Macau business daily, October 3rd by Business Daily

MOP 6.00 Vitor Quintã

reshuffle of the three-operator bus system introduced just two years ago. Reolian filed for bankruptcy late on Tuesday, blaming the government’s refusal to increase its operating subsidies. In a statement, Reolian pledged to continue operations “in order to avoid any disruption to the bus services and any disturbance to the livelihood of the

travelling public”. But the Transport Bureau decided to take the matter into its own hands and yesterday afternoon it seized all of Reolian’s facilities, buses and equipment for a six-month period. Seizure is an option available to the government in the event of “service disruption,” according to the contract. More on page 3

Year II

Number 384 Thursday October 3, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Bus firm broke, govt takes over

April 19, 2013

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Local gold standard outweighs PRC reforms

Zung Fu Motors (Macau) Limited

Hang Seng Index

Even as the mainland plans to relax rules that restrict the trade in gold, with the aim of lowering prices, Macau’s goldsmiths say the precious metal sold here will continue to be sought after. “Gold and gold jewellery sold in Macau and Hong Kong adopts international standards while the mainland has its own set of requirements,” Lei Chi Fong, president of the Macau Goldsmith’s Guild and managing director of Seng Fung Jewellery Co Ltd, told Business Daily. Mainland tourists also prefer to shop for gold products in Macau and Hong Kong as neither has a retail tax. It’s levied at five percent in the mainland. But the mainland’s retail gold trade could change dramatically if the People’s Bank of China follows through with its plan for reforms in the wholesale market. One aim is to avoid cartels and price fixing by increasing the number of firms allowed to import and export gold.

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National Day visitors down on last year General visitors to Macau fell six percent year-on-year on October 1, officially the first day of China’s Golden Week holiday, but arrivals from the mainland rose 16 percent year-on-year according to data from Macau Government Tourist Office. There were 124,499 arrivals on the day, with 102,227 of them – 82 percent – from mainland China. The previous day, general visitor numbers were up nearly 17 percent year-on-year. Page 4

‘Las Vegas model’ can Hengqin sells plot work in Japan: MGM for Chinese medicine

%Day

CHEUNG KONG

3.81

HUTCHISON WHAMPO

3.28

GALAXY ENTERTAIN

2.67

KUNLUN ENERGY CO

2.03

COSCO PAC LTD

2.02

CNOOC LTD

-0.89

HENGAN INTL

-1.21

HANG LUNG PROPER

-1.33

POWER ASSETS HOL

-1.44

TINGYI HLDG CO

-2.19

Source: Bloomberg

The great hope of some United States-based casino operators – to export to Asia the so-called ‘Las Vegas model’ whereby nongaming produces more revenue than gambling – is achievable in Japan, suggests a senior executive from MGM Resorts International. Bill Hornbuckle, president of MGM and also a director of MGM China Holdings Ltd, made his prediction at the recent Union Gaming Group conference in Tokyo.

Land has been reserved on Hengqin Island for businesses connected with traditional Chinese medicine say mainland officials. The Zhuhai Land and House Property Exchange Centre said this week that a 24,000-square-metre plot would be available for bidders and carry a reserve price of 1,200 yuan (1,560 patacas) per square metre of gross floor area. Only firms registered in Macau, Hong Kong and mainland China can bid.

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October 3, 2013

Macau

City’s edge could shrink as Beijing eases gold limits Goldsmiths say high standards make Macau an attractive shopping destination Tony Lai tony.lai@macaubusinessdaily.com

s the mainland plans to relax rules that restrict the trade in gold, leading to lower prices, Macau’s goldsmiths say the precious metal sold here will continue to be sought after. Mainland tourists prefer to shop for gold products in Macau and Hong Kong as neither has a retail tax, which is levied at 5 percent in the mainland. That means “the price here is also cheaper,” says Lei Chi Fong, president of the Macau Goldsmith’s Guild and managing director of Seng Fung Jewellery Co Ltd. Chow Tai Fook Jewellery Group Ltd, the world’s biggest jewellery retailer by market capitalisation, was selling gold jewellery in Hong Kong at HK$382.90 a gram on Monday and for 338 yuan (HK$428.1) a gram in the mainland – a difference in price

of about HK$45.2 or 11.8 percent. The People’s Daily, Beijing’s main mouthpiece, quoted unidentified sources in a July report as saying the National Development and Reform Commission was investigating some jewellery shops in Shanghai for price manipulation. But the gold trade could change dramatically if the People’s Bank of China follows through with its plan to increase the number of firms allowed to import and export gold. The central bank has requested opinions on a proposal to increase the number of import and export licences issued to member banks of the Shanghai Gold Exchange and gold producers with an annual output of more than 10 tonnes. The trade is currently restricted to just nine banks in the mainland. Reuters quoted a Hong Kongbased precious metals trader as

Cash handout bonus to 19,000 new claimants

saying: “If it comes into effect, supply into China could increase and [local] prices could ease depending on demand.” Although the same could be true in Macau, Mr Lei says he is not worried that mainland tourists will have less incentive to shop for gold products. “Gold and gold jewellery sold in Macau and Hong Kong adopts international standards while the mainland has its own set of requirements,” he said. “Macau and Hong Kong have a reputation among mainlanders for guaranteed quality, which will continue to give the city the edge on the mainland market.”

Cross-border cap The central bank did not say when the new rules would come into effect. The rules were meant to “standardise and promote the development of the gold and gold product import and export business”, the announcement said. The proposed policy also affects gold sales to individuals. Tourists would be allowed to take across the border up to 200 grams of gold and gold products without having to report to customs or pay tax. The current limit is 50 grams. Gold jewellery weighing 200

grams is currently worth about 74,700 patacas (US$9,350), based on a price of 14,000 patacas for a tael troy. A tael troy, about 37.5 grams, is a traditional unit used in Macau, Hong Kong and the mainland. Mr Lei said reducing restrictions on gold being taken across the border would have little impact on sales in Macau. He said the 200-gram limit could be raised for the sake of convenience. “When the gold price plunged in April and May, many mainlanders bought much more than that amount,” he said. “The limit should be raised to [cover] at least gold worth 100,000 yuan to be more convenient for the travellers.” Government data shows the city’s imports of gold jewellery were worth 6.19 billion patacas in the first eight months of this year, one-third higher than in the same period last year. Sales of jewellery and watches were worth 10.14 billion patacas in the first half, up by 24 percent in year-on-year terms. With Reuters

Macau and Hong Kong have a reputation among mainlanders for guaranteed quality, which will continue to give the city the edge on the mainland market Lei Chi Fong, Macau Goldsmith’s Guild president

Increase in payments means government could spend an extra 18.6 pct this year Vítor Quintã vitorquinta@macaubusinessdaily.com

he government could spend almost 4.86 billion patacas (US$608.49 million) on the annual cash handout scheme, with an additional 19,000 claimants this year. The government has offered each permanent resident 8,000 patacas and 4,800 patacas to nonpermanent residents this year. More than 634,000 people were deemed eligible, up from about 615,000 people last year, the Financial Services Bureau said this week. The number of eligible recipients is far greater than the city’s population, estimated at 582,000 people by the Statistics and Census Services at the end of last year.

Considering that more than 110,500 people in the official data were migrant workers, there were many residents living outside the city. But the number of cash handout beneficiaries is lower than the government’s estimate of almost 638,000 people, made in May. If every eligible claimant collects their cheque, the government is looking at a bill of 4.86 billion patacas, an increase of 18.6 percent from last year. The government said it had expected to spend more than 4.88 billion patacas, about 5.91 percent of its budget, on this year’s cash handouts. This year’s handout is the biggest yet, nearly 1.9-times bigger than the first in 2008. The scheme was introduced as a short-term measure to help people deal with inflation. The majority of recipients, more than 531,300 people, received their cheques in the post while another 102,750 people received payment through a bank transfer. There are almost 76,400 beneficiaries yet to withdraw or deposit their cheques.

The People’s Bank of China may soon allow more firms to import gold

October 2013 April 19,3,2013

Photo by Manuel Cardoso

Macau

Reolian goes broke, govt takes over Public bus operator ran out of money to pay its employees’ wages Vítor Quintã

vitorquinta@macaubusinessdaily.com

he government yesterday seized the operations of Reolian Public Transport Co, one day after the public bus firm filed for bankruptcy because it ran out of money to pay its workers. The dramatic twist to a year-long dispute is a further blow for Macau’s overworked public transportation and could force a reshuffle of the bus system introduced just two years ago. Reolian filed for bankruptcy l a te on T ues day, blamin g the government’s refusal to increase what the company is paid to run its bus services. There was no alternative because the operator “did not have sufficient funds” to pay its workers on the first day of the month as usual, general manager Cédric Rigaud told Business Daily yesterday, before the seizure was announced. In a statement also released late on Tuesday, Reolian pledged to continue operations “in order to avoid any disruption to the bus services and any disturbance to the livelihood of the travelling public”. But the Transport Bureau decided to take the matter into its own hands and yesterday afternoon it seized all of Reolian’s facilities, buses and equipment for a six-month period. All of Reolian’s staff will remain in place and the bureau has set up a team headed by its deputy director Chiang Ngoc Vai to monitor the operations and evaluate the company’s financial situation. Seizure is an option available to the government in the event of “service disruption,” according to the contracts signed between the government and the three public bus operators. Only Chief Executive Fernando Chui Sai On can approve a seizure.

Tender coming Transport Bureau director Wong Wan asked for the public’s understanding. “At the beginning of the period when we take over, it is unavoidable that some chaos will occur,” he said in a press conference

late yesterday. Chiang Chong Fai, president of the Public Utilities Concern Association of Macau, fears the government will not “have enough resources, like manpower” to keep Reolian going. “Running a bus company is not like operating a 7-Eleven store – there have to be executives monitoring the traffic flow daily,” he told Business Daily. Mr Rigaud said he still believed in “finding a solution” that would allow the company to come back from bankruptcy, once the Macau courts appoint an administrator. “We hope Reolian will be in a position to continue operating,” he added. Mr Wong promised there would be a solution before the six-month period is over.

It’s my duty as company executive to call for help or else I could face criminal liabilities Cédric Rigaud, Reolian general manager

A source that asked to remain anonymous told Business Daily the government is more inclined to launch – in the medium-term – a public tender to either introduce a new operator or split Reolian’s routes among Transportes Urbanos de Macau SARL (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM). The latter option is “more realistic” given the current market conditions, said Mr Chiang, but it would reduce bargaining power for the government when dealing with

the two operators. “The continuous heavy financial loss suffered by Reolian is impossible to bear by any standards and the Macau government knowingly ignored this situation,” the operator said on Tuesday. “We were negotiating [with the Transport Bureau] every day until Monday night to try to avoid reaching this position,” Mr Rigaud said. “We tried everything we could,” said the executive. Mr Wong confirmed that Reolian made “many proposals to solve its financial problems but none of these conform to the Macau laws and the obligations of a public utility”.

No alternative The government in June last year promised all three bus operators an increase of 23.3 percent in service subsidies. But the announcement of the increase provoked a public outcry over the quality of bus services. In April the government gave Transmac and TCM the increase it had promised, but not Reolian. The Reolian general manager reiterated there was no alternative to bankruptcy once it become clear that the operator’s finances “are not looking viable”. The company has accumulated losses of more than 120 million patacas (US$15 million) and it was losing 6 million patacas per month, it said on Tuesday. “This irrecoverable financial situation has forced Reolian to file for bankruptcy,” the statement added. “It’s actually an obligation according to Macau’s law, to protect the company and the employees,” Mr Rigaud explained. “It’s my duty as company executive to call for help or else I could face criminal liabilities,” he added.

Happy farewell The Transport Bureau has “promised” to give Reolian enough money to make sure staff wages are paid tomorrow, Mr Rigaud

said yesterday. The city’s largest labour group, Macau Federation of Trade Unions, met with some Reolian workers and the Transport Bureau yesterday morning. Lam Heong Sang, Legislative Assembly member, told media after the meeting: “There has so far been little impact on the emotions of the workers”. But he said the employees were yet to receive any “clear message” from Reolian. According to public broadcaster TDM Radio, Reolian has sent mobile messages to its workers confirming it has applied for bankruptcy and adding it would pay their salaries tomorrow. Mr Chiang, president of Public Utilities Concern Association, warned that the government’s move “sets a very bad example”. “In the future when other public utilities or companies fall into the same situation, will the government have to repeat this again and again?” he questioned. Mr Wong said the bureau would only pay for the company’s expenses in the next six months. “We will not be responsible for other expenditures and liabilities,” he stressed. Reolian’s bankruptcy has become a red-hot topic in social media and Macau’s Internet forums. Most people expressed satisfaction over the move, while criticising the company’s services. The Collective Wisdom Policy Centre, linked to the traditional Macau General Union of the Neighbourhood Associations, agrees. “As there is a huge gap between public expectations and the service standard Reolian offers, it could be a good thing for the residents when [Reolian] leaves the market,” the centre said in a statement. With Tony Lai

KEY POINTS Reolian had no money to pay wages Staff wages to be paid tomorrow Govt to run buses for six months New public tender expected

October 3, 2013

Macau

National Day visitors down on last year But October gaming revenue unlikely to be hurt by year-on-year variation: analyst Michael Grimes

michael.grimes@macaubusinessdaily.com

eneral visitors to Macau fell six percent year-on-year on October 1, officially the first day of China’s Golden Week holiday, but arrivals from the mainland rose 16 percent year-on-year according to data from Macau Government Tourist Office. There were 124,499 arrivals on the day, with 102,227 of them – 82 percent – from mainland China. The previous day, general visitor numbers were up nearly 17 percent year-on-year, while mainland tourist numbers leapt by nearly 54 percent according to MGTO data. Last year October 1 – China’s National Day – was on a Monday. The weekend prior to Golden Week is typically quieter than other weekends for tourist numbers. As a result, MGTO’s data for this year don’t offer a strict like-for-like comparison with 2012. However, from anecdotal evidence, new mainland rules banning cut-price package tours reliant on shop visits – that came into force only on October 1 – do appear to have had some structural impact over the start of the holiday period. Given the vast and growing pool of potential customers from the mainland as the country’s middle class grows and the Individual Visit Scheme of visas for outbound travel is extended to new cities, the effect on Macau of the new package tour rules may be muted in the longer term. Union Gaming Research Macau said in a note that from observations in Macau on Tuesday, there appeared to be a significant reduction in budget package travellers on the streets. The research house was careful however not to make assumptions about

cause and effect. “Yesterday [Tuesday]we spent the afternoon on Cotai and witnessed an exceptionally noticeable absence of tour group buses and customers,” stated the note from Union Gaming. It added that a visit to Hong Kong the same day also indicated fewer mainland visitors in some popular districts. “We also spent time in Hong Kong yesterday and noticed that prime shopping areas (e.g. Canton Road in TST [Tsim Sha Tsui], Causeway Bay, etc.) were less busy than expected. However, we do not think the new tour group rules are to blame as the higher-end shopping in these districts would not typically be patronised by low‑value tour groups.” Union Gaming suggests that regardless of headline year-on-year fluctuations in visitor numbers and the precise demographic structure of the arrivals, Macau is still likely to see a healthy rise in gaming revenue as minimum bets on casino table games remain high. That’s because bet minimums are supported by a general trend of a rising number of tourists chasing a limited amount of live table games inventory. “…the casino floors remained very busy with practically all tables operational and highly occupied. As would be expected, minimum bets were generally higher than normal,” observed Union Gaming, describing Cotai on October 1. “The dynamic seems to be playing out where we could see a record level of GGR [gross gaming revenue] in October despite lower levels of visitation given that low-value tour group customers are simply not in market…” it added. The Statistics and Census Service announced on September 23 that

Eight out of ten visitors on Tuesday from the mainland

visitors from mainland China reached 1.88 million in August, up by 15.1 percent from a year earlier. The mainland market accounted

for 65.5 percent of all the visitors to Macau in August, the highest proportion since official data was first made available in 1998.

October 3, 2013

Macau

‘Las Vegas model’ can work in Japan: MGM Dream of non-gaming revenue one day exceeding that of gambling also pursued by Macau government, LVS Michael Grimes

michael.grimes@macaubusinessdaily.com

he great hope of some United States-based casino operators – to export to Asia the so-called ‘Las Vegas model’ whereby non-gaming produces more revenue than gambling – is achievable in Japan, suggests a senior executive from MGM Resorts International. Bill Hornbuckle, president of MGM and also a director of MGM China Holdings Ltd, developer of the MGM Macau resort on the Macau peninsula, made his prediction for Japan at the recent Union Gaming Group conference in Tokyo. “What’s unique about Japan – unlike Macau or even Manila, where when you go there the vast majority of the revenues are driven by gaming – is that Japan sets itself up, particularly Tokyo and Osaka, because of the

Bill Hornbuckle, president MGM Resorts

airport, entertainment and all of the things that could be done around it and with it – [so] that you could end up with a Las Vegas model,” he told Bloomberg News. “You could end up with

it [Japan] being one of the great gaming markets of the world, but through entertainment and most notably MICE [meetings, incentives, conventions and entertainment] and

conventions, and bringing in folks from around the globe,” added Mr Hornbuckle. Non-gaming revenue has exceeded gaming revenue at casinos on the Las Vegas Strip since 1999 according to data compiled by the University of Nevada, Las Vegas. The same hopes have previously been expressed for Macau, but it hasn’t happened so far. Part of the reason may be structural, as no other casino operator has so far made the large bet on convention facilities in Macau that Las Vegas Sands Corp did when it opened The Venetian Macao and its massive CotaiExpo space in August 2007. Currently in Macau, nongaming revenues market wide still account for only about 10 percent of the casino concessionaires’ receipts

according to estimates by Bloomberg News. That may change as the next generation of Cotai resorts opens. They do so against a background of central and city government curbs on gambling growth and the central government’s often-stated desire to see a diversification of Macau’s general economy and the creation of more non-gaming amenities in the tourism sector. Sheldon Adelson, chairman and chief executive of LVS, said in an interview with Bloomberg News in 2011 commenting on criticism that the ‘Las Vegas model’ wasn’t applicable to Asia: “It’s working. They [competitors] just don’t want to acknowledge it. After all, if they acknowledged that what I’m doing is better than what they’re doing then they’re slapping their own face.”

October 3, 2013 April 19, 2013

Macau

David Chow’s Hengqin plan ready Could create a bridgehead for Macau firms to tap the island’s expected tourism and business markets Tony Lai

tony.lai@macaubusinessdaily.com

acau entrepreneur and casino owner David Chow Kam Fai said the construction of his Portuguesethemed commercial centre project could start by year-end. The investment is via a vehicle called Sino Perfect Investment Ltd. Mr Chow is also co-chairman of Hong Kong-listed casino and hotel services company Macau Legend Development Ltd. Regarding the Hengqin investment, Mr Chow told Chineselanguage newspaper Macao Daily News that his team “have already finished fine-tuning the project plan”. Mr Chow stressed he hopes his project “can serve as a lead” for the Macau firms to tap the Hengqin market. The businessman is also chairman of the Federal General Commercial Association of Macau Small and Medium Enterprises. The group said in August it hoped 200 local SMEs could join his Hengqin project. Macao Daily’s report yesterday did not mention details of the project or the latest budget forecast.

The former Macau legislator won the 30,000-square-metre land plot near the Hengqin border with a bid of 250 million yuan (320 million patacas) last December. The plot was the first – and so far only – Hengqin land reserved for Macau-based enterprises. Mr Chow previously went on record pledging to invest 1.6 billion yuan – including land costs – on the site, which he said would have a Portuguese-themed plaza and commercial centre. Property-to-transport conglomerate Shun Tak Holdings Ltd, listed in Hong Kong, captured a 23,834-sq. m. Hengqin parcel for 721 million yuan in July. Pansy Ho Chiu King, its managing director, said she wanted offices, a hotel, commercial spaces and serviced apartments on the site. Shun Tak is expecting to sign a contract with officials from Hengqin New Area this month, said the daughter of Macau gaming’s former monopolist Stanley Ho Hung Sun last month. Mr Chow also told Macao Daily

Hengqin gateway – David Chow

News he saw “business opportunities” for creating hotel projects in old Macau neighbourhoods as part of the government’s citywide regeneration programme. Additionally, he said that on the

basis of the government’s stated policy of three percent annual compound growth for live gaming tables over the next ten years, there would be enough local labour to provide dealers for them.

Corporate Magic signs partnership to expand into Greater China Magic Software Enterprises Ltd, a provider of software platforms for enterprise mobility, cloud applications, and business integration, is trying to push its products into Greater China. The Israeli company has appointed Beijing-based United Electronics Co Ltd as its prime partner and reseller for Macau, Hong Kong, and mainland China. The partnership agreement for licences, maintenance and support is worth nearly US$1 million (8 million patacas) over five years, Magic Software announced. “We have been looking for an established, reliable and qualified partner in China,” said Ran Lewinski (pictured), Magic Software’s distribution general manager. “United Electronics is a natural fit,” he added. “Demand for enterprise products and services is on the rise and the enterprise mobility is poised to take off,” said Donghui Wang, chairman of Shenzhenlisted United Electronics. Magic’s “robust enterprise-grade application and integration platforms” allow companies “to mobilise enterprise data easily, reliably and securely,” he added.

Hero MotoCorp debuts new bike in Macau Hero MotoCorp Ltd, India’s largest motorcycle manufacturer, debut a newly developed bike in Macau, in hopes of clawing back some of its lost market share. The new version of Splendor, the world’s largest-selling bike, called ‘Splendor iSmart’, was shown to dealer partners at the annual Hero Global Marketing & Sales Conference held here last month. Hero MotoCorp also showcased a refurbished version of its high-end bike Karizma, the first model developed in technical partnership with its United States-based partner Erik Buell Racing. Both Splendor iSmart and Karizma is likely to hit the market this quarter as the company looks to cash in on the festive season demand in India. After parting ways with former partner Honda, Hero MotoCorp’s overall market share has come down to 43 percent in the current fiscal year, the Economic Times reported.

October 2013 April 19,3,2013

Macau

Hengqin to sell plot for Chinese medicine One of three tracts is reserved for firms from Macau, Hong Kong or the mainland Tony Lai

tony.lai@macaubusinessdaily.com

Hengqin Island development authority has offered another three blocks of land for a u c t i o n with one reserved for Macau, Hong Kong and mainland Chinese firms to develop a centre for traditional Chinese medicine. The Zhuhai Land and House Property Exchange Centre said on Tuesday that a 24,000-square-metre site would be auctioned. It has a reserve price of 1,200 yuan (1,560 patacas) per square metre of gross floor area, which could reach 42,000 square metres. Only firms registered in Macau, Hong Kong and the mainland will be allowed to lodge a minimum bid, which would come to at least 57.6 million yuan, the centre said on its website. “The development should focus on developing traditional Chinese medicine and pharmacy industries,” it said. There are few Macau-registered companies that are likely to qualify for the auction, since the bidders or at least one of their shareholders must be publicly listed enterprises. The reserve price is almost twice as high as the amount paid for a bigger piece of land by the Guangdong-

Macau Traditional Chinese Medicine Technology Industrial Park Development Co Ltd. The company is owned by the Macau and Guangdong governments. In January last year, the company agreed to pay 600 million yuan for a 500,000-square-metre parcel of land at about 666.70 yuan for each square metre of gross floor area. The firm said in a seminar for investors in August that the project would be developed in four phases and completed by 2020. The construction of the first phase should start by yearend, the park company noted. Hengqin officials put up for auction the island’s first site devoted solely to office buildings on Tuesday. The 7,500-square-metre site will have a target price of at least 81.8 million yuan with a reserve price of 4,200 yuan per square metre of gross floor area. Another plot of nearly 11,500 square metres for commercial use will also be up for bidding for at least 418 million yuan. Online bidding for the three blocks closes on November 1. The Zhuhai centre could pocket at least 588 million yuan from the tender.

Three more blocks of land have been put up for auction by Hengqin Island officials

October 3, 2013 April 19, 2013

Greater China

Tesco clinches deal for China venture U.K. supermarket JV ends ‘go it alone’ strategy in China

esco Plc, the largest U.K. retailer, will pay HK$4.33 billion (US$558 million) to gain 20 percent of a venture with China Resources Enterprise Ltd to extend its reach in the world’s most populous nation. The venture, announced in August, will combine Tesco’s 134 outlets and shopping-mall business in China with the almost 3,000 stores owned by the state-backed conglomerate in China and Hong Kong. The two companies plan to run supermarkets, convenience stores and liquor shops in the Greater China region, China Resources, which will hold 80 percent of the venture, said in a statement yesterday. The deal would allow Tesco to expand in China’s US$574 billion hypermarket industry while ending almost a decade of independent operations as sales fall amid competition from rivals such as Sun Art Retail Group Ltd. China Resources, which runs the country’s second-largest hypermarket business, would gain from Tesco’s expertise in areas including private labels, e-commerce and international sourcing, the companies said. “Through this deal we have a strong platform in one of the world’s most exciting markets and it will move us more quickly to profitability in China,” Tesco chief executive Philip Clarke said in a separate statement. China Resources rose 1.42 percent to HK$25 in Hong Kong trading. The stock has declined 11 percent this year, while the city’s Hang Seng Index has gained 1.9 percent.

Board seats Tesco will have two out of a maximum of 10 seats on the board of the venture, whose annual sales are estimated at 10 billion pounds (US$16 billion), the Cheshunt,

HK$4.33 bln Tesco to pay for venture with China Resources

Tesco is exiting international markets to focus on its home base

England-based company said. Completion of the deal is expected in the first half of 2014, subject to regulatory and shareholder approval. Retailers including Tesco face slowing economic growth amid competition in China, where gross domestic product expanded 7.5 percent in the second quarter from a year earlier, the second straight deceleration. In addition to hypermarkets, Tesco owns 11 Lifespace shopping malls in China and eight in 50-50 joint ventures with local partners. China Resources and Wal-Mart Stores Inc are tied for second place in the country’s hypermarket industry with an 11 percent share each last year, according to Euromonitor

International. Sun Art, backed by France’s Groupe Auchan, was the market leader with 14 percent, while Tesco ranked eighth with 2.4 percent. Revenue in China’s hypermarket industry will probably expand to 864 billion yuan (US$141 billion) by 2015, a 50 percent gain from last year, according to Euromonitor.

Global exit The U.K. retailer is exiting international markets after almost two decades of overseas expansion took the focus off its home base. Tesco agreed in June 2012 to pay 40 million pounds to leave its Japanese joint venture, and said last month

HK stocks advance most in two weeks Market due for technical rebound, analyst says Kana Nishizawa

ong Kong stocks rose, with the equity benchmark rising the most in two weeks, as the city’s markets reopened from a holiday and casino shares and Hutchison Whampoa Ltd advanced. Galaxy Entertainment Group Ltd, the casino operator controlled by billionaire Lui Che Woo, rose 2.7 percent before the release of Macau’s September casino revenue. Hutchison Whampoa, controlled by Li Ka Shing, jumped to its highest since November 2007 on a report it may seek to raise US$10 billion spinning off its Watsons retail arm. Aluminum Corp of China Ltd, the nation’s No. 1 supplier of the commodity, slid 1.4 percent after metal prices fell as the U.S. government yesterday began its first

partial shutdown in 17 years. The Hang Seng Index gained 0.6 percent to 22,984.48 at the close in Hong Kong after falling the most in a month on September 30. Two shares rose for each that fell on the 50-member gauge, with volume 16 percent lower than the 30-day intraday average. The Hang Seng China Enterprises Index, also known as the H-share index, added 0.2 percent to 10,333.59. Mainland markets are shut until October 8. “The market is due for a technical rebound today but not by that much,” said Norman Chan, head of investment at Calibre Asset Management Ltd. “People are still worried about what the U.S. will do – the market expects them to resolve the issue in a few days but nobody is

going to make any big moves.” The Hang Seng Index climbed 5.2 percent last month and 9.9 percent in the three months through September, its steepest quarterly gain since the period ended March 2012, as data from China signalled the world’s second-largest economy is strengthening and the Federal Reserve unexpectedly refrained from cutting stimulus. Hong Kong’s equity benchmark traded at 11 times estimated earnings today, compared with 15.4 for the Standard & Poor’s 500 Index yesterday.

U.S. shutdown Futures on the U.S. equity gauge fell 0.7 percent. The index climbed for

that it was exiting the U.S. Tesco started selling goods in China in 2004 and generated 1.4 billion pounds of sales in the country last fiscal year, according to its website. Sales for its China stores open at least a year dropped 4.9 percent in the first quarter amid consumer concern over bird flu and weaker demand for pork after a national food safety scare. Tesco scaled back efforts in China last year to focus on building more profitable businesses, Mr Clarke said in April. The company has adopted a more cautious stance in the nation and shut five underperforming outlets to focus on its strongest regions, it said. Bloomberg News

a second time in nine days yesterday after data from the privately run Institute for Supply Management showed U.S. manufacturing expanded in September at a faster pace than forecast, indicating factories will provide a bigger boost to the expansion. The U.S. government yesterday began its first partial shutdown since 1996, putting as many as 800,000 federal employees out of work and halting some services. Congress also faces a dispute over raising the US$16.7 trillion debt ceiling this month as Republicans continue their fight to defund President Barack Obama’s health care law. The stoppage could cost the economy US$300 million a day, according to IHS Inc. “As soon as the shutdown started the market began to rebound because the U.S. market had dropped” several days beforehand, said Calibre Asset’s Mr Chan. “It was also helped by the rebounding economy, and we’ve seen some good figures from the U.S.”

Casinos advance Galaxy rose 2.7 percent to HK$55.85. Sands China Ltd, a unit of billionaire Sheldon Adelson’s Las Vegas gaming company, climbed

October 2013 April 19,3,2013

Greater China

Chinese demand boosts Australia’s estimates

Xi in Indonesia on first Southeast Asia trip Officials to sign deals worth up to US$20 billion

Canberra raises iron ore price estimates for next year

hinese President Xi Jinping arrived in Indonesia yesterday on his first trip to Southeast Asia since taking power, as Beijing seeks to tap into the country’s booming economy. He attended a ceremonial welcome at the start of the twoday state visit before holding talks with President Susilo Bambang Yudhoyono and signing a number of trade agreements. They are expected to include deals in several sectors, including infrastructure, technology and tourism, reportedly worth up to US$20 billion. He will also ink an accord for investment in construction of a monorail system in the capital Jakarta, where unrelenting traffic drains billions of dollars from Southeast Asia’s top economy each year. Today, Mr Xi will address the Indonesian parliament. Trade between China and Indonesia has soared from US$16.5 billion in 2005 to more than US$66.2 billion in 2012 and Mr Xi said he was aiming “to plan for our future collaborations” during the visit. Indonesia “has turned itself into a remarkable emerging market economy with political stability, economic growth, social progress and ethnic harmony,” he was quoted as saying in an interview with the Jakarta Post newspaper. China already has significant investments in Indonesia in several sectors, including mining. Regional territorial disputes may also be on the agenda, as Indonesia has often acted as a mediator between China and other nations during disputes over the South China Sea. Indonesia does not have any disputes with China over the strategically important sea, unlike nations such as the Philippines and

1.6 percent to HK$48.70. Macau’s Gaming Inspection & Coordination Bureau is expected to release its September casino revenue today after an 18 percent rise in August from a year earlier. Hutchison Whampoa increased 3.3 percent to HK$95.95, the secondbiggest gain on the Hang Seng Index. The company may list Watsons on the city’s exchange within the next 12 to 18 months, according to a Hong Kong Economic Times report citing unidentified people. “If Hutchison spins off its Watson business, it may create exceptional income for Hutchison, boost its earnings and improve stock valuation,” said Sam Chi Yung, a strategist at Delta Asia Securities Ltd. “Investors are expecting an earnings increase for Hutchison, that’s why the shares are rising today.” “We do not comment on market speculation,” said Hutchison spokesman Jeremy Lau. Material companies had the biggest drop among the Hang Seng Composite Index’s 11 industry groups. Aluminum Corp of China slid 1.4 percent to HK$2.84. Jiangxi Copper Co, China’s biggest producer of the metal, sank 2.9 percent to HK$14.80. Gold miners Zhaojin Mining Industry Co and

Xi will address the Indonesian parliament today

Vietnam whose territorial claims overlap with those of Beijing. Mr Xi said Beijing was committed to working with the 10-member Association of Southeast Asian Nations (ASEAN) to “safeguard peace and stability in this region, including in the South China Sea”. “As for the differences and disputes between countries, China has always stood for proper resolution through friendly negotiations and dialogue,” he was quoted as saying. After his visit to Indonesia, Mr Xi will head to neighbouring Malaysia and then a meeting of the Asia-Pacific Economic Cooperation forum on the Indonesian resort island of Bali. It was unclear if U.S. President Barack Obama would also be attending the regional summit after he scrapped a visit to Malaysia planned for next week due to the U.S. government shutdown. AFP

Zijin Mining Group Co each slumped at least 2.6 percent. “The Hong Kong market is consolidating, and in the near term it will remain that way,” said Calibre Asset’s Mr Chan. “Markets are closed in China and are weak in the U.S., that’s not going to be too helpful for the Hong Kong stock market. It may need to correct a little bit more.” Bloomberg News

If Hutchison spins off its Watson business, it may create exceptional income for Hutchison, boost its earnings and improve stock valuation Sam Chi Yung, Delta Asia Securities

ustralia, the world’s largest iron ore exporter, raised its price estimates for the steelmaking raw material as surging Chinese consumption absorbs increased supplies of the biggest commodity cargo after oil. Prices will average US$119 a metric ton in 2014 from US$112 forecast in June, the Bureau of Resources and Energy Economics said in a report yesterday. The commodity will average US$121 this year compared with US$117 estimated in June, the Canberrabased bureau said. China will import 872 million tons next year, 8.3 percent more than forecast in June, and by 2018 shipments from overseas may increase to almost 1 billion tons, it said. Iron ore entered a bull market in July as users in China replenished stockpiles that shrank in March to the lowest level since 2009. Morgan Stanley said last month that the commodity will be supported into the first half of 2014 before a global

surplus emerges, while Citigroup Inc and BHP Billiton Ltd have bearish short-term views as mining companies boost output. “China’s steel consumption is forecast to increase by 5 percent to total 703 million tons” this year, the bureau said. This expansion “is expected to be supported by continued growth in commercial and residential construction,” it said. Iron ore with 62 percent content delivered to the Chinese port of Tianjin was unchanged at US$131.40 a ton yesterday, according to The Steel Index Ltd. Prices have rallied 19 percent from this year’s low on May 31. The bureau’s price forecasts refer to ore with 62 percent content free-on-board Australia. Australia may ship 570 million tons of ore this year, up 16 percent from 2012, and 669 million tons in 2014, the bureau said. The country’s exports are projected to rise at an average annual rate of 8 percent a year from 2014 and 2018, it said. Bloomberg News

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October 3, 2013 April19, 19,2013 2013 April

Greater China Taiwan property deals analysis to surge in fourth quarter Financial integration As insurers had their ban on property investment lifted

ommercial real estate and land deals in Taiwan will probably surge in the fourth quarter after the government lifted some restrictions on insurers’ property investment, according to the world’s two biggest commercial realtors. Investments in offices and shops on the island will rise to as much as NT$40 billion (US$1.4 billion) in the next three months, Tony Chao, Taipei-based managing director at Jones Lang LaSalle Inc, said in an interview yesterday. That compares with NT$24.2 billion in transactions in the third quarter, according to CBRE Group Inc. The Financial Supervisory Commission in August lifted some restrictions including the ban on buying commercial real estate by insurers with financial irregularities. It kept some of the measures implemented last November to control office prices, including asking insurance companies to avoid investing in properties with an annual yield below 2.875 percent.

Sabine Bauer Senior director of financial institutions at Fitch Ratings

Property curbs were introduced in November to control office prices

“You have 10 months of pent-up demand,” Joseph Lin, Taiwan-based managing director for CBRE Group Inc, said in an interview yesterday. “We’re expecting a lot of money to be spent in the fourth quarter.” The value of transactions, including land changing hands, will rise to more than NT$80 billion this quarter, according to CBRE. For the full year, investors will probably buy about NT$250 billion, compared with NT$300 billion in 2012, the Los Angeles-based

realtor said. Prior to the ban last year, Taiwan’s insurance companies accounted for about 40 percent of commercial real estate transactions, said CBRE’s Lin. Cathay Life Insurance Co and Shin Kong Life Insurance Co are among insurers that had their ban on property investment lifted this year. The government also said this year it will allow insurers to invest in overseas property markets. Bloomberg News

Chinese gold demand seen rising

Lower prices have boosted coin and bar buying in Asia

onsumer gold demand in China, last year’s second-biggest user after India, may increase by at least the same pace as the country’s economic growth, according to the World Gold Council. Economic expansion may slow to 7.4 percent next year and 7.2 percent in 2015, from 7.6 percent this year, according to economist estimates compiled by Bloomberg. Chinese gold demand growth may at least match those increases and could rise further as a rising population has more disposable income, Albert Cheng, Far East managing director at the council, said in an interview at a London Bullion Market Association

presents new risks, opportunities to HK banks

conference in Rome. China’s consumption may reach 1,000 metric tons this year as it vies to match India’s demand, the council said in August. Gold rose 13 percent from a 34-month low in June as lower prices boosted jewellery, coin and bar buying in Asia. Economic growth in Asia that’s bigger than in western nations and rising populations aided demand that led Australia & New Zealand Banking Group Ltd, Deutsche Bank AG and UBS AG to open vaults in the region this year. “The number of cities and rising population are sources of future gold jewellery consumption in China,” Mr Cheng said. “There’s a rising middle class. There

are not many alternative investments. Gold is a good alternative to consider for protecting wealth.” Global sales of bullion bars and coins surged 78 percent to an all-time high in the second quarter as demand more than doubled in India and China amid lower prices, according to the producer-funded council. China’s population will reach 1.43 billion in 2020, 5.4 percent more than in 2010, according to United Nations estimates. “The Chinese consumer was on the sideline, waiting for gold to pull back,” Mr Cheng said. “Gold has an intrinsic value. They thought it’s a good time to get in.” Bloomberg News

ey developments in China’s evolving banking system, such as the recent liquidity squeeze, can promptly impact the operations of Hong Kong banks whose exposure to the mainland continues to grow. The relatively small size of Hong Kong’s banking system (only 8 percent of that of China) means spill-over effects can be huge when it comes under influence of the mainland’s fast-expanding financial system. In addition, the city’s financial sector is subject to contagion risk if there is real or perceived stress in China’s economy. This is most relevant for Hong Kong’s economy as banking assets account for close to US$2 trillion or about 7.5 times of Hong Kong’s gross domestic product. The most pertinent question Hong Kong banks are facing is how to best take advantage of the attractive growth opportunities including the offshore renminbi business, presented by Hong Kong’s increasing integration with China. But the home-grown institutions face strong competition from mainland and foreign institutions operating in the city. While the combined market share of the three largest, long-established banking groups HSBC, Bank of China and Standard Chartered remains high at close to 50 percent, Chinese banks significantly increased their presence to about 15 percent of system-wide assets from 9 percent at end-2009. The second challenge is how to deal with constantly present volatility. Hong Kong banks will be put to test if and when the United States authorities tighten monetary policy, particularly if adjustments were abrupt and unexpected. Hong Kong’s open economy and strong linkages with the Chinese financial system inevitably attract tight regulatory supervision to ensure superior capital and liquidity at the city’s banks. It is a sign of strength that system-wide loans remain fully deposit-funded which adequately positions the banks to meet unforeseen deposit outflows. Banks’ exposure to the domestic property market is less risky than their China activities as the former remains prudently managed and actively regulated. Rising interest rates will undoubtedly challenge borrowers in paying their mortgages and declining asset prices will depress system-wide confidence. However, domestic property loans only accounted for 12 percent of system-wide assets at end-June 2013 compared with China-related risks of 28 percent at end-March 2013.

Loan growth Hong Kong banks’ rapid loan growth in June once again highlights the city’s growing ties with China. The spike in trade loans should be temporary though. Fitch maintains its estimate of 12 percent for system-wide loan growth in 2013,

Multiple new business opportunities will arise from Hong Kong’s proximity to China making it the leading offshore renminbi market

compared with 9.5 percent year-todate by end-June 2013. Moderating economic growth in China will generally slow down Hong Kong banks’ lending and the performance of outstanding China loans will likely weaken. But it is difficult to generalise as the majority of those loans are short term, while China-related borrowers provide collateral and their creditworthiness also depends on international growth. Collateral enforceability and corporate governance remain prominent China-related risks. Diversification benefits from banks’ China expansion are largely offset by related risks. Banks usually make sensible use of collateral to address credit risks, while non-credit-related risks – such as regulatory and political risks and limited transparency – are harder to mitigate. Liquidity risk is mitigated by a facility which the regulator provides on the back of a bilateral swap line with China. Multiple new business opportunities will arise from Hong Kong’s proximity to China making it the leading offshore renminbi market. Profit contributions from payment processing and renminbi crossborder trade will undoubtedly grow alongside increasing volumes. However, we expect that over the next two to three years revenue from offshore renminbi activities, including dim sum bond underwriting and lending, will remain small and outweighed by related costs. In addition, high competition for these new products dents profitability. A pick-up in renminbi loan demand should have the biggest profit impact but we do not foresee a material increase over the near term. This is because demand from outside China may be held back by perceived currency risks and restrictions on cross-border renminbi lending.

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Asia

ADB cuts outlook for developing Asia Countries in the region can weather Fed’s tapering, bank says Rosemarie Francisco

sian economies can ride out the storm when the United States Federal Reserve finally begins ending years of easy money, with even those most at risk, India and Indonesia, holding enough currency reserves for rough times ahead, according to the Asian Development Bank. Updating forecasts for 2013 and 2014, the Manila-based lender said yesterday that growth in developing Asia is likely to be slower than it thought three months ago, when it last revised forecasts to an annual outlook released in April. It now reckons the region, grouping 45 countries in Asia-Pacific, will grow 6.0 percent in 2013 and 6.2 percent in 2014, little changed from last year’s growth of 6.1 percent. Between May and August, emerging markets were gripped by a sell-off after the Fed signalled that it would taper its bond-buying stimulus once the U.S. economy improved. The sudden capital outflows caused some alarm, but ADB said worries over potential for a regional meltdown were misplaced, and markets are now treading water, waiting for the Fed to act. “Fears of a repeat of the 1997 Asian financial crisis are unwarranted,” ADB said in a statement. “The region is now in a stronger position to weather the storm, with many economies running current account surpluses and holding large foreign reserve stockpiles.” The bank said developing Asia’s current account surplus is expected to narrow to 1.6 percent of GDP in both 2013 and 2014 from 1.8 percent last year. Whereas high external deficits resulted in India and Indonesia suffering far sharper falls in their currencies during the emerging markets’ sell-off, ADB took comfort

Economies have been hurt by a slowing demand from key export markets

in their levels of reserves. “Widening current account deficits have long made both economies more susceptible to shifts in market sentiment, as have fiscal deficits in India. Fortunately, both have sufficient foreign exchange reserves, enough as of August to cover imports to India for 7 months and to Indonesia for 5 months,” the bank said.

Need for reform China is expected to grow 7.6 percent and 7.4 percent this year

and the next, ADB said, trimming its July forecasts of 7.7 percent and 7.5 percent respectively. The slowdown in the world’s second biggest economy may usher in a more sustainable growth path as Chinese authorities seek a balanced development strategy away from its previous export- and investment-led growth model, the bank said. ADB made significant downward revisions to 2013 and 2014 growth forecasts for India, Indonesia, Malaysia and Thailand. India is expected to expand 4.7

Japan’s tax, spending plan double-edged sword for BOJ Leika Kihara

percent and 5.7 percent this year and the next, sharply lower than previous forecasts of 5.8 percent and 6.5 percent, respectively, with growth hampered by weak industry, investment and external demand and delays in structural reforms. The Philippines, the only country in East and Southeast Asia whose growth forecast was revised up, is expected to grow 7 percent this year against an April forecast of 6 percent. The country has kept pace with China to become one of the two fastest growing nations in the region this year. ADB also said inflation in Asia is likely to remain subdued this year and next, although some countries are likely to see mounting price pressures. Indonesia will see a sharp acceleration in inflation as it scales back fuel subsidies, the bank said. ADB said the past few months’ market volatility highlighted a need for structural reform to sustain growth in the region, including governance reforms that will ensure more inclusive growth. The bank said empowering citizens, engaging local governments and the private sector, and expanding the use of information and communications technology are among reforms needed to promote inclusive growth. It also said anti-corruption efforts should be intensified and regulatory and legal frameworks strengthened. “Inflows of cheap foreign capital into Asia may have allowed some countries to put governance reforms on the back burner,” ADB said. “But recent financial market volatility and a pullback in economic activity have added fresh urgency to long-term structural action which can ensure development gains are not lost, and future growth benefits all.” Reuters

KEY POINTS GOVT STIMULUS MAY BOOST CENTRAL BANK’S GROWTH FORECAST BOJ MAY FACE PRESSURE FOR FURTHER ACTION EARLY NEXT YEAR

he Japanese prime minister’s policy mix announced on Tuesday of giving to the economy on the one hand and taking away with the other is set to complicate life for the central bank next year. The Bank of Japan (BOJ) had already factored in an increase in the national sales tax to 8 percent from 5 percent from April 2014. Prime Minister Shinzo Abe confirmed the rise on Tuesday. But Mr Abe also said most of the extra revenue initially raised from the higher sales tax would end up back in the economy through a stimulus package amounting to about US$50 billion, a move designed to offset the economic blow of increasing the tax.

That is likely to result in the BOJ increasing its already rosy longterm growth and inflation forecasts, sources familiar with the bank’s thinking said. Still, the impact of the sales tax is an unknown. Economists expect it to deal an initial blow to the economy, which could easily place the BOJ under political pressure to ramp-up its stimulus yet further to ensure the economic feel-good factor continues. The last time that Japan raised its sales tax – to 5 percent from 3 percent in 1997 – the economy spiralled into recession. Although other factors were at play at that time, lawmakers may be jumpy next year if data shows the economy is starting to slide.

“Even with the stimulus package, Japan’s economy won’t be able to escape a contraction in the second quarter of 2014 after the tax hike,” said Masaaki Kanno, chief Japan economist at JPMorgan Securities. “The BOJ is highly likely to ease monetary policy in April next year to support the economy and accelerate inflation, which won’t be picking up much by then.” The central bank’s nine-member board will discuss the impact of the stimulus package and tax increase this week when it reviews policy starting today. However, Governor Haruhiko Kuroda is likely to welcome the sales tax hike – a move he had publicly

NO POLICY ACTION EXPECTED AT BOJ’S RATE REVIEW THIS WEEK

supported as a crucial first step in curbing Japan’s huge public debt. The review is widely expected to leave policy unchanged. The BOJ pledged in April to inject some US$70 billion a month into the economy to try to drive inflation to 2 percent in two years. But the board will also consider how Abe’s latest policies might affect their long-term economic projections, which are due to be published on October 31. Reuters

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Asia

SE Asia IPOs regain some lustre Westports Holdings’ floatation draws big investors Yantoultra Ngui and Saeed Azhar

estports Holdings Bhd, the operator of Malaysia’s busiest port, priced its IPO at the top of its projected range to raise US$680 million, signalling a boost for Southeast Asia’s capital markets on pent-up demand for emerging market stocks. Sources said foreign and domestic funds jostled to bid for Westports, which is partially owned by Asia’s richest man Li Ka Shing, taking advantage of the U.S. Federal Reserve’s unexpected decision not to withdraw stimulus. The result bodes well for an up to US$730 million IPO by UMW Oil & Gas Corp in October, which is set to be Malaysia’s biggest listing of the year and could give other firms in Malaysia and Southeast Asia the confidence to push ahead with listing plans. “Issuers in Southeast Asia are taking advantage of this new window as a result of the Fed’s surprise decision to not taper – free liquidity reigns and this has been a shot of adrenaline in the arm for emerging market risk appetite,” said James Fleming, co-head of Asia Pacific global capital markets at Bank of America Merrill Lynch in Hong Kong. IPOs in Southeast Asia had been hit by the global market turmoil sparked by Fed chief Ben Bernanke’s comments in May that the U.S. central bank planned to unwind its massive stimulus. Malaysian listings were also hurt by political uncertainty before general elections in May. Westports’ book was more than 30 times oversubscribed and closed two days earlier than scheduled.

Japan vehicle sales jump most in 14 months J

apan saw vehicle sales rise the most in 14 months, adding to signs of an improving outlook in the world’s third-largest economy. Total deliveries of passenger and commercial vehicles in September rose 17 percent to 522,760 units, according to figures from the Japanese dealers and minicar associations yesterday. That reversed a four-month slide and helped July-

Overseas demand was instrumental in pushing pricing to the top of 2.302.50 indicative range for institutional investors, the sources said. Westports, which manages the world’s 12th most active port overlooking the Malacca Straits, declined immediate comment.

Upcoming deals IPOs that could get a bump include a US$220 million deal by Seven Convenience Bhd, which could come in the coming months and a US$300 million floatation by property development firm Iskander Waterfront early next year. And 2014 could be a repeat of 2012, when Malaysia was Asia’s top destination for listings, with state investor 1Malaysia Development Bhd planning a US$3 billion listing for its energy assets and independent power producer Malakoff Corp looking at an up to US$1 billion IPO. Beyond Malaysia, companies

like the Philippines’ Travellers International Hotel Group are also reviving IPO plans although the size of that offering has been cut by almost half to US$450 million as investors become more demanding on valuations, sources said. The Philippines’ Robinsons Retail Group also plans to start premarketing for its US$500 million offering in the second week of October, although this IPO too was reduced in size, according to IFR, a

Thomson Reuters publication. “With a spectacular rise since 2010, valuations of companies in South East Asia are no longer cheap,” said David Poh, regional head of portfolio solutions, Societe Generale Private Banking, Asia Pacific. “IPOs at the present moment present both an opportunity if the fundamentals of the company is sound and reasonably priced, but may also be a high risk for investors as liquidity withdrawal may hurt.”

KEY POINTS Westports IPO prices at top of the range Institutional offer oversubscribed by more than 30 times Bodes well for UMW Oil & Gas Corp and other IPOs

Malaysia was Asia’s top destination for listings last year

to-September sales increase 2.3 percent, the first gain in four quarters. While sales still shrank 4.8 percent during the first three quarters, deliveries aren’t falling as steeply as the 12 percent that the Japanese automakers’ association predicted for 2013. In other signs of a recovery, rising share prices are enriching investors, the weaker yen is bolstering exporters’ profits and a Bank of Japan survey released yesterday showed business confidence among large manufacturers is at its highest level since 2007. “The biggest force that’s been giving domestic auto sales a boost is the improvement in the markets and optimism among consumers,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co in Tokyo. “The improvement in the economy and new models will continue to buoy demand.” The gains in Japan were a contrast to South Korea, where Hyundai Motor

Co’s sales in its home market plunged 20 percent last month, leading a 13 percent drop in industrywide deliveries, excluding imports. South Korean automakers sold a combined 101,021 units in September, the fewest since February, based on Korea Automobile Manufacturers Association figures. In Japan, the world’s third-largest auto market, last quarter’s increase in vehicle deliveries follows declines of 6.1 percent and 9.4 percent in the preceding two quarters, according to data compiled by Bloomberg. Honda Motor Co led gains last month with deliveries surging 40 percent as the company began selling its remodeled Fit hatchback to challenge Toyota Motor Corp’s lead in hybrid compact cars. Toyota saw domestic sales, excluding minicars, rise 12.5 percent last month. Local deliveries rose 16 percent at Nissan Motor Co and 14.5 percent at Mazda Motor Corp.

“The growth in September was very strong, much more than I expected,” said Yoshiaki Kawano, a Tokyo-based industry analyst at IHS Automotive. “It seems Honda’s Fit was very strong, and with other models from Mazda and other companies coming out, I think we can expect sales to continue to grow.” Bloomberg News

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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Asia At 2.50 ringgit per share, Westports will have a market value of some 8.53 billion Malaysian ringgit (US$2.6 billion) when it debuts on October 18. All proceeds from the offering will go to existing shareholders and not to the company which has said it is listing to raise awareness of its brand. Westports leaned heavily on cornerstone investors, ranging from Utilico Emerging Markets to Genesis Investment Management, who accounted for nearly half of the institutional tranche. With the IPO, the Gnanalingam family which is one of Malaysia’s wealthiest families, will see its collective holding fall to 46.8 percent from 60 percent. Hong Kong’s Mr Li, who owns shares in Westports through a subsidiary of Hutchison Whampoa, will see his interest drop to about 24 percent from around a third. Reuters

Packer signs US$450m Warner Bros deal Financing deal will cover the production of 75 films

consortium led by Australian billionaire James Packer and U.S. director Brett Ratner has struck a reported US$450 million cofinancing deal with Warner Brothers to cover the production of 75 movies. Casino mogul Mr Packer said the multi-year arrangement with his investment vehicle RatPacDune Entertainment was effective immediately. It covers upcoming releases including “Gravity” with George Clooney and Sandra Bullock, “Grudge Match” starring Robert de Niro and Sylvester Stallone as well as projects with Clint Eastwood (“Jersey Boys”) and Russell Crowe (“The Water Diviner”). “This is certainly not the dumbest thing I’ve ever done. Whether it works perfectly is another question,” Mr Packer told the Australian Financial Review on Tuesday, speaking about his new direction. Since his father Kerry’s death in 2005, Mr Packer has shifted the family business away from its traditional media operations and focused on creating Crown Ltd, a worldwide gambling empire. He operates casinos in Melbourne, Perth and Macau and is planning complexes in Manila and Sri Lanka, with Japan also in his sights. Mr Packer is co-chairman of Macau casino operator Melco Crown Entertainment Ltd. The gaming operator is building the US$2.9 billion Studio City on Cotai, described as a cinematically themed resort, which is due to be ready by mid-2015. As well as developing his U.S. business interests, Mr Packer said he hoped to tap into the booming

James Packer says he is interested in Chinese films

Chinese entertainment market through Rat-Pac Dune, whose third partner is Dune Entertainment boss Steven Mnuchin. “There is a globalisation play here,” he told the newspaper. “There is a real chance to grab the opportunity in China. In 10 years’ time, the Chinese box office will have overtaken the United States. “I’d like to see my business interests spread out evenly across the U.S., Australia and China.” Mr Ratner, best known for directing such hits as the “Rush Hour” trilogy, said that, like Mr Packer, he was also keen to branch out beyond Hollywood films into the lucrative Chinese entertainment industry. “James is very savvy about Asia and understands the culture,” Mr Ratner told the newspaper. In a statement, Warner Bros chief

executive Kevin Tsujihara said the deal covers films from all genres and budgets. No figure was put on its worth although the Financial Review said it was US$450 million. “This agreement gives us increased strength and flexibility in the motion picture division and an even greater ability to manage risk as we continue to produce high-quality filmed entertainment for the global audience,” Mr Tsujihara said. “We look forward to working with their team as we move forward in this exciting new partnership with a truly great organisation.” Hollywood studios often seek financing partners to spread the risk associated with costly film productions, and in the years leading up to the financial crash Wall Street investors beat a path to their door. T.A./AFP

Indian jewellers face long road to export growth Shipments down over summer as new import rules bite Jan Harvey and Siddesh Mayenkar

ndian jewellers, long spoiled by access to the world’s largest group of gold consumers, must seek expansion overseas after the Indian authorities tied gold imports to exports. But the path will not be easy. India has hiked import duty for gold, its biggest non-essential import, this year from 4 percent to 10 percent – 15 percent in the case of jewellery – in a bid to cut imports and close its record current account deficit. It has also linked imports to export volumes – at least 20 percent of bullion imported in India must now be exported. Pressure on the industry to increase gold exports is helping to push Indian jewellers towards overseas markets. “Just to secure domestic supplies, [jewellers] have to export,” Mayank Khemka, managing director of jewellery wholesaler Khemka Group, said on the sidelines of the London Bullion Market Association

conference in Rome. For his company, Dubai, Hong Kong and Singapore will be the primary markets to target, he said. C.K. Venkataraman, chief executive of the jewellery division of Titan Company Ltd, told Reuters at the conference that his company was looking at building up its exports as a part of its long-term growth strategy, targeting in particular Indian consumers living overseas. “I don’t think India has ever looked globally for gold jewellery sales,” he said. “Over the next decade, we should expect that to change.”

Tough competition But for all jewellers may want to sell overseas, the path to boosting exports is unlikely to be smooth. Exports have dropped 60 percent between April and August this year as confusion over the new regulations, tough competition from other

manufacturers like Thailand, and slack demand from major consumer the United States led to a virtual suspension of imports into India. The country is historically the world’s biggest consumer of gold, with imports hitting 850 tonnes last year. Only 8 percent of that was exported. Indian jewellers face tough competition from lower-cost producers, and will have to sharpen their design and manufacturing skills to move away from the heavy, yellow-gold pieces popular in India but less marketable overseas. “Our machine-made products have been facing huge competition from Thailand, Malaysia and Indonesia, and since we were unable to export in the last five weeks, our image has been hit in the international market,” Konal Doshi, partner at Modern Impex, a gold jewellery exporter said. Supply tightness due to the import

restrictions has made jewellers unwilling to ship material. In addition, jewellers unused to selling outside their own borders will have to familiarise themselves with export procedures and build up relationships with overseas retailers to the point where they are willing, for example, to send expensive samples overseas for approval. “Exporting isn’t something that can be started overnight, Mr Khemka said. “You need to give people time.” Pankaj Kumar Parekh, vice chairman of the Gem & Jewellery Export Promotion Council, said the jewellery industry has already met the Reserve Bank of India to push them to include the jewellery industry in its interest rate scheme, which facilitates loans at below normal lending rates. The commerce ministry is expected to announce financial incentives for jewellery exporters by end-October. Reuters

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Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 55.9

84.4

26.80

55.8

84.1

26.65

83.8

26.50

83.5

26.35

55.7 55.6 55.5 Max 55.85

average 55.639

Max 49.05

Min 54.45

average 48.787

last 55.85

Min 48.6

last 48.70

55.4

Max 84.3

average 83.997

22.50

49.0

22.38

48.9

22.26

48.8

22.14

48.7

22.02

48.6

Max 22.50

average 22.225

PRICE

DAY %

YTD %

(H) 52W

101.48

-0.54880439

8.557980317

111.3399963

85.79000092

BRENT CRUDE FUTR Nov13

107.53

-0.379840652

2.175978715

115.7599945

96.19999695

GASOLINE RBOB FUT Nov13

259.21

-0.708649353

0.946335384

293.6000109

243.3699846

909

0.44198895

0.553097345

980.25

837

3.605

-0.110834026

-3.738317757

4.59400034

3.281000137

294.96

-0.19287382

-1.285140562

322.3500013

276.8100023

Gold Spot $/Oz

1292.45

-2.8854

-22.3502

1796.08

1180.57

Silver Spot $/Oz

21.1295

-2.8417

-29.8256

35.11

18.2208

Platinum Spot $/Oz

1384.2

-1.4622

-8.7992

1742.8

1294.18

Palladium Spot $/Oz

GAS OIL FUT (ICE) Nov13 NATURAL GAS FUTR Nov13 NY Harb ULSD Fut Nov13

714.17

-1.6417

2.0739

786.5

587.4

LME ALUMINUM 3MO ($)

1827

-0.975609756

-11.86685962

2184

1758

LME COPPER 3MO ($)

7199

-1.410572446

-9.229605346

8379.75

6602 1811.75

3MO ($)

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

last 22.00

(L) 52W

WTI CRUDE FUTURE Nov13

LME ZINC

Min 21.95

Dec13

1878

-2.085505735

-9.711538462

2230

13750

-1.469007524

-19.4021102

18920

13205

15.04

0.434056761

-2.432695427

16.65000153

14.77000046

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

average 26.556

Min 26.20

last 26.65

26.20

27.8 27.6 27.4 27.2 Max 27.8

average 27.476

Min 27.8

last 27.8

27.0

-0.854214123

-27.42809504

647

435

678.5

-0.403669725

-17.3317088

913

635.5

SOYBEAN FUTURE Nov13

1264.5

-0.276025237

-2.936096718

1409.5

1162.5

COFFEE 'C' FUTURE Dec13

114.9

0.701139351

-26.55800575

200

113.1999969

NAME

SUGAR #11 (WORLD) Mar14

18.34

0.109170306

-10.88435374

22.14999962

16.69999886

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

87.03

0.496535797

10.52832106

93.72000122

74.34999847

CROWN LTD

(L) 52W

0.9342 1.6204 0.9044 1.3533 97.29 7.9871 7.7545 6.1212 62.465 31.32 1.2521 29.553 43.395 11356 90.889 1.22397 0.83513 8.2841 10.8093 131.67 1.03

-0.8491 -0.154 -0.0442 -0.0886 0.4831 0.0038 0.0064 0.0065 0.2441 -0.5587 -0.024 0.0237 -0.2074 0.0352 1.3467 0.0449 -0.0611 0.2402 0.0925 0.5772 0

-9.9827 0.1731 1.2163 2.6005 -11.5017 -0.0488 -0.0503 1.7872 -11.9587 -2.3627 -2.4519 -1.7596 -5.5075 -13.7636 -1.7186 -1.3473 -2.3601 -0.8039 -2.5802 -13.7465 -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 0.8993 1.2662 77.95 7.9818 7.7498 6.1064 51.3863 28.56 1.2152 28.913 40.54 9563 79.408 1.20302 0.79607 7.8281 10.1113 100.16 1.0289

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.88

2.736842

54.92063

4.905

2.56

6232801

15.46

1.510177

44.89222

16.08

9.14

1521823

1.3

-0.7633588

-7.142856

1.72

0.75

1315750

-0.4016064

2.904563

22.85

11708988

0.425

-1.162791

60.37737

0.56

0.23

480000

6.57

9.682809

6.74

3.82

49075

22.85

-1.082253

25.6

17.7

16189686

CHINESE ESTATES

17.8

0.5649718

58.28486

18.12

9.337

144000

CHOW TAI FOOK JE

11.02

-0.7207207

-11.41479

13.4

7.44

4633000

EMPEROR ENTERTAI

3.73

6.267806

97.3545

3.75

1.43

4780000

FUTURE BRIGHT

2.54

-0.78125

109.5664

2.76

1.103

658000

GALAXY ENTERTAIN

55.85

2.665441

84.01977

24.1

15369678

HANG SENG BK

127.4

0.7114625

7.329405

132.8

110.6

1363348

HOPEWELL HLDGS

26.05

0.3853565

-21.65414

35.3

23.2

1971934

HSBC HLDGS PLC

84.15

-0.2371073

3.505531

90.7

72.3

10987994

HUTCHISON TELE H

3.39

0.8928571

-4.775279

4.66

2.98

11644242

LUK FOOK HLDGS I

24.25

0.2066116

-0.6147525

30.05

16.88

5244000

MELCO INTL DEVEL

21.55

3.605769

139.1787

21.65

6.55

5320040

7050.05

MGM CHINA HOLDIN

26.65

3.495146

100.7037

26.8

12.236

7269400

1770.53

MIDLAND HOLDINGS

3.1

-1.587302

-16.21622

2.68

556000

NEPTUNE GROUP

0.181

-4.736842

19.07895

0.23

0.131

48720000

NEW WORLD DEV

11.82

1.372213

-1.663897

15.12

9.98

14907882

SANDS CHINA LTD

48.7

1.564129

43.44624

49.8

26.35

16661008

SHUN HO RESOURCE

1.71

1.785714

22.14286

1.92

1.19

4.43

1.83908

5.727922

4.65

2.97

11336699 12754998

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15191.7

0.4099891

15.93054

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3817.982

1.233018

26.4436

3817.982

2810.8

FTSE 100 INDEX

6400.71

-0.9179552

8.526893

6875.62

5605.589844

DAX INDEX

8638.76

-0.5798042

13.48288

8770.1

6950.53

NIKKEI 225

14170.49

-2.16939

36.3179

15942.6

8488.14

HANG SENG INDEX

22984.48

0.5451477

1.445742

23944.74

19426.35938

CSI 300 INDEX

2409.037

0.587314

-4.51514

2791.303

2023.171

TAIWAN TAIEX INDEX

8216.52

0.3603265

6.714975

8439.15

KOSPI INDEX

1999.47

0.03001696

0.1211748

2042.48

5215.556

0.1682032

12.18783

5314.3

4334.3

4383.805

0.8722246

1.554854

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1772

0.1678886

4.917259

1826.22

1590.67

NZX ALL INDEX

1002.317

0.5318882

13.63456

1005.231

839.483

SHUN TAK HOLDING

PHILIPPINES ALL SHARE IX

3836.8

1.947926

3.725894

4571.4

3440.12

SJM HOLDINGS LTD

Euromoney Dragon 300 Index Sin

(H) 52W

24.8

CHINA OVERSEAS

PRICE

JAKARTA COMPOSITE INDEX

YTD %

AMAX HOLDINGS LT

CHEUK NANG HLDGS

COUNTRY

S&P/ASX 200 INDEX

DAY %

BOC HONG KONG HO CENTURY LEGEND

World Stock Markets - Indices

PRICE

Macau Related Stocks

435.25

WHEAT FUTURE(CBT) Dec13

NAME

21.90

Max 26.75

Currency Exchange Rates

NAME

METALS

83.2

last 83.75

49.1

Commodities ENERGY

Min 83.25

614.84

0.66

-1.01

0.9174312

23.96002

22.5

15.835

SMARTONE TELECOM

10.2

-0.7782101

-27.55682

16.22

9.97

2765872

WYNN MACAU LTD

27.8

5.10397

32.69689

27.95

10100155

STOCK EXCH OF THAI INDEX

1404.23

-0.2812121

0.8836598

1649.77

1260.08

HO CHI MINH STOCK INDEX

494.39

0.4367788

19.49581

533.15

372.39

ASIA ENTERTAINME

3.96

1.538462

40.6908

4.7647

2.4835

69409

BALLY TECHNOLOGI

73.51

2.012212

64.41512

76.3

43.16

606143

Laos Composite Index

1285.98

-1.403829

5.862012

1455.82

1038.79

BOC HONG KONG HO

3.23

5.211729

3.6

2.99

6665

GALAXY ENTERTAIN

7.09

1.285714

78.58942

7.16

3.11

3890

INTL GAME TECH

19.3

1.954569

36.20325

21.2

12.37

3976747

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

JONES LANG LASAL

89.29

2.279496

6.373597

101.46

72.56

489801

LAS VEGAS SANDS

66.97

0.8280638

45.08232

67.351

37.8353

3538398

MELCO CROWN-ADR

32.56

2.293434

93.34917

32.56

12.74

3385584

MGM CHINA HOLDIN

3.22

83.96937

3.29

1.5895

13800

MGM RESORTS INTE

20.74

1.46771

78.17869

20.82

9.15

6501690 2875824

SHFL ENTERTAINME

23.21

1.044841

60.06897

23.21

12.35

SJM HOLDINGS LTD

2.826

1.290323

24.0771

2.9481

2.0508

11741

WYNN RESORTS LTD

160.07

1.303715

42.2971

160.15

103.0933

1676171

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

37.15

1.920439

29995714

ALUMINUM CORP-H

2.84

-1.388889

6848913

BANK OF CHINA-H

AIA GROUP LTD

3.54

297864378

BANK OF COMMUN-H

5.7

16833994

BANK EAST ASIA

0.456621

2297887

11.32

0.5328597

18688630

24.8

-0.4016064

11708988

BELLE INTERNATIO BOC HONG KONG HO

NAME CHINA UNICOM HON CITIC PACIFIC CLP HLDGS LTD

PRICE

DAY %

VOLUME

12.1

22129143

10.02

-0.3976143

9821848

63.3

0.2375297

3721406

15.64

-0.887199

46574694

12.1

2.023609

ESPRIT HLDGS

12.34

HANG LUNG PROPER

CNOOC LTD COSCO PAC LTD

NAME

PRICE

DAY %

POWER ASSETS HOL

68.4

-1.440922

VOLUME 7625143

SANDS CHINA LTD

48.7

1.564129

16661008

SINO LAND CO

11.52

0.8756567

6947794

SUN HUNG KAI PRO

105.8

0.2843602

4923054

7996710

SWIRE PACIFIC-A

92.35

-0.5920344

1257427

-0.6441224

5256286

TENCENT HOLDINGS

415

2.015733

3676146

26.05

-1.325758

7359599

TINGYI HLDG CO

20.1

-2.189781

8732214

15.4

1.315789

5896708

HANG SENG BK

127.4

0.7114625

1363348

WANT WANT CHINA

11.88

0.8488964

12374410

122.6

3.81033

5684910

HENDERSON LAND D

48.6

1.461378

1790013

WHARF HLDG

67.45

0.3720238

5560230

CHINA COAL ENE-H

4.61

-0.6465517

46674409

HENGAN INTL

89.6

-1.212789

3107411

CHINA CONST BA-H

5.98

0.1675042

271515106

18.72

0.3215434

7656463

CHINA LIFE INS-H

20.05

-0.2487562

22396214

CHINA MERCHANT

28.45

0.8865248

2645121

CATHAY PAC AIR CHEUNG KONG

CHINA MOBILE

HONG KG CHINA GS HONG KONG EXCHNG

123.9

-0.3218021

2579770

HSBC HLDGS PLC

84.15

-0.2371073

10987994

95.95

3.2831

12806635

5.46

0.9242144

187777578

87.1

0.5193306

16100292

HUTCHISON WHAMPO

22.85

16189686

IND & COMM BK-H

CHINA PETROLEU-H

6.14

1.153213

79373317

LI & FUNG LTD

11.28

16774193

CHINA RES ENTERP

1.419878

2557481

MTR CORP

30.75

0.1628664

1890558

CHINA OVERSEAS

CHINA RES LAND

22.1

0.2267574

6218850

NEW WORLD DEV

11.82

1.372213

14907882

CHINA RES POWER

18.5

0.3253796

5848232

PETROCHINA CO-H

8.52

-0.4672897

59654294

CHINA SHENHUA-H

23.4

-0.8474576

22070314

PING AN INSURA-H

57.85

0.3469211

8610411

MOVERS

23310

INDEX 22984.48 HIGH

23300.79

LOW

22859.86

52W (H) 23944.74 (L) 19426.35938

22850

29-September

02-October

15 15

October 2013 April 19,3,2013

Opinion

America’s endless wires budget battle Business

Leading reports from Asia’s best business newspapers

Taipei Times The Taipei District Prosecutors’ Office said on Tuesday it planned to summon President Ma Ying Jeou as a witness in a probe into allegations that Prosecutor-General Huang Shih Ming and the Supreme Prosecutors’ Office Special Investigation Division illegally monitored an opposition lawmaker’s telephone calls and leaked the content of the wiretaps to Mr Ma. Citing a gag order, the office said it could not discuss its investigative process, while media reported that the office had contacted the Presidential Office to ask when Mr Ma would be available.

Kenneth Rogoff

Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University

Korea Herald President Park Geun-hye on Tuesday vowed to step up efforts for stronger deterrence until Pyongyang made the “right” choice for peninsular peace, as Seoul marked the 65th anniversary of the founding of its armed forces. During Seoul’s largest military parade in a decade, Ms Park said Seoul would strive to quickly acquire key assets, including a low-tier missile defence system, to counter threats from North Korea’s nuclear arms and other weapons of mass destruction.

Wall Street Journal In smoky Malaysia, where almost every other male adult is a smoker, the government loses hefty revenue from illegal cigarette sales every year. Malaysia lost US$622 million in revenue in 2012, according to a recent study by Oxford Economics and the non-profit researcher International Tax and Investment Centre. The study looked at 11 countries in the Asia-Pacific region that suffer from tax evasion due to illicit cigarette sales. Australia, with an estimated revenue loss of US$1.14 billion last year, topped the list. Malaysia was second on the list.

The Age Australia’s housing sector recovery seems to be softening but economists are confident construction activity will strengthen later in the year. Approvals for the construction of new homes fell 4.7 percent across Australia in August, seasonally adjusted, the Australian Bureau of Statistics said, worse than the one percent fall the market was expecting. However building approvals were up 7.7 percent in the 12 months to August. “Generally there’s been enough of a tick up in approvals to suggest construction activity will pick up in the second half of this year,” RBC currency strategist Michael Turner said.

erhaps investors are becoming inured to the United States’ annual debt-ceiling debacle, now playing out for the third year in a row. But, as the short-term antics become more routine, the risks of long-term dysfunction become more apparent – a point underscored by the shutdown of the federal government. President Barack Obama is right to complain of blackmail. The U.S. Congress cannot expect to use the threat of default – that is, a weapon of mass financial destruction – as a normal means of extracting concessions. Unfortunately, because Obama himself has established a history of making concessions in the face of congressional brinkmanship, the debt-ceiling debate has morphed into more than just a short-term political fight. Increasingly, the battle over the U.S. government’s debt ceiling reflects a deeper constitutional power struggle between the president and Congress. This struggle, if left unresolved, could profoundly weaken the government’s ability to make significant economic decisions in the future. Of course, a breakdown in political civility would hardly make the U.S. unique; all too many countries suffer some degree of political dysfunction. It would take some doing to match (or exceed) Italy’s record of governmental paralysis. But if Congress continues to hijack U.S. economic policy, it bodes ill for the economy’s otherwise bright long-term prospects. At least for now, the rest of the world has seemingly unbounded confidence – reflected in very low borrowing rates – in America’s capacity to put its house (of representatives) in order. No one can imagine that a country with so many unique economic advantages would risk such a

damaging self-inflicted wound as default would cause.

Different case But this time could be different. Obama needs to force his Republican opponents to blink, and there is no guarantee that they will. In the past, it was Obama who blinked, knowing that even if a catastrophic debt default was largely caused by congressional Republicans, he would likely absorb some of the blame in the next election. Now that re-election is behind him, Obama could be inclined to take more risks, with an eye toward securing his economic legacy. What will that legacy be? Despite the federal government’s destructive impulses, the U.S. economy is showing great resilience and looks set to become stronger. Of course, Obama would love to see this trend continue, as would almost everyone else. Unfortunately, a U.S. debt default, even a technical one, would have unforeseeable consequences that could threaten the recovery. Consider what happened when the Federal Reserve misplayed its hand with premature talk of “tapering” its long-term asset purchases. After months of market volatility, combined with a reassessment of the politics and the economic fundamentals, the Fed backed down. But serious damage was done, especially in emerging economies. If the mere suggestion of monetary tightening roils international markets to such an extent, what would a U.S. debt default do to the global economy? Much of the press coverage has focused on various short-term dislocations from counterproductive sequestration measures, but the real risk is more profound. Yes, the dollar

The U.S. Congress cannot expect to use the threat of default – that is, a weapon of mass financial destruction – as a normal means of extracting concessions

would remain the world’s main reserve currency even after a gratuitous bout of default; there is simply no good alternative yet – certainly not today’s euro. But even if the U.S. keeps its reservecurrency franchise, its value could be deeply compromised. The privilege of issuing the global reserve currency confers enormous advantages on the U.S., lowering not just the interest rates that the U.S. government pays, but reducing all interest rates that Americans pay. Most calculations show that the advantage to the U.S. is in excess of US$100 billion per year.

Hefty bill There was a time, during the 1800’s, when the United Kingdom enjoyed this “exorbitant privilege” (as Valéry Giscard d’Estaing once famously called it when he served as French President Charles de Gaulle’s finance

minister). But, as foreign capital markets developed, much of the U.K.’s advantage faded, and had almost disappeared entirely by the start of World War I. The same, of course, will ultimately happen to the dollar, especially as Asian capital markets grow and deepen. Even if the dollar long remains king, it will not always be such a powerful monarch. But an unforced debt default now could dramatically accelerate the process, costing Americans hundreds of billions of dollars in higher interest payments on public and private debt over the coming decades. Ironically, the debt-ceiling fight is not really about debt. The Republicans are hardly debt hawks when they control things. The last Republican presidential candidate, Mitt Romney, and his vicepresidential running mate, Paul Ryan, campaigned in 2012 on a programme that would likely have added trillions of dollars to the U.S. debt over the next ten years, owing to tax cuts and increased defence spending. Rather, the debtceiling debate is about the size and reach of government. Yes, the U.S. should worry about its soaring public debt – and about the rising pension and health-care costs that loom large. Despite baseless politically motivated claims to the contrary, the academic research still overwhelmingly suggests that very high debt is a drag on long-term growth. Of course, Americans should worry just as much about the quality of education and infrastructure – not to mention the natural environment – that they are leaving to future generations. But, above all, they need to leave a legacy of civil political decision-making. That essential feature of effective government is now at risk. © Project Syndicate

16 16

October 3, 2013 April 19, 2013

Closing Singapore-U.K. deal on casino regulation Letta survives confidence vote The Casino Regulatory Authority of Singapore has signed a memorandum of understanding with the United Kingdom’s Gambling Commission. The CRA says it reaffirms their commitment to collaborate on information and knowledge sharing, exchange visits and training opportunities. Additionally the authority’s chief executive Lau Peet Meng has been appointed president of the International Association of Gaming Regulators. The CRA says this is the first time an Asian regulator has been appointed to this position. Mr Lau’s term will last until October 2014. He succeeds Susan Hensel, director of licensing for the Pennsylvania Gaming Control Board.

Italian Prime Minister Enrico Letta (pictured) won a confidence vote yesterday after Silvio Berlusconi backtracked on a pledge to bring down the five-month old government as his party showed signs of deserting him. Mr Letta was supported by 235 senators while 70 opposed him during a vote. Just hours before, former Premier Berlusconi announced that he would support the government, reversing an earlier pledge to oppose him in the vote. Mr Berlusconi said the decision was taken for the good of the country after “internal strife” within his party. He apparently backed down when it became clear that several of his senators would back the government.

Bossini group annual profit up 39 pct Firm has multi-floor Macau flagship store in Rua de São Domingos Michael Grimes

michael.grimes@macaubusinessdaily.com

ossini International Holdings Ltd – which has fashion retail stores at major locations in Macau including Rua de São Domingos just off Senado Square and The Venetian Macao – saw its group wide profit rise 39 percent yearon-year in financial year ending June 30. Profit attributable to the owners was HK$22 million (US$2.84 million), on revenue of approximately HK$2.52 billion – eight

percent down on 2012. The reduction in revenue was “owing mainly to the network consolidation process,” it said in a filing to the Hong Kong Stock Exchange. Gross margin improved one percentage point to 48 percent. The firm didn’t give a breakdown for Macau revenue. The total number of directly managed and of franchised Bossini stores – in Hong Kong, mainland China, Taiwan, Singapore

and ‘other countries’ – fell by nearly 23 percent during the period, to 1,017, from 1,314 a year earlier. In Macau, Bossini operates via a locally incorporated 100-percent owned business called Bright Star Fashion Ltd, according to its results filing. It currently pays US$75,000 (599,000 patacas) per month in rent for its Rua de São Domingos site according to a report last year. The six-

year lease signed in March 2012 with landlord, Yatin Development, allows for the rent to rise to US$90,000 per month in years three and four, and US$108,000 per month in years five and six. The landlord is a wholly owned subsidiary of Laws Property Holdings whose directors have substantial holdings in Bossini International. Bossini derived 65 percent of its revenue for fiscal year 2012-13 from Hong Kong, where it had 41 directly

managed stores during the reporting period. In mainland China, where it had 144 directly controlled stores and 156 franchised ones during the year, it generated 15 percent of group revenue. Taiwan and Singapore each produced 10 percent. ‘Other locations’ accounted for more than half of all stores, but since November 2011 have been run on an export franchise basis and do not appear in the consolidated revenue numbers.

Shutdown halts Obama’s Asia trip U.S. president had plans to visit Malaysia, Philippines next week

.S. President Barack Obama has cancelled stops in Malaysia and the Philippines as part of his planned trip to Asia next week because of the partial shutdown of the U.S. government stemming from a fiscal stalemate with congressional Republicans. Mr Obama called Prime Minister Najib Razak of Malaysia to say that “due to the government shutdown, he will not be able to go forward with his planned travel to Malaysia,” the White House said in a statement yesterday. Obama promised that he would travel to Malaysia later in his term and said he is sending Secretary of State John Kerry to head the U.S. delegation to a conference in Kuala Lumpur. Mr Kerry will be accompanied by Commerce Secretary Penny Pritzker and U.S. Trade Representative Michael Froman. Mr Obama also called President Benigno Aquino of the Philippines to advise that he won’t be able to make a planned stop in that country and committed to a trip there later in his term. Instead, Mr Kerry will travel to Manila, the White House said in a second statement yesterday. Mr Obama’s attempt to advance his foreign policy goal of shifting the U.S. strategic and economic focus to

a region that represents more than half of the global economy is the latest casualty of the standoff between Democrats and Republicans. He had earlier vowed not to allow Republicans to undermine his signature healthcare legislation as a condition to restart the U.S. government. “They demanded ransom,” Mr Obama said. Cancellation of part of the trip “is another consequence of the House Republicans forcing a shutdown of the government,” said Caitlin

Hayden, a spokeswoman for the National Security Council at the White House. “This completely avoidable shutdown is setting back our ability to promote U.S. exports and advance U.S. leadership in the largest emerging region in the world.”

Summit meetings The U.S. president planned to depart October 5 on an eight-day tour of Asia and was scheduled to make stops in four countries and

participate in three international summits, including the annual Asia-Pacific Economic Cooperation meeting in Bali, Indonesia. Among the administration’s main goals for the trip was making progress on the Trans-Pacific Partnership, an 11-nation free-trade zone linking an area with about US$26 trillion in annual economic output. Mr Obama’s scheduled events in Indonesia, Brunei, Malaysia and the Philippines have been planned for months and orchestrated to the hour. While the president’s Secret Service detail works regardless of a shutdown, the White House had to determine whether enough staff could be deployed ahead of the president’s arrival in each country to facilitate his movements during a furlough of non-essential employees. About three-quarters of the White House staff are subject to furloughs because of the shutdown, according to the Office of Management and Budget. Mr Obama staked his second-term foreign policy on enhancing the U.S. economic and military presence in the Pacific. The U.S. exported US$326.4 billion in goods and services to the Pacific Rim in 2010, according to U.S. Census Bureau data, up from US$254.6 billion in 2009. Bloomberg News