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MOP 6.00 Vitor Quintã Deputy editor-in-chief

Internet stock trading: big and getting bigger

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nline trading of securities is already big in Macau but is poised to grow further, says an expert. The city’s biggest bank by share of assets, the Macau branch of Bank of China Ltd, said this week that electronic trading, largely through online banking platforms, accounted for 75 percent of all stock trades made in Macau so far this year. “I think the figure is actually between 90 and 95 percent as it feels like most people are using the Internet to invest, even including some elderly,” said William Cheung Ming Yan of the University of Macau told Business Daily. The city has only two dedicated stockbrokers – Haitong International Securities Co Ltd and Sun Hung Kai Investment Services Ltd. More on page 3

Year II

Number 353 Wednesday August 21, 2013

Editor-in-chief Tiago Azevedo

April 19, 2013

Brought to you by Zung Fu Motors (Macau) Limited

www.macaubusinessdaily.com

Hang Seng Index 22490

22374

22258

22142

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Versace-branded hotel for SJM Cotai Macau casino concessionaire Sociedade de Jogos de Macau SA has agreed a deal to bring a Versacebranded hotel to its planned Cotai casino resort. SJM says Palazzo Versace Macau will be the first

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five-star hotel in Macau created by a leading fashion house and the first Palazzo Versace in Asia. Donatella Versace of the Italian firm Gianni Versace SpA will formally sign the deal with SJM executive director Angela Leong On Kei in Macau on September 5. But James Roy, senior analyst at Shanghai-based China Market Research Group, says the new hotel will have to work hard to get acceptance among Chinese consumers. Page 2

LRT cost rise Galaxy piles far from ‘small’: up cash contractor in first half

Eatery firm profits from tourism diet

Light Rapid Transit (LRT) railway contractor Top Builders International Co Ltd contradicts a government official’s claim constructors have asked only for a “small” payment increase. The firm’s Calvin Pang told Business Daily the amount was not “small, like three or four percent as the government described”. The administration is officially paying 983 million patacas (US$123 million) to Top Builders to build the LRT depot and a transport hub in Taipa. Page 4

Restaurant group Future Bright Holdings Ltd posted a one-third year-on-year rise in first half profits as visitors spent more money at the company’s outlets. The company said in a filing to the Hong Kong Stock Exchange yesterday its net profit in the first six months was HK$98.6 million (US$12.7 million). Its food and beverage sector reported a turnover increase of 9.6 percent year-on-year to HK$338.1 million. Page 6

Galaxy Entertainment Group Ltd’s cash balances grew 16 percent in the six months to June 30 it said in interim financial results filed yesterday. Cash on hand at June 30 for the Macau casino developer stood at HK$18.1 billion (US$2.33 billion), up from HK$15.6 billion at December 31, 2012. But the firm gave no hint that it planned to pay shareholders a dividend at this stage. Page 5

August 20

HSI - Movers Name

%Day

CHINA RES POWER

2.62

MTR CORP

-

CATHAY PAC AIR

-0.28

HENGAN INTL

-0.35

CHINA MOBILE

-0.89

CHINA LIFE INS-H

-3.90

BELLE INTERNATIO

-3.90

CHINA SHENHUA-H

-4.23

WANT WANT CHINA

-4.59

LENOVO GROUP LTD

-4.95

Source: Bloomberg

I SSN 2226-8294

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2013-08-23

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August 21, 2013

Macau

Versace-branded hotel for SJM Cotai Deal will be signed by Donatella Versace in Macau next month, says casino operator Michael Grimes

michael.grimes@macaubusinessdaily.com

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acau casino concessionaire Sociedade de Jogos de Macau SA has signed a deal to bring a Versace-branded hotel to its planned Cotai casino resort. SJM says Palazzo Versace Macau will be the first luxury five star hotel in Macau to be designed by one of the world’s leading fashion houses as well as the first Palazzo Versace in Asia. Apartments totally decorated with furnishings from the world’s leading fashion houses are also currently in vogue in mainland China, as part of the crossover seen globally between wearable fashion and fashionable decor. Donatella Versace will formally sign the deal for the hotel with SJM executive director Angela Leong On Kei at the Grand Lisboa Hotel in Macau on September 5. Ms Versace – a sister of Gianni Versace, founder of the fashion house Gianni Versace SpA – took over as chief designer of the firm after his murder in 1997. Versace said in April it may reach a 500 million-euro (US$640 million) revenue goal a year early as it weighs up global expansion options including an initial public offering. It plans to open between seven and ten new stores in Greater China this year. SJM did not say yesterday how many rooms the Cotai hotel would have, or when it would be built, but the casino operator’s chief executive Ambrose So Shu Fai stated in May the firm wants to open SJM Cotai “between 2016 and 2017” with an expected total budget of 20 billion patacas (US$2.5 billion). “We are excited to open a Palazzo Versace hotel in Macau, and we are

delighted to partner with SJM, such a prestigious player in the industry,” said Gian Giacomo Ferraris, chief executive of Versace. “The hotel and interior design business is very important to us as it is part of the brand’s history and we have invaluable know-how coming from major projects in Australia and Dubai among others. We are committed to further develop this business and, as Versace is enjoying great momentum, we continue to evaluate new opportunities in various parts of the world,” added Mr Ferraris.

Consumer acceptance James Roy, senior analyst at Shanghai-based China Market Research Group – a specialist in helping global brands understand consumer behaviour in China – told Business Daily the tie up was an interesting market development. But he added Versace might face some hurdles in gaining acceptance with Chinese consumers as a hotel as well as fashion brand. “It’s an interesting fit as a branded hotel, because Versace is a well-known name among Chinese consumers, especially those who also visit Hong Kong and are very brand savvy,” stated Mr Roy. But he added: “One issue is that Chinese travellers tend to look for hotel brands that they are already familiar with. So Palazzo Versace will have to work really hard to introduce themselves as hotel specialists in that market. Chinese consumers can be wary of trying a product that they view as coming from a specialist in a

Donatella Versace will visit Macau for ceremony

different area.” SJM only received its Cotai land concession from the government in May this year, but is hoping to open a facility by 2017 at the latest – three years before its current concession expires. Its Cotai plot is only 70,500 square

metres (759,000 sq. feet), while local legislator Ms Leong – fourth consort of SJM’s founder Stanley Ho Hung Sun – has a plot next door of 180,000 sq. m. Officially she is still in talks with SJM about combining the plots in the one project, Mr So confirmed to Business Daily a fortnight ago.

Quick bounce back for gambling after Utor Typhoon caused brief ‘20 pct’ dip last week but pick up suggests new market record for August: analyst

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ast Wednesday’s Typhoon Utor briefly reduced midweek gambling volumes in Macau’s casinos by 20 percent relative to market forecasts suggests a note from an analyst in the United States. “Our checks suggest mid-week table play was down by around 20

Tourists wait for taxis during Typhoon Utor

percent,” said Cameron McKnight of Wells Fargo in New York. “However, traffic has been strong since,” he added. That bounce back was sturdy enough to help average daily gambling revenue in Macau’s casinos rise 7.4 percent in the seven days to

Sunday inclusive – relative to the week prior period, he suggested. From August 12 to August 18 inclusive, the city’s venues produced average daily revenue of 1.09 billion patacas (US$136 million) according to the bank’s unofficial estimates via industry sources. “Based on trends through August 18, we estimate Macau gaming revenue growth for August is trending between 17 to 20 percent [growth] year-on-year, versus our prior 14 to 18 percent year-on-year estimate,” added Mr McKnight. David Bain of Sterne Agee said in his note: “Last week’s daily pataca [revenue] increase comes despite high typhoon signals…” He added: “Including slots, the gross gaming revenue run-rate for August is 31.5 billion patacas, or up 20 percent year-on-year, on track to slightly exceed the all-time monthly GGR record set in March of this year (31.3 billion patacas).” Last Wednesday’s typhoon signal 8 – raised at 1.30am that

day – was the first of 2013. The warning remained in place until 3.30pm that day, resulting in the cancellation of public transport services on land and the closure of all government offices. But ferry services – used by 41 percent of the city’s 28 million visitors last year according to government data – had been suspended several hours before the number 8 signal. In some cases they remained suspended well after the warning was eased. Ferry routes between Macau and mainland Chinese cities in Guangdong province only resumed on the Thursday, as the mainland ports stayed closed after those in Macau had reopened. China’s official Xinhua news agency reported Utor – which passed 230 kilometres (143 miles) westsouthwest of Macau and produced winds locally gusting at 100 kph – made landfall near Yangjiang, in the west of Guangdong province, late on the afternoon of August 14. M.G.


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August 21, 2013 April 19, 2013

Macau

Internet trading is big and it’s getting bigger Bank of China says three-quarters of securities trades are made online, a trend that will increase Tony Lai tony.lai@macaubusinessdaily.com

Most investors prefer to buy and hold equities, according to one academic

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nline securities trading is already big in Macau but is poised to grow further, says an expert. The city’s biggest bank by share of assets, the Macau branch of Bank of China Ltd, said this week that electronic trading, largely through online banking platforms, accounted for 75 percent of all stock trades made so far this year. The remaining deals were made over the phone or in person at bank branches. A researcher in trading behaviour at the University of Macau said he expects electronic securities trading to spread. “It is a little bit low, surprisingly. I think the figure is actually between 90 and 95 percent as it feels like most people are using the Internet to invest, even including some elderly,” said academic William Cheung Ming Yan. Investors can use online using

platforms set up by the banks and two authorised financial intermediaries: Haitong International Securities Co Ltd and Sun Hung Kai Investment Services Ltd. There is no official data available on online trading. If one uses the Bank of China Macau branch data as a basis for comparison, the penetration of online trading is higher in Macau than it is in Hong Kong. The latest Retail Investor Survey compiled by the Hong Kong Stock Exchange says there were 1.8 million regular traders of securities and 69 percent of them traded online in 2011, up by 2 percentage points from two years earlier. Mr Cheung said online trading will become more popular as the technology develops. Bank of China Macau assistant general manager Chan Hio Peng said the industry would “gradually shift

more to the e-banking path” which has huge growth potential. Online trading and banking services offer clients with more customised and immediate services, he said.

Buy and hold Mr Cheung, who also heads the BOC Macau Youth Association. said mum-and-dad investors trade online less frequently than professional traders. They have less of a need to follow the market closely. “After they have bought a stock, they usually hold it for a certain amount of time before taking any action,” he said. “The biggest advantage of online trading is that you can take immediate action after knowing the stock price. There is a smaller gap between the two events.” Mr Cheung said casual investors sometimes went days without making

a trade so it made little difference if they traded online or used more traditional means. “There are a certain number of buyers in Macau who do numerous [stock] transactions every day but they are definitely fewer than in cities like Hong Kong and Shanghai,” which have a stock exchange, he said. According to a Monetary Authority of Macau survey, residents invested 26.2 billion patacas (US$3.28 billion) in securities, including stocks, at the end of last year, up by more than half from 2011. Mr Cheung said security was not a worry as banks have done their job in protecting their networks. Simon Fong Chi Chiu, a computer and information sciences professor at the University of Macau, said a fortnight ago that the banks had set up good-enough protocols to protect customer and company data.

Yuan business soars as banks look overseas

Private companies and government invest in yuan, seeking further currency appreciation Vítor Quintã vitorquinta@macaubusinessdaily.com

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he city’s banks are enjoying more international business than ever, with yuandenominated deposits hitting a record high at the end of June. The Monetary Authority of Macau announced yesterday that international assets held by the banks reached 766.4 billion patacas (US$95.9 billion) in the second quarter. The banks’ international assets have jumped by one-quarter in one year, outstripping the growth in domestic assets. That growth was linked to an increase in deposits in foreign currencies, which rose by 29.2 percent

from the same quarter of last year to 351 billion patacas last quarter. The government and residents held the majority of deposits, 329.3 billion patacas, a 29.4-percent increase in year-on-year terms. External assets made up 84.8 percent of all banking assets, up by 0.6 percent from the end of March and the highest proportion in almost two years. The increase was mostly due to yuan deposits continuing to set new records. By the end of June, Macau banks had 56.3 billion patacas in yuan deposits, up by 4.4 percent from the

previous quarter. Most of that growth came from corporates, including the Macau government and private companies. The government has been investing more of the 166.09 billionpataca fiscal reserve in long-term mainland debt. Private investors are also making the most of the launch of more yuandenominated investments, while taking a chance on the currency appreciating further. Almost one-third of the banking sector’s assets were related to the mainland and 29.3 percent were linked to Hong Kong.

The Hong Kong dollar continues to be the most popular currency for international banking transactions, with 35.5 percent of all investments held in the currency at the end of June. That was the lowest proportion since Macau’s de facto central bank began releasing data on the banks’ international business in 2007. Yuan-denominated deposits pushed the share of “other foreign currencies” to 64.1 percent, the highest on record. Just 0.5 percent of banks’ assets and 3.1 percent of liabilities were denominated in patacas.


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August 21, 2013

Macau

LRT cost top-ups far from ‘small’: contractor

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Government comments on cost overruns ‘ridiculous’, says Top Builders

Passenger waves Every year Macau’s passenger landings absorb a big flow of sea travellers. The city has three passenger landings: the Outer Harbour Ferry Terminal, the Inner Harbour and the Pac On Ferry Terminal on Taipa. Together, they handled almost onequarter of a million passenger vessel arrivals from January 2010 to June this year – 209 short of 250,000, to be precise. That means they handled over 200 vessels a day, on average.

The busiest passenger landing is the Outer Harbour Ferry Terminal. Just over twothirds of all passenger vessels arrive there. Just under one-quarter of all passenger vessels arrive at the Pac On Ferry Terminal. Fewer than 10 percent arrive at the Inner Harbour. The chart shows how many sailings from each point of embarkation in the vicinity of Macau arrived at each passenger landing here in the past three and a half years. Hong Kong Island was the origin of 57 percent of sailings. Kowloon was the origin of under one-third as many. Shekou was the origin of 150 more sailings than Hong Kong International Airport. The Inner Harbour is peculiar in that passengers between Wanchai in Zhuhai and Macau use it for only part of the day. But it handled almost as many sailings from Wanchai as Macau’s other passenger landings handled from Shekou and Shenzhen combined. There were several hundred other sailings to Macau in the past three and a half years, but the services were discontinued. Sea travel seems to be predominantly a means to get here from Hong Kong. J.I.D.

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Passenger vessel arrivals, 2010-2013H1

Tony Lai tony.lai@macaubusinessdaily.com

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ight Rapid Transit railway contractor Top Builders International Co Ltd says it requested more than a small increase in its fee, contradicting government claims made earlier this week a “small” increase was paid. Top Builders senior commercial manager Calvin Pang said the amount was not “small, like 3 or 4 percent, as the government described”. Mr Pang would not say how much the Macau-based firm had asked for. The company asked for more money because some of their work was not covered by the first contract. The process was a “very common” phenomenon in public works projects, he said. The government is paying Top Builders 983 million patacas (US$123 million) to build the light rail network’s depot and a transport hub in Taipa. Transportation Infrastructure Office deputy director André Sales Ritchie said on Monday that some contractors had asked for “relatively small” increases to their contracts.

Mr Ritchie said the project had been delayed but could get back on schedule. That was “a lie” which “avoided the key issues,” Mr Pang said. “We utterly disagree with their comments. It is ridiculous.” Top Builders on Friday said the government’s indecision had delayed important decisions and might push back the project’s completion date from 2015 to 2018. Mr Pang said the infrastructure office had failed to address concerns raised by the contractor over the depot site, which is situated on reclaimed land. “Without consolidating the soil there first, no construction can be carried out as the soil cannot support the infrastructure on top,” he said. One-third of the time allotted for construction had passed but just 1 percent of the work had been completed, Top Builders said on Friday. Yesterday, Mr Pang questioned whether the new type of cement the government had requested could be produced in sufficient quantity.

Study subsidies on hold until next year Government says it will review the scheme before a second round of applications Stephanie Lai

sw.lai@macaubusinessdaily.com

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he government will not accept new applications for the continuing education scheme until next June, says the Education and Youth Affairs Bureau. In response to questions from Business Daily, the bureau said it would wait for the current round of courses to end before launching a second round of applications. Under the Continuing Education Development Scheme, residents 15 years or older are entitled to a maximum of 5,000 patacas (US$626) to spend on governmentapproved certificate examinations

or courses between 2011 and the end of this year. The bureau had previously confirmed that the scheme would be extended. It will now assess the scheme’s effectiveness before deciding when to accept new applications from education institutions and residents. The scheme has been widely criticised. Last November, the Commission of Audit published a report saying hundreds of courses and exams had been wrongly approved for subsidies. The education bureau said it is

The government has requested cement that could last for more than 100 years. The Civil Engineering Laboratory of Macau said yesterday the cement had already been used in the construction of three railway sections in Taipa.

Top Builders is being paid 983 million patacas to construct a train depot and transport hub in Taipa (Photo: Manuel Cardoso)

yet to decide whether the scheme would be extended for a further three years. It has confirmed, however, that the subsidy for each resident would be increased from the current 5,000-pataca limit, an allowance for inflation. Up to the end of last month, more than 110,000 Macau residents had taken advantage of the scheme, with the government spending more than 390 million patacas, the bureau’s data show. Each participant used an average of 3,363 patacas on subsidised courses or examinations. Just 30 percent of participants have used up the full subsidy. Earlier this month the bureau said that only core courses would be fully subsidised in the future. Studies are considered “core courses” if they contribute towards the government’s goal of making Macau a global tourism hub, or a centre for trade between the mainland and Portuguese-speaking countries. People taking courses that do not serve either purpose, such as cookery or tai chi, for example, will have to pay 20 percent of the course’s fee. Driving lessons might be removed from the scheme altogether.


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August 21, 2013

Macau

Galaxy stocks up cash in first half Vice chairman hopeful non-gaming project for Hengqin could be approved in few months Michael Grimes

michael.grimes@macaubusinessdaily.com

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alaxy Entertainment Group Ltd’s cash balances grew 16 percent in the six months to June 30 it said in interim financial results filed yesterday. Cash on hand at June 30 for the Macau casino developer stood at HK$18.1 billion (US$2.33 billion), up from HK$15.6 billion at December 31, 2012. But the firm gave no hint that it planned to pay shareholders a dividend at this stage. Galaxy has a lot of pending developments on Cotai, including Galaxy Macau Phase 2 due to open in mid-2015 at a cost of HK$19.6 billion; Galaxy Macau Phase 3 and 4 due to open in stages between 2016 and 2018 at a cost of HK$60 billion.

It’s also pursuing a non-gaming project on Hengqin Island, a special economic zone of mainland China next door to Macau. Hong Kong media outlets Apple Daily and RTHK reported Francis Lui Yiu Tung, vice-chairman of Galaxy, saying at yesterday’s results press conference that the firm was still negotiating with the Hengqin authorities on the scale and content of its Hengqin plan. He added he was “confident” the proposal could be confirmed in a few months. Mr Lui also said the company had several ideas for the refurbishment of Grand Waldo casino hotel on Cotai – which it recently bought for HK$3.25 billion – and that the gaming element

On track – Galaxy Phase 2

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he number of people working in gaming has fallen for the first time in three years, official data show, as over 900 casinofloor employees left the industry so far this year. At the end of June the gaming sector had 54,554 full-time employees, down by 281 from December, the Statistics and Census Service announced yesterday. The major reason for the drop was a cull in casino-floor staff. During the first half of this year 919 hard and soft count clerks, cage cashiers, pit bosses, casino floor workers, and betting service operators lost their jobs, taking the total down to 13,777. The drop came even as the number of gaming tables increased by 261 in the first half of this year to a total of 5,746. On the other hand the number of dealers – a job reserved for residents only – topped 24,000 for the first time, as 136 new dealers were hired. But the data show casinos would have liked to hire even more. By the end of June there were still 822 vacancies for dealers, up by 35 from December. In the second quarter alone the gaming sector had to hire 2,552 new employees just to catch up with a staff turnover rate of about 4 percent.

would remain there. The facility could “reopen in the next six to nine months”, he said, adding the number of gaming tables is yet to be confirmed. The group will also open a new junket room with 12 VIP tables at an undisclosed location before the National Day Golden Week holiday in October, Hong Kong media additionally reported.

Cotai expansion In March Mr Lui said that with Galaxy Macau Phase 2 adequately funded, the firm thought it best to offer investors long-term value by reinvesting cash balances in Phases

3 and 4 of Galaxy Macau. The phase-two expansion – due to be ready by mid-2015 – will add as many as 500 gaming tables and 1,300 rooms from the JW Marriott and Ritz-Carlton hotel brands. “Planning for Phases 3 and 4 is almost finalised and construction targeted to commence by the end of 2013/early 2014,” Galaxy said in its latest filing. “We believe that our development pipeline for Phases 2, 3 and 4 plus the Grand Waldo Complex on Cotai position us well for continued growth,” said company chairman Lui Che Woo in a statement accompanying the results. The firm also announced yesterday that it had prepaid HK$3.5 billion of debt early in the current quarter, which it said reduced borrowings by approximately 35 percent from HK$10.3 billion as of June 30, to HK$6.8 billion now. Adjusted earnings before interest, taxes, depreciation and amortisation, rose 18 percent to HK$3.02 billion for the second quarter ended June. First-half net income increased 35 percent to HK$4.6 billion while revenue rose nine percent to HK$30.8 billion during the period. VIP turnover at Galaxy Macau dropped four percent to HK$178.2 billion in the second quarter, while mass gaming revenue at the Cotai resort grew 13 percent to HK$6.85 billion. Galaxy’s shares – which joined Hong Kong’s benchmark Hang Seng Index on June 17 – dropped 2.5 percent yesterday to close at HK$42.90. The Hang Seng fell 2.2 percent.

Gaming staff falls after three-year run Casino industry promotes executives, pays more to frontline staff Vítor Quintã

vitorquinta@macaubusinessdaily.com

Nonetheless, the industry still had 1,591 job vacancies by the end of June. The gaming industry put most of its resources into attracting directors and managers so far this year, with a further 584 signed up, thus taking the total of 2,400. In contrast casino top- and midlevel executives saw their wages drop again to an average of 43,990 patacas (US$5,510). Directors and managers’ salaries have fallen by 8.7 percent in the last 12 months. This was the only exception, however. The average wage of all other gaming staff rose in the first half of this year. For instance, dealers got an average monthly pay of 16,720 patacas, up by 4.6 percent from the end of December.

The number of dealers – a job reserved for residents only – topped 24,000 for the first time


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August 21, 2013 April 19, 2013

Macau More people refused entry in Macau

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Over 22,100 visitors were refused entry in the territory during the first half of this year, up by 16.2 percent year-on-year, according to Public Security Police data quoted by the Portuguese-language newspaper Jornal Tribuna de Macau. Most of these tourists, over 18,600, came from mainland China, up by 17.7 percent year-on-year. Next came visitors from Hong Kong, with 1,852 barred by security forces. Most people were stopped either at the Gongbei and Hengqin borders (12,521) or at the ferry terminals (9,388). The police did not detail the reasons why these people were refused entry.

Financial Monitor Credit bonanza Our means of payment come in two main forms: cash in coins and notes, or deposits in banks that we can easily use at short notice and almost without cost. For practical purposes, the money available in current accounts is akin to cash. The money in other types of accounts, such as savings accounts and time deposit accounts, is not as readily available. Most of our money is in the form of bank deposits of one kind or another. The major source of money in modern economies is not the mints that turn out coins or notes but credit – loans of money deposited in banks. The amount of credit created by the Macau banking system has been growing continuously.

Future Bright profit jumps on steady visitor inflow Restaurant group eyes growth in souvenirs and catering services Tony Lai

tony.lai@macaubusinessdaily.com

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From 2008 to last year the amount of credit given by banks here rose by 132 percent. Most of the loans were to companies or individuals. Most of the lending was in Hong Kong dollars – almost two–thirds of it at the end of last year. But lending in patacas has been growing faster than lending in Hong Kong dollars recently, so the proportion of loans in patacas rose from one-fifth in 2008 to one-third last year. The proportion increased slightly in the first four months of this year. The proportion of loans in Hong Kong dollars has declined, but not by as much as the proportion of loans in other currencies, which shrank from 5.5 percent in 2008 to about 0.5 percent last year. J.I.D. The content of this column is the work of Business Daily’s journalists.

234.5 %

Growth in lending in patacas, 2008-2012

uture Bright Holdings Ltd posted a one-third year-onyear rise in profit in the first half of this year as visitors spent more money on its restaurants. The company said in a filing to the Hong Kong Stock Exchange yesterday its net profit in the first six months was HK$98.6 million (US$12.7 million). Its food and beverage sector reported a turnover increase of 9.6 percent year-on-year to HK$338.1 million. “The group’s restaurant chain business has performed with some growth in turnover and net profit, much in line with the mild increase in [the] number of visitors’ inflow to Macau,” said Future Bright. The number of tourists rose by 4.2 percent in the first six months to over 14.1 million, with a 9.8-percent growth in the mainland Chinese market. Japanese restaurants were still the main source of revenue for the operator, accounting for over half of the first half turnover, or HK$179 million. The group whose managing director is Macau businessman and Legislative Assembly member Chan Chak Mo had 37 restaurants and food outlets here at the end of June. Catering services still account for a small slice of Future Bright’s business but revenue surged five-fold year-onyear to HK$6.9 million. The company only began providing canteen services to the Macau University of Science and Technology in August last year, the filing explained. The catering is set to grow even more as the operator has also obtained a two-year contract to operate a cafeteria and canteen at “an international school in Macau”, the filing said.

Japanese restaurants were the main revenue source for Future Bright

Future Bright will also open two canteens in the new Hengqin campus of the University of Macau by February next year.

Cotai wave The company believes the restaurant chain business “shall remain a centre piece of the group’s business (…) in 2013 and 2014, [but] revenue from the group’s industrial catering business will be enhanced from the second half of 2013.” There is “great potential” in the catering market, particularly from 2015 onwards, when several integrated resorts in Cotai are slated to open, the group said. Future Bright is aiming to tap into the food souvenir market by launching a trial production before the end of this year. The group has a six-storey commercial building in downtown Macau peninsula and has decided to use one floor as the flagship store

for its souvenir products. “Meaningful revenue income from the food souvenir business is expected to roll in [by] 2014”, the company said. Future Bright agreed earlier this month to pay 4 million patacas (US$500,000) for Macau Yeng Kee Bakery’s Macau and Hong Kong trademarks. Mr Chan has told Business Daily that the purchase was part of the company’s strategy to develop its souvenir sector. High operating costs, namely “increases in [the] number of staffs and rental costs [that] followed the opening of more new restaurants” in 2012, hurt Future Bright’s profitability. The group’s gross profit ratio was down to 35.3 percent so far this year, down from 37.9 percent a year earlier. The operator will distribute interim dividend of HK$2.5 cents per share to its shareholders, up from HK$1.5 cents in the first half of 2012.


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Greater China Chaoyue buys metal producers for HK$10 bln Chaoyue Group Ltd agreed to buy two Chinese makers of stainless steel and copper products for HK$10 billion (US$1.3 billion) after selling its main water purification businesses last year. Chaoyue will pay Chung Ming Metal Resources Holdings Ltd HK$3 billion in cash, with the balance in shares and convertible bonds, it said today in a statement. Buying Chung Ming Metal gives Chaoyue control of one of the top 10 producers of scrap-based stainless steel and one of the top five makers of scrap-based copper in China as the nation makes resource recovery a priority, Chaoyue said.

China Mobile removes Guangdong head amid probe China Mobile Communications Corp, the state-owned parent of the world’s largest phone company by users, removed the head its Guangdong unit who is under investigation. Xu Long was removed as general manager, chairman, and Communist Party Secretary for the carrier’s Guangdong unit amid a probe of “a serious violation of discipline,” China Mobile Communications said in an e-mail yesterday from spokesman Zhang Xuan. Mr Xu is under investigation by “the relevant departments” Mr Zhang said, without supplying details. Mr Xu had resigned as an executive director of the Hong Kong- listed China Mobile Ltd on December 14, according to the company’s annual report.

Taiwan July export orders rebound Taiwan’s export orders surprisingly rebounded in July after five straight months of contraction bolstered by demand in China and the United States, pointing to stronger retail demand for Asian exporters in the third quarter. Taiwan’s export orders in July rose 0.5 percent from a year earlier, rebounding from a contraction of 3.5 percent in June. Orders in July rose 0.4 percent month on month, data from the Ministry of Economic Affairs showed. Orders from Taiwan’s two biggest markets were both up, with mainland China growing 2 percent and the United States 2.8 percent. Those from Europe and Japan contracted 1.2 percent and 10.7 percent, respectively.

Cnooc H1 profit rises 7.9 pct Cnooc Ltd, China’s biggest offshore oil and gas explorer, posted a betterthan-expected 7.9 percent increase in first-half profit as rising oil and gas production helped counter lower prices. Net income rose to 34.38 billion yuan (US$5.6 billion) from 31.87 billion yuan a year earlier, Cnooc said in a statement yesterday. Cnooc’s net production in the period was 198.10 million barrels of oil equivalent helping to compensate for the declines in the price of crude. Revenue was 139 billion yuan in the first six months, compared with 118 billion yuan, while production costs increased 23 percent to US$42.36 a barrel of oil equivalent from a year earlier, according to the statement.

Everbright shares plunge after trading blunders Investors punish the company for errors on back-to-back days

E

verbright Securities Co Ltd plunged in Shanghai as the broker faces possible fines and more restrictions on business after an unprecedented stock trading error that threatens to erode confidence in China’s market. The shares fell by the 10 percent daily limit to 10.91 yuan (US$1.78) at the close yesterday, with trading volumes about 68 percent below this month’s average. Haitong Securities Co sank the most in three weeks as its board secretary said the company was looking into media reports about a trading problem. State-controlled Everbright had been suspended since it made 23.4 billion yuan (US$3.8 billion) of erroneous buy orders on Friday, an event the China Securities Regulatory Commission described as the first of its kind. The company mispriced 10 million yuan of government bonds on Monday. The CSRC banned Everbright from proprietary trading for three months as the regulator seeks to lure investors back to the world’s second- worst performing stock market in the past four years. “It wouldn’t be surprising, as market participants and investors eagerly await, if the regulators hand down a harsh penalty and hefty fines to ensure that similar incidents will not happen again,” said Hubert Tse, a Shanghai-based partner at the law firm Boss & Young who’s not involved in the case. “The CSRC is likely to come to a decision fairly soon, probably in weeks.” The bad trades prompted the regulator’s second investigation of Everbright this year, following a probe of an initial public offering that the firm worked on. The CSRC hasn’t said when it will finish its investigation, or what further penalties it could impose. It didn’t respond to phone and fax requests for comment on whether it will include the bond trade in its investigation of the stock purchases.

phone, without commenting on the timing or potential penalties in the investigation. “We have normal operations and other financing channels, such as short-term loans on the interbank market.” Everbright, China’s 12th-largest brokerage by revenue, has been ordered to determine responsibility and to take corrective measures, the CSRC said in a statement on Sunday. The securities industry should be on “high alert” because of the flaws exposed by the Everbright case, it said. Haitong Securities’ information department is looking into media reports of a trading system problem, Jin Xiaobin, board secretary of China’s 2nd-largest brokerage, said yesterday. The stock slumped 3.3 percent, the most since July 29, in Shanghai. The firm’s Hong Kong shares slumped 5.7 percent. Everbright isn’t the first statecontrolled Chinese company to face regulatory scrutiny for its trading operations. Citic Pacific Ltd reported a currency-derivative loss of about HK$15 billion (US$1.9 billion)

in October 2008, the biggest by a Chinese company, prompting the resignation of Chairman Larry Yung and a bailout from state-owned parent Citic Group. Trading errors may erode confidence in a stock market where the benchmark index has slumped 25 percent in the four years to Monday. The drop by the Shanghai Composite Index is the second biggest among equity gauges in 45 emerging and developed countries, after a 61 percent slide in Greece’s ASE Index. Of Everbright’s 23.4 billion yuan of buy orders, 7.27 billion yuan were transacted, the company said. Everbright had a mark-to-market loss of about 194 million yuan based on Aug. 16 closing prices, and the final value may change, the company said in a statement to the Shanghai exchange on August 18. Everbright’s final trading loss could reach 300 million yuan to 400 million yuan, Citigroup Inc. analyst Paddy Ran wrote in a note dated August 16. Bloomberg News

Haitong securities “The company is capable of solving liquidity issues,” Everbright’s Board Secretary Mei Jian said by

Beijing to strengthen financial supervision C

hina is set to create an agency led by the central bank to coordinate financial supervision, without changing the roles of existing industry watchdogs, the cabinet said yesterday. The State Council said in its approval of the proposal from the People’s Bank of China (PBOC) that

The 10 pct decline is the maximum daily limit allowed

the new office will coordinate China’s monetary policies and financial regulations, maintain financial stability and reduce systemic risks. The agency would report to the cabinet and its creation is not expected to affect the role of current supervisors as it would not be a policy maker. This is contrary to market expectations, which have long speculated that China would create a super-agency for financial regulation to cut bureaucratic infighting and quicken reforms. For example, the development of China’s bond market is undermined by turf wars between three different regulators. The central bank governs bond sales in the inter-bank market, the China Securities Regulatory Commission (CSRC) oversees bonds issued by listed companies while the National Development and Reform

Commission (NDRC) approves bond issuance by non-public firms. The country’s current main financial supervisors include the PBOC, CSRC, the China Banking Regulatory Commission, the China Insurance Regulatory Commission and the State Administration of Foreign Exchange. The new agency can also invite the NDRC, China’s most powerful economic planner, and the Ministry of Finance if needed to its regular quarterly meetings and extraordinary meetings, the government said in a statement. It will also increase oversight of cross-asset financial products and innovations, improve information sharing and set up an accounting system across financial sectors. The statement was made public on yesterday but was dated August 15. Reuters


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Soho China H1 profit doubles Company ‘fully confident’ about development of office markets, chairman says

S

oho China Ltd, the biggest developer in Beijing’s central business district, said underlying profit in the first half more than doubled with increased earnings from property sales. Profit excluding revaluations climbed to 537 million yuan (US$88 million), from 233 million yuan a year earlier, according to a statement to the Hong Kong Stock Exchange yesterday. Revenue doubled to 2.5 billion yuan. Chief executive Zhang Xin last year steered the company toward what it called a build-and-hold model from a build-and-sell model to take advantage of more stable and predictable rental income rather than sales proceeds. “The company’s earnings rose because it has sold more properties left over from last year to book in the period,” Alan Jin, a Hong Kongbased property analyst at Mizuho Securities Asia Ltd, said before the results. “But a lot of uncertainty remains with this company because it will take at least four or five years for its new model to take effect and Soho doesn’t have a good track record for holding properties,” he said, rating the stock at underperform. Grade-A office rents in Beijing fell 2.2 percent in the second quarter from the previous three months to 387 yuan per square metre (10.76 square feet) each month, the first quarterly decline in almost four years,

as the country’s economy slowed, according to property broker Knight Frank LLP.

Fully confident “We are fully confident about the development potential of the office markets in Beijing and Shanghai,” chairman Pan Shiyi said in yesterday’s statement. Demand for prime office buildings in the two centres “remained robust, whereas the supply in these two cities remained constrained in

Soho selling more properties

prime locations”. Including property revaluations, net income more than tripled to 2.1 billion yuan, or 0.4 yuan a share in the first half of the year, from 613 million yuan, or 0.12 yuan, a year earlier. Soho shares rose 0.31 percent to HK$6.42 in Hong Kong trading. The stock has gained 1.9 percent this year, compared with the Hang Seng Index’s 2.3 percent loss. The company said it will pay an interim dividend of 0.12 yuan per share.

As it moves to the new business strategy, Soho will hold most of the unsold properties under development as self-owned investment properties and will also finish selling the “leftover” properties that were put on the market before it changed the model, it said. The developer said it leasing performance improved in the first half, with SOHO Century Plaza, its first wholly-owned investment property in Shanghai fully leased. Bloomberg News


10 10

August 21, 2013 April 19, 2013

Asia AirAsia Japan now ‘Vanilla Air’ Budget carrier AirAsia Japan is being rebranded as Vanilla Air, the airline announced yesterday. Executives chose Vanilla Air from over 200 other names, taking a month and a half to decide. The name was chosen following the break-up of a joint venture between the airline’s parent companies, Malaysia-based AirAsia Bhd and Japan’s All Nippon Airways (ANA), which now wholly owns the carrier. Vanilla Air, which will begin flights in late December with two passenger planes to be leased from ANA, is to target travellers heading for resort destinations. “We will begin with short-distance services but want to expand the range to mid- and longdistances in line with ANA’s branding strategy,” Mr Ishii said.

RBNZ cracks down on mortgage Central bank moved to rein in hot housing market

N

ew Zealand’s central bank will impose restrictions on low-deposit home lending from October 1 to guard the financial system from a bubble that has made houses in the nation the fourth most overvalued in the world. Loans for more than 80 percent of a property’s value must account for no more than 10 percent of a bank’s new lending, from about 30 percent now, the Reserve Bank of New Zealand said in a statement. The New Zealand dollar declined after Governor Graeme Wheeler said the kiwi is “over-valued relative to what would be sustainable long-term”. Mr Wheeler wants to curb the excesses of the property market, concerned that the banking system is getting over-exposed to any sudden collapse in house prices. He has been reluctant to raise interest rates because that may stoke demand for the New Zealand dollar, hurting exports and hindering an economic recovery. “If they were to whack up interest rates right now, when rates are still so low elsewhere, there is that risk that the currency gets pushed up further,” said Nick Tuffley, chief economist at ASB Bank Ltd in Auckland. “They will be hoping that these restrictions have an impact on house prices and reduce the need to put interest rates up.” The central bank has held the official cash rate at a record-low

New Zealand’s homes the fourth most overvalued in the world

2.5 percent since March 2011. Mr Wheeler on July 25 said the RBNZ expected to keep the cash rate unchanged through the end of 2013. “While higher policy rates may well be needed next year as expanding domestic demand starts to generate overall inflation pressures, this is not the case at present,” Mr Wheeler said yesterday. “Any OCR increases in the near term would risk causing

the New Zealand dollar to appreciate sharply, putting further pressure on New Zealand’s export and import competing industries.”

Price control Mr Wheeler yesterday reiterated that as much as 30 percent of new loans were being made with loanto-valuation ratios of more than

Manila shut for second day At least seven people were killed and more than 100,000 people fled their homes amid heavy rains and flooding that paralysed the Philippines’ capital and nearby provinces for a second day. President Benigno Aquino suspended work in government offices in the Manila region for a second day, prompting Bangko Sentral ng Pilipinas and exchanges to keep currency, bonds and stock markets closed. Roads leading to the airport were flooded, prompting the cancellation of some flights. Tigerair Philippines cancelled all its Manila outbound and corresponding flights until further notice. Tigerair will waive charges and issue refunds to all affected passengers, the company said.

Radioactive water leak at Fukushima Tokyo Electric Power Co Inc reported another breach of the defences it has built at the Fukushima nuclear plant in its more than two-year struggle to stop leaks of radioactive water into the soil and sea. Just weeks after the utility backtracked from earlier statements and admitted radiated water was flowing into the Pacific Ocean at a rate of 300 tonnes a day, it has found another leak from a storage tank. Shinichi Tanaka, the chairman of Japan’s Nuclear Regulation Authority, has said the water leaks are getting out of control and creating a state of emergency, according to Shinji Kinjo, who leads a task force for the regulator.

RBA minutes send dollar lower Central bank signals currency important as rate-cut option remains Michael Heath

A

ustralia’s central bank said the currency’s direction will be important in setting policy and signalled further interest-rate cuts remain a possibility, according to minutes of its August 6 meeting at which it reduced its benchmark rate to a

Musharraf charged over Bhutto case Pakistani ex-President Pervez Musharraf has been indicted on three charges over the 2007 assassination of opposition leader and former PM Benazir Bhutto. Prosecutors said he was charged with murder, criminal conspiracy to murder and facilitation of murder. Mr Musharraf made no public remarks at the hearing but denies the charges. The case was adjourned until August 27. Mrs Bhutto was killed at an election rally in the city of Rawalpindi in December 2007. “These charges are baseless. We are not afraid of the proceedings. We will follow legal procedures in the court,” Mr Musharraf’s lawyer Syeda Afshan Adil told AFP.

It was possible the exchange rate would decline further over time, which would assist in rebalancing growth in the economy… Reserve Bank of Australia

record-low 2.5 percent. “Regarding the communication of this decision, members agreed that the bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further,” the Reserve Bank of Australia said

in minutes of the meeting released yesterday. “The course of the exchange rate would be important” in setting policy, it said. The Australian dollar fell for a second day, following its biggest drop this month. It dropped 12 percent in the past three months,


11 11

August 21, 2013 April 19, 2013

Asia

lending 80 percent, up from 23 percent in late 2011. The Organisation for Economic Cooperation and Development said in May that New Zealand’s homes were the fourth most overvalued in the developed world, behind only Belgium, Norway and Canada. Prices rose 8.1 percent in July from a year earlier, the fastest pace since January 2008, according to Quotable Value New Zealand, a government research company. The central bank expects homeloan restrictions to curb house-price growth, reducing the risk of a slump in values that would damage the financial system and the economy, Mr Wheeler said. Allowing for exemptions including bridging loans, refinancing of existing loans and lending under a government plan for low-income earners, the effective limit on lending with a high loan- tovaluation ratio is 15 percent, he said. The measures are temporary and will be eventually removed “if there is evidence of a better balance in the housing market,” Mr Wheeler said. If they are not effective, they will be removed “but in this case their removal might necessitate higher interest rates than otherwise” or the use of other prudential tools, he said. Mr Wheeler has an agreement with Finance Minister Bill English to also use tools that require banks to

the worst performer among group of 10 currencies, and Governor Glenn Stevens and his board cut rates by 2.25 percentage points since late 2011 as growth slows and unemployment rises. The RBA is aiming to rebalance the economy from mining regions in the north and west, where an investment boom is waning, toward industries including residential construction in the south and east. “With growth expected to remain below trend for longer and inflation to remain within the target even with the effects of a lower exchange rate, members concluded that a lower level of the cash rate would better contribute to achieving sustainable growth in demand consistent with the inflation target,” the RBA said in the minutes. “The board would continue to examine the data over the months ahead to judge whether monetary policy was appropriately configured.” The RBA this month reduced its growth forecast to 2.25 percent in the year to December 2013, compared with 2.5 percent forecast three months earlier. Australia’s unemployment rate held at an almost four-year high of 5.7 percent in July as fewer people sought work, government data showed on August 8. “Employment growth was continuing, but at a pace below the rate of growth of the labour force,” the minutes said. “Wages growth was slowing.”

Slower growth Even so, there are signs that the central bank’s almost two-year easing cycle is impacting areas of the economy. Australian house prices climbed by the most in more

hold additional capital or increased funding from long-term sources. He selected loan restrictions because they can damp asset prices more directly, he said. The proposals have raised concerns that first-home buyers who may struggle to raise a 20 percent deposit will be shut out of the market. Government-owned Kiwibank yesterday said it would give priority to those buyers over people seeking investment properties. Mr Wheeler urged that priority be given to increasing housing supply. Supply constraints have been driving price increases in the nation’s biggest city of Auckland. More building and limits on lending will help reduce the risk of a house-price boom, he said. Bloomberg News

While higher policy rates may well be needed next year as expanding domestic demand starts to generate overall inflation pressures, this is not the case at present

India may delay capital infusion into banks I

ndia may delay injecting capital into state-run banks due to slumping stock prices, said Rajiv Takru, the Finance Ministry’s banking secretary. The government, which usually infuses capital into lenders by buying their shares, doesn’t want to lose money as prices slide, Mr Takru said in an interview in New Delhi. He had said on July 9 the government will inject as much as 140 billion rupees (US$2.2 billion) by the end of September to strengthen banks’ risk buffers and bolster credit growth. The S&P BSE Bankex Index, which tracks 13 banks, has lost 31 percent from a record on May 17 as central bank steps to support the rupee caused interbank rates to surge.

The capital infusion “may now not happen in September,” Mr Takru said. The government is waiting for stock prices to stabilise before it makes a decision on the matter, he said. The government will need to insert as much as 910 billion rupees into the banks it controls to comply with international standards known as Basel III if it wants to maintain the stakes it holds in the lenders, Reserve Bank of India Governor Duvvuri Subbarao had said. The possible delay “sends out a message that the government is seeing further downside to the banking stocks,” said Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd. Bank stocks have slumped as the Reserve Bank of India raised two interest rates and tightened lenders’ access to cash since mid-July, among efforts to steady the rupee, which has tumbled 16 percent against the dollar in the past three months. The currency weakened 1.6 percent yesterday to a new record low. India’s interbank overnight call money rate has climbed more than 4 percentage points in the past month and was at 10.35 percent yesterday, the highest level since March 2012. Bloomberg News

Graeme Wheeler, Governor of Reserve Bank of New Zealand

than three years in the second quarter and consumer confidence rose 3.5 percent this month after the RBA’s latest rate cut. “Borrowing for housing had picked up, as had dwelling prices, and there had been an increase in leading indicators of dwelling construction, but to date this had been moderate rather than strong,” the central bank said in the minutes. While Australia’s terms of trade, a ratio of export prices to import prices, peaked in 2011, Australian industry has been squeezed by a currency that held above US$1 from mid-June last year to May 9, the longest stretch above parity with the U.S. dollar since the Aussie was freely floated in 1983. The currency “had declined since the previous meeting, though remained high by historical standards,” the minutes of the August 6 meeting showed. “It was possible the exchange rate would decline further over time, which would assist in rebalancing growth in the economy, though it would also be affected by developments in other countries.” The Australian dollar has depreciated as China’s outlook darkened and Federal Reserve chairman Ben S. Bernanke signalled for the first time on May 22 that a tapering of bond purchases that devalued the greenback may be on the cards. The minutes showed board members were briefed on staff forecasts for global growth: “Aggregate growth of Australia’s major trading partners – including China – was expected to be a bit below its decade average in 2013 before picking up somewhat in the following year.” Bloomberg News

Capital injection may not happen next month

BHP Billiton to invest US$2.6 bln in potash project B

HP Billiton Ltd, the world’s biggest miner, said yesterday it would invest US$2.6 billion in work on a Canadian potash project, saying the longer-term outlook for the fertiliser was “compelling”. The move comes on the day BHP announced a 29.5 percent plunge in annual net profit due in part to a slump in commodity prices including iron ore and underscores its efforts to diversify its portfolio as the Asiadriven mining boom slows. Net income dropped to US$10.9 billion in the year to June 30 from US$15.4 billion a year ago, the Melbourne-based company said yesterday in a statement. Profit, excluding one-time items, was US$11.8 billion, compared with US$17.2 billion a year ago. The firm said the new investment would allow it to finish work on

excavating and lining production shafts at its Jansen Potash site. “Continued development of the shafts reflects our confidence in the quality of our 5.3 billion tonne measured resource and the compelling long term fundamentals of the potash industry,” chief executive Andrew Mackenzie said. BHP added that the cash would also allow it to continue the installation of essential surface infrastructure and utilities over a number of years. “Annual investment at Jansen of approximately US$800 million will form an important part of the group’s capital and exploration budget, which will decline to approximately US$16 billion this year,” Mr Mackenzie said. The approval takes BHP’s total commitment to Jansen, which is in the province of Saskatchewan, to approximately US$3.8 billion. The miner, which abandoned a US$39 billion bid for Canadian fertiliser maker Potash Corp in 2010 after it was rejected by authorities, said Jansen was the world’s best undeveloped potash resource, capable of supporting a mine with annual capacity of 10 million tonnes for more than 50 years. Mr Mackenzie said the investment was creating “a valuable asset”, and in time BHP could include one or more partners on the project. AFP


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Asia

Analysts see BOJ buying more bills As Fed tapers and economic recovery on track

A

s the Federal Reserve prepares to pare its bond buying, brokerages expect the Bank of Japan to do the opposite, stepping up short-term debt purchases and heading off any increase in yields. Bank of America Merrill Lynch and JPMorgan Chase & Co said the BOJ may increase the bills it buys directly from the government next fiscal year, in line with its doubling of purchases from the market. Average yields on Japanese government bonds maturing in up to 10 years have fallen three basis points since the end of June to 0.31 percent, while similar maturity Treasuries rose 12 basis points to 1.21 percent, according to data compiled by Bloomberg and the European Federation of Financial Analysts Societies. The forecasts for more bond purchases next year suggest that the impact of the BOJ’s monetary stimulus will intensify as it strives to end 15 years of deflation. The purchases may cap borrowing costs in the world’s third-largest economy, while debt yields rise elsewhere as the Fed begins to taper stimulus in the U.S., according to Bank of America. “Increased underwriting could reduce the supply of bonds to the market, so along with the BOJ’s purchases in the market, it would be a factor in lowering yields,” said Shuichi Ohsaki, a rates strategist in Tokyo at the U.S. bank, which is one of the 23 primary dealers obliged to bid at Japanese government debt auctions. “Lots of investors would struggle to find JGBs that they can buy.” Japan’s economic recovery is expected to remain on track this year thanks to public works projects and strong consumer spending but will slow the following fiscal year due to an expected increase in the sales tax, a Reuters poll showed. However, consumer prices are expected to fall short of the BOJ’s goal, and there is a 60 percent chance that the central bank could expand asset purchases by the middle of next year, the poll showed. The world’s third-largest economy is forecast to grow 2.6 percent in the fiscal year to Japan’s economy forecast to grow 2.6 percent this year

that are coming due, according to Bank of America. The central bank on April 4 doubled its monthly bond purchases from the market to more than 7 trillion yen (US$72 billion) to stoke 2 percent inflation in two years. The BOJ’s underwriting in the fiscal year started April will total 11.7 trillion yen, the Ministry of Finance said. Bank of America expects that to swell to as much as 25 trillion yen next year. The yield on Japan’s benchmark five-year note advanced half a basis point, or 0.005 percentage point, to 0.285 percent on Monday, near the least since May. The 10-year yield fell half a basis point to 0.76 percent today after dropping to a threemonth low of 0.73 percent last week. The yields may stay around these Shuichi Ohsaki, Bank of levels through the America Merrill Lynch rest of this year, said Takafumi Yamawaki, the Tokyo-based chief rates strategist at JPMorgan, another primary dealer. “The amount of debt that the BOJ buys from the government is determined politically, but it’s more likely to increase,” Mr Yamawaki said. J a p a n e s e corporate bonds have handed investors a 0.06 Takafumi Yamawaki, percent gain this JPMorgan Chase & Co month, compared with a 0.12 percent return on sovereign notes, according to

March 2014, a Reuters poll of 21 economists showed. Growth is expected to slow to 0.6 percent in the following fiscal year as an increase in the sales tax to 8 percent from 5 percent planned in April 2014 will slow consumer spending.

Politically determined “In 2013 government spending and consumption will lead growth, while in 2014 exports and capital expenditure will be the main drivers,” said Masayuki Kichikawa, chief Japan economist at Bank of America Merrill Lynch Securities. “There will be fluctuations due to exchange rates and unemployment, but it’s possible for inflation to reach about 1 percent.” Japan’s core consumer prices will rise 0.9 percent for the fiscal year starting April 2014 and 0.9 percent for fiscal 2015, excluding the effect of an expected sales tax hike, according to Reuters’ poll. While Japanese law prohibits the government from borrowing directly from the central bank, exceptions can be approved by the parliament under “special” circumstances. The scale of debt underwriting, limited to one-year bills, is usually equal to JGBs acquired by the BOJ from the market

Increased underwriting could reduce the supply of bonds to the market, so along with the BOJ’s purchases in the market, it would be a factor in lowering yields

The amount of debt that the BOJ buys from the government is determined politically, but it’s more likely to increase

Bank of America Merrill Lynch index data. Company debt worldwide has lost 1.08 percent. The yen was little changed yesterday. It has fallen about 19 percent in the past 12 months, the worst performance among 10 developed-market currencies tracked by the Bloomberg Correlation Weighted Indexes.

Bond auction A 400 billion yen auction of 40year government bonds yesterday attracted bids valued at 3.37 times the amount available, a higher ratio than the previous sale in May, according to Ministry of Finance data. Demand in May was the weakest since August 2011. Finance Minister Taro Aso last month said the government will present Japan’s medium-term fiscal plan at the September 5-6 summit of Group of 20 nations in St. Petersburg. The government will decide whether to go ahead with a planned consumption-tax increase pending the September 9 release of revised second-quarter growth figures. A preliminary reading released last week showed gross domestic product expanded 2.6 percent in the April-June period, down from 3.8 percent in the first quarter. Rating & Investment Information Inc said last week that a delay in fiscal consolidation will blur the boundary between fiscal and monetary policy in Japan. Extra spending financed by debt issuance may prompt the Tokyo-based ratings company to lower the outlook on its AA+ grade on the sovereign to negative from stable, it said in a statement. Economists say there is a 60 percent chance that the BOJ will ease monetary policy further by mid2014, according to the median from 17 respondents. Should the BOJ do that, it is likely to increase asset purchases by 10 trillion yen (US$102.2 billion) and focus its purchases on exchange-traded funds (ETFs), the poll showed. Bloomberg News/Reuters

KEY POINTS Growth seen on track this fiscal year Economy to slip in fiscal year 2014/15 Core consumer prices to fall short of BOJ expectations BOJ likely to increase asset purchases by mid-2014 – economists


13 13

August 21, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange)

Max 44.15

average 43.431

Max 44.4

Min 42.35

average 44.422

Last 42.9

Min 42.55

Last 42.8

44.2

70.50

43.7

70.15

43.2

69.80

42.7

69.45

22.7

42.2

Max 70.5

average 70.104

PRICE

average 22.512

Min 22.35

Last 22.45

22.3

44.0

19.6

21.5

43.5

19.4

21.3

43.0

19.2

21.1

42.5

Max 19.78

average 19.33

DAY %

YTD %

(H) 52W

Min 19.08

Last 19.14

(L) 52W

-0.830999066

13.32693128

108.9300003

86.23999786

BRENT CRUDE FUTR Oct13

109.17

-0.664240218

3.253570415

113.6100006

96.37999725

GASOLINE RBOB FUT Sep13

290.84

-0.848873283

6.227400562

309.1700077

260.2499962

GAS OIL FUT (ICE) Oct13

934.25

-0.927889714

3.089655172

975.75

835.5

3.438

-0.721917413

-4.446914953

4.517000198

3.128999949

305.51

-0.517746662

2.057791882

319.1699982

275.5500078

Gold Spot $/Oz

1360.18

-0.8767

-18.281

1796.08

1180.57

Silver Spot $/Oz

22.663

-2.2633

-24.7326

35.365

18.2208

NATURAL GAS FUTR Sep13 NY Harb ULSD Fut Sep13

Platinum Spot $/Oz

1503.05

-0.8281

-0.9685

1742.8

1294.18

Palladium Spot $/Oz

747.13

-1.0162

6.7847

786.5

587.4

1915

-1.542416452

-7.621804149

2200.199951

1758

LME ALUMINUM 3MO ($) LME COPPER 3MO ($) 3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep13 Dec13

WHEAT FUTURE(CBT) Dec13

7306

-1.27027027

-7.880469046

8422

6602

1988.5

-0.872382851

-4.399038462

2230

1779

14810

-1.266666667

-13.1887456

18920

13205

15.505

0

0.64913989

16.47500038

14.60000038

479.5

-1.235839341

-20.05002084

665

445.75

648.75

-0.726855394

-20.95644228

913

635.5

SOYBEAN FUTURE Nov13 COFFEE 'C' FUTURE Dec13 SUGAR #11 (WORLD) Oct13

19.0

COUNTRY MAJOR

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

ASIA PACIFIC

CROSSES

Max 21.65

average 21.25

Min 20.9

Last 20.09

20.9

1286

-1.323614042

-1.2857417

1409.75

1162.5

-0.651731161

-22.05177373

200

118.1499939

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

91.85

-0.060496068

-17.64705882

-1.087658841

21.82999992

16.6497333

93.72000122

World Stock Markets - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

15010.74

-0.4689861

14.54961

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

US

3589.086

-0.3800401

18.86305

3694.188

2810.8

FTSE 100 INDEX

GB

6414.16

-0.7975898

8.754947

6875.62

5605.589844

DAX INDEX

GE

8265.12

-1.209258

8.574574

8557.86

6871

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9043 1.5669 0.9207 1.3361 97.14 7.9878 7.7549 6.124 63.705 31.64 1.2769 30 43.94 10740 87.84 1.23017 0.8527 8.1811 10.6712 129.78 1.03

-1.2557 0.1214 0.5322 0.015 0.875 -0.0125 -0.0052 -0.0212 -0.9026 -0.8534 -0.1175 -0.08 -0.2959 -1.9274 2.1539 0.5154 0.1079 -0.2665 -0.0225 0.863 0

-12.8638 -3.1343 -0.5756 1.2964 -11.365 -0.0576 -0.0554 1.7407 -13.6724 -3.3502 -4.3465 -3.2233 -6.6796 -8.8175 1.6929 -1.8445 -4.372 0.4449 -1.3194 -12.4904 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3597 64.12 31.8 1.286 30.228 44.181 10851 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2295 77.13 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.78332 7.8281 9.8242 97.74 1.0289

Macau Related Stocks

121.95 16.52

COTTON NO.2 FUTR Dec13

NAME

Max 22.85

21.7

106.21

CORN FUTURE

69.10

19.8

WTI CRUDE FUTURE Sep13

LME ZINC

Last 70.05

Currency Exchange Rates

NAME

METALS

Min 69.15

22.5

44.5

Commodities ENERGY

22.9

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.28

-0.9259259

35.87301

4.63

2.49

VOLUME CRNCY 469464

13.86

-0.2877698

29.89691

14.03

8.86

770274

AMAX HOLDINGS LT

1.12

-3.448276

-20

1.72

0.75

1081325

BOC HONG KONG HO

24.55

-1.207243

1.867218

28

22.85

7824965

CENTURY LEGEND

0.355

0

33.96227

0.42

0.22

0

CHEUK NANG HLDGS

6.24

-2.5

4.173627

6.74

3.08

24244

CHINA OVERSEAS

23.6

-2.277433

2.1645

25.6

17.28

19905140

CHINESE ESTATES

16

1.010101

42.27852

16.98

7.996

143000

CHOW TAI FOOK JE

9.87

-2.083333

-20.65916

13.4

7.44

1479600

EMPEROR ENTERTAI

2.66

-1.481481

40.74074

3.07

1.35

775000

FUTURE BRIGHT

2.18

-3.964758

79.86411

2.76

1.053

1002000

GALAXY ENTERTAIN

42.9

-2.5

41.3509

44.95

20.45

8270165

HANG SENG BK

121.7

-1.616815

2.527383

132.8

109

1270798

HOPEWELL HLDGS

24.75

-1.590457

-25.56391

35.3

23.146

1655439

HSBC HLDGS PLC

84.65

-1.45518

4.120537

90.7

65.85

14313897

HUTCHISON TELE H

3.43

-4.722222

-3.651684

4.66

2.98

10309000

LUK FOOK HLDGS I

24.05

-2.631579

-1.434425

30.05

16.88

2396329

MELCO INTL DEVEL

16.2

-4.028436

79.80022

18.18

5.91

4002592 3355882

NIKKEI 225

JN

13396.38

-2.629354

28.87107

15942.6

8488.14

HANG SENG INDEX

HK

21970.29

-2.196477

-3.030557

23944.74

19076.78906

CSI 300 INDEX

CH

2312.465

-0.8134493

-8.342878

2791.303

2023.171

TAIWAN TAIEX INDEX

TA

7832.65

-0.8551671

1.729332

8439.15

7050.05

MGM CHINA HOLDIN

22.45

-0.08900757

69.07311

23.65

11.346

KOSPI INDEX

SK

1887.85

-1.553472

-5.468069

2042.48

1770.53

MIDLAND HOLDINGS

3.11

-4.601227

-15.94595

5

2.68

1130000

S&P/ASX 200 INDEX

AU

5078.179

-0.6719177

9.232816

5249.6

4261.2

NEPTUNE GROUP

0.17

-1.734104

11.84211

0.23

0.131

15250000

ID

4121.315

-4.455829

-4.525972

5251.296

3978.078

NEW WORLD DEV

11.22

-2.604167

-6.655578

15.12

9.38

9778298

FTSE Bursa Malaysia KLCI

MA

1738.92

-2.217774

2.958648

1826.22

1590.67

SANDS CHINA LTD

42.8

-2.837684

26.06774

45.5

26.05

9531342

SHUN HO RESOURCE

1.55

0

10.71429

1.67

1.06

32000

NZX ALL INDEX

NZ

961.61

0.1882678

9.019526

998.487

799.651

SHUN TAK HOLDING

3.77

-1.56658

-10.02387

4.65

2.76

4960055

PHILIPPINES ALL SHARE IX

PH

3974.93

0

7.460164

4571.4

3411.69

SJM HOLDINGS LTD

19.14

-3.235592

7.845217

22.382

15.401

9582145

11

-1.256732

-21.875

17.36

10.92

1209500

WYNN MACAU LTD

20.9

-3.464203

-0.2386671

26.5

16.92

6594929

ASIA ENTERTAINME

3.97

-0.5012531

41.04608

4.7647

2.4835

414594

0.8934903

59.1143

75.61

43.16

839529 427175

JAKARTA COMPOSITE INDEX

SMARTONE TELECOM

HSBC Dragon 300 Index Singapor

SI

600.08

-1.29

-3.38

NA

NA

STOCK EXCH OF THAI INDEX

TH

1354.33

-3.156999

-2.701292

1649.77

1207.53

HO CHI MINH STOCK INDEX

VN

504.81

-1.215217

22.01435

533.15

372.39

BALLY TECHNOLOGI

71.14

Laos Composite Index

LO

1370.44

0

12.81476

1455.82

1003.17

BOC HONG KONG HO

3.17

-1.246106

3.257331

3.6

2.99

GALAXY ENTERTAIN

5.66

0.8373419

42.56927

5.77

2.735

2200

INTL GAME TECH

18.75

0.4284949

32.32181

20.25

11.56

1359367

JONES LANG LASAL

83.49

-0.9608541

-0.5361001

101.46

70.02

800238

LAS VEGAS SANDS

56.84

0.9412183

23.13692

60.54

37.8353

4868012

MELCO CROWN-ADR

27.13

1.231343

61.10451

27.57

11.452

3432944

MGM CHINA HOLDIN

2.92

0

66.82937

2.98

1.5327

1000

MGM RESORTS INTE

17.2

0.05817336

47.76632

17.67

9.15

6227123

SHFL ENTERTAINME

22.75

0.08798944

56.89655

23.08

12.35

195618

SJM HOLDINGS LTD

2.57

0.7843137

12.83728

2.9481

1.9818

2300

139.18

0.4416604

23.72656

144.99

93.1279

898163

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

34.5

-2.953586

46028504

CHINA UNICOM HON

ALUMINUM CORP-H

2.58

-4.089219

11259200

CITIC PACIFIC

3.3

-2.366864

332855560

CLP HLDGS LTD

BANK OF COMMUN-H

5.26

-2.95203

33555825

BANK EAST ASIA

30.8

-1.44

2070012

BELLE INTERNATIO

11.32

-3.904924

16039466

BOC HONG KONG HO

24.55

-1.207243

7824965

BANK OF CHINA-H

NAME

DAY %

VOLUME

11.78

-3.125

32008101

POWER ASSETS HOL

9.09

-2.572347

13507012

SANDS CHINA LTD

62.4

-2.347418

8311819

CNOOC LTD

14.82

-1.724138

66151432

COSCO PAC LTD

11.18

-1.061947

3893122

SWIRE PACIFIC-A

ESPRIT HLDGS

13.44

2.752294

6330740

TENCENT HOLDINGS

25.2

-0.9823183

5123711

TINGYI HLDG CO

HANG LUNG PROPER

PRICE

NAME

SINO LAND CO

PRICE

DAY %

VOLUME

69.85

-1.827126

3894712

42.8

-2.837684

9531342

10.68

-3.085299

6170677

102

-1.828681

3405214

90.55

-1.682953

1786835

SUN HUNG KAI PRO

364

-1.67477

4481915

19.02

-2.361396

2848000

CATHAY PAC AIR

14.24

-0.280112

2628591

HANG SENG BK

121.7

-1.616815

1270798

WANT WANT CHINA

10.4

-4.587156

15305451

CHEUNG KONG

111.7

-2.017544

3633570

HENDERSON LAND D

46.95

-2.492212

3130299

WHARF HLDG

67.2

-2.112163

3806296

4.7

-3.885481

61304727

86.5

-0.3456221

1257500

CHINA COAL ENE-H CHINA CONST BA-H

5.78

-2.857143

263272788

CHINA LIFE INS-H

19.22

-3.9

38739062

CHINA MERCHANT

23.65

-1.046025

2498569

CHINA MOBILE

HENGAN INTL HONG KG CHINA GS

19.56

-3.168317

9443702

HONG KONG EXCHNG

123.6

-1.670644

2693238

HSBC HLDGS PLC

84.65

-1.45518

14313897

83.15

-0.8939213

14936524

HUTCHISON WHAMPO

90.2

-2.64436

6869754

CHINA OVERSEAS

23.6

-2.277433

19905140

IND & COMM BK-H

5.15

-2.830189

259766058

CHINA PETROLEU-H

5.77

-2.368866

81388908

LI & FUNG LTD

11.62

-2.023609

34318859

CHINA RES ENTERP

23.35

-2.505219

4542614

MTR CORP

29.2

0

22.2

-2.844639

5570400

NEW WORLD DEV

11.22

-2.604167

CHINA RES LAND

MOVERS

22686.39

2427709

LOW

22326.16

9778298

52W (H) 23944.74

18

2.622577

18134603

PETROCHINA CO-H

8.61

-3.691275

156982580

CHINA SHENHUA-H

23.8

-4.225352

27231608

PING AN INSURA-H

53.1

-2.747253

12327291

48

1 22670

INDEX 21970.29 HIGH

CHINA RES POWER

1

(L) 19076.78906

21910

16-August

20-August


14 14

August 21, 2013 April 19, 2013

Classifieds Mountain Villa For Sale in Koh-Samui Price: HK$ 16 million

3 x King Bed en-Suites, 1 x King Bed basement Suite, 2 x 2 Single Bed, Spacious Living area and fully furnished kitchen, Swimming pool - children / adult, 2 levels Maid’s quarter, Fully Furnished, Balcony, Terrace / Patio, 2 x Outside Salas, Barbecue, 2 x Parking Spaces, 7-seater SUV included. Contact Ms Chan - Sarah@clever-cloggs.com.hk Tel: 2861-3317

FOR SALE - ONE GRANTAI Tower 3; Flat 10K.

Luxury hilltop flat, fully air conditioned, 3 bedrooms, 2 full bathrooms, maid’s room, fully equipped kitchen , living room, dining area, and 2 balconies with stunning Cotai Strip and sea views. Facilities include: health club, swimming pool, tennis, play area, and much more. 2320 sq. ft.  selling price: HK$ 7,950/sq. ft. Contact: Steven Kahn  (852) 2541 7775 Monday - Friday 11am - 6pm

Bruno Beato Ascenção

Lawyer

Avenida da Praia Grande, no. 409, China Law Building, 11th floor. Tel:28785795 Fax:28785797 Email:bascencao@gmail.com

4 APARTMENTS BUILDING IN LISBON Price: HK$ 17,000,000

2 Apartments T3 (1st and 2 floor), 1 Apartment T2 (3rd floor), 1 Apartment T0 (top floor), garage for 4 cars + laundry and storage area. Location: Close to RPC embassy classifieds@macaubusinessdaily.com Mobile: +351910836655

Great opportunity Loft in Downtown 2 + 1 bedrooms, 2 living rooms and garden 140 sq metres with Mezzanine Price: HKD 12 million classifieds@macaubusinessdaily.com

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editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com 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 | 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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15 15

August 21, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Korea Herald A global survey that evaluates innovation showed South Korea falls behind Asian rivals, indicating that Korea must improve to become a more innovation-driven economy. In the 2013 global innovation index that features a ranking of the innovation levels of economies, Switzerland came out on top, followed by Sweden and the United Kingdom. Among countries in Asia, Hong Kong and Singapore placed seventh and eighth, respectively, whereas South Korea improved slightly from last year but fell behind its rivals, placing 18th.

Asahi Shimbun Japan plans to abolish tariffs on up to 85 percent of items in trade with potential partners in the Trans-Pacific Partnership agreement, but politically sensitive agriculture products are not included, sources told the newspaper. The proposal will be presented during a meeting of the 12 countries negotiating the TPP in Brunei starting this week. Japan is under pressure to open up more of its markets particularly because the United States plans to have the talks concluded by the end of the year.

Economic Times Legendary Wall Street trader Jim Rogers says the measures taken by the Indian government and the Reserve Bank to improve the macro-economic sentiment and arrest the fall of rupee have not yielded any results. “Debt is rising and the balance of trade is going higher. The government is making more mistakes and that’s not going to solve the problem,” Mr Rogers was quoted as saying. “The measures for exchange control are bad and the restrictions on gold are making things worse,” he added.

Taipei Times Lawmakers and tax experts urged Taiwan’s government to tax properties based on their actual selling prices, replacing the interim policy of levying a luxury tax. “The introduction of luxury tax has helped curb speculative property transactions and further stabilise prices in the housing market,” said National Taipei College of Business taxation professor Yophy Huang, who led a study on the luxury tax. The report said that without the luxury tax, property prices could have averaged 10 percent higher than current levels, Mr Huang added.

Decision time for the global economy Michael Spence

Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution

I

n the dog days of summer, Milan is quieter than many European cities. The locals are away, and, unlike Paris or Rome, tourists do not take their place. Here and elsewhere, people, businesses, governments, and markets take a break, decompress, and reflect. Europe’s economic problems will still be here, waiting for us, in September. And when summer ends, uncertainty about key issues will be the order of the day – and not only in Europe. Largely unanticipated protest movements in Turkey and Brazil have raised questions about the economic and social sustainability of emergingmarket growth. The fires in Bangladeshi garment factories have raised new questions about the governance of global supply chains. In the United States, the Federal Reserve hinted at “tapering” its quantitativeeasing policy later in the year, and a kind of global carry trade based on monetary conditions in advanced countries started to unwind as a result, causing credit tightening and market turbulence in emerging economies. This is probably only a preview of the complexity of the exit from the post-crisis assistedgrowth model that has prevailed in the U.S., Europe, and now Japan. A possible political impasse in the U.S. in September over the budget and debt ceiling complicates the outlook further. And yet much of the current uncertainty is set to dissipate. In the coming months, highly consequential policy decisions (or their absence) in systemically critical parts of the global economy will be revealed, with significant effects on growth rates, asset prices, and overall confidence.

China’s reforms For starters, China’s new leadership has moved away from outsize fiscal and monetary stimulus and accepted an economic slowdown, betting on structural change, systemic reform, and sustainable longerterm growth. The key signals will come from the Chinese Communist Party’s plenary meeting in the early fall. China’s reforms will either support the economic shift, boosting sentiment and lifting growth forecasts, or they will fall short and disappoint, with attention most likely to be focused on the size and nature of state intervention in markets. Either way, with the future of the global economy’s principal growth engine at stake, the effects will be felt worldwide.

In the U.S., economic deleveraging has proceeded significantly further than it has in Europe. The U.S. is adjusting structurally and generating real (inflationadjusted) GDP growth (though well below its potential annual rate of 3-3.5 percent). The tradable sector is expanding and is not dependent on leverage to generate aggregate demand. One can think of the U.S. economy as an 8-cylinder engine running on five, owing to residual deleveraging, fiscal consolidation and drag, publicsector investment shortfalls, and questions about the financial health and security of middle-income households (the backbone of domestic aggregate demand). Parttime employment is spreading

and may become the labour market’s new normal. Then there is the question of the Fed’s assisted-growth model. Is the U.S. economy ready to grow without abnormal policy support? It seems clear that tapering the Fed’s monthly purchases of long-term securities later this year would cause a realignment of asset values in financial markets. How this spills over into the real economy is yet another source of uncertainty. But, despite some transitional market turbulence, the overall effect will likely be positive. The beneficial effect on the risk-return options available to investors/savers (including pension funds) will outweigh the higher cost of debt; indeed, an important subset of growth engines in the tradable sector is not dependent on low-cost debt.

Europe woes

Without dismissing the downside risks, I remain cautiously optimistic about the global economy’s prospects

The same cannot be said of Europe, where Germany’s general election in September is viewed as a key barometer of continuing commitment to the euro. The European Central Bank’s “outright monetary transactions” programme – though conditional, limited to short-term government debt, and so far unused – appears to have stabilised euro zone sovereign-debt markets, albeit in a low- or zero-growth environment. But the OMT programme is dependent on German support. The question is how long this can last, given southern Europe’s growth

and employment challenges (and an apparent lack of understanding among policy makers and the public that there are no short-term solutions). In Italy, the debate centres on taxes in general, and the rather miniscule property tax in particular. The income tax (and thus the tax on employment) is high. But the country is relatively wealthy, especially in terms of property assets on household balance sheets. So higher taxes on property and lower taxes on income would contribute to the creation of a more dynamic, competitive economy. But that is far from the current focus of public debate. The key liberalising reforms that would enhance the economy’s flexibility and pace of adjustment are simply not on the agenda (owing to an underlying lack of trust among voters). This is important because the private sector in Italy (and in Spain) cannot match the structural flexibility found in the U.S. (and in Germany since its reforms in 2003-2006). Think now of an 8-cylinder engine running not on five cylinders, but on two or three at best. (Admittedly, the Spanish labour market reforms enacted earlier this year may start to lift employment and improve competitiveness and growth on the economy’s tradable side, which is constrained largely by low productivity, not weak demand.) But the default option in the context of political gridlock – a halting, slow-growth strategy, focused excessively on fiscal austerity and featuring high unemployment (especially for the young) – is unlikely to remain workable for long. At some point, the political agenda will either shift toward real reform, or sentiment will shift substantially against the euro. Fortunately, this uncomfortable uncertainty will not last much longer – in Europe or elsewhere. China’s leaders will make their choices, as will German voters. The Fed will clarify the direction of U.S. monetary policy. Markets will adjust and settle down. Distortions will begin to unwind. Without dismissing the downside risks, I remain cautiously optimistic about the global economy’s prospects. With greater clarity in terms of Chinese and U.S. policy, both economies should gain momentum. That will give developing countries (many of which face difficult domestic policy choices) a tailwind, while making the substantial challenges in Europe and Japan easier to address. © Project Syndicate


16

August 21, 2013

Closing China state firms’ profit growth quickens

Obama urges speedy Wall Street reforms

Annual profit growth in China’s state firms picked up pace in the first seven months of 2013, official data showed yesterday, offering new signs that the economy may be regaining strength in the second-half of the year. Stateowned non-financial companies made combined profits of 1.3 trillion yuan (US$212.32 billion) for January-July, up 7.6 percent from a year ago, the Ministry of Finance said in a statement on its website. It did not specify the type of profit. The profit growth is up from an annual rise of 7 percent in the first six months and 6.5 percent in the first five months.

President Barack Obama called top U.S. financial regulators to the White House, instructing them to speed up Wall Street reforms in the face of intense bank lobbying. Roughly five years after the depths of the financial crisis, regulators have completed about 40 percent of the rules called for in the 2010 Dodd-Frank financial reform law. Agencies have missed numerous deadlines as they struggle to coordinate with one other and also consider feedback from others. The president “stressed the need to expeditiously finish implementing the critical remaining portions of Wall Street reform,” the statement said.

Glencore takes US$7.7 bln Xstrata hit Glencore Xstrata Plc’s first-half profit slid 39 percent and the world’s biggest exporter of power station coal wrote down the value of assets acquired in the Xstrata Plc takeover three months ago by US$7.7 billion. Adjusted net income fell to US$2.04 billion from US$3.36 billion a year earlier, Glencore said yesterday in a statement. The company reported a net loss of US$8.9 billion. The US$29 billion all-share purchase of Xstrata created the fourth-biggest miner and added coal, nickel, zinc and copper output to Glencore’s global commodity trading empire. BHP Billiton Ltd, Rio Tinto Group and Glencore are among producers cutting costs, selling assets and reducing spending as lower prices trim profits and force more than US$60 billion of industry writedowns. The Xstrata impairments reflect “the broader negative mining industry environment and sentiment which prevailed during the first half of 2013 and the heightened risks associated with greenfield and large-scale expansion projects,” Glencore said in the statement. “A lot of the greenfield assets and certain assets which they had on their books we didn’t put a large amount of value on,” chief executive Ivan Glasenberg said. The first half showed “tentative signs that we may be entering a period of increased capital discipline within the sector,” Mr Glasenberg said in the statement. Rio Tinto posted a US$14 billion writedown in January on previous acquisitions of aluminum assets from Alcan Inc in 2007 and coal projects in Mozambique. Gold companies, led by the world’s biggest, Barrick Gold Corp, have written down the value of mines by at least US$26 billion in the past two months. Some investors may find the figure on the Xstrata writedown “somewhat jarring, especially given management rhetoric on capital allocation,” Bank of America Merrill Lynch analyst Jason Fairclough wrote yesterday in a note to clients. Glencore also posted a US$1.2 billion accounting loss on revaluing its 34 percent interest in Xstrata at the time the transaction was completed, as well as a US$452 million impairment charge at its Murrin Murrin nickel operation in Australia and a US$324 million charge on its investment in United Co Rusal. Declining metal prices, which averaged 15 percent lower in the first-half, were cushioned by increased production in coal and copper, Glencore said yesterday. The company’s marketing unit “still performed very well” amid the drop in prices, Mr Glasenberg said. The Xstrata takeover is expected to generate annual cost savings “well above” the stated US$500 million plan, Mr Glasenberg said in May. It will be “materially in excess of previous guidance,” he said yesterday. The combined group has interests in about 35 coal mines in Colombia, Africa and Australia, accounting for about 10 percent of global seaborne supplies of the fuel. It’s the fourthbiggest producer of mined copper and thirdlargest in nickel. It employs about 190,000 people in more than 50 countries across its industrial and trading divisions. Bloomberg News

Indonesia stocks enter bear market Stocks fall 20 pct from peak as outflows spur rupiah drop

I

ndonesian stocks fell in the biggest four-day plunge since 2011, sending the benchmark index down 20 percent from its peak, amid growing concern that capital outflows will accelerate. The rupiah tumbled. The Jakarta Composite Index declined 3.2 percent to close at 4,174.983, extending its four-day slide to 11 percent. The gauge has dropped 20 percent from its record closing high on May 20. The rupiah fell 1.8 percent to 10,685 per dollar after reaching 10,728 earlier, the weakest level since April 2009, prices from local banks show. The cost to insure Indonesian debt against default surged to an almost two-year high yesterday, according to CMA. The nation’s shares have tumbled at the fastest pace worldwide this quarter amid concern the quickest inflation in four years will spur the

Indian rupee falls to new record low T

he Indian rupee fell past 64 to the U.S. dollar for the first time yesterday and bond yields spiked to a five-year high before the central bank stepped in to sell dollars, as Asia’s third-largest economy bore the brunt of the global emerging markets selloff. Underscoring how hard it is for

central bank to tighten monetary policy further after it raised the benchmark interest rate in June and July. The Jakarta index sank 5.6 percent on Monday after data showed the country had a record current-account deficit last quarter. Speculation that the U.S. Federal Reserve will soon withdraw stimulus has fuelled the retreat. “We are in bear-market territory,” said Priyo Santoso, the chief investment officer at PT Mandiri Manajemen Investasi in Jakarta. “We have been defensive in our strategy.”

Losses pared Overseas investors have pulled US$255 million from local stocks in the past two days, exchange data compiled by Bloomberg show. PT Telekomunikasi Indonesia and PT Bank Rakyat Indonesia were

New Delhi to push through reforms despite the urgency of a deteriorating economic outlook, parliament was adjourned yesterday due to protests by members over a corruption scandal. India’s notoriously dysfunctional lower house of parliament was due to debate a bill to allow foreign investment in the fledgling private pension industry, a reform seen as key to government efforts to attract investment and narrow the current account deficit, which is exacerbating the currency crisis. “India’s problems are nowhere near resolution because New Delhi has not done anything – there is no focus on improving productivity, infrastructure or getting FDI (foreign direct investment) back,” said

among the biggest drags on the index yesterday as trading volumes climbed to 79 percent above the 30day average. The Jakarta gauge pared losses toward the end of the day after falling as much as 5.8 percent earlier. Its 14-day relative strength index fell to 26.6, below the 30 threshold that some investors see as an indication a rebound is imminent. PT Bank Mandiri gained 2 percent after declining as much as 7.2 percent, while PT Astra International, largest company by market value, finished unchanged after losing 2.5 percent earlier. “Some investors are buying some oversold stocks, particularly Bank Mandiri,” said John Teja, a director at PT Ciptadana Securities in Jakarta. “An index below 4,200 is basically a good entry point, however trading direction tomorrow will still be determined by foreign investors.” The retreat in shares, which sent valuations to the lowest levels in 14 months yesterday, is creating buying opportunities in banks and consumer companies, said PT Schroder Investment Management Indonesia’s Kiekie Boenawan. The Jakarta index fell to 12 times estimated profit for the next 12 months, the lowest level since June 2012. “We see this drop as an opportunity to buy selectively those stocks that have been overpriced in the past,” Mr Boenawan, the Jakarta-based head of investment at Schroder Investment Management Indonesia, the nation’s biggest mutual-fund manager with 37.9 trillion rupiah (US$3.5 billion) under management, wrote in an e-mail. “The government hasn’t been able to restore confidence in the market,” said Norico Gaman, the head of research at PT BNI Securities in Jakarta. “Investors now put more weighting on the risk that they have to take, no longer at the potential returns that they might have. Their main concerns right now are inflation and the exchange rate.” Bloomberg News

Nomura Holdings Inc credit analyst Pradeep Mohinani in Hong Kong. “It’s all about stemming the flow of currency and that is not the cause of the problem,” he said. India was due to hold a US$9.3 billion sale of government debt quotas, a gauge of foreign investor interest in local assets. Bankers said that the debt limits at the auction may get taken up, but at rock-bottom prices. The rupee slumped as much as 1.6 percent to 64.13 to the dollar, adding to its 2.3 percent rout on Monday, before traders said the central bank was seen stepping in to sell dollars. Stocks extended declines, with the BSE Sensex index falling as much as 1.8 percent to a near-year low. Reuters


Macau Business Daily, August 21, 2013  

Macau Business Daily digital version

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