La Scala trial starts without a star defendant
Macau Legend1 share price at maximum HK$2.98 Page 6
Public broadcaster gets record subsidy in 2012 Page 7
ong Kong businessman Steven Lo Kit Sing said only a few words inside court and nothing outside at the beginning of his criminal trial linked to the La Scala luxury housing project. He is accused of bribery linked to Ao Man Long, the jailed former secretary for Transport and Public Works. But the other ‘star’ defendant – Joseph Lau Luen Hung, the boss of Hong Kong-listed property developer Chinese Estates Holdings Ltd – was absent, due the court heard, to ill health. The presiding judge said the court couldn’t “verify” that. The trial could be concluded before the summer break, the Court of First Instance said yesterday.
Tuesday June 18, 2013
Editor-in-chief Tiago Azevedo
April 19, 2013
More on pages 2 & 3
Citic Telecom gets govt approval to buy CTM
itic Telecom International Holdings Ltd has been cleared to take over Macau’s biggest telecommunications operator, after the government approved the deal. CTM, Companhia de Telecomunicações de Macau, SARL, confirmed to Business Daily that the city’s Chief Executive Fernando Chui Sai On has given his blessing. Citic Telecom has agreed to pay US$1.16 billion (9.27 billion patacas) to buy out CTM’s major shareholders. Page 3
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Auctioneer sees art trade hub in Macau
Hang Seng Index
Auction house Long Hei Group (Macao) Investment Ltd is to open an exhibition centre in The Venetian Macao casino resort this year. It claims to be the first company in the city providing a one-stop art trade service, including financing. The firm expects to arrange monthly or bi-monthly exhibitions of classical and modern art. The 30,000 square feet (2,787 sq. metres) zone is be called the Asia Art Centre.
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Raymond Tam gets 90-day suspension
Clashing claims over civil servant pay
The president of the Civic and Municipal Affairs Bureau, Raymond Tam Vai Man, and vice-president Lei Wai Nong have been suspended for 90 days after a government probe concluded they “violated civil servants’ discipline”. Government spokesperson Alexis Tam Chon Weng said the investigation’s final conclusions should be out within 90 days. Sports Development Board director Alex Vong Iao Lek will replace Raymond Tam.
Macau is closer to having a formal mechanism for reviewing civil servant pay, the Public Administration and Civil Service Bureau said. Bureau director José Chu said earlier this month the committee had “reached a consensus”. But José Pereira Coutinho, member of the evaluation committee for civil servants’ salaries, told Business Daily that in fact there is no still consensus on a wage update scheme.
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June 18, 2013
The long-awaited La Scala trial has begun in the absence of six of the accused (Photo: Manuel Cardoso)
Court aims to wrap up La Scala trial by July The trial of the accused in the La Scala scandal begins at last Tony Lai
he trial of those accused of corruption in the grant of the land for La Scala, the highend housing project, could be finished before the summer break, the Court of First Instance said yesterday. The long-awaited trial began yesterday in the absence of one of the principal accused, Hong Kong billionaire Joseph Lau Luen Hung, the boss of property developer Chinese Estates Holdings Ltd. Mr Lau and the chairman of entertainment firm BMA Investment Group Ltd, Steven Lo Kit Sing, are each accused of one count of bribery and one count of money laundering. Assistant Prosecutor-General Paulo Martins Chan told the court that the two tycoons had paid Ao Man Long, a government secretary at the time, HK$20 million (US$2.5 million) to ensure the success of their bid for five plots of land near Macau airport, on which La Scala was being built. Rui Sousa, counsel for Mr Lo, asked presiding judge Mário Silvestre to clarify a “rumour” that “the court wants to complete the trial during this term”. Judge Silvestre acknowledged that he wished to wrap up the trial by July 31, before the courts close for the summer. “I want to finish the trial within 15 days, but this will depend on whether anything happens during the hearings,” he said. But he said no deadline had been set, as the court had no control over time. Judge Silvestre added, however: “Even if we cannot finish it by the
end of July (…) there will still be sessions in early or late August.” He explained he did not want “a large gap” between the hearings. The trial was due to begin in September last year, but was postponed three times owing to absences due to illness – first of Judge Silvestre’s predecessor as presiding judge and later of Mr Lau.
Inconvenient examination Mr Lau was still absent yesterday due to health reasons. It was mentioned in previous sessions the health reasons were related to chronic diabetes. Leong Weng Pung, his counsel, conveyed to the court Mr Lau’s agreement that the trial should proceed.
KEY POINTS Trial begins after three postponements, change of judge Joseph Lau remains absent due to health reasons Former bureau director sent written testimony from Portugal Lawyers for Pedro Chiang, Steven Lo file appeals
Judge Silvestre accepted Mr Lau’s submission, but said the court “cannot verify whether the justification for Lau Luen Hung’s absence is adequate”. The court said in April that it intended to send a medical team to Hong Kong to assess Mr Lau’s health, but later cancelled the mission. Health Bureau deputy director Cheang Seng Ip told reporters in May that the bureau could not send staff to assess the health of Mr Lau as he was outside Macau’s legal jurisdiction. Judge Silvestre said Mr Lau had not found it convenient to visit a Hong Kong hospital for a medical examination. Mr Lau’s partner and mother of his children, Yvonne Lui Lai Kwan, was present in court. She gave no reply to questions from reporters about Mr Lau. Of the eight accused, only Mr Lo and Fong Chun Yau, managing director of ATAL Engineering Ltd, were in court yesterday. Counsel for some of the accused argued against the trial going ahead. Mr Sousa, counsel for Mr Lo, said the written testimony of the former director of the Infrastructure Development Office, António Castanheira Lourenço, had not yet arrived in Macau.
Endless wait Mr Lourenço now lives in Portugal. He testified in March, but Mr Sousa said the written testimony was still in the Portuguese Consulate-General in Beijing.
Mr Sousa asked the court to postpone the trial until after the written testimony had arrived. Judge Silvestre said the court “cannot wait endlessly”, not knowing when the written testimony would appear. Mr Sousa said he had appealed to a “higher court” against this ruling. João Miguel Barros, counsel for another of the accused, Pedro Chiang, said he had lodged an appeal in the Court of Second Instance against his client having to stand trial, as Chiang had already been tried in another case of corruption involving Ao. A court convicted Mr Chiang and sentenced him to six years and 10 months in prison in 2011, but Mr Chiang has been at large since 2007. Mr Barros asked the judge to take this appeal into consideration before deciding whether the trial should proceed. But Judge Silvestre said the five corruption and money laundering charges against Mr Chiang were different from the ones on which the businessman had already been convicted. He said that other arguments in Mr Chiang’s appeal, such as whether a search of Mr Ao’s residence was illegal, had already been dealt with. Mr Chiang faces charges arising from the awarding of contracts to run the sewage treatment plants on Coloane and in the Zhuhai-Macau Cross-Border Industrial Park. The next session will be held on June 24 and the court tentatively decided to have hearings every Monday and Wednesday, starting next week.
June April 18, 19, 2013 2013
Steven Lo keeps quiet on La Scala allegations Lawyer for his co-defendant in corruption case calls for handwriting analysis of evidence Tony Lai
ong Kong tycoon Steven Lo Kit Sing said only a few words inside court and nothing outside at the start of his criminal trial for bribery linked to Ao Man Long, the jailed former secretary for Transport and Public Works. Mr Lo, chairman of entertainment firm BMA Investment Group Ltd told the Court of First Instance yesterday he had nothing to say over the charges he is facing in connection to the corruption-hit high-end housing project La Scala. Mr Lo was asked by the presiding judge if he wanted to enter a plea to the charges. He declined. Aside from giving his name, he said only in response to a question from the court president that he earned about “HK$10 [million] or 20 million a month”. Mr Lo and Joseph Lau Luen Hung, the boss of Hong Kong-listed property developer Chinese Estates Holdings Ltd, are accused of paying Mr Ao HK$20 million (US$2.5 million) to ensure the success of their bid for five land plots near Macau airport, on which La Scala was to be built. Mr Lau was absent yesterday but his counsel Leong Weng Pung pleaded the tycoon’s innocence. The lawyer asked the court to request an analysis of the handwriting on the so-called ‘friendship notebooks’, where Mr Ao allegedly recorded the bribe money he received. Mr Leong said he found there were “two different colours and
[Chinese] characters written in different styles” on the same line and same day in the notebook. He asked for a check on the legitimacy of the evidence, saying it was “important” to the trial. The Macau courts had previously turned down such requests but they would appeal, Mr Leong said. Jorge Neto Valente, one of Mr Lo’s lawyers, also pledged that his client was not guilty, stressing that Mr Lo’s name never appeared in the notebook. “The notebook is blank in the period between May and December 2005, when the [La Scala] land grant was awarded,” he said. The notebook also never mentioned anything linking Mr Lau to the airport land, said Mr Leong. “The notebook only recorded “[Joseph] Lau/Cotai land,” he added. The mention of the La Scala land only came on the next line but the notebook records show Mr Ao would never write about the same item in different lines, Mr Leong claimed. Fong Chun Yau, managing director of ATAL Engineering Ltd, was the only other among the eight defendants to appear in court yesterday. He pledged not guilty, adding he did not know Mr Ao nor did he ever have any contact with him. Mr Fong is charged with bribing Mr Ao to secure for his company sewage treatment contracts in Coloane and in the Zhuhai-Macau Cross-Border Industrial Park.
Citic Telecom gets govt approval to buy CTM No word yet on whether conditions will be imposed on takeover deal Vítor Quintã
he final hurdle for Citic Telecom International Holdings Ltd’s takeover of Macau’s biggest telecommunications operator is cleared, after the government approved the deal. A spokesperson for CTM, Companhia de Telecomunicações de Macau, SARL, confirmed to Business Daily that the city’s Chief Executive Fernando Chui Sai On has given his blessing. Citic Telecom has agreed to pay a total of US$1.16 billion (9.27 billion patacas) to buy out CTM’s major shareholders, Cable & Wireless Communications Plc and Portugal Telecom SGPS SA. Once the business aspects of the deal are finalised, Citic Telecom, a subsidiary of China’s state-owned Citic Group Corp, will control 99 percent of CTM. Macau Post will retain the remaining shares. The CTM spokesperson declined to reveal any further details, namely whether the government had imposed any conditions on the acquisition. The person said any further comments would have to wait until a joint press conference by CTM and Citic Telecom scheduled for June 24. Last month the director of the Telecommunications Regulation Bureau said he was analysing “documents from the shareholder [Citic Telecom] about the future development plan and its views on the market”. “These basically conform to the government requirements on the company’s role in Macau and its future development,” Lawrence Tou
Veng Keong said. However, Mr Tou said he hoped Citic Telecom’s takeover would push CTM to lower the leased-line fees it charges other telecommunications companies to use its network. Mr Tou said his bureau would put its findings in a report for the city’s Chief Executive to review. Business Daily asked the bureau and Citic Telecom if any conditions had been imposed on the takeover but received no replies before press time. The approval of the Macau government was the last obstacle Hong Kong-listed Citic Telecom faced. The central government, Cable & Wireless Communications and Portugal Telecom had already backed the deal. In its annual report, released last month, Cable & Wireless said the deal should be completed “between July and October”. Macau Post has the right of first refusal over CTM shares, but has said it would not exercise its right if Macau’s Chief Executive approved the deal. Citic Telecom plans to invest 494 million patacas up to 2017 in improving CTM’s services, according to a notice published in the Official Gazette two weeks ago. The majority of the money, 266 million patacas, will go toward expanding the fibre optic broadband network to all of Macau by 2015. Citic Telecom has already secured a syndicated loan of US$630 million from a group 11 banks to finance the acquisition. The company has also issued US$450 million-worth of senior 12-year bonds on March 5.
I want to finish the trial within 15 days, but this will depend on whether anything happens during the hearings Mário Silvestre, Court of First Instance judge
Citic Telecom to invest 494 million patacas up to 2017 to improve CTM’s services
June 18, 2013
Auctioneer sees art trade hub in Macau Long Hei Group puts down roots here because of low taxes and high-spending tourists Stephanie Lai
uction house Long Hei Group (Macao) Investment Ltd is set to open an exhibition centre in the Venetian Macao casino resort this year. Long Hei Group will thus become the first company here to provide a one-stop art trade service, including financing. The company expects to arrange monthly or bi-monthly exhibitions of classical and modern art. An associate director of the company, Ho Kin U, told Business Daily that the exhibition centre, covering 30,000 square feet, would be called the Asia Art Centre. Mr Ho said his company was investing 30 million patacas (US$3.75 million) in designing the centre. He said it would pay “millions of patacas” in rent. Long Hei Group is controlled by mainland Chinese company Long Hei International Auction Co Ltd. It was established in 2011 and specialises in auctioning ancient Chinese artefacts, ink paintings, porcelain and jade. Before establishing an office in the city centre here, the company had a display of private collections in Zhuhai’s Jida district. Mr Ho said that despite Macau’s small art market, his company had decided to put down roots here because of the stable business environment and low taxes. “Laws and taxation in Macau are much simpler and easier to work with, compared with a lot other cities in Asia,” he said.
“A lot of people hesitated to move here because of the local market size,” Mr Ho said. “But Macau is also a premium tourist destination in Asia. Nearly 30 million mainland tourists come here every year and, among them, a good part are successful businesspeople,” he said. “Businesspeople collecting artworks will be a big trend in future, as it is a stable investment form,” Mr Ho said. “And artworks are exempted from the mainland’s inheritance tax.” The State Council said in February that it intended to introduce an inheritance tax. “With Chinese businessmen, they tend to invest in ancient Chinese art items,” said Mr Ho. “But there are a lot of fake ancient paintings, and with improved techniques it is getting harder for experts to distinguish which one is real and which one is fake,” he said.
In the centre “Contemporary art has gained a lot of attention from China’s collectors as the market is quite open: you know the origin, and who
Big trend The government levies no tax on imports or exports of art, but levies income tax on the proceeds of art deals, at a rate of up to 12 percent on deals that turn a profit of 300,000 patacas or more. “Still, Macau’s taxation of the art trade is considerably lower than most countries on earth,” Mr Ho said. Long Hei Group and the Macao Creative Industry Association coorganised two weeks ago the first Art Macao show. Mr Ho said the tax system here had helped make the show a success. “The exhibitors are quite pleased with the policy terms,” he said.
Laws and taxation in Macau are much simpler and easier to work with, compared with a lot other cities in Asia Ho Kin U, associate director, Long Hei Group (Macao) Investment
After co-organising the first Art Macao show, Long Hei Group is opening an exhibition centre here
previously owned it,” Mr Ho said. One big obstacle Long Hei Group had to overcome is the lack of space here. “It is a crucial factor for the industry, as we need a large space: some sculptures can take up a whole room,” Mr Ho said. “In Macau, there is not as much commercial or shop space available.” He said industrial buildings, which are commonly occupied by Macau galleries or art associations, were not a viable option for Long Hei Group as places to display art. “You cannot hide in an industrial building forever, because if you want people to see it, you need to be in the centre of everything,” he said. “Given the rise in real estate costs over the past decade, I know how difficult it is for the government to facilitate art exhibitions,” Mr Ho said. “But there is still room for improvement in terms of providing space for the art-and-culture-related industry to hold their fairs and artwork displays.” Over two-thirds of the Asia Art Centre’s floor area will be given over to regular exhibitions of the collections of art institutions here and abroad.
Bit of everything The rest will be reserved for Long Hei Group’s collections of ancient Chinese artefacts and modern art.
“We will also have the Long Hei Business Service Centre facilitating sales of new artworks, and resales of artworks from other private collectors,” Mr Ho said. Mr Ho said the Art Macao show had closed on June 2 with favourable reviews from exhibitors and buyers. He estimates that the fourday event attracted 10,000 to 20,000 visitors. It included paintings and sculptures from more than 50 galleries and other institutions in the mainland, Portugal, Canada or Israel. The show encompassed exhibitions of the work of Macau artists and of selected modern pieces by young South Korean or Japanese artists. “Our vision for Art Macao is to make it an integrated art fair,” said Mr Ho. “The second Art Macao will feature more classical artworks from both China and Europe, and exhibitors from other artrelated industries, such as fashion design, architectural and interior design,” he said. “Macau is a very interesting market: you need to have a bit of everything for everyone to attract people from overseas.” Long Hei Group is considering arranging outdoor displays of large works of art at the city’s tourist attractions around three months before the next Art Macao show, in September 2014.
June 18, 2013
Raymond Tam gets 90-day suspension Chief executive suspends Civic and Municipal Affairs Bureau officials after internal probe Stephanie Lai
aymond Tam Vai Man has been suspended from his position as president of the Civic and Municipal Affairs Bureau, along with vice-president Lei Wai Nong. The “preliminary suspension” imposed by Chief Executive Fernando Chui Sai On will be in effect for 90 days starting today, government spokesperson Alexis Tam Chon Weng said in a media briefing yesterday. The decision was made after a probe led by Luciano Correia de Oliveira, a legal adviser for Secretary for Security Cheong Kuoc Va, concluded that the two officials “violated civil servants’ discipline”. Alexis Tam declined to elaborate on those breaches, namely whether they were connected to an ongoing court case. Last week, the Court of First Instance confirmed that Raymond Tam and Mr Lei, along with two
Raymond Tam is now facing disciplinary procedures, to add to a court case for disobedience
other bureau workers, were charged with disobedience. The four are accused of stalling a Public Prosecutions Office
investigation by delaying the delivery of documents linked to the perpetual lease of burial plots to a legal adviser of Secretary for Public Administration
and Justice Florinda Chan. Mr Oliveira will be in charge of the pre-trial stage of the disciplinary probe against Raymond Tam and Mr Lei, said Alexis Tam. “A report of that will be available within 90 days,” he added. The disciplinary procedures will be independent from the Court of First Instance’s trial, the spokesman stressed. “If the court eventually proves that Raymond Tam is innocent, but our administrative probe finds out that he has taken action against the civil servants’ code [of conduct], he will be penalised by the administration,” Alexis Tam noted. The head of the Sports Development Board, Alex Vong Iao Lek, will be in charge of the bureau during Raymond Tam’s suspension. The current vice-director of the Sports Development Board, José Tavares, will replace Mr Vong, Alexis Tam added. Mr Vong “has performed great at the Sports Development Board, and has had management experience in the Civic and Municipal Affairs Bureau,” said the spokesman. Alexis Tam also stressed that Mr Vong can speak both Chinese and Portuguese. Mr Lei’s replacement as bureau vice-president will be decided next week, the official added. The government’s spokesperson stressed that he had no information of Ms Chan having recommended Raymond Tam to become a member of the electoral committee for the Legislative Assembly. Raymond Tam resigned from the electoral committee two weeks ago.
Corporate DFS Galleria Macao exclusive from Christophe Claret DFS Galleria Macao’s Le Salon, at The Shoppes at Four Seasons Macao, has been named exclusive retail partner for French watchmaker Christophe Claret’s Kantharos timepiece range. Before launching his own brand, Mr Claret spent 22 years developing innovative movements for a number of major watch brands. The Kantharos range is based on an automatic winding chronograph with a striking mechanism and a gong that audibly chimes with each change of function. “We are very excited to be partnering with Christophe Claret as the only retailer in Macau to bring customers this exclusive timepiece,” said DFS Group North Asia Region president Benjamin Vuchot. Le Salon, which opened at the Watchmaker Boutique Hall at the DFS Galleria Macao at The Shoppes at Four Seasons in 2012, features specially selected offerings by independent watchmakers as well as exclusive vintage collections by prestigious brands. Watches from Mr Claret’s Baccara and Kantharos collections were originally shown at Baselworld 2013 in Switzerland.
Pavilion High Limit Area at StarWorld Macau The Pavilion High Limit Area opened recently at Galaxy Entertainment Group Ltd’s StarWorld Macau. It has 14 high-limit gaming tables and six high-limit slot machines. It’s expected to appeal to ‘premium mass’ players. That’s a generic term used in the local industry to indicate high limit cash players rather than high limit credit-based players. The latter are usually referred to as ‘VIPs’ or ‘high rollers’ because of the non-negotiable rolling chips issued at the start of their gambling sessions. The Pavilion is the most prestigious membership of The Galaxy Privilege Club, which is the company’s player membership and player rewards programme. It offers two levels of elite status with Pavilion Platinum and Pavilion Black, entitling its members ultraexclusive enjoyment anywhere that has the Pavilion logo. Pavilion membership perks include: complimentary accommodation or room upgrade at Galaxy Macau or StarWorld Macau; and special discounts at more than 50 eating places at the two resorts.
June 18, 2013 April 19, 2013
Macau Galaxy down on first Hang Seng outing Casino operator Galaxy Entertainment Group Ltd fell 0.72 percent on its first day with Hong Kong’s benchmark Hang Seng Index yesterday. The stock closed at HK$41.50 (US$5.35). In the past 12 months it has gained 124.81 percent. Rival Sands China Ltd, on the Hang Seng since June 2012, fell 0.89 percent yesterday to HK$38.95. It has gained 61.60 percent in the past 12 months. The performance of both stocks was counter to the index as a whole, which saw a rise of 0.4 percent to 20,969.1 after closing on Thursday at its lowest since October.
Argument over civil service pay system still simmering An official sees a glass half full and a trade unionist sees a glass half empty Tony Lai
He said the committee would continue to work on a “fair, reasonable” system. Mr Coutinho, who is also a Legislative Assembly member, contradicted Mr Chu, telling Business Daily that the committee was still discussing the matter. Business Daily asked the Public Administration and Civil Service Bureau to comment but we had received no reply by the time we went to press.
Macau’s 28,000 public-sector workers got a pay rise of 6.06 percent last month
he government is closer to instituting a mechanism for adjusting the pay of civil servants, now that it has received a proposal for such a mechanism, the Public Administration and Civil Service Bureau has said. But the president of the Macau Civil Servants Association, José Pereira Coutinho, who is a member of the
committee on civil service pay, has said there is still no consensus on any such mechanism. Public Administration and Civil Service Bureau director José Chu said this month in reply to an inquiry by Legislative Assembly member Ung Choi Kun that the civil service pay committee had “at this point reached a consensus”.
The committee is an advisory body made up of representatives of Mr Chu’s bureau and the civil service unions. The committee “has drafted a proposal on the basis of establishing a salary adjustment mechanism and submitted it to the government”, Mr Chu said in his written reply, which was made public only last week. He gave no details.
Mr Coutinho said the government was going to commission an academic study of a mechanism for adjusting the pay of civil servants “to help us identify how it can be created”. He said “it will take some time” to set up such a mechanism. “It is not easy. Even Hong Kong has had it for more than 20 years, but has as yet been unable to implement a credible mechanism,” Mr Coutinho said. Three police unions in Hong Kong decided to abandon the pay adjustment mechanism there last week, accusing the government of failing to make it work properly. The government here gave Macau’s 28,000 public-sector workers a pay increase of 6.06 percent last month. But the two main public-sector unions – the Macau Civil Servants Association and the Chinese Civil Servants Association – expressed disappointment with the increase. They said it was below last year’s rate of inflation, which was 6.11 percent. Some Legislative Assembly members have accused the civil service pay committee of failing to do its job. They have called for a pay bigger increase for lower-paid civil servants than for higher-paid civil servants. But Mr Chu said more “in-depth” study and discussion of the idea were needed as it involved “complicated issues,” namely the possibility of having to tweak the civil servants’ standardised pay index.
Macau Legend shares priced at maximum of HK$2.98
aming services and hotel company Macau Legend Development Ltd said in a filing yesterday shares in its planned global flotation will be priced between HK$2.98 (US$0.38) and HK$2.30 each. There are 2,048,309,000 shares available, made up of 204,832,000 under the Hong Kong public offer, and 1,843,477,000 under the international placing. There is also an over allotment option – depending on demand – of 264,868,000 additional shares representing the equivalent of approximately 12.9 percent of the
offer shares available under the global offering. The shares are due to start trading on the Hong Kong Stock Exchange at 9am on Thursday June 27. Gaming services accounted for 66.7 percent of Macau Legend’s total revenue in 2012 according to the IPO prospectus. The firm is not a licensed gaming concessionaire in Macau entitled by itself to operate casino games. But under a socalled service agreement unique to Macau, the company is a provider of gaming – and Macau gaming concessionaire Sociedade de Jogos de Macau SA the client – currently
at two venues – Babylon Casino and Pharaoh’s Palace Casino. Macau Legend plans to build three new hotels at Fisherman’s Wharf on
Macau peninsula between now and late 2016, and wants 350 new gaming tables for its expansion. M.G.
June April 18, 19, 2013 2013
TDM’s govt subsidy sets record in 2012
absolutely necessary” to improve programming. The company believes its investment has been successful. It says audience surveys in the fourth quarter of last year found that “all the respondents feel there was an improvement in television and radio programming”. The company spent 12.8 million patacas on setting up and launching in September a new television channel, TDM Information. TDM’s revenue rose by 10 percent to 70.3 million patacas. Some 47 million patacas of its revenue was from advertising sales, which rose by 2 percent. The strongest growth was in revenue from sales of programmes, which increased by 45.3 percent to 5.46 million patacas.
The broadcaster’s operating costs rose as it hired more staff and launched a new channel Vítor Quintã
ublic broadcaster Teledifusão de Macau SA (TDM) received more money from the government last year than ever before, allowing the company to hire more workers and change to highdefinition television. Its subsidy rose by 10.7 percent last year to 194.8 million patacas (US$24.4 million), according to the company’s annual report. The government gave TDM a further 7.2 million patacas for its capital budget, which reached 20.13 million patacas. TDM spent 10.28 million patacas of its capital budget on switching to high-definition television broadcasting and on digital production equipment. TDM says it replaced obsolete equipment, improved its network and increased its production and acquisition of information, sport and entertainment programmes. If it were not for the subsidy,
the company would have made a loss of 200.87 million patacas, one-third more than the loss it would have made in 2011. But the subsidy meant TDM made a profit of 1.03 million patacas last year, having made a profit of 28.51 million patacas in 2011. Most of the fall in profit was due to costs growing by over onequarter to 275.21 million patacas. The company spent most of its extra subsidy on covering rises in pay and benefits. Its staffing costs rose by one-quarter to 180.2 million patacas. TDM employees had a pay increase in April last year. The company hired 65 more workers during the year, taking its workforce to 623. Almost 50 staff left last year. The rate of turnover among journalists reached 13.1 percent. TDM’s board says in the annual report: “We still
experience some difficulties in recruiting new workers.” The board says the growth in spending was “a substantial effort��� for the company but “was
Almost 50 staff left TDM last year and the company says it is having trouble recruiting
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June 18, 2013 April 19, 2013
Li Ka Shing consortium buys Dutch firm Cheung Kong aims to secure steady recurring income from overseas deals
illionaire Li Ka AVR Afvalverwerking Shing’s Cheung Kong gives Mr Li control of the H o l d i n g s L t d a n d company with the largest partners agreed to buy AVR waste treatment capacity Afvalverwerking BV from in Europe, according to a Van Gansewinkel Groep separate statement. “AVR’s earnings growth BV for 943.7 million euros (US$1.26 billion) to add is quite significant,” said waste processing in Europe. Dennis Ip, a Hong KongThe bidding group will based analyst at Standard consist of Hong Kong-based Chartered Plc. “There’s Cheung Kong, Cheung Kong growth potential in European Infrastructure Holdings Ltd, countries where there’s great Li Ka Shing Foundation Ltd, focus on environmental and Power Assets Holdings protection,” he said. Net profit at AVR was Ltd, according to a statement yesterday. Eindhoven-based about 42.3 million euros in Van Gansewinkel is owned by 2012, up from 20.7 million privateequityfirmsCVCCapital euros in 2011, according to the statement yesterday. Partners Ltd and KKR & Co. Mr Li’s business empire, The company, which isn’t w h i c h s p a n s p r o p e r t y , publicly traded, is the largest telecoms, ports and retailing, energy from waste company has been seeking stable in the Netherlands, with investment opportunities plants at Rozenburg near in well-regulated markets Rotterdam and Duiven, close outside of Hong Kong, where to the German border, the its opportunities for expansion are becoming limited. This deal is the second waste treatment investment Cheung Kong made this year, following the NZ$501 million (US$405 million) purchase of New Zealand’s Cheung Kong and EnviroWaste partners will pay for announced in January. Buying Dutch waste firm
statement said. Conditions for completion of the acquisition include competition authority clearance, according to the statement.
Shares climb Cheung Kong gained 3.2 percent to HK$108 (US$13.9) in Hong Kong trading, while Cheung Kong Infrastructure climbed 3.2 percent to HK$53.55. The benchmark Hang Seng index rose 1.2 percent. Cheung Kong Infrastructure “is making good inroads in the area of waste management,” managing director Kam Hing Lam said in a separate statement. “With waste treatment being an imminent issue in most places around the world, we see good growth potential in this business.” The acquisition adds to utilities and infrastructure purchases Mr Li has made in markets including Europe in the past three years. In 2012, Mr Li almost doubled the size of the gas transmission businesses his companies control in the U.K. after acquiring Wales & West Utilities Ltd. Cheung Kong and Cheung Kong Infrastructure will each hold 35 percent of the
Cheung Kong Holdings chairman Li Ka Shing
bidding joint venture, while Power Assets will hold 20 percent and the rest held by Li Ka Shing Foundation, the statement said. Cheung Kong Infrastructure, Hong Kong’s No. 2
Yuan clearing beats volume in HK dollars Shows Chinese currency’s growing importance in international trade
aily average trading volume of yuan in Hong Kong jumped to a record in May, exceeding the volumes of Hong Kong dollars for the first time ever. Average daily yuan trading volume rose to a record 390 billion yuan (US$63.61 billion) last month in Hong Kong, according to data from the Hong Kong Monetary Authority and comments made by HKMA chief Norman Chan to reporters during a yuan roadshow in New York. Mr Chan said he expected turnover to rise further. In comparison, the average volume of Hong Kong dollars traded daily was 487 billion Hong Kong dollars (US$62.74 billion). The growth of the offshore yuan market in Hong Kong has gone from strength to strength since it was launched in mid-2010, with deposits growing from less than 1 percent of total deposits in the Hong Kong banking system to around 10 percent now. That impressive growth has led to the rise of a thriving offshore yuan bond market in Hong Kong and rising trade settlement volumes, with more than 12 percent of China’s global trade now denominated in the yuan compared to less than 1 percent in 2010.
property developer, and its investment arms have spent US$14.2 billion, including debt, buying assets globally over the past decade, according to Thomson Reuters data. Bloomberg News/Reuters
While the market’s momentum slowed in the second half of 2012 due to weak global sentiment and a Chinese leadership transition, recent months have seen a renewed determination from Beijing to widen the yuan’s footprint in global trade. New offshore yuan centres have been opened in Taiwan and Singapore, regulators have relaxed restrictions on investments via yuan and foreign currency quotas and more channels for moving yuan funds across borders have been opened. But even as more cities have shown a desire to become offshore yuan centres, the evidence indicates that Hong Kong remains the overwhelming leader in spearheading China’s yuan internationalisation initiative. For instance, a recent City of London report said that yuan deposits in banks and private wealth accounts in London declined in 2012 compared to net growth in Hong Kong in that period. In Hong Kong, about 174 participants had signed on to the yuan real time gross settlement system (RTGS), a system responsible for clearing all interbank payments, by the end of 2012, according to HKMA data. Reuters
June April 18, 19, 2013 2013
Failed sale spurs calls for PBOC to provide cash Beijing to continue ‘prudent’ monetary policy, says analyst
hina’s finance companies are calling for the central bank to resume capital injections after the worst cash crunch in at least seven years caused the failure of a government debt auction. The seven-day repurchase rate, the benchmark gauge of interbank funding availability, has averaged 6.03 percent so far in June, the most since the National Interbank Funding Centre began compiling a weighted average in 2006. The rate to borrow dollars for a week in London was 0.16 percent. China’s Finance Ministry sold 9.53 billion yuan (US$1.55 billion) of 273-day bills on June 14, less than its 15 billion yuan target. A measure of capital inflows into the world’s second-largest economy fell to a six-month low in May, aggravated by a government crackdown on hot money, a worsening growth outlook and signs the Federal Reserve plans to rein in the supply of dollars. The World Bank, Morgan Stanley and UBS AG all cut 2013 gross domestic product estimates for China last week and the Hang Seng China Enterprises Index of shares declined on each of the last 12 trading days in Hong Kong, a record losing streak. “The cash strain in China’s interbank market is caused by a sudden increase in capital outflows,” said Xu Gao, chief economist at Everbright Securities Co Ltd in Beijing. “The People’s Bank of China is expected to inject funds into the market in the coming weeks.” The central bank added a
net 92 billion yuan into the financial system last week as existing debt matured, down from 160 billion yuan in the five days through June 7, according to data compiled by Bloomberg. It refrained from draining funds from the financial system on June 13 for the first time in three months as money markets reopened after a three-day holiday. The last time it used reverse-repurchase agreements to inject funds was February 7. The People’s Bank of China gauged demand yesterday for possible sales of 28-day repurchase agreements, seven- and 14-day reverserepurchase contracts and 91day bills this week, according to a trader required to bid at the auctions.
The People’s Bank of China is expected to inject funds into the market in the coming weeks Xu Gao, chief economist, Everbright Securities
A one-year swap that exchanges a fixed cost for the floating rate climbed 45 basis points, or 0.45 percentage point, since the end of May to 3.76 percent, according to data compiled by Bloomberg. It reached 3.85 percent on June 14, the highest level since September 2011. Tim Condon, head of Asian research at ING Groep NV in Singapore, recommends investors receive the swap rate, predicting it will drop to 3.3 percent within three months. “It’s clear that policy makers see what the problem is and the PBOC is trying to alter money-market operations and increase liquidity,” he said. China will continue its “prudent” monetary policy and control loans to highenergy-consumption, highpolluting industries and sectors with overcapacity, the central bank said in a report published June 7. Standard Chartered Plc is waiting for a clearer indication of policy direction before recommending any trades involving the interestrate swap. “The central bank is sending a signal to banks that credit expansion in the previous months is overdone and it won’t easily pump in capital to the financial system,” said Becky Liu, the bank’s China rates strategist in Hong Kong. “It’s possible that the central bank will conduct short-term liquidity operations in the coming two weeks, but only as a temporary tool to ease the short-term liquidity squeeze.” Bloomberg News
Is China backtracking on attempts to control iron ore? Clyde Russell Reuters market analyst
t may be too early to start beating the drums of victory for free-market capitalism, but there are signs that China is stepping back from attempts to control the iron ore market. Just three months after accusing major iron ore producers of manipulating prices, China plans to scrap it’s decade-old import licensing system, a move that may eliminate middlemen in the market, lower costs for steel mills and improve transparency. It also looks like a strategic retreat for the world’s biggest buyer of iron ore in its battle to win pricing control from the big three producers, Brazil’s Vale SA and the Anglo-Australian pair of Rio Tinto Plc and BHP Billiton Ltd. The planned end of the licensing system will happen in the second half of the year, according to a Reuters report that cited a source with knowledge of the matter. The current system requires import qualification licences to be granted by government-backed industry bodies like the China Iron & Steel Association. It was designed to eliminate speculative traders from driving up prices and force the steelmaking industry to present a united front against the producers. However, it allowed middlemen to rent out licences and thereby drive up costs for steel mills, who couldn’t import directly. Under the proposed changes, iron ore importers will only need the same type of licence required by other commodity buyers, meaning steel mills should be able to buy directly from miners and traders alike. While this may not have much impact on iron ore prices in the short term, it could have important ramifications over time by lowering the cost of imported ore versus domestic supplies, which may boost the volume of foreign ore. It’s also not clear how plans to scrap the licensing requirements will fit with another recent proposed change, namely to force importers to use a domestic trading platform. New licences were to be conditional on importers using the China Beijing International Mining Exchange (CBMX) platform, according to a report in April. The big three miners are members of the CBMX, but they also back the Singapore-based globalORE system, which currently handles more of the physical trade than its Beijing rival. The Chinese move to support the CBMX was most likely aimed at trying to wrest pricing power away from the miners, especially given the allegations by authorities that the big producers manipulate prices.
Cutting costs China’s top economic planner said in March that the miners were behind
the 83 percent rally in the benchmark Asian spot price between September’s three-year low and a peak of US$158.90 a tonne in February. This was an extraordinary accusation by the National Development & Reform Commission (NDRC), especially since it came without any substance, other than an unsubstantiated claim that shipments were held back in order to control supplies and send a fake market signal. The NDRC appeared to conveniently ignore the fact that the rally in prices coincided with record imports by Chinese steel mills, with December being the strongest on record. It’s also no surprise that the recent price slump has resulted in a surge of imports again, with April and May being the third- and second-strongest months, respectively. Spot iron ore fell more than 30 percent from its February high to a low of US$110.40 a tonne on May 31, the lowest in almost eight months. It has since recovered slightly to US$113.60 a tonne on June 14. As I wrote in March, there was probably a stronger case to say that iron ore was manipulated weaker when the spot price plunged 42 percent between April and September last year, even as China’s imports held up remarkably well considering the weaker economic outlook prevailing at that time. Nonetheless, the concern remains that iron ore prices are subject to manipulation given the situation of one major buyer that accounts for more than 70 percent of the global seaborne market and three big producers that supply roughly that quantum. Currently iron ore is priced on benchmarks produced by Platts and Metal Bulletin, who in turn base their assessments on collecting information on deals from market participants. While the methodology used by these agencies is solid and robust, the system still relies on everybody being absolutely honest, and in the absence of a deliverable futures market, there will always be the temptation for involved parties to try and manipulate prices in their favour. But I would argue that it’s difficult to do this on a sustained basis, although a liquid futures market where participants have the obligation to deliver on contracts would certainly boost transparency. But for now, it appears the Chinese may just be resigning themselves to the reality that they are unlikely to be able to control the iron ore market, so they may as well do what’s possible to cut unnecessary costs from the system. Disclosure At the time of publication Clyde Russell owned shares in BHP Billiton and Rio Tinto as an investor in a fund. Reuters
June 18, 2013 April 19, 2013
S. Korea tightens capital flow checks Seoul creates task force to catch tax dodgers Cynthia Kim
outh Korea is strengthening supervision of foreign exchange transactions as President Park Geun-hye broadens her country’s part in a global crackdown against tax evasion. The Financial Supervisory Service and Korea Customs Service will have enhanced rights to investigate crossborder transactions at companies, the Finance Ministry said in an e-mailed statement. Failure to report details of funds wired, assets acquired or the annual balance in investments may be subject to fines, the statement said. Policing tax evasion has crept up the political agenda worldwide as governments struggle to pay for social programmes amid high unemployment and weak economic growth. U.K. Prime Minister David Cameron on Saturday said tax havens under Britain’s legal supervision pledged to fall in line with international agreements on exchange of information, a key topic at a meeting of the Group of Eight nations that began yesterday. Finance ministers from the Group of 20, which includes South Korea, are considering plans for exchanging tax information, Russian Deputy Finance Minister Sergei Storchak said on June 7 after a meeting of his counterparts in St. Petersburg. Tax was “about the hottest issue,” he said. South Korea’s Park aims to raise 135 trillion won (US$120 billion) without increasing tax rates to fulfil her welfare pledges. Of that, 53 trillion won will come from cracking down on the underground economy, according to the finance ministry.
accounts will jump as much as tenfold to 1 billion won, BNA said. The government will also start a naming-and-shaming campaign for individuals and corporations failing to declare more than 5 billion won in foreign account assets. The same violations will trigger criminal penalties next year, BNA said. At a meeting with top executives of foreign banks, insurers and brokerages in South Korea, Choi Soo-hyun, governor of the FSS,
Task force The Financial Supervisory Service in Seoul recently launched a task force to investigate some 2,000 undeclared foreign exchange transactions uncovered since 2011. The National Tax Service collected 479.8 billion won in back taxes on cross-border tax cheats in the first five months of the year, compared with 825.8 billion won for all of 2012, Bloomberg BNA reported yesterday. The tax authority said 45 more cases are under investigation, BNA said. Rewards for whistleblowers who give details on hidden foreign
Singapore exports continue to shrink S
ingapore’s exports fell more than economists estimated in May as manufacturers shipped fewer electronics after an uneven global recovery hurt demand. Non-oil domestic exports slid 4.6 percent from a year earlier,
US$120 bln South Korea aims to raise to fulfil welfare pledges
after falling 1 percent in April, the trade promotion agency said in a statement yesterday. Shipments of electronics dropped 13.2 percent from a year ago, extending the slump to a 10th month. The World Bank last week cut its global growth forecast for 2013 after emerging markets from China to Brazil slowed more than projected, weakening prospects for Singapore’s trade-dependent economy. Analysts have lowered their estimate for the island’s export expansion this year to 2.5 percent from 4 percent, according to a survey by the central bank this month. “The risks Singapore faces are always external,” said Wai Ho Leong, a senior regional economist at Barclays Plc in Singapore. “The external outlook is still fragile, particularly when we’re not well
called for “strict compliance” with reporting obligations concerning shell corporations set up by South Korean taxpayers in offshore tax jurisdictions, the agency said in a statement June 13.
Switzerland, U.K. The focus on offshore havens is racketing up pressure on governments to end or ease their traditions of secrecy or risk being labelled rogue jurisdictions and facing sanctions. A Swiss government-appointed panel on June 14 said the country should join the international push against tax dodgers by allowing banks to share customers’ details. Switzerland faces pressure from the European Union to join a system that automatically shares bankaccount data. That would end a tradition of banking secrecy as the government tries to resolve a U.S. Justice Department probe of at least 14 financial firms, including Credit Suisse Group AG and Julius Baer Group Ltd, which allegedly helped Americans dodge taxes. Switzerland is broadening antimoney laundering definitions to
tapped into the smartphone boom that’s going on in North Asia.” The Singapore dollar has weakened almost 3 percent in the past six months even as the central bank maintained a policy of allowing gradual gains in its dollar. The depreciation probably won’t help exports, said Song Seng Wun, an economist at CIMB Research Pte in Singapore. “As far as Singapore’s manufactured goods are concerned, it’s more about end demand than the exchange rate,” Mr Song said. “If there’s no demand, no matter how much gain you get from the currency depreciation, it hardly makes a difference in terms of whether the Singapore dollar is stronger or weaker” in the short or medium term, he said. Reuters
include serious tax crimes. Britain’s network of overseas territories and dependencies agreed to Mr Cameron’s request that they adopt extended transparency rules aimed at preventing tax evasion. The islands around Britain known as the Crown Dependencies – Jersey, Guernsey and the Isle of Man – joined the British Virgin Islands, Bermuda, Cayman Islands, Gibraltar, Anguilla, Montserrat and the Turks and Caicos Islands in agreeing to support an automatic exchange of information begun by the U.K., Germany, France, Italy and Spain. They also agreed to join the Multilateral Convention on Mutual Administrative Assistance on Tax Matters, and to publish plans on how they will force companies to reveal “beneficial ownership” – the details of who is really behind a firm. “It is important we are getting our house in order,” Mr Cameron said in a statement after the talks at his office in London. “Britain’s voice in the G-8 and the campaigning on this issue around the world for proper taxes, proper companies and proper laws will be stronger.” Bloomberg News
June April 18, 19, 2013 2013
Asia Jet slumps as India defers decision on stake sale Jet Airways (India) Ltd, the nation’s biggest publicly-traded carrier, fell the most in a week in Mumbai trading after the government deferred a decision on the airline’s plan to sell a stake to Etihad Airways PJSC. Shares of Jet slumped as much as 13 percent, the most since June 10, to 411.05 rupees (US$7.12). The stock changed hands at 431.50 rupees at the closing. The carrier has dropped 23 percent this year compared with the benchmark S&P BSE Sensex’s 1.3 percent decline. India’s Foreign Investment Promotion Board on June 14 deferred its decision on Jet’s agreement to sell a 24 percent stake to Abu Dhabi’s Etihad, as authorities sought more details about the local carrier’s ownership. The airline is seeking funds to add aircraft and pare debt after six years of losses caused by fuel costs and competition from discount carriers. Jet founder and chairman Naresh Goyal will own 51 percent of the company after the deal, according to a company statement in April. Etihad will hold 24 percent and the remainder will be held by the public. The Mumbai-based carrier, which agreed in April to sell its stake for 20.6 billion rupees (US$356 million), is counting on Etihad funds to accelerate repayment of working capital debt, K.G. Vishwanath, vice president of commercial strategy, told analysts in a conference call on May 27. The company is considering an order for Boeing Co. 737 planes, he said. Authorities are seeking more details from Jet about its “effective control and ownership,” Economic Affairs Secretary Arvind Mayaram said. After the Foreign Investment Promotion Board’s approval, the carrier also needs to obtain clearances from stock market regulator Securities and Exchange Board of India and the home ministry for its stake sale deal.
Suntory drinks unit sets IPO price range Suntory Holdings Ltd plans to price shares of its soft-drinks unit between 3,000 yen (US$32) and 3,800 yen in what could be Japan’s biggest initial public offering this year. The company in May set a tentative IPO price of 3,800 yen a share for the July 3 Tokyo listing. Suntory is providing the price range as the benchmark Topix index has lost 17 percent through June 14 from May 22. Japan’s broadest equity measure is still up 26 percent this year. About 350 billion yen of the proceeds will be used for Suntory Beverage, and the remaining of about 120 billion yen will be used for Suntory Holdings, which will stay unlisted, Midori Takahashi, a spokeswoman for the parent company has said. The offer price will be finalised on June 24, according to a May 29 filing. Suntory is raising funds in part for foreign acquisitions, undeterred by a weakening yen as it competes with rivals Kirin Holdings Co Ltd and Asahi Group Holdings Ltd on deals abroad while consumer demand stagnates in Japan. A rally in domestic shares has boosted the attraction of share issues but the offer’s success will also depend on Suntory presenting a compelling expansion plan overseas, where it has said it will focus on Southeast Asia. “Domestic beverage demand is saturated. Whether Suntory will be attractive in the beverage industry compared with Asahi and Kirin will depend on its overseas strategy,” said Makoto Kikuchi, chief executive of Myojo Asset Management. “Just because the IPO is big doesn’t mean people will buy.” Reuters
India leaves rates unchanged, warns of inflationary risks RBI also cites risks of a reversal of capital flows from emerging markets
ndia left interest rates unchanged after a plunge in the rupee to a record low threatened to stoke inflation in Asia’s third-largest economy. Governor Duvvuri Subbarao kept the repurchase rate at 7.25 percent, a Reserve Bank of India statement showed in Mumbai yesterday. The rupee’s fall of about 6 percent versus the dollar this quarter is among the steepest in Asia and may fan import costs in a country with the second-highest consumer inflation in the Group of 20 nations. The currency has been weighed down by an unprecedented current-account deficit that Mr Subbarao has said is the biggest risk in an economy hurt by moderating investment. “The tumble in the rupee could upset the easing inflation trajectory and add to concerns about financing of the current-account deficit,” said Radhika Rao, an economist at DBS Group Holdings Ltd in Singapore. “The central bank is clearly worried about maintaining economic stability at this moment.” Stocks and currencies have slid in nations from Brazil to the Philippines on concern the U.S. could pare monetary stimulus if its jobs market shows sustained improvement. India’s monetary-policy stance will be determined by the evolution of economic growth, inflation and the balance of payments in the months ahead, the Reserve Bank said, adding it stands ready to “respond rapidly and appropriately to any adverse developments”. “It is only a durable receding of
inflation that will open up the space for monetary policy to continue to address risks to growth,” the monetary authority said. “While several measures have been taken to contain the current-account deficit, we need to be vigilant about the global uncertainty, the rapid shift in risk perceptions and its impact on capital flows.” Mr Subbarao lowered borrowing costs in January, March and May to boost investment in an economy that expanded a decade-low 5 percent last fiscal year. India’s wholesale-price index rose 4.7 percent in May from a year earlier, a 43-month low. The central bank yesterday flagged “upside” pressures from rupee depreciation, food costs and recent increases in prices administered by the government.
Foreign investment Finance Minister Palaniappan Chidambaram signalled last week that more caps on foreign-direct investment may soon be eased, as he tries to extend a nine-month government drive to revitalise the economy and avert a credit-rating downgrade. He’s striving to woo funds to finance the current-account gap, which swelled to US$32.6 billion in the last quarter of 2012, or 6.7 percent of gross domestic product. Gold and oil imports have contributed to the shortfall. Prime Minister Manmohan Singh began policy changes in September.
Japan must reform to calm markets: minister Nishimura says there’s ‘no need to respond in a haste’
apan is determined to convince investors that it is serious about securing both solid economic growth and fiscal health as the best way to calm financial markets, Vice Economics Minister Yasutoshi Nishimura said in an interview. Mr Nishimura played down recent market turbulence as an understandable correction after past rapid moves but assured that Tokyo would swiftly implement growth and fiscal strategies approved on Friday. By doing so, the government would be taking advantage of breathing space provided by the central bank’s sweeping monetary stimulus. “We share the view that stock and currency markets are going through correction after rapid moves but that there’s no need to respond in a haste,” Mr Nishimura said. “We also take it that markets are pushing us to carry out our plans, so we’ve made a firmer resolve to steadily implement them. As long as we make
steady efforts, we are not worried about the overall economy,” he added. Japan’s Nikkei share average entered bear market territory for the second time in less than a week on Thursday, having plunged more than 20 percent from a 5-1/2-year high hit on May 23. The Nikkei share average jumped 2.7 percent and recovered the 13,000mark yesterday. It gained 346.60 points to 13,033.12 after trading as low as 12,549.82 earlier on the back of weak U.S. stocks on Friday.
‘Various tools’ The dollar hovered near its lowest level since April 4 when the Bank of Japan launched an intense burst of stimulus, which has led to volatility in bond markets. The BOJ held off on new steps this week arguing that bond markets had stabilised, the decision disappointed some investors and pushed the yen higher.
Duvvuri Subbarao, Reserve Bank of India Governor
The steps included paring the budget deficit, easing rules in the retail and aviation industries to lure overseas capital and speeding up approvals for infrastructure projects. Fitch Ratings revised India’s credit-outlook to stable from negative on June 12. That provided some succour for Mr Singh, whose coalition has been hurt by graft scandals and depressed growth. The prime minister is under pressure to bolster growth in a nation where World Bank data shows about two-thirds of the 1.2 billion population lives on less than US$2 per day. The economy may expand 5.7 percent in the fiscal year through March 2014, the Reserve Bank said in May. “India needs to accelerate the pace of reforms to send a clear message to investors that it can safely navigate through the choppy waters,” said Arun Singh, an economist at Dun & Bradstreet Information Services India Pvt. in Mumbai. Bloomberg News
But Mr Nishimura, who can attend the BOJ’s policy meetings in economy minister’s absence, said the central bank made a right decision, given that bond markets have become less volatile than stock and currency markets. “The BOJ has various tools for its fund supply and I expect it will respond appropriately based on its own judgment, so I’d like to trust it and watch it.” Mr Nishimura said the government should not react to day-to-day movements of the yen although its weakness caused as a result of the BOJ’s aggressive easing is supporting the economy for now. “The bold monetary easing is a policy that buys time … It means that we must use it to implement growth strategies.” As part of growth strategy, the government is aiming to overhaul tax system in the way that encourages capital spending, but broader corporate tax cuts should be tackled in the medium term, rather than right now, Mr Nishimura said. “It wouldn’t make sense if tax cuts only boosted internal reserves … There’s also a debate over how effective corporate tax cuts could be given about 70 percent of Japanese firms are not paying corporate tax,” Mr Nishimura said. “I’m also aware of the need for lower tax rates to attract foreign investment. So we need to make a comprehensive judgment on this issue.” Reuters
June 18, 2013
Markets Hang Seng Index NAME
AIA GROUP LTD
CHINA UNICOM HON
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52W (H) 23944.74 (L) 18710.58984
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AIR CHINA LTD-H
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CHINA CITIC BK-H
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NAME CHINA PACIFIC-H
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INDEX 9744.48 HIGH
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DAQIN RAILWAY -A
SANY HEAVY INDUS
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INDEX 2403.839 HIGH
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FTSE Taiwan 50 Index NAME
PRICE DAY %
TAIWAN MOBILE CO
TPK HOLDING CO L
ASIA CEMENT CORP
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HOTAI MOTOR CO
HUA NAN FINANCIA
CHANG HWA BANK
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CHENG SHIN RUBBE
CHIMEI INNOLUX C
MEGA FINANCIAL H
CHINA STEEL CORP
NAN YA PLASTICS
AU OPTRONICS COR
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FORMOSA CHEM & F
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INDEX 5522.72 HIGH
52W (H) 5896.71 (L) 4719.96
June 18, 2013
Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 63.20
WTI CRUDE FUTURE Jul13
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Gold Spot $/Oz
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NATURAL GAS FUTR Jul13 NY Harb ULSD Fut Jul13 METALS
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jul13
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
WHEAT FUTURE(CBT) Sep13
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COFFEE 'C' FUTURE Sep13 SUGAR #11 (WORLD) Oct13
COTTON NO.2 FUTR Dec13
World Stock Markets - Indices NAME
0.9614 1.5714 0.9226 1.3337 94.8 7.993 7.7597 6.1244 57.7312 30.68 1.2538 29.872 42.885 9888 91.138 1.2305 0.84873 8.1712 10.6608 126.43 1.0301
0.4598 0.0446 -0.1626 -0.0749 -0.5169 0.025 0.0193 0.1061 -0.3508 -0.3585 -0.1834 -0.0402 -0.1749 -0.1315 -1.207 -0.0991 0.1166 0.082 -0.1013 -0.6565 0.0194
-7.3617 -2.8561 -0.7804 1.1145 -9.1772 -0.1226 -0.1173 1.734 -4.7396 -0.3259 -2.5841 -2.8087 -4.3838 -0.9608 -1.9871 -1.8708 -3.9247 0.5666 -1.2232 -10.1716 -0.0194
1.0625 1.6381 0.9972 1.3711 103.74 8.0111 7.7664 6.3964 58.985 32 1.2847 30.203 43.315 10174 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032
0.9326 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1203 51.3863 28.56 1.2152 28.913 40.54 9338 78.93 1.20054 0.77553 7.7018 9.6245 94.12 1.0289
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MGM CHINA HOLDIN
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FTSE Bursa Malaysia KLCI
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June 18, 2013 April 19, 2013
Don’t underestimate Iran’s election upset Shashank Joshi
Research fellow at the Royal United Institute in London
ran’s presidential election presents a paradox. The vote was free enough for Hassan Rohani to score a shocking win and for the favoured conservative candidate to finish a dismal third. And yet it was blatantly unfair because hundreds of reformist and pragmatic candidates were blocked from running. For policymakers in the U.S. and Europe, this presents a challenge: How should they respond to this remarkable upset victory for Rohani, who was the eventual candidate of Iranian reformists and is also a regime-approved insider? In answering this question, it is essential that governments don’t just focus on how much influence the new president will or won’t have on the Iran’s
nuclear negotiations with the major world powers. What he does to expand individual liberties within the country will be at least as important. To borrow a slogan from President Barack Obama’s first election campaign, this vote was about hope and change. Iranians were deeply disillusioned by President Mahmoud Ahmadinejad’s stolen reelection in 2009. That ballot box theft and the failure of huge popular protests to overturn it made Iranians sceptical of their ability to change anything. Nevertheless, turnout on Friday exceeded 72 percent according to the interior ministry, a level the U.S. hasn’t managed in a century. Under the most difficult political circumstances, Iran’s
electorate broke with eight years of Ahmadinejad’s intemperate rule and cast scorn on Supreme Leader Ali Khamenei’s apparatchiks. Voters chose in Rohani a man who had promised to establish a ministry for women’s affairs, aimed at restoring some of their “trampled rights,” and rejected former nuclear negotiator Saeed Jalili, who said during the campaign that women are best kept as mothers. Rohani won almost 51 percent of the vote, according to preliminary results, avoiding the need for a run-off.
the shadow of Supreme Leader Ali Khamenei, but it is a serious mistake to believe that the new president will be powerless. In the 1990s, Presidents Ali Akbar Rafsanjani and Mohammad Khatami both put their personal stamps on Iranian policy, foreign and domestic. They moderated the bellicose government rhetoric of the 1980s, emphasised economic development (even American oil companies flooded back into Iran), and cooperated with the U.S. and its allies in the early days of the war in Afghanistan. Ahmadinejad came to office intent on confrontation with the regime’s perceived enemies. He dismissed the threat that the international dispute over Iran’s nuclear programme would be referred to the United Nations Security Council, and welcomed sanctions as good for the economy. He also deeply embarrassed many liberalminded Iranians with his denials of the Holocaust and generally crass manner. Rohani’s power to shape policy in the two areas of great interest to the U.S. and Europe – Iran’s nuclear programme and its assistance to the regime of Syrian President Bashar al-Assad – will be limited, constraining his ability to deliver on campaign promises to ease tensions and thereby ease Iran’s economic woes. The Iranian Revolutionary Guard Corps, a parallel military organisation to the regular army and a major player in the Iranian economy, is deeply invested in the Syrian civil war, and may even benefit from the smuggling opportunities created by sanctions. The negotiations over the nuclear programme, meanwhile, have fallen increasingly under the purview of Khamenei since Rohani led them as chief negotiator in the mid-2000s. As during Ahmadinejad’s final years, the key battles for
The U.S. and Europe need to seize any opportunities that Rohani creates, putting meaningful sanctions relief on the table in exchange for … reductions in Iran’s nuclear capability
Rohani’s victory therefore marks a pivotal moment for Iran. He certainly will serve in
Rohani may be over personnel. It will be a positive sign, for example, if Rohani is able to influence who succeeds his defeated rival Jalili as Iran’s nuclear negotiator. Even if Rohani is cut out of the nuclear talks, he may yet play an important role in shaping opinion, easing the path to an eventual compromise. Despite appearances, the supreme leader pays attention to what the public and elites think. In 2009, for instance, Khameini allowed a nuclear fuel swap to be negotiated with the West, but then quashed it after vigorous opposition from parliament.
Seizing opportunities The U.S. and Europe need to seize any opportunities that Rohani creates, putting meaningful sanctions relief on the table in exchange for concrete and verifiable reductions in Iran’s nuclear capability. If they instead meet any overtures with sullen distrust, Rohani’s political rivals will use the failure against him. These geopolitical issues aren’t the only ones that matter, though. Iranians live under an autocratic, repressive and economically stagnating system. Anything that eases those conditions is an unalloyed good. More important, the events of the past several years underscore that evolutionary political change is far preferable, both to its participants and bystanders, to the revolutionary violence witnessed in places like Syria. Rohani’s regime credentials may allow him to serve as a bridge figure, capable of couching modest reforms terms that are politically acceptable to the hardliners. Another way to judge his intentions and influence will be in his handling of former presidential candidates Mehdi Karroubi and Mir Hossein Mousavi, leaders of the Green Movement that was crushed in 2009, who have been under house arrest for two years. Their detention is a reminder of the cruel realities of the Islamic Republic, where bloggers and journalists are routinely jailed, freedom of information and association are tightly curtailed and minorities are frequently treated as second-class citizens. If Rohani frees Karroubi and Mousavi, whose supporters were ecstatic at Friday’s election result, it would be very encouraging. It is understandable that we, on the outside, treat geopolitical issues as the litmus tests of Iran’s trajectory. But if Rohani can start renewing and protecting cultural, social and political freedoms, the longerterm effects may be just as consequential for the rest of the world. Bloomberg View
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June April 18, 19, 2013 2013
The austerity pandemic
Leading reports from Asia’s best business newspapers
Director of the Global Social Justice Programme at the Initiative for Policy Dialogue, was a senior official at UNICEF and the Asian Development Bank
Matthew Cummins Worked at the UN Development Programme, UNICEF and the World Bank
Japan’s Prime Minister Shinzo Abe agreed with leaders of four central European nations to advance cooperation in the energy sector in an attempt to boost exports of nuclear reactors. “Closer ties with the V4 will lead to infrastructure exports, a goal under Japan’s economic growth strategy,” Mr Abe said after a summit with Poland, the Czech Republic, Slovakia and Hungary. The four countries plan to build nuclear reactors in an effort to lessen dependence on Russia for energy resources.
Jakarta Post Several companies remain persistent to have their initial public offerings on schedule despite the bearish market in the country that continues to face selling pressures, according to underwriters. At least 15 new companies are expecting to float their shares on the Indonesia Stock Exchange (IDX) immediately, including Southeast Asia’s largest textile company PT Sri Rejeki Isman and construction firm PT Acset Indonusa that will offer their shares this week.
The Age National Australia Bank boss Cameron Clyne believes Australia is not heading towards a recession, but expects economic activity to remain subdued until at least the September federal election. “There’s certainly still no credit growth, so you can surmise that on a range of things. There’s always a traditional period where people don’t spend or there’s not much activity into the election campaign,” Mr Clyne said.
Bangkok Post China International Water & Electric Corporation (CWE), a leading state utility, will invest in Thai energy and infrastructure projects worth an estimated 50 billion baht (US$1.63 billion). The company has appointed AEC Securities (AECS) as its financial adviser. CWE, a subsidiary of China Three Gorges Corp, has investments in 30 countries. Praphol Milindhachinda, AECS’s executive chairman, said CWE is keen on investing in green energy such as wind, solar and hydropower. “They see growth potential in Thailand and Asean,” he said.
tthisyear’sInternational Monetary Fund/World Bank spring meetings in Washington, DC, the IMF urged European countries to ease their austerity policies and focus on investment, marking a shift from past rhetoric. But, in the corridors of those two multilateral institutions, there was talk of double standards. In fact, most countries are cutting public expenditures – with the IMF’s support. So, even as some northern countries begin to question the austerity prescription, their southern counterparts (including southern European countries) are increasingly adopting fiscaladjustment measures. According to IMF projections, of the 119 governments that are shrinking their 2013 budgets (relative to GDP), three-quarters are in developing countries (including 21 low-income and 68 middle-income countries). Fiscal consolidation affects an estimated 80 percent of developing-country citizens, and its impact is expected to intensify steadily through 2015. During this time, the magnitude of contraction will be significant, with roughly one-quarter of all developing countries expected to cut expenditures below precrisis levels. A review of policy discussions from 314 IMF country reports published since 2010 – part of a comprehensive update on the global shift toward austerity – shows that many adjustment measures are most prevalent in developing countries, where citizens are especially vulnerable to austerity’s economic and social consequences. The most common adjustment measure, which governments in 78 developing countries are considering, is subsidy reduction. Deliberations on the subject are often – indeed,
in 55 developing countries – accompanied by discussion of the need for a targeted social safety net to offset higher food, energy, or transport costs for the poorest citizens. But developing and implementing a socialprotection floor takes time, and governments do not seem to be willing to wait. At a time when the need for food assistance is particularly high, some governments have withdrawn food subsidies and others have scaled back subsidies for agricultural inputs like seeds, fertilizer, and pesticides, hindering local food production.
Instead of slashing expenditures, developing-country leaders should focus on providing decent job opportunities and improved living standards for their citizens
Similarly, public-sector wage cuts and caps – currently being pursued by 75 developing countries – threaten to undermine service delivery to citizens, particularly at the local level in poor rural areas, where a single teacher or nurse can determine whether a child receives an
education or health care. This danger is heightened as policymakers in 22 developing countries consider health-care reforms and those in 47 developing countries discuss pension reforms. On the revenue side, as many as 63 developing countries are considering raising consumption taxes, such as the value-added tax. But taxing basic foods and household items can have a disproportionate impact on lower-income families, whose limited disposable incomes are already stretched thin, and thus can exacerbate existing inequalities. Instead of slashing expenditures, developingcountry leaders should focus on providing decent job opportunities and improved living standards for their citizens. They must recognise that austerity will not help them to achieve their development goals. On the contrary, spending cuts will hurt their most vulnerable citizens, widen the gap between rich and poor, and contribute to social and political instability. Indeed, civil unrest is already on the rise across the developing world. From
the Arab Spring to the violent food riots that have erupted in recent years across Asia, Africa, and the Middle East, populations are reacting to the cumulative effects of pervasive unemployment, high food prices, and deteriorating living conditions. Ours does not have to be an age of austerity; governments, even in the poorest countries, have options to foster a socially responsive economic recovery. These include, among other measures, debt restructuring, increasing the progressivity of taxation (on personal income, property, and corporations, including the financial sector), and curbing tax evasion, the use of tax havens, and illicit financial flows. Ultimately, reducing wages, public services, and household income impedes human development, threatens political stability, lowers demand, and delays recovery. Rather than continuing to adhere to policies that do more harm than good, policymakers should consider a new approach – one than actually contributes to their countries’ social and economic progress. © Project Syndicate
June 18, 2013
Closing India’s trade deficit widens on gold imports Co-op Bank unveils rescue plan India’s trade deficit widened to a 7-month high in May as gold imports surged, provisional data showed yesterday, but economists expect newly announced measures to dampen demand for the precious metal in coming months and narrow the shortfall. A nearly 90 percent annual jump in gold and silver imports saw the trade deficit rise to US$20.14 billion last month from US$17.8 billion in April. A combination of sliding global prices and regional festivals in India that traditionally increase demand for gold as gifts prompted frenzied buying in April and May.
The Co-operative Bank Plc has unveiled a rescue plan to tackle the 1.5 billion pounds (US$2.4 billion) hole in its balance sheet. Most of the capital to be used to plug the hole will come through a “bail in” – a process where bond holders will be offered shares in the bank. The deal will result in a stock market listing for the bank. The bank said the plan meant both investors and the Co-op Group would make “a joint contribution” to the bank’s recapitalisation. “This is the best solution for all concerned,” Co-op Group chief executive Euan Sutherland said.
AIG open to new ILFC offer
Mining industry to face tighter regulator scrutiny
After Chinese investors missed a second deadline
including the American Petroleum Institute on the grounds that they disadvantage U.S. companies against foreign-owned ones. BHP Billiton Ltd, the world’s largest mining company, said it has provided evidence to authorities investigating alleged breaches of anti-corruption laws, including the SEC. It began an internal inquiry in 2009 following an SEC request for information related to dealings with foreign officials, including Chinese dignitaries. BHP is the subject of a joint U.S.Australian bribery probe examining its multimillion-dollar hospitality and sponsorship programme at the 2008 Olympics, The Age newspaper reported in March. Projects in Cambodia and the Philippines are also being studied in the inquiries, the Sydney Morning Herald reported. Canada, home to the world’s largest number of mining-company listings, will also impose mandatory reporting standards, Prime Minister Stephen Harper said last week. While penalties for failing to disclose payments aren’t yet established, the filings will provide greater transparency to fight corruption, he said.
merican International Group Inc. said it is open to new offers for its plane-leasing business and may pursue a public offering of the unit. A group of Chinese investors, led by New China Trust Co Ltd chairman Weng Xianding missed another deadline to buy the operation and now has until July 31 to complete the deal, New York-based AIG said yesterday in a regulatory filing. The deadline to buy International Lease Finance Corp for US$4.2 billion was previously extended to June 14 from May 15. AIG “may pursue, but not enter into definitive documentation for, or consummate, other offers for ILFC and may continue to pursue, but not engage in widespread solicitation of orders for, or request effectiveness of, the alternative of a public offering,” according to yesterday’s regulatory filing. AIG chief executive Robert Benmosche is seeking to get rid of ILFC to reduce debt and focus the firm on its main businesses of selling life insurance and property-casualty coverage. He said on June 4 that he could return to a prior plan for an IPO of ILFC if the deal falls through. “It’s difficult to envision AIG doing much better through either an IPO or a newly negotiated outright sale,” John Nadel, an analyst at Sterne Agee & Leach Inc., said in a note on May 31, the day AIG announced that the would-be buyers missed a 10 percent deposit. The group paid the deposit on June 5. The deal called for a sale of 80 percent of ILFC for US$4.2 billion and gave the group the right to a stake of as much as 90 percent by paying more. The unit may be most attractive to Chinese buyers because the company could aid airline manufacturers in the nation and benefit from low-cost loans from domestic lenders, Josh Stirling, an analyst at Sanford C. Bernstein, said in a note to investors. Los Angeles-based ILFC had about US$24.1 billion in debt as of March 31. Mr Benmosche has said the firm needs to safeguard its credit rating before restoring a dividend or repurchasing shares. AIG suspended its dividend in 2008, when losses tied to soured mortgage bets pushed the insurer to a U.S. bailout that swelled to US$182.3 billion. The U.S. recouped the cost of the rescue last year, in part by selling shares acquired through the bailout back to AIG.
As governments worldwide probe mining companies
Mining sector – new rules looming
or an industry that routinely makes multi-billion dollar deals with developing-world governments and an array of sometimes controversial leaders, the mining sector has been remarkably free of political scrutiny. No longer. World leaders gathering in Northern Ireland for the Group of Eight summit that began yesterday have mining transactions and companies in their cross hairs. They are proposing tighter oversight by requiring companies to disclose all payments made to foreign governments. The new rules, aimed at exposing corruption, come as U.S. and British regulators probe mining companies including Eurasian Natural Resources Corp and a firm backed by Israeli billionaire Beny Steinmetz. The spotlight may change how mining groups, which have participated in US$524 billion of takeovers since 2008 according to data compiled by Bloomberg, make deals worldwide, restraining acquisitions of assets tainted with allegations of bribery or corruption. It may also put new assets in play as mining companies under legal pressure look to sell projects or, in
extreme cases, have them seized. “Mining has been caught in the headlights in the past few months,” said Raj Karia, a partner in London at law firm Norton Rose Fulbright. For deals in the sector as a whole, “the environment has changed,” he said. “There is more need now to be very sure of what you’re buying, and aware of the history of an asset.” Britain and the European Union are pushing for new laws that require mandatory disclosure by petroleum and mining companies of all payments including taxes and licensing fees to governments and officials, and for developing countries to report all resource revenues in a standardised way.
Lift veil The goal is to “lift the veil of secrecy that too often lets corrupt corporations and officials in some countries run rings around the law,” British Prime Minister David Cameron wrote last month. The U.S. Securities and Exchange Commission adopted similar disclosure rules last year as required by the Dodd-Frank Act. The measures are being challenged in court by entities