Hotel execs accused of labour import scam
Vitor Quintã
MOP 6.00
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April 19, 2013
Wynn, LVS, talk more on Japan casino plans Page 6
Mooncake makers face slimmer margins M
id-Autumn Festival mooncakes are famous for their high calorie content. But the local bakeries that make them are facing a slimming of their margins. Iun Loi Pastry Ltd and Choi Heong Yuen Bakery both cite keener competition amongst local bakeries and dim-sum restaurants as the reason they have tried to keep mooncake price hikes to customers
Sands China revenue close to catching SJM’s Page 7
at five percent or below. “The cost for the ingredients has risen by more than 20 percent this year,” Iun Loi’s owner Eduardo Ho Sio Meng told Business Daily. “But we still kept the selling price hike to three or four percent.” “The price of the nuts at present is four times the cost five years ago,” added Choi Heong Yuen’s managing director Alan Wong Yeuk Lai. More on page 2
Year II
Number 374 Thursday September 19, 2013
Editor-in-chief Tiago Azevedo
Deputy editor-in-chief
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Hang Seng Index 23220
23194
23168
23142
23116
Macau Legend to raise No planned extension US$300m via new shares to visa programme
23090
September 18
Macau Legend Development Ltd, a Macau casino services firm that halved its initial public offering size in June, plans to raise approximately another US$300 million (2.40 billion patacas) by selling new shares next year. The company expects to spend about US$1 billion to revamp its Fisherman’s Wharf entertainment complex on Macau peninsula. It plans to fund it through the new share sale and by raising debt.
There is no plan to extend China’s individual visit scheme – of exit visas issued to private travellers – to more mainland cities, Macau Government Tourist Office director Maria Helena de Senna Fernandes said yesterday. Hong Kong’s Chinese-language newspaper Apple Daily reported yesterday – quoting unidentified official sources – that Hong Kong had suggested extending the scheme to visitors from the northern cities of Qingdao, Taiyuan and Xi’an.
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HSI - Movers Name
%Day
CHEUNG KONG
3.09
NEW WORLD DEV
2.57
AIA GROUP LTD
1.96
HENDERSON LAND D
1.17
SUN HUNG KAI PRO
0.88
COSCO PAC LTD
-1.86
BELLE INTERNATIO
-2.11
CHINA MERCHANT
-2.73
TENCENT HOLDINGS
-3.92
BANK EAST ASIA
-4.47
Source: Bloomberg
Lau reshuffles legal team midway in trial
I SSN 2226-8294
Hong Kong developer Joseph Lau Luen Hung has replaced two of his original defence lawyers. The news was given yesterday in the latest hearing of his corruption trial linked to the high-end Macau housing project La Scala. No reason was given for the change but Chineselanguage media claimed it was due to differences of opinion between the businessman’s legal teams in Macau and Hong Kong. Page 5
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September 19, 2013
Macau
Mooncake makers face slimmer margins Ingredients up 20 pct, but only five pct price rise passed to customers Stephanie Lai
sw.lai@macaubusinessdaily.com
M
id-Autumn Festival mooncakes are famous for their high calorie content. But the local bakeries that make them are facing a slimming of their margins. Iun Loi Pastry Ltd and Choi
KEY POINTS Ingredient costs up 20 pct y-o-y Price rises to customers kept to five pct No impact from mainland corruption drive Local sales up by as much as 20 pct y-o-y
Heong Yuen Bakery both cite keener competition amongst local bakeries and dim-sum restaurants as the reason they have tried to keep mooncake price hikes to customers at five percent or below. “The cost for the ingredients has risen by more than 20 percent this year, and it is quite a large percentage,” Iun Loi’s owner Eduardo Ho Sio Meng told Business Daily. “But we still kept the selling price hike to three or four percent.” “The price of the nuts at present is four times the cost five of years ago,” added Choi Heong Yuen’s managing director Alan Wong Yeuk Lai. “All the costs in manufacturing and other ingredients have surged quite a lot, but we will not lift the selling price much because we don’t want to lose our edge when competing with other bakeries,” added Mr Wong. Bakeries here have escaped the anti-corruption drive slump in sales faced by some mainland
makers of the most extravagant and expensive cakes – some even dressed with jewels. “This has no particular impact on Macau,” stated Alan Wong. “The cases referred to in the mainland are what we call the luxury box sets of some gold-crusted mooncakes, which are sold in the mainland only.” He added: “Even for the mainland tourists that shop for mooncakes here, they only buy one or two boxes as a gift to their relatives or friends.” But the Macau firms said that this year’s tighter margins have been compensated for to some extent by higher volume of local sales. “We have a 20 percent rise in mooncake sales revenue for the festival this year,” said Mr Wong. For the 100-year-old mooncake specialist Iun Loi, sales have remained steady this year. The firm – which has a factory in Areia Preta and two outlets on Macau peninsula – has sold about 100,000 boxes from July until now. Prices range from 100 patacas (US$12.50) to 200 patacas (US$25) for each box of four Iun Loi mooncakes. Eduardo Ho said that local buyers – traditionally keen on a bargain – now seemed to be less sensitive to price rises. “Four or five years ago, the consumers could easily flinch away from buying mooncakes when you mentioned a price rise; but now it’s a total different scene,” said Mr Ho. “The economic growth seen
Mooncake daydreams (Photo: Manuel Cardoso)
The cost for the ingredients has risen by more than 20 percent this year Eduardo Ho Sio Meng, Iun Loi Pastry Ltd owner
these years in Macau has somehow contributed to the consumers getting more generous in buying mooncakes,” he suggested. “I even think that the cash handout plan has somehow boosted people’s demand in purchasing items like these cakes.” Alan Wong of Choi Heong Yuen, thinks observance of tradition, rather than a desire for extravagance is the main motivator for customers. “I think for Chinese, the tradition of buying festive foods for MidAutumn Festival will always be there,” he stated. Though he conceded: “Now the locals have got wealthier, they do care less about spending on the more expensive mooncakes. We’ve seen that for the past two years or so.”
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September 19, 2013 April 19, 2013
Macau
Macau Legend to raise US$300 mln via share sale Could happen only six months after IPO generated similar sum in Hong Kong
M
acau Legend Development Ltd, a Macau casino services firm that halved its initial public offering size in June, plans to raise approximately another US$300 million (2.40 billion patacas) by selling new shares next year. The company expects to spend about US$1 billion to revamp its Fisherman’s Wharf entertainment complex on Macau peninsula. It plans to fund it through the new share sale and by raising debt, cochairman Carl Tong Ka Wing said in an interview with Bloomberg News in Tokyo. Macau Legend’s other cochairman, David Chow Kam Fai, served as a Macau legislator from 2005 to 2009. The company has a deal allowing it to operate Macau casino venues using the licence of Sociedade de Jogos de Macau SA. Macau Legend raised HK$2.19 billion (US$282 million) in its IPO in July. It had originally hoped to generate HK$4.4 billion. It said in a draft prospectus it wanted to build up to three new casino hotels – populated by 350 new-to-market gaming tables – at Fisherman’s Wharf. Shares of Macau Legend fell 5.1 percent to HK$2.96 at the close in
Hong Kong trading. The stock is still 26 percent above its IPO price. On Tuesday the firm reported in a filing unusual upward movement in its share price, but said that day it was “not aware of any reasons for the increase”. The proposed share sale may take place early next year. It will increase Macau Legend’s public float to about 25 percent to 26 percent from the current 15 percent to 16 percent, Mr Tong said. The company is also looking to refinance existing syndicated loans through debt issuance, he said. The firm plans to work with CLSA Ltd, Citic Securities Co and Credit Suisse Group AG on the share sale, Mr Tong added. Macau Legend’s current assets include the Landmark Macau hotel, and the Pharaoh’s Palace casino inside it, as well as Fisherman’s Wharf, which is home to Babylon Casino and a 72-room hotel called The Rocks. Fisherman’s Wharf will focus more on mass-market gamblers instead of high-stakes bettors, Mr Tong said. The company will have a total of 500 gaming tables on site by 2016 he added. M.G. with Bloomberg News
Union wants tight new rules for subcontractors Tony Lai tony.lai@macaubusinessdaily.com
T
wo pay disputes have led the city’s biggest labour group to demand strict new rules on who can employ subcontractors and heavier penalties for not paying wages on time. The Macau Federation of Trade Unions delivered a petition to Secretary for Economy and Finance Francis Tam Pak Yuen yesterday after handling complaints from employees hired by TalentGroup Asia to work on the Galaxy Macau resort in Cotai. “According to the labour law, the employers have to pay their employees in the first nine working days,”
said Ella Lei Cheng I, union vice-president and a newly elected Legislative Assembly member. “But there is usually a delay of 10 days to halfmonth for those workers. For instance they have still not been paid their August salaries.” This dispute has dragged on since the end of last year and involves more than 100 workers, she said. Both TalentGroup Asia and Galaxy Entertainment Group Ltd have “skirted their responsibilities”. “There should be better rules to overseeing the subcontracting mechanism, not only limited to the
Galaxy Macau
Fisherman’s Wharf – big changes coming
construction [industry],” she said. “The employees are now in a helpless situation whenever there is a payroll dispute with the subcontractor or outsourcing company.” The government came up with a proposal to reform subcontracting two years ago but the Standing Committee for Coordination of Public Affairs has yet to discuss it. Ms Lei slammed the legislation procedures as “too slow”. She also wants heavier fines for companies failing who fail to pay their staff on time. Chief Executive Fernando Chui Sai On said last month they were drafting a registration system for subcontractors, particularly in the construction sector. Galaxy Entertainment Group Ltd told Business Daily it “took immediate action to follow up with the said service provider to understand the situation”. The operator said “any violation of employment regulations by any contractors will be reported (…) and appropriate actions will be taken immediately”. Calls to TalentGroup went unanswered. Another wage row mentioned in the union’s petition involved the more than 200 workers at the New Century Hotel. Most workers resigned and went without pay, but there are about 20 employees waiting for compensation after delays lasting more than two months in paying wages.
Hotel executives accused of imported labour scam T wo “top executives” of a hotel in the city are suspected of giving false information and forging documents to get imported labour quota, said the graft watchdog. The Commission Against Corruption said in a press statement yesterday it’s alleged the hotel tried to obtain quota for low-paid nonresident workers working as waiters. The commission did not name the hotel. As the government’s Human Resources Office did “not fully grant” the quota asked by the hotel, the executives applied again for quota, but this time claiming the waiters were going to get a higher salary and work in more qualified positions. The hotel would deposit the salary it had claimed to the government in the bank accounts of the employees,
said the statement. But then the executives would force them to give back part of the money every month, ranging from several hundred patacas to over 5,000 patacas. The two executives provided false information on the salaries and position of the workers to the Human Resources Office for eight times between 2011 and April this year. They also exaggerated the wage level of those employees to the Financial Services Bureau. The executives could face a jail sentence of up to three years for forgery, if found guilty, said the statement. Another hotel executive could also be charged with disobedience for not cooperating with the watchdog’s investigation. T.L.
4
September 19, 2013
Macau
Officials deny any further increase to solo visit scheme Tourism office ‘almost ready’ to launch walking trails to divert visitors from crowded spots Stephanie Lai
sw.lai@macaubusinessdaily.com
T
here is no plan to extend the individual visit scheme to more mainland cities, Macau Government Tourist Office director Maria Helena de Senna Fernandes said yesterday. Chinese-language newspaper Apple Daily reported yesterday that Hong Kong officials had suggested extending the scheme to tourists from the northern cities of Qingdao, Taiyuan and Xi’an. The report quoted unnamed government sources but did not mention if tourists would also be permitted to travel to Macau on their own rather than on a tour or business trip. “At present, we have not received any such news,” Ms Fernandes said at the Global Tourism Economy Forum in Macau yesterday. “Even in the recently signed supplement to the Closer Economic Partnership Arrangement there is no mention of any related measures,” the tourism head said. Currently, tourists from 49
The Global Tourism Economy Forum held in Macau ends today
mainland cities have been able to travel to Hong Kong and Macau under the individual visit scheme since 2003. Hong Kong’s Commerce and Economic Development Bureau yesterday denied there was “any plan at this stage to propose extending” the
scheme to more cities. The bureau said Hong Kong was at the final stage of assessing the city’s maximum tourism capacity. The Macau government’s thinktank, the Policy Research Office, has commissioned a similar study on the
tourist capacity here. Ms Fernandes said there were no details on available on that research.
Highly coordinated The study was launched amid an outpouring of frustration caused by overcrowding of facilities during the Lunar New Year holidays in February. The director of the Central People’s Government Liaison Office in Macau, Bai Zhijian, acknowledged the community’s growing discontent. “We can see from the residents’ reaction [to the visa policy]. For instance they are complaining about the inconvenience caused to the transport system and the city’s environment,” he said. However, Beijing’s top man in Macau gave no hint as to whether the government would change their position on the visa policy. The upcoming Golden Week that includes the mainland’s National Day holiday starting on October 1 will again mean added pressure from tourists on the roads and border checkpoints. Ms Fernandes said the city’s tourism bureau was “almost ready” to announce the details of four walking trails to divert visitors into the city’s heartland. “We will announce all the details by the end of this week or early next week,” she said. The office mentioned in late August that these four trails would try to lure tourists to the northern district, Tap Seac Square, and the Barra district. “We will inform visitors of the public transport options at the startand end-point of all these walking trails,” said Ms Fernandes.
Business interests will not dictate govt policy: Beijing Liaison office head says business-flavoured Legislative Assembly can represent all Macau Stephanie Lai
sw.lai@macaubusinessdaily.com
P
ublic policy formulated through the Legislative Assembly will not favour big business says Beijing’s top man in Macau, even though the business sector was the biggest winner in Sunday’s Legislative Assembly election. “The government’s decisions are reached not only through the Legislative Assembly but also from the public opinions gathered via the several advisory committees,” Bai
Bai Zhijian is expected to leave Beijing’s liaison office in Macau this year
Zhijian, the director of the Central People’s Government Liaison Office in Macau told reporters at the Global Tourism Economy Forum yesterday. “I do not think the policies reached will be leaning to the business sector’s interests because the procedures of passing a law here are very scrupulous and it goes through several layers of deliberation within the assembly.” Five of the 14 directly elected politicians to the assembly on Sunday have strong ties to the city’s gaming and construction sectors. The industrial, commercial and financial sectors hold four of the assembly’s 12 indirectly elected members. Moreover, businessmen Chan Chak Mo and Vitor Cheung Lap Kwan were re-elected to represent the cultural and sports functional constituency. Mr Bai said he hoped the newly elected legislators would fulfil their duty and contribute to the city’s development. Mr Bai has been the director of the liaison office since 2002 but has not confirmed a departure date. He is expected to resign this year, to be succeeded by Li Gang, a member of the Central Commission for Discipline Inspection.
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September 19, 2013
Macau
Joseph Lau revamps legal team midway through corruption trial Judge turns down lawyer’s request to delay hearing into bribery charges against Hong Kong tycoon Tony Lai
tony.lai@macaubusinessdaily.com
T
he legal team representing Hong Kong tycoon Joseph Lau Luen Hung was overhauled on Tuesday night, midway through the defence of the chairman of Hong Kong-listed developer Chinese Estates Holdings Ltd on bribery charges. The new lawyer, David Azevedo Gomes, did not offer the court an explanation for the change but it was reported elsewhere there had been differences of opinions between the tycoon’s legal teams in Macau and Hong Kong. “I only got the authorisation document [from Mr Lau] last night so I had no time to prepare for the case,” Mr Gomes told the Court of First Instance yesterday. A request to suspend yesterday’s session so Mr Gomes could “review many documents” was turned down by Judge Mário Silvestre. The trial has been plagued by delays. Lawyers Leong Weng Pun and Lee Kam Iut had represented Mr Lau since the corruption trial linked to the high-end residential project La Scala was first scheduled last September.
David Azevedo Gomes is the new lawyer defending the corruption-hit developer Lau
Both Mr Lau and Steven Lo Kit Sing, chairman of Hong Kong entertainment firm BMA Investment Group Ltd, face charges of bribing Ao Man Long with HK$20 million (US$2.5 million) in order to win a tender for the land near the airport. The La Scala residential development was to be built on the site. The former government secretary
Mr Ao was jailed for a 29-and-a-half years after being found guilty of taking bribes in earlier trials. Mr Gomes did not say when he was approached by Mr Lau or if there would be any change in the tycoon’s defence. Jorge Neto Valente, lawyer representing Mr Lo, did not say if the change would have an impact
on the case. Business Daily called the office of Mr Leong and Ms Lee but had not received a reply before going to press last night. Ms Lee told the Oriental Daily newspaper they had settled the matter with Mr Lau “peacefully”. But the Chinese-language newspaper Macao Daily News quoted an unidentified source saying Mr Leong and Ms Lee were replaced because they had “different opinions” from Mr Lau’s Hong Kong lawyers. A legal expert told Business Daily it was “not uncommon” for defendants to change lawyers midway through a trial. The impact was typically “limited” as the trial is being monitored closely by the tycoon’s legal team in Hong Kong. Though Mr Gomes is new to the La Scala trial, he is familiar with other cases related to the jailed secretary. The lawyer represented Mr Ao in his second corruption trial in 2009, which focused on several public infrastructure projects. The next session of the La Scala trial is scheduled for October 7.
Defence says Ao played no part in water contract wins There is not enough evidence to connect jailed civil servant to three public contracts, lawyers claim Tony Lai
tony.lai@macaubusinessdaily.com
T
here is not enough evidence that jailed government secretary Ao Man Long intervened to alter the outcomes in three contracts for wastewater treatment, lawyers for the jailed civil servant said yesterday. Yesterday’s session of a bribery trial with links to contracts to build and operate sewage treatment plants in the Zhuhai-Macau Cross-Border Industrial Park and Coloane has resumed at the Court of First Instance. Commission Against Corruption chief investigator Mak Chi Hung said Mr Ao gave orders to tweak the assessment report for the crossborder park contract. “How about the one in Coloane?” asked Ho Chon Hou, a lawyer defending ATAL Engineering Ltd managing director Fong Chun Yau. Mr Fong allegedly bribed the former secretary to secure contracts between 2004 and 2006, together with three other businessmen, including Waterleau Global Water Technology NV chief executive Luc Vriens. “But it is a fact that they [the accused] really deposited money
to accounts controlled by Ao Man Long,” Mr Mak said. Mr Ho said the investigator claimed “every project approved by Mr Ao was linked to bribery” without showing evidence of the former secretary’s influence in the contracts. The Commission Against Corruption has said the former deputy chief of the Infrastructure Development Office Pun Pou Leng took orders from Mr Ao to give a higher assessment to the consortium that included Waterleau and ATAL. Testifying in July, Ms Pun said she did not feel pressure from Mr Ao to make a decision. Yesterday, Mr Ho asked why Waterleau had not secured a contract for a wastewater plant in Taipa if they had bribed Mr Ao. Mr Mak replied that he did not “remember” the procedures for the tender for the Taipa plant. A lawyer for businessman Pedro Chiang, João Miguel Barros, raised doubts over the authenticity of four handwritten documents confiscated from Mr Ao’s home that allegedly record the transactions surrounding
A consortium led by Belgium’s Waterleau won four contracts for wastewater treatment
the treatment plants. Mr Chiang is accused of active corruption and money laundering. Mr Barros said the documents look like they were patched together from several pieces of paper. Although the documents appeared
to be on a hotel notepad, the logo and address was in the middle of the paper and not at the top or the bottom, he said. Mr Mak defended the authenticity of the documents, saying they had not been altered since their confiscation.
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September 19, 2013 April 19, 2013
Macau
Wynn, LVS, reveal more on Japan casino plans Senior industry executives in Tokyo for Union Gaming Group conference Michael Grimes
michael.grimes@macaubusinessdaily.com
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acau and Las Vegas casino investor Wynn Resorts Ltd, says it wants to join an unidentified Japanese consortium in a bid to spend more than US$4 billion on a Japanese casino resort. The company is interested in developing properties in Tokyo and Osaka, said Gamal Aziz, president and chief operating officer of Wynn Resorts Development LLC in a Bloomberg interview in Tokyo yesterday. Fellow Macau investor Las Vegas Sands Corp also wants two resorts – in Tokyo and Osaka – and is “open minded” about having local partners, George Tanasijevich, managing director of global development for LVS said in a separate interview in Tokyo yesterday. The company will fund Japan casino resorts with cash generated by existing operations if allowed to build, he said. LVS has begun considering potential locations, including the Odaiba section of Tokyo – an island of reclaimed land in Tokyo Bay located between Haneda Airport and the business district surrounding the city’s main train station. Senior executives from LVS, MGM Resorts and Wynn Resorts have all been making presentations at an investment conference in Tokyo organised by Las Vegas-based Union Gaming Group. The event started on September 17 and ends today. Tokyo’s potential as a gambling market is also drawing the interest of Macau operators SJM Holdings Ltd, Melco Crown Entertainment Ltd and also United States-based operator Caesars Entertainment Corp. Wynn’s Mr Aziz didn’t provide details on its potential Japan investment or say which Japanese consortium it might consider. It certainly won’t be linked to Japanese pachinko entrepreneur Kazuo Okada.
Almost five years ago to the day, Mr Okada – then a major investment partner of Wynn Resorts’ chairman Steve Wynn – told Bloomberg in an interview on the eve of another investment conference on Japan gaming, that he and Wynn Resorts planned to submit a joint bid for a Japanese casino resort if such facilities were legalised. But in February last year Mr Okada had a terminal falling out with his former “best friend” Mr Wynn. Wynn Resorts said in filings it was because of the manner of Mr Okada’s pursuit of a casino licence in The Philippines last year, which it said posed a threat to its Nevada gaming licence. Mr Okada denied that and has sued in Japan for defamation. Also in August 2007, Jay Defibaugh, then an analyst at Credit Suisse Group in Tokyo, told Bloomberg that legislation allowing casinos was unlikely to pass Japan’s parliament before “late 2008”. This year Mr Defibaugh – now an analyst at CLSA Asia-Pacific Markets in Tokyo – said Japan is likely to pass an enabling law in October or November this year. Prior to joining Wynn in January, Gamal Aziz was president and chief executive of MGM Hospitality, charged with overseeing the application of MGM Resorts International’s branding and management on another Asian venture – a casino resort at the Ho Tram Strip in Vietnam. Although MGM was not an equity investor in the project, in March it announced it was pulling out of the scheme. The developer said MGM “didn’t want to wait” for the scheme to get its investment certificate from the Vietnam government. Ho Tram eventually opened in late July without MGM.
Gamal Aziz (left) of Wynn, and George Tanasijevich of LVS
With Bloomberg News
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September 19, 2013 April 19, 2013
Macau
Minister suggests LVS should cough up on Madrid Regional government says real problem is central authorities’ stalling on smoking in the casino Michael Grimes
michael.grimes@macaubusinessdaily.com
I
gnacio González, president of the Community of Madrid, has warned that Las Vegas Sands Corp’s proposed multi-billion euro investment in a huge casino resort in the region is at risk unless “a legal framework” is established by Spain’s central government. Mr González, urged the central authorities to “create a legal framework” to build the project on the outskirts of Alcorcón according to the Barcelona-based newspaper La Vanguardia. The reference is understood to be a euphemism for giving LVS the legal right to let customers smoke inside the proposed casino at the resort.
The regional president also warned there was a risk the investment would go to another country because “companies cannot wait forever”. Sheldon Adelson, chairman of LVS, said in July he would delay proposals for construction of the scheme at its preferred site Alcorcón – a largely commercial district to the southwest of the Spanish capital Madrid – until there was clarity on whether smoking would be allowed in the casino portion. Since January 2011 Spain has banned smoking in all indoor public spaces, including restaurants, bars and cafes. The central government would need to give special permission
José Manuel Soria
if the casino were to be exempted from that legislation. The Madrid regional government has already agreed to waive its normal 40 percent tax on gross gaming revenue, in favour of a 10 percent rate for the project. José Manuel Soria, Spain’s Minister of Industry , Energy and Tourism, said during an interview with Europa Press agency EFE this week, that the central government and the Community of Madrid were working together to make the project happen because it would be “very good “ not only for Madrid, but for all Spain. But Mr Soria suggested the issue was whether funding were available from the developer. Salvador Victoria, a spokesman for the Madrid regional government, rejected that interpretation, saying the problem was “the current uncertainty”, without referring directly to the smoking issue. Also speaking to EFE, Mr Victoria said: “…no one makes an investment of billions of euros without a legal framework and legal security that guarantees the viability of a project of this size”. The Madrid scheme is typically referred to in the Spanish media as ‘EuroVegas’, although Michael Leven, president and chief operating officer of LVS, told Business Daily in February that another unrelated
project in Hungary was suggesting a similar name. “We really haven’t named it and I’m not sure we have to name it,” stated Mr Leven. “‘Euro’ itself has some connotations and we don’t really want to be confused with a bank,” he added. Figures ranging from six billion euros (64 billion patacas) to 17 billion euros have been mentioned in media reports, with the higher number including later phases. In February Mr Leven mentioned to Business Daily a sum of US$9 billion for the first phase. He said LVS were willing to spend US$3.6 billion in equity – up to 40 percent of the total cost for phase one – with the rest funded from debt. Mr Leven said Asian high rollers weren’t likely to be a priority for the new casino resort, as by Macau standards there were likely to be a modest number of high roller tables. But he added, referring to LVS’s Spain scheme: “It’s a very interesting destination for Asians. There’s more cash in their pockets these days and [that] will be [growing] for the next ten years at least, so I think we’ll get some of that traffic which will help the project.”
…no one makes an investment of billions of euros without a legal framework and legal security Salvador Victoria, Community of Madrid spokesman
Sands China close to catching SJM Firm’s August share of gross revenue only 120 basis points behind market incumbent Michael Grimes
michael.grimes@macaubusinessdaily.com
S
ands China Ltd is within 1.2 per centage points of drawing level with SJM Holdings Ltd in Macau monthly gross gaming revenue, according to unofficial market returns seen by Business Daily. The figures – yet to be confirmed by the Gaming Inspection and Coordination Bureau – suggest SJM’s total gross revenue for August was approximately 7.35 billion patacas (US$920.2 million), or 23.9 percent of the market total of 30.74 billion patacas. Sands China was just shy of 6.98 billion patacas, or 22.7 percent of the market. Since SJM was spun off from Stanley Ho Hung Sun’s former casino monopoly Sociedade de Turismo e Diversões de Macau, SA at the turn of the century, it has always been able to stay ahead of the market newcomers in terms of gross revenue market share. That’s been thanks to its large network of so-called satellite
casinos – mostly on Macau peninsula – that are owned by other parties but use the gaming licence of SJM’s concession unit Sociedade de Jogos de Macau SA. Recently however, massmarket revenues on Cotai have been ramping up. SJM doesn’t yet have a venue there, and won’t until 2017 at the earliest. Sands China – 70 percent owned by Las Vegas Sands Corp – has, via its four Macau properties, already gone ahead of SJM in massmarket table revenue in August according to the numbers seen by this newspaper. Sands China had a 30.7 percent mass table share in August (approximately 3.05 billion patacas) compared to SJM’s 26.5 percent (2.63 billion patacas). Critics of the revenue league table say SJM only gets the full economic benefit of revenue from its core properties – Casino Lisboa, Casino Grand Lisboa and Casino Oceanus. (Casino Jai Alai next door
The Venetian Macao
to Oceanus is closed for renovation). In the 16 satellites, SJM has to share with the third party owners, albeit at differing rates. Sheldon Adelson, chairman of LVS and of Sands China, said during his firm’s third quarter earnings call
in 2010: “I personally think there is an over-exaggeration of the issue of gross revenue for market share – if all you are getting is three percent out of it when you are counting the entire 100 percent as part of your market share.”
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September 19, 2013 April 19, 2013
Greater China US slaps dumping tariffs on Chinese The United States on Tuesday slapped high anti-dumping tariffs on Chinese hardwood and decorative plywood products, hitting nearly US$750 million worth of imports from China. The Department of Commerce’s International Trade Administration (ITA) said an investigation had determined that the wood products from China were both “dumped” – underpriced in the US – and enjoyed significant subsidies from the Chinese government. The ITA said the anti-dumping duties would range from about 56 percent to 122 percent, and that anti-subsidy duties would run up to 27 percent, depending on the exporter and product. The tariffs were set after an investigation requested by a group of US wood product companies under the umbrella of the Coalition for Fair Trade of Hardwood Plywood. Hardwood and decorative plywood is used in home and office interiors as wall panels, cabinets, and in some flooring.
Peugeot to consider Dongfeng stake sale PSA Peugeot Citroen, Europe’s second-biggest carmaker, is considering selling a stake to Chinese automaker Dongfeng Motor Corp to raise cash for an expansion outside its home continent, two people familiar with the matter said. The talks are at a preliminary stage and nothing has been decided yet, said the people, who asked not to be identified because the talks are private. The sale of a stake could lead the Peugeot family, which currently owns 25.5 percent of the French carmaker’s shares, to lose control of the company, the people said. Peugeot, which reported a first-half operating loss in its automotive unit of 510 million euros (US$681 million), is losing market share in Europe to Volkswagen AG, the continent’s largest automaker. To push expansion elsewhere, Peugeot is already partnering with Dongfeng, opening an assembly plant together in July to produce four models in China.
Home prices rise, testing govt
Some of China’s largest cities continued to show rises well above th By Xiaoyi Shao and Natalie Thomas
C
hina’s new home prices rose at the fastest rate in at least two-and-a-half years in August, with some large cities rising around double the national pace, complicating government efforts to keep prices in check while supporting one of the stronger areas of the economy. The government has tried to control property prices, wary of a potential bubble and the possibility of unrest if people are priced out of the market, but cannot push too hard as a strong property market has helped offset a general economic slowdown. “We think the government is likely keep property policy stable as the mild recovery of the broader economy is not so stable yet,” said Du Jinsong, property analyst at Credit Suisse in Hong Kong. Average new home prices in China’s 70 major cities rose 8.3 percent from a year earlier, according to Reuters calculations based on data published by the National Bureau of Statistics. That accelerated from July’s 7.5 percent gain to be the biggest increase since Reuters began calculating the nationwide figure in January 2011. From a month earlier, prices rose 0.8 percent in August, picking up slightly from July’s gain of 0.7 percent to end a four-month run of moderating rises. Sixty-six cities posted month-on-month price gains, up from 62 in July, the NBS said. Some of the country’s largest cities continued to show rises well above the national average, with prices up around 15 percent in annual terms in Beijing and Shanghai, and more than 18 percent in the southern cities of Guangzhou and Shenzhen.
The rises in those four cities were the largest since January 2011, when the NBS changed the way it calculated home price changes. The central government’s difficulty in checking house prices is partly due to strong demand for property, which is seen as a safe haven investment, and to efforts by local governments to sell land for much-needed revenues.
Record prices Two plots of land in Beijing and Shanghai sold for record prices in quick succession earlier this month, and analysts say the divergence between big cities with strong demand and small cities suffering a glut has forced the central government to adopt different targeted measures to rein in home prices. “Some local governments are likely take fresh measures to stem the rebound of home prices as many of them cannot meet their targets set earlier this year,” said Lin Bo, vice-head of research at China Real Estate Information Corp, a property data provider in Shanghai. Reuters
8.3%
year-on-year hike in China’s new home prices
The government has tried to control property prices,
Solar factor to drive mer Chinese authorities have overcapacity Ehren Goossens
C
China’s factories could produce 49 gigawatts of solar panels a year
hina, the world’s biggest maker of solar panels, will limit construction of new photovoltaic manufacturing plants to curb excess capacity, a move that may spur consolidation within the industry. New solar plants that “purely” expand capacity will be strictly banned, the Ministry of Industry and Information Technology said in a statement on its website on Tuesday. Annual spending by companies for research and development and upgrading equipment must total at least 3 percent of revenue and must exceed 10 million yuan (US$1.6 million). Chinese authorities have pledged to cut overcapacity in industries from steel to paper as
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Greater China
t curbs
he average
EU ready for talks on trade, investment deal Business pact could ease tense ties, unleash billions of euros in investment
E
wary of a potential bubble
uropean Union (EU) countries will agree next month to talks with China on a pact making it easier to do business, possibly paving the way for a free-trade deal between two of the world’s biggest markets, officials said on Tuesday. Brussels and Beijing want to negotiate an accord to break down barriers to each other’s markets and encourage billions of euros of new investment between the two, in a push for better ties after narrowly avoiding a trade war earlier this year. Trade between Europe and China has doubled since 2003 and is worth more than 1 billion euros (US$1.3 billion) a day, but China receives just 2 percent of the European Union’s investment abroad. European companies complain of poor treatment in China, such as being pushed into joint ventures and forced to share sensitive know-how to win access to Chinese funding and local contracts. Diplomats told Reuters that the governments of the 28-nation European Union will give the European Commission the power to negotiate on an “investment agreement” on their behalf at a meeting in Luxembourg on October 18. European Union Trade commissioner Karel De Gucht added that he had the support of countries in the bloc. “We are ready and China says it is also ready. We are waiting to get started,” Mr De Gucht told business leaders, officials and diplomats in Brussels. With the green light from European Union countries, talks could be formally launched at an
Over time, there will be a free-trade agreement between China and Europe Karel De Gucht
EU-China leaders’ summit either later this year or early in 2014 and completed in about two years, potentially unleashing billions of euros in new business. Agreeing the deal will be a challenge, however. China has the most restrictive foreign investment regime in the Group of 20 major economies, according to the Paris-based Organisation for Economic Cooperation and Development. The European Union is concerned by what it says is China’s state capitalism, accusing Beijing of flooding domestic industry with cheap credit to undercut companies
Reuters
More firms joining short-selling scheme
ry limits rgers pledged to cut solar panel
China’s securities regulator seeking to expand financial markets
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policy makers seek to reduce the economy’s reliance on investments and exports. A global oversupply of solar panels led to a 20 percent plunge in prices last year, according to data compiled by Bloomberg. The policy will slow efforts to expand production capacity in favor of mergers and acquisition as a growth strategy for the biggest companies, Angelo Zino, an analyst with S&P Capital IQ in New York, said in an interview. “They may be able to add capacity without actually building it,” Mr Zino said. “The Chinese government would be more than okay with companies if they joined forces or capacity gravitated toward the
in Europe. “We want clear rules on investment protection,” said Bernd Lange, a German social democrat and a member of the European Parliament that must give its consent to any investment accord. European Union trade chief Mr De Gucht said it was in both sides’ interest to deepen trade ties, even if EU member countries such as France and Italy are very distrustful of China’s trade practices. “Over time, there will be a freetrade agreement between China and Europe. I am sure about that,” Mr De Gucht said.
tier-one manufacturers.” Chinese solar companies have the capacity to supply the entire industry, with plenty left over. Were they to run at full speed, China’s factories could produce 49 gigawatts of solar panels a year, 10 times more than in 2008 and 61 percent more than installed globally last year, according to data compiled by Bloomberg. A gigawatt is about as much as what a new nuclear reactor can supply. “You still have so much capacity out there that is just not being used,” he said. “It will help stabilise the whole pricing environment.” Panel prices are about 84 US cents a watt, compared with US$2 at the end of 2010. Bloomberg News
hina is expanding a programme that facilitates the ability of brokerages to lend stocks to clients for shortselling, as regulators seek to promote new services on the country’s financial markets. Changjiang Securities Co, Founder Securities Co and Hong Yuan Securities Co are among 19 securities companies allowed starting yesterday to borrow shares from China Securities Finance Corp and re-lend them to clients, the statebacked agency said in a statement on its website Tuesday. They will join 11 brokerages, including Citic Securities Co and Haitong Securities Co, already able to borrow from the agency. Gaining the right to borrow shares from China Securities Finance expands a revenue stream for the brokerages, which have seen income from underwriting share sales dry up amid a crackdown on misconduct that’s halted initial public offerings
since mid-October. Short selling is one of the measures that will support development of the country’s financial markets, the nation’s securities regulator said last month. Short sellers borrow shares that they then sell, betting they can buy back the stock later at a lower price and profit from the difference. China Securities Finance also expanded the list of shares it allows brokerages to borrow from 87 to 287, according to a separate statement. The agency was established in 2011 to lend money and securities to brokerages to facilitate margin trading and short selling. The Shanghai and Shenzhen stock exchanges this month expanded the total list of stocks investors can short to 700. The outstanding value of margin and short-selling trade on domestic stock markets grew 2.5 times in the first half to 222.2 billion yuan (US$36.3 billion) at the end of June, according to Tebon Securities Co.
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September 19, 2013 April 19, 2013
Greater China Visteon may forgo NYSE for Hong Kong Visteon Corp, the auto-parts maker focusing on Asian growth, is considering leaving the New York Stock Exchange and trading in Hong Kong, where investors recognize the company’s value, its top executive said. “In Asia, where the bulk of our business is and the bulk of the automotive industry is, this is a growth industry, but we’re not getting growth multiples,” chief executive officer Tim Leuliette said. Visteon, which emerged from bankruptcy in 2010, does less than 10 percent of its business in the United States and is growing rapidly in Asia, Mr Leuliette said.
Entrusted loans soar as govt curbs shadow banking Companies lending money to each other in new risk for China credit
C
hina property developer Zhang Fuguo was rejected by banks for a loan to help keep building two office towers in the central city of Zhengzhou. So he turned to a manufacturer of water and gas meters. The 50 million yuan (US$8.2 million) loan last month at a 20 percent interest rate will help Mr Zhang pay workers and buy materials and was like “delivering coal on a snowy day,” he said. It was less so for one board member at lender Henan Suntront Technology Co, who abstained from approval on concern that Mr Zhang’s company would fail to repay the debt. So-called entrusted loans, in which banks are “entrusted” with funds as middlemen between companies, increasingly grease the wheels of China’s economy, withstanding a crackdown on shadow banking this year and rising to a record 293.8 billion yuan in August. The increase was part of a surge in non-bank credit that may add to default risks threatening premier Li Keqiang’s efforts to sustain 7 percent expansion this decade. “The more that we have financial activity taking place in the shadowbanking system, under the current regulatory standards and regime, the more risky that it is,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. Entrusted loans and other financing outside the main banking
system are “not so well regulated,” and “people who hold the assets don’t always understand and don’t always know where the money is actually being used,” said Kuijs, who previously was a World Bank economist in Beijing.
Record streak The increase in aggregate financing followed an unprecedented four straight month-on-month declines and the government’s signal that it would defend the year’s 7.5 percent expansion goal after two quarterly slowdowns. Mr Li, who’s preparing for a Communist Party meeting in November on economic-policy reforms, said last week that the nation is taking steps to stabilise expansion and can achieve the main economic targets this year. Shadow lending, which allows banks to bypass controls and capital requirements, may be valued at 36 trillion yuan, or 69 percent of gross domestic product, JPMorgan Chase & Co estimated in May. The entrusted loans in August were equivalent to 41 percent of the month’s 711.3 billion yuan in new local-currency bank loans. That is the second-highest percentage in the past five years. Both types of lending are part of aggregate financing, the government’s broadest measure of credit, which almost doubled to 1.57
trillion yuan last month from July, People’s Bank of China data showed. “In the short term it is positive for growth,” said Dong Tao, head of economics for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “However, compared with bank loans it has less transparency and bigger risks. It is a blind spot of regulation.” Mr Tao said the August pickup in credit shows that “quietly, shadowbanking channels opened again” as the government softened its regulatory stance. The government says debt risks are manageable. Vice finance minister Zhu Guangyao said earlier this month at a Group of 20 nations summit in St. Petersburg, Russia, that while China should strengthen supervision of shadow banking, officials are aware that smaller businesses need access to finance.
Temporary increase RBS’s Mr Kuijs said the increase in credit will probably prove temporary because key people such as the premier “are telling us that they do not want to go in that direction.” Lenders include Ningbo Yunsheng (Group) Co, a magnet maker, and Shanghai Tunnel Engineering Co, a local government’s infrastructureconstruction arm. At least 110 publicly-traded companies announced plans to
lend about 20 billion yuan to other firms in the first half, charging annual interest rates ranging from 7 percent to 12 percent, according to Shanghai Wusetu Mortgage Service Co. Zhu Haibin, chief China economist at JPMorgan in Hong Kong, said entrusted loans reflect demand from companies to support operations, and one month’s increase “may not be a big problem.” The complex being built by Mr Zhang, the developer in Zhengzhou, is called Yuxi, or Imperial Seal. Last week sounds of drilling and hammering of construction machinery emanated from the site as two yellow cranes carried materials. Suntront, the meter maker, said in a July 31 filing with the Shenzhen Stock Exchange that the one-year loan to Mr Zhang’s company, Henan Fuguo Property Co, will improve the manufacturer’s returns and won’t harm corporate or shareholder interests. “The entrusted loan has sufficient guarantees from buildings under construction as collateral,” Suntront said. Li Shuqu, the Suntront director who abstained from approving the loan, cited Henan Fuguo’s liability-to-asset ratio of about 65 percent, net assets of 78.4 million yuan, losses and lack of revenue, according to Suntront. Bloomberg News
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Asia
Abbott sworn in as Australia’s new PM Conservative leader axes carbon tax, talks tough on people smugglers Saeed Khan
T
ony Abbott was sworn in as Australia’s new prime minister yesterday and immediately ordered the scrapping of the nation’s carbon tax and the halting of asylum-seeker boats. The 55-year-old conservative launched straight into work with a cabinet meeting after the ceremony at Government House in Canberra where his Liberal/National government officially brought six years of Labor rule to a close. “Today is not just a ceremonial day, it’s an action day. The Australian people expect us to get straight down to business and that’s exactly what this government will do,” said Mr Abbott, a political hardman who has worked to soften his macho image in recent months. In presenting his frontbench team to governor-general Quentin Bryce, he added: “We will be a problemsolving government based on values not ideology.” Mr Abbott was elected on September 7 on a pledge to quickly scrap taxes on corporate pollution and mining profits imposed under Labor, as well as introducing a costly paid parental leave scheme and a vow to build new roads across the vast nation. Top of his to-do list is axing the unpopular carbon tax, which charges the country’s biggest polluters for their emissions at a fixed price. His government instead favours a “direct action” plan that includes an emissions reduction fund to pay companies to increase their energy efficiency, and money for schemes to replenish soil carbon and plant 20 million trees. Mr Abbott, who once said that evidence blaming mankind for climate change was “absolute crap”, said he would immediately instruct
officials “to prepare the carbon tax repeal legislation”. Another central plank of his election campaign was stopping asylum-seeker boats. His policy of using the navy to tow them back to Indonesia – their typical point of transit – came into effect yesterday, and could prove to be an early test of his mettle. “It’s so important that we send a message to the people-smugglers that, from today, their business model is coming to an end,” Mr Abbott said. The military tow-back is part of Operation Sovereign Borders, which is widely expected to be led by deputy chief of army Angus Campbell, a former special forces commander, reporting directly to new Immigration minister Scott Morrison. It includes a proposal to embed Australian police in Indonesia, buy up fishing boats to keep them out of
It’s so important that we send a message to the people-smugglers that, from today, their business model is coming to an end Tony Abbott, Australia’s new prime minister
The new prime minister was sworn in 11 days after an overwhelming victory
people-smugglers’ hands, and pay locals for intelligence – plans that have received a cool reception in Jakarta. Australia has struggled to manage the stream of asylum-seekers arriving on rickety, overloaded fishing boats with hundreds dying on the risky journey in recent years. Counting of postal votes is still under way after the election, but the conservatives are on track to win 90 seats in the 150-seat House of Representatives to Labor’s 55. It gives Mr Abbott a clear majority, although the makeup of the upper house of parliament is not yet apparent, with the likelihood that six to seven minor party candidates could secure seats to hold the balance of power – complicating the new government’s legislative push. The new prime minister and his key ministers were sworn in by Ms Bryce 11 days after Mr Abbott’s overwhelming victory over Kevin Rudd and he wasted no time asserting his authority, axing three high-profile
public service department heads and making two new appointments. While Mr Abbott has kept a low profile since the polls, he has been criticised for naming just one woman in his 19-person front-bench –Julie Bishop as foreign minister. The previous Labor government had six women in cabinet. He has also attracted criticism, including from his own party, for streamlining his ministry, with key portfolios such as water, climate change, science and aged care wrapped into other portfolios. “I mean we’ve got a minister for Sport for God’s sake, but we don’t have a minister for Science,” said Liberal representative Dennis Jensen, comments seized on by Labor as a “sign of disunity” in the government. Other ministers sworn in included Joe Hockey as treasurer, George Brandis as attorney-general, and Nationals leader Warren Truss as deputy prime minister. AFP
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Asia Yahoo develops 3D print search engine Yahoo Japan Corp has developed a voiceactivated Internet search that links to a 3D printer, letting users look online for blueprints to deliver solid objects in a few minutes, the company said. Yahoo Japan, which is part-owned by Japanese mobile carrier Softbank and United States Internet giant Yahoo! Inc, has no firm plans on commercialising the technology. As part of the project, Yahoo Japan has introduced the 3D search engine to a school for blind and visually impaired students in Tokyo on a temporary basis, it said, adding they can use it for free until mid-October.
Sega wins auction for bankrupt gamemaker Sega Sammy Holdings Inc won an auction to buy Index Corp, the bankrupt Japanese developer of handheld games, two people with knowledge of the matter said. The acquisition may be valued at about 14 billion yen (US$141 million), said one of the people, who asked not to be identified before an announcement. Index’s bankruptcy advisers plan to complete a deal with Sega Corp, a unit of Sega Sammy, in early November, they said. The company was forced to file for bankruptcy protection in part because of investment losses from earlier acquisitions, Index said on June 27.
Toyota to expand Russia plant capacity Indonesia is grappling with a record current account deficit and budget shortfall
Indonesia bonds soar as US investors buy Asia debt Rachel Evans
I
ndonesia is leading gains by new dollar-denominated debt offerings from Asia outside Japan this month as United States investors shrug off concerns about slowing regional growth and boost bond buying. The sovereign sold 24 percent of a US$1.5 billion issue of shariahcompliant notes to U.S. accounts last week, according to a person familiar with the matter, who asked not to be identified because the details are private. That’s double the 12 percent share of the nation’s last dollar sukuk in November, a separate person said. Indonesia is grappling with a record current account deficit and budget shortfall that spurred a 15 percent plunge in its currency this year.
Debt from the nation’s corporates lost almost 6 percent last month, the worst emerging market globally, Bank of America Merrill Lynch indexes show. Asian developing-market bonds fell 1.3 percent, the data show. The region, where growth will slow to 6 percent this year, offers “tremendous opportunities,” Credit Agricole CIB wrote in a note yesterday. “With pronounced selling in global emerging markets over the past few months, there’s an argument that certain jurisdictions may now offer good value,” said Duncan Phillips, the Hong Kong-based head of AsiaPacific syndicate at Citigroup Inc. “Encouraged by some meaningful new-issue concessions, it seems US investors might be leading a new buying trend.”
Indonesia priced its notes, which are the best performing new securities sold this month, at 6.125 percent, the highest yield since 2009, according to data compiled by Bloomberg. Bonds from India and Sri Lanka were the second and third- worst performers last month respectively, Bank of America Merrill Lynch indexes show. “When we talk about outflows or a sell off, part of that was attributable to market dislocation,” said Edwin Chan, the head of Asian credit research at UBS AG. “Market dislocation isn’t something we expect to carry on forever. When some stability returns, we should see interest coming back to emerging markets given where valuations are.” Bloomberg News
Toyota Motor Corp is investing around US$181.2 million, or 18 billion yen, to expand production capacity at its St. Petersburg plant in Russia, the Japanese carmaker said yesterday. Toyota, which will start a complete knock down production of its RAV4 SUV in 2016 at the plant, is expanding the plant’s capacity to a maximum of around 100,000 vehicles from the current 50,000 vehicles, the company said in a statement. Toyota currently makes the Camry at the plant. The Japanese carmaker added a second shift at the plant in April 2012.
Sharp sells shares after record loss Sharp Corp, a supplier of screens to Apple Inc, will raise as much as 166.4 billion yen (US$1.7 billion) in share sales to rebuild its balance sheet after record annual losses. Japan’s largest maker of liquid-crystal displays will sell as much as 149 billion yen of shares to the public, the company said yesterday. It will also make allotments to Makita Corp, Denso Corp and Lixil Group Corp with proceeds to be used for capital expenditure, it said. Intensified competition in LCDs and flat-panel TVs drove Sharp to losses totaling 921 billion yen over the past two financial years.
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.
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Asia
Vacant Japan homes show Abenomics holes Construction stimulus at odds with country’s fast-ageing population Kathleen Chu and Katsuyo Kuwako
B
roken wood pieces dangle and sway like autumn leaves from the window frames of vacant homes in Inariyato, part of Yokosuka in the greater-Tokyo urban area, where taped-over mailbox slots tell a story of abandonment. More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years. Prime minister Shinzo Abe’s plan to boost the economy in part by reviving the housing market and encouraging new home construction is in conflict with Japan’s demographics. Rural, suburban and lessdesirable urban areas are becoming littered with empty homes as younger people moving to cities combines with one of the world’s fastest-aging populations. At the same time, tax breaks on mortgages favoring new-home purchases, recently extended to 2017 and increased to 50 million yen from 30 million yen, are spurring demand for new properties. “ Even w hen the numbe r of vacant homes is on the rise, more and more new homes are being built,” said Hidetaka Yoneyama, a
Japan has one of the world’s fastest-aging populations
senior researcher at Fujitsu Research Institute in Tokyo who has written at least five books on Japan’s housing market. “That’s absurd.” Home vacancy in Japan, estimated at about 18 percent of housing nationwide, may reach 24 percent by 2028, he said.
Housing starts Housing starts have increased by 31,462 units a year over the past three years, according to the Ministry of Land, Infrastructure, Transport and Tourism. Helped by Mr Abe’s policies since he took office in December, housing
starts rose for the 11th month in July, the longest streak since February 1994, land ministry data show. “Is it really OK to continue to build more and more new homes?” said Wataru Sakakibara, manager of the real estate group at Nomura Research Institute Ltd. “We can’t stop housing stimulus because it revitalizes the economy, but we must consider ways to resolve this issue.” A Japanese government plan to increase the sales tax next year, including on housing, to 8 percent from 5 percent, has also boosted demand. Developers are seeking to profit
by putting more apartments up for sale as buyers rush to acquire them before the increase comes into effect. About 20 percent of residential areas in Japan will become ghost towns – devoid of population – by 2050, according to a land ministry forecast. Once an area reaches a tipping point of 20 percent home vacancy, it quickly turns into a ghost town as remaining residents flee seeking improved access to services and shops that inevitably close, Nomura Research’s Mr Sakakibara said. The lack of a secondary housing market has helped contribute to the rising number of vacant homes, Fujitsu Research’s Mr Yoneyama said. “Japan needs to head in the direction of expanding the secondary housing market and reducing the number of newly built homes,” said Mr Yoneyama. Japanese houses also have shorter lifespans than those in the West -just 30 years on average, partly due to the poor quality of the housing constructed prior to 1980s, according to estimates by Mr Yoneyama based on data from the land ministry. Japan can maintain the percentage of vacant homes at around 15 percent if the government starts introducing measures to encourage the owners to tear down vacant homes, Mr Sakakibara of Nomura said. Bloomberg News
Mindanao a thorn in Philippines’ economy Week of chaos has little impact on the island’s development: govt Rosemarie Francisco
A
commercial hub besieged by heavily armed guerrillas, hundreds of houses gutted by fire, helicopters raining rockets on rebel positions. The images from the Philippines this past week sit uncomfortably with its new-found reputation as an emerging market success story and one of Asia’s fastest-growing economies. The violence in Zamboanga City in the country’s long-troubled south will have little immediate economic or investment impact as long as it doesn’t spread in coming weeks, government officials and economists say. But it underscores how the resource-rich island of Mindanao could remain a long-term weakness for the economy. “Mindanao has so much to offer, but of course the stupid fighting in Zamboanga is just throwing everything back. Selling Mindanao to investors is so difficult now,” Henry Schumacher, vice president for external affairs of the European Chamber of Commerce of the
Philippines, told Reuters. The island accounts for around one-quarter of the Philippines’ 97 million population and one-fifth of its economy. It is rich in agricultural, marine and mineral resources – much of them untapped. Despite Mindanao’s riches, its people are the country’s poorest thanks to decades of chronic insecurity fuelled by separate communist and Muslim rebellions and by al Qaedalinked Islamist militants. A historic peace deal signed last year between the government and the largest Muslim rebel group appeared to mark the beginning of the end of a 40-year conflict. But a splinter group from the Moro National Liberation Front, which feels ignored by the 2012 agreement, sparked a week of chaos in Zamboanga that left more than 100 dead, 200 wounded, and paralysed the city of 800,000. Government officials minimised the broader economic impact of the conflict.
Finance secretary Cesar Purisima told reporters in Manila this week that much of Mindanao’s economy was doing well, noting recent investments there in shipbuilding and power and that it recently shipped banana exports to the United States for the first time. “The area that has issues is on the western side and it is a small portion
of Mindanao,” Mr Purisima said. “Nevertheless, this has to be resolved.” As long as incidents are only in local parts of the southern Philippines, “then the economic story remains positive,” said Jose Mario Cuyegkeng, economist at ING Bank in Manila. Reuters
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Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 54.6
80.7
24.00
54.4
80.4
23.98
54.2 54.0
23.94 79.8
53.8 Max 54.5
average 53.856
Min 53.6
53.6
Last 53.65
Max 80.7
average 80.087
Min 79.087
Last 79.55
47.4
Max 20.9
average 20.447
PRICE
DAY %
YTD %
(H) 52W
0.739897553
13.46153846
112.2399979
106.2
BRENT CRUDE FUTR Nov13
108.3
0.101672983
2.907639681
115.7599945
96.19999695
GASOLINE RBOB FUT Oct13
267
0.334448161
2.617318114
298.210001
246.6799974
922.75
-0.324061572
1.820689655
985.5
835.5
3.738
-0.186915888
2.975206612
4.525000095
3.154000044
299.26
-0.190107728
0.056839079
322.8999853
276.1999846
Gold Spot $/Oz
1301.5
-1.3462
-21.8065
1796.08
1180.57
Silver Spot $/Oz
21.5945
-1.7753
-28.2813
35.365
18.2208
1423.3
-1.2578
-6.223
1742.8
1294.18
GAS OIL FUT (ICE) Oct13 NATURAL GAS FUTR Oct13 NY Harb ULSD Fut Oct13
Platinum Spot $/Oz Palladium Spot $/Oz LME ALUMINUM 3MO ($) LME COPPER 3MO ($) 3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Nov13 CORN FUTURE
Min 20.25
Last 20.4
(L) 52W
WTI CRUDE FUTURE Oct13
LME ZINC
Dec13
86.04000092
699
-1.0882
-0.0943
786.5
587.4
1777.5
-0.252525253
-14.25470333
2185.25
1758
7075
-0.14114326
-10.7930904
8422
6602
1860.5
-0.348152116
-10.55288462
2230
1811.75
13830
-0.288392213
-18.93317702
18920
13205
15.565
0.225370251
0.973078171
16.65000153
14.77000046
455.5
0.330396476
-24.0516882
647
445.75
645
0.311041991
-21.41334146
913
635.5
WHEAT FUTURE(CBT) Dec13
20.20
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
25.3
25.2
25.1
Max 25.25
average 25.15
Min 25.05
Last 25.15
25.0
SOYBEAN FUTURE Nov13
1342
-0.037243948
3.012857417
1409.5
1162.5
115.5
0.4784689
-26.17449664
200
114.25
SUGAR #11 (WORLD) Mar14
17.38
-0.114942529
-15.54907677
22.14999962
16.69999886
ARISTOCRAT LEISU
COTTON NO.2 FUTR Dec13
84.7
0.307922822
7.569215138
93.72000122
74.34999847
CROWN LTD
World Stock Markets - Indices COUNTRY
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
15529.73
0.2255598
18.51011
15658.42969
12471.49
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3745.699
0.7491704
24.04974
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15942.6
8488.14
HANG SENG INDEX
HK
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23944.74
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CSI 300 INDEX
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TAIWAN TAIEX INDEX
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SK
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S&P/ASX 200 INDEX
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
0.9358 1.5967 0.9251 1.3355 98.92 7.9871 7.7543 6.121 63.19 31.67 1.2592 29.703 43.53 11324 92.562 1.23557 0.83642 8.1758 10.6667 132.11 1.03
0.1498 0.4024 0.0649 -0.0225 0.1719 -0.0038 -0.0026 0 0.2888 0.2052 0.1668 -0.1515 0.2872 -1.254 0.0346 0.0809 0.4292 -0.0514 0.0394 0.1968 0
-9.8285 -1.292 -1.0485 1.2509 -12.96 -0.0488 -0.0477 1.7906 -12.9688 -3.4417 -3.0019 -2.2557 -5.8006 -13.52 -3.495 -2.2734 -2.5107 0.51 -1.2778 -14.0338 -0.0097
1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3213 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032
0.8848 1.4814 0.9022 1.2662 77.44 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9511 79.408 1.20302 0.79235 7.8281 10.1113 99.64 1.0289
Macau Related Stocks
COFFEE 'C' FUTURE Dec13
NAME
23.90
Currency Exchange Rates
NAME
METALS
Last 23.95
20.34
Commodities ENERGY
Min 23.9
20.48
47.6
Last 47.55
average 23.977
20.62
47.8
Min 47.55
Max 24
20.76
48.0
average 47.814
79.5
23.92
20.90
48.2
Max 48.15
23.96
80.1
NAME
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
4.54
-0.8733624
15.65
-1.012018
VOLUME CRNCY
44.12698
4.7
2.56
3803595
46.67291
15.99
8.92
1328900
AMAX HOLDINGS LT
1.35
1.503759
-3.571427
1.72
0.75
30552008
BOC HONG KONG HO
24.85
-0.2008032
3.112032
28
22.85
6017216
CENTURY LEGEND
32501061
0.415
18.57143
56.60378
0.56
0.23
CHEUK NANG HLDGS
6.43
0.6259781
7.34558
6.74
3.31
94500
CHINA OVERSEAS
23.8
-0.6263048
3.030301
25.6
17.7
7736722
CHINESE ESTATES
17.54
-1.238739
55.97283
18.02
8.168
51000
CHOW TAI FOOK JE
10.78
-2.531646
-13.34405
13.4
7.44
14109902 6935000
EMPEROR ENTERTAI
3.41
5.572755
80.42328
3.5
1.43
FUTURE BRIGHT
2.58
4.453441
112.8667
2.76
1.053
5380851
GALAXY ENTERTAIN
53.65
-0.923361
76.771
55.5
24.1
8232052
HANG SENG BK
127.2
0.394633
7.160913
132.8
110.6
1520166
HOPEWELL HLDGS
25.55
0.3929273
-23.15789
35.3
23.2
512400
HSBC HLDGS PLC
86.2
0
6.027056
90.7
72.1
13483703
HUTCHISON TELE H
3.44
-0.5780347
-3.370785
4.66
2.98
4416000
LUK FOOK HLDGS I
24.05
-5.314961
-1.434425
30.05
16.88
1856000
MELCO INTL DEVEL
20.55
0
128.0799
21.15
6.55
4012000
7050.05
MGM CHINA HOLDIN
23.95
0.6302521
80.36976
24.45
12.18
4389377
1770.53
MIDLAND HOLDINGS
3.15
-0.6309148
-14.86487
5
2.68
3044000
NEPTUNE GROUP
0.198
3.664921
30.26316
0.23
0.131
425481500
NEW WORLD DEV
11.98
2.568493
-0.3327825
15.12
9.98
17408310
SANDS CHINA LTD
47.55
-0.2098636
40.05891
48.5
26.35
8306360
SHUN HO RESOURCE
1.7
0
21.42857
1.92
1.19
0
4.29
0
2.386633
4.65
2.9
2327753 5344787
AU
5238.14
-0.2495029
12.67361
5266.1
4334.3
ID
4463.254
-1.203421
3.395356
5251.296
3837.735
FTSE Bursa Malaysia KLCI
MA
1771.4
-0.1994434
4.881736
1826.22
1590.67
NZX ALL INDEX
NZ
993.585
-0.2673029
12.6446
998.487
834.309
SHUN TAK HOLDING
PHILIPPINES ALL SHARE IX
PH
3833.33
-0.1167332
3.632085
4571.4
3440.12
SJM HOLDINGS LTD
20.4
-0.9708738
14.94475
22.382
15.795
SMARTONE TELECOM
9.99
-0.498008
-29.0483
16.22
9.97
7775634
25.25
0.3976143
20.52506
26.5
19
15195643
JAKARTA COMPOSITE INDEX
HSBC Dragon 300 Index Singapor
SI
610.53
0.07
-1.7
NA
NA
STOCK EXCH OF THAI INDEX
TH
1438.93
-0.3359238
3.376606
1649.77
1260.08
HO CHI MINH STOCK INDEX
VN
474.26
-0.7263517
14.63031
533.15
372.39
Laos Composite Index
LO
1271.75
-0.08014017
4.690598
1455.82
1038.79
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
WYNN MACAU LTD ASIA ENTERTAINME
3.9
-3.940887
38.55912
4.7647
2.4835
204988
BALLY TECHNOLOGI
75.65
0.8666667
69.20152
75.8
43.16
353250
BOC HONG KONG HO
3.25
0.308642
5.863194
3.6
2.99
28231
GALAXY ENTERTAIN
7.09
-0.4213483
78.58942
7.16
3.11
16800
INTL GAME TECH
20.86
-0.4770992
47.21242
21.17
12.37
4990432
JONES LANG LASAL
88.49
1.223976
5.420535
101.46
72.56
292430
LAS VEGAS SANDS
64.25
0.9426551
39.18978
64.7201
37.8353
3337959
MELCO CROWN-ADR
30.85
0.2599935
83.19477
31.95
12.5
1564766
MGM CHINA HOLDIN
3.04
0
73.68537
3.07
1.5895
6100
MGM RESORTS INTE
19.55
1.295337
67.95532
19.8
9.15
5210696
SHFL ENTERTAINME
22.59
-0.132626
55.7931
23.08
12.35
628358
SJM HOLDINGS LTD
2.69
-1.824818
18.10595
2.9481
2.0311
43300
150.76
0.5200693
34.0208
152.61
103.0933
764755
WYNN RESORTS LTD
AUD HKD
USD
Hang Seng Index NAME
PRICE
DAY %
VOLUME
PRICE
DAY %
VOLUME
AIA GROUP LTD
36.4
1.960784
20285284
CHINA UNICOM HON
12.7
0.3159558
20927942
ALUMINUM CORP-H
2.77
-2.464789
10892897
CITIC PACIFIC
9.91
-0.1008065
BANK OF CHINA-H
3.6
0
317016041
BANK OF COMMUN-H
5.9
0.5110733
17144481
32.05
-4.470939
6564198
BANK EAST ASIA
NAME
NAME
PRICE
VOLUME
67.65 -0.07385524
1799858
4020981
SANDS CHINA LTD
47.55
-0.2098636
8306360
SINO LAND CO
10.92
0.5524862
8899569
SUN HUNG KAI PRO
103.5
0.877193
4201144
0.1633987
1339539 6462526
CLP HLDGS LTD
63.65
0.2362205
2755694
CNOOC LTD
15.98
-0.3740648
40202030
11.6
-1.861252
6296417
SWIRE PACIFIC-A
91.95
COSCO PAC LTD
DAY %
POWER ASSETS HOL
BELLE INTERNATIO
11.12
-2.112676
10353964
ESPRIT HLDGS
12.04
-0.660066
3975491
TENCENT HOLDINGS
402.4
-3.91595
BOC HONG KONG HO
24.85
-0.2008032
6017216
HANG LUNG PROPER
26.05
0.1923077
4814923
TINGYI HLDG CO
21.5
0.4672897
3112846
14.9
0.811908
2816025
HANG SENG BK
127.2
0.394633
1520166
WANT WANT CHINA
11.7
-0.5102041
11545947
47.65
1.167728
2616127
WHARF HLDG
67.4
0.297619
3217453
91.7
0.8246289
2356650
HONG KG CHINA GS
18.42
0.1086957
13178098
HONG KONG EXCHNG
129.5
0.3875969
2872240
86.2
0
13483703
CATHAY PAC AIR CHEUNG KONG
120
3.092784
11581254
HENDERSON LAND D
CHINA COAL ENE-H
4.97
-1.388889
65011012
HENGAN INTL
CHINA CONST BA-H
6.11
-0.3262643
192326738
CHINA LIFE INS-H
20.85
-0.9501188
29690150
CHINA MERCHANT
26.75
-2.727273
2981869
CHINA MOBILE
HSBC HLDGS PLC
87.35
-1.01983
11620487
CHINA OVERSEAS
23.8
-0.6263048
7736722
CHINA PETROLEU-H
6.13
-0.8090615
59304059
CHINA RES ENTERP
24.9
0.6060606
3724282
MTR CORP
HUTCHISON WHAMPO IND & COMM BK-H LI & FUNG LTD
92.85
0.5414185
9453703
5.49
-0.9025271
166711454
11.66
0.5172414
14209139
31
0.3236246
2553132
CHINA RES LAND
23.15
-0.2155172
7564715
NEW WORLD DEV
11.98
2.568493
17408310
CHINA RES POWER
18.06
-0.8781559
8672711
PETROCHINA CO-H
8.74
-0.2283105
50272060
CHINA SHENHUA-H
25.5
0
11158592
PING AN INSURA-H
59.7
-0.5828476
6617400
MOVERS
23
24
23260
INDEX 23117.45 HIGH
23256.45
LOW
23099.17
3
52W (H) 23944.74 (L) 19426.35938
23090
16-September
18-September
15 15
September 19, 2013 April 19, 2013
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Jakarta Globe
Muzzling the dogs of war Anne-Marie Slaughter
President and CEO of the New America Foundation and professor of Politics and International Affairs at Princeton University
Coffee farmers in Indonesia’s southern Sumatra, the main growing region of the world’s third-biggest robusta producer, harvested 92 percent of this year’s crop, according to Amsterdambased trader Nedcoffee BV. While all beans from the lowlands had been gathered by September 6, farmers in highlands collected 65 percent of the crop, the trader said in a report. About 70 percent of the beans harvested were sold by farmers and middlemen, it said.
Asahi Shimbun Opposition mainly from the agriculture ministry has forced the Japanese government to shelve internal discussions on which tariffs to protect under the Trans-Pacific Partnership (TPP) free trade agreement, sources said. Talks will resume after the Asia-Pacific Economic Cooperation forum in early October, leaving Japan with just two months to solidify its tariff strategy and negotiate with potential partners before a final agreement on the TPP expected by the end of the year.
Economic Times In a first by an Indian firm, ONGC Videsh Ltd (OVL) has exercised its preemption rights to block China’s Sinochem Group from buying 35 per cent interest in a Brazilian oilfield for US$1.54 billion. OVL, the overseas arm of stateowned Oil and Natural Gas Corp, in collaboration with Royal Dutch Shell will buy the 35 per cent stake in a block that Brazil’s Petrobras had planned to sell to Sinochem, sources with direct knowledge of the development said.
Bangkok Post Asean members need to study the proposed formation of an EU-type entity thoroughly before forming an economic community, or else the grouping could suffer a similar fate as its European counterpart, says former Malaysian prime minister Mahathir Mohamad. He said not all Asean members are ready for the Asean Economic Community (AEC) to be formed on Dec 31, 2015 due to policy differences between countries.
S
itting in Paris as the United States’s first ambassador to France, Thomas Jefferson reflected on how the new US government could avoid the errors of European “despots” who kept their people subjugated through war and debt. Writing to James Madison, he observed that the US Constitution had at least checked “the Dog of war,” by transferring “the power of letting him loose from the Executive to the Legislative body, from those who are to spend to those who are to pay.” At the same time, however, the Constitution designates the executive as the “Commander in Chief,” a power that American presidents have invoked to use military force without Congressional authorisation on more than 200 occasions. President Barack Obama relied on that power when he told both Congress and the American people that he had the authority to order limited strikes on Syria without going to Congress. By simultaneously claiming that authority and seeking Congressional authorisation to use it, Obama enters a small class of leaders who actively seek to constrain their own power. That is because he sees his historical legacy as that of a president who ended wars and made them harder to start, instead reinvesting America’s resources in its own people. He opposed the Iraq war in 2003 and promised in 2008 that he would end the unlimited “war on terror,” which had become a potential blank cheque for US presidents to use force anywhere in the world. But, beyond the system of political “checks and balances” created by the US Constitution, does it make sense for leaders to take decisions regarding the use of force to the people? It certainly makes the leaders’ lives harder. British Prime Minister David Cameron came
up short when he turned to Parliament to authorise British participation in US strikes against Syria. French President François Hollande faced intense criticism from rightwing parties in the National Assembly for his agreement to participate in the strikes. And Turkish Prime Minister Recep Tayyip Erdogan, who volunteered to participate in a military coalition, is facing strong domestic opposition to his Syria policy. There are several arguments for not allowing the people’s representatives to intervene in the complicated foreignpolicy dance between force and diplomacy. For starters, there is the traditional idea that politics end at the water’s edge, where messy domestic disagreements are supposed to give way to the abstraction of one state with a unified national interest. A related argument is that domestic political processes can hamstring a government in the great game of poker or chess that international politics is supposed to be. As Obama has just discovered, having a legislature that clearly does not want to go to war weakens the executive’s hand in international negotiations. Timing is another problem. Legislative processes are slow and often tortuous, while international diplomacy can change overnight, owing to shifting coalitions, unexpected opportunities, and well-hidden traps. Moreover, diplomacy thrives on back-room deals of the kind that US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov have just struck over Syria’s chemical weapons. In highstakes negotiations, the last thing the players need is public debate about the cards that each of them holds. A threat to turn from talks to tanks must be credible, which it will not be if an opposing player can simply count votes to see
if the necessary legislative majority exists. Still, Jefferson had it right. Though turning to the legislature may prove to be inconvenient, frustrating, and even counter-productive, it is the right thing to do, for three reasons. First, the use of force is costly in terms of lives, money, and leaders’ energy and attention. The people pay these costs, so their representatives should decide whether to incur them. Second, it is never more important for a democracy to follow its procedures and uphold its principles than in an armed conflict involving non-democracies. The Syrian people, oppressed and brutalised by their own government, should see that the American people have a different relationship with their leaders. Finally, a core component of democracy is a set of rules and procedures designed to require public officials
It is never more important for a democracy to follow its procedures and uphold its principles than in an armed conflict involving nondemocracies
to justify their policies with reasons that can be accepted or countered in public debate. When contemplating foreign military intervention, leaders must explain their actions in ways that make clear how their country’s strategic and moral interests are at stake – for example, how unbridled aggression and hideous suffering can fester and spread. Leaders would prefer to speak in the language of readily calculable interests. Talk of care and moral scruples is uncomfortable and unstable terrain. As the Turkish political analyst Mustafa Akyol has put it, for most of the Turkish population, “care for Syria does not translate into, ‘Let’s go liberate it.’” Yet leaders who need their people’s support to address complex, interdependent problems beyond their borders must socialise them into a twenty-first-century world in which caring without acting imperils us all. These arguments do not mean that leaders will not use force from time to time without turning to their people first. Obama does have constitutional authority to conduct limited military strikes to deter and degrade Syrian President Bashar alAssad’s ability to use chemical weapons. All leaders can order their forces into battle in cases of national emergency or selfdefense. They must preserve their legal and operational ability to act swiftly and decisively when necessary. But, two centuries after Jefferson, states are no longer merely coloured shapes on a map; increasingly, they are transparent and open territories that we view as home to millions of fellow human beings. It is thus ever more important that the people of one country participate in the decision to attack the people of another. © Project Syndicate
16
September 19, 2013
Closing FedEx profit higher on cost reductions
Sands China staff get share options
FedEx Corp reported first-quarter profit that beat analysts’ estimates as the operator of the world’s largest cargo airline reduced costs to counter a shift among customers to cheaper shipping methods. Net income in the quarter ended August 31 rose 6.5 percent to US$489 million, or US$1.53 a share, the company said yesterday in a statement. Analysts projected US$1.50 a share, the average of 28 estimates compiled by Bloomberg. FedEx company is parking older planes sooner, trimming capacity to Asia and eliminating 3,600 jobs through buyouts.
Sands China Ltd has granted options to 1,058,500 shares in the firm to some of its employees. The company said in a filing that none of those eligible were directors, chief executives or substantial shareholders of the casino investor. The subscription price of HK$47.55 (US$6.13) is equal to the closing price of the stock in Hong Kong yesterday. On the day it represents a total value of HK$50.33 million. The shares will vest in 25 percent increments between September next year and September 2017, added Sands China in its filing to the Hong Kong Stock Exchange.
Fed ponders bond-buying cut amid fall in home loans Federal Reserve expected to reduce bond purchases used to boost US economy Jeff Kearns
F
ederal Reserve policy makers, while considering yesterday (US time) whether to taper US$85 billion in monthly bond buying, confront a drop in demand for home loans that argues against a cut to their mortgage bond purchases. A surge in mortgage rates to twoyear highs has undercut borrowing, pushing down refinancing by more than 70 percent since last September. Wells Fargo & Co. said this month originations may fall 29 percent this quarter, while JPMorgan Chase & Co. said volumes may plunge 40 percent in the second half compared with the first six months of the year. The Fed yesterday could limit the impact from tapering by reducing Treasury purchases rather than mortgage-backed securities (MBS), said Michael Gapen, a senior U.S. economist at Barclays Plc in New York. Buying mortgage bonds reduces home loan rates, increases house prices, and pushes up consumer confidence and spending, said Mr Gapen, a former researcher in the Fed’s Division of Monetary Affairs.
Ben Bernanke is stepping down as Federal Reserve chairman in January
“There’s a fair degree of consensus that MBS purchases are more effective than treasuries in terms of stimulating activity,” said Mr Gapen. He expects the Fed to reduce monthly purchases by US$10 billion in Treasuries and US$5 billion in mortgage bonds. “It’s a more direct route to housing and household
balance sheets.” The Federal Open Market Committee will probably conclude yesterday’s meeting by dialing down monthly Treasury purchases by US$5 billion to US$40 billion, while maintaining its buying of mortgagebacked securities at US$40 billion, according to a Bloomberg News
survey of economists. The committee has pledged for more than a year to press on with bond buying until achieving substantial labor market gains. “Fed leadership probably views MBS purchases as more effective in boosting economic activity than Treasury purchases,” Jan Hatzius, the New York-based chief economist at Goldman Sachs Group Inc, said in a note to clients last week, referring to mortgage-backed securities. The central bank will probably curtail its monthly buying of Treasuries by US$10 billion and not alter its level for mortgage bond purchases, he said. Chairman Ben Bernanke and his policy making colleagues are debating how to scale back unprecedented stimulus aimed at stoking economic growth and reducing unemployment that was 7.3 percent in August. The Fed has held the main interest rate near zero since December 2008 and pushed its balance sheet to a record US$3.66 trillion through three rounds of bond buying. Bloomberg News
No more stimulus as UK economy picks up steam Investors are betting that the jobless rate will fall faster than expected Scott Hamilton
B
ank of England (BOE) policy makers voted unanimously to keep policy unchanged this month as an improving economic outlook prompted agreement that no more stimulus was needed. In a switch from August, when some Monetary Policy Committee (MPC) members saw a “compelling” case for a loosening of policy, the minutes of the September 3-4 meeting showed that “no member judged that further stimulus was appropriate at present.” The minutes, published yesterday in London, also showed the panel voted 9-0 to keep the
bond-purchase program at 375 billion pounds (US$598 billion) and benchmark interest rate at a record-low 0.5 percent. “Domestically, there were increased signs that the recovery was taking hold,” the BOE said. Recent data “presented an upside risk to the growth profile” published in the central bank’s August Inflation Report. Britain’s economy has shown increased signs of strengthening, and BOE staff now estimate growth of 0.7 percent this quarter, up from 0.5 percent last month. The MPC, led by governor
Mark Carney, introduced forward guidance last month, pledging to keep interest rates low until the unemployment rate falls to 7 percent. It was 7.7 percent in the three months through July. While the MPC forecast last month that the jobless rate would not reach the threshold until late 2016, investors are betting that it will have to increase its key rate sooner. The MPC noted the “upward movement” in sterling market interest rates and an increase in gilt yields, which it said was partly due to the stronger economy. “The UK economy is gaining
momentum and the unemployment rate will fall more quickly than the Bank of England predicts,” said James Knightley, an economist at ING Bank NV in London. Bloomberg News