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Year II

Number 342

Tuesday August 6, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

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April 19, 2013

Fonterra-linked milk powder taken off shelves

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ow & Gate brand infant milk powder has been taken off Macau shop shelves as a precaution after a worldwide scare linked to potentially deadly botulism. New Zealand’s Fonterra Cooperative Group Ltd – the firm that supplies whey protein for the product – knew a year ago there was evidence of bacterial contamination in its processes but didn’t go public. Fonterra said Karicare and Dumex infant formula could have been tainted with bacteria that might cause the rare illness, which can lead to paralysis and death. Both brands have not been imported to Macau, pharmacies and the Health Bureau told Business Daily. The bureau did confirm the precautionary recall of the Cow & Gate brand was for batch number 3178. Fonterra blew the whistle on China’s 2008 melamine in milk powder contamination scandal involving Sanlu products.

www.macaubusinessdaily.com

More on page 3

Visitor numbers flat at Guangdong products fair

Fare hike puts Cotai Water Jet back in black

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Calls for review on continuing education

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Hang Seng Index 22280

Local property investors become Arsenal fans

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An estate agency has held a marketing event in Macau for a London residential project. Such events are common in Hong Kong, but Jones Lang LaSalle says it’s a first for Macau. It’s to promote pre-sales of flats at Royal Arsenal Riverside, in southeast London. The development is scheduled for completion in 2015. The 76-acre (30.7-hectare) site mixes modern homes with historic military buildings. Page 2

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HSI - Movers

Money supply was down slightly in June

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Money supply dropped slightly in June when judged monthon-month, but was still up by at least 25 percent when measured year-on-year said the city’s de facto central bank the Monetary Authority of Macau. Many contemporary economists see money supply growth as an important predictor of expansion in prices and inflation. Judged annually, M1 and M2 rose 34.2 percent and 23.3 percent respectively in Macau during June said the authority. Page 4

Govt says still awaiting MTEL Internet bid The government says it has been waiting for almost two months for Companhia de Telecomunicações de MTEL Ltda to provide more information about its bid to introduce competition in the Internet market. Michael Choi, chairman

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KUNLUN ENERGY CO

4.00

TENCENT HOLDINGS

3.00

CHINA RES LAND

1.34

BANK EAST ASIA

1.33

CATHAY PAC AIR

1.13

PING AN INSURA-H

-1.09

CHINA RES ENTERP

-1.44

CHINA MERCHANT

-1.63

AIA GROUP LTD

-1.88

WANT WANT CHINA

-3.24

Source: Bloomberg

of the newcomer to the city’s telecommunications market, told Business Daily that the required information would be sent to the Bureau of Telecommunications Regulation “this week”. If MTEL’s bid is successful, the company will have to start providing Internet access within one year of getting its licence. Page 5

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August 6, 2013

Macau

London property beckons as buyers explore abroad Even though Macau investors still tend to focus on assets they are familiar with Vítor Quintã

vitorquinta@macaubusinessdaily.com

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n estate agency has held an event to promote a London residential project, the first event of its kind in Macau, in an effort to persuade savers here to diversify their investments. Jones Lang LaSalle organised the three-day event, which ended on Sunday, to promote presales of flats in Royal Arsenal Riverside, which is scheduled for completion in 2015. Jones Lang LaSalle (Macau) Ltd’s head of residential property, Jeff Wong Chi Wai, believes investors have money in the bank and are ready to look abroad for ways to make it grow. “Macau is going to another level as an international city. People are getting richer and deposits are going up fast,” he said. Bank deposits have doubled in the past three years, reaching 605.86 billion patacas (US$75.84 billion) in May, official data show. Mr Wong said Macau people invested mainly in assets they were familiar with, such as stocks in Hong Kong and property here or in the mainland. But their paths to property ownership in many big Chinese cities were blocked by restrictions, making Zhuhai and Zhongshan the only realistic options, he said. He believes the “appetite and strong desire for investment” among Macau people will drive them to look abroad. Most investors here “are not so familiar with London”, so selling them flats in Royal Arsenal Riverside is a challenge, Mr Wong admits. “We don’t expect their mindset to change overnight, but we are giving it a good try and we believe it could be the start of a trend,” he said.

Mature market He said that if there was enough interest in Royal Arsenal Riverside, Jones Lang LaSalle would be ready to put other foreign

Prices for flats in Royal Arsenal Riverside start at 2.5 million patacas

property on the market here. Mr Wong said his estate agency was “still bullish about local property”, but that better long-term returns could be found elsewhere. He said a rental yield of 3 percent “is very good in Macau” but that the yield at Royal Arsenal Riverside could reach 6 percent. Prices for flats in the Thames riverside development start at 207,500 pounds (2.5 million patacas). “With that kind of money, here you can only buy units in old buildings,” Mr Wong said. Three out of five homes sold here in the first four months of this year cost 4 million patacas or more, official data show. The average price of housing was 98,187 patacas a square metre in May,

over twice what it was a year earlier. Mr Wong said increases in housing prices elsewhere “will not be so crazy as in Macau”. But he predicts that the value of Royal Arsenal Riverside flats will double within a decade. “London is a very mature market, where the property increment is quite steady: just 4 to 5 percent a year,” he said. He said the weakness of the pound against the pataca could be another selling point. “The pound is still on the low side,” he said. One pound was worth 12.08 patacas on Friday, according to the Monetary Authority of Macau, having been worth 12.99 patacas in late December.

Macau is going to another level as an international city. People are getting richer and deposits are going up fast Jeff Wong, head of residential property, Jones Lang LaSalle (Macau)

Booth numbers up at Guangdong products fair

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Guangdong & Macau Branded Products Fair

he number of booths at the four-day Guangdong & Macau Branded Products Fair held at Fisherman’s Wharf rose nine percent compared to last year, said the organisers. But that didn’t translate into significantly higher sales or distribution agreements. The event ended on Sunday. The weekend saw two other food and drink shows at Fisherman’s Wharf – for Taiwan products and for beer. The Guangdong products event had 136,700 visitors in the four days to Sunday, similar to the attendance in 2012, said Macau Trade and Investment Promotion Institute, one of the organisers. “The sales volume was [also] similar to that of last year” when the amount reached 40.5 million patacas (US$5.1 million), said the institute. The number of booths was up by nine percent year-on-year to 267. Irene Lau, the institute’s executive

director, had said last week she hoped the “synergy effects” of holding several events at the same location would boost attendance at the Guangdong products show. A total of 17 long-term sales agreements were forged at the event – one more than in 2012 – for products including rice supplies and Guangdong specialities. The event also had ‘business matching sessions’ where potential suppliers and customers can meet. The number of sessions – focusing on food products, necessities, toys and clothing – rose 11 percent yearon-year to 966. Despite the data suggested otherwise, the institute stressed the event “concluded successfully” and The Taiwan food show saw 51 business-matching sessions arranged and three deals signed, the institute added. T.L.


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August 6,2013 2013 April 19,

Macau Group lobbies for tobacco tax hike An anti-smoking association has called for a rise in the tax charged on tobacco, to ensure the city is in line with the standards of the World Health Organisation. The tax currently accounts for about 40 percent the tobacco retail price but the Smoking and Healthy Life Association of Macau told the Chinese-language newspaper Macao Daily News that proportion should be 75 percent to 80 percent. The association also called for the end of the limits for carrying tobacco across the border, currently set at 100 cigarettes or five packets.

Fonterra milk powder taken off the shelves As a scare about tainted milk spreads, pharmacies fear sales of New Zealand infant formula could drop sw.lai@macaubusinessdaily.com

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Cow & Gate recalled as a precaution Little reduction in sales expected New Zealand’s reputation battered

Stephanie Lai

acau retailers of milk powder stopped selling yesterday a batch produced using an ingredient from a New Zealand dairy company involved in a botulism scare. Pharmacies took the product off their shelves only as a precaution. But they fear that this new scare about infant formula being tainted could reduce sales of New Zealand milk powder. Fonterra Cooperative Group Ltd said Karicare and Dumex infant formula could have been tainted with bacteria that cause botulism, which can lead to paralysis and death. Pharmacies and the Health Bureau told Business Daily that neither brand had been imported into Macau. Two batches of another brand of infant formula, Cow & Gate, were recalled in Macau and Hong Kong yesterday, even though none has been found to be contaminated. Only one batch, bearing the code number 3178, was imported to Macau. The Health Bureau ordered its removal from sale. The milk powder is for children between one and three years old.

KEY POINTS

Fonterra said on Saturday that three batches of a contaminated whey protein concentrate made at a New Zealand plant in May last year had been sold to China, Malaysia, Vietnam, Thailand and Saudi Arabia. It was used in products including infant milk powder and sports drinks. Fonterra chief executive Theo Spierings said at a media briefing in Beijing yesterday that Karicarebrand products exported to China by a subsidiary of France’s Danone, Nutricia, did not contain the contaminated whey. Mr Spierings said Dumex Baby Food Co Ltd in China, another subsidiary of Danone, had told Fonterra that 12 batches might have been affected. Half have been recalled as a precaution, and the other half are still in the factory. Pharmacies in the city centre here told Business Daily that the scare had done little to reduce sales.

sure they will shy away from the New Zealand infant formula brands for some time,” said Vong Io Fei, the deputy general manager of an outlet of a pharmacy chain. “But in the long term, the impact of the Fonterra incident will be very limited, as brands like Cow & Gate make up only a small portion of our sales,” Mr Vong said. “Our retail sales of infant formula depend mainly on Mead Johnson, Wyeth or Nestlé.” Another pharmacy expects New Zealand infant formula to sell slowly in the coming weeks. “If this contamination incident were to involve popular brands like Mead Johnson, it would have a much bigger impact on us,” said an employee of the pharmacy, who asked to not be identified. “It is hard to assess how big the impact will be in the coming months, as it pretty much depends on how

the corporation and officials from China and New Zealand clarify their product source and the supply chain,” he said. Fonterra, the world’s biggest dairy exporter, apologised in Beijing yesterday for the contamination scare. Mr Spierings said safety was the company’s “top priority”. He said Fonterra was not facing a ban on the sale of its products in China, only restrictions on its whey protein concentrate. About 38 tonnes of whey protein concentrate were contaminated, of which 18 tonnes were used in Fonterra’s factories in Australia and New Zealand to produce milk formula for two customers. Mr Spierings said Coca-Cola and Wahaha products made in China with Fonterra whey protein concentrate should be safe because the processing would have killed any bacteria. With Reuters/Bloomberg News

Small portion “But as the news continues to brew for another week and customers know more about the incident, for

Dumex infant formula has been recalled in mainland China but it is not sold here

Beijing steps ups NZ formula criticism C

hina’s food watchdog called on the New Zealand government to “take effective measures” to ensure the safety of dairy products exported to the mainland following a botulism scare involving products from a New Zealand dairy company. The official Xinhua news agency also criticised Fonterra Cooperative Group Ltd, one of New Zealand’s biggest dairy exporters, for taking so much time to recall the affected produce. “When such a problem takes more than a year to come to light, it’s elevated from an industry event to a national issue,” it said in an English-language commentary. Rushing to China, chief executive Theo Spierings sought to reassure customers, telling local media that processing methods would kill off harmful bacteria. “We really regret the distress and anxiety which this issue could have caused,” he said. “We totally

understand there is concern by parents and other consumers around the world. Parents have the right to know that infant nutrition and other dairy products are harmless and safe.” Nonetheless, New Zealand prime minister John Key said he was concerned at the impact on farmreliant New Zealand’s reputation as a supplier of “clean, green” dairy products, particularly in Asia. “I’m a bit staggered that in May of 2012, when this whey was produced, that it [Fonterra] did show something in its testing, but clearly not something that was of concern to the company because they allowed it to go out,” Mr Key told Radio New Zealand. Mr Key said the government had a team of more than 60 personnel working to contain the fallout and would eventually seek a “forensic” examination of how Fonterra had handled the crisis. Fonterra is a major supplier of bulk milk powder products used in infant formula in China, but doesn’t sell there under its own brandname after Chinese dairy company Sanlu Group Co Ltd, in which it held a large stake, was found to have added melamine – often used in plastics – to bulk up formulas in 2008. Six babies died then and thousands were taken ill. Agencies


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August 6, 2013

Macau Film subsidy to be launched this month A scheme granting subsidies of up to 1.5 million patacas (US$187,500) for feature films could be launched within this month, said the Cultural Affairs Bureau. The bureau said over the weekend there would be four openings for Macau residents in the first round of the scheme, which will cover at most 70 percent of the film’s budget up to a maximum of 1.5 million patacas. The film must be longer than 80 minutes, said the bureau, adding they would invite veteran filmmakers from outside Macau for the jury in charge of choosing the winning projects.

Money supply down slightly in June But judged year-on-year this broad predictor of prices and inflation is up by a quarter plus Michael Grimes

michael.grimes@macaubusinessdaily.com

New hospital ER to open in Q4 The government “is doing everything in its power” to open the new emergency service at the public hospital Conde S. Januário during the last quarter of this year, Health Bureau director Lei Chin Ion said on Sunday. The building is currently undergoing inspection and the authorities will soon begin to install the medical equipment, he added. Mr Lei said the average waiting time at the current emergency room is about one hour. The official said he is confident the service quality will improve once the new building opens.

Pentahotel plans to open here The hotel management arm of Hong Kong-based New World Development Co Ltd, Rosewood Hotel Group, is in talks to run a Pentahotel here. “Macau is our next target as it is becoming a favourite holiday destination,” Sonia Cheng Chi Man, chief executive of Rosewood Hotel, told the South China Morning Post. Pentahotel targets younger travellers. It has 16 hotels worldwide, with plans to expand to 80 properties by 2020. Hong Kong’s first Pentahotel opened yesterday and there are plans to open another three there.

Health Bureau wants 200 more nurses The Health Bureau is planning to hire a further 200 nurses, over 70 nursing assistants and more than 60 pharmacists, senior health technicians and diagnosis and therapy technicians, director Lei Chin Ion said on Sunday. The official said the city was open to hiring nurses and other health professionals from Portugal. Wong Kit Cheng, vice-president of the Women’s General Association and a candidate for the Legislative Assembly, told the Chinese-language newspaper Macao Daily News last month that hiring Portuguese nurses was not the solution because most patients speak Chinese.

Residents’ bank deposits dropped 2.8 pct on-month (Photo: Manuel Cardoso)

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oney supply dropped slightly in June when judged month-on-month, but was still up by at least 25 percent when measured year-on-year said the city’s de facto central bank, the Monetary Authority of Macau. Many contemporary economists see money supply growth as an important predictor of expansion in prices and inflation, though not on a one-for-one basis. The use of the indicator was developed by American academic Milton Friedman and popularised by right of centre politicians Ronald Reagan and Margaret Thatcher in the 1980s as a way to monitor and control the risk of the sort of high

inflation experienced in the West during the 1970s. ‘M1’ refers to that part of the money supply that includes physical coins and currency, as well as readily liquid assets such as on demand bank deposits, and money held in cheque accounts. ‘M2’ is M1 plus all time-related deposits, savings deposits, and non-institutional money-market funds. On an annual basis, M1 and M2 rose 34.2 percent and 23.3 percent respectively in Macau during June said the authority, though it added measured month-on-month it was down slightly. “…Broad money supply dropped in June,” said the body in a statement. “As total loans increased whereas

Hong Kong suspects face pyramid scheme charges T he Public Prosecutions Office has charged eight Hong Kong people with running a pyramid scheme here that purported to sell air tickets or other items of use to tourists. A written statement issued by the prosecutors yesterday says the suspects tempted people to join the scheme by offering them cheap air tickets or other things sold on foreign websites. The suspects charged a fee of US$200 (1,600 patacas) to join and gave out a US$20 bonus for each new member introduced. The suspects gave members even bigger bonuses for introducing a certain number of new members. “The members would continue to

find targets to become members,” the statement says. “Strong signs” indicate that the eight suspects used classic pyramid selling methods to make money, the statement says. It does not say how much money. The authorities heard about the scheme in June. When the police moved in last month to arrest the suspects, they found 17 members and 26 other people attending a seminar about the scheme. The suspects are all between 28 and 60 years old. The prosecutors sent the case back to the police for further investigation. T.L.

total deposits decreased, the overall loan-to-deposit ratio of the banking sector rose from a month earlier.” The average annual rate of inflation in the 12 months ended June fell for the fourth consecutive month to 5.52 percent, the lowest since October 2011 said the authority last month. The latest report from the authority says in June residents’ bank deposits dropped 2.8 percent from the preceding month to 388.1 billion patacas (US$48.6 billion). But nonresidents’ deposits rose 6.7 percent to 160.6 billion patacas. Public sector deposits also increased 1.4 percent to 56.7 billion patacas. Loans to ‘non-monetary financial institutions’, ‘gaming’ and ‘credit card balances’ increased at respective rates of 86.0 percent, 9.7 percent and 14.1 percent compared to the previous quarter. No information was given as to the size of the base from which those statistics were calculated. The authority told Business Daily by telephone that ‘nonmonetary financial institutions’ receiving loans included insurance companies, moneychangers, cash remittance companies and financial intermediation firms. The loan-to-deposit ratio for the resident sector at end-June rose 2.4 percentage points from the previous month to 50.9 percent.

MOP 605.4 bln Total bank deposits in June


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August 6, 2013

Macau

Govt still waiting for MTEL Internet bid details New telecom operator says it will deliver more data on application this week Vítor Quintã

vitorquinta@macaubusinessdaily.com

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he government has been waiting for almost two months for the newcomer to the city’s telecommunications market, Companhia de Telecomunicações de MTEL Ltda, to provide more information about its bid to introduce competition in the Internet market. MTEL chairman Michael Choi told Business Daily that the required information would be sent to the Bureau of Telecommunications Regulation “this week”. The company applied in the first week of June for a licence to provide Internet access to households and businesses here. At the time the regulator said it needed “further information” to make a decision. The bureau asked the company for more data but two months later “we have not yet received such information,” it told Business Daily in an e-mailed reply. “They sent us a list of information they were requesting. They asked us for more technical information,

Michael Choi, MTEL’s chairman

namely on how to build up our network,” Mr Choi said. If MTEL’s bid is successful, the company will have to start providing Internet access within one year of getting its licence. “I believe we will have all of that information ready by this week,”

Mr Choi said. Once the government receives the additional information, Secretary for Transport and Public Works Lau Si Io would have up to 90 days to make a decision. “Hopefully they will approve our ISP [internet service provider]

licence,” Mr Choi said. The one-year deadline could be hard for MTEL to meet, considering that it will have 18 months to set up a landline network to reach at least 30 percent of all households, and to sign up its first subscriber. In June MTEL chairman admitted that, as the government had taken longer than expected to approve its fixed-line telecommunications licence, the company had missed the opportunity to lay cables afforded by all the work on infrastructure, such as public housing and the Light Rapid Transit railway, which began last year. If MTEL takes more than one year to set up its own landline network, it may have to lease the Companhia de Telecomunicações de Macau SARL (CTM) network if it is to launch its Internet service by the deadline set. CTM remains the only telecommunications company that offers Internet access here, even though the market was liberalised in 2000. Bureau of Telecommunications Regulation chief Lawrence Tou Veng Keong said in June that the lack of interest from other telecommunications companies in offering Internet access was due to the high price CTM charged for the use of its network. Last month CTM reduced its charges for allowing companies to lease an international line. Charges for existing corporate customers dropped by 20 percent, while a 15 percent reduction was pencilled in for new commercial subscribers. A telecommunications executive told Business Daily the reduction was not enough to create a truly competitive market or to lead to lower consumer prices.


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August 6, 2013 April 19, 2013

Macau

Fare hike puts Cotai Water Jet back in black Better results than expected for ferry operator in first half of this year Vítor Quintã

vitorquinta@macaubusinessdaily.com

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he Cotai Water Jet ferry services are turning a profit so far this year, said operator Chu Kong Shipping Enterprises (Group) Co Ltd, after a fare hike earlier this year. The company said in a filing to the Hong Kong Stock Exchange yesterday that revenue and profit increased year-on-year in the first half of 2013. The growth is due to “the profit newly attributed” by Chu Kong High-Speed Ferry Co Ltd, a whollyowned subsidiary of Chu Kong. Chu Kong High-Speed Ferry has a 96 percent stake in a Macau subsidiary that has been running Cotai Water Jet since 2007 under an agreement with casino operator Sands China Ltd. Chu Kong told Business Daily in March Cotai Water Jet had been losing money for the past five years, although it gave no figures. On March 25 Cotai Water Jet increased fares for its routes from Macau peninsula and Taipa to Sheung Wan and to Hong Kong airport by 5.5 percent and 6 percent. At the time Chu Kong director Leng Buli told Business Daily that the fare increase approved by the government gave Cotai Water Jet little leeway to make a profit this year. Cotai Water Jet and rival ferry operator TurboJET had applied for a fare increase of 13 percent, two-times higher than what the government accepted. The improvement in Cotai Water Jet’s business “increased the group’s profit higher than expectation,” Chu Kong said yesterday. Far East Hidrofoil Co Ltda, the passenger ferry concessionaire that operates under TurboJET brand, posted a loss of 1.6 million patacas (US$200,000) for 2012, lower than in the previous year, the company said in June.

Cotai Water Jet increased fares for its services by 5.5-6 pct in March

Belle Grande Manila Bay in an early construction phase

Belle Grande ‘could have’ Macau hotel brands Manila casino resort now scheduled for Q3 2014 opening, says one of partners Michael Grimes

michael.grimes@macaubusinessdaily.com

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local partner in the Belle Grande Manila Bay casino project in the Philippines claims in a newspaper interview that hotel brands from Melco Crown Entertainment Ltd’s City of Dreams resort in Macau could be brought into the project. No co m m en t wa s a v a i l a b l e yesterday from either MCE – an investor in Belle Grande and its planned operator – or from the individual hotel brands that currently act as MCE’s Macau partners. MCE’s hotel inventory in Macau consists of the 791-room Grand Hyatt Macau, the 300-room Crown Towers, the 300-room Hard Rock Hotel and the 216-room ownbrand Altira Macau Hotel. “It [Belle Grande] will be two to three hotel brands because we have more than 900 rooms,” Willy Ocier, vice chairman of Belle Corp, was quoted as saying in an interview with The Philippine Star newspaper. Belle Corp is a gaming and leisure development unit of Philippine mall and banking conglomerate SM Investments Corp. It controls the US$150 million (1.2 billion patacas), 6.2-hectare (15.3-acre) plot occupied by Belle Grande. “[The Belle Grande hotels] are

five- and six-star brands. Solaire is five- and six-stars so we cannot be less than that,” added Mr Ocier, referring to a rival Manila casino venue that had its first phase opening in March. Belle Grande is likely to announce its hotel brand partners in September, said Mr Ocier. The venue is due to open in the third quarter of 2014 according to Belle Corp’s second quarter report filed with the Philippine Stock Exchange. Business Daily tried to contact Mr Ocier yesterday for more information on the hotels for Belle Grande but was unable to reach him. Solaire Resort & Casino is the first of four properties in a new miniLas Vegas-style casino zone for the Philippines capital and known as Entertainment City. Macau casino operator and developer MCE – via an indirectly held unit called MCE Leisure – has exclusive management, operation and control of the Belle Grande casino project according to an October filing in Hong Kong by the MCE parent. The total cost of Belle Grande was given as US$1 billion (eight billion patacas) in an MCE filing in Hong Kong in October. Since then, Belle Corp executives – when speaking

in interviews – have described Belle Grande as a US$1.3 billion scheme. When the rival Solaire opened, it was tagged as a US$1.2 billion project. Melco Crown (Philippines) Resorts Corp, a local unit of MCE, stated in June it is to increase by nearly one-fifth the number of hotel rooms at Belle Grande. It will now have 950 rooms, rather than the 800 originally planned. Additionally it will also open in a single phase, said Clarence Chung Yuk Man, chairman of Melco Crown (Philippines) on the sidelines of the unit’s stockholder meeting in Manila. The October filing by the MCE parent in Hong Kong said MCE Leisure would be entitled to “approximately” half of the property’s earnings before interest, taxation, depreciation and amortisation “subject to overall property revenue and profitability levels”. MCE Leisure will also get all profits from nongaming operations. The Philippine gaming regulator Pagcor claims that gambling revenues in the country could grow from US$1.3 billion in 2011 to at least US$10 billion by 2017, with most of the growth from four new resorts at Entertainment City.


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August 6,2013 2013 April 19,

Macau

Review of continuing education proposed The government means to subsidise courses it considers useful to Macau Tony Lai

tony.lai@macaubusinessdaily.com

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egislative Assembly member Paul Chan Wai Chi has called for a review of the effectiveness of the continuing education scheme before it is extended. The government has published figures showing how many people used the scheme and how much it cost. “But there is a lack of an in-depth study of what goals the programme has achieved,” Mr Chan, a former teacher, told Business Daily. “The government should instruct a third-party institution to compile a report on the issue, so that public money can be used in a better way,” he said. The scheme gives Macau residents aged 15 or older a maximum of 5,000 patacas (US$625) to spend on government-approved courses or examinations. The scheme had been due to end this year. The Education and Youth Affairs Bureau announced on Sunday that the scheme would be extended to next year and that the maximum subsidy would be increased in line with inflation, and perhaps by more. An official of the bureau’s continuing education division,

Kong Ngai, told reporters that only core courses that would help people contribute to making Macau a world centre for tourism or a platform for trade between China and Portuguese-speaking countries would be fully subsidised. People taking courses that do not serve these purposes, such as cookery or tai chi courses, will have to pay 20 percent of the cost.

Matter of quality Last November the Commission of Audit criticised the education bureau’s supervision of the scheme, saying hundreds of courses and exams had been wrongly approved for subsidies. Mr Chan said the changes outlined by the bureau would do little to solve the problem of the quality of the courses. “There are a lot of courses set up just for the sake of getting subsidies,” he said. Many courses lacked any purpose, he said. The president of the Adult Education Association of Macau, João Baptista Manuel Leão, said the

Corporate Tower Six, One Central at 95 pct occupancy Tower Six at One Central Residences – a luxury Macau apartment project developed jointly by Shun Tak Holdings Ltd and Hongkong Land Ltd – has achieved 95 percent occupancy says the tower’s manager Sniper Capital Ltd. Sniper Capital – launched in 2004 – says it has combined assets of over US$400 million (3.20 billion patacas) in the Macau property market. It operates the Macau Property Opportunities Fund Ltd. Tower Six at One Central has 59 apartments and is marketed as The Waterside. Accommodation in the tower ranges from three-bedroom suites, to one-floor and two-floor apartments branded as Emerald Suites. Karen Lau, associate director, asset management at Sniper Capital, said she expected demand for One Central apartments to increase as transport connections between Macau and the rest of the Pearl River Delta further improve. Sniper Capital quotes Vigers Research as saying total luxury residential property sales in Macau increased 34 percent in 2012, to 14.24 billion patacas.

Accountant and magistrate to sit on Neptune board Macau junket investor Neptune Group Ltd has appointed a former chief investment officer for family trusts in Hong Kong and Greater China as an executive director. Chartered accountant Danny Xuda Huang is also currently a magistrate in New South Wales, Australia, according to a Neptune filing in Hong Kong. Mr Huang has previously worked for firms including BNP Paribas, National Australia Bank, MLC Investments, Toyota Finance, PricewaterhouseCoopers and KPMG, according to the document. “Mr Huang has over 10 years of professional experience in assurance and advisory, tax and financial planning, internal audit and risk management, project finance and credit control,” adds the filing. It gives no details of what role the new director will have at Neptune. Jay Chun, chairman of the Macau Gaming Equipment Manufacturers Association, which has invited Macau’s junket operators to play a central role in a new trade show in November, on Friday described the sector as increasingly “transparent” with “corporate operations”.

By May the government had spent over 340 million patacas on the continuing education scheme

government had internal rules about which courses should be approved. “In the past the government argued that some of our course fees were too high, and did not approve some of our courses as it had doubts about the qualifications of the instructors,” Mr Leão told Business Daily. Even so, he said the government should clearly list criteria that a core course must meet. He said the government could use the courses to train professionals.

“The city now relies on outsiders in some professional areas,” he said. Mr Leão believes the government could ask people to pay 30 percent to 40 percent of the cost of noncore courses. “Twenty percent may not be a big enough amount,” he said. “It could still lead to the possibility of misusing public money.” By May the government had spent over 340 million patacas on the continuing education scheme.


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August 6, 2013 April 19, 2013

Greater China

Beijing underwhelms with salvo to industry Push towards consolidation slow to materialise, analysts say Fayen Wong

Interest rate deregulation needs time: Lian China may need at least two years to end government control of interest rates and full deregulation may narrow banks’ net interest margins by onethird, Bank of Communications Co Ltd predicts. As their next steps, policy makers are likely to remove restrictions on the rate banks pay for five-year deposits and allow lenders to issue certificates of deposit that offer higher rates and can be sold on a secondary market, Lian Ping, Shanghai-based chief economist at the bank said at a briefing yesterday. Five-year term accounts are about 3 percent of total deposits, Mr Lian said. The government must also make more changes before setting up a deposit insurance system, Mr Lian said.

GM sales growth accelerates to 11 pct General Motors Co said sales growth in China accelerated last month as deliveries of Buick vehicles expanded at the fastest pace this year. Total sales in July climbed 11.1 percent to 221,580 units, after expanding 10.6 percent the preceding month, GM said in a statement yesterday. Buick deliveries jumped 26 percent to 66,208 units on the popularity of the Excelle line and Cadillac sales surged 83 percent to 3,688, though Chevrolet fell 3.4 percent to 43,343. GM’s sales have risen 11 percent this year, keeping it on track to reach its target of selling 3 million vehicles this year in the world’s largest auto market.

China Overseas Land sees profit jump China Overseas Land & Investment Ltd, the country’s biggest developer by market value listed in Hong Kong, said first-half profit climbed 32 percent as it sold more properties. Net income rose to HK$11 billion (US$1.4 billion) from HK$8.38 billion a year earlier, the company said in a stock-exchange filing yesterday. Sales increased 27 percent to HK$32.2 billion, it said. “First-home buying is still strong in major cities and China Overseas’ strategy of focusing on those cities fits in very well,” said Alan Jin, Hong Kong-based property analyst at Mizuho Securities Asia Ltd.

Beijing invites bids for urban projects Beijing’s Commission of Reform and Development, the city’s economic planner, will invite foreign investors to bid on 126 urban infrastructure projects collectively seeking 338 billion yuan (US$55 billion) in financing, the China Daily reported yesterday. The projects include rail transport, roads, rail transit complexes, drainage treatment facilities, waste disposal and heat supply. The report said private bids will be treated on an equal footing with bids from state-owned firms, and predicted an internal return rate of 8 percent.

T

he central government’s edict to more than 1,900 companies to shut excess production capacity by September is the latest effort to slim down bloated industries, but in the key steel, aluminium and cement sectors the cuts are just a fraction of their surpluses. Broader efforts, including credit curbs, raising environmental standards and energy efficiency will help slow the expansion of these sectors, but Beijing’s push towards industry consolidation will be slow to materialise, analysts said. Premier Li Keqiang has vowed to curb overcapacity as part of efforts to shift the economy away from investment in heavy industries, a move that could dampen its appetite for raw material imports such as iron ore, coal, copper and bauxite. China is the world’s biggest producer of steel, aluminium and cement. Beijing’s latest orders suggest less than 1 percent of steel and aluminium production capacity will shut by September, which analysts said will still leave a significant surplus. In cement, the shutdown will cover about 3 percent of production capacity, also only denting the excess. “Many of these plants that have overcapacity problems have actually

idled their production line for a while,” said Raymond Yeung, an economist with Australia & New Zealand Banking Group Ltd. “So the actual impact of the cut on the rebalancing of supply will be pretty mild.” China has ordered about 7 million tonnes of excess steel output to be shut in a sector that the China steel association says has surplus capacity amounting to 300 million tonnes. It has ordered 260,000 tonnes of excess aluminium output to be shut when smelting capacity is 27 million tonnes and demand is about 21 million tonnes. Many smelters ordered to shut were already running at production rates as low as 20 percent and the impact of the shutdowns will be offset by some 2 million tonnes of new projects due to start by the end of 2013, analysts said. China has said 92 million tonnes of excess cement production must be phased out. Capacity is now about 3 billion tonnes a year and demand is 2.2 billion tonnes. “The expansion of aluminium smelting plants happening in the western regions like Xinjiang will have a cheaper production cost and that will again hit domestic prices further,” said Liao Zhenyuan, an analyst at Minmetals Futures.

Govt urges credit support for shipbuilders Combined profits of 80 major shipbuilders fell 54 pct in the first half

C

hina issued a three-year plan to urge financial institutions to support its troubled shipbuilding industry, the world’s biggest, one month after the nation’s largest private yard sought government financial support. Ship owners placing orders for China-made vessels, engines and axles should get better funding and some key companies will be allowed to issue corporate bonds, the State Council said in a statement released yesterday. Chinese shipbuilders don’t have strong innovation, while overcapacity persists, the statement dated July 31 said. China may have a third of its more

than 1,600 yards shut down in about five years, according to Wang Jinlian, head of the industry association. “It seems as if the government wants to soothe the sector by issuing the support plan as it can’t afford to see social unrest caused by largescale bankruptcies or job cuts,” said Lawrence Li, a Shanghai-based analyst at UOB-Kay Hian Holdings Ltd. “However, the government didn’t explicitly say how it would help the shipbuilders and what kind of yards are key.” China Rongsheng Heavy Industries Group Holdings Ltd, the largest shipbuilder outside state control by order book, reported last

In base metals, China also plans to phase out 654,400 tonnes of copper production capacity. The nonferrous metals association estimates there was more than 7 million tonnes of idle capacity last year and production capacity is expected to reach 40 million tonnes by 2015. More broadly, analysts have said that for now Mr Li will avoid radical macro reforms out of concern it could weigh too heavily on growth in the world’s second-biggest economy. Reuters

The actual impact of the cut on the rebalancing of supply will be pretty mild Raymond Yeung, economist, ANZ Banking Group

month it had a net loss in the first half and said it was seeking financial support from the government and shareholders after a plunge in orders strained cash flow. The company has also agreed to issue convertible bonds to raise a net HK$1.38 billion (US$178 million) for working capital and to support the development of its offshore engineering business. The State Council plan also urged local governments to support shipbuilders’ innovation, strictly control new capacity, promote high-end products and stabilise the industry’s international market share with greater funding support, according to the statement. Companies should be confident as “the potential in the domestic market remains relatively large,” according to the statement. Besides restricting new shipbuilding capacity, the government is encouraging mergers and acquisitions and pooling of resources in the industry, the statement said. Thirty-eight percent of yards in China didn’t get contracts for new vessels last year, and 10 percent had no deliveries scheduled beyond the end of that year, the Londonbased ship-broking unit of ICAP Plc said in a report sent by e-mail on December 24. The government also pledged to study securitisation of shipbuilders’ loans, according to the statement. Local authorities and agencies should formulate supporting policies and ensure the timely completion of targets, the statement said, without providing any specific goals. Bloomberg News


99

August 6,2013 2013 April 19,

Greater China

HSBC services PMI shows some resilience Sector stabilised ‘at a relatively low level of growth,’ says economist

A

ctivity in China’s services sector defied the country’s economic cooldown to expand modestly in July, a private survey showed yesterday, as new business orders recovered from a multi-year low in a rare sign of resilience. But that was tempered by a fall in prices charged by companies to a nine-month low, suggesting demand was still too weak for them to raise prices, and as business expectations hovered near their lowest since 2005. The HSBC Holdings Plc and Markit Economics Purchasing Managers’ Index (PMI) for the services industry stood at 51.3 in July, unchanged from June and just a whisker above a 20-month low of 51.1 struck in April. A reading above 50 suggests business grew compared to a month ago. China’s economy is set to grow this year at its weakest pace since 1990 as flagging foreign and domestic demand weighs on exports and factory production. A slowdown in investment has further dragged on growth. “China’s service sector has stabilised at a relatively low level of growth,” said Qu Hongbin, chief China economist at HSBC. “But profit margins continue to be squeezed. Without a sustained improvement in demand, services growth is likely to remain lacklustre, putting downside

Survey shows services sector expanding

pressures to employment growth.” The sub-index for new orders rebounded to 52.3 from June’s reading, which was the lowest in over four years. Financial markets have grown increasingly nervous about China’s economic health despite reassurances from Beijing that the world’s secondbiggest economy is on track to meet its 7.5 percent growth target this year. Crucially, services companies are the biggest employers in China, at a time when the government is worried the downturn could threaten social

stability by driving up unemployment as it tries to shift the economy away from a focus on manufacturing. A similar, official survey released on Saturday showed the nonmanufacturing sector picked up in July as support measures for small firms helped improve sentiment, though companies noted inflation was picking up and pushing up costs. The government’s nonmanufacturing PMI rose to 54.1 last month from June’s 53.9. A pair of PMI surveys of Chinese manufacturers last week showed

factory production was slightly stronger than expected in July among larger Chinese manufacturers. Smaller factories, however, remained under pressure. “I am more worried about manufacturers. I don’t think the worst is over,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong. He said the services sector was holding up better than manufacturing as it was not saddled with excess capacity and debt and was supported by demand intrinsically less volatile. “Policy will continue to be tight and growth will continue to slow in the second half of the year,” Mr Zhang said. The HSBC survey showed the employment sub-index slipped in July, although it remained above a four-year trough touched in April. HSBC said 6 percent of survey respondents increased their payrolls, with a particular focus on hiring graduates. In contrast, 2 percent of companies had shed jobs. The services sector accounted for 46 percent of China’s economy in 2012, so a sharp slowdown in the industry would exacerbate concerns about slackening economic growth. Services firms created 35 percent of all jobs in China in 2011, overtaking manufacturers who accounted for 30 percent of hiring. Reuters


10 10

August 6, 2013 April 19, 2013

Greater China/ Asia

Beijing gained a foothold along a strategic sea route

Sri Lanka eyes hub with Chinese mega port New infrastructure designed to handle mega ships Amal Jatasinghe

A

US$500 million Chinese-built port opened yesterday in Sri Lanka, giving Beijing a vital foothold on the world’s busiest international shipping lane as it seeks to secure maritime supply routes. The massive terminal in Colombo is located mid-way on the lucrative east-west sea route and has facilities on a par with Singapore and Dubai. The Colombo International Container Terminal (CICT), which is 85 percent owned by the staterun China Merchant Holdings International Co Ltd, is designed to handle mega ships – a first for Sri Lanka which is aiming to become the region’s shipping hub. The involvement of such a large Chinese company appears to conform to a pattern by Beijing after it sealed a deal in January to acquire the Pakistani port of Gwadar at a time when it is also building a US$14 million “dry port” in the Nepalese city of Larcha, near Tibet. Chinese loans and expertise were also instrumental in the construction of a new US$450 million deep-sea port at the southern Sri Lankan city of Hambantota which opened in June 2012. Independent shipping expert, Rohan Masakorala, says the new terminal made economic sense for China to tap in to the growing South Asian container cargo and gave Beijing a foothold along a strategic sea route. “Terminal investments are a good business which can give a very good return,” said Mr Masakorala, a former secretarygeneral of the Singapore-based Asian Shippers Council. “Through this investment, China is also securing the safety and efficiency of their main supply chain.” Mr Masakorala, who heads

the Shippers’ Academy Colombo, said about half of all world sea trade passed through the east-west shipping route and a presence at a mid-way point along that gives China a commanding position. “For China to maintain economic growth at home, they also need to go out and secure their supply routes. In that sense, coming to Colombo is a strategic commercial investment.”

India woes The Chinese investment in Sri Lanka, which is under pressure from Western powers and India over its human rights record, has raised fears in New Delhi about Beijing’s influence in the neighbourhood. But Priyath Bandu Wickrama, chairman of the state-run Sri Lanka Ports Authority (SLPA), insisted that India had nothing to fear from the new Colombo port and could in fact be a major beneficiary. “We will not allow any military base at our ports nor will we allow them to be used for any strategic military purpose by anyone,” the official said.

KEY POINTS Sri Lanka opens new US$500 million port Aims to become region’s shipping hub Port 85 pct owned by staterun Chinese company Container capacity to reach 10 million by 2020

Mr Wickrama said shippers in India could save up to four days by routing their cargo through Sri Lanka rather than using Singapore or Dubai. “Earlier, Indians along the east coast had to send their cargo to Singapore if they wanted to catch a mega ship going West. Now these mega ships will be going through Colombo and picking up Indian cargo,” he added. “That saves time and a lot of money.” The two major ports of south India, the Port of Cochin and the Port of Tuticorin, are too shallow for mega vessels such as the world’s largest container ship, the MV. Maersk McKinney Moller. Saliya Senanayake from the London-based Chartered Institute of Logistics and Transport says that “India is about five to six years behind Sri Lanka when it comes to port infrastructure”. Sri Lanka has been an important stop in the ancient Silk Sea Route and today hundreds of ships pass its southern coast daily while plying the world’s busiest international shipping lane. “Sri Lanka has been looking toward China because of the availability of funding,” said Dushni Weerakoon, deputy director at the Institute of Policy Studies in Colombo. “With Sri Lanka’s plans to create a hub concept, expansion of the Colombo port makes good economic sense.”

Ploughing money With a capacity of over 18,000 containers, the M.V. Maersk Mc-Kinney Moller, which was commissioned about two weeks ago, is expected to make up a fleet of 20 mega ships in the next two years plying the East-West route.

For China to maintain economic growth at home, they also need to go out and secure their supply routes. In that sense, coming to Colombo is a strategic commercial investment Rohan Masakorala, chief executive, Shippers’ Academy Colombo

The SLPA is pouring millions of dollars into infrastructure around the island and says it is on course to increase container handling capacity by 1.6 million containers to 6.4 million by April next year. It hopes to have a container capacity of 10 million by 2020, while revenue is forecast to triple to one billion dollars by 2020. Hambantota, which is just 12 kilometres (7.5 miles) away from the East-West sea lane, is being promoted as a key service centre and industrial port where large ships can re-fuel or take on fresh food. Next April, Colombo’s port is due to open another mega terminal just next to the Chinese-managed CICT. The new addition will initially be able to handle about 800,000 containers a year, according to the SLPA. Professor Tsz Leung Yip, head of the International Centre for Maritime Studies at Hong Kong Polytechnic University, said Chinese expertise coupled with Colombo’s strategic location would make Sri Lanka a key stop-over for international carriers who want to avoid the threat posed by Somali pirates operating off the Gulf of Aden. “In the presence of Somalia pirates, it is safer for ships [from the Far East to Europe] to stop over at Sri Lanka and head to Cape of Good Hope, without calling at Dubai port,” he stressed. AFP


11 11

August 6,2013 2013 April 19,

Asia Singapore bourse embracing derivatives Singapore Exchange Ltd, Southeast Asia’s biggest bourse, is relying on derivatives for growth amid a dearth of merger and acquisition candidates in Asia. SGX is planning energy and bond futures, chief executive Magnus Bocker said. The bourse’s revenue from derivatives climbed 50 percent to S$234.5 million (US$183.7 million) in the five years through June 2013, outpacing the 4.4 percent increase in equity trading to S$469.50 million, according to data compiled by Bloomberg. “Our primary focus is organic growth,” Mr Bocker said in an e-mailed response. “I cannot say that there are clear merger and acquisition opportunities in this region yet.” Exchanges worldwide have been building their futures and commodities businesses as the value of stock trading dropped 38 percent from June 2008, according to the World Federation of Exchanges. SGX has been searching for other growth avenues since its US$8.8 billion bid for ASX Ltd was rejected by Australian regulators in April 2011. Since then about US$16.3 billion in exchange deals have been completed, according to data compiled by Bloomberg. “There’s a lot of opportunity for Singapore to gain market share by facilitating derivatives trading,” David Kallus, co-chief investment officer at New York-based CC Global Advisers LLC, said.

ING, MBK Partners in talks for Korean unit Private equity firm MBK Partners is in exclusive talks to buy a controlling stake in ING Groep NV’s South Korean insurance unit, a source briefed on the matter said yesterday. ING’s South Korean unit attracted a total of four bids in May, including from Tong Yang Life Insurance Co Ltd, Hanwha Life Insurance Co Ltd and Kyobo Life Insurance Co Ltd, sources previously told Reuters. ING and MBK will start negotiations based on MBK’s original bid of about 1.5 trillion won (US$1.3 billion) to 1.6 trillion won for a 90 percent stake in the unit, but the final pricing and stake size could change, the first source said. A spokesman for MBK declined to comment. A representative for ING could not be reached immediately for comment. Shares in Tong Yang Life plunged 14.5 percent yesterday as Yonhap news agency and other South Korean media reported before local trading began that MBK replaced Tong Yang Life’s consortium as the party in exclusive talks for the ING unit. The sale of its Korea insurance unit would bring ING closer to fulfilling its agreement with European regulators to sell more than 50 percent of its Asian operations by the end of 2013.

Stagnant property drags on S. Korea growth Weak housing market adding to government challenges Eunkyung Seo and Cynthia Kim

S

outh Korea’s worst propertymarket slowdown since 2004 threatens to limit the economy’s rebound, as the government’s stop-go policies to stimulate the housing market fail to secure any sustained revival. Apartment transactions in Seoul plunged 80 percent in July from June, when temporary acquisition tax cuts expired, according to data on the city’s website. National home prices were flat or fell for 14 straight months through July, according to Kookmin Bank, the nation’s largest mortgage lender. Injecting life into the real-estate market was a key goal for President Park Geun-hye when she took office in February, rolling out on April 1 tax breaks to spur demand and supply-control measures to support prices. Now, a construction downturn is adding to the risk of the nation missing the government’s 2.7 percent growth forecast for this year amid patchy demand for exports and nearrecord household debt. “South Korea’s property market is sinking slowly, sapping the growth potential of the economy,” said Oh Suk-tae, a Seoul-based economist at SG Securities. “Given the large share of household wealth in real estate and the heavy reliance on mortgages, consumers will continue to scrimp on spending unless property prices make a sustained upswing.” The weak housing market adds to the challenges for Asia’s fourth-biggest economy. The Bank of Korea forecast on July 11 that growth will pick up from 2.8 percent this year to 4 percent in 2014, the fastest since 2010.

Steps planned Finance Minister Hyun Oh-seok said in April when the government unveiled its property-boosting measures that a prolonged slump “can weigh on the entire economy”. In addition to the acquisition tax cut that expired in June, the government introduced tax breaks for first-time home-buyers with low incomes and for multiple-home

Housing slump weighs on economy

owners subject to capital gains, both of which are set to expire at the end of the year. The government is discussing how to cut housing purchase tax to “normalise” the property market, and will prepare steps by the end of August to be submitted to parliament, according to a joint statement by the finance, land and public administration ministries on July 22. “Seoul’s housing transaction volume plunged in July and I expect

South Korea’s property market is sinking slowly, sapping the growth potential of the economy Oh Suk-tae, economist, SG Securities

almost the same across the country,” said Lee Mi-yun, a researcher at RealEstate 114, a Seoul-based realestate information company. South Koreans aren’t buying homes because they don’t expect prices to rise, said Ms Lee at RealEstate 114. Lowering purchasing costs through tax breaks in such an environment will likely increase transactions but won’t lead to a dramatic rise in trading, she said. “We’ve watched repeated minor measures to spur housing markets from the government. It’s like lots of bunts, but no home run,” said Stephen Lee, an economist at Samsung Securities Co. Month-on-month house prices were unchanged across the nation in July, while falling in cities including Seoul, according to Kookmin Bank. Nationwide prices were down 0.9 percent from a peak in May last year after registering average annualised gains of nearly 5 percent over the prior 13 years. The biggest problem facing the housing market is declining demand and “more than enough” properties, especially in the Seoul metropolitan area, said Wayne Lee, a property market analyst at Woori Investment & Securities. Bloomberg News

Australia: new bailout for auto industry The Australian government yesterday pledged a fresh A$200 million (US$177 million) bailout package for the car manufacturing industry as it looks to shore up struggling sectors to help the economy transition away from a mining boom. Industry Minister Kim Carr said the funds would ensure the “automotive manufacturing sector has a strong future and continues to provide high-skill, high-wage jobs for Australians”. The announcement came on the opening day of a five-week election campaign that will culminate in national polls on September 7, with the ruling Labor party facing an uphill battle against the conservative opposition. “The motor vehicle manufacturing industry in this country provides thousands of jobs, billions of dollars in export income and investment and benefits in research and development,” said Mr Carr. “Our actions will provide crucial ongoing support for an industry that has been under considerable pressure with a high Australian dollar over an extended period and an increasingly competitive global market.” The auto manufacturing sector employs more than 50,000 people in Australia with another 250,000 jobs in associated industries.

Global banks boost profits in Japan B

ank of America Corp led a fivefold increase in profit at foreign banks’ Japan securities units last fiscal year as they accelerated job cuts and increased fees and commissions during the country’s stock-market rebound. Combined net income at the Japanese units of 10 global banks rose to 32.8 billion yen (US$332 million) for the year ended March 31 from 5.7 billion yen a year earlier, according to regulatory filings

obtained by Bloomberg News. The banks eliminated about 1,000 Japan jobs in total over the period. In Tokyo, the resurgence in fee income at global firms from Goldman Sachs Group Inc to Deutsche Bank AG is stretching into the current year as Prime Minister Shinzo Abe’s economic policies stimulate trading and prompt companies to raise funds. At the same time, the world’s biggest banks have been cutting staff to sustain profits amid stricter regulations following the 2008 global financial crisis. “The business environment is still active, and bankers are getting busier because their firms have reduced headcount,” said Katsunobu Komizo, president at Executive Search Partners Co, Japan’s biggest recruiter focusing on banks. “Foreign firms can make the most of their global presence for equity underwriting and advising

on cross-border acquisitions. There’s more room for growth.” Combined headcount at the Japanese brokerage units of Bank of America, Deutsche Bank, Goldman Sachs, Citigroup Inc, Morgan Stanley, JPMorgan Chase & Co, Barclays Plc, UBS AG, BNP Paribas SA and Credit Suisse Group AG fell to 6,551 from 7,564, according to their statements filed to the Financial Services Agency by July 31. That’s a 13 percent reduction, steeper than the previous year’s 7.8 percent cut. Net income at Bank of America’s Merrill Lynch Japan Securities Co. unit climbed to 44.8 billion yen from 5.1 billion yen a year earlier, its FSA filing showed. That made it the biggest earner among the 10 firms. Trading profit increased 68 percent and fees from investment banking, including mergers advisory, rose 58 percent. Bloomberg News


12 12

August 6, 2013 April 19, 2013

Asia

Virgin Australia warns of steep net loss Airline sees up to A$110 mln loss on booking system

V

irgin Australia Holdings Ltd, Australia’s secondlargest carrier, lost as much as A$110 million (US$98 million) in the year ended June 30 as carbon costs and the transition to a new booking system eroded profits. Costs including moving to the Sabre ticketing system will total A$100 million this year, including A$36 million already announced at first-half results in February, the Brisbane-based carrier said in an unaudited forecast filed yesterday. It’s the second time in three months that Virgin has cut its forecast for 2013 earnings, for which analysts expect net income of A$21 million, according to the average of eight estimates compiled by Bloomberg. Backed by major shareholders including Singapore Airlines Ltd, Air New Zealand Ltd, and Etihad Airways PJSC, Virgin has vowed to take on Qantas Airways Ltd’s dominance of Australia’s domestic market, of which the first-ranked carrier holds 65 percent. While “today’s update

is disappointing,” the onetime costs taken this year will benefit the airline in the long term, John Borghetti, chief executive, said in the statement. “We now have the right platform in the Australian market to generate sustainable earnings benefits.” Virgin shares fell 5.5 percent, their biggest drop since their last earnings forecast on May 16, to close at 43 Australian cents in Sydney trading.

Net loss Virgin’s net loss will be in the range of A$95 million to A$110 million, while the loss before tax and one-time items will be A$30 million to A$50 million, the company said. It had also seen weaker sales as a result of moving to a ticketed system, which means some revenues are booked later than they were under the ticketless system, according to the statement. The airline has bought rural carrier Skywest and a 60 percent stake in Tiger Airways Ltd’s loss-making local unit to add capacity to compete with Qantas.

Virgin has cut its earnings forecast twice in three months

Yield, a measure of ticket prices, increased in June compared to a year earlier, and the proportion of seats filled rose to 74 percent from 69 percent the previous month, the carrier said. Local capacity growth in the six

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months through December will be in the range of 3 percent to 4 percent. Carbon pricing will also cost A$45 million to A$50 million, which the airline wasn’t able to recover in higher ticket prices due

to competition and weak demand, the carrier said. The carbon tax cost was “unable to be recovered due to weak economic conditions and the competitive environment,” it said. Bloomberg News

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13 13

August 6,2013 2013 April 19,

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 41.8

41.4

41.0

Max 41.8

average 41.314

Min 40.65

Last 40.95

40.6

Max 67.9

average 67.366

Min 66

Last 67.4

Last 42.7

PRICE

23.0

65.9

Max 23.3

average 23.093

Min 22.9

Last 23

22.9

21.9

20.0

21.8

19.9

21.7

42.5

Max 20.15

average 20.018

DAY %

YTD %

(H) 52W

Min 19.8

Last 20

(L) 52W

107.33

0.364690481

14.52198037

108.9300003

86.23999786

BRENT CRUDE FUTR Sep13

109.22

0.247820101

2.775948057

114.3699951

96.65000153

GASOLINE RBOB FUT Sep13

299.55

0.026713861

9.408670879

309.1700077

260.2499962

GAS OIL FUT (ICE) Sep13

928

0.270124257

2.230790416

980

832.5

3.329

-0.53779504

-7.476375764

4.517000198

3.319999933

307.67

0.172559745

2.77935527

319.1699982

275.5500078

Gold Spot $/Oz

1314.65

0.1997

-21.0164

1796.08

1180.57

Silver Spot $/Oz

19.9559

0.2996

-33.7233

35.365

18.2208

Platinum Spot $/Oz

1454.82

0.3843

-4.1463

1742.8

1294.18

Palladium Spot $/Oz

734.75

0.513

5.0153

786.5

572.7

LME ALUMINUM 3MO ($)

1809

-0.165562914

-12.73516643

2200.199951

1758

LME COPPER 3MO ($)

7005

0.085726532

-11.67570294

8422

6602

LME ZINC

1865

0.566190348

-10.33653846

2230

1779

14000

0.755667506

-17.93669402

18920

13205

NATURAL GAS FUTR Sep13 NY Harb ULSD Fut Sep13

3MO ($)

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

19.8

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

15.85

0.316455696

2.888672509

16.47500038

14.60000038

463.25

-0.107816712

-22.75948312

665

461.25

WHEAT FUTURE(CBT) Sep13

662.75

0.340651022

-17.87484511

905.75

648

SOYBEAN FUTURE Nov13

1181.75

0.021159543

-9.288044521

1409.75

1176.25

COFFEE 'C' FUTURE Sep13

118.85

0.507399577

-22.04001312

196.75

115.3499985

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

Dec13

SUGAR #11 (WORLD) Oct13

16.77

COTTON NO.2 FUTR Dec13

-0.119118523

85.37

0.458931513

-16.40079761

22.06999969

8.42011684

89.55999756

World Stock Markets - Indices NAME

66.4

20.1

WTI CRUDE FUTURE Sep13

CORN FUTURE

23.1

Max 22

average 21.822

Min 21.6

Last 21.85

21.6

Currency Exchange Rates

NAME

METALS

66.9

43.3

Commodities ENERGY

23.2

22.0

42.7 Min 42.55

67.4

20.2

42.9

average 43.141

23.3

43.5

43.1

Max 43.5

67.9

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.8912 1.536 0.9286 1.3286 98.5 7.9889 7.7562 6.1247 60.7663 31.33 1.2676 29.92 43.47 10248 87.79 1.23376 0.86499 8.1431 10.6157 130.87 1.03

0.0786 0.4315 0.0538 0.0753 0.4467 0.0038 0.0013 0.0833 0.5409 -0.2234 0.3313 0.3877 0.3681 0.8294 0.3543 0.0349 0.3827 -0.4654 -0.6528 0.3591 0

-14.126 -5.0445 -1.4215 0.7278 -12.5888 -0.0713 -0.0722 1.7291 -9.4975 -2.3939 -3.6447 -2.9646 -5.6706 -4.4399 1.7508 -2.1301 -5.7307 0.9137 -0.8035 -13.2192 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3742 61.2125 31.62 1.286 30.228 44.181 10333 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2256 77.13 7.9818 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.78128 7.799 9.7946 95.94 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.38

-0.6802721

39.04761

4.54

2.33

VOLUME CRNCY 1092010

13.42

1.206637

25.77319

13.75

8.46

714144

AMAX HOLDINGS LT

1.05

0

-25

1.72

0.75

232425

BOC HONG KONG HO

25.1

0.1996008

4.149376

28

22.85

6893967

CENTURY LEGEND

0.35

0

32.07548

0.42

0.22

0

CHEUK NANG HLDGS

6.45

1.895735

7.67947

6.74

3.01

150910

CHINA OVERSEAS

23.25

-0.6410256

0.649349

25.6

17.28

19564909

CHINESE ESTATES

18.04

1.234568

48.72931

18.06

8.42

659043

CHOW TAI FOOK JE

10.02

-0.1992032

-19.45337

13.4

7.44

3607400

EMPEROR ENTERTAI

2.71

1.879699

43.38624

3.07

1.35

550000

FUTURE BRIGHT

2.11

2.427184

74.08866

2.76

0.993

2918000

GALAXY ENTERTAIN

40.95

0.1222494

34.92586

44.95

19.22

5247281

HANG SENG BK

121.5

0.5794702

2.358891

132.8

108.4

1067708

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

15658.36

0.1941385

19.49171

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

US

3689.588

0.3766312

22.19146

3689.588

2810.8

FTSE 100 INDEX

GB

6671.84

0.3605666

13.12402

6875.62

5605.589844

DAX INDEX

GE

8419.84

0.1534447

10.60705

8557.86

6621.36

HOPEWELL HLDGS

24.55

0

-26.16541

35.3

22.405

1640279

HSBC HLDGS PLC

89.55

0.8445946

10.1476

90.7

65.85

15635842

NIKKEI 225

JN

14258.04

-1.438668

37.16011

15942.6

8488.14

HANG SENG INDEX

HK

22222.01

0.1398767

-1.919547

23944.74

19076.78906

CSI 300 INDEX

CH

2278.329

1.382393

-9.695896

2791.303

2023.171

TAIWAN TAIEX INDEX

TA

8138.63

0.4784021

5.703356

8439.15

7050.05

KOSPI INDEX

SK

1916.22

-0.3722613

-4.047474

2042.48

S&P/ASX 200 INDEX

AU

5111.251

-0.1077048

9.944198

ID

4640.781

0.3556186

FTSE Bursa Malaysia KLCI

MA

1787.52

NZX ALL INDEX

NZ

980.095

PHILIPPINES ALL SHARE IX

PH

3967.04

-0.3789429

JAKARTA COMPOSITE INDEX

3.7

1.648352

3.932586

4.66

2.98

13968000

LUK FOOK HLDGS I

23.35

4.474273

-4.303277

30.05

16.88

3112123

MELCO INTL DEVEL

16.54

0.976801

83.5738

18.18

5.54

3465491

MGM CHINA HOLDIN

23

-0.6479482

73.21521

23.65

10.21

1241900

1770.53

MIDLAND HOLDINGS

3.15

0

-14.86487

5

2.68

1896000

5249.6

4212.7

NEPTUNE GROUP

0.179

2.285714

17.76316

0.23

0.131

7960000

7.507928

5251.296

3978.078

NEW WORLD DEV

11.46

0.5263158

-4.658905

15.12

9.38

6454236

0.2810643

5.836174

1826.22

1590.67

SANDS CHINA LTD

42.7

-0.1169591

25.77319

43.7

23.6

7005189

SHUN HO RESOURCE

1.42

0.7092199

1.428573

1.67

1.06

50000

0.07229012

11.1152

998.487

790.156

SHUN TAK HOLDING

3.79

0

-9.546541

4.65

2.62

7178128

7.246865

4571.4

3411.69

SJM HOLDINGS LTD

HSBC Dragon 300 Index Singapor

SI

617.03

0.5

-0.65

NA

NA

STOCK EXCH OF THAI INDEX

TH

1420.99

0.003518797

2.087744

1649.77

1186.38

HO CHI MINH STOCK INDEX

VN

493.66

-0.2021591

19.31936

533.15

372.39

Laos Composite Index

LO

1353.13

1.216274

11.38981

1455.82

1003.17

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

HUTCHISON TELE H

20

0.1001001

12.69093

22.382

13.804

3570115

SMARTONE TELECOM

11.86

0.5084746

-15.76704

17.38

11.76

1449547

WYNN MACAU LTD

21.85

0.9237875

4.295939

26.5

16.92

1578030

ASIA ENTERTAINME

4.12

-0.2421308

46.37528

4.7647

2.2812

101011

BALLY TECHNOLOGI

73.12

-0.35432

63.54283

73.89

41.74

473312 4911

BOC HONG KONG HO

3.25

2.198044

5.863194

3.6

2.99

GALAXY ENTERTAIN

5.3499

-1.110906

34.75819

5.77

2.47

750

INTL GAME TECH

19.29

1.633298

36.13267

20.25

10.92

2629785

JONES LANG LASAL

91.68

-0.1850844

9.220869

101.46

66.82

308385

LAS VEGAS SANDS

57.49

0.506993

24.54506

60.54

35.7876

2894509

MELCO CROWN-ADR

26.19

2.105263

55.52256

26.4097

10.01

2967796

MGM CHINA HOLDIN

2.78

0

50.27027

2.85

1.52

9015

MGM RESORTS INTE

16.45

-2.373887

41.32302

16.99

9.12

11674658

SHFL ENTERTAINME

22.75

-0.1316945

56.89655

23.08

12.35

267874

SJM HOLDINGS LTD

2.59

0

13.71539

2.9481

1.8832

1354400

139.85

1.753492

24.32216

144.99

88.9234

1417369

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME AIA GROUP LTD

PRICE

DAY %

VOLUME

36.45

-1.884253

21067385

ALUMINUM CORP-H

2.49

1.632653

9023582

BANK OF CHINA-H

3.25

0

132580510

BANK OF COMMUN-H

5.13

0.7858546

17889346

BANK EAST ASIA BELLE INTERNATIO BOC HONG KONG HO

NAME CHINA UNICOM HON

PRICE

DAY %

VOLUME

NAME

PRICE

DAY %

VOLUME

11.32

-0.5272408

10930154

POWER ASSETS HOL

71.3

-0.4189944

974443

CITIC PACIFIC

8.49

0.2361275

3691635

SANDS CHINA LTD

42.7

-0.1169591

7005189

CLP HLDGS LTD

64.7

-0.231303

1351727

SINO LAND CO

11.12

-0.3584229

2440183

CNOOC LTD

14.2

-0.140647

21945788

SUN HUNG KAI PRO

104.8

0.6724304

1419798

30.4

1.333333

3254278

COSCO PAC LTD

10.86

-0.9124088

1467840

SWIRE PACIFIC-A

92.7

0

616454

11.62

0.3454231

6564321

ESPRIT HLDGS

13.66

0.5891016

5761560

TENCENT HOLDINGS

371

2.998334

4008099

25.1

0.1996008

6893967

HANG LUNG PROPER

25.65

0.5882353

3475111

TINGYI HLDG CO

19.48

0.6198347

3800400

CATHAY PAC AIR

14.38

1.125176

1396800

HANG SENG BK

121.5

0.5794702

1067708

WANT WANT CHINA

10.16

-3.238095

20813102

CHEUNG KONG

114.6

0.969163

4520866

HENDERSON LAND D

WHARF HLDG

69.75

0.867679

1675839

4.13

-0.7211538

15045153

CHINA COAL ENE-H CHINA CONST BA-H

HENGAN INTL

49

-0.3051882

998334

87.9

1.034483

2198685

5.76

-0.5181347

87651622

HONG KG CHINA GS

20.05

-0.7425743

3617390

CHINA LIFE INS-H

18.62

0.1075269

19812246

HONG KONG EXCHNG

122.5 -0.08156607

1791316

CHINA MERCHANT

24.1

-1.632653

5495865

HSBC HLDGS PLC

89.55

HUTCHISON WHAMPO

92.15

0.5455537

12941592

5.07

-0.3929273

116767758

0.3802281

9649451

0.8445946

15635842

CHINA MOBILE

83.15

0

6984958

CHINA OVERSEAS

23.25

-0.6410256

19564909

IND & COMM BK-H

5.8

0.1727116

37103278

LI & FUNG LTD

10.56

CHINA RES ENTERP

23.95

-1.440329

1180932

MTR CORP

29.45

0.170068

528757

CHINA RES LAND

22.65

1.342282

6745929

NEW WORLD DEV

11.46

0.5263158

6454236

CHINA RES POWER

17.48

-0.9070295

8246059

PETROCHINA CO-H

9.13

-0.6528836

30993918

CHINA SHENHUA-H

22.45

-0.443459

6392214

PING AN INSURA-H

50.1

-1.085884

8593790

CHINA PETROLEU-H

MOVERS

28

18

4 22280

INDEX 22222.01 HIGH

22273.82

LOW

22002.1

52W (H) 23944.74 22000

(L) 19076.78906 1-August

5-August


14 14

August 6, 2013 April 19, 2013

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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 6,2013 2013 April 19,

Opinion

The US$7 trillion problem wires that could sink Asia Business

Leading reports from Asia’s best business newspapers

The Age Australian Treasurer Chris Bowen says the Labor party will put up a new support package for car makers because the industry is important for Australian manufacturing. ‘‘It goes to co-investments with state governments to ensure that the industry survives, diversifying manufacturing production,’’ Mr Bowen was quoted as saying. The measures will also make sure Australian car manufacturers are able to compete in the world market and that local demand is strong, he said. The package is expected to be worth US$200 million over the next two years.

Inquirer Business A multi-use development project on a proposed reclamation site on Manila Bay is expected to provide up to 600,000 jobs that would help ease unemployment in the country, particularly in Metro Manila. In a statement, the Manila Gold Coast Development Corp, owned by the family of businessman William Tieng, said the project would generate up to 17 billion pesos (US$390 million) in taxes every year on top of 10 billion pesos in real estate taxes for the local government of Manila.

The Star Fitch Ratings downgrading its outlook for Malaysia’s credit rating was bad news for the stock market. Last week the stock market fell the most in seven weeks, the ringgit dropped to the lowest in three years and the yield of Malaysian government’s 10-year debt paper increased to the highest point since January 2011. There was a massive “knee-jerk” pullout by foreign funds in the equity market the day after the revised outlook by Fitch Ratings, said Pong Teng Siew, head of research at InterPacific Research Sdn Bhd.

China Daily China’s top quality watchdog has named on its website four importers, including Wahaha and Dumex, of potentially tainted products from New Zealand dairy giant Fonterra. Two companies under China’s largest beverage producer Hangzhou Wahaha Group - Wahaha Health Food Co and Wahaha Import & Export Co, infants and children’s nutrition company Dumex, and Shanghai Tangjiu Group were found to have allegedly imported problematic dairy products from Fonterra, according to the regulator. All those four companies have initiated recalling measures, said the website.

William Pesek

Bloomberg View columnist

“I

t’s our currency, but it’s your problem.” This musing from Nixon-era Treasury Secretary John Connally is about to find new relevance as the White House battles Republicans over raising the U.S. debt limit. Connally couldn’t have foreseen how right he would be 42 years on as Asia sits on almost US$7 trillion in currency reserves, much of it in U.S. dollars. Asia’s central banks engaged in a kind of financial arms race after a 1997 crisis, stockpiling dollars as a defence against turmoil. That altered the financial landscape in two ways: One, Asia now has more weapons against market unrest than it knows what to do with. Two, Asia is essentially America’s banker, with China and Japan having the most at stake. That might be less problematic if not for Capitol Hill’s propensity for shooting itself in the foot. A pointless squabble over the debt ceiling prompted Standard & Poor’s to yank the U.S.’s AAA credit rating in August 2011, sending panic through global markets. Asia is now bracing for months of posturing when the U.S. Congress returns from its August recess. In a perfect world, Washington’s bankers would threaten to call in their loans. Asian nations would sit White House and congressional leaders down and tell them to get their act together. But Connally’s 1971 observation is infinitely truer today than at any time in Asia’s history. We need to stop considering huge reserve holdings as a financial strength. They are a trap that is complicating economic policy making. It’s time Asia devised an escape.

Fiscal matters China isn’t without leverage. It’s no coincidence that new Treasury Secretary Jacob Lew’s first overseas visit in March was to his bankerin-chief, Xi Jinping, in Beijing. Nor did it go unnoticed that Lew was the new Chinese president’s first foreign-official meeting. Lew may have been sending Xi a signal this week by calling on Congress to act “in a way that doesn’t create a crisis” on fiscal matters. But that leverage is limited. Xi and Premier Li Keqiang are engaged in a risky rebalancing act, trying to wean the Chinese economy off exports without fanning social unrest. Another debt-limit tussle would fuel market volatility, strengthen the yuan as the dollar plunges, and result in the loss of tens of billions of dollars in China’s portfolio of U.S. Treasuries. “They don’t like it,” says

Leland Miller, the New Yorkbased president of China Beige Book International. “But while they’re sure to make some loud noises about it, at the end of the day, they understand they have no option but to accept the hand they’re given.” In Tokyo, Shinzo Abe faces a similar dilemma. An important pillar of the prime minister’s plan to end deflation and restore healthy growth is a weak yen. The currency’s 17 percent drop since midNovember has helped even down-and-out Sony Corp. eke out some profits. Yet the yen would surge anew on another U.S. downgrade: In 2011, a giant flight-to-quality trade drove huge amounts of capital Japan’s way. The more Asia adds to its holdings of U.S. debt, the harder they become to unload. If traders got even the slightest whiff that China was selling large blocks of its US$1.3 trillion in dollar holdings, markets would quake. The same goes for Japan’s US$1.1 trillion stockpile. So central banks just keep adding to them. Pyramid scheme, anyone?

The more Asia adds to its holdings of U.S. debt, the harder they become to unload

Never before has the world seen a greater misallocation of vast resources. Loading up on dollars helps Asia’s exporters by holding down local currencies, but it causes economic control problems. When central banks buy dollars, they need to sell local currency, increasing its availability and boosting the money supply and inflation. So they sell bonds to mop up excess money. It’s an imprecise science made even more complicated by the U.S. Federal Reserve’s quantitative-easing policies.

Stealth selling At the very least, Asia should stop adding to its dollar holdings and consider ways to bring more of those funds home. They could be used for infrastructure, education, research and development on cleaner energy, or any other vital investments in the future. The question, of course, is how? There is a clear firstmover advantage for smaller economies. South Korea (with US$53 billion in Treasuries), the Philippines (US$40 billion) or Malaysia (US$18 billion)

could try to dump dollars on the sly. Bigger ones couldn’t pull that off in this hyperconnected, 24/7-news-cycle world; news of sizable central-banker sell orders would inspire copycats. Washington can help, and not just by avoiding another suicidal debt-limit fight. The Treasury should engage with its Asian counterparts in a cooperative, transparent brainstorming process to draw down their reserves without devastating markets. It’s in the U.S.’s best interest to keep more of its debt onshore, Japan-style, by attracting greater purchases from cash-rich U.S. companies. That would make the U.S. less vulnerable to capital flights in the future. If ever there were a time for a currency summit, it’s now. Perhaps the International Monetary Fund or the Group of 20 can host the debate. Such high-level discussions would help Asia set goals and consider the mechanics and timing of reclaiming more of its savings. Only then will all those dollars start being the solution to Asia’s challenges, not the problem. Bloomberg View


16

August 6, 2013

Closing BMW to recall vehicles in China

Aviva to sell stake in Indian unit

BMW AG’s China joint venture will recall 143,215 vehicles due to a problem related to their electric power steering system, the country’s quality watchdog said yesterday. BMW Brilliance Automotive Ltd will recall some of its 5-series cars produced between 2009 and 2012, according to the website of China’s General Administration of Quality Supervision, Inspection and Quarantine. The announcement comes a week after the German luxury carmaker failed to win approval from China’s environment ministry for a plan to expand one of its plants in the country.

Aviva Plc is planning to pull out of its Indian insurance joint venture, valued at more than US$500 million, as the British insurer retreats from less-profitable markets where it has struggled to grow its business, sources said. Aviva is in the process of hiring corporate advisors to find buyers for its 26 percent stake in Aviva Life, its venture with Dabur Group, which owns personal care and food products manufacturer Dabur India Ltd. Aviva is considering various options, including the sale of its stake to Dabur Group if it fails to find a foreign insurer to buy it.

Britain leads Cost cuts help boost Europe’s HSBC earnings improving Shares drop as revenue hit by emerging market slowdown economy in July Steve Slater

R

ocketing British business led the way in Europe’s slowly improving economy in July, according to surveys that suggested the euro zone’s lengthy recession may be nearing an end. Yesterday’s purchasing managers’ indexes (PMIs), surveying thousands of companies worldwide, showed the U.K. services sector expanded at its fastest pace in more than six years last month, topping even the most optimistic forecasts. In the euro zone, businesses achieved a first, albeit faint rise in activity for 18 months, inspired by a pick-up in manufacturing. Although it will take another couple of months to work out if the region has really turned the corner, data company Markit Economics, which compiles the PMIs, said there was cause for optimism. In yesterday’s data it was the boom among businesses in the U.K., the world’s seventh biggest economy, that was most eye-catching. “It’s another storming PMI,” said VictoriaClarke,economistatInvestecLtd. The Markit/CIPS services PMI leapt to 60.2 in July from 56.9 in June, its highest level since December 2006 and a bigger gain than forecast by any of the economists polled by Reuters. Readings above 50 denote expansion. “Coupled with the lead that we saw in the construction PMI and the pretty solid manufacturing PMI, all those indicators are suggesting the UK recovery is really gaining pace now,” Ms Clarke said. That can’t yet be said of the euro zone, with some of its largest constituents like Spain and Italy still languishing in recession. But German business activity rebounded in July, while the downturns in the euro zone’s next three biggest economies – France, Italy and Spain – eased. Markit’s composite euro zone PMI broke above the 50 growth threshold for the first time since January 2012, hitting 50.5 in July from 48.7 in June, and revised up a tick from a preliminary reading. Retail sales data for May showed a 0.5 percent fall month-on-month, although that was a little better than expected, while investor sentiment in the bloc brightened in August. “All in all, most figures published recently continue to confirm the expectation of a subdued and fragile recovery in the second half of 2013,” said Peter Vanden Houte, chief euro zone economist at ING Groep NV. Reuters

Profits up despite drop in revenues

H

SBC Holdings Plc, Europe’s biggest bank, posted slower than expected earnings growth and a 12 percent drop in revenue, reflecting a slowdown in growth in emerging markets and sending its shares lower. Profit rose 10 percent in the first half of the year as HSBC’s threeyear cost-cutting plan started to pay off, but this fell short of forecasts after a steeper than expected drop in revenue. “For all the worthy progress in terms of strategic repositioning … weak revenues driven by anaemic loan growth and a declining margin constrain financial progress and returns,” said Ian Gordon, analyst at Investec Ltd. Shares in the bank, Europe’s biggest by stock market value, were down 3.9 percent yesterday afternoon in Europe, making it the weakest stock in the European banking index, having spiked to a more than twomonth high on Friday. Pre-tax profit in the six months through June reached US$14.1 billion, up from US$12.7 billion a year ago and boosted by a sharp

fall in losses from bad debts. But the outcome fell short of the average US$14.6 billion expected by analysts polled by the company. Revenue fell 12 percent to US$34.4 billion, stripping out an accounting gain made on the value of its own debt. “There has been a slowdown in faster-growing markets in recent quarters, even emerging markets go through business cycles,” said chief executive Stuart Gulliver. “But the reality is those markets continue to grow relatively quickly and HSBC remains well positioned across the faster-growing economies.”

Sustainable growth Mr Gulliver said he expected China’s GDP growth to slow to 7.4 percent this year and next as the country shifts away from economic stimulus toward reform measures, but said that slower expansion should provide the basis for more sustainable long-term growth. ProfitsinBrazilandMexicofellsharply as the bank significantly increased its provisions for bad loans there.

HSBC also set aside another US$367 million to compensate customers in Britain who were missold payment protection insurance against loan defaults, taking its provision for that issue – which has affected British banks across the board – to US$2.8 billion. Mr Gulliver is two and a half years into his restructuring plan and has cut more than 46,000 jobs as well as selling or closing 52 businesses. He said most of the big changes have occurred and the pace of deals is likely to slow. “We’ll do more disposals of real estate loans in the second half of this year, there are a couple of transactions we’re working on,” Mr Gulliver told reporters on a conference call. The bank’s number of staff could fall to 240,000 by 2016 from 259,400 at the end of June. HSBC, which said it would pay a second interim dividend of US$0.10 per share, taking the total for the first half to US$0.20, up 11 percent on a year ago, said it was sticking to its plan to pay out between 40 percent and 60 percent of its profits in dividends. Reuters


Macau Business Daily, August 6, 2013