Property curbs ‘dangerous’ warns real estate agent New government measures seeking to curb real estate prices will only cause discrimination and send the wrong signal abroad, Jane Liu Zee Ka, executive director of Ricacorp (Macau) Properties Ltd, said in an interview with Business Daily. The real estate boss thinks housing problems can be solved only with a greater and faster supply of new homes, namely by redeveloping old neighbourhoods.
Year I Number 169 Monday November 26, 2012 MOP 6.00 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte
Pages 6 & 7
Pricey Macau scares away visitors V
isitor arrivals have fallen year-on-year for six months in row, including from mainland China, the most important market for Macau tourism, but also from Taiwan, Hong Kong and India. The decline is blamed by some experts on higher prices for entertainment, accommodation and restaurant meals. Macau has become a more expensive destination but, partially due to the lack of human resources, the quality of the services and products provided remains lacklustre, critics say.
The city needs to build a more attractive brand. That’s in order to lure visitors from long-haul markets that stay longer and do more than just play in the casinos, they warned. The latest results from the Macao Visitor Profile Survey suggest there are fewer visitors coming only to gamble, with tourists turning to leisure and shopping. Another report shows tourists’ satisfaction with Macau went up in the third quarter to the best score since 2010, thanks to slight improvements to the transport and hotel sectors. More on pages 4 & 5
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More non-gaming needed - Tam
Officials face grilling over public spending
2G services live to dial another day Page 3
HSI - Movers
No stopping for house prices
Home prices will rise by 10 percent next year but rents will grow even more quickly, Midland Realty (Macau) Ltd forecasts. Measures to tighten mortgage lending and extend the special stamp duty have had limited effects on office, commercial spaces and car parks, chief executive officer Ronald Cheung Yat Fai says. Home sales dropped by 40 percent after the new curbs came into force but prices remain stable and some owners have even raised their asking price, the agency says. The lack of supply and a low-interest rate environment will ensure that both transaction volume and price will keep rising, Midland predicts. It calls on the authorities to introduce a tax on vacant homes. Page 3
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business daily November 26, 2012
macau learned that back in 2002 Ng Wai – who in the 1990s was arrested on suspicion of Triad involvement and questioned for five and a half hours by a Macau judge before being released without charge – made an attempt to apply for a casino concession in Macau when the government decided to introduce some competition to the market. Two sources have told us that Mr Ng approached the government with a letter of support purporting to be from a unit of one of the biggest casino operators in the United States, offering to set up a concession in competition with Stanley Ho’s STDM/SJM. “I don’t think it was taken seriously,” said one of the sources.
‘Market’ Wai had tendons cut in Triad-style ‘warning’ Junket boss once quizzed on gang claims later applied for Macau gaming concession: sources Michael Grimes
he attack on Macau junket room boss Ng Wai – also known as Ng Man Sun or Kai Tze [Market] Wai – at the New Century Hotel in Taipa in June had a symbolic aspect to it, Business Daily has been told by two separate sources. The media has previously reported that it was an attack with sticks and hammers. But this newspaper has been told that it involved the cutting of tendons in Mr Ng’s legs and arms – in effect to
disable him, albeit not for life. “In Triad circles this is a warning,” said one person familiar with the case. “Something similar happened to an associate of Stanley Ho [Hung Sun, Macau’s former gaming monopolist] when he was playing tennis in Hong Kong. But unfortunately in that case they cut too deep and he bled out and died,” added the second person. “Whoever did this to Mr Ng meant to humiliate him and to warn him.” Mr Ng was also the target of a
drive-by shooting at the New Century in 1997. Macau’s history during the 1990s of gang-related violence linked to control of Macau’s casino junket rooms has come to public attention again with the expected release on December 2 of 14K gang boss Wan Kuok Koi. He has served nearly 15 years in prison for being a triad gang member and leader, for money laundering and involvement in loan sharking. Separately, Business Daily has
Macau junket room investor Amax Holdings Ltd – of which Mr Ng is now chairman and chief executive – issued a profits warning at the weekend. In a filing to the Hong Kong Stock Exchange Amax said it expected to record a loss for the six months ended September 30 compared to a net profit in the equivalent period a year earlier. The firm stated: “The financial information of an associate, which has significant impact on the financial statements of the group for the six months ended 30 September 2012, is still unavailable to the company before the interim results.” It did not name the “associate” concerned. It added the results should be available “before the end of November 2012”. Previous Amax filings mentioned HK$2.06 billion (US$265 million) in bad debts racked up by Amax. According to Amax’s annual report for the year ended 31 March 2012, the amount represents combined losses on loans made by an Amax subsidiary to another company, AMA International, an aggregator of junkets that used to be the main investor in VIP play at Melco Crown International Ltd’s Altira property in Taipa. The filing said AMA used the money to provide gambling credit to agents and casino players. The auditor for Amax’s 2012 annual report – Baker Tilly Hong Kong Ltd – declined to provide an audit opinion due to lack of: “…sufficient appropriate audit evidence”.
Departments to be grilled about spending Legislative Assembly members will question the heads of five government departments about their plans for increased expenditure Tony Lai
he Legislative Assembly’s second standing committee will ask five government departments to explain plans for surges in their spending contained in next year’s budget, committee chairman Chan Chak Mo has said. However, Mr Chan told reporters on Friday that there were “no big problems” with the budget and that revenue would be sufficient. Compared with this year’s budget, next year’s envisages an increase of 17 percent in revenue to 134.8 billion patacas (US$16.8 billion) and an increase of 6.7 percent in expenditure to 82.5 billion patacas. But committee members are worried about the spending planned by some departments.
“The expenses forecast for the Transport Bureau on the mass transportation system have more than doubled from some 600 million patacas last year to 1.4 billion patacas forecast for next year,” Mr Chan said. “We want to know why. Is it related to the subsidies for the bus operators or other [factors]?” he asked. The heads of the Transport Bureau, the Macau Prison, the Consumer Council, the Tertiary Education Services Office and the Public Administration and Civil Service Bureau were to meet the committee to explain their spending plans, Mr Chan said. He said the committee had picked out these five departments because of obvious surges in spending planned for next year.
Legislators want more information about rises in public spending
The Tertiary Education Services Office plans 200 million patacas in current spending next year, having spent only 120 million patacas in 2011. The doubts expressed by legislators will not mean changes to the budget. “We can’t ask them to adjust their expenses as the budget has already passed its first reading. But we just want to understand it
better,” said Mr Chan. He said the government could cooperate with the assembly better by giving more background information and details. The assembly would have its final vote on the budget bill next month, provided that the government cooperated with the committee, Mr Chan said.
November 26, 2012 business daily | 3
More non-gaming attractions needed, says economy chief Increasing competition from neighbouring cities means changes are required here, says the secretary for the economy and finance Tiago Azevedo
Casino operators must put more emphasis on forms of entertainment other than gaming, Francis Tam says
t is time to plan properly the next steps needed for the city’s development, especially in the gaming industry, Francis Tam Pak Yuen, secretary for the economy and finance, told the Legislative Assembly on Friday. As other Asian destinations ramp up their casino offerings, operators here should invest more in non-gaming elements, Mr Tam said during the
debate on the Policy Address for 2013. Some members of the assembly criticised looser policy on the gaming industry, but Mr Tam said the government was limiting the sector’s expansion. Au Kam San, a pan-democrat, told Mr Tam that the city was paying a huge price for its gaming industry. “The sector is a huge part of our economy but we need to revise
policy on it in order to control its growth,” Mr Au said. A cap of 3 percent per year on the growth in the number of live gaming tables, to be introduced next year, “is a way to encourage casino operators to promote other, non-gaming elements”, he said. Mr Tam replied: “Casino operators have to include other amenities in their properties, such as more
entertainment and theatre shows, to attract more visitors that do not want only to gamble.” He added: “We hope the concessionaires will do more to diversify their offerings, improve their business model and help stabilise the economy and the human resources market.”
Smoking stress Angela Leong On Kei, a directly elected member who is also a director of casino operator SJM Holdings Ltd, expressed concern about the forthcoming ban on smoking in casinos. Ms Leong said casino operators did not have enough time to follow guidelines announced this month for complying with the ban, which comes into effect on January 1. Casinos can designate up to half of their gaming floors as smoking areas. But Ms Leong called for a total ban on smoking in casinos, indicating that some casinos cannot be bothered to set up smoking areas. Ms Leong said the government should carefully consider the effect of its new rules for slot machine parlours. On Thursday Mr Tam had said half of the city’s slot machine parlours would have to be moved out of residential areas. Mr Tam said on Friday that most of those that must move are in NAPE and near San Man Lo. But he did not identify those that must move. “These slot machine parlours have a one-year period to move to other areas,” he said. Mr Tam said that economic growth here might slow further next year because of the slowdown in the mainland Chinese and global economies. He stressed the need to diversify Macau’s economy. “We are clear about what we want for next year: our economic policies were drawn up to stabilise the economy,” he said. “We have to promote better productivity and enhance efficiency to achieve stable growth,” Mr Tam said. “We are confident of achieving stable economic growth next year of one digit.”
Housing market curbs forecast to lose effect Housing prices will rise by 10 percent and rents by 20 percent in the first half of next year, an estate agency forecasts Tony Lai
nvestors will take less than six months to absorb the effects of the government’s new curbs on the housing market, and prices will rise by 10 percent in the first half of next year, an estate agency says. In Midland Realty (Macau) Ltd’s latest review of the property market, its chief executive, Ronald Cheung Yat Fai, says that in the long run the government can limit the rise in housing prices only by increasing supply and taxing the owners of vacant homes. “The number of transactions dropped by 40 percent after new curbs came into force but housing prices remain stable and some owners even raised asking prices by 3 percent to 5 percent,” Midland Realty (Macau)’s assistant district manager, Joe Chan, told a press conference on Friday. Mr Chan said the number of viewings of homes had fallen by 40 percent to about 30 a week after the
new measures had come into effect. The new curbs include tighter mortgage lending limits and extension of the special stamp duty to cover sales of shops, offices and parking spaces as well as homes. Mr Cheung thinks these measures will have only a limited effect on prices of office and commercial space and parking slots. He says in Midland Realty (Macau)’s review that the market got used to “Panadol measures” after the special stamp duty was introduced in June last year. Official data show that the average price of residential space hit 58,305 patacas (US$7,288) per square metre in the third quarter of this year, 60 percent more than a year earlier. The surge in rents this year has been steeper, according to Midland Realty (Macau). Homes in La Cite in the northern
districtwereletfor9.50patacaspersquare foot last month, nearly half as much again as at the beginning of this year.
Supply worries “Transaction volume and price will pick up after the first quarter next year due to a lack of supply and a low-interest [rate] environment,” Mr Cheung says. “Housing prices will surge by 10 percent in the first half of next year and rents will increase by a further 20 percent,” he says. He believes there may not be enough new private homes in the next few years because between 2008 and 2011 construction of new homes averaged fewer than 1,500 per year. Developers made starts on only 1,059 new private homes in the first nine months of this year, one-third fewer than a year before, official data show.
“Our data show that between 3,000 and 4,000 private homes a year are required to satisfy the Macau market demand … and the increase in outside labour will put more strain on supply,” Mr Cheung says. “The government has been too focused on the public housing market in the past few years,” he says. “It has hardly approved land plots for private housing since the case of Ao Man Long,” he says. Mr Ao has been convicted of corruption while he was secretary for transport and public works. “The government should treat public and private markets separately and strengthen the supply in the private one by granting land plots and approving constructions quickly and promptly,” Mr Cheung says. He proposes that the government tax the owners of vacant homes to spur them to let empty property.
business daily November 26, 2012
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HOSPITALITY Farther and slower The main sources of visitors to Macau, as is well known, are found in Asia. The three top sources – mainland China, Hong Kong and Taiwan – represent, altogether, about 90 percent of visitors. The mainlanders alone, in 2011, provided in excess of 16 million visitors. In the first three quarters of this year, they provided just below 12.5 million. Hong Kong and Taiwan are the only other sources to proffer outbound visitors numbered in six figures, with 7.6 million and 1.2 million respectively in the past year. Compared with these tallies, visitors from other regions are somewhat marginal. And when we look beyond Asia, the numbers are comparatively very small. The top sources, combined, do not make half the number of Taiwan visitors, which have been decreasing.
The leader outside Asia is, without surprise, the United States, with about 15-17,000 visitors on average per month. That is, the rough equivalent to the number of mainlanders that enter the territory every half hour. The three countries following on are also (mostly) English-speaking ones Australia, Canada and the United Kingdom. Language is certainly a trump in the casino related business and in tourism. Only in fifth place the panorama changes with France, which does not reach even a threshold of 1,000 visitors, on average, per month. Overall, the figures suggest a slow decline in visitors from those countries or, at best, a steady flow. The top five from outside Asia have not reached, together, half a million visitors since 2008. A rough estimate based on the known figures point to similar levels, this year, to those reached last year or, even to a slight decline. J.I.D.
Decrease in top five non-Asian visitors
Tourist diversification starting to take hold Fewer visitors are coming to gamble, and more are coming for the shopping and other diversions, a survey has found Tiago Azevedo
he proportion of tourists saying their primary purpose in visiting is to gamble is declining, the results of the latest Macao Visitor Profile Survey show. The survey has been conducted quarterly by the Institute for Tourism Studies tourism research centre since 2008, with over 1,000 visitors interviewed each time. The results of the second-quarter and third-quarter surveys were released last week. Despite the opening this year of Sands Cotai Central, which two casinos, the proportion of visitors giving gambling as the primary purpose of their visits was 7.1 percent in the second quarter and 7.2 percent in the third. The annual average was 12.7 percent in 2010 and 8.2 percent last year. Only 4.6 percent of first-time visitors in the third quarter said they were visiting to gamble.
Tourists arriving primarily for purposes other than gambling made up 76.7 percent of all visitors in the second quarter, 4.2 percent more than a year before, and 74.7 percent in the third quarter, 1.8 percent more. “These latest figures likely reflect a growing mix of visitors coming for leisure and recreational opportunities,” the survey report says. “It is quite possible that tourist diversification – seen in terms of the primary purpose of activity sought – is beginning to take hold.” This observation is backed up by data showing that activities other than gambling, particularly shopping and dining, were the most popular among tourists, especially those from mainland China and Hong Kong. The general trend, however, has been increasingly toward shorter stays, the report says. “Macau may be more diversified in its offerings, but it risks becoming
a short-stop destination in the long run,” it says. While it appears that the city is becoming more of a shopping destination, “hopes for lengthening visitors’ stay and making Macau an international destination rest ultimately on attracting visitors from long-haul markets,” it says.
Satisfaction rising Another report by the tourism research centre, says that tourist satisfaction rose in the third quarter. The Macao Tourism Satisfaction Index for the third quarter rose to 70.7 points of 100 from 69.5 points in the second quarter. The tourism research centre did about 1,150interviewswithvisitorsatbigtourist attractions and transport terminals. The last time the Macao Tourism Satisfaction Index rose above 70 points was in the fourth quarter of 2010. The centre’s report says: “The most recent result continues a slight but improving short-term trend for 2012. “Macau’s events remain the most significant sector boosting overall visitor satisfaction.” The centre’s survey found slight increases in the third quarter in satisfaction with transport and hotels, but also declines in satisfaction with the heritage attractions and restaurants. “Tour guides and operators, retail shops and non-heritage attractions did not fare well, reporting declines in satisfaction,” the report says. Since the index was first compiled, in 2009, casinos and hotels have shown “ongoing though slight improvements” in their ability to satisfy tourists, the report says.
2G services extended until mid-2015
he Telecommunications Regulation Bureau has extended the life of slower second-generation wireless telecommunications networks for two years, and third-generation networks will now replace them completely only in June 2015. “The government needs time to study the timetable and arrangement for introducing new mobile services, such as 4G services, in the future,” the bureau said in a written statement released on Friday. 3G services had been due to become the only kind available at the beginning of next year. “Some residents also require more time to understand how the 3G services work, so the government decided to postpone the termination of the 2G network until June 4, 2015,” the bureau said. This is the second time the switch to 3G has been pushed back. The original date set, which was in July, was changed to early next year after the Commission against Corruption said keeping 2G services for tourists only was unfair to residents. A report by the commission released in June suggested keeping both services
for one or two more years. The bureau also said it would instruct the city’s wireless network operators to find ways to promote the uptake of 3G services. Companhia de Telecomunicações de Macau SARL (CTM) said the decision to extend 2G “responded positively to the community’s demand”.
Human error The Telecommunications Regulation Bureau also confirmed its decision to fine CTM 180,000 patacas (US$22,500) for a two-hour breakdown of its 3G service in May. An investigation by the bureau found that the service disruption had been due to human error.
It lasted for two hours and affected about 35,000 subscribers, all 3G subscribers. CTM said confirmed in a written statement that it had been notified of the fine. “There is no further comment as it is under regulatory process and the company is assessing the details of the relevant document,” it said. The company said it would enhance training “to further strengthen the professionalism of technical staff in order to reduce the risks of similar incidents”. CTM was previously fined 800,000 patacas for a breakdown of its network in February. Thousands of subscribers were unable to use its mobile and fixed-line telephone services or get access to the Internet for at least six hours. The director of the Telecommunications Regulation Bureau, Tou Veng Keong, told reporters on Friday that his bureau was still investigating two breakdowns of Hutchison Telephone (Macau) Co Ltd’s network. Mr Tou said its report on the breakdowns would be finished this year or early next year.
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November 26, 2012 business daily | 5
Number of tourists drops as prices they pay climb Visitor arrivals have fallen for six months in row, and the decline is blamed on higher prices Tiago Azevedo
he number of visitor arrivals in October dropped by 1.2 percent year-on-year to 2.35 million. Even the National Day Golden Week holidays did not interrupt the downward trend, arrivals declining in October for the sixth consecutive month, according to data released on Friday by the Statistics and Census Service. Visitors from mainland China fell by 1.4 percent year-on-year in October, the steepest decline since May, when the number declined by 4.2 percent. The number of tourists from Taiwan dropped by more than 10 percent. The number of visitors from Taiwan in the first 10 months of this year was slightly above 900,000, 13.1 percent fewer than in the equivalent period last year. While direct flights between Macau and India appear set to be introduced, the number of Indian visitors fell in October. Fewer than 12,500 Indian tourists entered Macau last month, 11.5 percent fewer than a year before. In the first 10 months the number of Indian visitors fell by 11.2 percent, having grown in each of the two preceding years. Macau had 23.2 million tourists altogether in the first 10 months of this year, 0.8 percent more than in the equivalent period last year. Macau’s numbers sharply contrast sharply with Hong Kong’s. The number of visitors there in the first nine months increased by 16.3
percent year-on-year to reach 35.37 million, according to data from the Hong Kong Tourism Board. The mainland was the source of 25.33 million or 71.6 percent of them, 24.2 percent more than a year before.
Getting costlier The president of the Macau Travel Industry Council, Andy Wu Keng Kuong, said: “The main reason behind this six-month losing streak is that while consumption spending in Macau is high – some may even surpass Hong Kong – the quality of the services and products provided here cannot catch up.” More people used to come here during the mainland holiday season, and patterns are changing. “Many tourists nowadays are smart consumers and know how to make a choice,” Mr Wu told Business Daily. The decrease in the number of mainland tourists in October may be explained by the National Day Golden Week holiday. “As mainland Chinese have more holidays in October due to the National Day, many opted to visit places further away than Macau,” Mr Wu said. He said the number of mainland visitors in the first 10 months had still been higher than a year before. More than 13.9 million mainland visitors came here in the first 10 months, 5.2 percent more than a year before. A drop in the number of Hong
KEY POINTS October arrivals down by 1.2 percent Arrivals up by 0.8 percent in first 10 months Average length of stay 1.0 day More attractive brand needed as city gets costlier
Kong visitors is hampering the tourism industry. “The number of arrivals from Hong Kong has suffered several double-digit monthly drops this year,” said Mr Wu. “This makes a difference between the tourist numbers in Macau and Hong Kong, as Hongkongers account for about one-fourth of Macau’s tourist market.” Almost 6 million visitors from Hong Kong came here in the first 10 months, 6.3 percent fewer than a year before.
Lack of value Mr Wu said that as Macau got pricier, Hongkongers were visiting less frequently. Higher prices for entertainment
and restaurant meals contributed to a 3.36 percent rise in the tourist price index in the third quarter of this year. Visitors are also spending more on hotel rooms. Tourist spending, excluding gambling expenses, amounted to 13.3 billion patacas (US$1.7 billion) in the third quarter, 10 percent more than a year before, official data show. Short stays are still the norm. The average length of stay was 1.0 day in October, 0.1 day more than a year before. This has led to criticism of João Manuel Costa Antunes, the outgoing director of the Macau Government Tourist Office. Mr Costa Antunes is to leave next month after more than 24 years in the job. Critics say the city needs to build a more attractive brand to encourage visitors to stay longer. “These declines serve as signals to the industry and the government for reflection,” said Mr Wu. “The industry should improve the quality of services they provide while the administration should find out ways to support the industry, particularly in human resources,” he said. “The shortage of workers has an impact on the quality of the service.” The coordinator of the faculty of international tourism and management of the City University of Macau, Gao Yan, said the city ought to enhance its value-added offerings to tourists to encourage them to stay longer. “Value-added travel in Macau has been developed only at the surface level. People come here to shop, eat and buy souvenirs,” she told Business Daily last week. With Tony Lai
3.36% Tourist price inflation in Q3
business daily November 26, 2012
Estate agent’s solution: build more homes faster
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Third quarter surprise Retail businesses, or at least some types of retail, are certainly among the winners of the economic transformation of Macau. A growing population means an increasing number of customers and, to make things even better, rising numbers of visitors produce a nice boost in revenue. On a quarterly basis, retail sales have jumped from 4.6 billion patacas in the first quarter of 2008 to 13.2 billion patacas in the first quarter of this year, when they reached a record value.
The figures for the earlier part of the period, from the beginning of 2008 up to the middle of 2009, suggest clearly some stagnation or, at best, a weak rise. But since then the figures have moved steadily upwards, more than doubling in monetary terms (and doubling in real terms) in just nine quarters. As prices began to rise, the real figures – here the sales totals were deflated by the consumer price index – started to grow more slowly. But, up to 2011, a period when inflation rates were low, the gap between monetary sales and real terms sales was not very significant. Throughout the period shown, prices rose by 20 percent; but three-quarters of that rise took place since early 2010. There is however a slightly worrying trend contained in the data. They show some seasonality. This is especially expressed in a decrease in sales commonly seen in the second quarter (although 2009, in the middle of a global crisis, is atypical). This year, however, the usual reprieve in the third quarter failed to occur. Instead, we saw a prolongation of the drop in sales. This may hint at loss of momentum in the main factors that have been driving the economic growth and could signify change to a lower growth regime. J.I.D.
drop in retail sales since Q1since 2008
Having heard the Policy Address for 2013, the executive director of Ricacorp (Macau) Properties Ltd, Jane Liu, says she was expecting the government to have a clearer picture of the needs of the real estate sector. In an interview with Business Daily, Ms Liu says measures such as an extra levy of 10 percent on home purchases by non-residents or allocating land for the exclusive use of residents are not going to stop prices increasing. Instead, they will discriminate and send the wrong signal abroad, she says. Ms Liu thinks housing problems can be solved only with a greater and faster supply of new homes. By Luciana Leitão
In his policy address, the chief executive talked about reserving land for the use of residents. If this goes ahead, would it solve the real estate market’s problems? Every policy has two sides. Now, any non-resident that buys a unit already pays an extra 10 percent levy, so actually there is already a distinction between the locals and non-locals. Non-locals coming to buy units here have dropped almost to zero. In the past month, after the government announced this extra levy, there were just one or two cases of nonlocals buying homes. According to government figures, before, around 11.8 percent of non-locals were investing in homes in Macau. If this extra levy is a long-term measure, it will be dangerous to Macau, because as an international city we have lots of people coming here to work who may want to buy a home to live in. And, actually, 11.8 percent of the people buying homes in Macau may not all be speculators. Of course, psychologically, all these measures make Macau people feel better. But the government is restricting investment by non-locals in Macau. So even if you have land only for the locals, it doesn’t really have a big impact. Considering speculation is one of the main problems affecting the sector, don’t you think such measures would counter this? Most of the people think this, but we have to support it with figures. According to government figures, this year locals buying homes amount to more than 88 percent, and non-residents are only 11.8 percent. People say the price goes up because of the non-locals, but I think that is irrelevant. The fact is that from 2003 until now, Macau’s economic growth has been tremendous. We have done research comparing Hong Kong and Macau. Our GDP growth on 2001 was 2.9 percent, and in Hong Kong it was 0.6 percent. But when,
in 2011, Macau’s GDP growth was 20.7 percent, Hong Kong’s was still 4.9 percent. That means Macau’s economy is growing a lot, compared to the neighbouring region. According to the figures, the average income in Hong Kong in 2001 was about HK$10,000 per person, while in Macau it was only HK$4,650. But in 2012, between June and August, in Hong Kong the average income was only HK$11,700, while in Macau it was already HK$13,000. Hong Kong’s growth in 10 years is 20 percent only, while our growth is 151 percent. Because of the growth of our economy, the prices of homes go up. That is a natural economic reflection of what we have. People expect the prices of homes to stabilise or to increase just a little bit, but with our big GDP growth, that is impossible. So the prices of homes are shadowing increases in people’s incomes? Yes, that’s why we compare Hong Kong and Macau. Hong Kong prices are going up, but their economic growth is not. If the prices are going up with the economy, that is healthy. But there are actually two factors behind the increase of prices: the growth of the economy and the world economic situation. Everybody is printing money – the
The faster way is to reuse the old town and to rehabilitate it
USA and everywhere else – and Japan and China are victims of all this. So we import their inflation, but this we cannot stop. The local government is now imposing policies to help slow down inflation. Our company also doesn’t want prices to go up so quickly, because that is not healthy. If prices rises grow at the same pace as our economy, it is healthy. However, it is growing with the economy, but because of the world economic situation factor, we also import inflation. This, however, is not affecting Macau as much as the neighbouring region. Our inflation is not as high as the neighbouring region. At this point, Macau is still healthy, but, of course, we also agree the government has to do something to make it slow down. In that case, what do you propose that the government do? At the moment the policy at issue is slowing down transactions, but it is not making prices drop, if this is their goal. If prices dropped a lot, that would not be healthy for the economy or for the people. Of course, 90 percent of our economy is casino or tourism business and only 10 percent is other businesses. Still, 80 percent of the people here own housing, so if the price dropped a lot nobody could bear this consequence. What the government has done right now has made the transactions drop almost by 70 percent. But then, price-wise, it didn’t drop a lot. You have less and less supply on the market and this is the issue. What the government should do is to supply more land and, of course, to make the supply a little faster. Also, it should speed up the issue of licences to build housing. If the problem is lack of supply, wouldn’t allocating land to house residents be good? We live on a small peninsula that is turning into an international city. We have very limited
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November 26, 2012 business daily | 7
MACAU At the moment the policy at issue is slowing down transactions, but it is not making prices drop, if this is their goal
What the government should do is to supply more land and, of course, to make the supply a little faster. Also, it should speed up the issue of licences to build housing
population, less land, and that’s why they have to reclaim more land. On the other hand, we have more people coming to work in Macau. This is an actual fact we cannot stop, because we don’t have enough manpower. If you want the people that come to work here to contribute to the economy of Macau, instead of coming and leaving, then they also have to be a part of society. If the government limits some land only to locals, that will not be good internationally. The chief executive also announced the bidding out in the first quarter of next year of the construction of more public housing. Can more public housing solve some of the problems? Of course. The government is acting very fast, compared with Hong Kong. In Hong Kong, they are too slow solving this problem. Economic development is so fast and lots of people can enjoy the growth, but of course there is still a part of the population that cannot keep pace with the economy. Some people complain that middleincome earners cannot really buy a home. They don’t want public housing and they can’t afford private homes. Do you think there is a structural gap here? I don’t see it as a big problem. In the past we had large homes, whereas in Hong Kong and in Japan homes are getting smaller and smaller. This is because of the price and the population. In Hong Kong, in 1,200 square feet they can have three or four rooms, so more people can live there. In Macau, 1,200 square feet means you can have only two rooms. There has to be an adjustment. What do you mean by an adjustment: homes with smaller rooms?
Yes, I think so. We are growing and we are different. The other thing is that we have research saying Hong Kong people put 40 to 50 percent of their incomes into their mortgages each month, while in Macau they put only 30 percent of their incomes into their mortgages. When they say they cannot afford a house in the private sector, that may not be telling the whole truth. How much of their income are they putting into their home? That is one point society has to look into. Our economic growth is so big that we cannot expect the prices of property to stabilise like a few years ago but, of course, we want steady growth. The government is doing a lot already for public housing, but I think we can see there are different types of supply in the market. This year we saw very young people that, after working in society for just one or two years, came to buy a house and were already looking for something that was over MOP4 million – very new, with very good facilities. That does not happen in Hong Kong. People were expecting a lot from this policy address on the real estate question, but got little out of it. Did it frustrate the hopes of the people? I think we expected they had a clearer picture of the supply. They don’t have a timeline and they don’t know how much land there is for how many units. A large part of Macau is very old. What is the timeframe they have in mind for renewing those parts of the old town? Macau’s land is very limited, and then they have five more areas, but it will take a long time to build on them. The faster way is to reuse the old town and to rehabilitate it. The government could do this a lot faster.
business daily November 26, 2012
Taiwan raises 2012 growth forecast China Eastern seals US$5.4 bln Airbus deal China Eastern Airlines , one of the country’s top three carriers, has agreed to buy 60 Airbus A320 aircraft for about US$5.4 billion, expected to be delivered in stages from 2014 to 2017. This is the first major deal involving Europe’s Airbus and a Chinese airliner after the European Union agreed on November 12 to “stop the clock” for a year on plans to force non-EU airlines to adopt its Emissions Trading Scheme (ETS). The new aircraft will help the airline satisfy rising demand for domestic medium- and short-haul passenger routes, China Eastern said on Friday. The deal is subject to approval by the airline’s shareholders and mainland regulators. In a filing to the Hong Kong Exchange after markets closed, China Eastern said it planned to fund the purchase from its working capital, commercial bank loans and other sources it didn’t specify.
BMW sees room for growth German carmaker BMW sees continued doubledigit sales gains in China next year as the luxury car market there, at 9-10 percent of overall sales, still lags the developed world, where the luxury segment accounts for 15 percent of the total. The German firm, which is building a second plant in northeast China to initially double its capacity to 200,000 vehicles, later rising to 300,000, expects to sell 1 million cars in China over the next three years, Duan Jianjun, deputy sales chief at BMW’s venture with the state-owned parent of Hong Konglisted Brilliance China Automotive Holdings, told Internet portal Sohu.com at the Guangzhou auto show. China’s luxury car market has lost some of its steam after years of break-neck growth, though demand for high-end cars remains robust as personal wealth grows. BMW’s China car sales grew 35 percent in January-October from a year earlier, five times the growth rate of the overall market.
Rising demand from U.S. and China improve outlook
aiwan raised its 2012 growth outlook for the first time in over a year on Friday as demand for its hi-tech electronic exports picks up in its top markets, China and the United States. The government lifted its fullyear 2012 growth forecast to 1.13 percent from 1.05 percent and its 2013 forecast to 3.15 percent from 3.09 percent, following the release of revised gross domestic product data for the third quarter. On a quarterly, seasonally adjusted basis, the economy grew 0.96 percent compared with a preliminary reading of 0.86 percent, indicating it carried slightly more momentum into the current quarter than previously anticipated. On a year-on-year basis, final thirdquarter GDP grew 0.98 percent, little changed from an advance estimate of 1.02 percent growth released in late October, the government said. “It makes sense the government adjusted its 2012 GDP target. Taiwan’s economy is picking up in Q4 after bottoming out in Q2,” said Tony Phoo, an economist at Standard Chartered Bank in Taipei. Taiwan’s central bank would keep interest rates unchanged until
at least the first half of next year, Mr Phoo predicted. Like other export-reliant Asian economies, Taiwan has seen a sharp deterioration in external demand for its goods this year and a subsequent slump in industrial production, but recent signs of improvement in China and the United States have offered some hope that conditions may be stabilising. Data earlier on Friday showed Taiwan’s industrial output climbed 4.56 percent in October from a year earlier, picking up from a 2.88 percent pace in September. Taiwan’s export orders grew by a stronger-than-expected 3.2 percent in October as U.S. retailers stocked up on popular electronic gadgets for the Christmas shopping season, offering more hope that the Asian economy may be turning the corner. Buoyed by demand for the latest smartphones and tablet PCs and the launch of Windows 8, orders from the United States rose 9.3 percent onyear to a monthly record of US$97.1 billion, and at a slightly stronger pace than in September, according to figures released by economics affairs ministry on Tuesday. Those from Taiwan’s top
Domestic demand is still a concern
customer China rose 1.2 percent, but growth was weaker than September’s 4.8 percent. Still, analysts say any recovery may be sluggish as the outlook for 2013 remains subdued. October orders from recession-hit
China conducts first landing on air Event seen a another symbol of country’s growing assertiveness
China mine blast death toll rises to 19 The death toll from a coal mine blast yesterday in China’s south-western province of Guizhou has risen to 19 from 18, the official Xinhua news agency reported, citing local government official. Four miners are still trapped after a coal-gas outburst hit the mine yesterday morning, Xinhua said, citing unidentified rescuers. Yin Zhihua, vice mayor of Liupanshui, which has jurisdiction over the area, said rescuers are expected to reach the trapped workers this afternoon, Xinhua said. The agency reported that the coal mine is operated by Pannan Coal Exploitation Co. and opened in 2006. It supplies Pannan power station which is part of the government’s strategy to send electricity from western regions to the eastern areas of the country, it said. The State Council, China’s cabinet, yesterday ordered tightened safety supervision of coal mines, according to the report.
Still three years, at least, before it becomes fully operational
hina has conducted the first landing of a fighter jet on its new aircraft carrier. The Chinese-made J-15 made the successful landing on the Liaoning, a former Soviet carrier, during recent exercises, the defence ministry said in a report Sunday on the flight tests. The Liaoning went into service in September in a symbolic milestone for China’s growing military muscle that comes at a time when Beijing is
increasingly embroiled in a series of territorial disputes with its neighbours. “The successful landing... has always been seen as a symbol of the operating combat capability for an aircraft carrier,” Zhang Junshe, a vice director at the military’s Naval Affairs Research Institute, told state television. “This is a landmark event for China’s aircraft carrier... and (moves it) one step closer to
combat readiness.” Video carried by China Central Television showed a tail hook on the rear of the J-15 catching hold of a cable on the deck of the aircraft carrier as the jet landed and slowed to a halt. The J-15 had also successfully taken off from the aircraft, the ministry said. The J-15 is a Chinese designed multi-purpose carrierborne fighter jet based on Russia’s Sukoi 33, equipped with Russian
November 26, 2012 business daily | 9
China steelmakers poised for rebound, CISA Trade association report sees end to seven quarters slowdown
Europe continued to fall, declining 2.8 percent, though the rate of decline was not as pronounced as September’s 5.6 percent. In comments after the GDP data, the government warned domestic demand has still not bottomed out.
Taiwan’s cabinet said earlier in the day it would announce measures by the end of the year to boost the sluggish stock market. The government held its 2012 inflation forecast steady at 1.93 percent. Reuters
hina’s steel industry, the world’s largest, will face better operating conditions this quarter and next year after posting nine months of losses, the official Xinhua News Agency reported, citing a trade association. Most large- and medium-sized mills reversed losses last month, Xinhua said, citing Liu Zhenjiang, vice president of the China Iron & Steel Association, at an industry forum yesterday. Mills lost 5.5 billion yuan (US$883 million) between January and September, compared with profit of 38.7 billion yuan in the same period of 2011, Xinhua reported, citing association data. Mr Liu’s comments add to signs that China’s economy, the world’s second largest, may be stabilizing after a seven-quarter slowdown that curbed growth to 7.4 percent in the three months ended September. Steel producers’ earnings may improve in the last three months of 2012 on rising prices of the alloy and better raw-material costs, Mirae Securities Co. said on October 25. China needs to maintain strict controls over steel-production capacity, Mr Liu was cited as saying. This year had been the hardest for the
country’s mills since the turn of the century, the report said, citing him. Economic growth may rebound to 7.7 percent in the final three months of this year, according to the median of analysts’ estimates surveyed by Bloomberg. A further acceleration is predicted in the first two quarters of next year, the data show. Total crude-steel output in China rose 2 percent to 59.1 million metric tons in October from September, the National Bureau of Statistics said November 13. Compared with a year earlier, output rose 6 percent, it said, without giving a figure. Baoshan Iron & Steel Co., the nation’s biggest publicly traded mill, said on November 12 that it would raise prices for most cold-rolled products for December delivery in the first increase in three months. Baoshan Iron shares have declined 7.6 percent over the past year. China’s government approved a US$158 billion subways-to-roads construction plan in September. While the infrastructure program will boost steel demand in the final quarter, mill overcapacity may limit gains in steel prices, the association said on November 14. Bloomberg
rcraft carrier Nissan sales down 25 pct in November
engines, press reports said. Since the carrier entered service, the crew have completed more than 100 training and test programmes, the ministry said. China bought the stripped-down 300-metre (990-foot) carrier from Ukraine nearly 10 years ago and refurbished it at the north-eastern port of Dalian. Construction of the vessel, formerly known as the Varyag, was commissioned by the former Soviet Union more than 20 years ago, but work halted with the sudden collapse of the Soviet bloc. The Liaoning - named for the northeastern province which includes Dalian - is not expected to be fully operational for another three years at least. At a key Communist Party congress earlier this month, outgoing President Hu Jintao urged the nation to push forward fast-paced military modernisation and set the goal of becoming a “maritime power”. Such an endeavour would mean that China would soon need to construct an independently built aircraft carrier, Hu Wenming, chairman of China State Shipbuilding Corp (CSSC) that retro-fitted the Liaoning, said. A top Taiwan intelligence official said earlier this year that China had already decided to build two aircraft carriers. However despite rumours that work has already begun, there is no evidence has started. AFP
Situation seems to be stabilising, company sees prospects of recovery
with Dongfeng Motor Group Co, told reporters during a tour of a plant at Dongguan, near Guangzhou in southeastern China. Nissan’s China sales - which make up around 27 percent of its global total - slumped 35 percent in September and 41 percent in October. “As the situation has stabilised, so have our sales,” Mr Kimata said, referring to the violent anti-Japanese protests in mid-September that were triggered by Japan’s nationalisation
of two islets - known to Chinese as the Diaoyu and to Japanese as the Senkaku. Mr Kimata said sales in China’s southeast had recovered to previous levels, but were still slow in the north and east. “My personal view is that ... people (in the southeast) are less impacted by the central government and are more pragmatic,” he said, noting Nissan traditionally sold well in the southeast. Nissan has had to revise down its full-year China sales forecast from 1 million vehicles, and Mr Kimata said the outlook should become clearer after China’s Lunar New Year holiday in mid-February. He stressed Nissan’s commitment to China, but said there had been a shift in strategy following the protests. “Rather than introducing new models, we’re undertaking policies that show our commitment to our customers, such as offering compensation,” he said. All Japan’s leading carmakers have compensated car owners and dealers for damage and injuries incurred during the protests - though this has been a low-key campaign as they don’t want to invite a flood of unrelated claims. Nissan has repaired “several hundred” vehicles under the policy, Mr Kimata said, but declined to put a cost on this.
Focusing on customer service, hoping for better times
issan Motor Co , the most exposed of Japan’s leading carmakers to China, expects its sales in the world’s biggest autos market to fall by around a quarter this month from last year, dented still by anti-Japanese sentiment in a dispute over ownership of East China Sea islets. Nissan, expects to sell around 45,000 cars in China this month, Hideki Kimata, senior general manager of the firm’s local car venture
business daily November 26, 2012
India seeks lower debt to escape rating cut High inflation, slowing growth threaten investment-grade credit ranking
op Indian officials said they would cut the widest budget deficit among the world’s largest emerging markets and curb public debt, as the Asian nation seeks to avert a credit-rating downgrade. The government is “optimistic” it will rein in the shortfall for the year through March 31 to 5.3 percent of gross domestic product from the previous year’s 5.8 percent, and has no plan “at the moment” to increase its record borrowing program, Finance minister Palaniappan Chidambaram said on Saturday. The deficit will be cut 0.6
percent annually for the next five years, Chakravarthy Rangarajan, chief economic adviser to Prime Minister Manmohan Singh, said on Saturday in Kolkata. “I would like to, with all the conviction and command, reiterate that the government is fully committed to contain the fiscal deficit within 5.3 percent,” Economic Affairs secretary Arvind Mayaram said Saturday at a conference in Mumbai. “We have a clear program of disinvestment and we are confident of meeting our targets,” he said, about 90 minutes before Mr Chidambaram spoke in the western city of Pune. Credit Agricole CIB said last week that financial markets are pricing in an increasing likelihood of a credit rating downgrade to junk status. The threat of losing the nation’s investment-grade sovereign ranking prompted Mr Singh to reduce fuel subsidies in mid-September to tackle the fiscal gap, and boost investment by allowing foreign investment in retailing and aviation. Standard & Poor’s and Fitch Ratings lowered India’s sovereign credit outlook this year, citing a widening budget deficit, and a slump in economic growth and investment in Asia’s third-biggest economy. Both companies rank India’s debt BBB-, the lowest investment grade.
Growth outlook The government is also looking to curtail expenditure, Mr Mayaram, one of the top bureaucrats in the finance ministry, said in a speech at a conference on Asian capital markets.
S.Korea think-tank calls for more policy easing More aggressive monetary policy needed to boost country’s economic growth
outh Korea needs to ease monetary policy further to support its stubbornly weak economy and help mitigate upward pressure on the won, the country’s top government think-tank said yesterday. The Korea Development Institute made the recommendation in a scheduled report, while slashing its 2012 and 2013 growth forecasts for Asia’s fourth-largest economy
to levels below the central bank’s latest projections. The export-reliant economy is now expected to grow by 3.0 percent next year after expanding 2.2 percent this year, it said, down from its previous forecasts for growth of 3.4 percent in 2013 and 2.5 percent in 2012. “Economic growth will remain relatively low at 2.2 percent (yearon-year) during the first half because
of uncertainties from the euro zone crisis, but the recovery will strengthen in the second half to 3.7 percent,” the institute said. It said quarterly economic growth for October-December would probably rise to a seasonally adjusted 0.6 percent from 0.2 percent set in the third quarter, but that economic activity would remain weak through the first half of 2013.
Given the sustained stability in consumer prices and slowing household credit growth, the institute said the Bank of Korea needs to take more aggressive monetary policy measures to prevent the economy from losing more momentum. “It would be appropriate to respond aggressively to sluggish growth through additional rate cuts,” it said, adding the political instability around the presidential election in December and concerns about a sharp rise in public debt would limit the scope for massive fiscal expansion. The think tank projects 2013 annual average inflation at 2.3 percent, lower than the Bank of Korea’s forecast for 2.7 percent. The central bank aims to keep inflation between 2.5 percent and 3.5 percent for the 2013-2015 period. The institute said additional policy easing would also help slow the foreign capital inflows by narrowing interest rate differences with the advanced economies, which in turn would mitigate the upward pressure on the won. So far this year, the currency has appreciated some 6 percent against the U.S. dollar, putting more pressure on the country’s struggling exporters. The think tank also said the government should consider increasing its total fiscal spending for next year to boost the economy and allocate more of the spending on the early part of the year when growth would remain depressed. Reuters
November 26, 2012 business daily | 11
ASIA Central bank Governor Duvvuri SubbaraolastmonthcuttheReserveBank of India’s growth forecast for the current fiscal year to 5.8 percent, the slowest pace in a decade, from 6.5 percent. He raised the monetary authority’s estimate for gains in wholesale prices to 7.5 percent from 7 percent. The central bank has kept benchmark borrowing costs unchanged at 8 percent at its last four policy reviews to curb the worst inflation among the so-called BRIC nations, comprising Brazil, Russia, India and China. “Fiscal consolidation is a necessary pre-requisite for sustained growth,” Mr Rangarajan said in a speech to businessmen. Policy makers also need to address the nation’s “high” inflation and the current-account deficit if growth is desired, he said. Gold imports account for 80 percent of the shortfall in the current account, the broadest measure of trade, central bank deputy governor Subir Gokarn said in Pune yesterday. The monetary authority last week issued guidelines prohibiting commercial banks from lending funds for purchases of gold, other than for jewelers’ working capital needs. The central bank is considering new gold investment plans, Mr Gokarn said. The current-account deficit has helped push the rupee down about 4.4 percent this year after a 16 percent plunge in 2011. A weaker currency raises import costs and fuels inflation in a nation which ships in more than 80 percent of its oil requirements and is the world’s biggest user of gold. Bloomberg
Massive retail mall marks Dubai comeback After almost defaulting in 2009, emirate is on the mend with tourism boom
ubai announced plans for a huge tourism and retail development including the largest shopping mall in the world, a fresh sign that the glitzy emirate has recovered its commercial ambitions after a crippling corporate debt crisis three years ago. The development, on the outskirts of Dubai’s current downtown area, will include a park 30 percent bigger than Hyde Park in London, said Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum, also prime minister of the United Arab Emirates. A retail complex named the ‘Mall of the World’ will be able to host 80 million visitors a year and include over 100 hotel facilities, Sheikh Mohammed said in a statement on Saturday. A family entertainment centre linked to the mall, developed with Hollywood’s Universal Studios, a unit of Comcast Corp, would be designed for 6 million visitors each year. The development, named ‘Mohammed Bin Rashid City’, would also include a district of art galleries and an area where entrepreneurs could develop businesses. Sheikh Mohammed did not say
how much the development would cost or when it would be finished, but his description indicated investment would total many billions of dollars. It would be built by Dubai Holding, a conglomerate owned by him, and Dubai’s leading real estate firm Emaar Properties PJSC, whose shares surged to the highest level since December 2010. Dubai’s benchmark stock index gained the most in almost two months.
Arab haven “The current facilities available in Dubai need to be scaled up in line with the future ambitions for the city,” Sheikh Mohammed said, adding that Dubai aimed to become a business and cultural capital for 2 billion people in surrounding regions. “We all know how well Dubai has been doing in terms of tourism and in terms of retail, so this is very positive news for Emaar to develop in this area and to have more exposure to this area,” said Chahir Hosni, equity sales manager at EFG- Hermes Holding SAE in Dubai. Such ambitions would have seemed ludicrous three years ago,
when a crash of Dubai’s inflated real estate market triggered a corporate debt crisis that forced state-owned conglomerate Dubai World into a US$25 billion (200 billion patacas) debt restructuring. But Dubai, home to the world’s tallest building, an archipelago of man-made islands and an indoor ski slope in one of its shopping malls, has staged a dramatic recovery this year, partly because of a tourism boom. Arab Spring uprisings in the Middle East, including Syria’s civil war, appear to have helped Dubai, which has attracted funds seeking a politically and economically stable haven. Although yields on bonds issued by Dubai firms have plunged this year, showing a return of investor confidence, some bankers are concerned that Dubai is merely pushing many debt maturities into the future without selling assets and taking other difficult steps to cut the debt load. Reuters/Bloomberg
Too many flights hit Australian airlines Flight capacity increase is cutting into carriers’ profitably, says Australia’s largest airline
ustralia’s domestic aviation market is awash with flights, benefiting passengers rather than airlines, said the head of Qantas Airways Ltd.’s local business. “There’s a lot of capacity sloshing round the Australian marketplace overall,” Lyell Strambi, chief executive officer of Qantas Domestic, said at a media briefing at Sydney airport yesterday. “Ultimately the winners are the customers.” Flight capacity in the domestic market in the December half is running about 12 percent more than its level last year, whittling profitability for carriers aiming to match the supply of seats to demand, Russell Shaw, an analyst at Macquarie Group Ltd., said by phone November 7.
A measure of business-class ticket prices has fallen 40 percent in the past year to two-decade lows as Virgin Australia Holdings Ltd. stepped up competition with Sydney-based Qantas, Australia’s largest carrier. There had been “some adjustments in capacity” in the last few months without any significant reduction in growth, John Borghetti, Virgin’s chief executive officer, said on a media call November 20. “Competition is certainly very aggressive now and competition will always be aggressive,” he said. A move announced yesterday by Qantas to switch all services that fly between the Western Australian capital, Perth, and Sydney and Melbourne, to Airbus SAS A330s from May won’t significantly affect domestic capacity, Mr Strambi said. The bulk of additional seats that Virgin is adding come from switching to wide-body jets like the A330 on routes between Australia’s east and west coasts, Borghetti said last week. Qantas’s A330s will replace Boeing Co. 767s on east-west routes, which will be moved to the busier east-coast network, Mr Strambi said today. Virgin plans to buy a controlling stake in Tiger Airways Holdings Ltd.’s local unit and to take over Skywest Airlines Ltd., the company announced October 30, in a deal that would raise its share of the Australian domestic market to about 35 percent from 30 percent at the moment.
Macau at your breakfast table. With Business Daily. Find us in the following newsstands Pacapio at San Ma Lo Opposite HKSB (Nam Van) Beside Luso Bank Building Wen Hang Bank at San Ma Lo In front of Portuguese Bookshop In front CTM at San Ma Lo In front Daiso shop at San Ma Lo Next to S. Lourenço Market Next to Human Resources Dpt Next BNU at Av. Sidonio Pais San Miu, Av. Horta e Costa Next to Metro Park Hotel
business daily November 26, 2012
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52W (H) 22149.69922 (L) 17613.19922
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AIR CHINA LTD-H
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PICC PROPERTY &
PING AN INSURA-H
CHINA MERCH BK-H
CHINA COSCO HO-H CHINA LIFE INS-H
INDEX 10606.99 HIGH
52W (H) 11916.1
CHINA NATL BDG-H
Shanghai Shenzhen CSI 300 PRICE
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PRICE DAY %
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52W (H) 2717.825 (L) 2149.538
FTSE TAIWAN 50 INDEX NAME ACER INC
PRICE DAY %
TAIWAN MOBILE CO
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INDEX 5170.53 HIGH
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November 26, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GAlAXy ENtErtAINMENt
MElco crowN ENtErtAINMENt
MGM cHINA HolDINGS
13.8 13.7 13.6
SANDS cHINA ltD
WTI CRUDE FUTURE Jan13
BRENT CRUDE FUTR Jan13
GASOLINE RBOB FUT Dec12
NATURAL GAS FUTR Dec12
Gold Spot $/Oz Silver Spot $/Oz
Platinum Spot $/Oz
Palladium Spot $/Oz
LME ALUMINUM 3MO ($)
LME COPPER 3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan13 Mar13
WHEAT FUTURE(CBT) Mar13
21.3 Average 21.719
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
1.0461 1.6028 0.9282 1.2976 82.4 7.9828 7.7504 6.2283 55.515 30.7 1.2228 29.132 41.05 9649 86.194 1.20414 0.80917 8.0282 10.2915 106.94 1.03
0.9165 0.4953 0.8942 0.8785 0.267 0.0088 0.0065 0.0112 -0.5494 0.0326 0.2372 0.0275 0.0853 -0.0518 -0.6543 0.0415 -0.3324 -0.4858 -0.2215 -0.6265 0
2.4684 3.1204 1.0666 0.1157 -6.6626 0.2105 0.2193 1.0709 -4.4132 2.7687 6.0353 3.9373 6.7966 -6.011 -9.0053 1.0505 2.9932 1.3203 0.5879 -6.8076 0.0097
1.0857 1.6309 0.9972 1.3548 84.18 8.03 7.7969 6.3964 57.3275 32 1.3138 30.444 44.35 9664 88.637 1.24438 0.86187 8.5805 10.8355 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
AMAX HOLDINGS LT
BOC HONG KONG HO
COFFEE 'C' FUTURE Mar13
SUGAR #11 (WORLD) Mar13
COTTON NO.2 FUTR Mar13
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DOW JONES INDUS. AVG
NASDAQ COMPOSITE INDEX
HANG SENG BK
FTSE 100 INDEX
HSBC HLDGS PLC
HUTCHISON TELE H
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17.8 Max 18.1
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SJM HolDINGS ltD
LUK FOOK HLDGS I
MELCO INTL DEVEL
MGM CHINA HOLDIN
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business daily November 26, 2012
Opinion Europe is breaking. How many EUs will there be? Pawel Swieboda
President of the Demos Europa Center for European Strategy and a former adviser on Europe to former Polish President Aleksander Kwasniewski
rospects for the survival of the euro area are looking up, raising a new question to dominate debate about the continent’s future: will there be one European Union, or several? To save itself from oblivion, the euro area is embarking on an unprecedented degree of integration that was left undone when Europe started a common currency just over a decade ago. If all goes according to the plans of a handful of leaders, including German Chancellor Angela Merkel, there will eventually emerge a banking union, a new federal budget and a joint commissioner who must reconcile national budgets. Given the resistance to many of these ideas at the moment, this may sound farfetched. But the project is likely to progress, because so long as the euro exists, logic points to countries that share the same currency pooling their fiscal as well as monetary sovereignty. That means separating from the rest of the EU crowd, and in some ways it’s only surprising that this hasn’t happened already. Countries exposed to the risks associated with sharing the euro are justified in demanding special terms relative to fellow EU members who have their own currencies and therefore face fewer constraints and can count on flexible exchange rates. That logic, however, has consequences.
Gradual departure While the 17 euro-area countries are integrating, the U.K. has started a process of gradually disassociating itself from the rest of the EU. Across the English Channel, this is often met with a sigh of relief - the U.K. has long been a difficult partner. However, those who quietly smile as Prime Minister David Cameron and his Conservative Party tie themselves in knots over Europe disregard the fact that the EU would be a different animal without the U.K., which was the driving force behind the creation of the EU’s single market. The euro area can’t simply detach itself from the larger EU without sacrificing
single market. Contrary to what some believe, there is no reason for the single market to falter if the euro area integrates further. The euro-area labour market may become more closely knit, but it need not discriminate against non-euro nationals. There are also ways of making the banking union an inclusive one, so that the national regulatory authorities of countries that don’t use the euro retain the ability to tailor rules to the specific needs of their own banking sectors.
Barring barriers competitiveness. Italy’s Prime Minister Mario Monti used to say clearly that those who want a stronger single market are outside of the euro. This includes EU states that are trapped between the euro area and the U.K. and worry they might not be able to stitch the two parts of Europe together. Of these, Poland is the most nervous at the prospect of Europe’s centre of gravity drifting beyond the country’s comfort zone. Denmark and Sweden are in similar positions but would probably feel more secure about operating at the euro area’s margins. A lot rides on how the changing European geometry will be worked out. It can be done divisively, leading to acrimony, or in an accommodating way that creates synergies. The former route has the potential to bring about an end to the EU as we know it, including its great achievement of overcoming the deep divisions that defined Europe for centuries. For example, it would make eminent sense for the euro area to create a functioning labour market among its members, complete with a euro-areawide social-insurance plan. Yet such innovations could also limit the free movement of citizens across the wider EU, a treasured benefit of the union, unless special arrangements were first negotiated to ensure that non-euro-area countries had the possibility of opting into these arrangements. Doing so would require a lot of goodwill and understanding. Unfortunately, the odds
of an orderly redesign of Europe are not good, because a more-integrated euro area is being born of necessity. Wolfgang Schaeuble, the German finance minister, accepted this last year when he said, “We can only achieve a political union if we have a crisis.” The midwives for this rebirth of Europe aren’t politicians - they are financial markets pushing for the federal structure needed to make the euro sustainable. Crisis and force-majeure don’t make an ideal setting for careful compromise.
Antagonizing merger Still, a new grand bargain in Europe is possible and worth fighting for. What would it take? It would need to be based on an acceptance that there are different types
Recognition is growing that the single market needs to be extended to new areas
of economies in Europe, different political systems and different societies. The
attempt to merge them into a giant fusion-Europe has not worked, creating antagonism instead. If post-crisis Europe is to be based on a revived idea of this idealized uniformity, it will backfire. In truth, a two-speed Europe already exists, and it divides northern Europe from southern Europe -- not euro from non-euro countries. It was born in 2002, the year that what the World Bank calls Europe’s convergence machine broke. After that, labour productivity in southern European countries began to fall, while in the north it continued to grow at 1.7 percent from 1995 to 2009, a little bit more than the rates of increase in the U.S. (1.6 percent) and Japan (1.2 percent). Inflows of capital replaced domestic saving in the south, but they increasingly didn’t fund productive investment. The result has been a mismatch that is only getting bigger. A new plan is needed to come to terms with this reality rather than pretend it doesn’t exist. It would require accepting that there will be three types of countries in the EU: those that use the euro, those that don’t but intend to once the crisis is over, and those that have no intention of joining in the foreseeable future. Being in or out of the euro area would not make you a more- or less-virtuous European. Euro and noneuro countries would need to create a nonaggression pact, under which they would avoid discriminatory policies and practices and create an agenda for a revamped, state-of-the-art
Moreover, there will be more support for the single market after the crisis than there was before, as the European welfare state undergoes its most fundamental reconstruction since World War II and governments search for sources of growth. Recognition is growing that the single market needs to be extended to new areas, such as digital technologies, where the EU has lost out to the U.S. over the past decade. For this to happen, enforcement to prevent governments from throwing up barriers would need to be stronger at the centre, with the European Commission exercising similar powers to the ones it enjoys in competition policy. If this were a common goal of the three Europes that emerge from the crisis, then there would be no need to worry about differences in macroeconomic governance. That’s all the more reason that the U.K., a long-term champion of the single market, would be foolish to leave the EU now. For years, many Europeans - Britons in particular have suspected others of conducting a federalist plot aimed at creating a European core with dependent satellites. Today it is not a plot but a blueprint. The euro area is forging ahead. The trick is to construct these European unions based on pragmatism, rather than resentment and ideology, so that the EU as a whole can continue with its fundamental purpose of holding the continent together. © Bloomberg View
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November 26, 2012 business daily | 15
wires Leading reports from Asia’s best business newspapers
Business Standard Prices of various leading drug brands in India will come down by up to 80 percent thanks to the newly approved National Pharmaceutical Pricing Policy. At the same time it will hurt investment sentiments in the country’s pharmaceutical sector, according to industry bodies. The Indian Pharmaceutical Alliance (IPA) and Organisation of the Pharmaceutical Producers of India (OPPI), say the new drug policy would also adversely impact profitability of pharmaceutical companies. That may deter companies from investing or expanding production capacity.
Yomiuri Shimbun Japan’stransportministry’sdecision to introduce a standardization system for ultra-minicars in January aims to encourage development by automakers by clarifying specifications and regulations. While promoting ultra-minicars as a convenient way to get around locally, the system will be the key to whether municipal governments, the ministry and automakers can jointly cooperate to create safe towns without accidents. Under theenvisagedsystem,announced by the Land, Infrastructure, Transport and Tourism Ministry, safety standards for the ultraminicars are more relaxed than those for minicars.
JoongAng Daily The average number of credit cards held by South Koreans declined in the first half of 2012, apparently due to the protracted economic slowdown and stricter government regulations. The country’s economically active population held 4.5 credit cards on average as of end-June, according to the Credit Finance Association. This compares with 4.9 tallied at the end of 2011. South Korea’s economically active population, or the number of people aged 15 years and above with the willingness to work, totalled 25.84 million at end-June.
Manila Times The Philippines Department of Trade and Industry (DTI) recently conducted the second round of stakeholder consultations for a Philippine-European Union (EU) trade agreement. The consultationspresentedstudieson the possible impact of a free-trade agreement with the EU. “The studiespresentedbyindependent research organizations during the stakeholder consultations support the government’s objectives to make our trade policies more transparent and responsive,” said the undersecretary for Industry Development and Trade Policy. The consultations were attended by members of the academe, government, civil society and business.
Should Europe emulate the U.S.? Jean Pisani-Ferry
Director of Bruegel, an international economics think tank, Professor of Economics at Université Paris-Dauphine, and a member of the French Prime Minister’s Council of Economic Analysis
aul Krugman, the Princeton University economist and blogger, recently summarized diverging transatlantic trends as follows: “Better here, worse there.” It is a shocking observation: as recently as in 2009, European politicians and commentators lambasted the U.S. for being at the root of the financial turmoil and hailed the euro for protecting the continent from it. Unfortunately for Europe’s boosters, the facts are unambiguous. According to the European Commission, U.S. per capita GDP is expected to return to its 2007 level next year, whereas it is expected to remain 3 percent below that level in the eurozone. Likewise, unemployment was roughly the same on both sides of the Atlantic in 20092010, but it is now almost four percentage points lower in the U.S. Capital expenditure in the U.S. is recovering more strongly, and exports are picking up. Even inflation is likely to be lower in America than in Europe this year. The one area where Europe is posting better results is public finances. In 2012, the aggregate fiscal deficit in the eurozone is expected to be slightly above 3 percent of GDP, compared to more than 8 percent in the U.S. There are two competing explanations for Europe’s relative malaise. One is the claim that Europe is paying the price of misguided austerity. The other is that the U.S., too, will eventually face its day of fiscal reckoning, and that Europe had no choice but to start it earlier: as the euro crisis demonstrates, things would have been worse had austerity been postponed.
Different emphasis There is truth in both views, but both overlook an important part of the story. In the aftermath of the Great Recession, the U.S. and Europe (including the United Kingdom) adopted opposite strategies. President Barack Obama’s administration and the U.S. Federal Reserve gave priority to healing the private sector. After expeditiously restoring confidence in the banks by forcing them to undergo severe stress tests, they gave households time to repair their balance sheets. The task for economic policy was to compensate for the resulting shortfall in private demand until households eventually recovered. Fiscal consolidation was put on hold (although some did occur, owing to the balanced-budget rules of most U.S. states), and monetary policy was geared toward flattening the yield curve. Europe, by contrast, put early emphasis on restoring fiscal sustainability, but
neglected its private-sector maladies. As early as the second half of 2009 – that is, before bond markets got nervous – policymakers’ top priority was to find the exit from fiscal stimulus. Private-sector problems were overlooked on the way out. Banks, for example, were said to be in good shape, whereas several were barely solvent. Households were assumed to be ready to consume, although, in Spain and elsewhere, many were over-indebted. And labour hoarding was encouraged at the expense of productivity and profitability. As a result, Europe emerged from the recession with too many zombie banks, wounded households, and struggling companies. In Germany, the private economy was fit enough to recover, but this was less true in southern Europe or even France. The UK, which has not suffered directly from the euro
Europe emerged from the recession with too many zombie banks, wounded households, and struggling companies
crisis, is an interesting test, for it also followed the European strategy. Instead of the productivity surge experienced in the U.S., it has gone through a sort of productivity holiday, with serious consequences. The Bank of England’s latest Inflation Report reckons that UK productivity is 10 percent below pre-crisis trends, owing to low investment and a slowdown of the Schumpeterian process of creative destruction. As in continental Europe, productivity has suffered from a combination of insufficient profitability and dysfunctional capital markets. Unit labour costs have risen, and potential output growth has fallen.
Europe quandary Neglect of the private sector has left Europe in a sad quandary. On the supply side, permanently lower output makes fiscal adjustment even more compulsory; but, on the
demand side, a weak private economy lacks the resilience needed to weather fiscal retrenchment. At this stage, struggling European countries evidently cannot afford to put publicsector adjustment on hold to concentrate on privatesector balance sheets. Nor should they take inspiration from America’s “fiscal cliff” theatre. Nonetheless, the U.S. approach holds three lessons. First, banking-sector repair should be policymakers’ top priority wherever it has not been completed. Second, the pace of consolidation should remain moderate as long as private demand remains constrained by deleveraging or credit restrictions. Finally, attention should be paid to the balance between fiscal tightening and supplyside reforms: whenever appropriate, more priority should be given to the latter than has been the case so far. © Project Syndicate
business daily November 26, 2012
CLOSING Blind activist honoured by U.S. magazine
Stanley Ho celebrates 91st birthday
Men’s magazine GQ has named blind Chinese activist Chen Guangcheng its rebel of the year, seven months after his escape from house arrest and flight to the U.S. embassy sparked a diplomatic row. Mr Chen, left China for the United States after fleeing his home in eastern Shandong province. He had publicised forced sterilisations and late-term abortions under China’s “one-child” family planning policy.In a GQ article accompanying his profile in the publication, The activist wrote of the challenge of adapting to life in New York, where he moved with his family after being invited to study at a university.
Stanley Ho Hung Sun, Macau’s former gaming monopolist, celebrated his 91st birthday yesterday. It’s nearly two years since Mr Ho began – following a serious illness in July 2009 – winding down his involvement in STDM and SJM Holdings Ltd, the gaming and leisure businesses he helped to build up over the course of half a century. Mr Ho appeared in 13th place in Forbes magazine’s 2011 ‘Hong Kong’s 40 Richest’ list with a US$2 billion (16 billion patacas) net worth. He doesn’t feature in this year’s list, but one of his daughters, Pansy Ho Chiu King, an investor in MGM China Holdings Ltd, is in 12th place with US$3.3 billion.
Egyptian stocks sink as nation divides President’s oversight decree seen as either ‘betrayal’ of revolution or patriotic act
gypt’s benchmark stock index plunged the most in 20 months after clashes resumed in Cairo between police and activists protesting President Mohamed Mursi’s decree to shield his decisions from judicial oversight. Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, tumbled 10
percent to 33.70 Egyptian pounds (US$5.54). Orascom Construction Industries, Egypt’s biggest publicly traded company, declined by the same amount to 227.02 pounds. The EGX 30 Index droppedninepercent,thebiggest intraday loss since March 2011, to 4,950.68 at midday Cairo time yesterday, trimming this year’s gain to 37 percent. Egypt’s judiciary readied
to suspend work in protest at the controversial decree. A statement from some judges denounced “an unprecedented attack on the independence of the judiciary and its rulings”. Other critics drew parallels between Mr Mursi’s moves granting him sweeping new powers, and the regime of Hosni Mubarak that hundreds died to topple last year.
Hours after mass protests on Saturday night, police fired tear gas at demonstrators in the capital’s iconic Tahrir Square. Dozens were reported injured in the clashes. “The decree pits the executive and the judiciary branches against each other and splits the population in two,” said Teymour ElDerini, Cairo-based director of Middle East and North Africa sales trading at Naeem Brokerage. “Buying in this market doesn’t make any sense considering the risk.” That sense of a nation split down the middle was reinforced yesterday when Egypt’s influential Muslim Brotherhood called national demonstrations in support of President Mursi The stock market uncertainty comes as Egypt announced it will offer five billion Egyptian pounds (US$821 million) of treasury bills in the first sale since President Mursi’s controversial decree. The Arab nation will seek bids for three- and nine-month notes valued at 1.5 billion pounds and 3.5 billion pounds respectively,
according to central bank data on Bloomberg. The government sold nine-month bills last week at an average yield of 12.89 percent, the lowest in almost 16 months. The yield on three-month bills declined three basis points to 12.3 percent. The yield on the nation’s 5.75 percent dollardenominated bonds due in April 2020 advanced one basis point to 5.13 percent on Nov. 23, according to prices compiled by Bloomberg. The pound, subject to a managed float, was little changed at 6.0897 a dollar. President Mursi said in his recent decree that all his decisions, dating back to his assumption of office in June, cannot be challenged in court. The U.S. and European Union criticised the move. Financial aid from the U.S., and U.S. support for Egypt’s efforts to get loans from the International Monetary Fund and other organisations, is contingent on democratic development. Egypt reached preliminary agreement with the IMF on November 20 for a loan of as much as US$4.8 billion. Bloomberg/AFP
One bid is not enough for Aston Martin owners James Bond carmaker at centre of Italian-Indian tussle say sources
he luxury car making world has been stirred, if not actually shaken, by news that two firms are bidding against each other for a 50 percent stake in Aston Martin Lagonda Ltd. Aston Martins appear in most James Bond films, including Skyfall, the latest release in the franchise. Italian private equity fund Investindustrial thought it had reached an agreement on Thursday with Aston Martin’s current owner, Kuwaiti investment house Investment Dar, to buy the stake for between 200 million and 250 million pounds (US$400 million) according to a person familiar with
the situation. But Indian carmaker Mahindra is understood to have come in with a higher offer. Both offers now give Aston Martin an enterprise value of around 750 million pounds with an equity investment of about 250 million pounds to be used for investment. Investment Dar, which has been trying to sell a stake in the carmaker for more than a month, would retain control of the remaining 50 percent of the company. Mahindra, India’s largest SUV maker by sales, declined to comment. Details of its offer weren’t immediately clear. Investment Dar was unavailable for comment.
Both bids are understood to want to retain production at Aston Martin’s main production plant in Gaydon, Warwickshire. The company was sold in 2007 by U.S.-based Ford Motor Co. for 479 million pounds to Kuwait’s Investment Dar and another Kuwait fund, Adeem Investment Co. The Aston Martin consortium was fronted by David Richards a former Formula 1 Benetton and BAR racing boss, who remains chairman. Aston Martin sells approaching 15 percent of its DB9, Vanquish and other models in Asia. Wealthy Chinese buyers snapped up
110 cars in 2010 and sales are expected to have multiplied five-fold to over 500 this year. Investindustrial, owned by Italy’s Bonomi family, is not new to luxury motor
brands. In 2006, it bought Italian motorcycle maker Ducati and sold it for about 860 million euros lastFederal April to Ben Bernanke, Volkswagen’s Audichairman division. Reserve Reuters