Page 4
Vitor Quintã
MOP 6.00
U.S. regulator 1 critical of media’s take on Macau
April 19, 2013
www.macaubusinessdaily.com
Year II
Number 418 Wednesday November 20, 2013
Editor-in-chief Tiago Azevedo
Deputy editor-in-chief
Sofa firm brings comfort to U.S. furniture maker Page 6
Animal rights campaigners urge halt to circus festival
Page 7
Govt pledges ‘improved’ approach for 2015 budget T
he government would make an effort to present a more detailed budget for 2015, said Secretary for Economy and Finance Francis Tam Pak Yuen yesterday. It would include total costs for multi-year projects and categorised information on the investment plan.
But the mixture of caution and guesswork show in previous forecasts is likely to apply for at least another 12 months. The amount the government is forecasting to raise from gaming tax in 2014 – 115.5 billion patacas (US$14.5 billion) is likely to be easily outpaced by this financial year’s gaming take. The
2013 number can’t be accurately predicted yet. A quirk of the government accounting system means December’s gaming take is only counted in the next year’s figures. A new budget framework law will apply officially from the 2016 budget onward.
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Environmental checks for public projects
Legislators urge honesty over bus scandal
Name
Public construction projects are being required, under a government pilot scheme, to assess the environmental impact of their work, though the request does not yet have the force of law. Cheong Sio Kei, director of the Environmental Protection Bureau, announced the initiative yesterday. So far the scheme applies to large-scale transport infrastructure; ports; energy, water and fuel storage and supply facilities, sewage treatment works and waterside infrastructure. Page 2
Several legislators yesterday criticised a lack of accountability in the way the city’s bus system has been operated. Transport officials have been under fire since the Commission Against Corruption last week said contracts with the bus operators were “illegal” and should be scrapped. The commission says the system was unlawful from its start in August 2011 because the Transport Bureau arranged service provider contracts not concessions. Page 3
Off-plan home loans extend recovery in Sept New approved mortgages for unfinished flats rose in value for a third consecutive month in September. It continued that housing segment’s recovery from the downturn seen since a new law – active since June – tightened rules on selling ‘off plan’. Lenders approved 77.9 million patacas (US$9.8 million) for loans to buy unfinished homes in September, up by 76.4 percent from August, the Monetary Authority of Macau said yesterday. Page 5
%Day
CHINA LIFE INS-H
4.76
HONG KONG EXCHNG
2.98
PETROCHINA CO-H
2.48
KUNLUN ENERGY CO
2.10
CHINA SHENHUA-H
1.17
LI & FUNG LTD
-2.35
SANDS CHINA LTD
-2.40
BELLE INTERNATIO
-2.74
CHINA RES ENTERP
-3.07
CHINA RES LAND
-4.67
Source: Bloomberg
I SSN 2226-8294
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November 20, 2013
Macau
Environmental impact checks ordered for govt projects Pilot scheme does not yet have force of law, but eventually to be extended to private sector Stephanie Lai
sw.lai@macaubusinessdaily.com
P
ublic construction projects are being required – under a government pilot scheme – to assess the environmental impact of their work, though the request does not yet have the force of law. Cheong Sio Kei, director of the Environmental Protection Bureau, announced the initiative yesterday. So far the pilot programme applies to large-scale transport infrastructure; ports; energy, water and fuel storage and supply facilities, sewage treatment works and waterside infrastructure. But the legislation to compel contractors to take part will not be passed until next year. The bureau is requesting a voluntary environmental assessment from private companies that are building manufacturing plants; or working on public facilities including the airport, the incineration plant, power supply plant and fuel storage facilities. Contractors on public construction projects near reservoirs, lakes, hills and ecological conservation zones are on the government’s ‘must have’ list as far as environmental assessment is concerned. “After the pilot stage, we’ll encourage the private construction projects to take reference from our scheme,” Mr Cheong told media on the sidelines of a seminar held yesterday. “We will keep on reviewing the
After the pilot stage, we’ll encourage the private construction projects to take reference from our scheme Cheong Sio Kei, director of the Environmental Protection Bureau
content of our scheme to see if any more types of projects and other specifications have to be included,” Mr Cheong added. “Our pilot scheme will continue until our legislation [on environmental assessment] is set,” he noted. “By then this scheme will become
part of the law, as it will include all the types of projects that need to submit an environmental assessment report on a compulsory basis.” The bureau’s director mentioned that there would be a consultation held on the legislation of environmental assessment before the end of next year.
The bureau’s pilot scheme also suggests that privately constructed performance venues or stadiums that can house 5,000 people or more should deliver an environmental assessment report to the government before starting the project. Housing projects, hotels, theme parks or amusement parks with a total area of 50,000 square metres or more should also undergo the assessment. The bureau did not give a timetable for extending fully the pilot scheme to the private construction projects.
Guangdong builder makes new loan to Birmingham Yang Yue Zhou could turn bonds into 26.5 pct stake in English football club Vítor Quintã
vitorquinta@macaubusinessdaily.com
G
uangdong developer Yang Yue Zhou has granted a new loan to help Macau-linked businessman Carson Yeung Ka Sing stave off bankruptcy of an English professional football club. Mr Yang could even become the second biggest shareholder in the holding company of struggling Birmingham City F.C. if he chooses to convert a batch of bonds. Birmingham International Holdings Ltd announced yesterday it has loaned HK$15 million (US$1.9 million) from British Virgin Islandsregistered U-Continent Holdings Ltd, owned by Mr Yang. U-Continent had already loaned HK$20 million to Birmingham International in July. Both loans have a
fixed monthly interest rate of 0.5 percent – over 6 percent a year. The money will be used “for general working capital purposes” of Birmingham International and will “immediately improve the group’s liquidity position,” the company said. Mr Yang is a former Birmingham International director who resigned in June 2012, the company told the Hong Kong Stock Exchange in a filing. Birmingham International has been suspended from trading since June 30, 2011 following Mr Yeung’s arrest. He is currently on trial at the District Court in Wanchai, Hong Kong, charged with five counts of laundering HK$721 million between January 2001 and December 2007. Part of that money
Carson Yeung facing charges of money laundering
came from 14 cheques that Macau gaming operator SJM deposited in an account controlled by Mr Yeung, it was said in court. Mr Yang was described by the company as the chairman of a property development company in Qinghai, northwest China,
and a Guangdong resident. The developer could gain a bigger role in Birmingham International, though. Mr Yang was granted HK$300 million in bonds last week that he can convert into a 26.5 percent stake. Mr Yeung hold 27 percent of Birmingham International.
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November 20, 2013 April 19, 2013
Macau
Govt pledges ‘improved’ approach for 2015 budget Francis Tam vows more information including total cost of multi-year projects Tony Lai
tony.lai@macaubusinessdaily.com
Francis Tam (top centre) promises better governance over public project budgets (Photo: Manuel Cardoso)
T
he government would make an effort to present a more detailed budget for 2015, including total costs for multiyear projects and categorised information on the investment plan, Secretary for Economy and Finance Francis Tam Pak Yuen said yesterday. The government would also start informing the Legislative Assembly of any “important budget changes”, Mr Tam told assembly
members during a meeting. The administration is expected to finish a revision of the budget framework law next year. It will focus on better control of the budgets for public projects to try to ensure they are realistic, accurate and met. It would be 2016 at the earliest before the new framework would be applied to government spending said Mr Tam. “But in order to increase supervision over the
government budget as quickly as possible,” the government would start following some new principles to compile the 2015 budget, he told assembly members. The 2015 budget, which will be submitted next year to the assembly for review, will include detailed investment on several categories under the Public Investment Programme, the official said. Currently the government only provides the overall
figure for each year. Total costs of large-scale projects will also be available rather than only the costs for a specific year, he promised. Mr Tam’s pledges were not enough to satisfy the pan-democrat members of the assembly. Legislator Au Kam San said he was “disappointed” and “regretted” that the major changes highlighted by Mr Tam “failed to increase the oversight power of the Legislative Assembly”. His fellow association member Ng Kuok Cheong urged the government to submit budgets for multi-year public infrastructure projects worth more than 40 million patacas (US$8 million). Those projects should be submitted independently for the assembly to assess them, he said. Mr Tam replied: “We will submit the information related to large-scale projects together with the [2015] budget next year and such information will be useful as a complement for the assembly to review the budget.” “Starting next year, such information will be provided to the assembly on a regular basis,” he added.
Spending less Mr Tam yesterday detailed some of changes that would be introduced in the budget framework bill. He said government departments would be
Legislators urge honesty over bus scandal Florinda Chan to help in assessing troubled bus system
S
everal legislators yesterday criticised the lack of accountability in the way the city’s bus system has been running. The Secretary for Transport and Public Works and the Transport Bureau have been under fire since the Commission Against Corruption (CCAC) last week said contracts with the bus operators were “illegal”. Macau’s bus system is illegal, a waste of money and contrary to the public interest, the commission said, calling for the government’s contracts with the bus operators to be scrapped. The commission says the system was unlawful from its start in August 2011 because the Transport Bureau chose to sign service provider contracts with the three bus operators. The law allows private companies to operate bus services only under public service concessions. “CCAC offered a different legal
Lau Si Io vows speedy analysis of bus operators contracts
opinion from the one we have on the new bus system [and] we respect it,” secretary Lau Si Io told reporters yesterday on the sidelines of a meeting at the Legislative Assembly. It was the first time Mr Lau spoke
about the case since the report was published last week. Assembly members yesterday called on the government to hold the officials involved in the process accountable, including Transport
banned from using money allocated for a specific purpose then to be shifted to cover other expenses. Authorities would also “control the expenses of special institutes in accordance with what the assembly had approved,” he said. Macau Foundation was one of the examples cited by the official. Yesterday the assembly members also officially approved the government’s budget for next year. It was first presented to the assembly on November 13. Mr Au and Mr Ng voted against yesterday’s first reading of the 2014 budget bill. The proposed budget for next year envisages total revenue of 153.6 billion patacas, 14 percent more than budgeted for this year, and spending of 77.6 billion patacas, six percent lower than 2013. The fiscal surplus is projected to reach 76 billion patacas. The government expects revenue of 115.5 billion patacas from gaming tax next year, according to its proposed budget for 2014. The sum is 25 percent – or 23.1 billion patacas – more than budgeted for this year. The government levies gaming tax on casino gross gaming revenue at the rate of 35 percent. Its revenue from gaming tax this year will probably be greater than the amount it has anticipated for 2014.
Bureau director Wong Wan. “Chief Executive [Fernando Chui Sai On] has instructed the Transport Bureau to carry out an in-depth analysis of the CCAC report,” said Mr Lau, adding that the Secretary for Administration and Justice, Florinda Chan, would give a helping hand in the process. “Today… the Chief Executive has also requested secretary Florinda Chan to analyse the CCAC report,” said Mr Lau. “I am now waiting for her opinions [on the matter].” He declined to say when exactly the government would present a solution, only saying the assessment will be ready “as soon as possible”. He declined to comment further due to a separate lawsuit filed by Reolian Public Transport Co Ltd related to bus subsidies. The government implemented the new bus system, “an administrativeled mechanism with commercial operations”, as suggested by a study of the University of Macau in 2008, the secretary said. “We had briefed this study to the Executive Council… and this new bus system was approved by the chief executive,” Mr Lau said. T.L.
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November 20, 2013
Macau Wynn Resorts Ltd said yesterday a decision to hire its own Washington D.C. lobbyist – rather than using the industry’s general advocate the American Gaming Association – on matters connected to Macau, was in line with corporate practice in the United States. “Consistent with many American companies, Wynn Resorts engages firms to assist in communicating the company’s unique business goals and needs to legislators, in addition to its participation with trade associations such as the American Gaming Association,” said Michael Weaver, Wynn Resorts’ senior vice president of marketing strategy in an email to Business Daily. He added: “Specifically, Brownstein Hyatt Farber Schreck was engaged to assist in communicating to U.S. legislators and congressionally appointed members of the U.S.China Commission the importance of our Macau and future Cotai resorts to our overall business operations.” Wynn Resorts is parent to Macau casino developer Wynn Macau Ltd. Minutes published from the congressional U.S.China Economic Security Review Commission hearings in June criticised Macau, saying it had “a lax regulatory system for its casinos, which has allowed traditional Chinese organized crime figures to operate in Macau with impunity”.
Casino owners’ firm underwrites offer of another A finance company – a unit of one Macau casino owner – is underwriting the new share offer of another Macau casino owner. Kingston Securities Ltd is the guarantor for up to HK$339.90 million (US$43.8 million) worth of new shares in China Star Entertainment Ltd. The latter controls Hotel Lan Kwai Fong Macau, a casino hotel operating under a licence from Sociedade de Jogos de Macau SA. The underwriter is in turn a unit of Kingston Financial Group Ltd. Pollyanna Chu Yuet Wah, Kingston Financial’s chief executive, acquired the SJM-licensed Casa Real and Grandview Hotel casino properties in 2005. China Star said on October 23 that it was in negotiations with “an independent third party” to sell its Macau casino hotel. Late on Monday it stated talks were “still in progress”. Pollyanna Chu – ranked by Forbes as 35th richest in Hong Kong – sits on the national committee of the mainland government’s advisory body the Chinese People’s Political Consultative Conference.
‘English’ media criticised by a U.S. casino regulator California gambling commissioner Richard Schuetz says press is missing ‘great story’ on Macau Michael Grimes
michael.grimes@macaubusinessdaily.com
A
member of the California Gambling Control Commission has criticised the “Englishlanguage press” for its coverage of the Macau casino industry. Commissioner Richard Schuetz – a former president and chief executive of the Stratosphere Hotel and Casino in Las Vegas – was speaking at the Macao Gaming Summit, the conference portion of a new trade show held last week in Macau. During a question and answer session, Mr Schuetz was asked about the many media reports linking Macau to allegations of crime and corruption. The commissioner – appointed by California’s governor Jerry Brown in September 2011 to help oversee gambling in America’s most populous state – said that the modern development of the Macau industry had given local people the chance “to earn money and to have futures”. “It’s a great story to tell,” said Mr Schuetz. “And I wish the Englishlanguage press would start telling that story a little bit better, because it’s an incredibly important story,” he added.
The commissioner suggested casino industry-fuelled economic and social development was “an incredible asset that this industry is providing in this community”. He added: “It has also seen educational institutions in this community grow to some of the finest in this part of the world.” In Macau however, direct casino industry donations to educational causes rather than tax-based ones have become subject to legal and regulatory scrutiny – but only in the U.S., and only it seems as part of the fallout from litigation between Wynn Resorts Ltd chairman Steve Wynn and his former business partner Kazuo Okada. The U.S. Department of Justice said in April it was conducting an investigation into Wynn Resorts’ 1.1 billion patacas (US$138 million at current prices) donation in May 2011 to the University of Macau Development Foundation. The bequest – spread across ten years – was announced at a time when the firm was still seeking Macau government permission for a Cotai project. In 2010, two ethnic Chinese
(Photo: California Gambling Control Commission)
U.S. lobbyist on Macau is ‘standard’: Wynn
Richard Schuetz
entrepreneurs heading Chineserun companies in the Macau casino market each donated 30 million patacas (US$3.8 million) toward the cost of the Hengqin Island campus for the University of Macau. At the time both Stanley Ho Hung Sun, chairman of SJM Holdings Ltd, and Lui Che Woo, chairman of Galaxy Entertainment Group Ltd, were also in the position of needing the Macau government’s support for further casino projects. But neither firm is listed in the U.S. and neither firm faced regulatory investigation there.
Vietnam to let locals in casinos ‘within 3 years’ But safeguards including entry levy and credit checks likely to apply says Macao Gaming Show speaker
I
Louis XIII debt deal kills ‘sniping’: Union Gaming Louis XIII Holdings Ltd – developing what it hopes will be a 66-table casino-hotel on the Cotai-Coloane border under a so-called service agreement with an existing licence holder – appears now to be fully funded says Union Gaming Research Macau. It began coverage of the firm’s Hong Kong-listed stock in August. “…total capital raised year to date (assuming the debt deal is finalised in short order) amounts to approximately US$1.058 billion, which suggests the property is therefore fully funded and should open with approximately US$100mm in cash on hand upon opening in early 2016,” said Union Gaming in a note yesterday. Louis XIII Holdings said in a filing a fortnight ago it’s in “advanced discussions with a mainland China-based bank” for debt funding. Union Gaming said yesterday: “…we view the announcement of the debt deal as the best indicator – short of a [government] comfort letter – that the project should ultimately receive an allocation of table games at the appropriate time.”
t’s “80 to 90 percent certain” that Vietnamese citizens would be allowed to gamble in big casino resorts in that country within “two to three years”, said a speaker at the Macao Gaming Summit. Currently only foreigners or Vietnamese with overseas passports are legally allowed to gamble in the 13 or so establishments of varying size that are unofficially classified collectively as ‘casinos’. “At that time Vietnamese will be allowed to play in Van Don and Ho Tram – not in small casinos,” said Augustine Ha Ton Vinh, who describes himself as an advisor to the Vietnamese government. He was referring respectively to one multi-billion U.S. dollar casino resort proposed near Hanoi in the north of the country – but still on the drawing board – and another international-standard resort already built in the south of the country near Ho Chi Minh City. Mr Vinh said it was likely Singapore-style safeguards – such as an entry fee to create a barrier for the poor, and also credit history checks for players would be adopted by the government. He added the necessary legislation could be drafted and passed “in two years if they want to”. “The Vietnamese government has sent a lot of delegations to Macau, Australia and to Singapore to learn best practice,” said Mr Vinh.
Augustine Ha Ton Vinh
He added that the timing of the announcement on locals being admitted to integrated resorts would coincide with the likely opening of the Van Don project in Quang Ninh province east of Hanoi. Van Don Economic Zone already has a ferry service to Mong Cai, a town on the border with China. Vietnam’s politburo in June commissioned a study on Van Don that should be ready by mid-2014, said Mr Vinh. The same notional US$4 billion investment threshold
used for Ho Tram would also apply, he added. Industry sources have told Business Daily on a non-attributable basis they wonder why, assuming the Vietnamese government is acting in good faith, it would leave foreign investors – who have already spent many tens of millions of U.S. dollars on Ho Tram – floundering for business for up to three years, rather than fast tracking locals’ entry to help Ho Tram through its opening phase. M.G.
5
November 20, 2013
Macau
Loans for unfinished flats increase for third month But new mortgage lending for pre-sales is still only about one-fifth of what it was in May Tony Lai
tony.lai@macaubusinessdaily.com
N
ew mortgage lending for unfinished flats rose in September for the third month in a row, climbing out of a slump caused by new rules on pre-sales. The Monetary Authority of Macau said yesterday that lenders had approved 77.9 million patacas (US$9.8 million) in loans to buy flats off the plan in September, 76.4 percent more than in August. New mortgage lending for unfinished flats has been increasing steadily since it fell to 9.3 million patacas in June. In May it peaked at 380.6 million patacas. Since June the law has allowed the sale of unfinished flats only once the foundations of the building that will contain them are completed, and each flat is registered with the government. The rebound in new mortgage lending for unfinished flats is expected to run out of steam as the number sold decreases. Land, Public Works and Transport Bureau data show that the bureau has issued permits for the sale of space in 25 unfinished housing developments that will together contain over 5,350 flats. Midland Realty (Macau) Ltd estimates in its latest review of the
MOP77.9 mln New mortgages for unfinished flats in September
real estate market that over 95 percent of those flats have already been sold.
Outsiders are back Midland Macau chief executive Ronald Cheung Yat Fai said last week that he did not foresee the housing supply increasing much next year, because few big developments were under construction.
Banks granted 4.59 billion patacas worth of mortgages for housing of all sorts in September, 38 percent more than in August but 1.5 percent less than a year earlier. Nearly 7 percent of this lending was to non-residents, the greatest proportion this year, although the 318.5 million patacas lent to nonresidents was 38.3 percent less than a year earlier.
In October last year the government tightened restrictions on mortgage lending, especially lending to buyers from outside Macau. Banks granted 3.37 billion patacas worth of mortgages for offices and shops in September, 17.8 percent less than a year earlier. They granted 135 million patacas worth of those mortgages to nonresidents, nearly 90 percent more than a year earlier. The proportion of mortgage lending that was non-performing shrank to 0.04 percent in September from 0.06 percent in August.
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November 20, 2013 April 19, 2013
Macau Brought to you by
HOSPITALITY Fresh off the boat Most visitors to Macau from the mainland come overland. But the number and proportion of ferries arriving here that come from the mainland have been increasing lately. The number was 35 percent higher last year than in 2008. The proportion of arriving ferries that come from the mainland was decreasing until 2010, when it was 15.4 percent, but has been increasing since, reaching 19.5 percent last year. The number of vessels from the mainland arriving at the Taipa ferry terminal has been rising fast. Since the terminal opened in 2009 the number has at least tripled. Since 2009 the number of vessels from the mainland arriving at the Outer Harbour ferry terminal has risen by 38 percent and the number arriving at the Inner Harbour ferry terminal has risen by 5 percent. The figures for the first nine months of this year suggest that the growth will continue.
Furniture maker’s purchase of Macau exporter pays off Bright Swallow acquisition boosts Nova LifeStyle sales in North America Vítor Quintã
vitorquinta@macaubusinessdaily.com
N
evada furniture maker Nova LifeStyle Inc’s third-quarter revenue grew by 16 percent after it bought a Macau exporter of sofas. Nova LifeStyle’s sales were US$22.3 million (178.1 million patacas) in the third quarter of this year, US$3.1 million more than a year earlier. US$2.4 million of the sales were by Bright Swallow International Group Ltd, a sofa exporter that Nova LifeStyle bought in April. Nova LifeStyle paid Zhu Wei US$6.5 million for Bright Swallow, which sells Chinese-made sofas in Canada through The Brick Ltd, a furniture retailer with over 200 outlets. Nova LifeStyle told the OTC Markets in the United States that its third-quarter sales in North America had risen by 84 percent to US$12.6
million as it “aggressively expanded” sales in the US and Canada. Gross profit increased by 15 percent to US$4.4 million. The company said the acquisition of Bright Swallow had been “an excellent opportunity” to gain new retailing partners and increase revenue. Nova LifeStyle is planning for higher sales, setting up a new factory in the mainland Chinese city of Dongguan, where it makes most of its products. Bright Swallow, which is registered in the British Virgin Islands, moved to new offices in Hong Kong last month with a view to expanding its business there. Nova LifeStyle has Nova Furniture Macao Commercial Offshore Ltd here to export its products to other markets. Nova LifeStyle applied in August for a NASDAQ listing. Company
US$6.5 mln
Price Nova LifeStyle paid for Bright Swallow president Tawny Lam Thanh described this as “a logical next step”. She said in a written statement issued at the time: “We continue to grow the business organically as well as through mergers, as recently demonstrated by our acquisition of the Bright Swallow International Group Ltd.”
Mobile app store puts faith in smartphones Low-priced phones will remain mainland China’s favourites, says Sky-mobi
“S
The majority of ferry sailings from the mainland to Macau are from Wanchai in Zhuhai to the Inner Harbour. All other important ferry services from the mainland to the Inner Harbour had ended by 2011. So although the number of sailings from Wanchai has risen considerably, the traffic in the Inner Harbour has grown little. The service from Wanchai is now principally the alternative to travelling from Zhuhai overland, and is mainly for local visitors. Ferry services to the Outer Harbour and Taipa from other places in the mainland, apart from Shekou and Shenzhen, did not last long.
13.8 %
Increase in ferry sailings from Wanchai to Inner Harbour, 2012
tronger than expected” growth in revenue from smartphones was not enough to pull Chinese mobileapplication store operator Sky-mobi Ltd back to black. Sky-mobi posted a net loss of 4.4 million yuan (5.8 million patacas) in the third quarter this year, 62.4 percent smaller than in the same period of 2012. The company said it was closer to breaking even thanks to a reduction in operating costs as it “realigned away” from the mid-range feature phone business. Sky-mobi’s next target is the smartphone business, chairman and chief executive Michael Tao Song said in a late Monday statement. Even though it is based in Zhejiang province, the company usually holds its annual meetings in Macau. The next one is scheduled for December 6 at MGM Macau. The firm’s revenue decreased 16.6 percent from a year earlier to 116.6 million yuan, according to a filing to New York’s Nasdaq stock exchange. In contrast sales of mobile applications to smartphones more
than doubled from the second quarter to more than 39.2 million yuan, accounting for a third of Skymobi’s business. Mr Tao said long-time users of the firm’s Maopao online store are also “more comfortable migrating to smartphones using the familiar features we offer them”. “This same group of users is quickly developing increased digital consumption habits,” he added. Maopao – China’s biggest mobileapplication store by revenue – has been adding over 360,000 new users per day and now has more than 73.4 million users, the executive said.
Hangzhou-based Sky-mobi be lieves that its smartphone user visits and downloads will increase “steadily” in future quarters as it expands its user base. The firm is cutting on costs to maximise cash flow from its feature phone operations while “allocating more resources to our smartphone business,” said chief financial officer John Bi. Sky-mobi is opening bricksand-mortar and signing deals with telecommunication operators like China Mobile Ltd to open up the country’s low cost smartphone sector, said Mr Bi. According to market research quoted by Sky-mobi, in the first half of this year, more than half of smartphones sold were priced under 1,000 yuan and over 80 percent cost less than 2,000 yuan. Low-priced units will continue to grow fast and remain the largest smartphone segment in the mainland, said Mr Bi. Sky-mobi expects revenue for the current quarter to range from 90 million to 100 million yuan, he added. V.Q.
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77
November 20, 2013 April 19, 2013
Macau
Animal rights campaigners urge halt to circus festival Objections to animal performances mean Chimelong Ocean Kingdom opens on a sour note Stephanie Lai
sw.lai@macaubusinessdaily.com
C
himelong Ocean Kingdom opens on Hengqin Island today with tigers, elephants and dozens of other kinds of animals putting on a show – a show that distresses animal rights campaigners. Animal rights campaigners belonging to 31 groups petitioned the Guangdong provincial government on November 12. The petitioners, led by Beijing’s Nature University, called for a ban on performances by animals during the First China International Circus Festival, which is being held in the Chimelong Ocean Kingdom resort. They said making circus animals perform was cruel. The resort is a 20 billion yuan (26.22 billion pataca) hotel complex and theme park covering 388,344 square metres of Hengqin. It is being developed by Chimelong Group Co Ltd, a Guangzhou conglomerate. The resort is near a
Rendering of Chimelong Ocean Kingdom
commercial area that is trying to attract Macau enterprises to run 70 stalls, which would concentrate on selling food and souvenirs. Chimelong Group said last month that it expected the first phase of the resort to draw over 20 million visitors a year and bring more than 50 billion yuan worth of economic benefits to Hengqin.
The New York Times has reported that the petition was addressed to Minister of Culture Cai Wu, Guangdong Governor Zhu Xiaodan and Chinese Acrobatic Association president Bian Faji. The Ministry of Culture, the Guangdong provincial government, the Chinese Acrobatic Association and Chimelong Group are partners in the circus festival.
The festival begins today and is due to end on December 1.
Deaf ears Business Daily tried to get comment from the festival organising committee and the Chimelong Group spokesperson but was unable to reach either during office hours. The festival’s website says
30 circuses from 17 countries will perform in the Chimelong resort’s International Circus Town, where the arena can seat 2,700 people. The objections of the animal rights campaigners may have fallen on deaf ears. The Chinese-language Macao Daily News has reported that tickets for seven performances during the circus festival are sold out. During the festival Zhuhai Holdings Investment Group Ltd will run ferries to the Chimelong resort from Shekou in Shenzhen, and from Dong’ao Island and Jiuzhou Port in Zhuhai, but not from Hong Kong. Visitors to the Chimelong resort from Hong Kong will have to go through Macau. Zhuhai Holdings Investment Group chief executive of Huang Xin has said passport control arrangements preclude a direct ferry service between Hong Kong and Hengqin.
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November 20, 2013 April 19, 2013
Greater China
Reform plan setting scene for debt c Leaders tightening control over local finances to limit risk of debt crisis
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hina’s Communist Party signalled a bigger focus on fiscal concerns during President Xi Jinping’s tenure, setting the scene for a clampdown to control the finances of indebted regional authorities. Local governments will be able to sell bonds to fund construction and officials will be rated on measures including borrowing levels, the party said on Friday. Tightening control over local finances and allowing new channels for funding would limit the risk of a debt crisis hobbling the world’s second-biggest economy, while corruption arrests since Xi became party chief may signal that officials ignore directives at their peril. The scale of regional debt woes is set to be shown in an audit that the Finance Ministry said was due last month although it has yet to be released. “It requires a lot of political brute force and it’s something you can only achieve if you are extremely vigorous,” said Arthur Kroeber, Beijingbased managing director
of economic research firm GaveKal Dragonomics, referring to efforts to ensure local governments toe the line. “The localities have so much power and their incentives are so nonaligned with the party’s grand objectives that it’s a real problem.” The anti-corruption campaign started by Mr Xi when he took over as party chief last year may be a way of telling officials and state-company bosses, “Look, this is the way it’s going to be, and if you don’t like it, we have a lot of space in the jails for you,” said Mr Kroeber, who is also a fellow at the BrookingsTsinghua Centre for Public Policy in Beijing. In a November 1 speech on local-government reform, Premier Li Keqiang said some authorities, in their own selfinterest, had only paid lip service to changes demanded by the central government, according to a transcript published in the China Daily newspaper. Local authorities must not be allowed to “play tricks or
conduct reform as a mere formality,” he said.
Spending, taxes The fiscal proposals were agreed to at a four-day Communist Party meeting ending November 12 that laid out economic and social reforms for the next decade, with pledges to reduce the state’s role in the economy and make markets “decisive” in allocating resources. Among proposed changes are making budgets more transparent, improving transfer payments, setting up risk-warning and debtmanagement systems for central and local governments and speeding up legislation on a property tax, according to the document. Currently local governments are responsible for 80 percent of spending while getting about 40 percent of tax revenue, according to the China 2030 report published last year by the World Bank and Development Research Centre of the State Council. “Right now the situation
Changes to the hukou system would put a bigger burden on city and town governments William Overholt, Harvard University Asia Centre
system would put a bigger burden on city and town governments and with all these social services to offer it would just sink the finances of localities that are already seriously strained.” Fiscal and tax reforms will broaden local governments’
is totally unfair for local governments – they have to bear most of the burden and they get a small proportion of the tax revenue,” said William Overholt, senior fellow at the Harvard University Asia Centre in Cambridge, Massachusetts. “Changes to the hukou
Securitisation plan aims to slow rapid money growth Success could make ABS ‘a regular financial tool’, trader says Lu Jianxin and Gabriel Wildau
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eaders in China are expanding asset securitisation on an unprecedented scale as the government looks to increase bank liquidity without expanding the money supply, market sources say. Regulators plan to grant quotas totalling 300 billion yuan (US$49 billion) to 400 billion yuan for firms to sell asset-backed securities (ABS) in coming years also as a tool to shift risk away from the banking system, reducing the chances of a financial crisis as economic growth slows and bad loans rise, market sources say. The quota will equal the total outstanding value of the central bank’s Short-term Lending Facility, a channel through which the central bank provides liquidity to the banking system, modelled after the U.S. Federal Reserve’s discount window. “The scale of the new round of the ABS programme is set to reach a level that will have a real impact on the market and economy for the first time,” said a senior money market trader at a major Chinese state-owned bank in Shanghai. China Development Bank, the policy bank that funds infrastructure projects, on Monday sold 8 billion yuan in securities backed by the bank’s loans to the state railway operator. CDB is likely to take a large share of the expanded ABS quota. The People’s Bank of China also
KEY POINTS New ABS quotas worth up to 400 bln yuan – sources Securitisation seen as tool to reduce money supply growth ABS pilot launched in 2005 but slow progress so far Banks take the lead, non-bank issuers to follow Mostly banks have conducted ABS deals since 2005
said on Monday that banks should start identifying assets suitable for securitisation with ABS deals based on small business, rural development, and infrastructure loans most likely to win approval.
Slow start Even after the expansion, however, the ABS programme will still be tiny compared with China’s money supply, implying huge potential for future growth. China’s broad M2 money supply reached 107.7 trillion yuan by the end of September, up from 40.3 trillion at
end-2007, fuelling worries that rapid money growth could fan consumer inflation and push up already-frothy property prices. ABS are securities created by packaging together a pool of underlying assets, typically small loans that are difficult to sell individually. Enabling banks to sell off loan assets that would otherwise sit on their balance sheets until maturity will provide fresh liquidity to these firms, allowing them to support the economy with new loans without the central bank adding liquidity by expanding the money supply. “Success will likely make ABS
a regular financial tool in China, revitalising huge amounts of static assets, while the product is still officially in an experimental period for now,” said the trader. China’s cabinet announced in August that it would aggressively expand an ABS pilot scheme. Among developments of the new round of securitisation, Reuters reported last month that foreign banks have been invited to apply for permission to issue ABS this month, giving them their first access to the programme since it was launched. Reuters
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clampdown
sources of income, helping to reduce local fiscal risk “and return local government finances to a more sustainable path,” Liu Li-Gang and Zhou Hao, China economists at Australia & New Zealand Banking Group Ltd, wrote in a report yesterday.
CLP to buy stakes in two Exxon units
“At this stage, the local government debt is still manageable as the local governments still own a large amount of assets on their balance sheet.” Mr Liu and Mr Zhou estimate that the audit of local government liabilities ordered by the State Council in July will show total debt of 14 trillion yuan (US$2.3 trillion). Liu Yuhui, a researcher at the Chinese Academy of Social Sciences, estimated in September the debt could be as high as 20 trillion yuan. Both figures would be higher than the end-2010 total of 10.7 trillion yuan given by the National Audit Office in a report published in June 2011, which amounted to 27 percent of gross domestic product. The financing arms of municipal authorities, known as local government financing vehicles, owed banks 9.7 trillion yuan, or 14 percent of all loans in mid-2013, according to figures from the China Banking Regulatory Commission.
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LP Holdings Ltd, Hong Kong’s biggest electri city provider, agreed to pay HK$14 billion (US$1.8 billion) for stakes in two Exxon Mobil Corp units, adding three power plants in the city. CLP will buy a 30 percent stake in Castle Peak Power Co, which owns the plants in Hong Kong, for HK$12 billion, the company said yesterday in a statement. It will also pay HK$2 billion for a 51 percent stake in another Exxon unit, Hong Kong Pumped Storage Development
Co. Additionally, Exxon will sell a 30 percent stake in Castle Peak to China Southern Power Grid Co. The transaction will put CLP “in a position to manage better the coordination of its Hong Kong generation business with its transmission and distribution business,” the company said in the statement. The deal increases CLP’s stake in Castle Peak’s 6,908 megawatt generating capacity to 70 percent. Hong Kongbased CLP first disclosed in March 2012 that it and China
Bloomberg News
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AG’s Audi in global deliveries by the end of the decade. Success in the region was hampered in the past by separate sales organisations for imported and locally produced cars, which led to price cuts as the two competed with one another for customers. Daimler announced plans last December to fold sales into one entity jointly owned with BAIC. The Stuttgartbased manufacturer also promoted former truckdivision executive Hubertus Troska to the management board, with responsibility specifically for China to underscore the market’s importance. As part of the deal between the two partners, BAIC will increase ownership in the production joint venture to 51 percent from 50 percent currently, and Daimler will raise its stake in the integrated sales partnership by 1 percent to 51 percent. Mr Zetsche is backing his effort to regain the top sales position that Mercedes lost to BMW in 2005 by rolling out 13 new models without a predecessor. The model push includes the addition of the four-door CLA coupe last April and the GLA compact sport-utility vehicle next year, which will also be locally produced in China. Bloomberg News
Bloomberg News
HK advisers propose Qianhai yuan investment programme
Daimler buys Beijing Auto stake ercedes-Benz an nounced a sweeping overhaul of operations in China last December as its sales in the world’s largest auto market sputtered out. A year later, the carmaker’s deliveries in the country are once again on the rise and propelling global growth that’s outstripping rivals. The reorganisation has included naming a new China chief who sits on the management board, adding dozens of dealerships, opening an engine factory in the country and merging competing sales organisations. The result: 10-month China deliveries at Mercedes are up 8 percent, compared with growth of just 1.5 percent last year. The revamp got a further boost yesterday when Daimler AG, Mercedes’s parent, completed the purchase of a 12 percent stake in joint-venture partner Beijing Automotive Group Co, Xu Heyi, chairman of the Chinese automaker, said. “Mercedes is on the right track in China,” said Frank Biller, a Stuttgart, Germanybased analyst at LBBW. “Sales have picked up since June and they seem to be gaining ground.” Catching up in China is crucial to chief executive Dieter Zetsche’s target to surpass Bayerische Motoren Werke AG and Volkswagen
Southern were in talks with Exxon to buy Castle Peak. In its preliminary 2012 annual report, CLP said negotiations with Exxon had been “protracted,” citing a “considerable gap” in valuation between the parties. CLP’s power unit applied to raise electricity tariffs in in the city next year, according to a report this month by The Standard newspaper. CLP raised prices by 5.9 percent in January, the newspaper said.
Qianhai is one of the smallest experimental zones on the mainland
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egulators should let financial institutions in Shenzhen’s Qianhai special zone invest yuan overseas, boosting Hong Kong’s holdings of the Chinese currency, a Hong Kong government-advisory body proposed. The Financial Services Development Council suggested China sanction a quota of 50 billion yuan (US$8.2 billion) and US$5 billion for Qianhai under the Qualified Domestic Institutional Investor programme. “Most financial institutions which engage in the renminbi business in Hong Kong consider the lack and instability of renminbi liquidity the biggest bottleneck of the offshore renminbi
market,” the council said in a research paper published late on Monday. The extended programme, or QDII3, must abolish and simplify approval procedures for individual investment products, and quotas should be allocated transparently, the council said. The People’s Bank of China identified QDII2, which will allow individuals to invest in overseas capital markets, as among its major goals for 2013. The central bank has approved a plan for trials in Guangzhou and Shenzhen, Shanghai Securities News reported in June, citing Wang Jingwu, head of the central bank’s Guangzhou branch. There haven’t been any public statements on QDII3.
China chose the Qianhai district of Shenzhen, a city that borders Hong Kong, as a testing ground for freer use of the yuan. Deposits in the Chinese currency in Hong Kong rose 21 percent this year to a record 730 billion yuan in September, after climbing 2.5 percent in 2012, Hong Kong Monetary Authority data showed. A Communist Party meeting that ended last week decided to accelerate convertibility of the yuan and the freeing-up of interest rates. It decided also to improve treasury yield curves and let qualified private investors set up small- to mediumsized banks. The Hong Kong council proposed allowing offshore banks to participate in China’s domestic repurchase market and to be permitted to remit the yuan borrowed offshore. Hong Kong lenders must be able to sell “sizable” certificates of deposit and yuan bonds in the onshore interbank market, it said. Companies from emerging markets such as Brazil, India and Russia can be encouraged to sell yuan securities, known as Dim Sum bonds, in Hong Kong, the council said. Hong Kong Chief Executive Leung Chun Ying welcomed the FSDC report, saying it provides concrete proposals for facilitating diversification of the financial services industry and enhancing the city’s position and functions as an international financial centre. Bloomberg News
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Foreign investment keeps steady growth October’s inflow up 1.2 percent to US$8.4 billion, ministry data show
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hina’s foreign direct investment inflows rose 5.8 percent in the first 10 months of 2013 from a year ago, extending gains since March and underlining a reviving appetite from global investors as the world’s second-largest economy gained traction. The Commerce Ministry said yesterday that China drew US$97 billion in foreign direct investment between January and October, with October’s inflow up 1.2 percent on year earlier at US$8.4 billion. FDI from the top 10 Asian economies, including Hong Kong, Japan and Singapore, rose 7.2 percent to US$83.6 billion for the ten months. “We can see that foreign investment from Asian countries, the European Union and the U.S. all kept relatively fast growth in the first 10 months,” Commerce Ministry spokesman Shen Danyang told a regular monthly briefing. Investment from the European Union rose 22.3 percent year-on-year in the first 10 months, while inflows from the United States rose
Inflows into manufacturing industries dropped to US$38.3 bln
12.4 percent. FDI is an important gauge of the health of the external economy, to which China’s vast factory sector is oriented, but it is a small contributor to overall capital flows compared with exports, which were worth about US$2 trillion in 2012. FDI inflows in China have maintained steady
growth every year since the country joined the World Trade Organisation in 2001. Inflows reached a record high of US$116 billion in 2011 before dipping slightly to US$111.7 billion in 2012. The ministry has said the annual FDI amount in 2013 would remain at a similar level to that in 2012. Foreign investment in
China’s service sector rose 13.9 percent to US$49.8 billion, while inflows into manufacturing industries dropped 5.3 percent to US$38.3 billion. China’s outbound direct investment from non-financial firms between January and October totalled US$69.5 billion, up 20 percent from a year earlier.
The ministry said about 90 percent of the total outbound investment went to five industries: commercial services, mining, wholesale and retail, manufacturing and construction. China’s outward investment in the real estate sector rose 95 percent to US$1.7 billion, while investment outflows into construction surged 426 percent during the same period to US$5.1 billion. Despite steady growth in investment, the spokesman sounded a cautious tone on the export outlook, citing unfavourable factors such as uncertain demand, rising wage and environmental costs, fast yuan appreciation and fierce competition. “China’s exports will continue to face difficulties from many aspects for the rest of the year and as well as in the relatively longer time frame,” Mr Shen said. But he added that it is “not completely impossible” to achieve the government’s 8 percent annual target for trade growth this year. Reuters
Beijing to ease IPO process but intensify audits
Xiao Gang says regulator will not ‘sit idly’
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hina’s top securities regulator reiterated commitments to easing the government’s control over the initial public offering (IPO) process yesterday, but said the government will also intensify its auditing of companies hoping to list. “We will unswervingly push forward stock issuance registration system reform and truly give power to the market and investors,” Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC), told a financial forum, according to remarks posted on the commission’s website. “This does not mean that the CSRC will sit idly, which will lead to more junk stocks,” he said. The CSRC has implemented a de facto freeze on IPOs since late 2012. While the stated reason for the suspension of approvals for new initial public offerings was to clean up fraud by forcing underwriters review the accuracy of pending IPO applications, the ban was widely understood to be an effort to prop up the chronically weak stock market by restricting the supply of new shares.
Lifting the ban would signal that policymakers are willing to abandon such market interference. Mr Xiao’s comments could imply the government is going to take its time before doing so. Detailed reform plans released on Friday after a party meeting pledged to “push forward stock issuance registration system reform”, suggesting firms seeking to tap equity markets will no longer depend on official approval. The reform will bring China’s IPO vetting process closer to that in developed countries where firms register their IPOs and go through a rigorous audit before listing. Mr Xiao highlighted the need for reforms as the stock market is marred by a host of problems, including artificially high share issuance prices, high price-to-earning ratios and the use of dominant positions by big shareholders to harm small investors. He also said China will allow more qualified foreign investors to enter China’s stock market, but conditions are not ripe for China to launched a long-awaited international board. Reuters
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Indonesia anger at Australia spy row Abbott balks at apology as Jakarta warns spy claims hurt ties
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ndonesia’s president says ties with Australia have been “damaged” by reports that Canberra spied on his phone calls and those of his ministers. Susilo Bambang Yudhoyono said it was a “hurtful action” and that Australia had “belittled” the row. Jakarta would review cooperation, he said. Australia’s Prime Minister Tony Abbott said he won’t apologise as Mr Yudhoyono recalled his envoy from Canberra. “Australia should not be expected to apologise for the steps we take to defend this country,” Mr Abbott told parliament in Canberra yesterday. He said he regretted any embarrassment to Mr Yudhoyono, while defending security measures implemented by past governments. Mr Yudhoyono brushed off earlier efforts to defuse tensions, saying on his official Twitter feed that he will review areas of cooperation with Australia and is awaiting an official response to the spying reports. “I also regret the Australian prime minister’s statement that downplays the tapping on Indonesia without a sense of remorse,” Mr Yudhoyono said. “The U.S. and Australia’s action really hurts the strategic partnership with Indonesia.”
The U.S. and Australia’s action really hurts the strategic partnership with Indonesia Susilo Bambang Yudhoyono, Indonesia’s President
Mr Yudhoyono’s mobile phone activity was tracked for 15 days in August 2009, the Australian Broadcasting Corp said on its website on Monday, citing documents leaked by U.S. whistle blower Edward Snowden. At least once, intelligence agencies tried to listen to a conversation although the call lasted less than a minute and couldn’t be tapped, it said. The claims could complicate Mr Abbott’s bid for a free-trade agreement with Australia’s neighbour, with whom two-way trade reached A$14.6 billion (US$13.7 billion) last year. The Abbott government, elected two months ago, is seeking Jakarta’s help to stop asylum seekers attempting to reach Australia by boat.
“We’re being naive if we think nations don’t spy on each other but it’s never nice to be caught out,” said Zareh Ghazarian, a political analyst at Melbourne’s Monash University. “It will frustrate both governments and could lead to Indonesia taking a more hard line on bilateral negotiations.” Indonesia, which has the world’s largest population of Muslims, is recalling its ambassador from Canberra for talks, Mr Yudhoyono said. “This is a stern diplomatic step.” “It is nothing less than an unfriendly act which is having already a very serious impact on our bilateral relations,” Foreign Minister Marty Natalegawa told reporters in Jakarta. “It’s not a smart thing to do.
It violates every single decent and legal instrument that I can think of.” The relationship between the two nations has improved under Mr Yudhoyono’s leadership, although he can’t run for a third term in elections due next year. “It’s in no one’s interests to do anything or to say anything that would jeopardise that relationship, and certainly I’m not going to,” Mr Abbott said yesterday. Indonesia will review cooperation on information exchange with Australia, Djoko Suyanto, coordinating minister for politics, law and security, said. That includes the assignments of Australian officials stationed in that country’s embassy in Jakarta, he said. Bloomberg News
Tata writing down assets after buying spree
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yrus Mistry, chairman of Tata Sons Ltd, is writing down the value of some of the US$15.5 billion assets purchased by his predecessor over two decades to boost the allure of India’s biggest corporate group. Less than a year after taking over as chief, the billionaire scion has pared the value of overseas assets by at least 95 billion rupees (US$1.5 billion) after Europe’s record recession and a global slowdown eroded the value of U.K. steelmaker Corus Group Plc and New York’s Pierre hotel. The US$100 billion group has more than 100 companies, including Asia’s top software developer by value, the world’s second-largest soda ash maker and Starbucks Corp’s India partner.
Reducing the market price of the assets may make them attractive to investors should Mr Mistry choose to sell them, said Shishir Bajpai, a fund manager at IIFL Wealth Management Ltd. in Mumbai. Mistry’s challenge is to revive some of the unprofitable companies in the group as he helps realise his predecessor Ratan Tata’s vision of boosting sales fivefold in a decade. “It makes you feel more positive as after a spring cleaning,” Alan Greene, a Singapore-based analyst at Moody’s Investors Service, said on Tata Steel Ltd’s impairment charge. “If there are overvalued assets on the balance sheet, you may end up hanging onto them. If you are not sure of some of the assets, it
creates uncertainty.” Under Mr Mistry, three of the biggest Tata companies have impaired their assets four times. Tata Steel Ltd, India’s biggest producer of the alloy which bought Corus for US$12.8 billion in 2006, took an 83.56-billionrupee writedown for the quarter ended March 31, the company had said in a May 24 statement. A few days later, Tata Chemicals Ltd shaved off 4.84 billion rupees “primarily relating to the European operations”. Indian Hotels Company Ltd, the unprofitable owner of New York’s Pierre hotel, on November 8 wrote down 2.87 billion rupees, citing net worth erosion caused by “global recessionary conditions”. It had already
Tata Steel took an 83.56-billion-rupee writedown earlier this year
pruned those assets by 3.73 billion rupees in May. “There exists a recognition that in its desire to internationalise, the group overpaid for some of the assets or got its timing wrong,” Nick Paulson-Ellis, the Mumbai-
based Indian country head for Espirito Santo Securities, said in an e-mail. “They were caught at the wrong end of the demand cycle, and there is now a need to write the assets down.” Bloomberg News
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Asia Sony turns to Bain to find cost cuts Sony Corp, which meets with investors this week about improving the company’s entertainment unit performance, has hired Bain & Co to identify US$100 million in cuts, a person familiar with the situation said yesterday. Sony chief executive Kazuo Hirai is hosting a conference tomorrow at the company’s studios in Culver City, California, to discuss his strategy for entertainment. The cuts will include job losses, said the person, who asked not to be identified because the moves haven’t been announced publicly. Mr Hirai is seeking to lower costs after reporting a second-quarter loss that led Moody’s Investors Service to warn Sony’s debt rating could be cut to junk. The Tokyo-based company has faced criticism over the profitability of its entertainment division, with billionaire Daniel Loeb of Third Point LLC calling for a partial sale of the business. “Sony is trying to appeal to investors and is making an effort to improve the entertainment business’s profitability,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co in Tokyo. The cuts are part of a nearly four-year process of increasing fiscal discipline, Charles Sipkins, a spokesman for Sony Pictures, said in an e-mailed statement. The entertainment division is conducting a review of its business to identify further efficiencies, according to the e-mail.
Petronas abandons Batista’s OGX OGX Petroleo & Gas Participacoes SA, the Brazilian explorer that filed for bankruptcy protection last month, lost Malaysia’s Petroliam Nasional Bhd as a financial backer for its most promising field. Petronas, as the company is known, cancelled a contract to buy a 40 percent stake in two offshore exploration blocks that include the Tubarao Martelo field, Rio de Janeiro-based OGX said in a statement yesterday. The company, controlled by former billionaire Eike Batista, said it’s studying its legal options. OGX was counting on US$850 million from the Petronas sale to develop the Martelo field where it plans to start output this year. The company, which expects to run out of cash in the last week of December, needs about US$250 million to sustain operations through April, it said in an October 23 presentation to Rothschild, the adviser hired by its bondholders. Petronas had set as a precondition to the Martelo deal that OGX restructure its debt, Shamsul Azhar Abbas, chief executive of Malaysia’s state energy company, said in August.
Spending on housing fuels Debt pile rose this year to 109 percent of disposable income
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he debt burden carried by South Korean households edged up this year as debts grew at a brisker pace than incomes, a survey separate survey showed yesterday, putting pressure on policymakers aiming to maintain a steady recovery in Asia’s fourth-largest economy. Total debt at South Korean households grew by an average 6.8 percent to 58.18 million won (US$55,000) as of March this year, of which 39.67 million won was in the form of financial debt, the survey by the central bank and two top local authorities found. In comparison, annual disposable income rose by 4.9 percent in 2012, resulting in the ratio of financial debt to disposable income rising to 108.8 percent in this year’s survey, from 106.0 percent in 2012. “Pressure on households has grown as South Koreans have increased their debt in comparison to the assets they carry, resulting in worse financial soundness,” said an official at the Bank of Korea. South Korean households carry one of the highest debt burdens in
the world as most are saddled with large mortgages – the survey showed 66.4 percent of households’ tangible assets were in the form of real estate. The survey found 60.7 percent of South Korean households carry financial debt, while 56.8 percent of all households said their debt status was not expected to change within a year. “I don’t see the household debt issue blowing up into crises that were seen in the U.S. or Japan,” Bank of Korea governor Kim Choong-soo said to reporters during a central bank event last week, referring to the U.S. subprime mortgage crisis in 2008 and Japan’s asset bubble collapse in the early 1990s. The survey, the second of its kind, was carried out by the Bank of Korea, Statistics Korea and the Financial Supervisory Service throughout 2012 and partially during the first quarter of 2013 in 20,000 households across the nation. The numbers will be revised once each year after the first results are published, the joint report said. South Korea’s top government think tank said also yesterday that
Japan won’t set dates for restarting nuclear reactors Delays a setback for plan to drive economy out of stagnation
Singapore Q3 GDP likely up 5.3 Pct Singapore’s economy likely expanded more than initially expected in the third quarter as electronics manufacturing rebounded, lending weight to the view that full-year growth could exceed the government’s target range of 2.5 percent to 3.5 percent. Gross domestic product grew 5.3 percent in July-September from a year earlier, according to the median estimate of 15 economists surveyed by Reuters. That would be higher than the official advance estimate of 5.1 percent reported last month. Third-quarter GDP was unchanged from April-June on a seasonally adjusted and annualised basis, the poll showed, contrary to the advance estimate of a 1.0 percent contraction. The data will be reported tomorrow. September industrial production figures, which beat economist estimates, indicated the manufacturing sector grew 5.5 percent on year in the third quarter, a full percentage point higher than the advance estimate of 4.5 percent, said Citigroup economist Kit Wei Zheng. “All else equal, our estimates suggest the upward revision in manufacturing alone could bring Q3 GDP growth up to 5.3 percent year-on-year,” he said in a note to clients.
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apan’s regulator said it has no fixed schedule to complete safety checks at idled atomic plants, possibly delaying reactor restarts and the supply of cheaper energy the government wants to drive economic growth. Speculation on when some of Japan’s 50 reactors would restart increased this year as the Nuclear Regulation Authority introduced stricter safety tests in July in response to the 2011 nuclear disaster in Fukushima. NRA chairman Shunichi Tanaka said at the time the inspections would take about six months, suggesting some atomic plants may restart in January.
The NRA now says Mr Tanaka was speaking generally and not citing a set schedule. “We are not sure when inspections will complete because the period of inspections depends largely on operators’ response,” NRA spokesman Tadashi Yamada said in an e-mailed response. “We do not have a time frame.” Any delays will be a setback for the government of Prime Minister Shinzo Abe, which wants to restart some of the reactors to help drive Japan out of decades of economic stagnation. Delays also may foster growing public disapproval of nuclear power and dissent within his own party on the issue.
Shutting Japan’s reactors after Fukushima has caused the nation’s trade deficit to balloon because of the cost of importing fuels such as liquefied natural gas, oil and coal for running replacement power plants.
Wealth loss The combined fuel costs for the country’s nine regional power companies will almost double to 7.5 trillion yen (US$75 billion) this fiscal year ending March 31, 2014, from three years earlier, the Ministry of Trade, Economy, and Industry estimated in an October 9 report. The estimate assumes no reactors will restart by March. Additional fossil-fuel imports would push Japan into its third consecutive annual trade deficit in the year ending in March, the government-affiliated Institute of Energy Economics, Japan, said in an August report. “The industry’s fuel costs for thermal plants have almost doubled from the level prior to the earthquake, causing an outflow of Japan’s national wealth,” Makoto Yagi, chairman of the Federation of Electric Power Companies of Japan, said at a press conference. Nuclear power has a role to play in Japan’s energy master plan because the country’s energy self-sufficiency rate is only about 4 percent, said Mr Yagi, who is also president of Kansai Electric Power Co, the country’s second-biggest utility and the one most dependent on nuclear power. He declined to comment on the progress of safety checks at reactors. 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, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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S.Korean household debt
More than 60 percent of South Korean households carry financial debt
the central bank should retain its accommodative stance and keep the policy interest rate around the current level of 2.50 percent to ensure continued economic recovery. Asia’s fourth-largest economy is now expected to grow 2.8 percent this year and 3.7 percent next year, the Korea Development Institute (KDI) said in a report, in line with the central bank’s latest forecasts. The think tank also forecast annual average inflation of 1.1 percent this year and 2.0 percent next year. In comparison, the central bank sees average annual inflation of 1.2 percent this year and 2.5 percent next year. “Considering the latest economic conditions, monetary policy should be conducted with the benchmark interest rate kept around current levels (of 2.50 percent) in the absence of a significant, unexpected shock,” the KDI said, arguing that 2014’s growth will still remain below potential. The comments come as the South Korean economy shows signs of recovery. Third-quarter economic growth stood at a seasonally adjusted 1.1 percent, beating expectations, while
Bangladesh workers die in protests Unsafe factories, low wages have sparked labour tensions
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t least two people died and 30 were injured as Bangladesh garment workers protesting the second-lowest wages in Asia clashed with police during a new round of demonstrations that shuttered about 100 factories. Thousands of workers, demanding a higher monthly salary of 8,000 taka (US$103), walked out of their factories and clashed with the police in the industrial zone of Gazipur, according to Mohammad Abdul Barek, an assistant sub-inspector of police. “We are in a deep crisis,” Abdus Salam Murshedy, president of the Exporters Association of Bangladesh, said by phone. “I don’t find any reason why the workers are still taking to the streets. Many factory owners find
it difficult to continue production for fear of violence.” Unsafe factories and wages higher than only Myanmar in Asia have sparked labour tensions in Bangladesh’s US$20 billion garment industry, which supplies global retailers with cheap apparel. The government last week increased the minimum wage to 5,300 taka, below the amount unions are demanding. The demonstrations follow last week’s labour unrest that shut about 250 factories in the industrial zone of Ashulia. The South Asian nation has struggled to rebuild its image after the April collapse of the Rana Plaza factory complex killed more than 1,100 people in the country’s worst industrial disaster.
Thousands of workers walked out of their factories this week
The two who died in the industrial zone outside the capital Dhaka were workers, said Mr Barek, the assistant sub-inspector of police, without providing details on the cause of the deaths. International retailers have been under pressure to improve conditions across the country’s apparel industry. In September, thousands of demonstrators demanding higher wages forced the closure of 400 of the country’s 5,000 clothing factories. Monthly manufacturing wages in Bangladesh average US$74, only higher than the US$53 workers receive in Myanmar, according to an Asia survey by the Japan External Trade Organisation released in December. Bloomberg News
October’s exports grew by an annual 7.2 percent amid firm demand from the United States and the European Union. The central bank kept the policy rate unchanged at 2.50 percent on Thursday for the sixth consecutive month as growth continues to recover, and market analysts mostly expect the central bank to stand pat until late next year. The think tank said the economy should continue recovering next year, citing a pickup in exports as well as improved domestic demand in line with stronger growth and the won’s appreciation. KDI expects the won’s average real effective exchange rate to appreciate by 6 percent in 2014. It also said the central bank should consider lowering its medium-term annual inflation target band of between 2.5 percent and 3.5 percent, arguing that the actual inflation rate should not be allowed to fall outside of the central bank’s target band for an extended period of time. The think tank also played down the risks posed by U.S. Federal Reserve’s expected tapering of its bond-buying stimulus, arguing that the effects of such an event would be limited and that need for a rapid monetary policy response appears small. The institute said fiscal policy should remain growth-supportive but recommended the government moves to balance the budget if the economy recovers next year as expected, to ensure its finances remain healthy. Reuters
Air New Zealand stake sale raises US$300 mln N
ew Zealand said yesterday it had raised NZ$365 million (US$304 million) from the sale of a stake in the country’s flag carrier to local and offshore investors. The centre-right government announced Sunday it would reduce its stake in Air New Zealand Ltd from 73 percent to 53 percent as part of a plan to partially sell state assets. “The sell down of shares has returned NZ$365 million, which will now be allocated to the Future Investment Fund so we can keep building new assets like schools and hospitals while controlling government debt,” Finance Minister Bill English said. He said more than 221 million shares were offloaded at NZ$1.65 each, the same price the company was trading at on Friday before they went into a halt. The sale was carried out just days ahead of a national referendum on the sale of government assets, which has so far seen the disposal of 49 percent of electricity generating companies Mighty River Power Ltd and Meridian Energy Ltd. Genesis Energy LP is expected to be the final asset on the block, with State-Owned Enterprises Minister Tony Ryall saying the selloff programme had raised NZ$4.0 billion so far. “Air New Zealand is a strong New Zealand brand recognised around the world [and] we are pleased with the high level of interest in Air New Zealand shares,” he said. Shares in Air New Zealand are expected to resume trading today. AFP
14 14
November 20, 2013 April 19, 2013
Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 91.5
61.20
27.8
60.82
27.6
90.9
60.44
27.4
60.06
90.3 27.2
59.68 Max 61.15
average 59.772
Max 58.50
Min 59.30
average 57.258
Last 59.65
Min 56.85
Last 57.00
59.30
Max 91.45
average 90.306
PRICE
Min 27.05
Last 27.10
27.0
30.0
58.16
24.66
29.9
57.82
24.52
29.8
57.48
24.38
29.7
57.14
24.24
29.6
56.80
Max 24.8
average 24.279
DAY %
YTD %
(H) 52W
Min 24.1
Last 24.1
(L) 52W
92.98
-0.053746103
-0.417693049
109.6999969
85.51999664
BRENT CRUDE FUTR Jan14
108.14
-0.304231585
3.552618979
113.3099976
96.13999939
GASOLINE RBOB FUT Dec13
265.05
-0.237127371
4.169941833
290.3199911
241.5999889
GAS OIL FUT (ICE) Dec13
905.25
-0.549299643
0.415973378
973
837
3.625
0.221177772
-8.181357649
4.744000435
3.378999949
NY Harb ULSD Fut Dec13
291.41
-0.27718842
-2.339220483
321.1599827
276.4999866
Gold Spot $/Oz
1275.3
-0.6869
-23.3806
1754.46
1180.57
NATURAL GAS FUTR Dec13
Silver Spot $/Oz
20.3325
-1.5351
-32.4726
34.3838
18.2208
Platinum Spot $/Oz
1412.95
-1.6243
-6.905
1742.8
1294.18
Palladium Spot $/Oz
717.73
-1.184
2.5827
786.5
629.75
1783
-0.446677834
-13.98938736
2184
1758
LME ALUMINUM 3MO ($) LME COPPER 3MO ($)
6975
-0.499286733
-12.05396545
8346
6602
LME ZINC
1885
-0.737230121
-9.375
2230
1811.75
13590
-1.735357918
-20.33997655
18770
13205
15.875
0.189334175
2.98410639
16.80999947
14.91500092
3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Jan14
421
0
-30.92698934
654.75
420.25
WHEAT FUTURE(CBT) Mar14
653.5
0.153256705
-21.43071836
904.75
647.75
SOYBEAN FUTURE Jan14
1283
-0.349514563
-1.986249045
1406
1169
109.55
0.091365921
-31.68069847
173.25
104.1499939
17.79
0.225352113
-13.55685131
20.71999931
16.69999886
Mar14
COFFEE 'C' FUTURE Mar14 SUGAR #11 (WORLD) Mar14 COTTON NO.2 FUTR Mar14
24.10
77.97
0.334577274
-1.813373631
90.61000061
76.58999634
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 29.95
average 28.814
Min 29.55
Last 29.60
29.5
World Stock Markets - Indices
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
0.9429 1.611 0.9125 1.3512 99.76 7.985 7.7523 6.0933 62.05 31.576 1.2443 29.47 43.585 11603 94.055 1.23305 0.83877 8.2354 10.7889 134.79 1.03
0.3299 0 0.0329 0.0222 0.2606 0.0038 0.0052 -0.0213 0.5882 -0.019 0.1607 0.2613 0.1032 0.2758 -0.0691 0.0073 -0.0274 -0.1336 -0.0093 0.2374 0
-9.1443 -0.408 0.3178 2.4412 -13.6929 -0.0225 -0.0219 2.2533 -11.3699 -3.1543 -1.8404 -1.4829 -5.9195 -15.5994 -5.0268 -2.0737 -2.7838 -0.2174 -2.396 -15.743 -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 1.2736 81.09 7.9818 7.7498 6.0732 52.89 28.56 1.2168 28.913 40.54 9590 84.288 1.20302 0.80059 7.8281 10.1705 103.54 1.0289
Macau Related Stocks NAME ARISTOCRAT LEISU CROWN RESORTS LT
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
VOLUME CRNCY
4.64
-0.2150538
47.30158
5.12
2.6
685567
16.58
-0.1806141
55.38894
17.38
9.79
1202211
AMAX INTERNATION
1.15
5.504587
-17.85714
1.72
0.75
2918575
BOC HONG KONG HO
25.8
-0.3861004
7.05394
28
22.85
17262896
0.445
-4.301075
67.92454
0.56
0.24
11250
6.98
-0.2857143
16.52755
7.28
4.13
10107
24.05
-1.028807
4.112552
25.6
17.7
22693925
CHINESE ESTATES
22.4
2.988506
99.18993
22.8
9.698
169000
CHOW TAI FOOK JE
12.62
-1.40625
1.446949
13.4
7.44
4442170
EMPEROR ENTERTAI
3.99
0.7575758
111.1111
4.66
1.6
1245000
FUTURE BRIGHT
3.27
1.23839
169.7962
3.41
1.103
1212000
GALAXY ENTERTAIN
59.65
-1.241722
96.54036
63.75
27
8855998
HANG SENG BK
124.4
-0.876494
4.802025
132.8
110.6
2088706
HOPEWELL HLDGS
26.15
0.7707129
-21.35338
35.3
23.2
1564182
HSBC HLDGS PLC
86.5
0.2898551
6.39606
90.7
73.9
11901468
HUTCHISON TELE H
3.05
-0.3267974
-14.32584
4.66
3.02
12262857
LUK FOOK HLDGS I
29.95
0
22.7459
30.5
16.88
2052670
MELCO INTL DEVEL
26.7
-2.018349
196.3374
28.1
7.58
3719012 2701840
CENTURY LEGEND
NAME
average 27.266
24.80
WTI CRUDE FUTURE Dec13
CORN FUTURE
Max 27.80
Currency Exchange Rates
NAME
METALS
89.7
Last 90.35
58.50
Commodities ENERGY
Min 89.70
CHEUK NANG HLDGS CHINA OVERSEAS
COUNTRY
PRICE
DAY %
YTD %
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
15976.02
0.08971475
21.91582
16030.28
12590.23047
NASDAQ COMPOSITE INDEX
US
3949.066
-0.9257977
30.78483
3994.969
2884.749
FTSE 100 INDEX
GB
6687.26
-0.5384133
13.38547
6875.62
5605.589844
DAX INDEX
GE
9190.77
-0.3757006
20.73435
9253.679688
7007.21
NIKKEI 225
JN
15126.56
-0.248874
45.51513
15942.6
9129.429688
HANG SENG INDEX
HK
23657.81
-0.009509697
4.417593
23944.74
19426.35938
CSI 300 INDEX
CH
2412.163
-0.6892
-4.391238
2791.303
2023.171
TAIWAN TAIEX INDEX
TA
8260.21
0.8392887
7.28242
8476.63
7061.87
MGM CHINA HOLDIN
27.1
-2.517986
104.0927
30
12.426
KOSPI INDEX
SK
2031.64
1.035901
1.732053
2063.28
1770.53
MIDLAND HOLDINGS
3.25
-0.6116208
-12.16216
4.29
2.68
536000
NEPTUNE GROUP
0.285
0
87.50001
0.4
0.131
49820000
NEW WORLD DEV
10.82
-0.5514706
-9.983364
15.12
9.98
17323159
57
-2.39726
67.89396
60.5
30.35
9787492
S&P/ASX 200 INDEX
AU
5352.902
-0.5897312
15.14216
5457.3
4340
JAKARTA COMPOSITE INDEX
ID
4401.402
0.1777589
1.962497
5251.296
3837.735
FTSE Bursa Malaysia KLCI
MA
1811
1.038278
7.226387
1826.22
1590.67
SHUN HO RESOURCE
1.62
0
15.71429
1.92
1.22
0
NZX ALL INDEX
NZ
1025.977
-0.5107424
16.31694
1048.998
858.253
SHUN TAK HOLDING
4.48
-0.2227171
6.92124
4.8
3.18
7565752
PHILIPPINES ALL SHARE IX
PH
3825.46
-1.019442
3.419321
4571.4
3440.12
Euromoney Dragon 300 Index Sin
SI
623.71
0.18
0.42
NA
NA
STOCK EXCH OF THAI INDEX
TH
1414.49
-0.6650468
1.620767
1649.77
1260.08
HO CHI MINH STOCK INDEX
VN
504.71
-0.3494709
21.99018
533.15
374.15
Laos Composite Index
LO
1279.86
-0.3177719
5.358213
1455.82
1196.44
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
SANDS CHINA LTD
SJM HOLDINGS LTD
24.1
-2.822581
35.79257
28
16.762
5369209
SMARTONE TELECOM
8.89
0
-36.8608
15
8.68
4747119
WYNN MACAU LTD
29.6
-1.168614
41.28878
32.6
19
3104577
ASIA ENTERTAINME
N/A
N/A
N/A
N/A
N/A
0
BALLY TECHNOLOGI
72.57
0.0689465
62.31269
78.03
43.57
328438
BOC HONG KONG HO
3.33
2.777778
8.469058
3.6
2.99
31667
GALAXY ENTERTAIN
7.92
4.623514
99.49622
8.11
3.471
48833
INTL GAME TECH
16.84
-5.605381
18.84262
21.2
12.63
10338274
JONES LANG LASAL
95.89
-0.1145833
14.23636
101.46
75.53
217504
LAS VEGAS SANDS
70.77
-0.631845
53.31456
73.49
40.3151
4063834
MELCO CROWN-ADR
35.07
0.5447248
108.2542
37
13.95
2697555
MGM CHINA HOLDIN
3.5
-1.129944
99.96671
3.88
1.703
5470
MGM RESORTS INTE
19.25
-1.028278
65.378
20.98
9.47
7189492
SHFL ENTERTAINME
23.17
0.04317789
59.7931
23.25
12.98
443659
SJM HOLDINGS LTD
3.23
2.866242
41.81495
3.6
2.1494
26782
163.59
-1.682793
48.09643
170.254
103.0283
905146
WYNN RESORTS LTD
AUD HKD
USD
Hang Seng Index NAME
PRICE
DAY %
VOLUME
39.35
0.1272265
28312428
2.83
-1.736111
9324275
3.7
-0.5376344
611646628
BANK OF COMMUN-H
5.75
-0.862069
44105211
BANK EAST ASIA
34.2
-0.1459854
2525330
BELLE INTERNATIO
9.57
-2.743902
46834065
ESPRIT HLDGS
BOC HONG KONG HO
25.8
-0.3861004
17262896
HANG LUNG PROPER
AIA GROUP LTD ALUMINUM CORP-H BANK OF CHINA-H
NAME
PRICE
DAY %
VOLUME
CHINA UNICOM HON
12.26
0
21449495
NAME
CITIC PACIFIC
10.96
-0.9041591
4723842
SANDS CHINA LTD
CLP HLDGS LTD
62.15
0.7293355
2554717
SINO LAND CO
CNOOC LTD
15.86
0.2528445
71285613
COSCO PAC LTD
11.34
0
3769388
SWIRE PACIFIC-A
16.9
0.4756243
9195677
TENCENT HOLDINGS
26.35
-0.5660377
6047611
TINGYI HLDG CO
POWER ASSETS HOL
SUN HUNG KAI PRO
15.38
0.5228758
2405484
HANG SENG BK
124.4
-0.876494
2088706
WANT WANT CHINA
CHEUNG KONG
123
-0.886382
4435253
HENDERSON LAND D
46.15
0.2171553
2266338
WHARF HLDG
CHINA COAL ENE-H
4.86
-0.6134969
75674917
HENGAN INTL
98.55
0.1015744
3378348
CHINA CONST BA-H
6.24
0.6451613
525783961
HONG KG CHINA GS
18.12
-0.330033
8500729
CHINA LIFE INS-H
24.2
4.761905
199193261
HONG KONG EXCHNG
CHINA MERCHANT
29.4
1.030928
4246064
CATHAY PAC AIR
CHINA MOBILE
134.8
2.979374
17755923
HSBC HLDGS PLC
86.5
0.2898551
11901468
82.5
-0.6024096
20386466
HUTCHISON WHAMPO
96.3
0.4694836
4601232
24.05
-1.028807
22693925
IND & COMM BK-H
5.55
0.3616637
435622181
CHINA PETROLEU-H
6.99
1.157742
206856394
10.82
-2.34657
17632227
CHINA RES ENTERP
26.8
-3.074141
3342158
29.9
0.3355705
2312623
CHINA OVERSEAS
LI & FUNG LTD MTR CORP
CHINA RES LAND
21.45
-4.666667
11515530
NEW WORLD DEV
10.82
-0.5514706
17323159
CHINA RES POWER
18.78
-1.778243
8034440
PETROCHINA CO-H
9.49
2.483801
268927581
CHINA SHENHUA-H
25.9
1.171875
32128866
PING AN INSURA-H
69.9
0.5755396
51272401
MOVERS
20
PRICE
DAY %
VOLUME
62.05
-1.115538
5829767
57
-2.39726
9787492
10.74
-1.648352
5777234
99.7
-0.3
6009838
91.95
0.1088732
1186568
419
-1.643192
3963573
22.55
-1.31291
8958760
11.04
-0.1808318
12344518
65
-1.065449
3318328
28
2 23835
INDEX 23657.81 HIGH
23834.52
LOW
22749.6
52W (H) 23944.74 22749
(L) 19426.35938 15-November
19-November
15 15
November 20, 2013 April 19, 2013
Opinion Business
wires
Leading reports from Asia’s best business newspapers
The Star Malaysia is not at risk of twin deficits, as the country is expected to maintain a healthy current account surplus while being on track to reducing its fiscal deficit, says Abdul Wahid Omar, minister in the Prime Minister’s Department Datuk Seri. “It [twin deficits] was a one-time concern raised by a few economists as well as rating agencies when they saw our current account surplus narrowing substantially in the second quarter,” Mr Wahid said. But with the current account surplus improving to 9.8 billion ringgit (US$3.07 billion) in the third quarter, Mr Wahid argued that fears of Malaysia getting into a twin deficit situation was unfounded.
China’s bold reform plans don’t mean much yet William Pesek
Bloomberg View columnist
Bangkok Post Thailand’s current fiscal policies have failed to address income inequality and should be redirected from populist schemes to improving social welfare for the poor, says the Thailand Development Research Institute. Even after the Finance Ministry’s restructuring of personal income tax brackets, the gap between rich and poor will not be reduced, said research director for inclusive development Somchai Jitsuchon. Thailand, he said, is among the top countries in the world in terms of income disparity, with money concentrated in the hands of a small, wealthy group.
Thanh Nien Daily While Vietnam hopes to boost exports and attract more foreign investment by signing a free trade agreement with the EU, the flip side is that the removal of tax and non-tax barriers could hurt its businesses. “Vietnamese firms may lose even at home since many EU industrial and service products have competitive advantages,” Nguyen Van Nam, former director of the Trade Research Institute, said. The deal will eliminate tariffs on 90 percent of Vietnamese goods, and cut by 10-20 percentage points the average import tax on the remaining 10 percent, which is at 4.1 percent now.
Jiji Press Malaysian long-haul budget airline AirAsia X said it will open a route between Kuala Lumpur and Central Japan International Airport in Aichi Prefecture. The affiliate of leading Malaysian low-cost carrier AirAsia plans to operate four flights a week on the route from March 17. This will be AirAsia X’s third route between Kuala Lumpur and Japan after those connecting the Malaysian capital with Tokyo International Airport at Haneda and Kansai International Airport in Osaka Prefecture.
Xi Jinping
T
he world appeared to change on November 15, the day bold and epochal reforms were unveiled that promised to overhaul one of the world’s biggest economies. Analysts, investors and historians alike rejoiced at the audacity of the plan. That was Japan. On November 15, 2012, Shinzo Abe, then one month away from becoming prime minister, pledged “unlimited” stimulus and the kind of supply-side policies for which investors had long been clamouring. A year later, the buzz is gone, and not a single structural reform has been implemented. Abe’s record should give pause to those now rushing to praise Xi Jinping for a Chinese reform document that is as vague as it appears bold. Granted, the comparison between Japan and China is an imperfect one. The two countries have vastly different political systems and levels of per capita income, not to mention different challenges to overcome. But they’ve followed similar development paths, with China now facing the same dilemma Japan did in the 1970s – how to lessen a dependence on exports and excessive investment and promote consumption-led growth. More important, both leaders face tremendously powerful vested interests that are intent on thwarting their most critical reforms.
Finger snapping In the West, there’s a sense that Xi can snap his fingers and have the Communist Party – indeed, all of China’s 1.3 billion people – fall in line. Yet the world once thought
the same thing of Japanese leaders from Kakuei Tanaka to Yasuhiro Nakasone to Junichiro Koizumi. Japan was long praised for its consensus-driven society and political system, where grey-haired party elders would issue decrees and obedient, self-sacrificing citizens would bow and do their duty for the motherland.
Xi is clearly positioning himself as China’s most powerful leader in decades
In fact, a network of entrenched bureaucrats, businessmen and local interest groups was developing all that time into a powerful force against change – one that has stymied Abe thus far. Xi may face even stronger resistance. Credit where it’s due: The 60-point plan released late Friday is more audacious than even many China bulls expected. In the 12 months since he took over the Communist Party, Xi has announced more economic reforms than predecessor Hu Jintao did in 10 years. Xi is clearly positioning himself as China’s most powerful leader in decades. Hence talk of a Deng Xiaoping moment. Deng put China on a new
course toward prosperity in 1978. Now Xi wants to move the country up the value chain. In the interim, though, the power of vested interests has expanded drastically. Politics is proving to be a bit too lucrative for China’s own good as untold numbers of millionaires and even billionaires get minted among the Communist Party’s upper echelons. The desire for change understandably shrinks as overseas bank accounts swell. Few of the epochal changes Xi proposes will work without the cooperation of these reluctant cadres. “Now it’s going to be the hard and complicated slog of implementation,” says Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong. Abe’s journey from economic rock star to question mark offers some pointers to Xi. First, be specific about not just what you want to do but also how you’re going to do it and when. Beware grand plans that rely copiously on verbs like “deepen,” “perfect” and “strengthen” without offering specifics or timetables.
Shadow banking Xi wants to increase the accountability of state-owned enterprises. Great, but tell us how. Government audits? More independent directors? Demanding greater disclosure about their operations, holdings or carbon footprint? And when exactly will all this happen? The Communist Party intends to liberalise the financial system. Terrific, but does that mean a more independent
central bank to set interest rates? Freer yuan trading? What about reining in the shadow-banking system shackling China with untold billions of dollars of nonperforming loans? Bottom line, Xiconomics so far is looking all too much like Abenomics. Dramatic statements and gestures to build support among the news media, foreign investors and the broader public are easy. But unleashing the necessary animal spirits requires bold action sooner rather than later. The best thing Xi could do to enliven the economy is clamp down hard on corruption. He’s already begun, most dramatically by taking down rival Bo Xilai: The Chongqing politician is now serving a life sentence in prison for bribery and abuse of power. If Xi really wants to scare party officials straight, Xi would allow anti-corruption investigators to go after an ally as well. Xi should order random lifestyle checks on top party officials to see who owns too many houses on Hainan Island or apartments in Paris. He might consider establishing an independent anti-corruption agency with subpoena powers. Also, leaders need to do more to change the incentives for promotions, making them more about merit, less about connections or factions. As Abenomics is proving, this initial burst of enthusiasm will carry Xi only so far. If the Chinese president hasn’t thought long and hard about how to implement his grand vision – which means, in part, how to navigate around China Inc – he’d better start today. Bloomberg View
16 16
November 20, 2013 April 19, 2013
Closing South Korea hikes power prices
‘Legitimate’ Bitcoin’s value soars
South Korea said yesterday it will hike electricity tariffs and lower consumption taxes on liquefied natural gas, propane and kerosene in a bid to avert power blackouts and reduce losses for the state-run utility company. The government hopes higher electricity prices will curb power use. Rural households could use propane and kerosene for such daily needs as cooking and heating, while industrial users could use LNG or other fuels to power manufacturing processes. That would alleviate pressure on power generation capacity after a spate of nuclear plant shutdowns. A third of the country’s power comes from nuclear reactors.
The value of virtual currency Bitcoin has soared to over US$900 after a U.S. Senate committee hearing. The committee was told that virtual currencies were a “legitimate financial service” with the same benefits and risks as other online payment systems. The currency has more than trebled in value since October. The Homeland Security and Governmental Affairs Committee is exploring the “promises and risks” of Bitcoin for “government and society at large”. The FBI, in a letter to the committee released on Sunday, said that it recognised virtual currencies offered “legitimate financial services” but they could be “exploited by malicious actors”.
OECD revises down growth forecasts Sees China growth accelerating in 2014, urges reforms
Weak prospects in emerging economies have led to the OECD downgrading global growth forecasts
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he Organisation for Economic Cooperation and Development cut its global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy will probably expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and and 4 percent predicted in May, the Paris-
based OECD said in a semiannual report yesterday. “Most of the emerging economies have underlying fragilities that mean they cannot continue growing as they used to,” OECD chief economist Pier Carlo Padoan said in an interview. “They used to be an important support engine for global growth in bad times. Now the reverse is true and advanced economies can’t be said to be
in very good times again.” The reduced growth prospects underline how the global economy remains vulnerable five years after the collapse of Lehman Brothers Holdings Inc. While the euro-area has exited a recession, the OECD said the European Central Bank should look at ways to ease policy further and the Federal Reserve must keep an accommodative stance for
some time before it begins tapering its stimulus. In the report, the OECD sees India’s economy expanding 3.4 percent this year and 5.1 percent in 2014, down from 5.7 percent and 6.6 percent previously. It cut its forecast for Brazil to 2.5 percent and 2.2 percent from 2.9 percent and 3.5 percent. Growth in the U.S. will be 1.7 percent and 2.9 percent this year and next, broadly similar to the outlook in May, while Japan’s gross domestic product will increase 1.8 percent and 1.5 percent. The OECD sees a 0.4 percent contraction in the euro area, less than the 0.6 percent previously forecast, and expansion of 1 percent in 2014.
Faring better China’s annual economic growth is likely to accelerate to 8.2 percent in 2014 from an expected 7.7 percent this year, driven by stronger domestic demand, the OECD said. “Growth is picking up and inflation remains low, domestic demand has led the turn-
around,” it said in the report. The government is aiming for 7.5 percent growth in 2013. The OECD highlighted the need for Beijing to quicken structural reforms in favour of stronger domestic consumption, as economic expansion still relies heavily on investment. “With the economy recovering, there is now a favourable window to push forward with structural reform, in particular financial liberalisation, encouraging labour mobility and tax reform,” the OECD said. China’s reforms may support economic growth eventually, but certain reforms may have some short-term negative impact on the economy, the OECD said without elaborating. “There are also downside risks, notably stemming from local public debt. Mishandled defaults, were they to occur, might jeopardise the health of the banking system and confidence in capital markets,” it added.
PBOC will exit normal yuan intervention: Zhou
JPMorgan withdraws from Everbright listing
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he People’s Bank of China will “basically” exit from normal intervention in the foreignexchange market, governor Zhou Xiaochuan said. The nation will widen the yuan’s trading band in an “orderly” way as it seeks to enhance the currency’s two-way flexibility, Mr Zhou wrote in a book explaining reforms outlined last week following a meeting of Communist Party leaders. The central bank currently sets a daily reference rate for the yuan, which the spot rate is allowed to trade up to 1 percent on either side of. The maximum allowed divergence was doubled in April 2012, having been increased from 0.3 percent in May 2007. China will also phase out investment caps for both domestic and foreign investors, Mr Zhou said, without giving a timeframe.
“We expect the changes to be gradual,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “This would likely put upward pressure on portfolio asset prices onshore.” Quotas under the Qualified Domestic Institutional Investor and Qualified Foreign Institutional Investor programmes will be expanded and then scrapped, he said. A ceiling on deposit rates offered by Chinese banks will also be gradually removed, PBOC deputy governor Yi Gang wrote in the book. “It’s a big step to take,” Patrick Bennett, Hong Kong-based strategist at Canadian Imperial Bank of Commerce, said. “My caution right now is these are statements rather than a timetable that we know will happen.” Bloomberg News
PMorgan Chase & Co has withdrawn from a syndicate of banks working on a US$2 billion Hong Kong listing by China Everbright Bank Co Ltd, a person familiar with the matter told Reuters. JPMorgan’s exit comes as it faces a number of investigations by U.S. regulators, including a look into its hiring practices in China. Regulators are probing whether the bank improperly gave jobs to well connected people in Asia to win business. JPMorgan at one point hired Tang Xiaoning, the son of Tang Shuangning, chairman of Everbright Bank’s parent, China Everbright Group, and a former bank regulator, The New York Times reported in August. After the younger Mr Tang joined JPMorgan, the bank won several
Reuters/Bloomberg News
important assignments from Everbright, including advising a subsidiary on a stock offering, the newspaper reported. JPMorgan has said it is cooperating fully with U.S. regulators, but declined to comment further yesterday. Shanghai-listed Everbright Bank said in March it planned to issue up to 12 billion shares in a Hong Kong listing, after shelving similar plans in 2011 and again in 2012. JPMorgan was at that time hired among a group of nine bookrunners to underwrite the deal, IFR magazine reported in March. Everbright told state media in August that its decision to hire JPMorgan to underwrite its Hong Kong listing was not linked to the U.S. bank hiring Mr Tang. Reuters