Macau Business Daily, September 5, 2013 by Business Daily

MOP 6.00 Vitor Quintã www.macaubusinessdaily.com

Year II

Number 364 Thursday September 5, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Direct flights to Delhi curry favour in India

April 19, 2013

and secure its approval,” the source said. “But I do not think the Macau side would say ‘no’.” The Civil Aviation Authority of Macau said it had “yet to receive a formal application” from the airline. “SpiceJet had previously contacted us to obtain some initial information on the application procedures, which is a common practice for any interested airlines,” the regulator said. More on page 3

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Yuan trade ‘cupid’ for ASEAN, Lusophones

Zung Fu Motors (Macau) Limited

Hang Seng Index 22430

The city could help in the trading of yuan-denominated products between Portuguese-speaking countries and the Association of Southeast Asian Nations (ASEAN), says Anselmo Teng Lin Seng, chairman of the Monetary Authority of Macau. Yuan business has increased here in the first half of 2013, via greater cross border trade and deposits, said Mr Teng, quoted by mainland Chinese website Sina Finance. His remarks came in a speech yesterday at the China-ASEAN Summit Forum on Financial Cooperation and Development in Nanning, China. “In the future Macau can play the role of linking the two yuan markets in ASEAN countries and Portuguese-speaking countries,” said Mr Teng.

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HSI - Movers Name

Page 5

Mass-market gambling grows 44 pct in August

Remove ads from Guangdong taxis, election ponders trade hopefuls told zone tie-up

Mass-market table game revenue grew by around 44 percent year-on-year in August according to unofficial market data obtained by Business Daily. VIP revenue grew by a more modest 7.9 percent. If the mass market numbers are confirmed when the local casino regulator the Gaming Inspection and Coordination Bureau issues the third-quarter results in the second half of October, it will be among the biggest annual expansions of mass-market gambling on record. Page 2

Two of the campaign tickets for the Legislative Assembly elections have been f o r c e d t o r e m o v e s t i c k - o n advertisements from the sides of taxis in the city. Incumbent legislator Melinda Chan and property developer Kuan Vai Lam said they misunderstood the electoral committee’s “unclear instructions”. Incumbent Macau legislators are likely to win another term, leaving just a few seats for newcomers, according to a Taiwan website. Page 4

Neighbouring Guangdong province on the mainland is considering a new free trade zone in the Pearl River Delta region. It will be in cooperation with Macau and Hong Kong, the official China Daily newspaper reported yesterday. The article quoted sources with knowledge of the situation as saying the province had been encouraged to apply “immediately” for central government approval to start it. Page 7

%Day

COSCO PAC LTD

1.88

BANK EAST ASIA

1.80

HONG KONG EXCHNG

1.46

CHINA MERCHANT

0.76

CHINA LIFE INS-H

0.75

CHINA RES LAND

-1.83

WANT WANT CHINA

-2.10

TINGYI HLDG CO

-2.16

HENGAN INTL

-2.26

BELLE INTERNATIO

-2.77

Source: Bloomberg

I SSN 2226-8294

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September 5, 2013

Macau

Mass market grows 44 pct in August Main floor table games see revenue leap y-o-y according to unofficial data Michael Grimes

michael.grimes@macaubusinessdaily.com

ass-market table game revenue grew by around 44 percent year-on-year in August according to unofficial market data obtained by Business Daily. VIP revenue grew by a more modest 7.9 percent. If the mass market numbers are confirmed when the local casino regulator, the Gaming Inspection and Coordination Bureau, issues its quarterly data for the third quarter – in the second half of October – it will be among the biggest annual expansions of mass-market gambling on record. In 2007, mass-market revenue – including slots – grew 37 percent year-on-year. It followed the opening of Wynn Macau and StarWorld in autumn 2006, and what was then Crown Macau (now Altira) in May 2007, The Venetian Macao in August, and the then MGM Grand Macau in December that year.

The August 2013 unofficial data suggest mass table games revenue was approximately 9.93 billion patacas, compared to 6.89 billion patacas in the same period a year earlier. It appears from the preliminary data that two operators, Sands China Ltd, which last year opened the approximately US$4.2 billion Sands Cotai Central, and Melco Crown Entertainment Ltd have each achieved year-on-year expansion in mass table revenue of more than 70 percent. Sands China appears to be up 72 percent, and Melco Crown nearly 76 percent. Galaxy Entertainment Group Ltd seems to have achieved close to 47 percent growth in mass table play in August. MGM China Holdings Ltd a p p e a r s t o h a ve put on nearly 32 percent. Market share leader SJM Holdings Ltd seems to have managed 24 percent

expansion year-on-year. Wynn Macau Ltd – noted for a management with an aversion to buying business via price and commission wars – is up about three percent in the

mass table segment. In the VIP table games market, gross revenue appears to be just shy of 19.57 billion patacas in August, compared to 18.14 billion patacas in August

Three-star rooms and lower on ‘endangered’ list Casino operators more interested in attracting gamblers in four-star and above category, says scholar

hree-star hotel rooms and lower could eventually disappear from Macau as real estate prices climb and pressure grows on gaming operators to squeeze more profit from available inventory, suggests an academic. “There is tremendous demand for lower category

rooms among visitors to Macau,” Edmund Loi Hoi Ngan, lecturer at the Gaming Teaching and Research Centre, Macao Polytechnic Institute, told Business Daily. “But I think it’s possible that before long such categories could disappear from Macau,” he added. “There is very little incentive

Hotel Lan Kwai Fong Macau – a 3-star renovated in 2009

for the casino operators to supply that product, because they are more interested in the five-star and four-star rooms that will be used by VIPs and other gamblers.” HVS Global Hospitality Services, a consultancy, said in July in its latest Greater China hotel review, that some mainland visitors to Macau preferred to sleep in neighbouring Zhuhai. It said there the average hotel room rate was 322 yuan (419 patacas). That’s around a third of the current three-star room rate in Macau. “Some package visitors to Macau are sleeping in Zhuhai,” said Mr Loi. Visitors in the lower price points may also stay on Hengqin Island once the Chimelong International Ocean Resort opens, possibly in time for Chinese New Year. The 1,888-room hotel is located in Fuxiang Bay on East Hengqin and will be one of the largest hotels in mainland China with a total construction area of 300,000 square metres, said a note from Union Gaming Research Macau last December. Mr Loi said that on this side of the water, Macau

hotel operators were less interested in selling rooms cheaply and then generating extra ‘in-room’ revenue from things such as delivered meals and pay television than were operators in some other markets. “Where they have a casino, they are more interested in their guests going out of the room and using the casino,” he stated. Fewer than half of Macau hotels classified by the government as threestar actually have casinos – Fortuna, Grand Emperor, Waldo and Lan Kwai Fong. Two of those four – Fortuna and Lan Kwai Fong (formerly known as Kingsway) – are so-called ‘legacy’ properties built before the gaming boom following market liberalisation in 2002. But the trend across the board in Macau has been to renovate and upgrade existing facilities in the lower categories. Prices have also risen, but whether that is primarily a function of supply and demand or how the renovated product is marketed is not clear from the data available. What is known is that in July the average daily rate

2012. There were gains across the board for the operators, with the exception of Galaxy, which appears to have slipped around 13 percent year-on-year in the high roller segment.

for three star accommodation was actually higher – 1,091 patacas (US$137) – than it was for four-star (906 patacas). In the seven months to July 31, three-star rates rose 5.56 percent year-onyear, while four-star rates rose 5.34 percent, show data released by the Macau Hotel Association, which represents high-end hotels here. Five-star rates rose by a more modest 0.93 percent during the period, to an average 1,686 patacas per night. In July-only, room rates rose 8.44 percent year-on-year for threestar accommodation, and 11.51 percent for fourstar, while five-star rates were up 5.84 percent. Last year occupancy for three- and four-star rooms was higher than for five-star ones when judged Januaryto-July and the month of July-only. But during 2013, occupancy rates for three- and four-star rooms have started to fall judged year-on-year. Three-star occupancy was down 1.61 percent year-onyear in July, while that for the four-star product slipped 1.86 percent, while that for the five-star category rose 0.24 percent. Mr Loi stated: “Another point to mention is that the marketing operations of the casino operators and the big branded hotels are very effective in filling rooms and ensuring consistently high occupancy. The lower category product relying on the retail travel agents doesn’t have the same consistent sales effort.” M.G.

September 5, 2013 April 19, 2013

Macau

Direct flights to Delhi win Indian approval Flights could begin in March, with a rubber stamp from Macau’s aviation regulator Tony Lai tony.lai@macaubusinessdaily.com

piceJet Airlines Ltd is on the verge of opening a route between New Delhi and Macau and flights could begin as early as March. India’s Directorate General of Civil Aviation recently approved the low-cost airline’s application, one year after it was first filed, a source in Macau’s aviation industry told Business Daily. “The remaining step SpiceJet has to do is to file an official request to the Macau regulator and secure its approval,” the source said. “But I do not think the Macau side would say ‘no’.” The Chinese-language newspaper Macao Daily News reported yesterday that SpiceJet had won approval from the Indian government. The Civil Aviation Authority of Macau said it had “yet to receive a formal application” from the airline controlled by Indian media tycoon

City immune to China fuel surcharges T

Kalanithi Maran. “We have been aware of communications [about the route] between the Macau International Airport Company Ltd and the airline,” a spokesperson said. “SpiceJet had previously contacted us to obtain some initial information on the application procedures, which is a common practice for any interested airlines.” SpiceJet’s former chief executive Neil Mills first expressed an interest in flying the route three times a week in August last year. Business Daily asked for a comment from the budget airline but had not received a reply before press time last night. The aviation source said the first direct flights could take off as early as the end of March. Restrictions on the number of international flights to India meant the route could not be added into the upcoming winter season. “The route can only be scheduled for next year’s summer season,” they said. The summer schedule for international flights usually runs from late March to late October in India. The current air services agreement between Macau and India allows each partner only two return flights a week that carry no more than 600 passengers in total.

Both governments say they want the agreement overhauled.

Mainland competition “The airport company and the airline are committed to make this work as both think there is a market for such a route,” the Macau aviation source said. The Macau airport company has been offering rebates to airlines operating direct flights to India. More than 98,900 Indian tourists visited Macau in the first seven months of this year, up 3.3 percent from the same period last year. But 86.6 percent, more than 85,600, arrived by sea – probably from Hong Kong. Just 3.1 percent of Indian tourists arrived on flights from other destinations this year. India’s fascination with Macau began after The Venetian Macao hosted the International Indian Film Academy Awards in 2009. The awards ceremony returned to the Cotai casino-resort in July. The organisers of the Marathi International Cinema and Theatre Awards said they hoped to hold the event here in late September. The Macau Government Tourist Office has targeted India as one its priority tourism markets, along with South Korea and Russia, to decrease the city’s reliance on

he city’s aviation regulator says it is closely monitoring the fluctuation in fuel surcharges added to flight fares, after several mainland Chinese carriers raised their surcharges this month. A spokesperson for the Civil Aviation Authority of Macau said the carriers do not need approval but they must notify the regulator of any surcharge changes. The surcharge fluctuates “on the changes in international fuel prices,” the spokesperson told Business Daily. “From what we have seen so far, the airlines have raised the surcharge when the [fuel] price has gone up but they have also lowered it when the price has declined,” she said. Several mainland carriers, including Xiamen Airlines Co Ltd and Air China Ltd, increased their surcharges between 8.2 percent and 9.1 percent, state-owned newspaper People’s Daily reported. Joy Gong, a spokesperson for Air Macau Co Ltd, majority-owned by Air China, said the price of flights between Macau and the mainland would not be affected. Xiamen Airlines’ office here also said there will be no impact on its flights to Macau, with the fuel surcharge unchanged at 476 patacas (US$59.5) per ticket. The aviation authority has not received any notification on surcharge changes from any airlines so far this month. T.L.

SpiceJet said last year it wanted to fly between New Delhi and Macau three times a week

mainland tourists. Meanwhile, new flight routes to the mainland will open later this month. The civil aviation authority said both Air Macau Co Ltd and Xiamen Airlines Co Ltd will start flying to Zhengzhou, capital of Henan, on September 25. Both carriers will fly three times a week, Air Macau and the regulator say. Once the new Zhengzhou route opens, the Macau airport will be connected to 21 airports in 20 mainland cities.

KEY POINTS India’s aviation regulator approves Macau flights Local aviation regulator yet to receive application SpiceJet, Macau airport were in talks over route New flights to Zhengzhou start in three weeks’ time

September 5, 2013

Macau

Remove ads from taxis, election hopefuls told Candidates for Legislative Assembly blame election committee, saying rules were ‘unclear’ Stephanie Lai

sw.lai@macaubusinessdaily.com

wo tickets for the Legislative Assembly elections have breached campaign rules and been forced to remove stick-on advertisements from the sides of the city’s taxis. The tickets led by incumbent legislator Melinda Chan Mei Yi and property developer Kuan Vai Lam said they misunderstood the electoral committee’s “unclear instructions”. “Prior to the campaign period, we had already sent our staff and even a lawyer to ask if it was okay to post taxi campaigns,” said Mr Kuan, who leads ticket number 20. He said the electoral committee instructed the candidates to ask the Civic and Municipal Affairs Bureau, which “did not say it is wrong” to use the mobile, taxi-mounted advertisements. Electoral rules prohibit a vehicle providing a public service, including buses and taxis, from displaying candidates’ campaign material either as a paid-for advertisement or for no charge. Late on Tuesday, the electoral committee released guidelines reminding candidates not to post campaign materials on buses and taxis. The second candidate on Ms Chan’s ticket number 12, Wu Kam Hon, also said the advertisements were created in good faith. “We are really surprised to learn that this [taxi ads] was not allowed,” Mr Wu said. “To be frank, the electoral committee has been, right from the start, quite ambiguous when explaining the campaign rules.

The electoral committee has been, right from the start, quite ambiguous when explaining the campaign rules Wu Kam Hon, Legislative Assembly candidate Campaign rules permit advertising on trucks but not on buses or taxis

“We will remove the taxi ads immediately and obey what the committee is now ordering.” Business Daily asked the electoral committee to clarify the legal consequences for anyone found to have broken campaign restrictions but had not received a response as of last night.

Ads everywhere “We have spent around 20,000 patacas [US$2,500] on the ads posted on taxis,” Mr Wu said. “We just want to exploit every campaign medium that can be exploited.” “It is not a matter of cost, of taxis being a cheaper medium [than trucks] for us.” The running partner of Ms Chan

said the adverts on the side of taxis gave the campaign an advantage because decorated trucks used by most candidates could not pass through the city’s narrower streets. Ms Chan is married to David Chow Kam Fai, who last year launched the Macau Taxi Federation, a body representing five taxi associations. Mr Kuan said taxi owners were backing his ticket by offering to carry the advertisements free of charge. “Now that taxis are banned from displaying campaign materials, we may assign more campaign trucks to go around,” he said. Mr Wu said his ticket would keep its two campaign trucks on the road. “It is not cheap to rent these campaign trucks nor are they easy to find these days,” said Mr Wu. “You pay the truck drivers 1,200

• It is not cheap to rent these campaign trucks nor are they easy to find these days Kuan Vai Lam, Legislative Assembly candidate

patacas a day”. “With the truck rent and the campaign decorations on the vehicle, you may end up paying up to 20,000 to 30,000 patacas for a 10-day campaign period.”

Prediction gives upper hand to incumbent legislators Agnes Lam gets seat, Jason Chao misses out: Taiwan-based prediction market

ncumbent Macau legislators are likely to win another term, leaving just a few seats open for newcomers, according to a Taiwanbased prediction market for political elections and sports events. Xfuture.org predicts that among the 14 directly elected seats just four will go to new faces: Lam Lon Wai, Wong Kit Cheng, Si Ka Lon and Agnes Lam Iok Fong. The forecast does not surprise Eilo Yu Wing Yat, political sciences professor at the University of Macau. “For sure the incumbent legislators will have little problem in keeping their seats,” said Mr Yu. However, he warned, “this time we have about 10,000 young voters aged below 24, which may bring more uncertainty to the election.”

“For quite some time the overall public opinion has noted that Si Ka Lon and Lam Lon Wai have a good chance to take the seats of their predecessors,” said Mr Yu. Mr Si is the second candidate in the ticket of Chan Meng Kam, who is considered the leader of the Fujian community here. He replaced former legislator Ung Choi Kun. Lam Lon Wai is also the second candidate on the Kwan Tsui Hang’s electoral ticket – backed by the Federation of Trade Unions – replacing Lee Chong Cheng. Ms Wong is on Ho Ion Sang’s electoral ticket, which represents another traditional powerhouse, the General Union of Neighbourhood Associations. If xFuture’s prediction proves to be accurate, then Agnes Lam would

overtake New Macau Association president Jason Chao Teng Hei for the final spot. xFuture Ltd chief executive Hung Yao Nan told Business Daily that the odds of each candidate winning a seat are expressed via a virtual currency price. “When the market price is at around 60 [New Taiwan] dollars, it means that a person thinks the candidate has stable support and a good chance to win the seat,” Mr Hung said. “If the price drops below 50 dollars, the candidate’s chance is seen as relatively smaller.” Until yesterday, the candidate with the best odds was Ho Ion Sang (93 dollars), followed by two New Macau Association candidates, Ng Kuok Cheong (92 dollars) and Au Kam San (90.5 dollars).

Agnes Lam, a second-time candidate representing the group Civic Watch, was marked at 54 dollars while Mr Chao missed out with just 44 dollars. Mr Hung said the company does not know where the people betting on Macau’s Legislative Assembly election come from. “Usually we only sort out the members’ origin after the election ends,” said Mr Hung. “But I believe most participants are Taiwan citizens.” “We have only a very small base of Macau residents participating in our platform,” he said. According to xFuture, 81 percent of its over 157,000-plus members are from Taiwan, while only 3 percent are from Hong Kong and Macau. S.L.

September 5, 2013

Macau

ASEAN-Luso banking ties next on Teng’s wish list Monetary authority chief says Macau an ideal centre for yuan trade with Southeast Asia Tony Lai

tony.lai@macaubusinessdaily.com

he city could play a role in trading yuan-denominated financial products between the Portuguese-speaking countries and members of the Association of Southeast Asian Nations, or ASEAN, says Monetary Authority of Macau chairman Anselmo Teng Lin Seng. Yuan transactions have increased in the first half of this year, namely though financial trade volume and deposits, the mainland website Sina Finance quoted Mr Teng as saying. His remarks came from a speech yesterday at the fifth China-ASEAN Summit Forum on Financial Cooperation and Development in Nanning, the capital of the Guangxi Zhuang Autonomous Region. “In the future, Macau can play the role of linking the two yuan markets in ASEAN countries and Portuguesespeaking countries,” said Mr Teng. The city had the right tools for it, he said. Branches of mainland and Portuguese banks accounted for a “big share” of the market and ASEAN banks, including

Singapore-based DBS Bank Ltd, have a presence in Macau. Such a move would “not only raise the yuan usage in both ASEAN [members] and Portuguese-speaking countries but also help promote the yuan’s internationalisation,” said Mr Teng. The city’s financial industry could also provide funding services for ASEAN countries to fund their development. The Sina Finance report quotes Mr Teng as saying the volume of settlements in yuan grew by 52 percent in the first half of this year, compared to the same time last year. The amount is “already 70 percent of last year’s total volume”, he said. The Monetary Authority, the city’s de facto central bank, did not respond to a request for additional details before press time last night. Business Daily calculates that cross-border trade settlement has exceeded 68.1 billion yuan (88.9 billion patacas) so far this year. Last year, cross-border settlements in yuan reached 97.25

Raise the yuan usage in both ASEAN and Portuguesespeaking countries but also help promote the yuan’s internationalisation Anselmo Teng, chairman of Monetary Authority of Macau

billion yuan. Mr Teng said yuan deposits accounted for 10 percent of the city’s total deposits in the JanuaryJune period, compared to just 7.5

percent last year. Data from the monetary authority show yuan deposits reaching 56.3 billion yuan by the end of June, up by 18.2 percent in year-on-year terms.

September 5, 2013 April 19, 2013

Macau Portugal-Macau joint body meets this month Government spokesperson Alexis Tam Chong Weng (pictured) will lead a delegation for the second formal meeting of the Portugal-Macau joint commission, to be held in the Portuguese capital by the end of the month. The meeting will discuss cooperation on education and environmental and consumer protection, the Portuguese news agency Lusa reported, quoting an unnamed official source. The first official meeting of the joint commission took place in April 2011, about a decade after it was set up as part of the Portugal-Macau cooperation framework agreement signed in 2001.

Alleged triad boss appeals Canada deportation Lai Tong Sang’s deportation order put off until next year

High hopes for private jets Jet movements up 21 percent in the first seven months

Vítor Quintã

vitorquinta@macaubusinessdaily.com

he alleged boss of Macau’s Shui Fong triad has appealed from its deportation order from Canada, according to Canadian media. Canada’s Immigration and Refugee Board ruled last week that Lai Tong Sang should never have been allowed into the country nearly 17 years ago and ordered his removal, citing his ties to organised crime. Mr Lai’s lawyer, Peter Chapman, has filed a court application asking for a judicial review of the decision, The Globe and Mail reported. This means the deportation order – under which Mr Lai would be permanently barred from returning to Canada – will be suspended until the review is completed. Mr Chapman told The Globe and Mail that a decision on whether to hold a hearing probably won’t be made until November or December. A hearing might only held by March, he added. Mr Chapman declined to answer questions on his client’s whereabouts. Mr Lai has been sighted here and he participated in his February admissibility hearing by telephone from Macau. The Immigration and Refugee Board in its ruling said that Canadian officials had failed properly to check his background when admitting Mr Lai into the country, and said it found

compelling evidence of his crime links and involvement in a 1990s deadly turf war between Shui Fong, also known as Wo On Lok, and rival 14K triad. A year after arriving in Vancouver in westernmost Canada in October 1996, Mr Lai’s home was peppered with bullets in a drive-by shooting, which Canadian police wiretaps showed was ordered by a 14K leader. Police gave evidence at Mr Lai’s immigration hearing in February that a HK$1 million (US$132,000) contract had been taken out on his life. All the while, the board heard, Mr Lai refused to cooperate with Canadian police, fearing it would expose his criminal gang ties. Mr Lai was also taped receiving briefings from overseas lieutenants “about the progress of the gang war” for control of Macau’s casino industry before the 1999 handover. Mr Lai in his defence chalked it all up to hearsay. The Immigration and Refugee Board ruled that the rest of Mr Lai’s family is permitted to stay in Vancouver.

Airport to have new private jet hangar

rivate jet landings and takeoffs are growing faster so far this year and the airport operator believes demand from big-spending businessmen will continue growing in the future Macau International Airport Co Ltd (CAM) said in a press statement yesterday that business jet movements in the first seven months of this year reached 1,090, up by 21 percent from a year earlier. This growth rate is faster than during the past six years, when private jet movements increased at an average annual rate of 16.3 percent, the operator said. If the growth pace remains unchanged for the remaining months of 2013, the annual number of private jet landings and take-offs will for the first time exceed 2,000, according to Business Daily calculations based on data provided by CAM. “Looking at the future development of Macau’s leisure tourism, there will be a large market for high-end business trips,” the company said in its statement. “The demand for business aviation will then grow further more,” said CAM, while noting that a planned new hangar would

be able to cater to this demand. CAM launched a tender for the construction of a private jet hangar in April, a project that was slated to take about 10 months. Yesterday’s statement makes no mention of how the hangar construction is progressing, even though the hangar is scheduled to be ready next year. The new hangar will be an initial step to boost the private jet business, which is a priority in the airport master plan revealed a year ago to make it more profitable. The Macau airport’s master plan forecasts around 3,400 business jet movements a year by 2030. The general and business aviation area will be expanded to 89,600 square metres after 2030 from the 12,000 square metres now, and particular attention will be given to the area for private jets and small planes. In the first two phases the number of parking spots for private jets should increase to 38, as the number of big inbound aircraft has been low. The plan’s third phase envisages 43 parking spots for small planes and budget airlines. The airport now has parking space for 24 small aircraft. T.L.

September 5, 2013 April 19, 2013

Macau

Guangdong studies trade zone tie-up Hengqin, Nansha could join two other areas in new free trade venture Vítor Quintã

vitorquinta@macaubusinessdaily.com

uangdong province is studying how to develop a new integrated free trade zone in cooperation with Macau and Hong Kong, the official China Daily reported yesterday. The article quoted sources with knowledge of the situation as saying the province had been encouraged to “immediately” apply for central government approval to begin implementing this zone. Guangdong already hosts three special economic zones: Qianhai near Shenzhen; Hengqin island; and Nansha district in Guangzhou. Sources said the new integrated zone would bundle these zones to g et her and also in clu d e the Guangzhou airport’s economic development zone. This “will be a big plus for Guangdong’s application, since Guangzhou Baiyun International Airport has become a global aviation hub,” Lin Jiang, a regional economic experts at Guangzhou-based Sun Yat-Sen University, told China Daily. Baiyun is one of the three busiest airports in the mainland, with airlines serving 122 international routes, according to the airport authority.

The free trade zone should be built based on stronger cooperation with Macau and Hong Kong, said Guo Wanda, head of the China Development Institute’s Shenzhen branch. “Nansha, Qianhai and Hengqin are all adjacent to Hong Kong and Macau and should seek further economic ties with the SARs,” he told China Daily. Getting the two territories on

Stronger yuan makes for steep construction costs City jumps to top 5 on international ranking of construction costs Vítor Quintã

vitorquinta@macaubusinessdaily.com

acau is the fifth most expensive construction location in the world, a recent report says, as the appreciation of the yuan made mainland Chinese imported materials more expensive. The International Construction Costs report released by built asset consultancy firm EC Harris LLP last week says the city jumped from the 21st position it occupied in last year’s ranking. The ranking is based on the comparison of average costs of 21 building types in 47 jurisdictions relative to the United Kingdom. The report says it can be 12 percent to 45 percent more expensive to put up a building in Macau than in the European country. This represents a huge increase from the previous report, which said the territory’s construction costs were 5 percent to 32 percent lower than in the United Kingdom.

The price growth is even more significant when compared to 2011, when Macau was first included in EC Harris’ research. At the time the city’s construction costs were 27 percent to 47 percent lower than in the United Kingdom. The report does not detail the reasons for Macau’s climb up the ranking. However, it does stress that the appreciation of the yuan made construction materials imported from the mainland more expensive. The yuan has gained 3.8 percent against the pataca in the past 12 months, data from the Monetary Authority of Macau show. Hong Kong emerged as the most expensive construction location in the world, overtaking Switzerland, Denmark and Sweden. Portuguese-language newspaper Tribuna de Macau first reported the story.

board offers Guangdong a unique advantage compared with other areas in the mainland, Mr Guo added. Hengqin and Nansha have been singled out for cooperation between Guangdong and Macau. Hengqin already hosts the new campus of the University of Macau and it will also include the 50,000-square-metre GuangdongMacau Traditional Chinese Medicine

Technology Industrial Park Development Co Ltd. There are plans to build a Guangzhou-Macau Cultural Creativity Industrial Park and a cruise port in Nansha. In June Guangdong governor Zhu Xiaodan said the Cuiheng district of Zhongshan city would become a prime area for a free-trade initiative between the province and Macau. The revelation was made after a meeting with Macau top officials, which concluded with the signing of a letter of intent to developing the Cuiheng district as a new marine tourism spot. The report comes as Shanghai prepares to launch its own new free trade zone, which will similarly integrate four previously existing zones in the city, and has been widely touted by state media as an area for major policy experimentation with financial reform, commodities trading and logistics services. Goods can be imported, manufactured and exported within China’s free trade zones without the intervention of customs authorities, enjoying preferential policies in foreign exchange and tax. With Reuters/AFP

September 5, 2013 April 19, 2013

Greater China Chinese insurers eye overseas real estate Chinese insurers could spend about US$14.4 billion on overseas commercial real estate, aided by a stronger local currency and easier regulations amid a limited supply of prime properties at home, CBRE Group Inc said. The insurers are seeking high-quality office investments in international gateway cities such as London, New York and Toronto, according to an e-mailed release from CBRE. Asian markets with similar cultural backgrounds such as Singapore, Hong Kong and Malaysia will also be major destinations, it said. China last year made it easier for insurers to buy real estate and other assets outside the country, a move that was expected to help them improve their investment yields. “Most of the Chinese investors with sufficient capital are now facing limited domestic investment channels,” Frank Chen, head of research for China at CBRE, said in the release. “Factor in the escalating purchasing power enabled by the continuous appreciation of the renminbi and now is the ideal time for Chinese capital to enter the overseas market.”

GM’s August sales accelerate General Motors Co, the largest foreign automaker in China, reported sales growth accelerated in the country last month, helped by demand for its Wuling and Buick vehicles. Total sales in August climbed 11.2 percent to 245,799 units, after expanding 11.1 percent the preceding month, the Detroit-based company said in a statement yesterday. Deliveries of Wuling vehicles, which account for almost half of GM’s China sales, gained 12.4 percent to 112,139 units last month. GM’s sales in China have risen 10.7 percent this year, keeping it on track to reach its 2013 target of selling 3 million vehicles in the world’s largest auto market. To defend its sales lead, the U.S. automaker is spending US$11 billion by 2016 on new plants and products in China and is building four assembly plants there to boost production capacity to five million vehicles a year by 2015. GM plans to introduce 17 new models this year in China, its largest market, focusing on sport utility vehicles and luxury models. The automaker is looking at adding nine new or refreshed SUVs in China over the next five years.

Bright Food in talks to buy Tnuva Bright Food Group Co, the dairy and consumerproducts group backed by the Shanghai government, said it’s considering an acquisition of Israel’s Tnuva Food Industries Ltd as the Chinese company expands overseas. Bright Food is in “preliminary” acquisition talks on Tnuva, the Chinese company’s spokesman Pan Jianjun said yesterday, without specifying the size of the stake it might buy. The company has been seeking acquisitions overseas and bought a 60 percent stake last year in British cereal maker Weetabix Ltd from private-equity firm Lion Capital LLP. Rivals including China Mengniu Dairy Co have also sought deals or foreign partnerships after a series of safety scandals hurt consumer confidence in local brands. “Bright Food needs to speed up on overseas acquisitions to improve the sourcing of raw milk as well as the research and development capacity,” said Todd Yang, an analyst at Guosen Securities Co. Tnuva is the largest food manufacturer and distributor in Israel, according to the website of private-equity firm Apax Partners, which has invested in the company.

Scandal-hit PetroChina to chang Former chairman now under an official corruption probe Charlie Zhu

etroChina Co Ltd’s days of super-charged spending may be over as the Chinese national oil giant seeks to steer clear of the legacy of former chairman Jiang Jiemin. PetroChina will likely record an annual drop in capital spending for 2013, according to company officials and industry specialists. That would be its first such decline since its Hong Kong and New York stock market listings in 2000. The world’s third most valuable oil company by market capitalisation remains on the prowl for global takeover targets but has vowed to become more choosy and focus on what it calls large-scale and quality projects, company officials said. “The new management is completely different from Jiang Jiemin, under whom PetroChina has been spending like crazy and got into a lot of deals at home and abroad with questionable economics,” a PetroChina official who has attended some recent strategy briefings by the firm’s new management, led by chairman Zhou Jiping, told Reuters. He declined to be identified because

RMB 352.5 bln PetroChina’s capital expenditure in 2012

Chinese services PMI at 5-month high G

rowth in China’s services sector hit a five-month high in August, underpinned by optimism over government policy measures, a private survey showed, the latest evidence that the world’s second-largest economy may have avoided a sharp slowdown. The HSBC Services Purchasing Managers’ Index (PMI), compiled by Markit Economics, climbed to 52.8 in August, up from July’s 51.3 and the highest since March, the survey showed yesterday. The data came on the heels of three other PMI surveys this week that pointed to a pick-up in activity at factories and service firms. Investors had as recently as a month ago worried that China’s economy was slipping into a deeperthan-expected downturn, especially after its money market was hit by an unprecedented cash crunch in June. But policy makers have stepped in with a series of measures aimed

he was not authorised to speak to the media. PetroChina spokesman Mao Zefeng declined to comment on the quality of the firm’s overseas projects, but said previous acquisitions were mainly driven by the need to secure reserves and expand the company’s international footprint. Beijing said on Sunday that it was investigating Mr Jiang for “serious discipline violations” – shorthand the government generally uses to describe graft – in what appears to be a deepening crackdown on corruption and a push for reform. It came after an official announcement last week that three top executives at PetroChina and one at its parent China National Petroleum Corp (CNPC) – China’s second largest company by revenue – were facing inquiry.

Oil giant likely to record drop in capital spending this

Changing course Under Mr Jiang, a vocal proponent of expansion and what he called political and social responsibility for state-owned enterprises, PetroChina’s capital expenditure surged to 352.5 billion yuan (US$57.60 billion) last year from 181.6 billion yuan in 2007. Mr Jiang was head of PetroChina and CNPC from late 2006 until early this year. The spending rise may partly reflect cost inflation in the global oil sector and extra resources required to stem production falls at its ageing oil fields, especially China’s largest oilfield Daqing, but critics contend that the company invested too heavily in its refining and petrochemicals

businesses at the expense of oil and gas exploration and production. PetroChina’s new management was quick to bury Jiang’s legacy, telling the media and investors that the group would become a more profit-driven entity and “enter [a] new development phase”, new president Wang Dongjin said in late August, shortly before news of the investigations officially broke. “To put development quality and profit at the core is the urgent need of PetroChina” and it will shift its focus away from “just scale expansion”, Mr Wang said. He did not specify what measures he will take to boost profitability.

Government quickening railway investment to boost economy

at stabilising the economy, including quickening railway investment and public housing construction and introducing policies to help smaller companies with financing needs. “It’s still too early to say that the economy has reversed its downward trend, but we have seen some signs of recovery,” said Xianfang Ren, senior economist with IHS Global Insight in Beijing. “Between June and now, the biggest change has been in policy expectations, with China rolling out some steps to boost growth. That has helped business sentiment, hence lifting the PMI readings,” Mr Ren said. Attention now turns to the raft

of data for August due from this weekend, with investors looking to figures for trade, industrial output, inflation, money supply and investment to further gauge how the country is faring in its efforts to reverse slowing growth. Qu Hongbin, chief China economist at HSBC Holdings Plc, cited new business growth as the key driver of the index and expected growth momentum of the services sector to be sustained in future. “A filter-through impact of VAT reform, combined with a rebound in manufacturing output, is expected to support service industry growth in the coming months,” Mr Qu said. Reuters

September 5, 2013 April 19, 2013

Greater China

ge course

Growth slowdown to allow economic adjustment: Xi Chinese president says problems ‘well within control’

year

While some watchers are sceptical PetroChina will make any substantive change given its role as China’s dominant oil producer, others say the new management is putting the company on the right track. “We are likely to see a flat, maybe lower capex number this year, which is a step in the right direction,” said Neil Beveridge, senior analyst at Bernstein Research in Hong Kong. PetroChina’s capex fell 3.1 percent to 108.2 billion yuan in the first half, with spending for refinery and chemical projects falling 52 percent while upstream spending rose 11 percent. Reuters

hinese President Xi Jinping said the government opted for slower growth this year to allow it to adjust the structure of the nation’s economy. China would “rather bring down the growth rate to a certain extent in order to solve the fundamental problems” hindering long-run development, Mr Xi said in a written interview yesterday with media outlets from Russia, Turkmenistan, Kazakhstan, Uzbekistan and Kyrgyzstan, according to a transcript distributed by the official Xinhua news agency. Mr Xi and his leadership team, who took office in a transition completed in March, are preparing for a Communist Party meeting in November that may add clarity on how they will try to sustain growth of 7 percent this decade. Data this week showed manufacturing strengthened last month, adding to signs that China will meet its 7.5 percent expansion target this year. “The fundamentals of the Chinese economy are sound,” Mr Xi said, according to the Xinhua transcript. “The growth rate could have been higher had we continued with the past development model.” The president’s emphasis for the international audience is more on “tolerance for a little slowing down,” while he’s stressing to the domestic audience the “bottom line” that he won’t let the economy decline in a noticeable and fast way, said Ding Shuang, senior China economist at Citigroup Inc in Hong Kong.

is a management of expectations,” Mr Ding said. “He still cares about the growth rate.” The economy expanded 7.5 percent in the second quarter from a year earlier, extending the longest streak of sub-8 percent growth in at least two decades. China is confronted with difficulties such as local government debt and overcapacity in some industries, Mr Xi said. Still, “problems are well within control and could be handled properly,” he added. Premier Li Keqiang said on Tuesday that he’s confident that the nation will achieve the year’s economic goals. Recent data show

employment and prices are stable and market expectations have “apparently” improved, Mr Li said in a speech at the China-ASEAN Expo in Nanning, China. Goldman Sachs Group Inc researchers on Tuesday boosted their 2013 growth estimate to 7.6 percent from 7.4 percent, joining Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co in raising projections. The government signalled in July that it will defend its economic-growth target for the year after expansion slowed for a second quarter. Bloomberg News

The fundamentals of the Chinese economy are sound Xi Jinping, China’s president

Growth rate “His message to the domestic audience, which is more important,

BofA exits CCB with US$1.47 bln sale B

ank of America Corp raised US$1.47 billion by selling its remaining stake in China Construction Bank Corp (CCB), ending an eight year-old investment that generated a paper profit more than five times the original cost. The North Carolina-based bank sold 2 billion Hong Kong-listed shares of CCB at HK$5.70 each, a 3.9 percent discount to Tuesday’s close, a term sheet of the deal seen by Reuters showed. CCB’s Hong Kong traded shares fell 1.35 percent yesterday. BofA joins a list of Western financial institutions that have found that their investments in Chinese financial firms did not give them the foothold they had hoped for in that country. “The only thing that will be central to banking in China will be China’s domestic banks,” said

Donald Straszheim, head of China research at International Strategy & Investment Group in Los Angeles. Bank of America’s exit makes it the second U.S. bank to completely sell out of a China bank investment this year, after Goldman Sachs offloaded its remaining US$1.1 billion stake in Industrial & Commercial Bank of China Ltd. BofA’s past three sales of CCB stock since August 2011 have helped raise US$16.37 billion, according to Reuters calculations. The original 9.9 percent stake was purchased by Merrill Lynch for US$3 billion in 2005 ahead of the Chinese bank’s initial public offering. BofA assumed the stake when it purchased Merrill after the bank and brokerage nearly collapsed in the 2008 financial crisis. The Chinese banking system has shown signs of stress, with bad loans picking up as economic growth slows. As a result, several Chinese lenders are preparing to launch equity sales to bolster their capital bases. Bank of America said on Tuesday that it expects to record about a US$750 million gain before taxes on the stake sale. With that profit, its total gains from dividends and selling shares will amount to nearly US$18 billion before taxes, according to regulatory filings between 2009 and 2013. Reuters

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September 5, 2013 April 19, 2013

Asia Packer buys 9.4pct of Zillow Australian billionaire James Packer, co-chairman of Macau casino operator Melco Crown Entertainment Ltd, bought 9.4 percent of Zillow Inc, becoming the second-biggest shareholder in the U.S. real-estate website amid a recovery in the housing market. Cavalane Holdings Pty, controlled by Mr Packer, bought about 3 million shares, Seattle-based Zillow said in a filing, without giving financial terms. The stake is valued at US$298 million based on Zillow’s last closing price.

Australia economy marks 22 years of growth GDP beats estimates in boost to next leader Wayne Cole

ustralia’s economy grew moderately last quarter as modest gains in consumer and government spending offset a very flat performance elsewhere, though there was still scant sign of

a much-needed recovery in business investment. The Australian Bureau of Statistics reported gross domestic product rose 0.6 percent in the second quarter, from the previous quarter when it

rose 0.5 percent. That was enough to send the local dollar higher as there had been fears the report would be much weaker. Liberal-National coalition leader Tony Abbott is on track to defeat

U.K. to charge Olympus, subsidiary Olympus Corp, whose former president revealed a US$1.7 billion accounting fraud that lasted 13 years, said it will be charged in the U.K. for allegedly deceiving auditors at a subsidiary. The U.K.’s Serious Fraud Office alleges that Olympus’s Gyrus Group Ltd unit misled auditors in 2009 and 2010, the company said in a statement to the Tokyo stock exchange. The potential financial impact of the prosecution on Olympus’s business is unclear, the company said.

Indonesia urges clarity on stimulus Indonesia’s finance minister has called on the U.S. Federal Reserve to provide more clarity about when it will wind down its stimulus programme. Finance Minister Chatib Basri told the Financial Times newspaper there was a lack of “transparency about the process” as the U.S. central bank moves towards reducing the stimulus. “People are guessing that the Fed will do the tapering in September. But we’re not very sure,” the minister added, stressing it was hard for Jakarta to formulate policy given the uncertainty.

S.Korea urges caution on monetary policy South Korea yesterday cautioned major economies to consider the global ripple effects of any shift in their monetary policy stance, as emerging markets bore the brunt of the recent selloff in their currencies. “If a reserve currency country changes its monetary policy stance, it should consider not only its domestic economic conditions but the effects on the global economy,” South Korea’s presidential office said in a statement ahead of the G20 summit in Russia later this week.

Uniqlo sales in Japan soar Fast Retailing Co’s Uniqlo brand sales gained the most in almost four years in Japan as Asia’s largest clothing retailer benefited from strong demand for summer apparel. Same-store sales at Uniqlo Japan outlets rose 29 percent in August as high temperatures drove up sales of summer clothes, Fast Retailing said in a statement to the Tokyo Stock Exchange. That’s the biggest increase since October 2009, according to data on the retailer’s website.

The central bank has lowered borrowing costs to a record low

Japan may face stock rout if tax rise delay Abe pledges to pursue growth and fiscal discipline

apanese shares could plunge 10 percent or more if Prime Minister Shinzo Abe fails to carry through on a plan to raise a sales tax in April. Postponing an increase would have a large and negative impact on Japan’s financial markets, said 22 of 32 economists in a Bloomberg News survey. JPMorgan Chase & Co senior economist Masamichi Adachi said a delay could push stocks down 10 percent, wiping out US$418 billion in market capitalisation, while UBS AG economist Daiju Aoki predicted a sell-off as steep as 12 percent in the Nikkei 225 Stock Average. The survey results bolster the case for Mr Abe to boost the tax to shore up the indebted nation’s finances and maintain faith in Japanese bonds, even at the risk of hitting households saddled with stagnant wages and the fastest consumer-price increases since 2008. The consensus contrasts with the view of Standard & Poor’s chief global economist Paul Sheard, who warned in June that Japan could make a policy error through a premature fiscal tightening. “Abe doesn’t have much choice

as delaying the sales-tax plan would be too risky,” said JPMorgan’s Mr Adachi, who is a former Bank of Japan official. “Abe would lose all of the trust that has buoyed Japanese markets so far.” While economists over recent months have highlighted the likely blow to consumption and the risk of the economy sinking into one quarter of contraction due to a higher sales tax, the government may be able to use stimulus to cushion the impact.

stop deflation and revive the world’s third-largest economy. The benchmark Nikkei ended up 0.5 percent at 14,053.87 yesterday, its highest closing since August 6. A law enacted last year gives Mr Abe the power either to let the levy rise to 8 percent in April and 10 percent in 2015 from 5 percent

Fiscal discipline Mr Abe said yesterday he will tell a Group of 20 nations summit this week that Japan is pursuing policies that will ensure economic growth and maintain fiscal discipline. He told reporters Japan could not rebuild its public finances without boosting economic growth. The Nikkei 225 has rallied 55 percent while the yen has fallen 18 percent against the dollar since mid-November, when investors started to price in an election win in December for then-opposition leader Mr Abe and his calls for policies to

Abe doesn’t have much choice as delaying the sales-tax plan would be too risky Masamichi Adachi, JPMorgan senior economist

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September 5, 2013 April 19, 2013

Asia ruling Labor party opponent Kevin Rudd on September 7, polls show, and will inherit record-low interest rates designed to support an economy in which unemployment is rising. The result marked 22 years since the country last suffered a recession, but still underwhelmed. Crucially, there are few signs as yet that business and consumer spending is ready to take over from mining investment as a growth engine. “Overall it tells us that the economy is continuing to grow but at a very subdued rate, and it’s not strong enough to push employment or inflation up,” said Shane Oliver, chief economist at AMP Capital Investors. “We’re still far from the collapse that many had feared, but we’re still looking for a replacement for mining investment as a driver for growth.” The Reserve Bank of Australia (RBA) has been doing its part by cutting cut interest rates to a record low of 2.5 percent last month. Many analysts think it will likely have to ease again in coming months. Financial markets, on the other hand, have pared back expectations for any more easing, in part because of brighter signs in the global economy and especially China. The Asian giant takes fully a third

KEY POINTS Australian growth hits 2.6 pct y-o-y Economy growing at ‘very subdued rate’ – analyst Few signs of replacement for mining investment

of Australia’s exports and influences the price for many of its commodities, so a stabilisation of demand there is a promising omen.

Not normal Yesterday’s data showed the value of all goods and services produced in Australia was 2.6 percent higher than in the second quarter of 2012. That was short of the 3.25-3.5 percent pace that economists consider “normal”, though the world’s 12th-largest economy did at least outpace its peers. Comparable growth United States was 1.6 percent, 1.4 percent for Canada and 0.7 percent in Germany. Despite all the talk of recovery in the European Union, its economy shrank by 0.7 percent over the year. Output for the 12 months to June was worth A$1.51 trillion in current dollars, or about A$65,163 (US$59,233) for each of Australia’s 23 million people. That compares with per capita GDP in the United States of US$52,712. However, growth was very narrowly based with only small contributions from consumer and government spending, as well as inventories. Pretty much every other sector was flat in the quarter. Especially disappointing was that home construction added nothing at all to growth. While home building only accounts for 5 percent of the economy it does have huge spillover effects into employment and consumption and a typical recovery can add a percentage point or more to growth over a couple of years, something the RBA was keen to see taking the place of mining investment. Consumer spending grew just 0.4 percent in the quarter, less than half of the pace seen last decade, while the personal savings rate stayed at a high 10.8 percent. Reuters

today, or to hold off if he concludes Japan’s economy isn’t strong enough to withstand the increases. The country’s economic recovery is strong enough to weather an increase in the sales tax to repair the government’s finances, said former Ministry of Finance official Eisuke Sakakibara. “Japan should raise the consumption tax as prescribed by the law,” he said. But not all economists agree that a delay in a sales-tax increase would hit financial markets. Takuji Okubo, chief economist at

Japan Macro Advisors in Tokyo, said postponing the consumption-levy increase would have the opposite effect on stocks than some analysts suggest. He said it could lift the Nikkei 225 by about 1500 points, as it would symbolise Mr Abe’s commitment to reflating the economy. Naoki Murakami, chief economist at Monex Inc in Tokyo, said a delay would significantly raise the odds of ending deflation and boosting growth, aiding stocks and weakening the yen.

The Nikkei 225 has rallied 55 percent since mid-November

Bloomberg News/Reuters

Rupee in danger of sliding past 70, adviser says

India services activity shrinks Weakest since 2009 as new business dries up

ndian services activity shrank in August at its quickest pace since the depths of the global financial crisis as new business dried up, a survey showed, the latest evidence that Asia’s third-largest economy is rapidly losing steam even as policymakers battle a full-blown currency crisis. Taken together with a survey of Indian factories published on Monday that showed activity shrank for the first time since early 2009, the data will stoke worries that growth in the July-September quarter could be even weaker than in April-June. The HSBC Services Purchasing Managers’ Index (PMI) compiled by Markit Economics, slipped to 47.6 in August, the weakest since April 2009, from 47.9 in July. A number below 50 denotes contraction. “The numbers we have seen so far for July and August for both the manufacturing and service sectors

Myanmar’s 2015 stock exchange deadline at risk

yanmar is running behind schedule for starting a stock exchange by 2015 after delays in getting the legal framework in place, said an executive at Japan Exchange Group Inc, which is assisting on the project. “We’re pressed for time,” Koichiro Miyahara, senior executive officer at Japan Exchange, said in an interview in Tokyo. He said the late approval of a capital markets bill has delayed the project, and it’s up to the Myanmar government as to how fast it can set up related organisations such as a securities regulator. Japan Exchange’s predecessor Tokyo Stock Exchange Group Inc and Daiwa Securities Group Inc were chosen last year to help Myanmar set up a stock exchange as the Southeast Asian nation opens itself from decades of isolation and military rule. Companies from Coca-Cola Co to Unilever Plc are investing in the country of 64 million people after the U.S. eased economic sanctions last year.

point to a further slowdown in GDP growth during the third quarter,” said Leif Eskesen, chief economist for India at survey sponsor HSBC Holdings Plc. The economy grew 4.4 percent in April-June, its slowest quarterly growth rate since early 2009, as mining and manufacturing contracted, data showed on Friday. India’s economic growth has almost halved in the past two years. The PMIs suggest more trouble ahead as the government and central bank grapple with a currency crisis that has battered the rupee to record lows against the dollar, with no expectations or signs that it will rally any time soon. HSBC cut its growth forecast for the year ending in March to 4.0 percent from its earlier 5.5 percent forecast on Monday, while last week Nomura Holdings Inc cut its GDP forecast to 4.2 percent from 5.0 percent. The rupee could sink to a record low past 70 per dollar and the Reserve Bank of India’s struggle to stem the drop has hurt its credibility, one of its advisers said as the currency tops incoming Governor Raghuram Rajan’s agenda. “There’s a high probability” of the rupee ending 2013 at 65 to 70 and an “external shock could push it above 70,” Arvind Virmani, a member of the Reserve Bank’s advisory panel on monetary policy, said. Reuters

“Like any other modern economy, Myanmar needs a capital market to allow companies to raise funds,” said Moe Thuzar, a Singapore-based research fellow at the Institute of Southeast Asian Studies. “It is more important to ensure that appropriate regulatory and operational infrastructure is in place” rather than meet an arbitrary deadline, she said. Myanmar President Thein Sein signed the Securities Exchange Law on July 31. The legislation sets rules that include the establishment and operation of a securities regulator to oversee trading activity. Mr Miyahara, who is in charge of Japan Exchange’s contribution to the project, said he had expected the bill to be passed at the start of 2013 and the delay will shorten the time for developing the bourse by about a year. His company will make “every effort” to complete the work on time, he said. Regulations still need to be developed under the law to outline how the exchange will function, Maung Maung, director general at the Central Bank of Myanmar, said. The government will begin working on infrastructure such as buildings and software for the bourse next year and it will begin operating in 2015, Deputy Finance Minister Maung Maung Thein said at a briefing on August 23. Bloomberg News

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September 5, 2013 April 19, 2013

Asia

Indonesian stocks plunged by the most in five years last month

Worst over for Asian emerging markets: Nomura But more losses still likely as the Fed pares stimulus Jonathan Burgos and Joyce Koh

he worst is over for Asian emerging markets after investors pulled billions of dollars last month on concern the U.S. Federal Reserve will start cutting back bond purchases, according to Nomura Holdings Inc. “We’re through the worst of the crisis but it doesn’t mean individual countries won’t continue to suffer significant challenges,” Steve Ashley, London-based head of global markets at Nomura, said in an interview. “We remain relatively positive on the longer term performance of risk assets in Asian emerging markets.” The outlook for Asian emerging markets remains “very positive” over the next five to 10 years as the amount of investments by funds in these countries will likely have to catch up with the growing size of their economies, Mr Ashley said in Singapore. The market value of shares traded in China accounts for 37 percent of gross domestic product, compared with 107 percent for stocks in the U.S., according to data compiled by Bloomberg. The proportion is 45 percent for Indonesia and 54 percent for India, the data shows. The International Monetary Fund in July predicted the economies of developing Asia will expand 6.9 percent this year, compared with 1.7 percent for the U.S.

Chinese manufacturing The MSCI Asia-Pacific Excluding Japan Index dropped as much as 14 percent after Federal Reserve Ben S. Bernanke said on May 22 the central bank may start tapering US$85 billion in monthly U.S. bond purchases if the world’s biggest economy improves. An official gauge of Chinese

We’re through the worst of the crisis but it doesn’t mean individual countries won’t continue to suffer significant challenges Steve Ashley, Nomura Holdings

manufacturing index rose to its h igh est l ev el i n 1 6 m o n th s i n August as new orders jumped and a private survey also showed signs of expansion, adding to evidence that growth in the world’s second-largest economy is strengthening after a two-quarter slowdown. The Philippine economy expanded by more than 7 percent for a fourth straight quarter in the three months to June, a separate report showed. The positive outlook for Asian emerging markets provides an opportunity for Nomura outside Japan, Mr Ashley said. The number of Nomura clients in Asia excluding Japan for the global markets division doubled in the past three years, he said. Since taking on his role in December last year, Mr Ashley, 46, has pushed to integrate the bank’s 1,800 sales and trading staff from equity and fixed income. There are now trading floors handling multiple

asset classes in London, New York and Singapore, he said, with the one in Hong Kong to be set up by the end of the year.

Closer collaboration “The closer collaboration between fixed income and equities is actually indicative of closer collaboration with all of the other Nomura divisions – retail, asset management, wealth management,” he said. Mr Ashley’s view contrasts with Stephen Jen, co-founder of hedge fund SLJ Macro Partners LLP, who has said more losses are likely for emerging markets because investors will withdraw funds as the Fed pares stimulus. About US$44 billion has been pulled from emerging-market stock and bond funds globally since the end of May, data provider EPFR Global said on August 23. The Indonesian rupiah and the Jakarta Composite Index plunged by the most in five years in August after the Southeast Asian nation’s current-account deficit climbed to a record, economic growth slowed and inflation accelerated. The Indian rupee fell to an all-time low last month after the country’s current-account deficit widened to an unprecedented US$87.8 billion in the fiscal year ended March.

Fragile sentiment “What we are seeing in emerging markets is a very fragile investor sentiment,” Rohit Arora, a Singapore-based fixed income strategist at Barclays Plc, said in a Bloomberg Television interview with Rishaad Salamat. “The focus has been countries with higher currentaccount deficits and investors are questioning how those countries will

fund their deficits in an environment of tight liquidity when the Fed starts to tighten the monetary policy.” Indonesia’s central bank unexpectedly increased its key interest rate last week to stem the rupiah’s decline, while the Reserve Bank of India raised benchmark borrowing costs in July. The two countries have the region’s biggest external funding needs. The markets have been “addicted to the methadone of quantitative easing,” Mr Ashley said. “It needs to wean itself off, and that’s why we see some turbulence in the markets. For the longer-term health of financial markets, it’s important that normalization takes place.” The Fed has kept its target for overnight lending between banks in a range of zero to 0.25 percent since December 2008. Investors see a 59 percent chance policy makers will raise the so-called federal funds rate to 0.5 percent or more by January 2015, data compiled by Bloomberg from futures show. Yields on 10-year U.S. government bonds surged for a fourth month in August, touching the highest since July 2011. “The market shouldn’t be frightened of normalisation,” Mr Ashley said. Historically, “the first half of the tightening cycle is normally accompanied with reasonable economic growth and reasonable performance by risk assets. It’s only toward the end of the tightening cycle that you see a tail-off in risk asset performance,” he said. Bloomberg News

KEY POINTS Outlook for Asian markets ‘very positive’ – Nomura US$44 bln pulled from emerging markets since May Analysts see ‘very fragile’ investor sentiment Developing Asia to grow 6.9 pct – IMF

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September 5, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 50.50

72.50

23.8

50.15

72.30

23.7

49.80

72.10

49.45

71.90

23.6 23.5

Max 50.5

average 49.854

Min 49.15

Last 49.7

49.10

Max 72.35

average 72.016

Min 70.75

Last 71.8

71.70

23.4 Max 23.75

average 23.541

Min 23.35

Last 23.35

20.0

46.2 46.1

24.0 23.8

19.9

46.0

23.6 19.8

45.9

Max 46.2

average 46.077

Min 45.8

Last 46.05

45.8

Max 19.94

average 19.825

Commodities PRICE

DAY %

YTD %

(H) 52W

Last 19.72

(L) 52W

WTI CRUDE FUTURE Oct13

108.08

-0.423806891

15.47008547

112.2399979

86.04000092

BRENT CRUDE FUTR Oct13

115.67

-0.008644537

9.401305211

117.3399963

96.37999725

GASOLINE RBOB FUT Oct13

285.14

-0.460797319

9.589146393

298.210001

246.6799974

GAS OIL FUT (ICE) Oct13 NATURAL GAS FUTR Oct13 NY Harb ULSD Fut Oct13 METALS

Min 19.7

962

0.130106687

6.151724138

985.5

835.5

3.679

0.354609929

1.349862259

4.525000095

3.154000044

313.85

-0.311279103

4.934969407

322.8999853

276.1999846

Gold Spot $/Oz

1405.75

0.9146

-15.5432

1796.08

1180.57

Silver Spot $/Oz

23.905

-1.1639

-20.6078

35.365

18.2208

Platinum Spot $/Oz

1530.49

0.2614

0.8394

1742.8

1294.18

Palladium Spot $/Oz

717.4

-0.3376

2.5355

786.5

587.4

LME ALUMINUM 3MO ($)

1822

-0.382722799

-12.10805596

2200.199951

1758

LME COPPER 3MO ($)

7245

0.096711799

-8.649602824

8422

6602

LME ZINC

1908

0.052438385

-8.269230769

2230

1811.75

13700

-0.363636364

-19.69519343

18920

13205

3MO ($)

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

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

15.78

-0.063331222

2.367823548

16.65000153

14.77000046

469.75

-1.157285639

-21.67569821

665

445.75

645.5

-0.270374662

-21.35242157

913

635.5

SOYBEAN FUTURE Nov13

1367

-1.424193258

4.93187488

1409.75

1162.5

COFFEE 'C' FUTURE Dec13

117.7

0.42662116

-24.76829658

200

116.0999985

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

CORN FUTURE

Dec13

WHEAT FUTURE(CBT) Dec13

SUGAR #11 (WORLD) Oct13

16.43

COTTON NO.2 FUTR Dec13

Max 24

average 23.612

Min 23.35

Last 23.35

23.2

-0.242865817

82.96

0.302260912

-18.09571286

21.82999992

5.359410719

93.72000122

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.914 1.5586 0.9367 1.3173 99.61 7.9885 7.7556 6.119 67.2 32.205 1.2758 29.828 44.41 11409 91.044 1.23392 0.84512 8.0577 10.5221 131.22 1.03

1.2182 0.0706 -0.0961 -0.0152 -0.0904 -0.01 -0.0116 0.0229 0.7887 -0.2329 0.1411 0.1207 0.1576 0.3155 -1.2928 -0.0802 0.0911 0.0894 0.0105 -0.0838 0

-11.9291 -3.6474 -2.2739 -0.1289 -13.5629 -0.0663 -0.0645 1.8238 -18.1622 -5.0458 -4.264 -2.6653 -7.6672 -14.1643 -1.8859 -2.1428 -3.5143 1.9832 0.0789 -13.4507 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3544 68.845 32.31 1.2862 30.228 44.82 11493 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2502 77.13 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20099 0.78875 7.8281 9.9897 97.99 1.0289

Macau Related Stocks PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.6

0.6564551

46.03174

4.69

2.545

VOLUME CRNCY 2413447

14.94

-1.190476

40.01874

15.4

8.9

1378086

AMAX HOLDINGS LT

1.02

-4.672897

-27.14286

1.72

0.75

382400

BOC HONG KONG HO

25.1

0.6012024

4.149376

22.85

12806000

0.345

30.18869

0.42

0.22

6.32

0.3174603

5.509186

6.74

3.1

23400 12409274

CENTURY LEGEND

NAME

19.7

23.4

Currency Exchange Rates

NAME ENERGY

23.3

CHEUK NANG HLDGS CHINA OVERSEAS

23.4

-1.265823

1.2987

25.6

17.54

CHINESE ESTATES

17.18

1.416765

52.77156

17.5

8.004

91232

CHOW TAI FOOK JE

10.68

2.10325

-14.14791

13.4

7.44

4683200

EMPEROR ENTERTAI

3.09

-1.277955

63.49206

3.19

1.38

1455000

2.4

2.12766

98.01553

2.76

1.053

3702000

GALAXY ENTERTAIN

49.7

-0.5005005

63.75618

50.6

20.45

7605610

HANG SENG BK

124

0.1615509

4.465041

132.8

109

1139833

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14833.96

0.1596861

13.20056

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3612.612

0.6335609

19.64218

3694.188

2810.8

FTSE 100 INDEX

6446.14

-0.3442886

9.297181

6875.62

5605.589844

DAX INDEX

8169.2

-0.1406968

7.314523

8557.86

6892.86

HOPEWELL HLDGS

24.65

0.407332

-25.86466

35.3

23.2

1322546

HSBC HLDGS PLC

83.75

-0.1192606

3.013526

90.7

65.85

14254669

HUTCHISON TELE H

3.52

3.225806

-1.123594

4.66

2.98

17580000

LUK FOOK HLDGS I

26.35

2.131783

7.991805

30.05

16.88

2944596

MELCO INTL DEVEL

18.66

0.8648649

107.1032

18.76

5.91

4144548

FUTURE BRIGHT

NIKKEI 225

14053.87

0.5396167

35.19603

15942.6

8488.14

HANG SENG INDEX

22326.22

-0.3052524

-1.459595

23944.74

19076.78906

CSI 300 INDEX

2350.699

-0.1615204

-6.827436

2791.303

2023.171

TAIWAN TAIEX INDEX

8083.44

-0.06095171

4.986557

8439.15

7050.05

MGM CHINA HOLDIN

23.35

-2.505219

75.8511

24.2

11.346

6929703

KOSPI INDEX

1933.03

-0.03671641

-3.205729

2042.48

1770.53

MIDLAND HOLDINGS

-18.91892

2.68

1527999

S&P/ASX 200 INDEX

5161.637

-0.6721936

11.02802

5249.6

4261.2

NEPTUNE GROUP

0.166

-0.5988024

9.21053

0.23

0.131

8870000

4076.196

-2.108928

-5.571193

5251.296

3837.735

NEW WORLD DEV

11.32

0.3546099

-5.823631

15.12

9.38

9403490

FTSE Bursa Malaysia KLCI

1719.41

-0.2783884

1.803492

1826.22

1590.67

SANDS CHINA LTD

46.05

-0.7543103

35.64064

47.55

26.05

11069124

SHUN HO RESOURCE

1.82

3.409091

1.92

1.13

170000

NZX ALL INDEX

979.857

-0.03274915

11.08822

998.487

813.947

SHUN TAK HOLDING

4.16

2.970297

-0.7159918

4.65

2.78

12639018

PHILIPPINES ALL SHARE IX

3663.8

-1.567642

-0.9510712

4571.4

3423.49

SJM HOLDINGS LTD

19.72

0.203252

11.11325

22.382

15.401

9818528

11.6

3.019538

-17.61364

16.84

10.6

2910500

WYNN MACAU LTD

23.35

-1.268499

11.45584

26.5

16.92

5873531

ASIA ENTERTAINME

3.95

-1.741294

40.33552

4.7647

2.4835

317536

BALLY TECHNOLOGI

72.54

0.5684181

62.24559

75.61

43.16

419968

BOC HONG KONG HO

3.24

2.857143

5.537462

3.6

2.99

33413

GALAXY ENTERTAIN

6.38

6.510851

60.70529

6.48

2.735

16881

INTL GAME TECH

19.01

0.6352567

34.15667

20.25

12.01

1606706

JONES LANG LASAL

82.15

-0.1094358

-2.132478

101.46

70.9

535367

LAS VEGAS SANDS

57.92

2.786158

25.4766

60.54

37.8353

7055391

MELCO CROWN-ADR

27.88

2.537698

65.55819

28.5

11.46

4836078

MGM CHINA HOLDIN

3.04

5.555556

73.68537

3.04

1.5327

3000

MGM RESORTS INTE

17.97

1.582815

54.38144

18.54

9.15

7803365

SHFL ENTERTAINME

22.85

0.3513395

57.58621

23.08

12.35

895545

SJM HOLDINGS LTD

2.54

0.3952569

11.52011

2.9481

2.0015

645

141.68

0.453772

25.94898

146.04

93.1279

1293457

JAKARTA COMPOSITE INDEX

HSBC Dragon 300 Index Singapor

579.26

-0.31

-6.73

STOCK EXCH OF THAI INDEX

1313.11

-0.1748504

-5.662646

1649.77

1230.41

HO CHI MINH STOCK INDEX

471.45

-0.1524875

13.95113

533.15

372.39

Laos Composite Index

1280.93

-1.485868

5.446301

1455.82

1003.17

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

SMARTONE TELECOM

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME AIA GROUP LTD

PRICE

DAY %

VOLUME

NAME

PRICE

DAY %

VOLUME

34.95

0.1432665

26612535

CHINA UNICOM HON

12.1

0.331675

23086668

ALUMINUM CORP-H

2.79

3.333333

26829890

CITIC PACIFIC

9.32

0.4310345

9204035

BANK OF CHINA-H

3.41

0.2941176

327500766

BANK OF COMMUN-H

5.41

0.1851852

23401170

BANK EAST ASIA

31.1

1.800327

2243443

10.54

-2.767528

26323901

BELLE INTERNATIO BOC HONG KONG HO

25.1

0.6012024

12806000

CATHAY PAC AIR

13.38

-1.181684

2033956

CHEUNG KONG

CLP HLDGS LTD

2317052

PRICE

DAY %

VOLUME

POWER ASSETS HOL

67.65 -0.07385524

SANDS CHINA LTD

46.05

-0.7543103

11069124

2438844

SINO LAND CO

10.76

0.5607477

4690236

15.94

38173912

SUN HUNG KAI PRO

101.6 -0.09832842

2959863

11.9

1.883562

12911615

SWIRE PACIFIC-A

91.6

-0.2721829

957339

12.44

-4.892966

9638491

TENCENT HOLDINGS

379

-0.2106372

3559848

HANG LUNG PROPER

25.4

0.5940594

4869517

TINGYI HLDG CO

18.98

-2.164948

8971401

HANG SENG BK

124

0.1615509

1139833

WANT WANT CHINA

11.2

-2.097902

75016940

HENDERSON LAND D

46.55

-0.2784919

1852651

WHARF HLDG

65.2

-0.1531394

3172426

HENGAN INTL

84.15

-2.264808

2026220

HONG KG CHINA GS

18.28

-0.867679

10049627

HONG KONG EXCHNG

124.8

1.463415

4565862

HSBC HLDGS PLC

83.75

-0.1192606

14254669

CNOOC LTD COSCO PAC LTD ESPRIT HLDGS

111.6

-1.32626

4962436

CHINA COAL ENE-H

4.83

-1.226994

46193508

CHINA CONST BA-H

5.85

-1.349073

2548430642

CHINA LIFE INS-H

20.2

0.7481297

42989578

CHINA MERCHANT

26.55

0.7590133

5999608

CHINA MOBILE

85.5

-0.2915452

24958975

HUTCHISON WHAMPO

CHINA OVERSEAS

23.4

-1.265823

12409274

IND & COMM BK-H

CHINA PETROLEU-H

5.97

92889370

LI & FUNG LTD

CHINA RES ENTERP

22.85

-0.6521739

3069375

21.5

-1.826484

6217036

CHINA RES POWER

17.3

-0.5747126

6136120

PETROCHINA CO-H

CHINA SHENHUA-H

25.8

0.3891051

13985864

PING AN INSURA-H

CHINA RES LAND

62.4 -0.08006405

NAME

-0.2169197

5392208

5.23

-0.3809524

325692848

11.54

-0.1730104

14077869

MTR CORP

29.85

-0.6655574

NEW WORLD DEV

11.32

0.3546099

8.48

1.122742

94591709

0.08779631

13296767

MOVERS

3 22450

INDEX 22326.22 HIGH

22446.75

2075905

LOW

21609.53

9403490

52W (H) 23944.74 (L) 19076.78906

21940

2-September

4-September

14 14

September 5, 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

September 5, 2013 April 19, 2013

Opinion Premier Li Keqiang

Business

wires

Leading reports from Asia’s best business newspapers

Times of India India’s manufacturing sector continued to remain in distress, as a survey showed the sector contracted for the first time since March 2009. Several economists and brokerages slashed their growth estimates for the current financial year, piling fresh pressure on policy makers. JPMorgan Chase & Co cut the growth estimate from 5.1 percent to 4.1 percent, while global financial services firm Nomura Holdings Inc expects the economy to grow 4.2 percent. Bank of America Merrill Lynch said growth was estimated to be 4 percent “in a stress case scenario”.

Wall Street Journal While Chinese mainlanders continue to arrive in Hong Kong, they seem to be spending less than they used to, according to official figures. Visitors from mainland China account for roughly a third of overall retail spending in Hong Kong, according to estimates from Hang Seng Bank. And yet, despite more visitors, growth in the city’s retail sales is slowing, with their total value increasing by 9.5 percent in July from the year before, down from June’s year-on-year growth rate of 14.7 percent.

The Star Malaysia’s government has yet to decide which projects would be postponed, but maintained that the Mass Rapid Transit project would proceed as planned, Prime Minister Najib Razak said. “Projects with low import content and high-multiplier effects would be given priority, without jeopardising economic growth. However, projects with high import components would be sequenced accordingly,” he said, adding that he wants to narrow the country’s current account surplus with a more cautious planning.

Straits Times The Malaysian ringgit hit a three-week high on Tuesday, outperforming some Southeast Asian currencies, as offshore funds bought it after the government cut fuel subsidies to reduce the country’s fiscal deficit. The ringgit advanced 0.29 per cent to 3.2645 against the U.S. dollar, after hitting 3.2590, its strongest since August 13. Late Monday, Malaysia cut the fuel subsidies to beef up the country’s fiscal position, which had spurred capital outflows. The cuts will save the government an estimated 1.1 billion ringgit (US$334 million) this year.

Chinese reform goes local Zhang Monan

Fellow of the U.S.-based China Information Centre

ince the eruption of the global financial crisis in 2008, China has used massive economic stimulus to sustain gross domestic product growth. But unresolved structural problems have meant that the stimulus packages generated significant fiscal and financial risk, while doing little to improve China’s capital stock. Indeed, while China’s overall capital stock is by no means small, capital structure and maturity mismatches have led to the accumulation of massive volumes of non-performing assets, undermining China’s economic stability and financial efficiency. In order to create the stability needed to reach the next stage of economic development, China must shift its focus from sustaining high GDP growth toward revitalising its capital stock. China’s new leadership seems to recognise this. Premier Li Keqiang has declared that the government will not introduce any additional economic stimulus; instead, the authorities will pursue profound and comprehensive economic reform, even if that means slower GDP growth. Moreover, Li has called upon the banking sector to reinvigorate idle capital and allocate incremental capital more effectively. And the State Council recently published “Guidelines for the Structural Adjustment, Transformation and Upgrading of the Financially Supported Economy”, which outlines ten key measures for revitalising the capital stock. This implies major macroeconomic reforms. China’s government is now attempting fiscal decentralisation to revitalise the public finance position, while adopting financial decentralisation to maintain currency stability. Indeed, the quest for macroeconomic balance has become the government’s main economic policy goal.

Turning to deficit Over the last three decades, the gradual decentralisation

of China’s fiscal management system enabled it to regulate fiscal transfers to sub-national governments, with the primary aim of clarifying revenue and expenditure at all levels of government. Why, then, did local government balance sheets swing from surplus to deficit over the same period? In 1994, China’s economic reform process reached a turning point with the introduction of a tax distribution system that reduced the proportion of tax revenue held by local governments from 78 percent in 1993 to 52 percent in 2011, while raising the proportion of expenditure from 72 percent to 85 percent over the same period.

debt through off-balancesheet loans and shortterm interbank funding to finance local government investment vehicles and real estate investment. In doing so, they dramatically increased their financial vulnerability. By the end of 2012, the combined liabilities of 36 of the most indebted local governments totalled roughly 3.8 trillion yuan (4.95 trillion patacas), up nearly 13 percent from 2010. Furthermore, a large proportion of the credit was invested in the overheated real estate sector, as well as in infrastructure projects with low rates of return, creating large-scale structural overcapacity that has undermined the efficiency of investment and resource allocation, and contributed to the structural mismatch of fiscal resources.

Budget control

China’s government must take fiscal and financial decentralisation further

Faced with intense competition to contribute to GDP growth, local governments were compelled to seek other ways to augment fiscal revenue. As a result, they turned to land transfers and debt financing, exacerbating the problem of soft budget constraints. Cash-strapped local governments began seizing farmland in order to sell it to commercial real estate developers, while accumulating massive

Now, China’s government must take fiscal decentralisation further, giving each local government the authority to collect taxes and control its budget’s scale and structure. Only by adjusting the distribution of public finance can China’s leadership help local governments to decrease their reliance on land-transfer revenues and bank loans. The next challenge for China’s leadership is to establish better mechanisms for ratification and approval of the overall budget, which comprises the general public budget, the government-fund budget, and the budget for state-owned capital. Currently, while sub-national governments are required to submit their budgets for approval to the people’s congress immediately above them, as well as to the National People’s Congress, the drafts undergo little scrutiny. Ensuring that all budgets are reviewed by people’s congresses at various levels would enhance resource efficiency by reducing fiscal competition between the central and

local governments as well as among local governments. China can further enhance the capacity of existing financial resources to support the real economy through financial decentralisation. In recent years, the central government has tightened its control over the banking sector, undermining the financial system’s development, not least by impeding banks’ ability to assess credit risk. By forcing banks to offer lower interest rates to stateowned enterprises, the government drove private firms and households to informal lenders, fuelling the emergence of a large and riskladen shadow banking sector. Likewise, the requirement that banks offer very low or even negative real interest rates to private depositors drove them to invest in fixed assets, leading to overcapacity in some sectors, such as real estate. As a result, market-oriented interest rate reform is now needed to help optimise capital allocation and support the development of China’s financial market, thereby laying the groundwork for future capital-account and exchangerate liberalisation. But financial decentralisation extends beyond interest rate liberalisation. Breaking the central government’s domination of China’s financial resources will fundamentally change the system of implicit guarantees that is currently generating significant financial risk. It will also help to synchronise financial development between urban and rural areas, ultimately eliminating China’s longstanding dual financial structure. If China’s leaders are genuinely committed to revitalising the capital stock, they must begin with fiscal and financial decentralisation. Such an approach would promote efficiency, stability, innovation and dynamism at the local level – exactly what China needs to support its progress toward advanced economy status. © Project Syndicate

September 5, 2013

Closing Merchants Bank raises US$4.5 bln

Putin warns over Syria action

China Merchants Bank Co raised 27.5 billion yuan (US$4.5 billion) in the Shanghai portion of a rights offer, paving the way for it to complete the world’s third-largest share sale this year. Investors holding 96.4 percent of the Shanghai-traded shares subscribed to the offer, Merchants Bank said in an exchange filing yesterday. The Shenzhen-based lender said last month it planned to raise 34.8 billion yuan by offering shares in Shanghai and Hong Kong. The sale will help Merchants Bank, the nation’s sixth largest, meet capital needs over five years, speed up growth and cope with growing competition.

Russian President Vladimir Putin has warned the U.S. and its allies against taking one-sided action in Syria. He said any military strikes without UN approval would be “an aggression”. U.S. President Barack Obama has called for punitive action in response to an alleged chemical weapons attack. Mr Putin said Russia did not rule out supporting a UN Security Council resolution authorising force, if it was proved “beyond doubt” that the Syrian government had used chemical weapons. On Tuesday, members of the U.S. Senate Committee on Foreign Relations agreed on a draft resolution backing the use of military force.

IMF sees vulnerable emerging economies

Euro zone services return to growth

Emerging markets susceptible to U.S. tapering, says global lender

dvanced economies led by the United States will increasingly drive global growth while emerging countries are at risk of slowing due to tighter U.S. monetary policy, the International Monetary Fund said in a note obtained by Reuters yesterday. In the surveillance note, prepared for the Group of 20 meeting in St. Petersburg, the IMF urged strengthened global action to revitalise growth and better manage risks, warning that some downside risks have become more prominent. Emerging economies are seen particularly vulnerable to a tightening of U.S. monetary policy and the IMF recommended that policy makers be ready to handle a rise in financial instability. “Policy makers should allow exchange rates to respond to changing fundamentals but may need to guard against risks of disorderly adjustment, including through intervention to smooth excessive volatility,” the IMF said. The U.S. Federal Reserve may start tapering its stimulus programme as early as this month, the IMF noted.

China local debt under control, says minister

hina’s local government debt is under control but there are relatively big problems in some areas, Finance Minister Lou Jiwei said in comments published yesterday, the latest comments on an issue that has raised concern among investors. Local government debt is among the biggest threats to its economy as the credit mostly funded the building of public infrastructure, which yield low financial returns. Poor government disclosure on debt levels have further aggravated concerns about the true size of China’s bad debt risks. “The basic size of local government debt is under control and the pace of increase is slowing.

The next Fed policy meeting is set for September 17-18. “The greatest worry may well be a prolonged period of sluggish global growth [a plausible downside],” the IMF said, adding it was revising downwards its near-term projections for emerging economies. Brazil, China and India account for much of that slowdown. But with the United States and other advanced economies picking up speed, the IMF said it still expected global growth to accelerate in 2014 from this year, helped by the highly accommodative monetary conditions in the rich world. Private demand, underpinned by recovering labour and housing markets, should further bolster the U.S. economy next year, though growth in Japan may become more subdued as a consumption tax increase takes effect and stimulus spending slows. The IMF said it expected a continued recovery in the euro zone in the third quarter but said the 17-nation currency area needed to boost the supply of credit by repairing its banks’ balance sheets and making

But problems are relatively big in some areas,” Mr Lou said in an interview with the official Xinhua news agency. “We are strengthening our communications with some local governments while the National Audit Office is conducting a new round of debt auditing,” he said. The office said in July it would conduct an audit of all government debt at the request of the cabinet, underlining concern over rising debt levels in the world’s secondbiggest economy. Mr Lou’s remarks echoed earlier comments by President Xi Jinping, who said during an official visit to central Asian countries that the government is able to deal with problems of local debt. The finance minister also expects growth in central government revenues to pick up in the coming months in line with economic recovery. China’s fiscal revenues in July rose 11 percent from a year ago, slowing a touch from June’s 12 percent rise, government data showed earlier.

progress towards a banking union. China and its Asian neighbours should strengthen financial ties to head off risks, China’s deputy central bank governor, Yi Gang, said yesterday. “Expectations that developed economies may start to exit quantitative easing policies have stirred financial markets in emerging countries, which requires our join efforts to handle,” Mr Yi said in a statement published on the central bank’s website. He made the remarks at a ChinaASEAN financial forum held in southern China. He called on China and ASEAN countries to broaden the use of regional currencies in bilateral trade and investment settlements and close more currency swap deals to facilitate capital flows. To help reduce global economic imbalances, the IMF urged surplus eco n o m i es s u ch a s C h i n a a n d Germany to stoke domestic demand while deficit countries such as the euro area periphery and Britain should improve their external competitiveness. Reuters

The key euro zone services sector returned to growth in August, with business activity across the board hitting a 26-month high, a closelywatched survey showed yesterday. Analysts said growth across the 17-country euro zone would remain sluggish after an 18-month recession that cost millions of jobs and tested the cohesion of the single currency bloc to the limit. However, the data was not all positive – growth in the powerhouse Germany economy was not enough to stop employment levels falling while second-ranked France slipped back faster than in July. The Composite Purchasing Managers’ Index compiled by Markit Economics rose to 51.5 points in August from 50.5 in July but was down from the 51.7 points flagged in the first flash estimate. At 50.7 in August, up from 49.8 in July, Markit said its separate PMI for the services sector – which accounts for the bulk of economic activity – showed growth for the first time in 19 months. Manufacturing activity had already crossed the 50-points boom-or-bust line in July. The PMI figures came as separate data yesterday confirmed that the euro zone grew 0.3 percent in the second quarter compared with the first, EU-wide growth coming in at an upwardlyrevised 0.4 percent. “The euro zone recovery is looking increasingly broad-based, with more sectors and more countries emerging from recession,” said Chris Williamson, Chief Economist at Markit. “Looking ahead, the hope for the eurozone is that currently rising confidence will encourage businesses to lift their employment and investment plans, and will also encourage consumers to spend more,” IHS Global Insight analyst Howard Archer said.

Chinese demand to pull global car market

The government aims to complete reforms to replace a business tax with value-added tax by 2015, which will result in a tax cut of hundreds of billions of yuan, he added. The government has expanded the tax reform in selected services sectors nationwide from August 1.

Global car sales will grow by 4.8 percent next year pulled by unexpectedly strong demand in China, the credit rating agency Moody’s forecast yesterday. In a report, Moody’s also upgraded its estimate for growth of the world car market this year to 3.2 percent. The agency said that the Chinese car market was growing faster than gross domestic product in the Asian economic powerhouse. Consequently it was revising upwards its estimate for the growth of Chinese demand for cars to 10.0 percent from an estimate in January of 7.0 percent, for both this year and next. Moody’s held to its forecast that the car market in Europe would contract by 5.0 percent this year from the 2012 level. The agency said that in 2014 the European market would rally by 3.0 percent, but this was a downgrade from a previous estimate of growth of 5.0 percent next year. Another study by auditing and consultancy group PwC in August said that the global car market would expand in the next few years, mainly because of growth of demand in China where sales were expected to double by 2019. The margins of German suppliers for the manufacture of new cars would continue to fall, but margins for Japanese automakers would be boosted by the fall of the yen. Automakers in the United States should be able to maintain their margins in the next 12-18 months, but these could be slightly compressed by increased competition and by a slowing of growth of the U.S. economy, Moody’s said.

Reuters

AFP

Increase in local government debt slowing, says Lou Jiwei