to its 2007 level).

Moreover, according to the Swiss Re report, “monetary policy and central bank asset purchases have aggravated economic inequality via equity price inflation.” The top 1% of US households have enjoyed a 50% gain in their financial wealth, while the bottom 90% have registered only a 12% profit. The bottom 20% have probably not benefited at all.

Not surprisingly, central banks do not like this argument. Fed Chair Janet Yellen insists that years of near-zero interest rates and quantitative easing were not intended to make it easier for the US government to fund its deficit. She argues that focusing on asset prices ignores the role – helpful for all income groups – of the Fed’s monetary

policy in maintaining growth and thus warding off the threat of a wholesale depression.

But central banks accept that their policies have led to distortions in financial markets.

For example, institutional investors, especially insurance companies and pension funds, have suffered badly. They are major holders of fixed-interest securities, and their investment income has fallen sharply.

The returns they can provide to investors and pensioners have similarly fallen. Logically, therefore, individuals need to save much more to guarantee their income in retirement.

That in itself may have a depressing effect on the economy, partly offsetting the monetary stimulus. Indeed, it may be one reason why highly expansionary policies by the Fed and other central banks have taken so long to generate growth.

A further distortion stems from the prudential regulation adopted in reaction to the global financial crisis. The imposition of higher capital requirements on riskier investments has pushed financial institutions into holding government debt, which in turn means that they have less money available to lend for productive investment.

Most countries have yet to see investment recover to pre-crisis levels.

On this analysis, a return to “normal” interest rates cannot come soon enough. The alternative is further financial repression and, with it, low investment, rising economic and social tensions, and the emergence of a generation of impoverished pensioners. Like Monty Python’s city-terrorizing “Hell’s Grannies,” tomorrow’s elderly will surely make their voices heard.

But can we really expect the old normal – positive long-term

interest rates on government bonds – to return? Maybe it is unreasonable for investors to expect positive rates on safe assets in the future. Perhaps we should expect to pay central banks and governments to keep our money safe, with positive returns offered only in return for some element of risk.

One reason is that investment may never reach its previous levels. If a service-based economy simply has less need for expensive fixed capital, why should we expect a return to the days when business investment was a strong component of demand? Apps are cheap.

Furthermore, excess savings could be more than just a cyclical phenomenon.

Individuals may have come to value future consumption, in retirement, over current consumption – the reverse of the traditional relationship. We are beginning to appreciate that in our productive years we must work harder, because our retirement years will be longer and healthier, and the income support provided by our governments and employers will be far less generous than they used to be. In other words, it is rational to save more now.

In the long run, such a brave new world might not be an intolerable place. But the transition from here to there will be very challenging for financial firms, be they banks, asset managers or, particularly, insurers. The types of products that the latter offer to their customers will need to change, and the mix of assets in which they invest will be different, too. The question for regulators is whether, in responding to the financial crisis, they have created perverse incentives that are working against a recovery in long-term private-sector investment.

Project Syndicate

16 | Business Daily

June 26, 2015

Closing HK regulator slams proposal to change listing rules

Authorities to foster textile industry in Xinjiang

Hong Kong’s securities regulator does not support a controversial proposal by the city’s stock exchange operator to change the city’s listing rules, the regulator said in a statement on its website yesterday. The Securities and Futures Commission (SFC) said its board had unanimously concluded it did not support the draft proposal put forward last Friday by Hong Kong Exchanges and Clearing Ltd (HKEx). HKEx is proposing a review of the listing rule that gives each shareholders equal voting rights in a company. The rule last year led to the bourse losing the record US$25 billion IPO of Alibaba.

China’s Cabinet issued a guideline yesterday to bolster the textile and garment industry in the western Xinjiang region in the hope of increasing local employment and exports. The country plans to build Xinjiang into a major textile base by 2020 to facilitate exports to its western neighbours, according to the State Council. The guideline specifies investment in industrial parks in Aksu, Shihezi, Korla and Alaer, and a focus on clothing, knitting and carpet industries in southern Xinjiang. A major cotton base that boasts sufficient raw materials and low labour costs, the areas are eyed by the government as the site of a new pillar industry.

Alibaba affiliate launches Internet bank for SMEs The new bank follows in the footsteps of arch-rival Tencent Holdings Ltd, which began trial operations of its WeBank in January Engen Tham and Paul Carsten

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libaba Group Holding Ltd’s financial affiliate launched yesterday Internet bank MYbank, targeting the small- and medium-sized Chinese enterprises that have struggled to obtain credit from major financial institutions.

MYbank, which is 30-percent owned by Alibabalinked Ant Financial Services Group, has 4 billion yuan (US$644 million) of registered capital and will offer loans of up to 5 million yuan (US$805,503), it said in a statement.

It will only be able to take in deposits when regulators approve a facial recognition technology that allow its customers to remotely open bank accounts, an Ant Financial spokeswoman told Reuters.

“MYbank is here to give affordable loans for small and micro enterprises, and we are here to provide banking services, not for the rich, but for the little guys,” said Eric Jing, Executive Chairman of MYbank.

MYbank follows in the footsteps of Alibaba archrival Tencent Holdings Ltd, which began trial operations of its WeBank, China’s first online bank, in January.

MYbank’s target clientele means it will pose

Hong Kong’s exports value down 4.6 pct in May

little immediate threat to China’s big state-owned lenders, who have seen deposits eroded by Alibabarelated wealth management product Yu’e Bao, which his now China’s biggest moneymarket fund.

The Internet bank said its lower overheads from operating online allowed it to offer more competitive interest rates, compared to the bigger banks.

Credit conditions have remained tight for SMEs,

despite a series of policy easing, as banks avoid the companies worst hit by an economic slowdown. Stateowned banks have also avoided customers such as farmers and smaller businesses because of the difficulties in assessing their credit worthiness and they have little to offer as collateral.

Ant Financial has said it will use its Sesame Credit arm, which analyses data from its payment processing arm Alipay and Alibaba’s e-commerce sites to assess risk and price loans for MYbank customers.

Some analysts, however, said MYbank would still face risks.

“The biggest risk for them is more than likely going to be credit costs, and will they be able to properly assess the risks?” said Matthew Smith, a banks analyst at Macquarie. “It’s not clear, if they grow too aggressively, potentially the answer would be no.”

Reuters

Vietnam approves controversial Japan to stop inefficient coalUS$16 bn mega airport fired power plants being built

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ong Kong’s total exports’ value in May decreased 4.6 percent while the value of imports dropped 4.7 percent year-onyear, Hong Kong’s statistics department said here yesterday.

The value of total goods exports decreased to HK$291.8 billion (about US$37.5) from a year earlier, after a year- on-year increase of 2.2 percent in April.

Within this total, the value of re-exports decreased 4.4 percent to HK$287.6 billion, while domestic exports fell 19.6 percent to HK$4.3 billion.

The value of goods imports lost 4.7 percent to HK$331.9 billion, after a year-on-year decrease of 2.9 percent in April.

A visible trade deficit of HK$40.1 billion, equivalent to 12.1 percent of the value of goods imports, was recorded in May. A government spokesman said looking ahead, Hong Kong’s export performance is likely to remain constrained by the slow global economic recovery.

awmakers in Vietnam voted yesterday to build a controversial new US$16 billion airport near Ho Chi Minh City, as the country vies to become one of the world’s busiest aviation hubs.

The project aims to ease airport congestion in Vietnam’s business hub and cater to an ambitious 100 million passengers and five million tonnes of cargo a year by 2050.

“Building the international Long Thanh airport has been approved by the National Assembly with 86 percent of votes in favour,” the communist state said in a posting on its government website, adding the new airport would be built around 40 kilometres from the city.

But the plan has sparked vigorous public debate in the country, with many questioning why the existing airport could not be expanded.

The problem appears to be a large golf course, owned by Vietnam’s powerful military, that sits right next to the existing Tan Son Nhat Airport. The government has ruled out expanding onto this land.

Xinhua

AFP

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apan plans to stop power firms building coalfuelled plants that are inefficient and dirty as it manages the competing demands of cutting greenhouse gas emissions while stepping up use of the fuel after the Fukushima disaster, officials said.

The government has come under fierce criticism from environmentalists and more subtle pressure from allies over its support for coal, the use of which has surged to record levels after the shutdown of reactors.

The government aims to have coal account for 26 percent of the electricity mix by 2030. After Fukushima it went up to nearly a third, against 24 percent before the meltdowns.

Ultra-super-critical plants get the most energy from coal, although more efficient technologies are emerging.

The government is opening up the US$65 billion retail electricity market to full competition from next April. They plan to build about 40 more coal stations in the next decade.

Reuters