Macau Business Daily, October 16, 2013 by Business Daily

Vitor Quintã

MOP 6.00

Govt ready to 1 pocket bust Reolian’s deposit

April 19, 2013

Page 3

www.macaubusinessdaily.com

Year II

Number 393 Wednesday October 16, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

City’s forex reserves slip in September Page 5

LVS told: rein in Spain and boost stock price

Likely assembly boss not ‘yes man’

Page 6

Macau is expected to follow tradition and promote the previous vice president of the Legislative Assembly to the president’s role in the new house. Ho Iat Seng, also chairman of Industrial Association of Macau, is odds-on favourite to replace Lau Cheok Va, who retired from politics at the end of the last session prior to the city’s election on September 15. “It’s only natural that he takes over, considering that he was the vice-president for the past four years,” legislator and Executive Council member Leonel Alves told Business Daily yesterday. But academic Lou Shenghua, of Macao Polytechnic Institute added Mr Ho would not shrink from challenging the administration. “His past performance shows he is sometimes critical of the government, particularly on the budget area,” said Mr Lou. More on page 4

Labour and youth courts will get staff

Brought to you by Zung Fu Motors (Macau) Limited

The Court of First Instance will have enough staff to run two new specialised tribunals said court president Ip Son Sang yesterday. Two judges each are to be assigned to the Labour Court and to the Family and Juvenile Court. Elsewhere the Commission Against Corruption has again called for changes to the election law following claims of vote buying in last month’s direct elections to the Legislative Assembly. Page 2

Hang Seng Index 23400.0

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Not easy to ban migrant dealers: Tam It is “somewhat tricky” to placate Macau casino dealers by creating a law to ban migrants from that work, Secretary for Economy and Finance Francis Tam Pak Yuen said yesterday. Mr Tam added that existing laws require all companies to obtain government approval before hiring workers from abroad. To enshrine any ban in law would “regulate not enterprises but the actions of the government,” he told reporters. Page 3

Arbitration proposed for patent cases Macau should consider a policy of compulsory arbitration in order speedily to settle patent litigation cases in the city, suggests a paper submitted to the specialist publication International Financial Law Review. According to the Macau Economic Services Bureau, the number of patent applications for new inventions in Macau rose by more than 4,000 percent between 2001 – when there were seven – and 2007, when there were 292. Page 7

23297.0

October 15

HSI - Movers Name

%Day

CHINA RES ENTERP

5.30

SANDS CHINA LTD

3.99

CHINA UNICOM HON

3.19

GALAXY ENTERTAIN

2.45

BELLE INTERNATIO

1.93

SINO LAND CO

-1.59

BANK EAST ASIA

-1.64

COSCO PAC LTD

-1.71

HENDERSON LAND D

-1.81

CATHAY PAC AIR

-2.85

Source: Bloomberg

I SSN 2226-8294

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October 16, 2013

Macau

New courts have staff to function Lower court president says Labour Court will strive for justice first, efficiency second Tony Lai tony.lai@macaubusinessdaily.com

Graft buster repeats demand for law change

We surely want to raise the judicial efficiency because [we know] the public has very high expectations, particularly on the efficiency of the Labour Court Judge Ip Son Sang

here are enough staff at the Court of First Instance to run the two new specialised courts – including one tackling all of the city’s labour disputes – that begin operations today. The newly appointed president of the lower court, Ip Son Sang, said two judges each would be assigned to the Labour Court and the Family and Juvenile Court. Judge Ip was appointed to his new role at a ceremony yesterday. “The president of the Court of Final Appeal and the judge’s committee have given us their support so there are enough human resources assigned,” he said yesterday. “We are satisfied with this current arrangement.” The new courts were mentioned in a 2004 law that regulates the judiciary but a shortage of staff meant it was impossible to launch them before now, the Executive Council said last week. The two new courts will each have more than 10 legal staff, Judge Ip said. The Labour Court will handle both criminal and civic cases, but all matters involving family law and children will be heard by the Family and Juvenile Court.

“The works of the court have not stopped. It is just a change in the way things are run, with all the pending cases being passed on to the two specialised courts,” he said. There were 618 unresolved cases related to labour disputes at the end of August, data from the courts’ website show. There is no detail on the number of family and juvenile cases. “We surely want to raise the judicial efficiency because [we know] the public has very high expectations, particularly on the efficiency of the Labour Court,” said Judge Ip. But “the quality of the judgement” would be the foremost priority. Macau Federation of Trade Unions vice-president Kwan Tsui Hang said last week she expects the Labour Court to bring about an improvement in judicial efficiency and in decision-making quality. Ms Kwan, a Legislative Assembly member, also expects more workers to use the specialised court to fight for their rights. Judge Ip was appointed president of the Lower Court and the Administrative Court a month after leading the Election Commission for the Legislative

Assembly election. He would not comment on any connection between the two roles but accepted the public’s criticism of the Election Commission’s performance. “[I] respect the different opinions from the public and I can only do my best,” he said.

Keep plastic bags away, shops told T

wo green groups are asking over 100 stores to stop offering plastic bags to their customers in an attempt to reduce the number of bags used. Starting last month these shops – most of which located in Horta e Costa and Rua do Campo – have stopped “voluntarily offering plastic bags to the customers”, said the Macau Green Student Union

The graft watchdog has again called for changes to the election law as an inquiry continues into vote buying in last month’s direct elections to the Legislative Assembly. “I respect the opinions from the public but, like I said earlier… such responsibility cannot only rely on one single department if the existing [legal] framework creates so many grey areas,” Commissioner Against Corruption Vasco Fong Man Chong said yesterday. Mr Fong also said the electorate had to become more aware of the importance of their right to vote. Prosecutor General Ho Chio Meng said last week a decision on at least one alleged case of vote buying would be released this month. The Public Prosecutions Office has asked the corruption commission for more information and evidence on another case. Mr Fong would not comment on the progress of the vote buying inquiry. T.L.

and the Green Future association in a joint statement. The stores will only hand out bags to customers that have asked for it, said the groups. They hope the firstphase of this programme will reduce by 30 percent the number of bags being used in these shops. The groups will review the programme “early next year”. They also want bigger stores that use up many plastic bags, such as supermarket chains, to join the second phase, which will start next year. These stores will refrain from handing out plastic bags in the next three years, the two groups said. The groups are also working with at least six primary and secondary schools here to recycle plastic bags and promote re-usable bags. T.L.

October 2013 April 19,16, 2013

Macau

It’s ‘tricky’ to ban migrant croupiers Economy and finance secretary says creating a law to exclude dealers would hurt government Tony Lai tony.lai@macaubusinessdaily.com

Mocha slot clubs face shutdown Three of Mocha Clubs’ slot outlets could close down temporarily next month but workers will not be sacked, said the unit of gaming operator Melco Crown Entertainment Ltd. Constance Hsu Ching Hui, Mocha president, said yesterday they were still looking for appropriate venues to relocate three parlours: Mocha Hotel Taipa Best Western, Mocha Lan Kwai Fong and Mocha Marina Plaza. Those venues will close if no ideal location can be found before the deadline, late next month, she told media after meeting with Secretary for Economy and Finance Francis Tam Pak Yuen. The workers will either receive vocational training or be transferred to Altira Macau and City of Dreams, both run by Melco Crown, Ms Hsu stressed. The government said last year slot parlours can only be located inside five-star hotels, within 500 metres of a casino or at resorts in less densely populated areas.

Wait for public flats over by 2016 All of the households that have been waiting since 2005 to buy a public home will be able to get a flat after the pre-sales of housing project in Ilha Verde begin next month. But the 336 two-bedroom flats in Fai Ieng building will be ready by 2016, the Housing Bureau announced yesterday in a press conference. This new batch and 100 flats in another Ilha Verde public housing project that remain unsold could be enough to satisfy the remaining 430 households in the waiting list, Kuoc Vai Han, the bureau’s deputy director, told media. The government has not taken in new applicants for public homes since 2005, with the exception of a tender for unwanted one-bedroom flats launched this summer. Ms Kuoc said the government expects to reopen applications for all types of public home purchases this December.

T.L.

The government will take its time studying a ban on foreign croupiers, says Francis Tam

Even if Chief Executive Fernando Chui Sai On was not re-elected next year, there would be no impact on the government’s policy on foreign dealers, Mr Tam said. Ensuring that casino operators promoted residents would be a focus of the policy address for next year,

which is scheduled for next month. Also yesterday, Mr Tam said the government had not stated if it would issue more or less gaming concessions or sub-concessions when the current six contracts expire between 2020 and 2022. Meanwhile, Mr Tam said the

United States would meet its international obligations and prevent a default ahead of tomorrow’s lapse of its borrowing authority. If there was a default, Mr Tam said he was “confident Macau has the ability and power to tackle any possible risks in the financial market”.

Govt ready to pocket Reolian deposit Authorities pledge to recover extra money spent to keep troubled bus operator running

roubled bus operator Reolian Public Transport Co Ltd will likely lose its security deposit of 65 million patacas (US$8.1 million) after the government took over its operation. The deposit has been in the government’s hands since the company signed the contract, said Transport Bureau director Wong Wan. Reolian “cannot get back this money unless it has completed its service,” Mr Wong told media yesterday after meeting with Choi In Tong Sam Association, a subsidiary of the Macau Federation of Trade Unions. But the administration took over Reolian’s operations on October 2, after the operator applied for bankruptcy, and is now paying for all expenses during a six-month period. The authorities do not rule out using “other means” to force Reolian to pay back the extra money the government is going to spend to keep the firm running, Mr Wong said. The government spent about 10 million patacas paying the wages of Reolian workers last month, Mr Wong said. The bureau said earlier this month Reolian was spending an average of 19 million patacas (US$2.4 million)

a month while the government used to pay the company about 14 million patacas for its services. Mr Wong also said the decision to seize Reolian allows the government to use all of the firm’s facilities, buses and equipment, even if bankruptcy is declared and creditors move in. “But there are possibly other interpretations on this issue,” said the director. The government has prepared different back-up plans but Mr Wong declined to reveal any details. The seizure could affect the

adjustment of some Reolian bus routes that was planned for later this year, Mr Wong acknowledged. Lam U Tou, vice-president of Choi In Tong Sam, quoted Mr Wong as saying in the meeting the government would have a long-term proposal on how to keep the current bus system running, before Reolian’s creditors meeting on December 4. But the government did not pledge to have a long-term solution in place after the six-month seizure ends, said Mr Lam. T.L.

Photo by José Aires Reis

t is “somewhat tricky” to meet the primary demand of Macau croupiers and create a law that would ban migrants working as casino dealers, Secretary for Economy and Finance Francis Tam Pak Yuen said yesterday. Mr Tam said existing laws currently require all companies to obtain government approval before hiring workers from abroad. To enshrine any ban in law would “regulate not enterprises but the actions of the government,” he told reporters. “How can [one] use a legal framework to regulate how the government sets up an economic or social policy? There are some tricky points and we will consider the matter based on legal reasoning.” Thousands of people took to the streets in two demonstrations last week. Dealers want a law that would protect their jobs and ensure that only residents can be croupiers before next year’s election of the chief executive. There is currently no law preventing workers with work permits from being employed at the city’s gaming tables. But the Human Resources Office has been instructed to reject these requests. Mr Tam warned croupiers that the government would take its time in studying the issue.

Reolian was losing 5 million patacas a month, the Transport Bureau says

October 16, 2013

Macau Brought to you by

HOSPITALITY Out of balance The government’s annual summary of travel agencies shows that economic growth and increasing tourist arrivals have pushed up the number of firms active in the business sector, their staff, revenue and gross value added. But the investment made by each agency has been relatively low. Between 2007 and last year, mid-sized firms had an average annual investment of less than 100,000 patacas (US$12,520) – when not in negative territory. The smallest firms are a case apart, with investment figures that are, surprisingly, well above most other companies.

Ho Iat Seng served as the Legislative Assembly’s vice-president (Photo: Io Wai Leong)

Ho Iat Seng ready to lead assembly There is a clear choice for president when the Legislative Assembly resumes today, but choosing a vice-president is problematic Vítor Quintã

vitorquinta@macaubusinessdaily.com

T The pattern of investment over time is irregular, which may partially reflect the uncertainties of the international crisis and its fallout. There were unexpected features in 2007. The smallest firms made the greatest investments – more than in the four subsequent years. The biggest firms were actually disinvesting. Investment was relatively muted over the next four years. The companies at the top of the ranking in terms of gross valued added are largely the only ones making any substantial investment. But they are also, comparatively, investing less than one might expect. In 2011, there was a significant rise in investment, which more than doubled in 12 months. Part of the explanation may reside in improved economic prospects and previously delayed investments coming together in that year. J.I.D.

MOP365 mln

Total investment made by travel agencies in the past two years

he Legislative Assembly could play a bigger role in Macau politics if odds-on favourite Ho Iat Seng is selected as the assembly’s president today. His is the only name bandied around to replace Lau Cheok Va, who has retired from politics. Mr Ho is a political heavyweight who is the chairman of Industrial Association of Macau. “It’s only natural that he takes over, considering that he was the vicepresident for the past four years,” indirectly elected assembly member Leonel Alves told Business Daily. The coordinator of the public administration programme at the Macau Polytechnic Institute, Lou Shenghua, said Mr Ho was the model candidate. “Past experience shows that the vice-president usually replaces the outgoing president. Mr Ho has been familiar with how to run the assembly in the past years,” he told Business Daily. Tradition aside, Mr Alves said Mr Ho was “the ideal person” to take up the job. “He was not afraid of working and he showed interest, namely in the work of the committee. He has the right profile.” The first president of the assembly post-handover was the occasionally outspoken Susana Chou Kei Jan. Even today she is often critical of the government in her blog. The situation changed with the election of the more subdued Mr

Lau, who ran the assembly in “a very different way”, Mr Alves said.

Toeing the line Mr Alves said it was important to the assembly’s work that the president was “in line with what the role has always been about, to be more active”. Mr Ho would become the face of the assembly and his attitude could allow the institution to “earn a more significant role” in politics, said Mr Alves. If Mr Ho takes the role, Mr Lou said his approach would be “kind of between Chou Kei Jan and Lau Cheok Va”. “His past performance shows he is sometimes critical of the government, particularly on the budget,” Mr Lou said. But his ties to Beijing would enable him to be more outspoken than Mr Lau. In overseeing the government, the assembly would remain inclined to be conservative, largely because of the dominance of strong business voices among the members. Mr Alves said he hoped for a renewed push to make the three committees monitoring public finance, administration and land use “more dynamic”. The three committees had six meetings during the previous term. “Two of them didn’t even file an activity report. I have no idea what they were doing,” he said.

The people that Business Daily spoke to for this report were split on who would become the vicepresident in the new assembly. Chui Sai Cheong, the first secretary-general of the assembly, was among the probable choices because he was “one of the most seasoned legislators” alongside Mr Alves and Kou Hoi In, according to Mr Lou. But the government would court negative public opinion if the job went to Mr Chui, the brother of Chief Executive Fernando Chui Sai On, Mr Lou said. “Although there is no direct conflict of interest, the public will probably have some grudge against this arrangement,” Mr Lou said. That sentiment would intensify in Chui Sai On’s absence, since Chui Sai Cheong could then serve as acting chief executive. Mr Alves believes the vicepresident will come from a labour background, a move that would maintain some balance between business and workers’ interests. The departing president, Mr Lau, was a member of the Macau Federation of Trade Unions, the city’s biggest workers association. Mr Lou said he would not be surprised if Kwan Tsui Hang was picked as vice-president. It would balance the interests in the assembly. Ms Kwan, a veteran legislator, is a vice-president of the trade unions federation. With Tony Lai

October 16, 2013

Macau

City’s forex reserves slip in September Yuan reached 19-yr high against U.S. dollar this week according to China’s central bank

he city’s foreign exchange reserves fell 0.9 percent month-on-month in September said the Monetary Authority of Macau yesterday. They amounted to 130.30 billion patacas (US$16.31 billion) as of September 30, compared to 131.4 billion patacas in August, stated the territory’s de facto central bank. Macau’s foreign exchange reserves at end-September represented 15 times the currency in circulation or 126 percent of ‘M2’ pataca money supply at end-August 2013. M2 refers to all time-related deposits, savings deposits, and noninstitutional money-market funds,

MOP130 bln Macau’s foreign exchange reserves at the end of Sept

plus ‘M1’, which is physical coins and currency, as well as readily liquid assets such as on demand bank deposits. The trade-weighted effective exchange rate index for the pataca – a gauge of the domestic currency’s exchange rates against the currencies of Macau’s major trading partners – dropped 0.09 points month-tomonth and 0.08 points year-on-year to 97.47 in September 2013. The pataca is pegged to the Hong Kong dollar, which in turn is directly pegged to the U.S. dollar. China’s yuan set a new peak against the U.S. dollar on Monday this week. The mainland’s reserve bank, the People’s Bank of China, fixed the yuan midpoint – the rate from which the traded rate is allowed to diverge by one percent in either direction – at 6.1406 per U.S. dollar at the market’s opening that day. That was the highest it had been since China created its domestic foreign exchange market in 1994. Some have expressed concern that the strength of the yuan is damaging China’s export competitiveness even as the global economic recovery remains in doubt. China’s currency has advanced 34 percent against the U.S. dollar in the eight years since the mainland began exchange reforms, reported the official news agency Xinhua in July.

The yuan has gained approximately 20 percent against the euro during the same period said Xinhua. The advance of the yuan against the U.S. currency has led Macau to

import some inflation, given that it buys many of its goods and services from the mainland, scholars told Business Daily last year. M.G. with Reuters

Corporate CTM to launch iPhone in Macau Companhia de Telecomunicações de Macau SARL (CTM) will offer Apple Inc’s latest iPhones, the 5S and the lower-cost 5C, to customers beginning on October 25. Customers may pre-register interest for any of the two iPhones at CTM’s website, the company announced yesterday. CTM and Hutchison Telephone (Macau) Co Ltd are the only two mobile operators authorised to sell iPhones with service plans in the territory. To buy an iPhone 5S or 5C could cost as much as 2,020 patacas (US$253) as part of a 24-month service plan offered by CTM with a monthly charge of 180 patacas. But those customers that sign up for a service plan with a monthly charge of 420 patacas could get an iPhone 5S or 5C with no down payment. Apple sold a record 9 million iPhones in the weekend debut of the two new models in September.

Onebiz group to join 18th MIF The Onebiz Group, a franchising group present in 30 countries, is starting its internationalisation strategy in Asia by joining the four-day 18th Macau International Trade & Investment Fair (MIF), which will start tomorrow. Onebiz is aiming to continue the business expansion of its brands and the network of franchisees for the Asian continent, the company said in a statement. In Portugal, Onebiz Group has 400 franchisees across six sectors: financial, consulting, real estate, education, health and beauty and sales and cost reduction. The group is also present in 30 countries where it has 100 franchisees and the next step is to host the brand in Macau. “The Asian market, especially China and Macau, should be given particular emphasis, since there is great potential for the different business areas of our brands,” said Ana Correia, marketing and communications director of Onebiz Group.

October 16, 2013 April 19, 2013

Macau 3 Macau’s Internet network stumbles Users of Hutchison Telephone (Macau) Co Ltd’s mobile network had problems in accessing the Internet during a period of about three hours on Monday. The network instability began around 2pm and the services only went back to normal at around 5pm, the Bureau of Telecommunications Regulation said. Hutchison, which operates under the 3 Macau brand, said users had no problem in making and receiving phone calls and text messages. The company received complaints from 56 customers. The bureau said it has asked Hutchison to send a preliminary report on the incident within 24 hours.

Dropping Spain can help LVS stock: J.P. Morgan Bank says abandoning super casino plan for Madrid could be catalyst to U.S. gaming operator’s share price Michael Grimes

michael.grimes@macaubusinessdaily.com

percent of the total cost for phase one – with the rest funded from debt. He also mentioned a return on capital investment of around 22 percent per year, which he said was in line with the company’s expectations in other markets where it already invests. That level of return might be compromised unless the Spanish authorities agree to the casino company’s request that gamblers be allowed to smoke on the gaming floor. Morgan Stanley, an investment bank, said in a report issued by its Hong Kong office last December, that when total smoking bans were imposed in casinos in parts of the United States and in Australia, gaming revenue fell by between four percent and 20 percent in the 12 months afterwards. It’s harder to assess the theoretical impact on gaming revenue of a smoking ban from day one in a new property.

Concessions possible

Sheldon Adelson views the proposed site for LVS’s Spain venture

f Las Vegas Sands Corp were to abandon its proposal for a huge gaming resort in Spain it would actually act as a positive catalyst for the rest of the business, suggests a note from J.P. Morgan in New York. Joe Greff, one of the bank’s managing directors, lists LVS dropping Spain as one of eight possible catalysts for the casino operator to achieve the bank’s target price of US$75.00 (599 patacas) per share. On Monday United States time the stock closed on Nasdaq up 0.82 percent at US$68.89. “Catalysts from here…[include if] its questionable, large-scale Spain integrated resort project gets shelved (in our view, management talked very little about it relative to prior calls, implying to us that additional concessions from Madrid are harder to get, causing LVS to rethink returns there),” writes Mr Greff.

Business Daily approached LVS for reaction to J.P. Morgan’s note, but no statement was available at the time the newspaper went to press. However in the firm’s second quarter earnings call in July, Sheldon Adelson, the LVS chairman, indicated the next move needed to come from the Spanish government. “Any investment would be subject to receipt of government approvals and the finalisation of any grants and [an] incentive package that would enable investment; as well as success in a competitive tender process,” stated Mr Adelson. In February Michael Leven, president and chief operating officer for LVS mentioned to Business Daily a sum of US$9 billion (71.88 billion patacas) for the first phase of a casino resort on the outskirts of Madrid. He said LVS were willing to spend US$3.6 billion in equity – up to 40

KEY POINTS Abandoning Madrid casino beneficial to LVS stock, J.P. Morgan says Bank sets target price of US$75 per share Potential smoking ban clouds casino project Spanish economy shows signs of recovery

Madrid’s city government appears in favour of letting LVS have casino smoking. The body has already agreed to waive its normal 40 percent tax on gross gaming revenue, in favour of a 10 percent rate for the project. But any smoking waiver is up to the central government. Since January 2011 Spain has banned smoking in all indoor public spaces, including restaurants, bars and cafes. Mr Adelson also said in July that he would delay proposals for construction of the scheme at its preferred site Alcorcón – a largely commercial district to the southwest of the Spanish capital – until there was clarity on whether smoking would be allowed in the casino portion. Since then there appears to have been stalemate between the two sides. José Manuel Soria, Spain’s Minister of Industry, Energy and Tourism, last month effectively said he wanted to see LVS’s money on the table before any special treatment could be considered. The apparent political impasse on LVS’s Spain project also comes at a time when there are signs of recovery in the Spanish economy – following a hellish five years that saw seven percent shaved off the country’s gross domestic product. Although unemployment is still stuck at 26 percent, the central government says growth returned in the third quarter. The economy is projected to grow at 0.7 percent next year, which looks like major progress under the current straitened circumstances. The governing Popular Party of prime minister Mariano Rajoy has recently seen an improvement in its opinion poll ratings. From next year, the country enters a two-year cycle of elections starting with a poll for the European Parliament and culminating in 2015 with national elections. The combination of flickering signs of economic revival and the possibility of politicians grandstanding in the hunt for votes could make it harder for the incumbent government to make concessions to foreign investors.

October 2013 April 19,16, 2013

Macau

Arbitration way forward in patent cases: lawyers City attorneys say asking generalist civil and criminal tribunals to judge complex commercial issues not best use of court time Staff Reporter

newsdesk@macaubusinessdaily.com

acau should consider a policy of compulsory arbitration to try speedily to settle patent litigation cases in the city, suggests a paper submitted to the specialist publication International Financial Law Review. According to the Macau Economic Services Bureau, the number of patent applications for new inventions in Macau rose by more than 4,000 percent between 2001 – when there were seven – and 2007, when there were 292. Only 56 applications were made in 2011, six fewer than in 2010. Since 2008 annual requests for invention patents have declined from the 2007 peak. But requests for legal protection of intellectual property of all kinds rose 105 percent between 2005, when there were 4,917 applications, and 2012 when there were 10,084 according to

bureau statistics. Many of them relate to the gaming industry and its supporting services, say the paper’s authors. “…arbitration could allow a dispute to be settled within a reasonable period of time (generally six months) and would allow experts in the specific art (usually better prepared to discuss matters of infringement) in dispute to participate in the decision making process,” write Rui Filipe Oliveira and João Nuno Riquito of the Macau law firm Riquito Advogados in the law review. They argue speedy settlement would be of benefit to all parties in a case and also to the consumer. If cases drag on, that can inhibit

technical innovation of products or services, they suggest. “The power of a patent may very quickly become null if the patent owner is unable to enforce it within a reasonable period of time. On the other hand, excessive time in excluding patent infringement may very easily exclude a competitor from entering

AND THE WINNERS ARE...

the market,” add the authors. “There are no specialised courts in Macau for intellectual property law or any other type of commercial disputes,” add the lawyers. “With the courts fully clogged, and given the novelty and specificity of matters involved in patent disputes, a decision could take years to be awarded by the Court of First Instance, and a few more could pass before the dispute was finally settled.”

The winners will be announced at the night of the Awards Gala Ceremony that will take place on the Grand Ballroom of the Grand Lisboa, on November 27, 2013.

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October 16, 2013 April 19, 2013

Greater China Ping An’s securities unit fined

Prices paid to gas utilities to rise

Regulators have fined Ping An Insurance Group Co of China Ltd’s securities unit for helping a fraudulent Chinese company to list its shares on the stock market, a move underlining Beijing’s determination to clean up the market. The China Securities Regulatory Commission slapped a 51.10 million yuan (US$8.4 million) fine on Ping An Securities for helping Wanfu Biotechnology to list, parent Ping An Insurance said in a filing to the Shanghai stock exchange. The CSRC will also confiscate Ping An Securities’ income of 25.55 million yuan generated from the IPO in 2011.

China will raise the on-grid prices paid to power generators that use natural gas to encourage the use of cleaner forms of energy and address the impact of possible supply shortages, the country’s top planning agency said yesterday. The National Development and Reform Commission said recent natural gas price hikes had raised generation costs and power prices need to be adjusted accordingly. Specific power price changes will be determined “soon” on a provincial level, it said. The statement also confirmed that on-grid coal-fired power prices have been cut to reflect falling coal prices.

China, U.K. agree on investment quota Britain offers to break down regulatory barriers to lure yuan trade

hina and the U.K. will introduce direct trading between the yuan and the British pound, helping London steal a march on Frankfurt and Paris to become Europe’s hub for the Chinese currency. The two nations also agreed on an 80 billion yuan (US$13.1 billion) quota for financial institutions in London to invest in China’s domestic securities under the Renminbi Qualified Foreign Institutional Investor programme, U.K. Chancellor of the Exchequer George Osborne said at a briefing in Beijing yesterday, after meeting Chinese Vice Premier Ma Kai. Mr Osborne said the countries will ensure access to yuan liquidity through additional settlement and clearing agreements in London. “My ambition is to make sure London is the western hub for yuan business,” Mr Osborne said, adding that the city would work in partnership with Hong Kong. Talks will begin to enable Chinese banks to establish wholesale branches in the U.K. for the first time, allowing them to scale-up their business activities, he added. The Bank of England was the first in a race among European central banks to establish a currency-swap facility with China when it agreed on a line of 200 billion yuan in June. The European Central Bank signed a 350 billion yuan swap line this month. Hong Kong was the first to host a yuan clearing bank and currently has the largest offshore pool of deposits denominated in the currency. The yuan has become the ninth most-actively traded in the world,

US$13.1 bln

Quota for financial institutions in London to invest in China’s domestic securities George Osborne rolled out the red carpet for Chinese banks looking to expand in London

up from 17th in 2010, according to a September report by the Bank for International Settlements. It was also the 12th most-used for global payments in August, according to an estimate this month by Belgiumbased financial services firm Society for Worldwide Interbank Financial Telecommunications.

Investment quotas China is seeking a greater role for the yuan in global trade and investment and is opening up its domestic capital markets under the RQFII and Qualified Foreign Institutional Investor programmes to achieve that goal. RQFII enables offshore yuan to be invested in China, while QFII quotas allow foreigncurrency investments.The nation’s 25.4 trillion yuan onshore bond market offers greater choice, better

liquidity and higher yields than are available in Hong Kong, where there is 253 billion yuan of Dim Sum debt outstanding, according to Bank of China Ltd data. Ten-year government bonds yielded 4.07 percent in Shanghai, compared with 3.67 percent in Hong Kong. “We want the quota to be used as quickly as possible but licences have to be issued,” Mr Osborne said, referring to London’s allocation, which is the first outside of Greater China. The pound will be the fourth major currency to have direct trading links with the yuan, after the greenback, Japan’s yen and Australia’s dollar. Trading between the Australian and Chinese currencies started in April, while yuan-yen trades began in June 2012. Mr Osborne didn’t give a timeframe for pound-yuan trading to commence.

The daily value of yuan trading in London now stands at around US$5 billion a day, double the daily volume of some US$2.5 billion in 2012, Mr Osborne said, citing data by HSBC Holdings Plc. China pegged its currency to the U.S. dollar until 2005, and now trades in a managed range against a basket of major currencies, with different rates inside and outside of China. Yuan trade settlement started in Hong Kong in 2009 with four cities in China. The program was extended nationwide last year. HSBC forecast in March that the currency will be fully convertible within five years and a third of China’s total trade will be settled in yuan by 2015, making it one of the top three global trade settlement currencies by volume. Bloomberg News

Dim Sum sales rebound tipped as yuan strengthens

ales of Dim Sum bonds are set to rebound from a record low as China’s economy shows signs of improvement and expectations build for yuan gains, according to Fitch Ratings and DBS Group Holdings Ltd. Yuan-denominated bonds sold outside of mainland China have gained for seven consecutive weeks, a Bank of China Ltd index shows, a sign demand for the securities is

strengthening. The average yield on Dim Sum notes fell to 4.43 percent on October 11, the least since May, and yuan forward contracts suggest traders are the most bullish on the currency in more than a year. Investor optimism about Dim Sum bond sale prospects remains buoyant, Fitch Ratings said in an October 9 report, even after issuance plunged to 3.7 billion yuan (US$606 million) last

quarter, the worst such period on record, according to data compiled by Bloomberg. More than three quarters of investors in Fitch’s survey expect both the on- and offshore bond markets to increase by 25 percent to 50 percent in the coming 12 months, driven by the yuan’s appreciation potential and tighter onshore financial conditions. “The Dim Sum market can grow at least 20 percent next year,” said Clifford Lee,

the head of fixed-income at DBS, Southeast Asia’s largest bank. “We’ll see a more mature pace of growth in 2014, underpinned by China’s economic expansion and greater price stability.” Dim Sum borrowing costs have dropped nine basis points this quarter, versus an 11 basis-point increase in the same period of last quarter, Bank of China indexes show. Yields have ranged from 3.84 percent to 6.00 percent

over the past year. “Dim Sum bond returns have outperformed others in Asia because they’re less correlated to U.S. rates,” said Crystal Zhao, a Hong Kongbased fixed-income analyst at HSBC Holdings Plc. The yuan has stayed resilient even as most other emerging-market currencies weakened after the Federal Reserve said it may dial back its bond-buying programme, she said. Bloomberg News

October 2013 April 19,16, 2013

Greater China

Dumex shakes up staff amid bribery claims Baby-food brand owned by Danone accepts ‘full accountability’

rench food maker Danone SA said it takes “full accountability” and will appoint new management at its Dumex infant milk powder operation in China and has suspended a nutrition programme for mothers in the wake of a bribery scandal at Chinese hospitals. Dumex China expressed “deep regret” for what it called shortcomings over a programme that was intended to raise standards in paediatric care and included advice on nutrition. The company launched an investigation after the official China Central Television (CCTV) reported in September that Dumex had bribed doctors and nurses across hospitals in northern China to recommend its infant formula to mothers. Authorities in the northern city of Tianjin had punished 13 medical workers for taking bribes to recommend the infant formula, the local government said on Monday. China is a magnet for foreign milk powder makers, with the country’s US$12.4 billion market expected to double by 2017. But foreign firms are under intense scrutiny after a spate of media reports alleging corrupt sales practices in the industry. Authorities in August also fined a group of mostly foreign milk powder producers including Danone a total

of US$110 million for price fixing. Danone reports third-quarter sales today, giving the firm an opportunity to brief investors on its problems in China. “Disciplinary actions will be taken according to the relevant company regulations including appointing new management personnel to deal with relevant issues,” Dumex China said in a statement. The bribery report “certainly doesn’t help the brand equity of Dumex,” said Warren Ackerman, an analyst at Societe Generale in London. “Consumers seem to be sensitive to things like this.”

Increased scrutiny Dumex said its policies included support for maternal breast feeding, as well as compliance with all local and national regulations in China. However, it said some practices had contradicted the purpose of the nutrition programme. It did not elaborate. Additional mandatory training to ensure compliance with the company’s marketing policies would be given to all employees, the statement said. Dumex added it would make no further comment. The statement did not refer to separate accusations published in a Chinese newspaper last month

Danone ranks as the third-largest formula maker in the mainland

that Danone’s advanced medical nutrition unit Nutricia had bribed more than 100 doctors in Beijing to boost sales. Danone has said it was investigating that report. The CCTV report on Dumex led to Tianjin’s government and police launching an investigation into the bribery accusations. The “serious violators” received penalties ranging from cancellation of medical licences to salary deductions, Tianjin’s government said in a statement on its website. Several of them had to go through Communist Party disciplinary procedures. Local government investigators said the workers were among 116 people from 85 hospitals and health

Money inflows boost Chinese reserves Reserves hit record US$3.66 trillion at the end of September

eserves were a record US$3.66 trillion at the end of September China’s foreign-exchange reserves rose last quarter by the most in more than two years, a sign the government’s efforts to protect growth attracted money even as developing nations from India to Indonesia saw capital exit.

The foreign-exchange data probably reflects China’s safe-haven status and suggests hot money came into the country during the period of market turmoil Timothy Condon, ING Groep NV head of Asia research

Reserves were a record US$3.66 trillion at the end of September, the People’s Bank of China said in Beijing, up from US$3.5 trillion in June. The median projection was US$3.52 trillion in a Bloomberg News survey of seven economists.

groups who took bribes from Danone to give talks to parents of newborns, recommend Dumex formula and give out product samples. World Health Organisation guidelines, implemented in China, say doctors must advise new mothers to breastfeed unless there are medical reasons to use formula instead. Infant formula has been controversial in China since a scandal in 2008 when the industrial chemical melamine was added to baby milk and killed at least six children and left thousands ill. The incident seriously damaged consumer confidence in local firms and led to international competitors gaining market share. Reuters

also inflows into the currency.” Zhou Hao, Shanghai-based economist at Australia & New Zealand Banking Group Ltd, said the surge in reserves reflects capital inflows and the central bank’s intervention as it bought “intensively” to prevent the yuan from strengthening.

Shadow finance

Bank lending expanded in September

The data suggest Premier Li Keqiang’s efforts to boost expansion stoked capital inflows while emerging markets suffered outflows on concern the U.S. Federal Reserve would taper monetary stimulus. The yuan strengthened by the least in five quarters in the JulySeptember period, signalling central bank intervention to slow gains in the currency. “The foreign-exchange data probably reflects China’s safe-haven status and suggests hot money came into the country during the period of market turmoil,” said Timothy Condon, ING Groep NV head of Asia research in Singapore. The yuan advanced to the strongest level since the

government unified official and market exchange rates at the end of 1993. The currency gained about 0.3 percent in the third quarter, following a 1.2 percent increase in the previous period. The central bank didn’t give an explanation for the increase in reserves. It didn’t immediately respond to a faxed request for comment from Bloomberg News. “The market is saying that China data is improving,” said Thomas Harr, head of Asia localmarkets currency and rates strategy at Standard Chartered Plc in Singapore. “In the very short term the cyclical data has started to improve and that is what is supporting the currency and thereby

New yuan loans topped estimates in the central bank data while the broadest measure of credit fell from August, as authorities try to support expansion without boosting shadow finance. Money-supply growth slowed in September, with M2, the broadest gauge, rising 14.2 percent from a year earlier. Aggregate financing was 1.4 trillion yuan (US$230 billion) in September, compared with 1.65 trillion yuan a year earlier. New yuan loans from banks were 787 billion yuan, exceeding the 675 billion yuan median estimate of economists. They accounted for 56 percent of aggregate financing, compared with about 45 percent in August and 87 percent in July, according to previously released data. “The PBOC may have implicitly expanded new loan quotas for banks as the authorities try to rein in the shadow banking sector,” Chang Jian, China economist at Barclays Plc in Hong Kong, said in a report. Chinese banks have advanced about 1.3 trillion yuan of mortgage loans in the first eight months compared with 300 billion yuan in the first half of 2012, Lian Ping, Shanghai-based chief economist at Bank of Communications Co, said last week. Banks are running out of quotas to offer more mortgage loans in the rest of the year and without financing support, home prices are unlikely to gain significantly, Mr Lian said. Bloomberg News

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October 16, 2013 April 19, 2013

Greater China

Alibaba controls over three-quarters of China’s e-commerce sector

Alibaba bets on US$500b marketplace Online giant to transform China’s retail industry Paul Carsten

libaba Group Holding Ltd’s plans to revolutionise China’s retail industry, investing US$16 billion in logistics and support by 2020, will open up China’s vast interior and bring access to hundreds of millions of potential new customers. With an extra US$15 billion or so in its pocket from a likely IPO, Alibaba and partners such as delivery service firms and life insurers will pump cash into revamping China’s fragile supply chains and big new data centres to process reams of consumer information. While Alibaba sees itself as a catalyst for change, its plans also lay the groundwork for retail rivals to chip away at its business further down the line. By encouraging retailers to be more Internet-savvy, and by building the networks to distribute goods nationwide, Alibaba is showing bricks and mortar rivals how to grow online without depending on its sites. Companies such as GOME Electrical Appliances Holding Ltd, Haier Electronics Group Co Ltd and Chow Tai Fook Jewellery Group Ltd have branched into e-commerce, riding Alibaba’s coattails and reaping the rewards with their own online stalls on Alibaba’s websites. Chief executive Jonathan Lu says Alibaba expects to nearly

triple the volume of transactions on its marketplaces to about 3 trillion yuan (US$490 billion) by 2016, overtaking Wal-Mart Stores Inc as the world’s biggest retail network.

Most traditional retailers now understand if they don’t move online, their time is limited Zeng Ming, Alibaba’s chief strategy officer

And the message to retailers from the group’s sprawling campus headquarters in Hangzhou, less than an hour’s train ride southwest of Shanghai, is simple: adapt or die. “The old companies that aren’t willing to transform will be wiped out by competition,” said Zeng Ming, Alibaba’s chief strategy officer. “Most traditional retailers

now understand if they don’t move online, their time is limited.” Analysts predict e-commerce will account for a fifth of total retail sales in China within 5 years, up from just 6 percent last year. “The pot is huge and most retail growth, and the fastest growth, is going to be in e-commerce,” said Boaz Rottenberg, managing director of China-based market researcher Maverick China. “If you look at all consumer spending, a big chunk is online. It’s disproportionate compared to other countries.”

Next level As China’s economy slows from years of double-digit growth, and where government policies have failed, Alibaba aims to level out an uneven distribution of wealth, where rural villagers have few opportunities and small businesses struggle to get loans. Using data to gauge supply and demand, Alibaba plans to pinpoint where to invest resources, such as new warehouses, and how best to shift the goods traded on its online marketplaces Taobao and Tmall – think e-Bay and Amazon.com – which accounted for 3 billion of the 5.69 billion parcels moved around China last year.

With its logistics and data firepower, Alibaba aims to deliver products faster and to more people than anyone else. It is also creating a network of financial services to facilitate online commerce, through which buyers can pay for their purchases, and companies and individuals can take out loans. “Alibaba is responsible for making the e-commerce market as big as it is. By building logistics and support systems around it, it’s a way of transforming the entire retail industry and taking it to the next level,” said Gartner analyst Praveen Sengar. Alibaba’s group has fought off foreign rivals to dominate China’s e-commerce sector, and now controls over three-quarters of a market that is forecast to grow at 32 percent a year up to 2015, according to Bain & Co. With less than half the population online, there is huge growth potential. Traditional and Internet retailers have struggled to reach China’s vast hinterlands where infrastructure is poor and Internet penetration is just 28 percent. “We are creating for the first time a truly nationwide, cross-territory single market across China. We are liberating its consumption power,” says Alibaba vice president Brian Li. Reuters

HTC joins Apple with fingerprint sensor

TC Corp, the Taiwanese handset maker which posted its first loss on record last quarter, unveiled a new handset with fingerprint sensor, joining Apple Inc in featuring the security technology. One Max has a 5.9-inch (15 centimetre) full high-definition screen and can run on fourthgeneration Long-Term Evolution networks, it said in a statement yesterday. The device, using Qualcomm Inc’s Snapdragon 600

processor will debut in China, U.K. and Taiwan before starting U.S. sales, chief marketing officer Ben Ho said in an interview yesterday. HTC’s largest phone, featuring Google Inc’s Android 4.3 operating system, is part of efforts to revive sales as it struggles to regain share from Samsung Electronics Co Ltd and Sony Corp. Apple last month unveiled its iPhone 5s with a fingerprint sensor to boost security and aid shopping while HTC said

its handset can automatically start an application according to which finger is scanned. “Large-screen phones have been picked up in Asia more than in Western countries, and the trend for larger is definitely there,” Mr Ho said by phone. One Max is HTC’s last major product release this year ahead of the next One device expected in the first quarter, he said. One Max will be released by the end of this month featuring HTC’s

UltraPixel camera technology, first unveiled with the HTC One in February. Its fingerprint sensor is on the device’s back while Apple’s is on the front. Third-quarter sales dropped 33 percent to NT$47 billion (US$1.6 billion), missing analysts’ estimates for NT$54 billion. The net loss of NT$2.97 billion was more than the NT$1.71 billion average of analysts’ estimates. Bloomberg News

11 11

October 2013 April 19,16, 2013

Asia

Sri Lanka cuts rates to multi-year lows IMF had recommended the central bank to keep policy rates steady Shihar Aneez and Ranga Sirilal

ri Lanka’s central bank cut key policy interest rates by 50 basis points to multi-year year lows in a surprise move yesterday to spur economic growth, just three weeks after the International Monetary Fund advised it to hold rates steady. “We thought it is a right time to give a push to the economy,” Central Bank of Sri Lanka governor Ajith Nivard Cabraal told Reuters after announcing the rate cut. “We would be able to achieve a 7 [percent] plus growth in the next year, even closer to 8 percent,” he said. Sri Lanka is investing heavily in infrastructure, with major new port and airport projects underway along with urban and rural road building. Growth this year was forecast at 7.5 percent, after slumping to a threeyear low of 6.4 percent in 2012. The decision to cut interest rates defied expectations. A Reuters poll of 11 analysts had expected the central bank’s monetary board to keep the monetary policy rates unchanged. The IMF had recommended on September 25 that the central bank should keep policy rates steady to assess the impact of the U.S. Federal Reserve’s possible tapering of stimulus programme in coming months.

We thought it is a right time to give a push to the economy Ajith Nivard Cabraal, Sri Lanka’s central bank governor

Mr Cabraal downplayed the risk posed to Sri Lanka by the Fed’s expected tapering, though foreign selling of government debt had helped push the rupee to a record low of 135.20 per dollar on August 28. “I don’t think Fed tapering will have an impact on us as we have already factored in,” Mr Cabraal said. “In the event of tapering, I don’t think we will have outflows, because those investors did not come due to QE [quantitative easing].” Having steadied off its low, the rupee is now just 2.5 percent

down since the start of the year. The exchange rate, which is closely shepherded by the central bank, opened steady at 130.85 per dollar, while the share market opened 0.01 percent down, as markets showed scant reaction to the rate cuts. With the latest easing, the central bank has cut policy rates by 125 basis point since December, and eased other policy tools. The repurchase rate was slashed to 6.50 percent, a level unseen since the central bank began compiling data for the interest rate in December

Vietnam commits to stable dong, rates

Regulator mulls raising foreign-ownership caps at weak banks

Thanh Binh said yesterday in an e-mailed response to questions from Bloomberg News. He cited the examples of Indonesia and Thailand, which raised investor caps to take “advantage of outside funding sources”. Vietnam’s economy is hindered by the slowest growth since at least 1999, after the highest level of bad debt among Southeast Asia’s biggest

Reuters

market,” Mr Binh said. The authority will “manage policy rates in a manner that maintains the current stability” as Vietnam’s inflation will be “controlled” at around 7 percent this year, he said.

Dong devaluation

Central bank encourages foreign banks to invest as it seeks to revive economy

ietnam’s central bank pledged to take “necessary measures” to stabilise the dong and signalled it would refrain from raising interest rates as the Southeast Asian nation struggles to revive economic growth. The State Bank of Vietnam is also considering raising foreignownership limits at weak domestic banks, deputy governor Dang

1999. The reverse repurchase was cut to 8.50 percent, its lowest since February 2012. The central bank said in a statement that given the benign outlook for inflation – it eased to 6.2 percent year-on-year in September – there was further space to ease monetary policy. Mr Cabraal said the outlook was positive so long as there were no sudden spikes in global oil or commodity prices in the next 12 months.

economies curbed lending and hurt businesses. The central bank cut a policy rate in July to support growth, after it devalued the currency the previous month to improve the balance of payments. “For the remaining months of the year, the State Bank of Vietnam will continue to closely watch market developments and take necessary measures to stabilise the currency

The government is seeking to boost an economy that grew 5.25 percent last year, the slowest pace in 13 years, according to the International Monetary Fund. “What they are trying to do now is stimulate economic growth while at the same time not stimulating inflation,” Adam McCarty, the Hanoi-based chief economist at Mekong Economics, said about the central bank’s measures. “All of these things are about them worrying about that balance. They are grappling and they are being conservative, which is probably a good thing.” The central bank devalued the dong by 1 percent in June, the first time since December 2011. It won’t weaken the dong by more than 3 percent this year as it seeks to prevent the hoarding of dollars, it said last week. The currency has weakened 1.2 percent against the dollar this year, trailing declines of currencies elsewhere in Southeast Asia. The government plans to weaken the dong by as much as 2 percent by the end of 2013 with the timing “dependent on the market,” Prime Minister Nguyen Tan Dung said in an interview in New York last month. The central bank also “encourages foreign banks to invest, buy and acquire stakes and merge with weak local banks,” said Mr Binh. Premier Dung had said the government plans to let foreign companies own as much as 49 percent of local banks in the “near future”. Bloomberg News

12 12

October 16, 2013 April 19, 2013

Asia

Queensland mulls three new casinos To help revitalise the state’s tourism industry

ustralia’s Queensland state may issue as many as three new casino licences as it seeks to spur tourism with integrated resorts. The state will welcome applications for redevelopment of a riverfront site in central Brisbane that includes an existing casino operated by Echo Entertainment Group Ltd, and consider allowing two more licences elsewhere in the state, Premier Campbell Newman said yesterday in an e-mailed statement quoted by Bloomberg. Mr Newman says Macau’s gambling houses and Singapore’s Marina Bay Sands casino impressed him on a recent tour of Asia. The move challenges Echo, which has three of Queensland’s four current licences and accounted for 97 percent of casino spending in the state in the 12 months through June, according to data compiled by Bloomberg. Neighbouring New South Wales state agreed in July to examine plans by billionaire James Packer’s Crown Ltd, also an investor in Macau, for a casino in Sydney that will challenge Echo’s monopoly in that city. Mr Packer said yesterday casino offerings needed to be more focused on attracting Asia’s aspiring middleclass and super-rich tourists. “Queensland can sustain up to three new integrated resort casinos,” Mr Newman said in the statement, referring to complexes containing gaming floors, hotels and

entertainment and retail precincts. “The casino is only part of these major developments, which are tourism draw cards in their own right.” The developments “could lead to similar benefits for Queensland” as those that Singapore has seen from Genting Singapore Plc’s Resorts World Sentosa and Las Vegas Sands Corp’s Marina Bay Sands, Mr Newman said.

Tourism revival Hong Kong investor Tony Fung announced in August he wanted to build a casino resort north of Cairns. The development has been given “co-ordinated project” status by the government of Queensland. Mr Fung’s Aquis casino resort, which will target wealthy Chinese tourists and operate 750 tables and 1,500 machines, has a price tag of A$4.2 billion (US$3.8 billion). It is unclear if it is included among the three licences mentioned by Mr Newman. Mr Newman is convinced that building a mega resort-style casino, and potentially another two in other parts of the state, is the best way to compete with other Asian destinations. “Our offering has been rundown and eroded,” Mr Newman said quoted by Australian media. “We’re not just looking for a hotel and some shops. It’s a world-class iconic precinct.” Mr Newman said the casino would include a new six-star hotel, retail,

NZ house lending limits may reduce rate rises

ew restrictions on lowdeposit mortgage lending in New Zealand may reduce the scope of rises in official interest rates, and as a result, ease upward pressure on the currency, Reserve Bank of New Zealand Deputy Governor Grant Spencer said yesterday. In an effort to cool record housing prices in Auckland and Christchurch, the country’s biggest cities, the RBNZ this month imposed restrictions on the amount banks can lend in lowdeposit mortgages. The central bank is concerned that an overheated housing market will ramp up overall inflation, which could force it to raise rates aggressively from a record-low of 2.5 percent sooner than the mid-2014 timeframe it has identified. “The LVR restrictions are intended to reduce the build-up of

Rendering of the Aquis resort

restaurant and entertainment zones, theatre and convention facilities and new open spaces. Singapore visitor numbers reversed a decline over the previous two years and rose more than 20 percent after the casino resorts opened in 2010, he said. In the Gold Coast, where Echo gets the bulk of its Queensland sales at Jupiters casino, the city council is examining four proposals to build a cruise ship terminal and possible casino resort on Broadwater Island, an artificial breakwater in the city’s lagoon. Echo fell 4.78 percent yesterday to A$2.59 after Mr Newman’s comments.

Proposals have been submitted by groups including Skycity Entertainment Group Ltd, Brookfield Asset Management, Zhuhai Ridong Group Ltd, and China State Construction Engineering Corp. The Queensland Government will decide on where the other two licences will be allowed based on expressions of interest proposals. Reef Casino Trust, which operates Cairns’ existing casino, is the only such operator other than Echo currently active in Queensland. There have been no new casino licences granted in Australia since 1996. Bloomberg News/T.A.

RBA retains option for loosening

systematic risk in the New Zealand financial system,” Mr Spencer said in a speech in Auckland. “They will also potentially reduce the extent of interest rate increases, and hence exchange rate pressure, that may be needed in the coming cycle. The LVR restrictions are also expected to reduce risk in the banks’ balance sheets.” From Oct 1, banks have had to keep lending to borrowers with mortgages of less than 20 percent of a property’s value – the so-called high loan-to-value ratio lending (LVR) – to no more than 10 percent of their total lending. The moves are being closely watched in other developed countries, where surging house prices are raising concerns among economists and policymakers. Reuters

ustralia’s central bank said interest-rate reductions are affecting the nation’s economy, while retaining the option to loosen policy further to spur growth, minutes of the October 1 meeting showed. “The effect of low interest rates was evident across a range of indicators and had further to run,” the Reserve Bank of Australia said in the minutes released yesterday. “Members agreed that the bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them.” The Australian dollar touched the highest level since June and investors pared bets on cuts as they interpreted the central bank shifting to a neutral bias. Governor Glenn Stevens and his board left rates at a record-low

2.5 percent this month after cutting by 2.25 percentage points since late 2011 to try to rebalance the economy as mining investment crests. The minutes are “light forward guidance pointing to a neutral stance,” said Joshua Williamson, a senior economist at Citigroup Inc in Sydney. “The assessment of the economic outlook was generally favourable.” Traders are now pricing in a 27 percent chance of a rate reduction by May, compared with 47 percent odds seen a week ago, swaps data compiled by Bloomberg showed. Policymakers are weighing a resurgent currency as data from China improved and the Federal Reserve delayed tapering its stimulus, with better local sentiment since a September 7 election. Bloomberg News

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

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13 13

October 2013 April 19,16, 2013

Asia

India may squeeze state firms for cash Government raised only 3 pct of the full-year target for asset sales

ndia’s plan to raise about US$9 billion from state-asset sales this year is in tatters, prompting the government to consider demanding state-run firms pay higher dividends as a way of papering over cracks in its budget. Four finance ministry officials with direct knowledge of the matter said that with the stake-sale target looking increasingly difficult to reach, they were preparing to take a decision early in the new year on other ways to raise cash. “We will see which companies have good cash reserves,” said one of the officials. “If they [companies] have made good profits and have no immediate plan to spend the money, we may ask for a special dividend.” Sales of stakes in state-run companies are critical to Finance Minister P. Chidambaram’s plan to mend strained public finances and prevent a budget blow-out that would put India’s investment-grade credit rating in peril. Indian debt is ranked at the bottom of investment grade and Standard & Poor’s has a negative outlook. A cut would put India into “junk” status, raise its borrowing costs and possibly spark fresh panic in financial markets. The rupee fell as much as 20 percent this year, before recovering, amid an economic slump. Half way through the 2013/14

Indian Oil’s share sale has been set for this month

fiscal year, the programme faces serious challenges, including squabbling among ministries. This month, a global roadshow to drum up interest from investment bankers in the sale of 10 percent of Indian

Oil Corp (IOC) was cancelled at the last minute after the oil ministry backed out. So far, Mr Chidambaram has raised 14.33 billion rupees (US$233 million) from asset sales, or around

3 percent of the full-year target of 558 billion rupees. He told Reuters last week he was confident of meeting the stake-sale target, or getting close to it “like last year”. Last year, however, he fell short of the target by 20 percent. “If it does not gather steam by December, the target will have to be revised down,” said another official, adding any revision would depend on the outcome of stake sales in IOC and Coal India. IOC’s share sale, expected to fetch about 40 billion rupees, was set for this month. A shortfall in sale proceeds this year will compound the formidable challenges Mr Chidambaram faces. The economy is growing slower than the official forecast, hurting tax revenues. He is widely expected to meet his deficit target, but he may yet have to find other revenue sources or cut deeper into spending. Ministry officials are already predicting spending cuts of 200 billion rupees or more to ensure they hit the deficit target of 4.8 percent of gross domestic product this fiscal year. Since even those cuts may not be enough, finance ministry officials are considering asking for more dividends from state-run firms than the 298.7 billion rupees in dividend income they budgeted back in February for the current fiscal year. Reuters

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October 16, 2013 April 19, 2013

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

Max 58.65

average 58.066

Max 53.6

Min 57.25

average 52.654

88.30

28.1

58.4

87.94

27.9

58.1

87.58

27.7

57.8

87.22

27.5

57.5

86.86

27.3

57.2

Last 58.65

Min 51.45

58.7

Last 53.45

Max 88.3

average 87.791

PRICE

24.30

53.08

24.00

52.66

23.70

52.24

23.40

51.82

23.10

51.40

DAY %

WTI CRUDE FUTURE Nov13

101.69

Max 24.25

average 23.904

BRENT CRUDE FUTR Nov13 GASOLINE RBOB FUT Nov13

YTD %

(H) 52W

8.7826273

111.3399963

85.79000092

110.47

-0.51332853

4.969593311

115.7599945

96.19999695

266.15

-0.198740063

3.649038087

293.6000109

243.3699846

933

0.538793103

3.494176373

973

837

3.844

0.628272251

2.6435247

4.59400034

3.281000137

302.55

-0.204505723

1.25502008

322.3500013

276.8100023

Gold Spot $/Oz

1256.08

-2.1531

-24.5353

1754.46

1180.57

Silver Spot $/Oz

20.7656

-3.5974

-31.0342

34.3838

18.2208

Platinum Spot $/Oz

1365.3

-1.0939

-10.0445

1742.8

1294.18

Palladium Spot $/Oz

GAS OIL FUT (ICE) Dec13 NATURAL GAS FUTR Nov13 NY Harb ULSD Fut Nov13

706.77

-1.2657

1.0162

786.5

587.4

LME ALUMINUM 3MO ($)

1870

-0.611214457

-9.792571153

2184

1758

LME COPPER 3MO ($)

7255

0.763888889

-8.52351532

8346

6602

1928.5

0.59989567

-7.283653846

2230

1811.75

14005

0.610632184

-17.9073857

18770

13205

15.15

-0.032992412

-1.719104768

16.65000153

14.68999958

438.25

0.28604119

-26.92788662

647

432

690.5

-0.288808664

-15.86963143

913

635.5

3MO ($)

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

Min 22.80

Last 24.05

(L) 52W

-0.703056342

LME ZINC

Dec13

WHEAT FUTURE(CBT) Dec13 SOYBEAN FUTURE Nov13

1271.25

-0.137470542

-2.417962003

1409.5

1162.5

COFFEE 'C' FUTURE Dec13

116.85

-0.128205128

-25.31160115

181.5500031

113.1999969

22.80

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

Max 28.10

average 27.783

Min 27.10

Last 28.05

27.1

30.20

29.90

29.60

Max 30.20

average 29.771

Min 29.35

Last 29.70

29.30

NAME

PRICE

19.05

-7.434402332

20.85000038

16.69999886

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

83.8

0.227245545

6.426212852

93.72000122

74.34999847

CROWN LTD

World Stock Markets - Indices

DAY %

YTD %

(H) 52W

(L) 52W

0.9535 1.5966 0.9133 1.3533 98.58 7.9872 7.7547 6.1025 61.625 31.252 1.2418 29.408 43.15 10904 93.995 1.23594 0.84761 8.2779 10.8107 133.41 1.03

0.612 -0.1251 -0.3504 -0.1991 -0.3348 -0.0038 -0.0039 0.1475 -0.1298 0.2176 0.2496 0.119 -0.2433 0.4035 -0.9415 -0.1456 0.072 0.0242 0.185 -0.1424 0

-8.123 -1.2982 0.2299 2.6005 -12.6598 -0.0501 -0.0529 2.0991 -10.7586 -2.1503 -1.6428 -1.2752 -4.971 -10.1889 -4.9662 -2.3027 -3.7977 -0.7297 -2.5928 -14.8714 -0.0097

1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.2755 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 78.62 7.9818 7.7498 6.1011 52.6763 28.56 1.2152 28.913 40.54 9577 80.476 1.20302 0.79607 7.8281 10.1113 100.33 1.0289

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.81

52.69841

5.02

2.56

2080506

16.44

3.722397

54.07685

16.5

9.3

3109792

AMAX HOLDINGS LT

1.19

-5.555556

-15

1.72

0.75

2975425

BOC HONG KONG HO

25.25

0.3976143

4.771783

22.85

4518263

CENTURY LEGEND

0.415

-5.681818

56.60378

0.56

0.232

1604799

7.21

4.644412

20.36728

7.24

3.87

303426

CHINA OVERSEAS

24.75

1.64271

7.142855

25.6

17.7

28292988

CHINESE ESTATES

20.35

2.98583

80.9605

20.85

9.543

196545

CHOW TAI FOOK JE

12.02

2.735043

-3.376203

13.4

7.44

5981200 5719270

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15301.26

0.4210116

16.76661

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3815.275

0.617162

26.35395

3819.275

2810.8

FTSE 100 INDEX

6552.77

0.6933378

11.10514

6875.62

5605.589844

DAX INDEX

8778.18

0.6232369

15.31437

8783.62

6950.53

HOPEWELL HLDGS

NIKKEI 225

14441.54

0.2554715

38.92535

15942.6

8488.14

HSBC HLDGS PLC

HANG SENG INDEX

23336.52

0.5090808

2.999523

23944.74

19426.35938

CSI 300 INDEX

2467.517

-0.2032321

-2.19722

2791.303

2023.171

TAIWAN TAIEX INDEX

8367.88

1.135128

8.680822

8439.15

7050.05

KOSPI INDEX

2040.96

1.024121

2.198739

2045.5

1770.53

S&P/ASX 200 INDEX

PRICE

Macau Related Stocks

SUGAR #11 (WORLD) Mar14

NAME

86.50

Currency Exchange Rates

NAME

METALS

Last 88.1

53.50

Commodities ENERGY

Min 86.5

EMPEROR ENTERTAI

4.5

8.958838

138.0952

4.66

1.43

2.44

-1.214575

101.3158

2.76

1.103

1446000

GALAXY ENTERTAIN

58.65

2.445415

93.24547

58.8

24.2

12741700

HANG SENG BK

128.3

0.4698512

8.087619

132.8

110.6

807764

26.4

-0.3773585

-20.6015

35.3

23.2

822892

85.15

0.7692308

4.735543

90.7

73.55

11394478

HUTCHISON TELE H

3.52

-0.8450704

-1.123594

4.66

2.98

6690000

LUK FOOK HLDGS I

25.45

0.3944773

4.30328

30.05

16.88

990000

MELCO INTL DEVEL

23.3

6.636156

158.6015

23.4

6.72

8994208

MGM CHINA HOLDIN

28.05

2.559415

111.2473

28.15

12.236

4687440

MIDLAND HOLDINGS

3.15

-14.86487

4.8

2.68

556000

NEPTUNE GROUP

0.208

3.482587

36.84211

0.23

0.131

74155000

NEW WORLD DEV

11.08

-1.247772

-7.820303

15.12

9.98

22739205

SANDS CHINA LTD

53.45

3.988327

57.4374

53.5

27.2

16436573

SHUN HO RESOURCE

1.67

-0.5952381

19.28572

1.92

1.19

2.455357

9.546538

4.65

2.99

11688592

FUTURE BRIGHT

5259.147

0.9847417

13.12547

5314.3

4334.3

4519.912

0.7407262

4.707895

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1784.76

-0.05543889

5.672759

1826.22

1590.67

NZX ALL INDEX

997.388

0.1985108

13.07575

1005.231

850.533

SHUN TAK HOLDING

4.59

PHILIPPINES ALL SHARE IX

3904.81

-0.5344147

5.564509

4571.4

3440.12

SJM HOLDINGS LTD

24.05

6.651885

35.51084

24.45

16.032

17293169

SMARTONE TELECOM

10.64

0.1883239

-24.43182

16.22

9.97

8955030

WYNN MACAU LTD

29.7

4.577465

41.7661

30.2

9445718

ASIA ENTERTAINME

3.96

#N/A N/A

69409

BALLY TECHNOLOGI

69.76

0.7655641

56.02774

76.3

43.16

486519

BOC HONG KONG HO

3.22

4.885996

3.6

2.99

8500

GALAXY ENTERTAIN

7.4

-1.333333

86.39798

7.59

3.11

3300

INTL GAME TECH

18.43

-0.6469003

30.06351

21.2

12.37

2564040

JONES LANG LASAL

84.48

0.9922295

0.6433137

101.46

72.56

242480

LAS VEGAS SANDS

68.89

0.8195522

49.24177

68.91

37.8353

3842305

MELCO CROWN-ADR

33.96

0.05892752

101.6627

34.11

13.43

1923402

MGM CHINA HOLDIN

3.6

0.2785515

105.68

3.6

1.6651

12485

MGM RESORTS INTE

20.59

0.6353861

76.89003

20.9

9.15

9076826

SHFL ENTERTAINME

23.16

-0.04315926

59.72414

23.21

12.35

603326

SJM HOLDINGS LTD

2.88

-0.6896552

26.448

2.9481

2.0607

1100

167.15

0.3241102

48.59099

167.81

103.34

882160

JAKARTA COMPOSITE INDEX

Euromoney Dragon 300 Index Sin

616.05

-0.29

-0.81

STOCK EXCH OF THAI INDEX

1474.39

0.9966846

5.924146

1649.77

1260.08

HO CHI MINH STOCK INDEX

495.72

0.4254285

19.81727

533.15

372.39

Laos Composite Index

1309.38

0.07796019

7.788304

1455.82

1039.81

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

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.2

1.003344

16574881

CHINA UNICOM HON

13.68

1.333333

22775492

ALUMINUM CORP-H

3.61

15433022

CITIC PACIFIC

10.12

0.1980198

6468988

BANK OF CHINA-H

3.15

1.286174

329406866

BANK OF COMMUN-H

5.87

0.8591065

37793438

0.1727116

14.5

BANK EAST ASIA BELLE INTERNATIO

NAME

CLP HLDGS LTD

NAME

PRICE

DAY %

64.4

0.625

2568679

SANDS CHINA LTD

28.75

-0.1736111

6213954

SINO LAND CO

14.28

0.990099

7686664

SUN HUNG KAI PRO

109.1

1.018519

8616634

-0.4815409

2456828

265.6

1.45149

2048509

23.9

2206357

0.8064516

5926157

52.75

1.05364

3208615

POWER ASSETS HOL

65.6

1561243

CNOOC LTD

16.32

0.4926108

46287676

1260442

COSCO PAC LTD

11.76

3138217

SWIRE PACIFIC-A

7192500

ESPRIT HLDGS

12.44

-0.48

4211743

TENCENT HOLDINGS

0.2087683

10140777

HANG LUNG PROPER

26.55

-0.1879699

7812341

TINGYI HLDG CO

CATHAY PAC AIR

13.78

0.2911208

3140232

HANG SENG BK

119.7

0.167364

1690249

WANT WANT CHINA

CHEUNG KONG

114.9

1.23348

3918568

HENDERSON LAND D

2.059087

5880582

WHARF HLDG

75.55

0.1325381

701703

1.112235

6329376

125.6

3.54493

9625332

76.5 -0.06531679

9291476

BOC HONG KONG HO

CHINA COAL ENE-H

7.7

-0.1297017

40174849

CHINA CONST BA-H

5.87

1.206897

202072100

CHINA LIFE INS-H

22.9

0.4385965

30126882

CHINA MERCHANT

25.6

0.3921569

4209584

CHINA MOBILE

HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC

85.45

1.064459

16569813

HUTCHISON WHAMPO

CHINA OVERSEAS

20.2

-0.2469136

19374736

IND & COMM BK-H

CHINA PETROLEU-H

8.36

0.9661836

101198904

CHINA RES ENTERP

25.2

0.8

77.35

1.243455

6697663

5.17

1.372549

317570965

LI & FUNG LTD

12.84

-0.9259259

17517410

4219717

MTR CORP

29.85

1.530612

4880670

CHINA RES LAND

17.16

1.179245

6849146

NEW WORLD DEV

12.98

1.564945

12528960

CHINA RES POWER

16.08

-0.618047

7490964

PETROCHINA CO-H

10.94

-1.263538

64234127

CHINA SHENHUA-H

33.35

-0.1497006

11160228

PING AN INSURA-H

63.35

1.198083

8338502

MOVERS

23399.79

LOW

22802.35

4 23400

INDEX 23336.52 HIGH

VOLUME

52W (H) 23944.74 (L) 19426.35938

22802

10-October

15-October

15 15

October 2013 April 19,16, 2013

Opinion

Shutdown psychology wires made simple Business

Leading reports from Asia’s best business newspapers

Yomiuri Shimbun Bank of Japan governor Haruhiko Kuroda expressed strong confidence in the country’s economic outlook, citing positive effects from the central bank’s aggressive monetary easing. “Positive developments in the Japanese economy have become increasingly pronounced” since the Bank of Japan adopted its quantitative and qualitative monetary easing in April, Mr Kuroda said in Washington. Japan’s economic outlook is “perhaps brighter than at any other point since the turn of the century,” he said.

Cass R. Sunstein

Professor at Harvard Law School and a Bloomberg View columnist

Jakarta Post Indonesia’s banking industry may have to brace for a moment of sluggish disbursement in investment loans with the domestic economy predicted to take a “breather” this year. The statistics show that the most significant slowdown recorded so far was in the investment loans segment. The month-on-month growth stood at 11.4 percent in June to stand at 697.91 trillion rupiah (US$61.42 billion). However, it crept to 2.1 percent in July, with outstanding loans reaching 712.92 trillion rupiah, and decelerated again to 1.8 percent in August, when loans amounted to 725.8 trillion rupiah.

Times of India The United States and India agreed to a raft of broad principles that will gradually try and put the two countries on the same page with regards to opening markets, resolving taxation issues, and fighting money laundering and illicit financial flows. The two sides “agreed to continue working towards a greater understanding of all investment related issues including taxation and IT services, an equitable and principled resolution of ongoing tax disputes, and strengthened bilateral ties in this regard,” said a joint statement.

Bangkok Post Thailand’s Commerce Ministry dusted off a plan to register gold shops nationwide with the Internal Trade Department in a fresh move to curb speculative trading. Deputy Commerce Minister Yanyong Phuangrach said that registration would enable the authorities to closely monitor the country’s gold trading transactions, particularly for proliferating online gold speculation and gold trading in the form of promissory notes in lieu of actual gold delivery. Through closer monitoring, consumers would be better protected, he said.

he best explanation of the U.S. government shutdown points to two factors. The first involves information, or what people think they know. The second involves incentives, or what motivates our elected representatives. From decades of empirical research, we know that when like-minded people speak with one another, they tend to become more extreme, more confident and more unified – the phenomenon known as group polarisation. One reason involves the spread of information within echo chambers.

Partisans and extremists know what they know, and efforts to correct what they know make them firmer still (and angrier to boot)

If you are in a group whose members think the Affordable Care Act is horrible, you will hear many arguments to that effect and very few in the other direction. After a

lot of people have spoken, Obamacare will seem much worse than merely horrible; it might well be taken as a menace to the republic. In recent months, the House of Representatives has been a case study in group polarisation. In a free nation, of course, no member of Congress can really spend life in an echo chamber. They are aware that people disagree with them. To appreciate what is happening with the shutdown, we have to understand a bit more about the nature of political beliefs. It turns out that when people’s convictions are deeply held but false, efforts to correct those views can backfire. Such efforts tend to entrench and fortify those very convictions.

Entrenched views When the news media corrects a false proposition (say, that Iraq had weapons of mass destruction, or that George W. Bush banned stem-cell research), both conservatives and liberals may become even more committed to that proposition. Partisans and extremists know what they know, and efforts to correct what they know make them firmer still (and angrier to boot). It is for this reason that the beliefs of some of the most extreme House Republicans, and their constituents, appear almost immune to correction. With respect to incentives, elected officials are often motivated by one goal above all: to get re-elected. They are

focused on their own electoral prospects, not those of their party. They know they have to answer to their constituents, not to the nation as a whole. Within the Republican Party, many members of Congress have no reason to fear a challenge from the left. There is no chance that they will lose their seat to a Democrat, and a moderate Republican isn’t going to run against them. The only threat is from the right. With respect to a controversy that the public is closely following, the main question may well be whether, in the view of the most extreme conservative voters, the legislators will “cave” to President Barack Obama or instead stand up for their convictions. Is it any wonder that many Republican members are willing to run the risks of a shutdown? Some political scientists insist that elected officials are solely motivated by the goal of being re-elected, but this view is too simple. We should acknowledge that many officials are committed to certain principles. They want to do what they believe to be right. It is here that information matters. Elected in a wave of conservative outrage, fuelled in part by some beast called Obamacare, many House members are standing on principle. Because of what they think they know, they sincerely believe that the health-care law is a clear and present danger. For the nation, the problem is that beliefs of this kind

create a clash of absolutes – and make compromise or accommodation unusually challenging. The framers of the Constitution fully appreciated the underlying risks. Indeed, their document was designed to ensure against situations of precisely the kind the nation is now facing.

Faction risks James Madison, the father of the Constitution, was concerned above all about the risks of faction, which he defined as citizens “united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.” Madison hoped that through the structures of the American republic, it would be possible “to refine and enlarge the public views, by passing them through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country, and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations.” It is an understatement to say that this kind of refinement and enlargement is not occurring. We will not see them unless the most extreme members of the Republican Party are able to move out of their echo chambers, and unless the incentives of those members are significantly altered. Bloomberg View

16 16

October 16, 2013 April 19, 2013

Closing Wumart strikes deal with CP Group

SoftBank takes control of Supercell

China’s Wumart Stores Inc will acquire a bulk of CP Group’s retail stores on the mainland and take a stake in one of the Thai group’s companies in an all-stock deal worth US$374 million, helping Wumart to grow its footprint in northern China. Wumart, an operator of supermarkets, has agreed to buy a majority of the CP Lotus retail stores in China for HK$2.34 billion, the companies said in a joint statement. Wumart will also gain a 10 percent stake in CP Lotus, which is listed in Hong Kong and controlled by CP Group, the conglomerate run by Thai billionaire Dhanin Chearavanont.

SoftBank Corp, Japan’s third-largest wireless carrier, bought a 51 percent stake in the Finnish developer Supercell Oy for US$1.53 billion to add games including “Clash of Clans” and “Hay Day”. The deal values all of the game developer at US$3 billion and will help accelerate global growth, Supercell chief executive Ilkka Paananen said yesterday. SoftBank is making deals in Europe and North America to tap growth amid a declining population at home. The company paid US$21.6 billion for control of Sprint Corp and invested US$150 million in 2010 to acquire a minority stake in Zynga Game Network Inc.

China may invest more reserves in European property

British blessing fails to break banking union impasse

China’s agency that manages the nation’s US$3.66 trillion of foreign-exchange reserves is looking to make more investments in European property, two people familiar with the situation said. The State Administration of Foreign Exchange, seeking to diversify the nation’s investments, is looking at real estate and infrastructure projects with a focus on the U.K., France, Germany, Poland and the Czech Republic, said the people, who asked not to be identified as they weren’t authorised to speak publicly about the matter. Valuations for such projects are currently at an attractive level, they said. The agency is considering investing more of the world’s biggest reserve stockpile in Europe while wrangling over the U.S. government’s borrowing limit raises the risk of a default in Treasury holdings that stood at US$1.28 trillion in July. China Deputy Finance Minister Zhu Guangyao said yesterday that the U.S. must take “concrete measures” this week on its debt. The safety of investments is the foreignexchange agency’s top priority, the people familiar with the matter said.

Time running out to agree scheme to tackle failing banks Robin Emmott and John O’Donnell

ritain dropped its objections to granting the European Central Bank sweeping powers of supervision in the eurozone, but EU governments remained divided yesterday over how to deal with failing banks ahead of a rapidly approaching December deadline. Europe’s finance ministers are striving to agree the next big step in European integration by setting up a banking framework chiefly for the eurozone that would not only police the bloc’s banks but find joint solutions to their problems. While ministers meeting in Luxembourg reassured Britain again that ECB supervision from next year would not interfere with London’s control of its financial centre, allowing Britain agree to the scheme, there was no agreement on anything else. EU leaders, who meet next week in Brussels, have tasked their finance ministers with reaching a deal by the end of the year on a eurozone agency to close or salvage failed banks, the second stage of an ambitious framework known as banking union. Lawmakers in the European Parliament have already given the ECB supervisory powers over the eurozone’s 6,000 banks from late 2014, but such a role would lose much of its influence without an agency to deal with banks found to be in trouble. With just 10 working weeks until

the end of the year, the complex talks ran into Germany’s long-held opposition to agreeing to an agency to deal with problem banks for fear that Berlin will have to pick up the bill. “Germany insists that the taxpayer is protected,” German Finance Minister Wolfgang Schaeuble said, as he arrived at the meeting, reiterating that only a limited banking union could be created without a change in the EU’s basic law. That is an anathema to France, Spain and Italy, which want to see an immediate commitment by all countries in the 17-nation currency block to stand by weak banks regardless of where they are.

Fundamental tests Banking union, which many economists consider as important as creating the euro currency more than a decade ago, aims to help countries deal with problems at banks before they get out of control. Between 2008 and 2011, the European Union spent the equivalent of a third of its economic output on saving its banks, but relied on taxpayers’ cash. In the case of Ireland, reckless bank lending almost bankrupted the country. The issue of how to pay for bank clean-ups is pressing as Ireland and Spain prepare to end their reliance on international aid that shored up

their banks, concluding programmes that neither Dublin nor Madrid plan to renew. While the ECB’s promise to buy government bonds calmed the panic about the euro’s future, many banks are still sitting on a mountain of loans that may go unpaid. The International Monetary Fund estimates Spanish and Italian banks alone face 230 billion euros (US$310 billion) of losses on credit to companies in the next two years. Before taking on its supervisory role, the ECB will conduct a series of health checks on the eurozone’s 130 biggest banks next year, seen as the last chance for the bloc to come clean on losses that have festered throughout the financial crisis. “This is fundamental and the tests have to be serious, with strict, rigorous scenarios,” Spanish Economy Minister Luis de Guindos told reporters. During the sovereign debt crisis, the European Union conducted two bank tests that were considered flops for blunders such as giving a clean bill of health to Irish banks months before they pushed the country to the brink of bankruptcy. The new round of tests will be tougher. But uncovering problems poses the difficult issue of who pays to salvage failing banks or close them down. Reuters

Greek economy to shrink by up to 4.2pct: IOBE Greece’s economy may shrink by up to 4.2 percent this year but is close to stabilising after six years of sharp contractions that have wiped out about a quarter of output, influential think tank IOBE said yesterday. Greece now needs to ensure that wage hikes do not exceed productivity growth and keep public sector spending in check to avoid the return of large fiscal shortfalls, the independent Athensbased think tank said. In its quarterly report, IOBE said the 183 billion euro (US$247 billion) economy was set to shrink by 4.1 percent to 4.2 percent in 2013, revising down a forecast made in July of a contraction of up to 5 percent. The new projection is more in line with the latest estimates by the country’s foreign lenders. “The Greek economy is very close to a stabilisation point,” IOBE said. “The twin deficits which reflected its chronic pathology are approaching a balanced level, and the six-year recession seems to be gradually reaching its end.” The think tank said the economy performed better than expected in the second quarter and further improvement is likely in the third, partly due to a strong tourism season, but it said it expects a weaker performance in the final quarter.