Britain calling – to home investors Brought to you by
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elaxed rules on inward investment, higher yields and distressed prices are attracting Macau-based investors to buy properties in Europe – especially the United Kingdom as well as Portugal, say market experts. Some first-time buyers are fleeing Macau’s real estate sector, scared off by cooling measures. The city’s estate agents are starting aggressively to promote overseas deals in response. London – with its strong rental market – is normally a favoured U.K. location for Macau and Hong Kong investors. But with prices having risen 10 percent year-on-year this month in many parts of the British capital, agents here are looking further afield. Last weekend Centaline (Macau) Property Agency Ltd launched for the first time a sales preview of a residential project in Manchester, northwest England.
Number 400 Friday October 25, 2013
Editor-in-chief Tiago Azevedo
Deputy editor-in-chief
Vitor Quintã
MOP 6.00
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April 19, 2013
Year II
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Hang Seng Index 22976
22938
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22824
22786
October 24
Taxi drivers seek 20 percent increase in fares
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Three labour unions representing taxi drivers delivered a request to the Transport Bureau yesterday asking it to raise the fares charged to their customers. The group called for the flag fall, the fare for the first 1,600 metres of a cab journey, to be raised to 18 patacas (US$2.10) from 15 patacas; a 20 percent increase. Tony Kuok Leong Son, representative of the unions, said the proposed increase is based on a ‘doubledigit’ rise in operation costs in the last two years, including for diesel fuel, maintenance costs and vehicle rental. Taxi drivers claim the costs of operating the 200 taxis newly licensed last year, which must meet the Euro IV emission standards, are much higher than older models.
%Day
CHINA UNICOM HON
1.66
CHINA RES ENTERP
1.31
GALAXY ENTERTAIN
1.00
SANDS CHINA LTD
0.53
HSBC HLDGS PLC
0.24
MTR CORP
-2.00
CHINA RES LAND
-2.06
WANT WANT CHINA
-2.11
CHINA OVERSEAS
-2.11
NEW WORLD DEV
-2.19
Source: Bloomberg
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Legislators join chorus versus non-res dealers
China State ex-mainland operating profit up 33 pct Page 4
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Banco Weng Hang parent courted by OCBC, AgBank Page 16
Licence plates are govt’s good fortune
Mainland visitors increasingly important
The Transport Bureau earned more than 13 million patacas (US$1.6 million) from auctioning a total of 188 ‘lucky’ car registration plates Business Daily has learned. The bureau calls them ‘special car licence plates’, a term it coined for those with numbers considered auspicious in local Chinese culture. The highest bid price at this auction – and the most paid since 2008 – was 688,000 patacas for a plate marked ‘MR88-88’.
Macau appears to be ever more focused on catering to mainland visitors according to data released by the government yesterday. In September, people arriving from the People’s Republic of China made up 64 percent of all tourists. In September 2012, they made up 58 percent of the arrivals. But the number of inbound travellers holding Hong Kong residency fell 10 percent year-on-year last month.
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October 25, 2013
Macau
Taxi drivers propose 20 pct fare increase The taxi flag fall rate was last increased in July last year Stephanie Lai
sw.lai@macaubusinessdaily.com
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hree groups representing taxi drivers asked the Transport Bureau yesterday for a fare increase. The drivers are proposing that the flag fall rate – the fare for the first 1,600 metres of a cab journey – be raised by 20 percent to 18 patacas (US$2.10) from 15 patacas. They are proposing that the fare for every subsequent 230 metres to be raised to 2.00 patacas from 1.50 patacas, or for the incremental distance that 1.50 patacas buys to be reduced. They are also calling for the charge for waiting to be raised to 2.00 patacas a minute from 1.50 patacas. They are seeking no increase in the charge for carrying luggage, which is 3.00 patacas per piece. Taxi Driver Mutual Association chairman Tony Kuok Leong Son said the demand was based on a “double-digit” rise in operating costs in the past two years, including rises in the price of diesel, the cost of maintenance and cab rents. Drivers say the cost of operating the 200 taxis newly licensed last year, which must meet the Euro IV emission standards, is much higher than the cost of operating older models. “After the 200 additional taxi licences were issued last year, the drivers experienced an average rise of 10 percent in the monthly rent, which is now about 20,000 patacas,” Mr Kuok told reporters. “The driver’s monthly expenditure for each taxi is up to about 40,000 patacas, which includes about 13,000 patacas for diesel, rent and
maintenance costs,” he said. “Considering that the government usually takes a year to grant a fare rise, we’re suggesting this percentage now because the operating pressure on the drivers has to be compensated for,” Mr Kuok said. “We’ll expect an answer from the government in the second quarter of next year.” Taxi fares were last increased in July last year, when the flag fall rate rose to 15 patacas from 13 patacas. Transport Bureau director Mr Wong Wan told reporters that the government had no schedule for considering a further increase. “We’ll have to consider public opinion, the inflation rate and the views of other taxi associations in making our assessment,” Mr Wong said. He said the new increase demanded was “a bit high” in comparison with the last increase. “Service quality is an important factor to consider when granting a taxi fare increase,” he added. Mr Kuok said taxi drivers would be urged to improve their service. “We’ve talked with the bureau director and mentioned that we would try our best to improve our service,” he said. “But improving service generally should also involve amendment of the regulations to introduce police oversight of any malpractice.” Asked about the quality of taxi services, Mr Wong ducked the question. “People can recognise me too easily,” he said, “and – that being the case – the service I get is usually good.”
The Transport Bureau director says the fare increase requested is ‘a bit high’
Licence plates good fortune for govt Auction of lucky tags brought bid of 700,000 patacas for ‘8888’ registration number Stephanie Lai
sw.lai@macaubusinessdaily.com
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he Transport Bureau has earned more than 13 million patacas (US$1.6 million) from auctioning a total of 188 ‘lucky’ car registration plates, Business Daily has learned. The event attracted 1,485 bids. The bureau refers to the tags as ‘special car licence plates’, a term it coined for plates marked with numbers considered auspicious in local Chinese culture. On Wednesday, the bureau announced the result of its second open bid for special plates. Those on offer this time all carry the prefix ‘MR’. The licence plates are categorised into four groups in ascending price order. The least prestigious had a reserve price of 20,000 patacas per plate, while the most prestigious had a reserve of 100,000 patacas per tag. The highest bid price at this auction – and the most paid since 2008 –was 688,000 patacas for a plate marked ‘MR88-88’. A total of 17 bids were recorded for the item.
In Cantonese, the spoken word for the number ‘eight’ rhymes in part with a phrase meaning “earning a fortune”. Mandarin speakers don’t pronounce the number in the same way. But the helix shape of ‘8’ when written in the Arabic number system adopted by the West has positive associations in China with the concept of ‘yin yang’ – the harmony and interconnectedness of things. The plate ‘MR88-88’ belonged to the most expensive category ‘A’, which also included two other popular licence plates ‘MR66-66’ and ‘MR99-99’. “In these two years, it’s not a surprise that you would keep on hearing of bidders competing for the lucky-numbered plates with record figures,” said Ben Leng Sai Vai, deputy director of the Transport Traders Association, a group representing local commercial vehicle owners. Mr Leng said the special car
licences are especially popular amongst junket executives or other wealthy individuals that earn money from the gaming sector. “The growing sales of cars in these two years also fuels this kind of open bid for lucky numbers,” said Mr Leng. “And licence plates that end with figures like 33 or 88 are usually the most popular ones with the bidders,” he added.
The Transport Bureau has been hosting the open bid for special car licences twice or at most three times a year since its establishment in 2008. That year, plate sales raised only 4.1 million patacas for the whole 12 months. The bureau has earned a cumulative income of more than 75 million patacas from the auctions since 2008.
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Macau
Canny investors buy into housing abroad Looser rules and higher yields make Macau property investors seek out foreign projects, particularly projects in Britain Tony Lai
tony.lai@macaubusinessdaily.com
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ore Macau investors are ploughing money into British property, taking advantage of fewer restrictions and higher yields. Many are making their first investments in property and their investments are relatively small, real estate agents say. Some are fleeing Macau’s real estate market, scared off by government measures to cool the market. Estate agents are seizing the opportunity and vigorously pursuing deals abroad, especially now that the law here regulates presales of unfinished flats. Centaline (Macau) Property Agency Ltd began promoting at the weekend a housing project in the northern English city of Manchester. Centaline regional sales manager John Ng said Macau offered “fewer investment opportunities” because of the government’s measures to cool the property market and the rules on presales of unfinished flats.
You can spend less than 1 million patacas to buy a flat of quite nice quality in the U.K. With the same amount you cannot even buy a car parking space here Ronald Cheung, Midland Macau chief executive
Since June the law has allowed the sale of unfinished flats only once the foundations of the building containing them are completed and each flat is registered with the government. “There are fewer limits on transactions and mortgages abroad, while investors here are affected by the special stamp duty, and the mortgage options are lower,” said Jones Lang LaSalle (Macau) Ltd’s head of residential property, Jeff Wong Chi Wai. “So there is definitely a trend of more investors here looking abroad.”
The special stamp duty is one of the measures taken to cool the property market. It is a levy of 20 percent on the sale of a property if it is sold within a year of being purchased, or of 10 percent if it is sold between one and two years after being purchased. Another measure is tighter restrictions on mortgage lending. Homebuyers can now borrow only 60 percent to 70 percent of the value of a home worth between 6 million patacas (US$750,000) and 8 million patacas.
A good time Centaline’s Mr Ng said these measures “raise investment costs and significantly affect small-budget investors without an abundant cash flow”. Jones Lang LaSalle says the preview it gave in August of a property project in London attracted youngerthan-usual people. “It is interesting that there were mostly non-active real estate investors in the seminar,” said Mr Wong. “They usually have one end-use flat and one for letting, and are now looking for more long-term, stable investment opportunities – of which they are deprived here.” Financial Services Bureau data show 534 homes were sold in Macau in August, 820 fewer than a year before. Estate agents blame the decline on the rules on presales of unfinished flats. Midland Realty (Macau) Ltd says housing prices here are also driving investors away. “Home prices in Macau and Hong Kong have almost reached their peak, while prices in Europe remain weak, meaning it is a good time to stock up for investment as the property market functions in a cycle,” Midland Macau chief executive Ronald Cheung Yat Fai said. Almost 6.6 billion patacas was drained out of the city’s property market in the first half of this year as outside investors cashed in – almost as much as was drained out in all of last year – Monetary Authority of Macau data indicate.
Understanding property Financial Services Bureau data show the average price of housing was 67,400 patacas a square metre in August, having peaked at about 100,000 patacas in May. “You can spend less than 1 million patacas to buy a flat of quite nice quality in the U.K. With the same amount you cannot even buy a car parking space here,” Mr Cheung said. As for investment yields, Mr Wong said: “The annual yield can be about 3 percent
Britain and Portugal have the property markets most favoured by Macau buyers
in the core areas in the United Kingdom, like London, and 6 percent to 7 percent in noncore areas.” He added: “In Macau, the annual yield stands – at most – about 2 percent.” A home in the development in Manchester that Centaline is promoting costs just over HK$700,000. The developer promises an annual yield of 8 percent in the first two years. Britain and Portugal have the property markets most favoured by Macau buyers, according to Midland Macau. “The language used in the U.K. is English – which many Macau people can speak – unlike in other European countries such as Italy and France,” Mr Cheung said. “And the buyers can understand their properties better.”
Centaline says the weakness of the pound also tempts Macau investors to invest in Britain. Monetary Authority of Macau data show that at the end of August one pound was worth 12.37 patacas, having been worth 12.87 at the end of last year. Mr Cheung said Portugal’s scheme allowing foreign investors to obtain residency there by buying Portuguese real estate worth at least 500,000 euros (5.5 million patacas) also attracted property buyers from Macau, particularly mainlanders with residency here. Even so, Mr Wong said it would take time for Macau buyers to become familiar with property markets outside Greater China.
MOP67,400 Average housing price per square metre in Macau in August
Estate agents are also promoting property abroad because it is now harder to get business here. “As it is, like, 20 agents vying for one transaction, the agencies work harder looking for other business opportunities,” said Mr Cheung.
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October 25, 2013
Macau
Legislators join opposition to non-resident dealers Assembly members say the law should dictate who can be employed as croupiers Stephanie Lai
sw.lai@macaubusinessdaily.com
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egislative Assembly members Ella Lei Cheng I and Melinda Chan Mei Yi have demanded that the ban on Macau’s casinos employing migrant workers as casino dealers be enshrined in law. They did so in written inquiries made on Wednesday. Ms Lei, an indirectly elected member who represents the Macau Federation of Trade Unions, also urged the government to give the ban on non-residents working here as drivers the force of law. On Friday the federation handed the government a petition setting out its demands. The petition contains about 23,000 signatures. “It’s particularly important for the city’s middle-aged workers,” Ms Lei told Business Daily. “Though we don’t have precise statistics on how many of these middle-
Daily that the government should consider imposing a regulation setting the ban on imported croupiers in stone. “It’s a faster way to realise what the chief executive has promised,” Ms Chan said.
Reasonable and effective
At the end of June 24,031 residents were working as croupiers
aged workers are in this occupation, I think it should be quite a considerable proportion, judging from the cases the federation has received before,” she said. “Since 2005, when Macau was at the transition point as manufacturing industry was dying out and more and more casinos were
opening, dealers’ positions have been an important sort of employment for older members of the workforce to switch to,” she said. “The job required lower academic qualifications and simpler vocational training, which was easier for middleaged workers.” Ms Chan told Business
Corporate California regulator at Macao Gaming Summit
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alifornia Gambling Control Commission chairman Richard J. Lopes will be keynote speaker at the Macao Gaming Summit – the conference portion of the Macao Gaming Show – at The Venetian Macao from November 14 to 16. He will speak on ‘Challenges for International Cooperation between Regulatory Agencies on Cross Border Issues’. His fellow commissioner Richard Schuetz will also talk, about ‘Expansion of Internet Gaming in California and the United States’. Other speakers include Professor Zeng Zhonglu, from Macao Polytechnic Institute, who will present his ‘Research Report on the Macao Gaming Industry’. His colleague, Wang Changbin, will provide a detailed insight into ‘Regulation for Gaming Machines in Macao’. The summit is organised by Macau Gaming Equipment Manufacturers Association with assistance from the International Masters of Gaming Law. Further discussion topics include: ‘Best Practices for Regulation of Internet Gaming’; ‘Gaming Crimes & Their Different Approaches’; ‘VIP Club Finance’; ‘Investing in Asian Gaming Stocks’ and ‘The Future of Asian Gaming’.
CTM finds help to improve operations
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ompanhia de Telecomunicações de Macau SARL (CTM) says it has enlisted the help of Comverse Inc and Tata Consultancy Services Ltd to improve its operations. Comverse and TCS will help CTM consolidate its various lines of business, including its fixed-line and mobile telephone and broadband Internet services. CTM director of Information Technology Rui Marcelo said: “While consolidation and professional services will benefit us with significant cost efficiencies, even more important is that it will enable us to deliver a greatly enhanced customer experience, giving our subscribers greater choice and control.” CTM has had four network failures since February last year, the latest occurring only this month. “CTM’s selection of TCS and Comverse is deeply rooted in the successes that the three parties have achieved throughout our history of working together,” said Jacques-Herve Maupin, Comverse’s managing director for Asia Pacific.
Some members of the assembly are against giving the ban the force of law. Cheang Chi Keong said it would tarnish Macau’s international image. Mr Cheang said restrictions on where casino operators could get their croupiers from could simply be written into the gaming concession contracts. This would be “more reasonable and effective”, he said. Gaming companies employed 24,031 dealers at the end of the second quarter, and the average croupier earned 16,720
patacas (US$2,093) a month, Statistics and Census Service data show. Chief Executive Fernando Chui Sai On has spoken in public three times in the past fortnight in an effort to reassure casino workers that while he is in office only residents will be allowed to work as croupiers. Groups representing workers unconvinced by Mr Chui’s promise have taken to the streets twice this month to voice their demand for legislation. Secretary for Economy and Finance Francis Tam Pak Yuen said last week that it would be “somewhat tricky” to give the ban the force of law. Mr Tam said the law already required employers to obtain government approval before hiring migrant workers. To enshrine any ban in law would “regulate not enterprises, but the actions of the government”, he said.
October 25, 2013
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October 25, 2013 April 19, 2013
Macau Carson Yeung got SJM cheques 4 times in a day
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Macau-linked businessman Carson Yeung Ka Sing has been questioned in court about why casino concessionaire Sociedade de Jogos de Macau issued him cash cheques four times in a single day. Mr Yeung – who is currently on trial at the District Court in Wan Chai, Hong Kong, for alleged money laundering – previously said he had been lucky playing VIP baccarat at SJM venues. The prosecutor asked – with reference to these particular SJM cheques – why he had not cashed his winning chips in one go. “Because there are four different junkets,” Mr Yeung replied.
HOSPITALITY Rare birds of passage Most of Macau’s visitors are Asians, and the package tourists that visit are overwhelmingly Asians. Since the government began publishing data on package tours, in 2011, the proportion of Asians among package tourists has increased steadily. Consequently the proportion of package tourists from other parts of the world has decreased from just over 1.1 percent to just under 0.7 percent. An average of 200 non-Asian package tourists visited each day between the beginning of 2011 and the end of the second quarter of this year. Even in August, usually a peak month for tourism, the daily average did not exceed 250. All in all, non-Asians count for very little in the package tour business.
2011 Q1 2011 Q2 2011 Q3
China’s individual travellers spend more, research suggests
2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 0
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Europe Americas Oceania
For most of the period represented in the chart, between 40 percent and 50 percent of non-Asian package tourists came from the Americas. The proportion of package tourists from the Americas contracted to just under 40 percent in the second half of last year, and so far this year the proportion has been smaller than before. At the beginning of the period under review the numbers of package tourists from Europe and Oceania combined were roughly equivalent to those from the Americas. But since the middle of last year the numbers from Europe have increased while the numbers from Oceania have been steady. The numbers of package tourists from Africa are negligible, having been under 50 in most quarters and never having reached 100 in any quarter. The chart does not show them because the plot representing them would be practically invisible.
16,135
Q2 package tourists from Americas, Europe and Oceania
Mainland visitors increasingly important While overall tourism grew 8 pct in September, PRC tourist numbers up nearly 20 pct y-o-y Michael Grimes
michael.grimes@macaubusinessdaily.com
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acau appears to be ever more focused on catering to mainland visitors according to data released by the government yesterday. In September, people arriving from the People’s Republic of China made up 64 percent of all tourists. In September 2012, they made up 58 percent of the arrivals. But the number of inbound travellers holding Hong Kong residency fell 10 percent year-on-year last month. The rate at which mainland arrival numbers grew in September was more than twice the rate of expansion in the city’s tourism sector as a whole. The Statistics and Census Service indicated that market-wide, visitor arrivals increased by nearly eight percent year-on-year to 2.3 million last month. By contrast the mainland component of that aggregate grew by nearly 20 percent, to 1.5 million. Of that cohort, 39 percent – 585,027 people – were from neighbouring Guangdong province.
For the third quarter as a whole, visitor arrivals totalled 7.77 million, up by nearly seven percent year-onyear. In the first three quarters of 2013, visitor arrivals totalled 21.9 million, an increase of five percent year-on-year. In September, Zhejiang province was in second place in the arrivalsfrom-the-PRC league table, but well behind with 62,990 arrivals. And nearly 64 percent of Zhejiangoriginating tourists were package tour visitors, rather than the usually more prosperous Individual Visit Scheme consumers who shop more and bet more when they get here. Shanghai only contributed 43,471 arrivals during the month, but 83 percent of them – 36,099 people – were IVS permit holders. Guangdong also scored highly for people travelling independently. Approximately 63 percent of the Guangdong cohort was an IVS visa holder. Across the mainland visitor segment, approximately four out
of every ten people – 589,667 in total – were from Individual Visit Scheme travellers. Visitors from South Korea (37,776) increased by 15.9 percent. The change coincides with Air Busan launching a direct service to Macau from Korea’s second city Busan in July last year. But in September the arrivals to Macau from Hong Kong (523,105 people); Taiwan (91,714) and Japan (25,516) decreased by 10.1 percent, 5.6 percent and 27.7 percent respectively. Despite the rise of hotel occupancy rates, by a narrow margin Macau remains a mainly day trip market. Same-day visitors accounted for 50.5 percent of the total in September, at 1.18 million. The average length of stay of visitors held stable from a year earlier, at 1.0 day in September 2013. Overnight and same-day visitors stayed an average of 1.9 days and 0.2 day respectively.
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Greater China Beijing to strengthen property regulations Authorities in China’s capital will strengthen oversight of the property market as they look to rein in surging prices and stabilise market expectations amid surging demand, the Beijing Housing Authority said. The authority said that it would speed up construction of lower priced apartments and ensure an adequate supply of land to build 20,000 new homes by the end of 2013. The official Xinhua news agency said that authorities would also increase scrutiny of mortgage applications and strengthen oversight of pre-sales of property. Average home prices rose 16 percent in Beijing in September, the biggest rise in three years.
Factory activity ticks up in October Strong new orders lift HSBC PMI to 7-month high Natalie Thomas
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trong new orders drove the fastest expansion in China’s manufacturing sector in seven months in October, a preliminary survey showed yesterday, more evidence that the economy is stabilising although a strong rebound remains elusive. The flash PMI figure, the earliest reading of China’s monthly economic performance, offers some positive news after disappointing export figures and September’s manufacturing PMI, which had shown weak domestic demand. The preliminary Purchasing Managers’ Index released yesterday by HSBC Holdings Plc and Markit Economics stood at 50.9, above September’s final reading of 50.2 and marking a seven-month high. Ten of 11 sub-indices rose. “China’s growth recovery is becoming consolidated into the fourth quarter following the bottoming out in the third quarter,” said Qu
China’s manufacturing strengthened more than anticipated
HTC cuts production as cash flow worsens Smartphone maker struggling to gain traction in the market Clare Jim
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aiwanese smartphone maker HTC Corp has halted at least one of its four main manufacturing lines, accounting for at least a fifth of total capacity, and is outsourcing production as a sales slump puts pressure on its cash flow, according to sources with direct knowledge of the situation. A Reuters reporter who visited an HTC factory at the company’s former headquarters in Taoyuan, about an hour’s drive from Taipei, saw loading docks shuttered and a sign on a locked lobby door that read: “Lobby is temporarily closed for use. Thank you for your cooperation.” HTC launched its latest version of the flagship One series handsets this year but has struggled to gain traction in a market dominated by larger rivals Apple Inc and Samsung Electronics Co Ltd. The company, whose woes have been exacerbated by supply chain constraints and
internal turmoil, reported its first ever quarterly loss this month and its cash flow from operations dropped to a negative US$707.27 million as of the end of June. Despite lacklustre sales, HTC devices usually receive rave reviews, and it has in recent months expanded its range to include smaller and larger models of the One phone and hinted at further products, including a tablet and a wearable device.
Optimising costs HTC initially denied it was shutting down any production, in Taiwan or elsewhere, and declined to comment on whether it was in discussions to outsource production. “HTC in not shutting down nor has plans to sell any of its factory assets,” the company said in an emailed response to queries from Reuters. “HTC has a very strong balance sheet
and will provide the latest financials in our upcoming earnings call to investors and the broader community.” When asked about what Reuters had seen at the factory in a telephone interview, HTC chief marketing officer Ben Ho declined to give details, but said: “Like any manufacturer, we do volume planning to optimise our lines, our manufacturing and production facilities. “Whether we are operating those facilities depends on market demand and our own expectations. When you have less demand you work with less facilities to optimise your costs. When you have demand, or bigger growth, you definitely have to activate all these facilities.” Two of the four sources who spoke to Reuters said HTC had combined production from two lines at Taoyuan into one, which would reduce its potential capacity by about 1 million phones per month, out of
Like any manufacturer, we do volume planning to optimise our lines, our manufacturing and production facilities Ben Ho, HTC chief marketing officer
a total capacity of around 2.5 million at the site and around 4.5 million including operations elsewhere. Manufacturing has been halted since at least August on the line, housed in a facility called Building H, while production continued at a nearby plant known as TY5. Most of the assembly lines in HTC’s Shanghai factory, which can produce 2 million phones a month, were also out of production, one of the sources said, with only a small number of phones being produced for sale inside China. HTC was considering selling the out-of-use production lines in China and Taiwan, two of the sources said. “HTC’s cash flow is not doing well. It has to do something soon to generate cash,” said one of the sources with direct knowledge of the manufacturing sale plan. Reuters
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Greater China HNA Group says not interested in Alitalia tie-up HNA Group, the parent company of China’s No.4 airline Hainan Airlines, denied a newspaper report saying it was interested in a tie-up with Italian carrier Alitalia SpA. A spokesman from HNA said the group was not interested in taking over any European airline after its purchase of French carrier Blue Eagle last year. Corriere della Sera had reported that Alitalia was in preliminary talks with Hainan for a possible partnership, citing sources. Alitalia is working on a 300 million euro (US$413 million) capital increase as it strives to avoid bankruptcy. Its biggest shareholder, Air France-KLM, has not said whether or not it will buy into the rights issue.
Hongbin an HSBC economist in a statement. “This momentum is likely to continue in the coming months, creating favourable conditions for speeding up structural reforms.” New orders rose to 51.6, the highest in seven months and well above the 50 line separating expansion from contraction. “From what we can see companies have drawn down inventories now, so once you get a little bit of demand you get orders coming in,” said Stephen Green, an economist with Standard Chartered bank. The strong reading lifted Chinese stocks off two-week lows, although investors are jittery about possible policy tightening by the central bank to put a cap on rising inflation and housing prices. Those fears have seen short-term money rates surge this week. “The pickup in the flash PMI suggests that economic momentum may hold up in October, but we maintain our view that growth will slow” in the fourth quarter and 2014 “as monetary policy tightens to contain inflation and financial risks,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong, said in a note yesterday.
Growth slowing In the first nine months of the year, the US$8.5 trillion economy grew 7.7 percent from a year earlier, putting it on track to achieve Beijing’s 2013 target of 7.5 percent, which would be the weakest growth in 23 years. Still, many economists see growth slowing ahead as global demand remains soft and as Beijing restructures the economy towards one driven more by consumer demand than investment and credit. “Despite the rise of this flash PMI reading, we believe sequential GDP growth peaked in the third
quarter at 2.2 percent and people should expect moderation to a more sustainable growth rate of 1.8-2.0 percent in the fourth quarter,” said Lu Ting and economist with Bank of America‑Merrill Lynch. The government has repeatedly stated it will accept slower growth during the restructuring, but policymakers have also shown a willingness to step in to keep growth stable. The flash PMI showed new export orders ticked up only marginally, suggesting a stabilisation in global demand but no solid rebound. Exports unexpectedly fell 0.3 percent in September, as fears of a tapering in U.S. monetary stimulus weighed on demand from Southeast Asia. Exports were a drag on the economy in the first three quarters, subtracting 1.7 percentage points from growth Policymakers stated they would support the trade sector if it looked like missing an 8 percent growth target for this year. Bank of America’s Mr Lu urged caution on attaching too much significance to the flash PMI figures. “We should keep in mind that the HSBC flash PMI is quite volatile and the final reading could vary significantly from the flash,” he said. “The HSBC PMI has a quite small sample size with undisclosed number of missing values.” Last month’s final PMI figures delivered a shock to the markets, coming in a full point below the flash reading for September. The flash PMI is based on 85-90 percent of total responses for each month. The final reading of the HSBCMarkit China manufacturing PMI will be released on November 1. The National Bureau of Statistics publishes the government’s manufacturing PMI, with a bigger sample size, on the same day. Reuters
Property loans climb in upbeat market
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al-Mart Stores Inc, the world’s largest retailer, plans to add as many as 110 stores over three years in China, while shutting some outlets and remodelling dozens more as it seeks to overhaul its business there. The Bentonville, Arkansas-based company plans to open the new stores from 2014 to 2016 in the world’s second-largest economy, it said in a statement yesterday. The retailer expects to shutter up to 30 nonperforming outlets in the country, Greg Foran, its China chief, said at a media briefing in Beijing yesterday. Wal-Mart has been closing less profitable stores and revamping business units in China amid increasing competition from regional rivals Sun Art Retail Group Ltd and China Resources Enterprise Ltd. The U.S. retailer has been battling setbacks in emerging markets
including the end of a six-year local partnership in India with local billionaire Sunil Mittal. International operations will be an area of growth for Wal-Mart, chief executive Mike Duke said at the press conference in Beijing yesterday. The company got almost 30 percent of its revenue outside the U.S. in the year ended January, according to data compiled by Bloomberg. The company said it is hiring in China and expects to create about 19,000 jobs in the world’s most populous nation. In India, Wal-Mart this month agreed to buy the stake held by Mittal’s Bharti Enterprises Pvt in their joint venture, which runs wholesale stores. Foreign companies need a local partner to run retail chains in India and Wal-Mart will have to find a new partner to open outlets. Bloomberg News
Sun Life sees China venture turning profitable in 2015
Profits from China would help meet net-income targets
S
un Life Financial Inc, Canada’s third-largest insurer, expects to become profitable in the Chinese market in 2015, ending more than a decade of losses after obtaining status to do business as a local insurer. The insurance company seeks to raise net income contribution from Asia to 12 percent in 2015 through organic growth, up from 8.3 percent last year, chief executive Dean Connor said. The Toronto-based firm would require acquisitions in the region to bring that level to the 15 percent to 20 percent range that would be high enough to matter to investors, he said. Sun Life is seeking to expand in higher-growth regions, including in China, the world’s fourthlargest insurance market, while it exits some U.S. businesses such as variable annuities and individual life insurance. Profits from China would help the insurer meet netincome targets that Connor said were “ambitious” without acquisitions. “Now the challenge is to take the benefit of that scale and make the business profitable,” Mr Connor said in an interview in Beijing. “We’re targeting to break even next year, and then profit should come after that.” Premium income at Sun Life Everbright Life Insurance Co jumped after Sun Life cut its stake in the joint venture set up in 2002 with statecontrolled China Everbright Group Ltd. The Canadian company cut its stake to just below 25 percent in 2010, giving it the legal status of a Chinese insurer and allowing it to
open branches across the country at a faster pace. Sun Life in August revised its net income target for 2015 to C$1.85 billion (US$1.8 billion) from C$2 billion, after the sale of its U.S. annuities unit to Guggenheim Partners LLC shareholders for C$1.35 billion as it seeks to cut risk.
‘Ambitious’ target “To achieve that organically is ambitious, but achievable,” Mr Connor said. “We’re also out, looking at potential acquisitions, but the nice thing is we don’t need an acquisition to achieve our aspirations.” Sun Life announced a deal in January with Khazanah Nasional Bhd to buy 98 percent of Aviva Plc’s and CIMB Group Holdings Bhd’s Malaysian insurance joint venture for 1.8 billion Malaysian ringgit (US$571 million). Such deals won’t be limited to Asia if the company can find “suitable acquisitions that make sense” in its other major business areas such as asset management and U.S. group insurance, Mr Connor said without naming any potential targets. Premium income at Sun Life Everbright in 2010 exceeded the venture’s combined sales in the previous seven years, the company said. The status as a local insurer also helped the joint venture win regulatory permission to set up an asset- management unit, which is already contributing to its profit after becoming operational last year, Mr Connor said. Bloomberg News
10 10
October 25, 2013 April 19, 2013
Greater China
Watsons IPO could arm Li to extend China lead Sale would also give added firepower to pursue expansion in Europe
owns 165 health and beauty Vivo stores in China. China Resources declined to comment for this article. Dairy Farm and Alliance Boots did not reply to emails seeking comment.
Big deal Mr Li, dubbed “Superman” in Hong Kong’s business centre because of his financial record – he built a sprawling ports-to-telecoms empire from a plastic flower business in the 1960s – is targeting fast growing lower-tier cities for his expansion plans across China, said people familiar with the matter. A spokesman for Hutchison Whampoa declined to comment, noting only last week’s statement mentioning the A.S. Watson strategic review. China accounts for 24 percent of A.S. Watson’s operating profit, but only 13 percent of its retail store count – two thirds of the group’s stores are in Europe. Its China health and beauty retailing business recorded 17 percent revenue growth in 2012, the fastest among the group’s geographies.
Denny Thomas
KEY POINTS Hutchison considers spinning off part of A.S. Watson Potential IPO could value A.S. Watson at about US$23 bln Beauty business in China to grow to US$186 bln by 2015
China’s health and beauty market was worth US$134 bln last year
H
ong Kong tycoon Li Ka Shing is expected to use proceeds from what could be the world’s biggest retail sector IPO to expand his health and beauty business in mainland China – a market forecast to grow by around 40 percent to US$186 billion by 2015. In the process, Mr Li would aim that firepower against foreign rivals such as Mannings Retail Ltd, controlled by Jardine Matheson Group’s Dairy Farm International Holdings Ltd; Alliance Boots Holdings Ltd, 45 percent-owned by Walgreen Co, the biggest U.S. drugstore chain; and Vivo, part of China Resources Enterprise Ltd. Mr Li’s conglomerate Hutchison Whampoa Ltd last week scrapped the sale of ParknShop, its Hong Kong supermarket chain, and said it would carry out a strategic review of A.S. Watson Co Ltd, its retail arm, which includes ParknShop, the Watsons, Superdrug and Kruidvat personal care stores, Fortress electronic appliance outlets, and chains selling food and wine and luxury and cosmetic products. That review may include an initial public offering of all or parts of the business, it said, without elaborating. Applying a 14 times multiple to last year’s earnings before interest, tax, depreciation and amortisation (EBITDA) of US$1.64 billion, an IPO could value A.S. Watson at about US$23 billion, bankers and analysts estimate.
Chartered Plc. “The biggest hurdle to growth would be finding the right store location.”
China’s health and beauty retail industry is hugely fragmented, and Watson has more room to grow John Chan, Standard Chartered
If 25 percent of A.S. Watson is floated – a standard Hong Kong IPO percentage – the IPO could raise close to US$6 billion. Health, beauty and luxury retailing accounted for 82 percent of 2012 revenue at A.S. Watson, which has its roots in a small dispensary set up in 1828 to provide free medical services to the poor in the southern province of Guangdong. “China’s health and beauty retail industry is hugely fragmented, and Watson has more room to grow,” said John Chan, an analyst at Standard
Market leader A.S. Watson, which generated US$19.2 billion in revenue last year from some 11,000 outlets worldwide, is already the market leader in personal care in China – a fragmented landscape of mainly small mom-and-pop stores where the top 10 firms control less than 5 percent. A.S. Watson leads with just a 1.6 percent share of the market that was last year worth US$134 billion. “China has been A.S. Watson’s growth engine, and given the huge growth opportunity and attractive returns, we would expect part of any IPO proceeds to support the expansion of the Watsons franchise there,” said Mr Chan. Watsons is the brand under which the health and beauty retailing business operates. Since 2008, it has tripled its China store count to 1,438, adding more than a store a day on average last year. Its China operating profit has grown four-fold to more than HK$3 billion (US$387 million) in that period. The business has a near20 percent operating margin. By comparison, Mannings has said it plans to grow its network of stores across China, which stood at 187 last year, while Alliance Boots has struck two deals to expand in China, with one of its partners owning 500 retail stores. State-backed China Resources
Western Europe’s health and beauty retail market shrank 8 percent last year and is forecast to grow just 4 percent by 2015, to around US$306 billion, Euromonitor forecasts. “Certainly, growing organically in China makes a lot of sense given the returns,” said CLSA analyst Jonathan Galligan. “They could also build more scale in Southeast Asia and you could see them making acquisitions in retail space in Europe, something they haven’t done in size since 2006.” If the strategic review does result in an offering of A.S. Watson stock, any deal of more than US$6 billion would make it Asia Pacific’s biggest IPO in three years, according to Thomson Reuters data. The A.S. Watson review is the latest move by Mr Li – ranked by Forbes as the eighth richest person in the world, with a near US$31 billion fortune – that some commentators have suggested shows he is cutting his exposure to Hong Kong and freeing up cash to invest elsewhere. Last month, Mr Li announced plans to list his Hong Kong power assets in a deal that could raise about US$5 billion. The moves would free up money for Mr Li to buy more assets also in Europe, where his companies have spent US$14.5 billion on acquisitions the past three years. Hutchison Whampoa said in July it is seeking more telecom assets in Italy, after agreeing the month before to buy Telefonica SA’s Irish unit for as much as US$1.1 billion. Also in June, a group of companies controlled by Mr Li agreed to buy Dutch waste processor AVR-Afvalverwerking BV for US$1.3 billion. Reuters
11 11
October 2013 April 19,25, 2013
Asia
Japan edges closer to lifting casino ban Casinos not limited to cities in lawmakers’ proposal
J
apanese lawmakers began to flesh out a plan to legalise casinos, with an outline of proposed legislation allowing gambling resorts to be developed not only in big cities but also in regional areas. The document includes a proposal that inspectors be appointed to monitor casinos for illegal activities, according to a copy obtained by Bloomberg News from a person who attended a panel meeting where the proposal was presented.
There are great hopes as regards casinos from the point of view of building up tourism Yoshihide Suga, Japan’s Chief Cabinet Secretary
While betting on horse, boat and bicycle races is allowed in Asia’s second-largest economy, casinos are currently banned and a lawmakers’ group is planning to submit a separate bill to parliament as soon as this year to legalise them. Tokyo’s selection to host the 2020 Olympics boosts confidence the government will open up the market and international companies including Wynn Resorts Ltd, MGM Resorts International and Las Vegas Sands Corp have showed interest in building resorts in the country. “There are great hopes as regards casinos from the point of view of
Casino operators prefer developing resorts in big cities like Tokyo
building up tourism,” Chief Cabinet Secretary Yoshihide Suga told reporters in Tokyo yesterday. “At the same time the whole government must consider whether this is possible from the standpoint of crime prevention and maintaining order.” Casino operators and the makers and sellers of casino equipment should all be required to obtain permits to operate, according to the document presented to the meeting attended by a cross-party group of pro-casino lawmakers. Japan should limit the number of casinos initially before it considers gradually increasing the number, according to the document. It didn’t say where casinos should be built. The proposals will form the basis of legislation to be submitted to parlia ment after the bill legalising casinos. Wynn Resorts and MGM Resorts
International executives have said their companies would invest several billion dollars in the North Asian nation. Las Vegas Sands and Caesars Entertainment Corp are also seeking expansion opportunities in what is projected to be the world’s secondbiggest gaming market. Macau gaming operator Melco Crown Entertainment Ltd said it plans to invest more than US$5 billion (39.9 billion patacas) in Japan casino resorts if it receives permission to build there, co-chairman Lawrence Ho Yau Lung said. Tokyo and Osaka are potential sites that Wynn, MGM and Las Vegas Sands have said they are interested in developing. The companies either plan to or are open minded about having local partners to develop projects. Among the potential local partners are trading companies such
as Mitsui & Co, Mitsubishi Corp and Itochu Corp, and gaming machine makers Sega Sammy Holdings Inc and Konami Corp. Japan has long been touted as an attractive gaming market with a large and relatively rich population base. It also enjoys global appeal as a tourist destination. The country would generate US$10 billion in casino revenue a year should it open up the market, Union Gaming Group LLC estimated. Future casino resort operators in Japan might be required to pay a national government tax on gross gaming revenue of up to 10 percent, Union Gaming Research Macau said in a note earlier this month. The report adds that a further GGR tax at prefecture (local government) level might be levied at a rate not over 10 percent. Bloomberg News/T.A.
Abe missing outside director pledge Failing to deliver risks Japan growth strategy
J
apanese Prime Minister Shinzo Abe is backing away from his pledge to require companies to name outside directors, a move that could curtail the investment needed to boost growth after three recessions in five years. New rules will only require companies to justify the lack of outside directors without forcing them to appoint any independent board members, according to a draft document prepared by the Justice Ministry that was obtained yesterday from an official of Mr Abe’s Liberal Democratic Party. The plan will prevent executives at parent companies from being counted as outside directors of their units, the document says. The proposal falls short of Mr Abe’s push to require companies to have at least one outside director as stated
liberal ideas, but he’s a product of the LDP. I don’t think he really wants to rock the boat on this.”
‘Veering off target’
Economy to face impact from sales-tax increase in April
in the government’s growth plan, which includes reforms that seek to double foreign direct investment in Japan to 35 trillion yen (US$358 billion) by 2020. About 90 percent of countries in which global investors trade equities have some form of corporate governance code, but Japan has none, according to
Nicholas Benes, from The Board Director Training Institute of Japan. “Those who bet on him being a transformation agent are going to be disappointed,” said Robert Dujarric, director of the Institute of Contemporary Asian Studies at Temple University’s Tokyo campus. “Abe on the one hand has
More than 20 companies in Japan’s Nikkei 225 Stock Average lack outside directors, according to data compiled by Bloomberg. Canon Inc, the world’s biggest camera maker, and Isuzu Motors Ltd, Japan’s largest maker of trucks, have no non-executive directors, according to the data. Coutts & Co, the wealth management unit of Royal Bank of Scotland Group Plc, is cutting holdings of Japanese shares on concern the government won’t pass the structural reforms needed to boost the economy. Coutts shifted from overweight to neutral on the best-performing equities
market among developed countries this year on signs Mr Abe will squander the early decisiveness of Bank of Japan governor Haruhiko Kuroda in tackling deflation, said Gary Dugan, chief investment officer for Asia and the Middle East. With a sales-tax increase approaching in April, Mr Abe is failing to deliver on reform measures that would ease the burden of the levy, Mr Dugan said. “The ‘third arrow’ of Prime Minister Abe’s recovery plan appears to be veering off target,” Mr Dugan said. Coutts, the U.K. company founded in 1692, managed 33.1 billion pounds (US$53.8 billion) of assets as of June 30. “On the government side, things are just slipping. The worry is that Japan is controlled by pressure groups.” Bloomberg News
12 12
October 25, 2013 April 19, 2013
Asia
India moves to boost liquidity
Ahoy there Kitty, Genting HK’s new cruise Government offers banks a cushion against increasing bad loans Genting Hong Kong Ltd, on operator of casino ships sailing out of Hong Kong, is to celebrate the 20th anniversary of its Star Cruises Ltd line with Hello Kittythemed cruises. Use of the animated characters has been agreed with the rights owner, Japanese firm Sanrio Co Ltd. The cruises will take place from November 17 to December 29 via the port of Singapore in the city-state, and of Penang in Malaysia. Events on board include the chance to meet costumed versions of the characters, a karaoke show, and breakfast and tea parties with ‘Hello Kitty and friends’.
Canon cuts full-year net income forecast Canon Inc cut its annual net income forecast as the world’s largest camera maker stumbles from slowing demand as users switch to smartphones for taking photos. Net income will probably total 240 billion yen (US$2.5 billion) for the year ending December 31, the company said in a statement yesterday, cutting its earlier forecast of 260 billion yen. The maker of EOS models cut its annual sales target for single single-lens-reflex models to 8 million from 9 million. The company kept its target for compact cameras at 14 million units.
Robinsons to raise US$650 mln in IPO Robinsons Retail Holdings Inc is set to raise US$650 million in a record initial public offering in the Philippines, an underwriter said yesterday, the latest in a slew of IPOs in the fast-growing Southeast Asian economy. Philippine firms, including Robinsons Retail, have raised US$1.35 billion from IPOs so far this year, making 2013 a record year in the country for new listings and compared with US$783 million raised in 2012, according to Thomson Reuters data.
Anto Antony and Siddhartha Singh
S
tate Bank of India and Central Bank of India are among 20 government-run banks that will receive a 140 billion-rupee (US$2.3 billion) capital infusion to guard against soured loans in a slowing economy. The recapitalisation of statecontrolled banks will enable them to raise money through share sales, Rajiv Takru, the Finance Ministry’s banking secretary, told reporters in New Delhi. State Bank of India will receive 20 billion rupees, while IDBI Bank Ltd and Central Bank of India will get 18 billion rupees each, he said. The injection is part of a ministry goal to help banks boost credit and meet tighter capitalreserve requirements. Bad debt as a percentage of Indian bank lending rose to a six-year high in June, with government-run banks holding a higher share of non-performing loans, central bank data show. “The infusion will help as the pain in terms of profitability and bad loans is going to last for another couple of quarters,” Jisha Nair, a Mumbai-based banking analyst at BOB Capital Markets Ltd, said by phone. “The banks will be better
Weaker currency to help revive growth: Lowe Central bank deputy sees gradual lift in the non-mining economy
A
POSCO cuts 2013 sales outlook South Korea’s POSCO cut its 2013 sales target by 3 percent yesterday as the world’s fifth largest steelmaker struggles to win orders away from Asian rivals also scrambling in an oversupplied market. POSCO posted its steepest quarterly fall in operating profits so far this year for the JulySeptember period, hit by declining sales and a prolonged slump in steel prices. Profits fell by nearly half to a lower-than-forecast 443 billion won (US$419.5 million). POSCO said it now expected sales for the year to reach 31 trillion won.
The government will inject 20 billion rupees in State Bank of India
ustralia’s record-low interest rates, weaker currency and improving sentiment should help revive growth in industries outside resources, central bank Deputy Governor Philip Lowe said. “A pick-up in non-mining investment is an important part of the story in the return of the Australian economy to trend growth,” Mr Lowe said in a speech in Melbourne yesterday. “Our expectation is that this will take place, with growth in non-mining investment predicted to pick up to at least high single-digit rates within the next couple of years.” Mr Lowe cited a better outlook in the manufacturing and tourism industries after an 8 percent drop in the exchange rate against a basket of other currencies since April, which has aided firms that boosted their efficiency. “A further depreciation would be helpful in rebalancing growth in the economy,” the deputy governor said, referring to the local currency. Mr Lowe’s speech reflects increasing confidence the Reserve
Bank of Australia’s two-year easing cycle and an election that ended the nation’s first hung parliament since World War II will allow the country to avoid a growth gap as a resource boom wanes.
Currency fluctuation The RBA’s No. 2 official said he wouldn’t be surprised if mining investment relative to gross domestic product fell by 3 percentage points or more in coming years. “A decline of this magnitude should be manageable, just as the earlier rise was manageable,” he told an investment conference hosted by the CFA Institute and CFA Societies Australia. “Other forms of spending will need to pick up.” “One of these other forms of spending is residential construction, and the modest rise that is underway here is a welcome development,” Mr Lowe said. The economy’s transition from growth led by mining development
in the north and west to industries like residential construction in the south and east was aided by a 12 percent decline in the Australian dollar in the second quarter. The currency has since rebounded as the Federal Reserve unexpectedly delayed tapering bond purchases. “Whether we will see a further realignment remains unclear,” Mr Lowe said. “But, from today’s perspective, a lower value of the Australian dollar would assist in lifting investment and activity in the sectors that have been constrained during the years of the mining investment boom.” Rising home prices and employment gains in the construction industry are heralding a revival in business confidence in Australia. The prospect of an economic recovery is prompting money markets to price in the end of the central bank’s easing cycle, which started in late 2011 and brought borrowing costs to an unprecedented low of 2.5 percent. Bloomberg News
editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
13 13
October 2013 April 19,25, 2013
Asia
US$2.3 bln India will inject into the country’s 20 state-run banks
positioned to tap equity markets for additional funds now.” The government usually infuses capital into lenders by buying their shares. Rules requiring government stakes of at least 51 percent have curtailed state banks’ ability to sell shares, making them under capitalised relative to privately owned lenders.
Economic slowdown Capital adequacy ratios at the state-run banks based on so-called Basel II rules stood at an average 12.4 percent as of March 31, lower than the 13.8 percent average for all the country’s lenders, Reserve Bank of India data show. While financial institutions started reporting ratios under the more stringent Basel III requirements in June, the RBI is yet to publish an industry average based on the new standard. China’s biggest banks tripled the amount of bad loans written off in the first half, cleaning up their books ahead of what may be a fresh wave of defaults. China has eased rules for writing off debt to small businesses
since 2010 and policy makers are pushing the lenders to increase risk buffers following an unprecedented credit boom that began in 2009. Indian Overseas Bank will get an investment of 12 billion rupees from the government, an e-mailed statement from finance ministry showed. Bank of India will get 10 billion rupees, while Bank of Maharashtra will receive 8 billion rupees. State Bank of India may raise additional capital of 17 billion rupees by selling shares to large investors, Takru, the banking secretary, said. The bank’s board may approve the share sale plans on October 30, he said.
Sour loans India’s economy, Asia’s third largest, will expand 5 percent to 5.5 percent in the fiscal year ending March, the Finance Ministry said in its quarterly review released earlier this month. Goldman Sachs predicted on September 3 growth of 4 percent, which would be the weakest pace in more than 10 years. Bad loans at Indian lenders climbed to 3.9 percent of total lending as of June 30 from 2.4 percent in March 2011, according to an August 22 report from the RBI. State-run banks account for three quarters of the country’s lending. The S&P BSE Bankex Index rose 0.6 percent yesterday. State Bank of India, the nation’s largest, gained 2.5 percent to 1,716.55 rupees. Central Bank climbed 1.3 percent and IDBI Bank jumped 4.2 percent. Bloomberg News
TPP trade pact at risk, ADB says Broader trade agreement may degenerate into bilateral deals
T
he Trans-Pacific Partnership trade pact risks collapsing and producing a series of bilateral deals if the 12 nations involved cannot reach agreement on concessions sought by some, the Asian Development Bank said in a report. Reports that the most recent round of negotiations made “very little progress” highlight the difficulties faced in finding common ground on the more difficult issues, the Manilabased lender said yesterday. Japan’s defence of its farming industry, Malaysia’s proposal to keep tobacco control measures out of the deal, and the impact of currency manipulation on markets are among issues impeding progress on the accord that the U.S. calls the cornerstone of its economic policy in the region. Leaders from nations participating in the TPP said this month negotiators are still aiming to complete the talks this year. “The secrecy surrounding the negotiations makes it difficult to assess progress, but – from what is known – there is the risk of degenerating into a series of loosely tied bilateral deals,” the ADB said. “Indications are that the two largest TPP members – the U.S. and Japan – are proceeding along bilateral lines, threatening the demanding single-
undertaking approach the TPP is supposed to adopt.” At stake for member economies amid an uneven global recovery is the prospect of faster growth as their goods and services find new and bigger markets. A TPP accord, which involves countries such as the U.S., Australia, Japan, Malaysia and Vietnam, would link an area with about US$28 trillion in annual economic output. “Although the TPP’s agenda is ambitious and wide ranging, it remains to be seen what can be agreed on, given the diversity of its membership,” the ADB said. “The need to provide exemptions, or ‘carve outs,’ to avoid a collapse in negotiations also raises concerns over the final form the TPP will take.” Countries are seeking concessions for industries such as agriculture, while U.S. automakers have expressed concern about Japan’s economic policies and said the TPP should include provisions to prevent currency manipulation. The TPP could yield global annual gains of US$295 billion by 2025, according to estimates by Peter Petri and Michael Plummer in a June 2012 policy brief published by the Peterson Institute for International Economics. Bloomberg News
14 14
October 25, 2013 April 19, 2013
Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange)
Max 60.8
average 59.712
Min 58.7
60.80
89.00
28.80
60.38
88.72
28.54
59.96
88.44
28.28
59.54
88.16
28.02
59.12
87.88
27.76
58.70
Last 60.4
Max 89.0
average 88.25
Min 87.6
87.60
Last 88.0
57.70 57.35 57.00 56.65
Max 57.70
average 57.004
Min 56.35
Last 57.35
56.30
Max 26.25
average 25.718
Commodities PRICE
DAY %
YTD %
(H) 52W
(L) 52W
97.24
0.392318811
4.144800257
109.6999969
85.51999664
BRENT CRUDE FUTR Dec13
107.9
0.092764378
2.948191966
114.4399948
95.95999908
GASOLINE RBOB FUT Nov13
255.49
0.101868903
-0.502375574
293.6000109
243.3699846
GAS OIL FUT (ICE) Dec13
913
-0.245834471
1.275651692
973
837
NATURAL GAS FUTR Nov13
3.605
-0.386847195
-3.738317757
4.59400034
3.281000137
NY Harb ULSD Fut Nov13
292.43
0.034207916
-2.131860776
322.3500013
276.8100023
Gold Spot $/Oz
1336.28
0.4616
-19.7169
1754.46
1180.57
Silver Spot $/Oz
22.6675
0.5911
-24.7177
34.3838
18.2208
Platinum Spot $/Oz
1442.35
0.3269
-4.9679
1742.8
1294.18
Palladium Spot $/Oz
747.85
0.083
6.8876
786.5
587.4
LME ALUMINUM 3MO ($)
1844
-1.862692922
-11.04679209
2184
1758
LME COPPER 3MO ($)
7171
-2.195853792
-9.582650359
8346
6602 1811.75
WTI CRUDE FUTURE Dec13
METALS
LME ZINC
3MO ($)
1932
-1.529051988
-7.115384615
2230
LME NICKEL 3MO ($)
14560
-1.952861953
-14.65416178
18770
13205
15.43
-0.194049159
0.097307817
16.80999947
14.91500092
444.25
0.338791643
-25.92746978
647
432
706.25
0.641254008
-13.95065489
913
635.5
AGRICULTURE ROUGH RICE (CBOT) Jan14 CORN FUTURE
Dec13
WHEAT FUTURE(CBT) Dec13
Min 27.55
Last 28.15
27.50
26.30
30.30
26.04
30.04
25.78
29.78
25.52
29.52
25.26
29.26
25.00
COUNTRY MAJOR
CROSSES
Max 30.25
average 29.622
Min 29.05
Last 30.25
29.00
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
0.9625 1.6197 0.8912 1.3788 97.34 7.9855 7.7529 6.0816 61.5225 31.167 1.2382 29.422 43.09 11006 93.681 1.22885 0.85126 8.386 11.0106 134.21 1.03
0.0312 0.4154 0.4825 0.3201 -0.0205 -0.0013 0 0.0707 0.1097 0.0353 0.1131 -0.0646 0.0464 -0.9449 -0.0448 0.1522 0.094 -0.1586 -0.3206 -0.3427 0
-7.2557 0.1298 2.7154 4.5337 -11.5472 -0.0288 -0.0297 2.45 -10.6099 -1.8834 -1.3568 -1.3221 -4.8387 -11.0213 -4.6477 -1.739 -4.2102 -2.0093 -4.3613 -15.3789 -0.0097
1.0599 1.6381 0.9839 1.3822 103.74 8.0111 7.7664 6.2566 68.845 32.48 1.2862 30.228 44.82 11730 105.433 1.265 0.88151 8.4957 11.0376 135.51 1.032
0.8848 1.4814 0.8904 1.2662 79.08 7.9818 7.7498 6.0773 52.89 28.56 1.2168 28.913 40.54 9590 81.971 1.20302 0.79607 7.8281 10.1113 100.33 1.0289
Macau Related Stocks
SOYBEAN FUTURE Jan14
1309
0.383435583
0
1406
1169
110.9
0.316598824
-29.11473314
179.25
110.4000015
NAME
SUGAR #11 (WORLD) Mar14
19.14
-0.726141079
-6.997084548
20.71999931
16.69999886
COTTON NO.2 FUTR Dec13
80.34
-0.433746491
2.032004064
93.72000122
74.34999847
World Stock Markets - Indices
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
ASIA PACIFIC
COFFEE 'C' FUTURE Dec13
NAME
Last 25.80
average 28.075
Currency Exchange Rates
NAME ENERGY
Min 25.00
Max 28.75
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
ARISTOCRAT LEISU
4.84
2.109705
CROWN LTD
16.85
1.140456
VOLUME CRNCY
53.65079
5.02
2.56
2547308
57.9194
17.215
9.3
1312339
AMAX HOLDINGS LT
1.21
-1.626016
-13.57143
1.72
0.75
1525500
BOC HONG KONG HO
24.85
-0.6
3.112032
28
22.85
7235869
CENTURY LEGEND
0.42
-3.448276
58.49057
0.56
0.232
600000
CHEUK NANG HLDGS
6.98
0.867052
16.52755
7.24
4.1
50000
CHINA OVERSEAS
23.15
-2.114165
0.2164486
25.6
17.7
20155960
CHINESE ESTATES
21.55
0.7009346
91.63139
22.25
9.543
11500
CHOW TAI FOOK JE
12.3
0
-1.125399
13.4
7.44
4993600
EMPEROR ENTERTAI
4.22
2.926829
123.2804
4.66
1.43
3615000
FUTURE BRIGHT
2.85
-0.3496503
135.1434
2.98
1.103
714000
GALAXY ENTERTAIN
60.4
1.003344
99.01153
63.75
24.35
15074934 1885500
COUNTRY
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
15413.33
-0.351249
17.62184
15709.58
12471.49
NASDAQ COMPOSITE INDEX
US
3907.074
-0.5723787
29.39415
3947.672
2810.8
FTSE 100 INDEX
GB
6687.85
0.2003152
13.39548
6875.62
5605.589844
HANG SENG BK
127.7
-0.7770008
7.582143
132.8
110.6
DAX INDEX
GE
8955.71
0.4019121
17.64649
8987.63
6950.53
HOPEWELL HLDGS
25.55
-1.541426
-23.15789
35.3
23.2
1395500
NIKKEI 225
JN
14486.41
0.4184098
39.357
15942.6
8619.45
HSBC HLDGS PLC
84.8
0.2364066
4.305039
90.7
73.55
13667434
HANG SENG INDEX
HK
22835.82
-0.7136102
0.7896059
23944.74
19426.35938
4390952
CSI 300 INDEX
CH
2400.511
-0.7434388
-4.853082
2791.303
2023.171
TAIWAN TAIEX INDEX
TA
8413.72
0.2394676
9.276183
8459.3
KOSPI INDEX
SK
2046.69
0.5373941
2.485661
2063.28
HUTCHISON TELE H
3.39
-2.305476
-4.775279
4.66
3.12
LUK FOOK HLDGS I
27
-1.99637
10.65574
30.05
16.88
1823000
MELCO INTL DEVEL
24.5
-0.4065041
171.9201
25.75
7.32
6501000
7050.05
MGM CHINA HOLDIN
28.15
-0.3539823
112.0004
30
12.236
4851200
1770.53
MIDLAND HOLDINGS
3.02
-0.9836066
-18.37838
4.6
2.68
1626000
NEPTUNE GROUP
0.37
1.369863
143.4211
0.4
0.131
519141500
NEW WORLD DEV
10.72
-2.189781
-10.81531
15.12
9.98
19704004
SANDS CHINA LTD
57.35
0.5258545
68.92489
60.5
28.25
16944029
S&P/ASX 200 INDEX
AU
5372.886
0.3134746
15.57203
5402.4
4334.3
JAKARTA COMPOSITE INDEX
ID
4582.498
0.7917961
6.157755
5251.296
3837.735
FTSE Bursa Malaysia KLCI
MA
1819.59
0.3020765
7.734984
1826.22
1590.67
SHUN HO RESOURCE
1.67
0
19.28572
1.92
1.19
0
NZX ALL INDEX
NZ
1019.625
-0.6755572
15.5968
1026.744
851.971
SHUN TAK HOLDING
4.63
1.091703
10.50119
4.8
3.02
5246504
PHILIPPINES ALL SHARE IX
PH
3973.89
-0.5873862
7.432046
4571.4
3440.12
SJM HOLDINGS LTD
25.8
1.775148
45.3713
28
16.486
14187000
SMARTONE TELECOM
10.48
1.747573
-25.56818
16.22
9.97
2985717
WYNN MACAU LTD
30.25
1.680672
44.3914
32.6
19
11820582
HSBC Dragon 300 Index Singapor
SI
626.62
-0.34
0.89
NA
NA
STOCK EXCH OF THAI INDEX
TH
1453.53
-0.262804
4.425508
1649.77
1260.08
ASIA ENTERTAINME
3.96
0
N/A
N/A
N/A
69409
HO CHI MINH STOCK INDEX
VN
501.17
-0.5713719
21.13456
533.15
372.39
BALLY TECHNOLOGI
69.5
-0.6291107
55.44621
76.3
43.16
239647
Laos Composite Index
LO
1306.32
-0.1559204
7.5364
1455.82
1047.94
BOC HONG KONG HO
3.26
-0.9118541
6.188927
3.6
2.99
24545
GALAXY ENTERTAIN
7.66
-1.033592
92.9471
8.11
3.17
8900
INTL GAME TECH
18.07
-2.271498
27.52294
21.2
12.37
3080646
JONES LANG LASAL
84.81
-1.026958
1.036452
101.46
72.56
305866
LAS VEGAS SANDS
70.95
-2.608099
53.70451
73.49
37.8353
6158789
MELCO CROWN-ADR
33.68
-3.495702
100
37
13.43
6232755
MGM CHINA HOLDIN
3.68
-4.663212
110.2507
3.88
1.6651
1000
MGM RESORTS INTE
20.06
-2.479339
72.33676
20.98
9.15
7054628
SHFL ENTERTAINME
23.19
0
59.93103
23.2101
12.35
900865
SJM HOLDINGS LTD
3.28
-1.796407
44.01023
3.6
2.0804
27214
WYNN RESORTS LTD
166.46
-2.076593
47.9776
173.38
103.34
1472442
NAME
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
AUD HKD
USD
Hang Seng Index NAME
PRICE
DAY %
VOLUME
PRICE
DAY %
VOLUME
PRICE
DAY %
AIA GROUP LTD
39.1
-1.262626
35274504
NAME CHINA UNICOM HON
12.22
1.663894
20637513
POWER ASSETS HOL
65.9
-0.753012
2324900
ALUMINUM CORP-H
3.03
-1.623377
12713493
CITIC PACIFIC
10.76
-1.102941
4960270
SANDS CHINA LTD
57.35
0.5258545
16944029
BANK OF CHINA-H
3.49
-1.133144
372856879
CLP HLDGS LTD
61.45
-0.2435065
3847932
SINO LAND CO
11.08
-0.8944544
8679701
BANK OF COMMUN-H
5.56
-0.7142857
53318327
CNOOC LTD
15.28
-0.7792208
56526280
SUN HUNG KAI PRO
101
-0.5905512
4591868
BANK EAST ASIA
32.45
-0.9160305
2617564
COSCO PAC LTD
11.06
-1.073345
5476748
SWIRE PACIFIC-A
90
-0.2217295
1468574
BELLE INTERNATIO
10.52
-1.12782
24458280
ESPRIT HLDGS
13
-0.6116208
1848706
TENCENT HOLDINGS
428.8
-0.32543
3517981
BOC HONG KONG HO
24.85
-0.6
7235869
HANG LUNG PROPER
25.1
-1.761252
6006401
TINGYI HLDG CO
21.25
0
4995814
CATHAY PAC AIR
15.28
-1.29199
2440299
HANG SENG BK
127.7
-0.7770008
1885500
WANT WANT CHINA
11.14
-2.108963
12971024
WHARF HLDG
67
-0.9608278
3889047
CHEUNG KONG
120.8
-1.30719
2621015
HENDERSON LAND D
46.05
-0.861141
3421335
CHINA COAL ENE-H
4.76
-1.652893
83756365
HENGAN INTL
90.9
-0.1098901
1143244
CHINA CONST BA-H
5.76
-1.873935
405666808
HONG KG CHINA GS
18.1
-0.3303965
9623015
CHINA LIFE INS-H
19.82
-1.147132
28313224
HONG KONG EXCHNG
123.8
-1.039169
2406566
CHINA MERCHANT
27.05
-1.096892
2966615
HSBC HLDGS PLC
84.8
0.2364066
13667434
CHINA MOBILE
79.9
-0.3119152
23646962
HUTCHISON WHAMPO
95.7
-0.931677
4870530
CHINA OVERSEAS
23.15
-2.114165
20155960
IND & COMM BK-H
5.21
-1.325758
310409868
CHINA PETROLEU-H
6.05
-0.8196721
74910001
LI & FUNG LTD
10.66
-0.5597015
12454242
CHINA RES ENTERP
27
1.313321
1894346
MTR CORP
29.4
-2
MOVERS
23486.73
3807487
LOW
22786.34
52W (H) 23944.74
CHINA RES LAND
21.35
-2.06422
11864100
NEW WORLD DEV
10.72
-2.189781
19704004
20
-0.990099
4908200
PETROCHINA CO-H
8.86
-0.8948546
69605145
CHINA SHENHUA-H
23.9
-1.848049
26104825
PING AN INSURA-H
57.5
-0.7765315
10789410
44
1 23487
INDEX 22835.82 HIGH
CHINA RES POWER
5
VOLUME
(L) 19426.35938
22786
22-October
24-October
15 15
October 2013 April 19,25, 2013
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Jakarta Globe Investment in Indonesia rose at a smaller pace in the third quarter and is forecast to grow slowly in 2014 as a weaker global economy continues to damp investor sentiment. Total foreign and domestic investment rose 23 percent in the third quarter year-onyear, after increasing 30 percent in the second quarter, according to data released by the Investment Coordinating Board. Chairman Mahendra Siregar anticipates growth will continue to be sluggish into 2014, with total investment predicted to rise by 15 percent.
Taipei Times Taiwan’s industrial production index rebounded unexpectedly by 1.06 percent last month from a year earlier, reversing from a 0.57 percent yearon-year decline in August, the Ministry of Economic Affairs said, citing strong competitiveness of the semiconductor industry’s highend processes. On a monthly basis, the index – which stood at 100.17 last month – dropped by 3.5 percent from a month earlier, but showed a 0.51 percent rise after seasonal adjustment, the ministry said in its monthly report.
Korea Herald The row over alleged irregularities in the prosecution’s probe into the National Intelligence Service is threatening to escalate into full-blown war between South Korea’s two main political parties over the legitimacy of last year’s presidential election. Following testimony from Yoon Seok-yeol at the parliamentary audit of the prosecution, voices questioning the legitimacy of last year’s presidential election have risen within the main opposition Democratic Party. While the DP’s official position is that the party does not contest the election results, comments from DP members are hinting otherwise.
Wall Street Journal Japan’s widely diverse cuisine ranging from sushi to ramen is one step closer to becoming a UNESCO-designated intangible cultural heritage. Following in the footsteps of a number of other countries who have received recognition for their food, Japan has applied to have its traditional diet also receive the designation. While Japan is still waiting for a final decision about its application, a unit of UNESCO’s decision-making body has more or less given the green light to the approval. The country’s entire culinary culture, which places a strong emphasis on social customs and respect for nature, would be recognised, Japan’s Agency for Cultural Affairs said.
America the reckless Michael Spence
Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business
T
he world’s developed countries face growth and employment shortfalls, while developing countries are confronting huge challenges in adapting to increasingly volatile capital flows while adjusting their growth patterns to sustain economic development. And yet America’s political dysfunction has come to marginalise these (and other) crucial issues. It is all very difficult to fathom. The threat of a default on U.S. sovereign debt has been lifted – for now – but the deeper problem persists: For America’s Republicans and Democrats, negotiating a fiscal grand compromise appears to carry higher costs than playing a game of brinkmanship, even at the risk of default. Surely this involves a collective miscalculation of the longerterm costs. Setting aside the external impact on the global economy, the damage to domestic stability and growth from anything other than a shortterm technical default would be so severe that the political system (and both parties with it) could not withstand the backlash. Domestic and foreign holders of U.S. Treasury bills would regard a deliberate, unforced default as a betrayal of trust. Some are reassured by this fact, because it suggests that a real default will not happen. And that means that the fragile global economy, dependent (for now) on a single country for its main reserve currency, can withstand America’s political shenanigans. That may be true, and it may be the only practical choice in the short run. But the U.S. pattern of decision-making (or non-decision-making) has already created additional risk. It will surely be reflected in upward pressure on interest rates, at which point the Federal Reserve will enter the picture. Far from tapering its monthly purchases of long-term assets, one can easily imagine a scenario in which the Fed’s already substantial balance sheet would have to expand even more quickly to counter the negative economic effects of an unplanned – and rapid – rise in borrowing costs. And this comes at a time when many (including me) believe that strengthening U.S. economic growth makes an orderly withdrawal from policy-assisted growth the wise course, both domestically and internationally.
Governance crisis Outside the U.S., even a technical default would have profound effects. The eurozone still faces rebalancing and structural challenges, but it has managed
Managing the global economy requires designing a system of global governance in which one country’s internal politics cannot jeopardise all countries’ prospects
to create a window of stability in sovereign-debt markets. In the case of a U.S. default, however, it would start to attract capital inflows, causing the euro to rise, adding to already-substantial headwinds to growth and employment, and making recovery in its damaged peripheral economies nearly impossible. Measures to counter “excessive” capital inflows – of the type introduced in Brazil and Malaysia – might be needed. China and other sovereign holders of U.S. debt face capital losses over and above those implied by the inevitable appreciation of their currency. One is reminded of the external consternation expressed during the 2008 crisis at the possibility of a default on debt carrying an implicit government guarantee. In March 2009, Zhou
Xiaochuan, the governor of the People’s Bank of China, argued that the dollar’s role as the main international reserve currency was not in the interest of the global economy or of the U.S. itself. In an expanding global economy, the supplier of the reserve currency is pushed to run current-account deficits – and hence toward a leveraged-growth model that systematically erodes its strength and independence as it becomes increasingly reliant on foreign capital and foreign asset ownership. Now we can see that the global economy is dependent not only on the strength of the reserve-currency country, but also on its values – particularly, on its continued willingness to put critical international commitments ahead of domestic disputes. America’s governance crisis has called this into question. The long-run effects of the U.S. default threat will be overwhelmingly negative. For starters, it will reinforce the notion that policies and policy disputes are to be conducted with a view to domestic issues and interests, independent of the systemic global effects – even as those effects grow larger.
Global risks Indeed, some factions within the U.S. political system do not appear to understand the large adverse feedback effects on the domestic economy from a disruption in the global financial system. Second, external holders of U.S. sovereign debt will almost certainly begin to view Treasuries as risky assets and, where possible, to diversify away from them. That is not necessarily bad – wholesale dumping of U.S. sovereign debt is highly unlikely, as that would be selfdestructive for many countries, including China – but the
transitions could be bumpy. Third, the willingness to hold America’s creditworthiness hostage for domestic political purposes will almost surely accelerate the decline of U.S. influence in global economic governance and management. In the short to medium term, that decline may create a vacuum and lead to volatility and heightened risk, because, as many have noted, there are few candidates to replace the U.S. To be fair, the trend toward diminished U.S. influence – and, ultimately, shared responsibility for global economic governance and stability – was already underway, and in a sense is inevitable. The hope was that the transitions would be gradual and stable, with the U.S. playing a leadership role as it has in most of the postwar period. Finally, the U.S. default risk may revive Zhou’s 2009 agenda (perhaps premature at the time) and accelerate the search for a workable alternative to the singlecountry reserve-currency model, which has outlived its usefulness. In the end, no one wants the global system to be vulnerable to a single country’s domestic political fights. The global economy faces tremendous trials in the coming years: growth, employment, and distributional challenges in many advanced and developing countries; farreaching institutional reform in Europe; the complex middleincome transition in China; and the continuing need to reduce poverty worldwide. Managing them effectively requires designing a system of global governance in which one country’s internal politics cannot jeopardise all countries’ prospects. The immediate threat is gone. But this is no time for a sigh of relief and business as usual. © Project Syndicate
16 16
October 25, 2013 April 19, 2013
Closing Macau’s Hotel Lan Kwai Fong in sale talks
EU’s Barroso to visit Macau next month
China Star Entertainment Group Ltd, which controls the Macau casino property Hotel Lan Kwai Fong – operating under a Sociedade de Jogos de Macau SA gaming licence – says it has started talks with “an independent third party” about possible sale of the venue. The firm voluntarily suspended trade in its shares at lunchtime on Wednesday, re-activating them shortly before the reopening of the Hong Kong market yesterday. Late on Monday China Star said it had two new and non-wholly owned subsidiaries, with the “ultimate beneficial owners” members of chairman Charles Heung Wah Keung’s family.
The president of the European Commission, José Manuel Barroso (pictured), will visit Macau next month, Radio Macau reported. Mr Barroso will visit Macau on November 23, Vincent Piket, the head of the Office of the European Union to Hong Kong and Macau, told the public broadcaster. Macau and the EU are celebrating this year the 20th anniversary of their agreement on trade and cooperation, which is the framework for their relationship. Mr Barroso will meet Chief Executive Fernando Chui Sai On, Mr Piket said. They are expected to discuss cooperation between Macau and the European Union.
China State’s ex‑mainland profit up 33 pct State construction firm’s international unit benefitting from Macau building boom Michael Grimes
michael.grimes@macaubusinessdaily.com
C
hina State Construction International Holdings Ltd, a major contractor on casino and housing projects in Macau, saw its operating profits and share of profits from allied businesses jump 33 percent year-on-year in the nine months to September 30. The group made approximately HK$2.25 billion (US$290.2 million) in operating profit for the period, compared to around HK$1.69 billion in the equivalent period a year earlier. The number is given
in unaudited third quarter results filed with the Hong Kong Stock Exchange. Group revenue rose 30 percent to just under HK$16.7 billion, compared to the HK$12.8 billion achieved in the first nine months of 2012. The company – which has a listing in Hong Kong – will announce its full unaudited results for the first three quarters to the Shanghai Stock Exchange “before the end of October 2013” it said. The firm does business out-
side the mainland on behalf of state-owned China State Construction Engineering. In May China State Construction International announced the biggest ever wholly conducted project in its history. It signed a HK$10.5 billion deal to act as main contractor on the construction of MGM Cotai, a new casino resort being developed on Cotai by MGM China Holdings Ltd. In the first half China State’s international unit also won what it described
as “the largest government project in Macau” for public housing in Ilha Verde, a contract worth HK$1.89 billion. However, one of the losing bidders for the work has appealed to the Court of Second Instance against the decision, Business Daily reported in August. In September it was announced that China State Construction International would invest HK$2 billion and pay for 29 percent of the pre-development costs (about HK$51 million) for the fifth
phase of the Nova City residential development at Taipa. Nova City owner Shun Tak Holdings Ltd told the Hong Kong Stock Exchange that China State Construction would be entitled to 29 percent of the profit or loss from the sale of the flats. Once the deal was finalised, China State Construction would be awarded the construction contract, it added. The building work should be completed in just over three years said Shun Tak.
OCBC, AgBank weigh Eurozone business Wing Hang Bank bid growth slows
S
ingapore’s Oversea-Chinese Banking Corp Ltd has joined other suitors in weighing a bid for Wing Hang Bank Ltd, one of four Hong Kong family-run lenders well positioned as a gateway between mainland China and the wider world. OCBC is weighing an offer, said a person with direct knowledge of the matter. Agricultural Bank of China Ltd, China’s No. 4 bank, is also considering a bid for Wing Hang, people familiar with the matter told Reuters. China’s economic clout and the growth of the offshore yuan fixedincome market has made Hong Kong’s mid-sized banks attractive to foreign lenders looking for a foothold on the mainland and for mainland Chinese banks seeking to branch out beyond their home turf. Other potential suitors include Australia and New Zealand Banking Group Ltd and United Overseas Bank Ltd, sources have said. Wing Hang rose 2.5 percent in Hong Kong yesterday, giving it a market value of HK$36 billion (US$4.6 billion). Banco Weng Hang SA, a unit of Wing Hang Bank, has 12 outlets in Macau. Wing Hang Bank’s controlling shareholders said last month they
T
had received preliminary offers from independent third parties which they did not name, putting the bank in play. Hong Kong’s Fung family and BNY International Financing Corp jointly own about 45 percent of the bank. For China’s AgBank, a successful bid would be its first major acquisition outside its home market since a record-breaking IPO three years ago and one that could help it catch up with other state-run rivals. Reuters
he pace of growth among businesses in the eurozone eased in October as the service sector slowed, a survey has indicated. The preliminary Purchasing Managers’ Index (PMI) from research firm Markit fell to 51.5 from 52.2 in September. However, a reading above 50 still implies expansion, and activity has now grown for four months in a row. Markit said expansion was “broadbased” across the eurozone, although growth slowed in both Germany and France. Germany, which has been the main economic powerhouse for the eurozone in recent years, saw growth slow to a three-month low. Markit also noted that the eurozone’s jobs market remained weak. Employment fell for the 22nd month in a row, with the rate of job losses picking up from September. “The survey data have been running in positive territory for four consecutive months now and indicate that the eurozone economy expanded at a quarterly rate of 0.2 percent at the start of the fourth quarter, suggesting an ongoing, albeit sluggish, recovery,” said Chris Williamson, chief economist at Markit. Spain’s economy, which was one of the hardest hit by the credit crunch and subsequent economic downturn,
has shown signs this week that it is slowly starting to recover. Official figures show the country’s unemployment rate, which is one of the highest in Europe, fell slightly in the third quarter of this year, to 26 percent from 26.3 percent in the previous quarter. The eurozone emerged from recession in the second quarter of this year when it grew by 0.3 percent following a record 18 months of economic contraction. Reuters