Wednesday May 15, 2013
Editor-in-chief Tiago Azevedo
April 19, 2013
Credit card spend down 9.5 pct Page 2
Guia block owner slams govt delay
Home rent reform urged
Nova City to get shopping mall Page 7
egislator José Pereira Coutinho has proposed major reforms to Macau’s home rental laws. He says they are too biased toward the interests of landlords and agents, with owners able to raise rents at any time during the initial two-year contract period. Some tenants are being forced to move two, three or even four times per year if landlords decide to sell in Macau’s currently overheating property
market, he suggests. His draft bill proposes no rent rises in the first two years of tenancy, followed by an inflation-tied cap. But he admits it’s unlikely to get enough support from his fellow Legislative Assembly members – many of whom are landlords.
A massive undersupply of gaming in Macau says Nomura
Macau gaming revenues could reach the equivalent of US$70 billion (560 billion patacas) by 2017 – nearly twice last year’s tally of US$38 billion – suggests a new report from Nomura Equity Research. “We have long believed that Macau is an undersupplied market when viewed from the perspectives of total gaming positions and population per position,” says the paper from New York-based analysts Harry Curtis, Louise Cheung and Brian Dobson.
‘Flexible’ holiday pay proposed Page 16
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Red tape rings market for moneychangers
HSI - Movers Name
Get tough on ‘bloated’ public investment figures Demand for currency exchanges has been rising along with tourist spending. But the number of licensed moneychangers is failing to keep pace. The Monetary Authority of Macau granted only one new licence – to British firm Travelex – in the past five years, and none to Macau residents. Six applications came from residents between 2008 and 2012 the authority said in a reply to a legislator. Page 2
The government should crack down on some departments that are grossly inaccurate with their investment budget estimates says Ho Iat Seng, vicechairman of the Legislative Assembly. Mr Ho said the assembly had told Secretary for the Economy and Finance Francis Tam Pak Yuen several times that the bureau should have the power to demand that the various departments give more accurate forecasts of their capital spending. Page 3
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May 15, 2013
Red tape rings market for money changers The business is there to be had, but it takes time to become a money changer Vítor Quintã
he amount of business that money changers do has been rising fast, but the number of licensed money changers is failing to keep pace with the increase in demand for their services. The Monetary Authority of Macau has revealed that it has granted no new money-changing licences to Macau residents in the past five years. The authority said in reply to an inquiry by Legislative Assembly member José Pereira Coutinho that it had received six applications from residents between 2008 and 2012. The authority made its reply public last week. It said it was still considering two of the applications. The other four applications had been withdrawn when it had become clear they did not meet the legal requirements, it said. The authority said an application “requires an in-depth assessment and evaluation of very diverse factors” and so took “a pretty long time” to consider.
At present, 12 companies have money-changing licences, and the six casino operators are also authorised to change money. The combined turnover of the licensed money changers was 29.5 billion patacas (US$3.7 billion) in 2011, official data show, more than half as much again as in 2009. The combined turnover of the exchange counters in casinos was 14.2 billion patacas in 2011, also more than half as much again as in 2009. Mr Coutinho said last December that the number of money changers outside casinos was insufficient to handle the huge amounts of money brought in by tourists. He said last November that the few licensed money changers “are able to obtain massive profits through mechanisms that have little or nothing to do with transparency”. The only newcomer to the money-changing market in the past few years was London-based Travelex Group Ltd. Travelex now has two outlets here: in the AIA Tower, in the
Macau Tower. A third one will open in Old Taipa village. The chief executive of Travelex, Peter Jackson, said in February that his company hoped to have several bureaus de change here eventually. Business Daily tried to get in touch with Travelex to ask it about its plans to expand here, but without success. A licensed money changer must have official permission to open a new outlet. It must also have a Macau resident on its board. Mr Coutinho said the paucity of options meant tourists often changed their money in “unlicensed and non-supervised” places such as restaurants and shops. He said this practice carried “inherent risks”, one being that it might open the door to money laundering. The Monetary Authority said it would “investigate and apply sanctions” but only “if it is confirmed that money exchange services are being offered without the necessary authorisation”.
Travelex’s third currency exchange outlet in Macau will open in Old Taipa village (Photo: Manuel Cardoso)
More have plastic, but don’t flash it The number of credit cards billed in both yuan and patacas continues to rise Tony Lai
anks issued more credit cards in the first quarter of this year but cardholders seemed less willing to splurge, official data show. By the end of March 668,966 credit cards were on issue, 16.3 percent more than a year earlier and 3.1 percent more than three months earlier, according to data released yesterday by the Monetary Authority of Macau. Cardholders used them to make 3.18 billion patacas (US$397.5 million) worth of transactions in the first quarter, 6.7 percent less than in the fourth quarter of last year. Macau people tend to use credit cards less in the first quarter of any year than in the fourth. Cardholders spent an average of 1,582.4 patacas per month with each credit card in the first quarter, according to Business Daily’s calculations, 9.5 percent less than in the preceding quarter. At the end of the first quarter of 2009 the number of credit cards on issue was 330,734, and since then it has doubled. The average amount cardholders spend per month with each card has risen by 3.1 percent in the past four years. In the first quarter cardholders used just 28 percent of the 11.39 billion patacas in credit available to them, 31.4 percent less than in the preceding quarter. The number of credit cards on issue billed in both patacas and yuan had risen to over 112,000 by the end of the first quarter, 36.8 percent more than a year before. In contrast, number of credit cards on issue billed in yuan only had fallen to just 34. The number of credit cards on issue billed in patacas only had risen by 13.9 percent to nearly 484,000 and number of credit cards on issue billed in Hong Kong dollars had risen by 7.6 percent to 72,461. Banks began issuing cards billed in both patacas and yuan in the third quarter of 2009, and they became popular with people that use credit cards for transactions both here and in mainland China.
May 15, 2013
Govt scored for ‘bloated’ capital budget forecasts Critics say money set aside for capital spending could be put to better use Stephanie Lai
government money that could instead be put in the fiscal reserve so it could be invested, he said. The government’s budget surplus is added to the fiscal reserve, which contained 166.22 billion patacas (US$20.54 billion) at the end of January. The budget surplus in the first four months of this year was 39.6 billion patacas, not far off the surplus of 41.07 billion patacas envisaged for the whole year.
he government should rein in departments that make excessive forecasts of their capital spending because they are preventing the fiscal reserve from putting the money budgeted to better use, according to Legislative Assembly vice-president Ho Iat Seng. Mr Ho and University of Macau professor of economics Henry Lei Chun Kwok think the government makes a poor job of drawing up its budgets. “There is usually a 30 to 40
percent difference between the projected revenue and spending for any fiscal year and the actual sums,” Mr Lei told Business Daily. “There should be more stringent quarterly reviews done to check public spending and revenue against the government’s projections, to see if any adjustments are needed,” he said. “The public, or at least the Legislative Assembly, needs to be updated about this review, as well.” Mr Ho told Business Daily that said some government departments
gave the Financial Services Bureau “bloated” forecasts of their capital spending. He did not say which departments. He said the assembly had told Secretary for the Economy and Finance Francis Tam Pak Yuen several times that the bureau should have the power to demand that the various departments give more accurate forecasts of their capital spending. Erroneously high forecasts of their capital spending locked up
MOP39.6 bln Budget surplus in the first four months of this year
Government capital spending rose last month as bills for the public housing in Seac Pai Van were settled (Photo: Manuel Cardoso)
Developer of Guia Hill tower criticises govt The owner of the suspended project says a government offer to buy the site was ‘unrealistic’ Stephanie Lai
he owner of an upmarket housing project in Calçada do Gaio, near Guia Hill, published yesterday an open letter accusing the government of not even trying to solve the problems it caused by suspending the project. The developer, San Va Construções e Fomento Predial Ltda, was building a residential tower 126 metres high on the site,
but had to stop in 2008. That was because the government had put a limit of 52.5 metres on the height of all buildings in the area, to preserve the views from the Guia Lighthouse, a World Heritage site. In a one-page open letter published in the Chineselanguage Macao Daily News, San Va says the authorities have
“spent five years in internal discussion, which far exceeds any reasonable period prescribed for administrative procedures”. The company says that in December 2010 the government made an “unrealistic” offer to buy the site for 1,726 patacas (US$216) per square foot of gross floor area that the project was expected to yield. The offer “did not cover the income losses of the construction parties, our project loan interest, and other financial losses incurred on our frozen capital,” the company says. The government made the offer on the advice of an adviser to the Secretariat for Transport and Public Works, San Va says. In a written statement issued yesterday, the Land, Public Works and Transport Bureau denied that the offer was based on advice from the secretariat. San Va says: “Several times we requested the legal and scientific basis of the government’s purchase proposal, though regrettably we received no reply.” Business Daily was unable to
Government capital spending jumped to 424.7 million patacas last month from 21.1 million patacas in March. The jump was due mainly to payments for the construction of the undersea tunnel connecting the city to the University of Macau’s new campus on Hengqin Island, and for the construction of public housing in Seac Pai Van. Over 66 percent of the money in the capital expenditure budget is for new infrastructure such as the Light Rapid Transit (LRT) elevated railway and the artificial island where the Hong Kong-Zhuhai-Macau Bridge will land. Despite the jump in capital spending last month, in the first four months of this year the government spent only 2.4 percent of the amount budgeted for capital expenditure for the whole year. Mr Ho does not consider this percentage too low, in the light of the government’s pattern of capital spending in years gone by. Capital spending tends to be higher in the second half of any given year, when the government pays the bills for big contracts. “The April figure is normal, as in the first quarter the government made the remaining payments for multi-year projects like the Seac Pai Van housing,” Mr Ho said. “And some big infrastructure projects, such as the LRT, were just at the opening stage, where digging had begun, which is not an item entailing big payments,” he said. “Last year the execution rate was higher than in previous years as it was a period with more multi-year infrastructure projects, like the public housing project in Ilha Verde.”
Construction of a tower 126 metres high next to Guia Hill has been suspended since 2008 (Photo: Manuel Cardoso)
contact San Va to get further comment. We also asked the Land, Public Works and Transport Bureau when it might solve the problem, but it did not answer. The bureau said only that it would continue to seek a settlement and keep trying to put a value on the suspended project.
May 15, 2013
Macau BIHL audit chairman resigns
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The audit committee chairman at Birmingham International Holdings Ltd has resigned. Accountant Raymond Yau Yan Ming was one of six current or former directors of BIHL officially criticised by the Listing Committee of the Hong Kong Stock Exchange in September 2012. It followed a 72-hour delay during August 2009 in reporting a ‘notifiable transaction’ to the exchange. That involved transfer of three million pounds (36.7 million patacas) to an escrow account as part of BIHL’s purchase of Birmingham City Football Club. BIHL’s chairman Carson Yeung Ka Sing is currently on trial in Hong Kong on unrelated money-laundering charges.
HOSPITALITY Freight fright After the introduction of direct flights across the Taiwan Strait made it unnecessary for travellers between mainland China and Taiwan to use Macau or Hong Kong as a staging post, attention focused on the fall in the number of passengers that use Macau International Airport. While the number of flights to and from Macau has risen lately, doubts about the viability of the airport in the long run persist. And there is more to airports than passengers. The introduction of direct flights across the Taiwan Strait also reduced the amount of cargo that the airport handles. The airport’s cargo throughput is now is under 28 percent of what it was five years ago.
Bill aims to keep rent rises below inflation A legislator calls for housing rents to be frozen during the first two years of a lease Tony Lai
Most cargo the airport handles comes from or goes to mainland China or Taiwan. Taiwan was the origin or destination of 59,000 tonnes of the cargo that the airport handled in 2008, or about 58 percent of the total. Last year Taiwan was the origin or destination of only about 14,000 tonnes, or 51 percent of the total. The airport’s throughput of cargo going to or coming from the mainland is now less than onefifth of what it was in 2008, and less than the throughput going to or coming from anywhere else in the world apart from Taiwan. The airport’s throughput of cargo going to or coming from the rest of the world is now only half what it was in 2008. But because less cargo is carried between the mainland and Taiwan, the proportion of the throughput going to or coming from the rest of the world is roughly double what it was before. Just think: not long ago the airport was still making plans to expand its cargo services.
egislative Assembly member José Pereira Coutinho has put forward a bill that would, if enacted, give tenants a break from relentless increases in housing rents. Mr Coutinho’s bill would allow no increases in rent during the first two years of a lease, and subsequently allow no increases greater than the annual rate of inflation. But Mr Coutinho admits that the assembly will probably throw out the bill. He tabled the bill in March, but it was published on the assembly’s website only on Monday. “I proposed this bill because many people in Macau cannot buy or rent a home nowadays, as the prices are too high,” Mr Coutinho told Business Daily. “I have many friends who have had to move house four or five times a year as their landlords keep raising the rents,” he said. No official data on housing rents have been published since the 2011 census. The average price of residential floor space rose to 88,097 patacas (US$11,012) per square
metre in March, the most ever. Mr Coutinho’s housing rent control bill says: “The first adjustment can only be proposed two years after the tenancy contract has become effective.” After that the rent can be increased only once a year, and then only by less than the rate of consumer price inflation in the preceding 12 months, the bill says. “I am open up to including other factors in the calculation besides inflation,” Mr Coutinho said.
Too troublesome Tenants that Business Daily spoke to support his proposals. “My landlord raised the rent in January by HK$1,500 to HK$7,500 a month,” said said Mr Kwan, who asked to be identified by his family name only. “We definitely think it is too much, but it is just too troublesome to look for a new place.” Mr Kwan lives with his partner in a two-room flat in the Areia Preta district. University student Candice Wang and two fellow-students rent a twobedroom flat on Taipa.
Fall in air cargo, 2008-2012
No official data on housing rents have been published since the 2011 census
“We have no choice when dealing with the landlords. Either we accept a ridiculously high increase or we move out,” Ms Wang said. The chief executive of Midland Realty (Macau) Ltd, Ronald Cheung Yat Fai, said of the bill: “This proposal just imposes too many restrictions.” Mr Cheung said Macau had a free-market economy. “Landlords regard [their property] as an investment instrument and this will impinge on their rights and interests.” But he thinks freezing rents for the first two years is worth considering, to balance the interests of landlords and tenants. Mr Coutinho’s housing rent control bill is likely to suffer the same fate as the other seven bills he has tabled in the assembly this year. His fellow-members voted down all of them. “One of my bills containing only one clause was rejected because they said they were too busy,” Mr Coutinho said. The assembly is struggling to pass several bills before it is dissolved for elections later this year.
May 15, 2013
Macau US$70 bln market by 2017: Nomura ‘Undersupplied’ market to grow despite macro uncertainties, say analysts Michael Grimes
acau gaming revenues could reach the equivalent of US$70 billion (560 billion patacas) by 2017 – nearly twice last year’s tally of US$38 billion – suggests a new report from Nomura Equity Research. The paper – by New York-based analysts Harry Curtis, Louise Cheung and Brian Dobson – spotlights the combination of strong and growing consumer demand, as more Chinese cities join the mainland’s Individual Visa Scheme – with limited table supply under the Macau government’s table cap policy – as important factors in growth. “History shows that an undersupplied market grows despite macro uncertainties, and the Las Vegas market from 1990-2005 is an excellent example,” suggest the authors. “We have long believed that Macau is an undersupplied market when viewed from the perspectives
of total gaming positions and population per position. Its revenues have increased over the last five years by 180 percent versus a 39 percent increase in gaming positions,” add the Nomura analysts.
The bank estimates Macau currently has 57,187 ‘gaming positions’ i.e. seats for gamblers on local casino floors. It doesn’t specify if that figure includes slot machines and stadium-style electronic table
games as well as live dealer tables. But it does say that when judged on the basis of the populations of Hong Kong and urban Guangdong – still the main market for Macau casinos – it works out to 1,891 people per seat. Even if not all those people are economically eligible to gamble, when the urban populations of other parts of China are added, the ratio of Macau gaming positions to target consumers is likely to look even more attractive. By comparison, the United States has only 227 people per gaming position, suggests the research unit. In the Macau market, the government’s 5,500-table cap on live dealer gaming tables was superseded in January by a ten-year scheme to control table numbers. It is supposed to limit table inventory expansion to a compound annual growth rate (CAGR) of three percent from the 5,500-table baseline. Under a section headed ‘$65b-$70b 2017 market size estimate’, Nomura’s report says of Macau’s general infrastructure: “…capacity growth in Macau is increasing at an estimated CAGR of around eight percent over the next five years, while we expect visitation and revenue to grow at a CAGR of around five percent and around 10 percent, respectively. When viewed thru mid-2015, the outlook is even brighter. Supply growth of tables is near zero, so the positive spread between demand and supply is wide.” Nomura also increases its estimate for year-on-year revenue growth in calendar year 2013 to 15 percent from its previous estimate of 13 percent.
Corporate Konami’s giant slot cabinet at G2E Asia Konami Gaming – a supplier of equipment to the region’s casino markets – is to exhibit video slot games and its new Podium Goliath slot cabinet during the Global Gaming Expo 2013 trade show in Macau next week. The firm – part of Japan’s Konami Corp. – says it recently opened a branch office in Singapore as part of its focus on emerging markets in Asia including Macau. The Podium Goliath is the latest version of the firm’s most popular cabinet. It stands more than seven feet (2.13 metres) tall and features dual 32-inch, high definition liquid crystal display screens and 360-degree lighting. It will be paired with Konami’s most popular slot game titles. The firm will also exhibit Synkros, the latest version of the Konami Casino Management System. As well as offering venue managers real-time analysis of the casino floor, it also enables patrons to play slot tournaments against other patrons ‘on demand’.
Macao Poly-GSA course: students graduate soon The first class of students from a collaboration between Macao Polytechnic Institute’s Technology Program and the Gaming Standards Association will graduate this summer. “It was the GSA standard that really stimulated us and gave us the idea for the programme,” said Rita Tse, coordinator of the Institute’s computing programme. “Together we hope to bring that talent and technology to Macau. We wanted to make a contribution to the community. Our goal is to create innovators,” she added. The GSA is an international trade association aiming to benefit gaming manufacturers, suppliers, operators and regulators. It specialises in the identification, definition, development, promotion and implementation of common technical standards for the sector. That enables “interoperability, innovation, education and communication for the benefit of the entire industry,” it says. At G2E Asia, GSA will discuss its standards and its upcoming Open Forum, which takes place on June 11 at Treasure Island in Las Vegas, Nevada.
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May 15, 2013 April 19, 2013
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Wynn Resorts objects to Japan court’s say Michael Grimes
Small chips More and more companies have been created in the past few years. Their average size, as measured by their capital, is small. The average capital of the 15,000 and more companies created in the past five years was about 187,000 patacas (US$23,392) when they were set up. The lowest average capital of newly created companies in any one of those five years was 135,000 patacas, in 2009, and the highest was just under 290,000 patacas, in 2011. The number of companies that closed also rose every year, and by the end of the five years 2,420 had been wound up. Interestingly, the average capital of the companies wound up was over 1 million patacas, much more than the average capital of the companies newly created. Part of the difference may be due to under-reporting, especially under-reporting of the closure of very small companies, which would make the figure for average capital higher than it should be.
The chart shows the average capital of companies created in each of the past five years in selected industries. The figures show some volatility, both across and within sectors. The averages had their ups and downs, but all fall within a narrow band of low values. Fewer than 100 companies were created in the hotel and restaurant industry. That made the average capital of the companies created in any one year sensitive to the establishment of any new hotel that was bigger than average. The paucity of new, big hotels is the cause of the fall in the average capital of the companies created in 2009. Note the absence of data for 2012, due to statistical secrecy rules. Which applied to the case of firms’ initial capital is a bit surprising. J.I.D. The content of this column is the work of Business Daily’s journalists.
Manufacturing companies created, 2008-2012
ynn Resorts Ltd has objected to a Japanese court claiming any jurisdiction in the legal battle between the company and Kazuo Okada, a Japanese citizen and former Wynn director. The news is given in a Wynn Macau Ltd filing to the Hong Kong Stock Exchange. On August 28 last year, Mr Okada filed a complaint in Tokyo District Court against Wynn Resorts. He claimed a press release by the company in February last year had damaged his social standing and credibility. The news release from Wynn at that time outlined the company’s cancellation of Mr Okada’s near-20 percent stake in Wynn Resorts – then valued at US$2.7 billion (21.6 billion patacas). It also linked that fact to his alleged “unsuitability” to be a Wynn Resorts director because of his business dealings in the Philippines. Mr Okada’s Japanese lawsuit – he has several others pending in the United States in connection with his ousting from the Wynn Resorts board – has named as d efenda n ts Wy n n R es o r ts , i ts directors – including the firm’s founder Steve Wynn but excluding Mr Okada – and also Kim Sinatra, the firm’s general counsel. “After asking the Okada parties to clarify the allegations in their complaint, the Wynn parties objected to the jurisdiction of the Japanese court,” said Wynn Macau in its latest Hong Kong filing. “The Wynn parties are vigorously defending against the claims asserted against them in this matter,” added the document. Mr Okada’s Jasdaq-listed Japanese company Universal Entertainment Corp. said in December it had filed a defamation suit in Tokyo against Reuters. The news agency had reported the Federal Bureau of Investigation in the U.S. was probing US$40 million in payments from Universal to a close associate of a former head of the Philippine Amusement and Gaming Corporation – around the time Universal Entertainment was granted concessions for a planned Manila Bay casino. Pagcor is the country’s regulatory body for gaming. Universal Entertainment and Mr Okada strongly deny any wrongdoing. Wynn Macau adds in the latest
Steve Wynn and Kazuo Okada
filing that Wynn Resorts has not so far received any subpoena from U.S. federal authorities – following the confirmation in early April by
the U.S. Department of Justice – of a criminal investigation into Wynn’s US$35 million bequest to the University of Macau.
Right of reply
To an article published in Business Daily on May 6, 2013 LT Game Limited is a company incorporated and with its headquarters in the British Virgin Islands who owns the global (including Macau) rights to use, distribute and maintain the material and equipment that uses, inter alia, the invention object of the Invention Patent l/380. The Invention Patent l/380 is registered in Macau and, as one can read in the heading of the Patent title, its invention refers to a “terminal and gaming system” (and not to a “concept” as wrongly stated in a quote of Alfastreet’s marketing and sales manager). Moreover, LT Game Limited does not own any invention patent (registered in Macau or elsewhere) and thus, there are no ‘patents’ to be challenged by SHFL or any other entity. Furthermore, neither LT Game Limited or any of its representatives nor any affiliated company or its representatives or even the inventor or the lawful owner of the Macau registered Invention Patent l/380 or its representatives has ever claimed, represented, expressed, declared, stated, or even suggested “it has an effective monopoly on multigame terminals involving live dealer baccarat” or has ever claimed, represented, expressed, declared, stated, or even suggested that own the exclusive right to sell in Macau any casino multi-gaming system or any electronic products that allow to play more than one casino game in real time and simultaneously. Finally, LT Game Limited as well as the lawful owner of the Macau registered Invention Patent l/380 have always been open to discuss the terms and condition under which any entity whatsoever may import, manufacture, offer, display, store, use, sell or distribute in Macau material and equipment that uses the invention protected by the Macau registered Invention Patent l/380. Alfastreet was one of the companies that did not want to further discuss such terms and conditions. Betty Zhao LT Game Limited COO
May April15, 19,2013 2013
Nova City to get shopping mall Foundations of residential development’s fifth phase to start this year Vítor Quintã
Shun Tak is close to launching the last phase of its Nova City residential project
he fifth phase of Taipa residential development Nova City will include a shopping centre with over 650,000
square feet (60,400 square metres). The foundation works are expected to start “by mid-2013,” developer Shun Tak Holdings Ltd
Macau sales overperform as Ferragamo profit surges
confirmed in a written reply to the Portuguese-language newspaper Hoje Macau. In its 2012 annual report, released in March, the conglomerate had said the “large-scale lifestyle” mall would house supermarkets, dining outlets and “leisure retail and entertainment components”. Shun Tak will build over 2.3 million square feet of residential units in eight towers above the shopping centre. The project is still “under planning,” the Hong Kong-listed company added. Shun Tak announced in February a bond scheme to raise up to US$1 billion (7.9 billion patacas) for “general corporate purpose”. Pre-sales for Nova Park, the fourth phase of Nova City already under construction, were launched in March 2012. Shun Tak had already pre-sold 334 of Nova Park’s 600 apartments by the end of last year for an average selling price of HK$5,200 per square foot. Nova Park’s three residential towers should be ready by the fourth quarter of 2014, the company said at the time. “Shun Tak currently has a pipeline of around 1,000 residential units in Macau,” Gregory Ku Ka Ho, managing director in Macau for property services company Jones Lang LaSalle, told Business Daily in February. “It has probably the biggest land bank of any developer here,” he added.
Salvatore Ferragamo SpA’s sales in Macau were higher than the Italian shoemaker’s expectations in the first quarter of this year, the company said. The luxury retailer said in a presentation on Monday that its operations in Macau and Hong Kong have been “overperforming”. It did not disclose any sales figures. Ferragamo has four stores in the city. The Florence-based company reported first-quarter profit that exceeded estimates and confirmed its projection for earnings growth this year. Earnings before interest, taxes, depreciation and amortisation rose 26 percent to 48 million euros (499 million patacas), Ferragamo said on Monday in a statement after the stock market closed. Analysts predicted 42.9 million euros, according to the average of nine estimates compiled by Bloomberg. Business patterns this year justify expectations for increases in revenue and profit through 2013 even as sales growth slows, chief executive Michele Norsa said on a conference call. Sales in the quarter advanced 8.6 percent to 281.9 million euros. Analysts estimated sales of 282.4 million euros, according to data compiled by Bloomberg. Revenue rose 6.2 percent for the Asia Pacific region, Ferragamo said, with the China market “growing (at different speed across brands and cities)”. V.Q. with Bloomberg News
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May 15, 2013 April 19, 2013
Renewables investors fear
Solar to wind’s US$3.5 bln due this year raises risks
Slump on naphtha imports point to slower industrial growth
Clyde Russell Reuters market analyst
hina’s slumping naphtha imports go a long way to explaining why industrial output growth has been muted and why it may not accelerate much in coming months. Net imports of the refined oil product, which is the building block for plastics and synthetic fibres, plunged 38 percent in the first quarter of 2013 to 612,654 tonnes from the same period a year earlier. Final figures for April aren’t available yet, but given that overall net refined product imports were only 1 percent higher than in March, it’s reasonable to assume that net imports of naphtha were largely steady. The sharp decline in naphtha imports fits with the underwhelming growth in industrial output, which rose 9.3 percent year-on-year in April – up from an 8.9 percent rise in March but below the consensus forecast for 9.5 percent. Lower naphtha imports are a sign of weakened demand from factories that make products with high plastics content such as toys, cars and electrical goods, as well as from clothing and fabric manufacturers. Another factor that explains some of the weakness in naphtha imports is the increased refining capacity in China. China brought online about 540,000 barrels per day (bpd) of new capacity in the last quarter of 2012, not all of it being fully utilised. Working on the assumption of an extra 20,000 bpd of naphtha being produced domestically in the first quarter of this year over 2012, this equates to an additional 212,000 tonnes. However, net imports dropped by 376,709 tonnes in the period, according to customs data, meaning that even without the new refining output, China’s net naphtha imports would still have been considerably lower than in the first quarter of 2012.
Weak cracks Since the 2008 global recession, naphtha imports have tended to be a precursor of growth in China’s industrial output. Naphtha imports rose from 38,028 tonnes in October 2008 to 359,544 tonnes in September 2009, leading a rise in industrial production growth from 5.4 percent in November 2008 to
19.2 percent by November 2009. In May 2011 naphtha imports were 107,201 tonnes, jumping to 363,675 tonnes by January 2012, while industrial output growth accelerated from 13.3 percent in May 2011 to 21.3 percent by February 2012. Conversely, after the January 2012 peak in naphtha imports, they fell to 131,873 tonnes by April that year, and industrial output growth more than halved to 8.9 percent by August. It’s worth noting that a big surge in naphtha imports to 460,781 tonnes in November last year was accompanied by only a small rise in industrial output growth, suggesting that traders bought cargoes in the expectation of rising factory activity, which then failed to materialise. The current decline in net naphtha imports has yet to show up fully in industrial production growth, which has been trending sideways since April last year, but it raises the risk that factory output may continue to disappoint. Weak naphtha imports are also unwelcome news for Asian refiners who are already battling soft profit margins. While China is only one of the major naphtha consumers in the region, others being Japan and South Korea, its imports tend to correlate with the profit margin, or crack. Naphtha’s premium over Brent crude oil was at US$97.33 a tonne on Monday, up from the 2013 low of US$66.28 on May 3, but still 44 percent down from the year’s high of US$175.03 on February 14. In addition to lower Chinese imports, the likelihood is for higher exports of naphtha out of India and the Middle East as new refining capacity comes online. Coupling those scenarios with the threat of cheaper petrochemicals in the United States, where at least 10 new plants that will use natural gas as a feedstock are planned or under construction, the outlook for improved naphtha margins in Asia starts to look grim. A short-term fix would be higher industrial output in China, but with U.S. growth sluggish, much of Europe battling recession and limited room to manoeuvre on monetary policy within China, this seems optimistic as well.
enewable energy companies from China and Hong Kong need to repay US$3.5 billion of debt this year, prompting global investors to fret that another issuer will follow Suntech Power Holdings Co. into default. Solar, wind, hydro and nuclear companies also have the equivalent of US$5.3 billion of notes due next year, data compiled by Bloomberg show. The 2014 yuan bonds of LDK Solar Co., which failed to fully repay US$23.8 million of convertible notes last month, slid to a seven-month low of 34 yuan per 100 yuan face value yesterday, pushing the yield to 220 percent. That compares with the 69 percent for Bonn-based Solarworld AG’s 2016 notes. The debt pile includes US$766.5 million of dollardenominated convertible bonds in solar companies whose shares have slumped 88 percent from their 2007 high, making the equity option unattractive for investors. Suntech defaulted on a US$541 million equitylinked bond in March, while LDK Solar must settle a US$240 million loan unless it spins off a unit by June 3, filings show. JA Solar Holdings Co., which has US$116.6 million due this week, has said it has prepared funds to repay the debt. “For the solar companies, it’s a function of too much debt and poor market dynamics leading to an inability to refinance,” said Bryan Collins, a Hong Kong-based fixed-income portfolio manager at FIL Ltd,
Suntech was once the world’s biggest solar panel maker
which is known as Fidelity Worldwide Investment and managed US$248.2 billion as of March 31. “For the more experienced and conservative companies, they will refinance well in advance but, for convertible bonds especially, I think they issue on the hope some will be converted to equity.”
Shares slide Convertible securities pay a fixed coupon for the life of the bond while offering investors the option to switch the notes into shares in the company at an agreed upon price. While shares of the biggest solar companies have rallied 43 percent this year as nearzero interest rates in the U.S., Europe and Japan burnish
the appeal of riskier assets, they plunged for four of the past five years, according to a Bloomberg index of the manufacturers. Suntech’s stock has slid to 63 cents from a high of US$47.81 in August 2008 after the bonds were sold, the data show. Wuxi Suntech Power Co., a subsidiary, will meet its creditors on May 22 as a Chinese court considers how to restructure its debts, according to a May 1 company statement. The manufacturer has delayed filing its full-year results for 2012, it said in the announcement. More than 60 percent of bondholders entered into a forbearance agreement in March under which they agreed not to exercise their rights until
China seen boosting oil-st
Beijing buys about half its crude from overseas
hina will probably c o m m i s s i o n additional storage sites for its strategic petroleum reserve this year, boosting crude demand even
as construction work on the programme takes longer than expected, according to the International Energy Agency. The nation, the world’s
second-biggest crude consumer, will add 245 million barrels of capacity in the second phase of its emergency stockpile plan, the Paris-based IEA said in its Medium-Term Oil Market Report released yesterday. That’s up 45 percent from the IEA’s original estimate of 169 million barrels. Completion may be delayed to 2015, according to the agency, which originally forecast the project would be finished by the end of this year. China, which buys about half its crude from overseas, is building emergency oil reserves equivalent to 100 days of net imports before 2020 in three phases to lessen the risk of supply disruptions, China Petrochemical Corp., the nation’s top oil refiner, said in September 2009, citing a plan approved by the State Council. While high
May April15, 19,2013 2013
today, according to a statement at the time. The Chinese solar issuers with dollar convertibles maturing in 2013 all booked losses last year or are expected to have done so. JA Solar’s shares have fallen 95 percent since the company sold its notes in 2008, while China Sunergy Co. slid 93 percent and Trina Solar Ltd lost 58 percent of its value, data compiled by Bloomberg show.
Rising risks JA Solar, whose convertible bonds mature today, is prepared to repay the debt, chief operating officer Xie Jian has said. The company had 3.03 billion yuan (US$493 million) of cash and cashequivalent assets at the
Top official sacked over ‘disciplinary violations’
end of last year, according to regulatory filings dated April 16. Chinese and Hong Kong companies have sold more than six times more notes in the U.S. currency this year to refinance debt than for the same period in 2012, data compiled by Bloomberg show. Yields on dollardenominated debt shrank to 5.47 percent this year, 1.84 percentage points less than a year ago, according to JPMorgan Chase & Co. indexes. Funding costs have also fallen onshore. Yields on China’s benchmark 10year government bonds fell 11 basis points last month, the most since May 2012, according to Chinabond. The notes paid 3.43 percent as of yesterday. Similar-maturity top- rated corporate bonds pay 5.10 percent, 6 basis points less than at the end of March, Chinabond indexes show. Bond risk for the nation rose last week. The cost of insuring China’s debt against non-payment with creditdefault swaps increased 1.5 basis points on Monday to 73 basis points, according to data provider CMA. Suntech’s bondholders face losing most of their principal as more than 85 percent of the company’s long-term assets as of 2011 are in China, according to regulatory filings. LDK reached a settlement with holders of US$16.6 million of its US$23.8 million outstanding convertible bonds that were due to be repaid last month, it said at the time. Bloomberg News
torage capacity crude costs and construction delays have slowed purchases so far, many regional administrations have expressed interest in holding supplies, the IEA said. “What is likely is that some additional Phase-2 sites will be commissioned in 2013, which, when considering the probable spare capacity at sites completed in 2012, could buttress China’s demand for crude over the year,” the agency said in the report. “If China completes tanks at Huizhou and Huangdao, which many observers believe likely to be completed in 2013, this could average over 56 million barrels, or 150,000 barrels a day, of incremental oil.” China finished filling the first phase of its strategic reserve, with 103 million barrels, in 2009 after
spending an average US$58 a barrel buying crude for the stockpiles the previous year, according to the National Energy Administration. The second phase, which started with the Dushanzi and Lanzhou facilities in the country’s western region, was designed with eight new locations, China National Petroleum Corp, the nation’s largest oil company, said in its annual research report in January. Tanks in the third and final phase of the plan should add about 152 million barrels of storage, which would take the overall capacity to 500 million barrels by 2020, the IEA said. That would be equivalent to about 60 days of net crude imports, which may climb to 8.4 million barrels a day by 2020, according to the agency. Reuters
he Communist Party has sacked a top government official, state media reported yesterday, following a probe into graft allegations that emerged on the Internet. Liu Tienan, deputy director of the powerful National Development and Reform Commission (NDRC), was dismissed, the official Xinhua news agency said quoting a statement from the ruling Communist Party’s Organisation Department. Citing the statement, Xinhua said the decision to fire him “was made because of Liu’s suspected involvement in serious disciplinary violations”, a
euphemism for corruption in China. Besides his position as deputy director, Mr Liu is also a member of a senior group of Party officials at the NDRC. Xinhua did not specify from which post he was dismissed, but Mr Liu was no longer listed as deputy director on the NDRC’s website. State media reported on Sunday that Mr Liu, 58, was being investigated by the Communist Party body tasked with probing corruption and other malpractice by party members. “Liu Tienan, a deputy director of the National Development and Reform
Volkswagen plans new plant in Changsha G erman auto giant Volkswagen AG will build a plant in central China, a spokesman said yesterday, as it battles U.S. rival General Motors Co to be top foreign automaker in the world’s biggest car market. The plant in the city of Changsha, Hunan province, will start production in early 2016 with an annual output capacity of 300,000 vehicles, a Beijing-based spokesman for the automaker told AFP. “We are quite close to an official announcement. I think it will come this week,” the spokesman said, but declined to give an investment figure. The move comes as Volkswagen battles
U.S. a u t o g i a n t G M f o r dominance in the huge Chinese market, despite worries about over-capacity. Volkswagen delivered 2.81 million vehicles in China last year while GM sold 2.84 million vehicles in the country, making them its biggest foreign automakers. China’s annual auto sales rose only 4.3 percent year-on-year to 19.31 million units in 2012, hit by limits on numbers imposed by some cities to ease traffic congestion and tackle pollution. But management consulting firm McKinsey & Company Inc. last year predicted China’s passenger car market alone will grow
Commission [NDRC], is being investigated over suspected serious disciplinary violations, the Central Commission for Discipline Inspection of the Communist Party of China said,” Xinhua reported. No information concerning allegations against him was given. Allegations against Mr Liu, who was party chief of China’s National Energy Administration until March, surfaced when Luo Changping, a journalist at the influential business magazine Caijing, accused him of improper business dealings late last year. Mr Luo claimed the official used his position to enrich family members. The energy agency denied those allegations at the time. China’s newly-installed leaders have made tackling corruption a key policy, with President Xi Jinping saying there would be “no leniency” for wrongdoing. AFP
an average eight percent annually to 2020. The German car maker currently has 12 vehicle and component plants in China, and the Changsha plant is a joint venture with Shanghai-based SAIC Motor Corp Ltd, one of its existing Chinese partners. An environmental assessment report conducted last year by the Hunan Research Academy of Environmental Sciences and posted on its website put the investment at 12.1 billion yuan (US$2.0 billion). Volkswagen produced 2.6 million vehicles in China last year, with the rest of sales coming from imports, according to the group’s annual report. It delivered nearly 770,000 vehicles in China in the first quarter of 2013, up more than 21 percent from the same period last year, according to an earlier statement. AFP
May 15, 2013
Asia Sharif to appoint Dar finance minister Nawaz Sharif, whose party gained most seats in Pakistan’s election, plans to name Mohammad Ishaq Dar as finance minister, ahead of a national budget. Mr Dar was the country’s commerce minister in Mr Sharif’s first term and finance minister in 1999. He has a bachelor’s degree in commerce from the University of Punjab and has been a director of the World Bank, Asian Development Bank and Islamic Development Bank, according to his profile on the Senate website. Mr Dar would have about a month to prepare a national budget at a time when sluggish growth and one of the region’s lowest rates of tax collection risks a widening of the fiscal deficit.
CRA stepping up presence in Singapore casinos: minister Government also planning to introduce responsible gambling legislation soon Michael Grimes
Nomura retail assets climb to record Nomura Holdings Inc. increased retail client assets to a record 90.3 trillion yen (US$889 billion) in April, achieving a goal of chief executive Koji Nagai two years ahead of schedule, thanks to Japan’s stock rally. The country’s biggest brokerage added 6.5 trillion yen of assets under management last month, the biggest jump since Tokyobased Nomura started compiling the data in 2002, company spokesman Kenji Yamashita said. The increase underscores why securities firms are the biggest beneficiaries of Prime Minister Shinzo Abe’s stimulus policies as a surge in trading volume boosts brokerage commissions.
S. Korea leader urges talks on industrial park South Korean President Park Geun-hye said yesterday she wants talks with North Korea on removing raw materials and finished products from a joint industrial complex closed by military tensions. Gaesong was the most high-profile casualty of two months of elevated tensions that followed the North’s nuclear test in February. The South Korean government has already agreed to provide 300 billion won (US$270 million) in emergency compensation to investors from the 120 South Korean firms in Gaesong. Estimates of their total losses range from 1.0 trillion to 3.0 trillion won.
Aquino poised to win Senate Philippine President Benigno Aquino appeared set to win control of the 24-member Senate with vote counting under way in legislative elections, a result that would bolster his reforms. Nine Senate candidates backed by Mr Aquino are leading among the 12 seats up for grabs with about 54 percent of precincts reporting, according to an unofficial count posted on the website of Rappler, which is authorised by the Commission on Elections to collect results. They would join four Aquino allies currently in the Senate whose terms expire in 2016, giving him an effective majority in the upper house.
Singapore’s casinos – facing ‘more proactive enforcement’
ingapore’s Casino Regulatory Authority has stepped up its presence on the gaming floors of the city’s two gambling resorts, says a government minister. S Iswaran, Minister in the Prime Minister’s Office and Second Minister for Home Affairs and Trade & Industry, gave the news during a CRA seminar in the city. In his speech to delegates, Mr Iswaran said: “CRA dedicated more resources in early 2013 to increase its ground presence in the casinos for more proactive enforcement. Even as CRA steps up such enforcement
efforts, it is incumbent that you also engage the casino operators through regular dialogues to foster a strong culture of compliance.” The minister added the authority was also doing a study this year with behavioural scientists into the “psychological profile of local casino gamblers”. The government is also planning to introduce responsible gambling legislation and will require its casino operators to implement relevant policies approved by the CRA. Singapore legalised casino resorts in 2005 after a ban on casino
Gold rush lifts profit at India’s jewellery makers Precious metal is off to its worst start to the year since 1982
surge in demand for gold ornaments and coins after the biggest slump in prices in three decades is poised to boost profit at Rajesh Exports Ltd, India’s largest manufacturer and exporter of jewellery. Net income in the three months ending June may advance 20 percent after rising 3.3 percent in the same period a year earlier, Rajesh Mehta, chairman of the Bangalore-based company said in an interview yesterday. Sales at the 75 retail outlets owned by the company probably surged as much as 40 percent yesterday during Akshaya Tritiya, the biggest gold-buying occasion, from a year ago, he said.
The festival considered to be an auspicious day to buy the precious metal led to shoppers crowding jewellery stores to buy ornaments lifting sales at retailers such as Rajesh, Titan Industries Ltd and Gitanjali Gems Ltd, while a company roped in cricketer Sachin Tendulkar to promote its coins. Gold plummeted 14 percent in two sessions through April 15 in the worst slide since 1983, boosting demand from India to Australia. “Gold is God’s currency for people so the faith is much more,” P r i th v i r a j Ko th a r i , m a n a g i n g director of Riddisiddhi Bullions Ltd said yesterday. “Indians have blind faith in gold. From birth to death people need gold.”
gambling stretching back to British colonial times in the 1920s. The aim of the about face was to boost employment, tourism spending and the gross domestic product of the city-state. Barclays Capital said in 2011 the two integrated gaming resorts – Resorts World Sentosa and Marina Bay Sands that opened in Singapore in February and April 2010 respectively – had initially contributed an estimated 0.3 percent to 0.4 percent annually to the citystate’s gross domestic product. Mr Iswaran says the resorts have
Imports by India, the world’s biggest bullion consumer, may soar 47 percent this quarter to 225 metric tons from a year earlier as the drop in prices and festivals spurs demand, Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, said yesterday. Sales during Akshaya Tritiya are estimated to be 20 percent more than a year earlier, he said.
Never diminishing During Akshaya, a Sanskrit word meaning “that which never diminishes,” Indians begin new ventures or buy valuables with the belief it will bring luck and prosperity. Based on the lunar calendar, the date changes every year. Gold sales may jump 50 percent to 30 tons during this year’s festival, said Mr Kothari, who chose the day to open his first retail outlet to sell diamond-studded jewellery in Mumbai’s Zaveri Bazaar. The festival is considered by the country’s more than 900 million Hindus as the traditional day to buy precious metals. Bullion is also bought during religious festivals and marriages as part of the bridal trousseau or gifted in the form of
May 15, 2013
Asia so far created more than 22,000 jobs directly, and a further 40,000 throughout the economy. But the city-state’s industry is one of the most closely regulated in the world and is focused on minimising harm to low-income locals from the so-called ‘Heartlands’ neighbourhoods. In September 2010, only months after the resorts opened, the authorities barred the casinos from running free shuttle buses from such suburban areas. “This signal is to reinforce the point that they [the casino operators] are not supposed to go after the lowhanging fruit which the local market represents, but instead to focus their effort on winning additional tourists from abroad,” stated Vivian Balakrishnan, Singapore’s Community Development, Youth and Sports Minister in answer to a question in Singapore’s parliament. Only one of the two casino venues – Resorts World Sentosa – uses middlemen junket agents authorised to advance credit for high stakes gambling. They’re known in Singapore as International Market Agents (IMAs).
Tight controls In Macau a form of the junket system generates enormous amounts of revenue from VIP gamblers. That hasn’t been the case in Singapore. Only three IMAs are currently licensed in Singapore. They undergo a rigorous vetting process by the CRA
Number of direct and indirect jobs govt minister says created by Singapore casino resorts since 2010
CRA dedicated more resources in early 2013 to increase its ground presence in the casinos for more proactive enforcement
Retailers in Bangladesh to sign safety pact H&M and Zara joining safety agreement pressures Wal-Mart
S Iswaran, Second Minister for Home Affairs and Trade & Industry
and must apply on a yearly basis if they want to renew their licences. In addition, they’re not allowed to recruit Singapore citizens or residents as clients. In September last year, Genting Singapore Plc, operator of Resorts World Sentosa was fined S$600,000 (3.87 million patacas) by the Singapore regulator for breaching laws against reimbursing casino entry fees payable by locals. The fees are meant to be a barrier to locals spending too much time and money in the venues. Staff at Resorts World, operated by a su b s i d i a r y o f Ma l a y s i a ’ s Genting Bhd, illegally provided hotel accommodation, concert tickets and free admission to its Universal Studios theme park to about 3,400 people when they purchased or renewed the S$2,000 annual entry levy imposed on Singaporeans and official residents, the CRA said in a press release. Between February 6 last year and February 13 this year, Resorts World’s competitor Marina Bay Sands, operated by Las Vegas Sands Corp, was fined a total of S$917,500 by the CRA. It included S$475,000 in penalties for inadequacies in its video surveillance system, and S$92,000 for allowing some locals to enter the casino without paying the statutory entry levy of either S$100 for 24-hour access, or S$2,000 for a year’s entry.
The collapse is being called Bangladesh’s worst industrial disaster
fter Hennes & Mauritz AB and Inditex SA, Europe’s two largest clothing retailers, committed to an agreement to improve fire and building safety in Bangladesh, pressure is mounting on U.S. retailers to sign the pact. The European companies are joined by more than 1 million consumers who have signed petitions urging companies such as Gap Inc. to support the programme. Some institutional investors also are beginning to express concern about the safety issue, including the Illinois State Board of Investment, which owns shares of Wal-Mart Stores Inc. The cost of doing nothing could be severe for retailers, said Steve Hoch, a marketing professor at the University of Pennsylvania’s Wharton School. “Most brands are smart enough to embrace the issue at hand and signal to the consumers they’re doing something about it,” he said in a phone interview. “If it does tarnish the brand, it’s going to really cost them in the long run.” At least seven companies have agreed to sign the pact before today’s deadline set by the retailers for a decision. Some companies involved in the discussions that have balked are citing concerns about how much the cost would be to individual retailers and how legal issues would be addressed. A Gap spokeswoman, Debbie Mesloh, said yesterday in a statement that the company is “ready to sign on” pending a change to the provision regarding binding arbitration.
Factories shut down
J.C. Penney Co. began discussing a contractually enforceable document for Bangladesh working conditions in April 2011. As outlined, the proposal would require companies to pay suppliers more so factory owners could afford to make safety upgrades. The accord would run five years and would be funded by the participants, according to PVH Corp., owner of the Tommy Hilfiger brand, which said yesterday that it would join the effort and pledged US$2.5 million. The plan calls for a review of existing building regulations and enforcement, the development of a worker complaint process and a mechanism for employees to report risks, the company said. Since the collapse of the factory building two weeks ago, the government of Bangladesh has taken a more forceful stance on workers’ rights. Prime Minister Sheikh Hasina’s government has shut factories as the European Union’s Trade Commissioner Karel De Gucht considers steps including trade sanctions against Bangladesh. The deadly accident helped spur the Bangladesh cabinet on Monday to approve an amendment to labour law that gives workers greater freedom to form trade unions. After a series of worker protests, the government has agreed to raise the minimum wage. Factory inspections have been stepped up as well. Government inspectors have found 700 garment factories “faulty in terms of workplace safety” in the 2,400 units examined since February 7, Commerce Minister G.M. Quader told reporters yesterday. Bloomberg News
Gold sales may jump up to 50 pct during this year’s festival
jewellery by relatives. Gitanjali, India’s biggest gold and diamond jewellery retailer by revenue, forecasts sales will increase 30 percent to 35 percent this quarter from a year earlier, managing director Mehul Choksi said yesterday. Deliveries during
Akshaya Tritiya may have increased 50 percent to 60 percent, he said. Gold entered a bear market in London in April as investors sold the metal in favor of riskier assets on speculation that the global economy was recovering. Bloomberg News
The collapse of the Rana Plaza factory two weeks ago, the worst industrial accident in the country’s history, killed at least 1,127 and came after a series of deadly fires in Bangladesh that already had prompted activists to call for Western retailers to take more responsibility for work conditions there. About 200 factory workers blocked a highway and vandalised several plants in the industrial belt of Ashulia on the outskirts of Dhaka on Monday to demand higher pay, forcing owners to shut 300 facilities indefinitely from yesterday, according to Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association Retailers including Wal-Mart and
KEY POINTS Big retailers vow to improve safety conditions 300 units closed as workers protest Govt agrees to raise minimum wage Workers gain greater freedom to form trade unions
May 15, 2013
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May 15, 2013
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0.9956 1.5293 0.9545 1.2992 101.48 7.994 7.7614 6.1429 54.665 29.61 1.2385 29.828 41.115 9757 101.032 1.23994 0.8495 7.9888 10.3874 131.84 1.03
-0.1404 -0.5139 0.1048 0.0616 0.138 0 0.0013 0.0553 0.1281 0.2702 0.1373 -0.0302 0.0973 -0.164 0.2762 0.0532 -0.5697 -0.2979 -0.077 0.0758 0
-4.0663 -5.4587 -4.0964 -1.5011 -15.1557 -0.1351 -0.1392 1.4277 0.6037 3.2759 -1.3807 -2.6653 -0.2675 0.369 -11.5854 -2.6179 -4.0118 2.8628 1.3767 -13.8577 -0.0097
1.0625 1.6381 0.9972 1.3711 102.15 8.0111 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 105.433 1.25692 0.88151 8.4957 10.9254 132.4 1.032
0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1307 51.3863 28.56 1.2152 28.913 40.54 9255 74.482 1.20054 0.77553 7.7018 9.6245 94.12 1.029
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VOLUME CRNCY 1913755
AMAX HOLDINGS LT
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HANG SENG BK
HSBC HLDGS PLC
HUTCHISON TELE H
LUK FOOK HLDGS I
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Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
MGM CHINA HOLDIN
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May 15, 2013
Chinese women aren’t taking Buffett’s advice on gold Adam Minter
Shanghai correspondent for the World View blog
“Perhaps the majority of Americans cannot comprehend the unusual feelings Chinese people have toward gold and silver. They’ve never considered that rather than being afraid to invest in gold, the Chinese are more afraid that they won’t possess gold.”
‘Last straw investment’
n Sunday afternoon, a microblogger in Beijing logged into Sina Weibo, China’s leading social media platform, to gossip about the “auntie” next door. It’s a broad term of respect for an older woman, and his followers understood precisely what he meant when he tweeted, “The auntie next door used all of her retirement savings to buy gold. When asked what she’d do if prices keep dropping, she replied that if everyone kept buying gold, the price wouldn’t drop...” This might strike a conservative investor as reckless. But in China, where gold has long been a national obsession, a midApril record crash in global gold prices has been seen as an unprecedented buying opportunity. According to reports in China, Chinese have purchased 300 tons of gold worth more than US$16 billion since the crash. Photos of crowds packing jewellery shops and emptying their shelves are now regular features in the news media. On Monday, a police officer in Shanxi province tweeted, in regard to his actual aunt: “My aunt’s family has a gold store, and my colleague who’s in the
market for some gold for his mother asked if I could get him a cheap price. I asked, and my aunt said first come and take a look to see if anything catches your eye. But at the moment the display cases are empty, and they are unable to get new inventory. All I can say is that the power of the Chinese is frightening.” China’s voracious appetite for gold is long-standing. At Chinese jewellery stores, the spot price for gold is always prominently displayed. Calculators and scales are never out of a customer’s reach. Gold jewellery is desirable, but so are gold bars, and any jewellery store that considers itself full-service will stock ingots of various weights. (In April, an investor in Guangzhou bought 44 pounds of the bars, according to a local newspaper.) Special commemorative bars in various weights and designs were issued for the 2008 Beijing Olympics and the 2010 World Expo in Shanghai.
Gold frenzy The current rush is unusual in two ways. The first is its epic scale. The second is that, according to both traditional
and social media, aunties are doing most of the buying. Who are these aunties? In the imaginations of many, they are the fierce, middleaged housewives who walk through wet markets and supermarkets confidently, and pragmatically, negotiating bargains. When it comes to gold, as China Economic Weekly noted wryly on Monday: “They buy it like cabbage.” There’s more than a hint of sexism in such characterisations and little actual data – beyond photos of middle-aged women buying jewellery. Nonetheless, news media sources – especially state-owned ones – are willing to repeat unflattering stereotypes explaining why these Chinese women are so interested in gold. (The U.S.based news media also can’t seem to help themselves.) On Sunday, Shanghaibased Liberation Daily, a newspaper owned by the Shanghai Communist Party, not only joined other news outlets in comparing the gold-shopping habits of aunties to grocery shopping but also suggested: “Their knowledge of banking and
finance is close to zero, so their investments change with the winds. They’re also based on feelings, as well as the advice of close friends.” Social media tends to take a less critical, and more personal, view of the aunties. Depictions involving motherdaughter interactions, in particular, are very common. On Saturday, Zhongxiao Fang Fang Fang, the handle for a microblogger in Shenzhen, tweeted: “Yesterday my mother called me to say the price of gold has fallen, and to ask me to go to Hong Kong to buy gold. I said I didn’t want any. She very calmly said it would be good to prepare a dowry so I can get married!” It’s an adorable anecdote, but can it – and numerous stories like it – really account for China’s renewed gold appetite? Is the gold frenzy really just a matter of bargainhunting by aunties (and perhaps others)? On Monday, in an effort to explain the country’s peculiar passion for gold, the Beijing Daily newspaper published a feature comparing the Chinese hunger for gold with Warren Buffett’s aversion to it and other investments that don’t generate returns:
Still, even though China’s gold buyers have shown what might appear as a short-sighted passion for what some consider a lowreturn investment, they’re not necessarily acting irrationally. Some news outlets have taken pains to point out that a precious metal might not be such a bad savings plan if you live and invest in China. On Monday, Zhu Ning, a professor at the Shanghai Advanced Institute of Finance, offered a sympathetic and detailed defence of the aunties presented in a widely-cited blog post: “Why are Chinese aunties so frenzied in their quest for gold? The primary reason is the limited options for domestic investments. The country strictly controls realestate purchases; money could be saved in the bank but interest rates are low, and taking into account inflation, there are hardly any profits, but mostly losses; it’s been only a few years since the stock market slump, with investors losing much of their wealth. So, after gold prices fell, many people thought of gold as a last straw investment and now eagerly anticipate a future rise in value. They only want an investment outlet.” Zhu’s point likely stands, regardless of whether it was aunties or a more diversified group purchasing the large volumes of gold that have flowed out of Chinese jewellery stores over the past month. But on China’s microblogs, if not in its newspapers, there remains a stubborn Chinese confidence that the gold price is now in the hands of the aunties. “It’s almost Mother’s Day,” tweeted a Wenzhoubased microblogger on Saturday. “My mother bluntly told me to buy her gold.” Bloomberg View
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May 15, 2013
The mismeasure of poverty
Leading reports from Asia’s best business newspapers
Jomo Kwame Sundaram
Assistant Director General at the Economic and Social Development Department of the United Nations Food and Agriculture Organisation
Moody’s Investors Service estimates core Chinese shadow banking products totalled 21 trillion yuan (US$3.4 trillion) at end-2012, or 39 percent of 2012 gross domestic product (GDP). The ratings agency said on Monday that China’s shadow banking sector is large, referring to products which are relatively nontransparent, loosely regulated, and carry elevated credit risk. Moody’s said China’s banks have significant exposures to shadow banking activities, through their involvement in the structuring and marketing of wealth management products.
Asahi Shimbun Led by automakers, a large number of listed companies recorded increased profits for fiscal 2012, due in large part to a weaker yen and higher stock prices. About 370 companies on the Tokyo Stock Exchange announced their financial results on May 10, with many showing higher operating profits over the previous fiscal year. According to figures compiled by SMBC Nikko Securities Inc., of the 606 companies that announced their results by May 9, total operating profits increased by 9 percent over the previous year. The eight major automakers saw their profits increase by about 250 billion yen (US$2.5 billion) over the past fiscal year.
Taipei Times Taiwan’s two biggest airlines reported a decline in revenue last month from a year ago due to the impact of weak demand in the cargo sector. China Airlines Ltd, the largest carrier, posted NT$11.45 billion (US$384.23 million) in consolidated sales last month, down 1.85 percent from a year earlier. EVA Airways Corp also reported a drop in revenue, shedding 3.35 percent to NT$9.95 billion last month. “It will be difficult for the air cargo sector to stage a significant rebound this year, since global sentiment continues to be weak anduncertain,”CapitalSecurities Corp said in a research note.
Bangkok Post The baht strengthened, snapping a two-day slide, as the governor of the Bank of Thailand (BoT) said steps to slow the currency’s gains were not discussed at a meeting with government officials. BoT governor said the central bank’s rate-setting committee will meet on May 29 as scheduled, ruling out a special session. No one put pressure on the central bank to move on the policy rate at the Monday meeting, he said. The baht reached a 16-year high last month as monetary easing in developed nations increased the flow of funds to emerging markets.
n early 2012, outgoing World Bank President Robert Zoellick announced that the Millennium Development Goal of halving the global poverty rate relative to its 1990 level had been achieved in 2010 – five years ahead of schedule. But many analysts have challenged estimates that rely on the World Bank’s current poverty line, raised in 2008 from US$1 to US$1.25 per day, in purchasing power parity (PPP) terms. Critics argue that, for methodological reasons, the PPP-based poverty line misrepresents the prevalence of poverty worldwide. For example, the three rounds of the World Bank’s International Comparison Programme that have been conducted so far have each defined the poverty line differently, underscoring the weakness of the current measure. In fact, taking into account inflation in the United States, the poverty line should have been raised to US$1.45 per day in 2005. Improving global poverty estimates – the World Bank’s extend over three decades, beginning in 1981 – requires overcoming three major problems: insufficient survey data, flawed survey execution, and faulty PPP conversions. Unfortunately, the World Bank’s approach has evaded these issues or addressed them inadequately. First, many countries lack survey data showing how income and consumption are distributed among their citizens. The World Bank avoids this problem by assuming that the poverty rate of any country without such data matches the region’s average. But this approach has led to North Korea being assigned essentially the same poverty rate as China, even though the former regularly receives food aid from the latter.
Second, the World Bank accepts survey data uncritically – even when it conflicts with data from other sources. For example, World Bank survey data suggest that India’s per capita household expenditure has grown by only 1.5 percent annually since the early 1990’s, implying that the average Indian spent US$720 in 2010.
With such a flawed system shaping the world’s understanding of poverty, declarations of success or failure carry little meaning
But national-income-accounts data show a 4.5 percent annual rise, on average, over the last two decades, translating into per capita expenditure of US$1,673 in 2010 – roughly 2.5 times higher than the Bank’s estimate.
Poor data Likewise, World Bank survey data estimate that the Indian middle class comprises roughly 90 million
people, despite more than 900 million cell-phone subscribers and 40 million cars. Such contradictions reflect significant measurement discrepancies, which, in India’s case, could be on the order of hundreds of millions of people. The third major challenge is using PPP estimates, measured in national currencies, to convert survey data into global poverty estimates that account for cost-of-living differences between countries. Given that the conversions that the World Bank currently uses are based on an international exercise that was conducted for 2005, they fail to account for recent factors that are significantly affecting the poor and vulnerable, such as much higher prices for staple foods. Furthermore, PPP conversions have little significance for some countries, most notably China. Rather than permit price surveys in a random sample of locations (required for accuracy), China restricted data collection to a few urban areas. The resulting data showed Chinese prices
to be 40 percent higher than previously thought; Chinese living standards were then revised downward by roughly the same proportion. If taken at face value, the survey data on prices, together with China’s growth rates, would suggest that China was almost as poor in 1981 as the world’s poorest country today, with average personal consumption below the current level of Liberia – another country to which China provides significant aid. While the Bank’s latest PPP-conversion rate puts the number of poor Chinese at 173 million, the previous rate would suggest that only 69 million Chinese were living below the poverty line. With such a flawed system shaping the world’s understanding of poverty, declarations of success or failure carry little meaning. An improved poverty indicator – one that addresses, rather than avoids, the three major problems plaguing global estimates – is urgently needed. © Project Syndicate
May 15, 2013
Closing Tories to publish EU referendum bill
Bloomberg users’ messages leaked
British Prime Minister David Cameron ceded to the rebellion in his own Conservative Party, offering to support a bill authorising a referendum by 2017 on the U.K.’s continued membership in the European Union. The prime minister’s visit to the U.S. has been overshadowed by a growing number of Conservative lawmakers saying they planned a Parliamentary vote against his legislative programme to protest his failure to deliver such a bill. The Conservative Party was due yesterday to “publish a draft bill to legislate for an in-out referendum by the end of 2017,” according to a party statement late Monday.
More than 10,000 private messages sent between users of Bloomberg’s financial terminals have leaked online, undermining the company’s attempts to restore faith in its ability to keep client data confidential, the Financial Times reported. They were taken down from the internet on Monday. Matthew Winkler, editor-in-chief of Bloomberg News, apologised for allowing journalists “limited” access to sensitive data about how clients used Bloomberg terminals, saying it was “inexcusable”. Several international government agencies, as well as central banks, are looking into any possible breaches in the confidentiality of their usage data.
Govt to propose ‘flexible’ holiday compensation New arrangement will help service industries, says secretary Francis Tam Tony Lai
he government will change the compensation mechanism for staff working on holidays to better suit the service industries, Secretary for Economy and Finance Francis Tam Pak Yuen said. The administration was currently preparing a labour law revision, namely on holiday compensation – a topic that has drawn “quite many” opinions, he added. “We will not minimise the present benefits or protection they [the workers] have but there could be another arrangement… more suitable to the service industries,” the official stressed. Mr Tam did not tell reporters yesterday what changes could be introduced but he claimed a new arrangement would be “more flexible”.
Singapore steps up fight on tax evasion Government to sign OECD convention on tax matters
ingapore, the world’s fourthbiggest offshore financial centre, said yesterday it will adopt new measures to make it easier to share information on potential tax evaders with other countries, including the United States. The Southeast Asian city-state, keen to avoid the kind of onslaught on tax cheats being waged against Switzerland, said it will sign up to the Organisation for Economic Cooperation and Development’s (OECD) multilateral treaty on sharing tax details. Singapore is expected to sign the Convention on Mutual Administrative Assistance in Tax Matters some time this year. The government also plans to change the law so the tax office, the Inland Revenue Authority of Singapore, will not need a court order
Under the current labour law, employers have to pay workers an extra day’s wage and give them an extra day-off if staff has to work on mandatory holidays or give them a triple-pay. There are 10 mandatory holidays every year, including New Year and Lunar New Year, according to the law. Employers, particularly those running restaurants and retail stores, have claimed compensation makes it difficult for them to keep their outlets open on mandatory holidays. Mr Tam said the revision proposal would be ready early next year, calling the timing “appropriate”. He stressed the law has to progress in time as the city’s economy and service industries have developed quickly. Mr Tam also said the government
to get information from banks and trust companies sought by foreign governments, a joint statement by the central bank, the finance ministry and the tax authority said. “This is a very significant move,” the director of the OECD’s Centre for Tax Policy, Pascal Saint-Amans, told Reuters in an email. “Their signing of the multilateral convention is also impressive and shows the move towards transparency is really global with a key player like Singapore taking that initiative.” Singapore’s move comes as the Group of 20 leading economies (G20) is pushing for all countries to improve the way they share tax information. Governments in Europe and in the United States have been stepping up their efforts to clamp down on tax evasion as they try to deal with rising levels of public debt. “These changes we are now making are a major enhancement, in step with the strengthening of international standards for exchange of information,” said Tharman Shanmugaratnam, Singapore’s deputy prime minister and minister for finance. “There is no conflict between high standards of financial integrity and keeping our strengths as a centre for managing wealth.” Singapore, which hosts offices of
Secretary for Economy and Finance, Francis Tam
would include discussions on paternity leave in their agenda, without mentioning any further details. Private sector workers here enjoy no paid paternity leave. Civil servants have the right to five days of paid leave.
The secretary also said the administration currently has “no stance” on whether to create a new mechanism allowing foreign students here to find a job after their studies, in order to ease the labour shortage.
the world’s biggest banks, will adopt the OECD standards on information sharing in all of its existing bilateral tax agreements that do not already contain them, as long as it gets reciprocity. Once the OECD-related measures
are fully in place, Singapore will meet the international standards on tax information sharing with up to 83 different jurisdictions, up from the current 41. Those new countries include the United States and Brazil. Reuters