Macau Business Daily, October 9, 2013 by Business Daily

Golden harvest since National Day N

ew rules curbing ‘zero fare’ tours had little impact on the city’s retailers and caterers in the Golden Week holiday following China’s National Day, say local businesses. Jewellery outlets, souvenir shops and restaurants told Business Daily they achieved up to 10 percent year-on-year sales growth in a seven-day stint starting from October 1. In the casinos, festive gamblers set new daily records for gross revenue during the holidays. Macau welcomed 901,000 visitors in the period, 6.2

Year II

Number 388 Wednesday October 9, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Ferry traffic rebounds during Aug Page 3

percent more than a year earlier, according to Macau Government Tourist Office. Mainland Chinese visitor numbers grew even faster at 12.1 percent year-on-year expansion to more than 722,000. They accounted for 80 percent of the total. “There was a decline in the number of package tour visitors but it was offset by more travellers under the Individual Visit Scheme,” said Frederick Yip Wing Fat, president of the Macau Association of Retailers and Tourism Services.

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Record daily revenue for Golden Week Page 7

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Housing confidence hits three-year low Residents are more pessimistic about the housing market than at any time in the past three years even as home prices remain high, a survey says. A consumer confidence index survey by Macau University of Science and Technology shows the sub-index on housing dipped to 46 points out of 200 in the third quarter. A score below 100 points suggest a negative outlook for the coming three months. Page 2

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The Swiss watch Sands China, Galaxy

Brought to you by Zung Fu Motors (Macau) Limited

Hang Seng Index 23208

23164

23120

23076

23032

22988

October 8

HSI - Movers Name

%Day

BELLE INTERNATIO

5.02

CHINA RES LAND

4.11

CHINA RES POWER

3.68

CHINA OVERSEAS

3.29

HENGAN INTL

2.71

HENDERSON LAND D

-0.53

CHINA UNICOM HON

-0.60

NEW WORLD DEV

-0.69

SINO LAND CO

-0.71

LI & FUNG LTD

-1.79

Source: Bloomberg

Work permit rules keep IT experts away

Local firms rush for Hengqin foothold

Some Macau companies are exporting their information technology management to people outside the city. That’s reportedly because the local talent pool is small and work permits for non-residents are hard to get. Hong Kong-listed casino investor Melco Crown Entertainment Ltd tries to work around the restrictions by keeping 25 of its IT workers in Hong Kong, Roger Seshadri, Melco’s chief information officer, told Computerworld.

At least 37 Macau firms have already registered to operate in Hengqin Island’s special economic zone. It is the biggest cohort of firms from outside mainland China expressing an interest in Hengqin said the Zhuhai government. A total of 73 non-mainland businesses have so far signed up, “more than half coming from Macau”, the Zhuhai administration said earlier this week, according to state-owned agency China News Service.

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October 9, 2013

Macau

Housing confidence hits three-year low Residents fear timing wrong for home buying and think worse is to come Tony Lai

tony.lai@macaubusinessdaily.com

he city’s residents are more pessimistic about the housing market than at any time in the past three years even as home prices remain high, a survey says. The latest consumer confidence index survey compiled by Macau University of Science and Technology shows the sub-index on housing dipped to 46 points out of 200 in the third quarter. This score is down by 6.1 percent from the previous period. It is also the lowest level since the first quarter of 2010 when the score was only at 37.6. A score below 100 points suggest a negative outlook for the coming three months. Chan Lai Kow, the university’s leading researcher on the index,

said in a press conference yesterday: “As home prices are getting higher and higher, many people think the present is not a good time for home purchase.” The average home price in the city reached 67,414 patacas (US$8,426.8) per square metre in August, up by 9.2 percent year-onyear, data from the Financial Services Bureau show. Stanley Au Chong Kit, chairman of Delta Asia Financial Group, said earlier this week he expects home prices to plunge by as much as 30 percent early next year. Mr Chan highlighted similarities between the situation in Macau and in nearby Hong Kong, where a plunge in the number of home sales affected

the residents’ confidence. Only 534 homes were sold in Macau during August, less than half the 1,354 units changing hands a year ago. A new law regulating sales of unfinished flats came into effect in June and may have had some impact. To compile the survey, the university telephoned 1,022 residents and asked them for their outlook on the city’s economy, employment status, price level, quality of life, home purchase and share purchase. The overall consumer confidence index in Macau, which includes those six factors, was down by 1.4 points from the previous period, to 86.2 points in the July-September period. The index was the lowest in the

past 12 months, ever since it hit 84.9 points in the third quarter of last year. Home prices aside, Mr Chan also blamed the drop on the persistently high inflation. The sub-index on price levels dropped by 3.5 percent quarterto-quarter to 57.2 points in July to September, the survey shows. It is the second lowest sub-index after the home purchase index. Confidence in the local economy was the only sub-index that rose in the third quarter, up by 0.4 percent to 113.1 points. Residents were most confident about the employment market, even though the sub-index fell by 2.8 percent from the second quarter to 119.6 points.

Ferries rebound after desertions

erry traffic at the Macau Outer Harbour Ferry Terminal has hit a 16-month high in August, rebounding after a period in which several ferry operators went under. The number of ferries arriving and departing at the Outer Harbour reached 8,058 in August, up by 16 from a year earlier, the Statistics and Census Service announced yesterday. It is the highest figure since April 2012, three months before Hong Kong North West Express Ltd suspended its ferry services due to safety problems. Just two operators are now serving the Macau-Hong Kong route: Shun Tak – China Travel Ship Management Ltd and Sands China Ltd’s Cotai Ferry Co Ltd. North West was the second ferry operator to abandon operations between the territory and Hong Kong in under a year.

In S ep tem b er 2 0 1 1 , Ma ca o Dragon Co Ltd suspended its ferry operations between the Taipa temporary terminal and Hong Kong and filed for bankruptcy. Since then no company has applied for new services from the Taipa terminal. As a result in August the terminal had about one third of the Outer Harbour traffic, 2,886 arrivals and departures. The Marine and Water Bureau is overseeing the construction of the Taipa Ferry Terminal in Pac On, which began in the second quarter of 2010. In July the Commission of Audit slammed the government for the project’s budget, which has already hit 3.28 billion patacas (US$411 million). The original project, which involved a much smaller terminal, had a budget of 583 million patacas in 2003. V.Q.

Almost 12,200 ferries arrived in the territory in August

October 2013 April 19,9,2013

Macau Labour court to be established soon Macau will soon have a court specialised on dealing with labour disputes, as well as a court to handle cases involving family disputes and minors. The Executive Council will announce the creation of new courts within the Lower Court in a press conference today. The Lower Court handled 1,596 cases of labour disputes last year, with 618 cases pending by the end of last August, according to the Macau courts’ website. The Executive Council will also announce the issuing of special banknotes to mark the Year of the Horse, starting January 31.

Shops, restaurants enjoy holiday spirit The National Day holidays bring 6.2 percent more visitors to Macau despite the ban on free package tours Tony Lai

tony.lai@macaubusinessdaily.com

he ban on free package tours did little harm to Macau’s shops and restaurants during Golden Week this autumn, businessmen say. Souvenir sellers, jewellers and restaurateurs told Business Daily that sales had grown by up to 10 percent during the seven days of National Day holidays, which began on October 1. “There was a rise of about 30 percent in customer traffic last week compared with normal days, matching our expectations,” said Daniel Chan, a sales assistant in a sports gear shop in Rua do Campo. Macau had 901,000 visitors during the holidays this year, 6.2 percent more than last year, Macau Government Tourist Office data show. Some people had expected the number to fall. The number of visitors from the mainland grew by 12.1 percent to over 722,000. “There was a decline in the number of package tourists but it was offset by more travellers using the individual visa scheme,” said the president of the Macau Association of Retailers and Tourism Services, Frederick Yip Wing Fat. “This definitely dented retailers that focus only on package tourists, but their number is small,” Mr Yip told Business Daily. “Preliminary figures show the industry still recorded slight growth in business.” The mainland banned this month free or excessively cheap package tours, which are run by operators that recoup their costs by compelling members of the tour groups to shop at shops that pay commission or to go on costly excursions. The ban made package tours more expensive, and some people feared this could deter mainlanders from visiting.

Sales of branded clothes, jewellery and gold rose last week

Small and Medium Enterprises of Catering predicted on Saturday that restaurant industry turnover during the holidays would be 10 percent higher this year than last. Mr Fong said the prediction was about right. He said businesses in tourist spots did best because Golden Week visitors were usually paying their first visit to Macau. “They are more inclined to shop and spend in Cotai resorts and in the city centre, the most well-known places,” he said. “The tourists that have been here before, most from nearby Guangdong province, do not come during the holidays, when the room rates are so high.”

Strategy overhaul The president of the Macau Travel Industry Council, Andy Wu Keng Kuong, said last weekend that between 20 percent and 30 percent fewer package tours had come during the holidays this year than last year. The vice-president of the United Association of Food and Beverage Merchants of Macau, Fong Kin Fu, said: “Some restaurants that only target tour groups saw a plunge of over 70 percent in their turnover in the past few days.” Mr Fong told Business Daily that such restaurants should “overhaul their business strategies and try to attract more walk-in customers”. The Association of Macau

There was a decline in the number of package tourists but it was offset by more travellers using the individual visa scheme Frederick Yip, Macau Association of Retailers and Tourism Services

Macau Government Tourist Office data show hotels raised their room rates for the holidays. Some three-star hotels tripled their room rates to as much as 4,500 patacas (US$563) a night. The Chinese-language Macao Daily News reported last week some visitors chose to camp at Hac Sa Beach on Coloane rather than pay for expensive hotel rooms.

Strong craving Mr Yip of the retailing association said sales of products that mainlanders usually buy, such as infant formula, had risen. He said sales of pricey consumer products such as branded clothing had also risen. Jewellers had a banner week for sales. “We have seen more customers in our shops, in line with the rise in the number of visitors. The market is very lucrative,” said the president of the Macau Goldsmith’s Guild, Lei Chi Fong. Mr Lei told Business Daily that gold and jewellery sales during the holidays were nearly 10 percent higher this year than last. “But they certainly did not spend as much as in April and May, when the international gold price plunged. That was just a historic event,” he said. Holiday visitors had a strong craving for pastries and souvenir fo o d , a cco r d i n g to t h e M a c a u Pastry Speciality Association. The

KEY POINTS Fewer package tourists troop in Restaurant turnover rises one-tenth Jewellery sales climb almost 10 pct Souvenir food brings in more revenue association said holiday sales were between 8 percent and 10 percent higher this year than last. “Macau souvenir food is better known in the mainland now, as we have attended many mainland trade fairs,” said association president Lam Vai Hong. “So right now it is not difficult to see mainlanders spending over 1,000 patacas on pastries, particularly as we have more high-value products with better packaging designs.” Mr Lam told Business Daily that most customers spent 200 patacas to 300 patacas on souvenir food last week. The Ministry of Commerce said on Monday that holiday sales in mainland shops and restaurants amounted to 870 billion yuan this year, 13.6 percent more than last year.

October 9, 2013

Macau

Rules mean IT skills kept at arm’s length A lack of computer-savvy workers and difficulty in importing them irks businesses Vítor Quintã

vitorquinta@macaubusinessdaily.com

acau companies are outsourcing their information technology work because the city’s pool of IT talent is small and work permits for migrant IT workers are hard to get, authorities on the subject say. The latest Macau IT Skill Set Demand Survey, conducted last year, found that about 40 percent of employers that responded had difficulty in recruiting qualified IT workers. The most common problems were a lack of experienced applicants and the tightness of the labour market in general. Richard Whitfield, who worked for a decade in IT consulting, told Business Daily: “In general, where you have a lack of staff, the option is to outsource and keep operations offshore.” Mr Whitfield – now president of the East-West Institute for Advanced Studies – said this was not difficult. The executive director of the Macau New Technologies Incubator Centre, or Manetic, Gilbert Chan Tong Seng, gives the example of casino operators that were new to Macau. “They wanted to start their business as soon as possible, so they just copied their IT systems from the US or Australia,” Mr Chan told Business Daily. But he said the difficulties became greater as companies tried to localise their IT systems. Mr Whitfield said the longterm solution to the problem was to allow companies to hire more migrant IT workers while

ICBC Macau must expand client list Rating could be raised if bank attains ‘more balanced profile’, Moody’s says

ndustrial & Commercial Bank of China (Macau) Ltd is too reliant on a small number of customers for its loans and deposits, warns Moody’s Investors Service. ICBC Macau scores a Ba1 rating – just below speculative grade –, which is “judged to have speculative elements and a significant credit risk”. Moody’s is worried over the bank’s “high borrower concentration and reliance on lumpy corporate deposits for funding”. Most of ICBC Macau’s loans go

About 40 percent of Macau companies have trouble hiring IT staff, a survey has found

“creating incentives for transfer of knowledge” to Macau people. He said one option would be to set precise limits on how long migrant IT workers could stay in Macau. “The government doesn’t think about this enough. They only see numbers,” he said. Mr Whitfield describes the policy on imported labour as “very

to hotel operators, local subsidiaries of mainland Chinese companies and syndicated lending in Hong Kong, the note says. The bank’s loans have grown by 86 percent in the last three years, which “may herald potential future asset quality deterioration,” Moody’s wrote. A small number of depositors, including government agencies and subsidiaries of Chinese stateown ed fi r m s , a cco u n ted fo r a large proportion of deposits, the agency added. ICBC Macau’s rating could be raised if the bank attains “a more balanced profile” with greater contributions from its retail business, the note says. As it stands the bank’s sound numbers could be hit by an economic downturn and “a significant property market correction in Macau”, Moody’s warned. Still, the note affirms the rating of ICBC Macau’s deposits at A3, three notches above speculative grade, due to its “sound capitalisation, stable profitability”. The bank, Macau’s second largest, can also rely on “very strong support” from parent Industrial & Commercial Bank of China Ltd, one of China’s big-four state-owned banks, the rating agency added. V.Q.

unsophisticated”. Mr Chan believes big gaming companies have enough money to keep their IT staff needs well covered. The founder of the Macau University of Science and Technology’s IT faculty, Tang Ze Sheng, said last November that the expanding casino industry had poached many IT staff from small companies by offering higher pay. Casino operator Melco Crown Entertainment Ltd’s spokesman, Roger Seshadri, told Computerworld that his company had hired workers from 12 countries for its IT team of 150. Mr Chan said that, in contrast, several start-ups nurtured by Manetic that focused on IT “don’t even consider” trying to hire outside Macau because of red tape.

The government doesn’t think about this enough. They only see numbers Richard Whitfield, East-West Institute for Advanced Studies president

He said small Macau enterprises could afford to hire IT workers only from the mainland. Yet luring them across the border is getting trickier as more opportunities pop up in the mainland. Start-ups could try to bring in more work but might then turn out to have insufficient staff to do the work, Mr Chan said. Mr Seshadri said getting work

permits for migrant IT workers was a drag for big companies. What is more, vendors needed Macau companies to act as their partners, he said. Melco Crown Entertainment tries to get around the restrictions by keeping 25 of its IT workers in Hong Kong. “We bring them over by ferry for meetings and then they go back,” Mr Seshadri said.

No classes, no students Mr Whitfield said too few Macau people had IT skills. “There are very few people who realise this is a reasonable career path,” he said. Mr Chan said a number of “very enthusiastic young people” had launched IT start-ups at Manetic. But most “just want to go into the gaming industry or get a government job”, he said. Mr Whitfield said IT support staff were “hidden away” from the public eye, unlike croupiers. “People don’t see beyond the obvious. They don’t see there is an opportunity,” he said. Mr Chan said few courses on IT were available, particularly courses on more specialised IT skills. “We can always bring people from overseas to come over to teach, but will we have enough students?” he said. Mr Whitfield said there was a mismatch between courses that focused on conventional website programming and demand for social network expertise. He said the increasing use of IT by hotels and casinos meant Macau had an opportunity to develop “leadingedge” services and products that would create “high-quality” jobs. Mr Chan also recognises this opportunity. “Macau has the biggest gaming industry in the world. If there are IT solutions that work well here, why not sell them to other places?” he said.

October 9, 2013

Macau

Macau firms eager to try out Hengqin More than half of all outside companies registered on the island are Macau enterprises Tony Lai

tony.lai@macaubusinessdaily.com

t least 37 of the companies registered to operate on Hengqin Island are from Macau, more than from any other place, according to the Zhuhai city government. The state-run China News Service quoted the Zhuhai government as saying this week that Hengqin had attracted 73 companies from outside and that “more than half” were Macau enterprises. The Zhuhai government said in response to an inquiry by Melinda Chan Mei Yi, a member of the Chinese People’s Political Consultative Conference’s Guangdong provincial committee, that it would “give preference to Macau commercial projects” in trying to develop retailing on Hengqin. Ms Chan is also a member of Macau’s Legislative Assembly. In June Hengqin had 244 registered companies with combined

capital of over 20.9 billion yuan (27.3 billion patacas). The Zhuhai government said incentives for Macau small and medium enterprises on Hengqin would be announced “soon”. It reiterated that there was no bar to investment on the island, except for companies wishing to buy land, which had to have minimum registered capital of 100 million yuan. The director of Hengqin New Area’s Bureau of Communication and Cooperation, Liu Yang, speaking about small enterprises last month, said: “The best way for them to develop here is to let the big firms finish the facilities on the land first and then rent or buy those facilities”. The Zhuhai government said the China Insurance Regulatory Commission had expressed “strong support” for trying out motor insurance policies valid on both

Incentives for Macau enterprises on Hengqin will be announced ‘soon’, Zhuhai says

sides of the Macau-Hengqin border for vehicles that cross it frequently. The Guangdong provincial insurance regulator and the Monetary Authority of Macau had been working on such policies but no date had been set for the start of trials, the Zhuhai government said. The Guangdong provincial

government said in July that trials could start on Hengqin this year or early next year. The Guangdong government also said it was considering making customs controls at the new border crossing at Ilha Verde simpler, making travellers go through customs only once instead of twice.

October 9, 2013 April 19, 2013

Macau Philippine probe finds evidence of Okada bribery

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Philippine investigators say they have evidence that a company owned by Japanese gaming tycoon Kazuo Okada (pictured), a former director of Wynn Macau Ltd, had bribed officials over a US$2 billion (15.97 billion patacas) casino-resort project in Entertainment City in Manila, the Philippine Star reported. Philippine Justice Secretary Leila de Lima said documentary evidence indicated bribery had been committed. “We just could not file the case then because we need testimonial evidence to be able to come up with a strong bribery case,” she said. Ms De Lima said former Pagcor chairman Efraim Genuino has been implicated in the anomaly.

HOSPITALITY Bigger and bigger The number of travel agencies in Macau has risen since the financial crisis. The total fell by two in 2008 to 155, but subsequently rose every year to reach 197 last year. If travel agencies are grouped in classes according to their gross value added (GVA), at the lower end of the scale are those that add under 100,000 patacas (US$12,520) in value annually, or about 8,000 patacas per month. That is hardly enough to pay one salary. The number of such travel agencies fell last year to 21 from 28 the year before. At the higher end of the scale are those that add over 5 million patacas in value annually. The number of such travel agencies rose to 30 last year from 15 in 2007. The figures suggest the general trend is for travel agencies to get bigger. This may be due in part to rising prices, but rising prices alone cannot explain the extent of the shift.

Julius Baer says Sands, Galaxy top China picks Swiss bank building private investor base via acquisition to compete with larger lenders

wiss private lender Bank Julius Baer has listed Macau casino investors Sands China Ltd and Galaxy Entertainment Group Ltd as number one and number two respectively in its fourth quarter, top ten, list of Greater China equities. The attractiveness of Macau gaming is because it offers investment exposure to growth in the disposable income of Chinese consumers says Kelvin Wong, Julius Baer’s China and Hong Kong equity analyst.

Two other firms with both retail and merchant operations in Macau – the mainland state-owned lender Industrial & Commercial Bank of China Ltd and the pan-Asian insurer AIA Group Ltd – are also on the list in 6th place and 9th place respectively. Julius Baer Group Ltd, founded in 1890, said last month it is on track to absorb as much as 72 billion Swiss francs (635.26 billion patacas) of client assets after acquiring Bank of America Corp’s non-U.S. wealth units last year.

Julius Baer has been making acquisitions to compete with its larger compatriots UBS AG and Credit Suisse AG. Zurich-based Julius Baer reported 47 billion Swiss francs of funds under management from Merrill Lynch clients as of July 22. But the Merrill business was unprofitable in 2011 and may increase pressure on Julius Baer’s margin when it reports its results for the second half of 2013, the firm has said. M.G.

Iao Kun chip turnover down 10 percent Junket investor previously known as a AERL also lowers annual earnings guidance In 2007 almost 37 percent of travel agencies were small or tiny ones with annual value added of under 500,000 patacas each. Last year fewer than 25 percent were in this class. Conversely, in 2007 48 percent of travel agencies were big or huge ones with annual value added of over 1 million patacas each. Last year almost 58 percent were in this class. The biggest class – those that add over 5 million patacas in value annually – made up over 15 percent of travel agencies last year, having made up under 10 percent in 2007. J.I.D.

10.7 %

Proportion of travel agencies with GVA under MOP100,000 in 2012

asdaq-listed Macau junket room investor Iao Kun Group Holding Co Ltd – known until last week as Asia Entertainment & Resources Ltd – says its unaudited rolling chip turnover from VIP gambling operations fell 10 percent year-on-year in September. Roll was US$1.12 billion (8.9 billion patacas) for the month compared to US$1.25 billion in September 2012. September chip turnover was “negatively impacted by an abnormally high win rate” of 4.24 percent said the firm, versus its claimed theoretical win rate of three percent. It added Typhoon Usagi on September 22 – that led to suspension and disruption of flights and ferries bringing tourists to the city – also had some negative effects on the monthly results. Iao Kun added it was lowering its rolling chip turnover guidance for the whole of financial year 2013 to a range of US$16.5 billion to US$18 billion from its previous guidance of US$19 billion. The company is also

Iao Kun gets profits from VIP room at Casino L’Arc

lowering its 2013 non-GAAP income guidance to US$46 million to US$52 million from its prior range of US$60 million to US$75 million. Iao Kun Group – headed by

veteran Macau junket operator Lam Man Pou – is entitled to the profits of VIP gaming promoters in five of the city’s VIP rooms. M.G.

October 2013 April 19,9,2013

Macau

Record daily revenue for Golden Week Average of MOP1.8 bln every day for first six days of October, say analysts Michael Grimes

michael.grimes@macaubusinessdaily.com

ross gaming revenue reached a new daily record of 1.8 billion patacas (US$225.4 million) for each of the first six days of October – a period that includes the Golden Week holiday in China – say analysts, quoting unofficial industry returns. If that daily rate were to be extended over the whole month it would give yearon-year growth in the high 30s of percent plus, they say. “Golden Week ADR [average daily revenue] of 1.8 billion patacas is a new weekly record. Weekly ADR was up 35 percent from last year’s record 1.329 billion patacas and was 88 percent above YTD [year-todate] ADR,” said Cameron McKnight, a senior analyst with Wells Fargo, in a note. But he and two other analysts opt for a more conservative expansion rate for the whole of October, of between 17 percent and 23 percent.

Kenneth Fong of J.P. Morgan in Hong Kong wrote: “If we assume average daily revenue for this week to be at 800 million patacas, which is slower due to normal seasonality post Golden Week – and the rest of the

month to be 960 million patacas (the same as the average weekly run rate for September) – then October should end at around 33.7 billion patacas, or 22 percent year-on-year growth.” David Bain of independent

brokerage Sterne Agee added: “Calendar year 2013 versus calendar year 2013 benefits from an eight percent increase in room capacity, the relaxation of certain visa policies (migrant worker applications),

increased capacity at the Gongbei Border, Guangzhou Zhuhai intercity mass rapid transit, no leadership transition issues, a more stable Mainland China macro-economic backdrop, and pent-up demand from Typhoon Usagi.” Stanley Au Chong Kit, chairman of Macau’s Delta Asia Financial Group, reportedly told the Chineselanguage media in Macau this week that a meeting of China’s senior leadership next month could result in some downward correction in the growth of the city’s gaming revenue. Mr Au’s Delta Asia Bank Ltd is still subject to sanctions by the United States’ federal government – first imposed in 2007 – that effectively prevents the lender from engaging in international business. The action came after allegations that the institution laundered money on behalf of North Korea.

October 9, 2013 April 19, 2013

Greater China

HK takeover targets overpriced: ANZ Hong Kong an attractive market but ‘too expensive’, chief executive says

ustralia & New Zealand Banking Group Ltd chief executive Michael Smith said takeover targets in Hong Kong are expensive, as the lender considers plans to expand its Asia-Pacific businesses. “I have always been interested in assets in this part of the world and Hong Kong obviously is an attractive market, but I feel they are overpriced,” Mr Smith said in an interview with Bloomberg Television yesterday. “I look at Hong Kong as very much a stepping stone into China. Therefore, anything you look for has to have the strategic next step in terms of your expansion into the Chinese mainland.” Mr Smith, who heads Australia’s most Asia-focused lender, is trying to double the contribution from his bank’s businesses outside Australia and New Zealand to as much as 30 percent of profit by 2017. He said the bank, which set up a locally incorporated unit in China in 2011 and has expanded its branches in Indonesia, is hoping to get its banking licence in Thailand next year. Speaking in Hong Kong, Mr Smith declined to say whether ANZ is bidding for Wing Hang Bank Ltd and Chong Hing Bank Ltd, two of the city’s four family-owned lenders. His bank was among firms interested in acquiring Wing Hang, Reuters and the Wall Street Journal said last month. The Melbournebased lender was among five bidders for Chong Hing, Oriental Daily reported on September 16. “The strategic value of Hong Kong is access to renminbi,” Mr Smith said, referring to China’s currency. “I don’t care if it’s offshore, international or if

The strategic value of Hong Kong is access to renminbi Michael Smith, ANZ Bank’s chief executive

it’s fully convertible. You’ve got to build your base in renminbi capability.”

‘Ridiculous’ valuations Wing Hang shares trade for 1.7 times the value of the lender’s assets after a 43 percent rally this year, according to data compiled by Bloomberg. The lender may fetch as much as three times book, according to Mizuho Financial Group Inc and BNP Paribas SA estimates. Chong Hing is valued at 2 times book value after its shares doubled this year. “Two times book is ridiculous at these times,” said Mr Smith, who

became ANZ’s CEO in October 2007. “I am always looking at various opportunities but right now I think it is all too expensive.” Industrial and Commercial Bank of China Ltd, the world’s largest by market value, is valued at 1.3 times book, data compiled by Bloomberg show. London-based HSBC Holdings Plc, which got 35 percent of its second-quarter revenue in the AsiaPacific region, trades for 1.2 times. Wing Hang has 15 mainland outlets, mostly located in the southern part of China including Shenzhen and Guangzhou as its business focuses on the Pearl River Delta, according

to the lender’s website. Chong Hing, the smallest family-run bank in Hong Kong, has three outlets on the mainland located in Guangzhou, Shanghai and Shantou, respectively. Both banks have branches in Macau. Mr Smith’s comments reinforce “that if he’s going to make an acquisition, he’s going to be disciplined,” Paul Xiradis, CEO of Sydney-based Ausbil Dexia Ltd, which manages about US$9 billion in assets including ANZ shares. “For just about any bank being sold in Asia, ANZ’s name is beside it but they haven’t bought any in recent times.” Bloomberg News

Services firms see weaker outlook Sector accounts for about 45 pct of GDP and is the biggest employer in China Jonathan Standing

usiness confidence in China’s services sector slipped in September and growth slowed, a private survey showed yesterday, another signal the world’s No.2 economy is finding it difficult to regain solid momentum after a protracted slowdown. The HSBC Holdings Plc services PMI for September, compiled by Markit Economics, dipped to 52.4 from August’s 52.8, although it was still well above the 50 line that separates expansion from contraction. A rise in new business offset a slowdown in new orders, the survey said. The survey showed business expectations weakened sharply, with respondents citing muted demand, although conditions were still expected to improve in the next year. The expectations sub-index stood at 58.7 in September from August’s 62.0. “The degree of confidence eased from August’s five-month high and was the second-weakest in the near eight-year series history,” HSBC said in a statement.

The government has an economic growth target of 7.5 percent for 2013, which would be the weakest rate in more than 20 years, and has repeatedly said it would accept slower growth as it tries to restructure the economy to be driven by consumer demand, rather than investment, credit and exports. As part of the reforms, businesses may find funding harder to come by as the government looks to tighten credit and curb state spending, adding to the likelihood of slower growth. “By no means is the economy out of the woods because growth is being driven by the old engines, that is the local government and property,” said Dong Tao, economist at Credit Suisse at Hong Kong. “Both sectors have their own specific problems and in the long term neither are on a sustainable track. Over the long term China needs to find new growth engines, China must not continuously rely on local investment and the property market.” GDP grew at an annual rate of 7.6 percent in the first half of 2013,

slower than 7.7 percent last year and 9.3 percent in 2011. GDP data for the third quarter is due on October 18.

Important pillar On Monday, President Xi Jinping said a “7 percent annual growth rate will suffice” to meet China’s medium-term goal of doubling per capita income by 2020. “The slowdown of the Chinese economy is an intended result of our own regulatory initiatives,” Mr Xi s a i d a t a n A s i a - P a c i f i c Economic Cooperation (APEC) forum in Indonesia, adding China’s fundamentals remained good. The services industry, which has so far weathered the global slowdown much better than the factory sector, is an increasingly important pillar in the economy as it accounts for about 45 percent of gross domestic product and is the biggest employer in China. Employment in services increased only marginally in September, the PMI found, with the sub-index at 50.6 from August’s 50.5

China plans to open up the largely sheltered sector to foreign competition and to test financial reforms in a new free trade zone in Shanghai. The private PMI reading is in contrast to China’s official services PMI, released last week, which showed the sector expanded at the fastest pace in six months in September as demand grew. The official PMI rose to 55.4 in September from August’s 53.9. Reuters

KEY POINTS HSBC private PMI dips to 52.4 Confidence eased from Aug’s high Second-weakest in near 8-year history

October 2013 April 19,9,2013

Greater China

China Resources may sell meat unit Supermarket operator readies funds to bid for ParknShop Denny Thomas and Stephen Aldred

hina Resources Enterprise Ltd is set to launch a strategic review of its Hong Kong meat distribution unit, a person familiar with the matter said, as it readies funds to bid for tycoon Li Ka Shing’s ParknShop supermarket business. Mr Li’s Hutchison Whampoa Ltd has put Hong Kong’s dominant supermarket business up for sale, asking for US$3 billion to US$4 billion. The operator of China’s second-largest supermarket chain has said it is interested in ParknShop

KEY POINTS Thai billionaire teams up with Carlyle for ParknShop bid Australia’s Woolworths also bidding for ParknShop CRE took Ng Fung Hong private in 2001 for US$662 mln

and discussed selling non-core units to fund future acquisitions without mentioning specific assets. State-backed CRE has long been seen as one of the frontrunners in the auction and a successful bid would give it control of more than half of Hong Kong’s US$6.6 billion supermarket industry as well as a brand name considered more trustworthy than mainland China brands. The list of suitors for ParknShop include Thailand’s CP Group, controlled by billionaire Dhanin Chearavanont, which has teamed up with Carlyle Group, people familiar with the process have told Reuters. Australia’s biggest supermarket operator Woolworths Ltd and Japan’s Aeon Co Ltd have also expressed interest, sources have previously said. There is, however, still a significant gap between the seller’s expectations and what suitors are willing to offer, people familiar with the matter said. The CP GroupCarlyle Group consortium has made the highest offer, one person said. The people declined to be identified as the discussions are confidential. CRE has yet to decide whether to sell beef supplier Ng Fung Hong, one

ParknShop has 11 outlets in Macau

person said, which it took private in 2000 valuing the company at HK$5.13 billion (US$662 million). Bloomberg first reported CRE’s review of its meat unit on Monday. CRE, CP Group and Carlyle declined to comment. The Chinese supermarket chain

has been expanding in food and other retail operations. In beer, CRE has a joint venture with SABMiller Plc and in beverages it has tied up with Japan’s Kirin Holdings Ltd. It also recently formed a joint venture with British retailer Tesco Plc. Reuters

Yuan forwards most bullish in a year Beijing vows to rebalance economy and support 7.5 pct growth rate

uan forwards signal that traders are the most bullish on the currency in a year as China’s economy shows signs of improvement and a U.S. government shutdown weighs on the dollar. Contracts that fix the currency for a month were at a 0.4 percent discount to the spot rate in Shanghai yesterday, after reaching a one-year low of 0.3 percent on Friday. The offshore forwards, which reflect both appreciation prospects and interest rates, rose 2.2 percent from a low on June 24 to 6.1430 per dollar yesterday. The outlook for gains helped drive the average yield on Dim Sum bonds lower for six straight weeks, the longest run of declines since March, a Bank of China Ltd index shows. “People were afraid the Chinese economy was terrible but now that it has bottomed out, confidence has returned,” said Frances Cheung, Hong Kong-based senior strategist at Credit Agricole CIB. “The yuan is going to be stable and maybe gain a little, which means there is a smaller need for investors to hedge risks because, if you look at other local-currency bonds, hedging costs are rather high.”

China’s offshore government bonds, known as Dim Sum notes, have risen 1.7 percent in the past three months, compared with a 5.2 percent decline for similar Indian securities and a 1.6 percent slide for Indonesian notes, HSBC Holdings Plc indexes show. Asian currencies have fallen since May as the Federal Reserve said it may taper stimulus that has buoyed emerging-market assets. The yuan’s one-month implied volatility, a gauge of expected exchange rate swings used to price options, is down 48 basis points this year at 1.24 percent. The rate on Indonesia’s rupiah is 15.7 percent and that for India’s rupee 14.7 percent. The Chinese currency is poised to end the year 0.3 percent stronger at 6.1, according to the median estimate in a Bloomberg survey of analysts. “Investors are not betting the yuan will gain a lot, but as long as it gradually appreciates, it’s already attractive,” said Credit Agricole’s Mr Cheung. “A lot of liquidity has also accumulated; the funds need to go somewhere, so there is some interest in buying Dim Sum bonds.” Bloomberg News

Congratulations

to the representatives of the fifth Legislative Assembly of Macao SAR Directly elected legislators: Chan Meng Kam, Mak Soi Kun, Ho Ion Sang, Si Ka Lon, José Maria Pereira Coutinho, Leong On Kei, Kwan Tsui Hang, Ng Kuok Cheong, Au Kam San, Chan Melinda Mei Yi, Zheng Anting, Wong Kit Cheng, Song Pek Kei, Leong Veng Chai. Indirectly elected legislators: Ho Iat Seng, Kou Hoi In, Cheang Chi Keong, Chui Sai Peng, Lam Heong Sang, Lei Cheng I, Chui Sai Cheong, Leonel Alberto Alves, Chan Iek Lap, Chan Hong, Cheung Lup Kwan Vitor, Chan Chak Mo. Appointment members: Tsui Wai Kwan, Tong Io Cheng, Ma Chi Seng, Vong Hin Fai, Fong Chi Keong, Lau Veng Seng, Sio Chi Wai. (Random list order)

10 10

October 9, 2013 April 19, 2013

Greater China

Taiwan dollar rally seen ending Central bank expected to intervene to ‘maintain an orderly market’ Yumi Teso and Justina Lee

rading patterns suggest the rally that drove the Taiwan dollar to an eight-month high will end on speculation that central bank governor Perng Fainan will step up intervention to support exporters. The currency’s 0.7 percent advance since the Federal Reserve unexpectedly maintained its bond-purchase programme on September 18 pushed the 14-day relative strength index to 29 on Friday, below the 30 threshold that typically signals a reversal, according to data compiled by Bloomberg. The Taiwan dollar’s commodity channel index stayed below minus 100 in the last four trading days, which some technical analysts interpret as meaning the U.S. currency was oversold. Taiwan’s dollar strengthened against the greenback in each of the last six weeks, the longest winning streak in a year, as overseas investors pumped US$5.4 billion into Taiwanese stocks. September’s net purchases of US$4.2 billion were the highest in four years, according to exchange data. Policymakers will “step in to maintain an orderly market” should irregular factors such as large short-term capital flows lead to “excess volatility,” the central bank said in a September 26 statement. “From a technical point of view, it’s reasonable to see the Taiwan dollar’s appreciation ending,” Koji Fukaya, chief executive and currency strategist at FPG Securities Co in Tokyo, said. “The pace of gains was quite fast and

Taiwan’s dollar strengthened in each of the last six weeks

it’s possible to see intensifying intervention. It may not reverse the trend, but at least it will see some correction from the recent sharp strength.”

‘Minimise volatility’ The island’s dollar declined on Monday for the first time in a week. It lost 0.1 percent to NT$29.536 versus the greenback, after a 0.5 percent gain last week, Taipei Forex Inc prices show. The currency dropped 0.4 percent in the final 19 minutes of trading on suspected intervention by the central bank. The monetary authority has sold

the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified. Taiwan’s central bank “wants to minimise volatility,” Eric Hsing, a Taipei-based fixed-income trader at First Securities Inc, said. “If the Taiwan dollar appreciates much more than the Korean won, the central bank will act more aggressively.” The Taiwan dollar will weaken 1.5 percent to NT$30 against the U.S. currency by the end of December, according to the median estimate of analysts surveyed by Bloomberg. The currency’s one-

month implied volatility, a measure of expected swings in the exchange rate used to price options, dropped 202 basis points, or 2.02 percentage points, to 4.04 percent from this year’s peak of 6.06 percent reached on June 26. “The authorities will intervene as of course they want to avoid any damage to exports from the rising currency,” Tsutomu Soma, the manager of the fixed-income business unit at Rakuten Securities Inc in Tokyo, said. “From a technical perspective, the currency is trading at a very crucial stage” and appreciation may halt, he said. Bloomberg News

Taiwan insurers have US$10 bln for property As regulator eased rules on real estate investments abroad

aiwan insurers have the financial capacity to invest at least US$10 billion in overseas properties after the island’s government relaxed rules in April on real estate investments abroad, according to an industry group. Insurers including Cathay Life Insurance Co have already submitted plans to buy more than 10 overseas buildings for approval by the island’s financial regulator, said Paul Hsu, chairman of the Life Insurance Association of the Republic of China. Most of those deals include office buildings in major Chinese cities such as Shanghai and Beijing, he said. Taiwan allowed insurers seeking stable returns to invest in real estate overseas after limiting them from buying locally to curb commercial property prices. Fubon Life Insurance Co, a unit of the island’s secondbiggest financial company,

said last week it plans to buy as much as US$3 billion of overseas properties over the next four to five years. “For the whole industry, the number can definitely be over US$10 billion,” Mr Hsu, a former lawmaker with the ruling party Kuomintang, said in an interview. “We’re now trying to build a base in some big Chinese cities before moving into the second-tier ones there. The former provide good rental and stability, while the latter would also give us potential capital appreciation.” Insurers accounted for about 40 percent of all commercial real estate transactions in Taiwan before the regulator in November banned them from buying locally, according to CBRE Group Inc. An index compiled by broker DTZ Holdings Plc shows office prices in Taiwan rose to the highest

Taiwan insurers eye major Chinese cities

since at least 2005 at the end of 2012. The Financial Supervisory Commission recommended six cities in April for insurers to buy properties. These include New York, London, Toronto, Frankfurt, Shanghai

and Ho Chi Minh City. Cities in Europe and the U.S. will be “difficult” for Taiwan’s insurers because of regulatory restrictions and high capital gain taxes, Mr Hsu said. Bloomberg News/Reuters

Taiwan, China regulators to meet Taiwan’s top financial regulator and the chief of China’s Insurance Regulatory Commission are to meet next Thursday in Taipei to discuss topics such as widening access to each other’s insurance markets, two sources with close knowledge of the matter told Reuters yesterday. This would be the first such meeting of insurance regulators across the Taiwan Strait. The meeting would include discussion on increasing the size of investment stakes that investors would be allowed to buy in each others’ markets. Financial ties between Taiwan and China have deepened since a yuan clearing agreement was signed last year.

11 11

October 2013 April 19,9,2013

Asia If any rating agency is looking for candidates to downgrade there are half a dozen other countries

KEY POINTS Chidambaram vows not to let deficit cross ‘red line’ India must tackle higher fuel and food subsidy bill ‘soon’

Palaniappan Chidambaram, India’s finance minister

‘No case’ for a sovereign downgrade of India

India to stick with austerity despite looming election Economic downturn no reason to think that Congress party would be ousted, Chidambaram says John Chalmers and Manoj Kumar

he Indian government will have to rein in spending and cut subsidies to meet its fiscal deficit target, the country’s finance minister said, underlining that an austerity drive will not be blown off course by an election due next year. P. Chidambaram told Reuters ahead of a trip to the United States – where one stop will be to woo investors on the West Coast – that he will not allow the deficit to cross a “red line” set at 4.8 percent of gross domestic product this fiscal year. “We’ve issued austerity instructions, it will bring us some savings,” he said. The finance minister’s vow to contain the deficit means there will be little room ahead of a tough election to spur growth, which has slumped from a double-digit pace

in early 2010 to below 5.0 percent, its lowest in a decade. The government recently introduced a plan to distribute cheap food for two-thirds of the population, a step widely seen as wooing voters ahead of the election. But – without giving details – Mr Chidambaram pointed to food subsidies as one area where spending would need to be addressed in coming months. Along with pallid growth, Asia’s third-largest economy is facing stubborn inflation, companies are struggling and bank asset quality is worsening. But Mr Chidambaram shrugged off the risk of a cut in India’s sovereign credit rating, which is one precarious notch above junk status. “There is no case for a downgrade,” he said. “If any rating

agency is looking for candidates to downgrade there are half a dozen other countries.”

Election hopes The Indian rupee was one of the hardest-hit emergingmarket currencies recently amid alarm in financial markets about an imminent “tapering” of the U.S. Federal Reserve’s monetary stimulus, falling by about 20 percent at one point from May. It has recovered somewhat recently, and Mr Chidambaram said the central bank may now be able to consider reversing some of the liquidity tightening steps it took to shore the currency up. “If the volatility of the rupee has been contained and speculation has

come to an end, the central bank may want to unwind some of the measures it took earlier, he said. Mr Chidambaram said there would be some impact when the Fed’s tapering – which was put on hold – does eventually come, but it was now mostly factored into the market and he was confident that speculators had been put in their place. “We think we have sent a message to everyone – don’t speculate on the rupee,” he said. Mr Chidambaram said the economic downturn was no reason to think that his Congress party, which has been weakened by years of fractious coalition rule and a string of corruption scandals, would be ousted in a national election that must be held by May. “Don’t write us off so easily,” he said, adding that the next leader of the Congress party would be Rahul Gandhi, scion of the NehruGandhi dynasty that has ruled India for most of its 66 years since independence. The weak coalition government of Prime Minister Manmohan Singh has struggled to push through reforms that might correct underlying economic imbalances, such as loosening strict labour laws and implementing a goods and services tax. Mr Chidambaram said a jump in spending on fuel and food subsidies must be tackled sooner rather than later as part of a series of steps to stabilise the economy. India imports nearly 80 percent of its oil needs and the rupee’s drop has made government fuel subsidies more costly. “On the government side, sooner [rather] than later we will have to address the issue of higher subsidies than budgeted, on both fuel and food,” he said. Reuters

Regulator eases cash crunch at banks I

ndia’s central bank rolled back further an emergency step taken to shore up its currency as the rupee’s continued stabilisation allowed it to relax liquidity for the nation’s banks. Governor Raghuram Rajan lowered the marginal standing facility rate to 9 percent from 9.5 percent, the Reserve Bank of India said in a statement, the second cut in less than a month. The benchmark for monetary policy, the repurchase rate, was left at 7.5 percent. Mr Rajan raised the repo rate last month to fight elevated inflation. The rupee has climbed about 11 percent versus the dollar since reaching a record low in August, among the world’s best performers in that time, boosted by Mr Rajan’s steps to attract inflows of the U.S. currency. The governor, a former International Monetary Fund chief

economist, took over at the RBI in September and has said he plans a measured rollback of liquidity curbs imposed on the banking system in July. “The timing is good; the rupee’s trading strong so they’ve got a very good window of opportunity to unwind some of these quantitative tightening measures,” said Mirza Baig, Singapore-based head of foreign-exchange and interest-rate strategy at BNP Paribas SA. Mr Rajan is “saying the right things and he’s being more orthodox in terms of how he’s running monetary policy,” he said. The central bank will probably increase the repurchase rate at the next policy meeting, Mr Baig said. Cutting the marginal standing facility rate will help enforce focus on the repo rate as the benchmark, he said. The impact of yesterday’s decision on the Indian rupee is

“ambiguous,” Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp, wrote in a research note. “The easier monetary conditions should be well received by equities, potentially encouraging foreign

inflows to the Sensex but it also reduces the yield support for the rupee as a further unwinding of the emergency measures” used when the currency was reaching record lows, he said. Bloomberg News

12 12

October 9, 2013 April 19, 2013

Asia Blumont names new chairman Blumont Group Ltd named the former chief executive of SouthGobi Resources Ltd as chairman, spurring a rebound in Blumont stock in Singapore trading after it plunged by a record on Tuesday. Alexander Molyneux will buy 135 million Blumont shares and become chairman after the transaction is completed, the company said in a statement. Mr Molyneux was ousted as CEO of coal miner SouthGobi in September 2012. Prior to that he was managing director, head of metals and mining investment banking, Asia Pacific, for Citigroup Inc. Blumont jumped as much as 131 percent yesterday, reversing two days of losses that shaved S$4.9 billion (US$3.9 billion) from its market value as restrictions were placed on the stock. The appointment may assist Blumont’s expansion in minerals and energy after the company said this month it has held talks with 20 potential takeover targets or partners since December. Blumont traded 58 percent higher at 20.5 Singapore cents yesterday.

Japan asks WTO to intervene on S.Korean fish ban Japan has asked the World Trade Organisation to step into a row over Seoul’s import ban on fish caught in waters near the crippled Fukushima nuclear plant, officials said yesterday. Tokyo wants the WTO’s Sanitary and Phytosanitary Committee, which deals with food safety, to discuss South Korean rules restricting the import of marine produce from a large area of northern Japan, a fisheries agency official told AFP. South Korea last month expanded a ban on Japanese fisheries products over fears of contamination from broken reactors at Fukushima, after the plant operator admitted highly toxic water may have made its way into the Pacific Ocean. The ban takes in products from Fukushima and seven other prefectures, making up the northern half of the main island of Honshu.

Sy seeks to expand Manila Bay Philippine billionaire Henry Sy plans to spend 54.5 billion pesos (US$1.26 billion) to reclaim land in Manila Bay as large plots for development become scarce in the capital. SM Land Inc, which Mr Sy is shaping to become the nation’s largest builder, has offered to reclaim 300 hectares (741 acres) from the sea, parent SM Investments Corp said. SM Investments is Mr Sy’s publicly listed holding company that owns banks, malls and grocery stores. “You can never escape Manila,” SM Investments vice chairwoman Teresita Sy-Coson said in an interview with Bloomberg. “You have to go where the consumers are.” “Metro Manila will always be full of opportunities,” said Richard Laneda, an analyst at Manila-based COL Financial Group Inc. “It’s got a good location and a large market. Portions can get saturated, but the region will never run out of demand.” SM Land is pursuing the reclamation project because Manila doesn’t have a supply of single properties of that scale, Ms Sy-Coson said. The company’s share of the reclaimed site will not exceed 49 percent, according to SM Land and government filings. The rest will be owned by the city of Pasay, where the area is being reclaimed.

Japan’s current account surplus shrinks Fall is reversal of market expectations Stanley White

apan’s current account surplus tumbled in August due to declining overseas profits and chronic trade deficits, raising questions about the nation’s ability to rely on its status as a net creditor to ease the pain of its massive public debt pile. The 63.7 percent annual decline in the current account surplus was the biggest in almost two years and confounded the median estimate for a 23.4 percent annual increase as the income surplus, which includes earnings from overseas subsidies, fell for the first time in nine months. The income surplus decline could prove temporary as overseas economies remain stable. Trade deficits will be more persistent, though, as energy imports soar to make up for closed nuclear power plants, which will in turn weigh on the current account. “We have to worry about Japan’s debt dynamics in the long term,” said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. “Japan was a high surplus country, but things are changing. Other countries have also transitioned from maintaining a high surplus via exports only to watch their surplus shrink.” The current account surplus stood at 161.5 billion yen (US$1.66 billion), versus the median forecast for a 549.0 billion yen surplus, finance ministry data showed yesterday. The income surplus fell 10.0 percent in August from a year

Japan’s surplus fell to 161.5 billion yen

ago to 1.3 trillion yen. Japan’s public debt has just topped 1,000 trillion yen, or about US$10 trillion. At more than twice Japan’s GDP, it is the heaviest debt burden among industrialised nations. Until a few years ago, some economists argued that Japan’s debt burden is not much of a problem because its hefty current account surplus means it is a net creditor to the world. However, the trade balance, which was already under pressure from a shift in production overseas, fell into deficit after the March 2011 earthquake and nuclear disaster as energy companies replaced nuclear energy with imported fossil fuels. Since sweeping to power in December with a mandate to jumpstart the world’s third-biggest economy, Prime Minister Shinzo

Abe has launched an aggressive policy mix of government stimulus and monetary easing dubbed ‘Abenomics’ that has driven the yen lower and buoyed the stock market. Still, while a weakening yen has boosted the competitiveness of Japanese exporters and increased the value of overseas revenue in yen terms, it has also pushed up import costs. In an effort to address the mounting debt problem, Mr Abe this month agreed to raise the 5 percent sales tax to 8 percent in April to pay for rising welfare costs. However, there are worries this will not make a sufficient dent in the debt burden because the government is also compiling stimulus spending worth (US$50 billion) that will wipe out much of the gain in tax revenue. Reuters

Singapore seen keeping currency gains T he Monetary Authority of Singapore will probably refrain from easing monetary policy this month as taming inflation takes priority over reviving economic growth. The central bank, which uses the exchange rate rather than borrowing costs as its main policy tool, will keep the current stance of a “modest and gradual” appreciation in the Singapore dollar and refrain from adjusting the trading band on October 14, according to 19 of 21 analysts surveyed by Bloomberg News. The economy probably contracted last quarter, another survey showed. Singapore is grappling with persistent price risks even as Asia’s growth outlook falters with the World Bank and Asian Development Bank cutting economic forecasts this month. The island has resisted

any monetary easing since October 2011 as a tight labour market and persistent demand for homes spurs inflation risks. “Core inflation is still very much on the radar and looks likely to trend higher,” said Alvin Liew, a Singapore-based economist at United Overseas Bank Ltd, referring to price gains excluding private transport and accommodation costs. “Growth isn’t fantastic, but it is still within the expected range of the government’s forecast.” Gross domestic product fell an annualised 4.1 percent in the three months ended September 30 from the previous quarter, according to the median of 12 estimates in a Bloomberg News survey before a report due the same day as the monetary policy statement. The US$275 billion economy

expanded 3.8 percent from a year earlier, according to the median of 15 estimates. Prime Minister Lee Hsien Loong forecasts economic growth of 2.5 percent to 3.5 percent this year. The Singapore dollar has risen 2.3 percent in the past three months against the U.S. dollar, the biggest gainer among Southeast Asia’s major economies. The increase compares with a more-than-13 percent drop in the rupiah and a 0.2 percent gain in the Thai baht. “Growth momentum isn’t picking up as much as the central bank expected in the last meeting, whereas inflation is nowhere to be seen,” said Andy Ji, a Singaporebased currency strategist at CBA. “Why not just give growth a little bit of a catalyst?” 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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13 13

October 2013 April 19,9,2013

Asia

James Packer signs up tennis ace Li Na In bid to lure big-spending Chinese tourists

Tennis star Li Na

asino and resort operator Crown Ltd has extended its sponsorship with Chinese tennis star Li Na for a further two years in a multimillion-dollar deal to promote the company to its Asian customers, Australian media reported yesterday. Crown chairman James Packer said the deal was a way of strengthening the company’s brand in Asia and was its most important sports sponsorship. “The Henry report into the Asian century commissioned by previous prime minister Gillard actually showcased Crown as being one of the best Australian companies in terms of engaging with Asia already,” the Financial Review newspaper quoted Mr Packer as saying in Beijing. “But for us to have an association with the most popular athlete in the biggest country in the world is an honour.” The deal comes as Mr Packer prepares to open a new US$1 billion casino in Manila next year and the US$2.4 billion Studio City property in Macau in 2015, both trough Melco Crown Entertainment Ltd. Mr Packer is co-chairman of

the Macau casino operator. In July, Crown moved a step closer to developing a casino in Sydney, beating a rival proposal from Echo Entertainment Group Ltd. Crown’s plan for a hotel and casino complex west of the city’s main business district is proceeding to the third stage of a government approval process, New South Wales state premier Barry O’Farrell said at the time. Crown’s pinnacle US$1.5 billion Barangaroo casino resort is due to be completed by 2019. Beyond that, Crown is expected to announce plans to build a US$350 million 400-room luxury hotel and casino in Sri Lanka to be opened in 2017. The company has sponsored Li Na since September 2011, the same year the Chinese star won her first grand slam tournament, the French Open. She has since been a losing finalist at the Australian Open, which she described as her “favourite” grand slam. Li Na is one of the highest paid female athletes in the world, with at least 14 endorsement deals that pay her an estimated US$15 million annually. The Australian casino operator has been given a ‘BBB’ assessment by Fitch Ratings on its long term issuer default risk and its senior unsecured debt. The outlook on the issuer default rating is ‘stable’. The credit assessor cites Crown’s concentration on Australian gaming as offering some risk, but added: “Future dividend flows from Melco Crown will bring some diversification.” T.A.

14 14

October 9, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 58.0

88.1

27.9

57.9

87.6

27.7

87.1

27.5

86.6

27.3

57.8 57.7 57.6 Max 58.00

average 57.643

Min 57.50

Last 57.55

57.5

Max 88.10

average 87.072

Min 86.15

Last 87.60

50.8

50.5

86.1

Max 27.85

average 27.525

Min 27.10

Last 27.35

22.40

28.80

22.25

28.72 28.64

22.10

28.56

50.2

Max 50.75

average 50.504

Min 49.95

Last 50.70

49.9

21.95

Max 22.25

average 22.037

Commodities PRICE

DAY %

YTD %

(H) 52W

103.32

0.281471416

10.52631579

111.3399963

85.79000092

BRENT CRUDE FUTR Nov13

109.74

0.054704595

4.275940707

115.7599945

96.19999695

GASOLINE RBOB FUT Nov13

262.99

0.144701268

2.418412649

293.6000109

243.3699846

GAS OIL FUT (ICE) Nov13

927.25

0.134989201

2.571902655

980.25

837

3.641

0.330669606

-2.777036048

4.59400034

3.281000137

301.07

0.046522447

0.759705489

322.3500013

276.8100023

NY Harb ULSD Fut Nov13 Gold Spot $/Oz

1323.29

0.743

-20.4973

1779.81

1180.57

Silver Spot $/Oz

22.337

2.5174

-25.8153

34.3838

18.2208

Platinum Spot $/Oz

1407.38

1.506

-7.2719

1742.8

1294.18

Palladium Spot $/Oz

709.15

1.6703

1.3564

786.5

587.4

LME ALUMINUM 3MO ($)

1853

0.610832089

-10.61263869

2184

1758

LME COPPER 3MO ($)

7245

-0.20661157

-8.649602824

8346

6602 1811.75

LME ZINC

3MO ($)

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

Last 22.00

(L) 52W

WTI CRUDE FUTURE Nov13

NATURAL GAS FUTR Nov13

METALS

Min 21.85

Dec13

WHEAT FUTURE(CBT) Dec13

1876

0.186915888

-9.807692308

2230

13960

-0.640569395

-18.17116061

18770

13205

14.82

-0.033726813

-3.859876743

16.65000153

14.68999958

448.5

-0.166944908

-25.21884118

647

435

696.5

0.251889169

-15.13859275

913

635.5

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

Max 28.80

average 28.637

Min 28.45

Last 28.45

28.40

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

SOYBEAN FUTURE Nov13

1298.75

0.173544157

-0.307042794

1409.5

1162.5

114.45

-0.043668122

-26.84563758

184.3499908

113.1999969

NAME

PRICE

SUGAR #11 (WORLD) Mar14

18.6

0.053792361

-9.620991254

22.02999878

16.69999886

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

84.47

0.535586765

7.277114554

93.72000122

74.34999847

CROWN LTD

DAY %

YTD %

(H) 52W

(L) 52W

0.9446 1.6049 0.9055 1.3567 97.1 7.9862 7.7538 6.1216 61.8 31.36 1.2492 29.37 43.125 11173 91.713 1.22854 0.84532 8.3018 10.8356 131.73 1.03

0.2973 -0.1307 -0.2098 -0.0663 -0.1751 0.0088 0.009 0.0033 -0.0081 0.0957 -0.1041 0.3064 -0.0278 0.6713 -0.4667 -0.1441 -0.0556 0.1819 0.0711 -0.1063 0

-8.9805 -0.7851 1.0933 2.8582 -11.3285 -0.0376 -0.0413 1.7806 -11.0113 -2.4872 -2.2254 -1.1474 -4.9159 -12.3512 -2.6016 -1.7142 -3.5371 -1.0154 -2.8166 -13.7858 -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 0.8968 1.2662 77.95 7.9818 7.7498 6.1064 52.2325 28.56 1.2152 28.913 40.54 9577 79.555 1.20302 0.79607 7.8281 10.1113 100.16 1.0289

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.87

-1.01626

54.60317

5.02

2.56

1513083

15.95

1.077313

49.48454

16.27

9.28

1301950

AMAX HOLDINGS LT

1.18

-0.8403361

-15.71428

1.72

0.75

1107200

BOC HONG KONG HO

1.214575

3.734438

22.85

9775214

0.425

1.190476

60.37737

0.56

0.232

16000

6.82

1.337296

13.85643

6.84

3.87

115036

CHINA OVERSEAS

23.55

3.289474

1.94805

25.6

17.7

23384851

CHINESE ESTATES

18.68

66.11018

9.337

90178

CHOW TAI FOOK JE

11.74

2.264808

-5.627006

13.4

7.44

8102200

EMPEROR ENTERTAI

3.83

2.406417

102.6455

3.84

1.43

3347000

FUTURE BRIGHT

2.54

1.195219

109.5664

2.76

1.103

876000

57.55

0.6999125

89.62108

58.8

24.2

6714619 1179213

CENTURY LEGEND

World Stock Markets - Indices

PRICE

Macau Related Stocks

COFFEE 'C' FUTURE Dec13

NAME

21.80

28.48

Currency Exchange Rates

NAME ENERGY

27.1

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14936.24

-0.9045565

13.98108

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3770.377

-0.9816023

24.86703

3819.275

2810.8

FTSE 100 INDEX

6417.75

-0.303389

8.815814

6875.62

5605.589844

HANG SENG BK

128

0.7874016

7.834881

132.8

110.6

DAX INDEX

8588.77

-0.03270644

12.82619

8770.1

6950.53

HOPEWELL HLDGS

26.2

0.5758157

-21.20301

35.3

23.2

948017

NIKKEI 225

13894.61

0.2980513

33.66397

15942.6

8488.14

HSBC HLDGS PLC

83.8

0.05970149

3.075027

90.7

72.85

11163811

HANG SENG INDEX

23178.85

0.8918797

2.303622

23944.74

19426.35938

CSI 300 INDEX

2441.811

1.360461

-3.216108

2791.303

2023.171

TAIWAN TAIEX INDEX

8375.65

0.5038602

8.781744

8439.15

7050.05

KOSPI INDEX

2002.76

0.4181667

0.2859198

2042.48

S&P/ASX 200 INDEX

5149.445

-0.2260559

10.76576

4416.845

0.9574033

FTSE Bursa Malaysia KLCI

1777.21

NZX ALL INDEX

PHILIPPINES ALL SHARE IX

JAKARTA COMPOSITE INDEX

GALAXY ENTERTAIN

HUTCHISON TELE H

3.49

2.046784

-1.966291

4.66

2.98

3880000

LUK FOOK HLDGS I

25.3

2.845528

3.688526

30.05

16.88

2370003

MELCO INTL DEVEL

21.8

141.9534

22.2

6.61

6124168

MGM CHINA HOLDIN

27.35

0.3669725

105.9755

27.9

12.236

4817651

1770.53

MIDLAND HOLDINGS

3.12

-0.6369427

-15.67568

4.95

2.68

1890078

5314.3

4334.3

NEPTUNE GROUP

0.207

5.076142

36.18421

0.23

0.131

132273000

2.320256

5251.296

3837.735

NEW WORLD DEV

11.46

-0.6932409

-4.658905

15.12

9.98

16333893

0.02194933

5.225732

1826.22

1590.67

SANDS CHINA LTD

50.7

1.501502

49.33726

26.35

9883164

SHUN HO RESOURCE

1.7

21.42857

1.92

1.19

996.447

-0.3905617

12.96907

1005.231

846.364

SHUN TAK HOLDING

4.54

1.339286

8.35322

4.65

2.97

6523911

3888.34

0.1499026

5.119252

4571.4

3440.12

SJM HOLDINGS LTD

0.2277904

23.96002

22.5

15.914

4906098

SMARTONE TELECOM

10.24

1.587302

-27.27273

16.22

9.97

3306831

WYNN MACAU LTD

28.45

35.79952

29.05

5872715

ASIA ENTERTAINME

3.96

#N/A N/A

69409

76.3

43.16

918397 12662

Euromoney Dragon 300 Index Sin

608.23

-0.24

-2.07

STOCK EXCH OF THAI INDEX

1432.63

1.273133

2.923994

1649.77

1260.08

HO CHI MINH STOCK INDEX

502.22

0.3496713

21.38834

533.15

372.39

BALLY TECHNOLOGI

68.83

-2.257881

53.94767

Laos Composite Index

1326.67

2.837853

9.211622

1455.82

1038.79

BOC HONG KONG HO

3.22

0.625

4.885996

3.6

2.99

GALAXY ENTERTAIN

7.43

87.15365

7.59

3.11

5580

18.62

-2.103049

31.40437

21.2

12.37

3390941

-0.2019722 0.07147672

INTL GAME TECH JONES LANG LASAL

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

101.46

72.56

344933

LAS VEGAS SANDS

65.69

-1.009644

42.30936

67.351

37.8353

2081797

MELCO CROWN-ADR

32.73

-0.4864701

94.35867

33.59

12.74

3677881

MGM CHINA HOLDIN

3.55

10.24845

102.8234

3.55

1.6651

650

MGM RESORTS INTE

20.38

-1.019913

75.08591

20.9

9.15

5298658

SHFL ENTERTAINME

23.03

-0.2166378

58.82759

23.21

12.35

328546

SJM HOLDINGS LTD

2.87

1.056338

26.00895

2.9481

2.0508

23200

159.04

-0.7116993

41.38146

162.33

103.0933

1109462

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

PRICE

DAY %

1.092896

17230480

CHINA UNICOM HON

13.18

-0.6033183

43391089

POWER ASSETS HOL

68.1

0.2207506

2750750

ALUMINUM CORP-H

2.77

-0.3597122

16227806

CITIC PACIFIC

11.26

0.7155635

11825619

SANDS CHINA LTD

50.7

1.501502

9883164

BANK OF CHINA-H

3.62

0.8356546

332433967

BANK OF COMMUN-H

5.79

1.757469

19589854

BANK EAST ASIA

32.95

1.07362

2052165

BELLE INTERNATIO

11.72

5.017921

20991447

1.214575

AIA GROUP LTD

BOC HONG KONG HO

NAME

CLP HLDGS LTD

0.4784689

2109410

16.1

1.641414

36464333

-0.1663894

6352844

ESPRIT HLDGS

13.2

4.928458

15239569

9775214

HANG LUNG PROPER

25.9

0.3875969

5713157

CNOOC LTD COSCO PAC LTD

NAME

SINO LAND CO

11.24

-0.7067138

12586472

SUN HUNG KAI PRO

102.6

0.1953125

7278139

SWIRE PACIFIC-A

92.25

-0.4854369

1786945

426

2.1093

3463327

TINGYI HLDG CO

19.86

-0.3012048

4620788

11.88

1.020408

10749891

67.3

0.4477612

3788311

TENCENT HOLDINGS

15.42

2.663116

5104006

HANG SENG BK

128

0.7874016

1179213

WANT WANT CHINA

CHEUNG KONG

125

0.9693053

4381084

HENDERSON LAND D

46.8

-0.5313496

3355284

WHARF HLDG

CHINA COAL ENE-H

4.68

1.518438

34420076

2.705687

1365612

CHINA CONST BA-H

6.06

0.4975124

185132188

HONG KG CHINA GS

18.48

0.5440696

8223540

CHINA LIFE INS-H

20.6

0.7334963

16929418

HONG KONG EXCHNG

127.3

1.353503

2571587

CHINA MERCHANT

29.65

1.367521

1766419

83.8

0.05970149

11163811

99.35

0.5058169

9159844

5.51

0.7312614

168122222

-1.785714

31630024

CATHAY PAC AIR

CHINA MOBILE

HENGAN INTL

HSBC HLDGS PLC

84.4

1.442308

18577762

HUTCHISON WHAMPO

23.55

3.289474

23384851

IND & COMM BK-H

CHINA PETROLEU-H

6.23

0.9724473

63655665

LI & FUNG LTD

CHINA RES ENTERP

25.2

1.002004

2086745

MTR CORP

30.55

0.1639344

3385162

CHINA OVERSEAS

CHINA RES LAND

22.8

4.109589

9269524

NEW WORLD DEV

11.46

-0.6932409

16333893

CHINA RES POWER

19.7

3.684211

10036226

PETROCHINA CO-H

8.68

1.520468

64166214

CHINA SHENHUA-H

23.55

1.508621

17288459

PING AN INSURA-H

58.7

0.427716

8708634

VOLUME

MOVERS

23207

INDEX 23178.85 HIGH

23206.44

LOW

22942.99

52W (H) 23944.74 (L) 19426.35938

22942

04-October

08-October

15 15

October 2013 April 19,9,2013

Opinion

Tea Party’s strategy wires is a proven loser Business

Leading reports from Asia’s best business newspapers

Jakarta Post Indonesia officially handed over on Monday the rotating chairmanship of the AsiaPacific Economic Cooperation (APEC) forum to China, which will host the forum’s summit in Beijing next year. “From this point on, a lot of preparatory work will be underway,” Yu Ping, the deputy chairman of the China Council for the Promotion of International Trade, told reporters at a press briefing. In order to involve more people from China’s business community within APEC, the China APEC Business Council would be set up this month, said Mr Yu.

Simon Johnson

Professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics

Taipei Times Taiwan’s annual inflation last month expanded at its fastest pace since April, as vegetable prices climbed after the nation was struck by heavy rain and typhoons, the DirectorateGeneral of Budget, Accounting and Statistics said yesterday. The consumer price index rose 0.83 percent last month compared with a year ago, following a 0.79 percent year-on-year drop in August, the DGBAS said in its latest monthly report. DGBAS deputy director Tsai Yu-tai attributed the rise to a surge in vegetable prices.

Wall Street Journal Thailand has decided to continue its costly rice programme, but critics are questioning how the government will find the money to pay for it. The rice subsidy programme, running between October 2013 and September 2014, is expected to need around US$8.6 billion to buy 11 million tons of rice. “It’s not clear where the new fund of 270 billion baht is coming from,” said Nipon Poapongsakorn, a researcher at Thailand Development and Research Institute. “It’s a big problem, even though the government has already trimmed the subsidies.”

Thanh Nien Daily Vietnam is expected to receive a record US$10.6 billion in overseas remittances in 2013, the ninth highest in the world this year, the World Bank said in a report. The figure will mark a 6.5 percent increase from around US$10 billion last year. There are more than four million Vietnamese living and working abroad. India will top the list with US$71 billion, followed by China (US$60 billion) and the Philippines (US$26 billion). Remittances are one of the main sources of foreign currencies for Vietnam.

n any negotiation, it is inadvisable to make threats that aren’t credible. Probably the only thing worse is to threaten actions that will end up helping the other side. Yet the Tea Partyaffiliated House Republicans aren’t simply making this very mistake with the government shutdown; they are gearing up to do it again, on a grander and more fatal scale, with the debt ceiling. Much as Arthur Scargill, leader of the U.K.’s National Union of Mineworkers, did in the 1980s, the Tea Party today appears to have a political death wish. Scargill ended up giving Prime Minister Margaret Thatcher exactly what she wanted – a protracted confrontation in which he came across as an extremist, eroding any popular support for the miners. Scargill got a great deal of national attention, but the miners ended up with very little, if anything. They had some legitimate grievances, but their attempt to force a democratic government into full capitulation didn’t play well. In the end, the miners were a minority of a minority (unionised workers). Their demands were perceived as extreme and extremely unreasonable. Tea Party Republicans seem determined to head the same way. The government shutdown has become a farce. Late last week, House Republicans supported a measure that promises full back pay to all government employees once funding is officially restored. President Barack Obama accepted this deal with alacrity (though it hasn’t passed the Senate), so now the

government and its services are shut down, without any likely cost savings. This is a strategy of pure pointless irritation and self-inflicted international humiliation. It also worsens the budget deficit.

Disappointed animals The Smithsonian’s National Zoo, for example, is one of the world’s leading organisations for the preservation of and education about animals. It is now closed – though all the animals remain fully cared for – because “nonessential” personnel aren’t allowed to work. If the shutdown persists through Halloween, the zoo will have to cancel one of its most successful fundraising events, Boo at the Zoo. So the zoo’s expenses remain about the same, but the public can’t see the animals, and the zoo’s efforts to raise money are imperilled. This is stupid economics and idiotic politics. Naturally, each side blames the other for the shutdown. But just as when Scargill sought to blame Thatcher for provoking a big strike in 198485, you can believe whatever you want – it’s the dynamics of public opinion over time that matter. As long as Scargill’s members remained on strike, the dislocation to the economy grew, and the miners became less sympathetic. In two months, the Affordable Care Act will be firmly in place, because individuals who need insurance will have signed up through exchanges. Do the Republicans really propose to strip those people of coverage? Even if they are successful in dissuading or otherwise preventing healthy

and what it implies about the opportunity to enlarge the mandate of government.

In two months, the Affordable Care Act will be firmly in place, because individuals who need insurance will have signed up through exchanges

young people from signing up, that tactic will just increase the costs of running the system. In this context, the looming confrontation over the debt ceiling really promises to do in the Tea Party. Let’s assume the threat is credible, and the Tea Party really would push the U.S. government to renege on its promises, to bondholders or Social Security recipients or other people with contractual payment commitments. There are two possibilities. One would occur if the Tea Party and House Speaker John Boehner have the ability to force a full default of some kind. The blow to private enterprise would be so colossal it would take us a generation to recover. Anyone who complains about what happened with the expansion of federal government during the New Deal in the 1930s should think some more about this scenario

Troubled markets Or, in a second scenario, the House Republicans bring about some form of partial, mixed quasi-default, creating tremendous uncertainty and undermining the important stabilising role of a well-run federal government in the modern economy. If this continues in on-off fashion for months, the results will be even worse. It is commonly supposed that Republicans won’t experience public blowback because the House has become so polarised as a result of gerrymandering. But Senate and presidential elections cannot be fixed in this way. Among other things, the strategy of establishing conservative control over the Supreme Court seems likely to go out the window. Moderate Republicans such as Representative Charlie Dent of Pennsylvania have it right: theirs doesn’t look much like the party of responsible government. Scargill and his tactics still have adherents, but not many. Thatcher won the election that followed the strikes, in 1987, and her Conservative Party stayed in power until 1997. Tony Blair eventually led the Labour Party to victory, but only by embracing many of Thatcher’s ideas. Perhaps the Republicans plan to blame Obama for any negative outcomes. They should check with Scargill on the electoral appeal of that approach. Bloomberg View

16 16

October 9, 2013 April 19, 2013

Closing IMF warn on risks of exit from stimulus

Indonesia central bank holds rates

Tighter monetary policy in advanced economies could create a bumpy ride for financial markets around the world that central banks may be unable to control, the International Monetary Fund said. The Washington-based IMF said unconventional monetary policies such as the U.S. Federal Reserve’s massive bond-buying programmes helped restore order and lift global growth in the wake of the financial crisis in 2007-2009. “As is typical in stretched markets, the bust appears much more abrupt than the boom during which the seeds of financial instability are sown,” the IMF said.

Indonesia’s central bank kept its key interest rate unchanged after its most aggressive tightening cycle in almost eight years as inflation pressure eased. Governor Agus Martowardojo and his board held the reference rate at 7.25 percent, Bank Indonesia said in Jakarta yesterday. It also held the deposit facility rate at 5.5 percent. After yesterday’s policy meeting, Mr Martowardojo told reporters that to deal with any volatility in financial markets, “we are preparing quite wide instruments in terms of macro prudential [policy] and probably we will announce them tomorrow”.

N.Korea ready to confront U.S. over drills North Korea put its troops on high alert and said it’s “ready to confront” the U.S. and South Korea over naval drills to be conducted this week off the peninsula. “The U.S. will be entirely accountable for tragic situations to be brought by the nuclear-armed invaders from the U.S.,” an unidentified official with the Korean People’s Army said in a statement carried by the North’s official Korean Central News Agency yesterday. “The U.S. should know that our army is ready to confidently confront whatever turbulences and perilous provocations with powerful military forces.” A typhoon moving through the region led the U.S. and South Korea to postpone the drills, which will include forces from Japan. South Korea’s military is closely monitoring the North’s troop movements, South Korean Defence Ministry spokesman Kim Min Seok said at a briefing in Seoul yesterday. Tensions on the peninsula have heightened since February, when North Korea tested its third nuclear device in defiance of United Nations Security Council resolutions and then threatened first strikes against the U.S. and South Korea over UN sanctions imposed after the February 12 blast.

HK, Philippines to hold talks on bus tragedy Hong Kong Chief Executive Leung Chun Ying (pictured) said yesterday the Philippines had agreed to hold official talks with Hong Kong to discuss issues surrounding the Manila bus hostage tragedy that occurred three years ago. Mr Leung said the agreement was reached during a formal meeting with Philippine President Benigno Aquino on the sidelines of the APEC summit in Bali, Indonesia. During the meeting, Mr Aquino expressed regret over the Manila hostage crisis that left eight Hong Kong residents dead in 2010, but Mr Leung said his words were not enough. “Again, we expressed our deepest regret [and said that it’s so contrary to how we treat visitors in our country,” Mr Aquino told accompanying Filipino reporters, according to transcripts of the interview released by his office. Mr Leung gave a less positive assessment of the talks. “The Philippine side, at the beginning, took the position that the matter has been resolved. I did not agree,” he told Hong Kong reporters in Bali. “I believe, and I made the case to the Philippine side, that this matter, unless it is resolved properly, will continue to stand in the way in the normal relationships between Hong Kong and the Philippines.” Hong Kong has long demanded a formal apology plus compensation for the relatives of the victims and for the injured.

U.S. remains hopeful of Asia trade deal Japan and China warn Washington on default

he United States maintained it hopes to seal an ambitious trade pact on schedule by year-end despite resistance in some countries and the absence of President Barack Obama from a regional summit that was to iron out differences on the pact. U.S. Trade Representative Michael Froman said yesterday that world trade ministers may discuss the U.S.-proposed Trans-Pacific Partnership (TPP) on the sidelines of a World Trade Organisation meeting that starts on December 3, with a goal of reaching a deal by year-end. But several outstanding issues remain, he told reporters at the Asia-Pacific Economic Cooperation (APEC) summit on the Indonesian island of Bali, citing issues ranging from intellectual property to stateowned enterprises, labour and the environment. The World Trade meeting will also be held on Bali. “I think there is a consensus that there has been substantial progress on outstanding issues and there are still remaining issues that must be addressed,” Mr Froman told reporters. The three-year-old TPP talks, now involving 12 nations, are aimed at establishing a free-trade bloc that would stretch from Vietnam to Chile to Japan, encompassing 800 million people, about a third of world trade and nearly 40 percent of the global economy.

China rebuffs Japan’s charm offensive J

apan’s prime minister reached out to the leaders of China and South Korea at an AsiaPacific summit, officials said yesterday, but Beijing said that more than handshakes were needed to ease deep tensions among Asia’s biggest economies. Shinzo Abe managed a brief

A major goal of the Obama administration, the TPP would tear down trade barriers in areas such as government procurement and set standards for workers’ rights, environmental protection and intellectual property rights. Mr Obama had hoped to settle the outstanding issues in discussions with other leaders at the APEC meeting but was forced to cancel his visit because of the fiscal standoff and partial government shutdown in Washington. “We didn’t expect any real breakthrough on TPP in the meeting, especially with Obama not here. There is some progress though,” said a delegate from an East Asian country, who wished not to be named because he was not authorised to speak to the media. The Singapore Straits Times newspaper said a draft statement showed that leaders will likely report that TPP talks are not “substantively finished”.

Debt row Meanwhile, Japan’s finance minister pressed the United States yesterday to quickly resolve its political deadlock over government finances to avoid a fiscal crisis that could damage the global economy. The comment from Taro Aso is the latest sign that Japan and China – the biggest foreign creditors to the United

encounter with Chinese President Xi Jinping and with South Korean President Park Geun-hye, as all three attended group meetings of the AsiaPacific Economic Cooperation forum in Indonesia. “I understand that he shook hands with the two leaders,” Japanese Chief Cabinet Secretary Yoshihide Suga told reporters in Tokyo. “I think it’s good that the leaders see each other repeatedly and exchange greetings,” he said, after Mr Abe staged similar encounters with Mr Xi and Ms Park at a Group of 20 summit in Russia last month. But while Japanese media afforded heavy coverage to the encounters, Beijing’s reading was more frosty. “I think the Japanese side should stop putting the cart before the horse,”

States – are increasingly worried that the U.S. government shutdown and the standoff over the debt ceiling could wreak havoc on their trillions of dollars of investments in U.S. Treasury bonds. “The U.S. must avoid a situation where it cannot pay [for its debt] and its triple-A ranking plunges all of a sudden,” Mr Aso told reporters following a cabinet meeting. “The U.S. must be fully aware that if that happens the U.S. would fall into fiscal crisis,” he said. Japanese officials held several emergency telephone conferences with U.S. Treasury Department officials on Monday, Japan’s Nikkei newspaper reported, citing unnamed sources. However, a senior Japanese government official shrugged off the report, suggesting instead that the subject had only been discussed as part of regular contact between the two countries. On Monday, Chinese Vice Finance Minister Zhu Guangyao said Beijing had been in touch with Washington over the standoff, in which House Republicans have refused to increase the US$16.7 trillion debt ceiling as they seek changes in Mr Obama’s signature healthcare law. As at July 31, China held US$1.28 trillion in U.S. Treasury bonds and Japan held US$1.14 trillion, Treasury Department data show. Reuters

foreign ministry spokeswoman Hua Chunying told reporters, insisting that Japan should first accept the reality that the nations are locked in a territorial dispute in the East China Sea. Japan maintains there is nothing to discuss because the islands – called Senkaku by Tokyo and Diaoyu by Beijing – are indisputably Japanese and that China should move on to bigger matters between the world’s second- and thirdlargest economies. “Without making any concrete effort, the Japanese side is only playing up these kinds of reports,” Ms Hua said, urging Tokyo “to remove the obstacles to the improvement of bilateral relations”. AFP