Macau Business Daily, October 10, 2013 by Business Daily

MOP 6.00 Vitor Quintã Deputy editor-in-chief Editor-in-chief Tiago Azevedo

Easier Taiwan visas are agreed for Macau students

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New Macau ventures on mainland at six-month low

Grand Prix doubles 1 budget for diamond jubilee meet

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Labour Court to resolve workplace rows T

he Court of First Instance will set up two specialised courts – a Labour Court and a Family and Juvenile Court – to handle relevant cases from October 16 onwards, says the city’s Executive Council. More workers will be willing to fight for their legal rights thanks to the creation of the Labour Court, a union leader says. When the economy was in the doldrums in 2009, most disputes were about

unpaid wages. Now many are complaints about imported labour, says Kwan Tsui Hang, vice-chairman of the city’s largest labour grouping, the Macau Federation of Trade Unions. It was also announced yesterday the government will cut the rental subsidy for permanent residents on the social housing waiting list if they reject flats they are offered. More on page 3

Year II

Number 389 Thursday October 10, 2013

April of 19,Dreams 2013 Part 2 City for Melco Crown in Philippines

Brought to you by Zung Fu Motors (Macau) Limited

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Hang Seng Index 23061.0

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Taiwan hints at U-turn on casinos

Generation Rich helps pay family bills

A Taiwan government minister has hinted the authorities there might back casino gaming near the capital Taipei on the main island. But it’s not clear whether such a venue or venues would be for foreigners only. Previously the official government policy has been to develop casinos open to all, but only in outlying island chains to discourage Taiwanese from gambling to excess.

Macau’s young are fast-tracking their traditional duty to support parents and family – as their wages surge during the city’s casino boom. Average monthly income of the city’s ‘youth’, defined as those aged 13 to 29, rose by half in just two years to more than 9,000 patacas (US$1,127). A survey found 42.3 percent paid toward family living costs last year – up by 12.3 percentage points from 2010.

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23002.0

October 9

HSI - Movers Name

%Day

PETROCHINA CO-H

2.42

KUNLUN ENERGY CO

1.70

CHINA RES POWER

1.32

CHINA OVERSEAS

1.06

AIA GROUP LTD

0.81

HENGAN INTL

-1.88

CHEUNG KONG

-1.92

CNOOC LTD

-2.24

CHINA UNICOM HON

-2.43

TENCENT HOLDINGS

-2.86

Source: Bloomberg

Court delays ruling on paying bust bus firm The Administrative Court will wait at least another week before deciding whether to order the government to increase payments to public bus operator Reolian Public Transport Co Ltd. In June Reolian asked the court to order the government to pay urgently a promised increase. It’s still waiting for the court’s ruling. The company filed for bankruptcy on October 1 after it ran out of money to pay staff. Page 6

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October 10, 2013

Macau Macau Legend partner taps online games plan Japanese firm Dynam Japan Holdings Co Ltd – which said in August it hopes to run a pachinko hall at Macau Fisherman’s Wharf from next year subject to regulatory approval – now says it also has a potential investment in a firm developing online game software. When Business Daily contacted Dynam’s office yesterday for more details, a spokesman said it was “too early” to give more details. Dynam also invested US$35 million (280 million patacas) in a Hong Kong share offer for casino services firm Macau Legend Development Ltd in July. Dynam has been speculatively linked to a Japanese casino bid.

Casino venue? Taipei’s Taoyuan International Airport opened in 2009

Taiwan hints U-turn on casinos for main island Previously wanted to restrict gambling resorts to outlying archipelagos Michael Grimes

michael.grimes@macaubusinessdaily.com

Taiwan government minister has hinted the authorities there might back casino gaming near the capital Taipei on the main island. But it’s not clear whether such a venue or venues would be for foreigners only. Previously the official government policy has been to develop casinos open to all, but only in outlying island chains to discourage Taiwanese from gambling to excess. According to a Taiwan news report re-blogged on cnyes.com, Ye Kuang-shih, Taiwan’s Transportation Minister, said in the island’s Legislative Yuan on Monday that a special economic zone already set up at Taoyuan International Airport on the southwest outskirts of Taipei might be more “practical” and more “feasible” for casino gaming. The report said Mr Ye also referred to the fact that any casinos placed on outlying island chains – two of them, Matsu and Kinmen (also known as Jinmen) are very close to the mainland Chinese coastal province of Fujian – would probably be dependent on mainland customers. The idea of using Taipei is not yet government policy but contained instead in an alternative bill for casino legalisation proposed by some legislators of the governing Kuomintang party said the Taiwan

news report. A regional precedent for a gaming resort next to an international air hub can be found at Resorts World Manila, in the Philippines, across the road from the capital’s Ninoy Aquino International Airport. The resort generated US$468.9 million (3.75 billion patacas) in total revenues in the first half this year, a 31 percent rise on the same period in 2012. Casino industry research house Union Gaming Group issued a note from its Macau office on the latest twist in Taiwan’s bid to join East and Southeast Asia’s casino legalisation bandwagon. Grant Govertsen of Union Gaming wrote: “While this Taipei area gaming proposal is short on details we believe its genesis stems from certain comments made by multiple mainland Chinese officials charged with Taiwan-related issues – and echoed by Taiwan’s Transportation Minister – that the PRC does not intend to let its citizens visit any casino(s) that might be developed in Taiwan, such as on the outlying islands like Matsu.”

Falling behind Recent years have seen a trend of Taiwan’s neighbours pressing ahead with policy on or implementation of, casino schemes, while Taiwan has

generally prevaricated despite being an early proposer. Formerly strait-laced Singapore approved in principle in 2005 two gaming resorts, with the first opening fewer than five years later in February 2010. South Korea has proposed but not yet allocated a licence for a multibillion U.S. dollar venue at Incheon, southwest of the capital Seoul. Last month Union Gaming held an investor conference in Tokyo with senior executives from the industry on the apparently brightening prospect of casinos being allowed in Taiwan’s northern neighbour Japan. Terry Gou, one of Taiwan’s richest entrepreneurs and boss of Foxconn Technology Group, which does contract manufacturing in Guangdong province next door to Macau, on behalf of Apple Inc, suggested in February that a “casino park” should be allowed in the north of the main island. Taiwan’s then incoming Premier, Jiang Yi-huah said Mr Gou’s proposal was “problematic for the time being”. One politician from Matsu said any such move would be “unfair” to outlying islands. Why Mr Ye now appears to be supporting the idea of casino gaming on the main island isn’t clear. One theory independently expressed to Business Daily by two industry sources is that

Taiwan might have been spooked by the possibility of Japan getting casinos first, potentially attracting many Taiwanese and some mainland Chinese players to spend their gambling dollars – including valuable gaming taxes – on other shores. According to farecompare.com, an air fares pricing website, Taipei currently has better air lift from Shanghai – a potential target market of affluent gamblers – than does either Tokyo or Osaka individually. The latter two cities have been suggested as potential hosts for Japanese gaming resorts. Shanghai has 304 connecting flights per week to Taipei, while Shanghai has 249 to Tokyo and 130 to Osaka. But Taipei’s potential advantage for air links would be lost were tourists heading for Taiwan required to change in Taipei to a connecting flight or ferry to outlying islands in order to gamble. Taipei has 53 connecting flights per week to Macau while Shanghai has 103 to Macau and Beijing has 166 according to the same online source.

KEY POINTS Possible U-turn on Taiwan casino policy Minister hinting may support rebel legislators’ bill for venues on main island Special economic zone at Taoyuan International Airport proposed Officials in Fujian, mainland China, opposed casinos for neighbouring Matsu islands

October 2013 April 19,10, 2013

Macau

Equity and greater efficiency promised by new Labour Court Union leader believes the specialist tribunal could encourage workers to take charge of their rights Tony Lai

tony.lai@macaubusinessdaily.com

ore workers may be willing to fight for their rights in court after the creation of a new court that could also hasten the resolution of labour disputes, a union leader says. The Court of First Instance will set up two specialist courts – the Labour Court and Family and Juvenile Court – on Wednesday. Executive Council spokesperson Leong Heong Teng told a press conference yesterday that the bylaw

New rules for social housing subsidy The government will cut the rental subsidy for applicants in the social housing waiting list that reject the flats they are offered, the Executive Council said yesterday. According to the current laws, these applicants will still have a second chance to pick a public home but they will be placed at the bottom of the waiting list. Leong Heng Teng, spokesperson for the council, hinted that the purpose of this move is to encourage applicants to accept public homes. The rental subsidy will be extended until August next year and it will be raised. The minimum will rise to 1,450 patacas (US$181.3) from 1,350 patacas while the maximum will jump from 2,050 patacas to 2,200 patacas. By the end of August there were 3,707 households receiving the subsidy and the government has spent 308.6 million patacas on the scheme since 2008. T.L.

to establish the courts would be published in the Official Gazette on Tuesday. The two courts can be set up the next day. “I can’t say how much time can be shortened in handling the relevant cases,” Mr Leong said. “But I am sure the efficiency will be raised with the setting up of specialised courts, together with an increase in judges and staff.” Six new judges were appointed last month and a further 80 court workers have been hired this year. Macau Federation of Trade Unions vice-president Kwan Tsui Hang welcomed the decision even though it had come “late”. Ms Kwan said the city’s biggest labour group had been asking for the Labour Court’s establishment since 2001. “The improvement in judicial efficiency can uphold justice as well as encourage more people to use this mechanism to fight for their rights,” said Ms Kwan, who is also a Legislative Assembly member. Many employees in the past “felt frustrated” and gave up on pursuing labour issues because the court case “dragged on like a prolonged battle”, she said.

Raising standards “Since Macau’s handover [in 1999], any labour dispute may take more than five or seven years and still remain unresolved.” The situation has improved “a bit recently with the introduction of simplified judicial procedures and I believe the efficiency will be further raised with the Labour Court,” she said. Data from the courts’ website show there were 488 labour civil cases pending at the end of August.

There were almost 500 civil labour disputes waiting to be heard by the courts at the end of August

Only three had concluded. Ms Kwan said the quality of the court’s decision-making would also improve. “If there are judges specifically in charge of the [Labour] Court… there will be fewer discrepancies in judgments and standards” between different cases, she said. Asked how many judges and staff would be assigned to the new courts, Mr Leong said that would be decided by the president of the Court of Final Appeal Sam Hou Fai. Even though there are currently

“fewer labour disputes” than in the past, Ms Kwan said the importance of the Labour Court could not be underestimated. With the economy growing, there are fewer cases of unpaid wages but there are now more problems involving imported labour and domestic helpers. These two specialised courts were mentioned in the 2004 law that regulates Macau’s courts but the lack of staff had made it impossible to create them until now, Mr Leong said.

City of Dreams junior Melco Crown’s Philippine project branded with name of Cotai flagship Michael Grimes

michael.grimes@macaubusinessdaily.com

elco Crown Entertainment Ltd’s Manila joint venture is to carry the same name and some of the hotel branding of its flagship Cotai Resort City of Dreams. More importantly, ‘City of Dreams Manila’ will be allowed 132 percent more electronic table games and slots and 50 percent more live dealer gaming tables than originally approved by the local regulator, the Philippine Amusement and Gaming Corporation. Melco Crown said in a Hong Kong filing yesterday the property will operate up to 365

gaming tables, 1,680 slot machines and 1,680 electronic table games. That compares to the 242 gaming tables and 1,450 electronic gaming machines (including both slot machines and electronic table games) originally approved. “The regulatory revisions allow for an increased number of gaming tables, additional bonus junket tables and electronic gaming machines provided that various size thresholds for hotel rooms, room suites and villas are met,” said Melco Crown’s filing. It was also announced yesterday

the resort will have a 260-room Crown Towers hotel. In June Philippines media reported Melco Crown (Philippines) Resorts Corp saying the property would have 950 rooms, rather than the 800 originally planned. The Melco Crown parent stated in a Hong Kong filing in October 2012 that a local unit – MCE Leisure – would be entitled to “approximately” half the resort’s EBITDA “subject to overall property revenue and profitability levels”. MCE Leisure will also get all profits from non-gaming operations. The resort is due to open in the

third quarter of 2014 according to local partner Belle Corp’s second quarter report filed with the Philippine Stock Exchange. Belle had already built the shell when Melco Crown got involved. But a filing by Melco Crown (Philippines) also yesterday, refers to a dome structure called ‘Fortune’s Egg’ – hinting at strong appeal to ethnic Chinese customers. The filing also mentions a ‘Family Entertainment Center’ and ‘licensed rights over fictional characters from animated motion pictures’.

October 10, 2013

Macau

Richer youths pitch in to help pay family bills Average income of youths rose by half in just two years to over 9,000 patacas Tony Lai

tony.lai@macaubusinessdaily.com

March 2013. About 53 percent of the respondents were students while the rest were already working. The study founded the wage level was still the most important criteria young people used to choose a job, with 45.9 percent saying this was their top priority. Young residents spend most of their money on food and beverages, entertainment and clothing, the study says. The study was released during a meeting of the government’s Youth Affairs Committee. Un Hoi Cheng, chief of the education bureau’s youth department, said the committee welcomed the interest-free loans for young entrepreneurs launched in July.

Youths are also earning more … so it is not surprising they also take on bigger responsibilities in the family Chang Mei Fan, head of the Sheng Kung Hui Macau Social Service Centre

The wage level was still the most important criteria young people used to choose a job

acau’s young people are more willing to pay part of the family bills as their wages have surged, a study commissioned by the Education and Youth Affairs Bureau claims. A survey carried out by the Sheng Kung Hui Macau Social Service Centre found that 42.3 percent of the youths shared their family’s

Ombudsman eyes new subsidy rules A

ssociations that receive public money could be required to release their financial statements for public supervision, the Commission Against Corruption said yesterday. Chief Executive Fernando Chui Sai On has asked the ombudsman for proposals to revise the rules on subsidies “that may be out-of-

economic burden last year, up by 12.3 percentage points from 2010. Chang Mei Fan, head of the centre, said in a press conference yesterday the results show “a trend of higher participation” of young people in their families. “In these last two years the youths are also earning more and had a better financial [situation] (…) so it is not

date,” the commission said. The watchdog said it has already put forward a preliminary proposal that would require associations that receive public funds to publish their accounts. On the other hand, the commission is carrying out “a global review” of the procedures, criteria and supervision in the current regulation. The ombudsman began looking into the issue after the New Macau Association filed a complaint in September 2012. The watchdog said “now is the right moment” to analyse the role of the Macau Foundation, namely because the amount of money granted to associations has been growing significantly in the last few years. V.Q.

surprising they also take on bigger responsibilities in the family,” she said. According to the study, the average monthly income of young residents was 9,241 patacas (US$1,155) last year, up by 49.9 percent from 6,164 patacas in 2010. The social service centre polled 3,291 Macau residents aged 13 to 29 between September 2012 and

Easier Taiwan visa for Macau students T

he Taiwan administration unveiled yesterday a simplification of the visa procedures for Macau residents enrolled in the islands’ universities. The long-waited visa exemption for Macau residents remained out of the picture, however. The Macau students will no longer need to ask for

Ms Un said the government already provided some support services to youths, like training and consultation, via the Macau Productivity and Technology Transfer Centre. But she did not reveal how many people had taken up these services nor whether there would be any more support services for young entrepreneurs. The Macau Economic Services said last month they had so far granted loans totalling 5.52 million patacas to 25 applicants since August. The loan scheme of up to 300,000 patacas is open to any Macau resident between 21 and 44 years of age seeking to start his or her first business.

written approval from their universities when entering or leaving Taiwan, the Ministry of Education said yesterday, according to media reports. Macau students can also remain in the island after their graduation during a year if they sign for an internship. These changes will come into force as soon as they are gazetted. Macau is the second-biggest source of foreign students for Taiwan, with 4,000 Macau students on the island now, Taiwan’s Mainland Affairs Council deputy minister Steve Lin Chu Chia said on Tuesday. Mr Lin said they were still “assessing” the situation on visa exemption for Macau residents. T.L.

October 10, 2013

Macau

New Macau ventures in mainland at six-month low Slowdown parallels general dip in foreign direct investment Tony Lai tony.lai@macaubusinessdaily.com

he number of new mainland investments by Macau enterprises hit a six-month low in August, the Ministry of Commerce said yesterday. Just 17 investments were approved by Beijing in August, five fewer than at the same time last year. It is the smallest number of monthly approvals since February, when seven new investments were okayed. February’s figure was also the smallest number of approvals since the ministry began publishing data in September 2006. August’s approved investments came to US$30 million (240 million patacas), US$20 million less than a year earlier. The fall in Macau-linked investment in August was in line with a general slowdown in foreign direct investment in the mainland. About US$8.38 billion in investment was recorded in August, a 0.6-percent increase over the figure from 12 months ago. Growth in August was much slower than in

Macau’s exports to the mainland have almost tripled in the first eight months of the year

the prior two months when foreign direct investment grew at more than 20 percent in year-on-year terms. Ministry spokesperson Shen Danyang said August’s decline was due to “a higher comparison base”

in the same month last year, stateowned news agency Xinhua reported. Mr Shen said the government’s focus was more on the quality and structure of foreign investments than on quantity.

In the first eight months of this year, there were 184 approved investments from Macau, a 4.6-percent rise overall, thanks to a rising trend earlier in the year. The total amount invested however was down by 2.2 percent to US$350 million, compared to the first eight months of last year. Since 1990, the Ministry of Commerce has approved 13,326 investments linked to Macau with a value of US$11.2 billion. Also yesterday, the ministry said the value of Macau-mainland trade surged by one-third in the first eight months of this year to more than US$2.33 billion. Imports of mainland goods and services rose by 23.7 percent to US$2.07 billion. The city’s exports to the mainland have almost tripled to US$260 million this year, even though they fell by 18.9 percent in year-on-year terms to US$20 million in August.

US$2.33 bln Value of Macaumainland trade in the first eight months of 2013

October 10, 2013 April 19, 2013

Macau Bauhaus sales soar this year

Photo by Manuel Cardoso

Bauhaus International Holdings Ltd saw its sales here and in Hong Kong grow by more than a quarter in the last six months, the clothing retailer said yesterday. Same store sales in the two cities rose by 27 percent year-on-year in its financial first half ended September 30, Bauhaus told the Hong Kong Stock Exchange. Sales rose even though the number of shops the fashion house has here and in Hong Kong decreased to 77 from 79. The company’s brands include Bauhaus, Tough Jeansmith, Salad and 80/20.

Reolian’s wait grows as court puts back ruling Creditors meeting for bankupt bus operator scheduled for December 4 Vítor Quintã

vitorquinta@macaubusinessdaily.com

he Administrative Court will wait at least one more week before deciding if it will order the government to increase its payments to public bus operator Reolian Public Transport Co. Reolian asked the court in June to order the government to pay urgently a promised increase. The company is still waiting for the court’s decision. The court held two public sessions on the issue

a fortnight ago. A third session was held on Monday where judges heard several witnesses, Reolian’s lawyer José Espírito Santo Leitão told Business Daily. Both sides were then given 10 days to file written submissions, he said. The process of dealing with an application such as Reolian’s “usually takes about a month and a half” a lawyer with no connection to the case told Business

Daily last month. Mr Leitão would not comment on the delay or offer a forecast of how much longer the courts would take. “I hope a decision can be made soon,” he said. The lawyer said he was confident the judges would rule in the company’s favour. The government announced a 23.3-percent increase in Reolian’s subsidy in June last year. The size of the increase provoked outcry

about the quality and cost of bus services.

Hopes dashed In April, the government increased the operating subsidies promised to Transportes Urbanos de Macau SARL (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM), but not Reolian. Business Daily understands that, among

its arguments, Reolian is claiming the Transport Bureau did not issue an administrative decision to withhold the increment. The court’s delay in dealing with its application has dashed Reolian’s hopes of using the money to ease its current financial pressures. Reolian general manager Cédric Rigaud said in August that his company was owed “maybe” 50 million patacas (US$6.3 million) backdated to July last year. The company filed for bankruptcy on October 1 after it ran out of money to pay its staff. The government has taken control of Reolian’s operations for six months in order to keep the services running. The Lower Court confirmed in a press statement yesterday that it has appointed a bankruptcy administrator for Reolian, as well as to recognise two creditors. The court did not identify the creditors but they are likely to be the two shareholders of Reolian: France’s Veolia Transport RATP and an unidentified mainland Chinese individual that got a stake previously held by Macau’s HN Group Ltd. A creditors meeting was scheduled for December 4, the court added. Reolian’s decision to file for bankruptcy has little impact on the injunction court case. Even if the company were wound down, any compensation or payment obtained under a court order would go to its debtors. Reolian has also filed a claim seeking a final decision on the issue of the subsidy payments, including damages, on July 22. “The claim will take longer to decide, maybe two years,” Mr Rigaud said in August.

Corporate Uniqlo to open first Macau store

Orbis Action for Sight kicks off today

Fast Retailing Co’s Uniqlo is to open its first store in Macau. The shop will be located at The Venetian Macao, but the retailer did not disclose the opening day. Asia’s largest clothing retailer will start hiring staff tomorrow, according to an advertisement published in Chinese-language newspaper Macao Daily News. Fast Retailing, led by Japanese billionaire Tadashi Yanai, is expanding outside its home market as it targets sales of 5 trillion yen (410 billion patacas) by 2020. The company in July reported third-quarter net income rose 56 percent to 23 billion yen, aided by a weaker yen. The apparel maker had a total of 2,327 stores globally as of February, with 847 Uniqlo stores in Japan and 359 outlets overseas, according to its website. In mainland China, the company plans to open 80 to 100 Uniqlo stores a year to bring the total to 1,000 by 2020. The clothing retailer got about 77 percent of its revenue from Japan in the year ended August.

The Macau office of global humanitarian organisation Orbis is launching its 3rd Action for Sight 2013 campaign today, as it celebrates the World Sight Day. The World Health Organisation designated the second Thursday of every October as World Sight Day, which falls on October 10 this year. Orbis Macau initiates a fundraising campaign every year to support the annual World Sight Day. The organisation will release the results of its latest Eye-care Awareness Survey today. This year, Orbis is holding its 3rd Action for Sight 2013 campaign until the end of October, urging the public to give a rest to their eye muscles regularly in order to prevent a negative impact on their sight. Its Macau office was set up in 2006 and the charity had 3,500 regular donors here last year.

October 2013 April 19,10, 2013

Macau

Grand prix doubles budget for diamond jubilee races Two weekends’ racing are forecast to return direct revenue of MOP50 million Vítor Quintã

vitorquinta@macaubusinessdaily.com

The 60th edition of the Macau Grand Prix next month will be funded by a record budget – almost twice as much as last year’s – that has been increased to cover

two weekends of racing. About 300 million patacas (US$37.5 million) will be invested in this year’s event, the coordinator of the Macau Grand Prix Committee, João

Manuel Costa Antunes, said yesterday. A year ago, Mr Antunes estimated the cost for this year’s race was 230 million patacas, a figure that dwarfs

The new race control tower cost 65 million patacas (Photo:Diamantino Santos)

the 160 million patacas spent last year. This year’s budget includes 65 million patacas to rebuild the race control tower. The construction of the new tower “is nearing completion,” Mr Antunes said. The extra money comes as no surprise, given that the event will last for two weekends, November 9 and 10, and 14 to 17, a longerthan-usual programme to celebrate the diamond jubilee. As a result, there will be 350 competitors this year – up from 221 last year – from 38 countries and territories, Mr Antunes said. Despite the additional budget and driver numbers, the organisers expect a smaller increase in revenue than last year’s recordbreaking return. The committee has forecas t direct revenu e

of more than 50 million patacas, an increase of 11 million patacas over last year, said Charles Lo Keng Chio, coordinator of the organisation’s marketing and advertising subcommittee. Most revenue will come from 40 million patacas in sponsorship deals that include the high-end Star River Windsor Arch development – the Grand Prix’s sole official sponsor. Casino companies are also in for the ride, with Melco Crown Entertainment Ltd’s City of Dreams resort sponsoring the Macau GT Cup, one of the three headline races. Among the support races, VIP gaming promoter Suncity Group will sponsor the Macau Road Sport Challenge and Hotel Fortuna will support the Macau-Hong Kong Interport Race. Mr Lo said an “independent study” found that the event generates a return 8.82 times higher than investment through television coverage and visitor spending. According to University of Macau research into the grand prix’s value to the city, the intangible benefits, derived from promotion and advertising, were worth more than 1 billion patacas last year. Tangible benefits, including spending by visitors, were worth 333.6 million patacas.

October 10, 2013 April 19, 2013

Greater China Beijing raises hurdles for foreign banks China’s banking regulator plans to more than triple the minimum registered capital requirement for new wholly-owned foreign banks and joint-venture banks, a state-owned newspaper reported yesterday. The Shanghai Securities News said that the China Banking and Regulatory Commission, in a bid to boost risk management, intends to raise the minimum capital requirement for new ventures to 1 billion yuan (US$163.37 million) from the current 300 million yuan. Chinese regulators have been tightening rules on foreign banks setting up in the country.

China grave developer plans Hong Kong IPO Fu Shou Yuan Group, a Chinese developer and operator of graveyards, plans to seek about US$200 million in an initial public offering in Hong Kong, according to two people with knowledge of the matter. The Shanghai-based company may start the share sale in the next three months, said the people, who asked not to be identified because the information is private. Citigroup Inc is managing the offering, the people said. Fu Shou Yuan runs a graveyard covering more than 1,000 acres in Shanghai and has operations in seven other Chinese cities, according to its website.

Sinopec markets dollar bonds China Petrochemical Corp, Asia’s largest refiner, and Franshion Properties China Ltd are marketing U.S. dollar-denominated bonds as Asian issuers head for the busiest start to a month since May. Property developer Franshion, controlled by Sinochem Group, is offering up to US$300 million of five-year notes at a yield of about 5.625 percent, according to a person familiar with the matter. China Petrochemical, known as Sinopec, is considering selling 5-, 10- and 30-year notes at respective premiums of 150, 205 and 200 basis points above equivalent maturity Treasuries, said another person.

Apple, China Mobile closer to iPhone deal Apple Inc plans to hire a manager with knowledge of the third- and fourthgeneration networks used by China Mobile Ltd, evidence it’s moving toward agreement for the world’s largest carrier by users to offer the iPhone. The carrier engineering manager position, based in Beijing, will “support and drive the carrier approval of mobile phones,” Apple said in an advertisement on its China website. China Mobile has 63 percent of the 1.2 billion wireless subscribers in the world’s biggest smartphone market, while Apple has distribution agreements only with the nation’s two smaller operators.

Heads from the 10-member Asean are gathering in Brunei

China builds Asean role in Obama absence As major powers asserting themselves in Asia

outheast Asian leaders yesterday started a two-day summit where talks with China on territorial disputes in the resource-rich South China Sea may overshadow discussions on progress toward forming an economic community. Heads from the 10-member Association of Southeast Asian Nations are gathering in Brunei and will then take part in the broader East Asia Summit, where U.S. President Barack Obama’s absence may give China space to press for more influence in the region. Major powers are asserting themselves in Asia as they hunt for new sources of growth, while assuring leaders they are not trying to dominate smaller countries or contain each other. Chinese Premier Li Keqiang called yesterday for a South China Sea of “peace, friendship and cooperation” as he extended a hand to Southeast Asian leaders wary of Beijing’s territorial claims in the strategic waters. “A peaceful South China Sea is a blessing for all,” Mr Li told the leaders during the summit in Brunei. “We need to work together to make the South China Sea a sea of peace, friendship and cooperation.” China has softened its tone after disputes over waters rich in oil, gas and fish raised tensions with countries such as Vietnam and the Philippines, agreeing to talks on a code of conduct for the area. “Geopolitical competition between the superpowers appears to be working in favour of Southeast Asia” as countries boost investment and trade with the region, said Chua Hak Bin, a Singapore-based economist at Bank of America Corp. The summits in Brunei’s capital of Bandar Seri Begawan come after leaders from the 21-member Asia-Pacific Economic Cooperation forum concluded meetings in Bali on Tuesday. They pledged to work together to revive growth while those involved in a key trade deal kept to a year-end deadline on

completing talks. “Global growth is too weak, risks remain tilted to the downside, global trade is weakening and the economic outlook suggests growth is likely to be slower and less balanced than desired,” the leaders said in the statement. U.S. and China touted their partnership credentials to Asian leaders in Bali. U.S. Secretary of State John Kerry – standing in for Mr Obama – and Chinese President Xi Jinping each pledged to work with countries to boost trade and investment. “There is nothing that will shake the commitment of the United States to the rebalance to Asia that President Obama is leading,” Mr Kerry said at the APEC CEO summit on Monday. Mr Xi said that “the Asia-Pacific is a big family and China is a member of this family.” The meeting was overshadowed by the absence of Mr Obama, who stayed home to deal with the partial government shutdown, raising questions about the U.S.’s commitment to its so-called military and economic pivot at a time China has become more assertive in Asia.

Advantage China “I’m sure the Chinese don’t mind that I’m not there right now in the sense that, you know, there are areas where we have differences and they can present their point of view and not get as much of a pushback,” Mr Obama said at a White House news conference yesterday. China’s handling of territorial spats has set back its ties with Southeast Asia, said Li Mingjiang, an associate professor at the Singaporebased S. Rajaratnam School of International Studies. “Beijing realises that and wants to reverse the trend to establish a stronger footprint to compete with the U.S.,” professor Li said. “In the past half year or so, China has adopted a sensitive strategy to Southeast Asia, more moderate, more engaging, more accommodating.”

Moving quickly to draft a code of conduct for the South China Sea is a priority, said Philippine President Benigno Aquino. “I am not saying that we are close to signing the code of conduct, but all parties have been convinced to discuss it,” Mr Aquino told reporters in Bali. The region is estimated to have as much as 30 billion metric tons of oil and 16 trillion cubic metres of gas, which would account for about onethird of China’s oil and gas resources, according to China’s official Xinhua News Agency.

Beijing realises that and wants to reverse the trend to establish a stronger footprint to compete with the U.S. Li Mingjiang, professor at the S. Rajaratnam School of International Studies

“Southeast Asia faces risks and opportunities in being the object of attention between the superpowers,” Mr Chua of Bank of America said. “Yet the inherent danger is that the desire for bilateral gains may come at the cost of sacrificing wider regional Asean interests.” Officials from the 10-member Asean are working to allow free movement of goods, services, investment, capital and skilled labour as part of a European Union-style integration plan, without a common currency. The Asean Economic Community is targeted for the end of 2015. Bloomberg News/AFP

October 2013 April 19,10, 2013

Greater China

Chinese stocks rise led by trade-related shares More cities may win government approval for free-trade zones

Bo Xilai appeals life sentence Fallen Politburo member convicted of bribery and abuse of power

global economy. The Hang Seng Index slipped 0.6 percent to 23,033.97 at the close, with almost four shares declining for each that rose. The Hang Seng China Enterprises Index, also known as the H-share index, lost 0.3 percent to 10,505.51. “A U.S. default could spur rating agencies to downgrade the nation’s credit standing,” Desmond Chua, an analyst at CMC Markets in Singapore, said in an e-mail. “We could see a steep selloff in U.S. treasuries and increased borrowing costs. This could spill over into the global economy.” The IMF on Tuesday trimmed China’s forecast for economic growth to 7.6 percent this year from a 7.8 percent estimate in July, saying expansion would slow considerably without reforms to spur consumption. Global growth will be 2.9 percent this year, down from a projection of 3.1 percent, with the outlook factoring in a short U.S. government shutdown and agreement on the debt limit before the October 17 deadline.

usted Chinese Politburo member Bo Xilai appealed his conviction for bribery, abuse of power and embezzlement, maintaining his innocence after a trial that resulted in a life prison sentence. The Shandong Provincial Higher People’s Court agreed to hear the appeal, according to a statement posted on the court’s website yesterday. Mr Bo was convicted and sentenced on September 22, a month after his five-day trial ended. An appeal, while unlikely to overturn the conviction, may result in a reduced sentence for Mr Bo, the former Chongqing municipality party secretary who was mentioned as a possible candidate for the ruling Politburo Standing Committee before his ouster last year. Throughout his trial, Mr Bo jousted with the judge hearing his case and insisted he never broke the law. “Bo Xilai declared his innocence because he would like to retain the chance of a political comeback,” Joseph Cheng, a professor of political science at City University of Hong Kong, said before yesterday’s announcement. Mr Bo was found guilty of taking 20.4 million yuan (US$3.3 million) in bribes, embezzling 5 million yuan and abusing power in the death of British businessman Neil Heywood. Prosecutors alleged that Mr Bo tried to cover up his wife Gu Kailai’s involvement in Heywood’s murder. The Communist Party may want to wrap up Mr Bo’s appeal before a party conclave in November where President Xi Jinping and Premier Li Keqiang may push for new financial policies that may reshape China’s economy for the next decade. The sentence fits into a broader campaign against corruption that Mr Xi has said poses a threat to Communist Party rule. Since Mr Bo’s trial in August, Mr Xi’s anti-graft campaign has focused on people tied to Zhou Yongkang, until last year head of China’s security services.

Bloomberg News

Tianjin awaits approval to set up a free-trade zone in the Dongjiang Bonded Port Area

hina’s stocks rose to a twoweek high as speculation that cities from Qingdao to Tianjin will win government approval for free-trade zones fuelled rallies for port operators and logistics companies. Tianjin Port Co, Tianjin Marine Shipping Co and Tianjin Quanye Bazaar (Group) Co, a department store operator, all jumped 10 percent. Ningbo Port Co gained 4.8 percent. ZTE Corp led declines for phone companies, sliding 1.6 percent after reaching an 18-month high. The Shanghai Composite Index climbed 0.6 percent to 2,211.77 at the close. The CSI 300 Index added 0.5 percent to 2,453.58. Gains in companies linked to the free-trade zone have fuelled the Shanghai index’s rebound from a four-year low in June. Qingdao is planning a free-trade zone that will link China to Japan and South Korea, the commerce ministry said on Tuesday. “The market is speculating there will be a second or third free-trade zone after Shanghai and port cities are the most likely candidates,” said Wei Wei, an analyst at West China Securities Co in Shanghai. “Freetrade zones represent the direction of China’s deepening reforms, which will reduce the government’s intervention in economic activities.” The Shanghai index has climbed 13 percent since June 27 as companies based in the city jumped on speculation they will benefit from deregulation in the free-trade zone. The measure trades at 8.8 times projected earnings for the next 12 months, compared with the five-year average of 12.6 times, according to data compiled Bloomberg.

Trade zones Tianjin, a port city southeast of Beijing, is awaiting approval from central government to set up a free-trade zone in the Dongjiang Bonded Port Area, Radio Television Hong Kong reported on September

30. China’s markets were shut for a week from October 1 for the National Day holiday. “The proposed free-trade zone in Tianjin is likely to give a significant boost to the local economy with several companies likely to benefit,” Gerry Alfonso, a trader at Shenyin & Wanguo Securities Co in Shanghai, said by e-mail. “There are buy and hold opportunities in the sector but there is going to be some volatility.” Qingdao’s free-trade plans include an international trade centre, according to a statement on the website of the Ministry of Commerce. China’s economy has “strong momentum” as major economic indicators have rebounded since July, the Xinhua News Agency cited Premier Li Keqiang as saying in a written interview with media from Asean nations. A measure of phone stocks in the CSI 300 slid 1.3 percent today, the biggest loss among the 10 industry groups. It rose to the highest since January 2012 yesterday after the government said it would bolster the development of industries related to fourth-generation mobile networks.

Hong Kong down Hong Kong stocks fell after the International Monetary Fund lowered growth forecasts for China and warned that a U.S. government default could “seriously damage” the

KEY POINTS China stocks rise to 2-week high Hong Kong shares fall on IMF outlook IMF trimmed growth forecast to 7.6 pct

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10 10

October 10, 2013 April 19, 2013

Greater China version of the car marketed in North America as the Fusion. The American automaker sold 647,849 vehicles during the first nine months of the year, up 51 percent, Ford said in a statement yesterday.

900,000

Number of vehicles Ford is likely to sell in China this year

Sales growing

Ford launched this year the redesigned Mondeo car

Ford comes from behind to stun Japanese rivals Car sales recovering in mainland China Norihiko Shirouzu

ord Motor Co is poised to overtake its Japanese rivals on the top seller’s list in China as Toyota Motor Corp and Honda Motor Co struggle to regain market share following a flare-up in anti-Japanese sentiment a year ago. For much of the past decade, the Dearborn, Michigan-based automaker has languished some way behind Japanese brands and South Korea’s Hyundai Motor Co. And it has lagged a long way behind

General Motors Co and Volkswagen AG in China. That’s mainly because of Ford’s late fo r a y i n to C h i n a a n d th e subsequent, conservative approach it has taken in an auto market that became the world’s biggest in 2009. Ford is fighting to change that picture and appears likely to sell more vehicles in China this year than two of its main Japanese rivals – Toyota and Honda. Its China sales are also zooming close to those of

Yum profit declines as sales slump KFC parent warns of delay in China sales recovery

um! Brands Inc, whose KFC fast-food chain is facing more competition in China, said third-quarter profit fell 68 percent and cut its 2013 earnings forecast as samestore sales dropped in the Asian nation. Net income decreased to US$152 million from US$471 million a year earlier, the company said yesterday in a statement. Excluding certain items, profit was 85 cents a share. Yum, which gets about three-quarters of its revenue from outside the U.S., is facing more competition from expanding restaurant chains, such as Dicos and Hua Lai Shi in China. It’s

also facing a backlash from consumers there after an outbreak of avian flu scared diners away from poultry and a former chicken supplier was investigated for selling food with too much antibiotics. The company may have opened too many fried chicken restaurants in China, analysts said. “We are seeing a slowing consumer spending environment in China,” Edward Jones analyst Jack Russo told Reuters. Yum will “have to continue to run the restaurants really well and get messaging out there that consumers will be fine coming into the restaurants.” Sales at Chinese stores open at least 12 months fell 11 percent at Yum eateries.

Nissan Motor Co. Ford is likely to sell more than 900,000 vehicles, including passenger cars and commercial vehicles, in China this year thanks to its beefed-up product line-up, said a company official who spoke on condition of anonymity. New in the showroom since last year are a couple of small sport-utility vehicles and the redesigned Focus car. It has also just launched the redesigned Mondeo car, a China

Sales have not yet fully recovered from the adverse publicity surrounding the December poultry supply incident Yum! Brands Inc

“It’s just taking a little longer than we expected” for China to recover, Jonathan Blum, a Yum spokesman, said in an interview. While consumer trust in KFC has improved in the Asian country, “it’s not exactly back to where it was,” he said.

Poultry incident Yum lowered its forecast for 2013 earnings, citing

“We should be able to sell more than 900,000 vehicles, possibly close to a million in China this year,” the Ford official said. Toyota is targeting to sell about 900,000 vehicles and Honda about 750,000 in China this year. Chinabased spokespeople at the two firms said they were on track to meet those objectives. Nissan is aiming to sell 1.25 million vehicles, but a Nissan company executive speaking on condition of anonymity said last month the company was “stretching to achieve” that goal. The Japanese carmakers have, however, recorded a sharp rise in year-on-year sales last month partly due to the low base from last September, when Japan’s decision to nationalise disputed islands in the East China Sea sparked anti-Japan sentiment among Chinese consumers. Ford and the Japanese carmakers are still no match for the likes of General Motors and Volkswagen. GM Group expects to sell more than 3 million vehicles in China this year. Its volume in China is forecast to grow 8 percent to 10 percent over last year, when the U.S. group sold a total of 2.84 million vehicles. Since Ford began an aggressive push to overhaul and beef up its product lineup for China over the past two years, “sales have been growing in leaps and bounds,” said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight. That momentum should not only remain intact for the rest of this year but should become “even stronger” next year and beyond, Zhang said, adding that Ford expected to start production at a major assembly plant in the eastern city of Hangzhou around 2015. Reuters

Yum has more than 6,000 KFC, Pizza Hut and other stores in China

“lower-than-expected China sales and a higherthan-expected full-year tax rate”. Full-year earnings excluding certain items will decline at a “highsingle to low-double-digit” percentage rate from the prior year, the company said. Yum previously said earnings would decline at a “mid-single-digit” rate. The fast-food company also cut its forecast for China, saying fourth-quarter same-store sales there will “unlikely” be positive. Yum last month forecast growth in comparable-store sales for the Asian nation. “Sales have not yet fully recovered from the adverse publicity surrounding the

December poultry supply incident,” the company said in the statement. “KFC is unquestionably the category leader in China and we remain confident sales will fully recover,” chief executive David Novak said in a statement. Yum, which has more than 6,000 KFC, Pizza Hut and other stores in China, has been trying to attract customers there with an ad campaign telling people it’s safe to eat properly cooked chicken. The company, which is targeting young families with the advertisements, also is promoting other proteins in China such as shrimp and mushroom rolls. Bloomberg News/Reuters

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October 2013 April 19,10, 2013

Asia

Scotiabank seeks to boost Thailand unit profit Bank eyes Vietnam, Indonesia and the Philippines

ank of Nova Scotia, Canada’s third-largest lender by assets, is seeking to boost annual profit contributions from its Thai unit by 38 percent in three years as it absorbs an acquisition. Thai contributions could rise to C$200 million (US$193 million) by 2015 from C$145 million for the year ended October 31, 2012, Brendan King, a senior vicepresident of international banking at the Toronto-based bank, said in an interview in Singapore. Scotiabank, as the lender is called, is aiming to increase return on equity from the unit, Thanachart Bank Pcl, to the “mid-teens” in three to five years from about 11 percent to 12 percent now, he said. Mr King is also deputy chief executive of Bangkok-based Thanachart Bank, in which Scotia bought a stake in 2007 and increased it to 49 percent in 2009. Thanachart paid C$2.2 billion in 2010 to purchase Siam City Bank Pcl, the integration of which is not yet complete, Mr King said. The purchases were part of an expansion strategy that has given Scotiabank businesses in 14 Asian countries and territories. “Right now in Thailand, we’re

really focused on putting in the infrastructure platforms, processes and technology to optimise the Siam City acquisition,” he said. “We’re really focused on maximising that opportunity for the next two years before we put our head up and look around again.” Scotiabank will look at expanding in Vietnam, Indonesia and the Philippines “very seriously in 2014,” Mr King said. While the lender is known more as a wholesale and trade finance bank in Asia, it wants to expand also in retail banking in those three Southeast Asian countries, he said. The bank has a representative office in Vietnam and no presence in the other two, Mr King said. Entry into these countries will be directly by Scotiabank, which will probably open a representative office first, he said. The lender may then build partnerships with local banks and consider acquisitions, he said. “We really focus globally on highgrowth markets where the population may be under-banked or population demographics are supportive and you see the middle class growing and developing,” Mr King said. “Markets in Southeast Asia certainly fit that bill.” Bloomberg News

Nakaso says see no immediate need for more easing

Bank of Japan sees global damage in U.S. default Deputy governor upbeat on Japan’s economy Leika Kihara

lobal stocks could plunge and long-term interest rates rise, dealing a severe blow to the global economy, if U.S. politicians do not reach a deal to raise their debt ceiling by mid-month, Bank of Japan deputy governor Hiroshi Nakaso said yesterday. The warning followed similar comments by the finance minister on Tuesday, signalling Tokyo’s worries about the impact on its holdings of more than US$1 trillion of U.S. Treasury bonds if the political deadlock is not resolved soon. Mr Nakaso said the standoff was the biggest uncertainty for the U.S. economy, which is otherwise enjoying solid growth driven by robust private demand, and a risk to the global economy. “A prompt resolution of the fiscal consultation issue is critical for the global economy, including Japan,” he said in a speech to business leaders in Matsue, western Japan. Redemption and interest payments of U.S. government debt will stop if the debt ceiling was not increased by October 17, which could lead to a U.S. credit rating downgrade, he said. “If that happens, it would have a significant adverse effect on the global economy” by triggering a spike in long-term interest rates, a plunge in stock prices and fluctuations in currency rates, said Mr Nakaso, a career central banker who became one of the BOJ’s two deputy governors in March.

Extremely ambitious Outside the U.S. risks, Mr Nakaso was upbeat on Japan’s economic outlook, saying the positive momentum seen in wages and household income will continue to support personal spending. Exports were expected to gain strength as overseas economies picked up, which would help sustain Japan’s recovery, although he cautioned emerging economies would

remain pressured by capital outflows due to investor expectations the U.S. Federal Reserve could soon taper its massive asset-buying stimulus. “Global economic uncertainty remains high so we would like to continue monitoring developments closely,” he told a news conference after his speech. On Tuesday, the International Monetary Fund cut its world growth forecasts for the sixth straight time in less than two years, saying a stronger performance in most advanced economies would fail to make up for a more sluggish expansion in the developing world. The BOJ launched its own intense burst of monetary stimulus in April, pledging to double the base money via aggressive asset purchases to achieve its 2 percent inflation target in roughly two years. Mr Nakaso described the policy as an “extremely ambitious approach in uncharted waters” since it attempted to intentionally lift inflation expectations in a country mired in deflation for decades. Mr Nakaso, who has voted with the majority of the board on policy since assuming his post, was confident it would succeed, saying he expected consumer inflation to reach 2 percent during the latter half of fiscal 2014 through fiscal 2015. The BOJ raised its assessment of the world’s third-largest economy last month to say it was “recovering moderately,” reflecting strong growth in the second quarter and improvements in business sentiment. Mr Nakaso saw no immediate need to loosen monetary policy further, reiterating the central bank’s view the economy can absorb the tax hike without additional monetary stimulus. “We’ll of course make necessary policy adjustments to achieve our price target if external or domestic risks force us to alter our economic and price projections,” he said. Reuters

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Asia

Singapore circuit breakers sought after losses Regulators worldwide still evaluating safeguards Jonathan Burgos

ingapore Exchange Ltd, Southeast Asia’s biggest bourse, faces calls from investors to add circuit breakers after a plunge in shares of three commodity companies erased US$6.9 billion in value over three days. The bourse operator imposed unprecedented trading restrictions on Blumont Group Ltd, Asiasons Capital Ltd and LionGold Corp after their stock prices plunged. Trading caps to prevent sharp gains or losses will give investors time to assess their holdings, according to Liquidnet Holdings Inc and the Securities Investors Association of Singapore. Regulators worldwide have evaluated safeguards since the May 2010 plunge known as the flash crash briefly erased about US$862 billion from the value of U.S. equities. American exchanges have implemented a limit-up/limitdown initiative that prevents market makers from quoting shares at prices deemed too far above or below current levels. “It’s more important now because today there’s so much electronic trading,” Seth Merrin, founder and chief executive of New York-based Liquidnet, operator of trading platforms for mutual funds and asset managers, said in an interview in Singapore. “That’s how a stock can go down from US$40 to a penny. I’m 100 percent in favour of circuit breakers.” Regulators around the world have stepped up oversight of capital markets after the global financial crisis in 2008. The Monetary Authority of Singapore

SGX-directed trading suspensions fairly rare

established a 13-member council in 2010 with the goal of boosting corporate governance standards and investor confidence.

Early warning While existing rules in Singapore are sufficient for company disclosures, regulators may need to introduce an “early warning” system for investors, said David Gerald, president of Securities Investors Association or SIAS, the largest organised investor lobby group in Asia. “SIAS calls on SGX to implement the circuit-breaker mechanism immediately to help prevent wild fluctuations of stock prices to enable investors to digest the information

available in the marketplace during the break and make informed decisions,” he said in a statement yesterday. The exchange said on Sunday that shares of the three companies have been declared designated securities, prohibiting investors from selling them unless they hold the same quantity of stock. Buyers must make cash payments for the transactions, it added. Carolyn Lim, a spokeswoman for the bourse, didn’t immediately comment on the call for circuit breakers. Blumont, which invests in minerals and energy, slumped 94 percent over two trading days on October 4 and October 7. That shaved S$4.9 billion (US$3.9 billion) off its market value,

prompting the company to scrap a proposed S$146 million acquisition of Australia’s Cokal Ltd. Kelly Teoh, a strategist at IG Markets in Singapore, said last week that short sellers are taking advantage of the “weak market sentiment”. Before the selloff, Blumont was the best performer on Singapore’s broader FTSE ST All-Share Index after a more than 12-fold increase in the first nine months of the year. Asiasons, which last month bought a stake in U.S. oil and gas producer Black Elk Energy Offshore Operations LLC, tumbled 96 percent over three trading days through Tuesday, shaving S$2.5 billion in market value. The stock, which was the secondbest performer on the FTSE ST AllShare Index, more than tripled in the nine months through September. LionGold, which said this week it’s in advanced negotiations for a possible acquisition of Minera IRL Ltd, a gold explorer in Peru, Argentina and Chile, plunged 87 percent over the three-day period, wiping off S$1.2 billion in market value. The shares climbed 42 percent in the first nine months of the year. The swings in the prices of these companies are “worrisome signs” that should be investigated, said Jim Rogers, chairman of Singapore-based Rogers Holdings. Still, he’s against the introduction of circuit breakers. “They should let the market take care of itself,” he said in a phone interview. “Circuit breakers are absurd. It’s just another interference for the market.” Circuit breakers could also affect investor perception, said Andy Maynard, global head of trading and execution at CLSA Ltd in Hong Kong, adding that Singapore should keep its market open and free. Trading limits are “just part and parcel of doing business in those markets where there isn’t a concept of a free market in the first place,” he said. “As long as participants are able to settle and deliver stock, then stocks should rise and fall on their own attributions.”

Samsung unveils curved-screen phone S amsung Electronics Co Ltd yesterday launched the world’s first smartphone with a curved display, a variant of the Galaxy Note which moves the Asian giant a step closer to achieving wearable devices with flexible – even unbreakable – screens. Curved displays are on the frontlines of Samsung’s innovation war with rivals such as Apple Inc and LG Electronics Inc, as the South Korean firm seeks to expand its lead in the slowing market for high-end smartphones. “It’s a step forward for having unbreakable

gadgets and flexible devices eventually. But for now, the new phone is more of a symbolic product,” said Hana Daetoo Securities analyst Nam Dae-jong, adding that Samsung did not yet have capacity for largescale production of curved touch-screens for the new Galaxy Round. The Galaxy Round is Samsung’s attempt to gauge consumer appetite for curved phones although its lack of other eye-catching features means it is unlikely to be a hit, he said. “I don’t think it’ll be massively compelling enough

for gadget buyers as ... the curved display doesn’t come with many unique features,” he said. The Galaxy Round’s

5.7-inch (14.4-centimetre) display has a slight horizontal curve and weighs less than the Galaxy Note 3, allowing a more comfortable grip than

Bloomberg News

other flat-screen models on the market, Samsung said in a statement. Its key features include a tilt function which allows users to check information such as missed calls and battery life, even when the home screen is off. Users can also scroll through media files by pressing the screen’s right or left, the company said. The phone initially would be available only in South Korea and no decision had been made about releasing it in other markets. Samsung’s new curvedscreen phone, available through South Korea’s biggest mobile carrier SK Telecom Co Ltd, costs 1.089 million won (US$1,000). Reuters

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

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Asia agricultural sector. And loosening rigid job protection laws – a step that could make Japanese companies more attractive for foreign investment – may prove difficult, he conceded in an interview with the Financial Times. “When it comes to redundancies, Japanese people are very sensitive,” he told the newspaper. “To gain people’s understanding will require more careful explanation than for other reforms.”

Delicate balance

Loosening job protection laws may prove difficult

Labour, trade reforms crucial to fix Japan: IMF Economic growth to slow in 2014 as government introduces sales tax hike Peter Brieger

he International Monetary Fund applauded Japan’s bid to revitalise its economy, but warned that liberalising the labour market and chopping trade barriers were crucial to its success. And the world’s third-largest economy faces “serious downside risks” if it doesn’t quickly roll out a “concrete and credible” plan to deal with the heaviest debt burden among advanced economies, the Washington-based IMF said in its World Economic Outlook. The report projects Japan’s

economy will expand 2.0 percent this year before slowing to 1.2 percent in 2014, as Japan ushers in a sales tax hike. The latest figures are barely changed from a previous outlook. The IMF credited Prime Minister Shinzo Abe’s policy blitz – government stimulus spending and central bank monetary easing – for powering the economy since the conservative leader swept to power in late 2012. The stock market is up about 34 percent from the start of the year, driven by a sharply weaker yen, which is boosting profits at major exporters.

And confidence among Japan’s biggest manufacturers sits at its highest level in more than five years. Mr Abe’s plan “has already lifted growth and boosted the near-term outlook”, the IMF said. But “despite these achievements, there is no guarantee of the longer-term success of Abenomics”. The so-called “third arrow” of the premier’s growth drive calls for deep structural reforms to the longlaggard economy. However, Mr Abe faces heavy resistance in deregulating protected industries, including the

Among the changes cited by the IMF report are bringing more women into the workforce – a move Mr Abe supports – as well as raising Japan’s retirement age while cutting soaring health-care expenses. On the trade front, it called on Tokyo to “ease barriers to entry into product and services markets”. Mr Abe’s recent decision to press on with a sales tax hike from 5 percent to 8 percent was a “welcome step forward”, the IMF said. The increase is seen as crucial to shrinking the worst debt burden among rich nations at more than twice the size of the economy. It also marks a major political gamble for Mr Abe, with previous tax rises having led to the downfall of his predecessors. Tokyo must keep moving forward on fixing Japan’s debt problem, the IMF added. “In the absence of more fiscal adjustment, debt would rise further, increasing the risk of a spike in bond yields and threatening financial stability,” it said. “Insufficient fiscal consolidation and structural reforms... could trigger serious downside risks.” The report also highlighted the delicate balance Japan faces in reviving an economy held back by years of deflation while keeping a lid on spending. “Consolidating too slowly will compromise credibility, and moving too fast will kill growth,” it said. “The second [challenge] is implementing a credible set of structural reforms to transform what is now a cyclical recovery into sustained growth.” AFP

India’s trade deficit dips in September Sharply lower trade gap bright spot for ailing economy

ndia’s trade deficit narrowed to a two-and-a-half-year low in September, raising hopes for a significant reduction in the country’s gaping current account deficit, which helped send the rupee to record lows in recent months. India’s trade deficit narrowed to US$6.7 billion last month, compared with US$10.9 billion in August and the lowest since March 2011, the trade ministry said. “The government has taken conscious steps to curtail imports of non-essential commodities, essentially precious metals. That is working out as the government intended,” said India’s top trade civil servant, S.R. Rao. In the last fiscal year India posted a whopping US$88 billion deficit on the current account, the third largest in the world, raising fears of a balance of payments crisis. The rupee crashed as much as 20 percent between May and August. The currency has since recovered slightly and Finance Minister P. Chidambaram is confident the

US$6.7 bln

India’s trade deficit in Sept

percent in the month. New Delhi has taken a slew of steps including fiscal incentives for its exporters to improve the deficit. It has also raised import duty on gold shipments to a record 10 percent, and made airline passengers pay duty on imports of flat-screen televisions. The import bill on gold and silver shipments, one of the biggest items after petroleum and crude products in the country’s import basket, moderated to US$800 million in September.

Festive blues current account deficit will narrow to under US$70 billion for the fiscal year to March 2014. Exports jumped an annual 11.15 percent in September thanks to stronger demand from Western nations and increased competitiveness thanks to the weaker rupee. The currency weakness, along with measures to reduce gold buying, helped tame imports, which fell 18.1

However, economists warned that trade data in the coming months could be slightly less rosy because of an expected surge in demand for jewellery as India enters its peak festive season later this month. “The September data has come as a big positive surprise. However, we do not expect such a trend to continue given that seasonally the ongoing quarter tends to witness a higher trade deficit,” said Upasna

Bhardwaj, an economist at ING Vysya Bank in Mumbai. The Indian rupee, shares, and benchmark bonds gained after yesterday’s data. The current account deficit for the three months through June was US$21.8 billion, or 4.9 percent of gross domestic product, driven by sluggish exports and high gold imports in April and May before the government hiked tariffs on the metal. Saugata Bhattacharya, chief economist at Axis Bank in Mumbai predicted that deficit could narrow or even become a surplus in the September quarter, before widening again during the festive season. “But overall, we still may end up with an encouraging current account deficit number of US$50-US$60 billion for the full year which may give the RBI some comfort to cut the MSF [marginal standing facility] rate further. The RBI may have been led by the better-than-expected trade deficit number to cut the MSF rate this week.” Reuters

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Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 57.40

86.0

27.40

57.22

85.5

27.26

57.04 56.86

26.98 84.5

56.68 Max 57.35

average 57.089

Max 50.60

Min 56.55

average 50.416

56.50

Last 57.00

Min 50.15

Last 50.40

Max 86.00

average 84.506

PRICE

average 26.902

Min 26.75

Last 26.90

26.70

50.5

21.94

28.3

50.4

21.88

28.2

50.3

21.82

28.1

50.2

21.76

28.0

50.1

Max 21.95

average 21.864

DAY %

YTD %

(H) 52W

Min 21.70

Last 21.85

(L) 52W

-0.231906464

10.45143346

111.3399963

85.79000092

BRENT CRUDE FUTR Nov13

109.92

-0.217864924

4.446978335

115.7599945

96.19999695

GASOLINE RBOB FUT Nov13

263.54

0.182467878

2.632603785

293.6000109

243.3699846

GAS OIL FUT (ICE) Nov13

932.5

-0.294039027

3.152654867

980.25

837

NATURAL GAS FUTR Nov13

3.716

-0.774365821

4.59400034

3.281000137

302.83

-0.138499588

1.348728246

322.3500013

276.8100023

Gold Spot $/Oz

1320.37

-0.0326

-20.6728

1778.41

1180.57

Silver Spot $/Oz

22.335

0.2032

-25.822

34.3838

18.2208

Platinum Spot $/Oz

1400.24

-0.5511

-7.7424

1742.8

1294.18

Palladium Spot $/Oz

710.15

0.0662

1.4993

786.5

587.4

1865

0.647598489

-10.03376749

2184

1758

7239.5

-0.075914424

-8.718950952

8346

6602 1811.75

NY Harb ULSD Fut Nov13

LME ALUMINUM 3MO ($) LME COPPER 3MO ($) 3MO ($)

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

21.70

Dec13

1885

0.479744136

-9.375

2230

13900

-0.429799427

-18.52286049

18770

13205

14.75

-0.033886818

-4.31397989

16.65000153

14.68999958

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

Max 28.35

average 28.134

Min 27.95

Last 28.10

27.9

0.396151669

-26.05252188

647

435

693.25

-0.036049027

-15.53457204

913

635.5

SOYBEAN FUTURE Nov13

1286.75

-0.155189137

-1.228171176

1409.5

1162.5

COFFEE 'C' FUTURE Dec13

114.75

-0.260756193

-26.65388303

182.6499939

113.1999969

NAME

SUGAR #11 (WORLD) Mar14

18.51

-0.590762621

-10.05830904

16.69999886

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

83.85

0.191193714

6.489712979

93.72000122

74.34999847

CROWN LTD

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9447 1.5982 0.9093 1.3527 97.38 7.9867 7.7542 6.1199 61.7525 31.43 1.2515 29.487 43.139 11240 91.989 1.22997 0.84642 8.2788 10.8037 131.73 1.03

-0.306 -0.6218 -0.4729 -0.3316 -0.2875 -0.0025 -0.0013 0.0278 0.0688 -0.2704 -0.2637 -0.3968 -0.0325 0.1068 0.0196 -0.1398 -0.3013 0.2778 0.3277 0.038 0

-8.9709 -1.1993 0.6708 2.555 -11.5835 -0.0438 -0.0464 1.8089 -10.9429 -2.7044 -2.4051 -1.5397 -4.9468 -12.8737 -2.8938 -1.8285 -3.6625 -0.7404 -2.5297 -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 52.5575 28.56 1.2152 28.913 40.54 9577 79.59 1.20302 0.79607 7.8281 10.1113 100.16 1.0289

DAY %

YTD %

4.81

-1.232033

15.9

-0.3134796

AMAX HOLDINGS LT

1.16

BOC HONG KONG HO

25.05

CENTURY LEGEND

0.41

CHEUK NANG HLDGS

6.82

CHINA OVERSEAS

23.8

CHINESE ESTATES

19.44

CHOW TAI FOOK JE

11.72

EMPEROR ENTERTAI

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14776.53

-1.069278

12.76231

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3694.833

-2.003619

22.36517

3819.275

2810.8

FTSE 100 INDEX

6341.64

-0.3799976

7.525337

6875.62

5605.589844

127.2

DAX INDEX

8553.1

-0.03260911

12.35761

8770.1

6950.53

HOPEWELL HLDGS

26.3

NIKKEI 225

14037.84

1.030831

35.04182

15942.6

8488.14

HSBC HLDGS PLC

83.3

HANG SENG INDEX

23033.97

-0.6250526

1.664175

23944.74

19426.35938

CSI 300 INDEX

2453.583

0.4821012

-2.749513

2791.303

2023.171

TAIWAN TAIEX INDEX

8344.73

-0.3691654

8.38016

8439.15

KOSPI INDEX

2002.76

0.4181667

0.2859198

2042.48

S&P/ASX 200 INDEX

PRICE

Macau Related Stocks

443.5

WHEAT FUTURE(CBT) Dec13

NAME

Max 27.35

28.4

103.25

CORN FUTURE

84.0

22.00

WTI CRUDE FUTURE Nov13

LME ZINC

Last 84.10

Currency Exchange Rates

NAME

METALS

Min 84.05

26.84

50.6

Commodities ENERGY

27.12

85.0

(H) 52W

(L) 52W

VOLUME CRNCY

52.69841

5.02

2.56

2163499

49.01593

16.27

9.3

1611924

-1.694915

-17.14286

1.72

0.75

669725

0.2

3.941907

22.85

7137003

-3.529412

54.71699

0.56

0.232

432000

13.85643

6.84

3.87

60000

1.061571

3.030301

25.6

17.7

22447764

4.068522

72.86841

19.5

9.337

222757

-0.1703578

-5.787778

13.4

7.44

3110419 2485000

3.94

2.872063

108.4656

3.97

1.43

FUTURE BRIGHT

2.5

-1.574803

106.2662

2.76

1.103

378000

GALAXY ENTERTAIN

-0.9556907

87.80889

58.8

24.2

6181200

-0.625

7.160913

132.8

110.6

537977

0.3816794

-20.90226

35.3

23.2

870807

-0.5966587

2.460021

90.7

72.85

12722590

HANG SENG BK

HUTCHISON TELE H

3.52

0.8595989

-1.123594

4.66

2.98

9469000

LUK FOOK HLDGS I

25.05

-0.9881423

2.663936

30.05

16.88

1541003

MELCO INTL DEVEL

21.4

-1.834862

137.5139

22.2

6.61

4630000

7050.05

MGM CHINA HOLDIN

26.9

-1.645338

102.5865

27.9

12.236

2605100

1770.53

MIDLAND HOLDINGS

3.09

-0.9615385

-16.48649

4.86

2.68

504000

NEPTUNE GROUP

0.201

-2.898551

32.23685

0.23

0.131

123225000

NEW WORLD DEV

11.32

-1.22164

-5.823631

15.12

9.98

18191259

SANDS CHINA LTD

50.4

-0.591716

48.4536

26.35

7807172

5152.989

0.06882295

10.84199

5314.3

4334.3

4456.931

0.55102

3.248884

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1771.81

-0.3201125

4.906013

1826.22

1590.67

SHUN HO RESOURCE

1.7

21.42857

1.92

1.19

NZX ALL INDEX

990.364

-0.610469

12.27942

1005.231

846.364

SHUN TAK HOLDING

4.54

8.35322

4.65

2.97

4537315

PHILIPPINES ALL SHARE IX

3857.37

-0.7964838

4.281995

4571.4

3440.12

SJM HOLDINGS LTD

21.85

-0.6818182

23.11484

22.5

15.973

3244331

SMARTONE TELECOM

10.24

-27.27273

16.22

9.97

5875694

WYNN MACAU LTD

28.1

-1.230228

34.12887

29.05

3646400

ASIA ENTERTAINME

3.96

#N/A N/A

69409

-2.135697

50.65981

76.3

43.16

993923 17834

JAKARTA COMPOSITE INDEX

Euromoney Dragon 300 Index Sin

610.23

0.33

-1.75

STOCK EXCH OF THAI INDEX

1431.33

-0.1903686

2.830595

1649.77

1260.08

HO CHI MINH STOCK INDEX

500.67

-0.3086297

21.0137

533.15

372.39

BALLY TECHNOLOGI

67.36

Laos Composite Index

1290.06

-2.759541

6.197884

1455.82

1038.79

BOC HONG KONG HO

3.24

0.621118

5.537462

3.6

2.99

GALAXY ENTERTAIN

7.35

-1.076716

85.13854

7.59

3.11

59000

INTL GAME TECH

18.18

-2.36305

28.29922

21.2

12.37

5095407

JONES LANG LASAL

82.68

-1.571429

-1.501075

101.46

72.56

417641

LAS VEGAS SANDS

64.33

-2.07033

39.36309

67.351

37.8353

5539151 5276131

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

MELCO CROWN-ADR

31.6

-3.45249

87.64845

33.59

12.87

MGM CHINA HOLDIN

3.55

102.8234

3.57

1.6651

700

MGM RESORTS INTE

19.94

-2.158979

71.30584

20.9

9.15

14126816

SHFL ENTERTAINME

23.07

0.1736865

59.10345

23.21

12.35

535036

SJM HOLDINGS LTD

2.82

-1.74216

23.81367

2.9481

2.0508

11000

157.21

-1.150654

39.75465

162.33

103.0933

1538103

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

37.3

0.8108108

12284989

ALUMINUM CORP-H

2.79

0.7220217

7391635

BANK OF CHINA-H

3.61

-0.2762431

206356689

BANK OF COMMUN-H

5.75

-0.6908463

13780392

BANK EAST ASIA

32.85

-0.3034901

963705

BELLE INTERNATIO

11.72

9859700

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

CHINA UNICOM HON

12.86

-2.427921

29404500

POWER ASSETS HOL

67.6

-0.7342144

2079521

CITIC PACIFIC

11.06

-1.776199

13322995

SANDS CHINA LTD

50.4

-0.591716

7807172

CLP HLDGS LTD

62.6

-0.6349206

2468465

CNOOC LTD

15.74

-2.236025

59891759

COSCO PAC LTD

11.84

-1.333333

13.1

ESPRIT HLDGS

SINO LAND CO

11.26

0.1779359

9317449

102.1

-0.4873294

5476442

5639399

SWIRE PACIFIC-A

91.65

-0.6504065

1340925

-0.7575758

5454180

TENCENT HOLDINGS

413.8

-2.86385

5150684

TINGYI HLDG CO

19.74

-0.6042296

4022290

WANT WANT CHINA

11.86

-0.1683502

8238824

-0.4457652

3283235

BOC HONG KONG HO

25.05

0.2

7137003

HANG LUNG PROPER

26.1

0.7722008

4656630

15.24

-1.167315

2002595

HANG SENG BK

127.2

-0.625

537977

CHEUNG KONG

122.6

-1.92

2886002

HENDERSON LAND D

46.55

-0.534188

2484724

CHINA COAL ENE-H

4.71

0.6410256

32956809

HENGAN INTL

91.25

-1.88172

1243040

CHINA CONST BA-H

6.03

-0.4950495

117863563

18.4

-0.4329004

5374247

CHINA LIFE INS-H

20.5

-0.4854369

12007894

HONG KONG EXCHNG

127

-0.2356638

1374731

CHINA MERCHANT

29.2

-1.517707

1558374

HSBC HLDGS PLC

83.3

-0.5966587

12722590

84.15

-0.2962085

14580136

HUTCHISON WHAMPO

CHINA OVERSEAS

CHINA MOBILE

23.8

1.061571

22447764

IND & COMM BK-H

CHINA PETROLEU-H

6.21

-0.3210273

42570761

CHINA RES ENTERP

24.95

-0.9920635

1976139

VOLUME

SUN HUNG KAI PRO

CATHAY PAC AIR

HONG KG CHINA GS

NAME

97.65

-1.711122

7778244

5.49

-0.3629764

102615616

LI & FUNG LTD

10.84

-1.454545

32011357

MTR CORP

30.45

-0.3273322

899085

CHINA RES LAND

22.95

0.6578947

10845384

NEW WORLD DEV

11.32

-1.22164

18191259

CHINA RES POWER

19.96

1.319797

8888520

PETROCHINA CO-H

8.89

2.419355

138878212

CHINA SHENHUA-H

23.45

-0.4246285

15583099

PING AN INSURA-H

57.8

-1.53322

7491314

WHARF HLDG

MOVERS

23207

INDEX 23033.97 HIGH

23206.44

LOW

22942.99

52W (H) 23944.74 (L) 19426.35938

22942

07-October

09-October

15 15

October 2013 April 19,10, 2013

Opinion Business

Angela Merkel’s Pyrrhic victory

Leading reports from Asia’s best business newspapers

George Soros

wires China Daily

Chairman of Soros Fund Management and of the Open Society Foundations

The central government vowed on Tuesday to strictly monitor the use of povertyrelief funds to protect the interests of people in need. These funds are “life-saving money” for the poor and the “propelling force” for development of povertystricken regions, which must be effectively supervised, according to the State Council. Recent audit reports have found that poverty-relief funds in some places have been misused by local governments due to a lack of supervision.

the sum that Germany owed in reparations and gave the country much more time to pay. The post-World War II Marshall Plan provided debt relief as well. French insistence on harsh reparations payments after World War I clearly prepared the ground for the rise of Hitler. The rise of Greece’s neo-fascist Golden Dawn is a similar phenomenon. These two examples justify my description of the euro crisis as a nightmare. Only Germany can end it, because, as the country with the highest credit rating and largest and strongest economy by far, it is in charge.

Economic Times Reserve Bank of India Governor Raghuram Rajan aims to build sophisticated financial infrastructure in three years that will facilitate trillion-dollar core sector investments. The dependence on external sources of funding needs to be curbed and domestic savings have to be encouraged, he said. “We cannot rely too much on the outside world because we do not want to run large current account deficits... moderate CAD with a lot of saving domestically will allow us to still fund a significant amount of investment which we need,” Mr Rajan said in an interview.

Korea Herald South Korea’s intelligence chief told the parliament on Tuesday that North Korea restarted its nuclear reactor capable of producing weapons-grade plutonium in August, ruling party lawmakers said. National Intelligence Service Director Nam Jae-joon was also quoted as saying that the North tested a long-range rocket engine around that time and recently beefed up naval forces and artillery near the border. “North Korea is seeking to secure status as a nuclear state and gain an upper hand in the Korean Peninsula situation through an unconditional resumption of the six-party talks,” Mr Nam was quoted as saying.

Yomiuri Shimbun A move by the Japanese government and ruling parties to consider removing some items from “sanctuary” categories in Trans-Pacific Partnership negotiations has sent a shock wave through political circles and the agriculture industry. The Liberal Democratic Party has now shifted its stance, with an eye toward removing some items, which would have limited negative impact on producers. But some LDP members plan to hold a meeting to discuss ways to protect the five farm categories from trade liberalisation.

s far as Germany is concerned, the drama of the euro crisis is over. The subject was barely discussed in the country’s recent election campaign. Chancellor Angela Merkel did what was necessary to ensure the euro’s survival, and she did so at the least possible cost to Germany – a feat that earned her the support of pro-European Germans as well as those who trust her to protect German interests. Not surprisingly, she won reelection resoundingly. But it was a Pyrrhic victory. The eurozone status quo is neither tolerable nor stable. Mainstream economists would call it an inferior equilibrium; I call it a nightmare – one that is inflicting tremendous pain and suffering that could be easily avoided if the misconceptions and taboos that sustain it were dispelled. The problem is that the debtor countries feel all the pain, while the creditors impose the misconceptions and taboos. One example is Eurobonds, which Merkel has declared taboo. Yet they are the obvious solution to the root cause of the euro crisis, which is that joining the euro exposed member countries’ government bonds to the risk of default. Normally, developed countries never default, because they can always print money. But, by ceding that authority to an independent central bank, the eurozone’s members put themselves in the position of a developing country that has borrowed in foreign currency. Neither the authorities nor the markets recognised this prior to the crisis, attesting to the fallibility of both. When the euro was introduced, the authorities actually declared member states’ government bonds to be riskless. Commercial banks could hold

them without setting aside any capital reserves, and the European Central Bank (ECB) accepted them on equal terms at its discount window. This created a perverse incentive for commercial banks to buy the weaker governments’ debt in order to earn what eventually became just a few basis points, as interest-rate differentials converged to practically zero.

Best remedy But interest-rate convergence caused economic divergence. The weaker countries enjoyed real-estate, consumption, and investment booms, while Germany, weighed down by the fiscal burden of reunification, had to adopt austerity and implement structural reforms. That was the origin of the euro crisis, but it was not recognised at the time – and is not properly understood even today. Converting all outstanding government bonds – with the exception of Greece’s – into Eurobonds would be by far the best remedy. It would require no transfer payments, because each country would remain responsible for servicing its own debt. And it would impose stricter market discipline on debtor countries than they currently face, because they could issue Eurobonds only to refinance maturing ones; any additional borrowing would have to be in their own name, and markets would impose penalty rates for excessive borrowing. Yet Eurobonds would substantially reduce the heavily indebted countries’ borrowing costs and go a long way to re-establishing a level playing field in the eurozone. Germany’s credit rating would not be endangered, because

Eurobonds would compare favourably with bonds issued by other major countries. Eurobonds would not cure disparities in competitiveness; eurozone countries would still need to undertake their own structural reforms. But they would remedy the euro’s main design flaw. All the alternatives are inferior: they either involve transfer payments, perpetuate an uneven playing field, or both. And yet, owing to Merkel’s opposition, Eurobonds cannot even be considered. Greece, too, is a victim of its creditors’ misconceptions and taboos. Everyone knows that it can never pay back its debt, most of which is held by the official sector: the ECB, eurozone member states, or the International Monetary Fund. After undergoing a lot of pain and suffering, Greece is close to posting a primary budget surplus. If the official sector could forgo repayment as long as Greece meets the conditions imposed by the Troika (the ECB, the European Commission, and the IMF), private capital would return and the economy could recover rapidly.

Leading role I can testify from personal experience that investors would flock to Greece once the debt overhang was removed. But the official sector cannot write down its debt, because that would violate a number of taboos, particularly for the ECB. Germany would do well to remember that it has benefited from debt write-downs three times in its history. The Dawes Plan of 1924 sought to stagger Germany’s reparations payments for World War I. The Young Plan of 1929 reduced

Making a U-turn is never easy for political leaders, but elections do provide an opportunity for a policy change

Germany, mindful of its recent history, does not want to be cast in the role of a hegemonic power; the current situation is not the result of some evil German plot. Still, Germany cannot escape the responsibilities and liabilities that go with that role. It must learn to act as a benign hegemon. Doing so would earn Germany the lasting gratitude of the countries that are currently subordinated to it, just as the Marshall Plan earned the United States the lasting gratitude of Europe. Failure to seize this moment would, I believe, lead to the disintegration and eventual collapse of the European Union. Of course, many countries have lived through nightmares and survived. But the EU is not a country; it is an incomplete association of sovereign states that will not survive a decade or more of stagnation. That is not in Germany’s interest, and it would leave Europeans worse off than they were when they embarked on the EU project. Making a U-turn is never easy for political leaders, but elections do provide an opportunity for a policy change. The best way to make one would be for Merkel’s next government to appoint an independent expert commission to evaluate the alternatives, without regard to the prevailing taboos. © Project Syndicate

16 16

October 10, 2013 April 19, 2013

Closing Fuel supply warning for Alitalia

Wal-Mart to buy out India partner

Alitalia SpA risks having its fuel supplies cut off as the company struggles to avert a financial crisis. Italian oil company ENI SpA said it could not keep supplying fuel if the airline failed to raise fresh finance. ENI’s chief executive said his firm could not provide credit “to a company whose future seems no longer assured”. After years of losses, Alitalia is trying to raise 100 million euros (US$136 million) from its shareholders to keep the business running. Those shareholders are due to vote whether to extend fresh financing on 14 October. Alitalia was rescued from bankruptcy in 2009 by a consortium of investors.

Wal-Mart Stores Inc and Bharti Enterprises are breaking up their Indian joint venture and will own and operate separate businesses in the country, the companies said in a joint statement yesterday. Under terms of their breakup, Wal-Mart will acquire Bharti’s 50 percent stake in Bharti Wal-Mart Pvt Ltd, which runs about 20 wholesale stores in India under the Best Price Modern Wholesale brand, and will run the business independently. “Given the circumstances, our decision to operate independently will be beneficial to both parties,” Scott Price, president and chief executive of Wal-Mart Asia, said in the statement.

Obama to nominate Yellen as Fed chair Monetary dove would provide policy continuity

.S. President Barack Obama nominated Fed number two Janet Yellen yesterday to run the world’s most influential central bank, providing some relief to markets that would expect her to tread carefully in winding down economic stimulus. The nomination will put Ms Yellen on course to be the first woman to lead the institution in its 100-year history. The advocate for aggressive action to stimulate U.S. economic growth through low interest rates and largescale bond purchases would replace Ben Bernanke, whose second term as Fed chairman expires on January 31. If confirmed by the U.S. Senate, which is expected to endorse her,

Panasonic to exit plasma TV business P

anasonic Corp will pull out of the plasma television panel business by the end of the financial year to March 2014, sources familiar with the situation told Reuters, marking a key milestone in the long-term decline of Japan’s TV industry. Panasonic’s TV division has been a major contributor to the electronics company’s combined US$15 billion net loss in its two latest financial years.

she would provide continuity with the policies the Fed has established under Mr Bernanke. Analysts say she would move cautiously in reining in policies in place to shore up the world’s largest economy. Expectations that the Fed might start to taper its stimulus programme have roiled financial markets since May and the central bank shocked investors in September by maintaining its cash injections of US$85 billion a month in full. “Thank God Yellen will be nominated under the current circumstances. You don’t want a change at the central bank right now,” said Dan Fuss, a portfolio manager at Loomis Sayles in Boston.

Its TV business posted an operating loss of 88.5 billion yen (US$913 million) in the last financial year. With the closure of its sole plasma panel factory in western Japan, Panasonic will book an impairment loss of more than 40 billion yen on the last remaining factory building in operation, the sources added. The company set aside 120 billion yen to cover restructuring costs at the start of the current financial year. The move also signals the demise in Japan of a technology in which TV makers once invested heavily but has now been overtaken by advances in the liquid crystal display (LCD) business. Panasonic said in a statement yesterday that it continued to consider various options for the plasma display panel business but that nothing had been decided yet. Reuters

“This Yellen news is one uncertainty lifted from already nervous markets.” Her nomination would come during a political stalemate in Washington that has closed the U.S. government and threatened a U.S. default if lawmakers fail to raise the US$16.7 trillion debt ceiling by an October 17 deadline. The debt standoff is fuelling expectations the Fed may delay any plans to reduce its stimulus for now.

Strong support “I believe she’ll be confirmed by a wide margin,” said Senator Charles Schumer, a Democrat from New York.

Yunnan Tin chairman arrested in bribery probe

ei Yi, chairman of the world’s largest producer of refined tin, Yunnan Tin Co, was arrested and charged with accepting 20 million yuan (US$3.3 million) in bribes, China’s state-owned Yunnan Info Daily reported. Mr Lei received bribes from four people, including Li Hongtao, the chairman of Leed International Education Group, the report said. Mr Li paid the bribes in order to secure a majority stake in a private college partially owned by Yunnan Tin, the

Described as a “good egg” by fellow Fed policymaker Richard Fisher and a “very able person” by Japan’s Chief Cabinet Secretary Yoshihide Suga, her most immediate challenge may be to determine when the Fed should scale back its bond buying. After September’s surprise decision against tapering, many economists now think the Fed will not move until Mr Bernanke has left office. Mr Obama turned to Ms Yellen, 67, after his former economic adviser Lawrence Summers withdrew from consideration in the face of fierce opposition from within the president’s own Democratic Party, raising questions about his chances of congressional confirmation. Ms Yellen has enjoyed strong support from Democrats. Her Republican backing is much softer. Many Republicans worry Fed policy of holding overnight interest rates at zero and buying bonds aggressively to drive other borrowing costs lower could lead to asset bubbles and an unwanted pickup in inflation. Still, Ms Yellen is expected to garner enough support to secure the 60 votes needed to overcome any procedural hurdles in the 100seat Senate. Democrats control the chamber 54-46. A respected economist whose research has taken her deep into theories of monetary policy, Ms Yellen has earned a reputation as one of the Fed officials most worried about unemployment and least concerned about inflation. Ms Yellen studied economics at Yale University and taught at Berkeley for more than a decade before her first stint as a Fed board governor from 1994 to 1997, a post she left to head President Bill Clinton’s Council of Economic Advisers. Reuters

newspaper reported. Leed was formed in 2008 as a joint venture between Goldman Sachs Group Inc and Beijing National Education Group, the Financial Times reported on Tuesday. David Wells, a Goldman spokesman in New York, declined to comment. Mr Lei is under investigation for “severe discipline violation,” Yunnan Tin said in a July 8 filing to the Shenzhen Stock Exchange. The company fell 3.6 percent, the most in a almost a month, to 13.01 yuan at the close in Shenzhen. The investigation comes amid President Xi Jingping’s campaign to tackle corruption in the communist party. Four PetroChina Co Ltd officials and the company’s former chairman are currently being investigated in the highest-profile case in the anti-graft push. Reuters