Macau Business Daily, October 11, 2013 by Business Daily

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

Home price bubble ready to burst, says agency

April 19, 2013

Number 390 Friday October 11, 2013

he risk of home prices falling in Macau next year can no longer be overlooked, says a property agency. The warning comes days after the chairman of the city’s Delta Asia Financial Group predicted home prices to plunge by up to 30 percent early next year – owing to a likely rise in interest rates and an uncertain macroeconomic outlook. “No one can ignore any more the risk for the home prices to go down,” Jacky Shek Po Tak, Centaline (Macau) Property Agency Ltd director, said in a third quarter market review published yesterday. But he doesn’t believe the correction will be anywhere near as bad as Mr Au fears. More investors have turned to office spaces because there is limited supply of homes for purchase, added Centaline.

Budget law 1 revision delayed until next year Page 3

Double-digit retail growth in Golden Week Page 4

New 3G blackout hits city’s troubled telco CTM Page 6

Brought to you by Zung Fu Motors (Macau) Limited

Hang Seng Index 23078.0

23022.8

22967.6

22912.4

22857.2

Year II

More on page 6 22802.0

October 10

Kerzner Resorts joins Hainan market www.macaubusinessdaily.com

Chinese conglomerate Fosun International Ltd and Florida-based Kerzner Resorts International Inc – a specialist in luxury holiday venues, some with gaming – plan to build a US$1.6 billion (2.78 billion patacas) property on China’s holiday island Hainan. Fosun will provide the money. Kerzner’s chief executive Alan Leibman said Atlantis Sanya wouldn’t be a speculative venture in anticipation of casino gaming being legalised on the island. Page 2

HSI - Movers Name

%Day

CHINA MERCHANT

1.88

WHARF HLDG

1.64

LENOVO GROUP LTD

1.35

CHINA OVERSEAS

1.26

SUN HUNG KAI PRO

0.49

NEW WORLD DEV

-1.06

CNOOC LTD

-1.27

CHINA UNICOM HON

-2.18

CHINA RES POWER

-2.20

BELLE INTERNATIO

-2.56

Source: Bloomberg

I SSN 2226-8294

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Shanghai a ‘model’ for Firms so far spurn Guangdong trade zone govt’s help over Hengqin Shanghai’s relatively liberal free trade zone launched last week could be an example for Guangdong’s proposed trade area, a Hengqin official says. Macau’s neighbouring mainland province has sent a plan for a regional free trade zone with Macau and Hong Kong to the central government. It would integrate three existing trade areas within Guangdong. They include Qianhai near Shenzhen, Hengqin Island and Nansha district in Guangzhou.

Macau’s trade promotion agency has so far received only three investment plans from Macau firms for Hengqin Island. Last week the Zhuhai government on the mainland said 37 Macau firms had registered with it expressing an interest in operating in the island’s special economic zone. Macau Trade and Investment Promotion Institute president Jackson Chang expects more inquiries soon, he said at a media event yesterday.

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October 11, 2013

Macau On-off North Cyprus casino plan back, says Amax Loss-making Macau junket investor Amax Holdings Ltd says its attempt to operate a casino in the Turkish Republic of Northern Cyprus is back on the negotiating table. Amax said in a filing on September 19 “the parties could not compromise on finalising the terms of a formal sale and purchase agreement”. Now Amax says in a Hong Kong filing yesterday the proposal is “subject to further negotiation” and the deadline for talks has been extended until November 30 “or such other date as may be agreed”. In August an external auditor said in the firm’s annual report for year ended March 31 that Amax’s accounts contain “material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern”. Amax had losses for the 12-month period of approximately HK$39.38 million (US$5.08 million). Last year Amax’s current chairman Ng Man Sun was attacked by masked men while dining at the New Century Hotel, Taipa.

Jacobs’ lawyers appeal to Nevada Supreme Court Lawyers for former Sands China Ltd chief executive Steve Jacobs (pictured) have asked the Nevada Supreme Court to overturn a district court decision that dismissed his allegation of defamation against Las Vegas Sands chairman Sheldon Adelson. The Associated Press reports the request was made on Wednesday, United States time. The defamation suggestion stemmed from a wrongful termination suit brought in Nevada by Mr Jacobs following his dismissal from Sands China in July 2010. LVS said he was sacked for “cause”. Mr Jacobs later amended his wrongful termination suit to accuse Mr Adelson of knowingly spreading harmful falsehoods about him. Clark County District Court Judge Elizabeth Gonzalez decided against Mr Jacobs at an earlier hearing on the question of defamation. She ruled that Mr Adelson and LVS were protected by the rule of legal privilege, in pursuit of litigation.

Apple sets iPhone launch for Macau Apple Inc’s latest iPhones, the 5S and the lower-cost 5C, will be available in Macau and 34 other territories on October 25, expanding on the product’s debut in a handful of markets last month. Apple sold a record 9 million iPhones in the weekend debut of the two new models in September, when the product was offered in the United States, China and Hong Kong. It was the first time a new iPhone debuted in China, the world’s largest mobile-phone market, at the same time as the United States. The initial sales exceeded analysts’ projections, sending the shares up 5 percent on September 23. The iPhone is Apple’s most important product, accounting for half of revenue. The new devices are aimed at helping Apple reverse market share losses against smartphones using the Google Android operating system, which hold about threefourths of the market.

Kerzner Resorts joins Hainan market CEO says mainland-funded project ‘not anticipating’ casino gaming Michael Grimes

michael.grimes@macaubusinessdaily.com

hinese conglomerate Fosun International Ltd and Florida-based Kerzner Resorts International Inc – a specialist in luxury holiday venues, some with gaming – plan to build a US$1.6 billion (2.78 billion patacas) property on China’s Hainan Island reports Reuters. Fosun will provide the money. Kerzner’s chief executive Alan Leibman told the news agency that Atlantis Sanya was not being done in anticipation of casino gaming being legalised on the island. “We have been very successful with and without gaming – within our business. It is nothing we have anticipated in why we are building Atlantis [in Hainan]”, Mr Leibman was quoted saying. But as Business Daily and Reuters have previously separately reported, officials on the mainland have issued a number of so-called ‘Special Entertainment Licences’ to other Hainan resorts that offer facilities that look and operate for all practical purposes like Macau’s casinos. The main difference is their business model is based on use of prepaid vouchers for placement of bets. In some cases winnings may be paid ‘in kind’ via consumer goods or services, rather than in cash. Business Daily has seen illustrations depicting the play areas of one of these ‘Special Entertainment’ facilities on Hainan. The fixtures, fittings and layout look remarkably like a Cotai casino, albeit on a smaller scale. Such ‘mission creep’ in tourism on the sub-tropical island – located 504 kilometres (313 miles) southwest of Macau – has led

Artist’s impression of Atlantis Sanya (Photo: Kerzner Resorts)

gaming analysts to speculate that mainland officials are willing to weaken Macau’s monopoly grip on casino style gaming in China; while not technically or legally ending Macau’s status as the only place in the People’s Republic of China where casino gaming is allowed. There’s no suggestion from Business Daily that the developers of Atlantis Sanya are seeking to apply for a Special Entertainment Licence on Hainan. Mr Leibman put the cost of the project at “about US$1.5 billion” in the interview, while Fosun and Kerzner said in a joint statement that Fosun would invest “over 10 billion yuan (US$1.63 billion)” in the scheme.

Kerzner Resorts operates the Caribbean’s biggest casino at Atlantis Paradise Island resort in the Bahamas. It also has a non-gaming resort called Atlantis The Palm on Dubai’s artificial Palm Island. Kerzner Resorts – founded in 1993 by South African entrepreneur Sol Kerzner – says the 62-hectare (153acre) resort in Sanya, will feature a luxury 1,300-room hotel. Hainan has attracted scores of international developers in the past t w o y e a r s , i n c l u d i n g InterContinental Hotels Group, Starwood Hotels & Resorts Worldwide Inc, and casino operators MGM Resorts International and Caesars Entertainment. With Reuters

‘No sudden rule changes please’: Ho Philippines’ casino take can pass Singapore’s, but tax question needs solution, says Melco Crown Michael Grimes

michael.grimes@macaubusinessdaily.com

he possibility of Philippine casino gaming revenue overtaking Singapore’s is “within striking distance” and “doable,” says Lawrence Ho Yau Lung, co-chairman of Macau gaming investor Melco Crown Entertainment Ltd. He was speaking in Manila as the firm’s joint venture at Entertainment City, Manila Bay was rebranded ‘City of Dreams Manila’, from Belle Grande Manila Bay. The Philippine gaming market is worth US$2 billion now, compared to Singapore’s US$6 billon said Mr Ho. As Business Daily previously reported, gaming revenues at Singapore’s two resorts fell yearon-year in 2012. Macau’s gaming revenue was up 13.5 percent year-

on-year in 2012 to approximately 304.14 billion patacas (US$38 billion) last year. Mr Ho said casino revenue expansion in the Philippines would “depend on how regulators and government support this industry”. He added: “If the country is really serious about trying to bring in foreign capital, then there can’t be sudden rule changes.” That was a reference to the nation’s Bureau of Internal Revenue. It wants to levy a 30 percent income tax on the Philippine Amusement & Gaming Corp (the state regulator known as Pagcor) and its licensees on top of a five percent franchise tax. Pagcor and its licensees, including a unit of Melco Crown, had previously been given an exemption from paying income tax.

Pagcor president Jorge Sarmiento said on Wednesday the tax issue hasn’t been resolved yet and that the regulator has asked the country’s Supreme Court to help settle the matter. A “bidding war” has already started among junket operators to bring clients to City of Dreams Manila, Mr Ho said. He added the company would have to “do more” to bring high rollers from Macau to Manila, such as providing private jets and helicopters. Melco Crown said on Wednesday it would boost its budget for the Manila casino by 10 percent to US$680 million. Pagcor has allowed it to have more live tables, electronic tables and slots. With Bloomberg News

October 2013 April 19,11, 2013

Macau

The Shanghai free trade zone was officially open on September 29

Guangdong FTZ could learn from Shanghai Reform plan expected from next month’s Communist Party meeting Vítor Quintã

vitorquinta@macaubusinessdaily.com

he reforms introduced in the Shanghai free trade zone (FTZ) launched last week could be an example for a similar area proposed for Guangdong province, a Hengqin official says. A Guangdong province committee has submitted a plan to set up a regional free trade zone with Macau and Hong Kong to the central government last month. The proposed zone would integrate three existing trade zones within Guangdong to promote trade and services. They include Qianhai near Shenzhen, Hengqin Island and Nansha district in Guangzhou. “Like measures unveiled for the Shanghai zone, our proposal

includes regulatory and financial reforms,” said Niu Jing, director of the Administrative Committee at Hengqin New Area. “Shanghai could serve as a lesson in how we innovate in our trade environment,” he said. Guangdong has been the bellwether in China’s export-driven economic growth in the past. Yet as overseas demand weakens and labour cost rises, the coastal province is losing its competitive edge but wants to reinvent itself through industrial upgrades and administrative reforms. China’s stocks rose this week as speculation that cities from Qingdao to Tianjin will win government

approval for free-trade zones “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.”

Small steps Zhuang Jian, an economist at the Asian Development Bank, said that the ongoing reforms by Chinese authorities fit into the reform scheme likely to be rolled out at the upcoming

session of China’s ruling party. Analysts say that the third plenary session of the party’s central Committee, to be held next month, has the potential to be a landmark event, if it can chart out a comprehensive plan to propel the world’s second-largest economy on a more sustainable growth path. Tianjin, a port city southeast of Beijing, is awaiting approval from central government to set up a freetrade zone in the Dongjiang Bonded Port Area, RTHK reported on September 30. Qingdao’s free-trade plans include an international trade centre, according to a statement on the website of the Ministry of Commerce. The State Council, China’s cabinet, is also considering revising for the first time in nine years an investment catalogue to open more sectors once reserved for state players. But the measures announced so far for the Shanghai zone and the absence of Premier Li Keqiang from the launch ceremony have raised doubts over its impact. Mr Zhuang described the Shanghai zone as a typical example of China’s resolution to advance complex reform prudently and said it could provide valuable experiences for reform in a broader sphere in China. Officially inaugurated on September 29, the zone opens industries in the service sector and will spearhead reforms in yuan convertibility and interest rate liberalisation. The Shanghai government, meanwhile, published a list of sectors where foreign investment will be banned or restricted within its new free trade zone. The negative list is also composed of hundreds of line-item restrictions in 16 major industrial categories, ranging from culture to hydropower to telecommunications. “While the packages unveiled for the Shanghai free trade zone aim at bolder reforms, they should be experimented with in a way that could be applied elsewhere in the country,” said Mr Zhuang. With Xinhua

Budget law revision only ready next year Legislative Assembly calls for more power to oversee big public projects Tony Lai

tony.lai@macaubusinessdaily.com

he long-awaited revision of the budget framework law will only be ready next year, as Legislative Assembly members continue to call for more powers to oversee the city’s public finance. The Financial Services Bureau said in a written reply to an inquiry from legislator Au Kam San that it was still working on revising the law, which was mostly unchanged since 1983. “The bureau is now collecting information on the budget and accounting mechanism of public finances in other places for data analysis and comparison,” wrote bureau director Vitória Alice Maria da Conceição. “The draft of the amendments to the bill should be completed within 2014,” said the reply dated

September 11 but only published this week. Ms Conceição said the topics they would look at included the supplementary budget and subsidiary ledgers for expenses and income. Several legislators have asked for a new law to allow the assembly to better oversee the budget for largescale public projects. Several big infrastructure projects have faced significant budget overruns, including the Light Rapid Transit elevated railway and the Taipa Ferry Terminal (pictured). Mr Au wrote in an August inquiry that any project or public spending of above 40 million patacas (US$5 million) should be sent for discussion in the assembly. In reply, Ms Conceição said her

bureau would ask other government departments to submit more details on large-scale projects. Apart from a mid-term review at

the assembly, the government will “actively” report to legislators any changes introduced in the project budgets, she said.

October 11, 2013

Macau

Jewellery sales growing faster than in Hong Kong

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HOSPITALITY

Other retailers also count blessings from lucrative National Day holidays

Super concentrated There were more than 4,300 people employed by travel agencies at the end of last year. A dwindling number of these firms could be considered small or very small, as determined by their headcount and gross value added or GVA. Companies generating less than 500,000 patacas (US$62,600) GVA annually employed almost 15 percent of all travel agency staff in 2007. The corresponding statistic for last year was less than 6 percent, no more than 240 workers. The biggest agencies generating annual GVA in excess of 5 million patacas employed 38 percent of the workforce in 2007 and 44 percent last year. Combining the mid-range firms with an annual GVA of between 1 million patacas and 5 million patacas, they employed 90 percent of the industry’s workforce.

The data shows the number of bigger firms is increasing. Between 2007 and last year, there were more big firms and they were employing more people. The opposite is occurring among the smaller agencies. Agencies in the two smallest categories had an average three to eight workers. Their share of the industry’s workforce fell by more than a quarter between 2011 and last year. The average size of agencies in the biggest category varied between 55 people and 75 people in the past five years, and headcount increased by 20 percent last year. The figures for the smaller firms should be interpreted with care. In the smallest category the value added per worker is so low it is doubtful those firms could operate with just the few workers they have.

Vítor Quintã

vitorquinta@macaubusinessdaily.com

ewellery sales during the weeklong National Day holiday were strong in Macau, where growth continued to outpace Hong Kong’s, retailers say. While sales in Hong Kong probably increased by more than 10 percent, Macau stores posted gains three to five percentage points higher, Lau Hak Bun, Chow Sang Sang Holdings International Ltd’s sales operations director, said in an interview. “We have seen increasing purchases by visitors traveling with their families in Macau during this holiday,” Mr Lau said. “Golden Week jewellery sales growth in Macau have surpassed Hong Kong for the past two to three years, thanks to the tourism boom along with the development of the gambling industry,” Wong Wai Sheung, chief executive of Luk Fook Holdings International Ltd, said in an interview. The company owns 37 jewellery store outlets in Hong Kong and nine in Macau, according to its interim statement in March. Jewellery buyers in Macau are also more likely to buy diamonds and gemstones, giving store operators a higher profit margin, Chow Sang Sang’s Mr Lau said. The company has four outlets in the gaming city, and 55 in Hong Kong, according to its website. Retailers also enjoyed the holiday spirit during Golden Week, with greater tourist arrivals fuelling sales increases at some shops.

Stelux Holdings International Ltd, which is an optical shop and sells affordable watches, saw brisk sales growth here and in Hong Kong during the National Day holidays. Stelux’s City Chain watch stores posted sales growth of 14.9 percent from October 1 to Monday compared to Golden Week last year, the company told the Hong Kong Stock Exchange on Wednesday. The retailer’s Optical 88 stores posted revenue 10.4 percent higher than in the same period of last year.

KEY POINTS Stelux: up by 14.9 pct Bonjour: up by 10 pct Sa Sa: up by 6 pct

Nineteen of Stelux’s 400 stores are in Macau, including 10 City Chain outlets. Sales growth during the vacation was driven by purchases made by mainland tourists, the company said. Beauty and healthcare products’ retailer Bonjour

Holdings Ltd also saw its revenue surge during the break. The company told the Hong Kong exchange that growth in same-store sales in Hong Kong and Macau rose by about 10 percent compared to the same period last year. The cosmetics retailer opened four new stores last year, including a second outlet here. Both stores are located in the peninsula’s historical centre, the most popular area for tourists. The company said growth was due to increased spending by locals and shopping by mainland tourists. Cosmetics retailer Sa Sa International Holdings Ltd was the only company unhappy with its National Day results. Sa Sa’s same-store sales grew by just 6 percent year-on-year, which was “slightly lower than in the past and the group’s expectation”, the company told the exchange. The retailer said mainland visitors “have more destination options as other countries have continuously upgraded their tourism facilities”. Macau and Hong Kong are facing more competition for Chinese tourist dollars, says Sa Sa. But the group said it “remains cautiously optimistic on the retail market in Hong Kong and Macau”. Hong Kong-based Sa Sa has 260 stores in Greater China, Singapore and Malaysia. It has eight outlets here and recently opened another store in Senado Square in a shop formerly rented by Starbucks Coffee Co.

J.I.D.

119%

Increase in staff size at travel agencies recording more than MOP1 mln in GVA from 2007-12

Tourist arrivals were up 6.2 percent in year-on-year terms during the National Day vacation

Stay in the finest hotels in Macau and read Business Daily news where it matters

With Bloomberg News

October 11, 2013

Macau

Only three firms bid for Hengqin projects But trade promotion agency expects to receive more proposals from Macau companies Tony Lai

tony.lai@macaubusinessdaily.com

he city’s trade promotion agency has so far received three investment plans from Macau firms for Hengqin Island, but expects to have more before this month’s deadline. Macau Trade and Investment Promotion Institute president Jackson Chang told a media luncheon yesterday the three proposals involve medical science, food products and technology. Mr Chang said the number of companies and amount of investment involved would only be known once the institute has reviewed the plans after the October 31 deadline. The institute has been taking applications from Macau firms seeking to invest on Hengqin since August. It has also received about 60 inquiries on different issues such as tax breaks and incentives, he said. Mr Chang said he believed more proposals would be filed before the deadline, stressing that many interested parties would rather wait for a bit longer. Macau Pastry Speciality Association president Alan Ho Hoi Ming told Business Daily last month

Macau firms have proposed setting up medical science, food products and technology projects on Hengqin Island, says Jackson Chang

that 15 of their members were interested in setting up an area of food souvenir shops on Hengqin, similar to Rua do Cunha in Old Taipa Village. They were still fine-tuning their proposal, said Mr Ho. Mr Chang’s institute has invited

business as usual

Not very charitable

Paulo A. Azevedo pazevedo@macaubusinessdaily.com

n a revealing interview with Portuguese-language newspaper Jornal Tribuna de Macau, Kiang Wu Hospital Charity Association president Fong Chi Keong said the association is now taking back most of the real estate it has been renting out. The idea behind the decision is to rebuild or revamp most of the properties and put them back on the market at higher prices. The association manages 324 properties, according to the report. If we know anything about Macau, the rent increases will not be minor, which means many of the traditional companies that have been there for years, even decades, will have to close doors, with many forced into extinction. Mr Fong, the association’s president since 2010 and a Legislative Assembly member who has been described as a close ally of Chief Executive Fernando Chui Sai On, could not have been more blunt: “It is impossible for the association to always help people,” he said. To Mr Fong, the task of supporting small and medium-sized companies belongs to the government. Let us not forget he is also a real estate developer and construction company president. So, if the association’s task is not to help Macau’s people and support the efforts to preserve the city’s tradition and culture, why exactly has it been receiving countless millions of patacas from the government? We can understand that the association now wants to cash in on its possessions, but if it has its own way of making money then it does not need public money to carry out charity work. It can just act as a private company with a good corporate social responsibility reputation. It is time for the government to say how many hundreds of millions have been given to the association and its subsidiaries. Most of the public funds go directly to the Kiang Wu hospital, a for-profit subsidiary of the association, and to the Kiang Wu Nursing College. There should be a detailed explanation of what has been done with the money that belongs to the Macau people. The same people Mr Fong thinks the association should not give a helping hand. A report should be published and independently audited to make sure that the association did not buy any property with public money, either directly or indirectly.

its Hengqin counterpart to make a presentation at the 18th edition of the International Trade and Investment Fair to be held in The Venetian Macao next week. More information on incentives for the city’s small and medium-

sized enterprises to operate on Hengqin could be announced at the presentation, he said. The Zhuhai administration will also organise a cocktail reception at the International Trade and Investment Fair this year, he added. This year’s trade fair is expected to see a 5.6 percent rise to over 1,900 in the number of exhibition booths, with at least 4,600 professional visitors expected. The area reserved for Portuguese companies, the “Pavilion of Portugal”, and the number of exhibitors from Portugal will be twice as big as last year. Portuguese firms “have more confidence in Macau as a platform” for trade and communication between the Portuguese-speaking countries and mainland China, said Mr Chang. There will also be more firms from other Portuguese-speaking countries this year. Most of the companies deal in food and wine. This year marks the 10th anniversary of the Forum for Economic and Trade Cooperation between China and Portuguesespeaking countries.

October 11, 2013 April 19, 2013

Macau

Centaline joins chorus on home price fall But doubts correction will be as big as predicted earlier this week by Stanley Au Tony Lai

tony.lai@macaubusinessdaily.com

he risk of home prices falling in Macau next year can no longer be overlooked, says a property agency. The warning comes only days after Stanley Au Chong Kit, chairman of the city’s Delta Asia Financial Group, said he expects home prices to plunge by as much as 30 percent early next year, owing to a likely rise in interest rates and uncertain macroeconomic outlook. “No one can ignore any more the risk for the home price[s] to go down,” Jacky Shek Po Tak, Centaline (Macau) Property Agency Ltd director, said in a third quarter market review published yesterday. But he doesn’t believe the correction will be anywhere near as bad as Mr Au fears. Mr Shek’s more moderate alert to consumers comes even as prices continue to rise in the short term. Home prices in the territory rose by “three to five percent” quarter-onquarter in the third quarter due to lack of supply, said Mr Shek.

…I do not see now the fall will be up to 20-30 percent Jacky Shek, Centaline (Macau)

No more high rises – at least on price, says Centaline (Photo: Manuel Cardoso)

The average home price in the city reached 67,414 patacas (US$8,426) per square metre in August, up by 9.2 percent year-on-year, data from the Financial Services Bureau shows. Mr Shek expects prices this quarter to stay flat or “inch up slightly” but “face pressure for correction” afterwards due to uncertainty over the regional economic outlook. “We are now in a correctional period in which the sales plunge but not the price. But when there is another wave, both the sales and the price will fall,” he said.

Gentle fall “Homes now in some housing projects can still be sold at a high price as [there are still] buyers that have the most [good] financial resources in the market.” But he added: “After they have

grabbed what they want…the price has to go down to the possible reach of the public for sales.” He declined to make any prediction on the timing and extent of any correction, but stressed: “…I do not see now the fall will be up to 20-30 percent”. “If the owners have more than one flat, it is now time for them to sell their stocks as there is a saying ‘Cash is king’,” said Mr Shek. “For the buyers, think about your financial ability first and it will be fine if [the flat] is for end-use,” he stated during a press conference to announce the review. Centaline estimated about 11,000 homes would be sold in the city this year, the lowest number since the global financial crisis in 2009. Last year Macau saw more than 16,900 residential transactions, data from the Statistics and Census

Investors turn to offices More investors have turned to office spaces because there is limited supply of homes available for purchase, said Centaline (Macau) Property Agency Ltd. Roy Ho Sao Hang, the agency’s senior regional sales director, said yesterday: “There is a trend of capital starting to flow from the residential market to the office [market].” Another reason why investors are favouring offices is that these units have an annual return of about 2.5 percent, currently higher than other property types, said Mr Ho in a property market review. As a result office spaces have seen the highest rise in sales volume and price so far this year among all property types, said the agency. The price of an office in NAPE district reached about 6,355 patacas (US$794.4) per square foot in the third quarter, rising by at least 11.5 percent from the first quarter, Centaline data show. In contrast the number of transactions of industrial units plunged by more than half, yearon-year, to fewer than 40 in the third quarter, as the city’s policy on revamping old neighbourhoods remained in limbo, said Mr Ho. T.L.

Service show. A new law in July to regulate estate agents and another in June regulating the sales of unfinished flats have had an impact on reducing supply, property agencies have said. Centaline yesterday said the city would need 6,000-plus new flats a year. The population increased by approximately 24,600 people last year. But the progress on the completion of new units was slow, said Mr Shek adding there were only 2,443 new flats completed last year. He urged the government to use idle land for private housing projects and simplify the paperwork for approvals.

New blackout hits troubled CTM Service interruption came after system repair work, operator says Vítor Quintã

vitorquinta@macaubusinesssdaily.com

nother service failure, the fourth since February 2012, has hit the city’s major telecommunications operator a fortnight after it announced an upgrade to its software and hardware. The 3G cellphone voice service provided by Companhia de Telecomunicações de Macau SARL (CTM) suffered a three-hour blackout early yesterday. In a statement, the company blamed the incident on repair work to a “non-core” part of its network operation and maintenance system carried out between 2.30am and 2.50am. CTM’s 3G users began to have trouble making and receiving phone calls and accessing the

Internet at around 3.30am and the services only went back to normal at around 6.30am. CTM said it received 60 inquiries from customers. The Bureau of Telecommunications Regulation criticised CTM for “not anticipating the occurrence of the incident when carrying out normal operation and maintenance work”. The bureau yesterday asked CTM to file a preliminary report on the incident and to make sure that it makes no system changes or updates without first making a full assessment. CTM pledged to “take serious measures”, including “a comprehensive and thorough investigation” of the delivery

arrangements of its vendor. Yesterday’s service disruption was CTM’s fourth blackout since February 2012. The operator had previously been fined 980,000 patacas (US$122,700) for two failures attributed to human error in February and May last year. CTM also suffered a 30-minute blackout on December 26 that it blamed on “software dysfunction”. No penalty was imposed over that incident. On September 24 the company said it was investing MOP400 million to “further enhance the resilience and stability” of its system. The upgrade will cover all of its fixed-telephone, mobile, and internet networks, CTM and network supplier Ericsson said.

October 2013 April 19,11, 2013

Macau

Govt complicity helping child sexual exploitation T

he alleged complicity of Macau government officials is making life easier for child traffickers, especially those linked to sexual tourism, a United Nations agency said. The Committee on the Rights of the Child said in a report released last week it is concerned at “the i n c r eas ed pr evale n ce of child trafficking and exploitation” in Macau. Child sex tourism “remains a serious problem” in the city, the report says. “Alleged complicity of government officials in trafficking and sexual exploitation related offences has led to impunity for such crimes,” the report said. Benyam Dawit Mezmur, vicepresident of the committee, said information gathered among non-governmental organisations “shows that the government does not take this problem seriously”. “It seems this problem is linked to the casinos,” said committee president Kirsten Sandberg, quoted by the Portuguese news

agency Lusa. “Casinos attract this type of business, increasing the chances of young people being sexually exploited,” she said. And casinos make up for most of the Macau government’s revenue, Ms Sandberg said. Casino taxes amounted to 81.79 billion patacas in the first eight months of this year, making up 82.5 percent of government revenue, official data show. The committee called on the city to “immediately address the issue of corruption and impunity (…), through rigorous investigations of complaints of complicity by government officials”. Macau must also strengthen identification, investigation and prosecution of foreign paedophiles, the report says. Business Daily asked for a comment from the Human Trafficking Deterrent Measures Concern Committee but received no reply before press time. V.Q.

Vítor Sereno, Portugal’s consul-general

Macau luring Chinese investors to Portugal A bout one third of the Chinese investors who obtained residency in Portugal came from Macau and Hong Kong, said Vítor Sereno, the Portuguese consul-general here. A year ago the Portuguese government began offering residency to foreign investors that transfer at least 1 million euros (10.6 million patacas) to Portugal, open a business that creates a minimum of 10 jobs there or buy real estate there worth a minimum of 500,000 euros. The country has already granted 226 golden visas, of which 168 went to mainland Chinese citizens, said Mr Sereno, quoted by the Portuguese-language news agency Lusa. Chinese investment has reached 106 million euros, with between 30 percent and 35 percent coming through Macau and Hong Kong, he said.

“That represents an investment of 33 million euros in Portugal,” the diplomat stressed. He believes this “extraordinary growth” in investment is linked to the opening of a special channel at the consulate for golden visa applications. In August the Portuguese Consulate-General in Macau told Business Daily it had received 61 applications for golden visas, most of the applicants being mainlanders seeking residency in the European Union by buying property in Portugal. Macau-based entertainment conglomerate Sociedade de Turismo e Diversões de Macau SA (STDM) and estate agency Midland Realty (Macau) Ltd have jumped on the bandwagon, trying to sell Portuguese property to mainland Chinese. V.Q.

October 11, 2013 April 19, 2013

Greater China

Moody’s says local defaults to rise Beijing willing to regulate local govt-related entities’ borrowings

efaults by China’s localgovernment financing vehicles may rise as Premier Li Keqiang curbs support to check surging debt loads, Moody’s Investors Service said. The yield premium over top-rated notes for five-year AA debt, the most common rating for the financiers of roads, sewage plants and subways known as LGFVs, widened 16 basis points last quarter to 102 basis points, the first increase in a year. The comparable gap in India is 54.5. “Some small and marginal LGFVs whose projects deviate from the governments’ development objectives

could see lower probability of being supported by local governments,” said Katie Chen, an analyst in Beijing at Moody’s. “Several governmental announcements appear to indicate the central government’s intention to regulate local government-related entities’ borrowings.” Premier Li said last month that China is taking “targeted measures” to address the issue of local debt, and Finance Minister Lou Jiwei has said authorities will regulate note sales to reduce credit risks, as five LGFV bond ratings were downgraded this year. Borrowings by the vehicles leapt 39 percent from 2010 to 19 trillion yuan (US$3.1 trillion) as of the end of 2012, about 37 percent of gross domestic product, according to Nomura Holdings Inc.

Stricter regulation

Some small and marginal LGFVs … could see lower probability of being supported by local governments Katie Chen, analyst at Moody’s

The yield on Inner Mongolia Hi-Tech Holdings Co’s 2019 note has climbed 35 basis points to 6.92 percent since Shanghai Brilliance Credit Rating & Investors Service Co lowered its rating to AA from AA+ on June 28, according to data compiled by Chinabond. The rating was cut in part because fiscal subsidies may be weakened, Shanghai Brilliance said in a statement. The rate on Xiangyang City Construction Investment Operation Co’s 2018 bond has risen 121 basis

points to 6.61 percent since Dagong Global Credit Rating Co cut the debt’s rating to AA from AA+ on June 26, according to exchange data. Regional governments set up more than 10,000 LGFVs to fund construction projects after they were barred from directly issuing bonds under a 1994 budget law. A 4 trillion yuan stimulus plan during the 2008-2009 financial crisis swelled loans to companies, which they have been rolling over or refinancing with new note sales. China’s Ministry of Finance issued a statement on December 31 forbidding local governments from injecting assets into financing vehicles. The eastern Chinese province of Jiangsu has changed rules to force local governments to get approval for buying and selling land-use rights, in a bid to control such fundraising transactions, Xin Hua Daily reported on September 24. “A lot of LGFVs are relying on government support, either through fiscal subsidies or land and assets injected by the government,” Moody’s Ms Chen said. “The government regulation has become stricter in how the local governments can provide support.” Nomura economists led by Zhang Zhiwei said in a report on September 26 that Chinese policymakers may allow some local governments’ debt to default next year to improve market

discipline as borrowings surge. Mr Zhang said in a media call on the day that any defaults are more likely to occur in shadow-banking activities, such as trust businesses, than the bond market.

Default risk While signs of an economic pickup have emerged, China’s gross domestic product expanded 7.5 percent in the second quarter, the longest streak of sub-8 percent growth in at least two decades. Premier Li said the nation’s economic growth probably exceeded 7.5 percent in the first nine months of the year, a sign the government will next week report success in arresting a two-quarter slowdown. The economy has “shown stronger momentum of steady growth” in the past few months, with indicators that reflect market expectations such as the Purchasing Managers’ Index improving, Mr Li said. He made the comments in a speech yesterday at an Association of Southeast Asian Nations summit in Brunei. “Default risks in local governments’ loans are rising,” said Xu Hanfei, a bond analyst in Shanghai at Guotai Junan Securities Co, the nation’s second-biggest brokerage. “Defaults would curb banks’ lending to LGFVs, which would cause LGFVs to raise money

Chinese premier outlines U.S. debt concerns Li tells Kerry China paying ‘great attention’ to developments

remier Li Keqiang said China is paying “great attention” to the U.S. debt-ceiling issue, adding his voice to official concern that wrangling over a borrowing limit risks a default in the world’s biggest economy. Mr Li didn’t elaborate on the concern in a report by the official Xinhua News Agency posted yesterday to the government’s website in Chinese, while a separate English report said the premier was “expressing Beijing’s concern about Washington’s debt-ceiling problem”. He made the comment in a meeting a day before with U.S. Secretary of State John Kerry at the Association of Southeast Asian Nations summit in Brunei, Xinhua said. Mr Kerry assured China’s prime minister that Washington was committed to resolving a fiscal impasse, a senior State Department official said yesterday. The official, speaking on condition of anonymity, said Mr Kerry made clear that the U.S. government shutdown, now in its ninth day, and friction over the U.S. budget “is a moment in Washington politics and reaffirmed the President’s commitment to resolving the issue”. Mr Li remarks boost pressure from China, the biggest foreign holder of U.S. Treasuries at US$1.28 trillion in July, for U.S. lawmakers

Li Keqiang

to overcome a political impasse and raise the country’s borrowing authority. Chinese Deputy Finance Minister Zhu Guangyao said earlier this week that the U.S. should prevent a default and ensure the security of China’s investment in Treasuries, according to Xinhua. “We hope the U.S. can take actions to ensure the safety of China’s assets and investments in the U.S.,”

Hua Chunying, a spokeswoman for China’s Foreign Ministry, said at a regular briefing yesterday. Economic problems in the U.S. will “naturally impact” China and the world economy, Ms Hua said. Japan, the second-biggest Treasuries holder, must consider the impact of any default on its bond holdings, even as the U.S. will probably avoid a fiscal crisis,

Japanese Finance Minister Taro Aso said on Tuesday. Any failure by the U.S. to honour its debt obligations would damage the dollar’s status as the world’s reserve currency. A shift in asset allocation by China, Japan or other major holders of Treasuries could push up U.S. interest rates and cause swings in global currency markets. Bloomberg News/AFP

October 2013 April 19,11, 2013

Greater China

Yu warns against hasty capital account reform

u Yongding, a former central bank adviser, has warned China to take cautious and gradual steps in fully liberalising its capital account to prevent “unpredictable” risks. Mr Yu, an influential researcher at the Chinese Academy of Social Sciences, said the time is not yet ripe to allow a free flow of short-term capital across borders, though most other items under the capital account had already been opened. Instead of rushing to ditch capital controls, he said, China must first speed up the reform of domestic financial markets to close risky loopholes in the system and pave the way for the eventual relaxation.

“China should not prioritise the task of opening capital account on its reform agenda. In fact, we have many other more urgent things to do right now,” Mr Yu told the official China Securities Journal in an interview published yesterday. He said China must quicken reforms to set up market-based interest rate and foreign exchange regimes, including launching its own benchmark interest rate in the money market and formulating a maturity structure curve for treasury bonds. “In a country where many factors are still distorting market forces, a free flow of capital across borders could do more bad than good,” he said. Mr Yu also noted a several other factors that could exacerbate financial market risk if the capital account were fully liberalised. These included high local government debt, rising bad loan ratios, shadow banking, a frothy property market, and the U.S. Federal Reserve’s expected tapering of its stimulus programme. Reuters

More than 10,000 LGFVs were set up to fund construction projects

through more public ways.” Vice Finance Minister Zhu Guangyao said last month that the government will this month release the findings of its second nationwide audit of local government debt in two years. Moody’s Ms Chen expects the government to improve management of liabilities to avoid “a wide range” of defaults. There have been a few debt repayment problems seen in LGFV loans while there hasn’t

been any default in the onshore LGFV bond market, according to the ratings company. “We expect to see a series of fiscal reforms to address the localgovernment debt issue after the National Audit Office report comes out,” Ms Chen said. “We expect that the central government will try to decrease the level of indebtedness of local governments and bring more transparency to this issue.” Bloomberg News

Beijing offers closer ties at Asean summit Leaders vow to avoid escalating sea tensions

outheast Asian leaders pledged with China to avoid escalating tensions in the South China Sea as they work toward a code of conduct over the disputed waters rich in oil, gas and fish. “We remain committed to resolving disputes peacefully in accordance with international law without resorting to the threat or use of force,” Association of Southeast Asian Nations leaders said in a statement yesterday after their meeting with China in Brunei on Wednesday. The statement did not give a time frame for further talks on a code of conduct for the waters through which some of the world’s busiest shipping lanes run. Still, the comments reflect the softer tone China has adopted after a rise in tensions with countries such as Vietnam and the Philippines, and as China and the U.S. vie to bolster ties in the region to seek new sources of growth. Premier Li Keqiang said China wants to resolve disputes through dialogue, while again urging nonclaimants in the South China Sea to stay out of discussions. “Countries that are not parties to the disputes should not get involved,” Mr Li said in a speech to the broader East Asia summit also held yesterday in Brunei.

“Freedom of navigation in the South China Sea has never been an issue and will never be one.” U.S. President Barack Obama’s absence at a series of summits in Bali and Brunei this week because of the partial U.S. government shutdown may give China space to press for more influence in the region. Mr Li said Asean and China should start negotiations for an upgraded free trade agreement. “We reaffirm our opposition to trade protectionism,” Asean leaders said in their joint statement with China. “We will endeavour to achieve the goal of two-way trade of US$500 billion by 2015 and US$1 trillion by 2020, and twoway investment of US$150 billion in the next eight years.” Reuters

Shunfeng bids for troubled Suntech

hinese solar panel maker Shunfeng Photovoltaic International Ltd has been chosen as the preferred bidder for a stake in the main unit of troubled rival Suntech Power Holdings Co Ltd, according to a notice issued by China’s Wuxi government. Shares of Shunfeng in Hong Kong surged more 20.79 percent to HK$4.88 yesterday, adding to a more than 20 percent gain on Wednesday after the company said it had submitted a bid. A source close to the situation said the success of the bid would depend on whether Shunfeng could strike a debt restructuring deal with Wuxi Suntech’s creditors. Amid a worsening glut in solar panels globally, Suntech filed for bankruptcy protection in China in March, five days after its New Yorklisted parent company defaulted on a US$541 million dollar convertible

Investors flock to Jiangsu bonds

hina’s Jiangsu province sold 15.3 billion yuan (US$2.50 billion) worth of bonds at low yields yesterday, suggesting that investors see little risk of default by one of the country’s richest provinces but also its most heavily indebted. Chinese localities are forbidden from issuing debt directly outside the small pilot project under which the province sold debt yesterday. But since 2009, local governments such as Jiangsu have increasingly evaded this restriction by borrowing through state-owned investment companies known as local-government financing vehicles (LGFVs). Such borrowing is technically corporate debt but is widely understood to carry an

bond. The unit has US$1.75 billion in debt. Shunfeng won the auction by beating out its only rival bidder – a consortium led by Wuxi Guolian Development Group Co Ltd, the investment arm of the city government of Wuxi where Suntech is headquartered, according to the government notice seen by Reuters. The value of the bid is not known. Shunfeng has made a 500 million yuan (US$82 million) deposit on the offer, which is aimed at strengthening its solar cell and module manufacturing capability and aiding its diversification into the operation of solar power plants. Reuters

implicit government guarantee. The pilot project for direct bond issuance is an effort to make local government debt issuance more transparent by decreasing reliance on opaque financing vehicles. The yields of 3.88 percent and 4.00 percent, respectively, for five- and seven-year bonds auctioned yesterday were both within three basis points of yields on central government bonds of the same maturity. The low yields suggest that investors view Jiangsu’s directlyissued bonds, which carry an explicit government guarantee, as much safer than debt issued by its LGFVs. Many trust loans carry interest rates above 10 percent for one- or two-year loans. Financing vehicles in Jiangsu accounted for 30 percent of all investment trusts sold in China in 2012, Shenzhen-based data provider Use-Trust said. Reuters

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Greater China Lotteries see highest growth since May 2012 Chinese lottery revenues for August grew at their fastest rate since May 2012, with sports lottery sales growth peaking at 31.8 percent. Combined revenue from the welfare and sports lotteries came to 24.62 billion yuan (US$4.02 billion), a 24.9 percent increase from last year, the Ministry of Finance said. The jump in monthly revenue pushed market growth for the year to 17.6 percent, at 198.7 billion yuan.

HK looks underground as developers eye parks Officials scour the territory for new places to build as city’s need for housing urgent Yimou Lee and Alexandra Hoegberg

of its territory – already houses 1.9 million people. Six areas for future reclamation have been proposed by the Development Bureau to potentially create up to a further 3,100 hectares of land. Another plan on the drawing board is man-made islands close to the city’s financial district, where the Development Bureau aims to create up to 2,400 hectares of “extension of urban area” to accommodate largescale community and industrial facilities. No further details on the proposed islands are available for now, the Development Bureau told Reuters.

Going underground

120%

Jump in house prices since 2008

The government is looking into all options that can create space

More than 7 million people packed into just 30 pct of the territory

ild boar and water buffalo are not an image most people associate with one of the world’s great global financial centres. Yet in Hong Kong, where more than 7 million people are packed into just 30 percent of the territory, the green belts, country parks, woodlands and wetlands that take up the rest of the land provide ample space for such animals to roam. That could be about to change. As officials scour the territory for new places to build, the prospect of going underground, creating manmade islands or developing the city’s cherished parks are all among the options being discussed. One idea is to build a crossharbour pedestrian corridor – with shops and entertainment facilities along the way – underneath the city’s kilometre-wide Victoria Harbour. Encroaching onto the green spaces has strong support from Hong Kong’s powerful property tycoons, who are feeling the heat from a series of tightening measures aimed at reining in prices that have jumped 120 percent since 2008. Gordon Wu, chairman of developer Hopewell Holdings Ltd

and vice president of the Real East Developers’ Association, calls the attachment to parks “stupid”. But some business executives say the rural habitats that make up the bulk of Hong Kong’s roughly 1,100 sq km (425 sq miles) help give the city an edge over rival global finance centres in the eyes of many expatriates. “They like that you can get out of Central and be up walking in the hills in 15 minutes,” said Simon Galpin, director-general of InvestHK, which supports foreign investment in Hong Kong. Richard Vuylsteke, president of the city’s American Chamber of Commerce, said people would not consider the city to be a great place to live if country parks were developed. “The quality of life has an impact on the quality of business,” he said.

Cage homes Last year, roughly 13 million people visited Hong Kong’s country parks, home to Burmese pythons, Chinese pangolins, civet cats, badgers and muntjac deer. But the space devoted to wildlife creates a dilemma for authorities

With strong public objections against developing country parks and further reclamation, authorities have another idea in mind: move the city underground. Hong Kong is conducting its first territory-wide study into the feasibility of creating an extensive underground city, with retail outlets, pedestrian links, a sports field and even a columbarium. “The government is looking into all options that can create space,” said Samuel Ng, chief geotechnical engineer at the Civil Engineering and Development Department. Mr Ng, who is responsible for the study, said by moving facilities such as refuse collection points underground, land could be freed up. “If we develop it properly, maybe in 10 years time it really becomes a solution option for us,” he said.

trying to find homes for the 230,000 people on a waiting list for public housing in one of the world’s most expensive property markets. Officials estimate an additional 470,000 flats will be needed in the next decade. “Why are boar allowed to wander around while humans are forced to live in cubicle apartments and cage homes?” Mr Wu told local television last month, referring to the stacked wire mesh hutches where some of the city’s poorest people live. “You say country park is the pride of Hong Kong, but I think it is stupid.” New World Development Co Ltd’s chairman Henry Cheng Kar Shun and billionaire Lee Shau Kee, chairman of Henderson Land Development Co Ltd, also see country parks as an ideal solution to the city’s housing problem. The government forecasts it will need to build one new town that would house roughly 600,000 people per decade over the next 30 years due to the continuous inflow of people to the city, both from mainland China and elsewhere. Sea reclamation is another option. Hong Kong’s 6,800 hectares of reclaimed land – about 6 percent

Samuel Ng, Civil Engineering and Development Department

The department said it would identify 15 urban areas for underground development by the end of 2015, with each site covering a surface area of at least 40 hectares – roughly twice the size of Victoria Park, the largest park on Hong Kong Island. But experts said moving facilities underground will be many times more expensive than surface projects due to higher construction costs. Lengthy studies are also needed on the feasibility of underground projects, and the city’s need for housing is urgent. “They are expensive and it also takes some while,” said Bernard Lim, president at Hong Kong Institute of Urban Design. “It’s definitely not the immediate answer.” Reuters

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October 2013 April 19,11, 2013

Asia

Korean banks’ margins to drop on rate decline Lender’ margins seen at four-year low Seonjin Cha

outh Korean banks may close 2013 with the lowest profitability in four years as central bank rate cuts meant to stimulate Asia’s fourth-biggest economy squeeze loan margins further. Three rate decreases by the Bank of Korea since July 2012 have left borrowing costs near a three-year low and average net interest margin for lenders, including Shinhan Financial Group Co, at the lowest since 2009, according to Financial Supervisory Service data. “Rate reductions since last year have slammed into the banks’ interest margins,” said Taye Shim, a Seoulbased analyst at Daewoo Securities Co who forecasts the gauge will slip to an average 2.28 percent in 2013 from 2.51 percent last year at the nation’s seven biggest banks. “Loan margin will probably show mild growth from 2014 after hitting a bottom in the second half of this year.” While the Bank of Korea yesterday cut its growth forecast for next year, it still expects the expansion

to accelerate. Faster growth and prospects for global rate increases may lift profitability at South Korea’s seven biggest banks including KB Financial Group Inc by an average 10 basis points next year from 2013, according to four analysts surveyed by Bloomberg. South Korea’s economy will expand 3.8 percent in 2014, slower than the 4 percent previously forecast, the central bank said. It left its projection for 2013’s growth at 2.8 percent. It also kept the benchmark interest rate unchanged at 2.5 percent for a fifth month to bolster the economic rebound.

Profit drop The nation’s lenders since 2011 have cut executive ranks and closed unprofitable branches to preserve profit amid tightening margins and sluggish credit demand. The average net interest margin at the country’s 18 banks was 2.1 percent last year, the lowest since

2009, following the global financial crisis, FSS data show. It dropped to 1.88 percent at the end of the second quarter, resulting in a 56 percent slump in lenders’ combined net income compared with a year earlier, the data show. Net interest margin for Southeast Asian banks averaged 4.5 percent and 2.9 percent for banks in the world’s top 20 economies, including South Korea, according to data from the companies’ latest filings compiled by Bloomberg. Combined second-quarter interest income for Korean lenders stood at 18 trillion won, the lowest level since at least 2009, according to the regulator.

Rate gap The time lag between adjustments on loan rates and the rates banks pay on deposits has deepened the impact of central bank rate cuts on banks’ profitability, according to Kim Jae Woo, an

analyst at Samsung Securities Co. Interest rates on almost 80 percent of the country’s outstanding loans are variable and adjust quarterly to reflect benchmark rates. That compares with the average 12-month term for time deposits at Korean banks, he said. The interest rate spread in August between what South Korean banks charge customers on new loans, and the amount banks pay customers on time deposits, narrowed to 1.92 percentage points from 2.03 percentage points a year earlier, according to central bank data. “Interest margin isn’t a factor banks can control as it’s closely tied to macroeconomic conditions,” said Kim Woo Jin, a senior researcher at the Seoul-based Korea Institute of Finance. “To Korean banks, whose revenue heavily relies on interest income, the low-rate environment has brought huge negatives.” Lending accounts for about 80 percent of the banks’ profit, he said. South Korea’s total outstanding bank loans in July rose 4.1 percent from a year earlier to 1.13 trillion won (US$1,05 billion), according to Bank of Korea data. Loans rose 3.4 percent last year to 1,099 trillion won, the slowest growth since at least 1999. “South Korean banks will need to accept the structural changes of a low-growth era,” said Korea Institute of Finance’s Mr Kim. “The country no longer has the growth potential of an emerging nation like Indonesia and Malaysia. Banks need to find a way to reduce their dependence on interest income and cut back costs, which won’t be resolved overnight.”

Seagate redeems shares held by Samsung Samsung set for US$1.4 bln windfall after stock sale

amsung Electronics Co Ltd will reap a US$1.4 billion windfall from its decision two years ago to accept stock in Seagate Technology Plc as partial payment for selling its computer harddisk drive business. Samsung sold the unit in April 2011 for US$687.5

million in cash and US$687.5 million in stock. Since then Seagate’s shares have more than doubled and Samsung agreed to sell part of the stake back to the Dublin-based company. Samsung exited its 22-yearold business making hard drives to focus on consumer electronics, memory chips

and medical technology. The world’s biggest smartphone maker will sell back 32.7 million of its Seagate shares for US$1.51 billion. It will keep another 12.5 million shares, valued at US$561 million based on Wednesday’s prices. “Its good news for Samsung and a positive for

the company that may be reflected in the fourth quarter result,” said Ahn Seong Ho, a Seoul-based analyst at Hanwha Investment & Securities Co. “Samsung’s key business now is mobile devices, including smartphones and tablets.” Nam Ki Yung, a spokes-

Bloomberg News

man for Samsung, declined to comment on the potential profit. Since selling the business, Samsung has become the world’s biggest smartphone maker while Seagate shares have surged as it regained its investment grade at Fitch Ratings and Standard & Poor’s. Samsung began making hard-disk drives in 1989 and the business was part of the company’s semiconductor unit, the world’s largest. The company is also the biggest maker of televisions. Bloomberg News

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October 11, 2013 April 19, 2013

Asia U.S., Vietnam sign nuclear agreement The United States and Vietnam yesterday signed a pact that would allow the transfer of nuclear technology to the Southeast Asian nation and open the way for U.S. investment in the burgeoning industry, in another sign that Washington is seeking stronger economic and strategic ties in the region. U.S. Secretary of State John Kerry said the U.S.Vietnam Civil Nuclear Cooperation Agreement would allow U.S. firms to tap Vietnam’s future nuclear power market, although the State Department said the deal will not allow Vietnam to enrich or reprocess U.S.-origin nuclear materials. “This agreement will create numerous opportunities for our businesses,” Mr Kerry told Vietnam’s Foreign Minister Pham Binh Minh on the sidelines of an Asian summit in Brunei. “Obviously our nuclear cooperation is quite significant.” Vietnam is working with Russia to build its first nuclear plant in 2014 for completion in 2020 in the south-central province of Ninh Thuan, as demand for energy grows rapidly in response to economic growth of around 5 percent a year. It has also signed an agreement with a Japanese consortium to develop a second nuclear power plant in the same province, with two reactors to become operational in 2024-2025. Vietnam has the second-largest market after China for nuclear power in East Asia, which was expected to grow to US$50 billion by 2030, according to Mr Kerry. The United States has moved to improve economic and security ties with Vietnam, part of its strategic rebalancing towards Asia that some see as a policy to counter China’s rising clout.

Bank Indonesia regulates currency hedging Rules expected to reduce rupiah volatility

ank Indonesia said it will regulate currency hedging by individuals and companies, including state-owned firms, to help stabilise Asia’s most-volatile currency. The central bank will require Indonesians and corporations to present documents to show underlying economic activity, such as international trade, foreign debt and investments, to conduct hedging transactions with lenders, it said in a statement posted on its website yesterday. The amount and duration of the hedges will be limited by the underlying activity, it said. “There was previously no framework to guide currency hedging,” said Tri Sulistianing Astuti, a foreign-exchange dealer at PT Bank Rakyat Indonesia in Jakarta. “With increased awareness, both banks and companies won’t be hesitant to provide and take out hedges, which will reduce rupiah volatility as companies can better organise their dollar demand.” The rupiah has fallen 16 percent against the greenback this year, the most among 24 emerging-market currencies tracked by Bloomberg, as Indonesia’s record current-account deficit and signs the Federal Reserve was preparing to cut stimulus deterred investors. One-month implied volatility, a measure of expected moves in the exchange rate used to

price options more than doubled to 15.73 percent, the highest in Asia. “This rule was issued as the regulatory framework for economic players in mitigating market risk amid the dynamics of the domestic foreign-currency market,” Bank Indonesia said in the statement.

State-owned firms The State-Owned Enterprises Ministry on September 25 said government-held firms can hedge against currency swings. Any gains or losses made from the hedging transactions will be accounted as company profit or cost, Difi Johansyah, a Bank Indonesia spokesman, said. Spot trading now accounts for an average of 73 percent of domestic foreign-exchange transactions and for all activity by state-owned firms, Mr Johansyah said. The monetary authority expects the proportion of swaps and forwards trading to increase following the introduction of the new rules, he said. Bank Indonesia set its first spot benchmark for the rupiah in May to develop the onshore currency derivatives market by providing a reliable reference to settle the contracts, Mr Johansyah said. The gauge competes with the daily fixing set by the Association of Banks in Singapore, which is used

The rupiah has fallen 16 pct against the greenback this year

to settle non-deliverable forwards. The association changed how it sets the benchmark to using realised trades, from compiling submissions from lenders, it said in a June 14 statement. The Monetary Authority of Singapore began a review into potential manipulation of the NDF references in September last year. Indonesia posted a currentaccount deficit of US$9.8 billion in the second quarter, or about 4.4 percent of gross domestic product. The shortfall may be 3.4 percent of GDP in 2013, Bank Indonesia Governor Agus Martowardojo said on Wednesday after holding the benchmark interest rate at 7.25 percent. Bloomberg News

Uniqlo store operator posts record profit Fast Retailing Co Ltd, Asia’s biggest retailer, posted record revenue and operating profit in its last financial year but fell slightly short of its profit target as heavy discounting depressed margins at its flagship Uniqlo casual clothing stores. Fast Retailing, which competes with Zara-owner Inditex SA and Hennes & Mauritz AB (H&M), posted a 5.1 percent increase in operating profit to 132.92 billion yen (US$1.37 billion) for the year ended August 31, below its guidance of 143.50 billion yen. It was also below expectations of 144.4 billion yen, the average of 21 analysts’ estimates according to Thomson Reuters Starmine. The company posted strong sales at Uniqlo, which accounts for the bulk of its business, as seasonal lines such as its breathable innerwear, Airism, and mid-length pants sold well through the hottest summer ever recorded in Japan. Profit margins at Uniqlo, known for its casual clothing ranges, were depressed by discounting as it moved to boost customer traffic, but in the current financial year the company plans to lure consumers upmarket into higher-margin items such as cashmere sweaters. Fast Retailing forecast a 17.4 percent increase in operating profit in the current financial year while sales were seen increasing 16.4 percent to 1.33 trillion yen, slowing from last year’s 23.1 percent rate of revenue growth. Fast Retailing’s shares fell 0.6 percent yesterday to end at 34,550 yen, compared with the Nikkei’s 1.1 percent rise.

Japan machine orders at highest since 2008 Strong orders bodes well for durable recovery

apan took another step forward to cementing a durable economic recovery, as core machinery orders rose in August to their highest level since the global financial crisis, a welcome sign for achieving sustainable growth. The 5.4 percent month-on-month rise in core orders, which exclude those for ships and electric power utilities, was the first rise in three months, data from the Cabinet Office showed yesterday. The reading also beat economists’ median forecast for a 2.0 percent gain, and followed a slight fall in July. The value of core orders reached 819 billion yen (US$8.4 billion), the biggest since the September 2008 collapse of U.S. investment bank Lehman Brothers triggered the global recession. The outcome is an encouraging

sign for Prime Minister Shinzo Abe, who is hoping the positive mood generated by his reflationary policies, dubbed “Abenomics”, will lead to a virtuous cycle of higher capital spending, growth in wages and private consumption. The government and the Bank of Japan see a recovery in capital spending as key in driving a sustained economic recovery and breaking 15 years of grinding deflation, paving the way for the ultimate success of Mr Abe’s policies. Growth so far this year suggests that the recovery in the world’s third-largest economy is solidifying, although the jury is still out on whether capital spending is about to take a decisive turn for the better. Second quarter gross domestic product data last month showed capital spending rose 1.3 percent, marking the

first increase in six quarters. “The [machinery] data confirmed a recovery in capital spending led by non-manufacturers, reflecting effects from Abenomics,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. Analysts expect companies to spend more on plant and equipment in coming months as the BOJ’s key tankan survey earlier this month showed confidence among big manufacturers hit its highest in nearly six years in the third quarter. In another positive signal for the economy, Japanese consumer confidence rose for the first time in four months in September, a government survey showed yesterday, reflecting improved views on incomes and jobs. 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

Mizuho under pressure as FSA scrutinises loans President steps down amid scandal over lending to criminal groups

ressure on Mizuho Financial Group Inc president Yasuhiro Sato mounted after Japan’s financial regulator told the bank to explain how and when top executives found out about its loans to crime groups. The Financial Services Agency issued the order on Wednesday after Mizuho said it erred in reporting only lower-ranking officials knew of the loans, an FSA official told reporters in Tokyo, asking not to be named in accordance with its policy. The order, the first against the parent company about the matter, comes less than two weeks after the FSA told Mizuho’s banking unit to improve compliance for allowing members of crime groups to borrow money through a consumer credit affiliate. Mr Sato said this week that he was unaware of the lending until the regulator’s investigation in March. Backtracking on his earlier denial, a red-faced Mizuho Bank said that two bank presidents knew that loans had been extended to gangsters, Japanese media reported yesterday. Mr Sato said that he will resign from public positions, including as a privatesector member of the government’s Industrial Competitiveness Council, to take responsibility for not taking any measures to halt the loans. “The situation is clearly getting more negative,” said Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc.

World Bank to sell US$1 bln offshore rupee bonds I

nternational Finance Corp, the World Bank’s investment arm, plans to sell a record US$1 billion of rupee bonds offshore to fund its investments as India struggles to lure capital amid the slowest growth in a decade. The bond sale aims to “attract greater foreign investment in a time of renewed economic uncertainty across the world,” the Washington-based IFC said in a statement yesterday. The so-called synthetic debt is settled in foreign currencies and allows investors to profit from rupee interest rates. The notes would share the World Bank’s top rating, according to Citigroup Inc, compared with India’s lowest investment-grade status. “The announcement of the bonds issuance does not have direct implications towards altering the capital inflows arithmetic,” Gaurav Garg, a strategist at Citigroup in Singapore, wrote in a research report yesterday. “However, the step in

Yasuhiro Sato quits government panel amid scandal

“This is completely different from what they first reported,” chief cabinet secretary Yoshihide Suga said at a news briefing in Tokyo yesterday. “They bear great responsibility as an organisation and I believe the people of Japan will feel the same.” Since becoming president of Japan’s third-biggest bank by market value in June 2011, Mr Sato has overseen the merger of its corporate and retail lending units to better integrate the company under its “One Mizuho” brand. The lender was formed from the combination of three banks more than a decade ago. Masako Shiono, a spokeswoman

the right direction towards greater capital account convertibility should support investor confidence further.” India’s rupee has rebounded 11 percent from a record low on August 28, the best performance in Asia and almost halving the year’s drop, as central bank Governor Raghuram Rajan offered concessional swaps to boost the supply of dollars. Citigroup predicts the rupee’s outperformance will continue, and has a buy-call on the currency. Foreign investors have cut holdings of rupee-denominated debt to US$25.9 billion as of October 8, the lowest since December 2011, official data show, as the U.S. prepares to pare stimulus. India’s economy expanded 5 percent in the fiscal year ended March, the smallest gain in a decade and the nation’s currentaccount deficit makes it reliant on overseas funding. India represents the biggest country exposure in IFC’s investment portfolio, with a total amount of US$4.5 billion as of June, said IFC, which focuses on the private sector. The IFC has sold bonds in 13 local currencies, including the Brazilian real, the Chinese yuan, and the Russian rouble. “This is a new initiative for the intermediation of international savings for development in India,” Arvind Mayaram, Secretary of Economic Affairs in India’s Ministry of Finance, said in the IFC statement. “It will also help deepen the capital markets in India and establish an Indian rupee benchmark in the global markets.” Bloomberg News

for Mizuho in Tokyo, said the holding company and banking unit both received the latest orders. They must report back to the FSA by October 28.

The FSA said earlier this week that it will take appropriate action after the bank and an independent panel complete investigations. Mizuho Bank Ltd made 230 loans, mostly for automobiles, valued at about 200 million yen (US$2 million), through its Orient Corp consumer credit affiliate, the FSA said that day. The bank failed to take enough steps to break off the transactions with “antisocial forces,” the regulator said. Standard & Poor’s said Mizuho’s credit rating won’t be affected by the correction of its report to the FSA or by the business improvement order, citing the “small” amount of transactions with crime group members. Still, revenue may be hurt if the regulator takes further action or the bank’s “lost business becomes substantial,” S&P said in a statement. Bloomberg News/T.A.

14 14

October 11, 2013 April 19, 2013

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

Max 57.10

average 56.147

Min 55.45

57.10

85.6

56.76

85.1

56.42

84.6

56.08

84.1

55.74

83.6

55.40

Last 56.65

Max 85.6

average 83.977

Min 83.1

Last 84.6

Last 50.50

PRICE

26.2

49.50

28.14

22.1

27.96 22.0

Max 22.30

average 22.135

DAY %

YTD %

(H) 52W

Min 21.95

Last 22.25

(L) 52W

0.324771184

9.050064185

111.3399963

85.79000092

BRENT CRUDE FUTR Nov13

109.87

0.742710435

4.399467883

115.7599945

96.19999695

GASOLINE RBOB FUT Nov13

264.72

0.922607701

3.092141132

293.6000109

243.3699846

GAS OIL FUT (ICE) Nov13

934.5

1.054339011

3.373893805

980.25

837

NATURAL GAS FUTR Nov13

3.719

1.087251971

-0.694259012

4.59400034

3.281000137

303.75

0.666136409

1.656626506

322.3500013

276.8100023

Gold Spot $/Oz

1300.14

-0.7883

-21.8882

1774.88

1180.57

Silver Spot $/Oz

21.7995

-1.4943

-27.6005

34.3838

18.2208

Platinum Spot $/Oz

1383.37

-0.5485

-8.8539

1742.8

1294.18

Palladium Spot $/Oz

703.25

-0.5445

0.5131

786.5

587.4

1858

-0.375335121

-10.37144235

2184

1758

7099.5

-1.93383521

-10.48417602

8346

6602 1811.75

NY Harb ULSD Fut Nov13

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

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Nov13 Dec13

WHEAT FUTURE(CBT) Dec13

1887

0.106100796

-9.278846154

2230

13660

-1.726618705

-19.92966002

18770

13205

15.025

-0.661157025

-2.530003244

16.65000153

14.68999958

445.25

0.394588501

-25.76073364

647

435

692.75

0.325850833

-15.59549193

913

635.5

SOYBEAN FUTURE Nov13

21.9

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

27.78 Max 28.50

average 27.934

Min 27.65

Last 28.00

27.60

1294

0.485342652

-0.671656112

1409.5

1162.5

0.607375271

-25.88686481

182.6499939

113.1999969

NAME

SUGAR #11 (WORLD) Mar14

18.54

-0.268961807

-9.912536443

21.89999962

16.69999886

COTTON NO.2 FUTR Dec13

83.89

0.829326923

6.540513081

93.72000122

74.34999847

World Stock Markets - Indices

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

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9433 1.5935 0.9106 1.3519 97.83 7.9871 7.7543 6.1161 62.035 31.414 1.2521 29.403 43.153 11329 92.287 1.23105 0.84844 8.2658 10.7976 132.26 1.03

-0.3065 -0.2317 -0.1098 -0.0074 -0.5418 -0.005 0.0026 0.0621 -0.1612 0.1241 -0.0799 0.2857 -0.0324 -1.0239 -0.2351 -0.1048 -0.2298 0.1573 -0.0037 -0.5293 0

-9.1058 -1.4899 0.5271 2.4943 -11.9902 -0.0488 -0.0477 1.8721 -11.3484 -2.6549 -2.4519 -1.2584 -4.9776 -13.5581 -3.2074 -1.9146 -3.8918 -0.5843 -2.4746 -14.1313 -0.0097

1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3002 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 79.734 1.20302 0.79607 7.8281 10.1113 100.16 1.0289

Macau Related Stocks

115.95

COFFEE 'C' FUTURE Dec13

NAME

Last 26.90

28.32

101.94

CORN FUTURE

Min 26.25

22.2

WTI CRUDE FUTURE Nov13

LME ZINC

average 26.566

Currency Exchange Rates

NAME

METALS

Max 26.95

50.62

Commodities ENERGY

26.4

28.50

49.78 Min 49.50

26.6

22.3

50.06

average 49.983

26.8

50.90

50.34

Max 50.85

83.1

27.0

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

ARISTOCRAT LEISU

4.76

-1.039501

CROWN LTD

15.7

-1.257862

AMAX HOLDINGS LT

1.26

BOC HONG KONG HO

25.05

VOLUME CRNCY

51.11111

5.02

2.56

2318159

47.14152

16.27

9.3

2303532

8.62069

-9.999998

1.72

0.75

4258200

3.941907

22.85

7911552 656000

CENTURY LEGEND

0.41

54.71699

0.56

0.232

CHEUK NANG HLDGS

6.81

-0.1466276

13.68949

6.84

3.87

222000

CHINA OVERSEAS

24.1

1.260504

4.329003

25.6

17.7

25026934

CHINESE ESTATES

19.52

0.4115226

73.5798

19.9

9.337

121946

CHOW TAI FOOK JE

11.4

-2.730375

-8.360126

13.4

7.44

8723800

EMPEROR ENTERTAI

3.98

1.015228

110.582

1.43

5460000

FUTURE BRIGHT

2.46

-1.6

102.9659

2.76

1.103

1718000

GALAXY ENTERTAIN

56.65

-0.6140351

86.65568

58.8

24.2

12278347

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14802.98

0.1790001

12.96415

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3677.776

-0.4616447

21.80027

3819.275

2810.8

FTSE 100 INDEX

6390.54

0.8303999

8.354457

6875.62

5605.589844

HANG SENG BK

126.9

-0.2358491

6.908175

132.8

110.6

879418

DAX INDEX

8600.42

0.9831284

12.97923

8770.1

6950.53

HOPEWELL HLDGS

26.35

0.1901141

-20.75188

35.3

23.2

1128637

NIKKEI 225

14194.71

1.11748

36.55088

15942.6

8488.14

HSBC HLDGS PLC

HANG SENG INDEX

22951.3

-0.3589047

1.299298

23944.74

19426.35938

CSI 300 INDEX

2429.317

-0.9890026

-3.711328

2791.303

2023.171

TAIWAN TAIEX INDEX

8344.73

-0.3691654

8.38016

8439.15

7050.05

MGM CHINA HOLDIN

26.9

KOSPI INDEX

2001.4

-0.06790629

0.21782

2042.48

1770.53

MIDLAND HOLDINGS

3.13

NEPTUNE GROUP

0.2

NEW WORLD DEV SANDS CHINA LTD

S&P/ASX 200 INDEX

83.45

0.180072

2.644523

90.7

72.85

12045339

HUTCHISON TELE H

3.56

1.136364

4.66

2.98

24827000

LUK FOOK HLDGS I

25.15

0.3992016

3.073772

30.05

16.88

535000

MELCO INTL DEVEL

21.45

0.2336449

138.0688

22.2

6.61

4328452

102.5865

27.9

12.236

2739147

1.294498

-15.40541

4.85

2.68

1134000

-0.4975124

31.57895

0.23

0.131

35833000

11.2

-1.060071

-6.821967

15.12

9.98

17438296

50.5

0.1984127

48.74816

51.15

26.35

11392639

SHUN HO RESOURCE

1.68

-1.176471

1.92

1.19

134000

-0.8810573

7.398567

4.65

2.97

4064001

5147.142

-0.1134681

10.71622

5314.3

4334.3

4479.338

0.4913136

3.767956

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1777.23

0.45842

5.226918

1826.22

1590.67

NZX ALL INDEX

991.993

0.164485

12.4641

1005.231

846.364

SHUN TAK HOLDING

4.5

PHILIPPINES ALL SHARE IX

3892.06

0.8993174

5.21982

4571.4

3440.12

SJM HOLDINGS LTD

22.25

1.830664

25.36866

22.5

15.973

11095339

10.3

0.5859375

-26.84659

16.22

9.97

7899148

WYNN MACAU LTD

-0.3558719

33.65155

29.05

3989744

ASIA ENTERTAINME

3.96

#N/A N/A

69409

BALLY TECHNOLOGI

67.81

0.6680523

51.6663

76.3

43.16

445332

BOC HONG KONG HO

3.24

5.537462

3.6

2.99

17834

GALAXY ENTERTAIN

7.33

-0.2721088

84.63476

7.59

3.11

5100

INTL GAME TECH

18.32

0.770077

29.28723

21.2

12.37

3373273

JONES LANG LASAL

83.98

1.572327 0.04765018

101.46

72.56

1105880

LAS VEGAS SANDS

64.91

0.9016011

40.61958

67.351

37.8353

4134340

MELCO CROWN-ADR

31.57

-0.09493671

87.47031

33.59

13.07

4105362

MGM CHINA HOLDIN

3.55

102.8234

3.57

1.6651

700

MGM RESORTS INTE

20.03

0.4513541

72.07903

20.9

9.15

11756905

SHFL ENTERTAINME

23.12

0.2167317

59.44828

23.21

12.35

542361

SJM HOLDINGS LTD

2.84

0.7092199

24.69178

2.9481

2.0508

100200

157.73

0.3307678

40.21691

162.33

103.0933

1309154

JAKARTA COMPOSITE INDEX

Euromoney Dragon 300 Index Sin

610.3

0.01

-1.74

STOCK EXCH OF THAI INDEX

1451.76

1.19192

4.298345

1649.77

1260.08

HO CHI MINH STOCK INDEX

494.81

-1.170432

19.59732

533.15

372.39

Laos Composite Index

1308.36

1.418539

7.704336

1455.82

1038.79

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

SMARTONE TELECOM

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

37.35

0.1340483

22615221

CHINA UNICOM HON

ALUMINUM CORP-H

2.84

1.792115

15478150

CITIC PACIFIC

BANK OF CHINA-H

AIA GROUP LTD

3.59

-0.5540166

254023072

BANK OF COMMUN-H

5.7

-0.8695652

20649054

BANK EAST ASIA

0.456621

1749805

BELLE INTERNATIO

11.42

-2.559727

13310968

BOC HONG KONG HO

25.05

7911552

NAME

CLP HLDGS LTD

DAY %

VOLUME

12.58

-2.177294

46592158

11.1

0.3616637

6775543

62.2

-0.6389776

3408527

15.54

-1.270648

63581088

11.8

-0.3378378

HANG LUNG PROPER

CNOOC LTD COSCO PAC LTD ESPRIT HLDGS

CATHAY PAC AIR

15.28

0.2624672

1932722

HANG SENG BK

CHEUNG KONG

122.4

-0.1631321

2936889

HENDERSON LAND D

CHINA COAL ENE-H

4.68

-0.6369427

28095349

CHINA CONST BA-H

5.98

-0.8291874

243096600

CHINA LIFE INS-H

20.35

-0.7317073

18295536

CHINA MERCHANT

29.75

1.883562

3408668

CHINA MOBILE

PRICE

HENGAN INTL HONG KG CHINA GS

POWER ASSETS HOL SANDS CHINA LTD

PRICE

DAY %

67.55

-0.0739645

VOLUME 1689276

50.5

0.1984127

11392639

SINO LAND CO

11.24

-0.1776199

5752796

SUN HUNG KAI PRO

102.6

0.489716

4228924

3410862

SWIRE PACIFIC-A

90.85

-0.872886

1338497

-0.7633588

6143010

TENCENT HOLDINGS

409.8

-0.9666506

3779694

25.85

-0.9578544

3098448

TINGYI HLDG CO

19.62

-0.6079027

7548000

126.9

-0.2358491

879418

WANT WANT CHINA

11.74

-1.011804

8833396

46.2

-0.7518797

4712412

68.1

1.641791

4646215

90.85

-0.4383562

1326313

18.3

-0.5434783

9322802

HONG KONG EXCHNG

126.9 -0.07874016

HSBC HLDGS PLC

83.45

0.180072

WHARF HLDG

MOVERS

2832717 12045339

-0.1782531

17389254

HUTCHISON WHAMPO

97.2

-0.4608295

8850621

CHINA OVERSEAS

24.1

1.260504

25026934

IND & COMM BK-H

5.45

-0.7285974

181382774

CHINA PETROLEU-H

6.17

-0.6441224

55218918

LI & FUNG LTD

10.8

-0.3690037

22732358

CHINA RES ENTERP

0.2004008

3170048

MTR CORP

30.2

-0.8210181

2046479

CHINA RES LAND

NAME

0.2178649

3493602

NEW WORLD DEV

11.2

-1.060071

17438296

CHINA RES POWER

19.52

-2.204409

12591253

PETROCHINA CO-H

8.82

-0.7874016

95277168

CHINA SHENHUA-H

23.45

14284457

PING AN INSURA-H

57.25

-0.9515571

11240707

23207

INDEX 22951.3 HIGH

23206.44

LOW

22802.35

52W (H) 23944.74 (L) 19426.35938

22802

08-October

10-October

15 15

October 2013 April 19,11, 2013

Opinion Business

Re-decentralising the Fed

Leading reports from Asia’s best business newspapers

wires Taipei Times

Amar Bhidé

Professor at Tufts University’s Fletcher School of Law and Diplomacy and the author of A Call for Judgment

cross-currents that buffet prices and jobs. In the rapids, it is best to concentrate on keeping the canoe from capsizing, rather than worrying about maintaining a straight course.

Taiwan’s Democratic Progressive Party (DPP) initiated a no-confidence motion against what it described as Presdient Ma Ying-jeou administration’s destruction of the Constitution and political destabilisation. Dpp’s chairman Su Tsengchang said last week that the party would choose the best of three constitutional mechanisms – recall, impeachment, or a noconfidence motion – to hold Mr Ma accountable for the damage he has done to the Constitution, as well as resolve the political crisis sparked by the dispute between Ma and Legislative Speaker Wang Jin-pyng.

Creative thinking

Inquirer Business Macau casino developer Melco Crown Entertainment Ltd is raising its investment in a US$1-billion casino project in the Philippines to offer more gaming tables and luxury hotel rooms, the company said on Wednesday. The “City of Dreams Manila” project, to open in mid-2014, will now require an initial outlay of US$680 million, or US$60 million more than previously announced, Lawrence Ho Yau Lung said in Manila. “As a company we make sure that there’s good value in terms of where we put the money in,” he said. The casino is a joint venture with the SM Group of billionaire Henry Sy.

Jakarta Globe Tin smelters in Indonesia started to furlough staff in the biggest producing region as some companies have yet to meet a new rule requiring metal be traded on a local exchange before shipment. “It’s hard for us, some smelters have stopped operations and put workers on furlough,” said Tjahyono Mukmin, president of Serumpun Tin, a group of 18 producers that wants to sell their output through the Jakarta Futures Exchange. Indonesia accounts for about 40 percent of global shipments of the metal.

Asahi Shimbun Backtracking on a denial made only days earlier at a news conference, a red-faced Mizuho Bank said that two bank presidents knew that loans had been extended to gangsters. The bank’s current president, Yasuhiro Sato, admitted that he and a former president knew about the loans to yakuza crime syndicate members. Mr Sato said that he will resign from public positions, including as a private-sector member of the government’s Industrial Competitiveness Council, to take responsibility for not taking any measures to halt the loans.

inancial circles are buzzing about Janet Yellen’s nomination to succeed Ben Bernanke as chair of the U.S. Federal Reserve. But they are largely ignoring another, much more fundamental question: How much discretion should the Fed – indeed, any central bank – be given to conduct daring monetary-policy experiments like the vast quantitative easing conducted by Bernanke’s Fed over the last five years? There is, of course, a role for bold experimentation. Many of life’s most important decisions are ultimately blind leaps, and accepted solutions often turn out to be wrong. For example, alcohol is now considered an inefficient method for cleaning wounds, because it kills infectionfighting white blood cells. In fact, venturesome trial and frequent error have driven human development. But experience has repeatedly demonstrated that, when it comes to government institutions, unchecked audacity is almost never desirable – and, in some cases, can be highly destructive. Mao Zedong’s rash decree in 1958 to eliminate China’s “pestilent” sparrows led to the proliferation of graineating locusts, diminishing yields and contributing to a famine that led to more than 20 million deaths. America’s system of government imposes particularly strict constraints on officials’ actions, reflecting a deep-rooted scepticism of philosopher-kings. Its political institutions are based on a carefully calibrated system of checks and balances, which, by enhancing accountability, helps to control the misjudgements and selfdealing of those in power. Where beliefs and interests diverge, America’s system

favours open debate that accommodates a wide range of views. After all, people are more willing to consent if their dissent has been heard.

Decentralised authority But checks and balances can also impede crucial reforms. Indeed, they are part of the reason why the United States did not establish a permanent central bank until the Federal Reserve Act of 1913 – long after the United Kingdom, France, and Germany – and, even then, authorised it only to prevent financial panic and monetary collapse. The fact that the Federal Reserve System comprises 12 regional reserve-holding banks reflects the fear at its founding that Wall Street financiers would otherwise capture monetary policy. How things have changed. Today, enormous power is concentrated in the hands of the 12-member Federal Open Market Committee, which sets interest rates and regulates the money supply behind closed doors – decisions that are not subject to review or challenge. Retirees can sue if their homes are seized for urban renewal, but not if the Fed’s financial suppression deprives them of a return on their savings. The Fed’s seemingly unchecked authority, like the National Security Agency’s warrantless surveillance, undermines ordinary Americans’ faith in their government. Tea Partiers and Occupy Wall Streeters alike now scorn the Fed – whose legitimacy is based on abstract theories that assume away winners and losers, rather than on democratic accountability – for serving the interests of major banks. A more decentralised monetary authority would align better with America’s

democratic traditions and economic reality.

Radical changes As it happens, governments directly provide only a thin “base” layer of money; most money is created by banks extending credit. Such a “loan-by-loan” process usually allocates money and credit effectively; however, it can overlend, stoking inflation and even triggering economic collapse. But centralised, one-size-fitsall monetary policies cannot counteract booms or busts reliably, and often have unintended consequences. For example, while raising interest rates may help to curb inflation and possibly even avert a credit bubble, doing so curtails both sound and unsound lending alike. A better approach would be to regulate individual banks, branches, and even loans, while limiting the Fed’s interventions to those that serve its original purpose of ensuring an adequate monetary base and acting as lender of last resort during panics, like the 2008 financial crisis. A return to monetary decentralisation would require radical policy changes, including the implementation of 1930’s-style laws enabling regulators to monitor banks, ensure that deposit insurance is credible and comprehensive, and halt off-balance-sheet financial activities. The Fed and other regulators would have to provide resources and backing to examiners in the field. Furthermore, Congress would have to relieve the Fed of unrealistic mandates for ensuring low unemployment and controlling inflation. While the Fed should be responsible for forestalling the monetary instability that can trigger intolerable inflation or mass unemployment, its policies cannot account for the many

More generally, there is a need for more creative economic thinking. Economists, beginning with Milton Friedman, have long emphasised top-down monetary policies; but they have failed to reach any useful consensus on the most effective strategy. Amid heated debates over whether monetary policy is too tight or too loose, a more grounded approach based on the “do no harm” principle has received little attention. Of course, achieving such radical decentralisation would take time. In the meantime, congressional review of topdown monetary-policy gambits could be established. As it stands, U.S. lawmakers routinely delegate technical issues to experts; but, given the hazards of these experts’ often-unwarranted certitude and insulation from popular opinion, lawmakers wisely retain authority over important decisions.

Central banking is too important to be left to technocrats

Indeed, the U.S. Constitution gives Congress far-reaching powers, including to declare war and appropriate funds for military campaigns. Against this background, major changes in Fed policy – such as the decision to purchase trillions of dollars’ worth of securities or push interest rates to zero – could easily be subjected to legislative approval (except in times of emergency). While such a system would reduce the Fed’s independence, it would put the onus of difficult political decisions where it belongs: on the democratically elected members of Congress. Countries with smaller, more homogenous economies and undivided, powerful governments might not benefit from more decentralisation and legislative review. And the European Central Bank, for example, faces unique challenges of governance and legitimacy. But, regardless of the circumstances, central banking is too important to be left to technocrats. © Project Syndicate

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October 11, 2013 April 19, 2013

Closing Caesars charts recovery with Ferris wheel

Computer sales fall as tablets grow

With US$23 billion in debt, the most of any United States hotel or casino company, Caesars Entertainment Corp bet its tight expansion budget on a 550foot Ferris wheel and “party district” right in the middle of the Strip, where 20 million people amble past its eight properties each year. The High Roller, set to debut in 2014, represents Las Vegas’ latest bid to reinvent itself for low-rolling tourists who have grown stingy at the blackjack tables. The US$550 million project is transforming the neighbourhood into a pedestrian-friendly dining, gambling and shopping experience, Caesars said.

Worldwide personal-computer shipments fell in the third quarter, reaching their lowest level for the period since 2008, market researcher Gartner Inc said. In the sixth consecutive quarterly decline, global unit sales fell 8.6 percent to 80.3 million. PC makers haven’t rolled out new products capable of winning back consumers who have been migrating to cheaper tablets to connect to the Internet, it added. “A greater availability of inexpensive Android tablets attracted first-time consumers in emerging markets, and as supplementary devices in mature markets,” said Mikako Kitagawa, an analyst at Gartner.

Alibaba decides against Hong Kong IPO: CEO says E-commerce giant not yet committed to other exchange

ECB sets currency swap line with PBOC Beijing pledged to expand cross-border use of the yuan

he European Central Bank and the People’s Bank of China agreed to establish a bilateral currency swap line, bolstering access to trade finance in the euro area and strengthening the international use of the yuan. The swap line will be valid for three years and have a maximum size of 350 billion yuan (US$57 billion) when Chinese currency is provided to the ECB and 45 billion euros (US$60.8 billion) when money is given to the PBOC, the Frankfurt-based central bank said in an e-mailed statement yesterday. The swap arrangement is available to all Eurosystem counterparties via national central banks, it said. “The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets,” the ECB said. “From the perspective of the Eurosystem, the swap arrangement is intended to serve as a backstop liquidity facility and to reassure euro area banks of the continuous provision of Chinese yuan.” The deal, set to be China’s secondlargest to date, is the latest of a string of currency swaps that China has created with other nations to promote usage of the yuan in global commercial and financial transactions, with the ultimate goal of rivalling the US dollar as a reserve currency. “The emphasis is on renminbi

internationalisation,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. He said currency swaps also provide central banks with additional liquidity in times of financial emergencies, though this function is of secondary purpose in China’s swap agreements. The swap deal with the ECB is China’s second-biggest with a foreign central bank, after South Korea’s 360 billion yuan swap line. China also has a 400 billion yuan swap agreement with Hong Kong. As China’s second-largest trade partner, Europe is a natural destination for Beijing in raising the yuan’s profile. The interest is reciprocated by some European nations such as Britain and Germany which want to be the clearing centre for the yuan in Europe and provide what may be a lucrative financial service.

Stepping up The yuan is now the world’s eighth most-traded currency, financial services provider SWIFT said this week, with a market share of 1.5 percent and overtaking the Swedish krona, the South Korean won and the Russian rouble. China’s swap deal with the ECB comes after French President Francois Hollande said in June that France is working on setting up a currency swap line with the world’s

No. 2 economy. Bank of France Governor Christian Noyer welcomed the agreement yesterday. “Banks in the eurozone and France will henceforth have the security they need to develop their activities in renminbi over the long term,” Mr Noyer said in a statement to Reuters. Only Hong Kong has been appointed by Beijing as an official offshore trading centre for the yuan, although banks in Taiwan and Singapore also provide similar services. With its status as a centre for global foreign exchange trading, London appears to be the forerunner in clinching an agreement with Beijing to become Europe’s offshore yuan trading centre, Chinese academics have said. Indeed, SWIFT said its data showed 60 percent of yuan trades are done out of Britain. In another development, China’s central bank said it will allow foreign businesses to invest in domestic financial firms using offshore yuan funding. Foreign businesses can invest their yuan revenues in domestic financial firms in several ways, including by setting up joint ventures or mergers or by buying stakes in domestic firms, the People’s Bank of China said in a statement on its website. Any such investments will still need to be approved by Chinese authorities, the central bank said. Reuters

hinese e-commerce company Alibaba Group Holding Ltd has decided not to list its shares in Hong Kong, but has not yet committed to listing on any other exchange, including the New York Stock Exchange, chief executive Jonathan Lu told Reuters yesterday. The company, founded in 1999 by billionaire Jack Ma, had planned to list on the Hong Kong stock exchange in an IPO analysts and bankers have said could raise up to US$15 billion. Alibaba failed to convince Hong Kong regulators to waive rules over the group’s unique partnership structure – specifically that 28 partners, mainly founders and senior executives, would keep control over a majority of the board, even though they own only around 13 percent of the company. “We’ve decided not to list in Hong Kong,” Mr Lu said in an interview at the company’s headquarters in Hangzhou city in Zhejiang province. “The Hong Kong authorities need time to study this corporate governance structure [for knowledge-based companies].” In his first public comment on Alibaba abandoning Hong Kong for the IPO, Mr Lu added the company had not yet committed to list on any other exchange, including the New York Stock Exchange. Alibaba, whose platforms handle more goods in a year than EBay Inc and Amazon.com Inc combined, expects to nearly triple the volume of transactions on its marketplaces to about 3 trillion yuan (US$490 billion) in three to four years from 2012, eventually surpassing WalMart Stores Inc. “In three years we hope to be the No. 1 retail network in the world – larger than Wal-Mart,” Mr Lu added. Reuters