Macau Business Daily, October 28, 2013 by Business Daily

MOP 6.00 Vitor Quintã

Page 4

Year II

Number 401 Monday October 28, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Not-so-touching moments: Tourist satisfaction falls

No details yet 1 on December subsidised homes sale

April 19, 2013

China to learn from Macau on democracy: academic

Page 5

he city’s marketing motto is ‘Touching Moments, Experience Macau’, but a new survey suggests visitors are growing touchy about the real thing. The tourist satisfaction index compiled by the Institute for Tourism Studies fell to 69.4 points out of 100 in the third quarter from 71.5 points in the second. Visitors were markedly less happy with hotels and heritage sites. The indices of

satisfaction in those two cases being lower than the overall index. The index of satisfaction with hotels fell to 68.5 points from 73.9 in the second quarter, its second-lowest reading since the satisfaction surveys began in 2009. Of 1,222 visitors surveyed in the third quarter this year, just 7.9 percent acknowledged the primary purpose of their visits was to gamble. More on page 2

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22819.0

22784.8

22750.6

22716.4

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October 25

Wynn already eyeing Cattle fattening station phase 2 of Cotai resort beefs up meat supply Wynn Palace – the new US$4 billion (31.95 billion patacas) Cotai resort being developed by entrepreneur Steve Wynn – will definitely be ready by Chinese New Year 2016 says the company. But Mr Wynn has already set his mind to developing phase two of his approximately 51-acre (20.6 hectare) Cotai site. It will be known as Wynn Diamond. Wynn Macau Ltd posted a 13 percent increase in third-quarter earnings.

The city’s supply of fresh beef will be more reliable and of higher quality thanks to a new deal signed on Saturday, Macau’s major importer Nam Yue Food Stuff & Aquatics Co Ltd told Business Daily. Before reaching Macau, live cows imported from the northern provinces of China will spend three to four months in a ‘transit farm’ in Dongguan city, Guangdong province said Nam Yue.

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HSI - Movers Name

%Day

CHINA MERCHANT

1.48

MTR CORP

0.34

CHINA MOBILE

0.25

CHINA OVERSEAS

0.22

HSBC HLDGS PLC

0.18

CHINA COAL ENE-H

-2.10

CHINA RES LAND

-2.11

COSCO PAC LTD

-2.53

CITIC PACIFIC

-3.53

SINO LAND CO

-3.97

Source: Bloomberg

Interview

Focus on mainland visitors deters long‑haul market Even though officials say they want to bring more long haul tourists to the city, in the short-term Macau will continue to have more and more day-trippers, says Don Dioko. In an interview with Business Daily, the head of the Tourism Research Centre at the Institute for Tourism Studies suggests different kinds of accommodation will be needed to appeal to travellers coming from far afield. Pages 6 & 7

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October 28, 2013

Macau TurboJet extends STDM discount Ferry operator TurboJet will continue to sell tickets at a 5 percent discount to Sociedade de Turismo e Diversões de Macau (STDM) SA, the flagship company of ailing gaming tycoon Stanley Ho Hung Sun until at least the end of 2016, said Shun Tak Holdings Ltd. TurboJet is a unit of Hong Kong-listed conglomerate Shun Tak, managed by Mr Ho’s daughter Pansy Ho Chiu King. Shun Tak expects STDM’s bulk purchases of ferry tickets to soar from HK$108.4 million (US$14 million) last year to as much as HK$192.2 million by 2016.

Visitor satisfaction hits 18-month low Front-line employees of the tourism industry should be encouraged to improve their service, an academic says Tiago Azevedo

tiago.azevedo@macaubusinessdaily.com

Gambling attraction fading A study of visitors by the Institute for Tourism Studies tourism research centre has found that the proportion of visitors that come to Macau primarily to gamble has shrunk during the course of this year. Of 1,222 visitors that the tourism research centre surveyed in the third quarter, 7.9 percent acknowledged that the primary purpose of their visits was to gamble. The proportion was 8.2 percent in the first quarter and 9.5 percent in the second. The centre’s index of satisfaction with gaming fell to 70.0 points in the third quarter, 3.0 points less than in the second, the latest reading being the lowest since the first quarter of last year.

The satisfaction of visitors with shopping is the lowest for nearly two years

isitors were less satisfied with their time in Macau in the third quarter of this year, mainly because they were less impressed by the heritage and shops, the results of a survey show. The tourist satisfaction index compiled by the Institute for Tourism Studies tourism research centre fell to 69.4 points out of 100 in the third quarter from 71.5 in the second. The last time the reading was so low was in the first quarter of last year, when it was 68.8. The third-quarter reading is slightly below the long-term average of 70.0 since the index was first compiled in 2009. For the third-quarter survey, researchers asked 1,222 visitors about their satisfaction with and expectations of various aspects of their visits. The survey found 25.9 percent of respondents came to Macau to shop. But the index of satisfaction with shopping was one the chief drags on the main index. The shopping index fell to 67.8 points in the third quarter from 71.5 in the second. The latest reading was the lowest since the fourth quarter of 2011, when the reading was 64.1. Events remained the most satisfactory experiences for tourists, although the index of satisfaction with events fell by 1.5 points to 74.2. However, the survey found that attending events was not among

Tourist Satisfaction Index

“We are not very active in doing these studies, and we have to do more research to understand the pulse of the industry”.

Corrective actions

the three main purposes of visiting Macau, which were shopping, seeing the heritage and eating out.

Progress neutralised Visitors were less happy with hotels and the heritage, the indexes of satisfaction with these aspects being lower than the main index. The index of satisfaction with hotels fell to 68.5 points from 73.9, the latest reading being the second-lowest on record. Visitors were least impressed by tour guides and tour operators, the index of satisfaction with tour guides and tour operators falling to 61.9 points from 68.8. “These results indicate that while there have been sustained overall improvements in Macau tourism products and services in the past four

years, there has also been consistent deterioration which, altogether, neutralises any progress made,” the tourism research centre said. The centre urged the tourism industry and government “to identify, pinpoint and address the underlying factors that inhibit the long-term and sustained delivery of a positive and favourable visitor experience.” University of Macau assistant professor of gaming and hospitality management Glenn McCartney said more research was needed to find out where Macau would stand as a destination for tourists in a few years from now. “This is just one survey about service quality – which is good to have – but it is not enough to have a real idea about the industry as a whole,” Mr McCartney told Business Daily.

He said the products and services available did not match the expectations tourists had upon arrival, which might have pushed the satisfaction index lower. “Macau still has a lot to offer, especially inside the new integrated resorts, but the main problem lies with training of the front-line staff,” he said. The survey results published since the index was first compiled show that Macau has not improved much in the past five years. “We have to put corrective actions into place,” Mr McCartney said. He said effort had to be made to solve labour problems. “How do you have a workforce that delivers quality? Macau has challenges there, because we have restrictions on imports that should be looked at,” he said. “We have to incentivise the frontline staff – from retail to taxi and bus drivers – so that we are able to improve service quality,” Mr McCartney said. “That will only happen when we decide on what corrective actions should be introduced.”

October 2013 April 19,28, 2013

Macau

Wynn eyes phase two of Cotai editorial Phase one, Wynn Palace, ready by Chinese New Year 2016, Enforcing the law says casino firm Michael Grimes

michael.grimes@macaubusinessdaily.com

Wynn’s Cotai construction site (Photo: Manuel Cardoso)

ynn Palace – the new US$4 billion (31.95 billion patacas) Cotai resort being developed by entrepreneur Steve Wynn – will definitely be ready by Chinese New Year 2016 says the company. But even as reportedly the last of the concrete is being poured into the foundations, Mr Wynn has already set his mind to developing phase two of his approximately 51-acre (20.6 hectare) Cotai site. Phase two will be known as Wynn Diamond. He spoke about it on the latest earnings call for the parent company Wynn Resorts Ltd, covering the three months to September 30. He gave no indication however on whether he would be seeking separate quota from the Macau government for gaming tables to populate that second phase. New table allocation market-wide is subject to a cap equivalent to three percent compound growth annually until 2022, from a baseline of

approximately 5,500 tables recorded by the local regulator in the fourth quarter of 2012. Mr Wynn told analysts on the third quarter call: “…in our phase two we have [a] property that is going to be primarily massive non-casino, but [with] some casino development.” A figure of 500 tables for Cotai was mentioned by Mr Wynn at a question and answer session with local media in June last year. Recent regulatory filings by Wynn Macau in Hong Kong haven’t mentioned specific table numbers. Mr Wynn stated on the latest conference call that Wynn Diamond would include a 15,000-seat entertainment venue called ‘Wynn Diamond Coliseum’. Hotel rooms in the phase two property would be at least 1,300 square feet (121 sq. metres). The smallest at Wynn Palace will be 720 sq. ft. The casino developer’s chairman had said in July that Leighton had

promised an all-in price of US$4 billion for Wynn Palace. He hoped the facility would be open “in time for Chinese New Year,” 2016 – the Year of the Monkey – which starts on February 8 that calendar year. Leighton will be entitled to “a big bonus” if it succeeds said Mr Wynn on the latest call. But if Leighton fails to meet “interim milestones” or “substantial completion” as per the contract, it faces maximum penalties of US$200 million said a Wynn Macau filing in July. Michael Harvey, president of Wynn Design & Development Asia – who was hired to oversee the Cotai project – told analysts the first phase of Cotai would be ready on time. From 2004 until his current appointment in April 2011, Mr Harvey was project director for Leighton China State Joint Venture, and oversaw the construction and development of Wynn Macau on the peninsula. It opened in September 2006.

Wynn Macau boosts Q3 earnings by 13 pct Analyst expects 10 pct compound growth in EBITDA over next 3 years

ynn Macau Ltd posted a 13 percent increase in thirdquarter earnings beating many analysts’ estimates. Earnings before interest, taxation, depreciation and amortisation benefited from a high hold rate for baccarat – the game of choice for most Chinese – experienced at Wynn Macau during the quarter. It helped quarterly EBITDA to the tune of between US$10 million (79.86 million patacas) and US$15 million said Matt Maddox, chief financial officer of the parent

company Wynn Resorts Ltd. Adjusted property EBITDA rose to US$329.1 million from US$292.2 million a year earlier. That surpassed the US$300.6 million average estimate of 10 analysts surveyed by Bloomberg. Wynn Macau’s net revenue climbed 9.6 percent to US$997.6 million. Wynn Macau will generate a compounded annual growth rate in EBITDA of 10 percent in the next three years, the smallest rate among all Macau casino operators, Philip Tulk, a Hong Kong-based analyst

at Standard Chartered Bank, said in a research note dated October 15. But Wynn Macau chairman Steve Wynn said during the latest earnings call that his firm wasn’t interested in “trying to bribe customers with credit to get them to come”. Wynn Macau’s shares fell three percent to HK$29.35 in Hong Kong at Friday’s close. Wynn Macau has risen 40 percent this year, outperforming the 0.2 percent gain in the benchmark Hang Seng Index. M.G. with Bloomberg News

he Court of Final Appeal made public on October 18 some of the information about the personal finances and property holdings of about 400 Macau officials. Among the officials are Chief Executive Fernando Chui Sai On, other government leaders, members of the Legislative Assembly, judicial office-holders, secretariat heads, directors and deputy directors of government departments, and senior managers of companies majority-owned by the government. The information covers real estate, shares, other investments and positions in not-for-profit organisations that the officials hold. It is progress that we have compulsory disclosure of officials’ assets – information that did not have to be made public in the past. But clearly there are still a few loopholes that need to be closed. Businessman and legislator Chan Meng Kam declared that he held 407 properties, including 53 flats, 239 shops, 28 office premises and 87 parking spaces. Mr Chan also declared ownership of 79 percent of Golden Dragon Group Co Ltd, which runs hotels and casinos. Angela Leong On Kei, an executive director of Macau casino developer SJM Holdings Ltd, declared 52 properties, including 38 flats and 11 parking spaces. Ms Leong also declared a direct interest of 6.8 percent in Sociedade de Turismo e Diversões de Macau SA. In contrast, legislators and developers Mak Soi Kun and Fong Chi Keong declared no direct holdings of real estate, although Mr Fong did acknowledge ownership of shares in five Macau construction or real estate companies. The absence of any property under their names seems strange, as they both said they had declared ownership of property but could not explain why this was not reflected on the website containing the declarations of assets. The court said that what it had published on the website was the full information provided by the various public figures. Requiring government officials to disclose their assets of is an effective way to fight corruption and back-door deals. The requirement has been enforced in many places, including other parts of China. Nansha and Hengqin Island, both in Guangdong, began requiring officials to disclose their assets last year. In Macau, failure to disclose assets accurately is punishable by fines equivalent to between three months’ and one year’s salary for the official in question, the law says. Public figures convicted of failing to make the origin of their assets clear can be imprisoned for up to three years. But, as in everything, there are flaws in disclosure systems, and officials that are deceitful generally go unpunished. Let us hope this is not the case and that the law is enforced as it should be. Often the problem is not the law, but how it is applied. Macau still has a long way to go toward building a mature assets disclosure system and, for sure, it will take time for officials to accept disclosure. But this is a good first step.

Macau still has a long way to go toward building a mature assets disclosure system and, for sure, it will take time for officials to accept disclosure

October 28, 2013

Macau

Subsidised homes please members of committee But the Public Housing Affairs Committee warns the government to keep an eye on the construction schedule Tony Lai

tony.lai@macaubusinessdaily.com

he quality of public housing is getting better, but the government must monitor the progress of construction to prevent delays, members of the Public Housing Affairs Committee say. Members remarked on the progress of the construction of public housing for sale at subsidised prices after visiting on Friday the Fai Ieng project show flats. The Fai Ieng housing is the next to be put up for sale. “The design and materials used this time are a huge improvement on the past, probably because the government departments concerned listened to our opinions,” said committee vice-chairman Leong Keng Seng. “This time the rooms also look bigger, because the window ledges, which do not count as usable space, are bigger,” Mr Leong said. “So we are satisfied with the construction quality this time.” The size and quality of

homes in public housing have come in for criticism. The critics have accused the government of sacrificing quality in its effort to keep its promise to build 19,000 such homes by the end of last year. The promise to build 19,000 homes was made in 2007 by the chief executive at the time, Edmund Ho Hau Wah, and the deadline was confirmed by Chief Executive Fernando Chui Sai On when he took office in 2009. Housing Bureau director Tam Kuong Man acknowledged last year that only 11,300 of the flats would be ready by the deadline.

Demand to be met The government’s failure to keep its promise came as no surprise to the critics. Some demanded an explanation of the holdup. Mr Leong urged the government to keep construction on track. “The government de-

partments should strengthen supervision of the progress of construction to ensure both the schedule and quality standards are met.” The government will start pre-sales of 336 twobedroom flats in Fai Ieng next month. The Housing Bureau said the flats would cost 925,200 patacas (US$115,650), on average. They will be completed by 2016. The supply envisaged will be enough to meet demand by applicants for subsidised housing. The bureau said the waiting list now contained 430 applicants. Housing Bureau deputy director Kuoc Vai Han said she expected the government to begin taking new applications for subsidised housing in December. Sales of subsidised housing have been suspended since 2005. Ms Kuoc said the government had begun

Corporate Business Awards has 140 nominees…so far The Business Awards of the Year 2013 event has so far received nearly three times as many nominations as were expected, say the organisers. They had thought there would be around 50 nominations but the event already has 140 candidates confirmed. “This demonstrates the tremendous public interest in this initiative, and at the same time proves how business culture and entrepreneurship are developing in the city, following the economic boom driven by the gaming industry,” said Paulo A. Azevedo, president of the Charity Association of Macau Business Readers. The organisers say the main objective of the awards is to promote Macau, the accomplishments of its people and institutions, and the city’s social and business potential Mr Azevedo stated: “I believe the jury will have a difficult task ahead of them, but each independent member of the jury is a very well recognised and acknowledged representative from different business, educational and social sectors.” The award categories and numbers of nominees so far are as follows: Corporate Social Responsibility (13); Environmental Performance (18); Innovation (19); Leadership (21); Non-Profit Organisations (9); Research Achievement (11); Small and Medium Enterprises (17); Woman Entrepreneur (14); Young Entrepreneur (15). The organisers have also announced that all those selected for the final round of judging will automatically win an ‘Excellence Award’. “We felt this was the right approach because the whole point of The Business Awards of the Year 2013 is to reward excellence,” said a spokeswoman. In each category there will be a total of four Excellence Awards presented, as well as a category winner. The awards presentation and gala dinner will take place on November 27 at the Grand Ballroom of SJM Holdings Ltd’s Grand Lisboa Hotel.

The government may begin taking new applications for subsidised housing in December (Photo: Manuel Cardoso)

making preparations. But she declined to say how many subsidised flats would be made available if the government began taking new applications in December. She said only that “minor adjustments” would be made

to the figure, depending on sales of subsidised flats already available. The Housing Bureau received more than 15,000 applications during the summer for the 1,544 unsold one-bedroom flats in subsidised housing.

October 28, 2013

Macau

Match China’s reform pace, academic says Meanwhile, the mainland will learn from Macau’s experience of democracy, the head of a think-tank says Tony Lai

tony.lai@macaubusinessdaily.com

acau should put more effort into diversifying its economy to keep up with political and economic reform in the mainland, the head of a Beijing think‑tank says. The head of the Chinese Academy of Social Sciences Institute of Political Sciences, Fang Ning, believes President Xi Jinping will lay out next month China’s main plan for reform in the next 10 years. Mr Fang told a seminar held by the Macau government on Friday that the relationship between Macau and the mainland meant any development in the mainland would benefit Macau. “But if Macau wants to profit more from the mainland’s development, that will depend on how much it can diversify its industries.” Some observers believe next month’s meeting of the Communist Party Central Committee will concentrate on economic problems, keeping political reform off the table. Mr Fang believes political reform will be one of the main issues on the agenda next month. But he indicated that any change

Fang Ning, left, praised the ‘balanced development’ of Macau’s political system

would be moderate. “Like President Xi Jinping has said, ‘A mistake can be made but not an irreversible mistake’,” Mr Fang said. “There will always be the possibility of retreating to the

starting point.” He did not say what he expected from next month’s meeting. Mr Fang said there was “still a long way to go” before the rule of law prevailed in the mainland. Some officials and other people

there still thought they were above the law, he said. Mr Fang described Macau’s political system as “interesting,” particularly the make-up of the Legislative Assembly, with its directlyelected, indirectly-elected and government-appointed members. He praised what he called the system’s “balanced development”, sharing influence between popularly elected and appointed political figures. Mr Fang declined to say whether universal suffrage should be instituted here. “Any experience of democracy here – whether there are weaknesses or setbacks – will be precious experience for the mainland to study,” he said. Government spokesman Alexis Tam Chon Weng told the seminar that Chief Executive Fernando Chui Sai On was “worried” by the “low turnout” of young voters in last month’s Legislative Assembly election. Mr Tam said the government should do more to educate people about the importance of participation in politics.

October 28, 2013 April 19, 2013

Interview

Too few ‘Touching Moments’ for

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HOSPITALITY Top-class jobs As the economy has surged, driven by gaming, so has the hotel industry, as all the main indicators show. The number of hotel employees is especially relevant. The industry’s workforce was relatively stable in 2008 and 2009, numbering about 26,500. Then, in 2011, employment by the hotel industry almost exploded, the advent of more rooms and hotels expanding the workforce by 6,400 – an increase of almost one-quarter in just one year. The expansion continued at a similar rate last year, increasing the workforce to almost 40,000. This meant that, for the first time, the industry had more than 10 percent of the employed labour force on its books.

Even though officials say they want to bring more long haul tourists to the city – via marketing campaigns such as ‘Touching Moments, Experience Macau’ – in the short-term Macau will continue to have more and more day-trippers, says Don Dioko. In an interview with Business Daily, the head of the Tourism Research Centre at the Institute for Tourism Studies suggests different kinds of accommodation will be needed to appeal to travellers coming from far afield.

HOTEL INDUSTRY ST AFF

Luciana Leitão

leitao.luciana@macaubusiness.com

35000

Photo by Manuel Cardoso

30000

25000

20000

15000

10000

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2008 5*

2009 4*

2010 2*

2011

2012

Most of the increase in employment by the hotel industry was in the top class of hotel. In the five years represented in the chart, five-star hotels accounted for 85 percent of the increase, or almost 11,200 jobs. That was almost 10 times the number of extra employees four-star hotels took on. At the other end of the scale, two-star hotels and guesthouses together took on just 89 extra employees. That was still relatively high growth, considering that two-star hotels and guesthouses combined now employ under 500 people. The average size of hotel payrolls is growing – especially the average size of the payrolls of five-star and four-star hotels. Between 2010 and last year the average payroll of five-star hotels grew by 29 percent to 1,130 and the average payroll of four-star hotels grew by 23 percent to 307.

48.4 pct

Increase in hotel employees, 2010-2012

What is the outlook for the tourism sector? Macau is a [global] tourism destination, but we’re far more integrated now with the mainland. The Guangzhou railway opened early this year, the new bridge is coming, there are more infrastructures connecting Macau now with mainland; the [PRC] individual visitors [visa] scheme will not go away in the near term. There are two kinds of tourism going on in Macau. One has to do with the proximity with the Pearl River Delta and the nearby Guangdong province. We get a lot of short day-trippers, shortterm visitors from this area. At the same time, there is a lot of effort to attract [international] long haul visitors. We have also long haul visitors from mainland China. We have visitors from Shanghai and Beijing and these tend to stay a bit longer than the ones in [from] the nearby areas. But what will drive Macau tourism more is this constant flow of visitors coming to and from the Pearl River Delta. Before, the flow of visitors coming to Macau was mainly from Hong Kong. Now we are part of a bigger circulatory system, so you have nearby visitors from Guangdong province visiting Hong Kong first and then they go and visit Macau and move on to the western part of the Pearl River Delta, and we have the reverse traffic the same way. Right now, we are on a trajectory that is unstoppable. So we will have more and more visitation coming from day-trippers from

nearby [places]. This is very evident from the activities we see. Shopping and the retail industry are doing a lot of business here, the hotel occupancy is very high, but, at the same time, the average length of stay is still the same for many years. Will we see a lot of long haul visitors? The MGTO [Macau Government Tourist Office] is doing a lot of efforts to attract longerhaul visitors, but a lot of businesses here right now are geared towards satisfying the demand of the short haul visitors, so it’s very hard to make conditions attractive to the long haul visitors. If you want to attract visitors from India, for example, there is quite a huge proportion of their population that are well-to-do; but there is a lot more [that are] middle class. If they see the hotel prices here, that will give many people a second look whether to stay longer in Macau or not. I have heard of people visiting Macau, but because of the lack of hotel rooms, they end up going to Hong Kong to actually spend the night. We are now exporting our visitors to Hong Kong. You were mentioning different types of accommodation. We’re now starting to see a few examples of what the government calls low cost hotels, but, still, these seem to be very expensive. Shouldn’t we be aiming at really low cost hotels? You can’t blame them [government

and business], because the demand is still there. You have to give them a bit of time. In the last few years, most of the incentives have been in building the accommodation for the upper-end. We should have been much more analytical, we should have had incentives to build low cost hotels. It [the strategy] is catching up.

…because of the lack of hotel rooms, they [tourists] end up going to Hong Kong for the night

But won’t the fact that we don’t have a supply of low cost hotels continue to deter potential overnight visitors? That’s why we still have a length of stay of one day. They can’t stay. Once the integration with Hengqin Island works, there will be a huge resort there that will

October 2013 April 19,28, 2013

Interview

long-haul visitors, says academic relieve a lot of the pressure and the accommodation sector will improve as well. What should be the right strategy to attract long haul visitors? The accommodations have to be much more varied. We have very attractive accommodations, [and] a lot of these are concentrated under [at the] high end. But we live in an area of developing economies. Although many [visitors from] Western and developed countries can also come here, it’s not very easy, as they have to go via Bangkok, Taipei or Hong Kong. However, just south of us there is a huge market of southeast Asian countries. I think we’ve exhausted a lot of the potential for the north Asian markets, like Korea and Japan. There is some potential in the Russian market, but what’s keeping me curious about that is that for many years the Russians have actually been visiting Vietnam in great numbers, and I’m surprised not to see that same number coming to Macau. There must be some barriers [causing that] as well. I suspect the costs might have something to do with that. To come from Moscow, everybody comes through Hong Kong. So, there are still a lot of infrastructures as well as transport links we’ll need in order to attract the long haul market. The [government’s] focus is quite correct - MGTO has identified India, Russia and Southeast Asian nations. They’ve recently launched a lot of promotional campaigns in these areas. That makes a lot of sense if we wish to diversify our portfolio of visitors to Macau. But the constant flow of mainland Chinese visitors will continue, eventually that will form the backdrop. We do have some case studies we can refer to. If you concentrate your product in terms of attracting just one single market that, in the long run, will detract other markets from coming. At the same time, there is such a thing as positioning. When you build a hotel, you have only one chance to build it either as a family hotel or as an adult theme [non-family] hotel. There’s been a lot of talk to make Macau a lot more family friendly by diversifying [the offer] and I think there is some merit in that. At the present, most of our product and offering are aimed at the adult market. We can attract the long haul market. But if our present products and services are mainly geared towards this already huge mainland Chinese market, then we might succeed to ask them [long-haul tourists] to come one time, but maybe return visits will not be likely. The key is to have some products and services that will cater not only to the huge mainland Chinese market, but also the non-mainland Chinese market. Do we have the products to satisfy these long haul visitors? There’s a slow development towards that. You can see the F&B [food and beverage offers] are becoming more diversified. The mainland Chinese market has formed our backbone now in order to sustain many of the small businesses. In terms of attractions, there should be more than the offerings of our casino

resorts, which are attractive for many adults. For children there is not enough. You have the Macau Tower and the AJ Hackett [bungy jumping and ‘skywalking’]. You’ve got a few playgrounds [children’s areas] in some of these [casino] complexes, but those are not enough. We should develop a lot more. The green parks and the countryside for families are being under-promoted, they should be promoted far more. Our heritage sites are already very popular, so there could be some attractions outside the core city centre that can be developed.

If you concentrate your product…attracting just one single market, that will detract other markets from coming

Looking at the heritage sites and how they’re being marketed, tourists still concentrate themselves at the same places. Should the government use some kind of strategy to divert the tourists to other places? Yes, I do believe that. We are suffering from our own success when you see our World Heritage status. A lot of it has to do with the way you market that. When you always show Saint Paul Ruins, everybody must see [visit] that. But we don’t show [advertise] the icons of the other less popular attractions. There should be [a] re-balance, so we must divert some of the traffic flow of the more popular heritage sites into the others. There are a lot of management strategies I would like to see implemented.

The changes…are happening too fast…we may need to be more decisive in managing our heritage sites

What management strategies? A lot of our heritage sites are open and free. There are ways to control the crowd, like [visitor] reservation systems. There could be a queuing system and there could be a ticketing system. It doesn’t have to be a paid system. In IFT we have some colleagues working with the Cultural Affairs

Bureau identifying these areas. It’s about time, given this trend that we will be facing [of] a lot more day-trippers and a free flow of visitors coming for the day. We might need to implement a more structured management approach. The changes taking place are happening too fast, therefore I think we may need to be more decisive in the way we manage our heritage sites, and at the same time, the way we develop a more diversified tourism product. Would having a border open 24 hours help spread tourism traffic from the mainland across the whole day? A lot of the ideas behind that [a 24-hour border] have something to do with the fact that in the evenings many of our casinos don’t have as much business as during the day. When that [a border hours extension] occurs, obviously you will need shops open 24 hours as well, so it will impact a lot of the residential areas. However, we will have the light railway system that starts at the border and it will be helpful in allowing visitors to avoid residential areas. If we become fully integrated, with a border open 24 hours, we might see land prices [and prices of] commercial property going up. It will change of course the working habits of Macau people as well. A lot of our families or households have at least one of the family members working on shifts and that might worsen under that scenario. It will change socially and economically the face of Macau. There’s been this talk for many years, but so far it has not transpired. There are policy makers in the government or advisors that do advise against that. If you make the border much more open to [visitor] flows, then you might relieve also the pressure within Macau. Whether that will actually happen, we need to study. Perhaps that should wait [for] the new Macau, Hong Kong and Zhuhai bridge. Also as we integrate more with Hengqin island, that might relieve the pressure. While we are building the bridge, it’s important we start to think about the policies we’re implementing when all of this is integrated. From the research we’ve been undertaking at IFT, we see this in our data. We’ve been seeing more traffic actually coming from Hong Kong to Macau on towards the western part of Guangdong, rather than the other way around. Using these data, if you open the border from the Macau side, but you have bottlenecks at the jetfoil [ferry terminals], then you will have a lot of pressure in Macau. All of these infrastructures in the long run will make a lot of visitors come to Macau, but that’s not entirely negative. If it [new infrastructure] relieves a lot of the pressure, that’s fantastic. Why is the flow of people moving east west from Hong Kong rather than the other way? Hong Kong has the airport with far more connections between it and the mainland. In order to reach Macau [more directly], they [tourists] either go to Guangzhou or to the Macau Airport. Although their [those two airports’] passenger numbers are going up

It [a 24-hour border] will change socially and economically the face of Macau

slightly, it is still far limited in capacity compared to the Hong Kong Airport does. Dragonair [a Hong Kong-based regional airline], which has a lot of connections between Hong Kong and the major mainland cities, does a lot to bring them [tourists] to Macau. The tour packages they sell to the major cities in mainland China, includes Hong Kong. It’s a fantastic deal. They [tourists] visit Hong Kong, they go into Macau, take the train to Guangzhou and then move on. It’s a pattern, but it seems to be attractive. We might see more of that in the future. UNESCO has been issuing over the past few years warning signals to Macau and the way it’s preserving its heritage sites. Do you think now we’re moving into the right direction? This is a complex issue because we have ownership rights. We’ve seen a lot of changes in the retail scene - the first Starbucks in Macau disappeared for example and in its place [came] a retail shop. You can see from commercial rents and property values that there is a lot of pressure to develop these properties that are very much within the historic preservation zone. We are lucky in Macau that so far a lot of these property owners have been very much following the Macau tradition of – unlike many other cities in the world in which they destroy to make it a taller building – [listening to the] community. I’m surprised, because given the property values you should have expected a lot of them [buildings] to have been changed already. We’ve seen a lot of retailing coming in and out, because owners want to take advantage of higher value. There is a lot of discussion coming on, so I think what’s saving us from having a lot of changes is also government influence. They do have guidelines and incentives to help property owners to upgrade their property and respect the overall sense of the community. There’s a lot of tacit community spirit helping us all along. Still, do we need to do more for heritage protection? Yes, I think it’s all about the management. It has been a long time since I’ve seen school children visiting the sites. It shows that a lot of the schools are maybe avoiding the sites, because they are too crowded with visitors. We need to manage it in a way that a lot of locals can still enjoy it [the venues], rather than avoiding them. Because of our success, it has created a system by which the visitors monopolise the heritage sites unintentionally.

October 28, 2013 April 19, 2013

Macau

Cattle fattening station boosts beef supply Arrangement means healthier beasts, more stable chain of provision, claims city’s main fresh meat importer Stephanie Lai

sw.lai@macaubusinessdaily.com

he city’s supply of fresh beef will be more reliable and of higher quality thanks to a new deal signed on Saturday, Macau’s major importer Nam Yue Food Stuff & Aquatics Co Ltd told Business Daily. Before reaching Macau, live cows imported from the northern provinces of China will from now on spend three to four months in a ‘transit farm’ in Dongguan city, Guangdong province said Nam Yue. The deal with the state-owned Guangdong Foodstuffs Import & Export (Group) Corp was signed on Saturday, said Nam Yue’s executive deputy general manager Tony Chen Wei. It used to take about 10 days to get the cattle from the northern provinces to customers in Macau, Mr Chen said. That includes four days on the road and six to seven days in the slaughterhouse here. “Now, instead of directly getting it here, we arrange [for] the cattle to get shipped to the Dongguan farm first to graze for three to four months,” said Mr Chen. “The cattle will also go through the quarantine process there before being imported to Macau,” he added. The cattle left waiting in the slaughterhouse here feed on hay, which has less nutritional value and inevitably impacts the cattle’s weight

Fresh beef supply cut several times in 2012

and the quality of the fresh beef, the deputy manager said. “This new arrangement solves the problem that we used to have of cattle losing weight or suffering from illness during the long transport process, with no time to treat their illness,” Mr Chen explained. In the worst situations, Nam Yue lost “two to three” cows in a month. Currently about 200 cows are imported to Macau every month, while seven to eight are slaughtered

for the local market each day. The fresh beef sold in the city mainly comes from cattle raised in farms located in Inner Mongolia autonomous region, Hebei province and Beijing prefecture. Supply interruptions occurred intermittently between June and August last year, with the importers blaming it on transport problems. Both Nam Yue and Guangdong Foodstuffs are planning to supply 50 cows from Dongguan’s transit farm

Li appoints Arculli as chairman of FWD Insurer seeking business opportunities in Asia

to Macau each month. The new deal will not increase the overall supply to the city. As a result, the importer does not expect any fall in the retail price. Mr Chen stressed the new arrangement would minimise the importer’s potential losses of cattle during transportation. The better quality feed supplied in Dongguan to the cattle would help improve the quality of their meat, he added.

FWD has a geographical advantage in reaching out to 3 billion people in a five-hour time zone, together with the Asia’s rapidly rising middleincome class, Mr Arculli told a media briefing in Hong Kong last week. “My goal is to oversee the regulatory environment, internal risk management, as well as business opportunities for expansion,” he said. “Southeast Asia is the more obvious of the opportunities,” chief operating officer Julian Lipman said in the same interview. The growth of the “under-served” insurance markets in Indonesia, Vietnam and the Philippines are all attractive, he said.

Investing wisely

Ronald Arculli is a former chairman of Hong Kong Exchanges & Clearing

ong Kong tycoon Richard Li Tzar Kai’s Pacific Century Group is stepping up its search for assets in Southeast Asia after spending more than US$2 billion (15.97 billion patacas) to acquire

insurance units at home and in Macau and Thailand. The company has been considering options to extend its presence over the last six to 12 months, Ronald Arculli, who was named chairman of the insurance unit FWD

Group, told Bloomberg in an interview. The group will pursue acquisitions or strategic partners and new licences, he said. FWD is now expected to announce a new chief executive.

FWD will get a capital injection early next year. Swiss Re Ltd, the world’s second-biggest re-insurer, will invest up to US$425 million in FWD, the company announced a fortnight ago. The Zurich re-insurer said in a written statement issued yesterday that it would buy 12.3 percent of FWD from Pacific Century Group, also owned by Mr Li, a son of Asia’s richest man, and invest in the insurer’s expansion in the continent. The deal will give Swiss Re an indirect stake in FWD

Life Insurance Co (Macau) Ltd, the city’s fifth-largest life insurer. Pacific Century Group bought ING Groep NV’s life insurance assets in Hong Kong, Macau and Thailand, and its general insurance and pensions businesses in Hong Kong last year and renamed them FWD. It paid 1.64 billion euros ($2.3 billion) to complete the deal. “I am confident that Mr Arculli will provide great insight and counsel for the business as we continue our journey to becoming one of the leading insurance companies in the pan-Asia region,” said Mr Li. The move puts his company in competition with Japanese insurers that have targeted the region’s growth potential. Acquirers from Japan have outbid rivals, spending more than US$1.4 billion in Southeast Asia so far this year, according to data compiled by Bloomberg. The company will not overpay if it finds itself outbid, Mr Arculli, a former chairman of Hong Kong Stock Exchanges & Clearing Ltd, said. “Richard has been around the block more than once or twice, he’s not likely to go overboard and pay over the odds,” he said. Bloomberg News/T.A.

October 2013 April 19,28, 2013

Greater China

Newspaper apologises over Zoomlion reports After journalists ‘confesses’ to releasing fabricated reports on state-owned firm

Chinese newspaper whose reporter allegedly told police interrogators he accepted payments in exchange for releasing fabricated reports about a stateowned company apologised on the front page of yesterday’s edition. The Guangzhou-based Xinkuaibao, which last week made two appeals for police to release Chen Yongzhou, said its response to the investigation was inappropriate and “seriously hurt the credibility of the press.” The statement appeared in the bottom left-hand corner of the front page, according to an electronic version on its website. The apology follows a report aired by China Central Television Satruday that showed footage of Mr Chen being interviewed by police in Changsha over stories he wrote questioning the finances of Zoomlion Heavy Industry Science and Technology Co, a constructionmachinery maker based in the city. Dressed in a detention-center vest, handcuffed and with his head shaved, Mr Chen was heard saying that the information he released was “absolutely not objective” and that “I’m willing to admit to the crime and repent.” The report by state-run CCTV and Mr Chen’s televised comments followed two front-page appeals last week by Xinkuaibao for police in Changsha, the capital of central Hunan province, to release the 27-year-old reporter, who was detained October 18. His arrest has drawn attention to the rights of journalists in China and follows a ruling by the country’s Supreme Court last month that people who post defamatory comments online could face as long as three years in jail.

‘Deep apology’ “No matter he’s guilty or not, there are serious issues with the procedures here,” Abe Yang, a lawyer with Dacheng Law Offices in Shenzhen, said in a telephone interview, referring to the airing of the program and Mr Chen’s statement. “Even if the police believe they have enough evidence, it’s up to the court to decide whether he’s truly guilty.” In its statement yesterday, Xinkuaibao said the police’s initial

Xinkuaibao had featured pleas asking the police to release Chen Yongzhou

investigation showed Mr Chen published “a lot of incorrect reports and took money.” It sent a “deep apology to all in society,” and pledged to “earnestly correct the existing problem” and “demand our editorial staff respect facts and abide by the law and professional ethics.” In an English-language report Saturday, the official Xinhua news agency quoted police as saying Mr Chen wanted to apologise to Zoomlion, its shareholders and his family and warn his peers to “learn a lesson from myself.” Mr Chen was detained “on suspicion of damaging business reputation,” Xinhua said in its report. He has worked at the Xinkuaibao as a reporter since graduating in 2009, it said.

Zoomlion’s shares fell in Hong Kong trading last week after reports of the journalist’s arrest brought renewed attention to the allegations. The stock rebounded 1.8 percent on Friday after plunging more than 9 percent in the previous twoday period. Zoomlion in February and May denied allegations by the paper that it falsified sales. On May 28, the company said an article accusing it of improperly accounting for sales was “distorted” and “misleading.” Mr Chen is the latest subject of a police investigation to be shown on state television saying he committed wrongdoing. Mr Chen was motivated by wealth and fame, CCTV said in its report, citing the police. He was asked by

other people, who weren’t named in the report, to release more than 10 pre-written articles under his byline which “negatively affected” Zoomlion, in exchange for hundreds of thousands of yuan of payments, according to CCTV. He also told the investigators he was paid 500,000 yuan (US$82,000) for notifying regulators of the company’s practices, CCTV said, citing the police. The stories alleged Zoomlion was involved with “losses” of state assets, irregular revenues and forging sales and financial information, according to the CCTV report. The government of Hunan owned 16.2 percent of Zoomlion at the end of 2012, according to the company’s annual report. Bloomberg News

Ping An profit surges as banking income climbs

ing An Insurance (Group) Co, China’s second-largest insurer, said profit more than doubled in the third quarter as a stock-market rally boosted investment returns and revenue from its banking unit expanded. Net income surged to 5.43 billion yuan (US$893 million), or 0.69 yuan a share, from 2.13 billion yuan, or 0.27 yuan a share, a year earlier, the Shenzhenbased company said in a statement to the Shanghai stock exchange Friday. The benchmark Shanghai

Composite Index climbed 9.9 percent in the three months ended September 30, as China’s economic growth accelerated for the first time in three quarters, boosting the value of Ping An’s equity holdings. Net income at unit Ping An Bank Co jumped 20 percent to 4.2 billion yuan in the quarter as loans expanded and margins improved, the lender said Tuesday. Investment income was 14.2 billion yuan, the insurer said. Impairment losses from investments, which more than doubled last year, were

2.12 billion yuan in the third quarter, according to the statement. Net premiums earned were 53.2 billion yuan, Ping An said. Third-quarter profits at Chinese insurers traded on mainland exchanges may have grown by an average 80 percent because of a low base from a year earlier and the stock-market rally that offsets fair-value losses on their portfolios, Guotai Junan Securities Co.’s Shanghai-based analyst Peng Yulong wrote in an October 20 report. Bloomberg News

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October 28, 2013 April 19, 2013

Greater China

State firm bids for Chong Hing Bank Trading arm of Guangzhou govt could enter Macau’s banking market

Chong Hing has one branch in Macau and another in mainland China

ue Xiu Group bid HK$11.6 billion (US$1.5 billion) for 75 percent of Chong Hing Bank Ltd, seeking a foothold in Hong Kong as the banking hub’s role in cross-border financing expands. Yue Xiu, a trading arm for the government of Guangzhou, is offering HK$35.69 for each of the 326.25 million Chong Hing shares it’s seeking, according to a joint statement Friday. That’s a 4.6 percent discount to the stock’s last price on Wednesday before a trading suspension. The bank’s founding Liu family will offer a stake equal to about 51 percent of the company, according to the statement. The first acquisition of a Hong Kong lender since 2009 will give Yue Xiu a network of 53 branches and help its units seek funding

outside mainland China. Chong Hing, which named Lau Wai Man as the first chief executive officer from outside the Liu family last year, said in August it had been approached by prospective bidders. “Yue Xiu’s subsidiaries have business relations with Chong Hing or will become Chong Hing’s customers in the future,” Steven Chan, a Hong Kong-based banking analyst at Maybank Kim Eng Securities Pte, said by phone. “Chong Hing may also help Yue Xiu develop cross-border yuan business.” The Chinese firm needs approval from the Hong Kong Monetary Authority for its Chong Hing offer, the bidder said in the statement. Yue Xiu said it intends to keep the lender’s stock exchange listing. Chong Hing shares did not trade on Thursday

and Friday pending an announcement on an acquisition, after Bloomberg News reported the bank was nearing a deal with Yue Xiu. The stock, which has jumped more than 170 percent in Hong Kong trading since Mr Lau’s appointment was announced November 28, will resume trading in Hong Kong today. Chong Hing Bank will sell its headquarters on Des Voeux Road in Hong Kong’s city center to the family’s Liu Chong Hing Investment Ltd, the current parent company, for HK$2.23 billion, according to the statement. Chong Hing Bank will distribute the proceeds as a special dividend of HK$4.52 a share. Hong Kong’s role as an international center for trade in the yuan has attracted Chinese financial institutions seeking to

expand abroad, including China Merchants Bank Co, which paid US$4.7 billion for the Wu family’s Wing Lung Bank Ltd in a deal completed in 2009.

Trading company The increasing integration of Chinese and Hong Kong firms was driven by increased cooperation between the city and the mainland’s economy, the internationalisation of China’s currency and Hong Kong’s development as an offshore yuan center, Yue Xiu said in a section in Friday’s statement explaining the reasons for its offer. Yue Xiu Group, founded in 1985 by Guangzhou as a trading company for Hong Kong and Macau, operates in businesses including real estate, securities and transportation infrastructure.

Outstanding loans in Hong Kong denominated in the mainland’s currency surged to 115.4 billion yuan (US$19 billion) in August from 1.8 billion yuan in 2010, HKMA data show. Yuan-denominated debt securities, known as Dim Sum bonds, jumped to 294 billion yuan at the end of June from 55.8 billion yuan in 2010. Chong Hing, founded in 1948 as Liu Chong Hing Bank Ltd, dropped the family name in December 2006 to “more accurately reflect the public nature of the bank,” according to its website. Mr Lau replaced Liu Lit Chi, a family member who had spent more than 50 years at the bank. Chong Hing has a network of 51 branches in Hong Kong and one branch each in Macau and mainland China. Bloomberg News

China Life back to black as investments come good Mainland’s biggest insurer benefits from rally in Shanghai stocks Zhang Dingmin

hina Life Insurance Co, mainland China’s biggest insurer, returned to profit in the third quarter from a year ago as a stock-market rally boosted investment returns. The insurer’s Macau branch also became the biggest player in the life insurance market here in the first quarter of this year, according to Monetary Authority of Macau data. Net income was 7.49 billion yuan (US$1.23 billion), or 0.27 yuan a

share, compared with a 2.2 billion yuan net loss a year earlier, the company said in a statement to the Shanghai stock exchange Friday. Nine-month profit was 23.7 billion yuan compared with 7.43 billion yuan a year earlier, it said. The benchmark Shanghai Composite Index climbed 9.9 percent in the three months ended September 30 as China’s economic growth accelerated for the first time in three quarters, boosting the value of China

Life’s equity holdings. Net premiums earned were 73.2 billion yuan in the third quarter, the company said. Investment income rose 20.5 percent to 23 billion yuan, the Beijing-based company said. Impairment losses from investments, which jumped 140 percent last year, were 43 million yuan, according to the statement. Third-quarter profits at Chinese insurers traded on mainland exchanges may have grown an

average 80 percent because of a low base from a year earlier and the stockmarket rally that offsets fair-value losses on their portfolios, Guotai Junan Securities Co.’s Shanghaibased analysts led by Peng Yulong wrote in an October 20 report. They forecast a 3.8 billion yuan profit for China Life and a 164 percent jump in the net income of China Pacific Insurance Group Co., which is scheduled to report earnings next week. Bloomberg News

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October 2013 April 19,28, 2013

Greater China

Goldwind expects boom in wind-energy demand

Party leader promises “unprecedented” reforms ‘Profound’ changes coming for Chinese economy, says Politburo member

top Chinese leader has promised “unprecedented” economic and societal reforms at the Communist Party’s much anticipated plenum meeting next month, state media reported on Saturday. Yu Zhengsheng, the fourthranked member in the elite Politburo Standing Committee of the Communist Party, said the closeddoor meeting would “principally explore the issue of deep and comprehensive reforms”. “The reforms this time will be broad, with major strength, and will be unprecedented,” he said, according to the official Xinhua news agency. “Inevitably they will strongly push forward profound transformations in the economy, society and other spheres.” Mr Yu’s comments are among the first from China’s top leaders about the plenum, where president Xi Jinping is expected to press for greater economic reforms. The broad reform agenda is expected to steer the world’s secondlargest economy, which is experiencing slowing growth, from a reliance on debt-fuelled investment to a more balanced model driven more by consumption, services and innovation. The meeting will mark the third time China’s elite 200-member Central Committee has gathered since a leadership transition last year. Historically, third plenums in China have served as a springboard for key economic reforms. Political reform is not expected to be a major point of discussion. China’s cabinet has called for

At the plenum, the reform agenda is likely to feature financial and tax reforms, but may also address persistent issues such as hastening urbanisation through land reforms and liberalising China’s household registration system, which restricts migration between rural areas and cities. Critics have said that vested interests, especially state-owned enterprises, could stymie reforms. Former leader Deng Xiaoping launched historic reforms at the third plenum of the 11th party committee in 1978 to rescue the economy from the verge of collapse after Mao Zedong’s disastrous Cultural Revolution.

injiang Goldwind Science & Technology Co, China’s biggest wind-turbine maker, said 2013 profit may triple on increased sales and cost controls. Net income will increase to as much as 459.2 million yuan (US$75 million) from 153.1 million yuan a year earlier, Goldwind said in a filing to the Hong Kong stock exchange Friday. Third-quarter net income climbed to 95.3 million yuan, compared with a net loss of 33.6 million yuan a year ago, as sales jumped 57 percent to 3.87 billion yuan, Goldwind said. “Increase in the company’s revenues, stronger cost controls and further implementation of lean management,” will contribute to the gain in profit, according to the statement. Goldwind and competitors such as Vestas Wind Systems A/S of Denmark are cutting costs to counter slower growth that has trimmed margins across the industry. China’s wind capacity addition may be 13 gigawatts in 2013, 6 percent less than a year earlier, according to estimates by Bloomberg New Energy Finance. Orders outstanding were 4,205 megawatts at the end of September, the company said. It has an additional 3,626 megawatts of orders lined up for which contracts have to be signed. The stock gained 3.7 percent to HK$7.60 at the close in Hong Kong trading Friday before the earnings were announced.

Reuters

Bloomberg News

Yu Zhengsheng is the fourth-ranked member in the Politburo of the Communist Party

greater effort in revamping the economy because a recovery is not yet solid. China’s US$8.5 trillion economy grew at its fastest pace this year between July and September in a rebound fuelled largely by investment, although signs are already emerging the pick-up in activity may lose some vigour. China still expects to meet its economic targets for this year, including growth of 7.5 percent. China last week launched a new benchmark lending rate, aimed at letting markets set the cost of funds and reducing distortions that have led to excessive investment and overcapacity now dogging the economy.

HKTV union plans new action over licence Protests will return on November 6 as lawmakers mull probe on free-to-air television

ong Kong Television Network Ltd workers called for a new round of protests demanding Chief Executive Leung Chun Ying explain the rejection of the company’s licence application. The staff members ended a week-long protest at government headquarters Friday and vowed to return on November 6, when lawmakers are scheduled to debate a motion to probe the decision, the company’s union said in a Saturday statement posted on its Facebook page. HKTV cut about 320 workers after the government snubbed its application in favor of PCCW Ltd and I-Cable Communications Ltd on October 15.

Tens of thousands of Hong Kongers joined the protest over the week, reflecting concerns over government accountability and freedom of expression. HKTV plans to file for a judicial review, chairman Ricky Wong said on Tuesday. “The issue is definitely not over, rather it’s the beginning of a new stage,” the union said in its statement. “We thank the support of the public and hope to seek justice together.” Mr Leung has said that the government will explain its decision in court. The free-to-air television permits awarded on October 15 were the first in almost 40 years, increasing competition for existing operators

Television Broadcasts Ltd and Asia Television Ltd. I-Cable’s Fantastic Television will start free broadcasts within three months from the formal granting of its licence, Ming Pao Daily News reported Saturday, citing a company announcement. It plans to have coverage for 95 percent of Hong Kong households within 12 months from the start of the service, Ming Pao said. Advertisers spent an estimated HK$13 billion (US$1.7 billion) in Hong Kong in 2012, with television accounting for about a third of that, Bank of America Corp’s Merrill Lynch unit said in a February report, citing Magna Global.

Hong Kong Chief Executive Leung Chun Ying is under pressure for rejecting HKTV’s bid

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October 28, 2013 April 19, 2013

Asia

Mongolia copper mine dispute closer to Issues linked to cost overruns and project financing still to be solved Michael Kohn

ongolia and Rio Tinto Group have resolved some of the disputes that have stalled the expansion of their US$6.6 billion Oyu Tolgoi copper mine, a Mongolian board member of the venture said. “Within the last 10 days we could resolve certain issues; we have reduced the state of urgency,” Davaadorj Ganbold, one of three Mongolian nationals on the Oyu Tolgoi LLC board, said in an interview in Ulaanbaatar Saturday, adding that some points remain to be agreed on. “Issues related to cost overruns, the feasibility study and project financing are large and broad issues that cannot be resolved in four or five days,” said Mr Ganbold, a board member since September and also executive director at Erdenes Oyu Tolgoi LLC, the company that holds the government’s 34 percent stake in the project. Rio in July delayed work on the expansion, which is expected to cost about US$5.1 billion, until wrangles with the government on funding and other issues are resolved. While open-pit work continues, the dispute has led to the suspension of

underground construction and the layoff of about 1,700 workers. The saga has taken its toll on Turquoise Hill shares, which have fallen 34 percent in Toronto over the year to date. It has also hurt Mongolia by weakening investor confidence and delaying other projects. Foreign direct investment fell 47 percent over the first eight months of the year.

Dispute points London-based Rio, the world’s second-biggest mining company by market value, manages the venture through its 51 percent stake in Turquoise Hill Resources Ltd, which owns 66 percent of the mine. Oyu Tolgoi, located 80 kilometers (50 miles) north of the Chinese border, is forecast to account for about a third of Mongolia’s economy when in full operation. Mongolia had listed 30 points of dispute with its partner over the mine. Chief among these have been criticism of cost overruns on the open-pit operation and objections to the mine being used as collateral for the financing of the

underground portion. On October 1, Mongolian board members said the number of outstanding issues was down to 15 following discussions with Rio in London, conceding that some Oyu Tolgoi assets could be used as collateral. Mongolia has also sought guarantees that the mine expansion won’t be subject to cost overruns, a reset of Rio’s management fees to be based on revenues earned rather than money spent, and a pledge that all money raised against Oyu Tolgoi assets be spent within the country. Issues related to water use, transportation of the concentrate, exports to China and company management are closer to resolution, said Mr Ganbold. Resolving the terms of the US$4 billion project financing package remains the biggest hurdle as development of the second phase of the mine relies on another influx of cash. The deadline to approve the financing is December 12. Commercial production at the mine started in July although Chinese customs delayed deliveries to customers for more than three months before releasing

Oyu Tolgoi is forecast to account for a third of Mongolia’s economy when in full

the first batch of concentrate from a bonded warehouse in China last week. “The concentrate started to go last week, so the first

official, touchable, visible cash flow has started to go to this joint venture company. That is big progress,” said Mr Ganbold, adding that so

Australia’s finance hole worsened: Cormann Growth in non-mining sector desperately needed, says Finance minister Jason Scott

ustralia’s budget position has worsened since the LiberalNational coalition took power seven weeks ago, with the US$1.5 trillion economy struggling for momentum in non-mining sectors, Finance minister Mathias Cormann said. “The reality is that we are in challenging times,” Mr Cormann said in a Sky News interview yesterday. The new government has inherited “not just a bad

position at the time of the election but a position that continues to deteriorate,” he said. The coalition, which ousted Labor on September 7, is pledging to cut red tape and lower taxes as a Chinaled mining investment boom crests. Prime minister Tony Abbott’s government is grappling with rising unemployment and cooling growth as a strong currency hurts manufacturing and

service industries. Treasury said in its preelection outlook released August 13 that the federal deficit will widen to A$30.1 billion (US$28.8 billion) for the fiscal year ending June 30, and the budget is no longer projected to return to balance in 2015-16. The coalition will release updated projections in a mid-year report before Christmas, Mr Cormann said yesterday. “We will put the budget

back into surplus as soon as possible,” he said, without committing to a timetable. “What we are committed to is to get spending growth under control.” Mr Abbott’s government on Tuesday announced plans to raise the nation’s debt ceiling to A$500 billion from A$300 billion now, and ordered a Commission of Audit to identify potential spending cuts as government revenue slows. “There’s no doubt that

investment in the mining industry is not at the same level that it has been in recent years,” Mr Cormann said yesterday. “It is so important that we take action to reduce the cost of doing business in Australia, to make ourselves more competitive internationally, to improve productivity, so that the non-mining parts of the economy can start to grow and prosper again.” 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

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October 2013 April 19,28, 2013

Asia

ending

Investors eye Japan’s little-known stocks Amid growing fears that shares in big corporations might be overpriced Shingo Ito

operation

far Mongolia has received more than US$1 billion from the mine in the form of taxes and other payments. Bloomberg News

resurgent Japanese stock market has seen a big boom in shares of the country’s corporate titans, but now rich returns are waiting in small firms virtually unknown overseas, according to analysts. The Nikkei 225 stock average – a who’s who of corporate Japan – has surged 36 percent since January, staging a sharp recovery as Tokyo’s policy blitz of government spending and monetary easing helped set off a sharp decline in the yen. But the multi-month surge on the Nikkei since late last year has stoked fears about overheating even as the index came off highs that saw it up about 80 percent at one stage. Now, some are looking beyond members of the bluechip index to the hundreds of other firms that populate the Tokyo Stock Exchange (TSE), one of the world’s biggest equity markets. “At first, monetary easing helped boost prices of the biggest capitalisation shares... which made smalland mid-cap stocks relatively undervalued,” said Shun Maruyama, chief Japan equity strategist with BNP Paribas Securities in Tokyo. “Foreign investors see

these smaller firms as a gold mine.” In fact, some have already made it onto investors’ radar screens. Discount retailer Don Quijote’s shares have doubled since January, SymBio Pharmaceuticals logged a 67 percent rally while Pickles Corp, Japan’s biggest pickle maker, has soared about 85 percent since the start of the year. Smaller firms that concentrate on the domestic market are often less affected than big exporters by fluctuations of currency markets. And they are set to benefit most from Japanese prime minister Shinzo Abe’s bid to reboot the economy by firing up consumer demand at home, analysts said. Infrastructure firms are also set to notch up more business from disaster reconstruction projects and Tokyo’s winning bid to host the 2020 Olympics. Among the firms asset managers are buying include Sho-Bond Holdings, which repairs and reinforces concrete structures such as roads and bridges, seatbelt and airbag maker Takata, and MonotaRO Co, which sells tools and parts to

Shinzo Abe’s bid to fire up consumer demand could help smaller firms

smaller manufacturers. “If you really want to find growing companies, you should target midand small-cap firms,” said Hideo Shiozumi, a fund manager with investment giant Legg Mason and also head of Shiozumi Asset Management. The long-time portfolio manager points to nursing care businesses that are

capitalising on a huge demographic shift in rapidly ageing Japan. People over 65 make up about one quarter of the country’s 128 million people and that ratio is expected to balloon due to low birth rates. “Who knows, the future of Japan Inc. could be represented by small firms,” Mr Shiozumi said. AFP

Unilever reaps riches from India’s cosmetics But analysts doubt long-term impact of huge advertising spending Adi Narayan

industan Unilever Ltd, the Indian unit of the world’s second-biggest consumergoods company, reported second-quarter profit that beat analysts’ estimates as sales of skin creams and cosmetics climbed. Net income rose 13 percent to 9.1 billion rupees (US$148 million) in the three months to the end of September from 8.1 billion rupees a year earlier, the Mumbai-based company said in a statement. Profit exceeded the 8.6 billion-rupee median of 34 analysts’ estimates compiled by Bloomberg. The maker of Dove moisturising cream and Surf Excel laundry detergent was helped by a “huge step-up” in advertising spending and consumers stocking up on cold creams before winter, chief financial officer

Unilever is the maker of Dove moisturising cream

Sridhar Ramamurthy told reporters in Mumbai. Demand for the company’s premium hair care products and packaged foods in India “still remains under pressure,” he said. “Considering the economic environment,

the growth in personal products is OK and the results are more or less up to the market’s expectations,” Nitin Mathur, an analyst at Espirito Santo Securities, said in an interview. “It remains to be seen how

long they can sustain these heavy advertising expenses to grow sales.” The company spent 9.54 billion rupees on advertising and promotions, 24 percent more than the same period last year, according to the statement.

Hindustan Unilever’s stock has gained 13 percent in Mumbai trading this year, compared with a 16 percent climb in the 11-company S&P BSE FMCG Index of the nation’s biggest consumer goods companies. Revenue at the company’s personal products unit, which includes its Dove and Vaseline skin creams, increased 12 percent to 19.5 billion rupees. Sales volume at the company rose five percent, compared with 7 percent in the same period last year. That metric reflects sales growth excluding price changes. “Volume growth remains dismal and suggests the economic environment is still very weak,” Mr Mathur said. Sales at Hindustan Unilever climbed 9.6 percent to 67.5 billion rupees in the second quarter. Bloomberg News

14 14

October 28, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 60.70 60.35 60.00 59.65

Max 60.7

average 59.962

Max 57.60

Min 59.35

average 57.195

Last 59.75

Min 56.55

Last 57.35

59.30

Max 91.15

average 90.595

PRICE

90.48

27.84

90.24

27.72

90.00

Max 28.2

average 27.864

Min 27.6

Last 27.8

27.60

57.38

25.94

30.1

57.16

25.78

29.9

56.94

25.62

29.7

56.72

25.46

29.5

56.50

Max 26.05

average 25.660

DAY %

YTD %

(H) 52W

Min 25.35

Last 25.45

(L) 52W

0.247142416

4.262611117

109.6999969

85.51999664

BRENT CRUDE FUTR Dec13

106.75

-0.22432003

1.850968419

114.4399948

95.95999908

GASOLINE RBOB FUT Nov13

256.71

-0.868860056

-0.02726069

293.6000109

243.3699846

904

-0.33076075

0.277315585

973

837

3.608

-0.57867181

-3.658210948

4.59400034

3.281000137

289.76

-0.093093818

-3.025435074

322.3500013

276.8100023

GAS OIL FUT (ICE) Dec13 NATURAL GAS FUTR Nov13 NY Harb ULSD Fut Nov13 Gold Spot $/Oz

1342.27

0.2233

-19.357

1754.46

1180.57

Silver Spot $/Oz

22.4225

-1.2681

-25.5314

34.3838

18.2208

Platinum Spot $/Oz

1441.55

-0.3663

-5.0206

1742.8

1294.18

Palladium Spot $/Oz

741.08

-0.7261

5.92

786.5

587.4

LME ALUMINUM 3MO ($)

1861

0.921908894

-10.22672455

2184

1758

LME COPPER 3MO ($)

7175

0.055780226

-9.532215357

8346

6602 1811.75

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan14 Dec13

1936

0.207039337

-6.923076923

2230

14650

0.618131868

-14.12661196

18770

13205

15.36

0.195694716

-0.356795329

16.80999947

14.91500092

441.5

0.283929585

-26.38599416

647

432

701

0.646087581

-14.59031374

913

635.5

WHEAT FUTURE(CBT) Dec13 SOYBEAN FUTURE Jan14

25.30

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 30.25

average 29.647

Min 29.35

Last 29.35

29.3

1299.75

-0.306807287

-0.706646295

1406

1169

110.5

0.181323663

-29.37040588

179.25

109.5

SUGAR #11 (WORLD) Mar14

18.88

-0.474433316

-8.260447036

20.71999931

16.69999886

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

78.94

-0.340866052

0.254000508

93.72000122

74.34999847

CROWN LTD

World Stock Markets - Indices

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.959 1.6214 0.8931 1.3809 97.15 7.9861 7.7535 6.0836 61.54 31.111 1.2357 29.383 43.04 11015 93.164 1.23326 0.85171 8.4013 11.0282 134.15 1.03

-0.3326 0.1978 -0.2687 0.0362 0.2162 -0.005 -0.0052 -0.0329 -0.1137 0.0932 0.1376 0.1327 0.1162 1.2256 0.5463 -0.3008 0.155 -0.1821 -0.0444 0.1789 0

-7.593 0.2349 2.4969 4.6929 -11.3742 -0.0363 -0.0374 2.4163 -10.6354 -1.7068 -1.1572 -1.1912 -4.7282 -11.094 -4.1185 -2.0904 -4.2608 -2.1878 -4.5139 -15.341 -0.0097

1.0599 1.6381 0.9839 1.3832 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 11.0434 135.51 1.032

0.8848 1.4814 0.8891 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

DAY %

YTD %

(H) 52W

(L) 52W

4.91

1.446281

16.79

-0.3560831

VOLUME CRNCY

55.87301

5.02

2.56

1034032

57.35707

17.215

9.3

940484

AMAX HOLDINGS LT

1.18

-2.479339

-15.71428

1.72

0.75

1687000

BOC HONG KONG HO

24.75

-0.4024145

2.697094

22.85

5453308

CENTURY LEGEND

432000

0.415

-1.190476

56.60378

0.56

0.232

CHEUK NANG HLDGS

6.99

0.1432665

16.6945

7.24

4.1

88164

CHINA OVERSEAS

23.2

0.2159827

0.4328988

25.6

17.7

20796866

CHINESE ESTATES

21.6

0.2320186

92.07601

22.25

9.543

76300

CHOW TAI FOOK JE

12.22

-0.6504065

-1.768485

13.4

7.44

4269100

EMPEROR ENTERTAI

4.12

-2.369668

117.9894

4.66

1.43

1873008

FUTURE BRIGHT

3.01

5.614035

148.3445

3.02

1.103

3822000

GALAXY ENTERTAIN

59.75

-1.076159

96.86985

63.75

25.45

9291344

HANG SENG BK

127.2

-0.3915427

7.160913

132.8

110.6

1683428

HOPEWELL HLDGS

25.7

0.5870841

-22.70677

35.3

23.2

905500

HSBC HLDGS PLC

84.95

0.1768868

4.489541

90.7

73.55

13825715

HUTCHISON TELE H

3.43

1.179941

-3.651684

4.66

3.12

2964000

LUK FOOK HLDGS I

27.5

1.851852

12.70492

30.05

16.88

1687259

MELCO INTL DEVEL

24.25

-1.020408

169.1454

25.75

7.35

4133723

27.8

-1.243339

109.3645

12.236

2543135

3.11

2.980132

-15.94595

4.6

2.68

53970000

NEPTUNE GROUP

0.335

-9.459459

120.3947

0.4

0.131

326543000

NEW WORLD DEV

10.72

-10.81531

15.12

9.98

9320553

SANDS CHINA LTD

57.35

68.92489

60.5

28.65

10458078

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15509.21

0.622059

18.35352

15709.58

12471.49

NASDAQ COMPOSITE INDEX

3928.96

0.5601634

30.11897

3947.672

2810.8

FTSE 100 INDEX

6709.29

-0.05794571

13.759

6875.62

5605.589844

DAX INDEX

8968.59

-0.1340663

17.81569

8987.63

6950.53

NIKKEI 225

14088.19

-2.748921

35.52619

15942.6

8619.45

HANG SENG INDEX

22698.34

-0.6020366

0.1828136

23944.74

19426.35938

CSI 300 INDEX

2368.559

-1.33105

-6.119531

2791.303

2023.171

TAIWAN TAIEX INDEX

8346.62

-0.7975069

8.404703

8459.3

7050.05

MGM CHINA HOLDIN

KOSPI INDEX

2034.39

-0.6009703

1.869756

2063.28

1770.53

MIDLAND HOLDINGS

S&P/ASX 200 INDEX

5386.346

0.2505171

15.86156

5402.4

4334.3

4580.846

-0.3046675

6.119489

5251.296

3837.735

JAKARTA COMPOSITE INDEX

PRICE

Macau Related Stocks

COFFEE 'C' FUTURE Dec13

NAME

27.96

30.3

97.35

CORN FUTURE

90.72

26.10

WTI CRUDE FUTURE Dec13

LME ZINC

28.08

Currency Exchange Rates

NAME

METALS

Last 90.55

28.20

90.96

57.60

Commodities ENERGY

Min 90.00

91.20

FTSE Bursa Malaysia KLCI

1817.57

-0.07476923

7.615382

1826.22

1590.67

SHUN HO RESOURCE

1.62

-2.994012

15.71429

1.92

1.19

4000

NZX ALL INDEX

1025.667

0.5925708

16.28179

1026.744

851.971

SHUN TAK HOLDING

4.6

-0.6479482

9.785201

4.8

3.05

4746247

PHILIPPINES ALL SHARE IX

3962.81

-0.27882

7.132509

4571.4

3440.12

SJM HOLDINGS LTD

25.45

-1.356589

43.3992

16.486

8638977

SMARTONE TELECOM

10.36

-1.145038

-26.42045

16.22

9.97

1435877

WYNN MACAU LTD

29.35

-2.975207

40.09546

32.6

25022466

Euromoney Dragon 300 Index Sin

629.68

0.49

1.38

STOCK EXCH OF THAI INDEX

1460.61

-0.3894102

4.934151

1649.77

1260.08

ASIA ENTERTAINME

3.96

#N/A N/A

69409

HO CHI MINH STOCK INDEX

500.75

-0.0838039

21.03304

533.15

372.39

BALLY TECHNOLOGI

70.77

1.827338

58.28674

76.3

43.16

314486

Laos Composite Index

1306.32

7.5364

1455.82

1047.94

BOC HONG KONG HO

3.26

6.188927

3.6

2.99

24545

GALAXY ENTERTAIN

7.82

2.088773

96.97733

8.11

3.39

19400

INTL GAME TECH

18.29

1.217488

29.07551

21.2

12.37

3444404

JONES LANG LASAL

84.16

-0.7664191

0.2620891

101.46

72.56

318355

LAS VEGAS SANDS

72.6

2.325581

57.27903

73.49

37.8353

4026304 2753563

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

MELCO CROWN-ADR

34.97

3.830166

107.6603

13.43

MGM CHINA HOLDIN

3.67

-0.2717391

109.6794

3.88

1.6651

400

MGM RESORTS INTE

20.64

2.891326

77.31958

20.98

9.15

8132913

SHFL ENTERTAINME

23.18

-0.04312204

59.86207

23.24

12.35

464437

SJM HOLDINGS LTD

3.35

2.134146

47.08362

3.6

2.0804

29801

172.85

3.83876

53.65811

173.38

103.34

1507214

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

38.75

-0.8951407

21430578

CHINA UNICOM HON

12.06

-1.309329

28461399

ALUMINUM CORP-H

2.94

-2.970297

14647790

CITIC PACIFIC

10.38

-3.531599

BANK OF CHINA-H

3.45

-1.146132

428285909

BANK OF COMMUN-H

5.46

-1.798561

31058711

32.35

-0.3081664

1796669

AIA GROUP LTD

BANK EAST ASIA

NAME

PRICE

DAY %

POWER ASSETS HOL

65.15

-1.138088

2872106

9607302

SANDS CHINA LTD

57.35

10458078

SINO LAND CO

10.64

-0.5607477

8915765

SUN HUNG KAI PRO

100.5

-0.4950495

3596190

-0.3888889

1688841

CLP HLDGS LTD

61.45

3555094

15.08

-1.308901

54074504

COSCO PAC LTD

10.78

-2.531646

7127132

SWIRE PACIFIC-A

89.65

ESPRIT HLDGS

12.88

-0.9230769

2462053

TENCENT HOLDINGS

426.2

-0.6063433

2723391

24.9

-0.7968127

5470897

TINGYI HLDG CO

21.05

-0.9411765

5177220

127.2

-0.3915427

1683428

WANT WANT CHINA

11.12

-0.1795332

7054819

-0.5428882

5462309

WHARF HLDG

66.65

-0.5223881

3182686

BELLE INTERNATIO

10.48

-0.3802281

22478940

24.75

-0.4024145

5453308

HANG LUNG PROPER

CATHAY PAC AIR

15.12

-1.04712

2163762

HANG SENG BK

CHEUNG KONG

119.7

-0.910596

2839685

HENDERSON LAND D

45.8

HENGAN INTL

90.3

-0.660066

1794810

-0.5524862

8139825

4.66

-2.10084

61269696

CHINA CONST BA-H

5.71

-0.8680556

376047938

CHINA LIFE INS-H

19.62

-1.009082

22851515

CHINA MERCHANT

27.45

1.478743

2380927

CHINA MOBILE

80.1

0.2503129

16251692

CHINA OVERSEAS

23.2

0.2159827

20796866

CHINA PETROLEU-H

-0.8264463

109432039

CHINA RES ENTERP

26.8

-0.7407407

1712732

CHINA RES LAND

VOLUME

CNOOC LTD

BOC HONG KONG HO

CHINA COAL ENE-H

NAME

HONG KG CHINA GS HONG KONG EXCHNG

123.8

1612835

HSBC HLDGS PLC

84.95

0.1768868

13825715

HUTCHISON WHAMPO

95.1

-0.6269592

3678227

IND & COMM BK-H

5.14

-1.34357

333002406

10.64

-0.1876173

12032629

29.5

0.3401361

LI & FUNG LTD MTR CORP

MOVERS

23486.73

2525574

LOW

22648.16

52W (H) 23944.74

20.9

-2.107728

11094477

NEW WORLD DEV

10.72

9320553

19.78

-1.1

4716638

PETROCHINA CO-H

8.72

-1.580135

89929619

CHINA SHENHUA-H

23.6

-1.25523

17715274

PING AN INSURA-H

57.05

-0.7826087

13034191

4 23487

INDEX 22698.34 HIGH

CHINA RES POWER

(L) 19426.35938

22648

23-October

25-October

15 15

October 2013 April 19,28, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Inquirer Business

Japan’s tax-hike test Koichi Hamada

Special Economic Adviser to Japanese Prime Minister Shinzo Abe, is Professor of Economics at Yale University

The Philippines is the best performer within the AsiaPacific region when it comes to gender equality and the country has improved its global ranking to 5th place from 8th in the 2013 Global Gender Gap Report. This latest annual gender equality-focused report of the World Economic Forum ranked 136 countries on their ability to close the gender gap in four key areas: economic equality, political participation, health and survival and educational attainment. “The Philippines remains the most advanced country in the (Asia-Pacific) region in terms of gender equality,” the Forum said.

Times of India Identifying India as one of the five fragile economies of the world, a senior U.S. official has predicted an uncertain outlook for its future in view of the next year’s general elections. “The big question about India now is what happens in the election next year and who will be the new government,” assistant treasury secretary for international finance Charles Collyns said. Mr Collyns said India is one of the five fragile economies of the world. The other four being Brazil, Indonesia, Turkey and South Africa because they have large current account deficits and they’ve relied heavily on portfolio capital to finance those deficits, he said.

Straits Times Malaysian tycoon Tan Sri Vincent Tan is also considering Singapore as a venue for the listing of his English Premier League club Cardiff City. The listing of the football club is likely to come in the second half of next year, industry sources said. Mr Tan, 61, who bought the club three years ago, is looking at two options: to list on home turf on BursaMalaysia, which is largely dominated by big state-owned funds and domestic investors, or pitch the offering to a wider investor base on the Singapore Exchange, the sources added.

Jakarta Post Bank Indonesia estimates overall credit growth will continue to decelerate next year as it maintains its efforts to stabilise the economy. The central bank has set the 2014 credit growth rate between 15.3 percent and 16.6 percent, lower than the growth range predicted for 2013 of between 19.1 and 20.4 percent, according to BI governor Agus Martowardojo. “We will continue carrying out stabilisation efforts because it seems that the global macroeconomic situation is going to keep affecting our economy,” he said in Jakarta.

s October began, Japanese Prime Minister Shinzo Abe announced that his government would raise the country’s consumption-tax rate from 5 percent to 8 percent next April, and presumably to 10 percent 18 months after that. The contrast with what is now happening in the United States could not be sharper. As U.S. President Barack Obama’s domestic opponents resist his signature healthcare legislation, owing to the wealth transfers that it implies, Japanese bureaucrats are trying to recover the authority to administer tax revenue to support social-welfare programmes.

effective corporate-tax rate in Japan is higher than it is elsewhere, making it difficult for Japan to attract investment, foreign or domestic. In order to survive international tax competition – and thus be able to rely on corporate taxes as a source of revenue – Japan’s corporatetax rate should be lowered in the long run. Nonetheless, with Japan’s economy just beginning to recover from more than 15 years of stagnation, such a steep consumption-tax hike is not advisable. In fact, such a large increase has seldom – if ever – been attempted, owing to the risk that it would spur consumers to spend before it takes effect, thereby reducing future consumption. Moreover, any sudden rise in the tax burden results in deadweight losses.

With Japan’s economy just beginning to recover from more than 15 years of stagnation, such a steep consumption-tax hike is not advisable

Favouring hike

There are many arguments for raising Japan’s consumptiontax rate. Japan’s government has a huge debt burden, and its consumption-tax rate is far lower than the value-added-tax rates that prevail in Europe. At the same time, the

A consumption-tax hike should be timed in such a way that it does not suffocate the economic recovery that Abe’s bold economic programme, dubbed “Abenomics,” is facilitating. Western economists typically favour gradual tax increases; Jeffrey Frankel, for example, recommends a pre-announced plan to increase the tax rate by, say, one percentage point annually for five years. But Japanese policymakers, media, and academics largely continue to favour a sudden and substantial hike. Last year, when Japan’s Diet passed the legislation to raise the consumption tax, it included a provision calling for the plan to be re-evaluated if economic conditions required it. When the Cabinet Office called upon 60 business leaders, academics, and economists (including me) to

perform such an evaluation, more than 70 percent favoured the hike. But the selection of experts reflected a clear bias toward the finance ministry’s views. In fact, the ministry has used its “informational campaign” to shape public discussion, convincing scholars, business economists, and the general public to be more concerned about keeping the budget deficit under control than about the effects of a negative demand shock. This is a typical example of what economists like Joseph Stiglitz call “cognitive capture”. For more than two decades – a period characterised by chronic recession and deflation – Japan has retained its position as the world’s richest country in terms of net wealth abroad. At the end of last year, Japan’s net international wealth amounted to 296 trillion yen (US$3 trillion). But Japan’s government is believed to be the world’s poorest, with the finance ministry reporting that the gross debt/GDP ratio exceeds 200 percent. That is an exaggeration. For example, Ichizo Miyamoto, a former senior finance-ministry official, claims that, accounting for the government’s assets, Japan’s net debt/GDP ratio is below 100 percent, similar to that of the United States.

Avoiding mistakes The validity of the finance ministry’s position on the tax increase was called into question by the decline in Japan’s Nikkei index of stock futures after Abe’s October 1 announcement. To be sure, the budget crisis in the U.S. caused most stock futures to decline on that day. But, if the ministry’s view of the consumption tax was

correct, Nikkei futures would have gained more – or at least lost less – than futures in other countries. Instead, the index declined three times more steeply than others. And yet, while the consumption-tax increase is not ideally timed, I am not entirely pessimistic about its impact. The Mundell-Fleming framework – which describes the short-run relationship between the nominal exchange rate, interest rates, and output in an open economy – indicates that, under Japan’s flexible exchange-rate regime, the post-hike decline in demand could be addressed relatively easily with more expansionary monetary policy. That is why Bank of Japan governor Haruhiko Kuroda should respond accordingly if the tax increase has a deflationary impact. In doing so, he would avoid the criticism that former Bank of England governor Mervyn King faced for supporting a consumer-tax hike in 2011 but failing to use monetary policy to offset its recessionary effects. Just a year ago, former Prime Minister Yoshihiko Noda attempted, despite a deep recession, to raise the consumption tax without monetary easing – a strategy that could have brought only continued economic stagnation. Abe must not make the same mistake. If Japan’s government can overcome a demand setback after the tax increase takes effect – leaving the economy functioning smoothly and initiating a recovery in government revenue – Abe will be able to declare Abenomics an unequivocal success. © Project Syndicate

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October 28, 2013 April 19, 2013

Closing Sabic third-quarter profit misses estimates

JPMorgan settles deal with housing agency

Saudi Basic Industries Corp., the world’s biggest petrochemicals maker, reported a 2.5 percent increase in third-quarter profit, missing analysts’ estimates. Net income rose to 6.47 billion riyals (US$1.73 billion) from 6.31 billion riyals a year earlier, the Riyadhbased company known as Sabic said in a statement to the Saudi stock market Friday. The mean estimate of 10 analysts was for a profit of 6.56 billion riyals, according to data compiled by Bloomberg. Lower petrochemicals prices linked to sluggish demand in a struggling global economy affected profit at Sabic affiliates.

JPMorgan Chase & Co has agreed to pay US$5.1 billion to settle claims that it and firms it bought misled Fannie Mae and Freddie Mac about the quality of mortgage securities and home loans it sold to them during the housing boom. The bank and the agencies’ regulator said Friday evening that the settlement was expected to be part of a tentative US$13 billion deal. The announcement, which appeared to catch other parties by surprise, resolves a 2-year-old lawsuit in which JPMorgan was of accused overstating the quality of loans in mortgage securities.

Sky is the limit for cultural fund bidders Funding rules to be introduced to the public in November Stephanie Lai

sw.lai@macaubusinessdaily.com

here will be no funding cap for the projects applying for the 200 million patacas (US$ 25 million) cultural industries fund, Executive Council spokesperson Leong Heng Teng said on Friday. The council has finished discussing the rules of the fund, which is open for Macau residents or locallyregistered companies controlled by residents. The fund will encourage the invention, production and marketing of ‘cultural and creative products’, as well as projects that ‘promote intellectual property registration,’ the council said in a statement. Secretary for Social Affairs and Culture Cheong U will lead the new fund, along with a board of trustees, an administrative committee, a supervisory

board and an advisory body to assess the applications. The administrative committee is authorised to grant funding of up to 500,000 patacas, which could be in the form of a direct subsidy or an interestfree loan. The board of trustees will make the call on applications for funding between 500,000 patacas and 9 million patacas. Any project seeking more than that will have to go to the chief executive. The rules will come into effect the day after it is published in the Official Gazette. The government plans to introduce the fund to the public in November, said Mr Leong. He assured there would be no overlapping with an existing fund for art and creative business projects managed by the Cultural Affairs Bureau.

Cultural projects will have access to subsidies or interest-free loans

“The fund from the Cultural Affairs Bureau mainly supports non-profit organisations or individual cultural activities,” said Mr Leong. “The cultural industries fund will mainly support companies whose business projects have development

potential,” he added. The council spokesperson admitted however that the government would have to detail the different roles and subsidy rules for several other funds. That includes the subsidies granted by the Macao Foundation and the

Industrial and Commercial Development Fund helping small and medium businesses. “In the future, (…) the government ought to detail all these funds’ roles, so that there will be no overlap in the use of resources,” said Mr Leong.

Construction Bank earnings slows on bad-loan reserves Net interest margin unchanged despite interest-rate reform push

hina Construction Bank Corp (CCB), the country’s secondbiggest lender, reported its slowest third-quarter earnings growth in more than five years yesterday, as increased loan-loss provisions eroded profits. Net profit rose 8.9 percent to 56.52 billion yuan (US$9.29 billion) in July-September from 51.91 billion yuan a year earlier, according to Reuters calculations based on CCB’s announcement. That compares with an average estimate of 57.69 billion yuan in a Reuters poll of four analysts. The growth rate for CCB, the first of China’s big-four banks to report third-quarter

results, marked a slowdown from 12.9 percent growth in January-June. Chinese banks’ remain among the most profitable in the world, but they face increasing challenges from shrinking margins and rising bad loans, as the country’s economy slows from the supercharged pace of the last decade and policymakers push ahead with market-based reforms to interest rates. CCB’s non-performing loan ratio fell slightly to 0.98 percent by end-Sept, down from 0.99 percent at end-June. But in a sign the bank remains wary of a rise in bad loans, the bank set aside 9.6 billion yuan in provisions in the

third quarter, up 12.1 percent from the same period last year. The increased provisioning was a key factor in the lowerthan-expected bottom line. The latest official figures for system-wide bad loans

show the ratio at 0.96 at endJune, though most outside analysts believe the true ratio is higher. CCB’s net interest margins held steady at 2.71 percent in the third quarter, unchanged

from the second quarter. Margins are expected to shrink in the medium term as China pushes ahead with interest-rate liberalisation, raising banks’ cost of funds while increasing competition for borrowers. In July the central bank eliminated the official lower limit on bank lending rates. Last week it introduced a new, market-oriented lending benchmark, in the latest incremental step towards more market-based credit allocation. Market watchers are on the lookout for further progress on liberalising bank deposit rates at a key Communist Party meeting scheduled for next month. Reuters