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Suspicious transactions up a third in first half The Financial Intelligence Office received almost 1,000 reports of suspicious financial transactions in the first half of 2012 – up 32 percent from the same period last year. Casinos in Macau are required to hand over currency transaction reports to the Gaming Inspection and Coordination Bureau for any deals worth above 500,000 patacas (US$62,500).

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Year I Number 164 Friday November 16, 2012 MOP 6.00 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte

Airport revenue takes off M

acau’s airport is likely to generate a record 3.4 billion patacas (US$425 million) in revenue this year says Deng Jun, chairman of the Macau International Airport Company Ltd (CAM). Mr Deng said more than half of it would come from ground operations – especially duty-free sales and advertising displayed in the facility. CAM – a private company albeit one bankrolled by the government – doesn’t publish a breakdown of where its revenue comes from. CAM posted a loss of 15.1 million patacas for 2011,

which was due mainly to interest payments on an airport construction loan first taken out in 1994. It also had more than 200 million patacas in depreciation costs. It’s only five months since CAM had to be bailed out to the tune of 1.95 billion patacas by two of its major shareholders – the government and STDM, the tourism investment company founded by Stanley Ho Hung Sun. The money came from an issue of new shares, completed in May, which paid off the outstanding loan.

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More on page 3

HANG SENG INDEX

Next generation of China’s leaders meets world media

21270

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21202

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Nine became seven as China’s ruling Communist Party confirmed its new leadership line-up yesterday. New party chief Xi Jinping, premier-in-waiting Li Keqiang and vice-premier in charge of economic affairs Wang Qishan, are considered cautious reformers. The other four members have the reputation of being more conservative, said political analysts. Mr Wang, thought to be the most reformminded, is charged with fighting widespread corruption. The elite group – known as the Politburo Standing Committee – has reduced its membership to seven, in what analysts suggest is an attempt to streamline decision-making over a range of challenges faced by the party and the country – including political reform, graft and environmental damage.

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November 15

HSI - Movers Name

%Day

ESPRIT HLDGS

Pages 8 & 9

22.03

CHINA RES ENTERP

1.18

HONG KG CHINA GS

1.12

POWER ASSETS HOL

0.30

COSCO PAC LTD

-2.64

BOC HONG KONG HO

-1.56

BANK OF COMMUN-H

-2.74

CHINA CONST BA-H

-2.74

LI & FUNG LTD

-3.06

TENCENT HOLDINGS

-6.95

Source: Bloomberg

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SJM has strong Q3 – even without Cotai casino Page 2

Value hunting tourists choose Zhuhai, HK hotels Page 4

Landslip threat delays new prison opening Page 6

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business daily November 16, 2012

macau Fitch rates MGM Cotai secured credit facility Fitch Ratings has given a ‘BB’ rating to MGM Grand Paradise SA’s US$2 billion (16 billion patacas) senior secured credit facility. The credit is toward the US$2.5 billion cost of MGM Cotai, a planned casino resort off the new Las Vegas-style strip zone on reclaimed land away from Macau’s traditional downtown casino zone. Fitch says on its website: “‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.”

SJM shareholder profit up 41 pct in Q3 But gaming rev down nearly 1 pct and market share also slips Michael Grimes

michael.grimes@macaubusinessdaily.com

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aming revenue at Macau casino operator SJM Holdings Ltd fell 0.9 percent year-on-year in the third quarter. Its market share also slipped to 26.1 percent from 28 percent a year earlier. But the company still achieved a 41 percent increase in profit attributable to shareholders. Mass market gaming revenue rose 12 percent for the quarter, while the lower margin but high volume VIP business fell 6.3 percent year-on-year. Shareholder profit rose to HK$1.66 billion (US$214 million) in the three months ended September, according to a statement to the Hong Kong Stock Exchange yesterday. Total gambling revenue fell 0.9 percent to HK$18.9 billion. Although more than half of Macau’s 35 casinos depend on SJM’s gaming licence in order to run their gambling operations, the company does not get the full economic benefit from most of those casino venues as they are owned by third parties. Referring to the non-core casinos in the SJM portfolio, Union Gaming Research Macau said in a note: “We

SJM’S flagship properties Grand Lisboa and Lisboa

continue to believe that this segment will bear the largest impact of any softness in market-wide VIP play, which, importantly, is a relatively small contributor to total SJM EBITDA (20 percent in 3Q12 versus 24 percent in 2010 and 2011), when

compared to the company’s wholly owned-properties.”

Core operations SJM relies for most of its revenue on its core, fully-owned operations at

Grand Lisboa, The Lisboa, Oceanus and Jai Alai. Grand Lisboa increased its gaming revenue in the third quarter by 25.5 percent to HK$7.32 billion compared to a year earlier. Adjusted earnings before interest, taxation, depreciation and amortisation at the flagship venue rose by 20 percent to HK$1.15 billion. But Union Gaming pointed out EBITDA margin of 15.7 percent at Grand Lisboa was down 70 basis points year-on-year. “The decline in margin owed to a few factors, including significant gaming volume growth in the largest junkets that have the most favourable terms (and therefore a lower margin contribution on a relative basis to other VIP junkets),” said the research house. It added that tables reclaimed from an SJM satellite operation – Casino Greek Mythology – at the end of the third quarter would likely help fourth quarter earnings. “The company only installed some of these tables (we think about 25 of the 40 reclaimed tables) with only several days remaining in the quarter. As such, we think these tables should provide a boost to 4Q12 results at Grand Lisboa relative to 3Q on the heels of a robust October Golden Week holiday period,” said Union Gaming. Ambrose So, chief executive of SJM Holdings said in reaction to the third quarter results: “Although global economic uncertainties this year have had an effect on overall revenue growth of Macau’s gaming sector, SJM continued to perform excellently in the recent quarter and we increased our net profit and EBITDA figures to record levels.”

Melco Crown markets dollar debt for Studio City

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unit of Melco Crown Entertainment Ltd – a New York- and Hong Kong-listed operator of Macau casinos – is marketing a sale of United States dollar-denominated bonds it was reported yesterday. Studio City Finance Ltd plans to sell US$825 million (6.6 billion patacas) of eight-year notes at about 8.25 percent interest, a person familiar with the matter told Bloomberg News yesterday. The note sale is understood to be toward the US$2.9 billion cost of the Studio City Casino project on Cotai – a scheme 60 percent owned by MCE. “This is the last push from Asian borrowers to get out their bond deals,” said Brayan Lai, a desk analyst in emerging market credit trading at Jefferies Group Inc. in Singapore. The so-called fiscal cliff

in the U.S. is weighing on sentiment meaning investors will probably only invest with serious price concessions, Mr Lai added. Melco Crown said in an October 19 U.S. regulatory filing it had entered into a commitment letter with a group of mandated lead arrangers for US$1.4 billion in “senior secured credit facilities” toward the cost of Studio City. The term ‘senior’ indicates that in the event of a company running into difficulty, holders of such bonds have precedence in terms of repayment of the interest and the principal sum borrowed over most other classes of debt. Melco Crown added however that the notes would not be guaranteed directly by MCE – which has strong cash flow from its existing Cotai operation at City of Dreams – but by Studio City Co. Ltd, an indirectly

Photo by Manuel Cardoso

Asian borrowers acting ahead of year-end holidays and U.S. ‘fiscal cliff’

held vehicle used to fund and deliver the Studio City scheme. Work on the stalled Studio City project – in which MCE took a majority stake in June last year after deadlock between the previous

shareholders – restarted this summer. But the project has not yet had the casino component of the complex confirmed in Macau’s Official Gazette. Bloomberg/M.G.


November 16, 2012 business daily | 3

MACAU Air Macau code-shares with Asiana Airlines Starting November 30, South Korea’s Asiana Airlines Inc will be able to sell tickets for Air Macau Co Ltd’s flights between the MSAR and Incheon, thanks to a codeshare agreement signed between the two parties last Wednesday. The memorandum of understanding enables both carriers vow to enhance cooperation in interline expansion, ground handling and catering service. Flagship carrier Air Macau had already entered code-share agreements with Air China Ltd, Japan’s All Nippon Airways Co Ltd and Philippines Airlines Inc.

CAM predicts jump in revenue Duty-free shopping and advertising are boosting takings at the airport Tony Lai

tony.lai@macaubusinessdaily.com

The airport expects its non-aviation business to generate more than half its turnover this year

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he operator of Macau International Airport expects its revenue to reach 3.4 billion patacas (US$425 million) this year because of growth in its non-aviation business such as duty-free retailing and advertising. The chairman of Macau International Airport Company Ltd (CAM), Deng Jun, told a seminar

in South Korea this week that CAM expected revenue to grow by 13.3 percent this year. In 2009 the airport’s revenue was just 2 billion patacas. Mr Deng said the company had set up a commercial development department in 2009 to focus on non-aviation business and that it had seen “rapid development” since then.

“The most significant contribution to non-aviation revenue at Macau International Airport was made by duty-free sales and advertising business,” Mr Deng said. CAM added in a written statement issued on Wednesday that sales in dutyfree shops at the airport were more than half as much again last year as the year before, and that advertising turnover

had grown by two-thirds last year. Mr Deng said the area for duty-free shops had been expanded by 1,158 square metres this year, but that the value of sales per square metre of retailing space had been maintained. The chairman said the airport’s non-aviation business had also benefited from commissions and rents. The airport’s revenue from commissions and rents rose by 37 percent last year. Mr Deng expects revenue from non-aviation business to account for 54 percent of revenue. In 2009 it accounted for 42 percent. Looking ahead, he stressed the importance of further developing the non-aviation business. “This will be the future of Macau International Airport,” he said. The chairman added CAM aimed to turn the airport into “a multifunction small and medium-sized international airport model”. The company told public broadcaster TDM last month that it hoped the number of passengers it handled would reach rise by 10 percent this year to over 4.4 million.

Reolian keeps up concession fight Firm chose wrong means to fight for status of public service concessionaire, court says Vítor Quintã

vitorquinta@macaubusinessdaily.com

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us operator Reolian Public Transport Co Ltd has already appealed to the Court of Final Instance in its struggle to become a public service concessionaire, general manager Cédric Rigaud told Business Daily. Even though the Court of Second Instance rejected last month the company’s case for becoming one, the executive is confident over the appeal: “We believe we have a good chance to win.” The company wants all three bus operators, including Transportes Urbanos de Macau SARL (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM) – to be considered public service concessionaires. For that purpose Reolian asked the Financial Services Bureau to publish the contracts in the Official Gazette. The request was turned down in July 2011. The operator took its plight to the cabinet of Secretary for Economy and Finance, Francis Tam Pak Yuen, but there was no reply, even after three months, the judgement released on

Wednesday reveals. But the Court of Second Instance says “the refusal to publish the contract signed between the appellant and the MSAR in the Official Gazette does no harm to the true legal status the appellant is entitled to”. Mr Rigaud disagrees and says the issue has at least caused “indirect” damage to the company. For instance, the disclosure of the contract “would bring more transparency to public utilities,” he stressed. In addition, “if we were recognised as a public service concessionaire, there would some elements we should be claiming from the administration,” the French national added, including exemption from paying road tax on its buses. While rejecting Reolian’s administrative appeal, the judges said the operator should have gone for an alternative action to have its legally protected rights confirmed by court. Mr Rigaud says it is “still too early to anticipate” whether the company might take this route. “We are taking a step-by-step approach.”

Cedric Rigaud, Reolian general manager


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business daily November 16, 2012

macau Brought to you by

HOSPITALITY Visitors stalling The growth in the number of visitors in the last years has been one of the driving forces of the economy’s growth. Since 2008 each year has steadily brought higher numbers than the previous one, with the exception of 2009. Note that the same trend could be said about previous years, but the different method of accounting used then limits the scope for comparison. The rate of growth, was negative in 2009, at about minus 5 percent. It picked in 2010 and 2011 and, in those years reached 14.7 percent and 12.2 percent, respectively. The data for the first nine months of this year suggest that growth has stalled.

Add value, tourism industry urged Critics say the city needs to build a more attractive brand to encourage visitors to stay longer Stephanie Lai

sw.lai@macaubusinessdaily.com

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igh hotel room rates and unsatisfactory transport are factors contributing to visitors’ short stays, according to Gao Yan, coordinator of the Faculty of International Tourism and Management of the City University of Macau. Although the city boasted an 81 percent average occupancy rate for its 100 hotels and inns in September, the average length of stay was 1.28 nights, down 0.18 night from last year. The rates of four-star hotels, the city’s most popular, rose by 9 percent in September from last year’s 841 patacas (US$105), Macau Hotel Association data show. Pricey hotel rooms drove

mainland Chinese tourists to opt for accommodation in Hong Kong and Zhuhai, Ms Gao said. Unsatisfactory transport and customs rules also discouraged tourists from staying longer, she said. Kenny Cheung Kin Chung, the vice-president of the Macau Hoteliers and Innkeepers Association, said that for tourists from Hong Kong and Guangdong, who could return home in less than three hours, accommodation here was not an urgent need. “When we are talking about mainland tourists from more remote regions, they normally stay in Macau for two to three nights,” Mr Cheung said. “But individual travellers from Taiwan tend to pass though Macau to mainland China without the need to stay overnight,” he said.

Brand building Ms Gao said Macau ought to enhance its value-added offerings to tourists to encourage them to stay longer. “The value-added of travel in

The monthly patterns from year to year are mostly similar. They highlight clearly that the contraction of 2009 was essentially a feature of the first half of the year. From January to July the figures are significantly below those of 2008. After the first quarter of 2010, the usual pattern, so to speak had been recovered. The current year breaks somewhat with the earlier years’ trends. That move away from the typical behaviour is seen not so much in its sequence of ups and downs, which are not far from those seen before; but in the stronger oscillations in the first half of the year, which remind us, up to a point, of those seen in 2009. However, the third quarter seems to mark a return to the ‘norm’ and it almost mimics the evolution one year earlier. If the average monthly changes seen in previous years are kept in the last three months of the year, final figures should be within plus or minus 1 percent of those registered in 2011. J.I.D.

Macau has been developed only at the surface level. People come here to shop, eat and buy souvenirs,” she said. “There is just not enough promotion for a more meaningful walking tour of the city,” she said. “At the hotels, you could leave brochures suggesting walking tour routes, or the government could build a more systematic incentive scheme for travel agencies and hotels to suggest various package tours in the city, through which tourists staying more nights in hotels would enjoy discounts,” Ms Gao said. She and Mr Cheung both said another way to make visitors stay longer was to get more foreign tourists. “Recently there has been big progress achieved in attracting more tourists from important markets like India, Russia and Southeast Asia,” said Mr Cheung. “In future, we ought to work harder to attract these tourists to come here.” He said multi-destination tours in cooperation with Guangdong and Hong Kong could be offered when the Light Rapid Transit elevated railway and the new border crossing opened.

Macau, HK save Sa Sa profits

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osmetics retailer Sa Sa International Holdings Ltd saw its profits rise in the last two quarters, but only thanks to a hike in sales in Macau and Hong Kong, the company announced in a filing yesterday. Sa Sa’s operations in the two SARs registered profits of HK$283 million (US$36.5 million) in the half-year ended September 30, up by 27.4 percent from the same period of last year. “The continuing strong performance of our core market Hong Kong and Macau” helped offset a loss of HK$19.8 million in mainland China, Sa Sa told the Hong Kong Stock Exchange. Retail sales in Hong Kong and Macau rose by 20.3 percent to HK$2.56 billion, accounting for a whooping 77.9 percent of the retailer’s turnover. Most of that growth came from mainland Chinese tourists, whose average sales value per ticket grew by 10.7 percent, while the average spending of local consumers increased by just 5.9 percent. Half of all visitors to Macau are same-day tourists, which “tend to buy

Average spending of Chinese tourists in Sa Sa shops rose by 10.7 percent

more daily necessities” than luxury goods, the company said. Furthermore, “the depreciation of the euro and cheaper listed prices for luxury goods in Europe and the United States” is making the two SARs less attractive for purchasers of luxury brands,” Sa Sa added.

The company expects to “see continued sales growth due to the desire of mainland tourists to save on purchases in a weaker economic environment”. Sa Sa’s investment in the two cities rose by 18.2 percent to HK$85.1 million. V.Q.


November 16, 2012 business daily | 5

MACAU Forex up but pataca weakens The city’s foreign exchange reserves amounted to 133.9 billion patacas (US$16.8 billion) last month, up by 0.8 percent or 1.1 billion patacas from September, the Monetary Authority of Macau announced yesterday. The figures also show the pataca depreciated in October for a third consecutive month against the currencies of Macau’s major trade partners. The trade-weighted effective exchange rate fell by 0.48 points from September to 97.07 points in last month and was down by 2.12 points from July, when it was at 99.19 points.

Dubious deals tackled by prosecutors triple Casinos remained the main breeding ground for suspicious transactions in the first half Tony Lai

tony.lai@macaubusinessdaily.com

T

he number of cases of suspicious transactions sent to the Public Prosecutions Office almost tripled in the first half of this year, though the number of reports of suspicious transactions received by the Financial Intelligence Office rose by just one-third. According to the office’s latest newsletter, released on Wednesday, it received 982 reports in the first half, 32 percent more than a year before. But the number of cases it sent to the prosecutors for further investigation shot up to 115 from 31. These figures suggest to the office

an upswing in more serious crimes such as money laundering. The office passed on to the prosecutors roughly one in every 10 cases of suspicious transactions in the first half, compared with one in every 20 a year before. The gaming sector remains the main breeding ground for dubious deals, accounting for 691 cases, or 70.4 percent of the total. Most of the other cases were in the banking or insurance sectors. Casinos are required to report to the Gaming Inspection and Coordination Bureau any transaction worth over

The Financial Intelligence Office has received almost 1,000 reports of suspicious transactions this year

500,000 patacas (US$62,500). The bureau then passes cases of suspicious transactions to the Financial Intelligence Office. Figures released by the bureau in May show reports by casinos of big transactions surged by 90 percent last year to over 555,000. The Financial Intelligence Office says that in February the international Financial Action Task Force, of which Macau is a member, revised its

recommendations for preventing money laundering and terrorist financing. The task force now requires financial institutions always to identify and verify the identity of their account holders. The purpose of the task force is to stop money laundering. The government here is amending the law on money laundering and terrorist financing to bring tax evasion within its ambit.


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business daily November 16, 2012

macau Brought to you by

Card tricks Much has been said about the remarkable growth in the number if credit cards issues in renminbis or, to use the standard international classification, the Chinese yuan. Most are dual cards, denominated both in patacas and yuans, but they are accounted separately, as two different cards. Only in the third quarter of this year did the Monetary Authority begin publishing data on the specific amount of dual-currency cards, giving figures for the first quarter of last year onwards. Rules on confidentiality prevented the publication of numbers of dual-currency cards starting from the third quarter of 2009, when yuan-denominated cards were first issued in Macau.

Slope trouble slows work on new prison With typhoons threatening to cause landslides that could interrupt work on the new prison in Ka Ho village, the government is taking urgent safety measures Vítor Quintã

vitorquinta@macaubusinessdaily.com

The context of the increase in the number of cards billed in yuan makes the increase all the more extraordinary. In the third quarter of this year, 54 percent more cards billed in yuan were on issue than a year before, and 2.6 times more were on issue than in the first quarter of last year. These growth figures are high because there were so few cards billed in yuan on issue in the first place. Almost all the cards billed in yuan are dualcurrency cards. The number of cards billed only in yuan in the past seven quarters is minimal. There were 257 early last year, just under 1,100 early this year and only 440 in the third quarter. Over that period the number of cards billed only in patacas rose by almost 165,000, while the number of cards billed in yuan rose by fewer than 60,000. The fast rise in the number of cards billed in yuan may be the result of a marketing strategy of the banks rather than demand from their customers. It is now time for the authorities to begin publishing data on how cardholders actually use their plastic. J.I.D.

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he government is reinforcing the slopes of Ka Ho hill on Coloane to prevent landslides during the typhoon season that could disrupt the building of a new prison there. The government admitted on Monday that construction of phase one of the prison would cost another 30 million patacas (US$3.8 million), about 27 percent more on top of the original price. The Land, Public Works and Transport Bureau told Business Daily that this money would be spent on reinforcing the hillside to make it safe for the public and construction work. “As we have been affected by several typhoons this year, contingent slope protection work is needed to repair the damaged slopes surrounding the construction site,” the bureau said. Storm warning signal number eight has been raised three times and signal number nine once during this year’s typhoon season. Last year signal number eight was hoisted just once. The bureau said the purpose of the extra work was to avert landslides that

might hit the site and public roads. “Construction has started and will last around eight months,” it said. An official notice in Monday’s Official Gazette says work will continue throughout next year, delaying the opening of first phase of the new prison by at least two years. The original contract said that the first of the four phases, which includes peripheral roads, observation towers, an electricity sub-station and gas storage areas, should be finished in 2011.

Overlapping schedules The slope reinforcement work is being done because typhoons “have considerably affected the progress of construction of the new prison,” the bureau said. It also said there were difficulties with “the specific requirements of the facilities and materials used for the new prison”. Even so, “the second phase will draw experience from the first on a design level”, it said. The government is sticking to its original schedule, which

envisages the new prison, covering about 69,200 square metres, being complete by 2014. “The optimisation of the design and the method statement of the remaining project are being expedited while all the phases will adhere to an overlapping construction schedule in an attempt to make up for the delay,” the bureau said. Officials said in January that a delay in completing the foundations had been caused by the complex characteristics of Ka Ho hill, heavy rain and a labour shortage. The contract to build the prison, worth 113.1 million patacas, was signed with Zhen Hwa Harbour Construction Co Ltd in October 2010. It was amended in March this year. The bureau said in April that the contractor would be responsible for any additional costs stemming from delays, including the wages of construction workers. Zhen Hwa Harbour Construction is a joint venture by state-owned contractor China Harbour Engineering Co Ltd, which owns 51 percent, and gaming company SJM Holdings Ltd.

We run fast and forward... just like them.


November 16, 2012 business daily | 7

MACAU

Transport, market size pushing up beef prices Beef prices are rising because transport problems are interrupting supply; buyers have little bargaining power, a supplier says Stephanie Lai

sw.lai@macaubusinessdaily.com

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ransport problems and the weak bargaining power of buyers in Macau’s small market are the cause of the surge in beef prices this year, the Civic and Municipal Affairs Bureau has said. The bureau said so in reply to an inquiry by Legislative Assembly member Au Kam San. The two main suppliers of fresh meat, Nam Kwong Kok Fong Distribution and Transportation Ltd and Nam Yue Food Stuff and Aquatics Co Ltd, raised the wholesale price of fresh beef by 380 patacas (US$47.60) to 4,380 patacas per 60 kg this month. The increase has been reflected in wet markets, where the retail price has risen by 3 patacas to 4 patacas per catty (60 grams) to over 70 patacas per catty. The wholesale price of fresh beef has risen several times this year, increasing at average rate of more than 100 patacas a month. At the beginning of the year the price was 3,260 patacas per 60 kg. Nam Kwong Kok Fong managing director Cheang Kun Man told Business Daily that the main cause

of the increases was interruptions in supply due to transport problems. Mr Cheang said interruptions had occurred intermittently between June and August. He said bad weather had caused transport difficulties for eight days.

Consumption habits “The quarantine process in mainland China has also not been running smoothly, causing delay,” Mr Cheang said. “The public has laid all the blame on us for the gaps in beef supply, which is not fair. For about 20 days of the hiatus period retailers were taking time off,” he said. Farms in Beijing, Hebei and Inner Mongolia in the north are the main source of fresh beef for Hong Kong and Macau. Mr Cheang said transporting cattle from there to Zhuhai usually took three days. Nam Kwong Kok Fong corroborated an assertion by the Civic and Municipal Affairs Bureau that the number of cattle available to the market here each month was

The wholesale price of fresh beef has risen by more than one-third this year (Photo: Manuel Cardoso)

now only 200 head, 15 percent fewer than a year ago. “Consumers’ consumption habits for fresh meat have changed over the years. People opt for frozen products instead of fresh meat,” Mr Cheang said. “When the choice of meat is that

wide, demand for fresh beef lessens relatively. The same is true in Hong Kong,” he said. The Civic and Municipal Affairs Bureau said the fluctuations in the price of fresh beef were similar in Macau, Hong Kong and neighbouring cities in mainland China.


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business daily November 16, 2012

GREATER CHINA

Xi heads new Chinese leade Politburo Standing Committee cut to seven members

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PICC Group eyes US$4 bln in HK IPO Chinese state-owned insurer PICC Group started meeting institutional investors in Hong Kong yesterday to gauge demand for a listing worth up to US$4 billion, braving a slump in equity deals with the city’s largest IPO in two years. People’s Insurance Company of China Group (PICC), one of the country’s largest insurers, will offer 6.9 billion new shares in the IPO, equivalent to a 16.7 percent stake in the company, said a source with direct knowledge of the plans who was not authorised to speak publicly on the matter and declined to be named. IPO issuance in Hong Kong has plunged more than 80 percent so far this year, with volumes likely to shrink to their lowest since 2008 as investors shun new deals because of volatility caused by Europe’s debt troubles. “It is definitely not the best time to come to market, but capital has been a pressing issue for the group for some time,” said Stanley Tsai, an insurance analyst in Hong Kong. “The group will need capital urgently to support its growth ambitions, particularly on the life side.” “The company will have to price the IPO at a considerable discount to peers in order to generate enough interest from institutional investors,” he added. The IPO would be the biggest in Hong Kong since the US$20.5 billion listing of AIA Group Ltd in October 2010. The company will start taking orders from investors during a roadshow due to start on November 22, with pricing of the IPO expected on November 29, the source said.

hina’s ruling Communist Party unveiled an older, conservative new leadership line-up yesterday that appears unlikely to take the drastic action needed to tackle pressing issues like social unrest, environmental degradation and corruption. New party chief Xi Jinping, premier-in-waiting Li Keqiang and vice-premier in charge of economic affairs Wang Qishan, all expectedly named to the elite decision-making Politburo Standing Committee, are considered cautious reformers. The other four members have the reputation of being conservative. “We’re not going to see any political reform because too many people in the system see it as a slippery slope to extinction,” said David Shambaugh, director of the China Policy Program at George Washington University’s Elliott School of International Affairs. “They see it entirely through the prism of the Soviet Union, the Arab Spring and the Colour Revolutions in Central Asia, so they’re not going to go there.” Mr Wang, the most reform-minded in the line-up, has been given the role of fighting widespread graft.

KEY POINTS Seven-member leadership team unveiled Xi Jinping to head party, Li Keqiang his deputy Xi to also take over as head of military Corruption a major challenge, Xi says in speech

Esprit founder doubles stake, shares jump One of the founders of Esprit Holdings Ltd, Hong Kong billionaire Michael Ying, has doubled his stake in the ailing retailer to become its secondbiggest shareholder, a surprise move that fuelled hopes he could help turn the company around. Since stepping down as chairman six years ago, Mr Ying has steadily been selling his shares as the fashion retailer’s fortunes have soured. His decision to buy back into the company pushed shares 33 percent higher yesterday, before closing 22 percent higher at HK$12.96, in their sharpest rise in three months. Under Mr Ying’s leadership, the company that was founded in 1971 rose to become the world’s fifth-largest fashion retailer and had a market value of about US$12 billion. It now has a market value of US$2.7 billion and ranks 21st among global apparel retailers. Esprit is in the midst of a US$2.3 billion restructuring that has been overshadowed by a management reshuffle and lingering uncertainty in the euro zone. “It is short-term positive news to Esprit. Investors were caught by surprise by his move and that also recalled the glorious moments of the company when Ying was in charge,” said Steve Chow, analyst at Kingsway Group Research. Ying has increased his holding in Esprit to 10.33 percent, which includes a 5.99 percent stake and a rights issue, as of November 7, according to a Hong Kong stock exchange filing. He bought 23.2 million shares at an average price of HK$11.669.

Xi Jinping led the new Politburo Standing Committee onto the stage at the Great Hall of the Peopl

One source said an informal poll was held within the 25-member Politburo to choose the seven members from among 10 candidates. Two of them who had strong reform credentials – Guangdong party boss Wang Yang and party organisation head Li Yuanchao – failed to make it to the standing committee along with the lone woman candidate Liu Yandong.

Leadership ‘divided’ The source, who has ties to the leadership, told Reuters on condition of anonymity that Wang Yang and Li Yuanchao, both allies of departing President Hu Jintao, did not make it to the standing committee because party

elders felt they were too liberal. However, all three are in the Politburo, a group that ranks below the standing committee. “The leadership is divided,” said JeanPierre Cabestan, a Chinese politics expert at Hong Kong Baptist University, adding however that the new leadership would finditeasiertomakeprogressoneconomic reform rather than political change. “It’s easier for them to move to a new growth model. I think they agree upon that and that won’t be the hardest task. But I see a lot of political paralysis.” Even for China, this is an older line-up, with an average age of 63.4 compared with 62.1 five years ago. Except for Mr Xi and his deputy Li Keqiang, all the others in the standing

Li takes economic mantle As economy forecast to grow the least in 23 years

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hina’s premier-designate is famed for running a province that saw three fatal conflagrations and an enduring HIV blood scandal on his watch. The nation may be hoping his luck has changed. Li Keqiang, appointed to the Politburo Standing Committee yesterday and set to replace Premier Wen Jiabao, is an award-winning economist and English speaker who has championed rapid urbanisation to establish China’s middle-class. Slated to take over the nation’s cabinet in March, Mr Li, 57, will inherit an economy forecast to grow the least in 23 years in 2013, according to Pacific Investment Management Co. To arrest the slowdown and address a widening income gap that’s fed social unrest, the incoming team will have to roll back state enterprises and speed a shift to market-set prices for everything from loans to raw materials, according to the World Bank.

Mr Li’s association with the bank’s “China 2030” report this year may be the strongest sign he’s ready to rejuvenate the reform agenda unleashed by Deng Xiaoping three decades ago. “The 2030 report is a very important base of policy recommendations, and it was endorsed by Li Keqiang,” said Ding Shuang, senior economist for China at Citigroup Inc. in Hong Kong, who previously worked at the country’s central bank. “China’s economy has reached such a point that the leaders are being pressed to take more ambitious steps. On the flip side, vested interests are more entrenched,” making the changes tougher to enact, he said. One signal of the sensitivity of the policy overhaul is a delay in publishing the Chinese version of the 448-page document co-written by the Washington-based lender and the Development Research Centre of China’s State Council.

The DRC wanted a postponement until after the Communist Party Congress, according to Yukon Huang, a former World Bank country head for China and an adviser on the project. “China 2030” is likely to be released in Chinese next month, according to a spokeswoman at the World Bank in Beijing.

Li ‘unwavering’ At stake for Mr Li and incoming Communist Party General Secretary Xi Jinping is steering China away from the so-called middle-income trap, where growth slows because of a failure by developing countries to implement reforms to financial, legal and government institutions needed to create a wealthy middle class. Of 101 middle-income economies in 1960, only 13 became high-income societies by 2008, the World Bank estimates. Mr Li gave the “China 2030” project


November 16, 2012 business daily | 9

GREATER CHINA

ership

le

committee – the innermost circle of power in China’s authoritarian government – are 64 or over and will have to retire within five years. That could open the way for Wang Yang and Li Yuanchao to replace them, at the next party congress in 2017, perhaps along with so-called “sixth generation” leaders like Inner Mongolia party chief Hu Chunhua. The standing committee has as expected been cut to seven members from nine, which should ease consensus building and decision making.

‘Severe challenges’ Mr Xi, who was also appointed head of the party’s top military body,

The country’s new leaders

said in an address following the party’s once-in-five years congress that he understood the people’s desire for a better life but warned of severe challenges going forward. “We are not complacent, and we will never rest on our laurels,” he said after introducing the other six members of the standing committee at the Great Hall of the People in a carefully choreographed ceremony carried live on state television. “Under the new conditions, our party faces many severe challenges, and there are also many pressing problems within the party that need to be resolved, particularly corruption, being divorced from the people, going through formalities and bureaucracy caused by some party officials.” The run-up to the handover has been overshadowed by the party’s biggest scandal in decades, with former high-flyer Bo Xilai sacked as party boss of the southwestern Chongqing city after his wife was accused of murdering a British businessman. North Korean-trained economist Zhang Dejiang is expected to head the largely rubber-stamp parliament, while Shanghai party boss Yu Zhengsheng is likely to head parliament’s advisory body, according to the order in which their names were announced. Tianjin party chief Zhang Gaoli and Liu Yunshan, a conservative who has kept domestic media on a tight leash, make up the rest of the group. Mr Xi will take over President Hu’s state position in March at the annual meeting of parliament, when Li Keqiang will succeed Premier Wen Jiabao. Despite the problems ahead, Mr Xi will at least not have to worry about Mr Hu looking too much over his shoulder. The latter has not followed his predecessor Jiang Zemin in staying on as head of the military commission after stepping down as party chief. Mr Xi has instead directly taken over that post, strengthening his position. Reuters

Xi Jinping

Xi Jinping has become China’s new Communist Party chief, and is now certain to take over next year as the country’s President as well. He is a so-called “princeling”, the privileged son of a former top leader, learning Chinese politics from an early age when his father was purged and he himself was sent to work in the countryside. Mr Xi’s close ties to the military and his support for state-owned industries suggest he is rather conservative. Mr Xi, 59, studied chemical engineering at Tsinghua University before joining the Communist Party in 1974. He worked in Hebei, Fujian and Zhejiang provinces, before being named Shanghai party chief in 2007.

Li Keqiang A bureaucrat with an unusually easy smile for China’s colourless Communist officials, Mr Li moves up in the party hierarchy and is due to be named prime minister in March, tasked with running the world’s second-largest economy. Vice Premier Li, 57, has held top posts in Henan and Liaoning provinces and was promoted to the Standing Committee in 2007. He has a reputation for caring about China’s less well-off, perhaps the result of a modest upbringing. He is close to President Hu Jintao, who he worked with in the party’s youth league.

Zhang Dejiang Zhang Dejiang was chosen by China’s leaders for their toughest assignment of 2012, taking over as party chief of Chongqing after the fall of Bo Xilai. It cemented his reputation as a troubleshooter who could be relied on to manage a crisis, and suggested he was set for the very top. Mr Zhang is an expert on a China’s oldest ally, North Korea, and even spent two years studying economics in Pyongyang. Mr Zhang started his party career on the North Korean border, before being moved to Zhejiang and then working as party secretary in Guangdong between 2002 and 2007.

Yu Zhengsheng Mr Yu, 67, is party chief of Shanghai, China’s largest city. A “princeling” with close ties to both former president Jiang Zemin and Hu Jintao, he also has links to the late Deng Xiaoping’s family. Mr Yu graduated from the Military Engineering Institute in Harbin, specialising in ballistic missiles, and worked in electronic engineering for almost two decades until the mid-1980s. He later worked as vice-mayor, mayor and party chief of the eastern city of Qingdao and was credited with helping launch two of China’s bestknown brands overseas – Tsingtao beer and Haier appliances.

Liu Yunshan Mr Liu, 65, is head of the party’s propaganda department, the body which strictly controls the country’s media and polices the internet. He worked in Inner Mongolia for almost three decades from 1968, after being sent there as a young man to work in a commune. He later became a Xinhua news agency reporter, public relations specialist, and finally deputy party secretary. He worked with President Hu Jintao at the party youth league and is seen as a close ally. Mr Liu is almost certain to take over the propaganda portfolio.

Wang Qishan

Li Keqiang under more pressure to take ambitious steps

his “unwavering commitment,” thenWorld Bank President Robert Zoellick said in February. The State Council group that helped in the project sought to flag the risk of forgoing reforms, according to Mr Huang. “The Development Research Centre people were always afraid that the report was not negative enough in saying, ‘You’ve got a crisis,’” Mr Huang said. “There are still many who say, ‘What’s the problem? This economy is still growing so well.’” The premier-designate hasn’t been slow to acknowledge the challenges. In a February 2010 speech he reeled off a litany of economic shortcomings: an unsustainable rate of investment; an overdependence on exports; weak domestic consumption; and an

underdeveloped services sector. Above all, he highlighted the growing inequality of income that meant city dwellers earned 3.3 times more than their rural counterparts in 2009. To deal with those issues, Mr Li may have to overcome resistance from politicians, provincial governments and state-run companies that have grown rich on the current system. “The big question is whether China will change before a crisis forces it to,” said David Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department. “China can, and ultimately will, rebalance either the easy way or the hard way,” said Loevinger, now an Asia analyst in Los Angeles at TCW Group Inc. Bloomberg

Mr Wang, 64, is well known to Western leaders, a key figure in discussions about the global economy and China’s economic links with the US. He is a former Beijing mayor, Guangdong boss, and vice governor of the People’s Bank of China. He is often compared to his political mentor, former premier Zhu Rongji, because both men are seen as dynamic and ready to challenge the status quo. Those characteristics led supporters to suggest Mr Wang would make a better premier than Li Keqiang. He is often grouped with the princeling faction.

Zhang Gaoli Born November 1946, Mr Zhang has been party secretary of Tianjin municipality since 2007. Born in Fujian, he graduated from Xiamen University after studying statistics and economics. He spent the early part of his career working in the oil industry, before becoming an official in the southern province of Guangdong in the mid-1980s. His career took off from 1998 as party boss of the southern boomtown of Shenzhen, across the border from Hong Kong. Reportedly close to Jiang Zemin and close to Hong Kong tycoon Li Ka Shing. Agencies


10 |

business daily November 16, 2012

ASIA Singapore’s private home sales drop Private home sales in Singapore in October dropped 26 percent from the previous month, as some developers held back launches and investors stayed on the sidelines in the wake of fresh property cooling measures, official data showed yesterday. Developers sold 1,948 residential units last month excluding executive condominiums, a category of apartments reserved mainly for Singaporeans, the lowest number since June and down from 2,621 in September, according to data form the Urban Redevelopment Authority. However, October’s sales were still 40 percent higher than a year ago due to buoyant demand in the mass market.

Japan megabanks’ stock losses may spur selloff Combined losses more than tripled Shigeru Sato and Shingo Kawamoto

J

apan’s biggest banks are poised to accelerate sales of their stock holdings after 534 billion yen (US$6.7 billion) in equity investment losses eroded profit. Combined losses from shareholdings of Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. more than tripled in the six months ended September 30 from 170 billion yen a year earlier, earnings statements from the Tokyo-based companies showed on Wednesday. Mizuho chief executive Yasuhiro Sato said his bank may speed up a reduction of stakes in companies and has set up a panel to tackle the issue. Sumitomo Mitsui President Koichi Miyata said he will further reduce the lender’s shareholdings. The banks have been paring stock investments over the past 15 years to reduce their vulnerability to financial markets as Japan’s Nikkei 225 Stock Average remains 78 percent below its 1989 peak. The faster they sell, the more disruptive it may be for the world’s third-largest economy, which is shrinking as companies from Sharp Corp. to Panasonic Corp. forecast losses. “Megabanks should carefully and gradually cut their shareholdings to mitigate fluctuation risks and further stabilise their management,” said Koichi Haji, an executive research fellow at NLI Research Institute in Tokyo. “If they rush to sell them off, they’d see an adverse impact on Japan’s

economy as a whole and further weaken lending demand.”

Shares rise Sumitomo Mitsui led bank shares higher in Tokyo trading, rising the most in two months after boosting its full-year profit forecast more than expected. The country’s second-largest bank by market value rose 3.3 percent to close at 2,448 yen. They have gained 14 percent this year, outpacing a 6.6 percent rise in the benchmark Topix Banks Index. The Nikkei 225 has slid 13 percent since March 31 as Japan’s economy worsened amid waning demand for

KEY POINTS Biggest banks lost US$6.7 bln in equity investment Seen speeding up sales of stock holdings Might impact Japan’s stock market Shares higher in Tokyo trading

exports. Gross domestic product shrank an annualised 3.5 percent last quarter, the most since the earthquake and tsunami in March 2011. Stock holding losses at Mitsubishi UFJ, Japan’s biggest bank, widened 79 percent to 173.6 billion yen in the fiscal first half from a year earlier. Net income declined 45 percent last quarter to 107.6 billion yen, according to Bloomberg calculations based on the half-year figures. Mitsubishi UFJ has moved ahead with a project over the past four years to reduce its stakes in other companies by about 700 billion yen, chief executive Katsunori Nagayasu said at a briefing. The bank plans to reduce the stock holdings by “hundreds of billions of yen” in the coming years, he said. The stock gained 3.2 percent to 356 yen, while Mizuho rose 3.3 percent to 126 yen in Tokyo. At Sumitomo Mitsui, losses stemming from stocks surged more than 10 times to 132.9 billion yen in the first half. It raised its fullyear profit forecast by 13 percent to 540 billion yen, led by gains from government bond trading and lending. Net income almost doubled to 213.2 billion yen last quarter. “The impact on our bank from cross-shareholdings is big,” president Miyata said. The lender’s holdings include Panasonic, which yesterday said it plans to cut 8,000 jobs in the second half of the fiscal year as it restructures

amid falling demand for televisions and a rising yen.

Mizuho losses Mizuho, the country’s third-biggest bank by market value, booked 227.6 billion yen in losses tied to equities in the six months ended September. That contributed to a more than 99 percent drop in net income to 356 million yen last quarter. The lender’s corporate banking unit has a 3.77 percent stake in Sharp, which has tumbled 75 percent this year, the most among companies on the benchmark Topix Index, after forecasting a record full-year loss. Mizuho maintained its 500 billion yen full-year profit forecast and Mitsubishi UFJ kept its target of 670 billion yen. Japanese banks, which hold shares of allied enterprises in part to cement ties, have been paring their stakes in recent years. Banks’ stock holdings dropped to 16.2 trillion yen as of August 31, the lowest since October 1997, when lenders held 47.9 trillion yen of shares, according to central bank data. “Risks stemming from shareholdings are now at a manageable level,” said Shinichi Ina, a Tokyobased banking analyst at UBS AG. “But this is clearly an issue that megabank executives should continue tackling, while gauging the impact on Japan’s stock market from a selloff.” Bloomberg


November 16, 2012 business daily | 11

ASIA

Qantas to repay debt, buy back shares Says share price does not reflect value of company

A

ustralia’s Qantas Airways will repay A$650 million (US$675 million) in debt ahead of schedule and buy back up to A$100 million in shares, saying the market is undervaluing the business after a slump in its share price. Qantas has been battling high fuel costs, tough competition at home and a strong Australian dollar that has dented tourism spending. It announced plans in September to tie up with Dubai’s Emirates to shore up its loss-making international business. “The board believes the current Qantas share price does not reflect fair value of the group, particularly considering the underlying strength of its domestic, loyalty and Jetstar businesses and the proposed partnership with Emirates,” Qantas chairman Leigh Clifford said in statement yesterday. In addition to the planned Emirates alliance, Qantas has been cutting jobs, cancelling plane orders and selling non-core assets to boost its balance sheet and reduce operating costs. Qantas shares rose 4.07 percent to close at A$1.28 in a weak market yesterday. The stock slumped to A$0.96 in June, the lowest since privatisation in 1995 and down from above A$6 in 2007. Some analysts were surprised to see Qantas’ plan to buy back shares. “The balance sheet might be okay

today, but it’s the future requirement for capital on the balance sheet which is still very high,” said Akshay Chopra, an investment analyst at Karara Capital. “To buy back stocks today, it just seems bizarre really.” The carrier posted an annual net loss of A$244 million last year, its first since being privatised. Qantas said it expected to report an underlying profit before tax for the six months ending 31 December 2012 in the range of A$180 million to A$230 million, versus A$202 million a year ago. “The outlook for the second half of FY13 remains volatile and, given the uncertainty in global economic conditions, fuel prices and foreign exchange rates, it is not possible to provide further guidance at this time,” Qantas said. Analysts are expecting a pre-tax profit of A$385 million for the year

Qantas has cut jobs and cancelled plane orders earlier this year

US$675 mln Qantas to repay in debt

Sony tumbles on convertible bonds issue Shares plunge over 8 pct on plan to raise US$1.9 bln

S

hares of Sony Corp tumbled over 10 percent yesterday, a day after the consumer electronics maker said it will raise 150 billion yen (US$1.9 billion) through a sale of convertible bonds to help finance a series of investments. Sony, beset with falling demand in its core TV business and the growth of rivals like Apple Inc. and Samsung Electronics Co, has invested in an assortment of businesses from medical equipment to cloud gaming after CEO Kazuo Hirai took the helm in April. On Wednesday, the maker of Vaio laptops and PlayStation game consoles said it will issue the fiveyear bonds convertible into shares to finance an investment in Olympus Corp, the acquisition of U.S. firm Gaikai Inc, ramping up in CMOS image sensors used in devices like digital cameras and to repay debt. Sony shares plunged 8.85 percent to 793 yen. “Worries of dilution are pushing shares down today,” said Katsuhide Takahashi, a credit sector specialist at Citigroup in Tokyo. If all the convertible bonds were exchanged for Sony shares, it would lead to a dilution of existing share holdings by as much as 15.6 percent. “In a way, the fact that Sony can issue corporate bonds and access the market is positive, in comparison to

its peers that can’t even do that like Sharp. From an equity perspective, there are worries of dilution but on a credit front this is positive,” Mr Takahashi said. Rival Sharp Corp, has effectively been shunned by the debt capital markets because of its massive losses and falling market share, forcing it to turn to its banks for a bailout in September and consider capital tie-ups. A Hong Kong-based credit analyst said some investors were likely selling Sony shares in favour of the convertible bonds, which protect their investment if the share prices falls but still offer upside in the event a rally. Despite a zero coupon, which reflects Japan’s near-zero rate environment, the bonds would be attractive given a low conversion premium, set at 10 percent above Wednesday’s close at 870 yen. “It would be a safer bet for stockholders to buy the convertible bond a s its downside is better protected relative to the equity,” he said. Convertible bond arbitrage traders and hedge funds could also use the bonds to hedge short selling Sony shares. “The cost of shorting Sony stock would be low and it will be easy to short, so this trade will be attractive, “ he said. Reuters

to end-June, 2013 according to the consensus forecast from Thomson Reuters I/B/E/S. Standard & Poor’s cut its rating on Qantas to BBB-minus in September.

That is still investment grade, making Qantas one of only two investment grade airlines in the world, along with Southwest Airlines. Reuters


12 |

business daily November 16, 2012

MARKETS Hang SENG INDEX NAME

NAME

PRICE

DAY %

VOLUME

11.16

-2.276708

31089641

9.87

-0.4036327

2756859

SANDS CHINA LTD

CLP HLDGS LTD

65.95

0.2279635

1857784

CNOOC LTD

15.74

-1.992528

37095357

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.1

-0.8237232

16400447

CHINA UNICOM HON

ALUMINUM CORP-H

3.25

-2.108434

13486285

CITIC PACIFIC

BANK OF CHINA-H

3.11

-2.201258

338031200

BANK OF COMMUN-H

5.33

-2.737226

20031325

BANK EAST ASIA BELLE INTERNATIO

28.6

0

609074

14.36

-0.5540166

7363340

COSCO PAC LTD

9.95

-2.641879

9871326

ESPRIT HLDGS

12.96

22.0339

88402253

NAME

PRICE

DAY %

66.85

0.300075

1251940

30.7

0

11317833

SINO LAND CO

13.22

-0.3016591

3281474

SUN HUNG KAI PRO

112.6

-1.314636

3233689

POWER ASSETS HOL

SWIRE PACIFIC-A TENCENT HOLDINGS

BOC HONG KONG HO

23.55

-0.6329114

7214998

HANG LUNG PROPER

26.65

-1.478743

7206353

TINGYI HLDG CO

CATHAY PAC AIR

13.52

-0.4418262

1859183

HANG SENG BK

114.5

-1.037165

1057752

WANT WANT CHINA

CHEUNG KONG

112.6

-0.9674582

2682628

HENDERSON LAND D

WHARF HLDG

7.4

-1.069519

18140562

CHINA COAL ENE-H CHINA CONST BA-H

52.8

-1.584343

2718041

70.15

-1.474719

3321856

19.9

1.117886

6124873

HONG KONG EXCHNG

122.1

-1.927711

3885949

HSBC HLDGS PLC

9453269

HENGAN INTL

5.68

-2.739726

273067197

CHINA LIFE INS-H

22.25

-1.982379

32967096

CHINA MERCHANT

23.1

-2.325581

4368397

73.95

-0.738255

CHINA MOBILE

84.1

-1.752336

14069909

HUTCHISON WHAMPO

76.7

-0.8403361

4772926

20.65

-2.132701

14286494

IND & COMM BK-H

5.01

-1.956947

212177286

CHINA PETROLEU-H

7.85

-1.875

45935959

LI & FUNG LTD

12.66

-3.062787

17060810

CHINA RES ENTERP

25.75

1.178782

1863542

MTR CORP

29.05

-0.6837607

1186195

CHINA OVERSEAS

HONG KG CHINA GS

MOVERS

HIGH

21442.98

LOW

21108.93

18.62

-0.1072961

7577867

NEW WORLD DEV

11.86

0

6650080

52W (H) 21847.69922

16.72

-0.1194743

12029725

PETROCHINA CO-H

10.1

-1.750973

58764913

(L) 17613.19922

PING AN INSURA-H

59.5

-1.490066

9164966

PRICE

DAY %

VOLUME

23.35

-3.71134

8633764

CHINA PETROLEU-H

7.85

-1.875

45935959

-2.090032

9862987

-0.1613771

705668

-6.945482

11365664

23.4

-0.2132196

3808897

10.66

-1.841621

14229687

53.1

-1.939058

2437907

41

3 21445

CHINA RES LAND

30.45

92.8 249.2

INDEX 21108.93

CHINA RES POWER CHINA SHENHUA-H

5

VOLUME

21100

13-November

15-November

Hang SENG CHINA ENTErPRISE INDEX NAME

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.29

-2.373887

114126789

AIR CHINA LTD-H

5.05

-1.174168

6932728

ALUMINUM CORP-H

3.25

-2.108434

13486285

CHINA RAIL CN-H

8.18

-2.035928

ANHUI CONCH-H

24.9

-0.2004008

11897883

CHINA RAIL GR-H

4.15

BANK OF CHINA-H

3.11

-2.201258

338031200

CHINA SHENHUA-H

CHINA PACIFIC-H

PRICE

DAY %

VOLUME

11.24

-1.919721

32667226

ZIJIN MINING-H

3.13

-1.26183

46815638

10002816

ZOOMLION HEAVY-H

9.28

-4.428424

38041425

0.7281553

22445749

ZTE CORP-H

11.36

-1.217391

3507982

30.45

-2.090032

9862987

5.33

-2.737226

20031325

CHINA TELECOM-H

3.99

-2.444988

79130093

19.82

-1.393035

3938308

DONGFENG MOTOR-H

9.57

-1.441813

19339829

3.84

-2.040816

39137978

GUANGZHOU AUTO-H

5.08

-1.359223

4733004

CHINA COAL ENE-H

7.4

-1.069519

18140562

HUANENG POWER-H

6.32

0.6369427

20189990

CHINA COM CONS-H

6.79

-2.020202

19363645

IND & COMM BK-H

5.01

-1.956947

212177286

CHINA CONST BA-H

5.68

-2.739726

273067197

JIANGXI COPPER-H

19.12

-2.44898

11204445

CHINA COSCO HO-H

3.49

-2.513966

10804943

PETROCHINA CO-H

10.1

-1.750973

58764913

22.25

-1.982379

32967096

PICC PROPERTY &

9.73

-2.407222

15450313

4.8

-3.225806

9978184

PING AN INSURA-H

59.5

-1.490066

9164966

13.84

-2.259887

13571925

SHANDONG WEIG-H

10

0.3009027

3150740

BANK OF COMMUN-H BYD CO LTD-H CHINA CITIC BK-H

CHINA LIFE INS-H CHINA LONGYUAN-H CHINA MERCH BK-H

NAME YANZHOU COAL-H

MOVERS

35

0 10410

INDEX 10199.6 HIGH

10409.42

LOW

10199.6

CHINA MINSHENG-H

7.09

-2.60989

31873380

SINOPHARM-H

24.6

-1.204819

1622876

52W (H) 11916.1

CHINA NATL BDG-H

9.46

-1.149425

50195180

TSINGTAO BREW-H

41.4

1.098901

2351776

(L) 8987.76

14.18

-0.8391608

3627696

WEICHAI POWER-H

26.8

-1.289134

2196868

CHINA OILFIELD-H

5

10190

13-November

15-November

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

CSR CORP LTD -A

4.55

-2.150538

49584261

SHANDONG DONG-A

40.05

-0.5956813

2099592

4785441

DAQIN RAILWAY -A

6.06

-0.9803922

15388261

SHANDONG GOLD-MI

36.8

-1.154983

4024336

-2.626263

15201236

DATANG INTL PO-A

4.09

-2.15311

2549752

10.79

-1.461187

4230900

-1.147959

12792810

EVERBRIG SEC -A

10.9

-0.9990917

6923326

SHANG PUDONG-A

7.42

-1.066667

29220009

2.33

-0.8510638

27322068

SHANGHAI ELECT-A

3.91

-2.005013

2482306

12.08

-1.30719

15565405

SHANXI LU'AN -A

16.68

-2.683781

7533800

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.58

0

62201524

AIR CHINA LTD-A

4.69

-1.677149

ALUMINUM CORP-A

4.82

ANHUI CONCH-A

15.5

NAME

BANK OF BEIJIN-A

7.06

-1.671309

11685577

GD POWER DEVEL-A

BANK OF CHINA-A

2.81

-0.7067138

30483019

GF SECURITIES-A GREE ELECTRIC

BANK OF COMMUN-A

4.18

-0.9478673

20571587

BANK OF NINGBO-A

8.83

-1.340782

4254306

GUANGHUI ENERG-A

BAOSHAN IRON & S

4.63

-0.4301075

19478170

HAITONG SECURI-A HANGZHOU HIKVI-A

BYD CO LTD -A

NAME

SHANG PHARM -A

22.9

0.6593407

8629699

SHANXI XINGHUA-A

40.99

-2.497621

2095630

15.46

-0.8338679

11558634

SHANXI XISHAN-A

11.92

-2.931596

10287632

8.3

-2.237927

25693576

SHENZEN OVERSE-A

5.69

0

15010165

28.04

0.9359251

2527639

SICHUAN KELUN-A

53.53

-0.6864564

608025

-0.5852843

614016

SUNING APPLIAN-A

6.31

0.1587302

27625781 4176553

16

-1.538462

4883947

CHINA CITIC BK-A

3.57

-1.381215

11987578

HENAN SHUAN-A

59.45

CHINA CNR CORP-A

4.05

-1.699029

40592326

HONG YUAN SEC-A

16.28

-2.51497

6332806

TASLY PHARMAC-A

50.47

3

CHINA COAL ENE-A

6.91

-1.002865

3466930

HUATAI SECURIT-A

8.27

-2.130178

9167020

TSINGTAO BREW-A

30.55

-0.2286088

480647

CHINA CONST BA-A

4.18

-2.336449

28930656

HUAXIA BANK CO

8.35

-1.880141

9913598

WEICHAI POWER-A

20.47

-1.963602

5099474 8139764

CHINA COSCO HO-A

4.02

-1.95122

6025206

IND & COMM BK-A

3.84

-0.7751938

36776485

WULIANGYE YIBIN

32.1

-1.654412

CHINA CSSC HOL-A

19.5

-2.01005

2647420

INDUSTRIAL BAN-A

12.45

-1.268834

20853271

YANGQUAN COAL -A

13.3

-1.917404

4699581

CHINA EAST AIR-A

3.19

-2.743902

12432998

INNER MONG BAO-A

32.79

-3.416789

43980931

YANTAI CHANGYU-A

41.4

-2.011834

1250662

CHINA EVERBRIG-A

2.57

-1.153846

40333236

INNER MONG YIL-A

21.29

0.4719207

4451709

YANTAI WANHUA-A

12.81

-2.954545

9292917

5.16

-2.087287

42178101

YANZHOU COAL-A

16.98

-2.301496

2232255

1509489

YUNNAN BAIYAO-A

65.4

2.139622

1619205

CHINA LIFE INS-A CHINA MERCH BK-A

18

0.7838746

7486585

INNER MONGOLIA-A

10.02

-0.5952381

15095665

JIANGSU HENGRU-A

29

0.554785

108.71

-0.6579549

964225

ZHONGJIN GOLD

15.54

-1.333333

8191241

20.56

-1.296207

3867786

ZIJIN MINING-A

3.73

-1.842105

25849538

CHINA MERCHANT-A

8.74

-2.888889

7508178

JIANGSU YANGHE-A

CHINA MERCHANT-A

21.56

-1.910828

5142790

JIANGXI COPPER-A

CHINA MINSHENG-A

6.13

-0.3252033

62695600

JINDUICHENG -A

11

-1.697945

2557234

ZOOMLION HEAVY-A

8.12

-0.3680982

20016151

JIZHONG ENERGY-A

11.07

-3.403141

7736218

ZTE CORP-A

8.25

-2.941176

9239268

CHINA NATIONAL-A

6.7

0

45029652

CHINA OILFIELD-A

15.47

-1.590331

2142330

KANGMEI PHARMA-A

16.07

-0.3101737

7046892

CHINA PACIFIC-A

17.28

-0.9174312

11399703

KWEICHOW MOUTA-A

227.25

-1.474095

1140061

6.16

-0.805153

15638165

LUZHOU LAOJIAO-A

36.07

-1.232202

2796312

2.02

-0.4926108

14939492

0

11683657

CHINA PETROLEU-A CHINA RAILWAY-A

5.18

-1.520913

15675122

METALLURGICAL-A

CHINA RAILWAY-A

2.76

-2.12766

40522725

NINGBO PORT CO-A

2.48

CHINA SHENHUA-A

22.11

-2.168142

4484091

PANGANG GROUP -A

3.55

-1.933702

24636196

PETROCHINA CO-A

8.61

-0.5773672

11368207

MOVERS

19

CHINA SHIPBUIL-A

4.24

-0.4694836

17869716

3.39

-2.586207

19956754

PING AN BANK-A

13.15

-1.718984

7651970

37.77

-0.1586043

19779809

HIGH

2250.84

LOW

2193.62

CHINA STATE -A

3.05

-0.974026

33155018

CHINA UNITED-A

3.34

-2.052786

44501080

POLY REAL ESTA-A

11.13

-0.890472

30192647

CHINA VANKE CO-A

8.25

-1.433692

45267675

QINGDAO HAIER-A

11.24

0.0890472

4800327

CHINA YANGTZE-A

6.32

-0.7849294

10698470

QINGHAI SALT-A

23.31

-2.672234

2681258

5.2

-1.328273

1595525

SAIC MOTOR-A

13.07

-2.752976

12452495

10.51

-2.050326

29284687

8.91

-1.219512

11088605

NAME

PRICE DAY %

Volume

PRICE DAY %

Volume

ACER INC

23.35 -0.6382979

11531694

FORMOSA PLASTIC

67.7

-3.285714

21289220

22.3 -0.6681514

12564701

FOXCONN TECHNOLO

97.5

0.7231405

5308656

2507361

FUBON FINANCIAL

30.6

-1.923077

CHONGQING WATE-A CITIC SECURITI-A

SANY HEAVY INDUS

8 2255

INDEX 2193.623

CHINA SOUTHERN-A

PING AN INSURA-A

273

52W (H) 2754.001 (L) 2172.878906

2190

13-November

15-November

FTSE TAIWAN 50 INDEX

ADVANCED SEMICON ASIA CEMENT CORP

NAME

PRICE DAY % 0.9661836

TPK HOLDING CO L

426

0.7092199

4180754

10492476

TSMC

90.2 -0.3314917

25096315

UNI-PRESIDENT

51.3

0.5882353

6294018

UNITED MICROELEC

10.6

0.4739336

17979429

0.6944444

ASUSTEK COMPUTER

311

-0.955414

3368144

HON HAI PRECISIO

90.1

0.3340757

31085266

AU OPTRONICS COR

11.5

-1.709402

40943902

HOTAI MOTOR CO

182.5

0.2747253

436178

TAIWAN MOBILE CO

Volume

104.5

36.25

CATCHER TECH

NAME

4013162

134.5

0.3731343

12610676

HTC CORP

237.5

1.495726

27437422

WISTRON CORP

28.15

0

6976593

CATHAY FINANCIAL

28.8

-1.200686

17792233

HUA NAN FINANCIA

15.25

0

4239212

YUANTA FINANCIAL

13.35

-1.476015

11136343

CHANG HWA BANK

14.6

-1.351351

3959277

LARGAN PRECISION

690

1.02489

1567820

YULON MOTOR CO

49.75

0.1006036

4062227

CHENG SHIN RUBBE

70

-1.129944

7072074

LITE-ON TECHNOLO

37.4

0.4026846

4760559

CHIMEI INNOLUX C

11.1 -0.8928571

66755454

MEDIATEK INC

318

0

6287657

CHINA DEVELOPMEN

6.47 -0.9188361

19868965

MEGA FINANCIAL H

20.5

-1.678657

12846441

25 -0.3984064

11575388

NAN YA PLASTICS

46.9

-3.099174

12215123

26933194

PRESIDENT CHAIN

147 -0.3389831

1216934

CHINA STEEL CORP CHINATRUST FINAN

15.55

-0.955414

CHUNGHWA TELECOM

92.6

0.4338395

5538206

QUANTA COMPUTER

68.1

0.1470588

6988401

COMPAL ELECTRON

18.5

1.092896

18258799

SILICONWARE PREC

28.2 -0.1769912

6935086

DELTA ELECT INC

105

0

3107648

SINOPAC FINANCIA

11.35

-1.304348

10409010

FAR EASTERN NEW

30.55

0.3284072

4632953

SYNNEX TECH INTL

56.3

0.1779359

2941843

FAR EASTONE TELE

70

0

7064599

TAIWAN CEMENT

36.35

-1.222826

5123226

FIRST FINANCIAL

16.4 -0.9063444

7573015

TAIWAN COOPERATI

15.4

0.3257329

5762075

FORMOSA CHEM & F

59.6

-1.160862

9036530

TAIWAN FERTILIZE

69.5

0.7246377

2389099

FORMOSA PETROCHE

80.1

0

1494798

TAIWAN GLASS IND

25.7

0.1949318

2118797

MOVERS

20

24

6 5075

INDEX 4991.98 HIGH

5070.43

LOW

4946.26

52W (H) 5621.53 4940

(L) 4643.05 13-November

15-November


November 16, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) 28.6

37.50

28.3

37.25

28.0

37.00

27.7

36.75

27.4

36.50

13.0

31.0

18.2

22.6

13.3

13.2

13.1

30.8

22.3

18.0

30.6

22.0

30.4

17.8

21.7

30.2 17.6

30.0

Commodities ENERGY

CURRENCY EXCHANGE RATES

NAME

PRICE

WTI CRUDE FUTURE Dec12

86.39

0.081093605

-11.94577515

110.25

79.11999512

BRENT CRUDE FUTR Dec12

110.15

0.49265578

6.025604004

122.0999985

89.84999847

GASOLINE RBOB FUT Dec12

DAY %

YTD %

(H) 52W

269.16

0.470324748

8.471024422

295.8800077

217.2600031

931.5

0.350121196

3.904071389

1040.25

798

NATURAL GAS FUTR Dec12

3.787

0.718085106

0.798509449

4.350000381

2.90899992

299.42

0.200789773

4.276659469

335.1700068

254.2500019

Gold Spot $/Oz

1725.71

0.0765

10.2754

1796.08

1522.75

Silver Spot $/Oz

32.705

0.6113

17.496

37.4775

26.1513

Platinum Spot $/Oz

1576.3

-0.6742

13.0369

1736

1339.25

Palladium Spot $/Oz

634.55

-0.929

-2.8998

725.19

553.75

LME ALUMINUM 3MO ($)

1970

-0.755667506

-2.475247525

2361.5

1827.25

LME COPPER 3MO ($)

7640

-0.520833333

0.526315789

8765

7100.25

LME ZINC

1950

0.775193798

5.691056911

2220

1745

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan13 CORN FUTURE

Mar13

WHEAT FUTURE(CBT) Mar13

PRICE

(L) 52W

GAS OIL FUT (ICE) Dec12

HEATING OIL FUTR Dec12 METALS

21.4

16155

0.654205607

-13.65579904

22150

15236

14.655

0.034129693

-4.558775643

16.60000038

14.60000038

729.5

0.034281796

21.53269471

846.25

511

MAJORS

ASIA PACIFIC

CROSSES

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

DAY %

1.0358 1.5848 0.9441 1.2753 80.83 7.9835 7.7512 6.2339 54.85 30.71 1.2244 29.082 41.25 9629 83.725 1.20394 0.80473 7.9464 10.1811 103.08 1.0299

-0.8139 -0.1449 0.0318 0.0392 -1.0516 -0.0025 -0.0077 -0.1396 0.0456 -0.0326 -0.2369 -0.086 -0.2909 0.0104 -0.2437 -0.005 -0.1839 -0.2932 -0.0295 -1.0865 0.0097

YTD %

(H) 52W

1.4595 1.9623 -0.6355 -1.6048 -4.8497 0.2017 0.209 0.9801 -3.2543 2.7353 5.8968 4.1159 6.2788 -5.8158 -6.3219 1.0673 3.5614 2.3633 1.6786 -3.3178 0.0194

(L) 52W

1.0857 1.6309 0.9972 1.3614 84.18 8.0308 7.7979 6.3964 57.3275 32 1.315 30.5 44.35 9662 88.637 1.24438 0.86648 8.613 10.887 111.44 1.0311

0.9582 1.5235 0.8931 1.2043 76.03 7.9823 7.7498 6.2202 48.6088 30.2 1.2152 28.914 40.996 8875 74.482 1.19995 0.77553 7.7018 9.6245 94.12 1.029

MACAU RELATED STOCKS (H) 52W

(L) 52W

ARISTOCRAT LEISU

2.61

-1.136364

18.63636

3.25

2.16

2287526

150.8999939

CROWN LTD

9.83

-0.8072654

21.50803

10.2

7.92

1643550

866.75

0.318287037

18.08583106

948.25

652

SOYBEAN FUTURE Jan13

1412

-0.493305144

16.40560594

1781.5

1126.75

COFFEE 'C' FUTURE Mar13

152.7

-0.032733224

-35.82685438

249

NAME

PRICE

DAY % YTD %

VOLUME CRNCY

SUGAR #11 (WORLD) Mar13

19.19

-0.25987526

-17.8510274

25.12999916

18.65999985

AMAX HOLDINGS LT

0.069

-1.428571

-20.68965

0.119

0.055

1450000

COTTON NO.2 FUTR Mar13

71.68

0.589390963

-19.01480059

98.5

66.84999847

BOC HONG KONG HO

23.55

-0.6329114

27.98913

25

16.24

7214998

CENTURY LEGEND

0.255

0

10.86956

0.335

0.204

0

4.18

0

49.28572

4.36

2.5

154229

CHINA OVERSEAS

20.65

-2.132701

59.27008

21.95

11.507

14286494

CHINESE ESTATES

11.28

-1.570681

-9.76

13.26

8.3

29100

CHOW TAI FOOK JE

9.9

-0.6024096

-28.87931

15.16

8.4

6648000

EMPEROR ENTERTAI

1.54

1.986755

38.73874

1.57

0.99

1590000

FUTURE BRIGHT

1.26

1.612903

200

1.36

0.37

702000

GALAXY ENTERTAIN

27.6

-1.075269

93.82023

29.45

13.2

15589160

CHEUK NANG HLDGS

World Stock MarketS - Indices NAME

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

US

12570.95

-1.45208

2.892481

13661.87

11231.56

NASDAQ COMPOSITE INDEX

US

2846.808

-1.285798

9.276173

3196.932

2441.48

HANG SENG BK

114.5

-1.037165

24.25393

120

91.05

1057752

FTSE 100 INDEX

GB

5698.26

-0.4150639

2.260834

5989.07

5075.22

HOPEWELL HLDGS

29.65

3.671329

51.25886

31.091

18.319

2221400

DAX INDEX

GE

7063.23

-0.5447823

19.74925

7478.53

5366.5

HSBC HLDGS PLC

73.95

-0.738255

25.33898

78

56

9453269

3.15

-1.5625

5.35117

3.88

2.81

6044000

LUK FOOK HLDGS I

20

-1.960784

-26.19926

34.8

14.7

1946000

MELCO INTL DEVEL

7.61

-2.18509

31.88908

8.28

5.12

7115000 1120400

HUTCHISON TELE H

NIKKEI 225

JN

8829.72

1.904156

4.427613

10255.15

8135.79

HANG SENG INDEX

HK

21108.93

-1.553307

14.50842

22149.69922

17613.19922

CSI 300 INDEX

CH

2193.623

-1.326385

-6.484894

2754.001

2172.878906

MGM CHINA HOLDIN

13.2

0

37.61248

14.76

9.347

TAIWAN TAIEX INDEX

TA

7143.84

-0.2222145

1.014691

8170.72

6609.11

MIDLAND HOLDINGS

3.56

-1.385042

-9.965662

5.217

3.249

936000

NEPTUNE GROUP

0.155

0

39.63964

0.222

0.08

4111000

NEW WORLD DEV

11.86

0

89.45686

13.2

6.13

6650080

SANDS CHINA LTD

30.7

0

39.86332

33.05

19.96

11317833

KOSPI INDEX

SK

1870.72

-1.231231

2.463658

2057.28

1750.6

S&P/ASX 200 INDEX

AU

4349.25

-0.8913794

7.215212

4581.8

3973.8

JAKARTA COMPOSITE INDEX

ID

4351.284

0.4432047

13.8486

4366.856

3618.969

SHUN HO RESOURCE

1.2

-2.439024

20

1.37

0.95

76000

FTSE Bursa Malaysia KLCI

MA

1631.68

-0.3608962

6.594898

1679.37

1424.19

SHUN TAK HOLDING

3.15

-0.3164557

23.08879

3.51

2.418

1900076

NZX ALL INDEX

NZ

860.004

-0.02778285

17.84101

874.107

712.548

SJM HOLDINGS LTD

17.98

-0.1111111

43.77632

18.18

11.519

3968659

SMARTONE TELECOM

14.56

0.5524862

8.333337

17.5

11.72

1668121

WYNN MACAU LTD

21.6

-3.571429

10.76923

25.5

14.62

6863400

ASIA ENTERTAINME

3.4

-6.849315

-42.17687

7.2508

2.4

92450

BALLY TECHNOLOGI

44.36

-1.83669

12.13346

51.16

35.45

555819

PHILIPPINES ALL SHARE IX

PH

3568.67

-0.6995361

17.19616

3607.89

2952.17

HSBC Dragon 300 Index Singapor

SI

583.69

-0.78

17.6

NA

NA

STOCK EXCH OF THAI INDEX

TH

1270.12

-0.7168039

23.87548

1314.64

965.07

HO CHI MINH STOCK INDEX

VN

386.91

-0.2063398

10.05832

492.44

332.28

BOC HONG KONG HO

3.15

3.960396

31.40399

3.3

2

2000

Laos Composite Index

LO

1196.44

0.08532566

33.01758

1241.19

876.33

GALAXY ENTERTAIN

3.495

-2.916667

86.8984

3.73

1.68

11320 5101396

INTL GAME TECH

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

12.6

-3.002309

-26.74419

18.1

10.92

JONES LANG LASAL

74.11

-1.854059

20.97617

87.52

55.88

165192

LAS VEGAS SANDS

40.92

-3.740296

-4.235899

62.09

34.72

6326522

MELCO CROWN-ADR

13.8

-4.03338

43.45115

16.02

8.18

3927248

MGM CHINA HOLDIN

1.76

0

47.68902

1.96

1.1917

2000

MGM RESORTS INTE

9.3

-1.587302

-10.83413

14.9401

8.83

11277804

SHFL ENTERTAINME

12.7

-1.930502

8.361772

18.77

10.22

183560

SJM HOLDINGS LTD

2.25

-1.746725

39.96256

2.32

1.4695

23200

104.56

-2.216403

0.9251782

129.6589

84.4902

2096571

WYNN RESORTS LTD

AUD HKD

USD


14 |

business daily November 16, 2012

Opinion Missing growth multipliers

Ashoka Mody

Visiting professor of International Economic Policy at the Woodrow Wilson School of Public and International Affairs, Princeton University

I

n April 2010, when the global economy was beginning to recover from the shock of the 2008-2009 financial crisis, the International Monetary Fund’s World Economic Outlook predicted that global GDP growth would exceed 4 percent in 2010, with a steady annual growth rate of 4.5 percent maintained through 2015. But the forecast proved to be far too optimistic. In fact, global growth has decelerated. In its most recent WEO, the IMF forecasts global GDP to grow by only 3.3 percent in 2012, and by 3.6 percent in 2013. Moreover, the downgrading of growth prospects is remarkably widespread. The forecast errors have three potential sources: failure to recognise the time needed for economic recovery after a financial crisis; underestimation of the “fiscal multipliers” (the size of output loss owing to fiscal austerity); and neglect of the “world-trade multiplier” (the tendency for countries to drag each other down as their economies contract). For the most part, the severity and implications of the financial crisis were judged well. Lessons from the October 2008 WEO, which analysed recoveries after systemic financial stress, were incorporated into subsequent forecasts. As a result, predictions for the United States – where household deleveraging continues to constrain economic growth – have fallen short only modestly. The April 2010 report forecast a U.S. growth rate of roughly 2.5 percent annually in 2012-2013; current projections put the rate a little higher than 2 percent. By contrast, the fiscal multiplier was seriously underestimated – as the WEO has now recognised. Consequently, forecasts for the United Kingdom – where financial-sector stresses largely resembled those in the U.S. – have been significantly less accurate.

by roughly 1 percent next year. Much of this costly divergence from the earlier projections can be attributed to the benign view of fiscal consolidation that UK authorities and the IMF shared. Likewise, the eurozone’s heavily indebted economies (Greece, Ireland, Italy, Portugal, and Spain) have

In good times, the trade generated by a country’s growth bolsters global growth. But, in times of crisis, the trade spillovers have the opposite effect

performed considerably worse than projected, owing to significant spending cuts and tax hikes. For example, Portugal’s GDP was expected to grow by 1 percent this year; in fact, it will contract by a stunning 3 percent. The European Commission’s claim that this slowdown reflects high sovereigndefault risk, rather than fiscal consolidation, is belied by the UK, where the sovereign risk is deemed by markets to be virtually non-existent. The world-trade multiplier, though less widely recognised, helps to explain why the growth deceleration has been so widespread and persistent. When a country’s economic growth slows, it imports less from other countries, thereby reducing those countries’ growth rates, and causing them, too, to reduce imports. The eurozone has been at the epicentre of this contractionary force on global growth. Since eurozone countries trade extensively with each other and the rest of the world, their slowdowns have contributed significantly to a decrease in global trade, in turn undermining

global growth. In particular, as European imports from East Asia have fallen, East Asian economies’ growth is down sharply from last year and the 2010 forecast – and, predictably, growth in their imports from the rest of the world has lost momentum.

Underestimating trade effects Global trade has steadily weakened, with almost no increase in the last six months. The once-popular notion, built into growth forecasts, that exports would provide an escape route from the crisis was never credible. That notion has now been turned on its head: as economic growth has stalled, falling import demand from trade partners has caused economic woes to spread and deepen. The impact of slowing global trade is most apparent for Germany, which was not burdened with excessive household or corporate debt, and enjoyed a favourable fiscal position. To escape the crisis, Germany used rapid export growth – especially to meet voracious Chinese demand. Although growth

was expected to slow subsequently, it was forecast at roughly 2 percent in 20122013. But, as Chinese growth has decelerated – owing partly to decreased exports to Europe – the German GDP forecast has been halved. And, given that this year’s growth has largely already occurred, Germany’s economy has now plateaued – and could even be contracting. In good times, the trade generated by a country’s growth bolsters global growth. But, in times of crisis, the trade spillovers have the opposite effect. As the global economy has become increasingly interconnected, these trade multipliers have increased. Indeed, while less ominous and dramatic than financial contagion, trade spillovers profoundly influence global growth prospects. Failure to recognise their impact implies that export – and, in turn, growth – projections will continue to miss the mark. The projected increase in global growth next year will likely not happen. On the contrary, policy errors and delays in individual countries will seriously damage economies worldwide. © Project Syndicate

Missing growth targets The April 2010 WEO forecast a UK annual growth rate of nearly 3 percent in 20122013; instead, GDP is likely to contract this year and increase

editorial council Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, Emanuel Graça Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief José I. Duarte Associated editor Michael Grimms Newsdesk Vitor Quintã (Chief Reporter), Alex Lee, Stephanie Lai, Tony Lai Creative Director José Manuel Cardoso Designer Janne Louhikari Contributors Frederico Rato, Pereira Coutinho, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, John Si, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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November 16, 2012 business daily | 15

OPINION China’s Xi won’t be able wires to take on the world Business

Leading reports from Asia’s best business newspapers

Business Times Guardian Industries Malaysia, a unit of US-based international float glass manufacturer Guardian Industries, will be investing up to RM800 million (US$261 million) in Malacca to build a production facility for high-technology glass products. State Development Corp had signed a purchase agreement to sell a 24-hectare plot to the company. “This development is in line with Malacca’s vision to become a green technology city-state, and in the near future, we hope to welcome more investments from international companies in the green technology sector”, authorities said.

Nation Boutique airline Bangkok Airways plans to list on the Stock Exchange of Thailand within the second quarter of next year, to support fleet and network expansion. Once listed, Bangkok Airways will be the third listed aviation company after Thai Airways International and Asia Aviation which majority owns and operates Thai AirAsia. It was reported that Bangkok Airways seeks to mobilise about Bt10 billion (US$325 million) in the initial public offering. The fleet will be expanded and more routes in Asean and China will be covered.

Korea Herald South Korea’s online bookstores were slapped with a collective 25 million won (US$22,984) in fines and corrective orders for deceiving customers with fabricated data, the nation’s antitrust watchdog said on Monday. 
The country’s major online bookshops – Yes24, Interpark, Kyobo Books and Aladin – allegedly displayed newly released publications on their websites’ section called “new this week” and “IT’S BEST” in return for receiving advertising fees ranging from 500,000 won to 2.5 million won per book.

Business Line Poor response to the 2G telecom spectrum auction is likely to make it difficult for the Indian government to keep the fiscal deficit in check and to meet the revised target of 5.3 percent of the Gross Domestic Product (GDP) in 2012-13. The 2G-spectrum auction, which concluded yesterday, would fetch just one third of the reserve price fixed by the Telecommunications Ministry. Furthermore, only part will be available thus year, as telecom companies have the option to stagger payment over three years.

Odd Arne Westad

Professor of history at the London School of Economics and Political Science

A

s he takes over as party leader after the 18th Congress of the Chinese Communist Party, Vice President Xi Jinping will face a host of ills. For all its newfound wealth, China is – to put it simply – very badly governed. Corruption is rampant, the provinces are neglected, and current party leader Hu Jintao has put off much-needed political reforms for a decade. To make changes at home easier to push through, Xi, who is expected to become president next year, may be tempted to pursue a populist foreign policy. Xi has already positioned himself in line with the nationalist instincts of many younger Chinese on a number of foreign matters. For instance, he has conveyed that China has been weak-kneed in its relations with the U.S., Japan and, for that matter, North Korea. At the same time, Xi is, above all else, pragmatic. He’s not expected to do anything that would endanger China’s continued economic growth. China’s gross domestic product has multiplied 30 times over since 1990, and even if its year-on-year growth is now slowing, it is still by far the fastest growing of the world’s large economies. Therein lies the new leadership’s foreign policy challenge. China’s goal in its relations with the outside world is to get the most for China. Yet that is no strategy. Nor is it even a viable policy, unless the country’s aim is to antagonise its neighbours.

Lacking framework Even within Asia, China has no overriding foreign policy framework. In conflicts over islands in the South China Sea,

China’s goal in its relations with the outside world is to get the most for China. Yet that is no strategy. Nor is it even a viable policy, unless the country’s aim is to antagonise its neighbours

the government, spurred on by increasingly nationalist public opinion, appears to be guided only by the desire to secure more territory for China. The reelected Obama Administration will find plenty of willing partners for cooperation in eastern Asia if the current Chinese attitude toward its neighbours persists. Xi Jinping and his key foreign policy advisers understand this. Yet there are few signs that they know what to do about it. One reason is that they are personally poorly equipped to deal with foreign affairs. Scholars sometimes argue that China’s leaders excel at foreign affairs strategy because they take the long view, while Western politicians can’t do so because they are encumbered by elections and legislatures. This view of the Chinese leadership – advocated in the past by Henry Kissinger – doesn’t hold up today. The last generation of Chinese leaders has been generally short-sighted and ill informed about international affairs. They don’t much like going abroad or having much to do with foreigners in China. They find international affairs difficult to understand and worry about embarrassing themselves in front of a foreign audience. Moreover, China lacks an effective foreign policy apparatus to advise the leadership and carry out initiatives. A “small leading

group” on foreign affairs is supposed to coordinate policies for the Central Politburo’s Standing Committee, the most powerful decisionmaking body in the country. It appears to do very little if any coordination, however. The Foreign Ministry is constantly at odds with various party departments and agencies with a hand in foreign affairs. And the military, at times, seems to have its own foreign policy, entirely uncoordinated with what goes on within the party or government. Taking a tough line on the outside world can bring political benefits in China, as it can in the U.S. or U.K. Yet in the absence of a clear and coordinated strategy and an effective

bureaucracy to carry it out, the leadership can become hostage to short-term sentiments, which may not reflect China’s long-term interests. Xi Jinping has demonstrated a more hands-on leadership style than Hu Jintao. Although his position will remain primus inter pares, Xi is expected to be more visible on major foreignaffairs issues. His ascension represents an opportunity for reform in the foreign as well as the domestic sphere. Rather than resort to knee-jerk nationalism, he would be wise to invest in a strategy – and an apparatus to carry it out – that would achieve both profitable and smooth relations with the outside world. Bloomberg View


16 |

business daily November 16, 2012

CLOSING Toyota recalls over 3,900 cars in Macau Motorcycle rider dies after GP crash Toyota Motor Corp is recalling 3,909 vehicles in Macau involving two models, Corolla and Prius, produced between 2000-2009 over water pump or steering problems, the brand distributor in the city told public broadcaster TDM. Japan’s top motor company is recalling a total of over 2.77 million cars around the world even though it claimed no accidents had been reported. Yat Fung Motors Ltd said the issues had no immediate impact on the vehicle’s safety and that they would notify the buyers in due course.

Portuguese motorcycle rider Luís Carreira died yesterday after a crash at Fisherman’s Bend during qualifying for the Macau Grand Prix, the organising committee confirmed in a press conference. The 35-year-old rider crashed around 4pm in a violent accident during which his motorbike caught fire. The medical services, a fast intervention vehicle, and an ambulance with two doctors rushed to the site and Mr Carreira was evacuated within 10 minutes. However, he was declared dead 20 minutes after arriving at public Hospital Conde S. Januário.

Euro zone slips back into recession With austerity widening, euro zone economy shrinks for the second time in three years

T

he euro zone fell into a recession in July-September, the second since the global financial crisis in 2009, as French resilience could not make up for a slump across Europe and the three-year debt crisis slowed Germany to a crawl. Economic output in the 17-country euro zone fell 0.1 percent in the third quarter, the European Union statistics office Eurostat said yesterday, following a 0.2-percent drop in the second quarter. Those two quarters of contraction put the euro zone’s 9.4 trillion euro (US$12 trillion) economy officially in recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression. Germany and France, the euro zone’s biggest economies, could not save the bloc from a doubledip recession even though both countries managed 0.2 percent growth in the quarter. Large countries like Italy, Spain and the Netherlands all contracted and Belgium, a big exporter, stagnated. Millions of people across Europe protested against government spending cuts that European Union

policymakers say are crucial to ending the debt crisis but which others blame for the economic contraction. “We are now getting into a double dip recession which is entirely self-made,” said Paul De Grauwe, an economist with the London School of Economics. “It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else,” he said. Not everyone shares that view and the European Commission says labour costs are falling and exports are rising for Greece, Portugal, Spain and Ireland, arguing that austerity is a necessary evil to bring down unsustainable budget deficits. The European Commission sees a 0.4 percent contraction for the euro zone in all of 2012. Hopes for a recovery next year are also fading, with the European Commission saying the economy will grow just 0.1 percent in 2013. A rebound in the euro zone could be vital for the rest of the world as the United States and China struggle with the impact of the crisis on their companies’ ability to grow and prosper. In one positive sign, Eurostat

The 3-yr debt crisis slowed Germany to a crawl

said separately that the euro zone’s annual inflation fell to 2.5 percent in October from 2.6 percent in September, suggesting an end to a run of stubborn inflation that has contributed to the difficult environment. Meanwhile European Union chief Herman Van Rompuy tabled a compromise draft budget for the bloc

Opposition leader says BOJ may need rates below zero Abe wants more aggressive action from Bank of Japan

T

Opinion polls suggest Shinzo Abe to be Japan’s new PM

he leader of Japan’s main opposition, seen as likely to become premier after a general election next month, called on the central bank to push interest rates to zero or below zero to spur lending, prompting the yen to slide to a sixmonth low. The remark was the latest in a string of calls by Shinzo Abe, a former prime minister and head of the Liberal Democratic Party (LDP), pushing the central bank to go to extraordinary lengths to revive growth in an economy slipping into its fourth recession since 2000. Mr Abe repeated that the Bank of Japan should pursue “unlimited” easing of monetary conditions until prices rise, signalling he would adopt a much tougher stance with the independent central bank than the incumbent government.

on Wednesday, aiming to mollify Britain which wants spending cuts but risking angering France by reducing farm subsidies. The draft would reduce the roughly 1 trillion-euro budget for 2014-2020 proposed by the European Commission by about 80 billion euros. Reuters

“If a commercial bank leaves reserves at the BOJ they get 0.1 percent, and this is too high when you look at what the consumer gets from their savings account,” Mr Abe told a gathering of media and business executives. “That’s why money always flows back to the BOJ. I think the BOJ will have to use zero interest rates or even use negative interest rates to spur lending.” After months of promising to call an election “soon”, Prime Minister Yoshihiko Noda is set to dissolve parliament’s lower house today, setting up a snap vote for December 16. However, opinion polls suggest Mr Noda’s Democratic Party of Japan is heading for a heavy drubbing in the election, with Mr Abe’s LDP clearly in the lead. After Mr Abe’s latest remarks, the yen fell to a six-month low of more than 81 to the dollar. His repeated calls for aggressive action by the BOJ has put currency policy and economic management firmly on the agenda for the election. It is uncertain whether Mr Abe would maintain his tough stance in office, but his rhetoric on monetary policy and his pledges to help small firms who suffer from a strong yen suggest he intends to lean on the BOJ to do more. Reuters


Macau Business Daily, November 16, 2012  

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