Macau Business Daily, November 27, 2013 by Business Daily

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Vitor Quintã

MOP 6.00

Chow Tai Fook 1 sees profit rise twofold

April 19, 2013

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Work underway at CoD’s new 6-star tower Page 7

Govt’s slot parlour policy facing headwinds T

he government’s policy of moving slot parlours out of mainly residential areas was supposed to protect locals from gambling too much. But yesterday it was reported that one closed SJM slot hall was advertising a shuttle bus service to take players to another company venue on the other side of town. And a Mocha Clubs slot club forced to close its doors yesterday plans to move just metres across

the road according to a parent company filing. Business Daily approached the regulator the Gaming Inspection and Coordination Bureau, SJM and Mocha Clubs yesterday for comment, but none was available by press time. The government says it has received two requests to relocate parlours, but didn’t name the venues. More on page 2

Year II

Number 423 Wednesday November 27, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

‘Mid-rollers’ will double gaming revenue: banker

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Tam soft peddles on non-res labour

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The gaming industry needs to have some non-resident workers so that there are enough locals to enable smalland medium-sized enterprises to survive said Secretary for Economy and Finance Francis Tam Pak Yuen yesterday. Separately, legislators from the business sector warned Mr Tam it’s “not the right time” to introduce even a limited scope minimum wage currently proposed for cleaners and security guards.

Hang Seng Index 23740

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%Day

CHINA RES POWER

2.41

TINGYI HLDG CO

1.81

HANG LUNG PROPER

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HONG KG CHINA GS

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HUTCHISON WHAMPO

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CHINA LIFE INS-H

-1.20

LI & FUNG LTD

-1.29

KUNLUN ENERGY CO

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CHINA COAL ENE-H

-1.57

CHINA PETROLEU-H

-2.64

Source: Bloomberg

Bosses’ jackpot as Wage hike fails to Bally-SHFL merger sealed tempt factory staff

I SSN 2226-8294

Ten senior managers at SHFL entertainment Inc – a casino equipment supplier in a long drawn out trade battle in Macau – sold stock valued at nearly US$13.6 million as a US$1.3 billion leveraged buy out by Bally Technologies Inc was announced. According to SHFL filings with Nasdaq, the biggest single beneficiary was Gavin Isaacs, SHFL chief executive, who sold US$3.08 million worth of shares.

Manufacturing has lost more than 500 workers in one year, mostly because the flagging textiles and clothing industries continue to shrink, official data show. But there is hope for industry, an economist says, as makers of food products keep on hiring and paying higher wages to meet demand from tourists. Retail sales of Chinese food products have grown 18 percent to 380 million patacas in the first three quarters of this year.

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November 27, 2013

Macau

‘Shuttle bus’ for customers of closed slot venue: reports Five slot parlours in residential areas were required to close by yesterday as part of govt’s responsible gambling policy Tony Lai

tony.lai@macaubusinessdaily.com

ive slot parlours from two gaming operators were confirmed yesterday as having closed – a year after the Macau government gave the industry notice it wanted slot venues moved out of residential areas. But Union Gaming Research

Macau said yesterday: “We note that following its closure, SJM’s Yat Yuen Canidrome Slot Lounge has set up free shuttle bus services outside the site to transport its customers to SJM’s slot parlour at the [Casino] Lisboa.” According to Chinese language media a notice outside SJM’s closed

Canidrome parlour said a free shuttle bus service would be provided from 8am to midnight between that site and SJM’s slot parlour at Casino Lisboa. That would appear to defeat the object of the government’s policy, which Business Daily understands from government announcements

Five slot lounges had to close under new policy (Photo: Manuel Cardoso)

and sources, was to reduce the exposure of Macau residents to easily accessible gambling. Business Daily approached the regulator, the Gaming Inspection and Coordination Bureau, and also SJM yesterday for comment, but none was available by press time. SJM Holdings Ltd reportedly closed the Canidrome facility and another – Treasure Hunt at Cheng Feng Commercial Centre also on the peninsula – a day before Tuesday’s deadline. Mocha Clubs – a unit of Melco Crown Entertainment Ltd – said in notices posted outside venues yesterday that its three parlours had continued up to the deadline and “suspended operations starting 6 am, November 26, to incorporate with the government policy”. Business Daily also asked Mocha for more information yesterday but no response was received by press time. But Constance Hsu Ching Hui, Mocha’s president, said last month that employees in the three affected Mocha parlours – Mocha Marina Plaza, Mocha Lan Kwai Fong and Mocha Hotel Taipa Best Western – would either receive vocational training or be transferred to the casino operations at Altira Macau or City of Dreams, both run by Melco Crown. The new rules do give operators the option of applying to relocate parlours away from predominantly residential areas. Chinese-language newspaper Macao Daily News – quoting an unidentified source – reported SJM was not seeking relocation for the Cheng Feng operation. The government says it has received two requests to relocate parlours, but didn’t name the venues. However Melco Crown said earlier this year in a regulatory filing that the Mocha Marina Plaza operation will move to Kuong Fat Commercial Centre a few metres away in the same street – Rua de Pequim. “For Melco Crown, we estimate these closures/relocations will have much less than a one percent impact on our 2014 EBITDA estimate of US$1,473 million,” said Union Gaming in a note yesterday. With Michael Grimes

Chow Tai Fook profit doubles on gold rush Mainland Chinese visitors the major source of revenue here

ith gold sales booming, Chow Tai Fook Jewellery Group Ltd said its profit rose nearly twofold year-on-year in its financial first half. Net income almost doubled to HK$3.5 billion (US$451.5 million) from HK$1.82 billion a year earlier for the six months ended September 30, the retailer said in a filing to the Hong Kong Stock Exchange yesterday. That was above the average estimate of HK$2.98 billion from five analysts compiled by Bloomberg. The jewellery retailer reported first-half profit that beat analyst estimates as a drop in bullion prices earlier this year drove strong Chinese demand for gold products. The world’s largest listed jewellery chain posted revenue of HK$37.8 billion in its financial first half, up by 48.5 percent from a year earlier. Revenue rose by 33 percent at stores

open for at least a year. Revenue in Macau, Hong Kong and other Asian markets increased by 61 percent year-on-year to HK$18.4 billion, the company said. The increase was driven by a surge in the sales of gold products and an improvement in the wholesale business. Retail sales of gold in China surged between April and June as global bullion prices plunged, aiding jewellers across the country.

Mainland reliance Chow Tai Fook gets more than 50 percent of its annual revenue from mainland China, but tourists from the mainland are also the “single customer group” for products in Macau and Hong Kong, the retailer said in yesterday’s statement. The filing shows that 59.6 percent of the jeweller’s total revenue in

Revenue up on strong gold product sales

Macau and Hong Kong was settled through China UnionPay or yuan. “This implies that approximately 80.4 percent of the group’s total revenue was originated from mainland Chinese consumers,” the company said. Chow Tai Fook also said it is adding stores to tap surging jewellery demand and rising incomes. The company said it opened 118 new points of sale during the period, which includes standalone stores and concessionaire counters, taking the total to 1,954 as of the end of September. The company has 15 outlets in Macau, according to its website.

Rental expenses increased to HK$656.7 million from HK$422.4 million a year earlier. “The increase in rental expenses was mainly due to the opening of new points of sale in prime areas and the renewal of rental contracts in Hong Kong and Macau,” it said. Chow Tai Fook dropped 0.3 percent to close at HK$12.30 in Hong Kong trading before the earnings announcement. The stock has fallen 1.1 percent this year, compared with a 4.5 percent gain in Hong Kong’s benchmark Hang Seng Index. T.A. with Bloomberg News

November 27, 2013 April 19, 2013

Macau

Francis Tam – policy needs to strike balance

Tam soft peddles on non-resident labour ‘No’ to outside casino dealers, but tough quotas in rest of sector will starve SMEs of labour says official Tony Lai

tony.lai@macaubusinessdaily.com

he gaming industry needs to have some non-resident workers so that there are enough locals to enable smalland medium-sized enterprises to survive said Secretary for Economy and Finance Francis Tam Pak Yuen yesterday. To that end, gaming operators have kept an “appropriate” ratio of non-local workers to locals said Mr Tam. The gaming industry was again the focus on the second day of the Legislative Assembly’s discussion of the official’s departmental policy address. Legislator Ng Kuok Cheong was critical of Mr Tam’s approach. “The

government has promised imported labour will not account [for] over 20 percent of the gaming operators’ labour force…,” said Mr Ng, adding “but the ratios in Macau [sic] Venetian’s and Galaxy Entertainment [Group Ltd] already exceeded 31 percent and 29 percent this year.” The proportions in the other four operators also topped such a 20 percent ceiling, he claimed. Mr Tam acknowledged imported labour accounted for 25.7 percent of the casino industry workforce of just over 73,700 workers. “Whether such ratio [sic] of 25.7 is too high or we should cut it down we can definitely have [a] review on that,” said Mr Tam. “But we

are trying to reach a balance across sectors in the human resource policy,” he added. More than 45 percent of local workers, 125,300 people, were classified as gaming workers, civil servants or self-employed while the rest of the local labour pool was absorbed by SMEs, said Mr Tam. “I think we have so far achieved an appropriate balance – there are some voices that we should not push all locals to the gaming sector,” he said. Latest data from the Statistics and Census Service shows the employed population – residents and nonresidents – reached 371,200 by the third quarter. Non-residents accounted for 25.1 percent of the total.

“The government should not cut quota [of imported workers] for gaming operators,” said legislator and restaurant operator Chan Chak Mo, supporting the government’s position. Mr Chan said SMEs stood no chance if they had to compete with gaming operators on wages in order to attract staff. “We [SMEs] have experienced we could not hire locals when several gaming resorts opened in the past,” he said. More than 99 percent of approximately 30,000 firms registered here have fewer than 100 employees, said Mr Tam. In 26,000 of the companies – 86 percent of all SMEs – there are fewer than five employees, he added. The official stressed again the government had been “doing well” in ensuring local employment in the gaming sector. “At the current stage the government does not have to adopt any other measure to do so”, such as a legislative ban against imported workers working as casino dealers, said Mr Tam. He also defended the policy – announced in Chief Executive Fernando Chui Sai On’s governmentwide policy address – to help locals receive training to move up in the management of gaming firms. “This will not worsen the business environment of the enterprises as they will not install locals that are not competent as their businesses are at stake,” said the official. Gaming executive and legislator Angela Leong On Kei demanded the government offer training to local gaming workers to supplement the efforts of the operators. She also lamented there was a lack of clarity on whether existing gaming concessions would be renewed or new ones issued. She said that uncertainty was damaging as Macau faced “competition from other places which are also open for gaming”. Mr Tam reiterated the administration would only discuss the future licence situation in 2015 or 2016. “Most tourists acknowledge that Macau is heading towards the direction of being a leisure tourism centre,” he said, adding that more and more tourists are coming here shop or sightsee rather than gamble. The event and exhibition industry “has also driven the local economy” with more than 300 event-related companies recently being established, Mr Tam stated.

‘Not right time’ for minimum wage Business sector warns even giving a few groups such a deal will just boost workers’ appetite for more

mployers’ representatives in the Legislative Assembly said it’s “not the right time” to introduce even a limited scope minimum wage – only for cleaners and security guards. “This will create a chain reaction that may impact other industries,” said assembly member Kou Hoi In, adding that it could lead to the sacking of old, poorly-educated workers. Mr Kou is an indirectly elected legislator representing the business constituency. His fellow legislator and businessman Cheang Chi Keong

also challenged the minimum wage proposal, saying the city lack related employment laws such as a statute for regulating building management firms. The government is planning a minimum wage for cleaners and security guards of between 23 patacas (US$2.88) and 30 patacas an hour. It completed consultations this month. The proposal should enter the final stage of drafting next year. But while bosses’ representatives criticise the proposal, other members of the assembly called for a more widespread minimum wage.

Directly elected legislator Ng Kuok Cheong called on the administration to implement a citywide version “soon”. “This will definitely hit the city’s small firms so instead of subsidising low-income individuals the government should draw plans to help those small companies,” Mr Ng said. Secretary for Economy and Finance Francis Tam Pak Yuen said the government’s proposal on the minimum wage “had reached consensus” at the Standing Committee for the Coordination of Social Affairs. It is composed of

workers and bosses representatives. The secretary also announced that new rules on employment agencies would be introduced. The proposal should be submitted to the social affairs committee next year, he added. But these new rules may be enshrined as law instead rather than administrative regulations, he said. The administration also hopes next year to turn the Financial Intelligence Office into a permanent department – to prepare a 2016 international review of the city’s anti-money laundering policy, said Mr Tam. T.L.

November 27, 2013

Macau Amax seeks advice on HK market compliance Troubled Macau junket investor Amax International Holdings Ltd has hired a firm to advise it on how to comply with the listing rules of the Hong Kong Stock Exchange. Amax as been on the city’s main bourse since 2002, albeit under differing corporate names and differing managements. South China Capital Ltd will act as advisor with effect from Friday, for a one-year period. In August an external auditor said Amax’s annual report for year ended March 31 that Amax’s accounts contain “material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern”.

Bosses’ jackpot as US$1.3 bln Bally-SHFL merger sealed SHFL CEO Gavin Isaacs leaves after three years with US$3.08 mln in stock options Michael Grimes

michael.grimes@macaubusinessdaily.com

the switch to Bally. Business Daily attempted separately to contact Mr Jolly and Bally yesterday for comment but was unsuccessful. Ramesh Srinivasan, Bally’s chief executive, said in July the deal would deliver “at least US$30 million of annual synergies” – management speak for cost savings. On Monday U.S. time the Las Vegas Review-Journal newspaper quoted the Bally boss saying that shouldn’t be interpreted as meaning job losses. But SHFL said in a July filing: “Bally has said that where there are two qualified people for the same role, they intend to select the best fit for the role regardless of their origin.”

US$13.6 mln Value of stock sold by 10 senior SHFL executives

Gavin Isaacs during a recent visit to Macau

en senior managers at SHFL entertainment Inc – a casino equipment supplier in a long drawn out trade battle in Macau – sold stock valued at nearly US$13.6 million (108.6 million patacas) on the completion day of a US$1.3 billion leveraged buy out by Bally Technologies Inc. According to SHFL filings with

Nasdaq in New York, the biggest beneficiaries were Gavin Isaacs, SHFL chief executive, who sold US$3.08 million worth of shares at US$23.25 per share, and Garry Saunders, a director and founder of the firm, who made nearly US$2.49 million. Roger Snow, chief product officer, and widely regarded in the industry as one of the driving forces behind

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SHFL’s product range, cashed in US$1.72 million worth of stock. SHFL applied on Monday United States time to end its listing on Nasdaq. At the end of its final day of trading on Friday, SHFL’s shares were valued at US$23.19. On Monday U.S. time, Bally’s chairman Richard Haddrill cashed in Bally stock options worth US$1.40 million. Of the three key SHFL figures listed above, only Mr Snow’s name appeared on a Bally press statement outlining the new management of the newly merged operation. He will become senior vice president of table games at Bally. The press statement didn’t clarify whether the SHFL brand name would be retained in the merged group’s product range. Mr Isaacs – chief operating officer at Bally for five years until March 2011 – will not stay on post-buy out. SHFL executives remaining in the new operation include Adrian Halpenny, who had been president of SHFL’s Australasian and Asia businesses since 2010. He becomes senior vice president of Australia and Europe.

Local team Ken Jolly, SHFL’s executive vice president Asia, was not mentioned on the list of senior leaders making

According to the Review-Journal, Bally has 1,300 employees in Nevada and 3,400 workers worldwide. SHFL employs 350 people in Nevada and 900 workers globally. One of the legacy issues inherited by Bally in the new set up is a bitter trade dispute between Macau gaming equipment maker LT Game Ltd led by local businessman Jay Chun, and SHFL. It concerns technology in a SHFL live dealer multi-game electronic table product. LT Game claims it holds a patent in Macau for technology used in the product. The dispute led to enforcement action against SHFL by Macau Customs on the final day of the Macao Gaming Show – a new casino industry trade event held a fortnight ago at The Venetian Macao and the brainchild of Mr Chun. Customs forced SHFL to cover its product display for most of the final day. LT Game confirmed to Business Daily it had made a complaint to customs regarding SHFL’s SHFL Fusion Hybrid product. SHFL said in an e-mailed statement last week: “No court of law has ruled that any of SHFL Asia’s products are in breach of any patents or other rights held by LT Game, any of its affiliates or related parties, or any other gaming supplier.” The Bally-SHFL merger and the departure of Mr Isaacs could present a new opportunity to resolve the dispute. He had vowed to pursue LT Game in the courts. Mr Chun has his own reasons for being interested in a fresh start. Nowadays he has ambitions to expand into the U.S. market. He said so during the recent trade show. Industry lawyers have told Business Daily it’s likely the Macau patent dispute – and some related litigation in Nevada – would need to be resolved between LT Game and Bally before LT Game can market successfully any of its electronic table multi-game products in the U.S.

November 27, 2013

Macau ‘Mid-rollers’ will double gaming rev: BoA Merrill Lynch Analyst says best days of Macau’s VIP market are ‘in past’ but middle class can help gambling grow twofold by 2018 Tony Lai

tony.lai@macaubusinessdaily.com

acau’s gross gaming revenue could double by 2018 says Billy Ng, a Hong Kong-based analyst for Bank of America Merrill Lynch. Expansion would be driven by the so-called ‘premium mass’ market of high stakes cash bet players, rather than credit-based high rollers reportedly suggested Mr Ng, the bank’s gaming analyst. “The peak period of growth in the VIP market has already passed, the premium mass will be the main driving force [for gaming revenue] in the future,” China News Service, a state-owned mainland press agency, quoted Mr Ng saying at a Hong Kong news conference. Macau’s annual casino revenue can “reach US$85 billion [678.7 billion patacas] in the coming five years”, reported the agency’s online portal attributing it to the analyst. Last year the city raked in the equivalent of US$38 billion (304.14 billion patacas) – six times the amount of gambling revenue generated by the

Expansion to be driven by ‘premium mass’ market

Las Vegas Strip in the same period. Up to the end of October, Macau recorded 297.10 billion patacas for 2013, a year-on-year expansion of 18 percent. In the period from 2005 to 2012, Macau’s gaming revenue rose 560 percent according to data from the local regulator, the Gaming Inspection and Coordination Bureau.

Mr Ng’s 2018 forecast is based on annual growth of four to five percent in the number of mainland residents classified as ‘middle class’. Currently 400 million people are in that bracket, he was reported as saying. The report didn’t give a definition for ‘middle class’. One indicator used by analysts is those economically qualified to spend money on trips outside the mainland’s immediate borders. Another catalyst will be the opening of new infrastructure including the Hong Kong-ZhuhaiMacau Bridge. Even the addition of up to 10 new casinos between 2014 and 2018 would still be “not enough” to cater for the demand for gaming, said the analyst. Mr Ng forecasts 2013 revenue will maintain the recent year-onyear expansion rate of 18 percent and close out at 357 billion patacas for the 12 months, the Hong Kong Economic Journal newspaper reported additionally.

Pacquiao effect’ gives Sands China punch T

he boxing match at The Venetian Macao on Sunday morning Macau time – between Filipino former world champion Manny Pacquiao and Brandon Rios for the WBO international welterweight title – coincided with a 70 basis points lift in host Sands China Ltd’s gaming market share, suggests an analyst. “Saturday’s [United States time] Pacquiao fight at the Venetian Macao likely boosted results (LVS’s share was up 70bps from last week),” wrote Cameron McKnight, senior analyst at Wells Fargo Securities LLC in New York in a note. Separately, Kenneth Fong of J.P. Morgan in Hong Kong, said November revenue was tracking at 21 percent year-on-year expansion to give a total of 30.1 billion patacas for the month. “Run rate was higher for the past week given that [the] boxing fight of Pacquiao Vs. Rios at [The] Venetian [Macao] has attracted significant amount of visitation to Macau over the weekend,” wrote Mr Fong on Monday.

With Michael Grimes

M.G.

Corporate Galaxy Macau wins four new awards Galaxy Entertainment Group Ltd’s Cotai casino resort Galaxy Macau says it has won four additional travel and hospitality awards. “We are grateful for the industry recognition, but especially proud of the public’s vote of approval for our spectacular resort,” said Gabriel Hunterton, deputy chief operating officer of Galaxy Macau. On October 1 Galaxy Macau was named ‘Asia’s Leading Casino Resort’ at the 2013 World Travel Awards, sometimes called the ‘Oscars’ of the travel industry. On November 8 the venue won ‘Best Resort Hotel’ at the World Hotel Continental Diamond Awards (pictured), organised by the World Hotel Association. At the inaugural U Magazine Travel Awards 2013, held in Hong Kong this month to recognise the best brands in travel and tourism, Galaxy Macau was voted ‘My Favourite Hotel & Resort in Asia’ reportedly by more than 100,000 members of the general public. The resort’s wedding services were recognised with three prizes at the Darizi Awards 2013, organised by Darizi magazine.

HSBC ex-head of Macau trade promoted Hongkong and Shanghai Banking Corporation Ltd’s head of global trade and receivables finance for Kong and Macau has been appointed head of commercial banking in China. Terence Chiu succeeds Montgomery Ho, who has been appointed as deputy chief executive of HSBC China subject to regulatory approval. Mr Chiu had been in his previous post since 2011. Rachel Wei will replace Mr Chiu as head of global trade and receivables finance for Hong Kong and Macau. HSBC has also named Sanjay Prakash as head of commercial banking, international countries, Asia-Pacific. He will be responsible for the commercial banking performance of Brunei, Macau, Maldives, Mauritius, New Zealand, Philippines, Sri Lanka, Taiwan, Thailand and Vietnam. He had been regional head of business management for commercial banking in Asia-Pacific since January 2012. Prior to that, he was CEO of HSBC Bangladesh. Mr Prakash will continue to report to Noel Quinn, regional head of commercial banking for Asia Pacific.

November 27, 2013 April 19, 2013

Macau Suspects arrested for HK$2.85 mln chip fraud

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Four suspects from Jiangxi province were caught allegedly using counterfeit chips to defraud four casinos in the ZAPE area on the peninsula. The suspects were able to pass a total of 2,852 counterfeit non-negotiable chips from June to November this year, the Judiciary Police said in a press conference yesterday. The counterfeit chips, each with a production cost of 70 yuan (91.7 patacas), each had a face value of HK$1,000 (US$128.9), a spokesperson from the police told Business Daily. However, the police refused to identify the four casinos that fell victim to the latest alleged scam.

HOSPITALITY Little packages Most package tourists that visit Macau are from the mainland, Hong Kong or Taiwan, and a growing proportion come from those places. Greater China was the source of 87.8 percent of package tourists in the first nine months of this year, having been the source of 84.7 percent last year and 82.8 percent in 2009. Increases in the number of package tourists from Greater China more than compensate for decreases in the number from the rest of Asia. In the first nine months the rest of Asia was the source of 11.5 percent of package tourists, having been the source of 18 percent in 2010, when the proportion from the rest of Asia was at its greatest.

Factory hands seek out lusher pastures Employment in textiles continues to shrivel but employment in food processing keeps growing Vítor Quintã

vitorquinta@macaubusinessdaily.com

In the past two years under 1 percent of package tourists came from beyond Asia. The proportion of non-Asian package tourists was greatest in 2010, when it was about 1.5 percent. The Americas are the source of most non-Asian package tourists, but the greatest proportion of package tourists from across the Pacific was only 0.96 percent, in 2009. The proportion so far this year is 0.34 percent. The number of package tourists from Europe has been mainly stable and this year’s slight recovery from last year may continue. The same can be said about number of package tourists from Oceania, most of whom are Australians or New Zealanders. If you have to peer closely at the chart to see how many package tourists come from Africa, it is because few do. Fewer than 200 came last year, and, probably, fewer still will come this year.

52,386

Non-Asian package tourists in the first 9 months

anufacturers have shed over 500 jobs in the past year, mainly because the flagging textiles and clothing industries continued to shrink, official data show. But there is hope for employment in manufacturing, an economist says, as food processors keep hiring and paying higher wages to get the labour they need to meet demand for their products among tourists. Manufacturers had 10,779 employees at the end of September, having had 11,302 a year earlier, the Statistics and Census Service announced yesterday. Manufacturing has lost almost two-thirds of its workforce in the past seven years. Early in 2006 Macau’s factories had 31,850 employees. Manufacturing used to be the dominant industrial sector, but the abolition in 2005 of quotas for international trade in textiles doomed it, particularly the textiles and clothing industries. Makers of clothing had 2,834 employees at the end of September, 926 fewer than a year earlier. The head of the University of Macau’s department of economics, Kwan Fung, said: “In one sense, it is expected.” Mr Kwan told Business Daily that the conditions for the “continuous decline” of the textiles industry had been in place for many years. He said factories here were labourintensive and added little value, so they were no longer competitive. Makers of clothing had 369 vacancies at the end of September, yet they paid under 6,000 patacas (US$750) a month, less than half average earnings in Macau. The average unskilled female permanent resident makes 2,310 patacas a month and the average unskilled male permanent resident makes 3,400 patacas, according to official data. In contrast, food processors

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Manufacturing has lost almost two-thirds of its workforce since 2007

had 3,627 employees at the end of September, 454 more than a year earlier. They had 430 vacancies. Mr Kwan describes the growth in employment in food processing as “interesting” saying it may be a sign of a shift in manufacturing. He said it was probably factories trying to meet the growing demand

5,704

Vacancies in hospitality and manufacturing on September 30

among tourists for souvenir food, such as Chinese bakery products, that were taking on more workers. Mr Kwan said the tourist market held potential for food processors. Macau had over 28 million tourists last year, and the number in the first 10 months of this year was 5 percent higher than a year earlier, official data show. But Mr Kwan said it was too early to tell whether the recovery in food processing would be sustained or how big the industry would grow. The value of retail sales of Chinese food was 380 million patacas in the first nine months, 18 percent more than a year earlier, official data show. But Mr Kwan thinks much of the food sold here may have been processed in the mainland, so more tourists may not mean more food processing here. At the end of September 6,900 people or 1.9 percent of the labour force were unemployed. Yet hospitality and manufacturing together had 5,704 vacancies.

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November 27, 2013 April 19, 2013

Macau

Work on ‘six-star’ Cotai hotel starts The fifth hotel tower in the City of Dreams is set to have a casino and a sky pool Vítor Quintã

vitorquinta@macaubusinessdaily.com

onstruction of the fifth hotel tower in the City of Dreams casino-resort in Cotai has begun, the contractor’s parent company has said. Bouygues Construction SA of France announced in a written statement on Monday that subsidiary Dragages Macau Ltd has been awarded a contract worth HK$3.68 billion (US$474.3 million) to build a “a six-star luxury hotel” in the City of Dreams. Bouygues said building the 39-storey hotel, which would have about 151,000 square metres of floor space, would take more than three years. Melco Crown Entertainment Ltd runs the City of Dreams, and the company’s co-chairman, Lawrence Ho Yau Lung, said during an earnings call this month that he hoped the new hotel could open in late 2016 or early 2017. Bouygues said the hotel would have 783 rooms, including some in 10 villas, a casino, restaurants, conference rooms and a sky pool. The company said over 1,000 employees would be working on the site at peak times. Finding that many workers may be hard. Labour is in short supply. The construction industry hired 6,100 workers in the third quarter, when the city had only 6,900 unemployed. Business Daily asked Bouygues how it would get enough workers, but the company had not replied by the time we went to press. Melco Crown Entertainment did not reply to a request for comment.

Tables for icons Bouygues Bâtiment International is part of the Bouygues group. The company’s chairman, Olivier-Marie

CMY

The City of Dreams casino-resort is due to get its new hotel around the beginning of 2017

Racine, said: “This project is going to become a new emblem for the city of Macau.” Mr Ho said this month that the hotel would be among the “iconic buildings” the government had been encouraging casino operators to build. “They have been telling us that they would reward operators for contributing to the diversity of Macau and, at the same time, for iconic buildings,” he said. “I think this gives us a really good chance of qualifying for tables.” Mr Ho was speaking in response

to a question about how many live gaming tables the new hotel’s casino will have. The government has capped the annual rate of growth in the number

783

Rooms in the new City of Dreams hotel

of live gaming tables in Macau at 3 percent from this year until the end of 2022. The city had 5,485 such tables at the end of last year. The land for the new hotel was originally meant to be used for an apartment hotel. Melco Crown Entertainment said in February that the government had given it permission to build another hotel instead, and to take four more years to do the work. The land grant changes have yet to be published in the Official Gazette.

November 27, 2013 April 19, 2013

Greater China

Beijing planning crackdown on banks’ loan limit evasion Rules would add to measures this year tightening oversight

Mid-sized Chinese banks got 23 percent of their funding from the interbank market last year

hina has drafted rules banning banks from evading lending limits by structuring loans to other financial institutions so that they can be recorded as asset sales, two people with knowledge of the matter said. The rules drafted by the China Banking Regulatory Commission impose restrictions on lenders’ interbank business by banning borrowers from using resale or repurchase agreements to move assets off their balance sheets, said the people, who asked not to be identified because they aren’t authorised to discuss the rules publicly. Banks are also required

to take provision charges on such assets before their maturity. The agreements entail one bank buying an asset from another and selling it back at a higher price after an agreed period. Chinese banks are expanding transactions with other financial institutions, known as FI business, which have lower risk-capital requirements, Australia & New Zealand Banking Group Ltd economist Li Gang Liu wrote in a report yesterday. “Many banks started to build up their FI business to escape the internal risk controls and the yet-tocatch-up regulations,” Mr Liu wrote. “The CBRC is likely to issue regulations

requiring banks to put high capital reserves on banks’ FI business.” The rules would add to measures this year tightening oversight of lending, such as limits on investments by wealth management products and an audit of local government debt, on concerns that bad loans will mount. The deputy head of the Communist Party’s main finance and economic policy body warned last week that one or two small banks may fail next year because of their reliance on short-term interbank borrowing. The CBRC’s press office didn’t immediately respond to requests for comment by e-mail and fax.

Japan carriers to obey China’s air zone rules

NA Holdings Inc and Japan Airlines Co have started reporting the flight plans of aircraft traveling through a new airdefence zone claimed by China that the Japanese government rejects. ANA began informing China on November 24 of flights to Hong Kong and Taiwan that pass through the area while JAL started giving details a day before, spokesmen at the two airlines said yesterday. Japan’s government plans to tell its airlines that the country opposes China demanding carriers submit flight plans, Akihiro Ohta, the transport minister, said in Tokyo. Japan told its airline operators that they are not bound by the China airspace defense zone, Kyodo News reported, citing remarks by Chief Cabinet Secretary Yoshihide Suga. The two airlines are considering halting submission of flight

The CBRC is likely to issue regulations requiring banks to put high capital reserves on banks’ FI business Li Gang Liu, ANZ Banking Group

Interbank assets at Chinese banks whose shares are traded in Hong Kong surged 140 percent in the three years through mid-2013, led by mediumsized lenders such as China Minsheng Banking Corp, according to Citigroup Inc. Banks channel funds from other institutions into corporate loans, booking them as interbank assets to avoid regulatory requirements such as loan quotas, capital requirements and the loan-to-deposit ratio cap, analyst Simon Ho wrote in a report. “The rapid growth in interbank financing, particularly among smaller lenders like Minsheng, clearly makes liquidity and risk management more difficult, and it’s giving little support to the real economy,” said Chen Xingyu, a Shanghaibased analyst at Phillip Securities Group. “The new rules will obviously lower banks’ capital adequacy levels and may affect profits if the assets are included onto their balance sheets, but the impact won’t be huge.” The proposed regulations would also limit a bank’s total lending to other financial institutions to 50 percent of its total deposits, and cap loans to non-bank financial companies at 25 percent of its net capital, according to the people. The rules, once approved, would take effect in February, they said. Increasing reliance on short-term interbank funding to finance long-term loans this year prompted China’s worst credit crunch, when the benchmark overnight money market rate reached a record on June 20. Mid-sized Chinese banks got 23 percent of their funding and capital from the interbank market at the end of 2012, compared with 9 percent for the largest state-owned banks, Moody’s Investors Service said in June. Bloomberg News

Peugeot CEO succession paves way for Chinese deal

plans, Kyodo reported yesterday, citing officials at the carriers it didn’t identify. ANA will take a decision after studying any requests from the government, Ryosei Nomura, a spokesman for the carrier, said yesterday. China, which began enforcing the air defence identification zone on November 23, said its military will take “defensive emergency measures” if aircraft enter the area without reporting flight plans or identifying themselves, increasing tensions between Asia’s two biggest economies. China traded barbs with the U.S. and Japan over the newly announced air defence zone in the East China Sea that encompass islands, known as Diaoyu in Chinese and Senkaku in Japanese, disputed by the two countries. Reuters

SA Peugeot Citroen’s move to name former Renault SA operations chief Carlos Tavares as its future chief executive stands to help secure an alliance with Dongfeng Motor Corp, which may be the carmaker’s last chance to end its reliance on Europe’s slumping car market. Mr Tavares will join Peugeot’s management board on January 1 and will replace CEO Philippe Varin, 61, later in the year, Peugeot said late on Monday. Before stepping down, Mr Varin will focus on discussions with partners. While the Paris-based company didn’t mention specific companies, deepening cooperation with Dongfeng – Peugeot’s joint venture partner in China – represents its best opportunity of gaining a foothold outside Europe. With other automotive options

scarce, the most likely alternative to Dongfeng is to go it alone and hope the French government steps in if finances get tight. “It does seem as if the Chinese are the only lifeboat left for Peugeot,” said Garel Rhys, head of the Centre for Automotive Industry Research in Cardiff, Wales. “In a sense, PSA is lucky to have a Chinese company wanting to get involved because there are huge issues.” Peugeot forecasts burning through about 1.5 billion euros (US$2 billion) in cash this year and reported a firsthalf operating loss of 510 million euros in its automotive unit. The company has been searching for new partners to end its dependence on mid-market cars in Europe, where auto demand is at a two-decade low and Peugeot is losing market share. Bloomberg News

November 27, 2013 April 19, 2013

Greater China

Qualcomm faces antitrust probe Company said the probe involved China’s anti-monopoly law

hinese regulators have launched an anti-trust investigation into Qualcomm Inc, the U.S. mobile chipmaker said, and some experts suggested China’s government may be seeking leverage in royalty negotiations. China’s largest cellphone carrier is preparing a major move to 4G wireless technology next year, and Qualcomm has been hoping that will provide it with a major new source of royalty revenue. But the company’s growth prospects in the world’s largest mobilephone market may be under threat. The company said it was not aware of any antitrust violations but would cooperate with the probe by China’s National Development and Reform Commission (NDRC). The NDRC did not say why the company was being investigated, according to Qualcomm. China’s state media on Sunday quoted an NDRC official saying regulators would focus antitrust investigations on six industries, ranging from technology to medicine. Qualcomm, the world’s biggest maker of cellphone chips, sees China as a key market as growth in smartphones shifts away from the United States to developing countries. China Mobile has been preparing to upgrade to high-speed networks using technology developed by Qualcomm.

The U.S. company reported US$12.3 billion in revenue from China in the 12 months through September, equal to 49 percent of its total revenue. But many of the smartphones made in China are exported, so the Chinese market actually accounts for about a fifth of Qualcomm’s chip shipments and licensing revenue, according to Raymond James analyst Tavis McCourt.

Corporate scrutiny Some analysts speculate China’s antitrust investigation may be an attempt to gain leverage in royalty negotiations with Qualcomm ahead of the expected rollout of new 4G wireless infrastructure in 2014. Analysts also theorised that Beijing may be moving to support local suppliers trying to compete with Qualcomm, the global leader in 4G technology, also known as Long-Term Evolution (LTE). In February, the NDRC attracted attention when it fined six South Korean and Taiwanese makers of liquid crystal displays about US$57 million for price fixing. With Broadcom Corp, Intel Corp and other chipmakers missing targets for the their own LTE components, Qualcomm is the main player in LTE,

Property developers deny unpaid taxes State broadcaster said billions owed in unpaid land taxes

hinese property developers have dismissed claims by China Central Television (CCTV) that they owe massive sums in unpaid land taxes, pitting some of China’s most powerful businessmen against the influential state-owned broadcaster. Listed companies including Gemdale Corp, BBMG Corp and Beijing North Star Co Ltd, all named in a CCTV report that aired on Sunday, denied claims they are among firms that avoided paying as much as 3.8 trillion yuan (US$624 billion) in taxes due. The property developers said the report by CCTV was based on confusion between provisions in their accounts for future tax bills and actual tax payments already made. Hua Yuan Property Company Ltd president Ren Zhiqiang said in a posting on an Internet microblogging site that he is considering whether to pursue legal action against the broadcaster. Officials at CCTV did not respond to a request for comment when contacted by Reuters.

CCTV has attracted attention internationally this year, with reports that previously targeted global companies operating in China, including Apple Inc and Samsung Electronics Co Ltd over quality and service issues, and Starbucks Corp over pricing. The row over the broadcast on developers comes as home prices in large Chinese cities have set records, despite a four-year long government campaign to cool the property market, raising concerns over a potential price bubble. In the broadcast that aired on Sunday, CCTV cited calculations by a Beijing-based lawyer, Li Jinsong, as showing 45 listed property firms were among developers that should have paid more than 4.6 trillion yuan in land taxes from 2005 to 2012. According to the calculations, authorities collected 800 billion yuan for the period. Other companies named in the report include China Vanke Co Ltd, the country’s largest property developer by sales, and Agile Property Holdings. Wee Liat Lee, analyst at BNP Paribas, said the CCTV report could be a signal that authorities may be gearing up to toughen enforcement of tax collection. “This could be the prelude to the central government’s tightening of land appreciation tax collection,” he said. Reuters

Qualcomm’s Snapdragon chips are used in Android, Windows Phone and Blackberry devices

which China Mobile plans to roll out next year to allow for faster data transfer rates over cellphones. “We suspect this investigation is related to the forthcoming launch of TD-LTE by China Mobile in early 2014 and the negotiations on chip pricing and license pricing between Qualcomm and Chinesebased handset [manufacturers] that are likely occurring right now,” Mr

McCourt wrote in an note to clients. A Qualcomm spokesman declined to comment but at the company’s annual investor day last week, chief executive Paul Jacobs and other senior executives focused on China and the upcoming LTE rollout there as big opportunities to sell more smartphone chips and collect new royalties as LTE is implemented. Reuters

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November 27, 2013 April 19, 2013

Greater China Authorities arrest over oil pipe blasts Police in China have arrested nine people in relation to explosions that killed 55 people, state media report. The blasts in the eastern city of Qingdao took place on Friday, after a leaking oil pipeline owned by oil refiner Sinopec caught fire. Seven of those arrested were Sinopec employees, while two came from the city’s economic and technological development zone, official Xinhua news agency reported. The explosions injured at least 160 people, with nine people still missing. Yang Dongliang, director of the State Administration of Work Safety, said that there had been “a serious lapse of responsibility”, state media said.

First Shanghai carbon permits start trading Total of 14,000 permits traded for 2013-2015 as China moves on emissions

he first carbon permits in Shanghai traded at 27 yuan (US$4.43) yesterday, as the financial hub launched China’s second such trading scheme in a bid to cut its fast-growing greenhouse gas emissions. Three trades for a total of 9,500 permits for 2013 compliance, known as Shanghai Emissions Allowances (SHEAs), went through in the first half-hour after the market opened. A third carbon market will open in Beijing tomorrow. China is the world’s biggest emitter of greenhouse gas emissions, but it has pledged to reduced its emissions per unit of GDP to 40-45 percent below 2005 levels by 2020. Bin Hui, vice director at the Shanghai Environment and Energy Exchange, told reporters that state-owned power company Huaneng Power International Inc was one of the companies involved in yesterday’s deals, but gave no further details. The opening price matched the first trades that went through when the Shenzhen emissions market opened in June, but prices there have since risen to around 60 yuan. A batch of 4,000 permits for use in 2014 also traded in Shanghai at 26 yuan, and 500 for 2015 changed hands at 25 yuan. Shanghai’s scheme caps

State power company Huaneng involved in first trades

carbon dioxide emissions from 191 big energy users in the financial centre, spanning electricity generation, manufacturing, airlines, harbours and commercial buildings.

Trading scheme Participants get free permits from the government to cover most of their expected emissions. If they exceed those levels they must buy permits

in the market from companies that have a surplus, or from offset projects elsewhere in China regulated by the central government. Ni Qianlong of the Shanghai Development and Reform Commission, which administers the market, told reporters yesterday that around 160 million permits had been issued for the scheme’s first year, although the number may be adjusted later.

The Shanghai government said last week companies that have taken action to reduce their emissions over the 2006 to 2011 period will be given additional permits. Among the companies participating are leading steel producer Baoshan Iron and Steel Co Ltd and chemical company BASF SE. The central government has planned seven regional carbon markets as China steps

up efforts to limit its impact on global warming, which scientists say cause rising sea levels, extreme weather events and prolonged droughts. “China will make efforts to contribute to building an international emissions trading scheme in the future,” Xie Zhenhua, vice director of the National Development and Reform Commission said at yesterday’s launch. Reuters

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November 27, 2013 April 19, 2013

Asia

India growth stuck below 5pct: poll GDP likely rose 4.6 percent in July through September from a year earlier

ndia’s economic growth likely picked up slightly in the JulySeptember quarter as improved manufacturing activity steered it from a four-year low in the previous three months, a Reuters poll showed yesterday. Any improvement would be welcome news for the government as a string of opinion polls forecast a poor performance for the ruling party in general elections which must be held by next May. Economic growth virtually halved in two years to 5 percent in the last fiscal year – the lowest level in a decade – and most economists surveyed by Reuters last month expect 2013/14 to be worse.

It is only a marginal improvement with much of the support from a slight recovery in manufacturing sector Upasna Bhardwaj, ING Vysya Bank

The consensus of 40 economists showed gross domestic product expanded 4.6 percent year-on-year in the last quarter, better than the 4.4 percent in the previous three months, which was the lowest since the global financial crisis. “It is only a marginal improvement with much of the support from a slight

Industrial production to help growth recovery in the second half of the fiscal year

recovery in manufacturing sector,” said Upasna Bhardwaj, an economist at ING Vysya Bank. A moderate recovery in Indian factories and exports were probably the main drivers for an increase in overall growth in the quarter through September. Annual industrial output picked up 2 percent in September, driven by an uptick in export and domestic orders.

‘Plans on ice’ Stronger global demand for India’s exports also led to an increase in production, with exports growing

11.15 percent annually in September. Also, a good monsoon should have boosted rural income and perked up flagging consumer demand. However, a dearth of investment lies at the heart of India’s economic malaise. Little improvement is expected ahead of the general election, with investors doubting whether Prime Minister Manmohan Singh’s minority government can force through any bold actions between now and then. Radhika Rao, an economist at DBS Group Holdings Ltd in Singapore, said euphoria surrounding Mr Singh’s earlier reform plans had eased after

they failed to materialise. “It is not surprising that the private sector keeps expansion plans on ice,” Ms Rao added. With wholesale price inflation moving back above the Reserve Bank of India’s perceived comfort level of 5 percent and consumer inflation quickening to more than 10 percent, there is little expectation the central bank will act to ease policy boost growth. In face, new RBI chief Raghuram Rajan has hiked interest rates twice in as many months since September, tackling rising prices head on. Reuters

BOJ board less convinced of price goal Some members fret about weak exports, inflation outlook Leika Kihara

ome Bank of Japan board members sought last month to water down the central bank’s inflation target because of concerns about risks, such as slow rises in business investment and wages, that clouded the outlook, board minutes showed. At the October 31 policy meeting, the BOJ said in a twice-yearly report that risks to the economic outlook were roughly balanced and Japan was making steady progress towards achieving its 2 percent inflation target in roughly two years. But minutes of the meeting showed a rift among the nine board members on the inflation target, with pessimists doubting whether firms would boost capital expenditure and

not yet be judged that Japan’s economy was on track to achieve the BOJ’s price target of 2 percent as expected,” according to the minutes.

More risks

October minutes show biggest rift on the Bank of Japan board

regular pay quickly enough. The minutes were released by the BOJ yesterday. It was the biggest rift on the board since BOJ governor Haruhiko Kuroda launched aggressive monetary stimulus in April to reach

the inflation target. Two board members saw consumer inflation as having already peaked because the effect of a weaker yen, which inflates import costs, was seen tapering off. “One member said it could

Board members Takehiro Sato and Takahide Kiuchi repeated their dissent made in April against the two-year timeframe for achieving 2 percent inflation, on the view it was too ambitious for a country mired in deflation for nearly two decades. Mr Sato proposed changing the inflation pledge to say such price levels were to be “foreseen”. Mr Kiuchi wanted to review the price target and the BOJ’s stimulus after two years. Their proposals were both voted down by the

board. The BOJ’s baseline scenario is for Japan to overcome headwinds, such as soft exports and an expected slump in household spending after the tax hike, and see an economic recovery strong enough to accelerate inflation. But some board members – including Mr Sato and former IMF economist Sayuri Shirai – saw risks to the economic and price outlook as tilted to the downside, the minutes showed, a sign not all are convinced about the rosy projections. Several members pointed to weak exports, particularly to emerging economies, and the risk that soft shipments overseas could dampen corporate capital spending, the minutes showed.

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November 27, 2013 April 19, 2013

Asia Philippines plans investor update The Philippines is planning a series of investor updates next week as the premium investors demand to hold the country’s dollar debt slips to a one-month low. The Southeast Asian nation hired six banks and will hold meetings from December 2, two people familiar with the matter said yesterday, asking not to be identified because the details are private. A benchmark-sized global bond sale is being considered, Treasurer Rosalia de Leon said last week. Spreads on the nation’s dollar bonds fell to 205.2 basis points on November 22, the least since October 25, JPMorgan Chase & Co indexes show. The Philippines, whose economy has matched China’s as the fastest growing in the region for two quarters, is holding meetings in the U.S. to update investors on rehabilitation plans after one of the world’s most powerful storms ravaged parts of the country, Ms de Leon said. The government’s debt is rated investmentgrade by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings Ltd, and policymakers have said the Philippines is able to fund recovery efforts itself.

Malaysia summons Singapore envoy Malaysia’s government summoned Singapore’s high commissioner for talks yesterday, saying it was “extremely concerned” by media reports that the city-state helps Western intelligence agencies spy on its Southeast Asian neighbour. Media reports citing documents leaked by former U.S. National Security Agency contractor Edward Snowden put Singapore, a key U.S. ally, at the centre of a spy network that reportedly taps undersea cables in the region. “If those allegations are eventually proven, it is certainly a serious matter that the Government of Malaysia strongly rejects and abhors,” Foreign Minister Anifah Aman said in a statement late on Monday. “It cannot be overemphasised that spying against a good friend and neighbour is unacceptable and goes against the true spirit of, and commitment to, good neighbourly relations.” A souring of Singapore-Malaysia ties would worsen the fallout on U.S. allies from spying accusations in Southeast Asia. Last week, Indonesia downgraded diplomatic ties with staunch U.S. ally Australia following media reports that Canberra spied on President Susilo Bambang Yudhoyono and his wife.

Rio Tinto reviews Gove refinery Rio Tinto Group is reviewing the future of its loss-making Gove alumina refinery in Australia in light of worsening market conditions, after deciding not to convert the plant to use gas-fired power, the global miner said yesterday. “Despite considerable efforts to improve the refinery’s performance, continuing low alumina prices, a high exchange rate and substantial after-tax losses for the refinery are key factors under consideration,” a Rio Tinto spokesman said in an emailed statement. The comments came after a newspaper reported that the global miner was expected to decide as early as this week to wind down the plant, which is part of the Pacific Aluminium business that Rio failed to sell and reintegrated into the company in August. Rio said it would still mine bauxite at Gove no matter what happens to the refinery. Bauxite is refined to produce alumina, which is then processed to yield aluminium. The company produced 1.6 million tonnes of alumina in the first nine months of this year at Gove, down 22 percent from the same period in 2012, and produced 5.8 million tonnes of bauxite, down only slightly from the same period last year.

Japan dismantles rice policy as Move seen as a first step to make Japanese rice farming efficient Aya Takada and Chikako Mogi

apanese Prime Minister Shinzo Abe’s government approved a plan to end a four-decade long policy that has helped to sustain the nation’s 1.2 million rice farms. The gentan system, which has paid landowners to reduce crops since 1970, will be dismantled by the end of the fiscal year through March 31, 2019, Agriculture Minister Yoshimasa Hayashi told reporters in Tokyo yesterday. The change may spur consolidation of small paddies into larger fields as Mr Abe seeks to increase agricultural efficiency and remove hurdles to his pursuit of free-trade pacts including the Trans-Pacific Partnership. The subsidies support a typical Japanese farmer who is a 70-year-old man living off pension payments, part-time work and sales of the grain, data from the Norinchukin Research Institute show. “I expect more deregulation to follow that is consistent with changing

agriculture into an industry,” Economy Minister Akira Amari said at a separate briefing. Mr Amari, who is spearheading Mr Abe’s plans for economic revitalisation, said the changes announced yesterday would see agricultural resources shift to “capable producers”. The government didn’t announce any changes to import tariffs, which are as high as 778 percent for rice. Sugar has a 328 percent duty while tariffs for beef and pork are 38.5 percent and 4.3 percent. The Agriculture Ministry said some subsidies for rice used as animal feed will increase.

I expect more deregulation to follow that is consistent with changing agriculture into an industry Akira Amari, Japan’s Economy Minister

2014 changes A government estimate in March found that joining the TPP agreement and cutting tariffs would boost Japan’s gross domestic product by 3.2 trillion yen (US$31.5 billion), even as farm

Hyundai bets on new Genesis to lift U.S. Sales

yundai Motor Co unveiled a sleek revamped version of its high-end Genesis sedan in South Korea yesterday, a key model along with the upcoming Sonata family car, to revive momentum in its key home and U.S. markets. Hyundai, the world’s fifth-biggest automaker along with Kia Motors Corp, is looking to lift its total U.S. vehicle sales by 10 percent next year on the back of the release of the new Genesis and, more importantly, the Sonata sedan. The South Korean automaker said the new Genesis would offer improved riding, handling and high-tech features to take on the likes of higher-priced Mercedes and BMW, but the model’s

fuel economy dropped. The new Genesis will arrive in U.S. showrooms in the first half of next year, followed by the Sonata, Hyundai’s second best-selling car in the United States. Hyundai aims to sell 32,000 new Genesis cars in South Korea and 30,000 in overseas markets next year. The Genesis will be sold in Europe for the first time. “We will remain as a follower if we fail to make cars that can compete with top-notch models. The Genesis has a big significance for us, and at the same time marks a challenge,” Park Joon-hong, a research fellow at Hyundai’s Research & Development Division, told reporters last week.

Hyundai’s Mr Park said the company has undertaken rigorous quality checks preceding the launch, after a series of recalls and consumer complaints hurt the company’s reputation. The Genesis, which was first rolled out in 2008 and won the North American “Car of the Year” the next year, is not a high-volume model like the Sonata, but is designed to raise the company’s image, he said. Although it will come with a cheaper price-tag than its European premium rivals, Hyundai has raised the price of the main V-6 3.3-litre model by 2.3 million Korean won to 52.6 million Korean won (US$49,500). Reuters

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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Asia

Abe targets farming

Change may spur consolidation of small paddies into larger fields

and fisheries production was forecast to drop by 3 trillion yen. As many as 72 percent of Japanese rice farmers work on one hectare or less, with 42 percent on half of that, according to Norinchukin. Japan and 11 other nations including the U.S., Australia and Vietnam are in talks for the TPP. The Agriculture Ministry will halve gentan subsidies starting in the fiscal year from April 1, 2014, and end all payments by March 31, 2019, said Takashi Amou, a director of the policy planning division. Farmers who grow rice for livestock feed will receive subsidies that increase by as much as 31 percent under the changes announced yesterday, according to Mr Amou. “Ending the gentan policy is a first step in making Japanese rice farming efficient,” said Takaki Shigemoto, a commodity analyst at research company JSC Corp in Tokyo. “The government has more to do if it wants Japanese farmers to be competitive against agricultural exporting countries.” Wholesale prices of the locally grown cereal averaged 276 yen a kilogram in the nine months through May, compared with 181 yen paid for milled short-grain rice from the U.S. and 152 yen for the same variety from Australia in import tenders last month. These prices included

shipping and inspection costs. The gentan system was originally devised to support prices by setting annual output targets that matched demand estimates. As Japan grew richer and people ate less rice, the targets shrank and the state paid subsidies to farmers who agreed to sow less grain. This year’s target was a record-low 7.91 million metric tons, compared with estimated demand of 7.86 million tons. Consumption peaked at 13.4 million tons in 1963. Farmers who plant less in line with the plan currently receive about 150,000 yen for each 1 hectare (2.5 acres) under cultivation and become eligible for other benefits. Japan, self-sufficient in rice, is the world’s largest importer of corn. It also depends on overseas shipments for almost 90 percent of its wheat. It has capped food-rice imports at 100,000 tons a year since 2001. Total inbound shipments, including feed grain for animals, were 770,000 tons in 2012. The Agriculture Ministry has previously outlined plans to create land banks in every prefecture to connect small holdings into larger tracts. They would pool mostly small lots from farmers ready to give up working their fields and consolidate them to lease as larger areas. Bloomberg News

Korea’s top-performing fund goes global

DBS submits final bid for SocGen Asia bank

South Korean investors view global consumer brands as safer bets

Could be third major transaction in Asia’s banking landscape since 2008 Saeed Azhar and Denny Thomas

outh Korea’s top-performing mutual fund more than doubled its assets in 2013 by betting on global consumer shares, luring inflows from domestic investors who have sold Kospi index stocks for five straight years. The US$610 million Mirae Asset Global Great Consumer Securities Master Investment Trust 1 returned 33 percent this year for biggest gain among Korea-domiciled equity funds with at least US$500 million of assets. The fund has grown from about US$283 million at the start of the year, even as individual investors withdrew a net US$4 billion from Kospi shares. The benchmark index has climbed 1 percent this year, trailing the 18 percent gain in the MSCI All-Country World Index. South Korean investors view global consumer brands as safer bets than domestic shares as the U.S. economy strengthens, according to James Dominick, co-manager of the Mirae Asset global consumer fund. The fund has been increasing stakes in MasterCard Inc, Cie Financiere Richemont SA and Tencent Holdings Ltd, Mr Dominick said in an interview. “South Korean retail investors have been moving to global equity markets,” Mr Dominick said in Seoul yesterday. “That’s the first step you take from a risk-appetite standpoint.” The Mirae Asset consumer fund’s gain this year is more than 10 times bigger than the average increase of 3.2 percent in the South Korea-domiciled funds tracked by Bloomberg. The MSCI All- Country World Consumer Staples Index has increased 16 percent in 2013. MasterCard, the second-biggest U.S. payments network, has jumped 54 percent while Richemont, the owner

S The benchmark index has climbed 1 percent this year

of the Cartier brand, has advanced 29 percent. Tencent, Asia’s biggest Internet company, rallied 76 percent. The fund’s holdings also include Starbucks Corp, Anheuser-Busch InBev NV and Google Inc, Mr Dominick said. Economic reports last week showed job openings in the U.S. climbed to a five-year high in September, indicating employers were confident about demand, while jobless claims fell. The Mirae Asset fund may increase holdings in emerging markets after the shares retreated amid concerns the U.S. Federal Reserve will reduce monetary stimulus. Eighty percent of investors in a Bloomberg survey predict the Fed will delay a decision to begin reducing bond buying until March 2014 or later, with 5 percent looking for a move next month, according to the latest Bloomberg Global Poll. The MSCI Emerging Markets Consumer Staples Index has dropped 9.5 percent from this year’s high in May. “We don’t think the impact will be as severe,” Mr Dominick said. “We’re turning more positive.” Bloomberg News

ingapore’s DBS Group Holdings Ltd, ABN AMRO Group NV and Credit Suisse Group AG have submitted final round bids for Societe Generale SA’s Asian private bank, which is being valued at around US$400 million, people familiar with the matter said. A successful deal would make it the third major transaction in Asia’s competitive private banking landscape since the global financial crisis, as smaller players struggle to generate enough revenue to support expensive bankers and rising regulatory costs. SocGen had short-listed five suitors, but it was not immediately clear if all those on the short list had placed final bids, which were due on Monday. Initial price expectations for the business ranged from between US$300 million to US$600 million, but a person with direct knowledge of the matter told Reuters the business is being valued at about US$400 million. Sources declined to be identified as they are not authorised to talk to the media. A SocGen spokeswoman in Singapore declined to comment. DBS, Credit Suisse and ABN AMRO also declined to comment. SocGen’s Asian private bank unit manages about US$13 billion, below the US$20 billion mark that the industry has come to see as necessary for critical mass in the region. DBS is seen by many as a leading contender for the unit and chief executive Piysuh Gupta told

SocGen’s Asia private bank unit manages US$13 bln

an earnings briefing this month the bank would look at Asian wealth businesses. UBS AG and Royal Bank of Canada were among bidders looking at the unit in the early stages of the sale, sources have said. Standard Chartered Plc was also an early bidder but has since dropped out, sources said. SocGen’s private bank sale follows two major transactions since the financial crisis including the sale of ING Groep NV’s private bank in late 2009 to Oversea-Chinese Banking Corp and Bank of America’s sale of Asian and European private banking units to Julius Baer Group Ltd. The industry has also seen smaller deals such as the sale of HSBC Holdings Ltd’s private bank in Japan to Credit Suisse and Julius Baer taking over Macquarie Group’s private banking unit in Asia. Reuters

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

Max 60.40

average 59.941

Max 57.70

Min 59.75

average 57.489

Last 59.75

Min 57.05

Last 57.05

60.50

89.4

60.34

89.3

60.18

89.2

60.02

89.1

59.86

89.0

59.70

Max 89.35

average 89.158

PRICE

24.3

57.56

24.2

57.42

24.1

57.28

24.0

57.14

23.9

57.00

Max 24.25

average 24.097

DAY %

YTD %

(H) 52W

Min 23.85

Last 23.85

(L) 52W

WTI CRUDE FUTURE Jan14

94.45

0.382612392

1.352076403

107.9400024

85.45999908

BRENT CRUDE FUTR Jan14

110.71

-0.261261261

6.013597625

113.3099976

96.13999939

GASOLINE RBOB FUT Dec13

267.76

-0.115641437

5.235025939

290.3199911

241.5999889

936.5

0.240834894

4.055555556

968

838.75

3.82

0.818157825

-3.242147923

4.744000435

3.378999949

302.44

-0.253949408

1.357284091

321.1599827

276.4999866

1251.56

1.6099

-24.8068

1752.24

1180.57

GAS OIL FUT (ICE) Jan14 NATURAL GAS FUTR Dec13 NY Harb ULSD Fut Dec13 Gold Spot $/Oz Silver Spot $/Oz

20.0895

1.65

-33.2796

34.3838

18.2208

Platinum Spot $/Oz

1389.75

0.018

-8.4335

1742.8

1294.18

Palladium Spot $/Oz

723.67

1.1094

3.4317

786.5

629.75

LME ALUMINUM 3MO ($)

1774.5

-0.420875421

-14.39942113

2184

1758

LME COPPER 3MO ($)

7099

0.056377731

-10.49048039

8346

6602

LME ZINC

1903

-0.314300681

-8.509615385

2230

1811.75

13545

-0.110619469

-20.60375147

18770

13205

15.745

-0.3796267

2.140771975

16.80999947

14.91500092

3MO ($)

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

430.25

-0.231884058

-29.40935193

654.75

420

WHEAT FUTURE(CBT) Mar14

655.5

-0.568828214

-21.1902615

904.75

647.75

SOYBEAN FUTURE Jan14

1325.5

-0.282113974

1.260504202

1406

1169

COFFEE 'C' FUTURE Mar14

108.55

0.976744186

-32.30433427

172.25

104.1499939

17.34

0.115473441

-15.74344023

20.71999931

16.69999886

CORN FUTURE

Mar14

SUGAR #11 (WORLD) Mar14 COTTON NO.2 FUTR Mar14

23.8

78.68

0.280397655

-0.919279688

90.61000061

76.65000153

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

27.6 27.5 Max 27.80

average 27.560

Min 27.45

Last 27.45

27.4

29.9

29.8

29.7

Max 29.90

average 29.827

Min 29.65

Last 29.75

29.6

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9173 1.6188 0.9083 1.3559 101.52 7.985 7.7525 6.0919 62.34 31.985 1.2509 29.623 43.735 11798 93.117 1.23153 0.83754 8.2623 10.8277 137.64 1.03

0.1966 -0.0124 0.2422 0.3478 0.1872 0.0025 0.0026 0.0213 0.2486 -0.0156 0.0799 0.027 0.3087 -2.4411 -0.0032 -0.0926 -0.3439 -0.2179 -0.35 -0.1453 0

-11.6111 0.0742 0.7817 2.7976 -15.1891 -0.0225 -0.0245 2.2768 -11.7822 -4.3927 -2.3583 -1.9917 -6.2421 -16.9944 -4.0701 -1.9529 -2.6411 -0.5422 -2.7457 -17.4876 -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 11798 105.433 1.265 0.88151 8.4957 11.0434 137.99 1.032

0.8848 1.4814 0.8891 1.2746 81.69 7.9818 7.7498 6.0773 52.89 28.56 1.2168 28.913 40.54 9590 85.24 1.20302 0.80331 7.8281 10.195 105.28 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

(H) 52W

(L) 52W

4.63

-2.93501

16.64

0.06013229

VOLUME CRNCY

46.98412

5.12

2.73

3052244

55.95126

17.38

9.98

1173152

AMAX INTERNATION

1.1

0.9174312

-21.42857

1.72

0.75

1091150

BOC HONG KONG HO

26.4

0.5714286

9.543567

22.85

12861491

0.485

83.01888

0.56

0.24

556000

7.1

0.8522727

18.53089

7.28

4.13

44000

CHINA OVERSEAS

23.55

-0.8421053

1.94805

25.6

17.7

14080152

CHINESE ESTATES

22.5

2.040816

100.0792

9.767

190500

CHOW TAI FOOK JE

12.3

-0.3241491

-1.125399

13.4

7.44

3524069

EMPEROR ENTERTAI

3.93

-1.007557

107.9365

4.66

1.65

1085021

FUTURE BRIGHT

3.79

-0.2631579

212.6995

3.96

1.103

2604000

GALAXY ENTERTAIN

59.75

96.86985

63.75

5380405

127.2

1.032566

7.160913

132.8

110.6

1722445

-0.5736138

-21.80451

35.3

23.2

1162413

CENTURY LEGEND

NAME

88.9

27.7

Currency Exchange Rates

NAME

METALS

Last 88.95

57.70

Commodities ENERGY

Min 88.95

27.8

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16072.54

0.04836671

22.65239

16109.63

12765.32031

NASDAQ COMPOSITE INDEX

3994.574

0.07327799

32.29197

4007.093

2935.878

FTSE 100 INDEX

6694.55

-0.001045616

13.50908

6875.62

5755.23

HANG SENG BK

DAX INDEX

9311.13

0.1202157

22.31546

9323.44

7265.44

HOPEWELL HLDGS

NIKKEI 225

15515.24

-0.6651459

49.25418

15942.6

9308.35

HSBC HLDGS PLC

86.7

0.2312139

6.642062

90.7

76.55

7890135

HANG SENG INDEX

23681.28

-0.01338431

4.521177

23944.74

19426.35938

HUTCHISON TELE H

2.96

-1.003344

-16.85393

4.66

2.91

8120000

CSI 300 INDEX

2387.416

-0.05078227

-5.372116

2791.303

2023.171

LUK FOOK HLDGS I

30.1

-2.903226

23.36066

31.4

16.88

3525350

MELCO INTL DEVEL

26.8

0.1869159

197.4473

28.1

7.84

1847300

TAIWAN TAIEX INDEX

8248.02

0.7390525

7.124093

8476.63

7370.28

MGM CHINA HOLDIN

27.45

-0.7233273

106.7286

12.805

2038103

KOSPI INDEX

2022.64

0.3303604

1.281388

2063.28

1770.53

MIDLAND HOLDINGS

3.26

1.557632

-11.89189

4.29

2.68

2541000

NEPTUNE GROUP

0.3

-1.639344

97.36843

0.4

0.131

27030000

NEW WORLD DEV

10.56

0.5714286

-12.14643

15.12

9.98

8376422

SANDS CHINA LTD

57.05

0.1755926

68.04123

60.5

30.35

9839921

S&P/ASX 200 INDEX

5357.01

0.07801475

15.23053

5457.3

4413

JAKARTA COMPOSITE INDEX

4269.025

-1.517439

-1.104136

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1798.76

0.04393844

6.501676

1826.22

1590.67

SHUN HO RESOURCE

1.62

15.71429

1.92

1.22

NZX ALL INDEX

1010.14

-0.4967577

14.52147

1048.998

858.253

SHUN TAK HOLDING

4.51

7.63723

4.8

3.27

4466501

PHILIPPINES ALL SHARE IX

3679.57

-0.05703933

-0.5247369

4571.4

3440.12

SJM HOLDINGS LTD

23.85

-0.8316008

34.38393

16.762

4677198

8.54

-1.499423

-39.34659

14.66

8.52

3173439

WYNN MACAU LTD

29.75

1.190476

42.00477

32.6

4005846

ASIA ENTERTAINME

N/A

72.23

0.654961

61.55223

78.03

43.57

259097 2000

SMARTONE TELECOM

Euromoney Dragon 300 Index Sin

616.15

0.15

-0.8

STOCK EXCH OF THAI INDEX

1362.64

0.7229129

-2.104275

1649.77

1260.08

HO CHI MINH STOCK INDEX

509.16

0.5331122

23.06577

533.15

374.15

BALLY TECHNOLOGI

Laos Composite Index

1275.78

0.8848718

5.022351

1455.82

1196.44

BOC HONG KONG HO

3.36

-0.8849558

9.446256

3.6

2.99

GALAXY ENTERTAIN

7.75

0.2846791

95.2141

8.11

3.6

6838

INTL GAME TECH

17.16

1.179245

21.10092

21.2

12.9

5110686

JONES LANG LASAL

98.19

0.02037282

16.97641

101.46

76.7013

189959

LAS VEGAS SANDS

70.26

-0.2979991

52.20971

73.49

40.9632

2475769

MELCO CROWN-ADR

34.33

-0.4927536

103.8599

13.95

1297700

MGM CHINA HOLDIN

3.52

2.325581

101.1094

3.88

1.703

5500

MGM RESORTS INTE

18.84

0.1062699

61.85567

20.98

9.8

5838651

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.07

-1.222651

34.79006

3.6

2.1494

7300

163.67

0.7510003

48.16885

170.254

104.7075

638597

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

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

39.2

0.5128205

15513710

ALUMINUM CORP-H

2.84

8959367

BANK OF CHINA-H

3.7

-0.5376344

228612561

BANK OF COMMUN-H

5.7

-0.6968641

21841650

34.25

0.2928258

2123875

BELLE INTERNATIO

9.49

-0.3151261

18950327

ESPRIT HLDGS

BOC HONG KONG HO

26.4

0.5714286

12861491

HANG LUNG PROPER

CATHAY PAC AIR

16.48

-0.2421308

3994417

CHEUNG KONG

BANK EAST ASIA

122.7

0.1632653

2994664

CHINA COAL ENE-H

5.02

-1.568627

40318272

CHINA CONST BA-H

6.22

-0.3205128

194809411

NAME

PRICE

DAY %

VOLUME

CHINA UNICOM HON

12.12

0.8319468

17083161

CITIC PACIFIC

11.04

CLP HLDGS LTD

63.65

CNOOC LTD COSCO PAC LTD

HANG SENG BK

PRICE

DAY %

VOLUME

POWER ASSETS HOL

62.95

0.159109

2959027

5240043

SANDS CHINA LTD

57.05

0.1755926

9839921

0.8716323

5072816

SINO LAND CO

10.8

0.7462687

9116663

15.58

-0.7643312

47273146

99.75

0.7067138

4078331

11.32

-0.7017544

6724213

SWIRE PACIFIC-A

91.1

0.4410143

3237412 3710660

SUN HUNG KAI PRO

7877330

TENCENT HOLDINGS

437

-0.2283105

26.1

1.162791

4590070

TINGYI HLDG CO

22.5

1.809955

9226253

127.2

1.032566

1722445

WANT WANT CHINA

11.06

0.7285974

14150195

WHARF HLDG

64.6

-0.5388761

2554197

HENDERSON LAND D

45.8

0.5488474

3067141

HENGAN INTL

94.5

-0.5263158

1838549

HONG KG CHINA GS

18.36

1.101322

12638942

HONG KONG EXCHNG

136.2

-0.3657644

2634617

86.7

0.2312139

7890135

CHINA LIFE INS-H

24.65

-1.202405

36230278

CHINA MERCHANT

29.25

0.3430532

4063766

CHINA MOBILE

81.65

0.7402838

18564474

HUTCHISON WHAMPO

97.75

1.033592

5571875

CHINA OVERSEAS

23.55

-0.8421053

14080152

IND & COMM BK-H

5.51

-0.1811594

175314283

CHINA PETROLEU-H

6.65

-2.635432

294237651

LI & FUNG LTD

10.7

-1.291513

20695765

CHINA RES ENTERP

27.4

-0.7246377

4292673

MTR CORP

29.9

0.8431703

HSBC HLDGS PLC

NAME

MOVERS

23829.97

3449602

LOW

23666.28

52W (H) 23944.74

CHINA RES LAND

20.95

0.7211538

6399383

NEW WORLD DEV

10.56

0.5714286

8376422

18.66

2.414929

6755047

PETROCHINA CO-H

9.23

-0.9656652

81480242

CHINA SHENHUA-H

26.2

-1.132075

14033471

PING AN INSURA-H

71.95

-0.4152249

14188473

2 23830

INDEX 23681.28 HIGH

CHINA RES POWER

(L) 19426.35938

23666

22-November

26-November

15 15

November 27, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Korea Herald South Korea is pushing to ban the use of cash in buying lotteries and instead introduce electronic cards to prevent excessive purchases and addiction, the finance ministry said. The government has begun working to make it mandatory for people to use electronic cards to purchase lotteries and asked outside experts to carry out related research. An electronic card carries personal information of its holders and places a cap on the amount of money that a user can spend on lotteries at one time. It has already been introduced in other areas, including casinos and horse racing.

Bringing the Iran deal back home Anne-Marie Slaughter

Former director of policy planning in the U.S. State Department and Professor of Politics and International Affairs at Princeton University

Taipei Times Taiwan’s manufacturing and service providers grew less optimistic about their business outlook due to lingering unease over the global economy and the U.S. fiscal debt problems, as well as the US’ quantitative easing, a think tank said yesterday. The Taiwan Institute of Economic Research made the observation after releasing the results of its monthly sentiment survey, which showed the business climate gauge for the manufacturing sector falling 2.08 points to 95.91 points last month, from a revised 97.99 points in September. The latest figures represented a second consecutive month of decline, the survey found.

Times of India India’s finance ministry and Vodafone Group Plc have agreed to sit across the table for talks on a possible settlement of the US$2.2 billion tax dispute after the government formally communicated that any conciliation will not be legally binding on the telecom company. On the one hand, the government tried to initiate conciliation talks with Vodafone, on the other it referred the matter to the Law Commission for suggestions to amend the Arbitration and Reconciliation Act where cases like Vodafone can be settled while avoiding international arbitration.

Asahi Shimbun With Japan’s major TV stations and movie industry on board, U.S. online retail giant Amazon. com Inc. is seeking to be a major player in the video distribution market in Japan, as it prepares to begin offering content as early as this week, according to sources. More than 10 companies are currently involved in online movie distribution service, also known as “video on demand,” in Japan. “We will welcome [Amazon.com’s] entry for revitalising the market and increasing the number of customers,” said a senior official of a broadcasting company.

he United States government’s initial statements on the “first-step agreement on Iran’s nuclear programme” have been focused, above all, on the great deal that the U.S. and the West have gotten. Iran has agreed to halt enrichment of uranium above 5 percent purity; neutralise its stockpile of uranium enriched to near 20 percent purity; stop building its stockpile of 3.5 percent enriched uranium; forswear “next generation centrifuges”; shut down its plutonium reactor; and allow extensive new inspections of its nuclear facilities. In return, Iran will get “limited, temporary, targeted, and reversible relief” from international sanctions. The agreement covers only the next six months, during which both sides will try to reach a final comprehensive agreement. For now, as President Barack Obama put it, the burden remains, from the U.S. point of view, “on Iran to prove to the world that its nuclear programme will be exclusively for peaceful purposes.” Framing the issue this way reflects the need to sell even a limited, temporary deal to a sceptical U.S. Congress. Israel’s manifest displeasure with the entire negotiating process, which Prime Minister Binyamin Netanyahu has emphasised to anyone who will listen over the past three months, reverberates loudly among Israel’s many congressional friends. Indeed, Israel’s stance bolsters the desire of Obama’s Republican opponents to paint him as weak and naïve in negotiating with Iran, a country that still describes the U.S. as “the great Satan”. Both Republicans and Democrats are threatening to pass a new round of tough sanctions against Iran in December. Thus, Obama must focus as much on

pushing back against domestic hardliners as on taking a hard line with Iranian negotiators.

Domestic space This is hardly surprising. One hopes that the Iranian government’s announcement to its own people reads roughly the same, in reverse, focusing on the important concessions that Iranian negotiators have won.

The West had better hope that the Iranian narrative proves true, because the political space for any meaningful diplomatic agreement is created at home

That includes suspension of international sanctions on Iran’s exports of oil, gold, and cars, which could yield US$1.5 billion in revenue; unfreezing US$4.2 billion in revenue from oil sales; and releasing tuitionassistance payments from the Iranian government to Iranian students enrolled abroad. Iranian President Hassan Rouhani needs to marshal support for the deal just as much as Obama does, above all by reducing inflation and

getting his country’s economy moving again. If domestic tensions, above all within Iran’s restive middle class, ease as a result, the government will receive the credit, while the Iranian Republican Guard and other hardliners will be weakened. The West had better hope that the Iranian narrative proves true, because the political space for any meaningful diplomatic agreement – both the desire for a deal and the room to achieve it – is created at home. This is particularly true when a new government comes to power with promises of improving the economy. Rouhani can undercut hardliners who would seek to block any ultimate deal only if the Iranian population both experiences economic relief and attributes it to his administration. The true test of this interim agreement, therefore, is whether both sides can secure the domestic space to continue negotiating. The stakes have never been higher – and not only because of the very real and dangerous geopolitical consequences of an Iranian bomb. As Obama put it, “If Iran seizes this opportunity, the Iranian people will benefit from re-joining the international community, and we can begin to chip away at the mistrust between our two nations. This would provide Iran with a dignified path to forge a new beginning with the wider world based on mutual respect.”

Regional victory Let us imagine, just for a moment, what the Middle East and Central Asia could look like if the U.S. and Iran could once again talk to each other. As we saw briefly after the terrorist attacks of September 11, 2001, the drug trade from Afghanistan could be sharply curtailed.

Moreover, a regional agreement involving Iran, India, Pakistan, Russia, China, Turkey, the European Union, and the U.S. would become much more likely, providing the framework for security and economic growth that diplomats from Henry Kissinger to the late Richard Holbrooke always claimed would be necessary for lasting peace in Afghanistan. Perhaps most important, a peace settlement in Syria would be much more likely – and more likely to endure – if the U.S. could talk to Iran, which has far more leverage with President Bashar al-Assad’s regime than Russia does. After all, it was fighters from Hezbollah, Iran’s Lebanese proxy, who turned the tide of battle decisively against the opposition this past summer. Iran has long made clear that it wants to resume its historic position as a major regional – and indeed global – power, an ambition that can only grow stronger as it watches Turkey’s geopolitical stature rise. Iran and Turkey, after all, are the 17th and 18th largest countries in the world by population, respectively, with sophisticated elites and illustrious and ancient pasts. The ultimate winner in the interim agreement with Iran is the cause of diplomacy itself. U.S. Secretary of State John Kerry, EU High Representative Catherine Ashton, and the other parties to the talks – all supported by able teams of diplomats – hammered out the deal’s details over months, staying at the table, compromising, holding firm, and managing the expectations of multiple players (including the press). The Obama administration committed itself to global leadership through civilian rather than military power. That is what it takes. © Project Syndicate

16 16

November 27, 2013 April 19, 2013

Closing China slowdown hits luxury brands

Ukraine leader firm over EU ‘U-turn’

French spirits group Remy Cointreau SA and German fashion house Hugo Boss AG have both said they are being affected by slower growth in China’s economy. Remy Cointreau said that its fullyear operating profits would see a “double-digit” decline. It blamed the fall on China’s “sharp slowdown”, together with an “uncertain economic environment” in Europe. Hugo Boss told investors it would not meet its profit target for 2015 because of weaker growth in China and Europe. Remy Cointreau said sales for the six months to 20 September fell to 558 million euros (US$756 million), as China’s crackdowns on extravagant gifting and dining.

Ukrainian President Viktor Yanukovych has defended his move to put on hold a historic deal with the European Union, amid continuing mass protest rallies. He said he was forced by economic necessity and the desire to protect those “most vulnerable”. The EU has accused Russia of exerting heavy economic pressure on Ukraine. Mr Yanukovych was speaking publicly for the first time since the announcement on Thursday that his government was halting preparations to sign the association and free trade agreements with the EU. The decision triggered mass protests in Kiev and a number of other cities across Ukraine.

Thai protesters surround more ministries Protesters urge civil servants to join anti-government push

hai protesters besieged government ministries in Bangkok and urged civil servants to join a push to oust Prime Minister Yingluck Shinawatra and dismantle the network of her brother, former premier Thaksin Shinawatra. Demonstrators who occupied the compounds of the finance and foreign ministries on Monday massed outside the interior, energy and transport ministries yesterday, forcing employees to evacuate. Yingluck offered to hold talks with leaders of the protest movement and called for an end to the occupations.

Rallies that began a month ago against an amnesty for political offences stretching back to the 2006 coup that ousted Thaksin have morphed into a wider push to end “suffering under the rule of Thaksin and his people,” said Suthep Thaugsuban, a former opposition lawmaker who is leading the demonstrations. The Criminal Court issued an arrest warrant for Suthep for leading Monday’s breach of the finance ministry. “The protesters still lack the backing of forces with the willingness and ability to topple the government

quickly,” said Michael Montesano, a visiting research fellow at the Institute of Southeast Asian Studies in Singapore. “If disorder spreads, we will see how long those forces are willing to stand aside.” A two-day confidence debate started yesterday in parliament against Yingluck and members of her ruling Pheu Thai party, after the opposition accused them of corruption and trying to pass laws to exonerate Thaksin of crimes he allegedly committed in office. Pheu Thai has a majority in parliament’s lower house. Demonstrators continued a

The protesters say the current government must step down

Bloomberg News

Mainland cities tighten home-buying rules Many Chinese cities are seeing record home prices

ore Chinese cities have announced measures to cool surging home prices, joining growing efforts nationwide as authorities come under pressure to rein in a red-hot housing market. The eastern city of Nanjing, the southern city of Xiamen, Nanchang in central China and Shenyang in the northeast unveiled a number of measures, according to city government websites, including raising minimum down payments for second home purchases and making more land available.

Wuhan, the capital city of central Hubei province, announced similar rules last Friday. Many Chinese cities are seeing record home prices, adding to the risk of a property bubble in the world’s secondlargest economy. Authorities are also aware of the potential for social tensions as many Chinese find themselves priced out of home ownership. Recently bigger cities including Beijing, Shanghai, Shenzhen and Guangzhou, where prices have surged most, have announced similar measures to cool the market.

symbolic occupation of the finance ministry yesterday after erecting a permanent protest stage overnight. Workers were told to leave the transport and energy ministries and the headquarters of state energy company PTT Pcl as groups of protesters arrived and blocked access to the compounds, government officials said. The government extended the use of the Internal Security Act to provinces near Bangkok including Nonthaburi and some districts of Samut Prakarn and Pathumthani until December 31, Yingluck said on Monday. The ISA, which has been in effect around Parliament House since October 9, lets authorities close roads, make arrests and take action against any security threats. Yingluck yesterday reiterated a pledge that authorities wouldn’t use violence to disperse the protests, and said she was willing to talk to Suthep, who oversaw a deadly crackdown on Thaksin’s supporters in 2010 when the opposition Democrat party was in power. Global funds pulled a net US$209 million from Thai bonds and equities on Monday, bringing this month’s net sales toUS $2.3 billion, official data show. The SET Index of stocks has fallen 6.3 percent in the past month, the most in Asia after Indonesia and the Philippines, according to data compiled by Bloomberg. The baht was little changed at 31.970 per dollar in Bangkok. It reached 32.11 earlier, the weakest level in 11 weeks.

“This round of the tightening campaign seems to be covering a larger area than market expectations as it has expanded from tier 1 cities to tier 2 cities,” said Luo Yu, property analyst with CEBM Group in Shanghai. “Given that many cities saw strong home price gains in October, there should be more cities to follow,” Mr Luo added. The government has been trying to rein in prices for four years through measures such as reducing financing for buyers and limiting the number of homes people can buy, and has

said it is aiming for “a balanced and sustainable” property market. It is trying out a housing tax scheme in two cities which analysts expect could be extended further next year. The unrelenting rise has been buoyed by strong demand for both owner-occupied property and as an investment, largely because of the view that property is one of the best investment options. The problem is also compounded by local governments selling land at high prices for much-needed revenues. House prices in China are likely to continue to rise in 2014, though at a slower pace than this year due to relatively tight credit controls and government measures aimed at fostering a more sustainable property market, the latest Reuters poll showed. Reuters