Macau Business Daily, August 29, 2013 by Business Daily

Page 3

Vitor Quintã

MOP 6.00

Tourism revenue1 here nearly equals all China’s

April 19, 2013

Year II

Number 359 Thursday August 29, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Recycled water to open up supply market Page 5

Emperor Watch profits slashed by price cuts Page 7

Air Macau H1 profit drops 15 percent A

ir Macau Co Ltd saw a 6.83 percent year-on-year rise in total first half revenue but a 15.2 percent drop in net profit. No reason for the fall was given. The city flag carrier’s performance only has a brief mention in the unaudited half-year financial report from its parent company the state-owned mainland operator Air China Ltd. Total Air Macau revenue in the six months to June rose to 1.247 billion yuan (1.61 billion patacas) – the majority, 1.199 billion yuan, from its aviation business. But net profit was only 82 million yuan during the period. New outbound flightsby all airlines from Macau International Airport rose 74 percent year-onyear in July and August, the Civil Aviation Authority said in a press release yesterday. More on Page 2

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Less buck for more bang LVS pays to end probe say Macau exporters on ‘suspicious’ deposits Macau exported more goods in this last quarter than in any other period since the 2008 financial crisis hit the city but has got less money for them. The volume growth is solely due to more re-exports – goods shipped in only to be shipped out. Local companies have been selling fewer ‘made in Macau’, mainly because of the decline of the textiles industry. Page 3

Gaming operator Las Vegas Sands Corp will pay US$47.4 million (378.63 million patacas) to the United States government to end a federal probe regarding failure to report a high roller’s allegedly suspicious cash deposits in Nevada. U.S prosecutors claimed that LVS failed adequately to investigate Chinese-Mexican businessman Ye Gon Zhenli – wanted in Mexico for alleged drug trafficking – before accepting his deposits. Page 4

HSI - Movers Name

%Day

CNOOC LTD

0.65

CHINA UNICOM HON

0.17

CHEUNG KONG

-0.37

CLP HLDGS LTD

-0.41

CHINA MOBILE

-0.42

CHINA RES LAND

-3.27

CHINA COAL ENE-H

-3.77

CATHAY PAC AIR

-3.92

PETROCHINA CO-H

-4.39

KUNLUN ENERGY CO

-13.51

Source: Bloomberg

Would be legislators go digital to lure young votes First-time voters could decide at least one seat at the Legislative Assembly elections next month, says University of Saint Joseph political scientist Eric Sautedé. In response candidates for the September 15 election are turning to social media to communicate their messages. Candidates linked to the gaming industry are also trying to broaden their appeal by seeking support from other sectors. Page 6

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August 29, 2013

Macau opinion

Precious little nuggets

supply of economically priced flats than there are parking spots. In discussing the economics of the issue, everything shouts that the square metre of parking space is more valuable than the square metre of housing. Parking spots also require less furniture and fewer fittings than a flat, and so cannot be subject to the same level of devaluation that may strike apartments endowed with rustinclined pipes and furnished with cheaper-thannormal materials.

No intervention José I. Duarte Economist

his time of the year does not typically inspire intense political activity or analysis. It is about now that the media struggle to find real, serious news. When “faits divers”, or lurid news briefs, insinuate themselves in the hard news sections of the newspapers or newscasts, and when seemingly unrelated subjects are bunched together in a desperate attempt to exorcise the menace of the void. The need to fill space and time overwhelms editors, who are intensely aware that readers, if there are all that many left, may be bored easily. Fortunately, Macau is not included among the list of places where there is a dearth of topics worthy of interest. The uninteresting may gain more pre-eminence than usual during this silly season but there are always subjects worth the attention of the most serious analyst, not to mention the public. Let me offer an example. The so-called affordable housing flats in Seac Pai Van promise to be a major source of serious news. This housing development seems destined to continually provide fodder for deeper consideration about the city’s political and social systems, as well as being a tool to educate the masses. In fact, it is hard to avoid the impression this news item is still in its infancy and could be the source of many interesting topics for a long time to come. The most recent issue involving Seac Pai Van, the cost of parking places, has just been splashed across the news. It seems it will cost more to buy a parking space there than it will to buy some of the flats. This newly defined category of “affordable parking” does not come as cheap as “affordable housing”, which might be considered a newly re-defined category. So what? The news will come as no surprise to readers who have paid any level of attention to the economics of urban development, Macau style. The law of scarcity is involved: there is a greater demand for economical parking in that part of the city than there is for affordable housing. And, just as important, there is a far greater

Apparently there was a promise (or implicit vow or maybe just an intention, one cannot be certain) that parking at the Seac Pai Van development would be preferentially allocated to its residents. That expectation now seems difficult to fulfil, if not impossible. The issue of parking is just the most recent addition to so many complex issues that it makes one lightheaded. Some observers, possibly with mean dispositions, might wonder why parking places in a public housing estate, assuming they should exist there at all, are not tied to the residential units or part of a public parking area. Other observers, of an even meaner disposition, might step forward and suggest that there were never enough people in Macau to fill such a big housing project or, at least, enough people considered poor enough to qualify for the flats under any reasonably defined income criteria. Some might go as far as to say that, in a city so proud of its present high level of income and positive economic indicators, too few applicants to fill the flats would survive a proper screening, even under tolerant or flexible interpretations of the criteria. But these questions are likely to be the consequence of increasingly cynical temperaments, not the outcome of any evidence-based inquiry. Best I stop here. At this stage, most readers have possibly forgotten about the issue and are increasingly willing to move onto another page, if not another activity altogether. But there is one final point. Sources from the government have confessed to the media their total impotence in the matter. Apparently, the contract with the developer was made under an old law that precludes any interference. On the strength of these comments I have to presume that the government would like to intervene, if only it could. Leave aside the issue of the law’s age, its relevance might be debated and lead us to digress from the critical issue. Everything in this process suggests the government should strive to identify and, if possible, discipline those responsible for shackling it in a matter which is so important, socially and politically. Any suggestions?

Air Macau H1 profit drops 15 pct Carrier posted rise in total revenue, but fall in net profit Stephanie Lai

sw.lai@macaubusinessdaily.com

ir Macau Co Ltd saw a 6.83 percent year-on-year rise in total first half revenue but a 15.2 percent drop in net profit. No reason for the fall was given. The city flag carrier’s performance only has a brief mention in the unaudited halfyear financial report from its parent company, the state-owned mainland operator Air China Ltd. Total Air Macau revenue in the six months to June rose to 1.247 billion yuan (1.61 billion patacas) – the majority, 1.199 billion yuan, from its aviation business. But net profit was only 82 million yuan during the period. Air Macau passenger numbers surged by 15.19 percent year-on-year in the period, to 854,900. Average seat occupancy only inched up 0.90 percentage points to 66.89 percent. The local flag carrier recorded revenue of 9.43 million yuan from its cargo traffic in the first half of this year, a rise of 20.83 percent on

a year earlier. Business Daily asked for more information on why Air Macau’s profit fell, but no reply was available by press time. Air Macau’s profits reached a historic high of 279.8 million patacas last year, which represented a 11.4 percent year-on-year growth, Air Macau’s chairman Zheng Yan told media in early May. Mr Zheng cited more flights and more passengers for the improvement in the airline’s results for 2012. But the chairman also added that the airline had felt “a pinch” in its profits from the central government’s crackdown on corruption and the outbreak of H7N9 bird flu virus earlier this year. Until June 30 this year, Air Macau had 14 aircraft operating more than 20 routes. The company added two new aircraft to its fleet in the first half of this year.

Summer travel boosts outbound air charters More new flights to regional holiday spots during July and August Stephanie Lai

sw.lai@macaubusinessdaily.com

Come fly – daily outbound air travel up 8.5 pct in August

ew outbound flights from Macau International Airport rose 74 percent year-onyear in July and August, the Civil Aviation Authority said in a press release yesterday. Most of them were charters, and most were run by the city’s flagship carrier Air Macau Co Ltd. The authority cited “increasing transportation demand” for the peak summer travel season for the growth. There were 47 new outbound flights during the period compared to 27 in the equivalent period a year earlier. The majority – 28 flights – were to Hanoi in Vietnam. The remainder were to Muan and Pusan in

South Korea, Matsuyama, Okinawa and Osaka in Japan and Guiyang in mainland China, the Civil Aviation Authority additionally told Business Daily in an e-mail. Some of the flights were for routes not previously served by Macau. Except for two extra outbound scheduled flights for Osaka, the rest of the approved new outbound services were all charter flights, the authority noted in the reply. The Civil Aviation Authority added that in July and August 2012 the 27 new summer flights flights were for Muan, Osaka, Hohhot in Inner Mongolia, Nanning in China

and Hualien in Taiwan. “To alleviate the situation where it’s hard for passengers to grab a ticket in the travel season – like summer, especially for family travels – we have to approve more flights for July and August because the regular flight capacity cannot cope at all,” a spokesperson for the authority told Business Daily. Macau International Airport Co Ltd (CAM) stated additionally that the number of inbound and outbound flight passengers travelling in July and August this year is higher than the same period in 2012.

In July this year, the airport recorded a daily average of 14,300 passengers. In August the daily average was 16,400 passengers, the airport told Business Daily in an e-mail. The daily average of flight passengers in July and August this year is respectively 700 more and 1,400 more than the same period in 2012 representing rises of 4.9 percent and 8.5 percent judged year-on-year. The airport noted a particularly strong increase in passengers on the mainland China routes in August this year, though it did not provide figures.

August 29, 2013 April 19, 2013

Macau ‘Aussies, compete please’, says MGM China boss Grant Bowie, chief executive of Macau casino developer MGM China Holdings Ltd, told a conference in Australia he would like to see “some competition” for Macau coming from the casino industry Down Under. “We [MGM China] are going to have to compete as hard as we can to take as much business from Australia. We would like to see some competition,” he said, adding that inbound tourist numbers to Australia are currently “pathetic”. He was speaking on Tuesday at a tourism forum in Queensland. Mr Bowie is a former boss of Jupiters Hotel & Casino, Gold Coast.

Exports grow but value shrinks But jump in overseas shipments mainly supported by re-exports Vítor Quintã

vitorquinta@macaubusinessdaily.com

acau exported more goods in this last quarter than in any other period since the 2008 financial crisis but has got less money for them, official data show. The reading of the quantum value index for exports, which measures the volume of goods sold elsewhere, was 131.2 points in the second quarter of this year, according to the Statistics and Census Service. This was 15.7 percent higher than a year earlier, and the index’s highest level since 2008. The jump was solely due to more re-exports – goods shipped in only to be shipped out, with no value added to them here –, whose index grew by over a quarter. In contrast the unit value index for exports, which measures the price of each product exported, was 99.4 points in the last April-June period. That figure was 3.2 percent lower than in the first quarter, and a threeyear low. The fall was also due to a 3.8 percent loss in the index for re-exports.

For the second consecutive quarter, the value of domestically produced exports exceeded that of re-exports. However, that has been of little help for the trade business considering that ‘made in Macau’ exports continue to shrink, falling by a further 9.7 percent year-on-year in the second quarter. In the past five years the volume of domestic exports has dropped to little more than a fifth. This is mainly because of the decline of the once-dominant textiles industry, which is still the city’s major domestic exporter. The end of World Trade Organisation quotas globally in 2005 doomed the local textilemanufacturing sector. The index of the volume of textiles exports has fallen by almost 90 percent since 2008. On the other hand Macau’s imports continue to grow, with the volume index setting a new record high of 124.8 points, up by 16.4

The once-dominant textiles industry continues to shrink

points year-on-year. The import growth was mostly fuelled by greater sales of raw and semi-finished materials. These imports increased by almost 25 percent year-on-year to an index of 131.9 points. With the service industry booming to meet the demand created by tourism, imports of consumer goods are also on the rise, posting a 22.3 percent year-on-year jump.

90 %

Fall in the index of the volume of textiles exports since 2008

Tourism earnings inch closer to matching the mainland’s T

he city’s revenue from tourism increased by 13.3 percent last year, largely because of turnover at the casinos, data from the World Tourism Organisation show. Macau generated almost as much money from tourism as the mainland, says the organisation’s recently released global tourism report. The city posted tourism receipts, including gaming expenses, of US$43.7 billion (349 billion patacas) last year, the fifth highest in the world. Its tourism revenue is already about 87.5 percent of what the mainland generated from tourism last year, about US$50 billion. This represents a substantial improvement from only five years ago when Macau’s tourism revenue was about 40 percent of the mainland’s revenue, about US$16.8 billion. The World Tourism Organisation does not include tourist receipts from Macau or Hong Kong in statistics for the mainland. The gaming revenue generated by Macau’s casinos is already six times higher than the revenue from Las Vegas casinos. The city’s tourism receipts last year were more than one-third of what the United States received. The world’s biggest economy earned US$126.2 billion from tourists last year, up by 9.2 percent year-on-year. The World Tourism Organisation also said the number of tourists to Macau rose by 5 percent year-on-year to 13.6 million people. The organisation only counts overnight visitors. Each visitor to Macau spent about US$3,213 last year, the highest in the world, British public broadcaster BBC reported earlier this month. Government data show that tourism and gaming are pumping over 100 billion patacas (US$12.5 billion) into Macau’s economy every quarter this year, up by 22.6 percent year-on-year. T.L.

August 29, 2013

Macau

LVS to pay US$47 mln over ‘suspicious’ funds In January, Macau unit Sands China said had hired three former FBI agents to strengthen anti-money laundering efforts here Michael Grimes

michael.grimes@macaubusinessdaily.com

as Vegas Sands Corp is to pay US$47.4 million (378.63 million patacas) to the United States government to end a federal probe regarding failure to report a high roller’s allegedly suspicious cash deposits in Nevada. Under the deal with federal authorities, the firm – with casino operations in the U.S., Macau and Singapore – will not face any prosecution action. As Business Daily has previously reported, the matter concerns an LVS patron in Las Vegas, ChineseMexican businessman Ye Gon Zhenli. The gambler’s family name in Chinese characters translates simply as ‘Ye’. But the entrepreneur – reportedly born in Shanghai – is referred to in U.S. official documents as Mr Ye Gon. Mr Ye Gon – who identified himself to the casino operator as the owner of a chemical business – wired or deposited US$58 million with Las Vegas Sands from February 2005 to March 2007 for VIP gambling, according to a statement of facts included with the agreement between LVS and federal authorities. The deposits were made with the “Venetian-Palazzo” according to the document. In March 2007, Mr Ye Gon’s Mexico City home was raided and law enforcement officials seized US$207 million in U.S. currency. On July 26, 2007, Mr Ye Gon was indicted in the U.S. District Court for the District of Columbia on Grand Jury charges with a single count of conspiracy to aid and abet the manufacture of 500 grams or more of the controlled drug methamphetamine (termed ‘crystal meth’ or ‘speed’ in street slang) “knowing or intending that it would be imported into the United States,”

UNLV in talks over Macau partnership T

he University of Nevada, Las Vegas is in talks with higher education institutions in Macau for a possible partnership that would allow it to open a campus here. Richard Linstrom, associate dean at UNLV’s Singapore campus, confirmed the negotiations in an e-mail sent to the university’s Rebel Yell student newspaper, without naming the institutions. UNLV currently has cooperation agreements here with the Institute for Tourism Studies and the Macao

according to a court document seen by Business Daily. The U.S. drug trafficking charges against Mr Ye Gon were dismissed in 2009. He is however awaiting extradition to Mexico where he is charged there with drug trafficking, added a U.S. Attorney’s statement on Tuesday. LVS failed adequately to investigate

Mr Ye Gon, his respective companies and the funds he supplied, U.S. prosecutors said this week.

Leaving Vegas U.S. Attorney André Birotte Jr speaking in Los Angeles, said it was the first time a casino had agreed

to turn over to the U.S. Treasury a gambler’s losses where the legitimacy of that person’s original funds were disputed. “What happens in [Las] Vegas no longer stays in Vegas,” Mr Birotte said in his statement. “For the first time, a casino has faced the very real possibility of a federal criminal case for failing to properly report suspicious funds received from a gambler.” Business Daily understands from industry sources that LVS feels it acted reasonably in relation to the information available to it at the time. LVS said in a statement to Business Daily on the Ye Gon case earlier this year: “We believe we have acted properly and have not committed any wrongdoing.” But the successful federal action against the company could serve to lower the threshold industry-wide for deciding what is “reasonable suspicion”. “The company has cooperated fully and that effort was recognised,” Ron Reese, a spokesman for LVS, said in the firm’s own statement on Tuesday U.S. time. The company confirmed the agreement that had been made with federal authorities.

Reporting rules The U.S. Bank Secrecy Act requires casinos with gross annual revenue “in excess” of US$1 million to file suspicious activity reports. They can be analysed by government agencies. Under the codified section of the Act, casinos are required to file a report to the U.S. Treasury’s Financial Crimes Enforcement Network within a maximum of 90 calendar days on any transaction that “…involves or aggregates at least [US]$5,000 in funds or other assets, and the casino knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part) involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity…” In January LVS’s majorityowned Macau unit Sands China Ltd said it had hired three former agents from the Federal Bureau of Investigation to strengthen antimoney-laundering efforts in Macau and improve the background checks the company does on VIP customers and junket operators. The Venetian in Las Vegas

With Bloomberg News/Reuters

Polytechnic Institute. The university is looking at five other locations, including Philippines capital Manila and Hong Kong, UNLV executive vice president and provost John White told Rebel Yell. “All of these [jurisdictions] have strengths and weaknesses,” Mr White said. “We haven’t had a chance to vet [Macau’s] weaknesses.” The priority would go to a jurisdiction willing to offer funding and ongoing tuition assistance for students, Mr Linstrom said. The university board is expected to make a decision by the end of the current academic year. UNLV will close its Singapore campus when the lease expires at the end of 2015, Mr Linstrom told Business Daily in July. V.Q.

Singapore firms eye Hengqin, Nansha S

ingapore companies have gained a foothold in Guangdong’s three special economic zones, including Hengqin and Nansha where Macau firms get preferential treatment. In Hengqin, planners from RSP Architects Planners & Engineers (Pte) Ltd are drafting the area’s master plan, which includes a recreation strip “the size of Las Vegas,” AsiaOne reported. Real estate company CapitaLand Ltd has won a tender for a residential project in Nansha, a district of

Guangzhou. The Hong Kong branch of DBS Bank Ltd this month became the first Singapore bank authorised to make cross-border yuan loans to firms in Qianhai, near Shenzhen. Singapore can help Guangdong’s economic and social development away from a heavy manufacturing province, said RSP director Liu Thai Ker. Mr Liu is also co-chairman of the Singapore-Guangdong Collaboration Council, a platform for deepening ties between the two jurisdictions. “As we understand the development of these new zones, we’d like to be in an advantageous position so Singapore firms can benefit,” he said. Businesses in Macau and Hong Kong get preferential treatment for the Hengqin and Nansha, including lower corporate taxes. V.Q.

August 29, 2013

Macau

Estate fund Macao Water chief eyes cashes in on recycled water monopoly But the government says it wants to open up the supply market Zhuhai property Tony Lai

tony.lai@macaubusinessdaily.com

acau Property Opportunities Fund Ltd has announced it will pocket 392 million yuan (511.2 million patacas) from the sale of its two Zhuhai properties. The London-listed fund managed by Sniper Capital (Macau) Ltd said on Tuesday it had agreed to sell APAC Logistics Centre and Cove Residence to an unidentified company. The fund has already received a non-refundable security deposit of 40 million yuan, about 10 percent of the sales price, with a further 20 million yuan to be paid tomorrow. The remaining money will be paid once the deal is closed, which will take place within six months, Macau Property Opportunities Fund said. This is the second significant sale clinched by the fund so far this year. In April it sold a penthouse in One Central Residences for HK$150 million (US$19.3 million). At the time the Macau Property Opportunities Fund said it might u s e t he pr oceeds to b u y more property, but only in exceptional circumstances. The fund declined to make any comments yesterday, stressing it was close to releasing its results for the first half of this year. V.Q.

he upcoming recycled water services should be granted to Macao Water Supply Co Ltd for the sake of the public, executive director Felix Fan Xiaojun said. “I suggest the government to acknowledge it is natural to have a monopoly, based on economic principles, for the water supply services,” including recycled water, he said. The government should ensure that just one company supplies normal water and recycled water, he said in a consultation report released earlier this week. Mr Fan stressed in its statement that he did not speak on behalf of his company. A taskforce led by the Marine and Water Bureau carried out a public consultation on the recycled water services in the first two months of this year as the city aims to start providing this kind of water by 2015. The taskforce rebuked Mr Fan’s idea. “The SAR government will use a public tender to opt for a qualified company to provide stable supply

The authorities are seeking to start providing recycled water by 2015

and sale services of recycled water to the public,” the taskforce wrote in its reply. Mr Fan argued that introducing a new company to supply recycled water would be “inconvenient” to the public as both recycled and normal water suppliers perform a similar job. He added that introducing a new player in the market would cause competition for professionals in an area where there is already a labour

shortage here. “A public tender could suggest a fairness that would correspond to public interest. But I think (…) convenience and professionalism are even more in the public interest,” Mr Fan added. “The SAR government will play a coordinating role between different operators to ensure the safety and stability of the water supply,” the taskforce replied.

August 29, 2013 April 19, 2013

Macau

First-time voters fuel social media campaign Growing number of voters under the age of 30 hold power to decide seats, says political analyst Tony Lai

tony.lai@macaubusinessdaily.com

ith first-time voters set to play an important role in the upcoming elections for the Legislative Assembly, candidates have turned to social media to get their messages through, a political scientist says. Compared to the last polls in 2009, next month’s election will have more young voters, says University of Saint Joseph political scientist Eric Sautedé. There are 26,909 first-time registered voters and about half are aged 30 or under, official data show. Together they account for almost 10 percent of eligible voters who number more than 277,000 people. “If you take the usual voting participation rate of 60 percent… this is about 8,000 votes,” Mr Sautedé said at a breakfast meeting held by the France Macau Business Association. “This means the new, young voters below 29 can elect one seat.” The September 15 poll will select 14 directly elected legislators, two more seats than in the previous assembly, thanks to the political reforms approved last year. In the indirect elections, another 12 representatives in five functional constituencies will be elected but voting is restricted to the grass-roots associations. “If you take all the young people [under 30], it is about 52,000 votes. Let’s say one seat represents about 8,000 votes. So you can see the youth vote can constitute at least three seats,” Mr Sautedé said. This is a

force that should not be ignored in September, he said. The 20 candidates running for election will make more use of social media to communicate with voters under the age of 30.

Image overhaul Some candidates with backgrounds in the gaming industry are trying to broaden their appeal by seeking support from other sectors. “They are trying to put on a

If you take all the young people [under 30], it is about 52,000 votes. Let’s say one seat represents about 8,000 votes. So you can see the youth vote can constitute at least three seats Eric Sautedé, University of Saint Joseph political scientist

show that goes beyond their narrow interests [linked to the] casinos,” said Mr Sautedé. He said Chan Meng Kam was an example. Mr Chan is a member of the Executive Council who runs the Golden Dragon Casino and is seeking re-election. Mr Chan is widely considered as the leader of Macau’s Fujianese community. “[He] is trying to strongly reinvent himself as a man of the people,” Mr Sautedé said. “He really defends not only his community… but also the community at large and the society. That’s the image he is trying to present.” The assembly has several members with close links to the casinos and the gambling sector was “overly represented”, he said. They could not necessarily expect the votes of workers in the gaming sector, particularly after the government’s handling of the partial indoor smoking ban in casinos, which most workers are unhappy with. Since the beginning of this year, smoking has been permitted only in specially ventilated areas that cover no more than 50 percent of a gaming venue’s floor space. But groups representing workers have complained that the casinos have escaped penalties for what they perceive to be deteriorating air quality. If the gaming industry “wants to keep social harmony, the ultimate goal, they should refrain from [being] too obvious in meddling [with] the politics,” Mr Sautedé said.

Taiwan promises ‘good news’ on uni recognition

acau university degrees could soon be recognised in Taiwan, the island’s Mainland Affairs Council chairman Wang Yu Chi hinted on Tuesday. Chief Executive Fernando Chui Sai On brought up the issue during a meeting, to which Mr Wang responded that Taiwan’s education authority was following up with the issue. He said he expected that “there would be good news within this year”. Currently, Taiwan only recognises the bachelor degrees issued by University of Macau, the Tertiary Education Services Office confirmed to Business Daily. Mr Wang noted to media on the sidelines of a visit to the city yesterday that he observed some “breakthroughs” in the way the Macau government addressed the visiting Taiwan officials. “As I understand, in the official press releases, the titles of the visiting Taiwan officials used to be addressed with quotation marks,” said Mr Wang. “But this time, that was not the case.” The diplomat also said him and Mr Chui referring each other by their official titles was an action that reflected “a positive progress” in Taiwan-Macau relations. S.L.

Filipina corruption suspect here: report

anet Lim Napoles, a businesswoman wanted by the Philippines police in connection with an investigation into misuse of public money, has reportedly escaped to Macau. According to an unnamed source quoted by the Philippines’ Journal Online, Ms Napoles travelled from Palawan to Macau in a private yacht on August 16. Reynaldo Esmeralda, deputy director of the Philippines’ National Bureau of Investigation, rejected the report, stressing that the suspect’s passport had been cancelled. Courts froze the bank accounts of Ms Napoles and issued a warrant for her arrest as part of a probe into discretionary budgets for lawmakers, Justice secretary Leila de Lima said a fortnight ago. Ms Napoles and her brother are wanted over allegations they illegally detained a cousin who turned whistle-blower on a scam that allegedly involved 10 billion pesos (US$224 million). The money was reportedly diverted from the country’s Priority Development Assistance Fund to fictitious non-governmental organisations and projects. Philippines president Benigno Aquino III yesterday announced a reward of 10 million pesos for information on the businesswoman’s whereabouts.

Legislative Assembly elections are scheduled to take place in just over a fortnight’s time (Photo: Manuel Cardoso)

V.Q. with Bloomberg News

August 29, 2013 April 19, 2013

Macau

Price cuts hit Emperor Watch profits Retailer’s first half profit here plunges 17.1 percent as revenue grows Tony Lai

tony.lai@macaubusinessdaily.com

etailer Emperor Watch & Jewellery Ltd posted a lower profit in the first half as it cut prices of watches and jewellery to attract more buyers. Net income from its five Macau outlets fell by 17.1 percent from a year earlier to HK$31.4 million (US$4.05 million) despite a hike in sales, the company told the Hong Kong Stock Exchange yesterday. Revenue from its Macau operation rose by 15.1 percent year-on-year to HK$233.9 million in the first six months of this year, the retailer said in the filing. But its revenue growth in the six months to June 30 was slower than the overall sales growth for jewellers and watch retailers here. Sales of watches and jewellery rose by 24 percent to 5.47 billion patacas in the first half of the year, according to the latest official data. Emperor’s results were hit across

Emperor – a premium for its downtown shop (Photo: Manuel Cardoso)

the region. The retailer also saw its profit decline in Hong Kong, mainland China and Singapore, bringing down the group’s net profit

Another Indian film awards ‘in Macau’ Website says event will take place in city next month Michael Grimes

michael.grimes@macaubusinessdaily.com

he website for an Indian film awards says its 2013 event will be held in Macau late next month. Attempts by Business Daily yesterday to contact the organisers were unsuccessful. We were also unable to get confirmation from either Macau Government Tourist Office or casino operators that the event was going ahead. Yesterday the website www. micta.in showed an image of Galaxy Macau with the words ‘MICTA Macau 2013’ superimposed on it. A scrolling message in the middle of the homepage read: “MICTA 2013 extravaganza hits this year in September…MICTA 2013 will be held in Macau”. But a spokesman for Galaxy Entertainment Group Ltd told us yesterday: “It’s not us, as of this moment.” The Times of India’s website said yesterday – citing a press conference on Tuesday in the Indian city of Pune in Maharashtra state – that the Marathi International Cinema and Theatre Awards was moving its annual event from Switzerland to Macau. Previous editions of the awards – marking achievement in cinema films produced in Maharashtra’s Marathi language –

have reportedly been held in Dubai, London and Singapore. The newspaper quoted filmmaker Mahesh Manjrekar – who devised the award ceremony in 2010 – saying the overall cost has inflated by 30 percent due to a sharp fall in the value of India’s currency the rupee. “The award ceremony runs into losses each year and adding 30 percent more to it would have made it impossible for us to host the event. Hence, it was decided to find an alternative venue and Macau was finalised,” Mr Manjrekar was reported saying. Marathi cinema – like the so-called ‘Bollywood’ industry – is produced in and around Mumbai. But the films are exclusively in Marathi, one of India’s 22 official languages and with reportedly 73 million native speakers – mostly in Maharashtra. The genre also claims to pre-date Bollywood, which produces films exclusively in Hindi. Hindi has at least 258 million self-identified speakers according to the 2001 census. The question wasn’t asked in the 2011 census. Last month Sands China Ltd’s The Venetian Macao hosted the International Indian Film Academy and its awards for Bollywood’s Hindi cinema. It was the second time the resort had hosted an IIFA awards, with the first being in 2009.

by 28.6 percent year-on-year to HK$156.7 million. The stock dropped 3.3 percent yesterday to close at HK$0.58 before

the earnings announcement. “During the [January-June] period, due to the sluggish demand on high ticket items and relatively keen price competition among the regular products, the group implemented sales promotion, hence moving down the general gross profit margin,” the retailer said in the statement. Its gross profit margin was down to 24.2 percent this year from 26.7 percent a year earlier. The red-hot property market also hit the retailer’s earnings. “The decrease of EBITDA and net profit were due to the decrease in gross profit margin and mild increase in rental expenses,” the company said in the filing. The company did not mention any rent hikes here in yesterday’s interim result. But the company said in last year’s annual results it had to pay HK$9.76 million for its shop in downtown Macau, at the Avenida do Infante D. Henrique last year, up by a staggering 54.9 percent. Macau’s operation accounted for 7.1 percent of the company’s revenue, the firm said. The Hong Kong market remains the company’s key earnings driver. The retailer said it would try to expand its jewellery segment to cater “to the growing economic independency and westernised lifestyle of working female in Greater China [sic]”. The jewellery segment only accounted for 22.7 percent of the retailer’s revenue in the first half. An interim dividend of 0.68 Hong Kong cents per share will be issued, down from 0.98 HK cents a year earlier.

August 29, 2013 April 19, 2013

Greater China

Urban migrants’ cost seen at least US$6.8 trln Spending may almost double in bid to improve living conditions

hina must spend at least 41.6 trillion yuan (US$6.8 trillion) over two decades to integrate rural workers living in cities and towns so the country realises benefits of urbanisation, a United Nations report said. Spending may exceed 75 trillion yuan in a scenario with a higher rate of investment to improve living conditions and housing quality, according to the report released in Beijing. The study’s baseline assumptions are for the urban population to rise to 976 million in 2030 from 666 million in 2010 and integrate about 210 million migrant workers. The report quantifies the urbanisation challenges faced by Communist Party leaders as they prepare for a November meeting to discuss deepening policy reforms amid an economic slowdown. Officials are considering changes to the hukou residence- registration system that excludes migrant workers from taking advantage of schools and pension benefits in cities. “Much more needs to be done to eliminate the continued gaps between migrant workers and registered urban residents,” said the report, produced by the United Nations Development Programme and the Institute of Urban and Environmental Studies of the Chinese Academy of Social Sciences, a government-run research organisation. “These will not be conducive to social stability, city liveability or sustainable development.” A major question is how to pay for the urban shift while regional governments face rising debt burdens. Local-government debt may have surged to about 18 trillion yuan, according to Societe Generale SA, from an official estimate of 10.7 trillion yuan at the end of 2010. The National

Audit Office said July 28 that the cabinet ordered a new nationwide government-debt review.

Financial support Jia Kang, director of the Ministry of Finance’s fiscal science research centre, said in June that urbanisation will require financial support of 60 trillion yuan based on a 150,000 yuan per-capita cost of making 400 million rural residents into urban dwellers. Mr Jia said that China should develop a public-private partnership in financing urbanisation. The UN report said funding may need to shift “from today’s one-source, government-dominated financing to a mix of sources.” Li Tie, an official with China’s top economic planning agency, said earlier this month that plans to encourage rural residents to settle in cities face opposition from local governments. “Nobody wants such a big group of migrants to be their neighbours and share their so-called civilised space,” Mr Li, director-general of the China Centre for Urban Development under the National Development

and Reform Commission, said at an August 10 forum. Mao Daqing, executive vice president of China Vanke Co, the biggest developer by market value traded on the country’s stock exchanges, told the forum some local governments may be hard pressed to pay for urbanisation. Separately today, China’s State Council said the nation will work to ensure steady growth in the second half while maintaining the consistency and stability of economic policies, the official Xinhua News Agency said, citing a report delivered to a session of the National People’s

KEY POINTS Urban population to rise to 976 mln in 2030 Public-private partnership may financing urbanisation Govt trying to boost consumption, sustain growth

Cities may integrate about 210 million migrant workers

Suntech directors quit over cashflow concern Resigning directors cite concerns about lack of business plan

untech Power Holdings Co Ltd, the Chinese solar manufacturer whose main unit was pulled into bankruptcy earlier this year, said three directors including the former chairwoman quit saying the company had no business plan. Susan Wang, Julian Worley and Zhizhong Qiu resigned on August 21, saying they weren’t provided with information they needed to fulfil their responsibilities, the Wuxi, China-based company said yesterday in a statement. Michael Nacson replaced Ms Wang as chair, who took the post in March, Suntech said. The resignations highlight the divisions that have plagued the company’s management and come less than six months after Suntech founder Shi Zhengrong was ousted as chairman. Mr Nacson was

Congress Standard Committee. Premier Li Keqiang is banking on hundreds of millions of migrant workers and their families becoming permanent urban residents to boost consumption and sustain growth at his bottom line of 7 percent a year, as the government restructures an economy that’s expanded at an average 10 percent a year over the last two decades. Speaking at his first news conference after becoming premier in March, Mr Li said, “Urbanisation will usher in a huge amount of consumption and investment demand, increase job opportunities,

appointed to the board last month by Suntech’s bondholders. “The matters of concern cited by the resigning directors are demonstrative of disharmony and issues of communication between the executive management and the resigning directors that decreased the efficiency of the board’s decisionmaking process,” the remaining independent directors Philip Fan, Mr Nacson and Kurt Metzger, said in the statement. The former directors cited concern about cashflow, a lack of clear business plan and failure to pay lawyers among concerns, Suntech said in the statement. They were also concerned about the potential erosion of internal controls and the impairment of employees’ ability to function effectively. The biggest unit of Suntech, once

the world’s largest solar-panel maker, was forced into bankruptcy in March after the company defaulted on US$541 million of bonds.

European concern Meanwhile, the European Union has warned Beijing it has evidence Chinese solar companies benefit from illegal subsidies, people close to the issue said told Reuters, but Brussels says it will not take action for now following a deal to defuse the row. European companies accuse Chinese rivals of benefiting from unfair state aid allowing them to dump about 21 billion euros (US$28 billion) worth of solar panels at below cost in Europe last year, putting European firms out of business. The solar dispute, by far the biggest

between China and the EU, threatened a wider trade war in goods from wine to steel until Brussels and Beijing agreed a minimum price for panels from China in late July and eased tensions. But a nine-month investigation by the European Commission into China’s solar industry has found Beijing broke World Trade Organisation rules by handing out cheap loans, land, interestfree credit lines and tax breaks to companies, people with knowledge of the situation told Reuters. “There are clear indications that [Chinese] government policy influences the decision-making of the banks when deciding on the terms of financing to solar companies,” said one person who declined to be named because the findings are not public. A second person said Beijing, as well as Chinese and EU manufacturers, had been given the results of the investigation. Under EU law, the Commission cannot impose more sanctions on Chinese solar exporters following the deal to set a price floor, but its investigation could influence EU free-trade advocates such as Germany and Britain that oppose limits on Chinese goods. Bloomberg News/Reuters

August 29, 2013 April 19, 2013

Greater China create wealth for farmers, and bring benefits to the people.” The 41.6 trillion yuan figure is based on an assumption of an 80,000 yuan cost to fully integrate migrants into urban areas, a number calculated by the Development Research Centre of the State Council. Without pension expenses, the figure would be 46,000 yuan, according to the UNDP report. China reported nominal gross domestic product of 51.9 trillion yuan last year. HSBC Holdings Plc estimated in an October report that the movement of 10 million rural residents to become urban residents every year for the next 20-30 years would create more than 100 billion yuan a year in additional consumer spending. “The model of relying on resourceintensive use and sacrificing the environment for rapid urbanisation is unsustainable,” Xie Zhenhua, an NDRC vice chairman, said yesterday at the report’s release. Bloomberg News

PetroChina, Kunlun shares slide as executives probed Kunlun unlikely to get more asset help, analyst says

he Hong Kong-listed shares of China’s dominant oil producer PetroChina Co Ltd and its natural gas distribution arm Kunlun Energy Co Ltd tumbled yesterday after they said several senior executives at the group were being investigated over alleged wrongdoing. PetroChina shares slid 4.39 percent to close at HK$8.27, a day after the company issued a statement saying three executives had resigned. Shares in Kunlun Energy plunged 13.51 percent to HK$10.88, bringing its market value down to about US$12 billion. The news has undermined investor confidence in the state-controlled companies which have been the key beneficiaries of a rapid rise in China’s natural gas consumption and market-oriented natural gas and oil product pricing reform. “Kunlun is the big loser here,” said Simon Powell, head of Asia oil and gas research at CLSA in Hong Kong. “There will be no asset injection into Kunlun from PetroChina for a long time.” PetroChina has injected a combined 24 billion yuan (US$3.9 billion ) worth of pipeline and LNG terminal assets in Kunlun since 2008, Powell estimated. “PetroChina is exploring feasible approaches and arrangements to support Kunlun Energy’s development, to ensure the operational stability of Kunlun Energy’s production,” spokesman Mao Zefeng said. Among the officials under investigation was Li Hualin, chairman of Kunlun Energy who also held senior positions at PetroChina and PetroChina’s parent China National Petroleum Corp (CNPC). The State-Owned Assets Supervision and Administration Commission (SASAC), which oversees China’s top state companies,

Beijing guiding expansion of industries with overcapacity

plan to cushion the economy from the global financial crisis. “There are going to be problems associated with the huge increase in indebtedness that took place in 2009 and 2010,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “It wouldn’t be

China’s top economic planner will delegate the right to approve most corporate bond issues to its provincial offices, the official China Securities Journal reported yesterday, as Beijing moves to streamline and upgrade the debt market. Previously, all applications had to be approved by the central National Development and Reform Commission (NDRC) office. Local NDRC offices must now decide on applications to issue bonds within 15 days, with exceptions for industries under government restrictions.

Alipay shutters POS service There will be no asset injection into Kunlun from PetroChina for a long time Simon Powell, CLSA in Hong Kong

said late on Tuesday that CNPC deputy general manager Li Hualin, vice-president of PetroChina Ran Xinquan, and PetroChina chief geologist Wang Daofu were also under investigation. It did not detail the accusations against them. The three senior officials have been put under investigation for “severe breaches of discipline,” SASAC said, employing the shorthand the Chinese government uses to describe graft. Mr Li is also an investor in Kunlun, holding 31.8 million shares in Kunlun as of May 21, 2013, Thomson Reuters data showed. The slide in Kunlun’s share price would likely have resulted in a loss of some HK$47 million for Mr Li, assuming no change in the size of the holding. Analysts say Mr Li obtained the shares through stock options granted as management incentives. Reuters

Coal miner’s rising financing costs flag debt concerns idili Industry International Development Ltd, a Chinese coal miner, reported rising debt servicing costs on Tuesday, flagging concerns about borrowing levels in the nation as it clamps down on smokestack industries. Financing costs at Hidili, whose US$400 million of 2015 bonds fell to as low as 55.5 cents on the dollar this month, jumped to 261.3 million yuan (US$42.7 million) in the first half, according to Tuesday’s filing. The miner, which Standard Chartered Plc last month identified as one of the 10 weakest dollar-bond issuers in Asia, lost 269.2 million yuan in the period. Non-payment concerns have mounted, with a gauge of creditdefault swap contracts in Asia rising toward its highest close in two months, as China grapples with the longest streak of sub-8 percent growth in at least two decades. Chinese companies and local governments have piled on debt since 2008, when the government announced a 4 trillion yuan stimulus

NDRC eases bond approval

reasonable to think that all of those loans are money good.” China will “strictly” control expansion of industries with overcapacity and those that consume a lot of energy or are highly polluting, according to a notice posted on the National Development and Reform Commission’s website. Yields on dollar notes from Chinese issuers have risen 134 basis points this year to 6.44 percent, JPMorgan Chase & Co indexes show. Hidili had about 5.87 billion yuan of debt as of June 30, of which about 4.64 billion yuan is due within a year, the filings show. The company is paying between 5.4 percent and 12.1 percent for 2.1 billion yuan of loans. The miner’s dollar bonds pay an 8.625 percent coupon, data compiled by Bloomberg show. “Meeting interest payments is a challenge,” BNP Paribas SA wrote in an equities research report. “Hidili’s balance sheet remains distressed, in our view.” Bloomberg News

Alipay, a unit of Alibaba Group, will stop its offline point of sales (POS) service for small companies, the Shanghai Daily reported yesterday. The company said it had halted the service for “obvious reasons”, without providing further details, but added that it will proceed with pay services in the future. The report cited market rumours that state-owned China UnionPay had put pressure on Alipay to route its POS service through UnionPay’s system.

Trainmakers post lower profits China’s biggest trainmakers said sales and profit fell in the first half after the nation delayed orders for bullet trains. CSR Corp and China CNR Corp said the economic slowdown also damped operations in the period. China CNR expects a “steady growth” in the second half as state-run China Railway Corp has opened a tender for 91 bullet trains, ending a two-year order hiatus. The company’s net income declined 24 percent to 1.46 billion yuan, the Beijing-based trainmaker said. China CNR’s profit fell 5.4 percent.

J&J centralises businesses in China Johnson & Johnson said the business heads of its three Chinese operations would begin to report to one local chairman next month in an effort to increase sales and centralise corporate oversight. The diversified healthcare company said Jesse Wu, worldwide chairman of its consumer business, will become chairman of J&J China, reporting directly to company chairman and chief executive Alex Gorsky.

Sanwei plans Hong Kong IPO Inner Mongolia Sanwei Resources Group Co, a Chinese producer of coal, silicon and magnesium, plans to seek about US$200 million in an initial public offering in Hong Kong, two people with knowledge of the matter said. The Ordos-based company has submitted an application to the Hong Kong Stock Exchange and may start the share sale this year, said the people.

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Greater China Taiwan said to win Apple iWatch orders Two leading Taiwanese electronics firms that assemble products for Apple have received orders to make the iWatch. “Apple is likely to introduce ‘iWatch’ in 2014. From our channel checks, Inventec is the major assembly source for ‘iWatch’, with about 60 percent of order allocation,” said CIMB Securities analyst Wanli Wang. CIMB projects 63.4 million units of iWatch shipments in the year after its launch with an average price of about US$199, while the iWatch project is estimated to contribute 19 percent of Inventec Appliances Corp’s earnings, Mr Wang said. Quanta Computer is splitting the orders with Inventec, Taiwan’s Apple Daily newspaper said.

ParknShop drops KKR and TPG from auction Offers failed to meet Hutchison Whampoa’s expectations Denny Thomas and Stephen Aldred

rivate-equity bidders for Hutchison Whampoa Ltd’s Hong Kong supermarket chain ParknShop were dropped from the auction amid signs strategic buyers like China Resources Enterprise Co Ltd (CRE) had the upper hand in a sale expected to fetch between US$3 billion and US$4 billion. KKR & Co and TPG Capital Management LP were told that they were out of the running to buy ParknShop, people close to the matter told Reuters, after their offers failed to meet the company’s expectations. The exit of private equity firms leaves China’s state-owned CRE, Japan’s Aeon Co Ltd and Australia’s Woolworths Ltd among the suitors left in the auction. Officials at Hutchison, KKR and CRE declined to comment. TPG officials did not comment. Some analysts say beer-to-retail conglomerate CRE, with its existing foothold in Hong Kong through its China Resources Vanguard unit and its recent joint venture with British retailer Tesco Plc, is emerging as the frontrunner to win the business. “For CRE it makes strategic sense to expand in Hong Kong, but they should be mindful of not paying too high a multiple,” said Steve Chow, an analyst with Sunwah Kingsway Research.

Reuters

ParknShop has 11 of its 345 outlets in Macau

Mr Chow said a reasonable priceto-earnings multiple for ParknShop is in the mid-20s. CRE itself trades at a 12-month forward price-toearnings multiple of 24.2, according to Thomson Reuters data, while Hutchison’s expected price tag represents a P/E of between 15-18, a person familiar with the process previously told Reuters. The highest private equity offer was around HK$20 billion

(US$2.6 billion), one of the people said. A successful bid would have CRE controlling more than half of Hong Kong’s US$6.6 billion supermarket industry.

Other bidders Yesterday, the chief executive of Australia’s largest supermarket chain, Woolworths declined to specifically comment on ParknShop,

Chinese appliance makers flip retail switch to survive Home appliance market forecast to be worth US$105 bln by 2015

hinese white goods makers like Haier Electronics Group Co Ltd are muscling in on their distributors and expanding into logistics and e-commerce in a bid to win the fierce battle for margins in the world’s biggest home appliance market. This strategy shift is expected to hurt retailers such as market leader Suning Commerce Group Co Ltd and GOME Electrical Appliances Holding Ltd as slowing economic growth and increasingly thrifty, web-savvy consumers intensify the already cut-throat competition in the

but said the company would be cautious on acquisitions. “In fact we’ve said in 2011 international expansion is part of our consideration for our future growth. We never speculate on what we will be looking at. This is something we are very cautious about,” CEO Grant O’Brien told reporters in a phone briefing. Hutchison, controlled by Asia’s richest man, Li Ka Shing, received at least seven offers in the first round of bidding in mid-August. Hutchison launched a strategic view of the business, though it remains unclear if it would end up selling the business or retain it. Established in 1973, ParknShop held a 40 percent share of the Hong Kong market for supermarkets for the year to June, according to Nielsen Homescan, with Dairy Farm at 33 percent. ParknShop currently has 11 of its 345 outlets in Macau. The supermarket chain generated HK$21.7 billion in revenue last year and earnings before interest, tax, depreciation and amortisation of HK$1.4 billion, another person familiar with the matter has previously told Reuters.

US$89 billion sector. “It has become the norm for manufacturers to roll over to e-commerce and logistics distribution, hoping to enrich customers’ online shopping experience, while holding up profit margins without having them eroded by a middle-man,” said Linus Yip, chief strategist at First Shanghai Securities. “Apart from securing market share, it is more about surviving in the highly competitive market,” he added. Chinese appliance manufacturers, already facing higher labour and operating costs, are currently vying

with their distributors and online marketplaces for the same customers, who are, by and large, unwilling to pay a premium for local products. Distributors often undercut manufacturers by offering discounts or financing for purchases, which in turn reduces the profit margins of everyone involved in the sector: second-ranked distributor GOME, backed by private equity firm Bain Capital, posted a loss for 2012. Now manufacturers like Haier, GD Midea Holding Co Ltd and Hisense Kelon Electrical Holdings Co Ltd are fighting back.

KEY POINTS CRE emerging as frontrunner to win the auction Woolworths CEO cautious of overseas acquisitions With win, CRE may control 50 pct of supermarket sector

The benefits of taking control of distribution and e-commerce are clear: manufacturers can expand into China’s vast interior where most of the sales growth is expected to come from without having to open physical outlets or share their already meagre profits with retailers. Home appliances are big business in China with the value of the domestic market forecast to grow by about one-fifth in the next two years to US$105 billion, according to data from consultancy Euromonitor. This growth potential was a factor that attracted Whirlpool Corp, the world’s largest maker of home appliances, to agree to buy a majority stake in China’s Hefei Rongshida Sanyo Electric Co Ltd for US$552 million. E-commerce is also booming with customers expected to almost double the value of home appliances they purchase online in the next two years to 257.54 billion yuan (US$42.06 billion). Reuters

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Asia Tepid demand hits Thai exports Thailand’s economy may not easily pull out of recession, data on factory output suggests, even as a retreat by foreign investors puts further pressure on its financial markets. The fourth straight month of contraction in manufacturing output has raised fresh concerns that a slew of economic data this week will show more economic slippage, including a widening current account deficit as exports and foreign investments slow. Thailand’s economy slipped into a mild recession in the second quarter and is grappling with faltering exports as investors position for the U.S. Federal Reserve to taper monetary stimulus, which has hit emerging Asia hard. Industrial output in July dropped 4.54 percent from a year earlier, hit by weak electronics and autos. On a monthly basis, unadjusted output fell 3.32 percent in July after a 0.89 percent rise in June. “Output data has tracked weak export numbers lower. With no immediate signs of rebound on the external front, net exports are likely to drag on growth for 3Q,” said Eugene Leow, an economist with DBS Bank in Singapore. “Momentum in the domestic economy has waned and elevated household debt could drag on consumption. Sequential GDP growth in 3Q is likely to be anaemic,” he added.

Woolworths net soars 24 pct Woolworths Ltd, Australia’s largest retailer, increased profit at the fastest pace in five years as it opened on average one grocery store every five days and served more customers than the country’s population. Net income rose 24 percent to A$2.26 billion (US$2 billion) in the year ended June, Sydneybased Woolworths said yesterday, matching the average of six analysts’ estimates compiled by Bloomberg. That’s the company’s fastest profit growth since 2008, according to data compiled by Bloomberg. Woolworths sold its money-losing Dick Smith electrical chain, opened 73 grocery, liquor and gasoline outlets, and doubled its network of Masters hardware stores in the year to reignite growth that spurred a tripling of its market value in the last decade. “It’s a good result on all the key criteria,” Jeremy Hook, investment director in Sydney at TMS Capital Pty, said. “We may be looking to add to some of our positions on the back of this.” Shares of Woolworths rose 2 percent to close at A$34.59 in Sydney, their highest level since May 16.

F&N jumps most in four months Fraser & Neave Ltd, controlled by Thailand’s richest man, climbed the most in four months on plans to spin off its property business through a Singapore listing at the end of the year. Shares of the 130-year-old company with investments from food and beverage to publishing climbed 4.2 percent to S$5.72 at the close in Singapore trading, the biggest jump since April 25. The company will offer two shares of its unit Frasers Centrepoint Ltd for every stock held, it said in a statement on Tuesday. F&N, as the company is known, is spinning off a unit with S$9 billion (US$7 billion) of assets as of June, allowing both companies to focus on their separate expansion strategies. The move follows the S$13.8 billion takeover earlier this year by Thai billionaire Charoen Sirivadhanabhakdi. “This makes the company a more transparent organisation,” Jonathan Foster, Singaporebased director of Global Special Situations at Religare Capital Markets, said by phone, adding that he plans to buy F&N shares on the spin off. “This helps enhance valuations. Conglomerates are always treated with a bit of a discount.” The listing of the property arm is expected in November or December, according to the statement, and the two companies will be traded separately on the Singapore exchange.

Fonterra products free of botulism bacteria Botulism scare had triggered recall of products Naomi Tajitsu

airy giant Fonterra Cooperative Group Ltd’s products at the centre of a global contamination scare this month did not contain a bacteria that could cause botulism, and posed no food safety threat, New Zealand officials said yesterday. The Ministry for Primary Industries (MPI) said tests showed that whey protein concentrate manufactured by the world’s largest dairy processor contained clostridium sporogenes, which cannot cause botulism, but which at elevated levels can be associated with food spoilage. Original tests conducted by Fonterra and a New Zealand government research institute had indicated the presence of clostridium botulinum, raising fears that infant formula and sports drinks made from the product and widely exported could be potentially dangerous. The botulism scare triggered a recall of products made by multinational brands that may have contained the whey protein in a number of markets, from China to the Middle East and Southeast Asia. It also prompted bans in Russia and Sri Lanka, while other countries stepped up scrutiny of Fonterra’s dairy products. “We went to world-leading labs, which are accredited and can test for this. That has given us a clear and definitive sense that it isn’t clostridium botulinum,” MPI acting director-general Scott Gallacher told reporters. “There is no food safety risk here.” Fonterra chief executive Theo Spierings said he was “very relieved” that the MPI’s tests showed the company’s products did not pose any food safety risk. He said Fonterra “did the right thing” in announcing the possible risk earlier this month. “When you go through a global recall, you know it will affect your reputation,” Mr Spierings told reporters. “If we had not acted on this, and if something had happened with one child in the world, then

it would have caused a massive reputation issue in the long term, or even you could be wiped off the map and possibly face closure.” Mr Spierings said Fonterra’s interim tests had isolated the possible presence of either clostridium sporogenes or clostridium botulinum, and that the final stage of the company’s testing had shown a positive result for the botulinum strain. He said he would not judge any mistakes which may have occurred in the testing process. Fonterra has said the contaminated whey protein concentrate was caused by a dirty pipe at one of its processing plants. The MPI said it began its own independent tests in early August after being informed by Fonterra of the possible contamination. New Zealand Trade Minister Tim Groser said the initial contamination scare based on Fonterra’s initial test result was “an embarrassment” to New Zealand, whose reputation as a source of clean, safe food products was questioned by global consumers. Fonterra controls around a third of the world’s dairy exports. “We checked the information, the information turned out to be false,

Nissan aims to introduce self-driving cars by 2020

issan Motor Co, which grabbed a global lead in electric car sales with its Leaf hatchback, wants to do the same thing with self-driving vehicle technology and plans to offer such models by 2020. “We will be able to bring multiple, affordable fully autonomous vehicles to the market by 2020,” Andy Palmer, Nissan’s executive vice president, told reporters yesterday at a briefing in Irvine, California. Such systems mean “frustrating and unproductive commutes could

become a thing of the past,” he said. Just as the Yokohama, Japanbased carmaker set a goal of becoming the world’s biggest seller of battery-powered autos, Nissan wants to be a leader in the move to make cars safer by adding electronic systems capable of preventing accidents and injuries. The systems also can reduce traffic jams by rerouting vehicles, which helps curb emissions of carbon dioxide. Nissan has sold more than 75,000 Leaf electric vehicles worldwide since late 2010. Including alliance partner

the consequences of this have been very serious, [we’re] not comfortable about that, and we need some answers to how all this happened,” he told Radio New Zealand, noting that a government inquiry was one of four currently underway into the affair. Reuters

KEY POINTS Fonterra products free of botulism causing bacteria Tests show presence of clostridium sporogenes False alarm an ‘embarrassment’ for NZ – minister ‘We did the right thing’ in raising potential risk – CEO

Renault SA of France, they have delivered about 100,000 electric cars. The company showed off selfdriving Leaf models at a former U.S. military base in Irvine yesterday, with the robotic cars ferrying passengers in simulated urban driving conditions. Technology underpinning autonomous autos, including adaptive cruise control, electronic steering and throttle controls, is already available, and added sensors and road-monitoring capabilities are being refined, Mr Palmer said. “The technology to create selfdriving cars is already here,” said Karl Brauer, senior industry analyst for Kelley Blue Book. “As sci-fi as it sounds, self-driving cars that don’t ever crash, reduce traffic congestion and make valet attendants obsolete are coming.” Bloomberg News

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Asia

Philippine stocks slump to eight-month low Foreign investors sold US$219 million of shares in August Ian Sayson

hilippine stocks tumbled for a second day, sending the benchmark index to the lowest level in eight months, amid concern that capital outflows will accelerate. The peso fell to the lowest level in almost three years. The Philippine Stock Exchange Index dropped 3 percent to 5,738.06 at the close in Manila. The gauge earlier slumped as much as 6 percent to its lowest intraday level since November 26, 2012. SM Investments Corp, owner of the largest shopping-mall operator and biggest grocery chain, slid 7.5 percent to the lowest since October. Ayala Land Inc, the nation’s biggest builder, sank 4.7 percent to the lowest level since December. The PSE index has fallen 14 percent this month, poised for the steepest loss since October 2008, amid concerns that reduced U.S. Federal Reserve stimulus will spur capital outflows and local protests over discretionary government budgets will slow state spending. Foreign investors have sold a net US$219 million of Philippine shares

in August after buying US$1.6 billion this year through July. Global equities retreated this week on speculation the U.S. will take military action against Syria. “There is global fear that the U.S. will tighten liquidity and then add the political tension in Syria,” said Rico Gomez, a Manila-based money manager at Rizal Commercial Banking Corp. “There’s unrest for emerging-market assets.” The PSE gauge is valued at

16 times estimated earnings for the next 12 months, the cheapest since November 2012. That’s still the second-highest level among 21 developing-nation stock indexes tracked by Bloomberg. The MSCI Emerging Markets Index has a multiple of 9.7.

Bond purchases The peso fell 0.5 percent to its weakest level since September 2010,

according to Tullett Prebon Plc. The yield on the benchmark seven-year peso bond rose four basis points, or 0.04 percentage point, to 3.62 percent, the highest level since July 17, according to midday fixing prices at Philippine Dealing & Exchange Corp. The Fed is expected to cut bond purchases next month, according to 65 percent of economists in a Bloomberg survey from August 9-13. Fed chairman Ben S. Bernanke has told Congress that any reduction in stimulus would depend on the economy’s performance. Philippine, Thai and Indonesian markets led a four-year rally in global stocks through May as corporate profits reached record highs on rising domestic demand and Fed stimulus spurred international investors to seek riskier assets. The Philippine economy grew 7.8 percent in the first quarter from a year earlier, the fastest expansion among 17 Asia Pacific nations tracked by Bloomberg. Second-quarter growth probably expanded at a similar pace, Economic Planning Secretary Arsenio Balisacan said on Tuesday. “While its fundamentals remain good, the Philippines can’t be insulated from the risk aversion that’s growing primarily from the anticipation that we are moving to a period when the U.S. will ease on stimulus,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc in Manila. “Throw in the threat of a war in Syria and rising oil prices and the temperature for emerging markets just got hotter for some investors. It’s hard to keep elevated valuations in this environment.” Bloomberg News

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Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange)

Max 46.3

average 45.037

Min 44.7

Last 45.15

45.30

70.3

45.15

69.9

45.00

69.5

44.85

69.1

44.70

Max 70.25

average 68.970

Min 68.75

Last 68.75

68.7

22.8

22.7

Max 22.75

average 22.681

Min 22.6

Last 22.7

19.6

44.70 44.45

23.20 23.05

19.5

44.20

22.90 19.4

43.95

Max 44.65

average 44.279

Min 43.8

Last 44.05

43.70

Max 19.52

average 19.472

Commodities PRICE

WTI CRUDE FUTURE Oct13

110.16

BRENT CRUDE FUTR Oct13 GASOLINE RBOB FUT Sep13

DAY %

YTD %

(H) 52W

Last 19.5

(L) 52W

1.054949087

17.69230769

112.2399979

86.04000092

115.99

1.42532354

9.703962924

117.3399963

96.37999725

307.14

1.229359612

12.18086855

310.3299856

260.2499962

GAS OIL FUT (ICE) Oct13

974.5

1.194184839

7.531034483

981.5

835.5

NATURAL GAS FUTR Sep13

3.535

0.028296548

-1.750972763

4.517000198

3.128999949

319.17

0.974406024

6.621012193

321.5999842

275.5500078

NY Harb ULSD Fut Sep13 METALS

Min 19.38

Gold Spot $/Oz

1426.8

1.132

-14.2785

1796.08

1180.57

Silver Spot $/Oz

24.856

2.662

-17.4494

35.365

18.2208

Platinum Spot $/Oz

1536.97

-0.6111

1.2663

1742.8

1294.18

Palladium Spot $/Oz

747.25

-0.0107

6.8019

786.5

587.4

LME ALUMINUM 3MO ($)

1886.5

-0.343370312

-8.996623251

2200.199951

1758

LME COPPER 3MO ($)

7315

-0.611413043

-7.766990291

8422

6602

LME ZINC

1983

-0.176189278

-4.663461538

2230

1809.75

14425

-0.688468158

-15.44548652

18920

13205

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Nov13

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

15.8

0.413091833

2.497567305

16.65000153

14.77000046

490.5

0.87403599

-18.2159233

665

445.75

667.5

0.564971751

-18.67194639

913

635.5

SOYBEAN FUTURE Nov13

1382.25

0.857351332

6.102475533

1409.75

1162.5

COFFEE 'C' FUTURE Dec13

117.35

0.51391863

-24.99201023

200

116.3499985

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

CORN FUTURE

Dec13

WHEAT FUTURE(CBT) Dec13

SUGAR #11 (WORLD) Oct13

16.45

COTTON NO.2 FUTR Dec13

84.2

-0.060753341 0.059417706

-17.99601196

21.82999992

6.934213868

93.72000122

World Stock Markets - Indices NAME

19.3

22.75 Max 23.2

average 22.881

Min 22.6

Last 23

22.60

Currency Exchange Rates

NAME ENERGY

22.6

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14776.13

-1.139601

12.75925

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3578.524

-2.161188

18.51325

3694.188

2810.8

FTSE 100 INDEX

6417.86

-0.3587969

8.817677

6875.62

5605.589844

DAX INDEX

8203.07

-0.4790987

7.759458

8557.86

6871

NIKKEI 225

13338.46

-1.505719

28.3139

15942.6

8488.14

HANG SENG INDEX

21524.65

-1.600565

-4.997456

23944.74

19076.78906

CSI 300 INDEX

2328.056

-0.5478707

-7.724919

2791.303

2023.171

TAIWAN TAIEX INDEX

7824.54

0.0473095

1.624002

8439.15

7050.05

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.892 1.5511 0.919 1.3371 97.47 7.9878 7.7552 6.1207 68.1 32.26 1.2817 29.994 44.71 11265 86.945 1.22882 0.86204 8.184 10.6802 130.32 1.03

-0.3686 -0.0322 0.2938 0.1948 0.3693 0.0175 0.0206 0.0098 -2.8047 -0.279 0.2029 0.0867 -0.2796 0.6391 0.7453 0.1001 -0.2204 -0.2615 -0.1723 0.1842 0

-14.0489 -4.111 -0.3917 1.3723 -11.6651 -0.0576 -0.0593 1.7955 -19.2438 -5.2077 -4.7047 -3.204 -8.2867 -13.067 2.7397 -1.7366 -5.4081 0.4093 -1.4026 -12.853 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3557 68.755 32.31 1.2862 30.228 44.82 11433 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2487 77.13 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20069 0.78875 7.8281 9.9774 97.99 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.4

-2.004454

39.68254

4.63

2.545

VOLUME CRNCY 1716337

14.39

-1.370802

34.8641

15.09

8.9

1797066

AMAX HOLDINGS LT

-28.57143

1.72

0.75

1284350

BOC HONG KONG HO

24.3

-0.6134969

0.8298739

22.85

11486227

CENTURY LEGEND

0.38

43.39623

0.42

0.22

CHEUK NANG HLDGS

6.15

-2.070064

2.671122

6.74

3.09

40827

CHINA OVERSEAS

22.5

-2.807775

-2.597404

25.6

17.28

21242849

CHINESE ESTATES

16.26

44.59055

16.98

7.996

99500

CHOW TAI FOOK JE

10.14

2.424242

-18.48874

13.4

7.44

2904360 1390000

EMPEROR ENTERTAI

2.72

43.91535

3.07

1.38

FUTURE BRIGHT

2.28

-0.8695652

88.11476

2.76

1.053

852000

GALAXY ENTERTAIN

45.15

-1.847826

48.76441

46.3

20.45

16820379

HANG SENG BK

119.8

-1.561216

0.9267086

132.8

109

1694515

24.1

-1.632653

-27.5188

35.3

23.2

2270300

-1.323706

0.8610048

90.7

65.85

17627379

HOPEWELL HLDGS HSBC HLDGS PLC HUTCHISON TELE H

3.2

-3.903904

-10.11236

4.66

2.98

9215027

LUK FOOK HLDGS I

25.2

3.917526

3.27869

30.05

16.88

3923700

MELCO INTL DEVEL

17.28

-3.030303

91.7869

18.18

5.91

4434189

22.7

-0.8733624

70.95589

23.65

11.346

1753600 7608000

MGM CHINA HOLDIN

KOSPI INDEX

1884.52

-0.06999533

-5.634813

2042.48

1770.53

MIDLAND HOLDINGS

2.91

-1.355932

-21.35135

2.68

S&P/ASX 200 INDEX

5087.163

-1.051366

9.426061

5249.6

4261.2

NEPTUNE GROUP

0.165

-1.785714

8.552635

0.23

0.131

4700000

NEW WORLD DEV

10.7

-2.727273

-10.9817

15.12

9.38

11561361

SANDS CHINA LTD

12673636

JAKARTA COMPOSITE INDEX

4011.864

1.10947

-7.061503

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1688.19

-0.7670875

-0.04499895

1826.22

1590.67

NZX ALL INDEX

961.587

-0.6432034

9.016918

998.487

801.619

PHILIPPINES ALL SHARE IX

3515.55

-3.063166

-4.958933

4571.4

3411.69

44.05

-1.893096

29.74963

45.5

26.05

SHUN HO RESOURCE

1.76

-4.864865

25.71429

1.9

1.06

10000

SHUN TAK HOLDING

3.98

-1.728395

-5.011934

4.65

2.76

4119256 3515230

SJM HOLDINGS LTD SMARTONE TELECOM

19.5

-0.102459

9.873653

22.382

15.401

10.64

-2.205882

-24.43182

17.36

10.6

847484

-0.862069

9.785199

26.5

16.92

5379476

HSBC Dragon 300 Index Singapor

572.49

-2.11

-7.82

STOCK EXCH OF THAI INDEX

1281.02

-1.000796

-7.968076

1649.77

1207.53

HO CHI MINH STOCK INDEX

473.3

-2.526927

14.39827

533.15

372.39

ASIA ENTERTAINME

4.06

-1.456311

44.2436

4.7647

2.4835

113094

BALLY TECHNOLOGI

71.46

-2.096178

59.83002

75.61

43.16

222005

Laos Composite Index

1333.83

-2.090567

9.801027

1455.82

1003.17

BOC HONG KONG HO

3.16

-0.9404389

2.931598

3.6

2.99

11682

GALAXY ENTERTAIN

5.8

-0.172117

46.09572

5.88

2.735

27948

INTL GAME TECH

18.97

-3.214286

33.87438

20.25

12.01

2238238

JONES LANG LASAL

83.24

-1.093156

-0.8339319

101.46

70.346

284417

LAS VEGAS SANDS

54.57

-3.176011

18.21924

60.54

37.8353

5946873

MELCO CROWN-ADR

26.53

-2.570694

57.54157

27.75

11.452

3058621

MGM CHINA HOLDIN

2.93

0.6872852

67.4007

2.98

1.5327

900

MGM RESORTS INTE

17.36

-4.352617

49.14089

18.54

9.15

10675040

SHFL ENTERTAINME

22.75

-0.4376368

56.89655

23.08

12.35

507663

SJM HOLDINGS LTD

2.58

13.27634

2.9481

1.9818

1100

139.21

-2.609486

23.75322

146.04

93.1279

986329

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

WYNN MACAU LTD

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

DAY %

VOLUME

33.35

-1.038576

34076354

2.6

-0.7633588

13684000

BANK OF CHINA-H

3.23

-2.416918

292583291

BANK OF COMMUN-H

5.12

-2.290076

24116293

BANK EAST ASIA

29.7

-2.782324

2294180

10.48

-1.688555

29397934

AIA GROUP LTD ALUMINUM CORP-H

BELLE INTERNATIO BOC HONG KONG HO

PRICE

NAME

PRICE

DAY %

VOLUME

CHINA UNICOM HON

11.7

0.1712329

22753347

CITIC PACIFIC

8.82

-2.325581

7597707

CLP HLDGS LTD

61.45

-0.4051864

3392064

CNOOC LTD

15.56

0.6468305

119970080

11.1

-1.595745

5218811

SWIRE PACIFIC-A

13.48

-0.5899705

5992263

24.2

-2.419355

119.8

-1.561216

WHARF HLDG

COSCO PAC LTD ESPRIT HLDGS

-1.791045

2619580

-1.893096

12673636

SINO LAND CO

10.12

-1.937984

7006874

SUN HUNG KAI PRO

99.05

-1.048951

4583469

88.4

-1.55902

1788500

TENCENT HOLDINGS

356.2

-1.60221

2741274

4465600

TINGYI HLDG CO

18.84

-2.68595

9556000

1694515

WANT WANT CHINA

11.34

-0.7005254

29149898

62.6

-2.1875

9389398

-0.6134969

11486227

-3.924419

6435409

HANG SENG BK

CHEUNG KONG

107.7

-0.3700278

5566900

HENDERSON LAND D

45.25

-2.162162

3280110

4.59

-3.773585

74272603

HENGAN INTL

84.05

-1.695906

2776576

CHINA CONST BA-H

5.62

-2.090592

283125781

CHINA LIFE INS-H

19.16

-1.944729

28215503

CHINA MERCHANT

23.2

-2.725367

2909958

CHINA MOBILE

82.6

-0.4219409

17754930

HUTCHISON WHAMPO

89.65

-1.26652

7192167

CHINA OVERSEAS

22.5

-2.807775

21242849

IND & COMM BK-H

5.05

-1.750973

263710350

CHINA PETROLEU-H

5.73

-1.376936

115687265

LI & FUNG LTD

11.5

-2.707276

21143779

CHINA RES ENTERP

22.25

-2.838428

5280150

MTR CORP

28.6

-0.8665511

3997201

20.7

-3.271028

18599000

NEW WORLD DEV

10.7

-2.727273

11561361

CHINA RES LAND

HONG KG CHINA GS

17.94

-2.074236

19621062

HONG KONG EXCHNG

119.1

-1.732673

3542501

-1.323706

17627379

HSBC HLDGS PLC

VOLUME

65.8

24.3

CHINA COAL ENE-H

DAY %

44.05

13.22

CHINA RES POWER

17.52

-1.016949

8608332

PETROCHINA CO-H

8.27

-4.393064

289410159

CHINA SHENHUA-H

24.15

-2.226721

17634210

PING AN INSURA-H

53.2

-2.025783

17501690

POWER ASSETS HOL

PRICE

SANDS CHINA LTD

CATHAY PAC AIR

HANG LUNG PROPER

NAME

MOVERS

0 22110

INDEX 21524.65 HIGH

22100.97

LOW

21494.28

52W (H) 23944.74 (L) 19076.78906

21490

26-August

28-August

14 14

August 29, 2013 April 19, 2013

Classifieds Mountain Villa For Sale in Koh-Samui Price: HK$ 16 million

3 x King Bed en-Suites, 1 x King Bed basement Suite, 2 x 2 Single Bed, Spacious Living area and fully furnished kitchen, Swimming pool - children / adult, 2 levels Maid’s quarter, Fully Furnished, Balcony, Terrace / Patio, 2 x Outside Salas, Barbecue, 2 x Parking Spaces, 7-seater SUV included. Contact Ms Chan - Sarah@clever-cloggs.com.hk Tel: 2861-3317

Unique opportunity The Fountainside

Apt. on Top Floor Approx. 180 square meters HKD 19.9 million

LIKE NEW 4 APARTMENTS BUILDING IN LISBON Price: HK$ 17,000,000

2 Apartments T3 (1st and 2 floor), 1 Apartment T2 (3rd floor), 1 Apartment T0 (top floor), garage for 4 cars + laundry and storage area. Location: Close to RPC embassy classifieds@macaubusinessdaily.com Mobile: +351910836655

Year: 2007 30,000 Km Very good condition Price: MOP88,000

classifieds@macaubusinessdaily.com

FOR SALE - ONE GRANTAI Tower 3; Flat 10K.

Luxury hilltop flat, fully air conditioned, 3 bedrooms, 2 full bathrooms, maid’s room, fully equipped kitchen , living room, dining area, and 2 balconies with stunning Cotai Strip and sea views. Facilities include: health club, swimming pool, tennis, play area, and much more. 2320 sq. ft. selling price: HK$ 7,950/sq. ft. Contact: Steven Kahn (852) 2541 7775 Monday - Friday 11am - 6pm

Great opportunity Loft in Downtown 2 + 1 bedrooms, 2 living rooms and garden 140 sq metres with Mezzanine

Translations

Price: HKD 12 million

Inês Dias

classifieds@macaubusinessdaily.com

Languages English, Portuguese and French

Contact now for a quote: inezfernandesdias@gmail.com

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, 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.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

15 15

August 29, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The global QE exit crisis

Stephen S. Roach

Asahi Shimbun

Faculty member at Yale University and former chairman of Morgan Stanley Asia, is the author of The Next Asia

With Prime Minister Shinzo Abe poised to make a decision in autumn on raising the consumption tax rate, a Asahi Shimbun survey shows a recent surge in public support for the hike. Respondents who support the scheduled consumption tax hike from the current 5 percent to 8 percent in April 2014 and 10 percent in October 2015 rose to 43 percent from the previous 30 percent, while those who do not support the plan fell to 49 percent from the previous 58 percent, according to the survey.

China Daily China on Tuesday joined an international effort to fight tax avoidance and evasion by signing a multilateral tax agreement to share tax and financial information. The agreement, known as the Convention on Mutual Administrative Assistance in Tax Matters, is the first multilateral tax instrument China has signed. Wang Jun, director of the State Administration of Taxation, said that China’s participation has “significant implications” as it will help enhance the country’s international tax cooperation while it experiences major economic and structural reforms.

Taipei Times Taiwan’s Council for Economic Planning and Development’s (CEPD) index of economic monitoring indicators flashed “yellowblue” last month, indicating a fall from steady growth to gradual economic recovery. “We had hoped to sustain the ‘green’ signal, but last month’s data showed that the economic recovery was not strong enough,” Hung Jui Bin, director-general of the council’s economic research department, said. While the financial sector’s performance was strong last month, production levels, exports, consumption and labor market conditions deteriorated, Mr Hung said.

Inquirer Business The Bangko Sentral ng Pilipinas (BSP) stands ready to control spikes in the foreign exchange market that may lead to higher consumer prices, which may choke the country’s growing economy. BSP Governor Amando Tetangco said the peso’s recent weakness, caused mainly by the pullout of foreign funds from emerging markets, has yet to become a source of concern for local economic managers. “If it was moving out of line, then that may be a basis for the BSP to try and smooth the peso’s movements,” Mr Tetangco said.

he global economy could be in the early stages of another crisis. Once again, the U.S. Federal Reserve is in the eye of the storm. As the Fed attempts to exit from so-called quantitative easing (QE) – its unprecedented policy of massive purchases of longterm assets – many highflying emerging economies suddenly find themselves in a vise. Currency and stock markets in India and Indonesia are plunging, with collateral damage evident in Brazil, South Africa, and Turkey. The Fed insists that it is blameless – the same absurd position that it took in the aftermath of the Great Crisis of 2008-2009, when it maintained that its excessive monetary accommodation had nothing to do with the property and credit bubbles that nearly pushed the world into the abyss. It remains steeped in denial: Were it not for the interestrate suppression that QE has imposed on developed countries since 2009, the search for yield would not have flooded emerging economies with short-term “hot” money. As in the mid-2000’s, there is plenty of blame to go around this time as well. The Fed is hardly alone in embracing unconventional monetary easing. Moreover, the aforementioned developing economies all have one thing in common: large currentaccount deficits. According to the International Monetary Fund, India’s external deficit, for example, is likely to average 5 percent of GDP in 2012-2013, compared to 2.8 percent in 2008-2011. Similarly, Indonesia’s currentaccount deficit, at 3 percent of GDP in 2012-2013, represents an even sharper deterioration from surpluses that averaged 0.7 percent of GDP in 20082011. Comparable patterns are evident in Brazil, South Africa, and Turkey. A large current-account deficit is a classic symptom of a pre-

crisis economy living beyond its means – in effect, investing more than it is saving. The only way to sustain economic growth in the face of such an imbalance is to borrow surplus savings from abroad. That is where QE came into play. It provided a surplus of yield-seeking capital from investors in developed countries, thereby allowing emerging economies to remain on high-growth trajectories.

Endemic feature IMF research puts emerging markets’ cumulative capital inflows at close to US$4 trillion since the onset of QE in 2009. Enticed by the siren song of a shortcut to rapid economic growth, these inflows lulled emerging-market countries into believing that their imbalances were sustainable, enabling them to avoid the discipline needed to put their economies on more stable and viable paths.

Developing economies are now feeling the full force of the Fed’s moment of reckoning

That has been the case in developing Asia, not just in India and Indonesia today, but also in the 1990’s, when sharply widening currentaccount deficits were a harbinger of the wrenching financial crisis of 1997-1998. But it has been equally true of the developed world. America’s gaping currentaccount deficit of the mid2000’s was, in fact, a glaring warning of the distortions created by a shift to assetdependent saving at a time when dangerous bubbles were forming in asset and credit markets. Europe’s sovereign-debt crisis is an outgrowth of sharp disparities between the peripheral economies with outsize current-account deficits – especially Greece, Portugal, and Spain – and core countries like Germany, with large surpluses. Central bankers have done everything in their power to finesse these problems. Under the leadership of Ben Bernanke and his predecessor, Alan Greenspan, the Fed condoned asset and credit bubbles, treating them as new sources of economic growth. Bernanke has gone even further, arguing that the growth windfall from QE would be more than sufficient to compensate for any destabilising hot-money flows in and out of emerging economies. Yet the absence of any such growth windfall in a still-sluggish U.S. economy has unmasked QE as little more than a yield-seeking liquidity foil.

Policy traps This is an endemic feature of the modern global economy. Rather than owning up to the economic slowdown that current-account deficits signal – accepting a little less growth today for more sustainable growth in the future – politicians and policymakers opt for risky growth gambits that ultimately backfire.

The QE exit strategy, if the Fed ever summons the courage to pull it off, would do little more than redirect surplus liquidity from higheryielding developing markets back to home markets. At present, with the Fed hinting at the first phase of the exit – the so-called QE taper – financial markets are already responding to expectations of

reduced money creation and eventual increases in interest rates in the developed world. Never mind the Fed’s promises that any such moves will be glacial – that it is unlikely to trigger any meaningful increases in policy rates until 2014 or 2015. As the more than 1.1 percentagepoint increase in 10-year Treasury yields over the past year indicates, markets have an uncanny knack for discounting glacial events in a short period of time. Courtesy of that discounting mechanism, the risk-adjusted yield arbitrage has now started to move against emergingmarket securities. Not surprisingly, those economies with current-account deficits are feeling the heat first. Suddenly, their savinginvestment imbalances are harder to fund in a post-QE regime, an outcome that has taken a wrenching toll on currencies in India, Indonesia, Brazil, and Turkey. As a result, these countries have been left ensnared in policy traps: Orthodox defence strategies for plunging currencies usually entail higher interest rates – an unpalatable option for emerging economies that are also experiencing downward pressure on economic growth. Where this stops, nobody knows. That was the case in Asia in the late 1990’s, as well as in the U.S. in 2009. But, with more than a dozen major crises hitting the world economy since the early 1980’s, there is no mistaking the message: imbalances are not sustainable, regardless of how hard central banks try to duck the consequences. Developing economies are now feeling the full force of the Fed’s moment of reckoning. They are guilty of failing to face up to their own rebalancing during the heady days of the QE sugar high. And the Fed is just as guilty, if not more so, for orchestrating this failed policy experiment in the first place. © Project Syndicate

August 29, 2013

Closing ‘Premature’ to quote figures, Rehn says

Myanmar airline eyes foreign routes

European Union Economic and Monetary Affairs Commissioner Olli Rehn said it’s too early to judge how much extra money Greece will need to plug an emerging hole in its 240 billion-euro (US$321 billion) rescue programme. Mr Rehn said the troika of creditors needs to pore over Greece’s accounts before determining whether the figure of 10 billion euros cited last week by Finance Minister Yannis Stournaras is accurate. “It is premature to quote any figure,” Mr Rehn said yesterday. “The troika will do its job and make the analysis of the potential financing gap and we in the normal order of things will make possibly a proposal in the course of this autumn.”

Myanmar’s Asian Wings Airways Ltd said yesterday it aims to launch international flights by October 2014, following the announcement of the sale of a 49 percent stake to Japanese carrier ANA. “We will start with nearby countries,” executive director Lwin Oo told reporters, adding the airline also plans to buy 10 more Airbus A320 jets by 2018 as part of its ambitious expansion plans. “ANA will provide us the assistance to gain international recognised standards of safety and services,” Lwin Oo added. On Tuesday All Nippon Airways Inc said it would acquire a stake in Asian Wings, becoming the first foreign firm to enter the market.

Rupee breaches 68 as slide accelerates India currency faces worst one-day fall in 20 years Swati Bhat and Himank Sharma

he Indian rupee slumped to a record low near 69 to the dollar yesterday on growing worries that foreign investors will continue to sell out of a country facing stiff economic challenges and volatile global markets. The pummelling in markets sent the rupee reeling more than 4 percent to an all-time low of 68.85 with the unit closing just a touch off that, at 68.80/81 per dollar, its biggest single-day fall since October 1995. It closed on Tuesday at 66.24/25. In absolute terms too, the 256-basis-point fall in the rupee was the biggest ever.

An assault on the psychologically key 70 level now appears imminent, as intervention from the central bank seen mid-morning only gave the rupee a brief respite. In the stock market, state-run Life Insurance Corp, which was spotted buying shares, allowed the domestic benchmark index to erase steep early losses and end the day stronger. “If steps are not taken to implement the reforms necessary to tackle the structural issues, the government will be left with the so-called ‘3D options’: debt default, devaluation, deflation,” said Angelo Corbetta, head of Asia equity for

Foreign investors turning heavy sellers of Indian shares

China may tax more luxury goods C

hina plans to levy consumption taxes on more luxury goods and may expand a pilot property tax beyond its current testbeds of Shanghai and Chongqing as it pushes ahead plans to reform the world’s second-largest economy. The official Xinhua news agency also cited Finance Minister Lou Jiwei as saying yesterday that China would levy consumption tax on goods that cause severe environmental pollution and over-exploitation of resources. Mr Lou made the remarks during

a once-in-two-months session of the standing committee of the National People’s Congress, China’s parliament. China’s leaders have pushed a strong reform line as the plank of their economic policy, looking to reshape the economy to one driven more by consumers than exports, big industries and credit. The ruling party will hold a key meeting in November that will set the country’s economic agenda for the next decade, with tax reform likely to be a priority.

Pioneer Investments in London. “In India, devaluation is happening now and deflation could be about to start. The good news is that the debt default is highly unlikely.” Foreign investors have sold almost US$1 billion of Indian shares in the eight sessions through Tuesday – a worrisome prospect given stocks had been India’s one sturdy source of capital inflows in the first half of 2013. If more foreign investors throw in the towel, traders fear it will put the country in a vicious cycle in which the hit to confidence in turn slams shares and the currency even harder. Policy makers have consistently struggled to come up with steps that can convince markets they can stabilise the rupee and attract funds into the country despite extraordinary measures last month by the central bank to drain liquidity and action to curb gold imports and cut India’s huge oil import bill. India badly needs foreign capital as it struggles with a record high current account deficit, growing fiscal pressures and an economy growing at the slowest in a decade. The failure to address India’s economic challenges is becoming an increasing source of tension at a time when fears of a possible U.S.led military strike against Syria are knocking down Asian markets, with the prospect that the Federal Reserve will soon end its prolonged period of cheap money further raising concerns. At the same time, rising domestic bond yields threaten to raise borrowing costs across the already slowing economy, while global prices of oil and gold – the country’s two biggest imports – have surged this week. “The end game for the current decline would be the day the rupee stops falling, alongside government measures like a substantial diesel price hike,” said Samir Arora, a fund manager at Helios Capital in Singapore.

Rongsheng posts first-half loss China Rongsheng Heavy Industries Group Holdings Ltd, the shipyard seeking financial assistance from the government, posted a firsthalf loss after a drop in vessel orders caused sales to plunge 71 percent. The net loss of 1.26 billion yuan (US$206 million) compared with a profit of 215.8 million yuan a year earlier, Rongsheng said in a Hong Kong Stock Exchange filing yesterday. Rongsheng, China’s biggest yard outside state control, has sought government assistance and pared workers as it struggles with the order slump and a credit crunch in the world’s secondlargest economy. China this month announced a three-year plan to support the industry as a third of its shipbuilders may shut down in about five years amid a global vessel glut. “All eyes are on Rongsheng’s liquidity situation as investors need to find out how bad it really is,” Lawrence Li, an analyst with UOB KayHian Holdings Ltd, said before the earnings announcement. “The outlook will remain bleak.” Shares of Rongsheng fell 5.9 percent to close at 96 Hong Kong cents in Hong Kong trading, before the earnings were released. The stock slumped 23 percent this year. Revenue plunged to 1.58 billion yuan from 5.46 billion yuan a year earlier, according to the statement. A third of China’s more than 1,600 shipyards face the danger of closure in about five years as they failed to win orders “for a very long period of time,” according to Wang Jinlian, secretary general of China Association of the National Shipbuilding Industry.

AgBank warns of ‘challenges’ ahead

There has been much talk about widening use of property taxes as China’s home prices keep rising, and cities where it might be imposed include Beijing, Hangzhou, Shenzhen, Qingdao and Wuhan. The tax is currently levied on owners of spacious and expensive homes in Shanghai and Chongqing. Extending tax on luxury goods would also fit into the government’s drive to discourage ostentation, itself a goal that is linked to a broader attack on corruption. At the same time, a tax on goods that cause pollution will fit with the government’s response to concerns raised by many Chinese over the impact on the environment from the country’s decades of rapid growth.

Agricultural Bank of China Ltd, the country’s No. 3 lender, beat expectations with a 22 percent rise in second-quarter profit, buoyed by higher fee income, but warned of major changes and challenges ahead for China’s banking industry. AgBank’s net profit rose to 45.3 billion yuan (US$7.4 billion) in the April-June period, according to Reuters calculations based on the bank’s first-half figures, above analysts’ expectations of 42.3 billion yuan. The rise in profit was faster than the 8.2 percent year-onyear growth it recorded in the first quarter. “We are well aware that the internal and external environment of the banking industry in China is undergoing dramatic changes which may bring arduous challenges to our operation and management,” bank chairman Jiang Chaoliang said in a statement. The China Banking Association said last month it expects net profit growth for China’s 17 listed banks to slow to 8 percent in 2013 from 19 percent in 2012. AgBank set aside 10.0 billion yuan in loan-loss provisions in the second quarter, equal to 8.6 percent of its operating income, down from 10.3 percent in the first quarter. While AgBank’s non-performing loan ratio fell to 1.25 percent in the first half from 1.27 percent at the end of March, overdue loans not designated as NPLs rose to 94.5 billion yuan as of end-June from 87.9 billion at the end of December.

Reuters