Year II Number 258 MOP 6.00 Wednesday April 10, 2013 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: Vitor Quintã www.macaubusinessdaily.com
Casino investors patient over ‘flu scare Page 2
Property cooling policies creating panic buying: agents A special tax on property sales is heating, not cooling, the local housing market suggested estate agents at a press conference yesterday. They say its introduction for home sales in June 2011 continues to cause panic buying. It’s also making existing owners horde property out of resentment that selling would risk profits being snatched by the government. Market sentiment accounts for “20 percent” of current price levels suggested Jacky Shek Po Tak, director of Centaline (Macau) Property Agency Ltd. Shop and office prices continue to grow despite a stamp duty imposed in October. Industrial units – that have no tax currently on sale profits – saw prices rising 20 percent in the first quarter.
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Consumers should watch Internet security: seminar
New flats sales soon in ‘Beverly Hills’ of Macau
A huge volume of tourists, a spreading free wireless Internet network, and some less than optimal information technology practices in local businesses are combining to create a major challenge to computer security in the city. “People can easily forget security principles, open the Wi-Fi and connect with banks to make payments, which would expose them to a lot of possible risks,” says Giuseppe Vaciago from the University of Insubria in Italy. He is visiting Macau for a five-day seminar on the combatting of computer-related crime.
Luxury flats in one of the city’s most upmarket areas – Penha Hill, overlooking Sai Wan Lake on the peninsula – start pre-sales this quarter. The move might enable Hong Kong-based developer Tomson Group Ltd to start marketing the near-100 units prior to new rules on pre-selling property in the city. A law – due to take effect “before the end of the second quarter” according to the government – includes a requirement that building foundations must be in place before any deposits or other money can be taken from buyers.
Hengqin university campus completion delayed to late April Page 2
Hotel occupancy at 90pct plus: HVS report Page 6
Monopoly era casinos ‘seedy’, had ‘criminals’: Suen Page 7
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Gaming stocks recover as bird ‘flu fears ease – for now Michael Grimes
acau’s casino company stocks rallied yesterday. It followed sell-offs last week reportedly on fears of a downturn in Chinese domestic tourism after a deadly bird ‘flu outbreak in the mainland’s eastern provinces. “At this stage, we consider fears regarding the avian virus as premature and a little overblown,” said John Kempf an analyst at RBC Capital Markets – a Canadian bank – in an e-mailed statement. “Right now, these appear to be isolated cases not near Macau, and we are not anticipating a breakout similar to the SARS [severe acute respiratory syndrome] virus that occurred in [the] early-2000s. Monthly detailed gaming revenues continue to show the strength of the Macau mass market, which is contributing to the bounce we are seeing today,” added Mr Kempf. On Thursday five of the six Macau-linked gaming names had seen stock price falls of between 2.1 percent and 5.6 percent, compared to the S&P 500 index performance that day which slipped by only 0.2 percent. Cameron McKnight of Wells Fargo Securities LLC in New York
said in a note overnight that day the likely cause was concern over “a new deadly variant of avian influenza, H7N9.”
VIP turnover Meanwhile Kenneth Fong of J.P. Morgan Securities (Asia Pacific) said in a note yesterday the volume of VIP baccarat gambling chips sold in Macau – a figure not affected by the ‘luck’ factor of casino hold rates for the game – rose by 10 percent year-on-year in March. It helped contribute to an expansion in high roller gross revenue of up to 25 percent during the month compared to a year earlier. Anil Daswani, of Citigroup Inc.’s Citi Research unit, estimated March VIP revenue growth at 24 percent based on the 10 percent rise in chip sales volume. Mr McKnight of Wells Fargo said in a note on Monday United States time that VIP revenue showed a slightly greater than 25 percent expansion in March. Mr Daswani suggested MGM China Holdings Ltd and Galaxy Entertainment Group Ltd had gained the most from the VIP
H7N9 – a bird problem that’s flown?
uptick, recording respectively a 1.7 percentage point and 1.3 percentage point rise month-on-month in Macau revenue market share. “MGM [China] was the best performer, regaining share both in VIP and mass [market],” said Kenneth Fong of J.P. Morgan. “By junket rolling chip share, MGM experienced the strongest month-on-month improvement of 1.8 while Wynn [Macau Ltd] saw the largest decline of 1.4 percent month on month. We believe the chips share decline for Wynn is in part driven
by a very high VIP luck factor last month,” added Mr Fong. In Hong Kong trading yesterday Galaxy closed up 3.94 percent at HK$31.70; MGM China gained 3.73 percent to finish at HK$16.70. Melco Crown Entertainment Ltd, only lightly traded in Hong Kong, was at HK$58.45 an upward movement of 3.45 percent. Sands China Ltd closed at HK$38.55 up 1.45 percent, while SJM Holdings Ltd concluded at HK$19.20, a gain of 1.27 percent. Wynn Macau Ltd ended the day 3.21 percent up at HK$20.90.
Hengqin campus completion delayed University of Macau campus was due to be delivered to the authorities last month Tony Lai
he Macau government will have to wait at least 10 more days to get full control over the new campus of the University of Macau on Hengqin Island. Guangdong-based contractor Nam Yue Group Corp Ltd was supposed to deliver the site last month. Mainland Chinese newspaper Legal Daily reported yesterday that the construction works could be completed by April 20 without quoting any sources. The official newspaper run by the Ministry of Justice’s Committee of Political and Legislative Affairs did not mention any reasons behind the delay. Chief Executive Fernando Chui Sai On had said in February that the new campus should be ready to be “transferred to the Macau side by the end of March”. Business Daily tried to confirm the delay with the Infrastructure Development Office yesterday, in charge of monitoring the progress, but received no reply before press time. In a Monday reply to Business Daily the office had admitted that two construction monitoring contracts for the campus originally set to end last year had been extended to “March
to April [sic]” 2013. The university is planning to start trial operations in the new campus by June and have it operating fully in September, in time for the new academic year. The campus construction, which began in late 2009, was far from smooth. A cave-in last July in an underwater tunnel connecting Macau to the campus led to the suspension of the works for several months. If another incident occurs, there are two piers in the campus to ensure students can return to Macau, Cheang Seng Chio, who heads the Security Forces Coordination Office, said yesterday. Public broadcaster TDM quoted him as saying the Macau and Zhuhai governments hope to finalise an emergency evacuation plan by the time the campus opens. The Commission of Audit also released a report in January slamming the authorities because the campus budget ballooned to over 10.2 billion patacas (US$1.28 billion) from an initial estimate of 5.8 billion patacas. With V.Q.
April 10, 2013 business daily | 3
Global anxiety to dent home prices Government has rare opportunity to scrap special stamp duty regime, say estate agents Tony Lai
Sales of industrial units thrive with no curbs Shop and office prices continue to grow despite latest curbs Tony Lai
he market for industrial unit sales was red-hot in the first quarter, as investors have turned their heads to such spaces, which are not covered by the latest property curbs. Roy Ho Sao Hang, senior regional sales director of Centaline (Macau) Property Agency Ltd, said the price of industrial units rose by 20 percent from last year’s average to 2,300 patacas (US$287.5) per square foot in the first quarter. A unit with over 34,000 square feet in Areia Preta’s Ocean Industrial Centre was sold for 85.7 million patacas in March – an average of 2,500 patacas per square foot, according to the agency. “Industrial units performed the best among all type of properties in the first quarter as the price for such units is still relatively low and it is not covered by the latest curbs,” Mr Ho told a press conference yesterday. The administration extended the special stamp duty on re-sales of homes to offices, shops and car parking spaces in October. Rents for industrial units also went up to 6 patacas per square foot from 5 patacas per square foot, the agency said. Mr Ho is optimistic over this segment as there is more demand for industrial units thanks to soaring prices in other segments of the property market. The number of transactions in commercial spaces amounted to about 300 in the January-March period, dropping by 60 percent from the previous quarter, said Mr Ho. But the average price continued to rise by 5 percent to 10 percent in the
first quarter, with downtown shops reaching 49,800 patacas per square foot, according to data compiled by Centaline. A shop close to Senado Square, with about 1,400 square feet, was sold last month for 81.8 million patacas, according to the estate agency. The shop is currently rented to a watch retailer for 130,000 patacas per month, it added. Shops in the NAPE district, particularly the west side, surged the most by 30 percent to 27,135 patacas per square foot in average. “I believe more owners in west NAPE will divide their shops into smaller units to have higher rents as the market there remains prosperous,” said Mr Ho. The average office price also increased by 10 percent from last year’s average to 4,800 patacas per square foot in the first quarter, data shows.
n uncertain global outlook and Hong Kong’s stagnant housing market will moderate Macau’s flat prices but scrapping the special stamp duty would increase supply and help prices fall further, according to some real estate agents. “There is room for home prices to go down by 5 percent in the second quarter as there are some uncertainties clouding the market here that affect market sentiment,” said Centaline (Macau) Property Agency Ltd director Jacky Shek Po Tak. Mr Shek was referring to the H7N9 bird flu outbreak in the mainland, tensions on the Korean peninsula, banking strife in Cyprus and a sluggish housing market in Hong Kong in his review of the property market. “The psychological state [of the market] is an important factor in setting up the housing price, taking up by 20 percent of price,” he said yesterday. The average price of dwellings in Macau was 70,385 patacas (US$8,798.10) a square metre in February, a 71-percent surge over the same time last year, government data show. Mr Shek said the special stamp duty has sustained high prices since its introduction in June 2011. “The special stamp duty has tightened housing supply, which spurs the price,” he said. The government’s regime imposes a 20-percent duty on the price of homes sold within one year of purchase. A 10-percent levy is charged if the dwelling is sold within two years. The regime was extended to offices, shops and car parks last October.
Stamp out Ricacorp (Macau) Properties Ltd executive director Jane Liu Zee Ka agrees with Mr Shek. “The [special stamp duty] rule has
affected the circulation of secondhand flats in the market, which is unhealthy,” she told Business Daily. “Many [flat owners] just hold up the sales and lease the flats as the rental market is prosperous.” “The sales of many new projects this year seem to be red hot, partly due to the fact that the buyers have no other option when there is no supply in the second-hand market.” Centaline says there were 3,800 transactions in the period from January to March – more than 1,260 transactions a month and much lower than the average of 1,400 transactions a month last year. Second-hand home sales account for about one-third of the transactions. “The second-hand flat sales should take up 60 percent of the total sales in a healthy market,” said Ms Liu. Roughly one in every two residential units sold in the first two months of this year cost 4 million patacas or more, the Statistics and Census Service reported on Monday. With the special stamp duty restrictions on the first batch of flats under the regime due to lapse this June, Mr Shek said “the government should take this chance to start considering whether this policy should continue”. Stamp duties had already “successfully stopped” speculation, he said. The government should focus on increasing the housing supply rather than on introducing new curbs. “But the market has prepared for facing new measures. Many of our customers have recently said they would wait until the end of this month before taking any action to see if there are any new curbs,” he said. Following the introduction of enhanced restrictions in Hong Kong and the mainland over the past two months, Chief Executive Fernando Chui Sai On said on March 4 that the government could take new measures to cool the market “at an appropriate time”.
MOP81.8 million Transaction value of a shop close to Senado Square, with about 1,400 square feet, according to Centaline Macau
One out of every two flats sold in January and February cost 4 million patacas or more
business daily April 10, 2013
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HOSPITALITY No stopping them The number of visitors in the first two months of this year was 2.1 percent higher than in January and February last year. In contrast, the number of visitors in January and February last year was 8.3 percent higher than in the first two months of 2011. This indicates that growth in the number of visitors is continuing to slow. Most of the increase was due to the rise in the number of visitors from mainland China. The number of mainland Chinese visitors in the first two months of this year was 7.2 percent higher than in January and February last year. The same figure in January and February last year was 14.2 percent.
Experts issue warnings about internet security Phishing and smartphone apps are the new focus of computer security Stephanie Lai
Geoffroy Thonon, principal consultant of MOCERT
The quarterly data for the past five years show how the number of mainlanders mostly determines the total number of visitors we get. The plots for the total number of visitors and the number of mainlanders are almost perfectly parallel. And they show that the proportion of visitors that are mainlanders has been slowly but steadily increasing. Since the middle of 2009 the number of visitors per quarter has risen from about 6 million to about 7 million. All-in-all, the number of visitors is still rising, but more slowly than before, and mainlanders are still the main driver of the growth. The slower growth may allay some of the worry about the city bursting at the seams. But slower growth is still growth. And, given the huge number of visitors we get already, even a slower growth rate can still result in significant increases. J.I.D.
Proportion of visitors in January and February that were mainlanders
acau is vulnerable to cybercrime owing to the volume of tourists and spreading Wi-Fi coverage, information technology experts believe, and they warn IT users to be extra cautious about internet security. “You have more than 25 million people visiting Macau annually and you cannot control all this human traffic,” University of Insubria law lecturer Giuseppe Vaciago told Business Daily yesterday. “Ninety percent of these people are spending money and making transactions via the Internet, so there is a great problem with security issues like money laundering or fraud.” Mr Vaciago and UN Interregional Crime and Justice Research Institute project officer Francesca Bosco are conducting a five-day cybercrime seminar which began here on Monday. “I’m quite optimistic over Macau’s legal instruments, like the personal data protection law, and the expertise in dealing with it,” said Mr Vaciago. “But open Wi-Fi can be a delicate point, especially in hotels,” he said. “People can easily forget security principles, open the Wi-Fi and connect with banks to make
payments, which would expose them to a lot of possible risks.” Geoffroy Thonon, the principal consultant of the Macao Computer Emergency Response Team Coordination Centre, told Business Daily that phishing websites had been the main problem for organisations and individuals here. Phishing is an attempt to acquire information by posing as a trustworthy website. “Bank customers are targeted,” said Mr Thonon. “There is a phishing website saying, ‘Please log in or you will longer be able to access the site,’ where, indeed, the name of the user and password get hacked. This has happened quite often.”
Caution required Users also overlooked keeping their web servers constantly up to date, Mr Thonon said. “A lot of people have not patched their servers,” he said. “The government sector and commercial units did keep up to date with the servers, but the dot org and the dot mo are the weak parts.” Out-of-date web servers can be vulnerable to outsiders “taking over
the administrative rights of your computer and putting up ‘phishing’ websites,” Mr Thonon said. “We did see cases happen here in Macau before, not only those hosted overseas.” He said he had not seen any reports of social engineering cases happening in Macau so far. In a typical social engineering case, a hacker poses as a customer of a company to receive payments or get access to the company’s confidential information. “We’re keeping an eye on bitcoin mining, though we haven’t seen any cases of that in Macau yet,” said Mr Thonon. Malicious software can hijack a computer and force it solve complex mathematical problems in order to gain bitcoins, a virtual currency. Mr Vaciago said cyberattacks via smartphone apps could be a new trend. “Recently, in Europe, there was a case where a smartphone game app succeeded in hacking users’ personal data,” he said. “This is the next challenge now: the perception of consumers over smartphone security or privacy protection is totally zero in some parts of the world.”
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April 10, 2013 business daily | 5
Luxury Penha Hill flats for pre-sale this quarter Hong Kong developer readies low-rise property near World Heritage site Vítor Quintã
Penha Hill is one of the most noble residential areas in Macau
eveloper Tomson Group Ltd is preparing to launch a presale marketing campaign this quarter for high-end flats in Penha Hill, the project’s principal agent
Jones Lang LaSalle said. The project will have less than 100 units and “less than 50 percent” will be up for early purchase, Jeff Wong Chi Wai, head of residential property
at Jones Lang LaSalle (Macau) Ltd told Business Daily. The selling price could be even higher than for other luxury projects, he admitted. “Units at One Central have been selling at HK$12,000 [US$1,500] per square foot,” or HK$129,171 per square metre. “Unlike properties like Windsor Arch and One Grantai this is a low-density project, which is really important for luxury properties,” Mr Wong stressed. The gross floor area of the project is 22,842 square metres, “owing to a change in design and in response to comments from the local authorities,” Tomson Group told the Hong Kong Stock Exchange in September. The buildings will be seven- to 12-storey high, Mr Wong said, without saying how many towers would be built. The construction of the property’s superstructure began in July and the buildings could be ready by late
2013, Tomson Group said in the September filing. But Mr Wong admitted the project completion would be pushed back to “mid next year”. Business Daily tried to get a comment from Tomson Group but received no reply before press time. The group holds a 70 percent interest in the project. The Hong Kong-based developer is not willing to sell all the units at once because it is confident that “in the long-term the luxury segment is still strong”. The project is located in the middle of the Penha Hill, with a view to the Sai Van Lake, and just a few minutes’ walk from the World Heritage site of the Penha Monastery. Less than 20 new units located at the Penha Hill area have been sold in the past 10 years and there are no new developments planned for the area, Mr Wong stressed. “Penha Hill is a traditional luxury residential area in Macau where most of the properties are held by local affluent community. Properties in the area are seldom available for sale,” he said in a statement.
22,842 sqm gross floor area of Tomson’s Penha Hill project
business daily April 10, 2013
macau Negotiations start over Japan tax deal
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A delegation with representatives from Japan’s Ministry of Foreign Affairs and Ministry of Finance will be in Macau tomorrow and on Friday to start negotiations for a tax information exchange deal with the territory, the Ministry of Finance said in a statement published on its website yesterday. The territory has so far concluded tax deals with 15 different countries or regions. A further 16 are still under negotiation, the Financial Services Bureau told Business Daily. Those jurisdictions include Malta, South Africa, Germany, United Kingdom, Spain, Ireland, New Zealand and Vietnam, the bureau added.
Trade links Economic ties between mainland China and Macau have grown. The reliance of our tourism and gaming industries on mainlanders is just the most visible aspect of an increasingly strong connection. Fresh food is another thing that we are highly dependent on the mainland for, most of our supply coming across the border. The flows of tourists and fresh food across the border have risen visibly. Other commercial exchanges are not so visible. But the data tell us that external trade, in general, has risen in a similar manner, driven up mainly by imports.
The Sheraton’s Earth Tower in Sands Cotai Central opened in January
Good omens seen for hotel business But HVS says growth in the number of visitors will remain slow After dropping sharply in the second half of 2008, imports have been rising steadily since early 2009. It took imports two years to recover from the contraction in 2008. Two years later still, their value was averaging nearly 2 billion patacas (US$250 million) per month. This was at least double the monthly value of imports at the depth of the international financial crisis, and well above the monthly value of imports before the crisis, when it averaged about 1.5 billion patacas. The value of exports is just a fraction of the value of imports. Exports have followed a different path. They also dropped in 2008 but have not properly recovered since. The monthly value of exports now seems to oscillate around 100 million patacas, and varies widely from month to month. In 2008 the monthly value of exports was typically over 150 million. Since 2009 the value of imports from the mainland as a proportion of all imports has been between 30 percent and 35 percent most of the time, having been above 40 percent before. Because exports have decreased, the value of exports to the mainland as a proportion of all exports has remained between 10 percent and 20 percent, with a slight upward trend. J.I.D. The content of this column is the work of Business Daily’s journalists.
Coverage of trade with the mainland in 2012
acau had the second-best performing hotel industry in Greater China last year, and business will remain healthy throughout this year, says an HVS report released yesterday. “Macau’s occupancy level in 2013 is expected to remain strong,” says HVS, a consulting and services company that focuses on the hospitality, gaming and leisure industries. Official data show that last year the average rate of hotel occupancy here was 83.07 percent, the second highest since the Statistics and Census Service began collecting data in 1997. The latest quarterly report by HVS’s Hong Kong office on the hotel business in mainland China, Taiwan, Hong Kong and Macau is written by analysts Cathy Luo and Daniel J. Voellm. It says the “success” of the Sheraton’s Earth Tower is a reason for optimism about the hotel business here. The Earth Tower is the third hotel tower in Sands Cotai Central.
It opened in January, adding 2,067 rooms to the market. The average occupancy level in both Sheraton hotel towers hit 96 percent during the Lunar New Year holidays and remained “in the high 90’s” during Easter, Sheraton Macao told Business Daily. The report says mainland Chinese made up 58.7 percent of all hotel guests here last year, 1.8 percentage points more than in 2011, and that the predominance of mainlanders will continue. “Leisure demand from Chinese tourists will continue to dominate the market due to a favourable exchange rate for the renminbi,” it says. The Monetary Authority of Macau’s website says the yuan has strengthened by 1.8 percent against the pataca in the past 12 months. The HVS report says growth in the number of tourists coming to Macau will remain slow in the long run. The number grew by just 0.3 percent last year. “Regional gambling competition is set to increase, limiting the potential for visitor arrivals growth
in the absence of new additions to supply,” it says. No new big resort is due to open in the Cotai Strip before 2015. The report compares the performance of hotels here; in Hong Kong; in the Taiwan cities of Taipei, Kaoshiung and Taichung; and in 15 mainland cities, including Zhuhai and Guangzhou. It says Macau’s hotels had the second-highest average room rate and revenue per room in Greater China last year, second only to Hong Kong. In Macau the average room rate was 1,426.50 patacas (US$178.40) and the revenue per room 1,259.50 patacas, the report says. HVS Hong Kong’s clients include New World Development Co Ltd, a property company controlled by Chow Tai Fook Enterprises Ltd. Chow Tai Fook has invested more than HK$4 billion in Casino L’Arc Macau. Chow Tai Fook’s chairman is Cheng Yu Tung, who owns 0.11 percent of Macau gaming company SJM Holdings Ltd.
April 10, 2013 business daily | 7
MACAU Packer faces challenge on Sydney casino plan A plan by Macau casino investor James Packer’s Crown Ltd to include gaming at a new development in Sydney, Australia, faces a potential obstacle. Echo Entertainment Group Ltd, operator of The Star – the only casino currently in Sydney – wants to extend its exclusivity deal with the New South Wales government beyond the expiry date of 2019. An e-mail to Bloomberg News from state premier Barry O’Farrell’s office said NSW would only give permission to one of the two projects. Mr Packer’s A$1 billion (8.37 billion patacas) scheme at Barangaroo should be ready in 2018.
Casinos ‘seedy’ with ‘criminal activity’ pre-liberalisation HK businessman defends his claimed role in getting LVS Macau gaming licence Michael Grimes
acau gaming was “seedy” and “invested with criminal activity” prior to market liberalisation said Hong Kong businessman Richard Suen in a Nevada court case on Monday United States time. Mr Suen claims that he’s owed US$328 million (2.62 billion patacas) for helping Las Vegas Sands Corp. win a licence in 2002 to operate casinos in Macau. Prior to that, “Gaming was going nowhere,” Mr Suen said. “It was seedy, it was small-time, it was invested with criminal activity,” he said, referring to the era of Stanley Ho Hung Sun’s monopoly that ran from 1962 until 2002. Any thoughts among onlookers that the Suen versus LVS civil trial in state court is about a culture clash between the American approach to business and the Chinese one appeared to be dispelled at that point. With roughly a third of a billion U.S. dollars at stake, it seems Macau’s reputation is a legitimate negotiating position in the proceedings. Things can be said in U.S. courts – and then reported by the media using the rule of court privilege there – that if repeated outside the tribunal or in other jurisdictions might be considered inflammatory or even defamatory. Whether Mr Suen used the same words to describe Macau prior to market liberalisation when speaking to his high level political contacts
Richard Suen, left, faced Sheldon Adelson in court
in China wasn’t discussed in the Nevada court. Mr Suen testified he and his team, which included the son of a senior Communist Party official, had the ‘guanxi,’ or relationships, to introduce LVS chairman Sheldon Adelson to the most powerful people in China who could influence which companies would be awarded a gaming licence in Macau. But Mr Adelson said in his evidence that once the Macau government decided to tender for new gaming concessions in the autumn of 2001, Mr Suen’s claim to be able to provide an exclusive licence was no longer relevant.
Street naming campaign for architect Manuel Vicente A campaign is under way to have one of the city’s streets named in honour of a leading Portuguese architect. Manuel Vicente died in Portugal on March 9, aged 78. The architect left a legacy in Macau of public sector and private sector works. They include a role in the reclamation plan that created the Nam Van and Sai Van lakes, the World Trade Centre building and public housing projects in Fai Chi Kei. Anyone wishing to contribute to a petition organised by Portugueselanguage newspaper Jornal Tribuna de Macau can sign it online at www.peticaopublica.com/?pi=JTM
“If it’s going to be open to anybody, there’s nothing you can do for me that I can compensate you for,” said Mr Adelson.
Internal matter Mainland officials said on Monday Macau’s casino licence process is an internal matter for the territory. “The process was carried out by the Special Administrative Region’s government by themselves on the principles of openness and transparency in accordance with the law,” China’s Ministry of Foreign Affairs said.
On Friday Mr Adelson had said on the witness stand in Nevada that his firm did not form a Macau partnership with Galaxy Entertainment Group Ltd as had been advised in some quarters. He said that was because, among other reasons, the Hong Kong company didn’t want to disclose its partners, which Mr Adelson said included the son of a reputed “triad member from years earlier”. Galaxy, in a statement to the Hong Kong Stock Exchange on Monday, said a number of press articles on April 7 referred to “certain inaccurate statements” about the company made by Mr Adelson during legal proceedings. Galaxy is investigating the statements, it said, without providing details. Galaxy is still seeking legal advice and won’t be able to comment further, Peter Caveny, principal, investor relations, said. Business Daily asked LVS for comment on the Galaxy filing, but none was available at the time we went to press. In Macau, any allegations of defamation are covered exclusively by the criminal code, rather than by the civil and criminal codes as is the case in most common law jurisdictions. ‘Truth’ and ‘legitimate interests’ are both defences available in Macau to fight a charge of defamation, says the code. But it adds that a proven offence is “punishable with imprisonment for up to six months or a fine. With Bloomberg News/Reuters
business daily April 10, 2013
April 10, 2013 business daily | 9
Easing food prices cool March inflation Lower prices reduce pressure for tighter credit
hina’s inflation eased last month from a 10-month-high as food-price gains ebbed, reducing pressure on policy makers to tighten credit as the world’s second-largest economy recovers from a slowdown. The consumer price index rose 2.1 percent in March from a year earlier, the National Bureau of Statistics said yesterday in Beijing. That compares with the 2.5 percent median estimate in a Bloomberg news survey of 38 economists and a 3.2 percent gain in February when spending for the Lunar New Year holiday pushed up prices. Slowing price gains are a boost for Premier Li Keqiang as he seeks to sustain a rebound from the economy’s weakest annual expansion in 13 years. Authorities have drained cash from the financial system this year, with central bank Governor Zhou Xiaochuan saying that China should be on “high alert” after February’s inflation figure exceeded forecasts. “Market concerns about centralbank tightening, which have been heavy after a high inflation reading in February, will be greatly relieved,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. “The central
bank may have no need to raise benchmark interest rates or the required- reserve ratio this year.” Food costs rose 2.7 percent in March from a year earlier, less than half of February’s 6 percent pace. The CPI fell 0.9 percent from February, the biggest drop in seven years. Producer prices fell 1.9 percent from a year earlier, the 13th straight decline, compared with February’s 1.6 percent drop.
Below target China is targeting inflation of about 3.5 percent this year, thenPremier Wen Jiabao said in his final annual report to the legislature on March 5, lowering the goal from last year’s 4 percent. Consumer prices rose 2.6 percent in 2012, less than half 2011’s pace. For the first quarter, inflation was 2.4 percent. “The main risk facing the economy is still weak growth, not inflation,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. JPMorgan’s Mr Zhu said inflation may make a comeback toward the end of 2013 while price gains for the full year will be 3.1 percent or 3.2 percent, “well below” the 3.5 percent target.
“The central bank may pay more attention to inflation in late 2013, although this does not mean serious monetary policy tightening.” Bloomberg surveys last month showed 14 of 33 analysts forecast an increase in the benchmark oneyear lending rate this year, while two out of 22 respondents said the central bank would raise lenders’ reserve-requirement ratio. “A growth rate of around 8 percent, and inflation of 3 percent, are within the comfort zone of the government,” Li Miaoxian, a Beijing-based economist at Bocom International Holdings Co., said before the report. The People’s Bank of China said in an April 3 statement that it will continue to seek a balance between growth and inflation under a “prudent monetary policy” framework. Mr Zhou said in a press briefing last month that monetary policy is “no longer relaxed” and is “relatively neutral”. That neutral stance “should continue for one or two more quarters,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. There’s “no need for the PBOC to switch to tightening mode for the moment,” she said. Bloomberg News
Bank of Shanghai plans HK IPO Bank of Shanghai Co. plans to raise about 15 billion yuan (US$2.4 billion) through an initial public offering in Hong Kong this year to replenish capital, the official Shanghai Securities News reported yesterday, citing an internal document distributed to shareholders. The Chinese lender, which is eight percent owned by HSBC Holdings Plc, also plans to raise a similar amount of money by selling shares publicly in mainland China, the newspaper said, without giving a timeframe. Both listings are subject to regulatory approval, it added.
Bird ‘flu ‘devastates’ poultry business The deadly bird ‘flu outbreak has dealt a “devastating” blow to the nation’s poultry sector, an industry group said yesterday, with sales reportedly plunging amid concerns over food safety. Chinese authorities say they do not know how the H7N9 avian influenza – which has killed seven people and sickened 24 – is spreading. “The impact is extremely big. It’s really a devastating blow to the market,” Qiu Baoqin, vice secretary general of China’s National Poultry Industry Association, told AFP. Mr Qiu said companies were still evaluating the impact, but state media said poultry sales have plunged in some areas of China as consumers shun fowl.
A growth rate of around 8 percent, and inflation of 3 percent, are within the comfort zone of the Huawei wins NZ government Li Miaoxian, Bocom International Holdings
Food costs rose less than half of February’s 6 percent pace
Failed mining deals top US$45 billion
ichuan Hanlong Group’s botched US$1.2 billion bid for Australia’s Sundance Resources Ltd brings the value of China’s recent failed mining deals to US$45 billion, a record that’s prompted stricter Chinese scrutiny of acquisitions. Chinese companies attempted US$107 billion worth of mining takeovers over the past five years, with about US$45 billion, or 42 percent by value, of deals ending in failure. Of US$562 billion of deals proposed globally in the same period, US$180 billion, or 32 percent, didn’t proceed, according to data compiled by Bloomberg.
The collapse on Monday of the bid for Sundance, seeking to develop a US$4.7 billion iron ore project in Africa, comes after a string of failed investments by Chinese companies, including the demise of a US$19.5 billion investment in Rio Tinto Group in 2009. Regulators under China’s new leadership team of Xi Jinping and Li Keqiang have told state-owned companies that overseas takeovers will face a more stringent approval process. “Chinese regulators are probably going to allow fewer deals to go through as they become more discerning,” Jonathan Li, a corporate partner at Clayton Utz,
said. “The market will come to expect that when a deal involving a Chinese acquirer is announced, all the internal Chinese approvals will already have been obtained.” The termination of Hanlong’s bid for Sundance is China’s biggest overseas acquisition failure since April 2011 when Minmetals Resources Ltd, the Hong Kong unit of China’s biggest metals trader, a b an d on ed i ts C $6 . 04 b il l io n (US$5.9 billion) offer for Equinox Minerals Ltd. China’s largest failed deal was the US$19.5 billion proposed investment in Rio, the world’s second-biggest mining company, by Aluminum Corp. of China that would have given Chinalco, as the state-controlled company is known, stakes in assets including iron ore mines in Australia. Sundance shares fell as much as 56 percent to 9.3 cents after they resumed trading yesterday in Sydney. The stock fell 48 percent to 11 Australian cents at the close of trade. Bloomberg News
4G network contract China’s Huawei Technologies Co Ltd has won a contract to build the 4G mobile network infrastructure for New Zealand’s biggest telecommunications company, expanding its presence in the country after receiving the cold shoulder in neighbouring Australia. Telecom New Zealand said yesterday that it had tapped Huawei, the world’s No. 2 maker of telecommunications equipment, to build its network. The network will go live in Auckland, the country’s biggest city, in October, it said. Telecom New Zealand said that it had selected Huawei because of its global dominance in network development.
Beijing expects more trade disputes China expects trade friction, especially with emerging economies, to increase, possibly damaging exports and undermining global trade stability, and will boost imports from them to ease the pressure, a Commerce Ministry official said. “We must take it as a longer-term and arduous task to cope with escalating global trade frictions in the future, especially considering the increasing cases from emerging countries,” Chinese trade investigation official Song Heping told a news conference. “We will step up efforts to boost imports from emerging markets to prevent new pressure from such regions.”
business daily April 10, 2013
ASIA Billabong to assess US$299 mln buyout Billabong International Ltd agreed to assess an A$287 million (US$299 million) offer by a group led by Sycamore Partners Management. The group, which includes former Billabong director Paul Naude, will hold talks for 10 days with management over a bid at 60 Australian cents a share for the Gold Coast-based company, according to a statement yesterday. Sycamore’s bid is 18 percent below the 73 cents that Billabong fetched before trading in its shares was suspended on April 2. Billabong last February rebuffed an approach from TPG Capital that valued it at nearly A$842 million.
ADB warns of risks to developing Asia’s rebound Bank sees economies in the region growing faster
rowth in developing Asia is seen gaining momentum this year, powered by rising domestic consumption and intraregional trade, but authorities need to ward off risks of inflation and asset bubbles arising from strong capital inflows, the Asian Development Bank (ADB) said. Tensions over long-standing border disputes in Asia, deepening austerity fatigue in the euro zone and political risks linked to wrangling over the U.S. debt ceiling are the main threats to the region’s near-term outlook, the Manila-based development lender said yesterday in its latest regional outlook report for 2013. The region needs to put up
safeguards against the build-up of asset b u b b l es a n d p o s s i b l e withdrawal of huge liquidity that has spilled over to the region following monetary policy stimulus in developed economies, the report said, adding that macroprudential policy must be reinforced when necessary. “Advanced economies will likely continue their accommodative monetary stance, and authorities in developing Asia must safeguard the soundness of the finance sector to avoid the emergence of disruptive asset bubbles,” the report said. The ADB’s report was finalised on March 15, just before Haruhiko Kuroda formally stepped down as president of the multi-lateral lender
in order to become governor of the Bank of Japan. Mr Kuroda has immediately stamped his mark at the BOJ, which last week unveiled plans for the world’s most intense burst of monetary stimulus, by proposing to inject about US$1.4 trillion into the anaemic economy to whip deflation and revive growth. Analysts say the impact of the BOJ’s dramatic quantitative easing on global money flows and currencies might prove to be a necessary side-effect of getting Japan’s economy motoring. Capital inflows to the region’s 10 large economies jumped to an average of 7.4 percent of GDP in
GDP Growth (%) Actual
Derivatives trading resumes in Singapore after glitch Authorities pledge to monitor the system closely
Nikkei futures fell in Osaka while trading was halted in Singapore
ingapore Exchange Ltd, the operator of Southeast Asia’s biggest stock market, said it resolved a technical glitch that delayed the trading of derivatives until 10.45 am local time.
2010 to 2012 against 1.7 percent in the previous three years, coming near the pre-global crisis average of 8.4 percent, according to the ADB report. These 10 economies are China, Hong Kong, India, Indonesia, Japan, South Korea, Philippines, Singapore, Taiwan and Thailand.
Private demand With continued sluggish growth in developed economies, the region is better off sustaining a shift toward more private demand and stronger intra-regional trade that are expected to support a rebound in the region’s biggest economy China and robust output in Southeast Asia, the ADB said. Developing Asia – comprised of 45 countries in Central, East, South,
The Nikkei 225 futures fell as much as 0.2 percent to 13,180 in Osaka while trading was halted in Singapore. They rebounded to 13,240 in Osaka and 13,240 in Singapore. “The derivatives trading market is now open for trading in all contracts,” the Singapore bourse said in a statement on its website. “We will continue to monitor the system closely.” Carolyn Lim, a spokeswoman for the exchange, declined to comment on the details of the malfunction. Market disruptions due to technical issues have been in the spotlight since May 2010 when a broker’s algorithm set in motion events that briefly wiped US$862 billion from U.S. stocks. In Asia, about US$10 billion was temporarily added to the Australian benchmark stock
April 10, 2013 business daily | 11
ASIA Most shares fall as yen climbs Most Japanese stocks fell amid concern shares have risen too fast and as the country’s currency rebounded. The Topix Index closed little changed at 1,102.04, with about three shares falling for every two that rose. The Nikkei 225 Stock Average closed little changed at 13,192.35. The yen weakened to as low as 99.66 per dollar yesterday before trading at 99.14 at the close of Tokyo stock trading. Weakness in the yen, which hasn’t been at 100 per dollar since April 2009, is the result of policies to end deflation, Japanese Finance Minister Taro Aso said yesterday.
N.Korea workers fail to turn up at Kaesong More than 50,000 North Koreans work in the industrial complex
Growth in developing Asia is picking up, underpinned by China’s rebound
and Southeast Asia and the Pacific – is forecast to grow 6.6 percent this year and 6.7 percent in 2014, the ADB said. The growth estimate for this year was unchanged from a December update of its 2012 regional outlook and is faster than last year’s 6.1 percent growth. “Resilient private consumption demand will help maintain that pace into 2014 as the region grows by an expected 6.7 percent,” the ADB said. China is expected to accelerate to 8.2 percent from 7.8 percent last year, driven by strong consumption and investment. Growth in India may recover to 6 percent this year and 6.5 percent in 2014 from 5.0 percent in 2012, but South Asia’s largest economy
index in October and two weeks earlier orders for Indian stocks improperly entered by a Mumbai brokerage sent the S&P CNF Nifty Index down 16 percent in eight seconds before it rebounded. Singapore Exchange’s derivatives daily average volume rose 30 percent to a record 358,532 contracts in the second quarter ended December 31, it said in a January 22 statement. Derivatives revenue climbed 21 percent to S$45.7 million (US$36.9 million) for the quarter, making up 28 percent of total sales, it said.
More derivatives Yuji Nakagawa, manager of derivatives trading at Toyo Securities Co. in Tokyo, said the delay may have contributed to a decline when contracts opened in
needs to pursue structural reforms to create a more favorable investment environment and spur growth, the ADB said. Southeast Asia – the only subregion to post faster growth last year – is expected to extend its resilience this year and into 2014 before a 2015 regional economic integration that is forecast to enlarge trade volumes and diversify export markets of its member-countries. Price pressures in developing Asia remain generally contained, mainly due to stable food prices throughout. But robust growth in many economies in the region has eliminated slack productive capacity, and continued loose monetary policy risks reigniting inflation, the report said. Reuters
Japan. “I get a feeling that Nikkei futures in Osaka started trading a bit lower than expected today because it didn’t have a catalyst with the contracts not trading in Singapore,” he said. Singapore Exchange will increase revenue from derivatives 10 percent to 15 percent this year as it introduces more products linked to benchmark stock indexes in the region, president Muthukrishnan Ramaswami said last month. The bourse plans to add equityindex futures on the Philippines and Thailand to offerings that include Nikkei 225 Stock Average and Indian contracts, he said. SGX is planning yuan and foreignexchange futures, as well as commodities contracts as it seeks to become a trading hub, Mr Ramaswami said in the interview. Bloomberg News
orth Koreans employed at a joint industrial complex with South Korea didn’t report for work yesterday morning, severing the last exchange link between the two countries as tensions rise over Kim Jong Un’s nuclear programme. South Korea is in communication with its northern counterparts at the Kaeseong complex, Unification Ministry spokeswoman Park Soo-jin said yesterday. It was the first time since the industrial park opened in 2005 that North Korean employees didn’t show up for work, Mr Park said. The North’s decision to suspend operations at the complex, announced on Monday, follows threats by Mr Kim’s regime to launch pre-emptive nuclear strikes against the U.S. and South Korea in the face of tighter United Nations sanctions. All foreigners in South Korea, including tourists, should take safety measures, North Korea warned yesterday via the Korean Central News Agency. The North may be ready to conduct a nuclear test or missile launch as early as this week, according to the South Korean government. Shuttering Kaeseong is “a brinkmanship tactic,” Kim Choongwhan, a lawmaker in the ruling New Frontier Party until April 2012 who led the National Assembly’s foreign affairs committee, said yesterday. “We’re unlikely to see the Kaeseong complex closing down permanently as it would really be bad for North Korea’s plans to attract foreign investment.”
Shares fall South Korean companies employ more than 53,000 North Korean workers at Kaeseong, located about 16 kilometres north of the demilitarised zone between the two countries. Removing the workers denies Mr Kim’s impoverished regime a source of foreign currency and indicates the North thinks it has nothing left to lose given the sanctions, said Koh Yu Hwan, a North Korean studies professor at Dongguk University in Seoul. Shares of companies operating in Kaeseong fell in Seoul. Shinwon Corp., an apparel maker, declined 1.95 percent and watchmaker Romanson Co. Ltd slumped 3.6 percent. Good People Co. Ltd, an underwear maker, fell 1 percent. Overseas investors have pulled some US$1.9 billion from Korean stocks since Pyongyang conducted its third nuclear test on February 12, helping drive the Kospi index down 1.5 percent and contributing to a 3.6 percent slide in the won. Still, the Kospi’s 3.8 percent drop this year is less than the 4.1 percent decline in the MSCI Emerging Markets Index and the won is only 1 percent
weaker than its average level for the past three years. South Korea’s military saw no immediate signs of North Korea making preparations for an attack, Defence Ministry spokesman Kim Min-seok said yesterday, a day after he confirmed the North has been ready since February to conduct a fourth underground atomic weapon test at its Punggye-ri site.
‘Very disappointing’ Representatives of the South Korean companies at Kaeseong held an emergency meeting in Seoul yesterday. The companies urged President Park Geun-hye’s government to send a delegation to the North to discuss resuming work at the complex, said Han Jae Kwon, who heads the group of businesses. The complex last year produced about US$1.3 million of goods a day or US$470 million for all of 2012, the highest since the park opened eight years ago, Unification Ministry data show. Ms Park called the Kaeseong halt “very disappointing” and expressed concern that a 1.83 trillion won (US$1.6 billion) inter-Korean cooperation fund will be used to cover business losses rather than on future ventures. “No company nor country will want to invest in North Korea if it continues to break promises with the international community and hinder Kaeseong operations,” Ms Park told her cabinet yesterday, according to a statement on her website. The North generates US$100 million in profits annually from the project and South Korea makes quadruple that amount, according to Yang Moo Jin, a professor at the University of North Korean Studies in Seoul. Reuters
We’re unlikely to see the Kaeseong complex closing down permanently as it would really be bad for North Korea’s plans to attract foreign investment Kim Choong-whan, lawmaker, New Frontier Party
business daily April 10, 2013
MARKETS Hang SENG INDEX PRICE
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INDEX 10610.77 HIGH
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MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange)
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World Stock MarketS - Indices 14613.48
FTSE 100 INDEX
MACAU RELATED STOCKS (L) 52W
0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1974 51.06 28.92 1.2152 28.913 40.54 9135 74.482 1.20051 0.77553 7.7018 9.6245 94.12 1.029
1.0625 1.6381 0.9972 1.3711 99.66 8.0039 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 103.815 1.25692 0.88151 8.4957 10.9254 129.94 1.0314
NASDAQ COMPOSITE INDEX
0.8383 -5.3165 -2.1695 -1.1827 -12.9864 -0.1726 -0.1726 0.4563 0.8481 5.3756 -1.4523 -3.3136 -0.4322 0.7718 -13.7371 -0.9889 -4.1821 1.6627 1.0275 -11.9408 -0.0097
COFFEE 'C' FUTURE May13
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LUK FOOK HLDGS I
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0.4994 0.0784 -0.2031 0.0768 -0.2931 -0.01 -0.0077 0.0242 0.0779 0.7236 0.0807 -0.0599 0.2914 0.3396 -0.7938 -0.278 -0.0012 -0.1138 -0.0835 -0.3722 0
1.0465 1.5316 0.9357 1.3034 98.95 7.997 7.764 6.2023 54.5325 29.02 1.2394 30.028 41.183 9718 103.552 1.21954 0.85101 8.0831 10.4233 128.97 1.03
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
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HO CHI MINH STOCK INDEX
BOC HONG KONG HO
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INTL GAME TECH
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business daily April 10, 2013
How Thatcher saved Britain Clive Crook
Bloomberg View columnist
ore than any other prime minister since 1945, Margaret Thatcher changed the course of British history. In one sense, like any politician, she was a product of her times, but don’t let that mislead you: Only she could have done what she did. No other U.K. politician of her time or since has had her combination of courage and single-mindedness. To meet the challenges she faced, she needed both. While she was in office, the country’s voters never much liked her, and to their shame Britain’s chattering classes despised her throughout. However, enough of the country believed she was necessary to keep her in power for 11 years. They were right – she really was necessary. “She did not just lead our country, she saved our country,” said Prime Minister David Cameron on Monday. “I believe she’ll go down as the greatest British peacetime prime minister.” She will, but it’s telling that the word “peacetime” jars. Thatcher saw herself, I think, as a wartime prime minister. There were enemies abroad, most notably in Argentina, and there were enemies at home who were very much more dangerous – Britain’s trade unions. She wanted no accommodation with either kind of foe. She set out to crush them, and crush them she did.
Take no prisoners To understand why the British, a tolerant people inclined to moderation in most things, supported this take-no-prisoners approach to government, you must understand the depths to which the country had fallen by 1979, when Thatcher first came to power. Five years earlier, a previous Tory government had been voted out of office after it had tried, and failed, to settle a strike by the coal miners’ union. That strike had literally shut down the country. Edward Heath’s government called a general election asking, “Who governs Britain, us or the unions?” The country gave its answer by voting in a Labour government. Characteristically, Britain’s then-militant unions showed no restraint in victory. Seeking
ever-higher wages, publicsector unions called a series of strikes in the winter of 1978- 79, the “Winter of Discontent,” leading to the biggest mass stoppage since the General Strike of 1926. Bodies were left unburied when gravediggers stopped work. Leicester Square became a rat-infested garbage dump, the trash piled 10 feet deep. With voters at the point of despair, Labour Prime Minister James Callaghan returned from a meeting in (of all places) Guadeloupe to say the country was taking “rather a parochial view” of these problems. The U.K.’s best-selling tabloid newspaper, The Sun, led next day with the indelible headline, “Crisis? What Crisis?” and the government’s fate was sealed. This is the sense in which Thatcher, who won the election in May 1979, was a product of the times. Even so, she was rare among leading conservatives for her determination to end the war she rightly believed the unions had already declared not with compromise, but with total victory. She and an inner circle of ministers made elaborate preparations (building up coal stocks, for instance, and restricting the unions’ right to strike in sympathy with other aggrieved workers) so that the government could face and win the next coal miners’ strike – which it did. In that
She won the war that mattered most – the war to save the British economy. For that, in my view, no praise is too great
battle, the National Union of Mineworkers wasn’t just beaten – it was wiped out. Further measures to limit union rights followed. British unionism, which had staked everything on confrontation rather than cooperation, went into rapid decline. In a second front in the same war, Thatcher led an assault on the U.K.’s state-owned enterprises – she brought the term “privatisation” into common usage. She also sold the country’s publicly owned
housing stock. She believed in free enterprise and thought the state had grown out of bounds, but she was no more driven by a deeply thought-through ideology than her friend Ronald Reagan. She got little respect from intellectuals and mostly returned the compliment. Her instincts were her guide.
Broken alliance Most consequentially of all, she broke the alliance between the Labour Party and organised labour, thus remaking the political opposition. Subsequent Labour governments made no move to restore the rights that Thatcher had taken away. They knew how unpopular that would be. Reluctantly and by degrees, the Labour Party moved to the right, until it eventually had a leader, Tony Blair, whom the Economist magazine once celebrated on its cover as “The Strangest Tory Ever Sold”. The reconstruction of the Labour Party was Thatcher’s most significant achievement. But it’s worth remembering that her triumph over the unions would never have been consolidated if she hadn’t won another war, as well – the one over some tiny, barely inhabited islands in the far South Atlantic. In this other pivotal moment, she showed the same unflinching determination as she had at home, together with another
trait common to those whom history anoints as great leaders – astounding luck. The war to win back the Falklands from the Argentine force that occupied them in 1982 was, by any standards, a reckless venture. By the early 1980s, Britain lacked the capacity to dominate even a weak military opponent at that distance. Argentina was fighting close to home. It had state-of-the-art air-tosurface missiles and much faster aircraft than the U.K.’s ship-launched jets, as well. Argentina should have won the war and nearly did. It lost through a combination of pantomime incompetence and fecklessness – things that Thatcher had no right to count on. A sensible prime minister would have argued for sanctions and a negotiated settlement. Thatcher wasn’t interested. You don’t win wars that way. If Britain had lost the Falklands War, the humiliation would have been abject, and Thatcher’s chances of being seen as the country’s greatest “peacetime” prime minister would have been zero. There would have been no subsequent domestic achievements, either, since she would probably have failed to win re-election.
Falklands triumph The Falklands victory expunged memories of the Suez crisis of the 1950s and sustained Britain’s “proud island nation” myth for several more decades – several decades too long. It helps to sustain that myth even now, though with gradually diminishing power. It shapes attitudes to Europe, and much else. (And a good thing, too, she would have said. Didn’t she warn us how Europe would make a hash of things?) The very qualities that made Thatcher indispensable as the scourge of the U.K.’s unions and toxic public sector came closer than most Britons realise to making her a nullity through foreign misadventure. She was lucky – as great leaders have to be. And the fact remains, she won the war that mattered most – the war to save the British economy. For that, in my view, no praise is too great. Bloomberg View
editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | firstname.lastname@example.org Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | email@example.com office manager Elsa Vong | firstname.lastname@example.org Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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April 10, 2013 business daily | 15
Abenomics and Asia
Leading reports from Asia’s best business newspapers
wires Wall Street Journal North Korea withdrew its workers from an industrial park jointly run with South Korea and said it is considering closing the complex permanently. That would leave the last remaining symbol of interKorean cooperation close to collapse and mark a significant exacerbation of tensions on the Korean peninsula. Some 53,000 North Koreans are employed at the complex but didn’t arrive for work yesterday morning, according to South Korean companies based there. As of late Monday, 475 South Koreans and four Chinese nationals remained on the site.
Straits Times Developers of private housing projects in Singapore face more stringent laws on marketing and information disclosure, after Parliament passed amendments to the Housing Developers Act on Monday. Showflats, for instance, can no longer be made to look bigger than the final product through the use of glass panels instead of brick walls, or higher ceilings. Transaction prices reported will also have to reflect all forms of discounts and rebates, including furniture vouchers and stamp duty refunds –a to counter any artificial inflation of prices by developers. Fines were raised to S$100,000 (US$80,632).
Yomiuri Shimbun Mexican President Enrique Pena Nieto announced his support for Japan joining negotiations on the TransPacific Partnership free trade accord during his talks with Prime Minister Shinzo Abe. Among the 11 countries that have already joined the multilateral trade talks, six have expressed support for Japan’s participation in them, but only at working-level discussions. Mexico is the first country whose leader has expressed support for Japan’s joining the negotiations. Japan needs the approval of all 11 participating nations before it can join the talks.
Vietnam News The Asia-Pacific Economic Cooperation is seeking ways to improve transport and logistics within the region. A working group, chaired by Vietnam’s Ministry of Transport, is meeting this week in Ho Chi Minh city. The Asian-Pacific region is the most rapidly developing area in the world. In upcoming years, experts predict a significant growth of the regional countries’ cargo turnover. With promising growth of exports, logistics infrastructure must be expanded, and new transportation routes built, the group has said. The goal of APEC economies is to achieve a 10 percent increase in regional supplychain performance by 2015.
Professor of Economics at Korea University, served as Chief Economist and Head of the Office of Regional Economic Integration at the Asian Development Bank
apanese Prime Minister Shinzo Abe’s economic agenda – dubbed “Abenomics” – seems to be working for his country. Expansionary monetary policy is expected to inject liquidity into the Japanese economy until inflation hits the Bank of Japan’s 2 percent target, while expansionary fiscal policy is expected to continue until economic recovery takes hold. As a result, consumer and investor confidence is returning. The Japanese stock market has soared more than 40 percent since November of last year, when it became clear that Abe would form the next government, and exports and growth are also picking up. With a large output gap and low inflationary pressure, expansionary policies show great potential for reviving economic activity. But other countries – including neighbouring Asian economies – fear that Japan is devaluing the yen to bolster exports and growth at their expense. Some have accused Japan of fuelling a global “currency war”. Anticipation of aggressive monetary expansion has sharply weakened the yen, which has fallen by almost 20 percent against the dollar in just over four months. Of course, Japan’s escape from its 15-year deflationary trap and two decades of economic stagnation would be good for the world. Japan remains the world’s third-largest economy, the fourth-largest trader, and the third-largest export market for neighbouring China and South Korea, which thus stand to benefit if “Abenomics” revitalises Japanese domestic demand. More broadly, given Europe’s slide into recession and only a slow rise in world trade volume, renewed growth and stronger import demand in Japan would support global recovery.
of asset bubbles in the 1990’s left Japan’s financial system and private sector saddled with a huge debt overhang. Recovery began only after the balance-sheet weaknesses in the financial, household, and corporate sectors were addressed. Sustainable growth requires sustained privatesector demand. Monetary easing and fiscal stimulus, combined with structural measures to restore private firms to financial health, would stimulate household expenditure and business investment.
If Japan starts to intervene directly in global currency markets to ensure a weaker yen, neighbouring competitors will respond in kind
Sustainable goals Thequestionnowiswhether Abenomics can achieve its goals without destabilising the world economy, especially neighbouring Asian economies. Doing so requires Japanese policymakers to focus on more sustainable growth while averting a vicious cycle of competitive devaluation and protectionism with Japan’s trade partners. In particular, expansionary monetary and fiscal policies – which are helpful in the short term – must be accompanied by fundamental structural reforms. Japan’s deflation and economic stagnation over the last two decades stemmed largely from a dysfunctional financial system and a lack of private demand. The collapse
innovation, and that combats the adverse effects of an ageing population. Japan, of course, is not alone in using exchangerate policies to keep exports competitive. Many emerging economies’ authorities intervene in currency markets to prevent exchange-rate appreciation and a loss of export competitiveness. But if Japan starts to intervene directly in global currency markets to ensure a weaker yen, neighbouring competitors will respond in kind. The danger of a currency war and protectionism should not be underestimated.
Indeed, the impact of real exchange-rate depreciation on growth is likely to be short-lived unless increased corporate profits in the export sector lead to higher household consumption and investment. And yet risks to financial and fiscal stability could arise if higher inflation and currency depreciation were to spoil investors’ appetite for Japanese government bonds, thereby pushing up nominal interest rates. That is why the success of “Abenomics” hinges not on the short-term stimulus provided by aggressive monetary expansion and fiscal policies, but on a programme of structural reform that increases competition and
In South Korea, the government and business leaders worry that a stronger won, which recently rose to its highest level against the yen since August 2011, will hurt key export sectors, including automobiles, machinery, and electronics. One report by a Korean research institute shows that the Korean economy will slip into recession if the yen-dollar exchange rate nears 118, its average level back in 2007. Moreover, unlimited quantitative easing by the Bank of Japan, the Federal Reserve, and the European Central Bank also increases the risk of volatile capital flows and asset bubbles in
Asian emerging economies. Chinese policymakers have raised serious concerns about the growing risks of inflation and property bubbles. This delicate situation could escalate into further currency intervention, trade protectionism, and capital controls. Beggar-thy-neighbour policies could lower total trade volume – a zero-sum game from which no one would benefit. After all, Japanese exports rely on emerging and developing markets, with East Asia alone accounting for nearly half of Japan’s foreign sales. The regional economy would benefit from closer coordination of exchange-rate and monetary policies. Mechanisms like the G-20 and ASEAN+3 (ASEAN, with China, Japan, and South Korea) should be used more actively for policy dialogue and surveillance. East Asian economies could then, over time, cooperate to enhance regional exchange-rate stability, thereby creating a more conducive environment for intra-regional trade. Japan’s economy is moving at last, which bodes well for Asia and the world. But, despite its new vigour, the benefits of recovery could prove to be short-lived unless a sustainable and cooperative growth path is found. © Project Syndicate
business daily April 10, 2013
CLOSING Treasury share sale for Melco Crown unit French ministers to declare assets A Philippines unit of Macau casino investor Melco Crown Entertainment Ltd has raised 2.13 billion pesos (US$51.8 million) from a treasury shares sale. It will go toward the US$1 billion (eight billion patacas) Belle Grande Manila Bay casino resort in the country’s capital. Melco Crown (Philippines) Resorts Corp. is developing it in a venture with Filipino Chinese entrepreneur Henry Sy. The Melco Crown unit will do a US$400 million follow-on offering. One billion shares will be up for sale with an overallotment option of 200 million shares. Citigroup Inc. and UBS AG are managing the offer.
The French government says the value of ministers’ assets will be published by April 15 in a new transparency drive, amid a scandal over tax evasion. The Socialist government also says it will present a draft law obliging MPs to declare their assets and introducing tougher penalties for financial fraud. Currently ministers only have to declare any conflict of interest. France’s ex-Budget Minister Jerome Cahuzac has been charged with fraud over a secret Swiss bank account. He admitted last week that he had hidden about 600,000 euros (US$770,000) in a Swiss bank account, causing shock in France.
Workers, employers deadlocked over dismissal compensation Two sides can’t agree on basics – severance pay, part-timers’ rights Stephanie Lai
Government proposing increase in severance pay
aximum severance pay for local workers could rise from 14,000 patacas (US$1,750) for month to at least 17,000 patacas per month according to a government proposal. The payments would
be available to anyone dismissed without “just cause, by employer initiative”. Some members of an advisory board on the matter want a higher new maximum of 20,000 patacas
per month, Labour Affairs Bureau director Wong Chi Hong told reporters yesterday. The worker delegates to the advisory body also opposed a cap on severance pay. Under the current system the severance pay can only go up to 12 months, setting a ceiling of 168,000 patacas on payments. The employer side worries that too high a compensation deal would put pressure on small businesses. “This new proposal can cover up to 73 percent of the local working population,” said Mr Wong, citing data from the Statistics and Census Service. Mr Wong was speaking after a closed-door meeting of the Standing Committee for the Coordination of Social Affairs. “When making this new proposal we have to also consider the operation status of the local small and medium enterprises, as they might have to bear a higher labour cost,” he added. Vong Kok Seng, representative of the employer side in the committee, said they were satisfied with the recommendation. “The government’s proposal is fairly progressive, and we’ll take it for the sectors to discuss further,”
Hutchison eyes stake in Telecom Italia
ong Kong’s Hutchison Whampoa Ltd is in talks to buy up to 29.9 percent of Telecom Italia SpA in a deal that would radically alter the power base at Italy’s leading phone company, two sources familiar with the negotiations said. Hutchison is looking at buying out three Italian investors in Telecom Italia’s controlling company and could pay about double the current market price for their stakes to become the biggest shareholder in the debt-laden operator. Telecom Italia’s shares have been languishing near historic lows as the group fights against falling margins in crisis-hit Italy and the cooling off of its other main market, Brazil.
But Hutchison will have to win over main investors and the Italian treasury, which has veto powers over takeover deals. Under the plan outlined in a memorandum of understanding presented to chairman Franco Bernabe, Hutchison would transfer its local mobile business 3 Italia, which analysts value at 1.5 billion euros (US$1.96 billion) to 2 billion euros, to Telecom Italia in exchange for shares. This would cut the number of Italy’s mobile phone operators from four to three, possibly leading to antitrust requirements since the new group would control 46 percent of this market.
In addition, the Hong Kongbased group is offering to buy a combined 11 percent stake owned by Italian financial services groups Generali, Mediobanca and Intesa Sanpaolo through controlling company Telco at a price that could be close to a book value of 1.2 euros (US$1.6) a share. “This is on the radar of the involved parties and will be discussed at an April 11 board meeting. But such a deal will not be struck in a week, so do not expect any decisions from that meeting,” said one of the two sources. “From embryonic talks to a fully negotiated deal, that takes months.” Reuters
said Mr Vong. But the proposal was not welcomed by the labour side, mostly composed by members from the Federation of Trade Unions. “Severance pay should be based on the work years of the employees,” said Ella Lei Cheng I. Ms Lei said the government’s proposal would further dwindle the coverage of the working population. Both the labour and the employer sides have to submit an opinion on the severance compensation by May 31. However, the earliest that the severance pay proposal can join the waiting list of laws for approval in the Legislative Assembly will be in 2014, Mr Wong said.
Divisive talks During yesterday’s meeting, both the labour and the employer side were also divided over the definition of part-time workers. Employees working a total of 24 hours a week or less than 96 hours every four weeks can be defined as part-timers, according to the government’s latest proposal. Mr Wong said the government hopes to introduce more flexibility in the labour market with the latest proposal on part-time work. Though the employer side agrees with the government’s definition of part-timers, the labour representatives still complaint that part-timers are unable to enjoy the same rights – even on a pro rata basis – as full-timers, especially when it comes to holidays. Also, the labour side disagreed with the government and employers’ proposition that the minimum wage level should only be reviewed every three years. “The wage level should be reviewed on a yearly basis,” said Ms Lei. The Labour Affairs Bureau head said the implementation of the minimum wage would not be possible this year. Currently, as a trial scheme, a 23-patacas to 28-patacas hourly pay rate is suggested as the minimum wage for cleaning workers and property management workers, Mr Wong said.