Macau Business Daily, October 22, 2013 by Business Daily

Govt fights court on Macau Cable TV compensation

Legislator’s claim of full disclosure is queried The reported claim by legislator and developer Mak Soi Kun that he had disclosed his real estate and business interests as required by the new Asset Declaration Law – but they had not been included in an official list placed online – was under scrutiny yesterday. Sections on the declaration for listing property and shares were “left blank”, the Court of Final Appeal said in a press statement yesterday. Page 5

he Macau government has appealed an arbitrator’s decision it must pay 200 million patacas (US$25 million) in compensation to Macau Cable TV Co Ltd. The court order was made last December but only made public on Friday. Macau Cable TV theoretically had an exclusive concession to offer cable television in the city starting in 1999 but its rights were breached from the start. It first took the government to an arbitration court in 2011. It had accused the administration of “failing to maintain a fair market operation” and asked for 500 million patacas. Macau Cable TV’s chief commercial officer, Chiang Kwong Io, told Business Daily yesterday that the amount of compensation awarded fell short of what his company had expected. Public antenna companies, operating since the 1970s, have most of the market. The government had done nothing to close down their operations until in June the Court of Second Instance gave the authorities 90 days to stop them. More on page 3

Year II

Number 397 Tuesday October 22, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

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STDM launched La Scala complaint in pique: lawyer

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Stanley Ho’s flagship company only complained about a government concession – granting land for the La Scala high-end housing development – because Mr Ho’s firm lost the bid, a court heard yesterday. A lawyer for Hong Kong businessman Joseph Lau – one of two men accused of bribing former government secretary Ao Man Long over the land – said Sociedade de Turismo e Diversões de Macau SA was displeased about missing out. Page 6

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CPI inflation up 6.12 pct year-on-year in Sept

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Macau’s composite consumer price index – an indicator of inflation – rose 6.12 percent year-on-year in September, according to data from the Statistics and Census Service released yesterday. The local composite CPI expansion rate was 1.52 percentage points higher than that seen in neighbouring Hong Kong during the period, which recorded a 4.60 percent rise. The statistics service here said the Macau number was attributable to “higher charges for eating out, dearer prices of vegetables and rising rentals for dwellings”. Page 2

Great Barrier grief: broke Queensland woos gamblers The heavily indebted Australian state of Queensland is aspiring to attract Chinese and other Asian gamblers from Macau, with a revamp of its small existing casino industry. The jurisdiction says it might be willing to issue three new licences to add to four there already. U.S. dollar billionaire Tony Fung has already proposed a A$4.2 billion (32.43 billion patacas) scheme near the coastal city of Cairns. Page 7

Name

%Day

GALAXY ENTERTAIN

4.60

TENCENT HOLDINGS

4.19

CHINA RES ENTERP

3.20

CHINA MERCHANT

3.04

SANDS CHINA LTD

2.93

HUTCHISON WHAMPO

-1.08

SUN HUNG KAI PRO

-1.17

AIA GROUP LTD

-1.25

COSCO PAC LTD

-1.93

BELLE INTERNATIO

-3.50

Source: Bloomberg

Street stall scheme gives heart to Hengqin

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A Portuguese-style street featuring up to 70 street vendors will be launched on Hengqin Island next month, Business Daily has learned. It will launch close to the time that the Chimelong Resort aimed at mass market mainland tourists is due to open. Ricacorp (Macau) Properties Ltd, the street project’s exclusive property agent, say it will focus on food and souvenirs. The agency hopes to attract small- and medium-sized enterprises from Macau to run some stalls. Rents will cost up to 5,400 yuan (7,026 patacas) a month. Page 4

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October 22, 2013

Macau

CPI inflation up 6.12 pct y-o-y Typhoon season helped to push up vegetable prices Michael Grimes

michael.grimes@macaubusinessdaily.com

acau’s composite consumer price index – an indicator of inflation – rose 6.12 percent year-on-year in September according to data from the Statistics and Census Service released yesterday. The local composite CPI expansion rate was 1.52 percentage points higher than that seen in neighbouring Hong Kong during the period, which recorded a 4.60 percent rise. Some of the difference could be due to variations in the composition of the ‘basket’ of items used to measure the CPI. The statistics service here said the Macau number was attributable to “higher charges for eating out, dearer prices of vegetables and rising rentals for dwellings”. For poorer households in Macau – more heavily affected by so-called regressive taxes such as duty on tobacco, paid at the same rate by all regardless of income – the underlying CPI inflation for September was even higher judged year-onyear, at 6.84 percent. The number – known to economists as ‘CPI-A’ – applies in Macau’s case to households with an average monthly expenditure

of 6,000 patacas (US$751) to 18,999 patacas (about half of the total). The ‘CPI-B’ relates to more affluent households – about 30 percent of the total – with an

average monthly expenditure of 19,000 patacas to 34,999 patacas. For those consumers, the CPI-B inflation rate for September was actually below the composite CPI,

recording a 5.93 percent expansion. Judged month-on-month September’s composite CPI was up 0.77 percent. The statistics service said seasonal factors included higher tuition fees and charges for tutorial classes in the new academic year (pushing costs up 2.08 percent). There were also higher prices of vegetables and pork in September compared to August (up 1.37 percent). Hong Kong statisticians attributed some of the rise in food prices in September to bad weather and disruption to transport caused by Typhoon Usagi, which made landfall near Hong Kong on September 22. For the 12 months ended September 2013, Macau’s average composite CPI increased by 5.42 percent from the equivalent period in 2012. The city’s average composite CPI for the third quarter increased by 5.60 percent year-on-year, while that for the first nine months went up by 5.37 percent. But September’s numbers were well below the inflation seen in 2008, when the composite CPI expanded 8.61 percent year-onyear and peaked at nine percent in the third quarter.

Sands Cotai Central opening new premium mass zone Total of 25 percent of Macau EBITDA now coming from non-gaming, adds LVS chairman Sheldon Adelson Michael Grimes

michael.grimes@macaubusinessdaily.com

ands China Ltd is to open a new premium mass gaming area at Sands Cotai Central on Cotai early next year, the parent Las Vegas Sands Corp says. In June the firm said a similar zone at The Venetian Macao was generating the equivalent of US$20,000 (159,712 patacas) per table per day and more than US$300 million in annual revenue. “SCC [Sands Cotai Central], as you know, has almost 6,000 hotel rooms on Cotai, and at this point, there’s 200 less mass table games at SCC versus The Venetian [Macao]. So in the spring, we open up our premium mass offering of 75 more games,” Rob Goldstein, LVS executive vice president and president of global gaming operations told analysts on the LVS third quarter earnings call. His boss, LVS chairman Sheldon Adelson reiterated during the call that in the light of the Macau government’s controls on the number of new live dealer tables allowed in the market, Sands China – in common with other operators –

would “take the lower-performing tables from other properties” to improve yields. At an investor presentation earlier this year in New York City, Michael Leven, LVS president and chief operating officer, mentioned investing “US$100 million” in a new premium mass area near to Holiday Inn and Conrad Macao at Sands Cotai Central. At the time Mr Leven said it would “produce 80 more tables at the premium mass level and open some time in the third quarter of [20]14”. Mr Goldstein’s latest comment suggests the opening date may have been brought forward. The latter executive added in the latest call with analysts that Sands Cotai Central was rapidly closing in on the generation annually of US$1 billion in earnings before interest, taxation, depreciation and amortisation. Mr Adelson said 25 percent of the firm’s Macau EBITDA was generated from non-gaming including hotel, retail, convention and exhibition businesses. According to Bloomberg

October 2013 April 19,22, 2013

Macau

Cable TV compensation battle ends up in court The government appeals against an arbitrator’s award of 200 million patacas to Macau Cable TV Stephanie Lai

sw.lai@macaubusinessdaily.com

he government has appealed to the courts against an arbitrator’s decision that Macau Cable TV Co Ltd should be paid 200 million patacas (US$25 million) in compensation. Macau Cable TV has an exclusive concession to supply cable television, but unlicensed public antenna companies established in the 1970s, before Macau Cable TV began operating, have most of the market, mainly because their service is cheaper. Macau Cable TV took its case for compensation to arbitration in 2011. The company asked for 500 million patacas in compensation for the government’s failure to uphold its exclusive right to supply cable television. The arbitrator decided last December that the government should pay 200 million patacas. Late last week the president of the Court of Final Appeal issued a written statement saying the

government is appealing to the Court of Second Instance against the arbitrator’s decision. Macau Cable TV’s chief commercial officer, John Chiang Kwong Io, told Business Daily yesterday that the amount of compensation awarded fell short of what his company had expected. The company originally intended to ask for 1 billion patacas. “The compensation figure of 1 billion patacas was based mainly on the potential return on our investment made between 1999 and 2011 – had we been given the right environment to operate normally in,” Mr Chiang said. “But it turned out that while giving us the exclusive concession to run the cable TV business, the government did not at once clear up the problem of the public antenna companies,” he said. Mr Chiang accused the antenna companies of relaying without permission programmes from the

likes of the BBC and Fashion TV. “We were paying to have them relayed,” he said. “We just couldn’t lay our cables as extensively as we would have liked to.” He said his company had eventually asked for only 500 million patacas in compensation as a gesture of its willingness to solve the problem. Macau Cable TV has had a monopoly of cable television since 1999 – in theory. However, the company ran at a loss until 2010 as it had to compete with antenna companies that relayed television transmissions to households more cheaply. Mr Chiang said Macau Cable TV had accumulated losses of about 170 million patacas. He said his company had not announced the arbitrator’s decision last December because the government had not accepted the decision, leaving the matter unsettled. Mr Chiang declined to comment on the government’s appeal against the decision. But he did remark: “From the report by the Commission against Corruption to the ruling by the Court of Second Instance, everyone can see what really happened – that reason

is on our side.” In June the Court of Second Instance gave the government 90 days to stop the antenna companies from illegally relaying cable television transmissions. In August Macau Cable TV signed agreements that allowed 14 antenna companies to relay through their networks programming provided by Macau Cable TV. Mr Chiang said the government’s appeal against the arbitrator’s decision should not weaken Macau Cable TV’s chances of winning a new contract when it bids for one next year.

We just couldn’t lay our cables as extensively as we would have liked to John Chiang, Macau Cable TV chief commercial officer

Confusion over new food safety rules Public consultations since 2011, but food safety centre head says no particular timetable for publicising standards

Sands Cotai Central – closing in on US$1 bln annual EBITDA

estimates, the market average for non-gaming is 10 percent.

Madrid project Elsewhere on the call, Mr Adelson recapped comments he made in the second quarter earnings discussion regarding LVS’s Madrid project. “With respect to our European development in Madrid, there are a number of various steps left in the development process. Any investment would be subject to the receipt of government approvals and the finalisation of the grants and incentives package that would enable investment…” he stated. A recent note from Joe Greff, managing director of investment bank J.P. Morgan in New York, suggested that dropping the Spain

scheme would act as a catalyst in boosting LVS’s Nasdaq share price and achieving the bank’s target of US$75.00 (599 patacas) per share. At the close of business on Friday, New York time, LVS was already closing in on that target, aided by record third quarter earnings in Macau that beat the general market. On Friday the parent firm’s stock was up 2.18 percent, at US$72.52. LVS also stated on the latest call with analysts it had not yet started looking for a replacement for Kenneth Kay, its former chief financial officer, who left the company with effect from July 31. It said the process of selecting a successor would probably start at the end of the year or the beginning of next year.

leader of the city’s food import sector has urged the government to be “lenient” with his members in the introductory phase of the new Food Safety Law, which took effect from Sunday. It consolidates Macau’s foodstuff regulations and makes inspection of food imports and exports the responsibility of the Civic and Municipal Affairs Bureau. Lei Kit Heng, president of the Macau Union Suppliers Association – which includes many of the city’s wholesale operations for importing frozen, canned and dried foods – said the industry welcomed the legislation. He added the association would “cooperate with the government to better enforce such new bill”. But he urged the authorities to make sure information about the new rules was widely publicised to the industry and asked officials to be “lenient” when considering any early enforcement action. He also asked the government to clarify the safety standards for

different food products such as the amount of food additives that are allowed. “There are many standards the industry is using now like the mainland [Chinese] and European ones on different products but it is still ambiguous which one the government will adopt for inspection,” Mr Lei told Business Daily. Leung Veng Han, head of the food safety centre set up under the municipal bureau’s control, said at the weekend that the government will “gradually” release relevant sets of safety standards for different food product categories. But she said there was no particular timetable for the government to lay out the standards. Public consultation on the food safety law began in 2011. Mr Lei suggested the administration consult with the industry every two to three months to review progress on enforcement of the bill. T.L.

October 22, 2013

Macau Thirtysomething MBA is junket firm CEO A Master of Business Administration has been appointed as chief executive and executive director of Macau junket room investor Dore Holdings Ltd. Regina Wong Yee Shuen, aged 38, holds an MBA from Hong Kong University of Science and Technology. Ms Wong is also a member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants, according to a filing by Hong Kong-listed Dore. The company, which has operations at The Venetian Macao, reported profits up 79 percent for year ended March 31, 2013, on revenue down nearly 43 percent.

Hengqin retail area woos Macau SMEs One street will be devoted to selling souvenirs and food

“The commercial street is just next to the Chimelong resort, which will also start running this year and can draw millions of visitors a year,” she said. “There are also plans to organise activities there regularly, like at Christmas and Chinese New Year, to attract travellers.”

Greater potential

Tony Lai

tony.lai@macaubusinessdaily.com

he developers of a commercial area on Hengqin Island have begun a campaign to attract Macau enterprises to join their project. The developers are trying to find enterprises to run 70 stalls which would concentrate on selling food and souvenirs. The stallholders could start operating as soon as next month. The stalls will cost up to 5,400 yuan (7,026 patacas) a month to rent. Macau’s small and medium enterprises welcome the project, the first on Hengqin tailored for SMEs, but are doubtful about how much custom they will get there. The project’s sole agent here, Ricacorp (Macau) Properties Ltd, says the Hengqin administration supports the establishment by the private sector of a commercial area with “international characteristics” in a street in Hongqi Village, the island’s main settlement. Ricacorp managing director Jane Liu Zee Ka said 50 small stalls would be let for 4,000 yuan a month and 20 slightly bigger stalls for food and drink would be let for 5,400 yuan a month. Ms Liu told Business Daily that the stalls should sell mainly traditional souvenirs such as Macau almond cookies. “Though the commercial street is themed with international characteristics, the project mainly targets Macau businesses, which can also sell, for instance, goods

with Indian or Malaysian flavours,” she said. The commercial area is scheduled to open on November 20. On that date the International Circus Festival, China’s first, will begin on Hengqin.

Added burden The campaign to attract Macau enterprises to join the project began officially only on Sunday. But Ms Liu said that before then her agency had had talks with about 100 Macau companies that had expressed interest. The vice-chairman of the Macau Small and Medium Enterprises Association, Daniel Iong Ieng Chun

KEY POINTS Hengqin commercial area to open on November 20 Area will have 70 stalls for Macau enterprises

said: “We welcome the project, which is the first scheme where big players have taken the lead in helping the city’s SMEs to venture into Hengqin. It will be particularly helpful to the food and beverage sector.” The director-general of the Hengqin New Area Administrative Committee, Niu Jing, said last week that officials were considering five projects on the island suitable for Macau SMEs to invest in, including the Hongqi project. Among the other projects are the Chimelong International Ocean Resort, which will open this year, and a shopping mall to be built by Macau businessman and casino operator David Chow Kam Fai. Construction of the mall has yet to begin. Mr Iong is worried about whether Hengqin will be able to draw enough visitors to sustain businesses there. He said that if the island failed to draw enough visitors, enterprises there would be wasting money on rent for the first few years. “This will be an added burden on the finances of these companies, which will have to see whether they can survive in such conditions,” he said. Ms Liu dismisses such worries.

Chimelong Group said last week that it expected the first phase of its Hengqin resort to draw over 20 million visitors a year and bring more than 50 billion yuan worth of economic benefits to the island. Mr Iong is also worried about Hongqi commercial area rents jumping eventually. Ricacorp says tenants must sign five-year leases, but that the terms of the leases are renegotiable after two years. The estate agency says it has had many enquiries about the Hongqi project from Macau companies and a few from mainland companies. Ms Liu said Ricacorp would also help enterprises with the Hengqin paperwork and come up with ways for them to staff their stalls there. She expects over 70 applications for leases. “We will pick companies with greater potential and unique goods. For example, a company that already has strong a reputation here will be among our first picks,” she said. She said an enterprise could rent more than one stall, adding that the list of tenants would be completed early next month. Mr Niu said last week that so far 37 Macau enterprises had invested 2.5 billion yuan in Hengqin. He said that, altogether, investors were undertaking 61 projects on the island with a combined value of over 240 billion yuan.

Stalls to cost up to 5,400 yuan a month to rent SMEs express worry about the amount of custom

The stalls on Hengqin will concentrate on selling traditional souvenirs (Photo: Manuel Cardoso)

October 22, 2013

Macau

Two legislators shy away from full asset disclosure Mak Soi Kun has yet to give complete information about the property and shares he owns Stephanie Lai

sw.lai@macaubusinessdaily.com

construction companies and is vice-president of the Jiangmen Communal Society. Another assembly member, property developer Fong Chi Keong, left blank the part of the form meant for the declaration of property owned, although he did declare his ownership of shares in five Macau construction or real estate companies. Mr Fong sits on the boards of three not-for-profit organisations.

Limited progress

egislative Assembly member Mak Soi Kun has declared only the parts he plays in not-for-profit organisations and has failed to give information about any property or shares he owns, the Court of Final Appeal said yesterday. In interviews with news media over the weekend, Mr Mak said he had submitted 13 pages of data on assets he owns, which should include the information that the court said was missing. “The fourth part of the asset declaration form from legislator Mak Soi Kun gives only his roles in non-profit organisations,” the court said in a written statement. The fourth part of the form is the part that contains information government officials and members of the Legislative Assembly must disclose to the public. The Court of Final Appeal posted online on Saturday the declarations of assets held by senior officials from

Mak Soi Kun heads two Macau construction companies

the Chief Executive downwards and by assembly members. The Asset Declaration Law, enacted in April requires such declarations.

Mr Mak, an assembly member directly elected with the secondhighest number of votes in last month’s elections, heads two Macau

Business Daily tried to reach Mr Mak and Mr Fong to invite them to comment on the gaps in their declarations, but we had been unable to contact either by the time we went to press. Failure to disclose assets accurately is punishable by fines equivalent to between three months’ and one year’s salary for the public figure in question, the law says. Public figures convicted of failing to make the origin on their assets clear can be imprisoned for up to three years. A professor of public administration at Macau Polytechnic Institute, Lou Shenghua, said: “It is progress that we have compulsory disclosure of officials’ assets, whereas in the past this information didn’t have to be made public.” But Mr Lou is not satisfied. “The disclosure that we have is still limited,” he said.“For instance, we still do not have any notion of how much officials have in their bank accounts, or the value of the properties they declare.”

October 22, 2013 April 19, 2013

Macau

STDM’s La Scala gripes sour grapes, court told A La Scala trial defence lawyer says STDM suggested it could match Moon Ocean’s bid for the land for the project Tony Lai

tony.lai@macaubusinessdaily.com

aming tycoon Stanley Ho Hung Sun’s flagship company, Sociedade de Turismo e Diversões de Macau SA (STDM), complained about the award of land to the wouldbe developers of La Scala only because its own bid for the land failed, the Court of First Instance was told yesterday. Counsel for Joseph Lau Luen Hung, chairman of Hong Konglisted developer Chinese Estates Holdings Ltd, made this assertion when the court resumed the trial of Mr Lau and another Hong Kong businessman, Steven Lo Kit Sing,

who are accused of bribery and money laundering. Mr Lau and Mr Lo are accused of paying Ao Man Long, the secretary for transport and public works at the time, HK$20 million (US$2.5 million) to ensure the success of their bid in 2005 for the land for La Scala, a high-end housing project. Mr Lau’s counsel, Luís Melo, asked why STDM had not complained during a meeting of shareholders in Lei Pou Fat Development Co Ltd, which was in charge of the land, held before the bidding process began in June 2005. The government was the majority

MOP1.37 bln Moon Ocean paid for the land where La Scala was to have been built

Steven Lo, left, at the Court of First Instance

owner of Lei Pou Fat. Other shareholders were STDM, Macau International Airport Co Ltd and Macau businessman Ng Fok. Mr Melo asked why the board of Lei Pou Fat, on which STDM was represented, had approved the arrangements for auctioning the land without any amendments to the rules, such as the rule on the amount of time allowed for making bids. The court had been told at an earlier hearing that STDM had complained about the time allowed for making bids. STDM had said in a letter read out in court that it had had only 10 days to prepare

its bid and that the requirements for tendering did not conform to government policy in land auctions held previously. Commission against Corruption senior investigator Io Fu Chun replied: “Though the requirements were approved, they were minority shareholders, who would just listen to the government.” The prosecution has argued that Moon Ocean Ltd – once owned by Mr Lo and later sold to Mr Lau – was able to make a detailed proposal for using the land in just 10 days because it had bribed Mr Ao. Mr Melo cited a letter STDM sent to Lei Pou Fat in August 2005, after the result of the land action had been made known, in which STDM officially complained about the auction. He said STDM had “suggested” in the letter that it could pay the same price for the land as Moon Ocean was paying. Moon Ocean paid 1.37 billion patacas for the land. Mr Melo said the bid evaluation committee had described STDM’s proposal for the use of the land as “detailed”. If the auction was flawed, he said, “Why did only one of the three bidders complain?” Mr Io replied: “Moon Ocean surely had no problem when STDM complained. The boss of the other bidder, Apex, was the same person behind Silver Point.” The court had been told previously that Silver Point, a Hong Kong company, had offered to lend Moon Ocean up to HK$717 million in late 2005 to cover the land premiums Moon Ocean had to pay. Mr Io described Apex’s proposal as “rough” and “casual”, implying that its bid for the land had not been a serious one. But he conceded there was no evidence of direct contact over the telephone between Mr Ao and Mr Lau. Mr Lo’s counsel, Jorge Neto Valente, reiterated that Lei Pou Fat intended to sell the land plots in the 1990’s, arguing that the two Hong Kong businessmen were not the only ones aware of the land sales. But Mr Io said the plan, and the evaluation report, were never made public. The hearing will resume on Wednesday.

October 2013 April 19,22, 2013

Macau

Debt-laden Queensland looks to Macau gamblers Australian state is considering issuing three new casino licences in bid to increase tax take Michael Grimes

michael.grimes@macaubusinessdaily.com

offer up to three new casino licences. “The infrastructure that we have in this state is from a different era,” he added. More than a third of the 3,892 hotel rooms in Cairns were empty in the three months to June, according to the state authorities. It should be noted however that the second quarter is not the peak time for domestic visitors. The wet season in tropical northern Queensland – while typically running from November to April – can spill over into the following months. Many Australians take their main holiday at Christmas, which is high summer in the more temperate and populous south of the country. The strength of Australia’s currency also serves to make holidays there expensive for many Asian tourists. Australia’s central bank warned in June that the Australian dollar still remains high and a barrier to economic growth, even after the currency’s recent steep fall.

Tax rates

Rendering of Aquis Great Barrier Reef resort

he heavily indebted Australian state of Queensland is aspiring to attract Chinese and other Asian gamblers from Macau, with a revamp of its small existing casino industry. The jurisdiction says it might be willing to issue three new licences to add to four there already. U.S. dollar billionaire Tony Fung Wing Cheung – a former chairman of the Hong Kong-based real estate developer Sun Hung Kai & Co Ltd – has already proposed a huge 3,750room, A$4.2 billion (32.43 billion patacas) scheme called Aquis Great Barrier Reef Resort, near the city of Cairns on Queensland’s coast. In 1997 Mr Fung founded another firm called Yu Ming Investment Management Ltd, according to a company document. Yu Ming Investment Management is wholly owned by Hong Kong listed Allied Group Ltd, according to the Englishlanguage website of Yu Ming Group. The same website lists Ambrose So Shu Fai, chief executive of Macau casino developer SJM Holdings Ltd, as an independent non-executive director of Yu Ming Group. Australia’s Echo Entertainment Group Ltd – an incumbent casino operator in Queensland – is already slugging it out with James Packer’s Crown Ltd (the latter already an investor in Macau) for the rights to provide more gaming facilities in the state. A suggested site for one new facility is Brisbane, the state capital. Echo already runs the Treasury Casino & Hotel Brisbane, the Jupiters Hotel & Casino Gold Coast, and Jupiters Townsville. A potential challenge for Queensland is building a sustainable business among longhaul visitors. There may however be potential to reach more domestic

KEY POINTS Queensland aims to expand gaming tax income 22 pct by 2016-17 Considering three new licences HK entrepreneur proposing A$4.2 bln resort near Cairns Chinese tourists spent A$4.2 billion in Australia in 2012

players and their families in the continent-sized country. During the 2011 national census 2.4 million Australians – about 12 percent of the population – declared that they had an Asian ancestral background. First- or secondgeneration immigrants may also have family members in East Asia that make regular visits to Australia, creating a multiplier effect regarding the potential repeat visit market. And repeat visitors appear to be important in the casino sector. Praveen Choudhary, managing director at Morgan Stanley in Hong Kong, suggested at Global Gaming Expo Asia this year that half of Macau’s 28 million visitor arrivals last year were made up of only six million unique visitors. Las Vegas-based gaming consultant Dean Macomber told Business Daily a fortnight ago that distance from a target market can be a factor in building a casino business. Even a domestic visitor travelling

from Perth to Cairns would cover 3,444 kilometres (2,140 miles). That’s the equivalent of flying from Bali, Indonesia, to Macau. “No matter what you do, if you double the distance from a casino site the demand diminishes by one quarter. If you triple the distance, it reduces by one ninth. It’s a reverse power curve,” explained Mr Macomber. But Justine Chien, director of Sydney-based tour agent Golden Dragon Travel Pty, thinks novelty could be part of Queensland’s appeal. “Whether they [Asian tourists] gamble or not, casinos are one of the prize attractions,” she stated. “They’ve all been to Macau already. They want to see the different casinos around the world,’’ she added. A record 110,100 Chinese arrived in Australia in February, according to Tourism Australia, the country’s promotion body for the inbound holiday industry. That was more than double the 42,600 who came during the whole of 1995. China is now the country’s biggest source of tourist revenue. Chinese visitors spent A$4.2 billion in 2012, up 13 percent on 2011.

Tax take Expanding that revenue further and capturing a bigger percentage of it would help Queensland. Its government is the nation’s most indebted. In June the state treasurer said the 2013-14 budget deficit would be A$7.7 billion – double the forecast made in 2012 of A$3.8 billion. “We’re in a global competition for tourists and the offering we have at the moment, I’m afraid, is not up there with our competitors,” Queensland Premier Campbell Newman said last week while announcing plans to

Another factor that could influence Queensland’s casino business is gambling tax rates – especially in the high roller segment. From July 2009, the state has placed a levy of 20 percent of monthly gross revenue on table games and keno for Gold Coast and Brisbane casinos and 10 percent of gross revenue on table games and keno for Townsville and Cairns casinos according to an Interstate Comparison of Taxes 2012-13. There is talk of increasing state taxes on casino operations. In Macau gaming tax is 35 percent of gross revenues, plus contributions for social projects equivalent to approximately another four percent of the gross. The Queensland Government has projected a 22 percent rise in all gambling taxes and levies by 201617, compared to the A$998 million actually raised in 2011-12.

I don’t know Australia would be the first cab off the rank Justin Casey, Asia Pacific Gaming Consultancy

Matthew Jones, director of Liquor & Gaming Specialists Pty, a Brisbane-based consultancy, thinks that if Tony Fung or another investor commits to building a property of similar standard to what’s available in Cotai, it could transform the state’s industry. “If someone is prepared to build something of a much higher standard, that’s going to encourage more visitors,” said Mr Jones. But annual returns on capital are an important factor for investors. “If you had a pocket full of money and you were looking to establish a new destination in Asia, I don’t know Australia would be the first cab off the rank,” said Justin Casey, managing director of Macau-based Asia Pacific Gaming Consultancy (Macau) Ltd. “Everyone’s got a marble floor, chandelier and a Chinese restaurant now,” he added. With Bloomberg News

October 22, 2013 April 19, 2013

Greater China Smog emergency shuts Harbin Choking smog all but shut down one of northeastern China’s largest cities yesterday, forcing schools to suspended classes, snarling traffic and closing the airport, in the country’s first major air pollution crisis of the winter. An index measuring PM2.5, or particulate matter with a diameter of 2.5 micrometres (PM2.5), reached a reading of 1,000 in some parts of Harbin, the gritty capital of Heilongjiang province and home to some 11 million people. A level above 300 is considered hazardous, while the World Health Organisation recommends a daily level of no more than 20.

China to restrict satellite TV stations China will allow satellite television stations to buy the right to broadcast only one foreign programme each year from 2014 as part of new restrictions to push “morality-building” and educational shows, state media reported yesterday. The official Shanghai Securities Journal, citing an order by the General Administration for Press and Publication to domestic television stations, also said foreign programmes could not be broadcast in prime-time viewing hours from 7.30pm to 10pm during the year in which the broadcasting rights were purchased.

Authorities punish eight in bribery case China’s anti-graft authorities have punished eight people at a stateowned rail construction firm for spending more than US$100 million on hospitality last year, a disciplinary body of the Communist Party said yesterday. Besides waste and fraud, the country’s railway system has been mired in debt from building high-speed lines. China Railway Construction Corp Ltd, the country’s second-largest infrastructure contractor, spent 837 million yuan (US$135 million) on receptions for guests, the ruling party’s Central Commission for Discipline Inspection said.

Municipal bonds eyed to clean u

Government think-tank favours expanding municipal bond marke Gabriel Wildau

hina may decide next month to expand a trial programme allowing local governments to sell bonds, in response to concerns that their huge borrowings are largely hidden from view and pose a risk to the stability of the nation’s financial system. A government think-tank that advises China’s cabinet, the Development Research Centre, has put forward a proposal calling for greater use of municipal bonds ahead of a policy-making meeting next month to decide Beijing’s long-term reform agenda. Local government debt totals up to US$4 trillion or 42 percent of gross domestic product, according to some unofficial estimates, but much of it has been raised via financing vehicles that do not disclose details on the size and health of loans. That lack of transparency – akin to the kind of off-balance sheet lending that froze international debt markets and led to the 200809 global financial crisis – could be addressed through use of bonds, which require disclosure and spread the risk of default across a wide array of investors. “’Open the front door, block the back door,’ and expand the scope of local government independent bond issuance,” the Development Research Centre said in its draft proposal submitted recently to leaders of the ruling Communist Party and published last week on the website of Beijing’s Renmin University. Chinese law bans local governments from selling debt directly in a measure that was meant

Local governments keep raising debt to fund infrastructure projects

to restrain their borrowings, but local officials have skirted it by raising debt through financing vehicles to fund infrastructure projects.

Borrowing through so-called local government financing vehicles exploded in 2008-09, when China pumped 4 trillion yuan (US$656

HK loans at record after cash crunch Mainland companies concerned about fundraising costs onshore

China Gas expects sales jump by 2020 China Gas Holdings Ltd, which supplies natural gas to 195 cities in the mainland, expects sales will jump as much as fivefold by 2020 as the nation pushes for wider use of the fuel to replace coal. Deliveries may reach 40 billion cubic metres by 2020 from an estimated 8 billion cubic metres this year, chief financial officer Eric Leung said during a group interview. Growing sales will gradually push dividend payouts toward 30 percent, he said, from 23 percent in the year ended March 31. “Those policies will greatly help our businesses, especially in expanding the number of our commercial and industrial users,” said Mr Leung.

ending in Hong Kong has surged to a record in 2013 as Chinese companies attracted by the biggest discount over onshore financing in four years boost fundraising in the city. Syndicated loans jumped to US$48.7 billion as the amount borrowed by Chinese corporates from Cnooc Ltd to Huawei Technologies Co doubled. China Petrochemical Corp, known as Sinopec, sought bank proposals for a US$2.5 billion facility by Oct. 25, two people familiar with the matter said last month. Loan spreads fell 43 basis points this year to 233, bringing the discount over mainland facilities to 20 percent, the most since 2009, data compiled by Bloomberg show. Chinese companies such as Shuanghui International Holdings Ltd, which acquired Smithfield Foods Inc for US$4.7 billion, accounted for 53 percent of borrowings in Hong Kong amid Premier Li Keqiang’s “going-out” policy of buying overseas assets. That’s up from 36 percent last year. Financing has also shifted toward the city after China’s worst cash crunch in at least a decade

fuelled concern about fundraising costs onshore. “Chinese borrowers are the key drivers of Hong Kong’s loan volume this year with their multi-billion dollar financings, which the onshore market may not have the capacity to syndicate,” said Katherine Lau, head of loan syndicate for the Asia-Pacific region at Barclays Plc. “The ample liquidity and falling loan pricing have also increased Hong Kong’s appeal to these borrowers.” Average margins for syndicated loans in Hong Kong have dropped to 233 basis points from 276 on December 31. The decline exceeds the 6 point retreat for dollar-denominated financings in China to 296 basis points, Bloomberg data show. Hong Kong banks’ loans have risen by a “relatively fast” annualised rate of 18 percent to 19 percent from January through September, Hong Kong Monetary Authority chief executive Norman Chan said last week. “Apart from strong demand, we also have affluent market supply as a result of the banks’ good liquidity,” said Donald Lam, head of corporate and commercial banking at Hang

Shuanghui sought financing in Hong Kong to buy Smithfield Foods

Seng Bank Ltd. Top-tier corporate borrowers will continue to enjoy strong bargaining power on loan pricing in the near future, Mr Lam added. Sinopec, Asia’s largest refiner, and other Chinese companies including Beijing Enterprises Group Co have turned to the Hong Kong loan market since June, when onshore money-market interest rates surged to record highs. Bloomberg News

October 2013 April 19,22, 2013

Greater China

up local-govt debt

KEY POINTS Local bond pilot remains tiny Ministry set a quota of US$57 bln Bonds well received by investors Rise in local-govt debt ‘a concern’ – World Bank

billion) in stimulus spending through the economy to cushion the impact of the global financial crisis. “The rise in local government debt

is ... a concern, given the complexity and opacity of municipal finances,” the World Bank warned in a regional economic update this month. “This lack of transparency has led to debt levels higher than would otherwise be acceptable to lenders, investors and policymakers.” Economists say a real municipal bond market would be key to addressing the local debt issue, with disclosure requirements helping to impose a hard budget discipline on local officials. In another sign authorities are poised to expand municipal bond issuance, another influential think tank, the China Academy of Social Sciences, teamed up with a major credit ratings agency last month to issue ratings of local governments. The local bond pilot remains

tiny compared to the scale of local financing needs. The finance ministry in March set a quota of 350 billion yuan (US$57 billion) under the programme for 2013. Still, bonds have been well received by investors and yields have hovered around 3.8 percent to 4.5 percent, nearly as low as Chinese treasury bonds of the same maturity. By contrast, weaker localities forced to resort to trust-company loans and other sources of shadowbanking finance often pay more than 10 percent annual rates. That suggests expanded bond issuance could enable many localities to cut borrowing costs. The use of longer-term municipal bonds could also relieve the worrying mismatch between infrastructure investments that may take decades to produce financial returns and the short-term loans that are often used to finance such projects. “Take a highway project as an example. It may take 20 or 30 years after it’s built to repay principal and interest. But the bank loans are typically three to five years,” Wu Xiaoling, a former Chinese central banker, told Reuters. But low yields on the small pool of existing municipal bonds may simply reflect investors’ assumption that the finance ministry has chosen fiscally strong localities for the pilot. “If you suddenly let everyone issue bonds, then the market no longer sees it as a special privilege. So then the market will have to go back to looking at fundamentals,” said a bond analyst at a midsized fund management company in Shanghai. The results of an official audit of local government debt, due this month, could determine whether the bond pilot is expanded or left to wither. The last audit showed local debt at 10.7 trillion yuan (US$1.76 trillion) at end-2010. A dramatic rise could make authorities balk at expanding the pilot.

Huishang Bank starts marketing HK IPO

uishang Bank Corp, a lender in the eastern Chinese province of Anhui, is seeking as much as US$1.5 billion from what could be Hong Kong’s biggest banking initial public offering in almost three years. The bank, based in Hefei city, plans to offer 2.5 billion shares, or about 23 percent of the company, according to a term sheet obtained by Bloomberg. State-owned shareholders may also sell shares on behalf of China’s National Social Security Fund. Proceeds from the sale, which may raise at least US$1 billion, will be used to strengthen Huishang’s core capital base, the terms show. “Huishang is a city commercial bank facing less capital pressure because its scale is smaller than the other larger national players,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group, said by phone yesterday. “This could be a selling point to investors.” A US$1.5 billion deal would be the largest banking IPO in Hong Kong since Chongqing Rural Commercial Bank Co raised US$1.7 billion in December 2010, according to data compiled by Bloomberg. China Everbright Bank Co, which is listed in Shanghai, said on October 16 it won regulatory approval to sell as many as 12 billion shares overseas, paving the way for a first-time stock sale in Hong Kong. Huishang started gauging investor demand yesterday and will take orders from October 28, according to the terms. It plans to set a final price for the offering on November 2. Bloomberg News

Reuters

Watson spinoff may bring biggest Asia IPO in 3 years Hutchison to carry out a strategic review of its health and beauty retail business Vinicy Chan and Eleni Himaras

illionaire Li Ka Shing’s Hutchison Whampoa Ltd is considering selling shares in its A.S. Watson Group retailing unit in what may become Asia’s biggest initial public offerings in three years. Hutchison will review all options for the unit, including a public offering, that will allow it to retain control, it said in a Friday statement. It could raise as much as HK$98 billion (US$13 billion) by spinning off part of A.S. Watson, according to Credit Suisse Group AG, making it the biggest IPO listing in Asia since AIA Group Ltd’s US$20.4 billion offering in 2010. Hong Kong-listed Hutchison is considering the spinoff after scrapping plans to sell its ParknShop supermarket

The spinoff of A.S. Watson would be a better option for Hutch in the long run as it could unlock a more attractive valuation given the assets are more appealing Steven Leung, UoB Kay Hian

chain and a review by its financial advisers. A.S. Watson has more than 11,000 stores operating in 33 markets worldwide, according to its website, and its brands include health retailer Superdrug in the U.K., Rossmann in Germany and namesake stores in Asia. “Hutchison Whampoa share price will be under pressure in short term to reflect the disappointment the investors have over its failed attempt to sell ParknShop,” Steven Leung, a director at UoB Kay Hian Ltd said by phone yesterday. “The spinoff of A.S. Watson would be a better option for Hutch in the long run as it could unlock a more attractive valuation given the assets are more appealing.” Hutchison hasn’t specified the timing,

valuation or listing location of any potential offering. Spokesman Jeremy Lau couldn’t immediately be reached for comment. If the company decides to list a Watson spinoff in Europe, it could become the largest regional IPO since the US$17.3 billion sale of Enel SpA, Italy’s largest utility, in 1999, according to data compiled by Bloomberg.

Market valuation The A.S. Watson business could have a market value of as much as HK$201 billion if Hutchison spins off 49 percent, according to Credit Suisse. Earnings growth in the retail business has remained strong across different regions, especially Germany and the Netherlands, the Credit

Suisse analysts said. Hutchison shares fell 2.0 percent to HK$94.85 in Hong Kong trading yesterdayafter announcing plans to scrap the ParknShop sale. Hutchison also operates ports, hotels and provides telecommunication services. Mr Li has stepped up investments in Europe, buying telecom and utilities businesses, betting growth will outpace some of his Hong Kong assets. The billionaire is planning to list his Hong Kong electricity business. A.S. Watson, which also operates retail stores that sell beverages, wines and electronics, posted sales of HK$148.6 billion last year, with earnings before interest and taxation of HK$10 billion, according to its annual report. Bloomberg News

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October 22, 2013 April 19, 2013

Greater China

Beijing urges more effort in revamping economy State Council calls for policy implementation to spur rebound

hina’s central government called for “unrelenting” implementation of its economic policies and reform measures to consolidate the nation’s recovery from a two-quarter slowdown and improve the quality of growth. While the economy is “stable and trending for the better,” and the nation has the ability to achieve this year’s targets, the foundations of the rebound are “not yet firm,” the State Council said in a statement yesterday after an October 18 meeting led by Premier Li Keqiang. China’s economic expansion accelerated to 7.8 percent in the third quarter from a year earlier, the statistics bureau said on Friday, reversing a slowdown that put the government at risk of missing its 7.5 percent growth target for 2013. The nation’s top leaders will meet next month to map out policies to reform the economy and sustain long-term growth at about 7 percent. “When downward pressures on the economy are relatively big, we should harden our confidence; when the economy stabilises and trends for the better, we should keep a sober mind,” the State Council said in

Inflation is still below the government’s target of 3.5 percent

its statement posted on the central government website. Local authorities and state agencies should quicken implementation of government policies to “further stabilise hard-earned expectations for improvement and for public confidence,” it said. The government will boost financial support to small businesses,

stabilise foreign trade growth, cut overcapacity and look for new engines to drive consumption, according to the statement, reiterating existing policies. The State Council meeting was to review the implementation of reform and economic policies this year and to arrange work to further consolidate the growth rebound,

according to the statement. China’s government will maintain its current policy stance through the fourth quarter, Song Guoqing, an academic adviser to the People’s Bank of China, said in Beijing. The economy will probably expand 7.7 percent from a year earlier this quarter and about 7.5 percent next year, he said. “Curbing inflation won’t be a pressing issue and the need to push additional growth is not big, so the policies will be stable, at least through the fourth quarter,” Mr Song said. Monetary policy may lean toward tightening if inflation accelerates, he said. China’s consumer price index rose 3.1 percent in September from a year earlier, the first increase above 3 percent since February. At the same time, inflation has been below the government’s 2013 target of 3.5 percent every month this year. The increase in gross domestic product may slow to 7.1 percent next year from 7.6 percent this year as the government focuses on rebalancing the economy and implementing reforms, Barclays Plc analysts Chang Jian and Joey Chew wrote in a research note on October 18 after the third-quarter data release. “Whether the government will announce meaningful fiscal reforms in the Third Plenum in November and lower the growth target to 7 percent for 2014 are key areas to gauge the new leaders with regard to their ability to make progress on the much needed but complicated reform agenda,” they wrote. Bloomberg News

Sunac China sees strong sales as rich buy

unac China Holdings Ltd, the Chinese developer in which buyout firm Bain Capital LLC has a stake, expects home sales to rise at least 11 percent this year from last year amid strong demand from rich buyers. The developer’s home sales will exceed 50 billion yuan (US$8.2 billion) this year as it focuses on mid-to-high-end properties in major cities including Beijing and Shanghai, chairman Sun Hongbin told reporters in Suzhou, a city west of Shanghai. The Tianjinbased homebuilder in January forecast sales of 45 billion yuan for 2013. Sunac is expanding amid resilient demand for luxury housing in big cities even as the government maintains residential curbs, Mr Sun said. New home prices in China’s four major cities rose in August the most since January 2011, led by a 19 percent jump from a year earlier in Guangzhou in southern China, according to data issued on September 18 by the National Bureau of Statistics. “I’m very confident in Beijing and Shanghai as there’s so much demand from everywhere,” Mr Sun said. “They are first-tier world-class cities. There’s no single China property market we are talking about, because markets in big cities are hot, while in some other cities the market is very cold.” Sunac sold 36.4 billion yuan of homes in the first nine months of

Sun Hongbin

the year, about 81 percent of its sales target for 2013, according to a statement on its website. Average selling prices of Sunac projects in Shanghai are between 60,000 yuan and 70,000 yuan per square metre (10.76 per square feet), according to Mr Sun. China’s newhome prices jumped 9.5 percent in September from a year earlier to 10,554 yuan for each square metre, according to SouFun Holdings Ltd, the country’s biggest real estate website owner. Specific property-related policies are unlikely to come out of a Communist Party meeting in November even as President Xi Jinping and his leadership team are preparing to discuss deepening reforms, Mr Sun said. “The government may let the market play a bigger role in the high-end property market, while emphasising social-housing construction in the lower end,” said Mr Sun, who also expects a property tax to be introduced in more cities beyond Shanghai and Chongqing. Bloomberg News

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October 2013 April 19,22, 2013

Asia

Nomura buys rupee as voters may favour Modi Investors also seen more inclined toward the BJP than the Congress

omura Holdings Inc is buying the Indian rupee, betting this quarter’s state elections will signal the opposition will win the 2014 national polls and help revive investment and growth in Asia’s thirdlargest economy. Japan’s biggest brokerage predicts the Bharatiya Janata Party will wrest more states in regional contests this year after naming Gujarat Chief Minister Narendra Modi as its prime ministerial candidate to unseat the ruling Congress party’s Manmohan Singh. Picking Mr Modi, credited with achieving higher growth than the national average in his home state, helped the BJP widen its lead before a national vote due by May, an opinion poll showed last week. Goldman Sachs Group Inc said a BJP-led government may increase investment, while Mr Singh’s ruling coalition will focus on boosting rural consumption. Global investors have cut their holdings of Indian debt to the least since December 2011 and the rupee is the second-worst performer

in emerging Asia this year as a slowing economy and corruption scandals erode confidence. “The government now gets forced to do things; it’s only when there’s tremendous pressure on the economy that they start to move,” Craig Chan, head of Asia ex-Japan foreign-exchange strategy at Nomura in Singapore, said in a telephone interview. A BJP win in state elections due in November and December will be “a big swing factor, and a big risk to Nomura’s current view, which is medium-term negative on India.”

Weak rupee Nomura recommends investors purchase options to buy the rupee against the dollar. India’s currency has weakened 10.3 percent this year to 61.2650 per dollar, compared with a 14.9 percent decline in Indonesia’s rupiah. The yield on the benchmark 10-year sovereign bonds has risen 50 basis points, or 0.50 percentage point, to 8.55 percent. Upcoming contests to govern the states of Rajasthan, Madhya Pradesh,

A win for Modi could boost markets

Chhattisgarh, Delhi and Manipur “will be an important barometer of the public mood” before next year’s national elections, Goldman analysts Tushar Poddar in Mumbai and Vishal Vaibhaw in Bangalore wrote in a research note. While Mr Modi, 63, has been hailed by investors including billionaire Mukesh Ambani, chairman of Reliance Industries Ltd, the politician is banned from the U.S. over his handling of anti-Muslim riots in 2002 that killed more than 1,000

people. Gujarat’s economy has grown an annual 10.2 percent on average over the last decade compared with 7.8 percent for India. Mr Singh, 81, credited with opening India’s economy to foreign investment after a balance-of-payments crisis in 1991, has seen his government’s popularity dented with graft scandals stalling legislation in the world’s largest democracy. The BJP will win 162 of 545 Parliament seats after naming Mr Modi its prime ministerial candidate, and

the Congress 102, according to a poll published last week by C-voter polling agency, India TV and Times Now television. During the last general elections in 2009, the BJP vowed to maintain a lowtax, low interest-rate regime and generate employment through spending on infrastructure projects. The Congress promised high growth and low inflation, the rolling out of a goods and services tax, and social security programmes. Bloomberg News

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October 22, 2013 April 19, 2013

Asia Japan on path to meet inflation target: Kuroda Bank of Japan Governor Haruhiko Kuroda (pictured) said yesterday the country was making steady progress towards achieving the central bank’s 2 percent inflation target. “Japan’s economy is likely to continue recovering moderately driven by a positive cycle of output, income and expenditure,” Mr Kuroda said in a speech to a quarterly meeting of the central bank’s regional branch managers. The BOJ offered an intense burst of monetary stimulus in April, pledging to double the county’s base money via aggressive asset purchases to achieve 2 percent inflation in two years.

Najib’s fiscal pledge faces budget test Prime minister determined to avoid credit downgrade

alaysian Prime Minister Najib Razak’s promise of measures to curb the budget gap and avert a credit-rating downgrade helped send three-year government bond yields to a fourmonth low. His resolve is about to be tested. Mr Najib, also finance minister, will deliver his 2014 budget speech to parliament on October 25 after cementing his leadership in a May general election. Having given handouts to the poor and pay increases for civil servants to woo voters earlier, he may now introduce a potentially unpopular consumption tax, delay projects and raise the levy on property gains, according to United Overseas Bank Ltd and DBS Group Holdings Ltd. The ringgit gained the most among 24 emerging-market currencies this month partly on speculation MrNajib, 60, will follow through on politically unpopular revenue-generating measures. Failure to act would risk a decline in investor confidence, with Fitch Ratings cutting Malaysia’s credit outlook to negative in July citing rising debt levels and a lack of budgetary reform. “Going into the budget, there

Najib vowed to cut state subsidies and broaden government’s tax base

is an expectation from the market that Malaysian authorities will take the right steps,” Vivek Rajpal, a Singapore-based strategist at Nomura Holdings Inc, said in an interview. “We believe authorities will take the right steps. But in case they don’t, it should impact the bond markets negatively.”

The yield on the 3.172 percent notes due in July 2016 dropped one basis point, or 0.01 percentage point, to 3.15 percent, the lowest since June 10, data compiled by Bloomberg show. It retreated 14 basis points last week, the biggest five- day decline since the notes were sold in January. The ringgit appreciated 2.9

percent this month, the best performance among 24 emergingmarket currencies tracked by Bloomberg, and reached a fourmonth high of 3.1413 on Friday. It has traded in a range of 3.15 to 3.25 per dollar since the U.S. Federal Reserve unexpectedly said on September 18 it would maintain monetary stimulus that’s boosted the supply of dollars and spurred demand for emerging-market assets. “Budget 2014 will be a watershed moment for Malaysia as it embarks on bold fiscal reforms and economic restructuring to ensure sustainable and balanced economic growth ahead,” CIMB Group Holdings Bhd economist Lee Heng Guie wrote in a report. “Malaysia’s current fiscal and debt situation means that the prime minister is tasked with making some necessarily tough but thoughtful decisions.”

Goods tax CIMB expects Mr Najib to introduce a goods and services tax, the consumption levy that the government has considered for years without implementing. The banking group also predicts further gradual

Bangladesh to hike garment wages Government may announce a new minimum wage next month but may not be enough to end strikes Shyamantha Asokan

angladesh’s garment factory owners are pencilling in a minimum wage increase of about 50 percent to 80 percent and will ask retailers to pay more to defray the cost, as the government tries to end a wave of strikes that hit nearly a fifth of workshops last month. The world’s second largest clothing exporter hopes to announce a new minimum wage early next month, bowing to international pressure after a string of fatal factory accidents that thrust poor working conditions and pay into the spotlight. Workers want the minimum wage, which was last raised in 2010, to go up to 8,000 taka (US$102) a month – 2-1/2 times the current rate. Factory bosses have formally offered 3,600 taka. Several, however, told Reuters they anticipated that Bangladesh’s official wage board would set rates in the 4,500 take to 5,500 taka range, and they intended to seek between 5 percent and 15 percent in price hikes from retailers. The wage board was due to meet

yesterday before submitting a draft proposal to the government. “These workers’ rights are being discussed all over the world now and the government is nervous,” said Amirul Haque Amin, the head of the National Garment Workers Federation, an umbrella group representing 37 unions. “There is this pressure now,” Mr Amin said in an interview in his ramshackle office. “This has given us the opportunity to raise our voices.” The wage negotiations must somehow strike a balance between Western fashion giants, politicallyconnected factory owners and protesting staff. The government did not respond to strikes over wages last year, but since then accidents including the collapse of the Rana Plaza factory complex near Dhaka, which killed more than 1,100 garment workers, have put the authorities on the back foot. Rock bottom wages and trade deals with Western countries have

KEY POINTS Minimum monthly wage set at US$39 Workers want basic wage raised to US$102 Garments sector becomes US$22 bln industry Accounts for four-fifths of Bangladesh’s exports propelled Bangladesh’s garments sector to a US$22 billion industry accounting for four-fifths of the poor country’s exports, with retailers such as Wal-Mart Stores Inc, JC Penney Co Inc and H&M Hennes & Mauritz AB buying clothes from its factories. Wal-Mart spokesman Kevin Gardner said the retailer “continues

to work with other stakeholders in encouraging the Bangladesh government to review minimum wages for workers in the garment industry to ensure worker needs are met”. H&M said it had urged Bangladesh to raise the minimum wage and revise it annually. “Wages are one of the issues that are at the top of our agenda to drive improvement in the textile industry,” Helena Helmersson, H&M’s head of sustainability, said in an emailed response to Reuters. The minimum monthly wage for garment workers is 3,000 taka (US$39), about half of what those in rival Asian exporters Vietnam and Cambodia earn and just over a quarter of the rate in top exporter China, according to International Labour Organisation data from August. Most Bangladeshi workers take home at least US$54 a month because of overtime pay, according to the Bangladesh Garment Manufacturers and Exporters Association. Reuters

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October 2013 April 19,22, 2013

Asia Vietnam sees quicker growth in 2013 Vietnam’s economic growth is expected to accelerate to 5.4 percent this year and is targeted to quicken further in 2014, Prime Minister Nguyen Tan Dung (pictured) said yesterday. The 2013 forecast would bring the average yearly growth for the 2011-2013 period to 5.6 percent, even after annual expansion slowed last year to about 5 percent, Mr Dung told the televised opening of the National Assembly. The government is hoping the positive momentum to be maintained and is targeting annual economic growth to quicken further to 5.8 percent in 2014, Mr Dung told the delegates.

We believe authorities will take the right steps. But in case they don’t, it should impact the bond markets negatively Vivek Rajpal, Nomura Holdings

subsidy rationalisation, changes in the state procurement system, and increases in excise duties for tobacco and alcohol. The risk premium on Malaysian bonds will probably fall if Najib takes fiscal consolidation measures in the budget, Barclays Plc strategists including Rohit Arora wrote in a note. Such steps could help the ringgit break out of the 3.15 to 3.25 per dollar range, Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp, said in a report. The prime minister has already moved to show he’s prepared to contain government spending. His administration raised subsidised fuel

prices for the first time since 2010 last month and has said it will delay some infrastructure projects. Mr Najib said this month he believes that Malaysia can avoid a cut to its credit rating while the government will try its “level best” to prevent a breach of its self-imposed sovereign debt ceiling. The country, which has a longterm foreign-currency denominated debt rating of A- at Fitch, has run annual budget deficits every year starting in 1998. “Najib has shown his resolve to avoid the downgrade and improve fiscal conditions, and the budget will probably reflect that,” Koji Fukaya, chief executive and currency strategist at FPG Securities Co in Tokyo, said in a telephone interview. “Improving fiscal conditions are positive for Malaysia’s bonds.” The government will further cut state subsidies, broaden its tax base and manage spending “prudently,” Mr Najib said in an October 11 interview. Cabinet will meet before the 2014 budget is released to decide if there’s enough public support to introduce a goods and services tax, he said. Malaysia will probably implement an initial 4 percent goods and services tax that will generate 20.5 billion ringgit (US$6.5 billion), or as much as 14 percent of total tax revenue, in the first year, according to a report from DBS. The government earlier planned to introduce a 4 percent GST by 2011. It hasn’t said what the rate may be if it now goes ahead. Bloomberg News

Vietnam airlines plan fleet boom

ietnam’s fledgling airline industry is poised for a boom as local competition heats up with fleet expansions, new routes and planned share offers that are set to make it one of the world’s three fastest growing markets. Even as the local economy chugs along at about 5 percent growth, its slowest pace in 13 years, demand for domestic air travel is growing by double digits. That is translating into a surprisingly robust new source of business for Boeing Co, Airbus SAS and regional aircraft makers such as Mitsubishi Aircraft Corp, Bombardier Inc and Embraer SA. The International Air Transport Association expects Vietnam to become the world’s third-fastest growing market for international passengers and freight next year, and second-fastest for domestic passengers. Vietnam’s Aviation Department expects 15 percent growth in domestic passengers this year, more than double last year’s 7 percent rise. Though starting from a low base, Vietnam’s carriers will boost their fleets in the next few years, double or tripling them to serve a domestic

market of 90 million people and tourist arrivals growing on average 20 percent annually. VietJet Aviation Joint Stock Co, Vietnam’s first private airline, agreed last month to a provisional order for up to 92 Airbus jets worth US$9 billion at list prices. The low-cost carrier is aiming for a stock market listing in either Hong Kong or Singapore in 2015 to fund the expansion, which would start with flights to Tokyo, Beijing, Singapore, Kuala Lumpur and South Korea, then eventually, China, Russia and Australia and beyond, managing director Luu Duc Khanh said. “Further it could be the United States, where 4 million people of Vietnamese origin live. They’re waiting for VietJet anxiously,” he told Reuters in an interview. VietJet plans to double its fleet by 2015 to 20 jets, and is speeding up work to get three joint ventures in the air, including one with an undisclosed carrier in Myanmar and another agreed with Thailand’s KanAir, to operate in early 2014. Those ambitious plans may have shaken state-run flag carrier Vietnam Airlines (VNA) into expediting its long-awaited initial public offering and fleet expansion. VNA dominates the local market and will increase its fleet by 28 percent to 101 aircraft by 2015. It has been preparing for an IPO in the second quarter of 2014. “The project is right on schedule,” said its spokesman, Le Truong Giang. Reuters

Japan’s export growth slows in September Poses mounting challenge for Abe ahead of sales-tax increase Keiko Ujikane

apan’s export growth slowed in September and the nation extended a record run of trade deficits, underscoring the challenge for Prime Minister Shinzo Abe in sustaining momentum in the world’s third-biggest economy. Shipments increased 11.5 percent from a year earlier, the weakest pace in three months, a finance ministry report showed in Tokyo. That compared with a 14.6 percent gain in August and the 15.6 percent median forecast of 24 economists surveyed by Bloomberg News. Imports climbed 16.5 percent, leaving a trade deficit of 932.1 billion yen (US$9.5 billion), an unprecedented 15th straight shortfall in data back to 1979. Mr Abe needs the economy to go into next year with a head of steam to

help withstand the blow to consumption from a sales-tax increase scheduled for April. While the yen’s 12 percent fall against the dollar this year is helping companies from Toyota Motor Corp to Sony Corp, the weaker currency and nuclear-plant shutdowns are pushing up import costs, especially for energy. “The decline in export growth partly reflects overseas conditions, with China’s economy likely to slow down,” said Minoru Nogimori, an economist at Nomura Securities Co in Tokyo. “But the weak yen means the pace of export increases won’t drop so rapidly.” Japan’s export growth to all major regions slowed, with the weakness concentrated in shipments to the Asian region. Exports to Asia rose 8.2 percent on year, down from a 13.5 percent gain in August.

Shipments to China climbed 11.4 percent after increasing 15.8 percent in August. Shipments to the U.S. rose 18.8 percent following a 20.6 percent gain in the prior month, while export growth to the European Union eased to 14.3 percent from 18 percent.Japan’s economy grew an annualised 3.8 percent in the second quarter, and is projected to continue to expand until the three months starting April when the consumption-tax increase takes effect. The growth outlook is linked to developments in China, the largest overseas market for Japanese companies. China’s central government called on Sunday for “unrelenting” implementation of its economic policies and reform measures to consolidate a recovery from a two-quarter

Japanese exports to Asia rose 8.2 percent on year

slowdown and improve the quality of growth. While the economy is “stable and trending for the better,” and the nation has the ability to achieve this year’s targets, the foundations of the rebound are “not yet firm,” the State Council said in a statement after a meeting led by Premier Li Keqiang. China’s economic expansion accelerated to

7.8 percent in the third quarter from a year earlier, the statistics bureau said on Friday, reversing a slowdown that put the government at risk of missing its 7.5 percent growth target for 2013. The nation’s top leaders will meet next month to map out policies to reform the economy and sustain long-term growth at about 7 percent. Bloomberg News

14 14

October 22, 2013 April 19, 2013

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

Max 63.50

average 62.362

Max 60.2

Min 60.10

average 59.627

Last 62.55

Min 58.9

Last 59.7

63.50

96.7

29.9

62.82

96.2

29.8

62.14

95.7

29.7

61.46

95.2

29.6

60.78

94.7

29.5

60.10

Max 96.65

average 96.023

PRICE

Min 29.45

Last 29.60

29.4

59.94

27.62

32.08

59.68

27.34

31.86

59.42

27.06

31.64

59.16

26.78

31.42

58.90

Max 27.85

average 27.439

DAY %

YTD %

(H) 52W

Min 26.50

Last 27.40

(L) 52W

-0.694375558

7.092426187

111.3399963

85.79000092

BRENT CRUDE FUTR Dec13

109.71

-0.209205021

4.675126419

114.4399948

95.95999908

GASOLINE RBOB FUT Nov13

266.59

-0.273080952

3.820390996

293.6000109

243.3699846

GAS OIL FUT (ICE) Dec13

933.75

0.080385852

3.577371048

973

837

NATURAL GAS FUTR Nov13

3.796

0.850159405

1.361815754

4.59400034

3.281000137

NY Harb ULSD Fut Nov13

302.6

-0.30967912

1.271753681

322.3500013

276.8100023

Gold Spot $/Oz

1318.51

0.1717

-20.7845

1754.46

1180.57

Silver Spot $/Oz

22.1875

1.1811

-26.3119

34.3838

18.2208

Platinum Spot $/Oz

1441.1

0.1633

-5.0502

1742.8

1294.18

Palladium Spot $/Oz

745.45

0.6073

6.5446

786.5

587.4

LME ALUMINUM 3MO ($)

1847

-0.162162162

-10.90207429

2184

1758

LME COPPER 3MO ($)

7245

0.20746888

-8.649602824

8346

6602 1811.75

3MO ($)

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

26.50

Dec13

1934

0.285195748

-7.019230769

2230

14200

1.392359871

-16.76436108

18770

13205

15.345

0.35971223

-0.454103146

16.65000153

14.68999958

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 32.25

average 31.912

Min 31.25

Last 31.9

31.20

0.283125708

-26.17757399

647

432

709.25

0.49592632

-13.58513555

913

635.5

SOYBEAN FUTURE Nov13

1294.5

0.251694095

-0.633275763

1409.5

1162.5

COFFEE 'C' FUTURE Dec13

114.65

-26.71780121

181.5500031

113.1999969

SUGAR #11 (WORLD) Mar14

19.49

-0.051282051

-5.296404276

20.85000038

16.69999886

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

83.2

0.108290218

5.664211328

93.72000122

74.34999847

CROWN LTD

World Stock Markets - Indices

NAME

PRICE

0.56

0.232

2648000

19.86645

7.24

4.1

191000

CHINA OVERSEAS

24.25

-0.2057613

4.978353

25.6

17.7

12327821

CHINESE ESTATES

21.85

1.392111

94.29911

22.25

9.543

71963

CHOW TAI FOOK JE

12.58

-0.6319115

1.125405

13.4

7.44

6874800 4085000

2810.8

FTSE 100 INDEX

6635.59

0.1964491

12.50939

6875.62

5605.589844

DAX INDEX

8851.36

-0.1549898

16.27571

8867.06

6950.53

HOPEWELL HLDGS

NIKKEI 225

14693.57

0.9067035

41.34984

15942.6

8619.45

HSBC HLDGS PLC

HANG SENG INDEX

23438.15

0.4200925

3.448088

23944.74

19426.35938

CSI 300 INDEX

2471.322

1.865911

-2.046408

2791.303

2023.171

TAIWAN TAIEX INDEX

8419.32

-0.2590867

9.348923

8459.3

7050.05

MGM CHINA HOLDIN

KOSPI INDEX

2053.01

0.0297213

2.802131

2060.18

1770.53

MIDLAND HOLDINGS

1590.67

NZX ALL INDEX

1008.711

0.8334891

14.35946

1009.599

PHILIPPINES ALL SHARE IX

3979.91

-0.1119374

7.594795

4571.4

1854877

67.92454

3914.932

1826.22

2951842

9.3

2.298851

29.63273

6.729628

2.56

17.215

-0.2777778

1.323584

0.167816

5.02

60.73102

7.18

3914.278

1802.61

53.96825

0.445

1.25261 2.38806

CENTURY LEGEND

NASDAQ COMPOSITE INDEX

FTSE Bursa Malaysia KLCI

4.85 17.15

VOLUME CRNCY

3065525

12471.49

4334.3

(L) 52W

7376644

15709.58

3837.735

(H) 52W

0.75

17.51745

5366.1

YTD %

22.85

0.1821535

5251.296

DAY %

15399.65

6.057683

0.8848 1.4814 0.8968 1.2662 79.08 7.9818 7.7498 6.0883 52.89 28.56 1.2168 28.913 40.54 9590 81.636 1.20302 0.79607 7.8281 10.1113 100.33 1.0289

1.72

15.11784

1.0599 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.2577 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 10.9436 134.95 1.032

4.771783

DOW JONES INDUS. AVG

0.6951832

-6.7739 -0.0247 1.3059 3.6543 -12.1966 -0.0313 -0.0322 2.2365 -10.4972 -1.6467 -1.5873 -1.3121 -4.949 -9.7669 -5.8467 -2.26 -3.5451 -1.3553 -3.551 -15.2968 -0.0097

-8.571427

(L) 52W

0.5694859

-0.0207 0.0309 -0.2103 -0.1096 -0.3467 0.0038 0 0.0345 -0.2929 -0.1029 -0.1611 -0.0068 -0.1623 0.4699 -0.3162 -0.089 0.1431 0.0636 0.1804 -0.2163 0

(H) 52W

4578.178

0.9675 1.6172 0.9036 1.3672 98.06 7.9857 7.7531 6.0943 61.445 31.092 1.2411 29.419 43.14 10853 94.874 1.2354 0.84539 8.3304 10.9181 134.08 1.03

-0.1976285

YTD %

5351.771

(L) 52W

1.28

DAY %

(H) 52W

25.25

CHEUK NANG HLDGS

YTD %

AMAX HOLDINGS LT

PRICE

JAKARTA COMPOSITE INDEX

DAY %

BOC HONG KONG HO

COUNTRY

S&P/ASX 200 INDEX

PRICE

Macau Related Stocks

442.75

WHEAT FUTURE(CBT) Dec13

NAME

average 29.714

32.30

100.11

CORN FUTURE

Max 29.90

27.90

WTI CRUDE FUTURE Nov13

LME ZINC

94.2

Currency Exchange Rates

NAME

METALS

Last 96.00

60.20

Commodities ENERGY

Min 94.20

EMPEROR ENTERTAI

4.3

3.614458

127.5132

4.66

1.43

2.94

7.692308

142.569

2.98

1.103

3594848

GALAXY ENTERTAIN

62.55

4.598662

106.0955

63.75

24.2

12980283

HANG SENG BK

128.8

0.3115265

8.508849

132.8

110.6

972603

26.5

0.3787879

-20.30075

35.3

23.2

818000

85.05

0.2357101

4.612542

90.7

73.55

7708827

HUTCHISON TELE H

3.54

-1.939058

-0.5617962

4.66

3.12

6108000

LUK FOOK HLDGS I

27.4

-2.142857

12.29508

30.05

16.88

2277000

MELCO INTL DEVEL

177.4695

25.75

7.26

15032000

29.6

0.1692047

122.9205

12.236

5970300

3.16

-0.9404389

-14.5946

4.6

2.68

482000

NEPTUNE GROUP

0.325

113.8158

0.325

0.131

717016000

FUTURE BRIGHT

NEW WORLD DEV

10.98

-8.65225

15.12

9.98

12594936

SANDS CHINA LTD

59.7

2.931034

75.84683

60.5

28.25

25353952

SHUN HO RESOURCE

1.67

1.212121

19.28572

1.92

1.19

194000

851.971

SHUN TAK HOLDING

4.78

1.271186

14.08114

4.8

14052671

3440.12

SJM HOLDINGS LTD

27.4

3.787879

54.38657

16.486

24586163

10.36

-2.079395

-26.42045

16.22

9.97

2027000

WYNN MACAU LTD

31.9

0.9493671

52.2673

32.6

9312758

ASIA ENTERTAINME

3.96

69409

69.79

-0.05728197

56.09484

76.3

43.16

217367

SMARTONE TELECOM

Euromoney Dragon 300 Index Sin

625.81

0.46

0.76

STOCK EXCH OF THAI INDEX

1456.01

-1.933698

4.603676

1649.77

1260.08

HO CHI MINH STOCK INDEX

501.57

0.1477547

21.23124

533.15

372.39

BALLY TECHNOLOGI

Laos Composite Index

1290.06

-0.7042741

6.197884

1455.82

1047.94

BOC HONG KONG HO

3.3

4.100946

7.491859

3.6

2.99

9350

GALAXY ENTERTAIN

7.7

3.407061

93.95466

7.79

3.13

18250 2463282

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

INTL GAME TECH

18.62

-1.062699

31.40437

21.2

12.37

JONES LANG LASAL

86.14

0.2560521

2.620917

101.46

72.56

143566

LAS VEGAS SANDS

72.52

2.184021

57.10572

73.07

37.8353

8663760

MELCO CROWN-ADR

36.505

4.989934

116.7755

36.65

13.43

5959754

MGM CHINA HOLDIN

3.85

4.054054

119.9634

3.85

1.6651

4600

MGM RESORTS INTE

20.69

-0.4331088

77.74914

20.98

9.15

10605703

SHFL ENTERTAINME

23.18

-0.04312204

59.86207

23.21

12.35

876960

SJM HOLDINGS LTD

3.37

3.058104

47.96173

3.37

2.0804

31000

171.92

1.45167

52.83137

172.75

103.34

1007342

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

39.55

-1.248439

40948474

CHINA UNICOM HON

12.76

0.6309148

15124721

ALUMINUM CORP-H

2.94

3.886926

36851183

CITIC PACIFIC

11.06

0.3629764

BANK OF CHINA-H

3.61

0.5571031

261710199

BANK OF COMMUN-H

5.74

0.1745201

9416211

0.3039514

732913

BELLE INTERNATIO

11.02

-3.502627

33960466

AIA GROUP LTD

BANK EAST ASIA

NAME

CLP HLDGS LTD

CHINA LIFE INS-H

20.5

13351773

28.85

3.035714

4935642

11.14

1.272727

6583223

101

-1.174168

6305742 935845

1.088647

3168458

TENCENT HOLDINGS

447.8

4.187994

4941841

25.7

0.7843137

1224453

TINGYI HLDG CO

20.75

0.2415459

3165996

128.8

0.3115265

972603

WANT WANT CHINA

11.46

1.236749

7409479

69.5

0.3610108

4946437

ESPRIT HLDGS

HENDERSON LAND D

CHINA MERCHANT

SINO LAND CO

-0.2206288

CHEUNG KONG

164889163

4258615

90.45

HANG LUNG PROPER

25353952

SWIRE PACIFIC-A

HANG SENG BK

6.05

2.931034

5481161

7376644

CHINA CONST BA-H

59.7

-1.929825

1457993 4616699

SANDS CHINA LTD

11.18

-0.1976285

34999704

3344459

3832364

COSCO PAC LTD

-0.3989362 -0.6134969

VOLUME

35026677

14.98

-0.5645161

0.1508296

-0.498132

25.25

4.86

DAY %

66.4

15.98

BOC HONG KONG HO

123.3

PRICE

POWER ASSETS HOL

CNOOC LTD

CATHAY PAC AIR CHINA COAL ENE-H

62 -0.08058018

NAME

HENGAN INTL HONG KG CHINA GS

46.5

0.9771987

3528407

92.45

-0.1080497

1414414

18.2

-0.1097695

10045337

HONG KONG EXCHNG

125.9

2496639

HSBC HLDGS PLC

85.05

0.2357101

7708827

95.75

-1.084711

16081852

5.42

0.1848429

198889809

10.88

0.9276438

9710810

0.1669449

1659740

CHINA MOBILE

85.05

0.5319149

15642828

HUTCHISON WHAMPO

CHINA OVERSEAS

24.25

-0.2057613

12327821

IND & COMM BK-H

CHINA PETROLEU-H

6.21

0.3231018

43365139

LI & FUNG LTD

CHINA RES ENTERP

27.4

3.201507

3783265

MTR CORP

CHINA RES LAND

22.75

2250965

NEW WORLD DEV

10.98

12594936

CHINA RES POWER

19.98

2.461538

3834360

PETROCHINA CO-H

9.04

-0.550055

29844407

CHINA SHENHUA-H

24.45

0.617284

21696581

PING AN INSURA-H

58.6

0.0853971

5957533

SUN HUNG KAI PRO

WHARF HLDG

MOVERS

23495

INDEX 23438.15 HIGH

23494.37

LOW

23094.88

52W (H) 23944.74 (L) 19426.35938

23094

17-October

21-October

15 15

October 2013 April 19,22, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Inquirer Business

The JPMorgan problem writ large Howard Davies

Former chairman of Britain’s Financial Services Authority, Deputy Governor of the Bank of England, and Director of the London School of Economics

The Philippine Government Service Insurance System will push through with its asset disposal programme, where it plans to sell several pieces of property worth an estima ted 30 billion pesos (US$694 million) in an auction it hopes to hold before the end of the year. Roberto Vergara, GSIS president and general mana ger, said the state firm would sell off several assets located in key cities in Metro Manila to boost the pension fund. The GSIS was supposed to bid out the assets in the first quarter, but was delayed by administrative matters, Mr Vergara said.

Bangkok Post Thailand’s Thonburi Hospital Group (THG) plans to acquire three or four hospitals and build new ones in China next year at a cost of tens of billions of baht to meet strong demand for health services. Group chairman Boon Vanasin said THG is looking at large Chinese cities with high growth potential. The list includes Chengdu and Hangzhou. THG plans to raise funds by either listing its China unit on Hong Kong’s stock exchange or borrowing from local partners. The group’s strategy is to join with local partners to acquire small hospitals and build new ones with about 200 beds each.

Times of India Indians have again taken to the skies for domestic travel. After witnessing constant fall in the past three years, September saw more domestic flights take off – up 13.4 percent from a year earlier. This is the second consecutive month of growth after August 2013’s robust 20.4 percent increase over the same month last year. Airlines raised fares last month by 25 percent and 30 percent. “The peak travel months of October-December are likely to see a moderate rise in flyers due to higher fares, but the negative growth is behind us for now,” said a senior airline official.

Financial Review Australian telecommunications company AAPT has been put up for auction by its parent company Telecom New Zealand. Goldman Sachs is understood to be managing the deal, which could be worth over A$400 million. AAPT owns a significant fibre optic cable network that links various cities and commercial hubs throughout Australia. The deal could be worth A$403.5 million. But sources close to the deal are sceptical because of the company’s sliding earnings and questionable future and say its value could be closer to between A$250 million and A$300 million.

Morgan Chase has had a bad year. Not only has the bank just reported its first quarterly loss in more than a decade; it has also agreed to a tentative deal to pay a fine of US$13 billion to the U.S. government as punishment for mis-selling mortgagebacked securities. Other big legal and regulatory costs loom. JPMorgan will bounce back, of course, but its travails have reopened the debate about what to do with banks that are “too big to fail”. In the United States, policymakers chose to include the Volcker rule (named after former Federal Reserve chairman Paul Volcker) in the Dodd-Frank Act, thereby restricting proprietary trading by commercial banks rather than reviving some form of the Glass-Steagall Act’s division of investment and retail banks.

The ‘too big to fail’ is another area in which the initial post-crisis enthusiasm for global solutions has failed

But Senators Elizabeth Warren and John McCain, a powerful duo, have returned to the fight. They argue that recent events have shown that JPMorgan is too big to be managed well, even by CEO Jamie Dimon, whose fiercest critics do not accuse him of incompetence. Nonetheless, the WarrenMcCain bill is unlikely to be enacted soon, if only because President Barack Obama’s

administration is preoccupied with keeping the government open and paying its bills, while bipartisan agreement on what day of the week it is, let alone on further financial reform, cannot be guaranteed. But the question of what to do about huge, complex, and seemingly hard-to-control universal banks that benefit from implicit state support remains unresolved. The “school solution,” agreed at the Financial Stability Board in Basel, is that global regulators should clearly identify systemically significant banks and impose tougher regulations on them, with more intensive supervision and higher capital ratios. That has been done.

New rules Initially, 29 such banks were designated, together with a few insurers – none of which like the company that they are obliged to keep! There is a procedure for promotion and relegation, like in national football leagues, so the number fluctuates periodically. Banks on the list must keep higher reserves, and maintain more liquidity, reflecting their status as systemically important institutions. They must also prepare what are colloquially known as “living wills,” which explain how they would be wound down in a crisis – ideally without taxpayer support. But, while all major countries are signed up to this approach, many of them think that more is needed. The U.S. now has its Volcker rule (though disputes between banks and regulators about just how to define it continue). Elsewhere, more intrusive rules are being implemented, or are under consideration. In the United Kingdom, the government created the Vickers Commission to recommend a solution. Its members proposed that universal banks be obliged to set up ring-fenced retail-banking subsidiaries

with a much higher share of equity capital. Only the retail subsidiaries would be permitted to rely on the central bank for lender-of-last-resort support. A version of the Vickers Commission’s recommendations, which is somewhat more flexible than its members proposed, is in a banking bill currently before Parliament. A number of MPs want to impose tighter restrictions, and it is difficult to find anyone who will speak up for the banks, so some form of the bill is likely to pass, and big British banks will have to divide their operations and their capital. The U.K. has decided to take action before any Europewide solution is agreed. We British are still members of the European Union (at least for the time being), but sometimes our politicians forget that. Sometimes they simply lose patience with the difficulty of agreeing on changes in negotiations that involve 28 countries, which seems especially true of financial reform, given that many of these countries are not home to systemically important banks and probably never will be.

Broader plan But EU institutions have not been entirely inactive. The European Commission asked an eminent-persons group, chaired by Erkki Liikanen, the head of the Finnish central bank, to examine this issue on a European scale. The group’s report, published in October 2012, came to a similar conclusion as the Vickers Commission concerning the danger of brigading retail and investment banking activities in the same legal entity, and recommended separating the two. The proposal mirrors the U.K. plan – the investment-banking and trading arms, not the retail side, would be ring-fenced – but the end point would be quite similar.

But the European Banking Federation has dug in its heels, describing the recommendations as “completely unnecessary”. The European Commission asked for comments, and its formal position is that it is considering them along with the reports. That consideration may take some time; indeed, it may never end. Germany’s government seems to have little appetite for breaking up Deutsche Bank, and the French have taken a leaf from the British book and implemented their own reform. The French plan looks more like a Gallic version of the Volcker rule than Vickers “à la française”. It is far less rigorous than the banks feared, given President François Hollande’s fiery rhetoric in his electoral campaign last year, in which he anathematised the financial sector as the true “enemy”.

Solutions needed So we now have a global plan, of sorts, supplemented by various home-grown solutions in the U.S., the U.K., and France, with the possibility of a European plan that would also differ from the others. In testimony to the U.K. Parliament, Volcker gently observed that “Internationalising some of the basic regulations [would make] a level playing field. It is obviously not ideal that the U.S. has the Volcker rule and [the U.K. has] Vickers…” He was surely right, but “too big to fail” is another area in which the initial post-crisis enthusiasm for global solutions has failed. The unfortunate result is an uneven playing field, with incentives for banks to relocate operations, whether geographically or in terms of legal entities. That is not the outcome that the G-20 – or anyone else – sought back in 2009. © Project Syndicate

16 16

October 22, 2013 April 19, 2013

Closing China steams over pricey Starbucks coffee U.K. agrees nuclear power deal with EDF Starbucks Corp has been charging customers in China higher prices than other markets, helping the company realise thick profit margins, a report by the official China Central Television (CCTV) said. The report by CCTV aired on Sunday and said a mediumsize latte at the U.S. coffee house in Beijing costs 27 yuan (US$4.43), or one-third more than at a Chicago store in the United States. “Each Starbucks market is unique and has different operating costs, so it would be inaccurate to draw conclusions about one market based on the prices in a different market,” Starbucks said.

Britain signed a deal with France’s EDF to build a 16-billion pound (US$26billion) nuclear plant, becoming the first European country to provide state guarantees to help fund a nuclear project. The Hinkley Point C project in southwest England is expected to start producing power from 2023 and will receive a guaranteed electricity “strike” price of 92.50 pounds (US$150) per megawatt-hour for 35 years, more than twice the current market rate, EDF and the British government said yesterday. EDF’s Chinese partners, China General Nuclear Corp and China National Nuclear Corp, will take a combined stake of 30 to 40 percent in the consortium.

BHP Billiton backs away from India Miner to relinquish energy blocks after delays

HP Billiton Ltd is walking away from almost all of its oil and gas interests in India, citing an inability to carry out exploration operations there and dealing the latest setback to the country in its efforts to draw foreign investments. The Anglo-Australian resources company would not confirm the reason for its decision to relinquish its interest in nine oil and gas exploration blocks in India, but media in India reported it is withdrawing because of delays in clearances. BHP had earlier said it was facing delays in receiving permits from India’s defence ministry to conduct necessary exploration activities. The pullback comes as India has been looking to attract foreign investment to bolster flagging economic growth and ahead of a likely fresh round of energy block auctions in January, which the government hopes will attract foreign energy firms. “This is a sad story for India’s E&P (exploration and production) sector. Sentiments are already negative and exit of BHP Billiton is going to do more harm,” said R.S. Sharma, former chairman of staterun Oil and Natural Gas Corp. In 2010 Norway’s Statoil ASA and Brazil’s Petroleo Brasileiro

China Mobile Q3 profit disappoints C

hina Mobile Ltd missed expectations yesterday with a nearly 9 percent drop in thirdquarter net profit as social messaging applications ate into the company’s traditional revenue streams. The applications send messages using a subscriber’s data plan, thus depriving telecom operators of the ability to charge for SMS messages. Third-quarter net profit fell to 28.37 billion yuan (US$4.65 billion) from 31.1 billion yuan in the same period last year, below analyst estimates of 30.72 billion yuan. The company blamed its “severe difficulties and challenges” on a tougher competitive environment

Pullback due to delays in clearances for exploration

SA decided against joining blocks operated by ONGC after showing initial interest as they could not get necessary approvals on time. “They did not come on board because of such apprehensions and delays in getting approvals,” Mr Sharma, who was the ONGC chairman then, told Reuters yesterday. India, beset by energy shortages that make power cuts common and fetter industrial growth, is the world’s fourth-biggest importer of fuel. It has tried to attract foreign investment in the oil and gas sector

and also blamed so-called “Over The Top (OTT) products” like Tencent Holdings Ltd’s WeChat social messaging app and those from other mobile carriers. China Mobile is betting its future growth on rolling out an expanded 4G network to reinvigorate its business after its slow, domestically-developed 3G standard compared unfavourably to faster offerings from China Unicom Hong Kong and China Telecom Corp. The company said in March it is investing 41.7 billion yuan to upgrade its homegrown 4G network, the licences for which China’s government is expected to give out by the end of the year along with those for the other 4G standards used by China Unicom Hong Kong and China Telecom Corp. China Mobile is also expected to soon reach a deal with Apple Inc to distribute the new iPhone 5S and 5C handsets on its 4G network. This could help attract China Mobile customers into upgrading to 4G, and also provide a boost for Apple as it gets access to 750 million of China’s 1.2 billion mobile subscribers. Reuters

to boost stagnant domestic output but global majors have tended to take a pass on opportunities due to a perceived lack of clarity in policy and bureaucratic hurdles.

Bureaucratic hurdles In recent years, the only major foreign investments into the sector have been London-listed Vedanta Resources’ acquisition of a controlling stake in explorer Cairn India and BP’s US$7.2 billion deal to buy 30 percent stake in some blocks operated by Reliance Industries Ltd.

Sale of Woori Finance gains ground A

t least three South Korean firms made preliminary bids for the brokerage unit of the Woori Finance Holdings Co Ltd, giving a boost to the government’s decade-old attempts to privatise the country’s biggest banking group. KB Financial Group, NongHyup Financial Group Inc and Seoulbased private equity firm PineStreet Group each said they were among the initial bidders for Woori Investment and Securities Co Ltd, South Korea’s biggest brokerage firm in terms of assets. The brokerage is one of several units of Woori Finance the current administration is selling off

Exploration efforts, however, have so far brought little in the way of major finds partly because of the delays over permissions but also in some areas because of geological factors. Some global companies, frustrated by bureaucratic hurdles, have been scaling back their presence in India. Earlier this year, South Korea’s POSCO said it would pull out of a US$5.3 billion steel project, while retail giant Wal-Mart Stores Inc, which has complained about restrictive investment rules, recently ended a joint venture in the country. BHP will give up its interest in six blocks in which it held 26 percent interest and local company GVK Power & Infrastructure Ltd held 74 percent, as well as three blocks in which it held 100 percent interest. It had acquired interests in the blocks between 2008 and 2010. “The decision to relinquish these blocks is the result of an exploration portfolio review ... there have been regular discussions and communications over the last 12 months with the Ministry of Petroleum and Natural Gas,” BHP said in a statement yesterday. BHP Billiton will keep its 50 percent interest in one block, operated by BG Group. Reuters

separately or in batches in a bid to speed up the privatisation of the holding company. The government is trying to sell its entire 57 percent stake in Woori Finance to recoup the more than US$11 billion of taxpayers’ money it used to bail out the firm since the Asian financial crisis in the late 1990s. South Korea has so far tried to sell Woori Finance three times, but failed due to a dearth of bidders. “As the government decided to split the sale of Woori, the likelihood of Woori’s privatisation has increased,” said Kim In, an analyst at Seoul-based Eugene Investment & Securities. Woori Investment had assets worth more than US$26 billion at the end of June. Other units like lease and loan company Woori Financial Co Ltd and non-performing loan management firm Woori F&I Co Ltd also attracted preliminary bidders including KB Financial and Daishin Securities Co Ltd, the bidding firms said. Reuters