Macau Business Daily, November 29, 2013 by Business Daily

www.macaubusinessdaily.com

Year II

Number 425 Friday November 29, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Govt loses battle over Cable TV compensation

he government’s fight against a ruling it must pay Macau Cable TV Co Ltd 200 million patacas (US$25 million) may be nearing an end. But it’s not yet clear which side will prevail. MCTV theoretically has an exclusive citywide concession to supply cable

television. But the government failed to suppress unlicensed public antenna companies from operating and undercutting the concessionaire’s prices. MCTV’s accumulated losses are about 170 million patacas, its boss told Business Daily last month. In June the Court of Second Instance

gave the government 90 days to stop the antenna companies from illegally relaying cable transmissions. There’s a suggestion the government may have made a technical mistake in its case that will trigger liability to pay. Other legal sources say things are more complicated. More on page 3

Hang Seng Index 24010

23958

23906

23854

23802

Taiwan open skies – possible accord next year

At present four airlines fly between Macau and the island. However, the deal would not allow flag carrier Air Macau Co Ltd to fly between Taiwan and the mainland – an attractive and growing market. The agreement will not include fifth freedom rights, which allow an international flight to pick up passengers at an intermediate destination and take them to its final destination.

Page 5

November 28

HSI - Movers Name

%Day

CHINA RES LAND

2.43

CHINA UNICOM HON

2.18

CHINA OVERSEAS

1.71

CATHAY PAC AIR

1.69

CHINA COAL ENE-H

1.57

HENDERSON LAND D

-1.20

HONG KONG EXCHNG

-1.23

SINO LAND CO

-1.48

CHINA MERCHANT

-1.56

CHINA RES POWER

-1.70

Source: Bloomberg

page 2

New flagship shop boosts Luk Fook’s local sales

23750

I SSN 2226-8294

Public housing drives construction rebound Page 6

Pachinko op wants ‘online’ games here

Brought to you by

Page 7

Viva Macau runs out of legal options

MICE events to get yet more subsidies

Backdoor HK listing on cards for junket

Defunct low-cost airline Viva Macau has lost an appeal against the decision by Air Macau Co Ltd to terminate its subsidiary concession in 2010. And a source with direct knowledge of the case told Business Daily that the company’s court-appointed bankruptcy administrator is very likely to drop the case. This is the last lawsuit related to Viva Macau’s grounding in March 2010 that left thousands of passengers stranded.

A new incentive scheme for international conventions and exhibitions will start next year, said Sou Tim Peng, director of Macau Economic Services. Details will be announced next month, Mr Sou told media after a closeddoor meeting. But Business Daily has learned the new scheme will cover up to 30 percent of hotel expenses for delegates to events of at least three days – up from 10 percent currently.

A Macau junket operation is on the verge of getting a back door listing on the Hong Kong Stock Exchange. A company previously specialising in selling frozen food in mainland China says it has a conditional deal to buy out for HK$400 million (US$51.6 million) the sole shareholder of a junket operation called Hang Seng Sociedade Unipessoal Limitada. It controls profit streams from 86 tables at seven VIP rooms.

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November 29, 2013

Macau

Taiwan open skies accord may be struck next year The agreement would lift all restrictions on the number of Taiwan-Macau flights Stephanie Lai

sw.lai@macaubusinessdaily.com

aiwan and Macau are close to striking an open skies deal that would lift all restrictions on air services between them, Taiwan’s Chinese-language Economic Daily News has reported. The newspaper quoted unidentified sources in Taiwan’s Ministry of Transportation and Communications as saying agreement could be reached next year. Such a deal could mean more competition on MacauTaiwan routes. At present four airlines fly between Macau and the island. However, the deal would not allow flag carrier Air Macau to fly between Taiwan and the mainland – an attractive and growing market. The agreement will not include fifth freedom rights, which allow an international flight to pick up passengers at an intermediate destination and take them to its final destination. The Civil Aviation Authority of Macau told Business Daily in writing that representatives of Taiwan and Macau had “exchanged views and opinions” on how to “further enhance the development of the aviation market for both sides”. A new air services agreement is in the cards but the authority did not to say when it might be signed. The current agreement allows only Air Macau and Taiwan’s Eva Airways, TransAsia Airways and Mandarin Airlines to serve

Taiwan-Macau routes. The agreement was signed in 1995 and was due to expire in 2005, but the signatories continue to stick to it. Air traffic between Taiwan and Macau has decreased drastically since 2008, when the introduction of regular direct flights between Taiwan and the mainland meant passengers flying between the two places no longer had to use Macau or Hong Kong as a staging post. The number of TaiwanMacau flights has averaged only about 510 a month so far this year, having been almost 1,000 a month before July 2008. Taiwan-Macau air tickets are more expensive than Taiwan-Hong Kong tickets. The cheapest flight from Taiwan to Macau is NT$4,900 (1,320 patacas), excluding airport tax and fuel surcharge. The cheapest flight to Hong Kong is NT$3,200. This month TransAsia Airways said it had become the first Taiwan carrier authorised to put on low-cost flights, which it could start doing in 2014 at the earliest. The airline said some of its low-cost flights would be to Macau. It gave no forecast of the price of a ticket. The Civil Aviation Authority of Macau said it had heard nothing official about TransAsia Airways becoming a low-cost carrier. The authority said any new services must comply with the current air services agreement.

Eva Airways is one of four airlines allowed to fly between Macau and Taiwan

Viva Macau runs out of legal options Court rejects appeal against Air Macau’s decision to ground budget airline in 2010 Vítor Quintã

vitorquinta@macaubusinessdaily.com

efunct low-cost airline Viva Macau – Sociedade de Aviação Ltda has lost an appeal against the decision by Air Macau Co Ltd to terminate its subsidiary concession in 2010. And a source with direct knowledge of the case told Business Daily that the company’s court-appointed bankruptcy administrator is very likely to drop the case. This is the last lawsuit related to Viva Macau’s grounding in March 2010, when repeated flight cancellations left thousands of passengers stranded. The carrier was said to be unable to pay its jet fuel bills from supplier

Nam Kwong Group Co Ltd. The Court of Second Instance agreed with an earlier decision of the Administrative Court and turned down an appeal from the budget airline against flag carrier Air Macau, according to a decision published in the courts’ website. The verdict is yet to be published. Viva Macau could still take its plight to the Court of Final Appeal but that is unlikely, said a source, who asked not be identified because he is not authorised to speak to the media. The carrier was declared bankrupt in September 2010. At the time it had debts of about US$38 million (303.6 million patacas) and no assets.

The court-appointed administrator is unlikely to want to push forward with the appeal, said the source. Viva Macau’s administrator admitted in an earlier court case that resuming operations “was likely not an option”. In July the Court of Final Appeal rejected another appeal by the budget carrier, this time against Secretary for Transport and Public Works Lau Si Io. Viva Macau argued Mr Lau issued an illegal administrative act that ordered Air Macau to revoke the budget carrier’s contract. The judges said there was no evidence that Mr Lau had issued

Air Macau an order that was legally binding and argued that any appeal should have focused on the role of the city’s flag carrier. Viva Macau’s bankruptcy procedures are still undergoing. Last week the administrator gave all creditors 15 days to inspect the company’s books. The government is still trying to find a buyer for a 99.9-percent stake in the failed airline, after a court auction in April found no bidders, Secretary for Economy and Finance Francis Tam Pak Yuen said during his Policy Address for 2014 at the Legislative Assembly on Tuesday.

November 29, 2013 April 19, 2013

Macau

Govt facing defeat over cable TV compensation Macau Cable TV seems to be closer to getting an arbitrator’s award of 200 million patacas Vítor Quintã

he government’s effort to get the courts to overturn an arbitrator’s award of 200 million patacas (US$25 million) in compensation to Macau Cable TV Co Ltd may have been in vain. The Court of Second Instance rejected yesterday a government appeal against an Administrative Court ruling on the government’s suit against the arbitrator’s decision, according to the judiciary’s website. There is no appeal against an arbitrator’s decision. But either party in a dispute submitted to an arbitrator can ask the courts to order that arbitration start from scratch if the original process was flawed. The government first tried to have the arbitrator’s decision annulled. But the Administrative Court ruled that the government should have been represented in the suit by a public prosecutor instead of the jurist it appointed, according to two knowledgeable sources, who asked not be identified because they are not authorised to speak to the news media. The government then appealed to the Court of Second Instance, which upheld the Administrative Court’s ruling. The Court of Second Instance’s judgement has yet to be published. Business Daily’s sources said the court had not considered whether the arbitrator’s decision should be annulled.

(Photo: Manuel Cardoso)

vitorquinta@macaubusinessdaily.com

Macau Cable TV’s exclusive concession to supply cable television ends in April

But the sources disagree about whether all this means the government now has no choice but to pay the compensation awarded to Macau Cable TV. One source said the government

had failed to correct in time its failure to have a public prosecutor represent it, and so could not take its appeal any further. The arbitrator’s decision would become effective in 10 days and the

government would have to pay 200 million patacas plus interest, the source said. Interest has been piling up since the arbitrator made the award in December.

Television epic The other source said the government might be able to take its appeal further, but that this would depend on what the Court of Second Instance’s judgement said. Macau Cable TV has an exclusive concession to supply cable television, but unlicensed public antenna companies established in the 1970s, before Macau Cable TV began operating, have most of the market, mainly because their service is cheaper. Macau Cable TV took its case for compensation to arbitration in 2011. The company asked for 500 million patacas in compensation for the government’s failure to uphold its exclusive right to supply cable television. Macau Cable TV chief commercial officer John Chiang Kwong Io said last month that the company had accumulated losses of about 170 million patacas. In June the Court of Second Instance gave the government 90 days to stop the antenna companies from illegally relaying cable television transmissions. In August Macau Cable TV signed agreements that allowed 14 antenna companies to relay through their networks programming provided by Macau Cable TV. The company’s exclusive concession ends in April. The government has said it will subsequently open up the cable television market. In August the director of the Telecommunications Regulation Bureau, Lawrence Tou Veng Keong, said the government had begun negotiating a new contract with Macau Cable TV. Last month the government replaced Mr Tou with one of his deputy directors, Hoi Chi Leong.

More money to lure in international MICE events New scheme to be announced next month means more subsidies for hotel expenses Stephanie Lai

sw.lai@macaubusinessdaily.com

he government will introduce next year a new incentive scheme to support international conventions and exhibitions (MICE), said Sou Tim Peng, director of the Macau Economic Services. Details will be announced next month, Mr Sou told media after a closed-door meeting of the government’s Commission for the Development of Conventions and Exhibitions. The scheme will come into effect in early 2014, the director added. He gave no forecast on how much money the administration would spend on subsidies. The government will subsidise up to 25 percent of the venue rental costs, 75 percent of the transport costs, and 50 percent of the event promotion expenses, said commission member Keyvin Bi Chi Kin. The new scheme will also cover up to 30 percent of the hotel expenses of the event participants, Mr Bi told

Business Daily after the meeting. Compared with the existing incentive plan for MICE events, the new scheme “has basically enhanced support for hotel costs,” said Mr Bi. In order to get the subsidy, any convention must be “regionally or internationally known” and have been held outside Macau twice before, he explained. As for exhibitions, the new scheme also has a minimum number of outside professional buyers “that the event aims to attract,” Mr Bi added. Secretary for Economy and Finance Francis Tam Pak Yuen pledged the government would only stop subsidising the industry once it starts turning a profit. “I hope we can see the MICE industry growing strongly … up to the point where it can generate its own economic benefits,” he told media after attending the commission’s meeting yesterday.

Loss-making MICE organisers will get more public money next year

November 29, 2013

Macau

Backdoor HK listing on cards for junket Hengsheng Group said a fortnight ago it planned to go public ‘soon’ Michael Grimes

michael.grimes@macaubusinessdaily.com

Macau junket operation appears on the verge of getting a back door listing on the Hong Kong Stock Exchange. A company previously specialising in selling frozen food in mainland China says it has a conditional deal to buy out for HK$400 million (US$51.6 million) the sole shareholder of a junket operation called Hang Seng Sociedade Unipessoal Limitada. According to a Chineselanguage database of registered Macau junkets maintained by the local casino regulator – the Gaming Inspection and Coordination Bureau – that Hang Seng entity uses the same Chinese characters as Hengsheng Group Ltd. An executive from the latter said a fortnight ago at the Macao Gaming Show that the junket operator – one of the fastest growing of the new generation of firms serving the city’s VIP gambling trade – was hoping to get a stock market listing “soon”. The filing by frozen food firm First Natural Foods Holdings Ltd late on Wednesday, stated: “The junket commenced its gaming promotion business to offer solely the game of VIP baccarat in Macau in July 2011 with only one VIP room and 12 VIP table games at StarWorld Casino and has since then been expanding quickly. “Up to the date of this announcement, the junket has evolved to become one of the leading gaming promoters in Macau with seven VIP rooms across most of the major

VIP trade still a major part of Macau casino industry

casinos in Macau, including StarWorld casino, Wynn casino, Galaxy [sic] casino, Sands Cotai Central casino, MGM casino and Venetian casino offering 86 VIP table games exclusively for VIP or premium players.” Unaudited net profit for the junket for the ten months to October 31 2013 was “approximately HK$462,080,000” added the document.

Yu Ming The offer for the shares in the junket is being made by Yu Ming Investment

Management Ltd on behalf of First Natural, states the filing. Yu Ming Investment Management is wholly owned by Hong Kong listed Allied Group Ltd according to the English-language website of Yu Ming Group. The same website lists Ambrose So Shu Fai, chief executive of Macau casino developer SJM Holdings Ltd, as an independent nonexecutive director of Yu Ming Group. Mr So is also listed in the 2012 annual report of SHK Hong Kong Industries Ltd, another Yu Ming firm, as a director. The sole owner of the shares in the target junket

M Residences pre-sales grossed HK$1.2 bln

ippo Group Ltd says its campaign to pre-sell units at its under-construction Macau luxury housing development M Residences, grossed HK$1.2 billion (US$154.8 million). The sales campaign occurred ahead of the government’s rule changes in June on such off-plan deals. The transactions accounted for 96 percent of the 26,025 square metres (280,130 sq feet) saleable area for the development, Lippo added in a Hong Kong filing. The firm has said in previous announcements it plans 311 units for the site at the bottom of Guia Hill on Macau peninsula. The 13-storey building will be on a site covering about 3,398 square metres in Estrada de Cacilhas. Main contract works for M Residences have started and are expected

is Cui Limei, who is the younger sister of Cui Lijie, the controlling shareholder of First Natural, added the filing. In early September, First Natural reported unusual increases in the price and trading volume of its shares. The directors at that time filed a report saying they had no knowledge as to the reason. The same month Hong Kong’s Securities and Futures Commission held an investigation into the fact just 14 shareholders held 94.22 percent of the shares. In early October the SFC advised investors to exercise “extreme

caution” when dealing in the stock. During the Macao Gaming Show, Yu Yio Hung, founder of a VIP club network called CCUE, was introduced as one of the frontmen of Hengsheng. Mr Yu – a 27-year veteran of Macau high roller operations – was also one of the original bosses of AMA, the junket consolidation arm of Hong Kong-listed A-Max Holdings (now known as Amax International Holdings Ltd). Mr Yu ended his involvement with AMA and A-Max in 2009 to pursue other business interests.

Tea restaurant boosts Macau sales by third

to be completed next year said Lippo, adding that the resulting revenue and profit arising will be reflected in the group’s results in the year of completion. Lippo also controls Macau Chinese Bank Ltd. The bank unit had turnover of HK$10 million for the six months ended September 30, compared to HK$6 million a year earlier. “Following the capital injection late last year, MCB has been seeking new business opportunities and remains positive to enhance its competitiveness in the Macau banking sector,” said Lippo. In June South Korea’s Ministry of Culture, Sports and Tourism announced it had rejected a bid by a consortium including Lippo’s Indonesian parent and Caesars Entertainment Corp, for a casino licence in that country. M.G.

estaurant operator Tsui Wah Holdings Ltd said revenue from its single joint venture operation in Macau rose by nearly one-third year-on-year in the six months to September 30. Macau revenue for the period was HK$6.69 million (US$863,000) from HK$5.04 million a year earlier. The Macau site opened in May 2011 at Cotai casino resort Galaxy Macau, run by Galaxy Entertainment Group Ltd. “Following an increase in the sales of the ‘Tsui Wah’ restaurant in Macau, which is under a joint venture arrangement with its joint venture partner, the group’s sale of food to ‘Tsui Wah’ restaurant in Macau had increased accordingly during the sixmonth period,” the parent said in an interim filing to the Hong Kong

Stock Exchange. As of September 30, the group also operated 25 restaurants in Hong Kong, and nine on the mainland. Group wide, revenue for the reporting period rose nearly 43 percent, to HK$694.9 million, compared to HK$487.0 million in the year-prior term. The firm added that outside the reporting period in October, it reached agreement on purchase of an office in Shanghai for 62.69 million yuan (82.14 million patacas). It said the reason was to “…control the increase of rental costs, avoid frequent relocation and further enhance its brand name in the PRC”. The group was founded in 1967 and is best known for its milk tea and egg tarts. M.G.

November 29, 2013

Macau

New flagship shop boosts Luk Fook sales here Revenue generated in Macau increased by 91.5 percent to HK$1.42 billion

uk Fook Holdings (International) Ltd forecast a “positive” outlook for the rest of the fiscal year after first-half profit jumped on a surge in Chinese demand for gold and the opening of new flagship shops. Net income rose to HK$965 million (US$124.5 million) from HK$558 million a year earlier for the six months ended September 30, the company said in a filing to the Hong Kong Stock Exchange on Wednesday. Revenue increased by 70 percent to HK$10.1 billion, a half-year record high, the jewellery retailer said. Sales in Macau accounted for 14.1 percent of all revenue. Revenue generated from the Macau market amounted to HK$1.42 billion, “representing a spectacular growth rate of 91.5 percent,” the company said. Luk Fook attributed the growth to the opening of a new shop in Macau’s main touristy area. When the jeweller opened

a flagship shop in the Circle Square building in June – its largest anywhere – it become the biggest retailer in San Ma Lou, a street already studded with shops selling expensive goods much sought after by tourists from the mainland. Luk Fook leased all five floors in Circle Square, which together have 6,500 square

metres of shop space, but it uses only the ground floor. “Serving as the group’s largest flagship store worldwide, it introduced various brand-new elements to create a superior shopping experience for the customers,” the company said. As the end of September, the company had 10 self-

operated shops here, two more than a year earlier.

Expansion plans The retailer’s revenue mainly derives from Hong Kong customers, as well as mainland China visitors in Macau and Hong Kong. Retail sales of gold in

China, including Macau, jumped between April and June as global bullion prices plunged. The Chinese economy is showing signs of resilience and demand for jewellery continues to be strong, the company said in its statement. Luk Fook had a total of 135 self-operated shops at the end of September, in addition to 1,053 licensed shops in mainland China, it said. The company maintains a “positive” outlook for the second half of its fiscal year. “Gold price maintains at a low level leading to a continual demand for gold, which will be beneficial to the group’s sales growth,” it said. Despite rental costs, Luk Fook plans to open one or two shops a year in Macau “to reach potential customers effectively,” it said. “The group will open new shops mainly in casinos and resorts” as a boom in the gambling and tourism industries keeps driving consumption in the city, the company said. The jewellery retailer could also pick up three new shops here if, as agreed, it buys a stake in the 3D-GOLD chain. Luk Fook has agreed to pay Hong Kong Resources Holdings Co Ltd HK$301 million for 50 percent of China Gold Silver Group Co Ltd, which operates under the 3D-GOLD brand. T.A.

November 29, 2013 April 19, 2013

Macau Brought to you by

HOSPITALITY Next stop: home The governments of Macau, Hong Kong and Guangdong often say they would like more visitors to come on tours that take them to two or more places in the Pearl River Delta, including at least one of the special administrative regions. The Statistics and Census Service has figures for package tourists that visit Macau only, those that visit Macau and the mainland, and those that visit Macau and somewhere else. Most package tourists come from the mainland, so most visit Macau only. Last year 71 percent of package tourists that visited Macau only were mainlanders and almost 99 percent were Asians. Therefore, few visitors to Macau come on package tours that take them to other places nearby. Seac Pai Van was among the big public housing projects that kept builders busy last year

Public housing drives construction rebound But more builders are closing down as competition heats up, a developer says Vítor Quintã

vitorquinta@macaubusinessdaily.com

Over 92 percent of package tourists from beyond Asia visit Macau only – although this proportion may include visitors to Hong Kong that make side trips to Macau. Fewer than 5 percent of package tourists from beyond Asia visit Macau and the mainland, and an even smaller proportion visit Macau and somewhere else. The figures for package tourists from the mainland and elsewhere in Asia that visit Macau only may also include visitors to Hong Kong that make side trips to Macau. The figures available fail to paint a clear picture. But it is clear enough that more visitors on tours that take them to two or more places in the Pearl River Delta are still more aspiration than reality.

82.6 %

Visitors on package tours of Macau only in the first 9 months

public housing boom has helped the construction industry out of the slump caused by a pause in the development of Cotai, official data show. But increases in costs are making the going tough for smaller builders, and many closed last year, developer João Afonso says. Construction’s gross value added, or its contribution to the economy, rose by one-third to 6.44 billion patacas (US$806.7 million) last year, the Statistics and Census Service announced yesterday. It was the second year of growth since 2010, when gross value added fell to 3.83 billion patacas after the first wave of casino-resorts in Cotai was completed. As the industry awaited the start of work on the next wave of casinoresorts there, public works contracts took up the slack last year. The value of government construction contracts more than doubled to 11.71 billion patacas, the most ever, mainly because of a fourfold increase to 7.57 billion patacas in the value of public housing work. The value of infrastructure work increased by 14.5 percent to 2.53 billion patacas. The value of work on the Light Rapid Transit (LRT) railway and the roads rose by about 250 percent to 1.1 billion patacas.

In contrast, the value of private construction contracts fell by 1.9 percent to 18.81 billion patacas. The value of work on hotels and casinos decreased by 10.6 percent to 11.67 billion patacas, as only Sands Cotai Central contracts were on the books last year. The value of work on private housing increased by almost onefifth to 5 billion patacas as housing prices rose to their highest ever. Despite the recovery, the construction industry contributed less to the economy last year than it did in 2007 and 2008, when it had its hands full building the City of Dreams and the Galaxy Macau.

Ferocious competition The industry accounted for 1.85 percent of gross domestic product last year, having accounted for 1.6 percent in 2010. It accounted for 7.9 percent of GDP in 2007. In 2008 its gross value added rose to a record 11.56 billion patacas. Soon after, many construction companies had to struggle to stay open, and 332 lost the struggle. The industry laid off 40 percent of its workforce. Last year 201 more builders closed down, taking the cumulative number of closures to 1,119. Mr Afonso, a director of property

developer Sniper Capital (Macau) Ltd, told Business Daily that smaller builders were having a hard time staying afloat amid fierce competition. He said it was getting more expensive to rent an office and “impossible” to buy one. Storage space for equipment and materials was harder to find, he said. Mr Afonso said the arrival here of international contractors meant Macau construction companies, even those paying “pretty high” wages, had difficulty attracting and keeping workers. The number of construction workers increased by 1,261 to 21,309 last year. Builders hired another 6,000 in the first nine months of this year. Macau Construction Association chairman Lo Kai Jone said in September that the construction workforce would double in the next few years to meet the demand created by new resorts being built in Cotai. The industry seemed confident last year about its prospects this year, its investment growing almost twofold to 354 million patacas. It invested 159 million patacas in buildings, almost six times more than in 2011. Each of the six casino operators intends to have a new or expanded casino resort in Cotai between 2015 and 2017. Meanwhile, the government is pushing ahead with more public housing and the LRT.

November 29, 2013 April 19, 2013

Macau

Dynam Japan wants ‘online’ games in Macau Bylaw gazetted last year foresaw possible ‘mobile’ gaming inside casinos Michael Grimes

michael.grimes@macaubusinessdaily.com

by the city’s regulator, the Gaming Inspection and Coordination Bureau. In the past preparatory work has even taken place with the goal of regulating Macau as a global jurisdiction for cross-border online gambling. It was abandoned. So far the local monopoly for non-racing sports betting (including an online portal) of Macauslot – Sociedade de Lotarias e Apostas Mútuas de Macau Lda, a firm founded by former casino monopolist Stanley Ho Hung Sun – has not been challenged in Macau.  Business Daily asked Dynam Japan Holdings for more information on its latest regulatory filing referring to online gaming in Macau, but none was available by press time.

Local partnership

Dynam will be operational partner at Fisherman’s Wharf

apanese pachinko hall operator Dynam Japan Holdings Co Ltd said in a new Hong Kong filing it has ambitions to work with a partner to produce “online casino games in Macau, provided that such games

comply with all applicable laws and regulations of Macau”. A Macau bylaw gazetted in November 2012 foresaw the possibility of “mobile” gaming inside some of the city’s bricks and mortar gambling premises. The

particular bylaw was mainly concerned with conventional slot machines and slot parlours. It also mentioned the possibility of mobile gambling using wireless networks, but “only inside gambling areas especially authorised”

The firm said in a Hong Kong filing in October it would invest US$15 million (119.8 million patacas) in Singapore-based online games provider I Got Games Inc to help it develop software for “next generation pachinko machines” to be operated in Macau. IGG has been listed on Hong Kong’s alternative bourse – the Growth Enterprise Market – since October 18. IGG is led by chief executive Cai Zongjian, who first founded an online

games business called Fuzhou Tianmeng Touzi Zixun Co Ltd in Fuzhou, mainland China, in 2005. The online supplier currently produces multilanguage online games on a free-to-play basis for portable devices as well as browser games for laptops and personal computers. Its revenue is generated by selling so-called ‘virtual items’ to the players. The firm also provides ‘client-based’ games whereby players are charged to access a game server. IGG has regional offices in mainland China, the Philippines and the United States. Dynam is already a US$35 million investor in former Macau legislator David Chow Kam Fai’s casino services firm Macau Legend Development Ltd. The latter currently operates two Macau casinos under a so-called ‘service agreement’ with Macau gaming concessionaire Sociedade de Jogos de Macau SA, and is building a third – Prague Harbor View – due to open next year. The third casino-hotel is at Macau Fisherman’s Wharf, which is also controlled by Macau Legend and is currently also undergoing major redevelopment. Dynam Japan said in an October filing that its ‘next generation’ pachinko machines would be operated at Fisherman’s Wharf.

Corporate BNU opens two new branches Banco Nacional Ultramarino (BNU) SA officially inaugurated on Wednesday two new branches in Taipa’s Nova City and in Rua da Barca, in the Three Lamps district. BNU is expanding its branch network in order to meet the needs of both corporate and retail clients, the company said in a statement. The bank now has 18 branches in the city. BNU has expanded its branch network with four new branches this year, “reflecting the bank’s confidence in the future of Macau’s economic development,” the company said. The ceremony was officiated by Anselmo Teng, chairman of the Macau Monetary Authority’s executive committee, Ho Iat Seng, president of the Legislative Assembly, and Pedro Cardoso, president of the BNU executive commission. BNU has been operating here since 1902 and it is one of the city’s two money-printing banks. The bank is a subsidiary of Portuguese state-owned Caixa Geral de Depósitos SA.

Fashion Link hits the catwalk tomorrow The second edition of Macau Fashion Link will hit the catwalk tomorrow, again bringing together creators from China and Portuguese-speaking countries. This year the event will showcase clothes from Sara Lamúrias (Portugal), Marinela Rodrigues (Mozambique), and Louis de Gama (Angola), said organiser Albergue SCM. The show sponsored by the Macau Foundation will also promote the latest collections of Shenzhen-based Victor Zhu and Macau designers Bárbara Diaz, San Lee e Lines Lab. On Sunday there will be a seminar, open to Macau youngsters interested in the fashion, where designers will talk about their creative methods and background. The seminar will be organised by Lines Lab. The Macau brand will also set up a ‘pop-up shop’ at Albergue SCM from December 13 to January 10 to sell clothes showcased at Macau Fashion Link. The first edition of Macau Fashion Link was organised in 2011.

November 29, 2013 April 19, 2013

Greater China

New FTZ attracts 38 overseas firms: govt S

hanghai’s new free-trade zone has drawn just 38 overseas firms in its first two months of operations, officials said yesterday, as foreign companies await concrete policies and deeper reforms. Authorities set up the FTZ in the commercial city of Shanghai in late September with pledges of reform, including free convertibility of the yuan currency. But a lengthy “negative list” of what is barred in the zone and an open-ended deadline to introduce financial reforms have made foreign firms hesitant to set up there, analysts say. The 38 overseas companies newly established in the FTZ had total registered capital of US$560 million, figures released yesterday showed. Fourteen companies are from Hong Kong, six firms from the United States, six from Japan and four from Singapore. The number of foreign firms is a fraction of the total 1,434 companies so far

registered in the FTZ. But Shanghai officials said it was too soon to make a judgement as the FTZ had only recently been launched. “I currently don’t sense that there is a feeling of disappointment,” said Ai Baojun, Shanghai vice mayor and head of the government agency managing the FTZ. “We can say there are hopes for quicker introduction of details,” he said. The FTZ is making preparations to introduce key financial reforms, including free capital flows and interest rate liberalisation, he added, but gave no timetable. As well as the 38 to have formally set up, another 67 foreign firms had applications under consideration, officials said. “It’s a normal process. You can’t use a short-term statistic to evaluate this issue and form a grand notion,” said Dai Haibo, deputy head of the FTZ’s management committee. Reuters

Wing Hang has a market value of US$4.3 billion

Anbang mulls bid for Wing Hang bank Lender has a network of 70 branches, including 12 in Macau

nbang Insurance Group is among companies considering bids for Wing Hang Bank Ltd, Hong Kong’s second-largest familyrun lender, according to four people with knowledge of the matter. Beijing-based Anbang, which offers insurance and asset management, has held talks to buy the 45 percent stake held by members of chairman Patrick Fung’s family, its affiliates and Bank of New York Mellon Corp, one of the people said. Wing Hang, with a market value of US$4.3 billion, has also drawn interest from companies including Canada’s Bank of Nova Scotia, said two of the people, who asked not to be identified as the deliberations are private. Singapore’s Oversea-Chinese Banking Corp is considering an offer for Wing Hang, people familiar with the matter said in October. Wing Hang is seeking a valuation of at least two times book value, one person said. The lender currently trades at 1.6 times book value, data compiled by Bloomberg show. Hong Kong’s family-run banks, squeezed for years by larger competitors like HSBC Holdings Plc and Bank of China Ltd, are attracting interest from acquirers as the city’s role in crossborder financing expands. Yue Xiu Group agreed last month to buy a majority stake in Chong Hing Bank Ltd for US$1.5 billion, the first acquisition of a Hong Kong lender since 2009.

Asia shift Anbang, whose shareholders include state-owned Shanghai Automotive Industry Corp and

China Petrochemical Corp, has 510 billion yuan (US$84 billion) of assets, according to its website. The company’s property and casualty insurance unit recorded 5.49 billion yuan of premium income in the first 10 months of the year, data from the industry regulator show. Anbang press officials said they couldn’t immediately comment. Scotiabank spokeswoman Ann DeRabbie declined to comment, as did Wing Hang spokeswoman Cherry Yung. Scotiabank, Canada’s thirdlargest lender, will target growth in Asia after decades of expansion in Latin America, former CEO Richard Waugh said in October. The Torontobased bank already owns a minority stake in Bank of Xi’an, a city lender in northwestern China. It withdrew a bid for a 20 percent stake in Bank of Guangzhou in July. Wing Hang would give a buyer a network of 70 branches spanning Hong Kong, Macau and mainland China. Its presence across southern China’s Pearl River Delta makes it a more attractive target than other smaller family-owned banks in the city, Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd, said. Banco Weng Hang SA, a unit of Wing Hang, has 12 outlets in Macau. In January it was announced as a participant in a US$1.4 billion syndicated loan for the construction of the US$2.9 billion (23.2 billion patacas) Studio City. The property, due to open in mid-2015 according to its senior management, is 60 percent owned by Melco Crown Entertainment Ltd. Bloomberg News

Li Ka Shing is Asia’s richest man

Land prices in China, HK deter purchases: Li L

i Ka Shing said his companies have slowed land purchases in Hong Kong and China as prices have escalated to a high level. “Land prices in Hong Kong are high, and already showing signs of an unhealthy situation,” Mr Li said in an interview with Southern Metropolis Weekly. “Land prices in China have surged, and we’re unable to win auctions for land.” The comments by Mr Li, who controls Hong Kong’s biggest developer Cheung Kong Holdings Ltd, underline concerns that governments in China and in the city are struggling to tame an asset bubble fuelled by cheap credit. New home prices in October jumped in all but one of the 70 Chinese cities tracked, the National Bureau of Statistics said on November 18. In Hong Kong, home prices remain more than twice as expensive as five years ago, even though they are little changed this year. Prices in China have escalated to a level that people are struggling to

cope with and developers need to be cautious, Mr Li told the newspaper. Mr Li said he’s optimistic about the market and will continue investing if prices are reasonable. Property sales in Hong Kong by Mr Li’s companies, which include Hutchison Whampoa Ltd, reached HK$4 billion (US$516 million) this year, the lowest in 13 years, because of a lack of government approval, the newspaper reported that he said. Hong Kong’s government has since 2010 introduced extra property taxes and tightened mortgage lending in its attempt to curb home prices that are now the highest among major global cities according to a Savills Plc report in March. Mr Li said any suggestion that his companies are withdrawing investments from Hong Kong is “a big joke” and that asset sales are driven by “business reasons,” according to a separate report in the Nanfang Daily newspaper, which cited the same interview. Bloomberg News

April 19, 2013

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November 29, 2013 April 19, 2013

Greater China Formosa bond market to remain local affair Taiwan’s decision to allow Chinese mainland firms to issue yuan bonds in the island may encourage more supplies from China, but it is unlikely to challenge Hong Kong’s yuan bond market any time soon. The so-called “Formosa” bond, or Chinese yuan debt issued in Taiwan, will stay largely as a domestic one that serves local investors given multiple barriers that may dampen appetite of global issuers and investors, analysts say. Issues that will likely prevent the fledgling market from growing rapidly include the need to seek approvals for yuan bond issues and obtain a licence in order to purchase bonds, as well as a withholding tax for investors, they say. Taiwan is a latecomer in developing yuan business after a clearing bank was assigned there in late January. A handful of firms sold a total of 3.9 billion yuan (US$640.14 million) bonds before the market fell into quietness since July. The Financial Supervisory Commission announced on Tuesday that Chinese policy banks, state-owned commercial banks, jointstock banks and their overseas branches can sell Formosa bonds with approvals from the GreTai Securities Market. Bank of Communications and Agricultural Bank of China immediately filed applications to issue yuan bonds on Wednesday, totalling 2.2 billion yuan.

HK stocks retreat from 10-month high

ong Kong stocks fell, with the city’s benchmark index retreating from the highest since January 30, as a drop in utilities offset gains from Chinese developers. China Power New Energy Development Co slipped 3.7 percent to lead losses among electricity providers. Kerry Properties Ltd, the Hong Kong builder controlled by Malaysian billionaire Robert Kuok’s family, sank 9.8 percent after going ex-dividend. Shimao Property Holdings Ltd jumped 3.9 percent, pacing gains among Chinese developers after JPMorgan Chase & Co said home prices will rise next year. The Hang Seng Index slipped 0.1 percent to 23,789.09 at the close in Hong Kong, erasing gains of as much as 0.9 percent that earlier pushed the gauge to its highest since April 2011. The Hang Seng China Enterprises Index, also known as the H-share index, dropped 0.2 percent

to 11,385.29 after rising as much as 1.5 percent. “The weakness is reasonable because the index breached this year’s high,” said Ben Kwong, Hong Kong-based chief operating officer at brokerage KGI Asia Ltd. “Hong Kong’s stock market is still lacking positive news, and follow-through buying is not so encouraging.” The Hang Seng Index advanced 20 percent from this year’s low on June 24 through yesterday on signs China’s economy is stabilising. An official report yesterday showed China’s industrial profits rose 15.1 percent in October from a year earlier, slowing from a 18.4 percent pace the month before. China Power New Energy, which develops alternative energy projects including wind power and hydroelectricity, sank 3.7 percent to 52 Hong Kong cents. China Resources Power Holdings Co slipped 1.7 percent to HK$18.46. China

Longyuan Power Group Corp lost 1.4 percent to HK$9.86. Kerry Properties slumped 9.8 percent to HK$31.15 after going ex-dividend, meaning investors buying the shares yesterday won’t receive a dividend from the spinoff of Kerry Logistics. Chinese developers advanced after JPMorgan Chase said average home prices in tier-1 Chinese cities may rise 10 percent next year. Shimao Property, which the brokerage named as one of its top picks, climbed 3.9 percent to HK$19.18. China Overseas Land & Investment Ltd, the biggest mainland developer listed in Hong Kong, rose 1.7 percent to HK$23.85. Futures on the Hang Seng Index that expired yesterday rose 0.5 percent to 23,941. The Hang Seng Volatility Index was little changed at 15.83, indicating traders expect the benchmark equity index to swing 4.5 percent in the next 30 days. Bloomberg News

S. Korea strongly protests China new air zone Sinopec warned of threats to pipeline repairs China Petroleum & Chemical Corp warned authorities in China two years ago that urbanisation was hampering repair work on a crude oil pipeline in the eastern city of Qingdao. A blast last week at the pipe killed 55 people. The pipeline had “several safety hazards,” Beijing-based Sinopec, as the company is known, said in a September 2011 report, submitted to the Environmental Protection Bureau in Weifang, a city near Qingdao. The report describes the 27-year-old pipeline as originally built in a sparsely populated suburb, now crowded by construction and a rising population. Qingdao is home to 7.66 million people. The November 22 crude oil spill and blast, the deadliest since at least 2005 according to the official Xinhua news agency, highlights the challenges facing China in balancing safety with urbanisation, as it rushes to add apartments, railways and factories. “Originally the pipeline was located on the outskirts and it has now become a bustling downtown district,” Sinopec wrote in its September 2011 report. The company cited “many buildings” and a “densely populated” area as impediments to conducting pipeline repairs.

Beijing carbon trading starts Beijing yesterday became the third Chinese city to launch a carbon trading scheme to regulate soaring CO2 emissions from its main power generators and manufacturers, with first trades reported to have gone through at 50 yuan (US$8.20) per permit. The capital followed newly established markets in Shenzhen and Shanghai, with Guangdong province set to open one in December that will be the second-biggest in the world after the European Union. The regional markets are part of China’s strategy to cut its greenhouse gas emissions per unit of GDP to 40-45 percent below 2005 levels by 2020 as the country seeks to limit climate change, address future energy security issues and stave off international criticism for being the world’s biggest emitter. The China Beijing Environment Exchange, which hosts trading in the Beijing market, told Reuters that two bilateral trades for a total of 40,000 permits had been registered yesterday at 50 yuan per permit. Each permit represents one tonne of carbon dioxide. State-owned oil and gas company Sinopec Corp and investment bank CITIC Securities each bought 20,000 permits. In addition, a smaller deal for 800 permits went through on the exchange at 51.25 yuan.

Biden to press Beijing over air zone as Hagel reassures Japan

Biden’s trip to Asia risks being overshadowed by the dispute over the air zone

outh Korea urged China during military talks in Seoul yesterday to revise its newly declared air defence identification zone in the East China Sea that has raised regional tensions. Vice Defence Minister Baek Seungjoo expressed Seoul’s “strong regret” at China’s unilateral announcement of the zone over an area that includes a South Korean-controlled rock and Tokyo-administered islands. “We expressed concern that China’s latest move was heightening military tension in the region,” said defence ministry spokesman Kim Min-seok. Japan, South Korea and the United States have rejected China’s demand that all aircraft traversing the new zone file flight plans and identification details. Two U.S. B-52 bombers flew through the area on Monday without complying, and a South Korean military plane followed suit the next day. Japanese military and paramilitary planes have also flown through the zone unopposed, according to an official and

a report in Tokyo yesterday. The annual talks in Seoul were led, on the Chinese side, by Wang Guanzhong, deputy chief of general staff of the People’s Liberation Army. Mr Baek stressed that Seoul could not recognise the zone and demanded that China revise its parameters, particularly a section that overlaps with South Korea’s own Air Defence Identification Zone (ADIZ). “China’s reaction was that it will not accept the demand,” Mr Kim said. The South Korean side also warned that it would have to consider expanding its own ADIZ to protect its national interests, he added. China has threatened “defensive emergency measures” against any aircraft that flouts its regulations.

Reassuring Japan U.S. Vice President Joe Biden will press Chinese leaders on their intentions with a new air-defence zone, as Defence Secretary Chuck Hagel assured Japan of U.S. support and continued military operations in the region.

Mr Biden will use meetings with leaders in Beijing next week partly to express U.S. concern about China’s behaviour toward its neighbours and seek an explanation of the air zone it claimed over disputed areas of the East China Sea, according to an administration official who briefed reporters on condition of anonymity to discuss the vice president’s plans. China’s establishment of the zone “is a potentially destabilising unilateral action designed to change the status quo in the region, and raises the risk of misunderstanding and miscalculation,” Mr Hagel said in a call on Wednesday to Japanese Defence Minister Itsunori Onodera, according to an e-mailed statement by Pentagon spokesman Carl Woog. “This is one of the most serious challenges ever posed by China to freedom of movement both on the sea and in the sky and will affect very seriously the forward deployment of the United States,” Tomohiko Taniguchi, an adviser to Japanese Prime Minister Shinzo Abe, said in interview with Bloomberg Television. AFP/Bloomberg News

11 11

November 29, 2013 April 19, 2013

Asia

Philippine growth slowest in more than a year GDP rose 7 percent in the three months through September from a year earlier Karen Lema

nnual growth in the Philippines cooled to its slowest in more than a year in the third quarter, with the economy set to take another hit from this month’s powerful typhoon that devastated much of the coconut and rice growing central provinces. The economic planning agency said yesterday it expects typhoon Haiyan to shave off 0.8 percentage point in annual growth in the fourth quarter, although the full-year GDP expansion is likely to be close to the high end of Manila’s 6-7 percent target. “How long will the impact linger in the coming months and years will depend on how quickly we can restore economic activity and livelihood in those areas,” socioeconomic planning Secretary Arsenio Balisacan told a media briefing. Most analysts agree the loss of output from the typhoon, which killed at least 5,560 people and reduced most of what was in its path to rubble, will not derail an economic revival overseen by President Benigno Aquino. Data released earlier showed the economy expanded a seasonally adjusted 1.1 percent in the JulySeptember quarter from the previous three months, missing forecasts, and slowing from a revised 1.6 percent in the second quarter. Growth was supported by strong domestic demand and a recovery in exports. Analysts polled by Reuters had forecast the Philippine economy would grow 1.4 percent in the September quarter on a seasonally adjusted basis. From a year earlier, the economy grew 7.0 percent, the slowest pace

Reuters

Damage from Typhoon Haiyan further crimping the outlook for full-year expansion

since the second quarter of 2012, and below the 7.3 percent predicted by economists. In the second quarter, the economy logged a revised 7.6 percent growth rate. The Philippines has been one of the fastest-growing economies in Asia this year, bolting ahead at an annual rate of around 7.6 percent in the first half, in step with China. Growth is expected to slow sharply in the fourth quarter and inflation to pick up in the coming months as the effects of the destruction wrought by a super typhoon feed through the economy. But officials are hopeful of a rebound next year as rebuilding efforts make up for lost production.

Manila is targeting a faster growth of 6.5-7.5 percent in 2014. Analysts believe the Philippines is strong enough to cope with the disaster, with the damage unlikely to significantly hurt Southeast Asia’s rising economic star. “We expect its strong macroeconomic fundamentals to help the Philippines weather the storm. Though we see Q4 GDP growth moderating due to the damage inflicted by typhoon Haiyan, we expect the effect to be muted,” Eugenia Victorino, Asia Pacific economist at Australia & New Zealand Banking Group Ltd said in a research note. The cost of rebuilding millions

Thai PM survives no-confidence vote As protesters reject talks with government

hai Prime Minister Yingluck Shinawatra has survived a noconfidence vote in parliament yesterday, amid major street protests in the capital, Bangkok. The motion was brought by the opposition Democrat Party, but Ms Yingluck’s Pheu Thai party dominates the chamber and voted it down. Thai protest leader Suthep Thaugsuban rejected Ms Yingluck Shinawatra’s offer to hold talks to ease political tensions as demonstrators continued their campaign to disrupt government ministries.

of houses and restoring livelihood in affected areas could reach as much as US$5.8 billion, but analysts do not expect it to substantially strain the government’s finances given its strong fiscal position. The government’s budget shortfall of 101 billion pesos (US$2.3 billion) in the nine-months to September is less than half of its 238 billion pesos deficit target this year. It also has at its disposal 100 billion pesos in reconstruction funds under the 2014 budget, and it can tap around US$1.5 billion in loans and grants from the World Bank and Asian Development bank to support relief and rebuilding. “We expect growth momentum to resume its pace in 2014, to be supported by reconstruction efforts of both the public and private sectors,” ANZ’s Ms Victorino said. The central bank raised its inflation forecasts for this year and next, but said the faster pace of price increases was not expected to force a rise in interest rates just yet. It meets to review policy for the last time this year on December 12. The overnight borrowing rate has been at a record low of 3.5 percent since October 2012 when it was cut by 25 basis points.

“There will not be any talks with her,” Mr Suthep told. “Political reform will be achieved only by the people. Politicians will have no role in the country’s new political reform.” Mr Suthep, who oversaw a deadly crackdown on anti-government protesters when he was deputy premier in 2010, has called for people to join a nationwide programme of civil disobedience to bring down Yingluck’s administration and dismantle the political machinery of her brother, former premier Thaksin Shinawatra.

About 50,000 demonstrators joined protests in Bangkok and seven other provinces, police spokesman Piya Uthayo said. The largest group is now based at a government complex on Chaengwattana Road that houses the country’s biggest immigration office and representative offices of several ministries. UN chief Ban Ki-moon has voiced concern over the tensions and urged restraint. The month-long protests have been peaceful, and haven’t had an impact on tourism, said William

How long will the impact linger in the coming months and years will depend on how quickly we can restore economic activity and livelihood in those areas Arsenio Balisacan, socioeconomic planning Secretary

Heinecke, chief executive of Minor International Pcl, which owns the Four Seasons, St. Regis, Marriott and Anantara hotel chains in Thailand. “We so far haven’t noticed any drop in bookings,” Mr Heinecke said in a Bloomberg Television interview from Bangkok yesterday. “The demonstrations are limited to the government sectors and no tourist or business operations in the city are affected at all by these peaceful demonstrations.” Rallies that began a month ago against an amnesty for most political offenses stretching back to the coup have morphed into a wider push to end the “Thaksin system,” according to Mr Suthep. Parties linked to Thaksin have won the past five elections on support from Thailand’s rural northeastern provinces. Bloomberg News

November 29, 2013

Asia

Japan’s tourist towns covet casinos Japanese cities increasingly reliant on tourism Nathan Layne and Junko Fujita

Hokkaido shaping up as one of the key casino battlegrounds

geing and shrinking, Japan’s country towns want to gamble away their economic and demographic woes. With lawmakers planning to submit legislation soon to open Japan to casino gambling, likely in time for the 2020 Olympics, several small cities, hot spring towns and tourist destinations are pushing to get one of the coveted licences. Japan is one of the world’s last untapped gaming markets and, with a wealthy population and proximity to China, could generate US$15 billion annually from casinos, industry experts say. That would make it the world’s second-largest gambling destination after Macau. So far, the cities of Tokyo and Osaka have garnered much of the attention, but even towns like Sasebo, a once-proud shipbuilding centre in southern Japan, and the ageing port city of Otaru to the north, are hoping to set up casinos to draw tourists, generate tax revenues and reverse demographic decline. “Hot springs, Japanese cuisine, Mt. Fuji and geisha [female entertainers] – these traditional Japanese things alone are not enough,” said Kanekiyo Morita, a hotel executive who has proposed a pyramid-shaped casino in Atami, a hot springs town in central Japan. “Japan’s population is rapidly declining and, for tourist towns, getting foreigners to visit is extremely important.” Lawmakers are planning to submit an initial bill aimed at legalising casinos by December 6 – when the current session of parliament ends – and enact concrete laws in 2015. The bill is thought to have a decent chance of passing with the businessfriendly Liberal Democratic Party in

power and Prime Minister Shinzo Abe backing the move. The lawmakers have proposed two types of licences – one for large integrated resorts run by global operators featuring convention and entertainment facilities in addition to expansive gambling floors, and another for more compact gambling resorts in the countryside. But they have also recommended that Japan limit the number of licences, prioritising locations promising the biggest economic impact and with the capacity to attract overseas tourists. “I don’t mean to negate Tokyo and Osaka,” said Keiichi Kimura, who heads a consultancy and advises local governments and casino operators interested in Japan. “But it’s just not right to be focusing the debate on those two places only.”

European connection Las Vegas Sands Corp and MGM Resorts International have made it clear that Osaka and the Tokyo region are their primary targets. Many of their competitors in Macau, Melco Crown Entertainment Ltd, Galaxy Entertainment Group Ltd and Wynn Resorts Ltd, have also announced that they would be interested in investing in Japan. “These are the locations you can drive that kind of business tourism into and are known as commercial and financial hubs,” George Tanasijevich, president of Las Vegas Sands Singapore unit, Marina Bay Sands, told Reuters after a presentation in September in which he showed a mock-up for a casino resort on Tokyo Bay. While lawmakers have not indicated how many locations would be given the right to develop

a casino, some politicians involved in the discussions have suggested that one or two licences might be allocated to big cities and one or two to regional economies. In Sasebo in Nagasaki Prefecture, business and political leaders want to secure one of those spots for a proposed casino alongside the windmills and canals of Huis Ten Bosch, a theme park modelled on a 17th century Dutch town.

KEY POINTS Country towns pushing to get casino licence Lawmakers may submit gaming bill by Dec 6 Bill thought to have decent chance of passing Law could include compact resorts in the countryside

The complex, which would include a hotel and entertainment facilities in addition to gaming tables and slot machines, would generate nearly US$1 billion in annual revenues, the local group estimates, jolting new life into a region that once had a vibrant manufacturing sector but is increasingly reliant on tourism. The plan is to attract tourists from nearby South Korea, China and Taiwan in addition to locals. “Tokyo shouldn’t absorb everything,” said Hideo Sawada,

the chairman of travel agent H.I.S., which owns Huis Ten Bosch. “We need balanced growth between Tokyo and the local cities.” In contrast to the massive resorts elsewhere, aspiring hosts outside the big cities are looking to the more compact facilities of Europe as a guide. The German spa town of BadenBaden, which also has casinos, is serving as a model for casino proponents in two traditional hot springs towns – Atami, in Shizuoka Prefecture, and Naruto, in southwestern Japan’s Tokushima Prefecture. Casinos Austria AG and Switzerland’s Grand Casino Luzern, both of which say they are considering entering the Japanese market with a local partner but don’t have billions of dollars to spend. To cut costs, they could use existing hotels and buildings. “There are buildings that could be re-utilised and rejuvenated in Japan. That’s a key feature of the European model,” Grand Casino Luzern CEO Wolfgang Bliem, who recently spoke at casino conferences in Naruto and Tokyo, told Reuters. “The casino operation should blend into the community.” The northernmost island of Hokkaido is shaping up as one of the key casino battlegrounds with three locations – the port towns of Otaru and Tomakomai and Kushiro on the eastern coast – officially putting themselves forward as aspiring hosts. Hokkaido, which draws tourists seeking a cooler location in the summer and skiers in the winter, has been cited by casino executives as one of the most attractive spots outside Tokyo and Osaka, along with the beaches of Okinawa in the south. 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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November 29, 2013

Asia

Law restricting foreign ownership is out of date, Australia’s Treasurer says

NZ central bank new rules hit lending

Data seen comforting RBNZ, may hint at later rate rises

Qantas rises as govt moots lifting share cap antas Airways Ltd rose the most since August after the government said it was considering whether to lift a cap on foreign ownership of the airline to “level the playing field” with Virgin Australia Holdings Ltd. The stock climbed as much as 5.1 percent and was up 1.7 percent at A$1.22 at the close in Sydney trading. A 1992 law restricting foreign ownership in Qantas is out of date and the airline may need taxpayer support if it’s not revised, Australia’s Treasurer Joe Hockey said in an interview yesterday with 3AW radio. The Qantas Sale Act prevents foreign ownership of the airline rising above 49 percent. Total ownership by foreign airlines can’t exceed 35 percent, and the largest stake permitted to any foreign investor is 25 percent, according to the law that’s incorporated into Qantas’s company constitution. Qantas chief executive Alan Joyce called on staff in an e-mail on November 18 to lobby politicians against secondranked Virgin’s share sale that could lift foreign airlines’ holdings of its stock to as high as 70 percent. Virgin is now “overwhelmingly majority-owned by foreign stateowned enterprises” that control its biggest shareholders – Air New

Zealand Ltd, Singapore Airlines Ltd, and Etihad Airways PJSC, Mr Hockey said. “Qantas can match Virgin by getting Emirates involved,” Ian Myles, an analyst at Macquarie Group Ltd in Sydney, said by phone, referring to the Dubai-based carrier that allies with Qantas on international routes. “If you take away foreign ownership restrictions, why is one owned by three foreigners while the other isn’t?” Qantas shares have fallen 20 percent this year, compared to a 15 percent gain in the benchmark S&P/ ASX 200 index and a 5.6 percent fall in Virgin.

airline ownership of Virgin Australia, and the flood of funds that come with it, the market has fundamentally changed,” Mr Joyce wrote in an e-mail to staff after Mr Hockey’s comments yesterday. Virgin is pursuing an “anti- competitive strategy aimed at crippling Qantas”, he wrote. Virgin Australia spokeswomen Emma King and Danielle Keighery didn’t respond to an e-mail seeking comment on Mr Joyce’s statement. Analysts have cut their estimates of Qantas’s full-year net profit by A$193 million since Virgin announced its had taken a A$90 million loan from its major shareholders on August 30. Bloomberg News

Capital raising Brisbane-based Virgin’s three airline shareholders have promised to buy as much as A$220 million (US$201 million) of new stock through a capital raising announced on November 14. That’s providing the airline with funds for a marketshare battle that had previously left it short of cash. Mr Joyce has forecast Qantas’s yields will drop to their lowest level since at least 2003 as a result of domestic and international competition. “With the foreign-government

US$201 mln

Virgin’s three airline shareholders are to buy of new stock

S.Korea current account surges to record surplus October surplus jumps to US$7.92 bln on higher exports Jungmin Jang and Choonsik Yoo

outh Korea’s current account surplus surged to a record high in October as exports grew more than imports, official data showed yesterday, underscoring still-weak domestic demand while adding to upward pressures on the won. Asia’s fourth-largest economy posted a current account surplus of US$7.92 billion in October on a seasonally adjusted basis, up sharply from a revised US$4.93 billion surplus in September, the Bank of Korea data showed. So far this year, the current account surplus has reached $58.26 billion before seasonal adjustment, on course for a record $63 billion surplus for the whole of the year as forecast by the central bank. “The current account surplus will likely continue through next year, although the amount will decrease to 4 percent of gross domestic product from a 5 percent level [seen] this year,” said Suh Dae-il, an economist at KDB Daewoo Securities. South Korea’s annual GDP product reached US$1.13 trillion last year and will likely grow to nearly US$1.2 trillion this year. “The continued surplus will spur the won’s appreciation, although the won needs stronger economic growth to break above the 1,000 mark [per dollar],” he added. The won is up only 0.9 percent against the dollar this year to date but

its strength has stood out in the second half of the year, rising a whopping 7.6 percent since the end of June to end Wednesday’s onshore trade at 1,061.1. Exports grew 4.4 percent from September to a record US$50.17 billion on a seasonally adjusted basis, while imports rose by 1.9 percent to US$43.92 billion, producing a goods account surplus of US$6.25 billion, the central bank data showed. Relatively weak imports reflected still-depressed domestic demand as households prefer to save more and pay back debt instead of spending on cars or homes. South Korea’s economy is expected to pick up to annual growth of 2.8

percent from last year’s 2.0 percent and reach a robust 3.8 percent next year, although not quite the 4 percent that had been seen for some time. South Korea has posted a current account surplus every month since early 2009. Without adjustment for seasonal patterns, the current account surplus in October was US$9.51 billion, also a record, up from US$6.54 billion in September, the data showed. On the financial account, South Korea saw a net outflow of US$10.09 billion in October, compared to a net outflow of US$4.54 billion in the previous month.

he Reserve Bank of New Zealand (RBNZ) said yesterday that home lending restrictions imposed on banks are beginning to bite, raising the possibility of a delay to the start of rate rises next year. The central bank last month imposed a 10 percent limit on banks’ low deposit-high value lending to customers with less than a 20 percent deposit for a house, in a bid to cool the hot housing market and reduce risk to the financial system from a potentially sharp downturn. The RBNZ said high LVR lending, after exemptions, had fallen to 11.7 percent of banks’ total mortgage lending in October from about 30 percent earlier in the year before the restrictions were imposed. “We still see rate rises in March, but the numbers may give them [RBNZ] some comfort to wait… and skew the risks to a later rate hike,” said ASB Bank chief economist Nick Tuffley. House prices hit a record high in October, with the national median rising 9.9 percent from a year earlier, although much of the increase is being driven by housing shortages in the two main cities, Auckland and Christchurch. “While there has been a significant reduction in high-LVR lending already, it is too early to assess what impact this is having on aggregate housing market activity and credit growth,” said deputy RBNZ governor Grant Spencer in a statement. The banks have six months to reach the 10 percent limit, which will allow them to manage loans approved before the rules came into force. “The RBNZ will take comfort that the limits are having some bite, and from the credit provision side we’re seeing a shift quite quickly, and they’ll be encouraged they’ll see some impact down the track,” Mr Tuffley said. The RBNZ, which has signalled it expects to start raising rates next year, has said the LVR restrictions will be equivalent to a 30-basispoint rise in the official cash rate over the first year. Reuters

Reuters

We still see rate rises in March, but the numbers may give them [RBNZ] some comfort to wait… and skew the risks to a later rate hike Nick Tuffley, ASB Bank chief economist

Won to get support from robust current account surplus

14 14

November 29, 2013 April 19, 2013

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

Max 61.4

average 60.889

Max 59 b

Min 60.2

average 58.677

91.1

28.3

61.1

90.9

28.1

60.8

90.7

28.0

60.5

90.5

27.7

60.2

Last 60.2

Min 58.35

61.4

average 89.612

58.9

24.4

58.9

24.3

58.5

24.2

Max 24.5

average 24.185

PRICE

DAY %

YTD %

(H) 52W

92.3

-0.955038094

107.9400024

85.45999908

BRENT CRUDE FUTR Jan14

111.43

0.107807025

6.703054678

113.3099976

96.13999939

GASOLINE RBOB FUT Dec13

270.65

0.303895045

6.370853639

290.3199911

241.5999889

GAS OIL FUT (ICE) Jan14

944.5

0.452007445

4.944444444

968

838.75

NATURAL GAS FUTR Jan14

3.892

-0.077021823

-3.901234568

4.825000286

3.464999914

305.4

0.233023729

2.349274439

321.1599827

276.4999866

1241.28

-0.9045

-25.4245

1740.6

1180.57

NY Harb ULSD Fut Dec13 Gold Spot $/Oz Silver Spot $/Oz

19.7148

-1.8847

-34.5241

34.3838

18.2208

Platinum Spot $/Oz

1360.39

-1.5815

-10.368

1742.8

1294.18

Palladium Spot $/Oz

718.53

-0.787

2.697

786.5

629.75

1757

-0.902425268

-15.2436083

2184

1748

LME ALUMINUM 3MO ($) LME COPPER 3MO ($) 3MO ($)

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

7020

-0.636942675

-11.48657168

8346

6602

1872.5

-0.715800636

-9.975961538

2230

1811.75

13285

-1.263470829

-22.12778429

18770

13205

15.835

0.603557814

2.724618878

16.80999947

14.91500092

426.5

0.412007063

-30.02461034

654.75

420

WHEAT FUTURE(CBT) Mar14

663.5

1.143292683

-20.22843402

904.75

647.75

SOYBEAN FUTURE Jan14

1320

-0.695881136

0.840336134

1406

1169

COFFEE 'C' FUTURE Mar14

108.1

-0.597701149

-32.58497038

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

17.22

-0.462427746

-16.32653061

20.71999931

16.69999886

CORN FUTURE

Last 24.1

(L) 52W

WTI CRUDE FUTURE Jan14

LME ZINC

Min 24.1

Mar14

COTTON NO.2 FUTR Mar14

78.44

-0.884521102

-1.221508626

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

average 27.9

Min 27.55

Last 27.55

27.5

30.1

30.0

29.9

Max 30.1

average 30.008

Min 29.8

Last 30.05

29.8

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9122 1.6335 0.9058 1.3604 102.22 7.9852 7.7527 6.0923 62.4113 32.133 1.255 29.643 43.74 12018 93.241 1.23223 0.83277 8.2876 10.8628 139.05 1.03

-0.0876 0.2578 -0.1104 0.0368 -0.4109 -0.0038 -0.0026 0.0098 -0.4107 -0.0716 -0.1434 0.054 -0.1143 -1.0984 -0.3293 -0.1445 0.227 -0.1243 -0.0322 -0.4459 0

-12.1025 0.9829 1.0598 3.1387 -15.7699 -0.025 -0.0271 2.2701 -11.8829 -4.833 -2.6773 -2.0578 -6.2529 -18.5139 -4.1977 -2.0086 -2.0834 -0.8458 -3.06 -18.3243 -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 12028 105.433 1.265 0.88151 8.4957 11.0434 139.14 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

4.8

3.448276

16.99

0.8308605

VOLUME CRNCY

52.38095

5.12

2.79

3855077

59.23149

17.38

9.98

1129555

AMAX INTERNATION

1.13

0.8928571

-19.28571

1.72

0.75

641525

BOC HONG KONG HO

26.1

0.1919386

8.298753

22.85

6755426

0.465

75.47171

0.56

0.24

216000

7.18

-0.8287293

19.86645

7.28

4.15

113000

CHINA OVERSEAS

23.85

1.705757

3.246752

25.6

17.7

16712565

CENTURY LEGEND

NAME

24.1

Max 28.3

Currency Exchange Rates

NAME

METALS

90.3

Last 90.3

24.5

Commodities ENERGY

Min 88.95

59.1

58.3

Last 58.4

Max 91.3

CHEUK NANG HLDGS CHINESE ESTATES

23.05

1.318681

104.97

23.5

9.767

68100

CHOW TAI FOOK JE

12.24

-0.4878049

-1.607714

13.4

7.44

8833641

EMPEROR ENTERTAI

3.93

-0.5063291

107.9365

4.66

1.65

265000

FUTURE BRIGHT

3.81

-1.038961

214.3497

3.96

1.103

2817000

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16097.33

0.1526181

22.84156

16120.25

12765.32031

NASDAQ COMPOSITE INDEX

4044.75

0.672043

33.95369

4045.808

2935.878

12.73438

6875.62

5755.23

HANG SENG BK

GALAXY ENTERTAIN

FTSE 100 INDEX

6648.86

-0.009173663

DAX INDEX

9370.02

0.2020077

23.08906

9371.05

7265.44

HOPEWELL HLDGS

NIKKEI 225

15727.12

1.796095

51.29243

15942.6

9308.35

HSBC HLDGS PLC

HANG SENG INDEX

23789.09

-0.07250166

4.997016

24014.81

19426.35938

CSI 300 INDEX

2439.53

1.037449

-3.306519

2791.303

2023.171

TAIWAN TAIEX INDEX

8362.43

0.8022054

8.610036

8476.63

KOSPI INDEX

2045.77

0.835958

2.439597

2063.28

60.2

-1.0682

98.35255

63.75

5934707

126.6

6.655437

132.8

110.6

885841

-21.80451

35.3

23.2

217845

86.65

-0.4022989

6.580562

90.7

76.9

11091128

HUTCHISON TELE H

2.98

1.016949

-16.29213

4.66

2.91

12534972

LUK FOOK HLDGS I

29.7

-4.038772

21.72131

31.5

16.88

5163000

MELCO INTL DEVEL

27.45

204.6615

28.1

7.84

4052741

7385.910156

MGM CHINA HOLDIN

27.55

107.4817

12.956

3016839

1770.53

MIDLAND HOLDINGS

3.42

1.183432

-7.567569

4.29

2.68

2321000

NEPTUNE GROUP

0.29

-3.333333

90.78948

0.4

0.131

36570000

NEW WORLD DEV

10.48

-0.56926

-12.81198

15.12

9.98

11831264

SANDS CHINA LTD

58.4

0.4299226

72.01767

60.5

30.35

10036708

S&P/ASX 200 INDEX

5334.337

0.02745237

14.74283

5457.3

4433

JAKARTA COMPOSITE INDEX

4214.881

-0.861063

-2.358433

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1803.52

0.2813518

6.783508

1826.22

1590.67

SHUN HO RESOURCE

1.6

-1.234568

14.28572

1.92

1.22

20000

NZX ALL INDEX

1013.538

0.2347789

14.90671

1048.998

858.253

SHUN TAK HOLDING

4.54

8.35322

4.8

3.27

8282757

PHILIPPINES ALL SHARE IX

3755.58

1.388443

1.530154

4571.4

3440.12

SJM HOLDINGS LTD

24.1

-0.8230453

35.79257

16.762

4450048

SMARTONE TELECOM

8.59

2.019002

-38.99148

14.52

8.37

5728070

WYNN MACAU LTD

30.05

0.8389262

43.43675

32.6

8277690

ASIA ENTERTAINME

N/A

3.430892

65.19795

78.03

43.57

529356 5200

Euromoney Dragon 300 Index Sin

613.82

-0.14

-1.17

STOCK EXCH OF THAI INDEX

1361.98

-0.8105687

-2.151694

1649.77

1260.08

HO CHI MINH STOCK INDEX

507.71

-0.1416124

22.71529

533.15

374.15

BALLY TECHNOLOGI

73.86

Laos Composite Index

1281.9

0.3192938

5.526149

1455.82

1196.44

BOC HONG KONG HO

3.37

9.771989

3.6

2.99

GALAXY ENTERTAIN

7.95

2.580645

100.2519

8.11

3.6

9100

17.39

1.695906

22.72406

21.2

13.27

3201937

INTL GAME TECH JONES LANG LASAL

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

0.2147459

16.75006

101.46

77.33

246509

LAS VEGAS SANDS

71.54

1.088032

54.98267

73.49

42.3534

3127357

MELCO CROWN-ADR

35.42

2.074928

110.3325

13.95

2604763

MGM CHINA HOLDIN

3.58

104.5374

3.88

1.703

5600

MGM RESORTS INTE

19.18

1.858736

64.77663

20.98

9.8

7844490

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.14

0.9646302

37.86345

3.6

2.1494

12380

165.56

0.9512195

49.87985

170.254

105.5618

617598

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

39.4

0.3821656

16627468

CHINA UNICOM HON

12.18

2.181208

31882287

ALUMINUM CORP-H

2.88

14130507

CITIC PACIFIC

11.08

-0.5385996

7711294

BANK OF CHINA-H

3.72

-0.5347594

220029099

CLP HLDGS LTD

63.55

1900770

BANK OF COMMUN-H

5.75

0.174216

18856373

15.7

0.7702182

32355854

34.15

-0.5822416

2605687

11.36

1.067616

3312678

BELLE INTERNATIO

9.49

-0.7322176

21131035

ESPRIT HLDGS

16.3

-1.451028

BOC HONG KONG HO

26.1

0.1919386

6755426

HANG LUNG PROPER

26.1

-0.7604563

BANK EAST ASIA

NAME

CNOOC LTD COSCO PAC LTD

3422136

93.2

1.249321

1386726

5089746

TENCENT HOLDINGS

442

0.1359311

4569516

2034100

TINGYI HLDG CO

22.95

0.4376368

6426613

WANT WANT CHINA

11.22

0.7181329

10705868

64.8

0.07722008

2508838

126.6

885841

45.15

-1.203501

3420753

CHINA COAL ENE-H

5.19

1.565558

88622786

96.2

-0.2074689

1182526

CHINA CONST BA-H

6.25

191490920

18.34

-0.1089325

10342588

35050483 3065843

CHINA MOBILE

HONG KONG EXCHNG

136

-1.234568

4264753

HSBC HLDGS PLC

86.65

-0.4022989

11091128

99.15

0.2527806

7097417

5.55

174659025

10.58

11614539

30.1

-0.4958678

1693694

82.6

-0.4219409

27184141

HUTCHISON WHAMPO

23.85

1.705757

16712565

IND & COMM BK-H

CHINA PETROLEU-H

6.66

-0.7451565

138668904

CHINA RES ENTERP

27.65

0.3629764

1334667

CHINA OVERSEAS

LI & FUNG LTD MTR CORP

10036708

SWIRE PACIFIC-A

HENDERSON LAND D

-1.557093

0.4299226

4669364

HANG SENG BK

24.9

58.4

-1.48423

5910738

28.45

3600883

SANDS CHINA LTD

-0.4002001

4774931

CHINA LIFE INS-H

VOLUME

99.55

1.694915

CHINA MERCHANT

-0.4746835

10.62

0.8149959

HONG KG CHINA GS

DAY %

62.9

SINO LAND CO

16.8

HENGAN INTL

PRICE

POWER ASSETS HOL

SUN HUNG KAI PRO

123.7

CATHAY PAC AIR CHEUNG KONG

NAME

CHINA RES LAND

21.05

2.43309

13168098

NEW WORLD DEV

10.48

-0.56926

11831264

CHINA RES POWER

18.46

-1.70394

5167558

PETROCHINA CO-H

9.1

-0.9793254

75116063

CHINA SHENHUA-H

26.55

1.529637

20088489

PING AN INSURA-H

71.8

-1.03377

13488198

WHARF HLDG

MOVERS

24010

INDEX 23789.09 HIGH

24006.68

LOW

23653.95

52W (H) 24014.81 23650

(L) 19426.35938 26-November

28-November

15 15

November 29, 2013 April 19, 2013

Opinion Business

wires

China’s consumer babies

Leading reports from Asia’s best business newspapers

Korea Herald South Korea’s government plans to allow local commercial banks to take over financial groups in foreign countries to boost their global competitiveness in the face of the saturated domestic market. The state-led project for encouraging the active expansion of domestic banks into foreign markets has been included in the policy agenda for development of the financial industry, unveiled by the Financial Services Commission on Wednesday. The authorities have decided to lift a ban on the acquisition by domestic banks of financial holding firms in the overseas market, the FSC said in a statement.

Taipei Times Taiwan’s central bank Governor Perng Fai Nan said the government will continue to keep the nation’s property market in check, as housing prices in Taipei City were still higher than those in Japan to some extent. Mr Perng’s remarks came after legislators expressed concern about continuing rises in property prices as media reported yesterday that the launch of the Taipei Mass Rapid Transit’s new Xinyi Line has boosted prices of an adjacent luxury housing project in Taipei’s Xinyi District to a record high. “Excluding public facilities, I fear that average housing prices in Taipei are more expensive than in Japan,” he said.

Jakarta Post Bank Indonesia has targeted for Indonesia’s current account deficit to stand at a sustainable level or between 0.25 percent and 2.5 percent of gross domestic product in line with the latest economic situation. “What we want to say is, this should not have to be a surplus – because an economy can sometimes have a ‘hard landing’ – but a deficit with a ‘sustainable’ figure, which is in a range of between 0.25 percent and 2.5 percent,” said BI Governor Agus Martowardojo. Mr Agus said Indonesia’s current account deficit had declined to US$8.4 billion or 3.8 percent of GDP in the third quarter.

The Star Consumers in Malaysia should brace themselves for a 10-20 percent hike in electricity tariffs next year. “The quantum [of increase] is not finalised … but anything below 20 percent is reasonable,” said Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili. The final decision on the increase has yet to be made by the Cabinet, but the hike could happen anytime in 2014, he told reporters. The move, he said, would be in line with the government’s plan to gradually cut subsidies.

Jin Keyu

Lecturer in Economics at the London School of Economics

hina’s leaders have now agreed to relax the country’s decades-old “one-child” policy. Couples now will be permitted to have two children if one parent is an only child (previously, both parents had to be only children), making the new rule applicable to most of the post1980’s generation that grew up in urban areas. But, while the potential social consequences are obvious, the likely economic impact is less apparent. When the one-child policy was implemented in 1979 – in an effort to alleviate social, economic, and environmental pressures following the population boom in the 1950’s and 1960’s – the fertility rate plummeted, from three children per household in 1970 to 1.2 in 1982. The household saving rate subsequently soared, from 10.4 percent in 1983 to a staggering 30.5 percent in 2011. Could the one-child policy have fuelled this rise? If so, will the modified policy precipitate a reversal in this trend and, in turn, a consumption boom in the coming decade? Rising fertility rates can lower the household saving rate in two main ways. First, children demand increased household expenditure – especially on education, which, for only children aged 15-22, accounts for 15-25 percent of total Chinese household expenditures. Second, with more children to support them in their old age, parents feel less pressure to save for retirement. An examination of the spending and saving patterns of households with twins born under the one-child policy suggests that these changes could lead to a drop of 8-9 percentage points in China’s household savings rate – to around 22 percent – in the coming decades. Because the birth of twins is arguably an exogenous occurrence (unrelated to factors like income and education that affect parents’ decision to have multiple children), comparing households with an only child to those with twins can reveal some of the effects that an additional child has on saving.

Saving rate From 2002 to 2009, the average saving rate for an only-child household was 21.3 percent, compared to 12.8 percent for a household with twins – a difference that holds across all income groups. Regression analysis of all urban households in the 1992-2009 period shows that an additional child reduced the saving rate by about

The most likely upshot of the policy change will be a moderate baby boom – and betterperforming childrelated consumer stocks

6-7 percentage points. One additional child increased education expenditure (as a percentage of household income) by an average of seven percentage points, food expenditure by 2.5 percentage points, and other spending by roughly 2.7 percentage points. Intergenerational support – whereby children provide for parents in old age – is not only a social norm; in China, it is stipulated by law. More than half of elderly people’s income derives from family support, which includes financial transfers and in-kind benefits like cohabitation. And the total amount of transfers that parents receive rises with the number of children.

The added security offered by additional offspring means that loosening the one-child policy will probably lead parents to save less on their own, and possibly even to make the kind of risky investments that would be unwise for only-child families. In fact, the one-child policy could be an important reason why, in recent decades, Chinese households have gravitated toward riskless assets. If parents view having a second child as doubling their “safe assets,” they may decide to allocate more of their portfolio toward riskier assets. It follows that parents of multiple children may also feel secure enough to consume more. On average, the share of household income spent by parents of multiple children on non-child-related consumption in later stages of life is about eight percentage points higher than it is for parents of only children.

Moderate consumption The coming demographic shift will also affect national saving. The share of young dependents/borrowers will rise relative to the middle-aged working population. Reducing the proportion of high savers in the economy will tend to lower the aggregate saving rate. The share of elderly people in the population, however, will not change until a generation later.

Though the change to the one-child policy may cause a moderate consumption boom, it could also reverse a positive trend: the acceleration of human-capital accumulation. The typical only child receives significantly more educational investment than the average twin and is 40 percent more likely to pursue higher education (as opposed to a vocational school). This can likely be explained, in part, by a quantity-quality trade-off. Of course, without a clear sense of what China’s natural fertility rate would be, any prediction about the new policy’s impact remains largely speculative. Rising education costs, housing prices, and wages (which increase the opportunity cost of having children) may mean that, even without strict controls, China’s natural fertility rate will not return to the 1970 level. If the average natural rate is currently two children per household, then imposing this restriction will ultimately be w e l f a r e - r e d u c i n g : households that would like to have more than two children will not be able to, while the restriction would be irrelevant to those who want fewer than two children. But the most likely upshot of the policy change will be a moderate baby boom – and better-performing child-related consumer stocks. © Project Syndicate

16 16

November 29, 2013 April 19, 2013

Closing Berlusconi expelled from parliament

Bitcoin currency breaks US$1,000 mark

The Italian Senate has voted to expel ex-Prime Minister Silvio Berlusconi from parliament with immediate effect over his conviction for tax fraud. Mr Berlusconi, who has dominated politics for 20 years, could now face arrest over other criminal cases as he has lost his immunity from prosecution. He told supporters in Rome it was a “day of mourning” for democracy. Ahead of the vote, he vowed to remain in politics to lead his Forza Italia in a “fight for the good of Italy”. The vote marks the end of a process which determines that Mr Berlusconi cannot take part in any general election for six years.

The value of a single bitcoin has surpassed US$1,000 for the first time, according to MTGox, one of the virtual currency’s major exchanges. Bitcoin’s value has been rising rapidly since a U.S. Senate committee hearing earlier this month. Confidence grew after the committee described virtual currencies as a “legitimate financial service”. Bitcoin has become popular in part due to it being difficult to trace transactions. The currency is often linked to illegal activity online. Enthusiasts say it is a highly efficient way of handling global money transfers. Although one entire bitcoin may be worth US$1,000, it is possible to pay for goods using fractions of bitcoins.

ECB warns of risks posed by Fed tapering

Greek economy ‘to shrink in 2014’ Greece may need more financial help, the OECD says

The European Central Bank said the risk to financial stability from global market turbulence has increased in the past six months, even as measures of systemic stress have declined. The market turmoil earlier this year amid changing expectations of U.S. monetary policy “might be a harbinger of further realignment of risk premia with fundamentals in bond markets, or even an overshooting,” the ECB said in its bi- annual Financial Stability Review published today. “Reduced cash buffers, combined with low secondary market liquidity in emerging and corporate bond markets, could amplify future asset price developments.” Federal Reserve chairman Ben Bernanke’s comments on June 19 that the U.S. central bank was preparing to taper its asset purchases sent money-market rates and bond yields surging across the 17-nation euro region, threatening the currency bloc’s economic recovery. The ECB responded on July 4 with an unprecedented pledge to keep interest rates low for an extended period. “Stable and predictable macroeconomic policies, as well as efforts such as forward guidance to reduce market uncertainty surrounding central banks’ reaction functions, are key to ensuring a smooth exit from nonstandard central bank measures without an abrupt rise in bond yields,” the ECB said.

The OECD said the recession in Greece was ‘much deeper than expected’

Portugal gets first IPO in five years Portugal is preparing for its first initial public offering in more than five years as the nation recovers from 10 straight quarters of contraction that erased about 70 percent in market value. The government will sell 70 percent of CTTCorreios de Portugal SA next month, the first IPO since EDP-Energias de Portugal SA spun off its renewable-energy unit in June 2008. The PSI-20 Index has lost about 50 billion euros (US$68 billion) in market value since peaking in 2007 as index members dropped out and investors shunned a gauge composed of banks, utilities and construction companies stung by shrinking domestic demand. Portugal is counting on the offering to reduce debt and narrow its budget deficit as the thirdmost indebted member of the euro area seeks to meet European Union targets. The nation is planning to exit a rescue package in June after it became the third country in the region to ask for an EU-led bailout almost three years ago, as soaring bond yields forced it out of the borrowing market. State-holding company Parpublica is selling as many as 105 million shares in CTT at 4.10 euros to 5.52 euros apiece, according to a November 18 prospectus. Bidders have until December 2, and trading is expected to start on December 5. Demand reached more than 6 times the amount on offer, Portugal said this week.

reece will remain mired in recession in 2014 for a seventh straight year, and is likely to need more financial assistance, the OECD said, in contrast to forecasts by Athens. The Organisation for Economic Cooperation and Development said the Greek economy would contract by 0.4 percent, and said Greece was likely to need additional aid. “The need for further assistance to achieve fiscal sustainability cannot be excluded,” the OECD said. “If negative macroeconomic risks materialise… serious consideration should be given to further assistance to achieve debt sustainability,” it said. Greece last week unveiled a budget in which it said the deep recession in the economy would end next year with 0.6 percent growth, following a 4.0-percent contraction in 2013. But the budget was tabled without Athens having reached a full agreement with auditors from the International Monetary Fund, the European Central Bank and the European Commission. In a separate study, the OECD said Greece’s crisis-hit economy could gain by at least 5.2 billion euros (US$7 billion) if hundreds of trade restrictions were abolished.

The organisation said it had found 555 regulatory restrictions that were “potentially harmful” to competition, in a study commissioned by the conservative-led Greek government. The sectors examined were food processing, retail trade, building materials and tourism, which account for 21 percent of the Greek economy and almost 27 percent of total employment, according to 2011 figures. “If the particular restrictions are lifted, the OECD has calculated a positive effect to the Greek economy of around 5.2 billion euros,” the organisation said. “But the positive effects on the Greek economy over time are likely to be far greater,” it said. Among the recommendations are the full liberalisation of Sunday trade, which is currently restricted to a handful of pre-holiday sales periods. The move is opposed by Greek trade associations on the grounds that most businesses are family-operated and are unable to hire more staff owing to persistently poor sales, made worse by recession and three years of tax increases. The OECD also suggests the abolition of taxes on advertising, flour and cement and the liberalisation of

The need for further assistance to achieve fiscal sustainability cannot be excluded OECD

prices for over-the-counter medicine and dietary supplements. The coalition government of conservative Prime Minister Antonis Samaras is attempting to push through legislation liberalising the trade and labour sectors. But the government has a slim majority in parliament and faces the threat of internal dissent, in addition to frequent strike action from unions. AFP