More news bad news in Four Seasons deal Sands China was on the verge of a new deal with the government last month over Four Seasons Macao apartments that could have raised US$1 billion (7.99 billion patacas) in sales. But bad publicity – some linked to former Sands China chief executive Steve Jacobs’ wrongful termination lawsuit – scared off the government for now say sources. Page 2
Banks all-in on property market O
n Monday Fitch Ratings classified the city’s Tai Fung Bank at just squeezing in to investment grade territory. But Fitch warned that its dependence on real estate loans could be costly if the city’s property market were to contract. It’s the second time in less than three months that Fitch has warned about local banks’ excessive dependence on property lending.
According to official data from Macau’s financial regulator, in April 2012 loans involving property accounted for 81.7 percent of all domestic lending. Economists say local banks’ lending patterns reflect Macau’s economic structure, which is too concentrated on gambling and property. With the European sovereign debt making many Western countries’ bonds a no-go zone and low returns from
investment funds, there are few alternatives for banks. But loans to small businesses could be a solution. Macau’s property market is far from collapsing but it is risky to place all eggs in one basket, especially through “aggressive” lending, economists warned. There are no guidelines on how much property lending may be too much but the city’s financial regulator has promised to take supervisory measures if necessary. More on page 3
More money for flagging MICE
HANG SENG INDEX
The government is considering subsidising more meetings, incentives, conferences and exhibitions (MICE) events and to make it easier to organise them, in another effort to boost the industry. But detailed plans, easier visas for mainland Chinese visitors and a MICE website are still to come. Though regional competition is heating up, cooperation with Guangdong province could help.
Economy please, with heritage on the side
After years in the making, the heritage protection bill has finally been presented to the assembly yesterday, though there was no voting. But legislators are more worried about how authorities will find a balance between economic growth and heritage protection. Meanwhile the assembly will work past its traditional summer holiday break to push through eight laws.
HSI - Movers Name
CHINA LIFE INS-H
SINO LAND CO
PING AN INSURA-H
HANG LUNG PROPER
SANDS CHINA LTD
WANT WANT CHINA
CHINA RES ENTERP
Lan Kwai Fong gets new owner
North West hit with rent deadline Page 7
Single-digit growth looming Page 16
Year I - Number 78 Wednesday July 18, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00
business daily July 18, 2012
Sands ‘on verge’ of Four Seasons deal before new leaks: sources
‘US$300 million’ Alves e-mail scuppered cherished apartment sales Associate Editor
ands China was on the verge of a deal with the Macau government allowing it to transfer the Four Seasons Macao to a subsidiary, in which shares allowing use of its apartment hotel could be sold. But that fresh deal was put on hold after new allegations about the apartments saga were published last month – two sources with knowledge of the situation have told Business Daily. The deal could have netted the firm up to US$1 billion (7.99 billion patacas). As we exclusively reported on June 4, the Four Seasons deal was to be in return for Sands discontinuing a lawsuit against the government for the latter’s December 2010 decision to take back Cotai Lots 7 & 8. As part of the same deal, Sands also negotiated an extension
on its completion deadline for Lot 3 – an agreement that was officially confirmed on Monday. But one source told Business Daily: “Once the fresh allegations were published in the Wall Street Journal it became too difficult for the government to let the Four Seasons apartment deal go through.” If the deal had gone through, then Steve Jacobs, a sacked former president and chief executive of Sands China currently in litigation with Las Vegas Sands Corp., would have had much less leverage against LVS in his Nevada lawsuit for ‘wrongful termination’.
‘Smoking gun’ There is no suggestion from Business Daily that Mr Jacobs himself or his lawyers supplied
documents to the WSJ or that the WSJ was aware of the significance of the timing of its story. But an important plank of Mr Jacobs’ case against LVS is that Leonel Alves, an external legal advisor to Sands China, had sent him an e-mail with an offer from a third party that in exchange for US$300 million the person would “handle” the Four Seasons question and a US$375 million lawsuit of Taiwan company Asian American Entertainment Corporation, alleging LVS had reneged on a deal to form a partnership in Macau. The existence of the ‘smoking gun’ e-mail and other supporting e-mails was widely rumoured in Macau. But until the key e-mail was published
in the WSJ it had not been publicly aired and the story had somewhat faded from public consciousness. But in a U.S. presidential election year, there has been much scrutiny of LVS chairman Sheldon Adelson’s Macau business success and his multi-million dollar contributions to Republican candidates Newt Gingrich and now Mitt Romney. No comment was available from LVS on our source’s claims at the time of going to press. But the company has previously stressed that at no time did it solicit, consider paying or actually pay any kind of fee to anyone on the promise of ‘fixing’ the Four Seasons and Asian American Entertainment Corp issues.
Ng Lap Seng – man in the middle
he e-mail from Mr Alves mentions the money “shall be paid to a muttually [sic] accepted escrow agent”. That ‘agent’ was identified this week in an investigative report on the U.S. website ProPublica.org, as Macau businessman Ng Lap Seng. Reporters yesterday at a meeting of the Legislative Assembly asked Mr Alves whether Mr Ng was the ‘agent’. Mr Alves, speaking in Portuguese, replied: “I will neither confirm nor deny it.” Attempts to contact Mr Ng yesterday for comment where unsuccessful. A 1998 U.S. Senate report identified him as a member of the Chinese People’s Political Consultative Conference. In April, CasinoLeaks-Macau.com published a paper trail that showed as of May 2007 Mr Ng held a 12.5 percent interest in Macau-based Tin Fok Holding Company Ltd. Tin Fok, in turn, controlled a 98 percent interest in the Hotel Fortuna, one of Macau’s monopolyera properties on Macau peninsula. There are no documents linking Ng Lap Seng with the casino operation. But there is a paper trail in the U.S.
linking Mr Ng to money laundering and illegal funding of the 1996 re-election campaign of President Bill Clinton. The 1998 U.S. Senate investigation found that over the course of three years from 1994 to 1996, Mr Ng had funnelled US$1 million to Charlie Yah Lin Trie, a not very successful ethnic Chinese businessman from Mr Clinton’s hometown of Little Rock Arkansas. A total of US$220,000 of that was donated to the Democratic National Committee in the lead up to Mr Clinton’s reelection campaign. A person who worked with Mr Ng in Macau and Hong Kong gave Senate investigators an account of Mr Ng’s background: “…Ng was a peasant farmer [in Guangdong] before coming to Macau, but somehow had been selected to act as a front for municipal and provincial authorities in the People’s Republic of China. The witness also informed the Committee that Ng is poorly educated, and still does not understand many aspects of his business, frequently erupting in anger at business meetings.”
Mr Ng has denied links to Chinese triads. But this pattern – of individuals of humble background acting as a ‘front’ for better-educated, betterconnected, more powerful people in politics and business – is a recurring theme in Chinese society. A.E.
Ng Lap Seng, President Clinton and then First Lady Hillary Clinton in 1994
Front man to headman
research paper titled ‘Crime, Business and Politics in Asia’ by Norwegian academic Bertil Lintner of Oslo University in 2002 claimed that in exchange for acting as conduits for money from mainland China into the U.S. – including the U.S. political system, Mr Ng and Chinese businessmen of his ilk are offered favours or protection by the mainland’s People’s Liberation Army. The PLA is widely regarded in China as the iron fist behind the silk glove of Communist Party rule
and a key player in many mainland business deals – and possibly some Macau ones. “Ng may not have had any personal interest in seeing Clinton re-elected, but in exchange for acting as conduits for money from the mainland he would get unofficial protection from the Chinese military for his own shady businesses. But to agree to help infiltrate the White House was pushing it, even for people with high-level PLA contacts,” wrote Mr Lintner. “China is trying to modernise without the
necessary institutions in place — and the outcome is a heavy and potentially very dangerous reliance on its traditional social formations, the secret societies,” he added. “Growing links between Chinese organised crime and the government and its agencies also make it far more dangerous than other criminal gangs in the region, including the [Japanese] yakuza, whose power is no longer what it used to be, and the extremely brutal but loosely organised Russian mafia.” A.E.
July 18, 2012 business daily | 3
MACAU Tai Fung’s core capital is inflated due to property revaluation gains Chikako Horiuchi, bank credit analyst for Fitch Ratings
There are many small business sectors that would require loans. Banks have that liquidity but they prefer to finance big projects
I have heard of some cases in which local commercial banks provide almost 100 percent of their loans to homebuyers Henry Lei Chun Kwok, economist
Photo by Manuel Cardoso
Albano Martins, economist
Banks take on big risks with exposure to property Banks make most of their loans for property, so they could be in trouble if the real estate market contracts Vítor Quintã
n an economy dominated by gambling and real estate, the banks have few options but to lend money for housing and commercial property. But analysts and economists warn that placing all their eggs in one basket is risky. On Monday, Fitch Ratings affirmed its BBB+ rating for Tai Fung Bank Ltd with a stable outlook, just squeezing it into the investmentworthy category – mostly because of “a high propensity of support” from its controlling shareholder, Bank of China Ltd. However, Tai Fung’s viability rating was bbb-, reflecting its small size, the proportion of its lending devoted to property and Macau’s “small, volatile and undiversified economy”. Tai Fung is the city’s thirdlargest bank. Fitch said the bank’s loan book was “strongly biased” towards domestic residential mortgages, which accounted for 30 percent of its lending at the end of last year, and towards real estate in Hong Kong and the mainland, which accounted for 13 percent. With real estate prices booming, Fitch’s estimate of Tai Fung’s core capital ratio rose to 15.4 percent last year from 12.8 percent in 2010. But “Tai Fung’s core capital is inflated due to property revaluation gains”, Chikako Horiuchi, a bank credit analyst for Fitch, told Business Daily. Those gains would shrink or disappear if the property market were to contract. Fitch warned that any greater concentration of lending on property may harm the bank’s ratings. This is the second time in less than three months that Fitch has warned about banks’ excessive
exposure to property. In May, Fitch affirmed its A- rating for Banco Weng Hang SA with a stable outlook but said the bank’s “loan concentration to propertyrelated sectors … acts as a constraint to the bank’s ratings”.
Too concentrated The government says that in April, the banks held 79.23 billion patacas (US$9.9 billion) in outstanding residential mortgage loans and 61.8 billion patacas in commercial real estate loans. Property loans accounted for 81.7 percent of all domestic lending, which reached 172.5 billion patacas. The Monetary Authority of Macau said these loans included those in which mortgages were used as collateral for other purposes, such as “import/export trade financing, business development financing, general facility financing”. Economist Henry Lei Chun Kwok of the University of Macau says the pattern of lending by banks “reflects Macau’s economic structure, too concentrated on gambling and property”. He says the city does not have many other comparably profitable businesses. The banks here typically play minor roles in syndicated loans for the big casino projects and they have to find a use for their remaining deposits, which reached 476.55 billion patacas in May. The euro zone sovereign debt crisis has made it “far more risky for banks to have bonds in their portfolio”, Mr Lei says. “Investment funds in this area are always too conservative and with low return,” he says. Even though gaming and property
both facing uncertainty, banks “don’t have much choice”, he says. Another economist, Albano Martins, disagrees. “There are many small business sectors that would require loans. Banks have that liquidity but they prefer to finance big projects, which provide a better return and are less work,” Mr Martins says. He feels the risk is moderate because the property market is “not at all close to collapsing” but is rather in a state of “relative stagnation”. In the first five months of this year the number of homes sold was 42.6 percent lower than a year before. Mr Martins believes many investors are still waiting for the government to decide what to do with the five new reclamation areas, which could provide p r o p e r t y opportunities.
from the shock of the special stamp duty to curb speculation but prices may ease by about 5 percent in the second half of this year, Mr Lei said. Mr Martins says property may not be a dangerous investment but it was “always very risky to have too much lending concentrated on the same customer or on the same sector”. He says it is important for banks to have a diversified credit portfolio. In the 1990s, banks were awash with property loans and “took a hit” when the mainland acted to pull the plug. “I have heard of some cases in which local commercial banks provide almost 100 percent of their loans to homebuyers because their valuation of property prices is quite high,” he said. “This sort of aggressive decision may bring about far more risk.” He said that overall the risk banks were taking was “still acceptable,” with bad loans making up just 0.09 percent of their combined portfolio in April. The Monetary Authority published guidelines on residential mortgage loans in October 2010, but there are no current guidelines on how much property lending may be too much. The Monetary Authority said it was prepared to “take any immediate supervisory measures”.
Mr Lei says the property market faces uncertainty but restrictions in the mainland may see “hot money move to Macau, supporting the price level”. The mainland’s annual rate of economic growth has slowed to 7.5 percent and further slowing is expected, which could be “a negative signal” and keep mainland investors out of the market, he said. The housing market here has recovered
April’s outstanding residential and commercial loans
business daily July 18, 2012
macau Brought to you by
HOSPITALITY Who stays where Guest numbers in the city’s hotels have risen 12.7 percent in the first five months of the year compared to the same period last year. That represents an increase of almost 420,000 guests. Guests from the mainland rose by almost 309,000 tourists, representing almost three-quarters of the increase. Together with the next three most important source markets – Hong Kong, Macau and Taiwan – they make account for 83 percent of all guests. Jan - May 2012
Serve or conserve? Assembly spars over new heritage bill The Legislative Assembly tackles heritage protection bill but struggles with development and conservation Tony Lai
Mainland visitors make up just less than 55 percent of all hotel guests, making it by far the biggest player. And their importance is increasing, with the number of guests from the mainland rising against the mostly stable guest numbers from Hong Kong and Taiwan. The increase in guests from Macau comes as a surprise. It is the third most popular source of hotel guests and has seen more than 26 percent growth this year over the same time last year. The total number of Macau guests in the first five months of the year, stood at 265,694 – just less than half of the city’s population.
Mainland visitors are the most common guests across all the city’s graded hotels. They contribute 48 percent of guests at fivestar hotels to more than 80 percent in the two-star hotel and guesthouse categories. For visitors from the rest of the world – basically every other nationality outside the top four source markets – and Macau, a fivestar hotel is the accommodation of choice. Guests who call Macau home, represent a small but significant share of five-star hotel stays but their contribution to other classifications of graded hotels is minimal. There is a similar trend among Taiwanese visitors but yet more pronounced. Overall, hotels from three-stars and down accommodate just 6.3 percent of all guests to the city. So, their relevance to citywide trends is almost insignificant. At the opposite end of the spectrum, five- and four-star hotels cater for about 82 percent of all hotel guests in Macau. J.I.D.
egislators tussled with how to balance the city’s development and heritage in yesterday’s Legislative Assembly sitting, clouding the future of a new heritage protection bill before it has reached a first reading. After several years in the making, the bill was presented to the assembly yesterday. Secretary for Social Affairs and Culture Cheong U told the chamber that better protection of the city’s cultural heritage was “an important cornerstone for Macau to become a global tourism centre” and was key to a “strategic transformation of the Macau economy structure”. The bill retains the existing category of “immovable cultural heritage” but includes two new categories for protection – “movable” and “intangible” heritage – but it only regulates the legacies belonging to public bodies for the latter two categories. The bill also proposes the establishment of a committee to evaluate heritage sites and better plan their conservation, including guidelines that would build a heritage list. It also punishes those guilty of demolishing a building listed as part of Macau’s cultural heritage with a fine of up to 15 million patacas (US$1.9 million). Legislator Ho Ion Sang said he was concerned about officials finding the right balance between economic growth and conservation. “If there are conflicts between economic [development] and heritage conservation, will the government consider economy first and sacrifice the city’s heritage sites,” Mr Ho said. He gave the example of Hong Kong’s Queen’s Pier, which was demolished in 2008 to make way for land reclamation from the harbour, amid bitter protests from Hongkongers who wanted to conserve the “outstanding” Grade 1-classified historic building.
Tommy Lau Veng Seng, legislator and developer, said he was also concerned by the law’s intent, saying it was a “sensitive proposal” for the real estate industry. He said some developments might be on hold for years, hampering the city’s progress, because each new project would have to undergo an assessment by the heritage committee. The bill allows the heritage committee to spend no more than a year evaluating any property. It permits the process to be extended for one year, once only.
Urban planning “It’s difficult to say which one we’ll consider first but we will deal with these matters in accordance with laws,” Mr Cheong said. The government would not include private property in the heritage list, he said. Mr Ho and fellow legislator José Chui Sai Peng wanted clarification on the bill’s compatibility with existing urban planning legislation that is making its way to the chamber. Drafting off that bill is taking longer than expected to include the results of a public consultation held between April and June. It is scheduled to reach the chamber in the second half of this year. “The legislation of the heritage conservation law will be a difficult journey without the coordination of the land law and the urban planning law,” said legislative assembly member Chan Wai Chi. Mr Cheong brushed aside fears the bills were in conflict. “The conservation of the city’s characteristics should be one of the main considerations for Macau urban planning,” Mr Cheong said. “The heritage conservation law can be one of the main references for the urban planning law.” Mr Cheong pledged to work closely with Secretary for Transport and
Public Works Lau Si Io. Mr Lau’s department is in charge of the city’s urban planning. Yesterday’s session was a first presentation of the heritage bill to legislators. No date has been set for the bill’s first reading.
Legislators agree to summertime overtime The Legislative Assembly will work past its traditional summer holiday break-up to push through a backlog of bills. A motion to push back the start of the assembly’s recess from August 15 to August 31 was agreed to unanimously by the 23 legislators present at yesterday’s sitting. There are eight items on the chamber’s agenda, including a political reform bill that would change election procedures for the assembly and chief executive, a bill to restrict youths from entering the city’s casinos and legislation to increase contributions to the central provident fund. Bills that will not be passed into law by the end of next month are legislation controlling the sale of unfinished flats, revitalising older neighbourhoods and a food safety bill. The chamber will resume work on these pieces of legislation when the new session begins in the middle of October. The legislators who spoke to the motion in yesterday’s meeting were critical of the government for not submitting bills on time and urged better cooperation between the assembly and government.
July 18, 2012 business daily | 5
Airline monopoly wrecks tourism, says Coutinho Legislator tells assembly that Air Macau’s stranglehold on air routes is hurting tourism and the airport Vítor Quintã
Air Macau’s concession lasts until 2020
egislative Assembly member José Pereira Coutinho has called for Air Macau’s monopoly to be ended, saying it hindered the development of the airport and the diversification of the city’s tourism source markets. Air Macau has a nominal monopoly on commercial flights originating at Macau International Airport. The flag carrier’s concession lasts until 2020. Asked how long Air Macau’s monopoly will last, the Civil Aviation Authority told Business Daily only that “some of the airport services were also granted to their
present operators with exclusive rights for a certain period of time”. Mr Coutinho told the assembly on Monday that the government should “urgently” revise Air Macau’s concession contract or “unilaterally terminate it” because of the carrier’s “non-compliance” with several contractual requirements. He said that on July 7 two Air Macau flights from Taoyuan in Taiwan were delayed first by a technical problem and then by an insufficient reserve of aircrew. He accused the Civil Aviation Authority of being “a long-time
accessory to these abuses”. Mr Coutinho said Air Macau “constantly and blatantly” breached its concession contract and had failed to reach the minimum level of satisfactory service. He said the monopoly was “simply shameful and unacceptable” for a city that aspires to international stature. The monopoly was the main reason that most visitors were still from the mainland. Mr Coutinho said Macau should be open to more airlines “local or foreign” to transform its airport, which was “called international but which, in fact, remains a regional airport”.
Property fund buys back shares
acau Property Opportunities Fund Ltd bought back 2.5 million of its own shares in the second quarter of this year, according to the fund’s latest investment update. The fund’s London-listed shares were trading at 1.05 pounds (13.10 patacas) last night, a discount of more than 40 percent to the adjusted net asset value (NAV) per share of US$2.87 (22.93 patacas). The fund bought back 2 million shares in one day alone last week at an average price of about 1.00 pound each, according to Bloomberg data. That represents 2.4 percent of the fund’s shares. The buyback resulted in an increase of 1.2 percent in the fund’s estimated adjusted NAV per share. The fund said Sniper Investments, which is associated with its manager, Sniper Capital Ltd, had bought 570,000 shares at a weighted average price of 1.06 pounds since April. The fund said that in the second quarter it had secured further credit of US$32 million and completed the acquisition of an upmarket property here for US$12 million. X.C.
business daily July 18, 2012
macau Brought to you by
The government has set aside 80 million patacas to support the MICE industry this year
Forex reserves still rising The Monetary Authority of Macau estimates that the city’s foreign exchange reserves grew by 3.3 billion patacas (US$413.1 million) between May and June, which is in line with the general trend since the beginning of this year. The rate of growth in May was slower than usual but last month’s growth rate seems to have compensated.
Foreign Exchange Reserves, monthly increases
5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Ja n Fe -11 M b-11 ar Ap -11 M r-1 ay 1 Ju -11 n Ju -11 Au l-11 g Se -11 p oc -11 no t-11 De v-11 c Ja -11 n Fe -12 M b-12 ar Ap -12 M r-1 ay 2 Ju -12 n12
Comparisons with last year are limited by a change in February in how the forex reserves are calculated, due to the government’s creation of its reserves for a rainy day. Note the sharp contraction in February, when a large amount of assets were no longer counted as forex reserves. The contraction was 55.27 percent but has been omitted from the graph for clarity. The change in how the forex reserves are calculated means the monthly increases in the forex reserves this year have been well below half what they were last year. However, the percentage increases each month since February are as expected, especially if we take into account the somewhat slower growth at the beginning of the year. We can tentatively conclude from these figures that the main causes of growth in net foreign assets (NFA in the following chart) have not changed significantly.
Foreign Assets 106 mop 300000 250000 200000 150000 100000 50000
Ja n Fe -11 b M -11 ar Ap -11 M r-11 ay Ju -11 nJu 11 Au l-11 g Se -11 p oc -11 no t-11 v De -11 c Ja -11 n Fe -12 b M -12 ar Ap -12 M r-12 ay -1 2
An increase in other foreign assets (OFA) has partly made up for the reduction in the forex reserves (FER). The decrease in the forex reserves is, however, permanent. The Monetary Authority appears no longer to count as net foreign assets some of what it previously counted as forex reserves, as the chart shows clearly. J.I.D.
Govt ponders better promotions for MICE Making MICE work could take some new thinking, including easier access to government handouts Xi Chen
he government may come up with new measures to promote the development of meetings, incentives, conferences and exhibitions or the MICE industry. “We discussed the feasibility of Macau as a MICE centre for Asia as well as the branding of the city. We have accumulated quite a lot of experience so far and we will have more detailed plans in the second half of the year,” Macau Economic Services director Sou Tim Peng told reporters yesterday after a meeting of the MICE development committee. The bureau was considering subsidising more types of events and to make it easier to organise them. Macau Economic Services said one measure would be to make it easier for mainland visitors to get visas. The government also intends to spend more on marketing and promotion, setting up a MICE website and publishing a brochure to give event organisers and the public more information.
Mr Sou said government and industry representatives had just visited Guangzhou for talks on improving cooperation, and had signed four agreements concerning the MICE industry. “Regional cooperation is good for the overall development for both sides,” he said. He also said healthy competition could spur improvements. The government has set aside 80 million patacas (US$10 million) to support the MICE industry this year. It has handed out 49.6 million patacas for 246 MICE events since 2009, when the subsidies were administered by the Macau Government Tourist Office. The government subsidises accommodation for participants, offers food and drink vouchers, and transport allowances. It subsidises expenditure on preparing promotional materials, contracting event consultants, renting venues and holding opening ceremonies.
This year the government began giving out a maximum subsidy of 300 patacas (US$37.55) per visitor taking part in an event if their group had more than 50 people staying for at least two consecutive nights. But even with all this government support, the industry has not performed much better. The city held 271 events in the first quarter, six fewer than a year before, even though seven times more money was spent on them. Only 18 incentive tours came here, three fewer than a year before. The city is struggling to achieve its ambitions in the face of fierce competition. Hong Kong is already one of the top three destinations for MICE in Asia. The other two are the mainland and Japan. The Singapore government is pouring S$900 million (US$713 million) into promoting the island’s tourism industry, with at least onethird of spending in the MICE sector.
Weather Beijing 32/23o C Changchun 29/21o C
Harbin 34/22o C
Xian 31/22o C Shanghai 29/25o C Chengdu 26/21o C Kunming 22/17o C Haikou 35/27o C Sanya 32/24o C
Guangzhou 34/27o C
MACAU (16 July-21 July) Day
Shenzhen 33/26o C
Hong Kong 34/27o C
Macau 32/27o C
July 18, 2012 business daily | 7
China Star new owner of Lan Kwai Fong hotel Hong Kong film production company forks out HK$618 million to gain control of hotel from company director Vítor Quintã
Photo by Manuel Cardoso
ong Kong’s China Star Entertainment Ltd has completed a deal to gain full control of the Lan Kwai Fong hotel, the company has announced. China Star told the Hong Kong stock exchange on Monday that its shareholders had approved unanimously its proposal to buy 49 percent of the Lan Kwai Fong hotel from China Star director, film producer Charles Heung Wah Keung for HK$618 million (US$79.7 million). China Star has bought another 1 percent of the hotel from SJMInvestimentos Ltda, part of the empire built by gaming tycoon Stanley Ho Hung Sun. The licence for the casino in the hotel belongs to Sociedade de Jogos de Macau SA (SJM). China Star mainly makes and distributes films and television drama series but it is also an investor in a VIP gaming room in SJM’s Grand Lisboa casino. China Star also told the stock exchange on Monday that it had yet to settle its dispute with Mr Heung over its proposal to buy back almost half its shares. The board wants to buy back 982.9 million shares for HK$0.35 each – more than yesterday’s closing price of HK$0.345 for China Star stock. If enough shareholders take up the offer China Star could end up paying as much as HK$344 million to cancel 45.55 percent of its stock. The company said it had made the offer last month because “the trading prices of shares are well
China Star to pay HK$618 million to increase stake in the Lan Kwai Fong hotel
below the [net asset value] per share and [it] considers the trading prices of shares do not reflect the profitability of the group”. China Star says its net asset value (NAV) per share reached HK$1 in the past year. China Star said the buyback “will lead to an enhancement of NAV per share and/or earnings per share” and that the terms of the offer were “fair and reasonable and in the interests of the company and the shareholders”. Mr Heung, a big shareholder in China Star, has “irrevocably and
China Taiping’s strong results fly flag for insurance sector T
he general insurance industry keeps sailing through vexing economic conditions with the Macau subsidiary of China Taiping Insurance Holdings Co Ltd having just released last year’s accounts. China Taiping Insurance Group (HK) Co Ltd controls 98 percent of the capital of the Macau company. And the parent company has reason to celebrate. Gross insurance premiums reached 333.7 million patacas (US$41.7 million) an increase of 11.3 percent compared to 2010 – a tad below the overall annual growth in the non-life insurance sector – the company’s data show. The company said premium growth corresponds to a 27.5-percent share of the non-life insurance market here, estimated at about 1.2 billion patacas. Together, work, fire and car insurance coverage provided most premium income – just less than three-quarters. Total equity, including reserves and retained profits, amounted to 171.9 million patacas. The results and advanced dividends, to the tune of 16.5 million patacas, on a net profit of 34.1 million patacas million, would be pleasing to management at headquarters. That translates into a net profit to equity ratio of 19.8 percent. The non-life sector of the insurance industry is a safe bet. J.I.D.
unconditionally” rejected the offer, saying the price is less than the value of the shares. Mr Heung has made his own bid to buy up to 59.79 percent of China
Star, which would increase his stake to 76.5 percent. If his bid succeeds, he could be obliged to make an unconditional mandatory offer for the remaining shares.
business daily July 18, 2012
Greater china FDI drops 6.9 pct in June Foreign direct investment in China dropped 6.9 percent in June from a year earlier as slowing global growth reduced companies’ enthusiasm for expanding in the mainland’s market. Inbound investment declined to US$12 billion, the Ministry of Commerce said yesterday. That’s the largest fall since December and compares with a less than 0.1 percent gain in May following a sixmonth slide. The data indicate Europe’s debt crisis and six quarters of a domestic economic slowdown may be limiting inflows of cash. “Foreign companies and investors will be more encouraged to pick up investments in China when there is greater clarity on the track of the domestic economy,” said Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong. He sees a “modest contraction in foreign investment growth” in the second half. Inbound investment in the first six months declined 3 percent from a year earlier to US$59.1 billion, the ministry said, after a 1.9 percent drop in the first five months. The yuan has fallen about 1.3 percent against the dollar this year through yesterday after a 4.7 percent gain in 2011. China may make it easier for foreign investors to pay a lower withholding tax on dividends they repatriate, according to KPMG LLP.
Beijing plans to boost railway in Full-year railway spending grows to 448.3 billion yuan
hina’s railway infrastructure investment may double in the second half of this year from the first six months, aiding efforts to reverse a slowdown in the world’s second-biggest economy. Full-year spending will be 448.3 billion yuan (US$70.3 billion), according to a statement on the website of the National Development and Reform Commission’s Anhui branch. The document indicates a 9 percent increase from a previous plan of 411.3 billion yuan. Spending was 148.7 billion yuan in
the first half. China’s fixed-asset investment has already started to pick up and a jump in spending on railway construction would echo the expenditure on rail lines and bridges that was part of stimulus during the global financial crisis. A decline in foreign direct investment reported by the government yesterday underscored the toll that Europe’s debt woes and austerity measures are taking on Asia’s largest economy. “China’s stimulus may be stronger than the market has expected,” said
Zhang Zhiwei, a Hong Kong-based economist for Nomura Holdings Inc. who formerly worked for the International Monetary Fund. “There will be more positive signs in the coming months to confirm that China’s pro-growth policies are taking effect.” China Railway Group Ltd and China Railway Construction Corp, the nation’s two biggest listed rail builders, jumped in Hong Kong trading yesterday. The Anhui document cited the railways ministry for the information.
U.S. strikes WTO win against China China discriminates against U.S. credit cards – ruling
eijing said yesterday it had “reservations” over a World Trade Organization ruling largely backing the United States in a dispute over lucrative electronic payments, in which U.S. companies are global leaders but lag in China. More than US$1 trillion in electronic payment services (EPS) transactions, including both debit and credit cards, are processed each year in China, the world’s second largest economy. Washington had gone to the WTO to accuse Beijing of discriminating against U.S. credit card firms. Ministry of Commerce spokesman Shen Danyang said in a statement that while not all aspects of the WTO ruling went against China, the government had some “reservations” and “will seriously review the panel’s report”. The WTO, he said, had found that EPS came under the payment and money transmission services that China “promised to open up at its entry into the WTO”. “China has reservations on this,” he added. Visa Inc., MasterCard Inc. and American Express Co. were among companies to win partial support. WTO judges in Geneva on Monday agreed with the U.S. that China unfairly discriminates against foreign suppliers of electronicpayment services by imposing requirements on them that aren’t applied to domestic companies. They rejected the U.S. argument
that China UnionPay Data Co., the world’s fastest-growing bank-card network, monopolises the handling of domestic-currency paymentcard transactions. “It is definitely a mixed bag for both parties,” Scott Lincicome, an attorney at White & Case LLP, said. Both sides have 60 days to appeal the WTO decision. The Office of the U.S. Trade Representative said it planned to accept the report.
Pave way “We are hopeful that this ruling will pave the way for international payment companies to participate in the domestic payments marketMore than US$1 trillion in electronic payment services transactions are processed each year in China
KEY POINTS Ruling says China discriminates against foreign bank cards Panel says China not following pledges on market access Washington hails victory; Beijing has ‘reservations’ Decision is open to appeal
place in China,” said Will Valentine, a spokesman for San Francisco-based Visa, the world’s biggest bank-card network. “In the meantime, our existing business in China is healthy.” MasterCard, the No. 2 network, forecast in September 2010 that China will overtake the U.S. as the largest market for credit cards by 2020, with about 900 million cards in circulation. Total cards probably will increase 11 percent a year as transaction value climbs
14 percent annually until 2025, the Purchase, New York-based company said at the time. “MasterCard has long been of the view that open payment systems promote growth by reducing the need for cash payments, fostering innovation and reducing system risk,” Jim Issokson, a spokesman for the company, said in an e-mailed statement. Tim Reif, general counsel at the U.S. Trade Representative’s office, called Monday’s ruling a “decisive victory” that may
July 18, 2012 business daily | 9
China’s two biggest listed rail builders jumped in Hong Kong trading yesterday
nvestment Yao Wei, a Hong Kong-based economist for Societe Generale SA, said that railway spending was typically larger in the second half of the year than the first and the significance of the reported increase shouldn’t be overstated, with the total to remain below the level in 2011.
Spending comparisons In 2009, spending of 600.6 billion yuan on railway infrastructure was part of stimulus that spanned low-
produce 6,000 new jobs. “We have achieved a landmark finding by the WTO against every aspect of China’s regulatory regime,” Mr Reif said in Washington.
China’s promise While the WTO judges found that China imposes four different requirements that violate the organisation’s rules, the U.S. failed to establish that China UnionPay is the sole supplier of electronic-payments services, Mr Lincicome said. “The extent to which American service providers see this CUP issue as a very big deal, they will stand to be disappointed,” he said. Foreign banks must “co-brand” with Chinese operators to execute payments through UnionPay. The U.S. says the rules clash with the promise China made when it joined the WTO to open up its credit- and debit-card markets to foreign processing companies by the end of 2006. WTO judges agreed with the U.S. that China had made pledges on market access when it became a member of the trade arbiter in 2001. UnionPay, which supplanted American Express as the world’s third-biggest payments network in 2010, processed US$2.36 trillion in credit- and debit-card purchases last year, a 46 percent increase from 2011, according to the Nilson Report, an industry newsletter based in Carpinteria, California. Visa handled purchases totalling US$5.38 trillion, a 12 percent gain, while MasterCard spending climbed about 15 percent to US$2.43 trillion. Bloomberg/AFP
cost housing, roads and earthquake reconstruction work. In 2010, rail spending exceeded 700 billion yuan. Last year, the total was 461 billion yuan. The nation is still digesting the consequences of the overall investment boom, including the risks to banks from loans to localgovernment investment vehicles. The ousting of Railway Minister Liu Zhijun in a corruption probe in February 2011 and a high-speed crash that killed 40 people near the eastern city of Wenzhou five months later may have slowed investment as officials strengthened scrutiny of projects. In April this year, JPMorgan Chase & Co. analysts Karen Li and Chapman Deng said the flow of railway orders should quicken from mid-year.
Wen gets bond backing 3.45
Shares jump 3.40
China Railway Group jumped 5.9 percent in Hong Kong trading to HK$3.4. China Railway Construction climbed 4 percent to end at HK$6.7. China Daily yesterday cited Zheng Xinli, an economist for a government-backed think tank, as saying that the nation’s growth rate may continue to decline this quarter and increased investment is crucial to driving a rebound. Mr Zheng, vice president of the state-backed China Centre for International Economic Exchanges, said spending on high-speed rail should play a role, the governmentbacked newspaper reported. While the government will accelerate projects, stimulus will not be on the scale unleashed from late 2008, said Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong.
In May, the official Xinhua News Agency said that there wouldn’t be any “massive stimulus plan to seek high economic growth”. The China Securities Journal reported that the State Council may hold a meeting as early as today to set the tone for monetary and fiscal policies after the economy grew 7.6 percent in the second quarter, the least in three years. Bloomberg
Ministry calls for ZTE to be treated fairly
While Chinese Premier Wen Jiabao warned that the nation’s recovery hasn’t taken hold, the country’s lenders to roads, dams and power plants are paying the lowest financing costs to sell debt in at least six months. Average yields on the 10-year bonds of socalled policy banks – China Development Bank Corp., Export-Import Bank of China, and Agricultural Development Bank of China – fell to 3.9 percent last week, according to Chinabond. The notes’ premium over government bonds slid to a three-month low at 62.6 basis points in June. Globally, financial companies pay an average 3.4 percent for debt, according to Bank of America Merrill Lynch indexes. “The lower borrowing costs for the policy banks give them more incentive to boost loans,” said Rainy Yuan, a Shanghaibased analyst at Masterlink Securities Corp., a Taipei-based brokerage. “The government really needs this support from policy banks to finance its stimulus and kick-start the economy.” The policy lenders, established in 1994 with mandates to help fund infrastructure, agriculture and trade, sold 657 billion yuan (US$103 billion) of debt since April 1, up 12 percent from 589 billion yuan in the same period last year, according to data compiled by Bloomberg. Meanwhile, China’s finance ministry will auction a total of 23.1 billion yuan (US$3.6 billion) of three-year bonds on behalf of five local governments on July 23. It will be the third time this year the finance ministry has issued bonds on behalf of local governments. It said in March that it would raise the quota for issuance of local government debt this year to 250 billion yuan, up from 200 billion yuan in previous years.
Amid FBI probe into sales to Iran
hina’s Ministry of Commerce said yesterday it hoped telecom equipment maker ZTE Corp, subject of an FBI probe into the sale of banned U.S. computer equipment to Iran, would receive fair and proper treatment from the United States. The U.S. investigation stems from reports in March that Shenzhen-based ZTE sold Iran’s largest telecoms firm a powerful surveillance system capable of monitoring landline, mobile and Internet communications, the Smoking Gun website reported. “We hope it [ZTE] will receive objective, fair and proper treatment from the U.S.,” Commerce Ministry spokesman Shen Danyang said. The FBI probe presents new troubles for ZTE – the world’s fifth-largest telecoms equipment maker – in the
United States, where it has been trying to expand its operations. The firm is also under investigation by the U.S. House of Representatives’ Intelligence Committee over whether its equipment represents a threat to national security. ZTE is China’s second-largest telecoms equipment maker and also the world’s fourth-largest mobile device maker with 4.2 percent global market share in the first quarter, according to technology research firm Gartner. ZTE is publicly traded and its largest shareholder is a Chinese state-owned enterprise. ZTE’s Hong Kong-listed shares fell for a second day. Stocks dropped 1.5 percent to end at HK$10.3 yesterday, a day after they took a heavy tumble on a profit warning and news of the FBI probe. Commerce Ministry spokesman Mr Shen added that groundless criticism of China’s relations with Iran was unfair. “China, like many other countries in the world, has kept normal, open and transparent relations with Iran and we think these relations do not go against the rules of the United Nations and should not receive groundless criticism from other countries,” Mr Shen said. Reuters
Liangtse said to mull German IPO China Liangtse Wellness, a massage chain with more than 300 branches in China and Europe, is planning an initial public offering in Frankfurt, according to a person with knowledge of the process. Liangtse, founded in Shandong, China, in 1997, plans to expand its business in Europe and seek a German listing as a part of that strategy, said the person, who asked not to be identified as the plans are private. Liangtse has branches in Germany, the U.K. and Finland, according to its website. While no final decision has been made on timing, size and valuation, the IPO may happen as early as this year, the person said. Chinese companies are forging ahead with small new share sales in Germany even as Europe’s debt crisis has roiled IPO markets in the region. Among the six newly listed companies in Germany this year, five have ties to China. Haikui Seafood AG and Goldrooster AG raised a combined 18.8 million euros (US$23 million) in May, while Vange Software, a Chinese information technology service provider, fetched 26 million euros in June. Fast Casualwear AG and Ming Le Sports AG, two clothing manufacturers, raised 21 million euros in their IPOs this month.
business daily July 18, 2012
asia Yen gains ‘speculative’: Azumi
apanese Finance Minister Jun Azumi said gains in the yen were “speculative” as the currency climbed to a one-month high against the dollar. “The yen has been strengthening in part because of speculative movements,” Mr Azumi said at a press conference yesterday. “We will continue to carefully watch movements in the currency market and take decisive action if needed.” The yen weakened on Mr Azumi’s
remarks, which echoed comments he has made before to signal that authorities may intervene in the foreign-exchange market to stem the currency’s gains. Investor concern about the outlook for the U.S. economy has been fuelling the yen’s strength, Mr Azumi said, noting that movements weren’t reflecting the state of Japan’s economy. Japan’s currency traded at 78.90 against the dollar in Tokyo.
Philippine firm in US$1b JV with Okada Philippine authorities trying to turn Manila into a gaming destination
hilippine property firm Empire East yesterday confirmed it would invest more than US$1 billion in a joint venture with Japanese gambling tycoon Kazuo Okada. Empire East said in a disclosure to the stock exchange that it would develop “at least 25 upscale residential towers” in Entertainment City, a gambling and resort complex on Manila Bay. The firm, owned by Filipino real estate tycoon Andrew Tan, would invest 45 billion pesos (US$1.07 billion) and have a majority stake in the project, it said. Its partners in the joint venture are the Okada Group, Tiger Resort Leisure and Entertainment, and Eagle 1 Landholdings. Philippine authorities are looking to turn Manila into the world’s number-two gaming destination ahead of Singapore and Las Vegas, and behind only Macau. Empire East, primarily known for middle-income housing, did not say how much Mr Okada’s group would be investing in the project, and Empire East spokesmen could not be contacted for comment. Gaming regulator Philippine Amusement and Gaming Corp. has previously granted an Okadabacked group a licence to build a casino at Entertainment City. Mr Okada is a former business partner of Steve Wynn. In February Wynn Resorts cancelled a 19.5
Kazuo Okada had previously been granted a licence to build a casino at Entertainment City
percent shareholding previously held by the Japanese slot machine entrepreneur. Wynn also threw Mr Okada off the board after alleging ‘misbehaviour’ amounting to breaches of the U.S. Foreign Corrupt Practices Act. It stemmed from Mr Okada’s investment in the Philippines casino project. The Philippines’ gaming regulator granted similar licences to Malaysia’s Genting Group, Bloomberry Resorts Corp. and Belle Corp that has teamed up with Macau casino operator Melco Crown Entertainment. MPEL, co-chaired by Lawrence Ho Yau Lung and Australian billionaire James Packer, has signed a memorandum of agreement with the Philippine property and leisure firm to develop a US$1 billion (8 billion patacas) casino-hotel in Manila. Belle, partly owned by the Philippines’ wealthiest man Henry Sy, and MPEL plan to develop and operate Belle’s integrated resort complex at Aseana Boulevard, Parañaque, Belle owner SM Investments said. MPEL, which developed and runs City of Dreams on Cotai and Altira in Macau will invest up to US$580 million via a company called MPEL Projects Ltd; including about US$320 million from a loan facility, MPEL said in a filing to the Hong Kong stock exchange earlier this month. AFP
S.Korea opens probe over rate fixing Anti-trust agency investigating at least six local brokerages Lim Seung-gyu and Se Young Lee
outh Korea’s anti-trust agency is investigating at least six local brokerages on suspicion of collusion in setting three-month certificate of deposit (CD) rates, which are used for a wide range of financial transactions, company officials and sources said yesterday. “At some securities firms, Fair Trade Commission officials visited in the morning then left. At others, officials appear to be still investigating,” a spokesman at one brokerage said, while asking not to be identified. KB Investment & Securities Co, KTB Investment & Securities Co, LIG Investment & Securities Co,
Hanwha Securities Co and Eugene Investment & Securities confirmed they were under investigation by the Fair Trade Commission, while a source with direct knowledge of the matter said Leading Investment & Securities was also under investigation. Officials at the anti-trust agency would not confirm the probe, which comes as the global financial industry has been rattled by the suspected manipulation by global banks of Libor benchmark international lending rates. No foreign firms were believed to be under investigation. A spokeswoman at the country’s financial markets regulator, Financial Supervisory Service (FSS), said it was aware of the investigation and watching the situation, but added it has not decided whether to join the probe. Commercial banks issue CDs to secure funds for lending and use the CD rates as a benchmark for setting their lending rates. Therefore, they
KEY POINTS Three-month CD rates stayed high despite falling interest rates No foreign company involved in setting CD rates Probe comes as Libor scandal hits global financial sector
could benefit when the rates are quoted at unusually high levels.
Benchmark rate The CD rates, which apply to a wide range of financial transactions in Asia’s fourth-largest economy from lending rates at banks to some derivatives products, had stayed at relatively high levels despite falling interest rates. Bank loans amounting to some 370 trillion won (US$322.59 billion), or just more than one-third of the country’s outstanding bank loans, were using the CD rate as a benchmark rate as of end-September last year, data from the FSS showed. The CD rate was quoted at 3.25 percent at the end of the morning session yesterday, compared with treasury bonds maturing in three months yielding 2.96 percent. The CD rate was around 25 basis points higher for most of June. The Korea Financial Investment Association publishes official CD
July 18, 2012 business daily | 11
InBrief Bahk rules out more Korea fiscal stimulus
Singapore exports beat forecasts But outlook still murky as global demand remains weak Kevin Lim
ingapore reported betterthan-expected export data for June yesterday, providing a glimmer of hope that a prolonged slide in Asia’s key electronics sector has bottomed, but economists cautioned that global demand still appeared weak. The Southeast Asian city-state, whose open economy is seen as a barometer for the region’s prospects, said non-oil domestic exports (NODX) rose 6.8 percent in June from a year earlier, beating the forecasts of all 14 economists polled by Reuters. Singapore’s domestic exports of electronics edged 1.6 percent higher in June from a year ago, while nonoil retained imports of intermediate goods, a leading indicator of manufacturing activity, rose for a second month after seasonal adjustment. On a seasonally adjusted month-on-month basis, NODX grew 6.7 percent after contracting 2.0 percent in May. “The story we like is that at least electronics NODX looks like it’s stabilised – it’s not on a declining path anymore,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp, Singapore’s second largest lender. “But if you look at the IMF downgrade of 2013 growth, it seems like we don’t expect a very strong pick-up in external demand in the near term, especially on the euro zone front,” she added. The International Monetary Fund
on Monday cut its forecast for global economic growth and warned that the outlook could dim further if policymakers in the euro zone do not act with enough force and speed to quell their region’s debt crisis.
Highly volatility Barclays’ economist Leong Wai Ho said the Singapore data suggested the global economy was not as weak as some commentators have suggested. “We see reasons to be optimistic about a resumption of a gradual recovery in electronics in the second half, driven by a slew of product launches,” he said. Mr Leong said the June export numbers also raises the chances of a small upward revision to Singapore’s second quarter gross domestic product, which shrank 1.1 percent on an annualised and seasonally adjusted basis, according to advance estimates. The weak GDP data, which was released last week, had prompted some economists to cut their growth forecasts for Singapore. But other economists warned against reading too much into the numbers, noting the rise in June domestic exports, which totalled S$15.7 billion
(US$12.4 billion), was due primarily to highly volatile pharmaceutical shipments, which jumped 24 percent from a year earlier. “The weak global economic conditions were still evident in June’s numbers if you look beyond the jump in pharmaceuticals, which was not driven by a cyclical upswing but rather the usual volatility associated with changes to the product mix,” said HSBC’s chief economist for India and Southeast Asia Leif Eskesen. “Electronics is a better bell-weather of global economic conditions and [Singapore’s] shipments were relatively weak across products and markets, although Hong Kong, Taiwan, and Japan cranked up imports,” he added. Non-oil exports to the European Union rose 17 percent on-year compared with a rise of 1.5 percent in May and a contraction of 12.2 percent in April. Shipments to the United States fell 2.0 percent last month after shrinking 11.4 percent in May, while those to China worsened, contracting 3.2 percent compared with a dip of 0.8 percent in May.
RBA: Rates ‘below average’ appropriate Australia’s central bank saw “no need” to cut interest rates at its July meeting. “Members continued to view it as appropriate for interest rates to be a little below average given evidence of slower global growth and the low rate of inflation in Australia,” according to minutes of the Reserve Bank of Australia’s (RBA) July 3 meeting, released yesterday. “With a material easing in monetary policy having occurred over the preceding six months or so, and with recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment.”
Key Figures (y/y pct change) June
- to U.S.
- to EU
- to China
rates twice a day based on quotations submitted by 10 brokerage houses, including five of the six now confirmed to be under investigation. Hana Daetoo Securities Co, Dongbu Securities Co, Woori Investment & Securities Co and Mirae Asset Securities Co said they were not under investigation, while officials at Meritz Securities Co could not confirm. Woori, Hana and KB are either affiliates of or belong to the same parent groups of three banks: Woori Finance Holdings Co, Hana Financial Group Inc. and KB Financial Group Inc., respectively. Eugene Investment was not on the latest list of contributing brokerages but had submitted quotations in the past. The list of contributors is changed periodically. Share prices of securities companies fell slightly after the report, with the sub-index for the sector finishing down 0.4 percent, compared with gains of 0.2 percent for the broader South Korean market. Reuters
South Korean Finance Minister Bahk Jae Wan ruled out additional fiscal stimulus for now, saying it could do more harm than good because the global economy is too weak to make it meaningful. “You don’t plant a tree in winter,” Mr Bahk said in an interview with Bloomberg News. While Asia’s fourth-largest economy retains room to boost growth both through monetary and fiscal measures, 3 percent growth “is not bad, given the global economy,” he said. Gross domestic product rose 2.8 percent in the first quarter from a year before. Policy makers in Seoul “still have ammunition” and would favour joining other nations in a coordinated approach, he said.
Hyundai Heavy cuts stake in H.Motor South Korea’s Hyundai Heavy Industries raised US$614 million by selling a 1.5 percent stake in Hyundai Motor yesterday, a source said, in the country’s biggest stock sale this year. Korea’s largest shipbuilder had been looking to garner funds to improve its financial position, especially after one of its units delayed plans for an initial public offering. Hyundai Heavy sold 3.2 million shares of the country’s biggest automaker at 220,000 won each in a block sale, the source, who had direct knowledge of the deal, said. The price represented a 3.7 percent discount to Hyundai Motor’s closing stock price on Monday.
N.Zealand inflation slowest in 13 years
South Korea is checking for possible collusion in setting certificate of deposit rates
New Zealand’s consumer price index rose 1.0 percent for the April-June period from a year earlier, the lowest yearon-year pace since the December 1999 quarter, data showed yesterday. Annual inflation is holding at the lower end of the Reserve Bank of New Zealand’s annual target band of 1 to 3 percent, increasing the chances that the bank will keep its official cash rate at a record low 2.5 percent into the middle of next year. Economists expect inflation will begin ticking up modestly later this year and next year, however, as reconstruction efforts pick up steam in earthquake-ravaged Christchurch.
business daily July 18, 2012
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52W (H) 12651.92 (L) 8058.58
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NINGBO PORT CO-A
PANGANG GROUP -A
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PING AN INSURA-A
POLY REAL ESTA-A
CSR CORP LTD -A
52W (H) 3137.922 (L) 2254.567
FTSE TAIWAN 50 INDEX NAME ACER INC ADVANCED SEMICON
PRICE DAY %
PRICE DAY %
PRICE DAY %
TAIWAN MOBILE CO
TPK HOLDING CO L
ASIA CEMENT CORP
HON HAI PRECISIO
HOTAI MOTOR CO
HUA NAN FINANCIA
CHANG HWA BANK
YULON MOTOR CO
CHENG SHIN RUBBE
CHIMEI INNOLUX C
MEGA FINANCIAL H
CHINA STEEL CORP
NAN YA PLASTICS
CHUNGHWA TELECOM COMPAL ELECTRON DELTA ELECT INC FAR EASTERN NEW FAR EASTONE TELE FIRST FINANCIAL
ASUSTEK COMPUTER AU OPTRONICS COR
SYNNEX TECH INTL
FORMOSA CHEM & F
TAIWAN GLASS IND
INDEX 4870.55 HIGH
52W (H) 5960.61 (L) 4643.05
July 18, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GALAXy ENtErtAINMENt
MELco croWN ENtErtAINMENt
MGM cHINA HoLDINGS 29.0
SANDS cHINA LtD
14.50 Max 14.7
BRENT CRUDE FUTR Sep12
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GAS OIL FUT (ICE) Sep12 NATURAL GAS FUTR Aug12
Gold Spot $/Oz
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Silver Spot $/Oz
Platinum Spot $/Oz
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COFFEE 'C' FUTURE Sep12
SUGAR #11 (WORLD) Oct12
AMAX HOLDINGS LT
COTTON NO.2 FUTR Dec12
BOC HONG KONG HO CENTURY LEGEND
CHEUK NANG HLDGS
World Stock MarketS - Indices COUNTRY
DOW JONES INDUS. AVG
NASDAQ COMPOSITE INDEX
FTSE 100 INDEX
HANG SENG INDEX
CSI 300 INDEX
TAIWAN TAIEX INDEX
S&P/ASX 200 INDEX
1.0286 1.5642 0.9765 1.2298 79.03 7.9889 7.7562 6.3731 55.0713 31.57 1.2621 29.968 41.7 9456 81.291 1.201 0.78623 7.8361 9.8253 97.2 1.03
0.7444 0.7147 0.9319 0.9191 -0.038 0.0038 0.0077 0.0894 0.463 0.1584 0.3407 0.0968 0.3597 0.349 -0.7775 0.0017 -0.2086 -0.4926 -0.9089 -0.9671 0
0.7542 0.6369 -3.9324 -5.1153 -2.6825 0.1339 0.1444 -1.2255 -3.6431 -0.0634 2.7335 1.0378 5.1319 -4.0926 -3.517 1.3147 5.9982 3.8042 5.3607 2.5309 0.0097
1.1081 1.6618 0.9873 1.4549 84.18 8.0449 7.8113 6.4694 57.3275 31.96 1.3199 30.716 44.35 9662 88.637 1.24736 0.88861 9.3616 11.6793 114.18 1.0311
0.9388 1.5235 0.7071 1.2163 75.35 7.9823 7.7526 6.2769 43.855 29.63 1.1992 28.764 41.575 8458 72.057 1.00749 0.78319 7.7719 9.7216 95.6 1.0288
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Russia’s Chinese wall to block the Internet Leonid Bershidsky
Bloomberg View correspondent
n July 10, the Russianlanguage Wikipedia greeted its millions of users with a largely blank page and a message asking them to “imagine a world without free knowledge.” The impetus for the web site’s one-day protest: Russia’s leaders are moving toward the creation of a “great firewall,” along Chinese lines, to limit what the country’s Internet users can see and read. The next day, the lower house of Russia’s parliament passed a bill that, while ostensibly aimed at protecting children from information that could be “harmful to their health and development,” allows broad censorship of the Internet. It sets up an official roster of websites containing forbidden information, including child pornography, “propaganda of drug use,” information that “may cause children to undertake actions threatening their life or health” or “any other information banned by court decisions.” The government is supposed to contract a Russian organisation, to be named later, to compile the roster of banned websites. The only way to appeal inclusion in the roster will be to go to the courts, which are notoriously loyal to the Kremlin. “Unfortunately, the practice of Russian law enforcement suggests a high probability of the worstcase scenario,” protested the blog service LiveJournal, which provides a platform for a host of opposition activists. President Vladimir Putin’s own increasingly liberal Council for the Development of Civil Society and Human Rights denounced the bill: “Many Internet resources with legal content may suffer from mass blockage since the system introduces tough restrictions on the basis of subjective criteria and judgments.”
Vague standards Protecting human rights and the free flow of information wasn’t high on the agenda of the bill’s authors, most of whom are from the Kremlinloyal United Russia party. They got into parliament as a result of last December’s blatantly rigged elections. The Internet, especially blog services and social networks, has provided a highly visible venue for protests against those elections and Putin’s authoritarian rule in general. The primitive system proposed by the Russian bill is not exactly comparable to what happens in China. The Golden Shield, as China’s system of Internet censorship is officially known, works through a system of filters placed on servers between foreign networks and strictly licensed Chinese providers. Unlike Russia, China has tens of thousands of Internet police, and the list of “offenses” that leads to
a site being blocked is much broader. pirated intellectual property. The site It includes transgressions such as immediately migrated to the .org “making falsehoods or distorting the domain, and, according to Kolesnikov, truth” and “injuring the reputation of the added news exposure boosted its traffic by 10 percent to 20 percent. state organisations.” Russian anti-government activists, “I will take the liberty of suggesting though, see the new bill as only a that a black list of resources will give first step. “The Kremlin crooks have ‘bad’ resources extra popularity,” realised that paid commentators Kolesnikov wrote, adding that even or robot networks will not help the effectiveness of Chinese filters them in their ideological war on was overrated. the Internet,” wrote anti-corruption blogger Alexei Navalny. “Now it’s Wikipedia down? going to be simple: They will leave a comment on any site, blog or forum Migration to other domain zones or dealing with how to make LSD from addresses is a better solution for real child pornogracereal, and send phy purveyors the site owner than for legitirunning around mate sites that the courts for may displease months trying It is possible that the government. to prove he did Wikipedia’s nothing wrong.” restrictive measures problem is that Internet experts it contains pages argue that there is will prove more that could fall no effective way under the proto block content damaging for Russia’s posed restricon the Web. tions, such as Writing on the current leadership than articles on suiopinion website cide or narcotic Chaskor, Andrei for Internet users substances. As a Kolesnikov, result, the entire who heads the ru.wikipedia.org .ru domain’s domain could coordination committee, cited the example be taken down. That’s why Russia’s of a popular site called torrents. lively Wikipedia community, which ru that was banned for spreading counts more than 800,000 members,
12,000 of whom have made changes to Wiki articles within the last 30 days, voted for the one-day strike. “Russian Wikipedia’s strike is a correct, timely and adequate reaction to this shameful circus,” one of the pioneers of Russian Internet, Anton Nosik, wrote in his blog. “For the past 12 years I have been happily confident that the Russian government will have the intelligence not to introduce censorship on the Internet... But the situation is changing.” One of the bill’s drafters, Yaroslav Nilov of the ultra-nationalist LDPR faction, claimed that Wikipedia’s “leadership” had not actually read the bill, even though one of the few Russian-language Wikis that remained active during the strike provided analysis of its text. “Let’s see what happens a year after the bill is passed,” Nilov said. “We’ll take a look at national suicide statistics before and after. Then we’ll have a full picture.” On the other hand, it is possible that restrictive measures will prove more damaging for Russia’s current leadership than for Internet users. As Kolesnikov of .ru pointed out, the Chinese firewall “can exist only within the framework of China’s cultural environment and customs. Here, it would be totally unique and damaging to the nation’s reputation.” Bloomberg View
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July 18, 2012 business daily | 15
The bell tolls wires for India’s congress party Business Leading reports from Asia’s best business newspapers
Business Standard India missed oil and natural gas production targets by a wide margin, according to Planning Commission. “Against crude oil production target of 206.73 million tonnes in 11th (Five Year) Plan period (2007-12), the anticipated achievement is 177 million tonnes, i.e. 14 percent below the target,” the Plan Panel’s draft note on Energy for the current 12th Five Year Plan period (2012-17) said. Similarly, natural gas production at 216.65 billion cubic metres was 16 percent short of 255.76 bcm target. Plan Panel projected oil consumption to rise by a compounded annual growth rate of 4.7 percent.
Japan Today Nissan Motor, in cooperation with FedEx Express, will carry out real-world driving tests of the 100 percent electric commercial vehicle, e-NV200, in the Yokohama area beginning this week. The e-NV200 test vehicle is based on Nissan’s multi-purpose compact van NV200. Nissan will provide FedEx Express with a test model e-NV200 to use as a delivery vehicle for approximately one month. Nissan will then evaluate the vehicle’s potential for the delivery of international air cargo. This will be the second test conducted with FedEx, following a similar trial in Europe during last winter.
Manila Times Personal remittances from overseas Filipino workers (OFWs) reached US$9.3 billion in the first five months of the year, showing an increase of 5.5 percent from the same period in 2012, according to the Bangko Sentral ng Pilipinas (BSP). The continued stream of remittances emanated from the strong global demand for professional and skilled Filipino workers. The bulk of processed job orders were intended for the manpower requirements in Saudi Arabia, United Arab Emirates, Qatar, Kuwait and Taiwan.
Bangkok Post Bangkok is increasingly becoming a port of call for low cost carriers (LCC). On July 5 Scoot, part of Singapore Airlines, began daily flights from Bangkok-Singapore. THAI Smile inaugurated its operation on July 7 with the launch of twice daily flights between Bangkok and Macau. Spring Airlines, China’s first and only LCC, is scheduled to open a direct link between Bangkok and Shanghai in August. IndiGo, India’s largest LCC, will also launch a second daily flight from Bangkok to New Delhi, catering to growing demand on this city pair.
Senior Fellow at the Council on Foreign Relations and Professor of Economics and Law at Columbia University
Professor of Economics and of Indian Political Economy at Columbia University
olitics in Asia’s two giants, India and China, has suddenly turned very uncertain. China remains in authoritarian mode, of course. But egregious human-rights violations and suppression of dissent are raising the spectre of growing internal disruptions, particularly in the wake of purges within the top leadership. By contrast, India, with its firmly rooted liberal democracy, smells to some like roses. But many believe that India, too, faces uncertain political prospects. In particular, there is widespread belief in India today that one of the country’s two main political parties, the Indian National Congress, essentially run by Sonia Gandhi and her son, Rahul Gandhi, has now run its course and will sink into oblivion. According to The Economist: “The Congress Party…is in a funk” and “in danger of…long-term decline.” But the Congress has been written off before: the article from The Economist was published in January 2003. Indeed, the uniform prediction prior to the 2004 election was that, after having lost three elections in a row, the Congress was heading for its fourth defeat and eventual dissolution. Yet it won that election, and then won a second parliamentary election in 2009. Politics is, of course, full of reversals of fortune. But, unlike in 2004, it is unlikely, for several reasons, that the Congress can survive the dire predicament that it now faces today.
New context For starters, in 2004, the Congress was challenging an incumbent government that had served for six years. This time, the Congress has formed the incumbent government for two consecutive terms, and its tenure has recently been marked by scandals that have made it look ineffectual, rudderless, and corrupt. To make matters worse, India is experiencing a sharp economic slowdown, further undermining the Congress’s prospects in elections that must be held no later than June 2014. Second, and more important, voter attitudes have shifted significantly during the past decade. Average annual economic growth of 8.5 percent over the eight-year period from 2003 to 2011 has led to a revolution of perceived possibilities. As the economists Poonam Gupta and Arvind Panagariya have demonstrated, voters in most Indian states now support leaders and parties that deliver good economic outcomes,
and turn out those who do not. This marks a major shift from the fatalistic attitudes of the past, which generally helped incumbents, who benefited from voters’ belief that there was no real alternative to existing arrangements. This voting behaviour has been reinforced by recent examples of political failure and success. Brazenly corrupt leaders such as Kumari Mayawati of Uttar Pradesh and Digambar Kamat of Goa were each bundled out after one term. Meanwhile, positive role models like Nitish Kumar of Bihar, Narendra Modi of Gujarat, and Navin Patnaik of Orissa have all been returned to power as Chief Ministers at least once; all have delivered remarkable results while maintaining an unblemished record of personal integrity. The Congress will inevitably be under acute pressure to perform, as the electorate now knows that better performance is not beyond its grasp.
Dim prospects Prime Minister Rajiv Gandhi’s assassination over two decades ago created a wave of sympathy for his widow, Sonia, on whose sari-tails the Congress won in 2004. Today, no such tragedy is likely to help the Congress. Sonia Gandhi is rumoured to have cancer, but, rather than capitalising on it, she has kept the details within the walls of the Gandhi family compound in New Delhi. But the real problem is that brand-name politics is increasingly at a discount in India, much as it is in the United States. Like the Kennedy and Bush brands, the Nehru-Gandhi label has lost its lustre in India.
That is partly a function of rapidly changing demographics. Individuals born after 1975 now account for a very large proportion of the electorate. For these voters, Jawaharlal Nehru and Indira Gandhi are merely historical figures, and are a distant memory even for many
The Congress will inevitably be under acute pressure to perform, as the electorate now knows that better performance is not beyond its grasp
voters born before 1975. It is not surprising that Rahul Gandhi proved unable to bring the Congress a victory in a recent election in a constituency that historically had been a bastion of support for his family. Indeed, the Nehru-Gandhi condominium that has dominated Indian politics has itself undermined the party’s survival prospects by making it immensely difficult for it to recruit and develop new leaders. It is common knowledge that, for the last eight years, Sonia Gandhi has exercised virtually total control within the party. As a result, no rival to Rahul Gandhi has emerged. With Sonia Gandhi in ill health, Rahul unable to connect to the electorate even in his historically “safe” constituency, and the Nehru-Gandhi brand name having lost its appeal, the prospects for the Congress in 2014 look bleak. Only the outcome will tell whether it can survive. © Project Syndicate
business daily July 18, 2012
CLOSING Yahoo turns to Mayer for revival
China’s Premier Wen Jiabao warned yesterday the country was facing a more “severe” employment situation as the world’s second-largest economy slows. Mr Wen said China had created 98 million new jobs between 2003 to 2011 but would now have to work harder to find jobs for its growing workforce, particularly its 250 million migrant workers and 40 million college graduates. “From now on, the country’s employment situation will become more complicated and severe. Achieving full employment is a very difficult process, but we must work harder,” he said in a statement posted on the government website.
Yahoo Inc picked Google Inc’s Marissa Mayer to become its new chief executive, turning to an engineer with established Silicon Valley credentials to turn around the struggling former Internet powerhouse. She hopes to stem losses to Google and Facebook Inc. Her hiring signalled the Internet company is likely to renew its focus on Web technology and products rather than beefing up online content. Ms Mayer, Google’s 20th employee and first female engineer, has led a number of its businesses, and was credited for envisioning the clean, simple Google search interface still in use today, a major selling point for Web surfers.
North West in financial trouble
One-digit GDP growth in second quarter: Tam File Photo
Wen warns over unemployment
Secretary Francis Tam Pak Yuen
North West suspended its services on July 1
Hong Kong court has asked ferry operator North West Express Ltd to pay back two-months rent for Tuen Mun pier within 14 days, the Macau Maritime Administration said yesterday. A press release said the May and June rents are overdue, and the contract could be revoked. North West’s chief operations officer Koji Chan told reporters earlier this month that the rent of HK$2.32 million (US$300,000) was imposing “much financial pressure on the company”. The operator suspended its services on July 1 because of unspecified technical problems with its two vessels. “If the company cannot solve this problem effectively, … the
Maritime Administration will not allow it to sail again even though the company’s vessels have been repaired and passed safety inspection,” the statement said. A seaworthiness trial on one of the vessels is scheduled for today, after being pushed back for two days as the operator claimed “there were still some problems with the ferry”, the authority told Business Daily on Monday. A probe on the service suspension is “almost complete” and North West may be penalised between 50,000 patacas to 100,000 patacas, the statement said. The authority criticised the operator for suspending services without approval or “drawing any back-up plan”. T.L.
acau’s economic growth is likely to drop to a single-digit range, reflecting global uncertainties, the Secretary for Economy and Finance, Francis Tam Pak Yuen, said yesterday. In the first quarter of this year the territory’s gross domestic product – wealth creation – grew by 18.4 percent but the second quarter will probably close with a single digit growth, Mr Tam said. “So for the first half of the year, we will probably see low double digit growth,” he said The official is less optimistic about the second half: “We will have more cautious economic forecast”. “For the whole year we are expecting a single digit growth
rate. This is a reflection of the global economic situation,” he said. But Mr Tam is confident that the growth slowdown “will not affect the real economy in the territory”. Still, he added, “there might be some impact to the employment situation and how much salaries can be increased”. Unemployment has remained at 2 percent in the March-May period. The dominant gambling industry has seen its revenue growth shrink and “this might have some impact on the retail industry,” the secretary said. Mr Tam was speaking after this year’s first meeting of the meetings, incentives, conferences and exhibitions development committee. V.Q./X.C.
HSBC apologises for money-laundering Bank allowed shadowy funds to move globally – Senate panel
SBC Holdings Plc put itself at the mercy of the U.S. Senate yesterday, acknowledging shortcomings in its anti-money laundering operations and promising to fix what a scathing report called a “pervasively polluted” culture at the bank. The bank said it would apologise to the U.S. Senate after an investigation claimed that the bank was being used to launder dirty money around the world. In a statement, Europe’s largest bank, said it expected to be held accountable for what went wrong. On Monday, a Senate report said that suspicious funds from countries including Mexico and Syria had passed through the bank. “We will apologise, acknowledge these mistakes, answer for our
actions and give our absolute commitment to fixing what went wrong,” HSBC said in a statement. The Senate report said large sums of drug money from Mexico had almost certainly been laundered through the bank, as well as questionable funds from the Cayman Islands, Iran and Saudi Arabia. Senator Carl Levin, chairman of the subcommittee that released the report, spoke of a “polluted” system that allowed black-market funds to move through the U.S. banking system. “In an age of international terrorism, drug violence in our streets and on our borders, and organised crime, stopping illicit money flows that support those atrocities is a national security imperative,” said Mr Levin. The report also concludes that the U.S. bank regulator, the Office of
the Comptroller of the Currency, failed to properly monitor HSBC. The report comes at a difficult time for the British banking sector, which is having its standards and practices scrutinised by regulators and policymakers. Critics say the current furore over the manipulation of the Libor inter-bank interest rate is the latest example of a banking system in
need of fundamental reform. The report into HSBC was released by the Senate Permanent Subcommittee on Investigations, a Congressional watchdog that looks at financial improprieties. The year-long inquiry included a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators. Agencies
HSBC operates in more than 80 countries around the world
Published on Jul 17, 2012