MOP 6.00 Vitor Quintã
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New lower court to be raised by 2016 Page 6
www.macaubusinessdaily.com
Year II
Number 394 Thursday October 17, 2013
Editor-in-chief Tiago Azevedo
Deputy editor-in-chief
‘No plan’ to relax table cap: govt
Room rates leave tourists counting cost
April 19, 2013
Macau’s casino regulator the Gaming Inspection and Coordination Bureau said yesterday the government “does not have any plan” to relax the cap on live dealer casino table numbers. A report issued on Monday by Standard Chartered bank in Hong Kong suggested the cap was to be raised to four percent annual compound expansion, providing up to 2,800 new tables over the next decade from a base of circa 5,500. Currently the cap policy envisages only three percent compound growth – or around 2,000
new tables – for the ten years to 2022 as a way of limiting the upswing in gambling revenue in the territory say other analysts. The casino operators want at least 3,421 tables according to filings and press comments reviewed by Business Daily. But the gaming bureau told us yesterday: “The related sayings are rumours. MSAR [Macao Special Administrative Region] government does not have any plan to relax the table cap.” More on page 3
Assembly to keep govt in check: new president The Legislative Assembly will work harder to oversee the government, particularly on spending, even if powerful business interests don’t like it, said the assembly’s newly elected president Ho Iat Seng. As expected, Mr Ho won support – from 30 of 33 legislators – yesterday to lead the assembly in the next four years. There were two blank votes and one for Chan Meng Kam. Speaking after the voting, Mr Ho said the government should hasten to revise the budget framework bill so that the assembly can better oversee public spending. Stronger supervision “could hinder the interests of part of the business sector,” Mr Ho, who is also vice-president of the Macau Chamber of Commerce, acknowledged, “but we must overcome this”. The Financial Services Bureau said last month that changes to the budget law, not updated since 1983, would only be ready next year. The bureau did not say what changes would be introduced.
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Doubts on Tycoons used Logistics needs future of Taipa shell to pay young talent, casino’s tables bribes: watchdog more flights
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Questions have arisen about the future of 80 gaming tables assigned to a Taipa casino and belonging to Sociedade de Jogos de Macau SA. An executive connected with the New Century Hotel and Greek Mythology Casino has been arrested on suspicion of fraud. Chen Mei Huan was held on Sunday over the allegations, which involve 35 investors and more than HK$300 million (US$38.7 million).
Two Hong Kong businessmen used a shell company to pay bribes to secure the land where the high-end housing project La Scala was being built, the graft watchdog told the Court of First Instance. The defence of Steven Lo Kit Sing rejected claims of money laundering and said the firm was routinely used to transfer money, including to “prominent figures here”.
Macau’s logistics sector needs younger managers and more direct flights with Portuguese-speaking countries to remain competitive in the region, said Jack Chan Wai Chi, founder and managing director of Jet Forwarding and Trading Ltd. “Stakeholders in the sector should have a wider vision and work on cultivating young talents,” he said on the sidelines of a conference.
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October 17, 2013
Macau
Assembly to keep govt in check: Ho Iat Seng New budget law needed better to oversee government spending, says new assembly president Tony Lai
tony.lai@macaubusinessdaily.com
The assembly will have more bite even if business interests don’t like it, says Ho (Photo: Manuel Cardoso)
T
he Legislative Assembly will work harder to oversee the government, particularly on spending, even if powerful business interests don’t like it, said the assembly’s newly elected president Ho Iat Seng. As expected, Mr Ho won the support from 30 of 33 legislators yesterday to lead the assembly in the next four years. There were two blank votes and one for Chan
Meng Kam. Speaking after the voting, Mr Ho said the government should hasten to finally revise the budget framework bill so that the assembly can better oversee public spending. Stronger supervision “could hinder the interests of part of the business sector,” Mr Ho acknowledged, “but we must overcome this”. Mr Ho is also vice‑president of the Macau Chamber of Commerce.
The Financial Services Bureau said last month that the revision of the budget law, unchanged since 1983, would only be ready next year. The bureau did not say which changes would be introduced. “The biggest loophole” is the assembly’s inability to monitor how the government spent the money on public projects after getting the assembly’s approval for the overall budget, Mr Ho said.
“If [the government] does not have enough money for a single project, it can ask for more,” he said. “But right now the government can transfer money from one project to be used in another.”Lam Heong Sang, the newly elected vice-president of the assembly, also said the budget law must give legislators more power. The vice-president of the city’s biggest workers’ group, Macau Federation of Trade Unions, got the support from 27 legislators for his new position in the assembly. Analysts had predicted that a workers’ representative could get the vice-presidency in order to maintain a balance. Former president Lau Cheok Va, who retired from politics, is also a labour activist. Asked whether it would be more difficult to fight for workers’ rights with more businessmen in the assembly, Mr Lam said “contradictions between employees and employers” always exist and are “commonplace” worldwide. “I will surely insist on carrying out my obligations as a labour union representative,” he added. Mr Ho, meanwhile, admitted there is “a slightly higher presence” of business interests in the new assembly than in the past term. But, he added, “being a businessoriented legislator, the overall interests of Macau will be my main concern, not business interests”. With nine new faces joining the assembly, Mr Ho will think about providing some training for the new members to help them get used to the job quickly. He added the assembly is “never against” the live broadcast of all assembly sessions to let the public oversee the work that is done within the assembly walls. The first session of the new legislative term was marred by a protest from the activist group Macau Conscience asking for more directly elected legislators. Kou Hoi In, the second secretarygeneral of the assembly, said they would continue to revise the internal rules this term, like reducing time for speeches and questions.
Big decisions await new telecoms boss Hoi Chi Leong will oversee deregulation of cable television and fixed-lines; Lawrence Tou’s departure considered ‘normal’ Stephanie Lai
sw.lai@macaubusinessdaily.com
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he decision to appoint a new leader of the Bureau of Telecommunications Regulation comes at a sensitive time, when the bureau is preparing to deregulate the cable television and the fixed‑line telecommunications markets. Hoi Chi Leong, the former deputy director of the telecommunications regulator, was named as the acting director for at least the next six months. Former director Lawrence Tou Veng Keong will move to become an adviser to the Secretary for Transport and Public Works Lau Si Io. It is a role he will hold until late in December next
year, according to a dispatch published in the Official Gazette yesterday. “This is a normal change in personnel,” Mr Lau told reporters on the sidelines of a logistics seminar yesterday. “Mr Tou is still in the telecommunications affairs team. It’s just that his position changed with him now serving as my adviser.” Mr Lau said his new adviser would help him make “better decisions on telecommunications at a technical level”. He said the leadership change was made at the “proper moment” before the government prepares to deal with potentially trying tasks: overseeing the convergence of
telecommunications, television and Internet services. Mr Tou has served as the city’s top official for telecommunications since 2000, when the Office for Development of Telecommunications and Information Technology was set up. He held the position after the office became the Bureau of Telecommunications Regulation in 2006. Mr Tou has faced severe criticism recently, largely because of blackouts that have interrupted mobile phone services and the public conflict between Macau Cable TV Co Ltd a nd th e city ’s p u bl ic antenna firms.
Lawrence Tou is the new adviser to Secretary for Transport and Public Works Lau Si Io
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October 2013 April 19,17, 2013
Macau
‘No plan’ to change table cap: govt Macau plays down HK analyst’s report that policy loosened to 4 pct compound annual growth Michael Grimes
michael.grimes@macaubusinessdaily.com
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acau’s casino regulator the Gaming Inspection and Coordination Bureau said yesterday the government “does not have any plan” to relax the cap on live dealer casino table numbers. A report issued on Monday by analysts Philip Tulk and John Chan of Standard Chartered bank in Hong Kong suggested the cap was to be raised to four percent annual compound expansion. Officially at the moment the cap policy envisages only three percent compound growth in such tables per year for the ten years to 2022 as a way of limiting the upswing in gambling revenue in the territory. In reality revenue has expanded anyway – at a rate of 16.7 percent year-onyear to September 30 – partly due to higher minimum bets in the mass segment as ever more visitors from mainland China compete for access to limited numbers of mainly baccarat tables. Citing “several” sources he did not name, Mr Tulk and his
Francis Tam – previously hinted at flexibility
colleague wrote: “We update our Cotai project assumptions based on a one percentage point increase in annual average table growth (from the currently guided three percent to four percent), which would add an additional 700 tables by end-2022.” But the gaming bureau said in a statement e-mailed to Business Daily yesterday: “The related sayings are rumours. MSAR [Macau Special Administrative Region] government does not have any plan to relax the table cap.”
The 700 figure mentioned in Mr Tulk’s report is a reference to new tables beyond the increase already envisaged under three percent compound growth. Grant Govertsen of Union Gaming Research Macau, said in a note in September last year that under a three percent compounded regime, “based on simple math, a total of nearly 1,900 [new] table games will become available…” It’s generally accepted in the industry that the starting base for the cap policy –
which came into effect on January 1 – is the 5,485 live dealer tables that were recorded in the market by the bureau at the end of the fourth quarter. If Mr Tulk’s latest analysis bears fruit he says, it would mean 2,800 new-to-market tables between now and the end of 2022, the year when the last of Macau’s six current casino concessions and subconcessions are due to expire. Business Daily has calculated that based on previous regulatory announcements on tables sought for new projects and by those holding socalled ‘service agreements’ – allowing them to used existing licensees to spin off casino operations – the territory would need at least 3,421 new tables between now and 2022. Mr Tulk suggests that even before his Monday findings, analysts were being given guidance of up to four percent compound growth in Macau table numbers. That in itself appears to be some loosening of the three percent
cap mentioned by Francis Tam Pak Yuen, Secretary for Economy and Finance, when he first announced the policy in March 2010. Indeed in January Mr Tam explicitly stated that he was willing to be flexible. In comments reported by Business Daily he said: “The government has the room to assign further tables to recently-opened casino-resorts where large investment is made and which fit its non-gaming development focus.” No analysts or industry sources were prepared to go on the record yesterday regarding the suggestion of a loosening on the cap. But one person told Business Daily: “I don’t think the government would want to come straight out and say the cap had been changed. I would imagine they would take the approach that Francis Tam has previously indicated, which is to show there might be some flexibility for individual operators if they show strong commitment to non‑gaming facilities.”
Doubts on future of Taipa casino’s tables Executive recently arrested for fraud, and SJM previously clawed back one-third of Greek Mythology’s quota Michael Grimes
michael.grimes@macaubusinessdaily.com
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uestions have arisen about the future of 80 gaming tables currently assigned to a Taipa casino and belonging to Macau concessionaire Sociedade de Jogos de Macau SA. An executive connected with the New Century Hotel and Greek Mythology Casino has been arrested in Macau on suspicion of fraud. Chen Mei Huan – also known as Chan Mei Fun – was held on Sunday over the allegations, which involve 35 Macau and mainland Chinese investors and more than HK$300 million (US$38.7 million), said police. SJM had previously stripped Greek Mythology of a third of its then 120 tables in August 2012 following a dramatic and bizarre series of events. They included an attack the previous June by masked men on Ms Chen’s
former boyfriend and business partner, the Macau junket veteran Ng Man Sun, and complaints from tourists that they had been locked out of their rooms at the hotel portion of the property. Those and other incidents followed a business dispute between the former romantic partners. In October last year Ambrose So Shu Fai, chief executive of SJM Holdings Ltd, confirmed to Business Daily that the 40 gaming tables previously confiscated from Greek Mythology had been transferred to Grand Lisboa and were operational. Mr Ng – who in September last year completed a hostile takeover of loss-making Macau junket investor Amax Holdings Ltd – is no stranger to controversy. In 1997 he was the target of a drive-by shooting at the
Troubled – New Century Hotel and Greek Mythology Casino
New Century. No one was ever arrested or charged in connection with either that attack or the one last June. Hong Kong-listed Amax
had losses for the 12-months to March 31 of approximately HK$39.38 million. It has been pursuing casino projects in Northern Cyprus and
Vanuatu according to filings. A spokeswoman for Amax declined to comment yesterday on the arrest of Ms Chen.
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October 17, 2013
Macau
Graft buster says Ao bribes were laundered through shell Ongoing corruption trial hears Hong Kong businessmen transferred money to other ‘prominent figures’ through shell company Tony Lai
tony.lai@macaubusinessdaily.com
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wo Hong Kong businessmen used a shell company to pay bribes and launder money that secured land for the failed La Scala residential development, the Court of First Instance heard yesterday. A lawyer for Steven Lo Kit Sing, the chairman of entertainment firm BMA Investment Ltd, rejected claims of malfeasance and said the company, Eastern Base, was routinely used to transfer money – including to “prominent figures” in Macau. The Commission Against
Corruption’s senior investigator Io Fu Chun told the court that Mr Lo used Macau-registered Eastern Base to process transfers of cash. That included an alleged bribe of 20 million patacas (US$2.5 million) paid to jailed former Secretary for Transport and Public Works Ao Man Long, which is at the centre of this corruption trial. “Many cheques transferred to the Eastern Base account would be redirected to the account of Lo Kit Sing shortly after,” Mr Io said.
Mr Lo’s assistant was also a director of Eastern Base, he told the court. Mr Lo and Joseph Lau Luen Hung, chairman of listed developer Chinese Estates Holdings Ltd, are accused of bribing Mr Ao to ensure the success of their bid for five pieces of land near Macau airport in 2005. Mr Lau signed a HK$20-million cheque to Eastern Base but the money ended up in a bank account in Hong Kong that was controlled by Mr Ao, who is serving a 29-½ year jail term for corruption. Mr Io said yesterday that Eastern Base did not provide any services on the La Scala project, contradicting the defence’s claims. “Tax records from the Financial Services Bureau for 2004 and 2005 show that Eastern Base had no income, expenses or employees,” Mr Io said. Mr Lo’s lawyer, Rui Sousa, objected to the investigator’s claims that Eastern Base was used for “money laundering”. “Many prominent figures here have also received money from the [Eastern Base] account,” Mr Sousa said. The anti-corruption commission was selectively revealing evidence to suit the prosecution’s case, he said.
Incorrect characters
Jailed civil servant Ao Man Long allegedly pulled the strings on a tender for land
In court yesterday, Mr Io showed the court a document, which he claimed was owned by Mr Lo, showing the banking details of Mr
Ao’s bank account. The handwriting on the document was “similar” to the documents confiscated during raids on Mr Ao’s home. For example, the Chinese character for “bank” was written incorrectly but in the same way. “This unusual [mistake] likely comes from the same person,” said Mr Io. Mr Io told the court the government had wanted companies with international experience to join the tender in 2005. It set up a company called Lei Pou Fat Development Co Ltd to manage the land near the airport and deal with bidders. The winning bid was from Moon Ocean Ltd, a company that was controlled by Lo and later bought by Mr Lau. Mr Io said it had a capital of just HK$40,000 when it was set up in 2005. Moon Ocean’s brief history contradicted the intentions of Lei Pou Fat and demonstrated Mr Ao’s undue influence over the tender process, Mr Io said. Mr Sousa and Luís Melo, Lau’s lawyer, said former Chief Executive Edmund Ho Hau Wah had the final decision over who won the tender – not Mr Ao. They presented a document saying control was transferred to the chief executive after the handover in 1999. Mr Ho was the chief executive between 1999 and 2009. The case continues.
Hotel room rates leave tourists counting pennies Restaurant meals, food souvenirs also more expensive in third quarter Vítor Quintã
vitorquinta@macaubusinessdaily.com
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rices of Macau hotel rooms rose the fastest since 2011, meaning tourists found their money did not go so far, the latest official data show. The rates charged for hotel rooms increased by 10 percent in the third quarter compared to a year earlier, the Statistics and Census Service announced yesterday. Accommodation is the biggest single expense for most visitors, accounting for 23 percent of an average tourist’s spending here. In August the average hotel room rate was at 1,491 patacas (US$187), up by 6.4 percent year-on-year,
according to the Macau Hotel Association. This data does not include two-star hotels and guesthouses. Hotel prices only got higher in early October, which coincided with the mainland’s seven days of National Day holidays. Data compiled by the Macau Government Tourist Office indicate that many hotels and guesthouses have raised their room rates for the recent golden week. The increases in rates for rooms in low-end hotels was particularly steep, with some charging three times as much as the normal rate.
Eating out in Macau became more expensive as well, with the restaurant price index growing by 7.2 percent year-on-year. The same goes for food souvenirs, whose price rose by 9 percent from the third quarter of last year. Tourists need more money particularly if they want to take Macau pastries and cookies home, with the index rising 11.1 percent year-on-year. The absence of a retail tax makes luxury goods like branded clothing cheaper here than in mainland China and, as such, popular among mainland visitors.
Accommodation is the biggest single expense for most visitors
But clothes and shoes were 9.7 percent more expensive in the third quarter of this year than a year earlier. The statistics service said the increase
had been due mostly to dearer handbags. In the end the annual rate of tourist price inflation was 6.9 percent in the 12 months ended September.
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October 17, 2013
Macau
Logistics need young talents, more flights Logistics workforce is ageing and young managers are in demand, says executive Stephanie Lai
sw.lai@macaubusinessdaily.com
M
acau’s logistics sector needs younger managers and more direct flights with Portuguese-speaking countries in order to remain competitive in the Pearl River Delta region, an executive suggests. The sector remains “quite conservative,” Jack Chan Wai Chi, founder and managing director of Jet Forwarding and Trading Ltd, said yesterday. “Stakeholders in the sector should have a wider vision and work on cultivating young talents,” he said on the sidelines of the 8th China, Taiwan, Hong Kong and Macau Logistics Cooperation and Development Congress. Mr Chan stated that Macau’s logistics business is now at a “rather embarrassing” position when compared with its neighbours, as the city does not have a good location like Hong Kong nor an edge in talents or technology. “Even in a more conservative estimate, the average age for our logistics workforce is now around 40,” Mr Chan told Business Daily. “Many of them have been engaged in the sector for a long time, and the workforce is ageing.”
In addition, many are doing low-qualified jobs like driving or delivering goods, Mr Chan added. “What we need are young people that are adept at logistics management.” The executive suggested in his speech that more logistics experts from mainland China or overseas should be lured in to help train logistics management teams here. “Macau should improve in order to compete in the region and the government can roll out measures to support an upgrade of the logistics sector,” Mr Chan said. He called on the administration to launch training for “young talents” or incentive policies to encourage young people to take up this profession.
New transit hub Mr Chan, who is also a member of the government’s Logistics Industry Development Committee, also suggests an easing of the labour import rules. The sector is constantly facing labour shortage, particularly of truck drivers, he said. Mr Chan believes Macau needs to seek a new position for its airfreight services, a chief component in the
The average age for Macau’s logistics workers is 40
logistics business. Macau should focus on becoming an aviation transit hub between the Pearl River Delta region and the Portuguese-speaking countries, he said. The city has geographical advantage and some historical ties with these countries, he added. In the first half of 2013, air cargo volume decreased by 6.4 percent year-on-year to 12,502 tons – 44.3 percent of the cargo volume target set by the airport operator for the whole of 2013.
The city’s cargo volume has been plunging since the launch of direct flights between Taiwan and mainland China in 2008. The Hong Kong-Zhuhai-Macau Bridge, set to open in 2016, could prove to be “a good chance for people to see how to attract more aviation routes from the Portuguese-speaking countries,” said Mr Chan. Macau could become a platform to shuttle cargo between the neighbouring region and the Portuguese-speaking countries, he said.
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October 17, 2013 April 19, 2013
Macau Capital Estate to post ‘significant’ loss Capital Estate Ltd, the developer of two housing projects in Coloane, has announced it will record a “significant” loss for the year ended July 31. The loss is mainly due to a drop in the value of its properties, the group led by prominent Macau businessman Sio Tak Hong told the Hong Kong Stock Exchange on Tuesday. Capital Estate expects the value of its properties to fall by HK$120.5 million (US$15.5 million). But the company, one of the owners of Hotel Fortuna (pictured), said its financial position “remains healthy”.
New lower court ready by 2016 Building will offer more dignity to Court of First Instance, says legal expert Vítor Quintã
vitorquinta@macaubusinessdaily.com
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he Court of First Instance will move into a new building to be built near Sai Van Lake by 2016. The announcement of the tender in the Official Gazette gives November 14 as the deadline for bids. The winning contractor will have slightly more than two years to complete the new court building. Judges, prosecutors and lawyers would welcome the long-awaited move said Rui Afonso, a lawyer who has lived in Macau for more than 30 years and served as the vice-president of the now defunct Consultative Council for Judicial Reform. Mr Afonso said the relocation was “well overdue”. The need for a new court building “has been felt for decades, even during the Portuguese administration”. Debate about moving the court was certainly under way between 2005 and 2009, when Mr Afonso served on the judicial reform council. “It inexplicably got stuck somewhere along the way,” he said. “It was definitely not because of a lack of [financial] resources; there was a lack of political will.” At present, the Court of First Instance occupies two floors of a commercial building, The Macau Square. The existing arrangements are considered uncomfortable and cramped by all parties, Mr Afonso said. “You have prisoners in handcuffs
The new home for the Court of First Instance will be next to the Fire Services headquarters
being brought up in an elevator, right next to office workers.” “It’s common to see court workers eating takeaway meals on their desks.” The former Macau High Council of Justice member said The Macau Square facilities “lack the necessary dignity” and hurt the lower court’s image. Macau Lawyers Association president Jorge Neto Valente said last November it was “a shame to have the Court of First Instance working in a commercial building”.
One year ago, Prosecutor General Ho Chio Meng said the lack of premises exclusively for the use of judicial institutions detracted from their image and their efficiency. Mr Afonso says there will be efficiency gains from working in a new building. “Having everything in one building will help a lot, compared to having to wheel papers up and down the elevator,” he said. The new facilities will be built on vacant land near the Fire Services headquarters and facing Sai Van
Lake. The building will have eight storeys, with a gross floor area of 14,300 square metres, the Land, Public Works and Transport Bureau told Business Daily. Mr Afonso is sure it will be bigger than the current facilities and will allow the court to cater to lawyers, judges and it staff. The Court of Second Instance and Court of Final Appeal are just 500 metres away from the site of the new lower court. Mr Afonso says a building for the Public Prosecutions Office should be the government’s next priority. The prosecutions office’s facilities are currently spread over three office buildings. The tender announced yesterday by the Land, Public Works and Transport Bureau has no base price for construction. But the final cost is likely to be high, given that each bidder will have to provide a temporary deposit of 7 million patacas (US$876,400). The government had a plan, as far back as 2006, to create one building complex to host all the courts and the Public Prosecutions Office. Architect Vicente Bravo was drafting the project, slated for a plot in NAPE district. Business Daily asked for comments from the president of the Court of Final Appeal, Sam Hou Fai, Mr Neto Valente and Mr Ho. We had not received a response by late last night.
Corporate Westin to host MB Charity Golf gala
PokerTek installs e-tables at City of Dreams
The Westin Resort Macau has been named as premium partner of this year’s Macau Business Charity Golf Tournament, and the venue for next week’s Charity Gala Night. The gala night and prize giving from the golf tournament will take place at the resort on October 25. The organisers of the charity tournament made the announcement on Tuesday and confirmed the continuing sponsorship of slot machine specialist Aristocrat Leisure Ltd. The tournament’s organiser and founder of the Charity Association of Macau Business Readers, Paulo A. Azevedo, said both companies were great supporters of the event and dedicated to corporate social responsibility. The Macau Business Charity Golf Tournament will take place on October 25 at Caesars Golf Macau. One of the major changes of this year’s edition is that the golf tournament is no longer divided into two days to make logistics easier for the teams.
PokerTek Inc has installed six of its PokerPro electronic gaming tables at the PokerStars Live room at City of Dreams resort. PokerTek, based in the United States, says the tables handle both new and existing types of poker games. The six tables offer 60 gaming positions and will add to Macau’s largest poker room. “Macau is a key market for the continued growth of PokerTek’s e-table business,” said Mark Roberson, PokerTek’s chief executive officer, in a statement. PokerTek develops and distributes electronic table games solutions, namely for baccarat, the most popular table game in Macau. “PokerStars Live Macau will be a showcase for our e-tables in Macau,” Mr Robertson added, given the growing interest and demand for poker in Asia. PokerStars Live offers cash games and daily tournaments and is the venue for the Asia Championship of Poker, Macau Poker Cup and Macau Millions.
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October 2013 April 19,17, 2013
Macau
Money laundering risk still strong: U.S. Congressional commission calls for tightening of Macau’s rules on casino transactions Michael Grimes
michael.grimes@macaubusinessdaily.com
T
he United States federal government’s partial shutdown didn’t prevent it from this week publishing a 320-page report highly critical of China’s record on political, human and commercial rights, with some passages specifically on Macau. The document, titled ‘Congressional-Executive Commission on China Annual Report 2013’, is issued in the name of five senators, including California Democrat Dianne Feinstein, who introduced the 1994 law – that expired in 2004 – banning U.S. residents owning military-style assault weapons. The other members of the commission are seven congressmen and women, and five officials from the executive branch of government, including Seth D. Harris, the U.S. Deputy Secretary of Labor. The report calls on the U.S. government to “urge Macau to develop law enforcement mechanisms for combatting money laundering,” in what the report calls a local gambling industry “reportedly tied to widespread corruption and the laundering of large amounts of
Hillside blues – U.S. Congress critical of Macau
money out of mainland China”. The report does not directly refer to the Macau casino regulator, the Gaming Inspection and Coordination Bureau, and its ‘Instruction No. 2/2006 – Preventive Measures against Crimes of Money Laundering and Terrorist Financing’ and subsequent amendments. But the U.S. report appears to imply that
that the safeguards in the bureau’s anti money laundering provisions are insufficient. The report also makes reference to a story called ‘Cross-border cash flow controls mooted’ that was carried in July by our sister publication Macau Business magazine. In it Macau’s Financial Intelligence Office director Deborah Ng Man Seong said the
government was considering a new arrangement for the declaration of cash when travellers cross the Zhuhai-Macau border. The congressional commission calls not only for tighter rules on declaring cross border cash but also “a mechanism to freeze suspicious assets…lowering transaction reporting thresholds for casinos, and enhancing legal requirements for casino customer due diligence”. The commissioners reported additionally that a World Trade Organization panel had decided China had acted inconsistently with its WTO obligations to support free trade by “maintaining China UnionPay – a Chinese company – as a monopoly supplier for yuandenominated transactions with bank cards issued in China and used in Hong Kong and Macau”. The report further states that although Macau’s Basic Law has a provision making the International Covenant on Civil and Political Rights applicable to the territory, “the lack of democratic elections in line with the ICCPR and threats to the freedoms of press and assembly in Macau remain ongoing challenges”.
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October 17, 2013 April 19, 2013
Greater China
Beijing plans to ban new projects Vows to strengthen role of private sector in battling overcapacity David Stanway
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hina will tackle chronic overcapacity problems in sectors such as steel and cement by blocking approvals for new projects and by making better use of the market, according to a new plan issued by the State Council. Margins in the targeted sectors, which also include shipbuilding, aluminium and glassmaking, have been affected for years by a capacity glut that has left many firms suffering heavy losses and reliant on government subsidy. The long-awaited plan, published by China’s cabinet, said it would focus on “establishing and perfecting” market mechanisms, marking a change of approach after years spent trying to strong-arm the sectors into submission. It would also set higher environmental and quality standards for industries and encourage the private sector to play a role in restructuring oversized firms. As well as blocking new approvals, the new plan will seek to absorb overcapacity by stimulating domestic demand, and will also offer tax incentives to encourage firms to
relocate plants overseas. The previous approach sought to encourage giant state-owned firms to merge or swallow up smaller competitors but it was not successful, with industry experts complaining that the focus on strengthening SOEs had served to raise capacity, rather than reduce it. China will also seek to eliminate old capacity by strengthening environmental, safety and energy standards. It will also set up differential electricity and water prices for firms that violate environmental standards. Beijing has been trying to take a more coordinated approach to tackling the problem of overcapacity, and China’s 20132017 pollution “action plan” has already laid out closure targets for outdated steel capacity, and will allow the authorities to stop the construction of projects in industries facing oversupply. Past efforts to rein in overcapacity had failed to tackle the role played by growthobsessed local governments, which had encouraged rapid capacity
Efforts to rein in overcapacity fell short in the past
expansions with subsidies, access to credit and favourable contracts. Beijing has already launched a series of reforms that will reduce
Shanghai FTZ office rents jump on demand Office rents still lagging city’s average
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ffice rents in Shanghai’s designated free-trade zone have doubled in three months as building owners take advantage of companies rushing to register an address in the region, according to CBRE Group Inc. A surge in demand for a presence in the 29-square-kilometre (11-square-mile) area has pushed up asking rents to 4.2 yuan (US$0.69) per square metre (10.76 square feet) per day, double the level in July, Los Angeles-based broker CBRE said in a report released yesterday. Shanghai, the nation’s commercial hub, last month inaugurated the zone as a testing ground for free-market policies that Premier Li Keqiang has signalled may later be implemented
more broadly in the world’s secondlargest economy. HSBC Holdings Plc, Citigroup Inc and Bank of China Ltd are among financial institutions that have won approval to set up a subbranch in the region. HSBC’s outlet will start by early next year, Europe’s largest lender said this week. “There’s definitely lot of speculation,” Sam Xie, a research director at CBRE, said at a press conference in Shanghai yesterday. “As long as it’s office space, no matter how small, it rents out quickly for companies to register there. It will take some time for people to realize the plan is actually a long-term process.” The State Council on September 27 announced plans to allow trials
Shanghai’s free-trade zone opened for business last month
of yuan convertibility in capital flows and permit foreign companies to invest in more of the nation’s service industries in the zone. The free-trade zone covers four customs areas where goods stored are exempted from tariffs and value added taxes: Waigaoqiao bonded zone and logistics park, Pudong airport zone, and Yangshan port zone, according to the government. There is 400,000 square metres of office space similar to Grade B in the zone, of which 56 percent is more than 10 years old, CBRE said. Selling prices for offices in the area have risen about 20 percent since September with the highest asking price hitting 35,000 yuan per square metre, similar to the cost of buildings sold this year in the city’s center, CBRE said. Office rents in the free-trade zone are still lagging behind the Shanghai average, which rose 0.3 percent in the third quarter from the previous quarter to 251 yuan per square metre per month, according to the report. A majority of companies registered in the zone are small- to-mediumsized private Chinese companies that may not move into the zone in the near term, according to CBRE. “The effect we see in the free trade zone is not going to twist the overall office market in Shanghai,” said Mr Xie. “For a long time, we will see a lot of companies registered in the zone but operate outside.” Bloomberg News
the role of local governments in the approval process while attempting to strengthen their regulatory powers. Reuters
99
October 2013 April 19,17, 2013
Greater China
Alibaba profit surges on e-commerce Securities regulator calls for protection A for retail investors
libaba Group Holding Ltd, China’s biggest online marketplace, more than doubled secondquarter earnings as it heads toward the biggest initial public offering since Facebook Inc. Net income attributable to ordinary shareholders rose to US$707 million in the three months ended June from US$273 million a year earlier, according to a presentation released yesterday by Yahoo! Inc, which owns a stake in Alibaba. Revenue increased to US$1.73 billion from US$1.08 billion a year earlier. Alibaba is adding instant messaging, making acquisitions and expanding into TVs that connect to the Internet to win a greater slice of China’s Web users and shoppers. China’s biggest e-commerce operator has been valued by investment banks at as much as US$120 billion and is considering moving toward a listing in the U.S. after Twitter Inc goes public as soon as this year. “The earnings will help Alibaba achieve higher valuations in the potential IPO,” Ricky Lai, an analyst at Guotai Junan International Holdings Ltd in Hong Kong,
C
Alibaba accounted for 70 pct of package deliveries in China
said by e-mail. “The main driver for Alibaba is through the use of different platforms or mediums such as instant messaging, Smart TV.” The company is moving toward an IPO in the U.S. after talks for a Hong Kong listing broke down following management’s proposal to keep control in a share sale, two people familiar with the matter said in September. Alibaba is seeking U.S. law firms to help with an IPO and hasn’t hired banks yet, said one of the people, who asked not to be identified because the process is private. Alibaba will go public in 2014, people with
knowledge of the matter said this month. Yahoo, which owns about 24 percent of the Hangzhou, China-based e-commerce operator, said yesterday that the maximum number of shares it’s required to sell in an Alibaba IPO fell to 208 million from 261.5 million. That means Yahoo will reap more gains if Alibaba’s stock surges after the IPO, said Ben Schachter, an analyst with Macquarie Research. “The idea is you don’t want to have to sell at the IPO price, you want to sell later to potentially get the appreciation going up,” he said. Bloomberg News/Reuters
hina should implement more policies to protect retail stock investors to ensure the healthy development of the country’s capital market, the head of the securities regulator said yesterday. Retail investors with less than 500,000 yuan (US$81,900) of investment account for about 60 percent of the total market transaction value, but they suffer from inadequate information disclosure by listed companies as well as illegal behaviour by some of them, Xiao Gang, the chairman of the China Securities Regulatory Commission (CSRC), wrote in the official People’s Daily. “Protecting the interest of small investors has been a key hurdle of the development of the capital markets,” he said. The government needs to protect investor rights to access information, improve the decision-making mechanism
and shareholders’ voting at listed companies, open various channels to solve disputes and improve the compensation mechanism for small investors, Mr Xiao added. The CSRC has been stepping up efforts to restore investor confidence in the market. It has been clamping down on insider trading and has frozen initial public offerings for over a year to ensure the quality of companies listing on the Shanghai and Shenzhen stock exchanges. Mr Xiao also said the government should work to quickly launch a planned pilot project allowing companies to issue preferred shares. Preferred stock is a class of equity that has preference over common stock when it comes to dividend payments and asset liquidation, but ordinarily does not trade, carries no voting rights and does not dilute net profits attributable to other shareholders. Reuters
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October 17, 2013 April 19, 2013
Greater China Citic sets up rural land investment fund Citic Trust Co Ltd set up China’s first fund to invest in rural land, offering farmers a way to cash in on their usage rights as the world’s second-largest economy continues property reforms and speeds up urbanisation. The investment product will lease 5,400 mu (360 hectares) from rural residents in the northern part of Anhui province, Citic Trust, part of the state-controlled holding company led by Citic Group Corp, said in a statement yesterday. The fund will then transfer the rights to a farming company, according to the statement, which said this is the first such vehicle in the country.
HK home prices to fall 5 pct in 2013 Bank of America says housing market ‘has peaked’ Kelvin Wong
H
ong Kong home prices will fall as much as 25 percent from their peak as housing supply increases and the possibility of rising interest rates grows, according to Bank of America Corp’s Merrill Lynch unit. Prices will drop 5 percent this year and another 15 percent in 2014, Raymond Ngai, a property analyst, told reporters at a briefing in the city yesterday. He declined to give forecasts beyond 2014. UBS AG said on Tuesday that it expects prices to decline 5 percent in 2013 before dropping 15 percent to 20 percent next year. Hong Kong home prices have fallen about 3 percent since March and transactions are at the lowest in almost two decades, after the government in February imposed its toughest yet measures to curb concerns of a real estate bubble. Prices have more than double since early 2009 on record-low mortgage rates, a shortage of new housing supply and an influx of mainland Chinese buyers. “The housing market has peaked,” Mr Ngai said. “The 20 to 25 percent drop will probably bring prices back to the level around 2011, but even at that, many people would still find it difficult to buy properties.” Chief Executive Leung Chun Ying, who has pledged to increase land supply since coming to office
Home transactions at the lowest in almost two decades
last July, said in January the private sector may sell 67,000 homes in the next three to four years. Hong Kong developers completed 48,936 homes from 2008 to 2013, the lowest in any five-year period since data became available in 1985.
Price war Home transactions in the third quarter have fallen to the lowest since the government began making the data available in 1996. Mr Leung
doubled the stamp duty on all property transactions above HK$2 million (US$257,914) in February. He also has imposed a 15 percent extra tax on non-resident buyers and raised minimum down-payment requirements for some mortgages. Hong Kong property prices may rebound to levels before the curbs were introduced if the restrictions are removed or partially eased, Mr Leung said on Tuesday. As transactions slow, a price war between developers will intensify,
Chinese stocks fell most in three weeks On economic concerns and potential policy disappointment
C
hina’s stocks fell the most in three weeks after JPMorgan Chase & Co advised reducing holdings and companies linked to Shanghai’s free-trade zone tumbled on concern valuations are excessive. Shanghai International Port (Group) Co and Shanghai Waigaoqiao Free Trade Zone Development Co plunged more than 8 percent after more than doubling since August 22. The Shanghai Composite Index slid 1.8 percent to 2,193.07 at the close, the biggest loss since September 26. JPMorgan cut China to underweight, citing an economic slowdown and potential policy disappointment from a Communist Party meeting in November. Consumer prices quickened last month, while exports unexpectedly fell, according to government reports. Hong Kong shares also slipped
from a near-three week high, roiled by a weak mainland Chinese market. The Hang Seng Index, which closed on Tuesday at its highest since September 23, finished down 0.5 percent at 23,228.3 points. The China Enterprises Index of the top Chinese listings in Hong Kong shed 0.4 percent. “There are increasing worries about the economy,” Li Jun, a strategist at Central China Securities Co, said from Shanghai. “We may have reached bottom but we don’t see much upside in the economic numbers. There are also concerns that the meeting in November may not provide much detail and our stocks rallied excessively on policy expectations.” The CSI 300 Index fell 1.9 percent to 2,421.37, with gauges of telecom, consumer-discretionary,
technology and industrial companies losing more than 2 percent. The ChiNext index of small companies declined 3.9 percent. The Hang Seng China Enterprises Index retreated 0.7 percent. The Shanghai Composite has climbed 13 percent from its fouryear low on June 27, boosted by speculation the city’s free-trade zone will attract foreign companies and allow for financial liberalisation. The China Securities Regulatory Commission yesterday denied market speculation the zone will introduce an international stocks board, saying rules don’t allow foreign companies to sell shares in the trade area. A measure of developers in the Shanghai index slid 4.2 percent, the biggest loss among five industry groups. Chinese real-estate stocks were
said Mr Ngai. Cheung Kong Holdings Ltd, the city’s biggest builder by market value, earlier this year cut prices at a new project in the city to boost sale. Mr Ngai said he’s still “positive” about Hong Kong developers because of their “attractive valuation”. They are also less dependent on the performance of the home market because of the portfolio of investment properties they have accumulated over the years, he said. Bloomberg News
dragged down by concern of potential tightening after the Communist Party plenum next month, Credit Suisse property analyst Jinsong Du wrote in an e-mailed message. Premier Li Keqiang and President Xi Jinping are expected to seek support for national plans to reduce the government’s hand in the economy and financial system at the meeting. Bloomberg News
We may have reached bottom but we don’t see much upside in the economic numbers Li Jun, Central China Securities
11 11
October 2013 April 19,17, 2013
Asia
Singapore home sales fell 52 pct in September
India’s economy to pick up by year-end: Rajan New interest rate cuts this month could be on cards Richard Valdmanis
I
ndia’s economy will pick up by year-end thanks to the start-up of billions of dollars worth of stalled resource projects and a good monsoon season that will bolster agricultural production, the new head of India’s central bank said. The Reserve Bank of India is due to review monetary policy on October 29, with a rising pace of inflation bolstering odds for another central bank interest rate hike even as the economy stumbles through its worst crisis since 1991. “The correct question is: are you going to raise rates or not? The
KEY POINTS Economic growth to pick up in Q4 – Rajan Large projects to come back onstream US$115 bln worth of stalled projects to be cleared Monsoon season to bolster agricultural production
answer is: I’m not going to tell you,” Raghuram Rajan told an academic audience at Harvard Business School in Cambridge, Massachusetts. He later said that he believed India’s economic growth would start to pick up in the fourth quarter after a commission gave the green light to scores of resource projects that had been put on hold during a sweeping government review of transparency and environmental policy. He said about half of the US$115 billion worth of stalled projects had been cleared. “The effects of that clearance will show up toward the end of the year. So growth will start picking up because these large projects will start coming back onstream,” he said. He did not give a forecast for fourthquarter growth. “The second piece of good news is the monsoon has been very good ... with a bountiful harvest, and with the associated activities like animal husbandry, poultry, also picking up, you can see a lot more value in the rural areas, which will help sentiment and growth,” he said.
Filtering out India’s economic growth has slowed sharply in recent years from around 8 percent per year between 2002 and 2012 to about 5 percent
in 2012-13, while its current account deficit has ballooned and inflation has risen. Worries over the rising pace of inflation had already led Mr Rajan to surprise markets last month with an interest rate hike of 25 basis points. Mr Rajan said that investors were quick to blame structural dysfunction for India’s economic troubles, but that the issues were more likely to do with the unwinding of stimulus in the wake of the global financial crisis, policy reviews stalling projects, and a spike-up in Indian demand for gold. “There’s a lot that is going on to fix these medium-term problems,” he said. “If you are an outsider looking at India, learn to filter out both the irrational exuberance and the excessive pessimism. We’re subject to both. You will become manic-depressive if you follow our moods.” He added that the question of using interest rates to address inflation was more complicated in India than in the United States. “In the U.S. you know there is a large interest rate-sensitive sector that is going to be affected when you raise interest rates ... But what if you have a large part of the country that is not connected directly to the financial system?” he said, referring to India’s massive rural population. Reuters
Prices rising at the slowest pace in six quarters Pooja Thakur
S
ingapore’s home sales fell 52 percent in September from a year ago, signalling that the government’s efforts to cool its property market are working. Home sales fell to 1,246 units last month compared with 2,621 in September 2012, according to data from the Urban Redevelopment Authority released yesterday. From the previous month, sales increased 65 percent from a revised 756 units sold in August as developers marketed more projects, the data showed. Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a campaign that started in 2009 to curb speculation in Asia’s second-most expensive housing market. Singapore unveiled new rules in June governing how financial institutions grant property loans to individuals, in addition to previous curbs including new taxes and higher down-payments. “The total debt-servicing ratio measures is really biting into the market now,” said David Neubronner, national director of residential project sales in Singapore at broker Jones Lang LaSalle Inc. “I expect sales to be sub-1,000 units a month over the next three months.” Home prices in the island-state rose at the slowest pace in six quarters in the three months ended September 30. The island-state’s private residential property price index rose 0.4 percent to a record 216.2 points in the three months ended September 30, after climbing 1 percent in the second quarter, according to preliminary figures released by the authority on October 1. That was the smallest gain since the first quarter of 2012, when the index dropped 0.1 percent. Among the developers that began sales of their projects was United Venture Development (Thomson) Pte, which sold 264 units of 320 marketed at its “Thomson Three” project last month, the data showed. Sky Vue, offered by Allamanda Residential Development Pte, sold 433 of 505 units offered. Bloomberg News
The total debt-servicing ratio measures is really biting into the market now David Neubronner, Jones Lang LaSalle
Raghuram Rajan
12 12
October 17, 2013 April 19, 2013
Asia NZ inflation quickens as rates to rise next year New Zealand inflation accelerated faster than economists forecast in the third quarter, ending more than a year of subdued price pressure and underpinning the Reserve Bank’s case to start raising interest rates in 2014. Consumer prices rose 0.9 percent from the second quarter, when they gained 0.2 percent, Statistics New Zealand said yesterday. That’s the biggest increase in more than two years. The annual inflation rate climbed to 1.4 percent, the highest in 18 months and back within the RBNZ’s 1-percent-to-3-percent target band for the first time since the second quarter of last year. New Zealand is on track to become one of the first developed nations to start tightening monetary policy in the wake of the global financial crisis. The Reserve Bank has said it’s likely to lift its benchmark rate from a recordlow 2.5 percent in the first half of 2014 as the housing market booms, economic growth gathers pace and inflation moves toward the middle of its target band.
S. Korean analysing Goldman Sachs inspection results South Korea’s financial regulator has completed an inspection of Goldman Sachs Group Inc’s local operations and is now analysing the results. The Financial Supervisory Service hasn’t decided what actions will be taken as a result of the probe, Cho Gook-hwan, director-general at the FSS said by phone. The Korea Economic Daily earlier yesterday reported the regulator plans to ask local prosecutors to investigate the U.S. firm’s Hong Kong unit, alleging the company offered investments to Korean clients without a licence, citing unidentified FSS officials. The regulator is reviewing derivative sales and other operations at three foreign brokerages for compliance with South Korean rules, it said last month. The FSS began reviewing Credit Suisse Group AG, Goldman Sachs and Royal Bank of Scotland Plc’s local units in late August, MoneyToday reported at the time, citing unidentified financial industry officials. Goldman Sachs is “cooperating fully with regulator’s ongoing inspection and is unaware of any conclusion stemming from it,” Christoper Jun, a spokesman for the Wall Street firm, said in an e-mailed statement.
Asian exports losing steam Waning competitiveness seen in trade disconnect Shamim Adam and Karl Lester Yap
A
sia’s exporters are failing to benefit from a recovery in advanced nations, putting the onus on policymakers to shift reliance to domestic demand as a driver of economic growth. China’s exports unexpectedly fell last month, while overseas shipments from Taiwan and South Korea also declined. Asia’s export-led growth engine is showing “signs of serious defects,” according to Frederic Neumann, Hong Kong-based cohead of Asian economics at HSBC Holdings Plc, who says the region’s trade data has disappointed over the past couple of years and may be evidence of a loss in competitiveness. The region’s export recovery is faltering even as Europe emerges from its longest recession on record and U.S. manufacturing grows at the strongest pace in more than two years. The International Monetary Fund this month lowered its forecasts for growth in developing Asia for 2013 and 2014 while leaving projections for advanced nations unchanged. “Many Asian economies are relying on domestic demand as an engine of growth, rather than external as they move away from an export-led strategy,” said Jeff Ng, an economist at Standard Chartered Plc in Singapore. Economists at financial companies from Bank of America Corp to Morgan Stanley are predicting a healthier U.S. economy will provide less of a boost abroad than it once did, partly because of changes wrought by the financial crisis and recession. Before a partial shutdown of the U.S. government began at the start of October, the world’s largest
economy had been improving enough for the Federal Reserve to consider tapering the amount of stimulus it provides monthly.
Exports cool Malaysia’s domestic sector has been “solid and has been the anchor” of growth, central bank governor Zeti Akhtar Aziz said in an interview this month. The expansion in the Southeast Asian nation would have been 1 percent to 2 percent this year instead of being on track for 4.5 percent-to-5 percent growth if policymakers had not rebalanced the economy, she said. In the Philippines, where President Benigno Aquino is raising spending to a record this year, central bank governor Amando Tetangco said that growth is set to
KEY POINTS Asian exporters failing to benefit from recovery elsewhere Growth engine showing signs of ‘defects’ – analyst IMF lowers growth forecasts for developing Asia
exceed 7 percent in 2013. Sri Lanka unexpectedly cut interest rates on Tuesday to “stimulate the economy to reach a higher growth trajectory” as it identified risks including the U.S. shutdown and political impasse over raising the debt ceiling. Asia – which had seven of the top 10 exporters of textiles and clothing and office and telecommunications equipment in 2011 – shipped US$6.1 trillion of goods last year, a 2.3 percent increase from the year before, according to World Trade Organisation data. The jump was 18 percent in 2011. Growth of shipments from Asia from mid-2003 to mid-2008 averaged 22.5 percent a year, according to Paul Gruenwald, AsiaPacific chief economist at Standard & Poor’s in Singapore. Since the global financial crisis, the average is 8.5 percent, he said. “Solid export growth had been a mainstay of the Asian story before the global financial crisis,” Mr Gruenwald wrote in a September 30 report. “That is no longer true.” As the cost of goods from emerging Asian economies rises, any demand increase in advanced nations may be met by local production rather than imports, HSBC’s Mr Neumann said. “Many countries in emerging Asia may be losing competitiveness,” Mr Neumann wrote in an October 14 report. “It’s important not to push this argument too far, but the trend is evident among a number of industries, with even some textile and electronics production being relocated back into the United States for example.” Bloomberg News
Orient Corp to recall loans to crime groups
US$6.1 trln
Orient Corp, the Japanese consumer credit company being probed for lending to crime groups with Mizuho Financial Group Inc, said it will seek to promptly recall or cancel the loans. Orient set up an investigative committee to check each of the transactions, which were made at outlets throughout Japan mostly before October 2009, it said in a statement on its website yesterday. Japan’s trade ministry this month ordered Tokyo-based Orient to submit a report clarifying its involvement in lending to criminal organizations with Mizuho, its biggest shareholder. The Financial Services Agency ordered Mizuho to improve compliance on September 27 after finding that it failed to take sufficient steps to break off 230 transactions valued at about 200 million yen (US$2 million) to crime groups through Orient. The investigation escalated after Mizuho President Yasuhiro Sato said last week that a former lending unit head knew of the loans, correcting earlier statements by the bank that only lower-ranking officials were aware.
value Of goods shipped by Asian exporters last year
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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October 2013 April 19,17, 2013
Asia
Thailand holds steady on key policy rate Bank of Thailand to revise growth forecast this month
T
hailand kept its benchmark interest rate unchanged for a third straight meeting, refraining from monetary easing even as the threat of a U.S. debt default adds to growth risks from rising household debt and weakening exports. The Bank of Thailand held its one-day bond repurchase rate at 2.5 percent, with all six monetary policy committee members present voting in favour, it said in Bangkok yesterday. Thailand’s decision to hold borrowing costs is at odds with the Finance Minister Kittiratt NaRanong, who said this month the rate is “too high”. “The U.S. debt-default deadline and Fed tapering are among global uncertainties that the central bank is aware of and will need to monitor closely,” said Usara Wilaipich, a Bangkok-based economist at Standard Chartered Plc. “The central bank is expected to keep financial stability as a priority as household debt remains high.” The baht advanced 2.9 percent against the dollar last month, the third-best performance among Asia’s 11 most-traded currencies tracked by Bloomberg, after the Federal Reserve decided to postpone tapering its monthly asset purchases, diminishing the risk of capital
outflows from emerging markets. The Asian Development Bank this month lowered its growth forecasts for developing Asia, and international finance chiefs last week warned that failure by U.S. lawmakers to resolve their debt spat would hurt the global recovery. The Thai finance ministry last month cut its forecast for expansion this year to 3.7 percent from 4.5 percent, and its export growth prediction to 1.8 percent from 5.5 percent, citing weak overseas sales, slowing local demand and delayed government spending. The central bank has said it will announce its revised estimates on October 25.
Household debt
The baht advanced 2.9 percent against the dollar last month
Prime Minister Yingluck Shinawatra’s two-year-old administration has tried to speed up budget disbursement as plans to spend 2 trillion baht (US$64 billion) on infrastructure and 350 billion baht on water-management projects have stalled. The federal budget for the fiscal year from October 1 received a court approval on October 4, while the bill to finance infrastructure projects is still in parliament. Total loans to Thai households rose to 9.28 trillion baht in the quarter through end-June, compared
RHB eyes Philippines as it expands abroad Investment bank would like to expand in China, managing director says
R
HB Investment Bank Bhd, a unit of Malaysia’s fourthlargest lender, said it’s in talks with potential partners in the Philippines to further its push into Southeast Asia’s fast-growing economies and boost revenue. “We’ll start with a joint venture first, with a pre-emptive right to buy out the joint venture probably a few years down the road,” Mike Chan, managing director of the Kuala Lumpur-based company, said in an interview. The investment bank, owned by RHB Capital Bhd, wants to increase overseas revenue to as much as 40 percent by 2017, from 25 percent now, Mr Chan said. The group has expanded its presence in Singapore and Thailand, and gained footholds in countries including Indonesia after buying OSK Investment Bank Bhd last year for 1.95 billion ringgit (US$617 million). RHB is following bigger Malaysian
RHB was Malaysia’s biggest arranger for syndicated loans last year
lenders Malayan Banking Bhd and CIMB Group Holdings Bhd in extending their regional reach for growth. Maybank bought Singapore brokerage Kim Eng Holdings Ltd for S$1.79 billion (US$1.4 billion) in 2011, and CIMB acquired most of Royal Bank of Scotland Group Plc’s Asia-Pacific investment banking interests last year. “We are going to shift the playground from Malaysia to Southeast Asia,” Mr Chan, who was appointed managing director in September, said. In Indonesia, the bank wants to complete its planned acquisition of a stake in PT Bank Mestika Dharma, while increasing its own treasury services and broking platform, he said. RHB Investment wants to extend its presence in Singapore and Thailand with more of its own banking services, Mr Chan said, adding that he would also like to expand in China. “It’s a right move to expand in the Asean countries,” said Jason Chong, chief investment officer at Manulife Asset Management Services Bhd in Kuala Lumpur. “The Philippines is still relatively untapped.” The Philippines won a debt rating upgrade from Moody’s Investors Service this month, completing the nation’s ascent to investment rank as President Benigno Aquino leads a growth resurgence that is outpacing the rest of the region. Bloomberg News
to 8.98 trillion baht in the previous three-month period, according to central bank data. Second-quarter household debt was 81.5 percent of GDP, compared with 78.9 percent in the first three months, according to calculations by Bloomberg. The government last month agreed to expand subsidies for rice and rubber farmers to quell protests, a move seen as undermining the government’s efforts to curb rising debt. Falling commodity prices may
increase pressure on the economy, which unexpectedly contracted 0.3 percent in the three months through June from the previous quarter, when it shrank by 1.7 percent, official data showed. Exports rose 3.9 percent in August from a year earlier, the first gain in four months. Consumer prices climbed 1.42 percent in September from a year earlier, the least since October 2009. Reuters
14 14
October 17, 2013 April 19, 2013
Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 58.6 58.2 57.8 57.4
Max 58.6
average 57.687
Max 53.8
Min 57
average 53.435
57.0
Last 57.3
Min 52.8
average 88.147
PRICE
88.1
28.0
87.9
27.9
87.7
Max 28.10
average 27.783
Min 27.10
Last 28.05
27.8
24.6
30.6
53.4
24.4
30.4
53.2
24.2
30.2
53.0
24.0
30.0
Max 24.8
average 24.541
DAY %
YTD %
(H) 52W
Min 23.85
Last 24.4
(L) 52W
0.088924019
8.36542576
111.3399963
85.79000092
BRENT CRUDE FUTR Nov13
109.94
-0.018188432
4.465982516
115.7599945
96.19999695
GASOLINE RBOB FUT Nov13
266.29
0.116550117
3.703559467
293.6000109
243.3699846
GAS OIL FUT (ICE) Dec13
931.75
-0.347593583
3.35551858
973
837
3.837
1.240105541
2.456608812
4.59400034
3.281000137
302.12
0.139211137
1.111111111
322.3500013
276.8100023
Gold Spot $/Oz
1278.44
1.9538
-23.1919
1754.46
1180.57
Silver Spot $/Oz
21.1695
2.6813
-29.6928
34.3838
18.2208
Platinum Spot $/Oz
1384.15
1.5964
-8.8025
1742.8
1294.18
NATURAL GAS FUTR Nov13 NY Harb ULSD Fut Nov13
Palladium Spot $/Oz
705.3
0.1065
0.8061
786.5
587.4
LME ALUMINUM 3MO ($)
1849
-1.122994652
-10.80559575
2184
1758
LME COPPER 3MO ($)
7240
-0.206753963
-8.712646577
8346
6602 1811.75
3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Nov13
23.8
1929
0.025926886
-7.259615385
2230
14000
-0.035701535
-17.93669402
18770
13205
15.455
-0.161498708
0.259487512
16.65000153
14.68999958
Dec13
COUNTRY MAJOR
CROSSES
Max 30.65
average 30.158
Min 29.8
Last 30.15
29.8
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
0.9528 1.6019 0.912 1.3534 98.37 7.9871 7.7543 6.1002 61.845 31.261 1.2441 29.435 43.194 11012 93.728 1.23432 0.84486 8.2581 10.8093 133.14 1.03
0.042 0.6029 0.4825 0.3336 0.2541 0.0013 0.0039 0.0377 -0.4851 0.0288 -0.1045 -0.0917 -0.1019 -0.9807 0.2048 0.158 0.2711 0.2398 -0.3247 -0.0901 0
-8.1904 -0.9706 0.3728 2.608 -12.4733 -0.0488 -0.0477 2.1376 -11.0761 -2.1784 -1.8246 -1.3657 -5.0678 -11.0697 -4.6955 -2.1745 -3.4846 -0.4916 -2.5802 -14.6988 -0.0097
1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.2595 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 6.0958 52.6763 28.56 1.2152 28.913 40.54 9577 80.877 1.20302 0.79607 7.8281 10.1113 100.33 1.0289
Macau Related Stocks
445
0.338218715
-25.80241767
647
432
686.75
0.145825738
-16.32653061
913
635.5
SOYBEAN FUTURE Nov13
1271.75
0.374901342
-2.379581654
1409.5
1162.5
COFFEE 'C' FUTURE Dec13
117.05
0.515242593
-25.18376478
181.5500031
113.1999969
NAME
SUGAR #11 (WORLD) Mar14
18.71
0.053475936
-9.08649174
20.85000038
16.69999886
COTTON NO.2 FUTR Dec13
83.94
0.274758093
6.604013208
93.72000122
74.34999847
World Stock Markets - Indices
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
ASIA PACIFIC
WHEAT FUTURE(CBT) Dec13
NAME
28.1
53.6
101.3
CORN FUTURE
88.3
30.8
WTI CRUDE FUTURE Nov13
LME ZINC
28.2
Currency Exchange Rates
NAME
METALS
Last 88.1
88.5
24.8
Commodities ENERGY
Min 87.7
28.3
53.8
52.8
Last 53.4
Max 88.65
88.7
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
VOLUME CRNCY
ARISTOCRAT LEISU
4.82
0.2079002
53.01587
5.02
2.56
2573352
CROWN LTD
16.7
1.581509
56.51359
16.8
9.3
3206734
AMAX HOLDINGS LT
1.19
0
-15
1.72
0.75
1107650
BOC HONG KONG HO
25.1
-0.5940594
4.149376
28
22.85
5598048
CENTURY LEGEND
0.39
-6.024096
47.16982
0.56
0.232
1804000
CHEUK NANG HLDGS
7.09
-1.664355
18.36394
7.24
3.98
20000
CHINA OVERSEAS
24.4
-1.414141
5.627704
25.6
17.7
12933786
CHINESE ESTATES
20.9
2.702703
85.85132
21.5
9.543
215400
CHOW TAI FOOK JE
12.02
0
-3.376203
13.4
7.44
5615821
EMPEROR ENTERTAI
4.23
-6
123.8095
4.66
1.43
5859079
FUTURE BRIGHT
2.49
2.04918
105.4411
2.76
1.103
1932000
GALAXY ENTERTAIN
57.3
-2.30179
88.79736
58.8
24.2
9848558
HANG SENG BK
128.3
0
8.087619
132.8
110.6
773291
26.35
-0.1893939
-20.75188
35.3
23.2
1574684
COUNTRY
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
15168.01
-0.8708433
15.74976
15709.58
12471.49
NASDAQ COMPOSITE INDEX
US
3794.01
-0.5573648
25.64971
3824.438
2810.8
FTSE 100 INDEX
GB
6524.77
-0.3716536
10.63039
6875.62
5605.589844
DAX INDEX
GE
8794.18
-0.1165321
15.52455
8820.980469
6950.53
HOPEWELL HLDGS
NIKKEI 225
JN
14467.14
0.1772664
39.17162
15942.6
8619.45
HSBC HLDGS PLC
84.9
-0.2935995
4.42804
90.7
73.55
7058518
HANG SENG INDEX
HK
23228.33
-0.4636081
2.522012
23944.74
19426.35938
HUTCHISON TELE H
3.56
1.136364
0
4.66
2.98
4552000
CSI 300 INDEX
CH
2421.371
-1.870139
-4.026268
2791.303
2023.171
LUK FOOK HLDGS I
25.7
0.9823183
5.32787
30.05
16.88
2698143
MELCO INTL DEVEL
23.15
-0.6437768
156.9367
23.6
6.85
5974000
TAIWAN TAIEX INDEX
TA
8332.18
-0.4266314
8.217153
8439.15
7050.05
MGM CHINA HOLDIN
28.05
0
111.2473
28.3
12.236
4453967
KOSPI INDEX
SK
2034.61
-0.3111281
1.880771
2049.5
1770.53
MIDLAND HOLDINGS
3.16
0.3174603
-14.5946
4.72
2.68
838000
NEPTUNE GROUP
0.203
-2.403846
33.55264
0.23
0.131
35695000
NEW WORLD DEV
10.98
-0.9025271
-8.65225
15.12
9.98
13580890
SANDS CHINA LTD
53.4
-0.09354537
57.29013
54.05
27.8
13070951
SHUN HO RESOURCE
1.65
-1.197605
17.85714
1.92
1.19
0
4.62
0.6535948
10.26253
4.68
2.99
9371890
S&P/ASX 200 INDEX
AU
5262.908
0.0715135
13.20638
5314.3
4334.3
ID
4494.786
-0.5558958
4.125829
5251.296
3837.735
FTSE Bursa Malaysia KLCI
MA
1793.49
0.4891414
6.189647
1826.22
1590.67
NZX ALL INDEX
NZ
1000.676
0.3296611
13.44852
1005.231
851.971
SHUN TAK HOLDING
PHILIPPINES ALL SHARE IX
PH
3923.52
0.4791526
6.070323
4571.4
3440.12
SJM HOLDINGS LTD
JAKARTA COMPOSITE INDEX
Euromoney Dragon 300 Index Sin
SI
616.44
0.06
-0.75
NA
NA
STOCK EXCH OF THAI INDEX
TH
1475.5
0.1765225
6.00389
1649.77
1260.08
HO CHI MINH STOCK INDEX
VN
498.96
0.6535948
20.60039
533.15
372.39
Laos Composite Index
LO
1300.23
-0.698804
7.035074
1455.82
1039.81
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
24.4
1.455301
37.48293
24.9
16.052
16913866
SMARTONE TELECOM
10.64
0
-24.43182
16.22
9.97
7517126
WYNN MACAU LTD
30.15
1.515152
43.91408
30.9
19
6443718
ASIA ENTERTAINME
3.96
0
#N/A N/A
#N/A N/A
#N/A N/A
69409
BALLY TECHNOLOGI
69.29
-0.6737385
54.97652
76.3
43.16
387229
BOC HONG KONG HO
3.22
0
4.885996
3.6
2.99
8500
GALAXY ENTERTAIN
7.57
2.297297
90.6801
7.59
3.13
11615 3479329
INTL GAME TECH
18.46
0.1627781
30.27523
21.2
12.37
JONES LANG LASAL
84.01
-0.5563447 0.08338999
101.46
72.56
280999
LAS VEGAS SANDS
69.11
0.3193497
49.71837
70.62
37.8353
6466968
MELCO CROWN-ADR
34.16
0.5889282
102.8504
34.91
13.43
4154235
MGM CHINA HOLDIN
3.6
0
105.68
3.6
1.6651
12485
MGM RESORTS INTE
20.56
-0.1457018
76.6323
20.9
9.15
10490715
SHFL ENTERTAINME
23.11
-0.2158895
59.37931
23.21
12.35
514272
SJM HOLDINGS LTD
3.11
7.986111
36.54628
3.14
2.0607
16470
WYNN RESORTS LTD
167.2
0.02991325
48.63544
170.16
103.34
1711212
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
0
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
29
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
93
-0.4815409
2456828
265.6
1.45149
2048509
23.9
0
2206357
10
0.8064516
5926157
52.75
1.05364
3208615
POWER ASSETS HOL
65.6
0
1561243
CNOOC LTD
16.32
0.4926108
46287676
1260442
COSCO PAC LTD
11.76
0
3138217
SWIRE PACIFIC-A
0
7192500
ESPRIT HLDGS
12.44
-0.48
4211743
TENCENT HOLDINGS
24
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
57
2.059087
5880582
WHARF HLDG
75.55
0.1325381
701703
20
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
7
40
23399.79
LOW
23155.64
3 23400
INDEX 23228.33 HIGH
VOLUME
52W (H) 23944.74 (L) 19426.35938
23150
11-October
16-October
15 15
October 2013 April 19,17, 2013
Opinion Business
wires
Leading reports from Asia’s best business newspapers
The myth of German euroscepticism Daniel Gros
Director of the Centre for European Policy Studies
Taipei Times Taiwan’s Premier Jiang Yi Huah and the KMT breathed a sigh of relief after the noconfidence motion against Mr Jiang failed, while the Democratic Progressive Party (DPP) tried to regroup in its fight against President Ma Ying Jeou’s administration. The proposal, jointly tabled by the DPP and the Taiwan Solidarity Union, was rejected by a margin of 67 to 45, with all 112 legislators voting along party lines. Legislative Speaker Wang Jin Pyng, whose KMT membership was revoked after Mr Ma and the KMT accused him of improper lobbying, voted against the proposal.
Straits Times Singapore’s Central Business District, new Marina Bay Downtown and its future southern waterfront district may be linked by an extensive underground road network beyond 2030. The plan being studied by the Land Transport Authority will see traffic zipping about unobtrusively beneath the surface in a series of subterranean ring roads. Such roads, which free up surface space and improve the liveability of urban areas, are found in cities such as Brussels, Stockholm, Madrid, Paris, Hamburg and Boston. Singapore’s plan is to be able to accommodate a growing population.
The Star The year-end sale, which kicks off next month, is expected to drive spending in Malaysia’s retail sector in the fourth quarter, but not as much as originally forecast. For the whole of 2013, Retail Group Malaysia has revised slightly downwards its growth forecast of the retail industry of Malaysia from 6.4 percent – updated in May 2013 – to 6.2 percent. It said the retail industry was expected to expand to 93.2 billion ringgit (US$29.3 billion) this year. This is the second revision of the industry growth forecast this year.
The Age Australia’s economy has suffered a significant loss of momentum since the start of the year as its transition away from mining investment-led growth gets bumpy. The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 3.2 percent in August, down from 4 percent in July but marginally above its long term trend of 2.9 percent. ‘‘Although the growth rate in the leading index remains slightly above trend, it has slowed abruptly over the last six months,’’ Westpac chief economist Bill Evans said.
A
c c o r d i n g t o conventional wisdom, the eurozone crisis has reduced citizens’ trust in the European Union – and in European institutions in general – across all member states. Several recent reports have claimed that the German public, in particular, has turned its back on Europe. For example, a recent briefing note by Open Europe claims that German citizens tend to trust the European Parliament less than their national parliament and detects a trend of declining German trust in EU institutions since the start of the crisis. Similarly, a commentary by the European Council on Foreign Relations states: “Trust in the EU has plummeted across the continent. Both southern debtors and northern creditors feel like they are victims.” And a Pew Research Centre report released in May, entitled “The New Sick Man of Europe: The European Union,” concludes: “The European project now stands in disrepute across much of Europe.” This narrative is simply wrong. In fact, Germans’ trust in the euro has been increasing throughout the crisis, and, though their trust in EU institutions was falling until a couple of years ago, it has now recovered. The best indicator of Germans’ attitude toward the euro is provided by a regular poll conducted since 2002 that asks a simple question: “Would you like to have the Deutsche Mark back?” In recent years the proportion of those who would like to have the DM back has steadily declined, and now stands at only about 35 percent. By contrast, the proportion of those who would rather keep the euro has increased steadily throughout the crisis and is
now around 50 percent. In fact, the trend of increasing acceptance of the euro began in 2008, with the onset of the global financial crisis, and continued its upward trajectory with the onset of the eurozone’s sovereign-debt crisis in 2010.
European project It seems that crisis conditions have forced German citizens to reflect more carefully on the importance of the common currency. In recent years, the German public has been extensively informed about the potential fiscal cost of the rescue operations for Greece and other countries. But, despite the high potential cost, Germans have increasingly concluded that they prefer to keep the euro. Even the Pew report found that a majority of Germans (52 percent) believe that “their government should provide financial assistance to other EU countries that have major financial problems”. Moreover, Germany is not an
outlier. On average, there has been only a modest EU-wide decline in trust in European institutions, and this has been driven largely by the pronounced decline of trust in four countries on the eurozone periphery: Spain, Greece, Portugal, and Ireland. More important, however, trust in EU institutions has actually been more resilient in these countries
In Germany, trust in the key element of the EU, namely the euro, has been growing steadily
than trust in national institutions. Thus, what is commonly perceived as a widespread crisis of trust in the EU is really a generalised crisis of trust in all official institutions within the periphery. In Germany, trust in the key element of the EU, namely the euro, has been growing steadily. This fundamental trend also helps to explain the outcome of Germany’s recent general election, in which Chancellor Angela Merkel campaigned on her record of “saving the euro” and won a resounding victory. The only openly antieuro party failed to clear the 5 percent threshold to enter the Bundestag. There is much speculation about the composition of Merkel’s next government and what it will mean for Germany’s position toward Europe. But the details of coalition politics in Germany matter much less for Europe than Germans’ broad support for the euro. Germany will not turn its back on the single currency – or on the European project in general. © Project Syndicate
A Fitch downgrade wouldn’t matter
F
Matthew C. Klein
itch, the ratings company, just said that it placed the U.S. government on “rating watch negative” meaning it might reduce the country’s AAA credit grade. It worries that the Treasury may not be able to make all of its debt payments on time without raising the debt ceiling, now being held up by a congressional stalemate. It also worries – wrongly – that “prolonged negotiations
over raising the debt ceiling” would endanger “confidence in the role of the U.S. dollar as the preeminent global reserve currency,” which is supposedly “a key reason why the U.S. ‘AAA’ rating can tolerate a substantially higher level of public debt than other ‘AAA’ sovereigns.” Fitch might be right about the risks, but its decision to downgrade (or not!) shouldn’t have much of an impact.
I’m reminded of an amusing Bloomberg News article from late last year, which found that changes in sovereign credit ratings had basically no impact on sovereign borrowing costs. Markets moved as if ratings changes mattered a little less than half the time and moved in the opposite direction of the ratings change the other half. When S&P downgraded the U.S. government in 2011, borrowing costs plunged.
More recently, there is the case of Japan, which Fitch downgraded last May. Sovereign borrowing costs have been lower ever since. So although there may be plenty of hand-wringing if Fitch follows through and lowers the U.S. government to AA+, it is no reason to panic. You should be more concerned about the possibility that the government defaults on its debt. Bloomberg View
16 16
October 17, 2013 April 19, 2013
Closing Ireland to shut ‘Apple’ tax loophole
Greens reject coalition with Merkel
Ireland plans to shut a tax arrangement used by Apple Inc to shelter US$40 billion from taxation. Firms have been able to funnel profits into Irish subsidiaries or “ghost companies” that had no declared tax residency. The government said it plans to make it illegal for a company to have no tax domicile. “Ireland wants to be part of the solution to this global tax challenge, not part of the problem,” Finance Minister Michael Noonan said. But firms would be able to nominate any country as their tax residence. Because of that, tax experts say that the change will not make much difference.
German Chancellor Angela Merkel was left with the Social Democrats as her sole potential governing partner after the Greens dropped out of coalition talks citing irreconcilable differences over tax policy. Mrs Merkel and her Christian Democratic negotiators ended their meeting with Greens party leaders in the early hours yesterday after failing to identify enough common ground to begin formal coalition negotiations. With the Greens sticking to their demands for tax rises to finance infrastructure and Merkel’s bloc unwilling to drop its rejection of tax increases, the talks broke up with no more meetings planned.
HK looking into forex manipulation allegations
trader to counterparts at other banks, Reuters reported last week. According to one banking source at one of the biggest FX banks in the world, “every bank” has handed data and other information over. “It’s a two-way flow of infor m ation,” said a source at a U.S. bank, also one of the world’s major FX institutions. Media reports this week suggest the investigations centre on senior traders at big banks who were part of electronic chatrooms with names such as “The Cartel” and “The Bandits’ Club”. Senior traders at certain banks involved in this process are alleged to have shared information with each other ahead of the fixings, such as the size and nature of their clients’ orders, in order to manipulate the fixing rate and make money. Britain’s Financial Conduct Authority has declined to comment, as did Royal Bank of Scotland and JP Morgan, while Citigroup’s chief financial officer John Gerspach declined to comment during a conference call with reporters on Tuesday.
Monetary Authority questions banks as probe widens to Asia
H
ong Kong is looking into allegations of price-rigging in the US$5.3 trillion-a-day global foreign exchange market as probes into possible currency rate manipulation widen from Europe and the United States to Asia. The Hong Kong Monetary Authority said yesterday that it had spoken to foreign regulators and was speaking to banks about allegations that traders manipulated fixings, or snapshots of where currencies are trading at a particular time in the 24-hour-a-day global market. Switzerland, Britain and the United States have already opened investigations. “The Hong Kong Monetary Authority is aware of the allegations. We have been in communications with the relevant overseas
regulators and following up with individual banks,” the de facto central bank said in a statement to Reuters. Switzerland’s competition commission WEKO and its financial markets regulator FINMA said earlier this month that they had opened investigations into potential manipulation of foreign exchange markets by banks. They did not name the banks under investigation. Last week, a source familiar with the matter told Reuters the United States was also involved in the probe. Until now, no Asian authority has confirmed it is also involved in the investigations. Royal Bank of Scotland Group Plc has already handed Britain’s financial regulator instant messages sent by a former currency
Probe into foreign exchange rates could affect banks around the world
PBOC sticks to prudent monetary policy Central bank sees credit expansion pressure amid inflows
C
hina’s central bank said yesterday it will keep monetary policy largely stable but warned that rising capital inflows are putting pressure on credit expansion.
The People’s Bank of China (PBOC), in the wake of data showing robust bank loan growth in September, said it will stick to its prudent policy with some fine-tuning and keep banking system liquidity at appropriate levels.
Chinese companies added 787 billion yuan in lending last month
“We must realise that bank lending has increased at a relatively fast pace recently and the rising trade surplus as well as massive foreign exchange inflows have also added more pressure on credit expansion,” the central bank said in a statement on its website. “We will continue to implement prudent monetary policy and make appropriate fine-tuning and preemptive adjustment.” Chinese banks made 787 billion yuan (US$128.6 billion) worth of new yuan loans in September, higher than a forecast of 650 billion yuan and more than August’s 711.3 billion yuan, central bank data showed on Monday. Large foreign exchange purchases by the PBOC, which regularly intervenes in the market to slow yuan rises, amount to creation of base money and can fuel inflation unless the central bank soaks up the
Reuters
excess yuan injected into the system. China’s foreign exchange reserves – the world’s largest – grew by US$160 billion in the third quarter, one of the largest increases on record, the central bank data showed, signalling sustained inflows despite a dip in exports in September. “We will flexibly use a mix of various monetary tools to manage banking system liquidity and guide reasonable growth in credit and total social financing,” the PBOC said. Strong credit expansion in recent months showed that the central bank may have loosened control on bank lending following a liquidity crunch in June. Analysts have warned that the expansion could fan property bubbles and long-term inflation risks. The central bank also pledged to move ahead with reforms to liberalise bank deposit rates in a step-by-step way. It freed up bank lending rates in July. The central bank said it has not changed change the policy stance on real estate sector. “We will continue to implement the differentiated credit policies for the property sector and will actively meet the credit demand from first-home buyers,” it said. Reuters