Macau business daily, Dec 5th by Business Daily

MOP 6.00 Vitor Quintã Deputy editor-in-chief Editor-in-chief Tiago Azevedo Number 429 Thursday December 5, 2013 Year II

April 19, 2013

Insurer’s expansion plan meets agent shortage

Govt turns down offer to save Reolian

Page 4

‘Nothing fishy’ with survey ahead of La Scala tender Page 6

Resource sharing helps students top PISA: govt Page 7

ublic bus operator Reolian Public Transport Co Ltd was declared bankrupt yesterday after the government rejected an offer by two Macau banks to refinance the company’s debts. Sources told Business Daily that Banco Luso Internacional SA and Bank of China’s Macau branch offered to refinance Reolian’s loans of about 160 million patacas (US$20 million) to keep the firm running. In return they asked the government to pay Reolian about 50 million patacas from a 23.3

percent in service subsidies approved in June last year but which Reolian never received. The government refused to do so, saying it had to wait for a lawsuit in which the Administrative Court will decide whether or not Reolian was due the increase. The Lower Court declared the bus operator bankrupt and all of its assets seized, including its buses, which could pose a danger to the city’s public bus system. The administration asked the court to keep running the buses. More on page 3

Macau airport eyes 5 mln passengers www.macaubusinessdaily.com

The Macau International Airport could wrap up the year with 5 million passengers, a level last seen in 2008, before the launch of direct flights between mainland China and Taiwan sliced the number of transit passengers. Total passenger traffic is up by 12 percent to 4.57 million in the first 11 months of the year thanks to the mainland and Southeast Asia. Page 2

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Mainland investments smaller in October

December 4

HSI - Movers

Macau firms are ploughing less money into mainland projects so far this year, the Ministry of Commerce in Beijing said yesterday. It approved 27 new Macaufunded projects in October, one project more than the month before. But all those investments were worth just US$30 million (240 million patacas), a fall of 12.8 percent. Bilateral trade declined mostly due to a fall in mainland imports.

Name

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Wages major expense for security, cleaning firms Security services and cleaning already fork out 84 percent and 81 percent respectively of their expenditure on labour, a survey released yesterday shows. But the going could get tougher if the government succeeds in introducing a proposed minimum wage of up to 30 patacas (US$3.8) per hour for all security guards and cleaners. These two sectors collectively employed 9,514 people last year. Page 4

%Day

CITIC PACIFIC

1.32

PING AN INSURA-H

1.28

CHINA MOBILE

0.90

GALAXY ENTERTAIN

0.08

POWER ASSETS HOL

0.08

PETROCHINA CO-H

-1.64

TINGYI HLDG CO

-1.73

CHINA RES ENTERP

-1.80

CHINA RES LAND

-1.89

CHINA MERCHANT

-2.30

Source: Bloomberg

I SSN 2226-8294

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December 5, 2013

Macau

Passengers may top 5 mln at Macau airport Airport operator launches tender for ground handling for business jets Tony Lai

tony.lai@macaubusinessdaily.com

s passenger levels take off, the Macau International Airport could see the numbers reach the 5-million benchmark this year, after a 10 percent year-on-year jump last month. The Macau International Airport Co Ltd (CAM) announced yesterday that the airport handled more than 410,000 passengers last month. Total passenger traffic is up by 12 percent to 4.57 million in the first 11 months of the year, the company said in a press release. Keeping the current pace this month, passenger volume could be about 5 million this year, beating CAM’s target of 4.7 million for 2013, according to Business Daily calculations. The numbers show that the airport is growing less reliant on transit traffic from Taiwan. The airport handled more than 5 million passengers a year in 2007 and 2008 before the launch of direct flights between mainland China and Taiwan which have hit the number of transit passengers. “Driven by the booming economy of mainland China and Macau, the passenger traffic of the Macau International Airport grew steadily this year,” CAM said. “The Southeast Asia market has performed particularly well this year, accounting for 39 percent of the overall passenger market,” the company added. Aircraft movements in the first 11 months of the year were in line

Number of passengers handled by the airport grew 10 pct in November

with CAM’s forecast. The number of take-offs and landings increased by 16 percent to over 44,000 movements in the January-November period after a 12-percent jump last month.

Business aviation In a separate statement CAM said it is now inviting bids from across the globe for ground handling services for business jets. The public tender will run until March, the company said in its website yesterday.

Macau Business Aviation Centre Ltd was the exclusive concessionaire for the operation until last month when its concession ended. “We have a temporary arrangement with the existing operator to ensure the continuation of the services” until the end of the tender process,” a CAM spokeswoman told Business Daily. Macau Business Aviation Centre will have to join the tender if it wants to continue in service, she added. CAM director of logistics and

Reserve adds MOP4 bln to triple last year’s return Return on investment to the end of October reaches 4.08 percent, inching closer to inflation rate Vítor Quintã vitorquinta@macaubusinessdaily.com

he return from the government’s fiscal reserve has cleared 4.09 billion patacas so far this year, edging ever closer to the annual rate of inflation. The reserve held 168.07 billion patacas (US$21.05 billion) by the end of October, 67.83 billion patacas more than at December 31, according to an update on the fund’s performance published by the Monetary Authority of Macau in the Official Gazette yesterday. The return on investment so far this year is almost three times as great as last year’s return of 1.38 billion patacas. The reserve has returned 4.08 percent in the first 10 months of this year,

according to Business Daily calculations – more than twice the 1.75 percent rate of growth achieved last year. The reserve was established in the middle of February last year with capital of about 98.86 billion patacas. The strong growth so far this year is largely due to the transfer of the 2011 fiscal surplus in January, worth almost 64 billion patacas. It is also a far greater performance than its predecessor, the MSAR Reserve Fund, which achieved an average annual return of 2.21 percent between 2001 and 2009. The reserve’s return on investment is inching closer to the inflation

rate, which was 4.34 percent in the 10-months to the end of October. After getting its hands on the surplus from 2011, the monetary authority said it was able to adopt “an investment strategy that aims to achieve a higher return in the long term”. Its second year of operation began strongly but ran into turbulence in June, with its first monthly loss of 246.4 million patacas. In August, the city’s de facto central bank told Business Daily that the riskier investment strategy could mean more losses in the short term. The special reserve, which is set aside for investment, held 56.15 billion

general aviation development Cui Guang said in September they wanted at least one more fixed-base operator running the private jet business at the local airport. CAM is also seeking a maintenance, repair and overhaul operator for private jets using the airport, a first in Macau as business aviation is taking off here. According to the tender documents, the number of passengers using business jets tripled since 2007 to over 7,770 last year.

patacas by the end of October. Most of the capital, 111.92 billion patacas, remains in the basic reserve, which is kept for emergencies. The fund’s rules say the basic reserve must amount to 150 percent of the expenditure budgeted by the government, which has now reached 74.63 billion patacas. There was a budget surplus of 72.76 billion patacas last year. That amount will be added to the reserve early next year, after the Legislative Assembly finishes reviewing the budget report. After the first 10 months of the year, the government had a surplus of 85.47 billion patacas, official data show. The government is forecasting a surplus of nearly 76 billion patacas next year, according to budget documents sent to the assembly.

MOP 168.07 bln Held in the fiscal reserve at the end of October

December 5, 2013 April 19, 2013

Macau

Reolian goes bankrupt as govt rejects subsidy hike Lenders offered to refinance bus operator’s debts but to no avail Vítor Quintã

vitorquinta@macaubusinessdaily.com

ublic bus operator Reolian Public Transport Co Ltd was declared bankrupt yesterday after the government and two Macau banks were unable to reach a deal to keep the firm running. A court press statement says no formal proposal to save the company from bankruptcy was presented during a creditors meeting held yesterday. But two sources told Business Daily that Banco Luso Internacional SA and Bank of China’s Macau branch offered to refinance Reolian’s loans of about 160 million patacas (US$20 million). In return they asked the government to approve an increase to what the company is paid to run its bus services, said the sources, who asked not be identified because they were not authorised to speak to media. According to Reolian’s financial statements, the company is owed about 50 million patacas from a 23.3 percent in service subsidies approved in June last year but which Reolian never received. The government refused to do

so, saying it had to wait for the Administrative Court to decide on whether or not Reolian was due the increase, the sources said. Business Daily asked for a comment from the Transport Bureau but received no reply before press time. The administration attended the meeting on behalf of Reolian. The government took over Reolian’s operations on October 2, one day after the bus firm filed for bankruptcy because it ran out of money to pay its workers. With no deal to exit bankruptcy, the Lower Court judge presiding

over the meeting declared the bus operator broke and all of it assets seized, including its buses, the sources added. An asset seizure could pose a danger to the city’s public bus system because Reolian runs 27 of the city’s over 60 routes. In a document filed later, the administration asked the court to be allowed to continue using the buses, one of the sources said. The court is yet to decide on this issue. Reolian’s financial statements show that the government’s refusal to give the operator the subsidy

increase was the main reason behind its bankruptcy. The government approved the hike in subsidies it pays to Sociedade de Transportes Colectivos de Macau SARL (TCM) and Transportes Urbanos de Macau SARL (Transmac) in April. Most of Reolian’s bank loans, or about 90 million patacas, were taken up this year, the sources said. However this credit posed no immediate pressure because it was all made up of long-term loans and payments were being made on time, the sources added. Bank of China is owed about 90 million patacas and Banco Luso a further 70 million patacas in loans, the sources added. Reolian’s assets were estimated at 80 million patacas, the sources said, far from what is needed to cover its debts. Bank of China and Banco Luso were keen on saving the company because the loans they granted are unsecured, which means they have no priority in getting their money back. The company’s workers will be paid first, with the government second in line. There might be little left to help the two banks reduce their losses, the sources said.

MOP160 mln

Reolian’s bank debts

The government is trying to prevent Reolian’s buses from being seized (Photo: Manuel Cardoso)

Transport office slammed for over-budgeting Delay in new Seac Pai Van, UM campus bus routes means less money spent Stephanie Lai

sw.lai@macaubusinessdaily.com

he troubled Transport Bureau faced further criticism at the Legislative Assembly yesterday for over-estimating its spending for this year. The bureau was told to overcome its shortcomings in drafting inaccurate budget plans, said Chan Chak Mo, president of the assembly’s second standing committee. Transport Bureau director Wong Wan estimated in a committee meeting that the bureau would spend only 54 percent of its budget for this year, Mr Chan said. This budget execution rate is low because the bureau intended to open “a few more” bus routes for the Seac Pai Van public housing complex and

the University of Macau’s Hengqin Island campus, he said. “But eventually it turns out that the occupancy rate in the public housing and the campus is not as high as the bureau expected, so the routes have not been launched,” Mr Chan said. The inauguration ceremony of the university’s new campus was held last month, two months behind schedule. State-owned contractor Nam Yue Group Co Ltd is yet to deliver all of the campus buildings and the teacher residences will only be in use early next year, the university said last month. As a result the Transport Bureau has over-estimated its spending “a

bit too much,” Mr Chan told media after a closed-door meeting yesterday. “The legislators have advised the Transport Bureau to make more detailed and careful budget planning, as a poor one can affect the government’s finance allocation,” he said. The committee is analysing the government’s budget draft for next year. The Transport Bureau is one of the public departments with the biggest budget but it will have less money next year. In 2014 the bureau’s budget is set at 1.88 billion patacas (US$235.9 million), 7 percent lower than this year, Mr Chan said. Mr Wong told legislators that

most of the money will be used to recruit more staff to deal with growing demand for driving licences and vehicle inspection, Mr Chan said. The Transport Bureau director did not mention whether the budget for 2014 includes the service fee increase requested by the city’s three public bus operators. The legislators also met with representatives from the Environmental Protection Bureau, Infrastructure Development Office, Bureau of Telecommunications Regulation and Energy Sector Development Office yesterday. All of these departments will have a higher budget next year, mostly to hire more workers, Mr Chan said.

December 5, 2013

Macau

Pay big part of minimum wage firms’ overheads Security and cleaning operations already spend 80 pct plus of costs on worker pay Michael Grimes

michael.grimes@macaubusinessdaily.com

ecurity services and cleaning, the two commercial segments likely soon to see the introduction in the city of a minimum hourly wage, already fork out 84 percent and 81 percent respectively of their expenditure on labour. So says the Service Sector Survey for 2012 released yesterday by the Statistics and Census Service. The two sectors collectively employed 9,514 people last year and produced receipts of nearly 1.28 billion patacas (US$160.3 million). But in security services, 96 percent of the 759 million patacas in receipts came from just 12 companies. The 21 establishments with 50 or more people engaged in cleaning services accounted for only 18 percent of the total firms in the sector. But those 21 businesses took 74 percent of the 483 million patacas generated in segmental receipts.

Cleaning services – 4,395 employed last year

The story was different for the real estate management sector, where 86 percent of the establishments had fewer than 50 persons engaged, but accounted for 58 percent of the sector’s 924 million patacas receipts. Property management employed 5,139 people in 2012, according to the survey. In advertising, small outfits predominated. There were 325 establishments with five or fewer people, but their receipts made up 47 percent of the segment’s total 399 million patacas. There were 33 entities working in conference and exhibition organising services, up by seven year-on-year; employing 130 people and generating 206 million patacas for the segment. “Conference and exhibition organising services saw rapid growth in recent years, with notable year-on-year increase in receipts and expenditure between 2007 and 2012, except in 2011,” said the statistics service in a commentary on the survey. An important statistic covered by the survey is the expenditure of firms in the service sector – because of its multiplier effect in terms the local economy. In 2012 spending in the segments researched came to 2.39 billion patacas. Gross value added, a measure of the segmental and sectoral contribution to the economy, was highest in security services, up by 28 percent year-on-year, to 681 million patacas. Gross fixed capital formation was highest in advertising, at 34 million patacas – up 396 percent apparently due to an increase in acquisition of machines and equipment.

Insurer finds agents hard to come by AIA Macau still trying to recruit 300 more agents here Vítor Quintã

vitorquinta@macaubusinessdaily.com

he Macau branch of American International Assurance Co (Bermuda) Ltd is struggling to increase the size of its sales team, after losing its position as market leader. A year ago AIA Macau chief executive Chris Ma Chuk Ho said the company’s goal was to “employ 360 new agents to build a quality team”. The city’s biggest insurance company by market share at the time had about 1,000 agents. “We at AIA Macau are in the same position as regards our expansion plan,” Mr Ma told Business

Daily yesterday. “We currently have just over 1,000 agents, and our plan for 2014 financial year is to engage 300 more,” he said in an e-mailed reply. Mr Ma did not disclose how many agents AIA Macau has hired so far this year. “We are on target but we have to put in a lot more resources,” the executive had told Business Daily in June. “Every single agent we recruit is fresh to the industry. We are looking for university graduates with at

AIA Macau lost its position as market leader to China Life this year

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least one year of work experience,” he stressed. Jacky Chan Wing Sing, chief executive of AIA Hong Kong and Macau, said on Tuesday the company would hire more brokers for its Hong Kong and Macau operations, Hong Kong Standard reported. AIA Macau had been market leader since the Monetary Authority of Macau began releasing data on the life insurance industry in 2003 but that changed this year. The Macau branch of China Life Insurance (Overseas) Co Ltd

became the biggest player in the life insurance market here in the first half of this year. Monetary Authority of Macau data show that the China Life branch had premium income of 1.07 billion patacas (US$134.3 million) in the first half, three times more than a year earlier, giving it 39.4 percent of the life insurance market. AIA Macau’s first-half life insurance premium income was 772.2 million patacas, 21.4 percent more than a year earlier, giving it 28.4 percent of the market.

December 5, 2013

Macau

Firms plough less money into mainland projects With MOP240 million invested in October, annual growth in new projects increases by 42 pct in year-on-year terms Tony Lai

tony.lai@macaubusinessdaily.com

ew mainland investments backed by Macau capital remained flat in October, official data show. The Ministry of Commerce in Beijing said yesterday it approved 27 new Macau-funded projects in October, one project more than the month before but a 42-percent increase in year-onyear terms. Investments bounced back in September after hitting a six-month low in August, when 17 new investments were approved. While Macau firms sought more bang for their buck by investing across the border, they are ploughing less money into mainland projects. October’s investments were worth US$30 million (240 million patacas), a fall of 12.8 percent in month-onmonth terms. In the first 10 months of this year capital for mainland investments reached US$420 million, declining by 9.5 percent compared to the same time last year, despite

Manufacturing is the biggest draw for Macau firms investing in the mainland

a 3 percent rise in the number of approved projects to 237. The decline in Macau investment bucks a global trend towards in-

creasing foreign direct investment in mainland China. Combined foreign direct investment in China reached US$97.03 billion in

the January-October period, an increase of 5.8 percent compared to the same period last year. University of Macau assistant professor of business economics Henry Lei Chun Kwok said in August that the mainland’s transition from manufacturing to value-added services had seen local investments dry up. “There are only very few local firms that invest in higher value-added projects there,” he said. “Macau is still mainly investing in labour-intensive projects there, which come with a lower profit margin and bigger production costs, such as the textiles industry.” Meanwhile, bilateral trade between the mainland and Macau declined to US$290 million in October, a 6.8 percent drop compared to a year earlier. The decrease was mostly due to a 9.2-percent fall in mainland imports, which were worth US$260 million. The city’s exports shot up by one-fifth to slightly more than US$30 million.

US$420 mln

Value of Macau investments in the mainland in the first 10 months this year

Corporate Unions, employers, support Chinese chef contest Macao Federation of Trade Unions and the United Association of Food and Beverage Merchants of Macao are supporting the local finals of a regional competition open to young Chinese chefs. Lee Kum Kee International Young Chef Chinese Culinary Challenge - Hong Kong and Macau Final involves a total of 55 young chefs. They must each cook two dishes within 90 minutes. Each dish must be inspired by a Chinese New Year theme. Contestants must include two major ingredients: giant grouper and beef. The top eight will represent Hong Kong and Macau against young chefs from Japan, Korea, Taiwan, Singapore and Malaysia in March 2014. Up to 20 percent of the estimated 200,000 available Chinese chef posts in the regional hospitality industry remain unfilled, suggests the Chinese Cuisine Training Institute. An executive chef working at a major hotel can enjoy a wage over HK$1 million annually it suggests.

Three’s U.K. users can roam free in Macau Cellular telecoms provider Three is allowing its United Kingdom subscribers to roam free of extra charges when in Macau with effect from this week. The latest ‘Feel at Home’ offer also applies in Indonesia, Sri Lanka and the United States. “We want customers to get the most out of their devices at home or abroad. High roaming charges stop people enjoying their phones while they’re away and Feel At Home is the antidote to that,” said Dave Dyson, chief executive of Hutchison 3G UK Ltd. The initiative allows customers to utilise their U.K. allowances to use data, text, make calls home and receive calls from home when abroad in certain jurisdictions. Feel At Home now operates in 11 destinations around the world. Three said it expanded its U.K. customer base by 9.7 percent, or nearly 300,000 users year-on-year in the third quarter. It now serves 7.8 million people in that country.

December 5, 2013 April 19, 2013

Macau

Iao Kun’s US$1.51 bln chip turnover in Oct I

Pre-sales of flats at La Scala were frozen in June last year

Survey ahead of tender was normal, court hears Feasibility study ahead of La Scala tender was commissioned for another developer ended up in Chinese Estates’ hands Tony Lai

tony.lai@macaubusinessdaily.com

here was nothing irregular in surveying land for an apartment development although a tender had not been announced, the Court of First Instance heard yesterday. The trial of two businessmen charged with paying a HK$20-million (US$2.57 million) bribe to former government secretary Ao Man Long heard feasibility studies were common in Hong Kong. Hong Kong-based Canadian architect Philip Liao Yi Kang told the court that developers there often carried out studies on vacant land before a tender was announced. Mr Liao carried out the study on the site where the La Scala flats were to be built in early 2004, ahead of the tender in early 2005. His remarks yesterday contradicted statements put forward by the prosecution, who have argued that Hong Kong tycoons Joseph Lau Luen Hung and Steven Lo Kit Sing obtained first-hand information on the tender and gained an unfair advantage. “It is very common for developers to have feasibility studies on land plots.

They may have in-house [architects] working on these or outsource [them to] other consultants,” said Mr Liao. “They will do it right after the public announcement of the land [tender] or they even do it before any public notice. Anything can happen.” He said it was another developer, without ties to Mr Lau or Mr Lo, who had commissioned his architectural practice to survey the land. He did not name the developer yesterday, arguing he had to maintain his client’s confidentiality. “The developer was probably interested in developing the site and they might know they have a chance” to join the tender, Mr Liao said.

Gaming ties In October, the Commission Against Corruption identified the developer in court as “a company called Ka Wah”. “Ka Wah” bears the same Chinese name as K. Wah International Holdings Ltd, a company listed on Hong Kong Stock Exchange and founded by Lui Che Woo, the

chairman of gaming operator Galaxy Entertainment Group Ltd. The court heard earlier this year that Mr Lo had provided consultancy services during the construction of Galaxy Entertainment’s Galaxy Macau resort and StarWorld casino in 2004 and 2005. K. Wah has not commented. Yesterday, Mr Liao said he carried out the study but the client did not apply for a land grant. The study was later acquired by Mr Lo, and used 12 months later by Mr Lau’s firm Chinese Estates Holdings Ltd in the tender documents for the land near the airport. Mr Liao denied having any personal or professional relationship with the two businessmen yesterday. “After I had finished the study, I submitted it back to the client and did not give it to anybody [else],” Mr Liao said. Veteran Macau businessman Ng Fok did not testify yesterday due to illness. Mr Ng held a 2-percent stake in the private company – controlled by the government – that managed the land plots. The trial resumes next Wednesday.

ao Kun Group Holding Co Ltd, a Nasdaq-listed investor in Macau casino junket rooms, says rolling chip turnover for October in related operations rose three percent year-on-year to US$1.51 billion (12.06 billion patacas) compared to US$1.47 billion for the month of October 2012. Win rate for the month of October 2013 was 2.27 percent. The firm said the increase in rolling chip turnover was primarily attributable to the acquisition in June of 100 percent of the profit interest in a VIP gaming room at Le Royal Arc Casino on Macau peninsula “as well as a lower-thannormal win rate”. For the first ten months of 2013, Iao Kun – previously known as Asia Entertainment & Resources Ltd – reported rolling of US$14.19 billion (an average of US$1.42 billion per month), down 9 percent year-on-year, compared to US$15.57 billion (an average of US$1.56 billion per month) for the first ten months of 2012. Late last month Iao Kun, which has interests in five VIP rooms in Macau casinos, said it had hired Rothschild (Hong Kong) Ltd, part of global financial advisors Rothschild Group, as its new sponsor for a dual listing in Hong Kong. M.G.

Le Royal Arc Casino

December 5, 2013 April 19, 2013

Macau

Better resources help students to top scores Even spread of resources and maths curriculum reform take students to new heights, says government Stephanie Lai

sw.lai@macaubusinessdaily.com

he even-handed allocation of education resources among high schools helped Macau’s 15 year olds to score high marks in an international study, the government said. The results from the Programme for International Student Assessment (PISA) carried out last year show that Macau has some of the top performing students in maths, science and reading. Education and Youth Affairs Bureau school supervision coordinator Wong I Lin said the education development fund had allowed secondary schools to hire more teachers. More poorly performing students were taking additional after-school lessons in subjects including English and mathematics, she said yesterday. The authors of the assessment, the Organisation for Economic Cooperation and Development, agree. “School systems with high student performance in mathematics tend to allocate resources more equitably between advantaged and disadvantaged schools,” it said. “In these systems, there are small differences in principals’ reports on teacher shortages, the adequacy of

the report said. The mainland’s mathematics education reforms over the past decade have also contributed to the outstanding performance said Cheung Kwok Cheung, the national project manager of Macao-China PISA study. The reforms were also adopted here. “Aside from the acquisition of some basic knowledge and skills in mathematics, the reform has placed more emphasis on how students can incorporate maths learning in their daily life experience,” said Mr Cheung. “So it enabled them to achieve better in the PISA tests.” More than 5,330 of the city’s secondary school students took the assessments in mathematics, reading, science and problem solving. Macau’s 15-year-old students achieved a mean score of 538 in the mathematics test on a 1,000-point scale – which is above the OECD average of 494 points. In 2009, Macau had an average score of 525 in maths.

School systems with high student performance in mathematics tend to allocate resources more equitably

Macau’s 15 year olds score above the OECD average and are improving (Photo: Manuel Cardoso)

educational resources and physical infrastructure, and smaller differences in average mathematics learning time between schools with more advantaged and those with more

disadvantaged students.” Macau is one the best-performing territories with the weakest link between the students’ socioeconomic status and performance,

OECD PISA 2012 report

Fitch expects LVS to refinance Macau ‘soon’ Says casino firm had US$3.2 bln outstanding on local credit facility at end Q3 Michael Grimes

michael.grimes@macaubusinessdaily.com

itch Ratings says it expects casino operator Las Vegas Sands Corp to refinance its Macau credit facility “in the near term” following the firm’s announcement of a refinancing exercise in the United States. It thinks LVS would allocate US$1.8 billion (14.38 billion patacas) capital expenditure during 2014 for The Parisian, the company’s new French-themed US$2.7 billion resort on Cotai. LVS said in its third quarter earnings filing it hoped to open the property in “late 2015”. Fitch adds in a note that LVS had US$3.2 billion outstanding on its Macau credit as of September 30. The ratings agency states that LVS’s U.S. credit facility had US$2.8 billion outstanding at the same date. “Executing the refinancing transactions of the U.S. and Macau credit facilities will result in 61 percent of the company’s debt being refinanced,” said the note from Michael Paladino, senior director at

Fitch in New York. The document adds: “The terms of the refinancings have not yet been made public, but Fitch anticipates the transactions will improve the company’s maturity and liquidity profiles, supporting the outlook revision to positive.” The agency assigns a ‘BBB-’ rating to Las Vegas Sands LLC’s proposed U.S. senior secured credit facility. Fitch also affirms all outstanding ratings for Las Vegas Sands Corp and its subsidiaries including the ‘BB+’ issuer default ratings at each rated entity and the ‘BBB-’ on the Macau and Singapore credit facilities. LVS said in a statement on Monday U.S. time that an aim of the U.S. refinancing exercise was to “extend the maturity profile of the company’s long-term debt and remove certain financial covenants”. Fitch said in its note dated Tuesday U.S. time it calculated LVS’s consolidated gross and net leverage at

Sands China – US$2.15 billion of cash on hand

2.6 times and 1.8 times, respectively, for the latest 12 months period ending September 30. The ratings house added that maintaining leverage below four times on a gross basis and 3 times on a

net basis “for an extended period” would act as a positive for LVS’s credit rating. It stated that if “the Spain project were removed from the development pipeline” it would also be a positive.

December 5, 2013 April 19, 2013

Greater China Services industry growth steady in Nov China’s services industry grew at a steady pace in November, a private survey showed yesterday, a further indication of strength in the world’s second-largest economy as the government embarks on a sweeping restructuring drive. The HSBC Holdings Ltd/Markit services PMI stood at 52.5 in November, little changed from October’s 52.6 and above the 50 line that separates expansion from contraction. On Tuesday a government PMI survey of the services industry showed growth holding near a oneyear high. Growth in new orders eased from October’s seven-month peak, pointing to a possible softening ahead, the HSBC/Markit survey found.

HK stocks to trail Asia on pr

Developers will trail but casino stocks seen as a bright spot, says JP Kana Nishizawa

China Mobile seen taking pre-orders for iPhones China Mobile Ltd, the world’s largest mobile phone carrier, has quietly begun taking pre-orders for Apple Inc’s iPhones, according to a report on Fortune.com. Apple, which needs to expand its footprint in China, is trying to offset slowing revenue growth in developed markets that are increasingly saturated and hypercompetitive. The Chinese carrier has struggled to sustain growth as rivals like China Unicom Hong Kong Ltd sign up new users at a faster pace. Representatives for China Mobile could not be reached for comment. Apple declined to comment.

Cinda planning IPO near top end China Cinda Asset Management Co plans to sell shares in a Hong Kong initial public offering at near the top end of a marketed price range to raise about US$2.5 billion, said two people with knowledge of the matter. Strong demand prompted the company to stop taking orders for shares on Tuesday, a day earlier than scheduled, said the people. Institutional investors ordered several times the amount of stock available to them at the high end of the price range, they said. Cinda, one of four funds created in 1999 to buy bad debts from China’s banks, benefited from a resurgent IPO market in Hong Kong as investors bet the Chinese economy will stabilise.

Home prices have dropped but they’re still too high, JP Morgan says

ong Kong stocks will trail the rest of Asia next year as property values sink in the world’s most expensive real estate market, according to JPMorgan Chase & Co. The MSCI Hong Kong Index will lag behind a 15 percent gain in 2014 for the broader gauge of equities in Asia outside Japan, Adrian Mowat, JPMorgan’s chief Asia strategist, said in an interview in Hong Kong. Developers will trail as home values tumble about 30 percent in two years, while utility stocks will struggle as rising interest rates erode investor demand for dividend yields, he said. “It’s difficult to see the MSCI Hong Kong doing well,” said Mr Mowat. “What we think will happen in residential property values is that they will gap

lower rather than being able to identify a smooth position.” Barclays Plc, UBS AG and Bank of America Corp are also expecting a Hong Kong real-estate slump. Mr Mowat’s projection, which is in line with Barclays’, implies the biggest plunge since 1998. Rising wealth from house prices more than doubling since 2009 likely contributed half of the city’s consumption growth, the Hong Kong Monetary Authority said in March. Gaming shares are a bright spot for the city’s stock market, Mr Mowat said. The top five gains this year on the MSCI Hong Kong Index were by casino operators, with MGM China Holdings Ltd and Galaxy Entertainment Group Ltd more than doubling their share price. The sector remains attractive for

growth potential, Mr Mowat said. “It’s a very popular and crowded trade though, so if there were any earnings disappointment, people need to be very conscious of the downside risks,” Mr Mowat said.

Property slump The MSCI Hong Kong Index rose 8.7 percent this year amid signs China’s economy is stabilising. Seven of the biggest 10 declines on the gauge were local property companies, including Sun Hung Kai Properties Ltd and Sino Land Co. The measure traded at 16.4 times estimated earnings, compared with 8.4 for the Hang Seng China Enterprises Index and 13.9 for the MSCI Asia

Huawei South Korea deal worries U.S. Company says U.S. scrutiny of Asian project is groundless

InterContinental to open more mainland hotels InterContinental Hotels Group Plc, the world’s largest provider of hotel accommodation, plans to open “at least the same” number of hotels in China next year as 2013, even as growth in room revenue slows. The hotel operator, which also runs the Holiday Inn and Crowne Plaza brands in Greater China, opened 17 hotels this year to the end of the third quarter in China, Hong Kong, Macau and Taiwan, which together are its second-largest market outside the U.S., said chief executive Richard Solomons. “We are not cutting back at all in terms of what we are doing here,” he said.

uawei Technologies Co Ltd, China’s largest maker of phone network equipment, said there is no basis for U.S. scrutiny of its contract to supply broadband equipment for a project in South Korea. “Our gear is world-proven and trusted, connecting almost one-third of the world’s population,” Scott Sykes, a spokesman for Shenzhen-based Huawei, said in an e-mail yesterday. “The motivations of those that might groundlessly purport otherwise are puzzling.” U.S. Senator Dianne Feinstein, chairman of the Select Committee on Intelligence, and Senator Robert Menendez, who leads the Committee on Foreign Relations, sent a letter last week to Defence Secretary Chuck Hagel, Secretary of State John Kerry and James Clapper, the director of national intelligence. The lawmakers expressed concern

that Huawei’s involvement creates risks for the U.S.-South Korea alliance, including for U.S. troops based on the peninsula. U.S. officials privately have expressed to counterparts in Seoul the same concerns voiced by the lawmakers, to little effect so far, said a U.S. intelligence official on condition of anonymity because he wasn’t authorised to speak to the news media. A 2012 report prepared by the U.S. House intelligence committee said Huawei and competitor ZTE Corp provide opportunities for Chinese intelligence services to tamper with U.S. telecommunications networks for spying. Regional news outlets reported last month that Huawei was chosen to provide equipment using the long-term evolution standard for the wireless project by LG Uplus Corp, a subsidiary of

Seoul-based LG Corp, to build a 2.6 gigahertz broadband LTE network. The value of the Huawei contract has yet to be determined, Kim Sang-yup, a spokesman for LG Uplus, said yesterday. LG Uplus hasn’t considered ending the contract with Huawei because of the U.S. concerns, Mr Kim said. “All we get from Huawei is their network equipment,” Kim said. “Other network-related maintenance and operations will be handled solely by us and through our domestic partners, so Huawei will have no access to our network operations as soon as the equipment is handed over.” Huawei’s relationship with the Chinese government and the cybersecurity risks posed to the U.S. caused the company to end plans to expand into the U.S. market. Bloomberg News

December 5, 2013 April 19, 2013

Greater China

Cameron defends GSK’s business practices

roperty

P Morgan

Xi hints at slower growth in 2014

British PM gave public backing during his trade mission to China Pacific Index. Hong Kong property prices reached an all-time high in March and are now the most expensive among the world’s major cities, according to realtor Savills Plc. The government since 2010 imposed additional taxes on non-resident buyers, doubled stamp duties and raised minimum mortgage down-payments to tame surging home values. Prices have dropped about 2.6 percent from the record, an index compiled by realtor Centaline Property Agency Ltd show. They’re still too high, JPMorgan’s Mr Mowat said. “The economic value of that apartment, that shop, that office is less than the price that the market wants at the moment,” he said. “We’re correcting property prices before there’s any move in interest rates.” An increase in yields when the U.S. Federal Reserve pares stimulus will translate into higher mortgage costs in Hong Kong and is a reason to reduce investments in the city, BlackRock Inc said in October. Expectations of rising interest rates “could gradually affect” the city’s property market, Financial Secretary John Tsang said in June. Bloomberg News

What we think will happen in residential property values is that they will gap lower rather than being able to identify a smooth position Adrian Mowat, JPMorgan’s chief Asia strategist

ritish Prime Minister David Cameron mounted a robust defence of GlaxoSmithKline Plc’s business practices in China – where it is being investigated for alleged bribery – calling the firm “very decent”. Mr Cameron’s intervention came a day after he raised GSK’s situation with China’s top leadership in a move one person familiar with the conversation said was designed to draw a line under the company’s woes and ensure it was treated fairly. The British prime minister is on a trade promotion trip to China with around 100 executives, including GSK chief executive Andrew Witty, and is trying to help the firm grapple with the aftermath of accusations it funnelled up to 3 billion yuan (US$492 million) to travel agencies to facilitate bribes to boost its drug sales. The claims are the most serious against a multinational in China in years. Police detained four Chinese GSK executives as well as Peter Humphrey, a British man running a risk advisory group. He is still being held. Mr Cameron gave reporters what

Tingyi considers new food deals

ingyi (Cayman Islands) Holding Corp, PepsiCo Inc’s Chinese partner, is considering buying instant food businesses to boost growth after annual sales expanded at the slowest pace in eight years. The maker of Master Kong brand ready-to-drink teas and snacks is seeking acquisitions, and will likely form a new strategic alliance next year, chief financial officer Frank Lin said in an interview, declining to provide details. It’s considering both domestic and overseas brands for deals and cooperation, he said. Tingyi has formed ventures with PepsiCo, Asahi Group Holdings Ltd and others in the past three years to win customers as rising incomes in China boost consumption. The

amounted to a strong character reference for GSK, making it clear he was happy to fight its corner. “All I’ll say is that from all my dealings with GSK I know that they are a very important, very decent and strong British business that is a long-term investor in China and it’s a business that very much does think about the long-term development of its products and its businesses,” he said. “I think it is right to raise a case like that. Britain has a record of properly standing up for British businesses and British individuals, raising individual cases in the right way and about having a proper dialogue with the Chinese authorities about the issues.” The person familiar with the matter said Britain had detected a softening in China’s position, saying it had encouraged GSK’s Mr Witty to join Mr Cameron in China. Mr Witty himself has declined to comment on the investigation into alleged illegal payments by GSK to doctors and officials, but told Reuters in Beijing on Monday that the British drugmaker would have something to say “quite soon”.

resident Xi Jinping said the environment for economic and social development next year isn’t optimistic, in a signal that leaders may be willing to accept slower growth in 2014. All of society should be allowed to feel “tangible benefits” from reforms, Mr Xi said at a symposium on November 22, according a report from the official Xinhua news agency late on Tuesday. Mr Xi’s comments, which echoed past statements by party officials, may reflect efforts to tamp expectations for growth in 2014. While industrial investment is picking up and the Ministry of Commerce says retail sales will rise more than 13 percent this year, China faces headwinds that include factory overcapacity, excessive corporate debt and slower export demand. “While the overall situation is good, the environment for economic and social development next year is not optimistic,” Xinhua said, paraphrasing remarks made by Mr Xi. He said reform should be integrated into all sectors. China may set its 2014 gross domestic product growth target at 7 percent, down from 7.5 percent this year, the Economic Information Daily said, citing research groups. Economists estimate growth in gross domestic product will slow to 7.5 percent next year from 7.6 percent this year, according to the median projection in Bloomberg News surveys last month. Premier Li Keqiang said in October that China needs annual growth of 7.2 percent to keep unemployment stable after indicating in July his “bottom line” for expansion was 7 percent. Xinhua released Mr Xi’s remarks came after data showed this week that Chinese manufacturing growth beat analysts’ estimates in November. The Purchasing Managers’ Index was 51.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on December 1.

Reuters

Deutsche set for bigger share of yuan funds pie

Tianjin-based company can leverage its US$1.6 billion of cash for acquisitions to stave off competition from global food companies such as Nestle SA. “For the instant food business, we choose M&A instead of organic growth because it’s faster to expand our presence in the China market,” Mr Lin said. No final decision has been made on the acquisition and alliance plans, and Tingyi will focus on deals in China over the next five years, he said. The company gets more than half its revenue from beverages, 43 percent from instant noodles and 2.5 percent from instant foods, which include sandwich snacks, muffins and egg rolls. Bloomberg News

lobal fund managers are reaching outside Asia to tap growing demand for Chinese assets after authorities relaxed investment restrictions to promote the international use of the yuan. Chinese asset manager Harvest Global Investments recently partnered with Deutsche Asset & Wealth Management to list an exchangetraded fund (ETF) in the United States under a growing yuan-denominated investment scheme offering U.S. investors direct access to China’s A-share market for the first time. Offshore ETFs focused on the A-share market are among the few options for foreigners to access mainland markets and they have become popular in recent months due to anaemic growth prospects in the West

and a recovering Chinese economy. Total assets under management for the offshore ETFs have swelled to about US$19 billion in a few years, with the new U.S. listed ETF attracting more than US$100 million in initial investments, the biggest launch among all equity ETFs in the U.S. ETF market this year, Deutsche Bank said. “We are very satisfied,” Marco Montanari, head of Passive Asset Management Asia Pacific of Deutsche Asset & Wealth Management, told Reuters. European money manager Amundi Asset Management and DBS Bank led the way with renminbi-denominated units in their funds, with JPMorgan Asset Management and Value Partners reportedly also planning similar moves. Reuters

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December 5, 2013 April 19, 2013

Greater China HK PMI hits 10-month high in Nov The HSBC Holdings Plc purchasing managers index (PMI) for last month signalled the strongest improvement in business conditions in Hong Kong’s private sector since January. The reading released yesterday improved to 52.1 from 50.1 in October. A survey reading above 50 indicates expansion. New business received by private-sector companies expanded at the fastest pace for 10 months. New orders from mainland China expanded for the first time since January. “New business from China o expanded for the first time in 10 months, suggesting improving mainland demand is filtering through to local markets,” said Qu Hongbin, HSBC’s chief China economist.

Baidu’s Li becomes China’s richest Passes property tycoon Wang on Bloomberg’s daily billionaires list

obin Li passed Wang Jianlin as the richest man in China yesterday by just US$63.6 million, according to the Bloomberg Billionaire Index. The founder of China’s largest Internet search engine Baidu Inc, has become the wealthiest individual in the world’s second-biggest economy, 14 days after he took the No. 2 spot. Mr Li’s net worth has climbed by US$4.8 billion, or 65 percent, to US$12,231,451,760 so far this year as Baidu shares rallied. Wang, chairman of closely-held Dalian Wanda Group, has seen his fortune rise by US$2.9 billion to US$12,167,866,855. Mr Wang may reclaim the first spot after he sells shares in AMC Entertainment Holdings Inc, the U.S. movie chain he bought for US$2.6 billion in 2012. AMC this week said it plans to raise as much as US$368 million in an initial public offering. Quick expansion in smartphones and tablets plus a predominant position in the desktop search market have boosted Baidu shares 69 percent in the past six months, according to Lucy Zhang, an analyst at Internet consulting group IResearch. “Baidu’s development on mobile has surprised the

market and its search app’s traffic volume has been growing very fast,” Ms Zhang said in a phone interview from Beijing, where Baidu’s headquarters is based. Baidu had an 81 percent share of search-engine queries in China in the three months ended June, followed by Qihoo 360 Technology Co with 10.1 percent, according to data compiled by Bloomberg. Baidu’s market share for desktop search has been stable as threats to its dominance faded after Qihoo failed to acquire Sohu.com Inc’s search engine Sogou, Ms Zhang said.

US$4.8 bln Li’s net worth has climbed so far this year

Handsome Rewards Baidu, whose name is derived from a Chinese poem from the Song dynasty, was co-founded by Mr Li on January 1, 2000 in Beijing’s Zhongguancun, China’s equivalent of Silicon Valley. The company, which has grown from fewer than 10 staffers to more than 17,000 today, sold shares on the NASDAQ in 2005. The bulk of Mr Li’s wealth comes from his 20.8 percent stake in Baidu. The shares are owned directly by Mr Li and his wife Melissa Dongmin Ma through Handsome Rewards Ltd, a British Virgin Islandsbased holding company. The 45-year-old billionaire

The majority of Li’s wealth comes from his stake in Baidu

also owns 1 percent of 360buy Jingdong Mall, a closely held Chinese online retailer that had revenue of US$3.9 billion in 2012. Mr Li, who also goes by his Chinese name Li Yanhong, said in October that his company would continue to invest aggressively in mobile search. Its search app instalments rose 50 percent to 330 million users by the end of September, compared with

three months ago. “We probably invested a lot more than any of the competitors in the mobilesearch front,” Mr Li said during an earnings call. “This year and next year will be very, very crucial for the eventual success of the overall mobile strategy.” The Internet company agreed in August to pay US$160 million for 59 percent of location-based e-commerce

Hong Kong beefs up ‘flu checks at borders

ong Kong beefed up surveillance of travellers with fever, activating part of a pandemic preparedness plan, after confirming its first case of a new strain of bird ‘flu that killed 45 people in the mainland. Border control points have implemented disease prevention and control measures and body temperature checks have been enhanced, the city’s Centre for Health Protection said late on Tuesday in a statement. Seventeen people in contact with a domestic helper thought to have caught the H7N9 ‘flu virus in the neighbouring Chinese city of Shenzhen are in quarantine. The novel avian influenza strain is often lethal to humans, though it doesn’t transmit easily from person to person. The initial cases are prompting international concern that the germ may trigger a global contagion if it’s allowed to spread and mutate into a more contagious form. “The Serious Response Level under

service Nuomi Holdings Inc and said in July it would buy app store 91 Wireless Websoft Ltd for US$1.9 billion. It bought U.S.-based TrustGo Mobile Inc. for its security and personalprivacy protection technology earlier this year, Mr Li said in a televised interview with “Bloomberg West,” without disclosing details. Baidu is also exploring opportunities on Internet finance. In October, it offered “Baifa”, a money-market fund managed by China Asset Management Co. The product has attracted more than 1 billion yuan (US$164 million) of investment from more than 120,000 customers on its debut, according to Baidu spokesman Kaiser Kuo. Bloomberg News

the government’s preparedness plan for influenza pandemic has been activated while the CHP’s epidemiological investigation and follow-up actions are currently in full swing,” the agency said. Human cases of H7N9 in China date to February and surged in April, before agriculture authorities temporarily closed live poultry markets and quarantined farms to limit human exposure. The Geneva-based World Health Organization counted 139 laboratory-confirmed cases as of November 6. Hong Kong’s case, a 36-yearold Indonesian woman, is in critical condition, Ko Wing Man, the city’s health secretary, told reporters. She had travelled to Shenzhen, where she bought and slaughtered a chicken. A 33-year-old woman who joined her on the trip doesn’t have symptoms and tested negative for the H7N9 virus. Ten people who were in contact with the patient in the home, including four with non-specific symptoms, have been quarantined in Princess Margaret Hospital. They tested negative for the ‘flu. Six patients hospitalised near the patient in Tuen Mun Hospital have been quarantined in the hospital pending laboratory testing. Bloomberg News

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December 5, 2013 April 19, 2013

Asia

Korea Exchange targets gold trading Government hunts tax revenue from illegal trading Jae Hur

orea Exchange Inc said physical gold trading would begin on March 24 as Park Geun-hye’s government seeks to wring tax revenue out of a market that is dominated by illegal transactions. Trading bullion of 99.99 percent purity will start on a test basis from February 10 to March 21, the bourse said in a statement yesterday. The exchange will use units of 1 gram to spur liquidity and delivery will be in 1 kilogram bars, it said. South Korean individuals hold seven times more gold than the 104.4 metric tons in the central bank’s vaults and the majority of trading is on the black market to evade import duty and value-added tax, according to government estimates. Ms Park, who marks the oneyear anniversary of her election as president this month, scaled back welfare pledges in September as her administration forecast the first drop in revenue in four years. “It’s a positive move to combat the underground market,” said Johnston Bae, a director at Eugene Investment & Futures Co in Seoul. “The timing is good as gold prices fell this year, offering cheaper entry levels for physical buyers.”

Gold climbed off a five-month low on Tuesday, following the biggest oneday drop since October on Monday, as investors assessed whether the U.S. economy was strong enough to warrant a reduction in monetary stimulus. Bullion has lost 27 percent this year and is on course for its first annual drop in 13 years. Asia’s fourth-largest economy, which already has gold futures trading on Korea Exchange, has been mulling plans for a physical bullion market since at least 2010.

Illegal trade Small local refiners that typically employ a handful of people and operate below the level of corporate smelters may recycle as much as 4.5 trillion won (US$4.2 billion) of gold scrap and jewellery into bars

each year, the Financial Services Commission said in July. Illegal trading to avoid tax accounts for as much as 3.3 trillion won of that total, depriving the government of 300 billion won in tax revenue, it estimated. The 3 percent import duty on gold may be waived for bullion traded on the new market, Korea Exchange said in a presentation in November. Investors may still be required to pay 10 percent value-added tax when they take physical delivery of gold purchased on the exchange. “There is some scepticism because people may prefer to keep using underground transactions unless more incentives are offered to trade on the bourse,” said Lee Won-jae, an analyst at SK Securities Co in Seoul. As much as 110 tons of gold are traded in South Korea every year,

with illegal transactions to avoid tax accounting for as much as 70 tons of this figure, the commission estimates. Individuals hold as much as 720 tons, Korea Exchange said in July, citing a survey by the Wolgok Jewelry Research Center and Gallup Korea. The Korea Customs Service made 19 gold seizures in the 11 months through November, collecting 344 kilograms of the metal, said Jo Bonggil, deputy director of the investigation and planning division. He wasn’t able to estimate how much bullion comes through undetected. “If the government offers tax benefits, it will help physical traders and retailers keep away from the black market and eventually raise the government’s tax income,” said Ohn Hyun-sung, a director of the Wolgok Jewellery. Bloomberg News

It’s a positive move to combat the underground market Johnston Bae, Eugene Investment & Futures

Gold prices on course for first annual drop in 13 years

Japan to sanction Deutsche Securities Firm likely to be ordered to improve business practices

apan’s securities watchdog will recommend that a Tokyo-based unit of Deutsche Bank AG be sanctioned for excessive entertainment of pension fund executives, sources with knowledge of the matter said yesterday. The Securities Exchange and Surveillance Commission (SESC) has been investigating entertainment by Deutsche

Securities because the clients involved managed part of the Japanese national pension scheme, Reuters reported in September. As such, the executives are subject to antibribery statutes. The watchdog found that Deutsche Securities employees spent a total of between 6 million yen (US$58,600) and 9 million yen to entertain officials of three pension funds

between 2010 and 2012 in return for them investing in financial products, the Nikkei newspaper reported yesterday. A spokesman for Deutsche Securities in Tokyo declined to comment. The probe is part of a wider investigation into the wining and dining of pension fund executives triggered by a 2012 scandal in which Tokyobased money manager AIJ

Investment Advisors was found to have defrauded pensioners out of more than US$1 billion. Lavish entertainment was one of the tools AIJ used to attract investment from dozens of employee pension funds partially invested in the national pension scheme, regulators found in that case. The SESC is planning to

apply a clause in the financial instruments law against “providing special benefits” to clients in recommending the sanction, which it is expected to make official soon, the sources said. The Financial Services Agency, which carries out the recommendations of the SESC, will likely issue an order to Deutsche Securities to improve its business practices, the sources told Reuters. The firm has stopped marketing directly to such pension funds as part of a review of its sales and compliance practices, the sources said. Reuters

December 5, 2013

Asia Australian govt clinches deal on debt ceiling Australia’s Treasurer Joe Hockey struck a deal with the Greens yesterday to scrap the government’s debt ceiling a week before the A$300 billion (US$274 billion) limit is breached. The agreement would see the government provide comprehensive debt reporting in its annual budget papers, mid-year updates and pre-election reports. The government will also include details of spending on climate change. Green’s Leader Christine Milne said it was a good outcome. Last month, the government had sought to increase the ceiling by A$200 billion, but was knocked back by the upper house Senate. The opposition Labor Party had preferred a smaller A$100 billion increase.

Australia growth disappoints as consumers stay frugal Slowdown suggests RBA may need to do more Wayne Cole

ustralia’s economy put in another subpar performance last quarter as domestic demand disappointed and consumers chose to save rather than spend, although a solid contribution from international trade helped avoid something worse. Gross domestic product rose 0.6 percent in the third quarter from the previous quarter, when it increased 0.7 percent, the Australian Bureau of Statistics said yesterday. That was less than analysts’ median forecast of 0.8 percent, with many sectors of the economy showing little or no growth at all. If not for a sizable boost to growth from net exports, GDP would have actually contracted in the quarter. Investors reacted by sending the local dollar down half a U.S. cent as the data slightly added to the case for another cut in interest rates. “It very much confirms the idea of an economy that is running around sub-trend pace and has a number of challenges,” said Su-Lin Ong, a senior economist at RBC Capital Markets. “It’s supportive of a mild easing bias. The Reserve Bank is obviously reluctant to cut further but if you’ve

Household consumption weaker than expected

got sub-trend growth and very well behaved inflation, there’s got to still be scope to move if necessary.” The Reserve Bank of Australia has done its part by cutting rates to a record low of 2.5 percent and recent evidence does suggest the stimulus is

working, albeit slowly. Rising house and share prices have fattened household wealth, boosted consumer confidence and revived home building. The central bank has had less luck with the local dollar, which it is anxious to get lower to relieve competitive pressure on trade-exposed sectors of the economy. It has even hinted at the chance of intervention, though without much enthusiasm. While the local dollar has dropped 4 U.S. cents in the last couple of months, analysts suspect the RBA would prefer to see it at US$0.8500 or lower, rather than the current US$0.9075. That is a major reason markets still see a one-in-three chance of the RBA cutting rates again in the next few months. Further out, investors have been toying with the timing of the first hike, though not until early 2015.

Not partying Yesterday’s data showed the value of all goods and services produced in Australia was 2.3 percent higher than in the third quarter of 2012. That was well short of the 3.25-3.5 percent pace

that economists consider “normal”, although the world’s 12th-largest economy did again outpace its peers. Comparable growth was 1.6 percent in the United States, 1.9 percent for Canada and 1.5 percent in the U.K. Despite all the talk of recovery in the European Union, its economy shrank 0.4 percent over the year. Output for the 12 months to September was worth A$1.54 trillion (US$1.4 trillion) in current dollars, or about A$66,619 for each of Australia’s 23 million people. That compares with per capita GDP in the United States of US$53,211. Adding most to growth was international trade as export volumes benefited from all the billions spent on resource expansion, while imports declined as some mining projects got closer to completion. This trend has years to run, with exports of liquefied natural gas in particular not set to truly explode until 2015. However, consumers were refusing to come to the party. Household consumption added just 0.2 percentage point to growth, while the savings ratio defied all expectations by popping higher to 11.1 percent. There have been signs of a pick-up in spending in the last few months, but the jury is very much out on whether Australia’s remarkable run of 22 years without recession will make it to 23. “The economy looks like it’s still stuck in first gear,” said Michael Blythe, chief economist at Commonwealth Bank of Australia. “The readings we’ve seen for the fourth quarter so far actually look quite encouraging, but it’s difficult to see [the growth transition] from today’s numbers.” Reuters

Shopping giant Westfield to split mall empire Mall operator to reshape its global property empire

estfield Group, Australia’s biggest mall op erator, plans to split its domestic and international businesses, advancing a separation of assets that began three years ago. Its shares jumped by the most in almost 22 months. The company, which jointly owns malls in Australia and New Zealand with Westfield Retail Trust, proposes combining their stakes to create a new company called Scentre Group, it said

in a regulatory filing. Westfield Group will be renamed Westfield Corp and hold malls overseas. Both REITs will be listed on the Australian stock exchange, and Westfield Corp may also be listed elsewhere, it said. The mall operator, which is increasing its focus on higherreturn activities including development, is distancing itself from Australia and New Zealand, where it expects to see the slowest growth this year.

The Sydney-based company spun off half of its Australian and New Zealand malls into Westfield Retail Trust in 2010, and billionaire co-founder Frank Lowy and his family sold their 7.1 percent stake in the trust in February. “The company is always looking to cater to the changing desires of their shareholders,” Ben Le Brun, a Sydney-based market analyst at broker OptionsXpress, a unit of financial services firm

Charles Schwab Corp, said in an e-mail. The restructure “makes the investment decision more clear cut for holders and potential holders.” Westfield Group shares rose 4.1 percent to A$10.78 at the close of trading in Sydney, the most since February 2012. Westfield Retail Trust shares fell 0.3 percent to A$2.99, after earlier gaining as much as 4.7 percent. The benchmark S&P/ASX 200 index added

0.3 percent. Under the plan, Westfield Retail Trust shareholders will receive A$285 and 918 shares in the new Scentre Group for every 1,000 of their shares. The cash component equates to an A$850 million (US$770 million) capital return, according to the statement. Westfield Group shareholders will get 1,000 shares in Westfield Corp and 1,246 shares in Scentre Group for every 1,000 securities held.

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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December 5, 2013

Asia S.Korea to cut overseas energy spending South Korea’s state-owned energy firms will focus on exploration as the importreliant nation cuts back its total spending on overseas energy and resources development, a senior energy ministry official said yesterday. Asia’s fourth-largest economy rapidly expanded overseas investments to develop oil and gas reserves between 2008 and 2012, as it grappled with inflation driven by costlier imports. But the country’s new government, which took office in February, has criticised stateowned firms for running up large debts and for investing in already producing fields. The country’s three state firms invested US$23.2 billion between 2008 and 2012.

BOJ’s Sato sees no need for more easing Board member says easing again may be counter-productive Leika Kihara

ank of Japan board member Takehiro Sato said he saw no need to expand monetary stimulus pre-emptively to counter the pain to the economy from next year’s sales tax hike, seeking to dispel speculation of a near-term expansion of its ultra-easy policy. Even if the BOJ had tools remaining to expand stimulus, doing so could be counter-productive after having deployed all possible steps in a single blow in April, said Mr Sato, who is among those in the board who are more pessimistic about prospects for achieving the central bank’s inflation target. “The BOJ has broken away from the incremental approach [on monetary policy],” Mr Sato told business leaders yesterday in Hakodate, northern Japan. “This is the time to carefully monitor the policy effects, taking into account future economic and price conditions.”

The BOJ has kept monetary policy steady after stunning financial markets in April by pledging to double base money via aggressive asset purchases to achieve 2 percent inflation in roughly two years. Expectations that the BOJ will maintain its ultraloose policy longer than other major central banks, and may even expand it again, have bolstered Tokyo share prices and pushed down the yen to a six-month low against the dollar. The BOJ sees no need for immediate action but its bureaucrats are pondering options in case pressure for further stimulus heightens next year, when the economy takes a hit from a national sales tax hike and prices lose support from the weak yen that is now pushing up import costs.

Flexible target Mr Sato and fellow board member Takahide Kiuchi

have publicly doubted that 2 percent inflation can be specifically achieved in two years. Many private-sector analysts also see the BOJ’s timeframe as too ambitious for a country mired in deflation for 15 years. The former privatesector economist was among the three board members who dissented to the BOJ’s rosy projections in October, calling for the price target to be watered down. Mr Sato repeated his view that the BOJ’s target should be considered a flexible one with certain allowance for deviations, given it was difficult to keep inflation rigidly at 2 percent due to uncertainty over how the effect of monetary policy appears on the economy. He also voiced scepticism on whether consumer inflation, now nearing 1 percent, can sharply exceed that level because companies may increase wages only temporarily

and there was no guarantee the BOJ’s massive stimulus will heighten public expectations that prices will keep rising. “There’s high uncertainty on whether short-term price rises will affect mediumto long-term inflation expectations,” he said. Mr Sato stuck to the BOJ’s baseline view that Japan’s economy is recovering moderately, adding that he did not expect next year’s sales tax hike to cause a steep downturn in growth. He stressed the BOJ should not expand stimulus unless Japan is hit by a severe shock of a scale matching the eurozone debt crisis or the collapse of Lehman Brothers. “My understanding is that downside risks [that will warrant further BOJ action] … do not concern such trivial matters as a small divergence from our economic and price forecasts,” Mr Sato said.

Govt readies US$182b economic package Japanese Prime Minister Shinzo Abe is readying a US$182 billion economic package this week in his latest bid to pull the economy out of deflation, but the new measures will not require the government to sell more debt. The package, likely to be approved by Mr Abe’s government today, will have a headline value of 18.6 trillion yen (US$181.6 billion), people familiar with the process said yesterday. That puts the overall package on a par with Mr Abe’s 20 trillion yen burst of spending early this year as part of his campaign to end 15 years of falling prices and tepid growth. The long-expected core of the package will be spending measures Mr Abe ordered in October to bolster the economy ahead of a national sales-tax hike in April, the sources told Reuters on condition of anonymity.

Reuters

Sony to begin talks with Renesas Company plans to increase output of smartphone sensors

ony Corp is set to begin formal talks to buy a Japanese chip plant from Renesas Electronics Corp to increase production of smartphone image sensors, people with knowledge of the situation said. Sony plans to begin due diligence next week, and the companies may not reach a final agreement, the people said, asking not to be identified because the discussions are private. The Tokyo-based company is increasing output of the sensors, which help phones take high-quality photos, as companies such as Apple Inc buy Sony’s technology for use in their own devices. Chief executive Kazuo Hirai is seeking to bolster profits as the company struggles with falling demand for televisions and missteps with its Hollywood studio. While its smartphone business has just 3.7 percent of global shipments, Sony has garnered almost a third of the US$7.6 billion market for low-power sensors. “Sensor demand is growing for smartphones,” Tsunenori Ohmaki, an analyst at Tachibana Securities Co in Tokyo, said by phone. “Sony

is considering the acquisition of Renesas’ Tsuruoka plant to expand sensor production.” The components are called complementary metal-oxide semiconductors, or CMOS chips, and are used in Xperia phones, Cyber-shot cameras and competitors’ products such as the iPhone. Sony and Renesas will sign a memorandum as early as next week as they initiate talks over the plant in Tsuruoka, another person with knowledge of the plans said. Sony shares fell 3.4 percent to close at 1,845 yen in Tokyo trading. Renesas rose 0.4 percent to close at 684 yen. Sony is deciding between purchasing the Renesas plant in northern Japan and investing in its own chip factories in the south, said the person, who asked not to be identified because the talks are private. The company has said it plans to spend 60 billion yen (US$585 million) this financial year on facilities for its chip operations, which gets 77 percent of sales from image sensors. Bloomberg News

Sony may soon acquire a Renesas plant

14 14

December 5, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 63.3 62.9 62.5 62.1

Max 63.25

average 62.622

Min 61.75

Last 62.35

61.7

Max 92.3

average 91.902

Min 91.0

Last 92.3

62.6

92.5

29.90

92.2

29.56

91.9

29.22

91.6

28.88

91.3

28.54

91.0

Max 29.85

average 29.254

Min 28.25

Last 29.45

28.20

25.8

31.6

25.5

31.3

25.2

31.0

62.1 61.6 61.1 60.6 Max 62.30

average 61.312

Min 60.15

Last 60.40

60.1

Max 25.75

average 25.429

Commodities PRICE

DAY %

YTD %

(H) 52W

(L) 52W

1.145356102

4.238652216

107.9400024

85.45999908

WTI CRUDE FUTURE Jan14

97.14

BRENT CRUDE FUTR Jan14

112.54

-0.07103534

7.765967634

113.3099976

96.13999939

GASOLINE RBOB FUT Jan14

273.41

0.381833535

7.837027688

287.259984

243.1999922

GAS OIL FUT (ICE) Jan14

948.5

0.105540897

5.388888889

968

838.75

NATURAL GAS FUTR Jan14

3.987

0.27665996

-1.555555556

4.825000286

3.464999914

306.45

-0.019575218

2.797625038

320.0099945

278.0799866

1215.01

-0.4408

-27.0028

1723.45

1180.57

Silver Spot $/Oz

18.9548

-0.9309

-37.0482

33.765

18.2208

Platinum Spot $/Oz

1351.25

0.502

-10.9702

1742.8

1294.18

NY Harb ULSD Fut Jan14 METALS

Gold Spot $/Oz

Palladium Spot $/Oz

715.6

0.5056

2.2782

786.5

629.75

LME ALUMINUM 3MO ($)

1739

-0.200860832

-16.1119151

2184

1736.25

LME COPPER 3MO ($)

6960

-0.215053763

-12.24309671

8346

6602

LME ZINC

1875

-0.10655301

-9.855769231

2230

1811.75

13450

-0.480947096

-21.16060961

18770

13205

15.9

-0.188323917

3.146286085

16.80999947

14.91500092

432

0.173913043

-29.12223134

654.75

418.5

670

0.26187804

-19.4469492

895

647.75

3MO ($)

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

Last 28.35

Mar14

WHEAT FUTURE(CBT) Mar14 SOYBEAN FUTURE Jan14

1323.25

0.265201743

1.088617265

1406

1169

COFFEE 'C' FUTURE Mar14

110.2

0.272975432

-31.2753352

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

16.85

0.237953599

-18.12439261

20.71999931

16.69999886

COTTON NO.2 FUTR Mar14

78.4

-0.267141585

-1.271880116

90.61000061

76.65000153

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

Max 31.60

average 31.229

Min 30.75

Last 30.7 5

30.7

World Stock Markets - Indices

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9024 1.6379 0.9053 1.3581 102.74 7.9857 7.7536 6.0913 62.31 32.223 1.2555 29.649 43.87 11965 92.717 1.22944 0.82914 8.2723 10.845 139.53 1.03

-1.0526 -0.1828 0.0663 0.0884 0.0681 -0.0075 -0.0129 0.0164 0.0883 -0.1334 0.0239 -0.0101 -0.3328 -0.6435 1.1357 -0.0211 -0.275 -0.1584 -0.1005 -0.0215 0

-13.0468 1.2549 1.1157 2.9644 -16.1962 -0.0313 -0.0387 2.2869 -11.7397 -5.0988 -2.716 -2.0776 -6.5307 -18.1529 -3.6563 -1.7862 -1.6547 -0.6625 -2.9009 -18.6053 -0.0097

1.0599 1.6443 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 140.03 1.032

0.8848 1.4814 0.8891 1.2746 81.72 7.9818 7.7498 6.0773 52.89 28.56 1.2168 28.913 40.54 9600 85.636 1.20625 0.80331 7.8281 10.195 105.98 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.61

-1.284797

46.3492

5.12

3.04

642469

16.65

0.9090909

56.04498

17.38

9.98

1379070

AMAX INTERNATION

1.18

-0.8403361

-15.71428

1.72

0.75

2358700

BOC HONG KONG HO

25.95

-0.9541985

7.676347

22.85

8057044

0.51

5.154639

92.45284

0.56

0.255

3090432

7.2

1.408451

20.20034

7.28

4.2

138000

CHINA OVERSEAS

23.3

-1.061571

0.8657992

25.6

17.7

16421900

CHINESE ESTATES

22.85

-0.2183406

103.1915

23.5

9.853

96500

CHOW TAI FOOK JE

11.6

-2.192243

-6.752408

13.4

7.44

13610988

EMPEROR ENTERTAI

4.14

1.470588

119.0476

4.66

1.65

7446000

FUTURE BRIGHT

3.81

-0.2617801

214.3497

3.96

1.103

2556000

62.35

0.08025682

105.4366

63.75

9598538 792291

CENTURY LEGEND

NAME

24.9

Currency Exchange Rates

NAME ENERGY

Min 24.95

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15914.62

-0.5881151

21.44727

16174.51

12883.89

NASDAQ COMPOSITE INDEX

4037.198

-0.199295

33.70358

4069.7

2951.036

FTSE 100 INDEX

6541.69

0.1417543

10.91727

6875.62

5852.88

HANG SENG BK

127

-0.2356638

6.992421

132.8

110.6

DAX INDEX

9251.45

0.3041178

21.53148

9424.83

7417.3

HOPEWELL HLDGS

26.2

0.7692308

-21.20301

35.3

23.2

956710

NIKKEI 225

15407.94

-2.169698

48.22197

15942.6

9376.97

HSBC HLDGS PLC

85.4

-1.214575

5.043046

90.7

77.85

20239887

HANG SENG INDEX

23728.7

-0.7602109

4.730473

24111.55078

19426.35938

CSI 300 INDEX

2475.135

1.32435

-1.895276

2791.303

2023.171

TAIWAN TAIEX INDEX

8418

0.3032451

9.331775

8476.63

KOSPI INDEX

1986.8

-1.122746

-0.513257

2063.28

GALAXY ENTERTAIN

HUTCHISON TELE H

2.9

1.045296

-18.53932

4.66

2.84

9535829

LUK FOOK HLDGS I

28.7

-1.880342

17.62295

31.5

16.88

2592696

MELCO INTL DEVEL

27.55

-0.7207207

205.7714

28.2

7.84

4737300

7491.52

MGM CHINA HOLDIN

29.45

4.80427

121.7908

12.956

9452431

1770.53

MIDLAND HOLDINGS

3.33

-0.2994012

-10

4.29

2.68

1108000

NEPTUNE GROUP

0.33

-2.941176

117.1053

0.4

0.131

204480000

NEW WORLD DEV

10.2

-1.162791

-15.14143

15.12

9.98

19308828

SANDS CHINA LTD

60.4

-0.9836066

77.90869

62.4

30.35

8342854

S&P/ASX 200 INDEX

5273.751

0.3363538

13.43961

5457.3

4500.2

JAKARTA COMPOSITE INDEX

4255.213

-0.7823

-1.424104

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1825.92

0.08934983

8.109778

1840.12

1597

SHUN HO RESOURCE

1.56

-0.6369427

11.42857

1.92

1.27

NZX ALL INDEX

993.348

-1.246071

12.61773

1048.998

858.253

SHUN TAK HOLDING

4.62

-1.070664

10.26253

4.8

3.27

2727474

PHILIPPINES ALL SHARE IX

3733.61

-0.8816455

0.9362075

4571.4

3440.12

SJM HOLDINGS LTD

25.35

0.1976285

42.83575

16.762

9333363

8.68

0.6960557

-38.35227

14.52

8.37

1779114

WYNN MACAU LTD

30.75

-1.6

46.77804

32.6

4161270

ASIA ENTERTAINME

N/A

74.17

-0.4028468

65.8913

78.03

43.57

300336

SMARTONE TELECOM

Euromoney Dragon 300 Index Sin

618.01

0.2

-0.5

STOCK EXCH OF THAI INDEX

1383.38

-0.03685264

-0.6142585

1649.77

1260.08

HO CHI MINH STOCK INDEX

510.88

-0.1446386

23.48149

533.15

377.89

BALLY TECHNOLOGI

Laos Composite Index

1263.59

4.018863

1455.82

1196.44

BOC HONG KONG HO

3.36

-0.8849558

9.446256

3.6

2.99

2047

GALAXY ENTERTAIN

8.03

1.133501

102.267

8.11

3.6

16400 5096734

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

INTL GAME TECH

17.28

-0.288517

21.94778

21.2

13.58

JONES LANG LASAL

98.23

-0.9678395

17.02406

101.46

80.36

196785

LAS VEGAS SANDS

71.7

0.09772442

55.32929

73.49

42.3534

4777647

MELCO CROWN-ADR

35.75

0.5060444

112.2922

13.95

3247674

MGM CHINA HOLDIN

3.55

102.8234

3.88

1.703

7200

MGM RESORTS INTE

19.26

0.1560062

65.46391

20.98

9.83

8785259

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.23

-0.6153846

41.81495

3.6

2.1494

3560

163.31

-0.8680345

47.84294

170.254

105.5618

1287607

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

38.55

-1.40665

26490262

CHINA UNICOM HON

ALUMINUM CORP-H

2.85

-0.3496503

17986280

BANK OF CHINA-H

3.69

-0.8064516

292745298

AIA GROUP LTD

BANK OF COMMUN-H BANK EAST ASIA BELLE INTERNATIO BOC HONG KONG HO

NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

12.1

-0.3294893

15847761

POWER ASSETS HOL

62.8

0.07968127

4525259

CITIC PACIFIC

12.24

1.324503

17575182

SANDS CHINA LTD

60.4

-0.9836066

8342854

CLP HLDGS LTD

62.85

-0.3172086

2734269

10.46

-0.1908397

4417202

SINO LAND CO

CNOOC LTD

15.76

-1.253133

44981644

SUN HUNG KAI PRO

98.15

-1.058468

7686430

COSCO PAC LTD

11.36

-0.6993007

2940347

SWIRE PACIFIC-A

93.85

1306630

ESPRIT HLDGS

16.02

-1.233046

8376178

TENCENT HOLDINGS

443.6

-0.9379187

3509878

8057044

HANG LUNG PROPER

25.75

-1.340996

5096761

TINGYI HLDG CO

22.75

-1.727862

5353090

WANT WANT CHINA

11.42

8659978

63.4

-0.6269592

4044849

5.63

-1.401051

25572937

33.95

-0.8759124

1673957

9.28

-1.4862

33347652

25.95

-0.9541985

CATHAY PAC AIR

16.66

-0.5966587

4740396

HANG SENG BK

127

-0.2356638

792291

CHEUNG KONG

123.4

-0.4035513

3751001

HENDERSON LAND D

44.9

-1.210121

5777862

CHINA COAL ENE-H

5.11

-1.160542

37855011

CHINA CONST BA-H

6.21

-0.798722

272075929

HENGAN INTL

95.6 -0.05227392

1803000

HONG KG CHINA GS

18.18

-1.623377

10761064

HONG KONG EXCHNG

136.8

-0.7976795

3965004

85.4

-1.214575

20239887

CHINA LIFE INS-H

25.55

38004985

CHINA MERCHANT

27.55

-2.304965

5927134

CHINA MOBILE

84.2

0.8987418

26678039

HUTCHISON WHAMPO

101.8

-0.4887586

7910747

CHINA OVERSEAS

23.3

-1.061571

16421900

IND & COMM BK-H

5.51

-1.25448

222799523

CHINA PETROLEU-H

6.52

-1.062215

97799063

LI & FUNG LTD

10.4

-0.1919386

21307625

CHINA RES ENTERP

27.3

-1.798561

1612025

MTR CORP

29.95

-0.8278146

2232845

CHINA RES LAND

NAME

HSBC HLDGS PLC

20.8

-1.886792

9188148

NEW WORLD DEV

10.2

-1.162791

19308828

CHINA RES POWER

18.66

3812682

PETROCHINA CO-H

8.97

-1.644737

87602704

CHINA SHENHUA-H

25.85

-1.52381

16485785

PING AN INSURA-H

75.2

1.279461

17580684

WHARF HLDG

MOVERS

24075

INDEX 23728.7 HIGH

24072.2

LOW

23810.57

52W (H) 24014.81 (L) 19426.35938

23650

2-December

4-December

15 15

December 5, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Yomiuri Shimbun Prime Minister Shinzo Abe and visiting U.S. Vice President Joe Biden agreed to urge China to eliminate its newly established air defence identification zone that includes airspace over the disputed islands. During the talks, they reaffirmed that they would never tolerate China’s one-sided attempt to change the status quo in the East China Sea, and would continue to cooperate closely to deal with the issue based on the strong alliance between Japan and the United States. Mr Abe said at a joint press conference, “We will never tolerate any move to threaten the safety of commercial airlines.”

Europe’s real inflation problem Jean Pisani-Ferry

Teaches at the Hertie School of Governance in Berlin, and currently serves as Commissioner-General for Policy Planning in Paris

The Star Malaysian businesses and households can expect costs to go up, as inflation trends higher in the wake of the new electricity tariffs effective January 1. Bank Negara governor Zeti Akhtar Aziz said an early estimate showed that there could be a 0.4 percent increase in the consumer price index, which measures headline inflation, including volatile food and energy costs, when the new electricity rates become effective. Economists expect inflation to rise above 3 percent next year after picking up pace in recent months.

The Age Australia’s economy has continued to expand at a below-trend pace in the thirdquarter of this year, with the annual growth rate at 2.3 percent. The economy grew a seasonally adjusted 0.6 percent in the three months to September, after expanding by a revised 0.7 percent in the second-quarter, Bureau of Statistics data showed. The latest GDP figures showed the Australian economy was underperforming, Moody’s Analytics associate economist Katrina Ell said. “We are cautiously optimistic earlier rate cuts will bring growth back to trend at 3 per cent later in 2014,” Ms Ell said.

Jakarta Post The ASEAN Infrastructure Fund Ltd (AIF) has commenced lending operations with a US$25 million loan to fund power links in Indonesia, becoming a new source of funding for the development of priority infrastructure projects in the region. “The start of AIF lending is a critical step toward mobilising regional resources for infrastructure development in the region,” said Deputy Finance Minister Bambang Brodjonegoro, who is also chair of the AIF board of directors. Infrastructure needs in ASEAN countries are projected to be US$60 billion a year until 2020.

“H

aving said that deflation in the United States is highly unlikely,” outgoing Federal Reserve chairman Ben Bernanke famously remarked in 2002, “I would be imprudent to rule out the possibility altogether.” At that time, annual inflation in the U.S. exceeded 2 percent, and the risk of it becoming negative was indeed remote; but Bernanke nonetheless felt it necessary to map out an escape route from a potentially catastrophic scenario. The response that he described was essentially a preview of the policies that the Fed implemented in the aftermath of the 2008 shock. For the eurozone today, the threat is not remote. According to the latest inflation data, annual consumer price inflation is just 0.9 percent (and 1 percent if volatile energy and food prices are excluded). That is one percentage point below the European Central Bank’s target of “below, but close to, 2 percent”. With the economy clearly operating below full capacity and unemployment above 12 percent, the risk of a further decline cannot be excluded, especially given downward pressure from a gradually appreciating exchange rate and a global context of negative growth surprises and subdued commodity prices. So it is past time to recognise the deflation danger facing Europe and to consider what more could be done to prevent it. The first problem with deflation is that it tends to raise the real (inflationadjusted) interest rate above its equilibrium level. As there is a zero lower bound to the nominal interest rate, the central bank may well find itself unable to drive the interest

rate/inflation differential to a low enough level, which may result in a slump and even a downward spiral.

Uncomfortable choice True, some central banks (Sweden in 2009 and Denmark in 2012) have charged banks for taking deposits, thereby posting negative interest rates. But there are limits to such tactics, because if depositors are being charged, at some point it becomes preferable for them to buy safes and store banknotes. This problem is highly relevant for the eurozone, which is emerging from a long recession, with GDP still below its 2007 level and the recovery, though real, still lacking momentum. Having recognised the danger, the ECB has lowered its benchmark interest rate twice in recent months, to 0.25 percent. The problem is that this may be too little too late to move the real interest rate to where it should be in order to foster sufficiently strong enough economic recovery. The second problem with deflation is that it makes economic rebalancing within the eurozone much more painful. From October 2012 to October 2013, inflation was negative in Greece and Ireland, and zero in Spain and Portugal. But these countries still need to gain competitiveness by lowering the relative price of their export goods, because they need to sustain external surpluses to correct accumulated imbalances. With average inflation in the eurozone hovering near zero, these countries face a very uncomfortable choice between lack of competitiveness and even deeper domestic deflation. Average inflation that

It is past time to recognise the deflation danger facing Europe and to consider what more could be done to prevent it

is too low amounts to sand in the wheels of eurozone rebalancing. Last but not least, deflation increases the burden of past debt. Unlike equity, a debt security is a nominal claim whose value does not vary depending on the inflation rate. With deflation leading to negative income growth, the weight of debt relative to income increases, potentially becoming unbearable for borrowers – and thus increasing the risk of sovereign- and privatedebt crises.

Political correctness Once upon a time, this “debt deflation” scenario was merely a case study for macroeconomics students. Not anymore. As a result of deflation and recession, GDP (in current euro prices) in Greece, Ireland, Portugal, and Spain is at the same level today as in 2005 or 2006. For this reason, and despite all their deleveraging efforts, the legacy of past failings

still weighs heavily on these countries’ economies. The ECB’s recent interestrate cuts clearly reflect its concern about these risks. Indeed, it expects a prolonged period of low inflation, followed by a gradual upward movement toward its target, with downside risks to this scenario. Accordingly, it expects its main policy rate to remain at the current 0.25 percent level or be brought to zero. But, while the ECB cannot be accused of neglecting the deflation risk, the difficulty with its stance is that keeping annual inflation at around 1 percent and hoping for a delayed and gradual ascent is hardly enough. Not only does it run counter to what the ECB has been mandated to achieve; it also implies too small a buffer in the event of a further deflationary shock; leaves too much sand in the wheels of eurozone rebalancing; and makes deleveraging in high-debt countries unnecessarily painful. Can the ECB do more? Having acted boldly since the summer of 2012 to preserve the eurozone’s integrity, it has felt compelled not to antagonise policy hawks and to err on the side of caution in formulating its monetary strategy. This is an uncomfortable middle way. Alternatively, the ECB could put political correctness aside and do more to fulfil its pricestability mandate by spelling out a strategy to return to normalcy, and by indicating an unambiguous readiness to adopt an explicit list of unconventional policies. The point is that the ECB must be prepared to make that choice. As Bernanke can attest, conventional monetary policies may stop working sooner rather than later. © Project Syndicate

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December 5, 2013 April 19, 2013

Closing Eurozone recovery ‘loses momentum’

PBOC’s Zhou reaffirms yuan reforms

The eurozone “lost some momentum” in November, a survey says, with private sector activity slowing slightly. The Markit composite purchasing managers’ index (PMI), which tracks several sectors, slipped to 51.7 from 51.9 in October. But the PMI reading stayed above 50, indicating expansion. In Spain, the service sector returned to growth and the sector saw its biggest increase of new business since 2007. But other readings indicated France was at risk of going back into recession, with an all-sector reading of 48 – a five-month low. “It’s clearly a concern that the rate of growth remains so fragile,” said Markit’s chief economist Chris Williamson.

China will quicken interest rate reforms and unveil a long-awaited deposit insurance system for banks, People’s Bank of China governor Zhou Xiaochuan said yesterday, reaffirming key reforms laid out by the leadership last month. The central bank will also push reforms of the yuan exchange rate reform, Mr Zhou said in remarks published on the central bank’s website. China’s push to promote the yuan in the international market is starting to take root. The yuan accounted for 8.66 percent of letters of credit and collections used in global trade finance in October, second only to the U.S. dollar and surpassing the euro’s 6.64 percent share.

EU fines banks over rate-rigging Commission fines lenders US$2.3 billion for benchmark rigging

Deutsche Bank was fined 725 million euros, the biggest penalty in the case

U antitrust regulators fined six financial institutions including Deutsche Bank AG, Royal Bank of Scotland Plc and Citigroup Inc a record total of 1.71 billion euros (US$2.3 billion) yesterday for rigging financial benchmarks. The penalty is the biggest yet to be handed down to banks for rigging the benchmarks used to determine the cost of lending, one of the most brazen violations of conduct since the financial crisis. It is also the highest antitrust penalty ever imposed by the Commission, the EU’s competition regulator.

The other banks penalised are Societe Generale SA, JPMorgan Chase & Co and brokerage RP Martin Holdings Ltd. Deutsche Bank received the biggest fine of 725.36 million euros. The European Commission said it would continue to investigate Credit Agricole, HSBC Holdings Plc, JPMorgan and brokerage ICAP Plc for similar offences. The benchmarks involved are the London interbank offered rate, or Libor, the Tokyo interbank offered rate and the euro area equivalents. They are used to price hundreds of

India refuses to budge on WTO trade deal Could block the first global trade deal in a generation

opes of sealing a global trade deal at a World Trade Organisation (WTO) summit in Indonesia have faded, after India said it would not budge on some rules governing food subsidies. Food security has been an obstacle to reaching an 11th-hour agreement at the WTO’s 159-country summit in Bali. And now India’s trade minister, Anand Sharma, has left little hope for a breakthrough. If completed, the deal could add nearly US$1 trillion to the

world economy. India has said the planned deal could endanger domestic grain subsidies designed to help feed India’s poor. “Agriculture sustains millions of subsistence farmers. Their interests must be secured,’’ Mr Sharma said. “For India, food security is non-negotiable.’’ The politically combustible issue of farm protectionism has long bedevilled WTO plans for liberalised trade, and Indian passions on the issue threaten

trillions of dollars in assets ranging from mortgages to derivatives. “What is shocking about the Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other,” EU Competition Commissioner Joaquin Almunia said in a statement.

Likely sanctions RP Martin and ICAP could not be immediately reached for comment.

to scupper that vision for good at the pivotal four-day conference. WTO chief Roberto Azevedo is pushing trade ministers from around the world to reach a modest agreement on trade issues including agriculture in Bali. He hopes that it could be the basis for a renewed push to salvage the faltering, 12-year-old Doha Round of talks on slashing international trade barriers. But while there are also other areas of discord, India’s refusal to budge on subsidies for its millions of poor farmers to keep food prices low has emerged as perhaps the key stumbling block. Hopes were already low for success after negotiators failed to agree on a limited package last week in Geneva to present at the gathering. In Geneva, India appeared to have agreed to a compromise deal including a so-called “peace clause” allowing it to hand out subsidies

Deutsche Bank said it has set aside enough money to cover most of the 725 million euro fine. JPMorgan confirmed its 79.9 million euro penalty in the Libor case but said it would defend itself in the Euribor case. Societe Generale declined to comment. Unlike the six banks which admitted liability in return for a 10 percent reduction in their fines, Credit Agricole has refused to settle and will likely face sanctions next year. HSBC has also contested the EU’s proposed penalty. Both banks were expected to be formally charged yesterday. A spokesman for HSBC said the bank would defend itself vigorously in the Euribor case, while Barclays Plc confirmed its cooperation with the Commission which helped it stave off a 690 million euros sanction. RBS said its 391 million euro penalty had been fully provisioned for. Authorities around the world have so far handed down a total of US$3.7 billion in fines to UBS AG, RBS, Barclays, Rabobank Groep and ICAP for manipulating rates, while seven individuals face criminal charges. UBS paid a record fine of US$1.5 billion late last year to the U.S. Department of Justice and the UK’s Financial Services Authority for rate-rigging. Reuters

above a WTO cap for around four years without challenge. But following resistance from powerful farmers’ unions and opposition parties, New Delhi hardened its stance. Mr Sharma yesterday told his fellow commerce ministers that the “peace clause” as it stands in the draft Bali deal “cannot be accepted”. However, the United States and others are expected to baulk at this. The U.S. trade representative, Michael Froman, asked the WTO’s member economies to work past their differences in order to help finalise the deal during the Bali summit. “Leaving Bali this week without an agreement would deal a debilitating blow to the WTO as a forum for multilateral negotiations,” he said. “If that happens, the unfortunate truth is that the loss will be felt most heavily by those members who can least afford it.’’ AFP