Macau business daily, Dec 6th by Business Daily

MOP 6.00 Vitor Quintã

Housing policy ‘total failure’: legislators

LVS offers higher interest for adjusted loans Galaxy loses final appeal on land rent

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Civic Affairs boss denies evidence delay

Number 430 Friday December 6, 2013 Year II

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Reolian bus workers fear for rights www.macaubusinessdaily.com

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Editor-in-chief Tiago Azevedo

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April 19, 2013

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Employees of Reolian Public Transport Co Ltd yesterday accused the government of failing to address their concerns after the bus operator went bankrupt. “Since the company has already been declared bankrupt, shouldn’t we be the first ones dismissed?” asked a Reolian driver in a meeting with government officials, adding afterwards in comments to the media the administration “is yet to offer us any satisfying answers on this issue.”

Banks set a new all-time profit record

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Two assembly tickets could face court action

Vang Iek Radio-Taxi Co Ltd, the city’s only dial up cab operation, says it confident of being granted a new contract. It is seeking more drivers to staff its on-call service. The Transport Bureau has previously said that it would only renew the special licence for Vang Iek to operate yellow taxis – due to expire on February 6 – if the operator could field 100 on-call vehicles.

The Public Prosecutions Office is looking into two Legislative Assembly candidacies that election watchdogs say failed to deliver a full record of campaign spending. The Election Commission said in a statement published yesterday in all Chinese- and Portuguese-language newspapers the investigations concerned pro-labour activists Leong Shek and Lei Kin Yu. Mr Leong told Business Daily he had no documents to back his campaign spending because all of the money came from his own salary earned as a construction worker. He criticised the commission, saying he “submitted several names suspected of vote-buying to both the Electoral Commission and the Commission Against Corruption”. Mr Lei couldn’t be contacted.

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Yellow taxi firm ‘confident’ of new contract

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Source: Bloomberg

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Macau banks have set a new all-time record in profits for this year with two months still to be counted, even though loans for use outside the city fell, according to official data. The combined operating profit of the banks increased to 6.96 billion patacas (US$871 million) in the first 10 months of 2013, the Monetary Authority of Macau announced yesterday.

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December 6, 2013

Macau

Housing policy ‘total failure’: legislators Secretary Lau admits measures have ‘no big impact’ on home price Tony Lai

tony.lai@macaubusinessdaily.com

he government’s housing policy was harshly criticised at the Legislative Assembly yesterday with some members describing it as “a total failure”. Secretary for Transport and Public Works Lau Si Io defended his policies but laid out no new measures. He only pledged to bring about more public housing projects “one by one”. Legislator Kwan Tsui Hang dismissed his arguments. “It’s a total failure,” she said, adding “residents can only buy smaller and older homes now” than in the past as the home price “is totally out of the residents’ reach”. “The measures simply failed completely and do not match your goals,” she told Mr Lau. Fellow legislator Ho Ion Sang agreed: “In the past 10 years the residents’ median income tripled but the housing price inflated faster; eleven-fold.” Mr Lau admitted the government’s policy and curbs on property transactions “have no big impact on the [home] price”. “But our policies hope to… minimise the formation of [asset] bubbles in the housing market to keep our economy and financial market immune to the fluctuations in the property market,” said the official. He added the number of home sales had declined and there were fewer outsiders snapping up flats here. Macau saw 793 homes sold in October, less than half of the 1,890 transactions recorded a year earlier, official data show. Developer and chief executiveappointed legislator Tommy

Public housing system has failed to help residents, legislators said yesterday

Lau Veng Seng sided with the government, saying the housing policies have been effective.

Flexible cap Legislator Si Ka Lon urged Mr Lau to remove the income ceiling for residents seeking to build subsidised public homes, in order to help the ‘sandwich class’. Mr Lau said the cap is already “very flexible, pegged to factors like the home price in the [private] market, so when the price goes up the ceiling will also be pushed upwards”. Details on the application

procedures for 1,900 subsidised homes could be announced “in the next few days,” Mr Lau said. The government has dozens of seized land plots at hand but many involve “complicated legal issues and land rights”, said Mr Lau. “We will handle the plots at the quickest possible rate and put out the [plots] one by one when the conditions have matured”, he said. A study will be ready later this month on whether – in some parts of the city – to reserve flats only for Macau residents the secretary said. A public consultation would be carried out next quarter he stated.

LRT will start running by 2016 only in Taipa T

he government will try to have the first phase of the Light Rapid Transit (LRT) railway running in Taipa first by 2016, said Secretary for Transport and Public Works Lau Si Io yesterday. There is no date for when the Macau section might start operating. Mr Lau’s remarks confirm that the project launch will not happen in 2015, as previously planned. The construction of the Macau section faces delay after the government announced last month the railway will run along the waterfront ather than through the middle of NAPE district amid opposition from residents. The decision “impacts” the design of other LRT stops including the Barra one, Mr Lau told the Legislative Assembly. The government would “prioritise” building the Barra stop so that “the railway can connect Taipa and the peninsula as soon as possible to relieve traffic burden” for the three bridges, he said. The official said the government will discuss with Reolian Public Transport Co Ltd’s creditors “what the government has to pay” to continue using the buses of the bankrupt operator. The administration has taken over Reolian’s operation for six months after the company filed for bankruptcy on October 2. Some legislators, including Au Kam San and José Pereira Coutinho, called on Mr Lau to accept responsibility and step down for what they called a poor performance. “If I have not done my job well I am very willing to accept criticism and advices. If I have committed any error, I will take up the relevant responsibilities,” said Mr Lau. T.L.

Govt can still appeal Cable TV compensation ‘Third party’ to supply free-to-air TV signal to public antennas firms after April

Secretary Lau Si Io met legislators yesterday

he government claims it can still overturn an arbitrator’s award of 200 million patacas (US$25 million) in compensation to Macau Cable TV Co Ltd.

“There is a misunderstanding” about the latest court decision, Secretary for Transport and Public Works Lau Si Io told the Legislative Assembly yesterday.

“The defeat of our appeal does not mean we have to pay the compensation but it is only about our representative in the case,” he said. The Court of Second Instance rejected last week a government appeal against an Administrative Court ruling on the government’s suit against the arbitrator’s decision. The arbitrator previously ruled the administration had to pay 200 million patacas to Cable TV for not protecting its 15-year exclusive concession on cable television which ends April. The intermediate court sided with the administrative court’s decision that the government should have been represented by a public prosecutor instead of a jurist it appointed. “The government will now be represented by a prosecutor,” said Mr Lau. Once Macau Cable TV’s concession ends, the television market will be divided into free-to-air and paid television, the secretary said.

The government will appoint “a third-party” to provide the signal that will then be relayed by the government to the public antenna firms, according to a government statement. As for paid television, the details will only be revealed once the final report on a study on Macau’s television market is released in September. The preliminary report could be ready next month. Mr Lau did not say whether there would be immediate changes to the television market after April. Right now most households receive television signal relayed by Cable TV to 14 antenna companies based on an agreement signed in August. Mr Lau also said the government is pondering whether to let other telecommunications operators use the land lines now run by Companhia de Telecomunicações de Macau SARL (CTM). T.L.

December 6, 2013 April 19, 2013

Macau the Electoral Commission and the Commission Against Corruption”. He admitted there was no video or photo evidence to back his own complaints. Mr Leong declined to name the candidacies he had reported. The spending limit per ticket was set at 5.64 million patacas, almost 3.3 million patacas fewer than in 2009. That of Melinda Chan Mei Yi topped the campaign spending rankings with nearly 3.88 million patacas, the Election Commission’s statement adds.

Campaign budget

Spending limit for this year’s assembly election campaign lower than 2009 (Photo: Manuel Cardoso)

Two assembly tickets could face court action Pro-labour activists Leong Shek and Lei Kin Yu under investigation over election spending Stephanie Lai

sw.lai@macaubusinessdaily.com

he Public Prosecutions Office is looking into two Legislative Assembly candidacies that election watchdogs say failed to deliver a full record of campaign spending. The Election Commission said in a statement published yesterday in all Chinese- and Portuguese-language newspapers the investigations concerned pro-labour activists Leong

Shek and Lei Kin Yu. Mr Leong’s ticket spent the least money of all candidacies, only 17,400 patacas (US$2,200), while Mr Lei’s ticket spent 81,913 patacas. Mr Leong told Business Daily he had no documents to back his campaign spending because all of the money came from his own salary earned as a construction worker. “I don’t know whether they will

continue to proceed with the case or not. They can sue me if they want,” he added. Business Daily could not reach Mr Lei. The Electoral Commission told us it found no problems with any of the other tickets. Mr Leong criticised the commission, saying he “submitted several names suspected of vote-buying to both

Four years ago, where Ms Chan – the wife of prominent businessman David Chow Kam Fai – made her political debut, her ticket spent nearly 3.5 million patacas – the third-highest budget. This September Ms Chan’s ticket failed to win a second seat in the assembly. Her candidacy scored 8,755 votes in the September election, only 898 votes more than in 2009. SJM Holdings Ltd executive director Angela Leong On Kei was the candidate with the highest campaign spending in 2009: 4.8 million patacas. But this election her ticket spent only about half of that amount, nearly 2.52 million patacas. The big winner of this year’s Legislative Assembly election, businessman Chan Meng Kam, had the second-highest campaign spending at nearly 3.54 million patacas. Mr Chan, the leader of Macau’s powerful Fujianese community and boss of Hotel Golden Dragon, led the only candidacy that won three seats in the assembly. Legislator and developer Mak Soi Kun, known for his Guangdong province ties, secured his re-election while spending the third-most at 2.99 million patacas. Mr Mak’s ticket won a second seat for Zheng Anting, a VIP gaming promoter who became a Macau resident in 2001. Mr Mak was criticised by fellow legislators and the media for handouts to members of his Macau Jiangmen Communal Society before the campaign began. With Tony Lai

Reolian’s workers fear the unknown The government promises to keep the bankrupt company’s buses running, but its employees feel they are being kept in the dark Tony Lai

tony.lai@macaubusinessdaily.com

mployees of Reolian Public Transport Co Ltd accused the government yesterday of failing to heed their concerns arising from the bus operator’s bankruptcy. “Since the company has been declared bankrupt, won’t we be the first ones dismissed?” a Reolian driver asked during a meeting with government officials. Chinese-language news media quoted the driver as saying after the meeting that the government “has yet to offer us any satisfactory answers on this issue”. The driver said: “The government says the company still exists in name after the bankruptcy. But what kind of existence is it when the company’s

cheque cannot be cashed?” Another employee said: “The government just tries to put us off, and thinks we are dumb.” The Transport Bureau has held two meetings with Reolian employees since a court declared the company bankrupt on Wednesday. The government took over Reolian’s operations on October 2, one day after the company sought bankruptcy because it ran out of money to pay its employees. Transport Bureau deputy director Chiang Ngoc Vai told reporters after yesterday’s meeting that the government would “actively follow up” the bankruptcy of Reolian. Mr Chiang said the government

intended to exercise its legal right to keep putting Reolian’s buses and employees to work. He promised that Reolian’s services would be maintained He said the company’s bankruptcy would not impinge on the rights of its employees. A source told Business Daily on Wednesday that the Lower Court had yet to decide on a government request to continue using Reolian’s assets. Asked what the government would do if the court decided to seize the company’s assets, Mr Chiang said the government had “a back-up plan”. He declined to elaborate. One Reolian driver asked who an employee should turn to – the

The government says the company still exists in name after the bankruptcy. But what kind of existence is it when the company’s cheque cannot be cashed? Reolian driver

government or Reolian – if he had an accident at work. Another employee said he was not too worried, even though the company owed him some 10,000 patacas (US$1,250) from its pension fund. “Deputy director Chiang said they will help us follow up on it,” the employee said.

December 6, 2013

Macau

LVS offers higher interest for adjusted loan terms Group leverage was at lowest for eight years in Q3 according to Bloomberg data Michael Grimes

michael.grimes@macaubusinessdaily.com

as Vegas Sands Corp is offering a higher interest rate to lenders in exchange for extending maturity on its U.S. loans and removing certain financial covenants according to Bloomberg. The precise terms of the covenant changes hadn’t been made public at the time Business Daily went to press. But covenants on loans made to corporations usually stipulate – expressed on a gross and a net basis

– a maximum ratio of debt – relative to earnings – permitted during the lifetime of the loans. Leverage at Las Vegas Sands group wide fell to 2.32 times at the end of the third quarter – the lowest in at least eight years – according to Bloomberg data. Las Vegas Sands Corp said it had total group debt outstanding of US$9.76 billion as of September 30, and US$3.21 billion in unrestricted cash balances.

The borrowing subsidiary in the latest exercise, Las Vegas Sands LLC, has about US$2.8 billion of outstanding loans from an existing credit pact, a portion of which matures as soon as next May, Bloomberg data suggest. LVS’s debt rating was raised by Standard & Poor’s on Tuesday U.S. time to BBB-, the lowest level of investment grade, from BB+. The adjustment was on expectations that leverage, or the ratio of debt to earnings before interest, taxes, depreciation and amortisation (EBITDA), would remain below 2.5 times. Since the global financial crisis that began in late 2008, ratings agencies and investors have become more conservative in their approach to leveraged finance, even for the Macau casino industry which offers exceptionally high rates of return on capital investment and the prospect of early free cash flow. Senior LVS executives have mentioned annual capital returns of 20 percent as a yardstick for new projects.

Leverage ratio

U.S. loans refinanced for LVS LLC

LVS said in its annual report for 2012 filed in March this year, that covenants then existing on its U.S. credit facility mandated a maximum leverage ratio of five times for all quarterly periods through to loan maturity. That was based on net debt to trailing twelve-month EBITDA. It added that was due to decrease to four times for the quarterly periods ending September 30, 2013 through to December 31, 2014. It would then fall to 3.5 times for the quarterly periods ending March 31 through to December 31, 2015. Thereafter it would further decrease to, and remain at, three times “for all quarterly periods…through maturity”. Under the new arrangement for its U.S. debt, LVS will pay 2.25 percentage points to 2.5 percentage points more

US$2.8 bln U.S. loans outstanding on previous deal

than the London interbank offered rate with a 0.75 percent minimum on the lending benchmark on a US$2.5 billion term loan B due in seven years, according to data compiled by Bloomberg. That’s at least 0.5 of a percentage point more than it pays on a US$1.4 billion loan coming due in November 2016 added Bloomberg. The financing, which is being arranged by Barclays Plc, also consists of a US$750 million revolving credit line that will pay 1.5 percentage points more than Libor. Other banks arranging the new debt include Citigroup Inc., Bank of America Corp., BNP Paribas SA, Goldman Sachs Group Inc. and Bank of Nova Scotia, Bloomberg data indicate. LVS as a group generated 84 percent of its revenue from operations in Macau and Singapore last year, according to Bloomberg. Moody’s Investors Service has a rating of Ba2, or two levels below high grade for the latest loan deal. Fitch Ratings assigns a ‘BBB-’ rating to Las Vegas Sands LLC’s new U.S. senior secured credit facility. Fitch said on Tuesday U.S. time it expects LVS to refinance its Macau credit facility “in the near term”. It said LVS had US$3.2 billion outstanding on its Macau credit as of September 30. With Bloomberg News

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December 6, 2013

Macau

Jardine buys KFC franchise here Fast-food brand talks of ambitious growth plans for ‘huge potential’ region Vítor Quintã vitorquinta@macaubusinessdaily.com

Galaxy Macau

Galaxy loses final appeal on land rent Judges said ‘no legal principle’ that Cotai land concession annual rent only payable on receipt of bill Staff Reporter

newsdesk@macaubusinessdaily.com

asino operator Galaxy Entertainment Group Ltd has lost an appeal against a penalty imposed for late payment of the 2011 rent due on the firm’s Cotai land concession. Galaxy had argued in the Court of Final Appeal that the Financial Services Bureau (DSF) custom of first sending a bill asking for the annual rent became “a legal practice”. The company had earlier claimed it was only late paying because the bill had been sent to an old corporate address. But the judges said – in a written explanation published late on Wednesday on the court’s website – that although the habit

of the bureau sending a rent bill to land concessionaires had become “institutionalised”, there was “no rule or legal principle” requiring the government to do so. “There is no point in deciding on this issue,” the judges wrote. “Even if DSF was required to notify the concessionaire (…) – and had not done so – that would not mean” said the judges, that the concessionaire could wait until it received a notification before paying. An earlier ruling dated June 6 – by the Court of Second Instance – had upheld a Financial Services Bureau decision to impose a three percent surcharge amounting to

Ex-Macau casino exec named COO NagaWorld Mark Brown will oversee Russian casino investment of Cambodian operator

ark A. Brown – president of The Venetian Macao and also of Sands Macao from April 2006 to April 2009 – has been appointed chief operating officer of NagaWorld Ltd. The latter is the operating unit for the casino resort of the same name developed and run in Phnom Penh, Cambodia, by Hong Kong-listed NagaCorp Ltd. In April 2012 it was announced that Mr Brown had been declined a gaming employee licence in the Australian state of New South Wales. The Independent

Liquor and Gaming Authority did not give a reason. That prevented him accepting a salaried job offer as international marketing manager at The Star casino resort in Sydney operated by Echo Entertainment Group Ltd. Prior to his latest move to NagaWorld Ltd, Mr Brown was senior vice president for strategic development at Wynn Resorts Inc’s Encore Las Vegas facility, where he oversaw marketing, according to NagaCorp’s new filing to the Hong Kong Stock Exchange.

528,299 patacas (US$66,123) for late payment by Nova Galaxy Entretenimento Co Ltda – the unit that holds the Cotai land on which Galaxy Macau is built. The company is required to pay its annual rent of 13.7 million patacas in May every year but the 2011 payment was made only in June 2011, stated the earlier judgement. The concessionaire “did not carry out the payment of the annual rent on time due to its own inertia or negligence,” the Court of Second Instance had said. Galaxy declined to comment on the Court of Final Appeal’s ruling on the matter.

His new job involves – with the help of consultants – overseeing the initial stages of NagaCorp’s casino project near Vladivostok in Russia’s Far East said the regulatory document. NagaCorp announced in September it was planning to invest US$350 million (2.80 billion patacas) to build a casino, hotel and exhibition venue in the Russian province of Primorsky Krai, which shares a border with China and North Korea, and is accessible by air from Beijing in under three hours. NagaCorp, which is aiming to fund the project using equity and or debt, said the complex would have 100 gaming tables, 500 electronic machines, a large theatre facility to accommodate 2,000 people as well as entertainment offerings such as karaoke and spas. The company’s Russian project will take several years and may not begin operations before 2018, according to its September statement. M.G.

ardine Restaurant Group says it wants to expand the business of fast-food chain KFC, after buying the franchise for Macau and Hong Kong from Yum! Brands Inc. The acquisition was closed on November 29, a spokesperson for Hong Kong-based Jardine Restaurant Group confirmed to Business Daily. The value of the deal was not disclosed. KFC has “huge potential” in Macau and Hong Kong, the restaurant operator said in an e-mailed statement. “We have ambitious growth plans for the business over the long term,” said Jardine Restaurant, which is part of the conglomerate Jardine Matheson Group. KFC currently has just one outlet here, at Sands Macao hotelcasino. In contrast fast-food rival McDonald’s operates about 15 chain stores in the city. Jardine Restaurant did not say whether it plans to open more KFC stores here. The acquisition will bring no changes to the KFC Hong Kong management team, which the group described as “very capable”. “We will support Alan Chan, the business’s CEO, and his team,” the spokesperson said. Jardine Restaurant operates 128 KFC outlets in Taiwan, as well as Pizza Hut – another chain owned by Yum! Brands Inc – in Hong Kong. Yum! Brands posted a surprise gain in same-store sales in mainland China last month as promotions lured diners to the company’s fried-chicken chain. KFC introduced an advertising campaign in November about quality assurance in China that features store employees and poultry farmers. The chain has been seeing more competition from local restaurants and is trying to lure back consumers following the investigation of a former supplier for selling food with too much antibiotics. With Bloomberg News

KFC currently has just one outlet here

December 6, 2013 April 19, 2013

Macau

Record year for bank profits seems certain

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HOSPITALITY

October was a winning month for the banks despite a drop in lending to outsiders

Still lagging The meetings, incentives, conventions and exhibitions (MICE) industry is probably the economic activity upon which the majority of people pinned their hopes as a pillar for the diversification of Macau’s economy. However, the performance over the years has been clearly below those expectations. Specific figures about the sector started to be compiled and published in 2009 and in the following year all related indicators went up; but that early promise did not support a sustained upward trend. Most of the sector’s figures have either stabilised or decreased since then. Exhibitions aside – which rose by seven percent since 2009 – all types of events were last year well below their peaks. The highest numbers were recorded either in 2009 or 2010, and the last figures are down by values ranging between one third and two-thirds of those peaks.

MICE, Q3 Log scale 300

The third quarter data, despite some promising signs, do not dispel most concerns. Compared with the average for the previous four years in that same quarter, the number of conferences and exhibitions was up. These are the types of events that bring in more participants and usually last longer, which is positive for the local economy. But those results do not seem enough to justify abandoning a cautious overall outlook. The number of meetings in the last quarter was about 20 percent below the average for the previous years, and the equivalent figure for incentive travel and meetings was just about one quarter. The latter type seems to be losing appeal. The brightest star in this picture is conferences. Their number more than tripled compared with the same quarter last year, and was up by 40 percent relative to that quarter’s average in the previous four years.

Vítor Quintã

vitorquinta@macaubusinessdaily.com

he combined annual operating profit of Macau’s banks will probably be the highest on record this year, official data show. Their operating profits so far this year have already broken the annual record. The combined operating profit of the banks in the first 10 months of this year rose to 6.96 billion patacas (US$871 million), 36.5 percent more than in the equivalent period of last year, the Monetary Authority of Macau announced yesterday. Their annual profits last year amounted to 6.3 billion patacas. A bank executive, who asked to remain identified because he is not authorised to speak to the news media, told Business Daily last month that that the growth in the industry’s operating profits would be lower by the end of the year than in the year up to that point because the banks would probably set cash aside to improve their balance sheets. “It is reasonable to expect banks to close the year with profit growth of 15 to 20 percent,” he said. Banks here and elsewhere are preparing for the imposition of the Basel III rules, which will require them to improve the ratio of their capital to their lending. The capital adequacy of Macau’s banking industry at the end of September was well above that

required by the Basel III rules. The banks made a combined operating profit of 908.5 million patacas in October, the secondhighest amount in any month on record. They made their highest combined operating profit in any month on record – 957.9 million patacas – in May.

Saving spree The growth in October was remarkable because the growth in their lending – from which they make much of their income – was the slowest in any month so far this year. Lending by the banks amounted to 514.3 billion patacas in October, only 0.4 percent more than in September. Their lending outside Macau – the most profitable sort – fell by 1.5 percent to 264.8 billion patacas. Banks pay low interest on deposits in Macau. The six-month benchmark rate was about 0.55 percent at the end of October. But the high savings rate of depositors here means the banks have plenty of money to lend elsewhere at interest rates that are higher than they could charge at home, but which look competitive by international standards. Bank deposits rose to 671.5 billion

patacas in October, 2.4 percent more than in September, as the amount saved by Macau residents jumped. Residents put 18.77 billion patacas in banks here in October, the most in any month since records began in 1985. Outsiders took 5.3 billion patacas out of banks here, having put in 13.18 billion patacas in September, the most for 20 months. The bank executive that Business Daily spoke to last month played down the spike in September, calling it a seasonal phenomenon. He said deposits by outsiders were prone to “very large swings”.

KEY POINTS Profits rise by one-third in first 10 months Rate of lending growth slows in October October’s deposits by residents a record

J.I.D.

Number of conferences in Q3 this year

THERE ARE THINGS WE DON’T DO

Macau residents put a record 18.77 billion patacas in banks here in October

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December 6, 2013 April 19, 2013

Macau

Yellow taxi company’s boss ‘confident’ about contract Vang Iek believes it will have enough drivers to run its on-call service Stephanie Lai

sw.lai@macaubusinessdaily.com

ang Iek Radio-Taxi Co Ltd has expressed confidence that it will get a new contract to run its unique on-call cab service, saying it will have enough drivers. The Transport Bureau has said it will renew the special licence for Vang Iek to operate yellow taxis, which expires on February 6, only if the operator can field 100 on-call taxis. Vang Iek executive director Eugenio Cheng Wing Chiu said yesterday that the biggest threat to his company staying in business was still the shortage of drivers available in Macau. “But we are confident that by February we will have enough drivers ready to take on the job of driving the 100 taxis,” Mr Cheng told reporters. Vang Iek introduced in March a new pay scheme for drivers. Drivers work a fixed number of hours over the course of a six-day working week. They get basic pay of 60 patacas (US$7.50) an hour, bonuses, paid holidays, and have their insurance premiums and social security contributions paid. Usually, cabbies simply rent taxis from the owners for a set period. Their work schedules vary wildly. Mr Cheng said Vang Iek’s new pay scheme had attracted a “satisfactory” number of full-time drivers. But he declined to say how many drivers the company now has. Chief Executive Fernando Chui Sai On said last month that the government would “study” the idea of importing drivers to work here. Vang Iek operations director Victor Wai told reporters yesterday that migrant labour might ease the shortage of drivers in other businesses. But Mr Wai has misgivings about imported drivers working

Vang Iek’s new control system constantly monitors the movements of its yellow taxis

in public transport. “For public transport, you have to hire drivers that are very familiar with the local road conditions, landmarks and driving requirements,” he said. “Imported labour might not be a ready solution.”

Treading carefully The Vang Iek executives were speaking on the sidelines of a briefing on a one-month trial of an on-call taxi service for the disabled. The Transport Bureau has demanded that Vang Iek field more

taxis for the disabled and improve its service in older parts of the city. Vang Iek introduced in September an integrated dispatch and management system for its 100 yellow taxis, which enables the control centre to tell prospective passengers where the nearest available cab is. Any Object Info and Tech Co Ltd designed the system. Any Object Info and Tech technical director Paulo Ieong said the system could store data on the movements of taxis during the course of the day. Mr Cheng said: “It is a seven-digit investment, and it is necessary for us

to have it to run the on-call service.” He declined to disclose the exact amount Vang Iek had invested in the system. But he said the investment was “for sure bigger” than the sort of investments owners of conventional taxis made in the services they operated. Asked if Vang Iek would like to raise the fares it charges to cover the investment cost, Mr Cheng replied: “It would require a social consensus on the matter first”. He added: “It is an issue that we will deal with very carefully with the Transport Bureau.”

Civic Affairs boss denies delay over cemetery evidence Raymond Tam claimed papers on controversial lease of burial plots to aide of justice secretary couldn’t be found Stephanie Lai

sw.lai@macaubusinessdaily.com

uspended Civic and Municipal Affairs Bureau president Raymond Tam Vai Man denied in court yesterday criminal charges that he failed to cooperate with the Public Prosecutions Office in a high profile investigation. It was claimed he instructed his staff to delay the delivery to prosecutors of documents concerning a perpetual lease of cemetery plots to a legal adviser of Secretary for Public Administration and Justice Florinda Chan. Prosecutors asked Mr Tam several times to deliver the relevant papers the Court of First Instance was told. Mr Tam, his bureau vice-

president Lei Wai Nong, the head of the Environmental and Licensing department Fong Vai Seng, and civil servant Siu Kok Kun are charged with disobedience. Mr Tam said his colleagues could not find the original documents, linked to a payment for a columbarium niche in 2003 and another application for perpetual lease of a burial plot in 2004. Since the documents could not be found, there was no delay in handing the documents to the prosecutors, Mr Tam said. Mr Tam said Mr Fong – who was in charge of the city’s funeral affairs – and Mr Lei, handled the

original documents. Assistant prosecutor general Paulo Martins Chan said that, since the handover from Portuguese administration in 1999, no public department has been as uncooperative as the Civic and Municipal Affairs Bureau in this case. Paulina Alves dos Santos, an assistant to the case, tried to add several documents to the accusation, claiming they are evidence of document forgery. The presiding judge rejected the request but warned that any evidence of document forgery could lead to the opening of a new criminal case.

Raymond Tam remains suspended from Civic and Municipal Affairs Bureau

December 6, 2013 April 19, 2013

Greater China

Biden trip to China leaves air zone U.S. Vice President says airspace zone has caused apprehension

hina’s new air defence identification zone over the East China Sea has caused “significant” unease in the region, U.S. Vice President Joe Biden said yesterday, adding he had stated Washington’s firm objection to the move during talks in Beijing. Mr Biden had around five hours of discussions with President Xi Jinping on Wednesday, with both leaders laying out their perspective on an issue that has rattled East Asia. The zone, two-thirds the size of Britain, covers an area that includes islands at the heart of a territorial dispute with Japan. In response, China’s Foreign Ministry said Mr Biden had been told the zone accorded with international law and that the United States should respect it. “China’s recent and sudden announcement of the establishment of a new air defence identification zone has, to state the obvious, caused significant apprehension in the region,” Mr Biden told a gathering of U.S. executives in Beijing. “I was very direct about our firm position and our expectations in my conversations with President Xi.” Beijing’s announcement of the zone on November 23 has triggered protests from the United States,

Japan and South Korea. Under its rules, all aircraft have to report flight plans to Chinese authorities and maintain radio contact. U.S., Japanese and South Korean military aircraft have breached the zone without informing Beijing. China’s military has scrambled fighter jets on at least one occasion to monitor. Japanese and South Korean commercial carriers have also been told by their governments to ignore the rules. Three U.S. airlines, acting on government advice, are notifying China of plans to transit the zone. Mr Xi took on board what Biden said, according to a senior U.S. administration official travelling with the vice president. “From our perspective, it’s up to China. And we’ll see how things unfold in the coming days and weeks,” said the official. China has repeatedly said the zone was designed to reduce the risk of misunderstandings, and stressed that since it was set up there had been no issues with freedom of flight for civilian airlines. “During the talks [with Biden] the Chinese side repeated its principled position, stressing that the Chinese move accorded with international

Joe Biden and Xi Jinping met for a total of five hours

law and practice and that the U.S. side ought to take an objective and fair attitude and respect it,” Foreign Ministry spokesman Hong Lei said

in a brief statement. The United States has made clear it will stand by treaty obligations that require it to defend the Japanese-

Cinda prices IPO at top raising US$2.5 bln Flotation to be the largest in the Asia-Pacific region this year Elzio Barreto and Denny Thomas

hina Cinda Asset Management Co Ltd has priced the AsiaPacific region’s biggest initial public offering this year at the top of its marketing range after rampant investor interest in a company that converts China’s growing pile of bad loans into profits. Backed by Hong Kong’s army of mom and pop investors as well as marquee global fund managers, Cinda is set to raise US$2.5 billion in a December 12 debut that spotlights a growth opportunity even as China’s economy cools. It could tempt the country’s other three state-run bad debt managers, including Huarong Asset Management Corp, to go public sooner rather than later. Coaxed by a retail tranche that was oversubscribed 160 times, Cinda priced the shares at the top of the offer’s HK$3.00-3.58 range, people familiar with the matter said. Sources declined to be identified as the information is not public yet. “With a good historic track record, good relationships, Ministry of Finance backing them with foreign players that they can work with, I don’t see this as just a pile of junk that people are buying into,” said Jimmy Weng, a portfolio manager at hedge fund

KEY POINTS Retail tranche more than 160 times oversubscribed Global investors and Beijing support drive demand Interest swivels to China’s other bad loan managers Cinda was set up to buy non-performing loans from state-owned banks

Genesis Capital Investment. Cinda’s offering, the largest in the Asia-Pacific region since the US$3.6 billion listing by People’s Insurance Company (Group) of China (PICC) in November 2012, also provides a welcome boost for Hong Kong’s IPO market. Hong Kong has suffered a drop in IPO volumes in the last two years, but deals are picking up steam with financial offerings such as the up-to-US$2.8 billion listing by mid-sized lender China Everbright Bank. With Hong Kong brokerages predicting a trading pop of up to 10 percent when Cinda makes

its debut, investor interest will swivel to Huarong, the next of China’s bad loan asset managers expected to seek an IPO. Huarong hopes to raise up to US$2 billion, Reuters reported in June, though no timetable has been set.

Global appetite Beijing set up Cinda, Huarong, Great Wall Asset Management Corp and Orient Asset Management Corp some 14 years ago to buy up non-performing loans from its state-owned banks in preparation for the lenders’ eventual listing. The Ministry

of Finance will still control nearly 70 percent of Cinda after the IPO. Global investors lapped up the deal. A group of 10, including Norway’s sovereign wealth fund and hedge fund Och-Ziff Capital Management Group LLC, became cornerstone investors pledging to buy 45 percent of the shares for US$1.1 billion. Alvin Cheung, associate director at Prudential Brokerage, expects the shares to rise between 5-10 percent when they debut on Dec. 12, as both institutional and retail investors that couldn’t get into the original deal jostle to buy them.

Robust appetite for the original US$123 million retail tranche of the IPO defied expectations of some in the market who feared a lukewarm retail reception. Hong Kong’s individual investors are more usually drawn to easy-tounderstand businesses, unlike Cinda’s complicated bad debt trading activities. While recycling soured loans and seized assets into profits may be a more complex business than some, it can be lucrative. Cinda said in its IPO prospectus that profit attributable to equity holders jumped 36 percent in the six months to June to 4.06 billion yuan (US$666 million) from a year earlier. Reuters

December 6, 2013 April 19, 2013

Greater China

rift open

controlled islands, but it is also reluctant to get dragged into any military clash between rivals Japan and China.

Japan’s Chief Cabinet Secretary Yoshihide Suga, speaking in Tokyo, rebuffed suggestions that Washington’s decision not to publicly ask Beijing to rescind the zone meant the United States was out of sync with Japan. Mr Biden said Washington had an enormous interest in what happens in the region. “The United States has a profound stake in what happens here because we need, and we are, and we will remain a Pacific power, diplomatically, economically and militarily,” he said. China’s stake in regional stability would also continue to grow, Mr Biden added. “That’s why China will bear increasing responsibility to contribute positively to peace and security. That means taking steps to reduce the risk of accidental conflict and miscalculation … and refraining from taking steps that would increase tension,” Mr Biden said. The official English-language China Daily said the two countries had to address a serious “trust deficit”. “The U.S.’ reaction to the [zone] is only the latest reminder of how difficult it is for the two nations to overcome their distrust,” it said in an editorial. But the fact neither Mr Biden nor Mr Xi mentioned the zone in front of reporters on Wednesday was a positive sign that both are “indeed capable of managing their occasionally volatile ties”, it noted. Reuters

Renault-Dongfeng Trainmakers’ in US$1.3 bln orders total venture US$7.3 bln

hina’s top economic planner has approved the launch of a joint venture between Dongfeng Motor Group Co and Renault SA to build and sell cars in China, the country’s second-largest automaker said yesterday. The 50-50 joint venture with the French automaker, to be known as Dongfeng Renault Automotive Co Ltd, will have total investment of 7.76 billion yuan (US$1.3 billion), Dongfeng said in filing to the Hong Kong bourse. Approval for the venture was given by the National Development and Reform Commission, Dongfeng said. The new venture, which will be granted certain non-exclusive rights to use Renault trademarks and the Dongfeng brand, plans to make 150,000 vehicles a year. It will also produce and assemble engines, and will consider manufacturing key engine components. Dongfeng is state-owned and has existing partnerships with Honda and Nissan, amongst others. Renault’s joint venture with the Chinese giant will see it enter a crowded marketplace filled with competitive local brands. While car sales in Western countries have been waning, Chinese sales have been growing. Official figures showed vehicle sales rising by 4.3 percent in 2012 to 19.3 million. Under Chinese trade laws, foreign carmakers looking to launch manufacturing operations in China must have a local partner. Reuters

SR Corp and China CNR Corp, the nation’s two biggest trainmakers, won bids for 258 bullet trains worth as much as 44.3 billion yuan (US$7.3 billion) as China’s high-speed rail network opens new lines. CSR estimated it won bids totalling 25.9 billion yuan to make 83 bullet trains with maximum speeds of 350 kilometers per hour (217 miles per hour) and 78 trains with maximum speeds of 250 kph for state-owned China Railway Corp, it said in an e- mailed statement, citing calculations based on previous bidding prices. The purchase is the second large order placed this year by China Railway, operator of the nation’s train network, as it builds more railroads to help boost the economy. It started a trial run of a new line linking the cities of Xiamen in Fujian province and Shenzhen in Guangdong province earlier this month. “Demand for bullet trains will remain strong next year as China opens more new lines,” said Xu Minle, a Shanghai-based analyst at Bank of China International Ltd. He said the amount of the order was in line with his expectations. China CNR may receive an order worth 18.4 billion yuan, CSR said, based on the same calculation. The final value is decided by China Railway, which only gave train order numbers in its statement on the bids yesterday. Bloomberg News

China Mobile to start offering services on a 4G network

Regulator awards first 4G licences to operators China Mobile moves closer to iPhone with new network licence

hina Mobile Ltd won state approval to start commercial service on the world’s largest fourth-generation wireless network, clearing a key hurdle to offering Apple Inc’s iPhone to its 759 million subscribers. The world’s biggest phone company and two smaller domestic carriers received 4G licences from China’s Ministry of Industry and Information Technology. China Mobile will deploy TD-LTE technology to promote faster downloads as it tries to push customers toward higher-priced voice and data plans. Starting services on a 4G network using global standards may help China Mobile win over handset makers, including Apple, that hadn’t supported its homegrown 3G standard. The high-speed network was scheduled to reach 100 cities covering 500 million people this year, potentially weighing on the company’s earnings for years as it tries to lure users with enticements such as subsidies for new devices. “With the expense of setting up the 4G network, there is going to be pressure to load the network and encourage customers to migrate faster than they normally would,” Tucker Grinnan, a Hong Kong-based analyst with HSBC Holdings Plc, said by phone. “The start of 4G service will mean more pressure on profits.” China Mobile signed a deal with

Apple to start offering the iPhone later this month, the Wall Street Journal reported, citing a person it didn’t identify. “China Mobile and Apple have continuously been engaged in talks on cooperation and currently there is no information that can be disclosed,” Rainie Lei, a Hong Kong-based spokeswoman for China Mobile, said in an e-mail yesterday. Carolyn Wu, a Beijing-based spokeswoman for Apple, declined to comment. Shares of China Mobile rose 0.53 percent to HK$84.65 at the midday trading break in Hong Kong, paring this year’s decline to 5.9 percent. Apple is close to agreeing to a distribution deal with China Mobile, a person with knowledge of the matter said in September. The carrier said in 2011 that Apple agreed to make an iPhone for its customers once it shifted to 4G. Apple chief executive Tim Cook travelled to Beijing at least twice this year as the carrier said it was discussing possible cooperation with the Cupertino, California-based company. China Unicom and China Telecom both carry the iPhone. The two carriers also received 4G licences, China’s MIIT said in a statement on its website. The government didn’t say when services using the TD-LTE standard will begin. Bloomberg News

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Greater China

Gap for mainland, offshore stocks hard to bridge H-shares trading at their biggest premium to mainland-listed A-shares Clement Tan

Ping An Insurance’s H-shares trading at a 39 pct premium to its A-shares

nvestors looking to exploit the widest gap in three years between the performance of mainland and offshore Chinese stocks could well get their fingers burnt. H-shares, or Chinese stocks listed in Hong Kong, are trading at their biggest premium to mainland-listed A-shares since October 2010, as offshore investors cheer Beijing’s bold economic reform plan unveiled last month. The H-share benchmark index surged 7 percent last week alone, its biggest weekly gain in nearly two years, outperforming a 2 percent rise for the CSI300 index of leading A-share listings during the same period. Qualified foreign investors may see the gap as an opportunity to switch into

KEY POINTS H-shares trade at biggest premium to A-shares since Oct 2010 Funds eye H-shares on Beijing reform plan, low valuations Mainland stocks seen lagging amid tight liquidity

the A-shares of dual-listed Chinese companies whose H-shares have outperformed. This strategy could backfire, however, as the contrasting

liquidity situations in the two markets suggest the gulf could remain for some time. “Theoretically, you could go long A-shares and short the H-share market, but I wouldn’t be in any hurry to do that now,” said Hong Hao, chief equities strategist at Bank of Communications International. “With liquidity so tight in the mainland and improving in Hong Kong as global funds start to allocate more money to offshore equities, you are going to end up getting squeezed on both sides,” Mr Hong said. Encouraged by Beijing’s reform agenda, funds in the offshore market in Hong Kong are upgrading to a more neutral position from a previous underweight stance on Chinese stocks.

Low valuations are also proving attractive, with offshore Chinese equities trading at their biggest discount to shares in Asia, excluding Japan, since the 2008 financial crisis in priceto-earnings terms. “I think Beijing’s made it quite clear what it wants to do to reform the economy and global funds are starting to reposition themselves,” said Xing Hu, a China fund manager with Edmond de Rothschild Asset Management.

Cash squeeze But the enthusiasm for Chinese equities offshore has yet to spill over to the mainland, where investors are chafing under a lingering cash

HKEx plans to launch metals contracts in HK Exchange plans development as commodities ‘meeting ground’, says CEO

he Hong Kong bourse plans to build up its commodity business by co-listing global benchmarks in metals and other products and matching them with key contracts traded on China’s exchanges, its chief executive said. By hosting both Chinese and global benchmark contracts, the Hong Kong Exchanges and Clearing Ltd (HKEx) aims to tap opportunities from arbitrage trade and the growing acceptance of China’s currency internationally. HKEx plans to launch monthly, cash-settled futures contracts based on its suite of London Metal Exchange

(LME) contracts, in the second half of 2014, Charles Li told Reuters. The exchange bought the LME for US$2.2 billion last year. “Hong Kong traditionally is not a fertile ground for commodities,” Mr Li said in an interview. “But the LME allows us to build a greater global leadership in base metals… and use that as a catalyst for us to broaden into a comprehensive commodity-based platform, by trying to create a meeting ground of products.” Working with China exchanges such as Shanghai Futures Exchange (ShFE), China’s top exchange for base metals and the LME’s closest

competitor, HKEx also aims to crosslist contracts such as industrial metals, iron ore and thermal coal, Mr Li said. Dual-listed products would

Charles Li

squeeze in the money market. Still fresh in their minds is the 15 percent dive in the onshore stock market in June sparked by a cash crunch at the end of that month. The last two times that H-shares traded at such a big premium – in October 2010 and January 2011 – a strong A-share rally followed and erased the premium in a matter of weeks, but liquidity on the mainland was not so tight back then. The A-share market has historically traded at a premium over H-shares, primarily because of capital controls in the mainland and inflated valuations in a largely retail-driven market. Only approved foreign institutional investors have access to the A-share market through limited quotas and they amount to about 2 percent of the 24.4 trillion yuan (US$4 trillion) market. But with the A-share market heading towards a fourth year of anaemic returns, that premium – which was as high as 100 percent in January 2008 – has flipped to a 6 percent discount as onshore investors have fled the stock markets and sought relatively higher yields in fixed-income securities. Some investors say arbitraging the gap between A- and H-shares occurs on a stock-specific basis rather than an index level. “It’s difficult to take the broader A-H premium index as a basis, because benchmarks are very bankheavy and the premiumsdiscounts vary greatly among components,” said Lilian Leung, who manages the US$871.5 million JP Morgan China Pioneer A-share Fund. Even then, Ms Leung said any premium or discount would have to be more than 30 percent over a sustained period of time before she decides on a switch for any dual-listed stock. She declined to elaborate. The biggest H-over-A share premiums are seen for the non-banking financial sector, a popular financial reform play. Reuters

be cash settled but based on the contract’s home settlement prices, he said. For China-based contracts with no international equivalents, HKEx would consider developing its own. China’s first iron ore futures launched on the Dalian Commodity Exchange in October and its first thermal coal futures contract debuted on the Zhengzhou Commodity Exchange in late September. New products, in particular yuan denominated, would boost renminbi volumes traded on the exchange as the currency takes steps towards convertibility, a key part of the HKEx’s growth strategy, and from which it can develop new products, said Mr Li. HKEx signed an agreement with Singapore Exchange on Wednesday to work together to promote the internationalisation of the renminbi, explore joint product development and collaborate on issues to do with technology and regulation. Reuters

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Asia

Qantas issues profit warning, to cut jobs Airline forecasts A$300 mln loss amid Virgin market fight

antas Airways Ltd, Australia’s largest carrier, flagged a record A$300 million (US$271 million) first-half loss and 1,000 job cuts, sending its shares down the most in 18 months. Rising fuel costs and a fall in ticket prices amid an increasing supply of airline seats will drive the company to lose between A$250 million and A$300 million in the first half before tax and one-time items, the Sydneybased company said in a regulatory statement. The shares plunged 11 percent to A$1.07 at the close of trade in Sydney. Qantas has called for support from Australia’s government as secondranked Virgin Australia Holdings Ltd funds attempts to take market share by selling new stock to investors. The carrier said it will review its capital spending plans, freeze executive pay and look for other ways to cut costs as the outlook for the second half remained volatile. “The loss is larger than expected,” David Liu, head of research at Sydneybased fund manager Above the Index Asset Management Pty, said. “Qantas’s investment grade rating is clearly at risk now. Maybe the government needs to step in and assist Qantas.” Qantas, rated BBB- by Standard and Poor’s, is one of just two carriers, with Southwest Airlines Co, to be judged investment grade by more than one ratings company. The airline needs its domestic business, which posted more than A$450 million of operating profits last year, to support an international unit that faces stiff competition from state-owned carriers, chief executive Alan Joyce told a media call yesterday. “In the past we were able to live with an unlevel playing field in the

Qantas vows to accelerate cost reduction programme

international business because we had such a strong domestic franchise,” Mr Joyce said. The investments in Virgin Australia by Air New Zealand Ltd, Singapore Airlines Ltd, and Etihad Airways PJSC, change that, he said. “You have three state-owned enterprises pumping money in to continue a loss-making business,” Mr Joyce told journalists.

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

The company said in the statement it expects free cash flow to be negative in the financial year to June 2014. The airline “will go into a vicious circle of losing its investment grade credit rating and not being able to fund the replacement aircraft” if it can’t get free cash flow above its planned capital spending, Mr Joyce told a parliamentary hearing in Canberra in February 2012. Australian Treasurer Joe Hockey on November 28 suggested the government may need to remove a cap on foreign investment in Qantas or provide direct taxpayer support for the carrier to “level the playing field” with Virgin Australia. Qantas doesn’t appear to have put a specific proposal to the government, Prime Minister Tony Abbott told a media conference on December 2. Yields, a measure of ticket prices, will be 3.5 percent lower during the six months ending December than they

KEY POINTS Qantas expects to post pre-tax loss Airline says outlook remains volatile Plans to cut 1,000 jobs within 12 months Cuts CEO and board pay, freezes bonuses were the previous year, according to yesterday’s statement. That’s below Qantas’s previous forecast of a 2 percent to 3 percent drop made at their annual shareholder meeting on October 18. Bloomberg News/Reuters

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Westfield buys WTC retail stake for US$800 mln

es t f ield Group agreed to buy the Port Authority of New York and New Jersey’s 50 percent stake in retail space at lower Manhattan’s World Trade Center site for US$800 million to take full control of the project. The purchase brings Sydney-based Westfield’s investment in the site to more than US$1.4 billion, the company and the Port Authority said in statements yesterday. The deal is for about 365,000 square feet (34,000 square metres) at the underconstruction World Trade Center transportation hub and includes street-level real estate on Church, Cortland and Dey streets.

Westfield Group, Australia’s biggest mall operator, on Wednesday said it plans to split its domestic and international businesses, with global development projects such as the World Trade Center to be part of a company that will be renamed Westfield Corp. Westfield’s Australian and New Zealand malls will be held by a separately listed company, Scentre Group. Westfield’s investment will allow the Port Authority to “refocus agency resources on our core transportation mission,” chairman David Samson said in the statement. The mall company acquired a 99-year lease interest in the project in 2001 and formed a 50/50 joint

venture with the authority in May 2012. The retail complex is scheduled to open in 2015. “Westfield’s US$1.4 billion commitment to the retail project generates upfront capital, allowing us to further reduce our redevelopment risk, and additionally deliver critical jobs to the region,” said Scott Rechler, the Port Authority’s vice chairman. Westfield’s acquisition of the 50 percent stake represents a 30 percent premium in value for the authority, according to the statement. “In addition, the Port Authority will have the potential to receive an additional one-time payment from Westfield within the first five years after the retail grand opening, should Westfield exceed certain agreed-upon return thresholds,” the agency said. Bloomberg News

December 6, 2013

Asia True Infrastructure seeks US$1.8 bln IPO True Telecommunications Growth Infrastructure Fund is seeking US$1.8 billion in the country’s second-largest initial public offering. The fund is offering as many as 4.76 billion units at 10 baht apiece to institutional and retail investors, according to terms for the deal seen by Bloomberg News. Bangkok-based True Corp, operator of Thailand’s third-largest cellular network, will buy 1 billion units and hold at least 18 percent of the fund, the document shows. With the True fund planning to list on December 27, this year will see Thailand host the two biggest IPOs in its history.

S.Korean growth to reach target: BOK South Korea’s economy looks set to post growth of at least 0.8 percent during the current quarter, that would bring growth for the whole year at 2.8 percent as forecast, a senior central bank official said yesterday. “The forecast annual growth would be achieved if the fourth-quarter growth reaches 0.8 percent or more, and I think there’s no big problem [in achieving the growth],” Jung Yung Taek, director general of the Bank of Korea’s economic statistics department, told reporters.

Nine Entertainment to raise A$643 mln Nine Entertainment Co and its owners plan to raise about A$643 million (US$582 million) in Australia’s secondbiggest initial public offering this year as first-time share sales in the country surge. Nine will sell shares at A$2.05 apiece, the low end of a marketed range, and will have a market capitalisation of A$1.93 billion, the Sydney-based company said yesterday in an e-mailed statement. The broadcaster marketed shares at A$2.05 to A$2.35.

Thai resilience eroding as Economy experiencing ‘something akin to a perfect storm’, analyst says

hailand’s economy has withstood coups and regimechanging protests for decades, luring manufacturers even when turmoil dented stocks and the baht. This time may be tougher. Demonstrators in Bangkok seeking to oust Prime Minister Yingluck Shinawatra sparked the most violent anti-government clashes in more than three years, raising the risk of the third removal of an elected leader since August 2006. Foreign investors sold a net US$1.5 billion of Thai shares last month, the most among 10 Asian markets tracked by Bloomberg. The current turmoil coincides with the rise of frontier nations such as Myanmar and the resurgence of neighbours including the Philippines, both of which are enjoying a period of political stability and quickening growth. In contrast, rising Thai household debt and stalled infrastructure projects are highlighting economic risks in a nation that Indonesia overtook as a destination for foreign direct investment in 2010. “Investors are getting increasingly nervous about political risk in Thailand,” said Frederic Neumann, co-head of Asian economics at HSBC Holdings Plc in Hong Kong. “While Thailand has shaken off political uncertainty in the past, challenges have mounted in recent years,” he said, adding that the latest round of tensions puts at risk long-term growth prospects, with the possibility of “a lost decade”.

While Thailand has shaken off political uncertainty in the past, challenges have mounted in recent years Frederic Neumann, HSBC Holdings

The baht depreciated 2.9 percent in November, the biggest monthly decline since May. The benchmark SET Index fell 5 percent last month.

Tourism affected Thailand is no stranger to upheaval. Since August 2006, the country has had six prime ministers, a coup, seizures by protesters of international airports and the torching of one of Bangkok’s biggest shopping centres. Rallies that began more than a month ago against an amnesty for most political offences stretching back to the 2006 coup that ousted Thaksin Shinawatra, Ms Yingluck’s

Indonesia to keep tight stance as rupiah weakens Central bank official says policies ‘showing results’

Deutsche employee arrested in Tokyo A Deutsche Bank AG employee from its Japanese brokerage unit was arrested yesterday on suspicion of bribery, a Tokyo Metropolitan Police Department official said. Shigeru Echigo, a director of Deutsche Securities Inc’s pension fund solution sales department, is suspected of entertaining a client at a Mitsui & Co unit in exchange for purchases of investment products, the official said, asking not to be named in accordance with its policy. A former executive at Mitsui’s pension fund was also arrested, the official said. Deutsche Securities will probably be penalised by regulators for breaching rules on entertainment spending.

Higher taxes for luxury goods

ndonesia’s rupiah is “undervalued” after weakening to a four-year low and the central bank will keep its policy stance tight to restore investor confidence, senior deputy governor Mirza Adityaswara said.

Bank Indonesia may use policy tools including interest rates and reserve requirement ratios to curb inflation and shrink the currentaccount deficit to below 3 percent of gross domestic product in 2014, he

Indonesia is planning to impose a higher luxury tax for imported retail goods in its latest attempt to dampen domestic consumption in Southeast Asia’s biggest economy, an official at the finance ministry said yesterday. The G20 economy has been struggling to stabilise its external balance sheet, due to persistently high imports and weak structural reforms, which is putting downward pressure on the ailing rupiah currency. “For our luxury tax, there are other goods that will be subject for harmonisation – consumer goods,” Deputy Finance Minister Bambang Brodjonegoro said on the sidelines of a Thomson Reuters conference.

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December 6, 2013

Asia

protests sap confidence brother, have escalated into a wider push to replace what protest leader Suthep Thaugsuban calls the “Thaksin system” with an appointed “parliament of the people”. Thailand’s revered King Bhumibol Adulyadej called on his people to do their duty for the security of the country in a birthday address yesterday but avoided making direct reference to the latest political turmoil. The unrest has “affected consumption, investment and tourism,” and has a direct impact on sentiment, Bank of Thailand Governor Prasarn Trairatvorakul said on November 30. The economy expanded 2.7 percent in the third quarter from a year earlier, the slowest pace since the first three months of 2012, official data showed last month. The central bank cut its 2013 growth forecast to about 3 percent from 3.7 percent on November 27 as it unexpectedly lowered its benchmark interest rate by a quarter of a percentage point, citing greater risks to expansion. The economy “is now experiencing something akin to a perfect storm,” said Nicholas Spiro, managing director at Spiro Sovereign Strategy in London. “The timing of the political unrest in Thailand is particularly inopportune and heaps yet more pressure” on the central bank, he said, adding that scope for a further escalation of the crisis is considerable.

Bloomberg News

Reuters

Investment bank also faces suit in Singapore

Korea Economic Daily reported yesterday, citing unidentified financial industry officials. Under Korean rules, sales and product recommendations should be made through licensed local units. Meanwhile, the investment bank was sued by Singaporean wealthmanagement client Oei Hong Leong over a US$34.3 million loss on Brazilian real-yen options trades he claimed the bank misled him into making. Mr Oei accused the New York-based bank of fraudulent misrepresentation, breach of fiduciary duty, fraudulent inducement and unjust enrichment in papers filed yesterday in New York state court. Goldman Sachs rejected allegations that it acted improperly or cheated him, according to a letter it wrote in July and filed in a Singapore court, where the businessman is suing a unit of the bank over the same loss. The bank has said it will defend that lawsuit, which it is seeking to halt in favour of private and confidential arbitration. “We believe this lawsuit is without merit and we intend to defend ourselves,” Andrea Raphael, a spokeswoman for Goldman Sachs in New York, said yesterday.

Bloomberg News/Reuters

S.Korean regulator to punish Goldman Sachs outh Korea’s financial regulator plans to punish Goldman Sachs Group Inc’s local unit and employees for breaking rules on sales of financial products. The Financial Supervisory Service informed Goldman Sachs of its plans and will determine the penalty after hearing an explanation from the Wall Street firm, Cho Gook-hwan, director-general at the regulator, said yesterday. The penalty and the number of employees to be sanctioned will be decided later in a committee meeting, Mr Cho said. Three foreign brokerages have been under investigation as part of a review of derivative sales and other operations for compliance with local rules, the FSS said in September. A month later, it said it completed its investigation of Goldman Sachs. Credit Suisse Group AG and Royal Bank of Scotland Group Plc were also being inspected, MoneyToday reported in September. Christopher Jun, a Seoul-based spokesman for Goldman Sachs, declined to comment on the FSS’s plans when reached by phone. The regulator found that Goldman Sachs sold Malaysian governmentbacked bonds to South Korean investors through its Hong Kong office in violation of local rules, the

Consumer prices hit 9-month high in November hilippine annual inflation is likely to accelerate in coming months after hitting a ninemonth high in November because of typhoon damage, but not fast enough to compel the central bank to raise interest rates. The consumer price index rose 3.3 percent in November from a year earlier, matching the consensus estimate in a Reuters poll, and at the low end of the central bank’s forecast range of 3.3 to 4.1 percent. Financial markets shrugged off the news. Bangko Sentral ng Pilipinas governor Amando Tetangco said inflation will likely inch up in the coming months as more of the effects of last month’s super typhoon become known, but he believes the impact of the disaster on consumer prices is unlikely to persist. “Over the policy horizon, inflation is still seen to be within target,” Mr Tetangco said in a mobile text message to reporters.” “Policy settings therefore remain appropriate, but we stand ready to make adjustments as and when needed to address unforseen developments,” he added. Typhoon Haiyan, which slammed into the central Philippines on November 8, cutting a swathe of destruction and killing more than 5,700 people, is seen dragging on growth over the next year and pushing up inflation. But analysts in a Reuters poll expect inflation to remain manageable with the pace of consumer price increases forecast to stay within the central bank’s 2013 and 2014 comfort range of 3-5 percent. The economic planning agency has said the government still expects full-year growth will likely be close to the high end of Manila’s 6-7 percent goal even after GDP slowed in the third quarter, and is confidently targeting 6.5 to 7.5 percent in 2014. The central bank, which meets for the last time this year on December 12, is widely expected to keep its benchmark interest rate steady at a record low of 3.5 percent for the ninth meeting in a row.

The baht has depreciated 2.9 percent last month

said in Jakarta yesterday. The current account has been in deficit for eight quarters and was at 3.8 percent of GDP in the July-September period. “Our target is stability over growth,” Mr Adityaswara said in an interview in his office. “When there’s an improvement in the currentaccount deficit, capital inflows will return and at that time we can ease on the tight-bias policy.” Indonesia’s most aggressive interest-rate tightening in eight years has barely dented the current-account shortfall, prompting calls from some economists for more increases that may help it curb capital outflows. The central bank has raised its key rate by 1.75 percentage points since early June, damping growth in Southeast Asia’s biggest economy. The rupiah fell 0.8 percent to 11,985 per dollar yesterday and has lost almost 20 percent this year, the worst performer among 11 major currencies in Asia tracked by Bloomberg. At 11,000 to 11,500 to the dollar, the rupiah will help the economy by reducing import demand, Mr Adityaswara said. At the current level, it has “overshot” a suitable range, he said, declining to say whether Bank Indonesia will defend the currency. The central bank will guard volatility and ensure market liquidity, he said. Since Governor Agus Martowardojo took the helm in May, Bank Indonesia has increased its benchmark rate five times to tackle the inflationary effect of increased fuel prices and support the rupiah as capital flowed out of emerging markets. “Our policies are showing results,” said Mr Adityaswara. “We’re satisfied with our policies but we can’t be complacent.”

Philippine c.bank sees brief inflation burst

14 14

December 6, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 94.60

63.5 63.3

93.94

62.9

average 63.081

Min 62.75

Last 63.35

29.5

94.16

63.1

Max 63.35.25

29.7

94.38

29.3

93.72

62.7

Max 94.55

average 93.993

Min 93.55

Last 94.50

93.50

Max 29.65

average 29.4

Min 29.1

Last 29.5

25.6

62.00

31.4

61.64

31.3

25.5

61.28

31.2

60.92

25.4

31.1

60.56 Max 62.00

average 61.502

Min 60.35

Last 61.65

60.20

Max 25.60

average 25.493

Commodities PRICE

DAY %

YTD %

(H) 52W

97.31

0.113168724

4.421075223

107.9400024

85.45999908

BRENT CRUDE FUTR Jan14

111.71

-0.151948516

6.971176865

113.3099976

96.13999939

GASOLINE RBOB FUT Jan14

270.98

-0.345689909

6.878599038

287.259984

243.1999922

GAS OIL FUT (ICE) Jan14

944.5

-0.447957839

4.944444444

968

838.75

NATURAL GAS FUTR Jan14

3.954

-0.151515152

-2.37037037

4.825000286

3.464999914

305.59

-0.10460593

2.509140921

320.0099945

278.0799866

1234.25

1.751

-25.8468

1723.45

1180.57

Gold Spot $/Oz Silver Spot $/Oz

19.4919

2.4757

-35.2644

33.765

18.2208

Platinum Spot $/Oz

1365.88

1.0266

-10.0063

1742.8

1294.18

Palladium Spot $/Oz

725.23

1.4166

3.6546

786.5

629.75

LME ALUMINUM 3MO ($)

1772

1.897642323

-14.5200193

2184

1736.25

LME COPPER 3MO ($)

7095

1.939655172

-10.5409154

8346

6602

LME ZINC

1895

1.066666667

-8.894230769

2230

1811.75

13650

1.486988848

-19.98827667

18770

13205

15.88

-0.157183276

3.016542329

16.80999947

14.91500092

3MO ($)

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

435.25

-0.286368843

-28.58900738

654.75

418.5

WHEAT FUTURE(CBT) Mar14

660.5

-0.188893087

-20.58911933

895

647.75

SOYBEAN FUTURE Jan14

1329.5

1.566080978

1406

1169

COFFEE 'C' FUTURE Mar14

108.4

-1.633393829

-32.39787964

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

16.69

0.059952038

-18.90184645

20.71999931

16.64999962

CORN FUTURE

Mar14

COTTON NO.2 FUTR Mar14

78.84

-0.265654649

-0.717793729

90.61000061

76.65000153

World Stock Markets - Indices NAME

Last 25.45

(L) 52W

WTI CRUDE FUTURE Jan14

NY Harb ULSD Fut Jan14 METALS

Min 25.35

25.3

Max 31.4

average 31.170

Min 31.0

Last 31.2

31.0

Currency Exchange Rates

NAME ENERGY

29.1

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9032 1.6389 0.9012 1.3614 101.97 7.986 7.7536 6.0917 61.7325 32.23 1.2549 29.645 43.84 11951 92.1 1.22692 0.83068 8.2939 10.8731 138.83 1.03

0.1886 0.1895 0.2663 0.1692 0.5492 -0.0063 -0.0026 -0.0131 0.5224 0.1706 0 0.0135 0.0684 0.2929 0.3626 0.1003 0.0193 -0.2833 -0.1821 0.3746 -0.0097

-12.9697 1.3168 1.5757 3.2146 -15.5634 -0.0351 -0.0387 2.2802 -10.914 -5.1195 -2.6695 -2.0644 -6.4667 -18.0571 -3.0109 -1.5845 -1.837 -0.9212 -3.1518 -18.1949 -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 12075 105.433 1.265 0.88151 8.4957 11.0434 140.03 1.032

0.8848 1.4814 0.8891 1.2746 82.05 7.9818 7.7498 6.0773 52.89 28.56 1.2168 28.913 40.54 9603 85.869 1.20625 0.80331 7.8281 10.195 105.98 1.0289

Macau Related Stocks NAME ARISTOCRAT LEISU CROWN RESORTS LT

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.54

-1.518438

16.43

-1.321321

VOLUME CRNCY

44.12698

5.12

3.04

2300671

53.98313

17.38

9.98

1603417

AMAX INTERNATION

1.45

22.88136

3.57143

1.72

0.75

15751125

BOC HONG KONG HO

25.7

-0.9633911

6.639002

22.85

6376818

CENTURY LEGEND

0.51

92.45284

0.56

0.255

990250

7.2

20.20034

7.28

4.25

165712

CHINA OVERSEAS

23.2

-0.4291845

0.4328988

25.6

17.7

15458081

CHINESE ESTATES

22.95

0.4376368

104.0808

23.5

9.853

74473

CHOW TAI FOOK JE

11.44

-1.37931

-8.038582

13.4

7.44

6966200

EMPEROR ENTERTAI

4.29

3.623188

126.9841

4.66

1.65

4930030

3.8

-0.2624672

213.5246

3.96

1.103

2260000

GALAXY ENTERTAIN

63.35

1.603849

108.7315

63.75

7836008 1108057

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15889.77

-0.1561457

21.25763

16174.51

12883.89

NASDAQ COMPOSITE INDEX

4038.001

0.01989003

33.73018

4069.7

2951.036

FTSE 100 INDEX

6491.06

-0.2904775

10.05882

6875.62

5869.04

HANG SENG BK

126.2

-0.6299213

6.318453

132.8

110.6

DAX INDEX

9119.08

-0.2357606

19.7926

9424.83

7418.36

HOPEWELL HLDGS

26.05

-0.5725191

-21.65414

35.3

23.2

1361500

NIKKEI 225

15177.49

-1.495657

46.00508

15942.6

9376.97

HSBC HLDGS PLC

84.2

-1.405152

3.567032

90.7

77.85

29889055

HANG SENG INDEX

23712.57

-0.06797675

4.659285

24111.55078

19426.35938

8588000

CSI 300 INDEX

2468.197

-0.2803079

-2.17027

2791.303

2023.171

TAIWAN TAIEX INDEX

8375.54

-0.5043953

8.780311

8476.63

7491.52

MGM CHINA HOLDIN

29.5

0.1697793

KOSPI INDEX

1984.77

-0.1021744

-0.6149085

2063.28

1770.53

MIDLAND HOLDINGS

3.32

-0.3003003

S&P/ASX 200 INDEX

5197.958

-1.437174

11.80929

5457.3

4500.2

JAKARTA COMPOSITE INDEX

4199.724

-0.9803122

-2.709552

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1825.07

0.1739942

8.059445

1840.12

1597

NZX ALL INDEX

990.369

-0.2998949

12.27999

1048.998

PHILIPPINES ALL SHARE IX

3703.06

-0.8182429

0.1103028

4571.4

HUTCHISON TELE H

2.84

-2.068966

-20.22472

4.66

2.83

LUK FOOK HLDGS I

28.7

17.62295

31.5

16.88

2128461

MELCO INTL DEVEL

27.35

-0.7259528

203.5516

28.2

7.84

5583880

122.1673

12.975

4601200

-10.27027

4.29

2.68

1542000

NEPTUNE GROUP

0.345

4.545455

126.9737

0.4

0.131

226815000

NEW WORLD DEV

10.14

-0.5882353

-15.6406

15.12

9.98

11463519

SANDS CHINA LTD

61.65

2.069536

81.59057

62.4

30.35

8011284

SHUN HO RESOURCE

1.56

11.42857

1.92

1.27

30000

858.253

SHUN TAK HOLDING

4.64

0.4329004

10.73986

4.8

3.27

2698771

3440.12

SJM HOLDINGS LTD

5623429

Euromoney Dragon 300 Index Sin

611.79

-1.01

-1.5

STOCK EXCH OF THAI INDEX

1376.63

-0.5246082

-1.099197

1649.77

1260.08

HO CHI MINH STOCK INDEX

510.03

-0.1663796

23.27605

533.15

382.1

Laos Composite Index

1261.55

-0.1614448

3.850937

1455.82

1196.44

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

FUTURE BRIGHT

25.45

0.3944773

43.3992

16.781

SMARTONE TELECOM

8.59

-1.036866

-38.99148

14.52

8.37

1402391

WYNN MACAU LTD

31.2

1.463415

48.92601

32.6

3399580

ASIA ENTERTAINME

N/A

BALLY TECHNOLOGI

74.31

0.1887556

66.20443

78.03

43.57

262521

BOC HONG KONG HO

3.39

0.8928571

10.42346

3.6

2.99

12295

GALAXY ENTERTAIN

8.08

0.622665

103.5264

8.11

3.6

1640

INTL GAME TECH

17.78

2.893519

25.47636

21.2

13.58

6824849

JONES LANG LASAL

98.09

-0.1425227

16.85728

101.46

80.36

207482

LAS VEGAS SANDS

74.51

3.919107

61.41681

74.945

42.4097

8194142

MELCO CROWN-ADR

36.44

1.93007

116.3895

14.25

3468486

MGM CHINA HOLDIN

3.84

8.169014

119.392

3.88

1.703

3950

MGM RESORTS INTE

19.71

2.336449

69.32989

20.98

9.86

9933440

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.32

2.786378

45.76645

3.6

2.1494

35500

167.78

2.737126

51.88959

170.254

106.9562

1573472

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

38.8

0.6485084

19219844

ALUMINUM CORP-H

2.84

-0.3508772

9794854

BANK OF CHINA-H

3.69

215884862

BANK OF COMMUN-H

5.64

0.1776199

14955298

BANK EAST ASIA

33.8

-0.4418262

1980172

9.1

-1.939655

33044472

BOC HONG KONG HO

25.7

-0.9633911

CATHAY PAC AIR

16.4

-1.560624

BELLE INTERNATIO

CHEUNG KONG

NAME

PRICE

DAY %

VOLUME

CHINA UNICOM HON

11.96

-1.157025

21844529

CITIC PACIFIC

12.18

-0.4901961

9994554

NAME

PRICE

DAY %

POWER ASSETS HOL

62.35

-0.7165605

VOLUME 1804816

SANDS CHINA LTD

61.65

2.069536

8011284

SINO LAND CO

10.42

-0.3824092

3080484

-0.1528273

2719017

93.2

-0.6925946

981226

449.8

1.397656

3529692

CLP HLDGS LTD

62.45

-0.636436

1818648

CNOOC LTD

15.76

36375783

COSCO PAC LTD

11.22

-1.232394

3627652

SWIRE PACIFIC-A

ESPRIT HLDGS

15.72

-1.872659

6292151

TENCENT HOLDINGS

6376818

HANG LUNG PROPER

25.65

-0.3883495

3535000

TINGYI HLDG CO

1.098901

4215480

3661553

HANG SENG BK

126.2

-0.6299213

1108057

WANT WANT CHINA

11.42

11485450

WHARF HLDG

62.65

-1.182965

3882994

123.1

-0.2431118

2085269

CHINA COAL ENE-H

5.15

0.7827789

29058628

CHINA CONST BA-H

6.21

180658575

HENDERSON LAND D

44.55

-0.77951

2363265

HENGAN INTL

95.25

-0.3661088

1522140

HONG KG CHINA GS

18.08

-0.550055

8014488

136.4

-0.2923977

2529167

84.2

-1.405152

29889055

CHINA LIFE INS-H

25.45

-0.3913894

21326329

HONG KONG EXCHNG

CHINA MERCHANT

27.35

-0.7259528

13879777

HSBC HLDGS PLC

CHINA MOBILE

84.65

0.5344418

26659965

HUTCHISON WHAMPO

101.6

-0.1964637

4502315

CHINA OVERSEAS

23.2

-0.4291845

15458081

IND & COMM BK-H

5.51

168749336

CHINA PETROLEU-H

6.58

0.9202454

83303592

LI & FUNG LTD

10.3

-0.9615385

23267647

CHINA RES ENTERP

-1.098901

2012271

MTR CORP

29.9

-0.1669449

1434743

CHINA RES LAND

20.8

6947463

NEW WORLD DEV

10.14

-0.5882353

11463519

CHINA RES POWER

18.7

0.2143623

3962680

PETROCHINA CO-H

9.06

1.003344

77419260

CHINA SHENHUA-H

26.05

0.7736944

15104273

PING AN INSURA-H

75.05

-0.1994681

10038665

SUN HUNG KAI PRO

MOVERS

23975

INDEX 23712.57 HIGH

23974.58

LOW

23576.29

52W (H) 24014.81 (L) 19426.35938

23576

3-December

5-December

15 15

December 6, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Thanh Nien Daily Debts in Vietnam’s stateowned sector hit nearly 1,350 trillion dong (US$64.1 billion) in 2012, up 6 percent from the previous year and amounting to nearly half the country’s GDP, according to a government report. Among 127 corporate groups and corporations, the oil and gas group PetroVietnam ran up the largest debt of 124 trillion dong, according to the report. Many analysts were concerned about such large debts given last year’s GDP of US$136 billion. Le Dang Doanh, former chief of the Central Institute for Economic Management, fears the debts will act as a barrier to the country’s attempts to reform the sector.

Turning good economic luck into bad Ricardo Hausmann

Professor of economics at Harvard University, where he is also Director of the Centre for International Development

Taipei Times Taiwan’s GDP growth will accelerate next year, as major trade partners will recover further and President Ma Ying Jeou’s government will increase spending ahead of the year-end elections. Standard Chartered Bank expects the nation’s GDP to expand 3.9 percent next year from the estimated 2.2 percent growth this year, according to a report written by the bank’s Taipeibased chief economist, Tony Phoo. The recent decline in public spending and investment is set to reverse next year, as the government approved a 10 percent increase in public construction spending in its budget.

Korea Herald South Korea’s foreignexchange reserves hit a record high in November on the back of increased profit on investment, the central bank said. The country’s foreign reserves totalled a record US$345.01 billion as of endNovember, up US$1.79 billion from the previous month, according to the Bank of Korea. The foreign reserves rose for the fifth consecutive month last month after declining by the largest amount in 13 months in June. In October, the figure grew by the biggest monthly gain of US$6.3 billion since the same month of 2011.

Inquirer Business After five straight quarters of above 7-percent economic expansion, the Philippines may post a much slower growth of 4 percent this fourth quarter as a result of the typhoon devastation, Citigroup Inc said. In a research note, Citi economist said the average growth of 7.4 percent for the first nine months would be a sufficient cushion to a sharply lower GDP growth this last quarter. Citi pared down its full-year GDP growth forecast for the country to 6.5 percent from an earlier outlook of 7.3 percent.

t is often difficult to understand how countries that are dealt a pretty good economic hand can end up making a major mess of things. It is as if they were trying to commit suicide by jumping from the basement. Two of the most extreme cases (but not the only ones) are Argentina and Venezuela, countries that have benefited from high prices for their exports but have managed to miss the highway to prosperity by turning onto a dead-end street. They will eventually have to make a U-turn and backtrack over the terrain of fictitious progress. The puzzling thing is that this is not the first time either country has veered into an economic cul-de-sac. It has been said that only barbers learn on other people’s heads, but some countries seem unable to learn even from their own experience. The ultimate reason for such self-destructiveness may be impossible to identify. But it is certainly possible to describe how the road to hell is paved, whatever the intentions. It all starts when some imbalance causes overall inflation or some key price – typically the exchange rate, but also power, water, and gasoline – to come under upward pressure. The government then uses its coercive power to keep a lid on price growth. For example, Brazil has wreaked havoc on the financial health of its national oil company, Petrobras, in order to keep gasoline prices low. Argentina destroyed its natural-gas sector with price controls. Many countries have kept power and water prices

too low and have ended up with shortages.

Nasty controls But things become really nasty when the government opts for foreign-exchange controls. The usual story, nicely summarised by the late Rüdiger Dornbusch and Sebastian Edwards, is that lax fiscal and monetary policies cause a flood of freshly printed currency to chase more dollars than the central bank can provide at the going exchange rate. Rather than let the currency depreciate, or tighten its policies, the government opts for foreign-exchange controls, limiting access to dollars to those who “really” need it and thus preventing “speculators” from hurting “the people”. Foreign-exchange controls, typically accompanied by price controls, give the government the sense that it can have its cake (lax policies) and eat low inflation. But controls lead to a parallel exchange rate, which can be either legal, as in Argentina, or illegal and even unpublishable, as in Venezuela. But having two prices for an identical dollar creates enormous arbitrage opportunities. A dollar purchased at the official rate can be sold for almost twice as much in the “blue” market in Argentina and a whopping ten times more in Venezuela. Repeat that game a few times and you will be able to afford a corporate jet. Nothing becomes more profitable than over-invoicing imports and under-invoicing exports. In Venezuela, importing spoiled food and letting it rot is more profitable than any investment anywhere

else in the world (disregarding, of course, the bribes needed to make it happen). The dual-exchange-rate system ends up distorting production incentives and causing the effective supply of imported goods to decline, leading to a combination of inflation and shortages. But here things turn interesting. Public spending tends to rise with inflation more than government revenues do, because revenues depend on the tax on exports, which is calculated at the pegged official exchange rate. So, over time, fiscal accounts worsen automatically, creating a vicious circle: monetised fiscal deficits lead to inflation and a widening gap in the parallel exchange-rate market which worsens the fiscal deficit. Eventually, a major adjustment of the official rate becomes inevitable.

Dead-end streets For example, when Hugo Chávez was first elected President in 1998, the Venezuelan bolívar could be exchanged for 2,610 Colombian pesos. Today, despite a raft of foreignexchange controls, a bolívar is worth barely 300 pesos at the official exchange rate (which is soon to be readjusted); one would be lucky to get 30 pesos at the black-market rate. Not surprisingly, prices in Venezuela rise in one month more than they do in two years in neighboring Colombia. Why do countries opt for such a strategy? Any system creates winners and losers. In Argentina and Venezuela, the winners are those who have preferential access to foreign exchange, those who

The dual-exchangerate system ends up distorting production incentives and causing the effective supply of imported goods to decline

benefit from the government’s profligacy, those who can borrow at the negative real interest rates that lax policies create, and those who do not mind waiting in long lines to buy rationed items. Such a system can generate a self-reinforcing set of popular beliefs, which may explain why countries like Argentina and Venezuela repeatedly drive down dead-end streets. Because so many businesses make money from the rents created by the rationing of foreign exchange, rather than by creating value, it is easy to believe that markets do not work, that entrepreneurs are speculators, and that governments need to control them and impose “fair” prices. All too often, this allows governments to blame the car, and even the passengers, for getting lost. © Project Syndicate

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December 6, 2013 April 19, 2013

Closing Macau gets two three-star restaurants

Australia, South Korea agree trade deal

The Eight, located at Grand Lisboa Hotel, has won a third Michelin star in the 2014 Michelin Guide for Hong Kong and Macau, released yesterday. Robuchon au Dôme, founded by French chef Joel Robuchon and also based at Grand Lisboa Hotel, retained its threestar rating – the first restaurant here to gain that accolade. Eleven restaurants in Macau received Michelin star status in the 2014 edition. Two restaurants received two stars and a further seven were awarded a one-star rating. The guide also features nine Bib Gourmand restaurants chosen for their “good value”.

Australia and South Korea have agreed on a free trade deal in an attempt to boost trade between the two countries. As part of the deal, tariffs on key Australian exports to South Korea such as agricultural products, energy and resources will be eliminated. It is also likely to help South Korean firms in sectors such as steel, textile and car manufacturing to boost their presence in Australia. Bilateral trade was worth A$32 billion (US$29 billion) in 2012. Australian Prime Minister Tony Abbott said the benefits of the free trade agreement would “start flowing immediately and will be long-lasting”.

Beijing bans banks from Bitcoin deals C

Parties aim to pass the bill in the next session, says Hiroyuki Hosoda

Japanese bill to legalise casinos moves forward Legislators submit bill to parliament one day before current session ends

apanese lawmakers from the ruling Liberal Democratic Party submitted a bill to legalise casinos to parliament, moving closer to opening up what is projected to be the world’s second-largest gaming market. The bill was also jointly submitted by the members of the Japan Restoration Party and other groups, Hiroyuki Hosoda, the chairman of a cross-party group of pro-casino lawmakers, said yesterday. LDP’s junior coalition partner New Komeito has approved the submission, LDP’s policy chief Sanae Takaichi said. The parties aim to pass the bill in the next session beginning January, said Mr Hosoda, who is also an executive acting LDP secretary-general. The bill, drafted by a group of pro-casino lawmakers across parties, was approved by the LDP’s General Council last month. International companies, including several casino operators in Macau, have said they plan to spend billions of dollars to build resorts if the country opens up the market. The country may generate US$10 billion (79.9 billion patacas) revenue a year if it opens up, Union

Gaming Group LLC estimated. While New Komeito has approved the submission, policy chief Keiichi Ishii said the party remains undecided whether to support the bill and needs more time to consider. This is the first time LDP lawmakers in the North Asian nation have submitted a casino bill to the Diet. The LDP has a single-party majority in the lower house and would probably gain enough opposition support to pass the bill in the upper house and enact the law even without New Komeito’s backing.

Competitive bids Casino developers, some of them in the Macau market, see their best chance in years to build casino-resorts in Japan. They hope that the prospect of Tokyo holding the Olympic Games in 2020 will give the drive to legalise casinos the impetus that it has lacked do far. Its potential as a gambling market has drawn the interest of Las Vegas Sands Corp, Wynn Resorts Ltd, MGM Resorts International, Melco Crown Entertainment Ltd and Galaxy

Entertainment Group Ltd. Melco Crown, a joint venture between Macau businessman Lawrence Ho Yau Lung and Australian billionaire James Packer, has said it would spend more than US$5 billion if it receives permission to build. Galaxy Entertainment plans to invest at least US$2.58 billion. Some of the overseas firms are interested in partnering with local investors to open casinos, with Tokyo and Osaka seen as potential sites. Among the potential local partners are gaming machine companies Konami Corp, Sega Sammy Holdings Inc and Pachinko company Dynam Japan Holdings Co Ltd, which has said it is interested in operating a casino in Japan. Dynam Japan has plans to run a pachinko hall in the Macau Fisherman’s Wharf theme park, starting next year. A competitive bidding process will be needed before one or more casino resorts can be developed and it would take five years after the legalisation before the first casino is operational, Mr Hosoda from the pro-casino group said in September. T.A./Bloomberg News

hina’s central bank warned yesterday that financial institutions should not trade the digital currency bitcoin, saying that while it does not yet pose a threat to China’s financial system, it carries risks. The central bank also said in a statement on its website that it would act to prevent money laundering risks from bitcoin, a prominent digital currency that is not backed by a government or central bank. Bitcoins, and other computergenerated virtual currencies like it, have seen their relative values rise to historic highs in recent months as speculators have piled into the currency. While there is no official data available, bitcoin market operators say Chinese nationals are major participants in the market and hold an outsized share of the total number of bitcoins in circulation. As such they have been heavily covered in domestic media, including a special broadcast on state-run television earlier in 2013. The People’s Bank of China (PBOC) may have cause to be concerned about bitcoins, which are anonymous, untraceable, and can be carried on memory sticks or transmitted electronically, because they represent a potential hole in the country’s closed capital account. However, analysts point out that, given the tiny value of the total bitcoins in circulation relative to other currencies, it is unlikely to have much impact on the wider economy. More cause of worry is the way these currencies have engendered a new wave of creative criminality focused on hacking online platforms and stealing bitcoins stored there, and their potential for use in money laundering, bribery and purchases of illicit products such as drugs and weapons. The PBOC will require trading platforms that deal in virtual currencies such as bitcoin to register with telecommunications authorities, it said. The central bank did allow that ordinary individuals were free to use bitcoin, so long as they take on the risk themselves. “I don’t think it’s good or bad,” said bitcoin vendor Du Zhiliang, who sells bitcoin “mining” computers online. Mr Du owns over 2,000 bitcoins himself and has been a heavy speculator in the past. “The policy won’t affect the BTC exchange rate. It means the government acknowledged its existence, and didn’t say it’s illegal. Now the whole country has their eyes on bitcoin.” Reuters