Macau Business Daily, October 2, 2013 by Business Daily

Deputy editor-in-chief Editor-in-chief Tiago Azevedo Number 383 Wednesday October 2, 2013

Chief Executive Fernando Chui Sai On remains non-committal on whether he will run for re-election next year, saying he wants to focus on the government’s current goals first. “Will I run for [chief executive] re-election? That is a very serious topic and I will surely reveal it at an appropriate time,” said Mr Chui on the sidelines of an official National Day reception yesterday.

Vitor Quintã

MOP 6.00

Chui tight-lipped on second term

April 19, 2013

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Hotel room rates soar

Affordable homes plan on track: govt Page 4

VIP room investor Neptune’s profits up 26 pct

he cheapest five-star deluxe hotel room listed for Cotai during the Golden Week holiday is 5,888 patacas (US$737) according to Macau Government Tourist Office. That’s two-and-half times more than the US$207 per night lowest price quoted by tripadvisor.com for a night at Encore at Wynn Las Vegas during the upcoming Thanksgiving holiday in the United States on November 28. But Maria Helena de Senna Fernandes, MGTO director said yesterday the government here had no power to intervene because Macau has a “free market”. The territory was among the few Greater China cities where hotel revenue grew in the second quarter, says HVS Global Hospitality Services. Meanwhile, legislation governing travel agents has been drafted and will be sent to the Law Reform and International Law Bureau for review, MGTO says.

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U.S. judge dismisses Adelson defamation case Page 7

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Election bribery ‘probe’ pre-judges findings The Public Prosecutions Office is investigating two of the tickets that won Legislative Assembly seats in last month’s election for alleged vote buying – but says it will make no difference to the results. It hasn’t identified the tickets concerned. The Commission against Corruption arrested two suspects prior to the September 15 poll for allegedly offering free meals to people in return for their votes for a particular candidacy. Page 3

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Hang Seng Index 22990

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CSR to win extension on rubbish collection The government is ready to allow Macau Waste Systems Co Ltd, known as CSR, to continue managing the city’s solid waste while a new 10-year contract remains on hold due to a legal challenge, Secretary for Transport and Public Works Lau Si Io said yesterday. CSR’s original deal was due to end in September 2011, but was extended three times. It is now due to expire on October 31. Page 4

Failing casinos appeal smoke check results The government has not yet published names of casinos that failed a second check on air quality within designated smoking zones because some of the venues have appealed against the findings. Cheong U, Secretary for Social Affairs and Culture, gave the news yesterday on the sidelines of an official government reception to mark China’s National Day. The results had been promised by the administration before the end of June. Page 5

22850

September 30

HSI - Movers Name

%Day

POWER ASSETS HOL

2.59

CITIC PACIFIC

1.31

KUNLUN ENERGY CO

1.12

CHINA RES POWER

0.55

HONG KG CHINA GS

0.11

TENCENT HOLDINGS

-2.63

WHARF HLDG

-2.89

CHINA MERCHANT

-2.93

BELLE INTERNATIO

-3.76

COSCO PAC LTD

-3.89

Source: Bloomberg

I SSN 2226-8294

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October 2, 2013

Macau

Govt powerless to stop hotel room rate surge Some hotels have tripled their rates for the National Day holidays Tony Lai

tony.lai@macaubusinessdaily.com

isitors will have to pay inflated prices for hotel rooms this week and the government can do nothing to stop the increases, its tourism chief says. The director of the Macau Government Tourist Office, Maria Helena de Senna Fernandes, said yesterday that the government had no means to intervene because Macau had a free-market economy. Data compiled by Ms Senna Fernandes’s office indicate that many hotels and guesthouses have raised their room rates for the mainland’s seven days of National Day holidays, which began yesterday. The increases in rates for rooms in low-end hotels are particularly steep. “Macau does not have a mechanism for capping room rates as it is a free market. What we can do is to ask them to report their standard room rates to us,” said Ms Senna Fernandes, speaking on the sidelines of an official reception to mark National Day. “Depending on the market, they can adjust their room rates,” she said. She said hotels would be breaking the rules only if they charged more than the room rates they reported to her office. Forson Residential Pension, a guesthouse in the city centre, is

charging 1,800 patacas (US$225) a night for a standard room during the National Day holidays, twice as much as its normal weekday rate. The three-star Hotel Fortuna in the NAPE district is charging up to 4,500 patacas for a standard twin room during the holidays, three times as much as normal. Ms Senna Fernandes, asked if she thought hotels were profiteering, replied: “Macau has no limit set for room rates and we cannot tell them that their prices cannot exceed a certain amount.” Academics have said high room rates scare tourists away, particularly during the mainland’s other long set of holidays, at Lunar New Year.

Price to be paid Ms Senna Fernandes said she had a feeling that the number of visitors during the National Day holidays would be about the same this year as last year, in spite of the cost of hotel accommodation and the mainland’s imposition of a ban on free or excessively cheap package tours. Nearly 1 million visitors came last year. People in the tourism industry have predicted that between 10

percent and 50 percent fewer package tourists will come this year because of the ban on free package tours. Operators of ‘zero-fee tours’ recoup their costs by compelling tour group members to shop in shops that pay commission, or to take costly excursions. Ms Senna Fernandes said more visitors than expected came immediately before the National Day holidays, probably because they wished to visit before package tours became more expensive. Preliminary figures from her office show over 524,000 visitors came between last Friday and Monday, 28.7 percent more than in the corresponding period last year. Over 392,000 were mainlanders, almost half as many again as a year earlier. Ms Senna Fernandes said her office would help enforce the ban on free tours by making checks at entry points, tourist spots and hotels and reporting any irregularities to the mainland authorities. She said it would take time for the four walking trails opened last week to have their intended effect of diverting visitors away from the most crowded tourist spots. She said the number of tourists Macau could handle would rise as more infrastructure was built.

Travel agency bill set for next step Legislation governing travel agents has been drafted and will be sent to the Law Reform and International Law Bureau for review, the Macau Government Tourist Office says. The director of the office, Maria Helena de Senna Fernandes, said yesterday that the bill could then be sent to the Legislative Assembly. Ms Senna Fernandes declined to say when the bill might be passed. Her office would need more time to draft amendments to the law on bars, restaurants and hotels because it “involves many issues”, she said. “We did a wide-scale consultation last year, collecting opinions from the industry and the public, and we have already analysed those opinions,” she said. The government originally proposed banning people under the age of 16 from bars and keeping bars away from residential buildings.

Ms Senna Fernandes said in August that she expected the number of visitors to rise by 6 percent this year. That implies a total above 29.6 million visitors, which is as many as the city can handle, according to the results of a study commissioned by her office.

Macau hotels rival HK on revenue H

Macau does not have a mechanism for capping room rates as it is a free market Maria Helena de Senna Fernandes, Macau Government Tourist Office director

otels here are making almost as much money from their rooms as their Hong Kong rivals, says the Hong Kong branch of consulting firm HVS Global Hospitality Services. The territory was also among the few Greater China cities where hotel revenue grew in the second quarter of this year, the consulting firm says in a review of the industry published last week. HVS’s review says the average room rate here was 1,391 patacas (US$174.1) in the second quarter. In Hong Kong hotels, the average room rate was HK$1,379. Macau hotels are also rivalling the neighbouring city when it comes to average revenue per hotel room. Each room provided hotel operators here with a revenue of 1,192 patacas, up by 1.1 percent year-on-year. In Hong Kong revenue fell by 2.9 percent to HK$1,210. Macau, Shenzhen and Shanghai were the only major cities in Greater China where revenue per hotel room increased year-on-year in the second quarter. Hotels here were as busy in the April-June period as a year earlier, with the occupancy rate unchanged at 85.7 percent. This figure remains the second highest in Greater China behind only Hong Kong, where occupancy rate hit 87.8 percent. V.Q.

October 2013 April 19,2,2013

Macau

Chui keeps mum about re-election The chief executive says his main task is to keep the promises he made four years ago Tony Lai

tony.lai@macaubusinessdaily.com

Chui Sai On called for Macau people ‘to dream big and chase and fulfil their dreams’

hief Executive Fernando Chui Sai On was non-committal yesterday about whether he will run for re-election next year, saying he wishes to focus first on the job in hand. “Will I run for re-election? That is a very serious topic and I will surely reveal it at an appropriate time,” Mr Chui said on the sidelines of an official reception marking National Day. “The most important thing now is to get all the work done within the current term, with my team.” He said the work to be done was laid out in the Policy Address and the policies he put forward when seeking election in 2009. Mr Chui was formerly secretary for social affairs and culture. He became chief executive four years ago. His term will end on December 19, 2014. He is expected to run for a second term, which would last until 2019. In his speech to nearly 1,000 guests at yesterday’s reception, Mr Chui said Macau would cooperate more actively with Guangdong on Hengqin Island and in Nansha. He said he felt recent data showed the mainland economy “is stabilising, with bright prospects”.

Macau would continue to diversify its economy “appropriately”, he said. Mr Chui said the city would promote tourist attractions other than gaming, and promote tours that took in other places as well as Macau. He said the government would ensure that permanent residents had priority in employment and encourage employers to promote residents to higher positions. He said the government would improve the way it consulted the public about policy. The government would strive to create a “fairer environment for Macau residents, particularly the youth, to dream big and chase and fulfil their dreams”, Mr Chui said. Prime Minister Li Keqiang said yesterday that the central government would support Macau and Hong Kong. Addressing a reception held in the Great Hall of the People to mark the 64th anniversary of the founding of the People’s Republic of China, Mr Li reiterated that the central government would adhere to the one country, two systems principle and ensure the long-term prosperity and stability of Macau and Hong Kong.

Prosecutors investigate vote-buying allegations But cast no doubt on the Legislative Assembly election results as no winning candidates are implicated Tony Lai

tony.lai@macaubusinessdaily.com

he Public Prosecutions Office is investigating two successful tickets of candidates on suspicion of buying votes in last month’s Legislative Assembly elections. But the outcome of the investigation will not change the outcome of the elections. Prosecutor-General Ho Chio Meng said yesterday: “We have officially opened case files for two incidents, while there is not enough evidence of other incidents.” The Public Prosecutions Office said on polling day on September 15 that “fewer than 10” cases of alleged vote-buying were under preliminary investigation. Speaking on the sidelines of an official celebration marking National Day, Mr Ho said two tickets under investigation had won seats, but declined to identify either. He said the investigations “will not affect the election result” because of the absence of any “automatic direct relation” b e tween t he s uspe cts and the winning candidates. Asked if it was fair for candidates to keep seats they won if their tickets were found guilty of vote-buying, he declined to comment.

The head of the Commission against Corruption, Vasco Fong Man Chong, said last month there had been more foul play by frontline campaign staff this year than in previous elections, but that candidates had been unaware of it. Mr Ho said yesterday: “We will hasten our investigations as we have to hurry in this type of case.” He said one of the cases of alleged vote-buying had been made public. He said both cases were about alleged offers of “material benefits” and “promises” in return for votes. The commission alleged last month that it had found two members of an association offering free meals in return for votes. Mr Ho replied that election bribery had “gone underground” when asked if vote-buying was worse this year. “Society is different now and some of our legal standards are quite lax, so I think we should improve the law,” he said. Secretary for Administration and Justice Florinda Chan, speaking on the sidelines of the same National Day celebration, said that “if there is the need” the government was ready to change the election law. “We are now waiting for the report from the Election Commission, and

Election law standards are ‘quite lax’, Prosecutor-General Ho Chio Meng says

we also notice the commission is now collecting opinions from society, including those participating in the election,” she said. The new assembly will convene

on October 15 with 14 directly elected and 12 indirectly elected members. The chief executive is expected to appoint another seven members this week.

October 2, 2013

Macau La Scala trial to end this year: lawyer The corruption trial linked to the luxury housing project La Scala should be over “by year-end”, said Jorge Neto Valente (pictured), legal counsel for businessman Steven Lo Kit Sing. Mr Lo and property developer Joseph Lau Luen Hung are accused of bribing Ao Man Long, former government secretary, for securing the land where La Scala was being built. Mr Neto Valente said it was normal for the trial to take this long because the court “is busy”. He declined to comment on claims made by Mr Lau last week that he was being “persecuted by influential people”.

CSR to win extension on rubbish collection Govt pledges to keep waste management up and running despite legal challenge Vítor Quintã

vitorquinta@macaubusinessdaily.com

he government is ready to allow Macau Waste Systems Co Lt d, k n own as C S R , to continue managing the city’s solid waste while a new 10-year contract remains on hold due to a legal challenge. “We do not rule out that if the solid waste contract litigation is still unresolved by the end of this month we will have a temporary extension w i th t he [ cur r ent] ope rator,” Secretary for Transport and Public Works Lau Si Io said yesterday. CSR’s original contract was supposed to end in September 2011, but it was extended on three occasions. It is now due to expire on October 31. In June Spanish company Urbaser SA applied to the Court of Second Instance for an injunction to stop the government from giving the contract to CSR, and later asked the court to overturn the award of the contract. “As the matter is right now undergoing the litigation process, we cannot grant [the contract] immediately,” Mr Lau said on

CSR’s contract has been extended on three occasions and is now due to expire on October 31 (Photo: Manuel Cardoso)

the sidelines of a National Day reception yesterday. “We will request the current company to ensure that all solid waste management and cleaning [ke eps] r u n n i n g a s o r i g i n a l l y planned,” the secretary told media. Asked for how long the fourth contract extension with CSR could last, he said: “We will announce it at an appropriate time”. CSR won the 10-year contract

with a bid of 2.07 billion patacas (US$258.8 million), the lowest of the five bids. Urbaser’s bid was 2.39 billion patacas. In its appeal Urbaser claimed the bid criteria were flawed, namely the lack of anti-corruption criteria. Those flaws “objectively benefited CSR,” the company argued. Mr Lau declined to comment on whether the bidding process was flawed or if the government was to

If the solid waste contract litigation is still unresolved by the end of this month we will have a temporary extension with the operator Lau Si Io, Secretary for Transport and Public Works

blame for the legal dispute. CSR is a joint venture by Hong Kong’s Swire SITA Waste Services Ltd and Macau’s H. Nolasco Group. The company has been responsible for collecting Macau’s rubbish since before the handover. With Tony Lai

Affordable homes remain on track: govt Housing Bureau still to assess applications for one-bedroom flats Tony Lai

tony.lai@macaubusinessdaily.com

esidents will be able to apply to buy public subsidised homes in this quarter as originally planned, Secretary for Transport and Public Works Lau Si Io said. “The applications will be open in the fourth quarter and now we are only at the beginning of the quarter,” the official said yesterday on the sidelines of an official government reception in Macau to mark China’s National Day. He declined to say how many affordable homes would be on sale and their location, only saying: “We will announce that later”. There were doubts on whether the application for affordable homes would reopen this quarter because the Housing Bureau had already postponed other public housing works. The application for renting public flats, known as social housing, was reopen at the end of May, even though

the bureau had originally planned to do so in the first quarter. The last time residents could apply to buy all types of affordable homes was back in 2005. In the first quarter of this year the government did allow residents to apply for the 2,000 one-bedroom flats that had not been picked up by households in the waiting list. Tam Kuong Man, the Housing Bureau director, said on the same occasion yesterday they had finished inputting more than 15,000 requests for these one-bedroom flats. “We will assess the applications according to the standards stated in the new affordable housing law,” he said. The bureau will “strive” to release the name of the households that got one of the 2,000 flats “by the end of this year,” Mr Tam pledged. However, he warned that they had a lot of work. Mr Tam added they had

The last time residents could apply to buy all types of affordable homes was in 2005

received over 6,000 applications for social housing. The bureau had already reviewed about 2,000 applications but 70 percent of those were asked to submit

more documents, he said. The bureau director expects the names of the households that will be able to rent a public flat to be out only early next year.

October 2, 2013

Macau

Failing casinos appeal smoke check results Govt says it’s delayed naming venues that flunked air quality standards in springtime tests until process plays out Michael Grimes

michael.grimes@macaubusinessdaily.com

he government has not yet published names of casinos that failed a second check on air quality within designated smoking zones because some of the venues have appealed against the findings. Cheong U, Secretary for Social Affairs and Culture, gave the news yesterday on the sidelines of an official government reception in Macau to mark China’s National Day. The results had been promised by the administration before the end of June. “The reason for the delay is that we have received some appeals,” said Mr Cheong. Secretary Cheong asserted early last month that the size of smoking areas in 16 gaming establishments would be reduced after they flunked the second series of tests in April and May. But yesterday he stated: “We still need about some 10 days to handle the appeals from the gaming venues and then we will announce the result together with the relevant procedures.” He declined to say

Cheong U, Secretary for Social Affairs

how many casinos have appealed or what were the prospects of appeals being upheld. Under rules introduced at the start of this calendar year, Macau’s casino sector avoided a complete ban on smoking on gaming floors, but in return had to meet minimum air quality standards in official smoking

zones via regular tests. The first tests were in March. Smoking zones cannot be more than 50 percent of the total gaming floor in each venue, but the fact any smoking is allowed at all there – it’s banned in other public spaces – is seen as a concession to the industry. The casinos produce a huge and growing annual public surplus for the city thanks to the near-40 percent gaming tax levied on gross casino revenue. Praveen K Choudhary, managing director of Morgan Stanley in Hong Kong, said in a report last December that when total smoking bans were imposed in casinos in parts of the United States and in Australia, gaming revenue fell by between four percent and 20 percent (on average 12 percent) in the 12 months afterwards. Mr Cheong stated yesterday: “I am surely unsatisfied with the second round result and I believe everyone – the gaming operators, the employees – are all unsatisfied as they all want [their venues] to reach the [government’s]

standards and to let the tourists, residents and workers have a better environment.” He added: “For the second round result there are actually more gaming venues meeting the standards, only 16 [failing again]. We hope there will be fewer and fewer [failing venues] in the future and any failing venues will be handled in accordance with our mechanism. We cannot call this as [a] penalty [as it] only ensures the enforcement of the law and protection for the tourists and employees.” “We are aware that [many venues] have adopted new equipment like the air cleaners (…) I believe the [air quality] will improve if everyone is committed.” But he added: “…I want to emphasise that the first part of the smoking ban on public [general indoor] space runs relatively smoothly whereas for the gaming venues the present air quality in at least 51 percent of the area [all gaming floors] has improved,” stated Mr Cheong yesterday. With Tony Lai

October 2, 2013 April 19, 2013

Macau

Neptune profits rise 26 pct

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But receivables also up 30 percent in 12 months to June

HOSPITALITY

Michael Grimes

michael.grimes@macaubusinessdaily.com

Comings and goings The growth of tourism in Macau has increased demand for the services of travel agents. Travel agencies cater to the increasing numbers of visitors coming to the city and residents going elsewhere. The annual number of visitors on package tours increased by 21 percent last year, official data show. The annual number of residents on trips arranged by travel agencies here rose by 71 percent. The rising demand is being met by a rising supply of travel agents. The chart shows growth indexes for the number of travel agencies and the number of staff they have. The base year for the indexes is 2007, before the financial crisis.

Between 2007 and last year the number of travel agencies grew to 197 from 157. The increasing numbers of travellers is reflected especially in the number of staff the travel agencies employed. The number grew by 61 percent or almost 1,400. The effects of the financial crisis were mild. At most, the crisis may have caused a net loss of two travel agencies in 2008 and a slowdown in the hiring of staff. Growth resumed immediately in 2009. One characteristic of the travel agency business is that many of the companies in it are small. The average number of employees of each travel agency rose last year to 18.6. But the average was simply continuing its rebound from its fall in 2008 and 2009.

nnual profits at Macau junket room investor Neptune Group Ltd rose by more than onequarter in the year ended June 30 the firm said in a filing to the Hong Kong Stock Exchange. Profits for the business reached nearly HK$564.51 million (US$72.79 million) for the 12-month period, a 26 percent improvement compared to HK$442.15 million the previous year. That’s against the background of a VIP gambling market that saw year-on-year revenue growth slow to 11 percent in the second quarter of the calendar year, while mass-market gaming expanded by 26.5 percent in the same period. Neptune Group’s turnover during the year ended June 30 rose one-third

to just under HK$577.52 million, from approximately HK$433.38 million in 2012. The rolling chip turnover of the associate junket businesses to which Neptune has profit rights are significantly higher than the turnover recorded by Neptune. The latter number is calculated under the profit stream deals Neptune has with five Macau junket firms. Neptune’s deals cover 61 junket tables at four casinos in Macau, namely The Venetian Macao, Sands Macao, Galaxy StarWorld and Grand Lisboa. On September 27, the group announced it had signed a memorandum of understanding for a possible investment in a

Neptune partners keep on rolling (Picture: Manuel Cardoso)

junket promoter business at Galaxy Guangdong VIP Club at “Galaxy Casino, SA”. The latter is a reference to the Galaxy Entertainment Group Ltd unit that holds the latter’s Macau concession, rather than a specific Macau casino. But Business Daily understands it’s a reference to a club at Galaxy Macau on Cotai.

Share earnings Neptune Group underwent a reorganisation in senior management during late 2012 and early 2013, following the reported arrest on the mainland of a number of senior junket executives in the Macau industry. For the financial year ending June 30, Neptune’s earnings per share – both basic and diluted – fell 5.5 percent to 6.95 HK cents from 7.35 HK cents a year earlier, following dilution of existing shareholders due to a near eight percent increase in issued ordinary shares during the period. Diluted earnings per share for the year were the same as the basic earnings per share because the exercise prices of the company’s outstanding share options were higher than the market prices of the company’s shares during the year. Receivables – mainly money owed to the company from credit-based VIP gambling – rose 30 percent year-on-year to approximately HK$418.13 million, from HK$321.12 million in 2012. A total of 69 percent of the 2013 receivables were for accounts more than 90 days old. “The group’s trading terms with its customers are mainly on credit. The credit terms are generally for a period of 30 days for [the] gaming and entertainment segment,” said Neptune in its filing, though it added no impairment loss had been recorded on receivables for financial year 2013 or 2012.

J.I.D.

Okada ordered to Manila casino hearing 11

Net increase in travel agencies last year

apanese entrepreneur Kazuo Okada has been summoned to appear at preliminary hearings convened by the Philippine Department of Justice on October 17 and 18 according to a subpoena. He faces allegations of criminal behaviour in relation to his pursuit of a US$2 billion (16 billion patacas) casino resort at Entertainment City,

Manila Bay, on the outskirts of the country’s capital. In July Mr Okada was accused of circumventing the country’s 40-percent limit on foreign ownership of businesses. He’s facing claims he breached the Philippine Anti-Dummy Law, Public Land Act, Foreign Investment Act and Article XII of the constitution. Mr Okada made his fortune from

pachinko machines but later became an investor in the Las Vegas and Macau-based casino operator Wynn Resorts. His near 20 percent stake in Wynn was cancelled at a discount in February 2012 after claims his pursuit of the Manila project was putting Wynn’s Nevada licence at risk. Mr Okada denies wrongdoing.

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October 2013 April 19,2,2013

Macau

Judge dismisses US$10 mln LVS suit on ‘prostitution’ claims Lawyer for Sheldon Adelson says allegations against Macau operation ‘a boldfaced lie’ and is looking to appeal Michael Grimes

michael.grimes@macaubusinessdaily.com

US$10 million (80 million patacas) defamation suit stemming from repetition of accusations that Las Vegas Sands Corp had condoned prostitution at its Macau venues has been dismissed by a United States District Judge. Paul Oetken sitting in Manhattan on Monday U.S. time, said the reporting by the National Jewish Democratic Council of claims made in another lawsuit was covered by constitutionally protected rules on expression of opinion and reporting of court proceedings. The council had repeated an allegation made in a wrongful dismissal case brought in Nevada by former Sands China Ltd chief executive Steve Jacobs. Mr Jacobs was dismissed for what LVS said was “cause” in July 2010. The prostitution allegation against LVS was included in an article on the council’s website before the 2012 U.S. presidential election. The piece detailed the litigation

between Mr Jacobs and his former employer. LVS’s chairman Sheldon Adelson was a prominent financial backer during the presidential campaign of Republican candidates Newt Gingrich and the eventual party nominee Mitt Romney. Mr Adelson and his lawyers argued in the libel case that the council, its president, David Harris, and its chairman, Marc Stanley, “crossed the threshold from constitutionally protected speech to defamation of a public figure”. In a statement reported by the Las Vegas Review-Journal, Lin Wood, an attorney for Mr Adelson, said the court acknowledged Las Vegas Sands’ policy is one of “no tolerance” for prostitution. “[The court] referenced records establishing that there is no evidence that can be found that anyone at the company supported in any way a different policy on this issue,” the lawyer said in a statement. “The statement by the National Jewish

Sheldon Adelson – said article ‘crossed line’ on freedom of speech

Democratic Council at issue in this case remains a boldfaced lie. We are reviewing the opinion for a likely appeal on what we believe to be an erroneous decision denying Mr Adelson the basic right of trial by jury,” the attorney added. Last week a Nevada judge awarded Hong Kong businessman Richard Suen US$1.03 million to cover expenses for a lawsuit that ended in May. Mr Suen had successfully claimed he was owed

money for helping LVS gain its Macau gaming licence. The jury in that case awarded Mr Suen US$70 million, accepting his version of events. Including interest, the actual lawsuit award came to US$101.6 million as of the end of May, and is still accruing interest. LVS is expected to appeal in the Nevada Supreme Court against the trial expenses award and the trial verdict itself. With Bloomberg News

Corporate BNU opens China Plaza branch Banco Nacional Ultramarino (BNU) SA officially inaugurated on Monday a new branch in China Plaza building, in downtown Macau. BNU is expanding its branch network in order to meet the needs of both corporate and retail clients, the company said in a statement. The bank now has 16 branches in the city. During the current year BNU is planning to expand its branch network with four new branches, “reflecting the confidence in the future of Macau’s economic development,” the lender said. The ceremony was officiated by Anselmo Teng, chairman of the Macau Monetary Authority’s executive committee, Chui Sai Cheong, the sole supervisor of BNU and Pedro Cardoso, president of the BNU executive commission. BNU has been operating here since 1902 and it is one of the city’s two money-printing banks. The bank is a subsidiary of state-owned Caixa Geral de Depósitos SA, one of Portugal’s biggest financial services conglomerates.

Jones Lang LaSalle scoops Asia Pacific awards Jones Lang LaSalle in Asia Pacific has been awarded nine top-advisor accolades at the Euromoney Real Estate Awards 2013. The firm was distinguished as the top advisor in four countries and territories in the region, including Hong Kong where it won the categories of Overall Advisor, Valuation, and Research. Jones Lang LaSalle also dominated the awards for Thailand while picking up the Research category in Malaysia and the Agency/Letting category for the Philippines. Alastair Hughes (pictured), chief executive of Jones Lang LaSalle for Asia Pacific, said: “We are pleased to have been recognised in these awards, particularly as they are voted for by our industry peers.” “Accolades such as this are testament to the quality and dedication of our people across the region,” he added. “All our offices in Asia Pacific are dedicated to providing marketleading services and excellence to our clients.”

October 2, 2013 April 19, 2013

Greater China KKR buys stake in appliance giant

China confident of meetingecono

KKR & Co agreed to buy a 10 percent stake in appliance maker Qingdao Haier Co for 3.38 billion yuan (US$552 million), the New Yorkbased private-equity firm’s biggest investment in China. The Shanghai-listed unit of China’s largest appliance maker is selling 299.5 million shares at 11.29 yuan each to KKR in a private placement, the company said in a statement posted to the Shanghai Stock Exchange late on Monday. That’s a 15 percent discount to the price on September 12, the last day before Qingdao Haier suspended share trading pending an announcement. KKR is making the investment as Chinese Premier Li Keqiang drives an urbanisation campaign that may see hundreds of millions of rural workers and their families become city residents, boosting consumption demand. The private equity firm is stepping up deal-making in Asia after raising US$6 billion earlier this year for the industry’s largest investment pool in the region, according to researcher Preqin Ltd. China’s consumer industry “can expect to see more interest from foreign firms looking to take advantage of the sector as demand from China’s burgeoning middle-class increases,” Mitul Patel, manager for Asia research at Preqin, said via e-mail yesterday. “The theme of consumer migration from lowincome to middle class is certainly something we’re seeing” in emerging markets such as China and Brazil, Alex Navab, KKR’s co-head of private equity in the Americas, told a conference audience last month. “Those industries that benefit from that migration are certainly industries that we look at,” Mr Navab said, citing the consumer, health-care and education industries. KKR has invested more than US$5.5 billion in Asia since it opened its first office on the continent in 2005. The firm has more than 100 deal makers across Asia, it said in July.

Premier says economy shows good momentum for further growth

hina can meet its main economic targets this year, Premier Li Keqiang said in a speech. “We have the confidence, conditions and ability to meet the main targets projected for our economic and social development this year,” Mr Li was quoted by the official Xinhua news agency. The premier spoke while addressing a reception held at the Great Hall of the People to mark the 64th anniversary of the founding of the People’s Republic of China. Communist Party leaders are expected to meet in November to set the direction for economic policy in coming years. Mr Li has signalled he wants to reduce the state’s hand in the economy and financial system, with the government experimenting with more relaxed controls in a free-trade zone in Shanghai. A holistic approach has been adopted to strike a balance between maintaining growth, readjusting economic structure and promoting reform, and a series of policy measures have been carried out to serve both the immediate and longterm needs of development, Xinhua quoted Mr Li as saying. “We have kept our macro policies stable, innovated in adjustment

China will deepen and speed up reforms by stimulating market activities and developing social creativity Li Keqiang, China’s prime minister

Manufacturing tepid as small fir Factories struggle for growth in lacklustre Asia

Baidu’s travel service files for US$125 mln IPO Qunar Cayman Islands Ltd, an online travel service provider controlled by Baidu Inc, seeks to raise as much as US$125 million in the biggest U.S. initial public offering by a Chinese company in two years. Qunar, which runs China’s most popular mobile travel app, plans to sell American depositary shares and to list on the New York Stock Exchange, according to its filing to the U.S. Securities and Exchange Commission yesterday. Goldman Sachs Group Inc and Deutsche Bank AG are lead underwriters of the deal. Baidu, operator of China’s largest search engine, paid US$306 million in 2011 for a majority stake in Qunar to tap the country’s growing travel market. Qunar reported sales of US$58.5 million for the six months ended June 30 and a net loss of US$2.8 million during the period, it said in the filing. “It looks like they are on the path to break-even just in sight, and having a powerful parent sponsor is very helpful for its IPO success,” Francis Gaskins, president of California-based researcher IPOdesktop.com, which monitors initial public offerings, said in a phone interview. “The market for Chinese IPOs is a lot healthier than it was two years ago.” Tudou Holdings Ltd, a video website, raised US$174 million in an August 2011 U.S. offering. LightInTheBox Holding Co, a Beijing-based online retailer that raised US$78.9 million in a June IPO, has climbed 25 percent. Montage Technology Group Ltd has returned 42 percent since its US$71 million IPO on September 25. Bloomberg News

hina’s manufacturing activity expanded only slightly last month, raising concerns a nascent economic recovery may be foundering at a time of market uncertainty about a U.S. government shutdown and a political crisis in Italy. Similar purchasing managers indexes measuring the factory sectors in India, South Korea and Taiwan rose modestly, although the improvements were not enough to give much comfort. The one bright spot for Asia was in Japan, where a report said on Monday that manufacturing activity expanded in September at its fastest pace since the 2011 earthquake and tsunami. China’s official PMI rose to 51.1 in September from 51.0 in August, data showed yesterday. That was

KEY POINTS Official China PMI edges up to 51.1, below expectations Large firms seeing improvement, smaller ones struggling Adds to worries economic recovery may be losing steam Recovery may peak in Q3 – economist

still the highest in 17 months, but the increase was less than expected. “Although overall manufacturing is stable, development is not balanced,” said Zhao Qinghe, senior statistician at the National Bureau of Statistics in a comment accompanying the PMI. “The trend towards improvement for large and medium companies is consolidating, but small companies face difficulties,” he said, noting overcapacity and weak demand. The data showed the sub-index for small firms at 48.4, down from 48.8 the previous month, while that for large companies rose to 52.1 from 51.8. The overall new orders subindex rose to 52.8 from the previous month’s 52.4, with export orders at 50.7 from 50.2. A separate China PMI from HSBC Holdings Plc and Markit Economics on Monday also showed manufacturing activity growing less than expected last month on soft domestic demand. “The question is how sustainable is the recovery,” said Haibin Zhu, chief China economist for JP Morgan in Hong Kong. “We are still cautious. We see the recovery peaking in Q3 and slowing in Q4 on a sequential basis.”

Lacking momentum China’s economy has shown signs of picking up but the PMI figures suggest it is struggling for momentum. Analysts like Mr Zhu have warned China’s economic rebound could be short-lived. Unlike in the past, the government is reluctant to implement strong stimulus policies that could

Factory gauge signals limits on China’s rebound

come back to haunt it longer term. But the manufacturing index showed the economy’s momentum is “not strong,” Zhang Liqun, a researcher with the State Council’s Development Research Centre, said in a statement on a CFLP website. Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong, said yesterday’s number “reinforces our view that the recovery is not sustainable”. China’s struggle adds to a complicated global economic

October 2013 April 19,2,2013

Greater China

omic targets: Li methods, and effectively guided market expectations,” he said, adding the Chinese economy has shown good momentum for further growth. China on Sunday inaugurated an 11-square-mile experimental area in Shanghai, where it will allow trials of yuan convertibility in capital flows, establish an international energy centre and allow overseas parents of companies established in the zone to sell yuan-denominated debt in China. Companies with the word Shanghai in their name led Chinese shares to their best quarterly advance in three years on speculation they will benefit from further reforms. “China will deepen and speed up reforms by stimulating market activities and developing social creativity,” Mr Li said in his speech. The economy probably grew 7.7 percent in the third quarter, according to the median forecast in a Bloomberg News survey last month, up from an estimate of 7.5 percent in August. Growth cooled in the first and second quarters. The government, which is targeting a 7.5 percent economic growth expansion, has chosen not to expand the fiscal deficit and will continue with a steady monetary policy, Mr Li said last month.

The premier told his audience that China is currently at a crucial stage for economic readjustment and upgrading and still confronted with many challenges. There is still a long way to go before modernisation is achieved, he added. When it comes to Macau and Hong Kong, the premier reiterated that the central government will adhere to the principle of “one country, two systems” and ensure long-term prosperity and stability in these regions. On Monday, Mr Li also praised the work of foreign experts in China, emphasising that the country will continue to invite more overseas workers. “Through the foreign experts, we have got the opportunity to learn about the advanced technology and administrative experience of developed economies,” Mr Li said. “Inviting foreign experts has aided China in opening up. It benefits the Chinese people and the whole world,” he added. More than 550,000 foreign experts were working in China last year. Mr Li said China will continue to invite foreign experts during a “critical period of China’s modernisation construction”. T.A. with Xinhua/Bloomberg News

rms struggle

China seen as a relatively safe haven among emerging economies

Q4 unlikely to produce any surprise for stocks ‘Too early’ to say if equities entered long-term up trend, analysts say Clement Tan

environment for policymakers and investors. The U.S. government began a partial shutdown yesterday for the first time in 17 years after lawmakers could not break a political stalemate over spending. It faces another critical deadline in coming weeks to raise its debt ceiling of US$16.7 trillion. Failure to find an agreement could lead to a historic U.S. government debt default. The central government is seen as unlikely to do much to support economic growth beyond mild

measures it has announced so far, including accelerating infrastructure investment, mindful of the lessons learned in 2009 when a massive stimulus package saddled the country with massive debt that remains today. “The Chinese government should be able to achieve its 7.5 percent growth target,” said Lu Ting, head of Greater China economics at Bank of America Corp in Hong Kong. “Premier Li will continue his current pro-growth policies.” Reuters/Bloomberg News

n early July, long-depressed Chinese stocks stepped into the unlikely role of stars among emerging markets. But the outperformance has ended, and it’s very unlikely investors will see a repeat any time soon. At the rebound’s peak in early September, the MSCI China index of mostly offshore listings in Hong Kong was up 20 percent from June lows, while the onshore market spiked 16 percent. Helping fuel that rally was a spate of reassuring data that considerably improved views of the Chinese economy. Also, China, with its closed capital system, was seen as a relatively safe haven among emerging economies, whose growth is threatened by more capital outflows when the U.S. Federal Reserve cuts its asset-buying programme. But the recent rally reflected mainly a reduction in extreme bearishness on the Chinese market, and hence an improvement in share valuations, rather than a foundation for sustained share-price gains. “It’s not the beginning of a trend reversal,” said Joseph Tang, who as Invesco Asia’s investment director helps manage US$1.3 billion in a series of China-focused funds. “It’s too early to say if China equities have entered a long-term up trend.” Ahead of the one-week closure of mainland markets for National Day, China shares trimmed gains and some with large recent gains have been hit by profit-taking. Still, the MSCI

China index has risen more than 10 percent in the third quarter. Long-term domestic issues clouding the outlook for offshore Chinese shares include growing indebtedness of companies, industrial overcapacity and still-soft growth. It was a spike in mainland interbank lending rates in late June that raised fears of serious grief in the world’s second-largest economy, triggering a slide in global markets. The rally effectively began after the People’s Bank of China intervened by ordering larger banks to lend to smaller banks and by promising to stabilise the market. A slew of positive July and August economic data, along with the approval of a Shanghai free trade zone, spurred further gains. While some investors were concerned about missing the rally, “there has not been any real change in their outlook on China,” said David Cui, Bank of America-Merrill Lynch’s Shanghai-based chief China equity strategist. Already, capital flows data suggests the interest in Chinese equities remains sluggish. Short selling interest in Hong Kong has remained largely above the 8 percent historic average throughout. According to a September 30 Macquarie report citing data from funds tracker EPFR, Chinadedicated funds saw fund outflows intensifying in the week that ended September 25 in a 19th consecutive week of outflows. Reuters

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Greater China US$82 bln for water pollution battle China has allocated 500 billion yuan (US$82 billion) for water-pollution prevention and control projects in major drainage areas under the current 2011-2015 five-year plan, Xinhua news agency reported. The amount of spending was 300 billion yuan in the previous five-year period, China’s official news service said yesterday, citing the Ministry of Environmental Protection. The water-contamination situation remains “grave,” Xinhua said. The government won’t approve new projects that risk causing water pollution in the cities Siping, Hefei, Liu’an and Kunming and in the Enshi Tujia and Miao autonomous prefecture, Xinhua said.

Guangzhou shipyard to sell new shares Company to spend US$156 million to buy yard

Guangzhou Shipyard being forced out of its current city-centre location

uangzhou Shipyard International Co Ltd, a unit of China’s biggest shipbuilder, plans to sell HK$2.82 billion (US$364 million) of new shares and use some of the proceeds to buy a yard from its parent and two partners. The company will sell 387.5 million shares at HK$7.29 each to China State Shipbuilding Corp, its parent, and to Baosteel Group Corp and China Shipping Group Co, according to a filing to Hong Kong’s Stock Exchange. Guangzhou Shipyard, based in the southern Chinese city, will use 956 million yuan (US$156 million) of the proceeds to buy CSSC Guangzhou Longxue

Shipbuilding Co, now owned 60 percent by its parent, 30 percent by Baosteel and 10 percent by China Shipping. The purchase of Longxue will provide a relocation facility for Guangzhou Shipyard, which is being forced out of its current city-centre location by the Guangzhou municipal government in favour of residential and commercial development, according to the filing. Longxue is the biggest builder of modern large vessels in southern China, with an annual capacity of 3.5 million deadweight tons, and its yard can build bigger ships than Guangzhou Shipyard’s current site. Guangzhou Shipyard was

halted from trading in Hong Kong on Monday, pending the announcement. The stock will resume trading today in Hong Kong and on October 8 in Shanghai, where the market is closed for the weeklong National Day break. In August, China issued a three-year plan to urge financial institutions to support its troubled shipbuilding industry, the world’s biggest. Ship owners placing orders for China-made vessels, engines and some main parts should get better funding and some key companies will be allowed to issue corporate bonds, the State Council said in a statement released on August 4. Bloomberg News

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Asia Indonesia sees trade surplus Indonesia recorded a surprise trade surplus for August, its first in five months, offering some relief to the ailing rupiah, but the country’s current account deficit will likely keep weighing on Asia’s weakest currency this year. Southeast Asia’s largest economy had a trade surplus of US$130 million in August, compared with a record US$2.3 billion deficit the previous month. “The trade surplus will give comfort to the current account deficit problem,” said Aldian Taloputra, senior economist with Mandiri Sekuritas. In a further worrying sign for the economy, exports and imports were markedly weaker than expected. August exports fell 6.31 percent from a year ago, versus forecasts for a gain of nearly 3 percent, while imports declined 5.69 percent, compared with forecasts for a rise of nearly 10 percent. Prior to last year, Indonesia always had an annual trade surplus, thanks to oil and other exports. But now it regularly has monthly trade deficits, reflecting how it is now a net oil importer and recent weakness in prices for its commodity exports. In the April to June period, the current-account deficit was 4.4 percent of gross domestic product (GDP), adding to investors concerns over the government’s ability to fund the economy. Earlier yesterday, the statistics bureau said that consumer prices fell 0.35 percent in September from the previous month. The annual inflation rate was at 8.40 percent last month.

Japan to press ahead with sales-tax rise Prime minister pledges to cushion blow to economy Tetsushi Kajimoto and Stanley White

RBA holds key rate at record-low 2.5 pct Australia’s central bank left its benchmark interest rate unchanged at a record low as accelerating housing prices outweighed a rebounding currency. Governor Glenn Stevens and his board kept the overnight cash-rate target at 2.5 percent, the Reserve Bank of Australia said in a statement yesterday. The decision was predicted by all 33 economists surveyed by Bloomberg News and markets had seen almost no chance of a reduction. Household sentiment has improved since Tony Abbott’s coalition won a September 7 federal election and property prices surged to a record in response to the RBA’s two-year easing cycle. At the same time, Australians are facing increased job insecurity as the sustained strength of the Australian dollar renders some industries uncompetitive. “The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values,” Mr Stevens said in the statement. “The full effects of these decisions are still coming through, and will be for a while yet.” The central bank may be hesitant to further stoke the property market. Home prices in Australia’s biggest cities rose 3.7 percent in the three months through September, according to the RP Data-Rismark Home Value Index.

Garuda expands fleet in lease deal PT Garuda Indonesia will lease as many as 35 ATR 72-600 turboprop aircraft from Nordic Aviation Capital to modernise its regional fleet amid rising travel demand in Southeast Asia’s largest economy. Garuda has signed a firm commitment for 25 of the planes, with options for 10 more, ATR said in a statement yesterday. The deal is worth more than US$840 million, and deliveries of the aircraft will start next month. ATR, as the Avions de Transport Regional joint venture of European Aeronautic, Defence & Space Co and Finmeccanica SpA is known, has booked 83 aircraft sales this year including the turboprops for Garuda it previously listed as being purchased by an undisclosed customer. “This agreement highlights the strong commercial success of the ATR 72-600 in Asia,” ATR chief executive Filippo Bagnato said in the statement. “We will continue investing to support and further develop this growing region.” The aircraft, which can seat up to 74 passengers, will accommodate 70 in Garuda’s configuration, ATR said. The aircraft maker has also sold its planes to Indonesia’s PT Lion Mentari Airlines.

There are fears that a tax hike may hurt domestic demand

apan’s Prime Minister Shinzo Abe took a step yesterday that none of his predecessors had managed in more than 15 years – making a dent in the government’s runaway debt. Mr Abe, riding a wave of popularity with economic policies that have begun to stir the world’s third-biggest economy out of years of lethargy, said the government will raise the national sales tax to 8 percent in April from 5 percent. “I believe it is possible to quickly put Japan back on a growth path. Because of this and to maintain trust in Japan and to hand to the next generation a sustainable socialsecurity system, I have decided to raise the sales tax,” Mr Abe said. But at the same time he will soften the blow to the nascent recovery. As the tax increase is set to raise an additional 8 trillion yen (US$81.42 billion) a year, Mr Abe will also announce an economic stimulus package worth 5 trillion yen or more, according to a final draft seen by Reuters. A source involved in the process said the size of the package could increase somewhat, depending on how some corporate tax issues are dealt with. The tax increase marks the first serious effort since 1997 to rein in Japan’s public debt, which recently blew past 1,000 trillion yen. At more than twice the size of the economy, this is the heaviest debt load in the industrial world. Japan’s budget deficit is around 10 percent of GDP, huge for a country not in financial crisis. The debt pile grows every year by nearly the size of the combined GDP of Greece, Portugal and Ireland. Yet, successive governments have done little to rein in spending and Mr Abe is watering down the impact of the tax hike, so some critics doubt yesterday’s move will be enough to get Japan on track to achieve its goal of halving the budget deficit – excluding debt service and income from debt sales – by the fiscal year to March 2016 and balance it five years later. “Even if Abe’s policies go well, we

still will not eliminate the primary budget deficit,” said senior Standard & Poor’s official Takahira Ogawa. “It will just slow the pace of growth in outstanding debt and slow the pace of budget-deficit growth, but things would still be deteriorating,” Mr Ogawa, the ratings firm’s Tokyobased director of sovereign ratings, told reporters last week. S&P could cut Japan’s rating if it does not shrink its budget deficit, he said.

Balancing act Still, pressing ahead with the tax hike bolsters the image Mr Abe has sought to foster of a decisive leader, withstanding opposition from his advisers and some of his own party. “This plan was already in the works, but we have to give Abe some credit for following through with it,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. Mr Abe is seeking a difficult balance with massive fiscal and monetary stimulus to end 15 years of deflation and tepid growth, while setting the groundwork to get the government’s finances in order over time. “Escaping deflation is my administration’s highest priority. We should realise that this will not be an easy task,” Mr Abe told an economic advisory panel. “We also have to balance the need for an economic recovery with the need for fiscal discipline.” To ensure that the fiscal tightening does not derail the recovery, Abe ordered his government to compile the stimulus package. It features public-works spending for the 2020 Tokyo Olympics, tax breaks to promote corporate capital spending and an early end to a corporate tax add-on that has funded reconstruction following the 2011 earthquake and tsunami, which will save companies 900 billion yen. The stimulus could add 0.5-0.6 percentage point to economic growth in the fiscal year starting in April, but after that the impact is likely to fade away, said Sumitomo Mitsui’s Mr Muto.

KEY POINTS Hike is biggest fiscal-reform move since 1997 Stimulus to offset some 5 trln yen of 8 trln yen hike Japan under pressure from credit rating agencies Critics say Abe’s mix favours companies over consumers

Financial markets have given Tokyo the benefit of the doubt: the government can borrow 10-year money for less than 0.7 percent. But government officials and private economists have long feared a crisis in confidence in Japan’s creditworthiness that could cause a crippling spike in interest rates. The tax hike is part of a package agreed last year by the previous government and the two current ruling parties. The increase to 8 percent is the first step in a doubling of the consumption tax – similar to a goods-and-services tax in other countries – over two years. The law stipulates that the government must confirm that the economy is strong enough to weather the tax hike before proceeding. It posted the strongest growth among the Group of Seven powers in the first half, expanding at an annualised 3.8 percent rate in the second quarter after a 4.1 percent surge in the first. Tokyo’s Nikkei stock index finished in positive territory yesterday. The benchmark Nikkei added 0.20 percent, or 28.92 points, to 14,484.72, while the Topix index of all first-section shares slipped 0.06 percent, or 0.66 points, to 1,193.44 at the close. Reuters

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South Korea data suggest subdued growth momentum Weakening exports weighs on economy

outh Korea’s September exports posted their biggest annual drop in seven months while consumer inflation eased to a 14-year low, likely keeping the policy rate near all-time lows as a firm recovery for the tradedependent nation looks far from assured. With Europe still in the doldrums, China’s growthrebound in its infancy and the U.S. gearing to turn off the tap on cheap dollars, Asia’s fourth-largest economy faces an uncertain outlook. “Headline exports underperformed against market expectations, suggesting that the growth outlook remains challenging,” Australia & New Zealand Banking Group Ltd bank economists said in a report. “Inflation is not a concern, offering some freedom for the central bank to remain accommodative,” they said. Data released by the Ministry of Trade, Industry and Energy yesterday showed that overseas shipments in September fell 1.5 percent from a year earlier, the sharpest contraction since February. This was weaker than a 2.0 percent rise tipped in a Reuters survey of economists and the 7.7 percent rise in August. Annual inflation eased to 0.8 percent, its weakest level since September 1999 and slipping further below the central bank’s 2.5 percent-3.5 percent target band. The inflation reading was also weaker than any individual forecast in a Reuters survey of economists. “Construction investment and domestic consumption

1.5 %

Fall in overseas shipments in September

are all suffering,” said Kiwoom Securities analyst Ma Ju-ok. “If you don’t have demand then it will be hard for inflation to pick up.” The economy’s pedestrian growth rate was underlined this week when President Park Geun-hye backed away from a pledge to balance the budget within her fiveyear term, as tax revenue is expected to fall 7 trillion won (US$6.51 billion) to 8 trillion won short of target. Moreover, the jolt to the economy from this year’s 5.3 trillion won government stimulus package is expected to fade in the fourth quarter, while policymakers and economists say the firm August industrial output data released on Monday

won’t be enough on its own to suggest a full recovery. On top of that, manufacturers are still reporting low activity, and a cut in government spending puts another dampener on growth. The HSBC Holdings Plc/Markit Economics purchasing managers’ index (PMI), which was also out yesterday, edged up to a seasonally adjusted 49.7 from 47.5 in August, suggesting some improvement but still below the 50-point mark separating expansion from contraction. All of this means the Bank of Korea will likely keep the benchmark rate at a near historical low of 2.50 percent well into 2014. The

central bank, which last eased the policy rate by 25 basis points in May, stood pat in September for the fourth consecutive month. While the BOK has given no indications that it is contemplating any nearterm moves, some analysts say that another rate cut cannot be ruled out. “I believe that a rate cut is possible once a new Bank of Korea governor takes office,” SK Securities analyst Yum Sang-hoon said. Current BOK Governor Kim Choong-soo’s term ends at end-March 2014. Although a majority don’t expect the BOK to cut rates again, dealers say Korean authorities have been quite active in the currency

Philippines Q3 growth likely above 7 pct P

hilippine economic growth probably stayed above 7 percent in the third quarter, making it likely this year’s full-year growth target will be surpassed, economic planning Secretary Arsenio Balisacan said yesterday. Strong consumption and investments likely cushioned the impact of weak exports and damage from storms in July-September, allowing the economy to sustain its

solid growth momentum. “For the third quarter, it [growth] is likely to be above 7 percent,” Mr Balisacan told reporters, adding he is “very confident” the government’s 6-7 percent growth goal this year will be exceeded. The Philippine economy expanded by a faster-than-expected 7.5 percent in April-June, matching China’s expansion for the second consecutive quarter, as domestic spending and

investments buttressed it from capital outflows and weak exports. If Mr Balisacan’s estimate proved to be correct, the third quarter will be the fifth straight quarter when the economy will have posted annual expansion of more than 7 percent, defying a slowdown in the region. “Imports are picking up and that is good for growth in the coming quarters but exports are still down. But the good thing is, our economy

market, intervening to keep the won from rising too sharply to minimise erosion of price competitiveness for local exporters. To be sure, the September exports data was skewed as the long Chuseok holiday break this year led to fewer working days in the month compared to a year earlier. The trade ministry said it expects exports to grow in annual terms in October, without giving a specific target. “We’ll need to see October’s numbers to be more certain, but exports are slowly getting better,” HI Investment economist Park Sang-hyun said, noting that external conditions continue to improve. Reuters

is largely domestic now, we are not vulnerable,” Mr Balisacan said. Data last month showed Philippine imports grew at their best pace in seven months in July on a jump in electronics shipments, while exports climbed for a second month in a row in July, boding well for one of the region’s fastest growing economies. Official third-quarter GDP data will be released on November 28. Reuters

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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Singapore home prices rise at slower pace

Japanese companies’ confidence at six-year high Tankan survey showed improvement across many sectors Leika Kihara

Price index rose 0.4 percent in the three months ended September 30

apanese manufacturers’ sentiment improved sharply in the three months to September to a near sixyear high, a closely-watched central bank survey showed. Service-sector sentiment also brightened slightly and big companies plan to increase capital spending, a sign robust personal consumption and a pickup in exports are solidifying a recovery in the world’s third-largest economy. “This is very constructive in terms of the assessment of the current economic situation,” said Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo. But there were signs the improvement in mood may have peaked partly due to uncertainty on overseas economies, underscoring the challenge policymakers face in sustaining the positive momentum long enough to persuade firms to raise wages. The headline index for big manufacturers’ sentiment rose 8 points to plus 12 in September, much better than a median market forecast for plus 7, the Bank of Japan’s “tankan” quarterly survey showed yesterday. It was the third straight quarter of improvement and the highest reading since the survey of December 2007, suggesting that the feel-good mood generated by prime minister Shinzo Abe’s reflationary policies is broadening. The sentiment index for big nonmanufacturers also rose 2 points to plus 14 in September with hopes for bigger public works spending lifting morale among construction firms. Mr Abe had cited the tankan outcome as key factor in deciding whether to raise the sales tax from next April to 8 percent from 5 percent, which is part of a two-stage increase in the tax rate aimed at fixing Japan’s tattered finances.

Wages falling Japan’s economy expanded for three straight quarters in April-June, outpacing many G7 nations, as Mr Abe’s reflationary policies bolstered household spending and drove down the yen, benefiting exports.

S Big manufacturers have benefited from the weakness in the yen

The BOJ also offered an intense burst of stimulus in April, pledging to double the base money via aggressive asset purchases to achieve its 2 percent inflation target in two years. Sentiment improved sharply for sectors that benefit from a weak yen, such as automakers and electronic goods makers. Big manufacturers revised down their yen forecasts for the current business year to 94.45 to the dollar, from 91.20 yen in the previous tankan survey. But there were some signs of potential weakness in the outlook: Both big manufacturers and non-manufacturers expect business conditions to stay largely unchanged three months ahead, a sign the improvement in mood may have peaked. Big firms plan to increase capital spending by 5.1 percent in the current fiscal year to next March, lower than 6.0 percent projected in a Reuters poll. That was largely unchanged from their plan three months ago, despite government plans to boost tax incentives to encourage companies into spending more. “There’s a gap between improving sentiment and the state of the real economy, which slowed somewhat in July-August as shown by recent indicators such as exports, factory output and consumption,” said Naoki

Iizuka, economist at Citigroup Global Markets Japan. The BOJ raised its assessment of the economy in September to say it was recovering moderately but some officials worry about slowing growth in emerging economies, many of which are big markets for Japanese cars and electronic goods. Another concern for policymakers is whether companies will finally start to raise wages, instead of sitting on a huge pile of cash, so that consumers have more money to spend. So far, the signs are not good. Wage earners’ total cash earnings fell 0.6 percent in the year to August with regular pay down for 15 months in a row, government data showed yesterday. Separate data showed household spending fell 1.6 percent in August from a year earlier, a sign the rising cost of daily necessities may be weighing on consumer spending. Such weak signs may be discussed at the BOJ’s two-day rate review that ends on Friday, although the central bank is widely expected to keep its monetary settings unchanged. The tankan’s sentiment indexes are derived by subtracting the percentage of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists. Reuters

Indonesia to announce new stimulus package

ndonesia will announce a second fiscal stimulus package this month as part of efforts to cut a ballooning current account deficit, the Jakarta Globe daily yesterday quoted a senior government official as saying. The government released a package of fiscal measures in August, when waning investor confidence in Indonesia was hammering its financial markets. However, it has yet to make public details of some of those measures, including a promised new “negative investment list”,

setting out which areas are closed to foreign investment. The rupiah has continued to fall and is now Asia’s worst performing currency, having lost almost 17 percent of its value against the U.S. dollar since the start of the year. Analysts warn that when the U.S. Federal Reserve does finally start its expected stimulus tapering, which was delayed in September, Indonesia could again see a rush funds leaving the country and even sharper falls in the rupiah. “There will be a [new] regulation so that exports could

be bigger while imports would be controlled,” the newspaper quoted the head of the finance ministry’s fiscal office, Bambang Brodjonegoro, as saying. Some of the measures announced in August included an increase in luxury tax on certain imports and planned incentives for labour-intensive industries to prevent layoffs. The current account deficit widened to 4.4 percent of gross domestic product in the first half of the year. Reuters

ingapore home prices increased at the slowest pace in six quarters after the government introduced new loan measures to cool prices in Asia’s second-most expensive housing market. The island-state’s private residential property price index rose 0.4 percent to a record 216.2 points in the three months ended September 30, after it climbed 1 percent in the second quarter, according to preliminary figures released by the Urban Redevelopment Authority yesterday. That’s the smallest gain since the first quarter of 2012, when the index dropped 0.1 percent. Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a campaign that started in 2009 to curb speculation in the property market. Singapore unveiled new rules in June governing how financial institutions grant property loans to individuals, in addition to previous curbs including new taxes and higher down-payments. “The loan curbs are biting into the market,” said David Neubronner, national director at broker Jones Lang LaSalle Inc’s residential project sales in Singapore. “The days of easy borrowing are over.” The new loan framework requires that lenders take a borrower’s debt into consideration when granting mortgages, the Monetary Authority of Singapore said on June 28. Home loans should not exceed a total debt-servicing ratio of 60 percent and those that do will be considered imprudent, it said. The gain in housing and bridge loans slowed to 13.5 percent in August compared with a year earlier, the slowest increase in almost four years, according to data compiled by Bloomberg based on information from the central bank. Apartment prices fell 0.5 percent in prime districts in the third quarter, more than the 0.2 percent decline in the previous three months, the URA data showed. Those in the suburbs climbed 2.1 percent, compared with the 3.8 percent increase in the previous quarter, according to the data. The measures are also affecting public housing, where 82 percent of Singaporeans live. The resale price index for public housing fell 0.7 percent in the third quarter, the first decline since the first quarter of 2009, according to a statement from the Housing & Development Board. Bloomberg News

14 14

October 2, 2013 April 19, 2013

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

Max 55.45

average 54.7

Max 49.25

Min 54.25

average 48.437

Last 54.4

Min 47.9

Last 47.95

55.60

82.20

55.25

81.75

54.90

81.30

54.55

80.85

25.7

54.20

Max 82.1

average 81.520

22.0

48.95

21.8

48.60

21.60

48.25

21.4

47.90

Max 21.95

average 21.779

PRICE

DAY %

YTD %

(H) 52W

101.73

-1.108194809

8.825417202

111.3399963

85.79000092

BRENT CRUDE FUTR Nov13

107.66

-0.892939335

2.299505891

115.7599945

96.19999695

GASOLINE RBOB FUT Oct13

264.8

-1.053732905

1.771782159

298.210001

246.6799974

911.25

-1.59287257

0.80199115

980.25

837

3.536

-1.476734466

-5.580774366

4.59400034

3.281000137

297.18

-0.612019665

-0.638603765

322.8999853

276.1999846

GAS OIL FUT (ICE) Nov13 NATURAL GAS FUTR Nov13 NY Harb ULSD Fut Oct13 Gold Spot $/Oz

1341.65

0.3568

-19.3943

1796.08

1180.57

Silver Spot $/Oz

21.849

0.2698

-27.4361

35.365

18.2208

Platinum Spot $/Oz

1423.5

0.2112

-6.2099

1742.8

1294.18

Palladium Spot $/Oz

731.69

0.1972

4.5779

786.5

587.4

LME ALUMINUM 3MO ($)

1840

0.987925357

-11.23974916

2184

1758

LME COPPER 3MO ($)

7300

0.675768859

-7.956121548

8379.75

6602 1811.75

3MO ($)

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

Min 21.3

Last 21.8

(L) 52W

WTI CRUDE FUTURE Nov13

LME ZINC

Dec13

1907

0.474183351

-8.317307692

2230

13985

1.157323689

-18.02461899

18920

13205

15.38

-0.12987013

-0.227051573

16.65000153

14.77000046

454.25

0.055066079

-24.26010838

647

445.75

WHEAT FUTURE(CBT) Dec13

680.75

-0.32942899

-17.0575693

913

635.5

21.2

SOYBEAN FUTURE Nov13

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

Max 25.95

average 25.666

Min 25.15

Last 25.75

25.1

26.9

26.7

26.5

Max 26.9

average 26.591

Min 26.3

Last 26.45

26.3

1314.25

-0.416745596

0.882748033

1409.5

1162.5

113.8

0.087950748

-27.26110578

200

113.5

SUGAR #11 (WORLD) Mar14

17.74

-13.79980564

22.14999962

16.69999886

ARISTOCRAT LEISU

0.427103775

10.49022098

93.72000122

74.34999847

CROWN LTD

COTTON NO.2 FUTR Dec13

World Stock Markets - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15258.24

-0.4570631

16.43832

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3781.594

-0.1540096

25.23851

3798.76

2810.8

FTSE 100 INDEX

6463.04

-0.7619007

9.583727

6875.62

5605.589844

DAX INDEX

8574.48

-1.00479

12.63848

8770.1

NIKKEI 225

14455.8

-2.06144

39.06253

HANG SENG INDEX

22859.86

-1.496012

CSI 300 INDEX

2409.037

TAIWAN TAIEX INDEX

KOSPI INDEX

S&P/ASX 200 INDEX

NAME

YTD %

(H) 52W

(L) 52W

0.9325 1.6152 0.9055 1.3506 97.94 7.9867 7.7544 6.121 62.63 31.29 1.2555 29.63 43.475 11427 91.329 1.22287 0.83614 8.2671 10.7863 132.28 1.03

0.0859 0.0806 0.0442 -0.1183 0.3063 0.0063 -0.0026 -0.0392 -0.2116 0.1278 0.0796 -0.2126 -0.253 -1.2514 0.2256 0.1791 0.1985 -0.0702 -0.0046 0.4385 0

-10.1465 -0.1484 1.0933 2.3958 -12.089 -0.0438 -0.049 1.7906 -12.1906 -2.2691 -2.716 -2.0148 -5.6814 -14.2995 -2.1921 -1.2585 -2.4781 -0.6 -2.3725 -14.1442 -0.0097

1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3005 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 10.9254 134.95 1.032

0.8848 1.4814 0.9021 1.2662 77.79 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9563 79.408 1.20302 0.79424 7.8281 10.1113 99.79 1.0289

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.62

0.4347826

15.55

-1.892744

VOLUME CRNCY

46.66666

4.7

2.56

2201979

45.73571

16.08

9.01

1260157

AMAX HOLDINGS LT

1.31

-6.42857

1.72

0.75

1149900

24.9

-0.9940358

3.3195

22.85

8356772

CENTURY LEGEND

0.43

-1.149425

62.26416

0.56

0.23

3276000

CHEUK NANG HLDGS

6.57

0.4587156

9.682809

6.74

3.82

32400

CHINA OVERSEAS

22.85

-0.867679

-1.082253

25.6

17.7

18155506

CHINESE ESTATES

17.7

0.6825939

57.39562

18.12

9.337

34500

CHOW TAI FOOK JE

11.1

-0.7155635

-10.7717

13.4

7.44

3512800

EMPEROR ENTERTAI

3.51

85.71429

3.56

1.43

1475000

FUTURE BRIGHT

2.56

-1.538462

111.2166

2.76

1.103

1166000

GALAXY ENTERTAIN

54.4

-1.00091

79.24217

24.1

9392110

HANG SENG BK

126.5

-0.2365931

6.571191

132.8

110.6

1693297

6950.53

HOPEWELL HLDGS

25.95

-21.95489

35.3

23.2

1089902

15942.6

8488.14

HSBC HLDGS PLC

84.35

-1.171646

3.751534

90.7

72.3

14750402

0.8957063

23944.74

19426.35938

HUTCHISON TELE H

3.36

-1.754386

-5.617976

4.66

2.98

6388000

0.587314

-4.51514

2791.303

2023.171

LUK FOOK HLDGS I

24.2

-1.626016

-0.8196706

30.05

16.88

1904000

MELCO INTL DEVEL

20.8

-0.2398082

130.8546

21.2

6.55

3380000

8173.87

-0.6902224

6.161051

8439.15

7050.05

MGM CHINA HOLDIN

25.75

2.18254

93.92573

12.236

7655621

1996.96

-0.7376479

-0.004511048

2042.48

1770.53

MIDLAND HOLDINGS

3.15

-1.5625

-14.86487

2.68

1562000

NEPTUNE GROUP

0.19

3.825137

0.23

0.131

85240000

NEW WORLD DEV

11.66

-1.52027

-2.995012

15.12

9.98

16308564

SANDS CHINA LTD

47.95

-1.641026

41.23711

49.8

26.35

10865718

SHUN HO RESOURCE

1.68

-0.591716

1.92

1.19

62200

4.35

3.818614

4.65

2.97

3450102 17806145

5218.877

-1.661635

12.25926

5314.3

4334.3

4337.282

-1.953944

0.477107

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1776.09

5.15942

1826.22

1590.67

NZX ALL INDEX

996.157

-0.8780265

12.93618

1005.231

835.827

SHUN TAK HOLDING

PHILIPPINES ALL SHARE IX

3758.23

-2.161276

1.601793

4571.4

3440.12

SJM HOLDINGS LTD

Euromoney Dragon 300 Index Sin

DAY %

BOC HONG KONG HO

JAKARTA COMPOSITE INDEX

PRICE

Macau Related Stocks

COFFEE 'C' FUTURE Dec13

NAME

80.40

Last 80.4

25.4

Currency Exchange Rates

NAME

METALS

Min 80.4

49.30

Commodities ENERGY

26.0

618.84

0.51

-0.36

STOCK EXCH OF THAI INDEX

1386.42

-2.191903

-0.3958539

1649.77

1260.08

HO CHI MINH STOCK INDEX

492.63

1.23713

19.07041

533.15

372.39

Laos Composite Index

1309.38

0.7827834

7.788304

1455.82

1038.79

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

21.8

2.347418

22.83311

22.382

15.835

SMARTONE TELECOM

10.28

-0.9633911

-26.98864

16.22

9.97

2786502

WYNN MACAU LTD

26.45

26.25298

26.95

10060914

ASIA ENTERTAINME

3.83

0.5249344

36.07216

4.7647

2.4835

32924

BALLY TECHNOLOGI

73.01

-1.775864

63.2968

76.3

43.16

526885

BOC HONG KONG HO

3.23

5.211729

3.6

2.99

6665

GALAXY ENTERTAIN

7.1

0.8522727

78.84131

7.16

3.11

1900

INTL GAME TECH

19.23

-6.966618

35.70924

21.2

12.37

9231434

JONES LANG LASAL

87.95

-0.1929187

4.777219

101.46

72.56

267279

LAS VEGAS SANDS

65.88

-1.524664

42.72097

67.351

37.8353

5321310 2150543

MELCO CROWN-ADR

31.6

-0.8160703

87.64845

32.24

12.74

MGM CHINA HOLDIN

3.22

-0.617284

83.96937

3.29

1.5895

13800

MGM RESORTS INTE

20.22

-0.24667

73.71134

20.41

9.15

6127585

SHFL ENTERTAINME

22.97

-0.08699435

58.41379

23.09

12.35

827972

SJM HOLDINGS LTD

2.76

-1.075269

21.17934

2.9481

2.0508

21780

WYNN RESORTS LTD

158

-1.08927

40.45693

159.85

103.0933

788222

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

36.45

-2.016129

23285171

CHINA UNICOM HON

ALUMINUM CORP-H

2.88

0.3484321

12619128

BANK OF CHINA-H

3.54

-1.117318

312501816

5.7

-2.229846

26590478

BANK EAST ASIA

32.85

-1.203008

3763514

BELLE INTERNATIO

11.26

-3.760684

17644000

24.9

-0.9940358

8356772

AIA GROUP LTD

BANK OF COMMUN-H

BOC HONG KONG HO

NAME

PRICE

DAY %

VOLUME

12.1

-0.1650165

26226488

NAME POWER ASSETS HOL

PRICE

DAY %

69.4

2.586844

CITIC PACIFIC

10.06

1.309164

10595185

8818996

SANDS CHINA LTD

47.95

-1.641026

10865718

CLP HLDGS LTD

63.15

-1.018809

4129590

SINO LAND CO

11.42

-0.1748252

8025667

CNOOC LTD

15.78

-1.251564

64610647

SUN HUNG KAI PRO

105.5

-1.769088

3605450

COSCO PAC LTD

11.86

-3.889789

10358032

SWIRE PACIFIC-A

92.9

-0.5353319

1124243

ESPRIT HLDGS

12.42

2.985075

7649091

TENCENT HOLDINGS

406.8

-2.632839

3690132

26.4

-0.3773585

4136917

TINGYI HLDG CO

20.55

-1.909308

6054570

11.78

-1.174497

11619780

67.2

-2.890173

5963029

HANG LUNG PROPER

15.2

-0.3931848

4118675

HANG SENG BK

126.5

-0.2365931

1693297

WANT WANT CHINA

118.1

-2.396694

3614645

HENDERSON LAND D

47.9

-1.74359

2880272

WHARF HLDG

CHINA COAL ENE-H

4.64

-1.694915

45654628

HENGAN INTL

90.7

-1.945946

1624200

CHINA CONST BA-H

5.97

-1.485149

251073449

18.66

0.1072961

8526997

CHINA LIFE INS-H

20.1

-2.189781

35019114

HONG KONG EXCHNG

124.3

-1.035032

2396637

CHINA MERCHANT

28.2

-2.92599

4702043

HSBC HLDGS PLC

84.35

-1.171646

14750402

CHINA MOBILE

86.65

-1.701645

17051334

HUTCHISON WHAMPO

92.9

-1.327669

5611511

CHINA OVERSEAS

22.85

-0.867679

18155506

IND & COMM BK-H

5.41

-2.34657

265765811

CHINA PETROLEU-H

6.07

-1.938611

93487098

LI & FUNG LTD

11.28

-1.052632

17145617

CHINA RES ENTERP

24.65

-1.004016

2269059

30.7

-0.8077544

2010369

CATHAY PAC AIR CHEUNG KONG

VOLUME

HONG KG CHINA GS

MTR CORP

CHINA RES LAND

22.05

-0.4514673

5020000

NEW WORLD DEV

11.66

-1.52027

16308564

CHINA RES POWER

18.44

0.5452563

7344820

PETROCHINA CO-H

8.56

-1.722158

67957236

CHINA SHENHUA-H

23.6

-1.871102

22496832

PING AN INSURA-H

57.65

-1.87234

10567894

MOVERS

23310

INDEX 22859.86 HIGH

23300.79

LOW

22859.86

52W (H) 23944.74 (L) 19426.35938

22850

26-September

30-September

15 15

October 2013 April 19,2,2013

Opinion

The eurozone’s calm wires before the storm Business

Leading reports from Asia’s best business newspapers

Times of India India’s current account deficit was narrower than expected at US$21.8 billion, or 4.9 percent of gross domestic product, in the June quarter, data released on Monday showed. Still, it was wider than the US$18.17 billion, or 3.6 percent of GDP, in the three months ending in March, on a seasonal slowdown in exports and firm imports. Five economists had predicted the June quarter current account deficit would rise to between US$23 billion and US$25 billion.

Nouriel Roubini

Chairman of Roubini Global Economics and Professor of Economics at the Stern School of Business, NYU

review and stress tests, and even the European Union’s competition rules (which force banks to contract credit if they receive state aid) all imply that banks will have to focus on raising capital – and thus not providing the financing needed for economic growth.

Austerity fatigue

Jakarta Post The European Union and Indonesia have struck an agreement to control the origin of all timber exports from the Southeast Asian nation to prevent illegal logging, which is devastating the country’s tropical forests. The European Commission said on Monday the deal will only allow the export of verified timber and timber products to the EU in the future. It says the EU is a key market for Indonesian wood and paper, with annual exports totalling about US$1.2 billion, accounting for some 15 percent of the country’s exports.

Yomiuri Shimbun Japan’s industrial production in August fell 0.7 percent from the previous month, down for the first time in two months, the Economy, Trade and Industry Ministry said on Monday. The seasonally adjusted production index for the manufacturing and mining sectors stood at 97.2 against 100 for the base year of 2010. In the previous month, the index was up 3.4 percent. But the ministry kept its assessment unchanged, saying “industrial production shows signs of picking up at a moderate pace”.

The Star Malaysia’s sin sector is being taxed more in Budget 2014. British American Tobacco (Malaysia) Bhd confirmed that the government had increased the excise duties on tobacco by 14 percent, resulting in it raising the price of its cigarettes by 14 percent to 17 percent. The attention is also turning to the brewers, with analysts predicting that this sector would be slapped with at least a 10 percent increase in excise duties. “We anticipate 10 percent increase for the brewery sector, and government coffers may grow by 145 million ringgit (US$44.7 million) per annum,” said AmResearch analyst Patricia Oh.

little more than a year ago, in the summer of 2012, the eurozone, faced with growing fears of a Greek exit and unsustainably high borrowing costs for Italy and Spain, appeared to be on the brink of collapse. Today, the risk that the monetary union could disintegrate has diminished significantly – but the factors that fuelled it remain largely unaddressed. Several developments helped to restore calm. European Central Bank President Mario Draghi vowed to do “whatever it takes” to save the euro, and quickly institutionalised that pledge by establishing the ECB’s “outright monetary transactions” programme to buy distressed eurozone members’ sovereign bonds. The European Stability Mechanism (ESM) was created, with 500 billion euros at its disposal to rescue eurozone banks and their home governments. Some progress has been made on a European banking union. And Germany has come to understand that the eurozone is as much a political project as an economic one. Moreover, the eurozone recession is over (though five periphery economies continue to shrink and recovery remains very fragile). Some structural reform has been implemented, and a lot of fiscal adjustment has occurred. Internal devaluation (a fall in unit labour costs to restore competitiveness) has occurred to some extent (in Spain, Portugal, Greece, and Ireland, but not in Italy or France), thus improving external balances. And even if such adjustment is not occurring as fast as Germany and other core eurozone countries would like, they remain willing to provide financing, and governments

committed to adjustment are still in power. But beneath the surface calm of lower spreads and lower tail risks, the eurozone’s fundamental problems remain unresolved. For starters, potential growth is still too low in most of the periphery, given ageing populations and low productivity growth, while actual growth – even once the periphery exits the recession in 2014 – will remain below 1 percent for the next few years, implying that unemployment rates will remain very high.

Fiscal drag Meanwhile, levels of private and public debt – both domestic and foreign – are still too high, and they continue to rise as a share of GDP, owing to slow or negative output growth. This means that the issue of medium-term sustainability remains unresolved. At the same time, the loss of competitiveness has been only partly reversed, with most of the improvement in external balances being cyclical rather than structural. The severe recession in the periphery has caused imports there to collapse, but lower unit labour costs have not boosted exports enough. The euro is still too strong, severely limiting the improvement in competitiveness needed to boost net exports in the face of weak domestic demand. Finally, while the fiscal drag on growth is now lower, it is still a drag. And its effects are amplified in the periphery by an ongoing credit crunch, as undercapitalised banks deleverage by selling assets and shrinking their loan portfolios. The larger problem, of course, is that progress toward banking, fiscal,

economic, and political union – all essential to the eurozone’s long-term viability – has been too slow. Indeed, there has been no progress whatsoever on the latter three, while progress on the banking union has been limited. Germany is resisting the risksharing elements of such a union: common deposit insurance, a common fund to wind up insolvent banks, and direct equity recapitalisation of banks by the ESM. Germany fears that risksharing would become risk-shifting, and that any form of fiscal union would likewise turn into a “transfer union,” with the rich core permanently subsidising the poorer periphery. At the same time, the entire regulatory process for the financial sector is pro-cyclical. The new Basel III capitaladequacy ratios, the ECB’s upcoming asset-quality

Moreover, the ECB is unwilling to be creative in pursuing policies – like those embraced by the Bank of England – that would ameliorate the credit crunch. Unlike the U.S. Federal Reserve and the Bank of Japan, it is not engaging in quantitative easing; and its “forward guidance” that it will keep interest rates low is not very credible. On the contrary, interest rates remain too high and the euro too strong to jumpstart faster economic growth in the eurozone. In the meantime, austerity fatigue is rising in the eurozone periphery. The Italian government is on the verge of collapsing; the Greek government is under intense strain as it seeks further budget cuts; and the Portuguese and Spanish governments are having a hard time achieving even the looser fiscal targets set by their creditors, while political pressures mount. And bailout fatigue is emerging in the eurozone core. In Germany, the next coalition government looks set to include the Social Democrats, who are pushing for a bailin of the banks’ private creditors, which would only exacerbate balkanisation of the eurozone’s banking system; and populist parties throughout the core are pushing against bailouts for banks and governments alike. So far, the grand bargain between the core and the periphery has held up: the periphery continues austerity and reform while the core remains patient and provides financing. But the eurozone’s political strains may soon reach a breaking point, with populist anti-austerity parties in the periphery and populist antieuro and anti-bailout parties in the core possibly gaining the upper hand in next year’s European Parliament elections. If that happens, a renewed bout of financial turbulence would weaken the eurozone’s fragile economic recovery. The calm that has prevailed in eurozone financial markets for most of the past year would turn out to be only a temporary respite between storms. © Project Syndicate

16 16

October 2, 2013 April 19, 2013

Closing Tom Arasi named as Solaire COO

Stocks rise as investors weigh shutdown

Tom Arasi, first president and chief executive of Las Vegas Sands Corp’s Marina Bay Sands casino property in Singapore, has been appointed president and chief operating officer of Solaire Resort & Casino in the Philippines. Enrique Razon, chairman of majority owner Bloomberry Resorts Corp, will remain as chairman and CEO of the US$1.2 billion casino. It opened at Manila Bay in March. Mr Arasi replaces former Macau executive Michael French. He was dismissed last month after Global Gaming Asset Management, headed by former LVS group president and COO Bill Weidner, was sacked as the manager of the resort.

Asian stocks rose, paring Monday’s slump that was the biggest in a month, as investors weighed the impact of a U.S. government shutdown and Japan’s decision to proceed with a sales-tax increase. The MSCI Asia Pacific Index rose 0.3 percent in Tokyo, with all but two of the 10 industry groups advancing. South Korea’s Kospi index rose 0.1 percent and Singapore’s Straits Time Index gained 0.5 percent. Taiwan’s Taiex index and New Zealand’s NZX 50 Index both rose 0.2 percent. Financial markets in Hong Kong and China were closed yesterday. The Nikkei 225 Stock Average added 0.2 percent.

U.S. govt to start shutting agencies

France says deficit to be reined in more slowly France will bring down its public deficit more slowly than previously expected, according to long-term forecasts released yesterday. President Francois Hollande’s government, which faces scrutiny of its public finances from its European Union partners, has already raised its estimate for next year’s deficit, because recovery is proving weaker than hoped. That slippage means less headway will be made against the deficit in the following years, leaving a shortfall of 1.2 percent of output at the end of Mr Hollande’s term in 2017, instead of 0.7 percent as expected only six months ago. The numbers, however, remain far below the deficit to GDP target required by the European Union. Mr Hollande had originally hoped to produce France’s first balanced budget since 1974 by the end of his five year-term in 2017, but has had to back track. The government now sees a deficit of 3.6 percent of GDP next year, from a previous 2.9 percent. However, his government points to a steady improvement in the structural deficit, which excludes swings in the business cycle, as evidence of its determination to rein in its public finances. It is now forecast to stand at 0 in 2017. EU Economic and Monetary Affairs Commissioner Olli Rehn last week put aside any frustration with the pace of French reforms, telling Finance Minister Pierre Moscovici his budget plans were on track.

Hundreds of thousands of workers to be sent home

he U.S. government yesterday began its first partial shutdown in 17 years, idling as many as 800,000 federal employees, closing national parks and halting some services after Congress failed to break a partisan deadlock by a midnight deadline. Congressional leaders have scheduled no further negotiations on spending legislation, raising concerns among some lawmakers that the shutdown could bleed into the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after October 17. Chances of a last-minute deal – seen so often in past fiscal fights – evaporated shortly before midnight as the House stood firm on its call to delay major parts of President Barack Obama’s health-care law for a year. Senate Democrats were equally firm in refusing to concede and planned a morning vote to reject the House’s call for formal talks. “It is embarrassing that these people who were elected to represent the country are representing the Tea Party,” Senate Majority Leader Harry Reid, a Nevada Democrat, said after midnight. “This is an unnecessary blow to America.” House Speaker John Boehner, speaking after 1am in Washington, called on Senate Democrats to come to the negotiating table. “Let’s resolve our differences,” Mr Boehner, an Ohio Republican told reporters. “The House has voted to keep the government open, but we also want basic fairness for all Americans under Obamacare.”

Lost output A partial federal government shutdown would cost the U.S. at least US$300 million a day in lost economic output at the start, according to IHS Inc. That’s a fraction of the country’s US$15.7 trillion economy, and the effects probably will grow over time as skittish consumers and businesses stay on the sidelines. Goldman Sachs Inc estimates a three-week shutdown could shave as much as 0.9 percent from U.S. GDP this quarter. Shortly after midnight, President Obama tweeted: “They actually did it. A group of Republicans in the House just forced a government shutdown over Obamacare instead

Obama signs act guaranteeing military pay during shutdown

of passing a real budget.” Abroad, U.K. Prime Minister David Cameron, whose Conservative Party is a traditional Republican ally, said the U.S. political crisis poses a threat to global growth. “It is a risk to the world economy if the U.S. can’t properly sort out its spending plans,” Mr Cameron told the BBC. In South Korea, the finance ministry said it could make investors more risk adverse and fuel capital outflows from emerging markets. Treasury 10-year yields rose 3.9 basis points to 2.65 percent. The S&P GSCI Index of 24 commodities fell 0.3 percent, declining for a third day, as West Texas Intermediate crude oil retreated 0.2 percent to US$102.15 a barrel. During the partial government shutdown, many essential government operations will cease. Internal Revenue Service call centres will close and more than 90 percent of Environmental Protection Agency workers will stay home. National parks and museums will be shuttered. Other services will continue uninterrupted. Social Security and Medicare benefits will be paid. U.S. troops will remain at their posts around the world and will be paid under a bill Mr Obama signed. Airtraffic controllers and airport security screeners will keep working.

Health-law enrolment The shutdown comes on the first day of enrolment in the exchanges mandated under Mr Obama’s Affordable Care Act, itself at the heart

of the fight. Enrolment will continue despite the shutdown, because it’s paid for out of mandatory funding not affected by the lapse, officials said. In a rejection of congressional Republicans’ strategy, Americans overwhelmingly oppose undermining the health-care law by shutting down the federal government or resisting an increase in the nation’s debt limit, according to a poll released yesterday. By 72 percent to 22 percent, Americans oppose Congress “shutting down major activities of the federal government” as a way to stop the Affordable Care Act from going into effect, the national survey from Quinnipiac University found. By 64 percent to 27 percent, voters don’t want Congress to block an increase in the nation’s US$16.7 trillion federal borrowing limit as a way to thwart implementation of the health-care law. In the end, the final hours before the shutdown were marked by a combination of legislative procedure and partisan vitriol. House Republicans said they would appoint members to a committee meant to negotiate a compromise between the Republican and Democratic positions – something several rounds of votes didn’t accomplish. Before midnight, the U.S. Office of Management and Budget issued guidance to agencies, telling them how to go forward when money ran out at midnight in Washington. More than 800,000 federal employees face unpaid leave with no guarantee of back pay once the deadlock is over. Bloomberg News

Eurozone factory growth eases Eurozone factory activity grew for the third month running in September as stronger demand enabled manufacturers to raise prices for the first time since mid-2012, a survey showed yesterday. Although factories didn’t quite maintain the pace of growth seen in August, survey compiler Markit Economics said that the data showed manufacturers were lifting the region’s economy and that even the bloc’s periphery countries were seeing improved demand. Markit’s Manufacturing Purchasing Managers’ Index (PMI) dipped to 51.1 last month from August’s 26-month high of 51.4, in line with an earlier flash estimate. A sub-index measuring output, which feeds into the wider composite PMI due tomorrow and seen as a good indicator of growth, eased to 52.2 from August’s 27-month high of 53.4, just above the flash estimate of 52.1. Readings above 50 signify expansions in activity. “An improvement in eurozone manufacturing business conditions for a third straight month in September sends a reassuring signal that the sector is providing an all-important lift for a region that has been besieged by recession,” said Chris Williamson, Markit’s chief economist. “But we must not get too carried away. Although signalling the best performance for over two years in recent months, the PMI slipped slightly compared with August and remains only just above the 50 ‘no change’ level, indicating that this is still early days in what looks like a fragile recovery.” Reuters