Macau business daily, Dec 11th by Business Daily

he Legislative Assembly has criticised the government for drafting next year’s budget without making any forecast for Macau’s economic growth. The public budget for next year, which is being reviewed at the assembly, shows a 14 percent increase to 153.62 billion patacas (US$19.24 billion) in revenue. But these numbers “on their own do little” to prove that the budget is reasonable, the assembly’s second standing committee said in its opinion on the budget. Public spending and revenue should be analysed “in reference to its size relative to the wealth created in the economy,” the committee wrote. That analysis becomes “limited” because the government failed to provide an estimate for gross domestic product growth in 2014, the opinion adds.

MOP 6.00 Vitor Quintã Number 433 Wednesday December 11, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Govt lacks forecast for GDP growth: assembly April 19, 2013

8 gaming venues submit smoking reduction plan

Page 2

‘Social responsibility’ is not charity, casinos are told Page 4

Hengqin-Zhuhai customs upgrade is completed Page 7

Year II

More on page 3

Brought to you by

www.macaubusinessdaily.com

Hang Seng Index 23800

23786

23772

23758

23744

23730

Shuttles to slot parlours ‘breaches’ policy: Tam

Labour debate needs more voices: H.R. boss

Any shuttling of residents from closed slot machine parlours to other gaming venues “violated the consensus” between the government and gaming companies to curb locals’ gambling said Secretary of Economy and Finance Francis Tam Pak Yuen yesterday. “This is not right, and we’ll tell them [the gaming operator] that,” the secretary said yesterday. He was speaking on the sidelines of an unrelated event in response to media questions.

Debate on Macau labour issues shouldn’t only involve employers and unions says a group representing employment agencies. “The Standing Committee for the Coordination of Social Affairs should expand its scope to include not only the representatives of bosses and employees,” Ao Ieong Kuong Kao, the Macau Overseas Employment Agency Association president told Business Daily. He added ‘Filipinos’ and other foreigners should be barred from working here as tourists.

Page 2

Page 5

Unlicensed give gambling credit in Macau: report A Macau gaming executive confirmed to investigators in the United States that so-called sub-junkets and agents in Macau offer VIP players here credit – despite not being licensed by the Macau government and not having direct contractual relationships with the casinos. Separately MGM China Holdings co-chairperson Pansy Ho told Massachusetts investigators she wanted to stop using middlemen – known locally in Macau as gaming promoters – for MGM China’s Macau VIP business. Page 6

December 10

HSI - Movers Name

%Day

KUNLUN ENERGY CO

3.31

HANG LUNG PROPER

1.19

SINO LAND CO

0.96

TENCENT HOLDINGS

0.82

HENDERSON LAND D

0.80

CHINA MOBILE

-1.00

POWER ASSETS HOL

-1.21

WANT WANT CHINA

-1.39

LI & FUNG LTD

-1.75

CHINA COAL ENE-H

-2.38

Source: Bloomberg

I SSN 2226-8294

Brought to you by

2013-12-11

2013-12-12

2013-12-13

15˚ 20˚

14˚ 21˚

15˚ 20˚

December 11, 2013

Macau Chui Sai On heads to Beijing next week Chief Executive Fernando Chui Sai On will head to Beijing on December 16. Mr Chui will stay there for three days and he is scheduled to meet with mainland officials. During his stay in Beijing, Mr Chui will report on the government’s work this year and explain the measures included in the Policy Address for 2014. Mr Chui will also meet with representatives from the Ministry of Foreign Affairs and the National Tourism Administration, the government’s spokesperson office said in a statement. Macau’s top official may also take the opportunity to discuss the extension of the opening hours at the borders and the development of Hengqin Island.

Bussing locals to slot parlours ‘breaches’ policy Shuttling residents from a closed slot venue to a casino would violate govt’s deal with the industry: Francis Tam Stephanie Lai

A notice in Chinese posted outside Yat Yuen and seen by this newspaper soon after the closures stated: “Guests please proceed to take the shuttle bus from the parking lot inside the Canidrome that would take you to Crystal Palace SJM slot parlour” – understood to be a reference to Crystal Palace Casino attached to the old Lisboa casino hotel in downtown Macau.

Policy aim

sw.lai@macaubusinessdaily.com

ny shuttling of residents from closed slot machine parlours to other gaming venues “violated the consensus” between the government and gaming companies to curb locals’ gambling said Secretary of Economy and Finance Francis Tam Pak Yuen yesterday. “This is not right, and we’ll tell them [the gaming operator] that,” the secretary said yesterday. He was speaking on the sidelines of an unrelated event in response to media questions. Five slot parlours – operated by Mocha Clubs, a unit of Melco Crown Entertainment Ltd, and market rival SJM Holdings Ltd – shut down with effect from November 26. It was in compliance with an administrative regulation gazetted a year ago that required gaming facilities to move away from residential areas. But a representative of the Fai Chi Kei branch of General Union for Neighbourhood Associations told Business Daily that after the closures shuttle buses were seen picking up customers near SJM’s Yat Yuen Canidrome Slot Lounge.

SJM’s Yat Yuen Canidrome Slot Lounge closed on Nov 26 (Photo: Manuel Cardoso)

The regulation says slot parlours must be located in either a five-star hotel, a non-residential building located within a 500 metres (0.31-miles) radius of a casino, or a resort that is “not situated in a densely populated area”. “I think the gaming companies did understand the government’s intention… and they did obey our instructions,” Mr Tam said on the sidelines of a Macau Youth Entrepreneur Association event yesterday, though he added the government will try to collect more information about the alleged use of shuttle buses. Business Daily asked SJM for comment on the bussing claims but got no reply by press time. Secretary Tam reiterated the government was not currently considering issuing more gaming concessions or sub-concesssions. “In 2015 and 2016, we’ll examine how we are going to handle the renewal of the gaming concessions, and we can collect more opinions on that issue,” said Mr Tam. “But some news or some people have raised the concept that there will be more issuances of gaming licences. At the moment the government didn’t consider it,” he added.

Eight gaming venues submit smoking reduction plan

he Health Bureau said last night only eight of 14 current gaming venues that previously failed a second round of air quality checks in smoking zones

have said how they will respond to punitive action by the government. The venues had been given until yesterday to explain how they planned

to reduce their smoking areas – the price of a second test failure. Since the test results announcement in autumn, two failing slot parlour venues have closed for other reasons. Last night the Health Bureau didn’t say what specific action those meeting the deadline for smoke zone reduction had proposed. Nor did it state what further sanction – if any – would be faced by those that missed last night’s deadline. It’s already on public record however that David Chow Kam Fai, cochairman of Macau Legend Development Ltd, which operates one of the failing venues – VIP Legend, under the gaming concession of

Sociedade de Jogos de Macau SA – has suggested airport-style smoking rooms with no gaming machines or tables. That would mean casino staff and non-smoking patrons would have minimal exposure to tobacco smoke – two of the key considerations the administration had when creating in January this year ‘smoke free’ areas on at least half of every casino main floor. The other sites aside from VIP Legend that submitted plans yesterday were: Diamond, also under an SJM licence; StarWorld Casino operated by Galaxy Entertainment Group Ltd; and Melco Crown Entertainment Ltd’s Royal

Mocha; Mocha Taipa Square; Mocha Golden Dragon; Mocha Sintra, and Mocha’s Casino Taipa Square. The Health Bureau said in a statement: “We reiterate that after receiving the plans by the casinos to reduce their smoking areas the Health Bureau, DICJ [the gaming regulator], and DSSOPT [Land, Public Works and Transport Bureau] will examine the information delivered and conduct checks at the sites. It [they] will process the approval for the reduction plan as soon as possible. Once approved, the casinos can start implementing the new smoking areas.” Those failing venues that have not yet submitted plans to reduce their smoking areas are all SJM-licensed, namely: Jimei; Emperor Palace Casino; Lan Kwai Fong; Kam Pek; Golden Dragon and Grandview Casino. M.G./S.L

December 11, 2013 April 19, 2013

Macau

Legislators slam lack of GDP forecast in budget A committee report says the government’s financial planning is still ‘too lax’ Vítor Quintã

vitorquinta@macaubusinessdaily.com

Fall in govt spending budgeted for 2014

he Legislative Assembly has denounced the government for drawing up next year’s budget without giving any forecast of economic growth. The assembly is considering next year’s budget, which envisages revenue of 153.62 billion patacas (US$19.24 billion), 14 percent more than this year. A report by the assembly’s second standing committee says the numbers “on their own do little” to prove that the budget is reasonable. The committee’s report says government spending and revenue should be analysed “in reference

to their size relative to the wealth created in the economy”. The report says the government’s failure to give an estimate of next year’s gross domestic product growth limits the ability to make such an analysis. The annual rate of GDP growth was 9.9 percent last year and 10.5 percent in the first nine months of this year – less than the growth in government spending planned for next year. The Economist Intelligence Unit predicts that the economy will grow by 13.5 percent next year. The budget envisages direct

KEY POINTS Govt ‘very conservative’ on gaming revenue Social Security Fund budget ‘more realistic’ Put surplus in fiscal reserve sooner, govt told

taxes on gaming providing most revenue, as usual. The government expects 115.5 billion patacas from direct taxes on gaming, 25 percent more than what it was forecast for this year. But the second standing committee expects more. Its report says the government “has usually been very conservative” in forecasting gaming tax revenue. In the first 10 months of this year the government pocketed 103.04 billion patacas in direct taxes on gaming. The committee expects gaming tax revenue of 120 billion patacas this year. The government proposes to spend 77.61 billion patacas next year, 6 percent less than this year.

Cheers and jeers This is the first fall in government spending budgeted for since the handover. The second standing committee is surprised. Its report says it expects economic growth to continue, and a “very reasonable” increase in government revenue. The government said it was planning for a fall of 17 percent in capital spending, and pointed out that the budget no longer includes individual Social Security Fund accounts. The committee’s report expresses happiness that the Social Security Fund budget has been drawn up “in a more realistic manner”. But the report warns that adding the fund’s budget to “the ever longer” list of aspects of the public finances excluded from the general budget “make it increasingly impossible” to get a full picture of spending. The report acknowledges a “marked improvement” in the quality and quantity of financial information sent to the assembly, but says the way the budget is drawn up is still “too lax”. The committee urged the government to put any annual surplus in the fiscal reserve as soon as possible before May 1 the following year. The government put its surplus for 2011 in the fiscal reserve only in January this year. The government said the law allowed the transfer of an annual surplus only once the assembly had approved the budget report for the year in question. The Monetary Authority of Macau managed the money in the meantime, the government said. “In no situation has any budget surplus remained idle or not invested,” it said.

Gaming gifts MOP140 bln to public finances

he Macau government will pocket about 140 billion patacas (US$17.5 billion) in the 2013 fiscal year from taxes and other fees on the gaming industry. The administration pockets 35 percent of takings from gaming directly, or 124.4 billion patacas in the period between December 2012 and November 2013. The government’s fiscal year goes from December to November. The authorities collect another four percent of

the gross gaming revenue indirectly, or 14.2 billion patacas this fiscal year, according to calculations by the Portuguese news agency Lusa. That money is paid to Macao Foundation and then redistributed to local charities and associations or spent for city development, tourism promotion and social security. Casino operators also pay a licensing fee for every gambling table and slot machine, ranging from 1,000 patacas per slot machine to 300,000

patacas per VIP table. There were 14,775 slot machines by the end of September, according to Gaming Inspection and Coordination Bureau data, which means the six operators paid a combined 14.7 million patacas in fees. Calculations for the licensing fees of gambling tables are more difficult because there is no official data on the split between VIP and mass-market tables. Lusa estimates that operators paid 712.2 million patacas for 4,748 massmarket tables and 300 million patacas for 1,000 VIP tables. There were 5,748 gaming tables in operation by the end of September. V.Q.

December 11, 2013

Macau Brought to you by

HOSPITALITY Casino juggernaut Last year’s survey of the gaming industry confirms trends toward change in the industry’s structure. The industry has two main aspects. One is betting in casinos and the other is betting on lotteries and sports. The attraction of betting in casinos is pushing betting on lotteries and sports to the margins. Revenue from betting on lotteries and sports fell by about 8 percent last year, having fallen by 4 percent the year before. In contrast, in the past two calendar years revenue from betting in casinos rose by more than 61 percent. That meant revenue from betting on lotteries and sports as a proportion of total gaming revenue shrank to about 0.36 percent last year from 0.66 percent in 2010. Casinos are becoming the only show in town. Revenue from betting on lotteries and sports is so small that the plot representing it in the chart is hard to discern.

A big winner during this spell of gaming growth was the public purse. Government revenue from the gaming industry rose by almost 65 percent in the past two calendar years to over 113 billion patacas (US$14.15 billion) last year. The government collected an average of 9.5 billion patacas per month in tax from the gaming industry in the past two years. That means it raked in tax at the rate of about 310 million patacas a day or 12.9 million patacas an hour. Divide last year’s tax revenue from the gaming industry by the estimated population at the end of last year, and the result is annual tax revenue of 195,000 patacas for each man, woman and child in Macau.

There’s more to CSR than philanthropy: expert Gaming should make an effort to solve the problems its growth has caused, an adviser says Tony Lai

tony.lai@macaubusinessdaily.com

asino operators wishing to show that they are socially responsible should do more than just give to charity, an authority on corporate social responsibility says. CSR Asia Ltd chairman Richard Welford says donations may make headlines, but do little for company reputations. Speaking yesterday at a conference held by the International Association for Volunteer Effort, Mr Welford said Macau was “way behind” Hong Kong and the mainland in corporate social responsibility. “There is a lot of philanthropy in Macau. People give away money,” he said. “There is always a role for handing out cheques … but philanthropy does not get you noticed,” he said. “Having your picture taken with a one-metre-wide cheque and all that PR stuff doesn’t get you any brand reputation any more, because it is just easy to give money away, particularly if you are a profitable entertainment hotel or casino.” Mr Welford has been advising companies in the Asia-Pacific region on environmental management and social responsibility for over 20 years. “Macau’s growth over the past five years has actually brought a number of social problems, and I think the corporations should begin to look at some of those problems,” he said. “One of the things the big businesses in Macau need to engage in is how people feel about development,” he said. “It has brought higher property prices and more expensive living standards.” Mr Welford said Macau had once been a cheap place to live, but no longer. Last week members of the Legislative Assembly denounced the government for failing to act to curb housing prices. Financial Services Bureau data show the average price of housing was over 80,000 patacas (US$10,000) a square metre in October, double what it was two years earlier.

Negative perception

MOP16,200 Monthly tax revenue per head from gaming, 2012

Mr Welford said casino operators had to shoulder responsibility for dealing with “the social issues they partly created”. He said one such issue was human trafficking. An effort by the casino operators to curb human trafficking would

You will remember.

welcome

@ : signature@macaubusiness.com tel : +853 2833 1258

Richard Welford says many people believe Macau companies ‘are greedy’

improve the reputation of their industry and Macau as a whole, he said. A United States Department of State report published in June says Macau fails to “fully comply with the minimum standards for the elimination of trafficking”. Mr Welford said: “Macau wants to be seen as an attractive venue for a broad range of people, including families.” But it was not regarded as such, he said. “The perception of Macau is quite negative in some people’s eyes.” He said they believed the city and its businesses “are just interested in money, and greedy.” Mr Welford offered no specific

advice to companies here. “Some of the big businesses should actually get together and think about what is the corporate social responsibility agenda in Macau,” he said. He said it was always important to have a way of measuring the effects of a corporate social responsibility programme. Chief Executive Fernando Chui Sai On said last month in his Policy Address for 2014 that he would encourage big enterprises to make more Macau residents managers. Secretary for Economy and Finance Francis Tam Pak Yuen said a fortnight ago that two-thirds of managers in casinos were residents.

celebration

December 11, 2013

Macau

Labour debate needs more voices: H.R. boss Employment agency association also calls for tougher rules to stop tourists getting work Tony Lai

tony.lai@macaubusinessdaily.com

he public body discussing labour issues in Macau shouldn’t contain only employers and unions says a group representing employment agencies. It should consider adding academics and other voices that don’t have entrenched interests – in either more protection of the local labour market or more relaxation of the rules. Such people would improve the quality of labourrelated laws and regulations, suggests the Macau Overseas Employment Agency Association. “The Standing Committee for the Coordination of Social Affairs should expand its scope to include not only the representatives of bosses and employees,” Ao Ieong Kuong Kao, the association’s president told Business Daily. “Representatives from groups like us should be

allowed to join the committee, which is going to discuss the city’s first regulation on the employment agencies,” he said. Secretary for Economy and Finance Francis Tam Pak Yuen said a fortnight ago the committee would discuss employment agency regulation next year – including possibly a menu of standard charges. “The committee should incorporate the participation from the academics as well, not only for the agency bill but also for the long-term benefits on other labour issues,” said Mr Ao Ieong. “These inputs can improve the quality of the regulations, minimising the problems arising during the implementation stage,” added the president. The current committee is composed of five employee representatives and five bosses, with four government officials

serving as coordinators. Hong Kong uses a series of committees to discuss issues including minimum wages and standard working hours. They are formed by employees, employers and scholars.

More details So far the Macau government has only consulted the local employment agencies once regarding their prospective regulation, with no specific details suggested Mr Ao Ieong. The sector “has no problem” with the coming regulations but the government should put stricter rules on how foreigners can go about looking for a job here, he said. “The current regulations allow foreigners like the Filipinos to look for a job here by themselves even on a tourist visa, but the importation of mainland Chinese needs

Footwear retailer sales up 15 pct Le Saunda Holdings currently has no plans for more Macau outlets

Best foot forward – Le Saunda sales rise

ootwear manufacturer and retailer Le Saunda Holdings Ltd said total sales rose 15.2 percent year-on-year in the three months ended November 30. It didn’t express the growth in cash terms. The firm added in an interim filing to the Hong Kong Stock Exchange that same store sales for the third quarter of financial year 2013-14 expanded by 14.2 percent from the prior period. The numbers were buoyed by a reduction in promotion discounts and an increase in retail gross margin it said. As at November 30, the group had a total retail network covering 967 outlets in mainland China, Hong Kong and Macau, a net increase of 19 outlets compared to the corresponding period of last year. The total number

About 63 percent of Macau’s migrant workforce comes from mainland China

of outlets consisted of 788 self-owned outlets on the mainland, Hong Kong and Macau and 179 franchised outlets on the mainland. In October Le Saunda said it had no current plans to open any more new stores in Macau or Hong Kong due to local spikes in rent costs. The retailer has two stores in Macau, both on the peninsula. In January Le Saunda agreed to a 60 percent increase in the rent of its other Macau outlet, located at Rua de São Domingos, near the tourist-heavy Senado Square area. Le Saunda is now paying HK$3.46 million (US$446,300) per year for a store of just 103.7 square metres near Senado. The company is leasing the store from one of its executive directors, Marces Lee Tze Bun. M.G.

to follow standard, strict procedures including the role of the agencies,” said the association president. His association’s membership consists of around 80 agencies responsible for organising importation of foreign workers – mainly from Southeast Asia. The importing of mainland employees to Macau can only be handled by 19 mainland agencies and their Macau subsidiaries, according to China’s Ministry of Commerce.

Mr Ao Ieong estimated they only involved in the importation procedures of fewer than half of the nearly 50,000 non-mainland migrant wwwworkers. “The agencies with the mainland background are making money but not us,” said Mr Ao Ieong. Human Resources Office data show 132,950 migrant workers were employed in Macau in October, with 63 percent coming from mainland.

December 11, 2013 April 19, 2013

Macau

Unlicensed give gambling credit in Macau: report Local casinos’ open secret spelled out in investigation by Massachusetts Gaming Commission Michael Grimes

michael.grimes@macaubusinessdaily.com

under Macau law and that are not covered by any of the relevant Macau licensing regulations. The people directly raised concerns that the lack of accountability and oversight could allow convicted triad gangsters such as Wan Kuok Koi to be involved in casino VIP operations in Macau. Following his release in December last year after serving a 15year jail sentence, Mr Wan told a Hong Kong magazine he was interested in returning to the VIP business. Some rumours in Macau suggest he’s already active there as an investor.

No entry

VIP credit issuance opaque – report

n investigation by a gaming regulator in the United States has confirmed that in the Macau casino VIP business some so-called “collaborators” – below the level of the officially licensed gaming promoters – also issue credit to players. These lower level people, often referred to as sub-junkets, agents or sub-agents, can comprise a network of thousands says a report from the Massachusetts Gaming Commission’s Bureau of Investigations and Enforcement. Yet they’re not subject to the licensing procedures of Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau (known locally as DICJ), adds the report. The Massachusetts paper is about MGM Resorts International’s suitability as a casino licence applicant in that state. The inquiry found the firm’s casino partnership in Macau with Pansy Ho Chiu King is no

obstacle to progress. That doesn’t mean it will actually win a licence in Springfield. But the 506-page report into MGM’s business dealings – including Macau – is revealing for stating explicitly what has been an open secret in Macau for years; that completely unlicensed people are involved with issuing gambling credit there. Business Daily reported in July the concerns of two lawyers – both with knowledge of the Macau junket licensing process. They alleged structural weaknesses in Macau’s gaming regulations. They say the loopholes undermine the progress that has been made in the market in recent years on due diligence and anti-money laundering policies. Their worry was about the proliferation of several legally fictitious entities – typically referred to as ‘junkets’ but which are not official ‘gaming promoters’ as designated

MGM Resorts made it clear in evidence to the Massachusetts investigators that a person such as Wan Kuok Koi would not be able to get access to the VIP operations of MGM Macau. But that’s only because the operator – concerned about its standing with Nevada and other U.S. regulators – goes well beyond the background checks required by the Macau government. The Massachusetts document says: “…this investigation shows that MGM has taken steps beyond those required by the regulations to identify [gaming promoter] ownership interests that go undisclosed in the DICJ application process and to vet the backgrounds of those ownership interests”. According to the report, MGM’s steps include: a criminal record check of subject individuals in related countries; a database and media search conducted by corporate security; a company registration check from the Macau company registry; an ‘intelligence’ check (understood to include sources of criminal intelligence); a litigation check and a bankruptcy check. But technically and legally, all Macau casinos only have a contractual relationship with the official and

government-licensed VIP gaming promoters whom they have chosen as partners, not with the promoters’ customers and the sub-junkets etc that recruit the players. On July 1, Massachusetts commission investigators conducted a sworn interview with Mark Whitmore, senior vice president of VIP Operations, Markers and Collections at MGM Macau. He was asked whether Macau’s gaming promoter ‘collaborators’ issued credit. He replied: “…some of them have their own bank roll, some of them may have some combination of a matching bank roll or something of that nature where they say to the [junket] operator, I will put up ten million, you advance me five or ten million, a matching basis.” The Massachusetts investigators added in a commentary: “MGM Macau does not, as a matter of course, conduct due diligence inquiries into the gaming promoters’ collaborators/ sub junkets, who may number in the many hundreds or even 1,000 for each gaming promoter…” The investigators continued: “Nor are background investigations of these collaborators required under the [Macau government] regulatory scheme.” The report also said: “The DICJ suitability review [for gaming promoters] is conducted by the Macau Unitary Police Service. During our meeting with DICJ Director Manuel das Neves, it was unclear as to the extent of review undertaken by the Unitary Police Service. Neither the MGM Macau executives nor the gaming promoters we interviewed could describe the extent of the DICJ suitability review.”

KEY POINTS MGM Macau junket checks beyond DICJ requirements U.S. operators in Macau have “cleansing effect”: Nevada regulator Some Macau sub-junkets, sub-agents, issue credit unlicensed Background checks on subjunkets etc not required by DICJ

I want to drop gaming promoters: Pansy Ho MGM China Holdings co-chairperson gave testimony on partner’s U.S. licence bid

ansy Ho Chiu King, a part owner of MGM China Holdings Ltd, told Massachusetts investigators she would like to stop using middlemen – known locally in Macau as gaming promoters – for MGM China’s Macau VIP business. On June 19, Massachusetts investigators conducted an unsworn interview with Ms Ho to explore her involvement with MGM Resorts International, and to discuss both her historic and current roles in the operation of the joint venture partnership. The report stated: “…she indicated that her goal is to build their own base of customers and not use gaming

promoters in the future, but opines that it will take time.” In May 2009 the New Jersey Division of Gaming Enforcement issued a report into MGM’s Atlantic City licence. It described Ms Ho as “unsuitable” as MGM’s Macau partner. It raised concerns that she was not sufficiently independent from her father Stanley Ho Hung Sun. He had been touted as MGM’s original Macau partner after the gaming market was liberalised in 2002. But Nevada’s gaming regulator told MGM that would cause problems, citing previous investigations linking him with triad associates. M.G.

December 11, 2013 April 19, 2013

Macau

Hengqin-Zhuhai customs post upgrade completed The work awaits a final inspection by the central government Stephanie Lai

sw.lai@macaubusinessdaily.com

mprovements to the customs post for checking goods being moved between the Hengqin Island special economic zone and the rest of Zhuhai were completed on Sunday, the Hengqin authorities have said. The customs post is by the bridge linking the island to mainland Zhuhai. The improvement work included the installation of an electric fence and a surveillance system, and expansion of the post’s capacity to six lanes of vehicles. Sources with first-hand knowledge told Business Daily that the work had taken more than a year and cost more than 615 million yuan (809 million patacas). State-owned Zhuhai Da Heng Qin Investment Co Ltd and China North Industries Group Corp were the main contractors. The Administrative Committee of Hengqin New Area said the customs post was for checking goods moved in and out of the special economic zone by truck. Only the border crossing between

The customs post is for checking goods trucked in and out of the Hengqin New Area

Hengqin and Macau will have immigration checks. The Hengqin authorities began trying out the special economic zone’s own import, tax and immigration

Corporate Mercearia Portuguesa celebrates second year Mercearia Portuguesa – a Portuguese grocery store in the historic São Lázaro district of Macau peninsula – celebrates its second anniversary this evening with a party featuring appetizers by chef Fausto Airoldi. The outlet – founded by local businessman Ivo Ferreira and Portuguese actress Margarida Vila-Nova – won an Excellence Award in the Young Entrepreneur category at last month’s Business Awards of the Year. Recently the shop – in the courtyard at Albergue SCM – was mentioned in the New York Times as one of 10 must see places in Macau. The operation is marking its anniversary with plans for a second store, and the launch of on home delivery service available throughout Macau. A Mercearia Vai a Casa – or The Grocery Goes Home – can be accessed via the company’s website www. merceariaportuguesa.com. The planned new store – to be called ‘Futura Clássica’ – will be an exclusive stockist of luxury soaps, bath salts and aromatic candles from Portuguese company Ach. Brito & Cia Lda/Claus Porto.

Golden Peacock gets Michelin star The Venetian Macao’s Golden Peacock restaurant has been awarded a Michelin star in the Michelin Guide to Hong Kong & Macau 2014. The venue is one of only nine Indian restaurants worldwide currently starred by Michelin, and is the only one in Asia, according to Sands China Ltd, the operator of The Venetian Macao. Justin Paul, the chef at the Golden Peacock, is described as a native of the southwest Indian state of Kerala. In 2009 he catered to 5,000 guests attending the International Indian Film Academy Awards at The Venetian Macao. He also provided food in 2011 for guests at the STAR Parivaar Awards – an event held at the casino resort for India’s STAR Plus television channel. Food at the Golden Peacock is produced by a team of 17 chefs – 13 of them from regions across India. Other restaurants at the property – Portofino and Morton’s The Steakhouse – have each earned awards from Wine Spectator magazine.

regulations on August 1. The regulations say machinery and other equipment imported for use in Hengqin’s infrastructure and its factories are exempt from tax.

Consumer goods and construction materials imported from Macau will not be exempt from tax. Mainland companies will have to pay import and sales taxes on products made or processed on Hengqin. It is not clear when the Hengqin authorities will allow Macauregistered vehicles to travel freely in and out of the special economic zone. Chinese-language news media reported that the Guangdong provincial government has asked the central government to give the work on the customs post a final inspection. The director of the Hengqin Communication and Cooperation Bureau, Liu Yang, told reporters last week that the customs post should be inspected soon. Mr Liu said the Hengqin development plan stressed the importance of the special economic zone’s special immigration and customs clearance rules.

RMB615 mln Cost of upgrading Hengqin-Zhuhai customs post

December 11, 2013 April 19, 2013

Greater China

China data

Retail sales jump while in

hina’s industrial output rose less than estimated in November while retail sales unexpectedly accelerated, giving a mixed picture of growth. Factory production rose 10 percent from a year earlier, the National Bureau of Statistics said in Beijing yesterday, compared with analysts’ median projection of 10.1 percent in a Bloomberg survey. Retail sales advanced 13.7 percent, while fixedasset investment excluding rural households showed a slowdown. Following on previous figures that showed a jump in exports and subdued inflation, the data published yesterday confirmed that the world’s second-largest economy remained in good health and had once again defied predictions for a more pronounced slowdown. “A modest slowdown in investment and industrial production may lead to a little softening of growth in the coming months,” said Gao Shanwen, Beijing-based chief economist with Essence Securities, a Chinese government-backed brokerage. At the same time, the indicators show China’s economy is generally stable, he said. Fixed-asset investment grew 19.9 percent in the first 11 months of the year, less than estimated. The value of property sales rose 30.7 percent in the January-November period, yesterday’s data showed. The Shanghai Composite Index

Manufacturing has been a key driver of China’s growth over the past few years

Leaders to set policy, reform priorities for 2014 Economy holding up better into year-end than some had thought Kevin Yao

hina’s leaders began mapping out their economic and reform plans for 2014 behind closed doors yesterday, and would have drawn confidence from data showing the economy has sustained momentum from a mid-year pick-up into the final quarter. Even as the government’s 7.5 percent growth target for this year looks increasingly secure, some

The economy is humming along and there is no need for growth upgrades or growth downgrades Tim Condon, ING Financial Markets

advisors think it may not issue a specific target for 2014 in order to have more room to pursue reforms intended to lead to more sustainable growth. The government has repeatedly said it has the appetite to overhaul the world’s second-largest economy, and last month outlined an ambitious agenda for the next decade, but it has also shown a distaste for growth slowing towards 7 percent. Top government think tanks, which make policy proposals, were still debating whether the growth target should be cut to 7 percent in 2014 from this year’s 7.5 percent as the leadership convened in Beijing for the Central Economic Work Conference. Zhao Xijun, deputy head of the Finance and Securities Institute at Renmin University in Beijing, said he had proposed to the government that it set a range of 7-7.5 percent, but saw an outside chance that Beijing simply scrapped the target. “It’s even better not to announce a target, otherwise you strengthen the importance of GDP,” Mr Zhao said, adding that the government could simply stress economic

stability for next year. The annual conference brings together top party leaders, ministers and provincial officials to set economic targets for the year ahead, which will be unveiled in parliament next March.

Split on target High on the agenda this year is a detailed reform plan for 2014 after the Communist Party last month unveiled sweeping economic and social changes, including relaxing the country’s one-child policy and liberalising financial markets. Economists expect priorities to include preparations for freeing up bank deposit rates and experimenting with greater yuan convertibility in a new free-trade zone in Shanghai. The push for reform means growth will be slower – something leaders have said they are comfortable with as it will lead to more sustainable growth. But as a protracted slowdown extended into the first half of 2013 and analysts questioned whether the growth target would be missed, the government stepped in to shore up activity. That saw growth pick up in the third quarter, and many analysts had

Li Keqiang targets economic growth of 7.2 percent

expected that to taper into year-end. “The economy is humming along and there is no need for growth upgrades or growth downgrades. They can focus on what they need to focus on, with no need to worry about growth stabilisation policies,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore. Last month, Premier Li Keqiang said economic growth of 7.2 percent was needed to keep a lid on unemployment, and on Monday the official China Securities Journal said the government was likely to stick with this year’s 7.5 percent target for 2014. The State Information Centre and the Chinese Academy of Social Sciences have proposed lowering the growth target for 2014, arguing it would help Beijing focus on reforms, but other think tanks, such as China Centre for International Economic Exchanges, have proposed keeping the current target. Reuters

December 11, 2013 April 19, 2013

Greater China

defy slowdown forecasts

Huijin fund gets access to trade banks’ bonds

ndustrial output tapers slightly reversed gains after the figures and was down less than 0.1 percent at the close. Estimates for industrial-production growth ranged from 9.6 percent to 10.5 percent, following a 10.3 percent gain in October. Retail sales were forecast to rise 13.2 percent, after a 13.3 percent pace in the previous month. The median estimate was 20 percent for fixed-asset investment expansion in the first 11 months of the year.

Inflated numbers China’s economy expanded 7.8 percent in the third quarter from a year earlier, rebounding from a slowdown in the two preceding periods. Analysts surveyed by Bloomberg News last month see growth easing to 7.6 percent this quarter and 7.5 percent in 2014, based on median estimates. Customs data released on Sunday showed China’s trade balance had the largest surplus in more than four years as exports rose 12.7 percent from a year earlier and imports gained 5.3 percent. While the increase in exports topped projections from 41 of 42 analysts surveyed by Bloomberg News, the data triggered speculation among some analysts that capital flows disguised as trade could be boosting the export numbers, a practice that authorities tried to crack down on in May.

Yesterday’s data show the previously reported export growth was inflated because the industrialproduction figures indicate goods for export advanced only 5.8 percent, said Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong. China’s foreign-exchange regulator said on Saturday that it will boost scrutiny of trade financing and that banks should prevent companies from getting financing based on fabricated trade. The measures are aimed at preventing abnormal foreign-exchange flows, the State Administration of Foreign Exchange said in a statement posted on its website.

bank’s 7.7 percent forecast. “Investment has softened but retail sales are strong and industrial production growth is still robust. Most people had expected growth to decline in the fourth quarter but now it’s likely to be even with the third quarter’s 7.8 per cent,” said Lu Ting, an economist with Bank of America. China’s gross domestic product is expected to rise 7.5 percent in 2014, the Chinese Academy of Social Sciences, a government researcher, said in an annual forecast yesterday in Beijing. Retail sales will rise 13.1 percent in 2014, the organisation said. Bloomberg News/Reuters

Growth forecast Other previously released data showed an official gauge of manufacturing purchasing managers in November was unchanged from October, while a private index from HSBC Holdings Plc and Markit Economics fell. While retail sales suggest “improved consumption,” a broader look at the data points to a slowing economy, Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole CIB, said in a note. Bank of America Corp had a different interpretation of today’s figures, saying economic growth this quarter is “very likely” to exceed the

KEY POINTS Factory output rose 10 pct year-on-year Retail sales were up 13.7 pct in Nov Follows stronger than expected jump in exports Economy showing signs it is picking up pace

from normal foreign-exchange market intervention,” PBOC’s Mr Zhou wrote in an article in a guidebook explaining reforms outlined at a November 9-12 Communist Party plenum. “It is suggestive that policymakers may be allowing already the degree of flexibility to some degree that was hinted at in recent statements,” Sacha Tihanyi, a Hong Kong-based currency strategist at Scotiabank, wrote in a note to clients yesterday. Bloomberg News

Bloomberg News

Currency’s ascent to 20-year high signals less intervention

Central bank seen relaxing grip on yuan’s movements

6.1114 per dollar yesterday, the strongest since a peg to the greenback ended in July 2005. The currency can trade a maximum 1 percent on either side of the daily fixing. The central bank has boosted the reference rate by 0.35 percent in December.

Best performer The yuan has advanced 2.61 percent against the dollar this year, the bestperforming currency in Asia, extending its gain to 36 percent since 2005. Confronted with a slowing economy, China last month vowed to allow more private investment in state-controlled industries, loosen its one-child policy and elevate the role of markets in the most sweeping reforms in two decades. The central bank will “establish a managed floating exchange-rate system based upon market supply and demand,” and will “basically exit

Shuanghui weighs options on Campofrio Smithfield Foods Inc, the world’s biggest hog and pork producer, and its owner China’s Shuanghui International Holdings Ltd are weighing options for Smithfield’s 37 percent stake in a Spanish sausage maker. Smithfield said in a December 6 filing it has reviewed its shareholding in Campofrio Food Group SA and a takeover bid made for the Spanish company. Sigma Alimentos, a unit of Mexico’s Alfa SAB, last month offered 675 million euros (US$926 million) for Madrid-based Campofrio, its first foray into Europe. Shuanghui, which bought Smithfield in September for US$4.7 billion, is considering a rival bid for Campofrio, El Mundo reported on November 27. Hong Kong-based Shuanghui said on the same day it signed an US$8 billion non-binding funding agreement with Bank of China Ltd as it seeks to expand, possibly through acquisitions. Keira Lombardo, a spokeswoman for Smithfield, and Chuck Dohrenwend, a Shuanghui spokesman, declined to comment yesterday on the companies’ options for the Campofrio stake. In September, Shuanghui said it will reduce its indirect stake in Campofrio to below 30 percent of voting rights within three months. When a bid is approved by regulators in Spain, an acceptance period set by the bidder begins and counterbids can be launched until five days before the end of that period. Spain’s regulators haven’t approved Sigma’s offer yet.

Yuan hits record high on PBOC policy shift he Chinese yuan’s surge to a 20-year high signals policymakers are becoming more willing to let investment and trade flows determine the exchange rate as the nation’s trade surplus swells to the biggest since 2009. The yuan traded at 6.0713 per dollar in Shanghai, after touching 6.0703 earlier, the strongest level since the end of 1993, China Foreign Exchange Trade System prices show. Twelve-month non-deliverable forwards were little changed at 6.1198, after rising 0.57 percent in the past six days and reaching an all-time high of 6.1193 yesterday, according to data compiled by Bloomberg. China’s trade surplus expanded to US$33.8 billion, the largest since January 2009, as exports surged, data showed on Sunday. The People’s Bank of China will “basically” end intervention in the currency market and widen the trading band where the yuan is allowed to fluctuate in an “orderly way,” central bank governor Zhou Xiaochuan said last month. “The surge in the trade surplus will lead to more appreciation pressure on the yuan,” Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd in Hong Kong, said yesterday. “Fundamentally, China’s determination to implement foreignexchange reforms, including a wider trading band, means further room for yuan gains.” The PBOC raised the yuan’s reference rate by 0.03 percent to

Central Huijin Investment Ltd, the sovereign investor that holds stakes in China’s biggest banks, received approval to trade on the interbank bond market, giving the government another way to support the nation’s lenders. The authorisation was granted by the Shanghai office of the People’s Bank of China, according to a statement posted on Chinamoney.com.cn, a website of the China Foreign Exchange Trade System. Huijin owns shares in banks including Industrial & Commerical Bank of China Ltd, the world’s most profitable. Huijin didn’t immediately reply to an e-mail seeking comment. The fund gains access to a market where the value of outstanding bonds reached 25.7 trillion yuan (US$4.2 trillion) in October, triple the amount five years earlier. The move allows Huijin to buy banks’ subordinated bonds that include the possibility of a writedown, said Dong Hui, a fixed-income analyst at China Securities Co in Beijing. “Huijin is not your traditional investor – its purpose has always been to support government policies,” Mr Dong said by telephone. “Subordinated bonds with the writedown feature haven’t been well received by the market.” China’s four biggest commercial lenders outlined plans this year to sell as much as 230 billion yuan of the junior bonds. Holders of the notes get paid after senior bondholders in a bankruptcy and the value of the debt can be reduced if the issuer faces financial difficulty. China on December 8 issued rules for trading of certificate of deposits on the interbank market, giving banks a new way to raise funds as the government prepares to end limits on the interest they’re allowed to pay on savings.

Great opportunity Loft in Downtown 2 + 1 bedrooms, 2 living rooms and garden 140 sq metres with Mezzanine Price: HKD 12 million advertisng@macaubusinessdaily.com

10 10

December 11, 2013 April 19, 2013

Greater China

Beijing raises ship scrapping subsidy Government trying to trim glut of vessels

hina, the world’s biggest shipbuilding nation, will increase cash subsidies for scrapping obsolete ships by 50 percent to help cut overcapacity and emissions. The government will grant 1,500 yuan (US$247) per gross ton for shipping companies to replace obsolete ships, according to a statement on the transport ministry website yesterday. The award applies to vessels scrapped in the years 2013 through 2015. Chinese shipbuilders also stand to benefit from the subsidy, half of which is awarded only after replacement orders are placed. “The programme will be positive for the shipbuilding sector in the long term,” said Lawrence Li, a Shanghai-based analyst at UOB Kay-Hian Holdings Ltd. “In the near term, it may not be material for the shipping industry, as the incentive is not attractive enough and many cash-strapped shipping firms may not be able to place new orders amid

a bad market.” Under the new programme, ship operators get half the money upon completing scrapping and the rest after placing new building orders, according to the statement. By comparison, under a 2010 rule, they had to complete scrapping and place new ship orders before getting any of the subsidy. The programme is “somewhat disappointing” as it didn’t lower the age requirement for ships that can be scrapped, which means less tonnage is eligible, according to a note published yesterday by Credit Suisse Group AG analysts led by Davin Wu. The Baltic Dry Index, the benchmark for commodity-moving rates, has slumped 41 percent in the past four years. The monthly index that tracks prices for all types of vessels dropped 31 percent in November from its peak in September 2008, when the global financial crisis caused orders to slump, according to Clarkson Plc, the world’s biggest shipbroker. Bloomberg News

New scheme applies to vessels scrapped through 2015

Rongsheng ghost town struggles to survive Company has become a test of China’s market reforms Adam Jourdan and Keith Wallis

eserted flats and boarded-up shops in the Yangtze river town of Changqingcun serve as a blunt reminder of the area’s reliance on China Rongsheng Heavy Industries Group Holdings Ltd, the country’s biggest private shipbuilder. Like Rongsheng’s shipyards, the area is struggling to survive. The shipbuilder last week predicted a substantial annual loss, just months after appealing to the government for financial help as it reeled from industry overcapacity and shrinking orders. Rongsheng lost an annual record 572.6 million yuan (US$92 million) last year, and lost 1.3 billion yuan in the first half of this year. While Beijing seems intent to promote a shift away from an investmentheavy model, with companies reliant on government cash injections, some analysts say Rongsheng is too big for China to let fail. As ship orders and funding have dried up, the firm has delayed deliveries and now faces legal disputes, shipping and legal sources said. The company – whose market value has slumped more than 90 percent to about US$1 billion since its Hong Kong listing in late 2010 – is in talks with bankers to restructure its debt. Local media reported in July that Rongsheng had laid off as many as 8,000 workers as demand slowed. Three years ago, the company had about 20,000 staff and contract employees. This week, the shipbuilder said an unspecified number of workers had been made redundant this year. The local community, on the outskirts of the eastern Chinese city of Nantong, has mirrored

give his name as he feared he could lose his job. The uncertainty isn’t only at the yard. “Morale in the office is quite low, since we don’t know what is the plan,” said a Rongsheng executive, who declined to be named as he is not authorised to speak to the media. “We have been getting orders but can’t seem to get construction loans from banks to build these projects.” A company spokesman said the shipyard had no confirmed new orders in the second half of the year. While Rongsheng has won just two orders this year, state-backed rival Shanghai Waigaoqiao Shipbuilding Co Ltd has secured 50, according to shipbroker data. Singapore-listed Yangzijiang Shipbuilding Holdings Ltd has won more than US$1 billion in new orders and is moving into offshore jack-up rig construction, noted Jon Windham, head industrials analyst at Barclays Plc in Hong Kong. Some Rongsheng customers say the company is behind schedule in delivering ships. At least two law firms in Shanghai and Singapore are acting for shipowners seeking compensation from Rongsheng for late or cancelled orders. “I’m now dealing with several cases against Rongsheng,” said Lawrence Chen, senior partner at law firm Wintell & Co in Shanghai. Reuters

A purpose-built town near the shipyard’s main gate is largely deserted

Rongsheng’s fall. A purpose-built town near the shipyard’s main gate, with thousands of flats, supermarkets and restaurants, is largely deserted. Nine of every 10 shops are boarded up; the police station and hospital are locked. “In this area we’re only really selling to workers from the shipyard. If they’re not here who do we sell to?” said one of the few remaining shopkeepers, surnamed Sui, playing a videogame at his work-wear store. “I know people with salaries held back

and they can’t pay for things. I can’t continue if things stay the same.” In the shadow of the shipyard gate, workers told Reuters the facility was still operating but morale was low, activity was slowing with the lack of new orders and some payments to workers had been delayed. “Without new orders it’s hard to see how operations can continue,” said one worker wearing oil-spattered overalls and a Rongsheng hardhat, adding he was still waiting to be paid for September. He didn’t want to

RMB1.3 bln Rongsheng lost in the first half of this year

11 11

December 11, 2013 April 19, 2013

Asia

Japan Inc sees BOJ easing as sales-tax hike looms Higher taxes needed to rein in huge public debt, government says James Topham

lmost two-thirds of Japanese firms expect the Bank of Japan will increase its stimulus in the first six months of 2014, a Reuters poll showed, underscoring the pressure on the central bank to remain the engine of growth under Abenomics. The results of the monthly Reuters Corporate Survey also showed broad support for the toughest economic policy decision Prime Minister Shinzo Abe is likely to face in the year ahead – pushing ahead with a further salestax increase to 10 percent. Financial markets are speculating whether the BOJ will launch a second round of quantitative easing next year after economic growth slowed sharply in the third quarter and inflation – albeit at a five-year high – remains well short of the central bank’s target. Businesses are also looking to additional BOJ stimulus to help the economy withstand an already approved sales-tax increase in April. Mr Abe and others have argued that higher taxes are needed to rein in Japan’s huge public debt even at the risk of slowing the economy in the short term. “It will be an adrenaline shot to counter the negative impact of the sales tax hike,” said an executive at a steelmaker who responded to the survey, referring to possible further easing by the central bank.

BHP Billiton to reduce spending by 25 pct Miner on track to meet production guidance, chief executive says

ining giant BHP Billiton Plc said yesterday it plans to cut spending by 25 percent this year and focus on its flagship operations as soft prices and extra supply squeeze resources firms. BHP chief executive Andrew Mackenzie said the world’s largest miner was on track to meet production guidance and deliver 16 percent growth in the next two years. Despite tough operating conditions in the mining sector due to an easing in key market China’s rampant growth and a surge in new supply, which has hit prices, Mr Mackenzie said BHP remained profitable by finding savings. “By generating more volume from our existing equipment and lowering

The national sales tax is set to rise to 8 percent from 5 percent in April, increasing prices for consumers and likely prompting some to save rather than spend. Almost half of the survey respondents, however, expect the negative impact of the tax hike on consumer spending to have faded within six months. By the autumn, the Abe administration will be in the early stages of considering whether to press ahead with a second increase that would take the sales tax to 10 percent in October 2015, according to the timeline officials have described.

Fiscal reform In the survey, fiscal reform was the top choice for 97 of the 252 companies that ranked their top three priorities for Mr Abe’s 2014 economic policy – ahead of restarting nuclear power plants, taking steps to increase wages or focusing on improving diplomatic ties with China and South Korea. “Continuous growth can’t be expected if a path of fiscal reform is not presented,” said an executive at a chemicals firm. The sales-tax hike in April will be the first such increase since 1997, when a rise to the current 5 percent was blamed for botching an economic recovery. To cushion the blow this

Japan’s sales tax is set to rise to 8 percent in April

time, the Abe administration has announced a stimulus package worth 5 trillion yen (US$49 billion). The April hike to 8 percent is projected to raise an additional 8 trillion yen per year. At more than twice the size of the economy, Japan’s public debt of over US$10 trillion is the largest the industrial world. The country also runs a huge annual budget deficit of 10 percent of GDP. The government has committed

to eliminating the primary budget deficit, which excludes debt servicing costs, by 2020, although ratings agencies see risks to that forecast. The Reuters Corporate Survey polls upper management at 400 companies each capitalised at more than 1 billion yen. The firms, which are split evenly between manufacturers and nonmanufacturers, are not required to answer every question, and provide responses on condition of anonymity. Reuters

A 25 percent reduction in capital and exploration expenditure is planned for this financial year and our level of investment will decline again next year Andrew Mackenzie, BHP chief executive

unit costs, we will continue to build on the US$2.7 billion reduction in controllable cash costs delivered in the 2013 financial year,” Mr Mackenzie said in an update to the Australian stock exchange. “A 25 percent reduction in capital and exploration expenditure is planned for this financial year and our level of investment will decline again next year.” Mackenzie said BHP would

focus on its “four key pillars” – coal, iron ore, petroleum and copper – in a bid to deliver “higher growth, higher margins and strong investment returns”. Rival Rio Tinto Group Plc last week unveiled dramatic spending cuts, aiming to halve capital expenditure by 2015 as it targets a return to profit following its first loss in 18 years in 2012. BHP’s net profit slumped 29.5

percent to US$10.88 billion in the year to June, with the company citing slowing global growth and commodity price volatility. But production in the JulySeptember quarter was higher than analysts expected and BHP, which employs 128,000 people in 26 countries, lifted its key iron ore production guidance for the 2014 financial year to 212 million tonnes. AFP

December 11, 2013

Asia

Thai PM rejects resignation call Protesters want Yingluck replaced with a ‘people’s prime minister’

hai Prime Minister Yingluck Shinawatra yesterday refused demands by anti-government protesters to resign ahead of upcoming elections, urging them to abandon their “people’s revolution”. Bangkok has been shaken by more than a month of mass opposition rallies aimed at ousting Ms Yingluck and ridding the kingdom of the influence of her older brother, deposed former leader Thaksin Shinawatra. About 140,000 people were estimated to have gathered in Bangkok on Monday, calling for the elected government to step down. The protesters are a loosely-allied group united by their animosity towards Mr Thaksin, a billionaire tycoon-turned-politician who was overthrown in a military coup seven years ago but is widely thought to control the government from abroad. Ms Yingluck, who called an early election on Monday in an effort to calm the political turmoil, said her cabinet was legally-bound to act as an interim government until the polls are held. “I would like the protesters to stop and to use the electoral system to choose who will become the next government,” she told reporters after a cabinet meeting early yesterday. A visibly emotional Ms Yingluck – who said she had not discussed with party colleagues whether she would run in the February 2 election – reacted angrily to protesters’ calls that her family be removed from Thailand. “I have retreated as far as I can – give me some fairness,” she said.

Not enough Rally leader Suthep Thaugsuban has rejected elections and vowed to set up a parallel government that would suspend the democratic system in Thailand and redraw its constitution. He issued an ultimatum late on Monday calling on Ms Yingluck and her colleagues to resign from the

Yingluck Shinawatra urged protesters to vote to determine the next prime minister

caretaker government. Huge crowds converged on the government headquarters on Monday in one of the largest turnouts since the protests began, bringing with them a caravan of food stalls and vendors of a wide variety of protest paraphernalia – from t-shirts to tiaras. Numbers had dwindled dramatically overnight after Bangkokbased protesters returned to their homes to sleep. Mr Thaksin is loathed by many in the royalist elite and Bangkok middle class, but loved among the working classes and those in his rural northeastern heartland. His overthrow in 2006 by generals loyal to the king ushered in years of political turmoil and rival street protests by the royalist “Yellow Shirts” and Mr Thaksin’s supporters,

known as the “Red Shirts”. Pro-Thaksin parties have won every election in more than a decade, but all governments linked to the divisive former premier since 2006 have been cut short by military or judicial intervention without serving a full term. Observers have raised fears that if another Thaksin-allied government is forcibly removed it could trigger a fresh round of violence in the politically turbulent nation. Ms Yingluck’s ruling Puea Thai Party is widely expected to win the upcoming vote, bolstered by Mr Thaksin’s enduring popularity. The opposition Democrat Party – whose MPs resigned en masse on Sunday because they could not achieve anything in parliament – has not won an elected majority in about

Qantas plunges to record low Q

antas Airways Ltd, Australia’s largest carrier, closed at its lowest level since a 1995 privatisation as analysts forecast a record loss amid a market share fight with Virgin Australia Holdings Ltd. The stock fell 3 percent to 96.5 Australian cents in Sydney, half a cent below its previous record low last June. Net losses in the year ending June will hit A$428 million (US$390 million), according to the average of six analyst estimates compiled by Bloomberg, the second annual loss

for the Sydney-based company since the privatisation. Qantas lost its investment-grade credit rating on December 6 from Standard & Poor’s after the company

said it would have negative free cash flow over the year to June, meaning it will need to increase debt or sell assets or new shares to pay for new equipment. Yields, a measure of

two decades. Democrat Party officials said on Monday they had not yet decided whether to take part in the upcoming election. AFP

KEY POINTS Yingluck won the last polls in 2011 Thailand facing largest turmoil since 2010 Early election set for February 2

ticket prices, will fall to their lowest level in at least a decade as Qantas and Virgin add more flights than travellers want. “The market is of the view that they need to raise equity,” Peter Esho, chief market analyst at Invast Financial Services Pty, said by phone yesterday. “Debt is probably a bit too high, which will need to be funded by selling something.” Qantas’s bond risk climbed above lower-rated British Airways Plc for the first time since 2007 as Australia’s largest carrier considers asset sales to help fund new aircraft purchases. An internal review looking at divestments, and a proposed saleand- leaseback arrangement for its fleet, have heightened the uncertainty, according to Westpac Banking Corp. Bloomberg News

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

December 11, 2013

Asia Asian hedge funds much cheaper to run Management fees fall as start-up managers pressed to offer discounts

unning a hedge fund in the Asia-Pacific region can be as much as 42 percent cheaper than in the U.S. and Europe, helped by lower-than-average compensation, according to a survey by Citigroup Inc. But small funds started in the region struggle to achieve profitability and expand assets, the fourth-largest U.S. bank cautioned. Ninety-five, or 57 percent, of the 167 regional equity long-short hedge funds which began trading with less than US$50 million still manage less than that amount after an average of 5.3 years in existence, it added, citing data from Singapore-based Eurekahedge Pte. “A critical success factor in the launch of a hedge fund is the size of assets under management at launch,” Citigroup said in the regional supplement to its Business Expense Benchmark Survey. “Small fund launches in Asia have demonstrated a statistically reduced chance of accelerated assets under

management growth.” The US$2.5 trillion global hedgefund industry is facing pressure to cut fees to attract investors amid rising costs of complying with regulations and client demand. The average Asian hedge-fund start-up raised US$8 million this year, down from US$25 million seven years ago before the 2008 global financial crisis dented investor interest, according to Eurekahedge data provided in early November.

US$100 million hedge fund are 20 percent lower than in the U.S. and Europe. The gap widens to 42 percent for a hedge fund managing US$500 million and 39 percent for those with assets of US$1.5 billion, it added. Asian hedge funds may break even at US$135 million, relying solely on a 1.5 percent management fee, Citigroup estimated. “It is likely that, initially, any excess cash may need to be reinvested into the business to ensure an institutional-grade infrastructure is in place” to help expand assets, the survey said. “Historically, U.S. investors have held the view that Asia-Pacific managers under-invest in operational and technology infrastructure.” The survey sampled 124 hedgefund managers in North America, Europe and Asia with combined assets of US$465 billion. Bloomberg News

Fees declining Management fees charged by hedge funds globally have fallen to as low as 1.58 percent for all but the largest companies, from the previous standard of 2 percent, as start-up managers have been pressed to offer discounts to early investors. A hedge fund on average needs to manage at least US$300 million to break even, the Citigroup global survey released late yesterday found. In Asia, operating expenses of a

US$8 mln

The average Asian hedge-fund start-up raised this year

Cars made in Australia slumped to 13 percent of domestic sales in 2012

Facing a deteriorating budget position, Prime Minister Tony Abbott’s coalition government plans to cut A$500 million from subsidies to the car industry by 2015. Australia’s Acting Prime Minister Warren Truss has written to GM asking for an “immediate statement clarifying their intentions,” he told parliament in Canberra yesterday. Holden continues to make the case to GM that it wants to make two types of vehicles in Australia, Mr

A$96 mln

Holden received in government assistance last year

Australia’s Holden is one of GM’s most expensive operations

Nokia Oyj is ready to pay at least 355 million euros (US$487 million) to India’s tax authorities to enable the transfer of a factory in the country to Microsoft Corp, according to two people familiar with the matter. Nokia is willing to pay at least 270 million euros on top of an already announced amount of 85 million euros if India’s government allows the shifting of assets including the manufacturing plant in Chennai, said the people, who asked not to be identified because the offer isn’t public. The assets were frozen by India in September because of a tax dispute. Earlier that month, Nokia agreed to sell its mobile-phone business to Microsoft in a 5.44 billion-euro transaction to focus on network equipment. Nokia might need to find a new buyer for the assets, which are part of the handset unit, unless it can start the transfer this week, the people said. In an e-mailed statement, Nokia said it’s committed to getting its assets unfrozen and called on India’s government and tax agency to work with urgency toward a solution.

Sydney waterfront home expected to set price record

GM Holden considers future in Australia eneral Motors Co’s Holden unit has made the case for continued government assistance in Australia as it considers whether to keep making cars in the nation. Annual subsidies of about A$150 million (US$136 million) a year result in A$33 billion of economic activity, managing director Mike Devereux told the government’s Productivity Commission in Melbourne yesterday. Detroit-based GM hasn’t made a decision on its future in Australia beyond 2016, he said. “That is a very good return for the economy of this country,” Mr Devereux said. “There is a level of assistance that needs to be there for GM to make a business case viable to be able to make cars here.” The local car-making operations of GM, Ford Motor Co and Toyota Motor Corp have been hit by an Australian dollar that surged almost 50 percent against the U.S. dollar from 2009 to 2012, making exports uncompetitive and boosting the appeal of imports.

Nokia to offer India US$487m to transfer factory

A soon-to-be-completed home on Sydney’s harbour with access to a secluded beach is expected to fetch an Australian record price of more than A$60 million (US$55 million), according to the real estate agent who is marketing the property. London-based international bank consultant Andrew Ipkendanz is selling the seven-bedroom, 12-bathroom home at 6-8 Carrara Road in Vaucluse, 10 kilometres (6.2 miles) from the city centre, after spending A$27 million on its construction, due to be completed this month, Alison Coopes, director at agency by alison coopes, said in an interview. Ms Coopes estimated the price at A$60 million to A$68 million based on a persquare-metre comparison to other top end sales this year. Luxury home sales have picked up in Australia due to a combination of low interest rates, rising stock prices and demand from Asian buyers. Australia’s most expensive home, in the Perth suburb of Mosman Park, sold for A$57.5 million in 2009.

Devereux said, amid reports by the Australian Broadcasting Corp and the Wall Street Journal that the unit will cease production in the country as soon as 2016. It costs the company A$3,750 more to produce a car in Australia than at other plants in Asia, Mr Devereux said.

Government subsidies GM is free from U.S. taxpayer ownership after the Treasury Department sold off its remaining stake in the nation’s largest automaker, almost five years after first receiving government aid. Bailouts from the George W. Bush and Barack Obama administrations helped GM avoid liquidation and reorganise in a 2009 bankruptcy that has given new life to the company. “That was a good thing to happen because you now have a resurgent auto industry in the U.S.,” Mr Devereux said. “It was a difficult time for the company, but now we are hiring people again and we are increasing sales. So by any measure, that was an intelligent decision.” GM’s Holden unit received an average of A$153 million a year in Australian federal government assistance from 2001 to 2012, according to a November 27 submission to the Productivity Commission. That dropped to A$96 million in 2012, it said. The value of government assistance has outstripped Holden’s own capital investment every year since 2007, according to the report. Since 2004, the GM unit only posted a profit in two years, 2010 and 2011. Bloomberg News

Singapore to charge rioters after violence Prime Minister Lee Hsien Loong ordered an inquiry into Singapore’s first riot in more than four decades as tensions rise over the influx of foreign workers in the city state. “There is no excuse for such violent and criminal behaviour,” Mr Lee said in a statement on Monday. Prosecutors will charge 24 Indian nationals in a subordinate court over the riot, the Singapore police force said in a statement on its Facebook page. The riot involving about 400 people broke out on the night of Sunday in the Little India district after a traffic accident, the police said in a separate statement. Little India, about 3 kilometres from the city state’s central business district, attracts thousands of foreign workers on their Sunday days off. Discontent in Singapore over foreign workers has risen after years of open immigration spurred complaints on social media about congestion and infrastructure strains at a time of widening income inequality. A four-year government campaign to encourage companies to employ fewer overseas workers has in turn led to a labour shortage, prompting some companies to seek cheaper locations.

14 14

December 11, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 64.4

96.9

29.50

64.1

96.5

29.28

63.8

96.1

63.5

95.7

29.06 28.84

Max 64.3

average 63.535

Max 63.65

Min 63.25

average 62.404

Last 63.5

Min 62.05

Last 62.3

63.2

Max 96.9

average 96.654

PRICE

average 28.666

Min 28.45

Last 28.5

28.40

33.6

63.35

25.8

33.3

62.90

25.6

33.0

62.45

25.4

32.7

62.00

Max 25.95

average 25.393

YTD %

97.76

0.431477296

4.903959652

107.9400024

85.45999908

BRENT CRUDE FUTR Jan14

109.8

0.374805741

5.142200517

113.3099976

96.13999939

GASOLINE RBOB FUT Jan14

268.29

0.299076601

5.817622466

287.259984

243.1999922

GAS OIL FUT (ICE) Jan14

933.75

-0.18706574

3.75

968

838.75

4.234

0.047258979

4.543209877

4.825000286

3.464999914

302.15

0.238861427

1.355204455

320.0099945

278.0799866

1244.16

1.2278

-25.2514

1723.45

1180.57

WTI CRUDE FUTURE Jan14

NATURAL GAS FUTR Jan14 NY Harb ULSD Fut Jan14 Gold Spot $/Oz

(H) 52W

Min 25.2

Last 25.3

(L) 52W

Silver Spot $/Oz

19.9681

2.1595

-33.6828

33.765

18.2208

Platinum Spot $/Oz

1382.25

1.5778

-8.9277

1742.8

1294.18

Palladium Spot $/Oz

739.28

1.0152

5.6628

786.5

629.75

LME ALUMINUM 3MO ($)

1793

0.786958966

-13.50699469

2184

1736.25

LME COPPER 3MO ($)

7135

0.182532996

-10.03656538

8346

6602

LME ZINC

1918

0.682414698

-7.788461538

2230

1811.75

13955

1.417151163

-18.20046893

18770

13205

15.5

-0.064474533

0.551410963

16.80999947

14.91500092

3MO ($)

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

437.25

-0.171232877

-28.26086957

647.75

418.5

WHEAT FUTURE(CBT) Mar14

650.75

0.038431975

-21.76134656

894.5

647.75

SOYBEAN FUTURE Jan14

1342.25

-0.111627907

2.540106952

1406

1169

COFFEE 'C' FUTURE Mar14

106.15

0.047125353

-33.80106018

172.25

104.1499939

16.49

-0.362537764

-19.87366375

20.71999931

16.45000076

Mar14

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

80.44

0.099552016

1.297065861

90.61000061

76.65000153

World Stock Markets - Indices NAME

Max 29.45

26.0

DAY %

CORN FUTURE

95.3

25.2

Max 33.6

average 32.783

Min 32.4

Last 32.6

32.4

Currency Exchange Rates

NAME

METALS

Last 96.85

63.80

Commodities ENERGY

Min 95.35

28.62

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

0.9095 1.6433 0.8895 1.3751 103.17 7.986 7.7532 6.0712 61.2075 32.07 1.251 29.6 44.29 11920 93.837 1.22313 0.83682 8.3494 10.9812 141.87 1.03

0.1101 0.2807 0.3485 0.2991 -0.1163 0.0013 0.0039 0.0247 -0.1184 0.2027 -0.1119 0.0169 -0.3613 0.453 -0.2281 0.054 -0.0203 -0.3102 -0.2914 -0.4088 0

-12.3627 1.5888 2.9117 4.2532 -16.5455 -0.0351 -0.0335 2.6255 -10.1499 -4.6461 -2.3661 -1.9155 -7.417 -17.844 -4.8062 -1.2795 -2.5573 -1.5798 -4.1052 -19.9478 -0.0097

1.0599 1.6466 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 142.17 1.032

0.8848 1.4814 0.8884 1.2746 82.12 7.9818 7.7498 6.0694 52.89 28.56 1.2168 28.913 40.54 9603 86.094 1.20626 0.80355 7.8281 10.195 106.01 1.0289

Macau Related Stocks NAME ARISTOCRAT LEISU CROWN RESORTS LT

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

VOLUME CRNCY

4.39

0.6880734

39.36508

5.12

3.04

3565724

16.75

2.823818

56.98219

17.38

10.08

1620132

AMAX INTERNATION

1.98

2.590674

41.42857

2.12

0.75

27482425

BOC HONG KONG HO

25.5

-0.5847953

5.809127

22.85

9022767

CENTURY LEGEND

0.54

3.846154

103.7736

0.68

0.255

4660000

7.1

0.1410437

18.53089

7.28

4.5

112000

22.85

-0.4357298

-1.082253

25.6

17.7

10146523

CHEUK NANG HLDGS CHINA OVERSEAS CHINESE ESTATES

23.05

-1.072961

104.97

23.8

9.853

105205

CHOW TAI FOOK JE

11.68

0.4299226

-6.109322

13.4

7.44

14325435

EMPEROR ENTERTAI

4.12

-2.369668

117.9894

4.66

1.65

1805000

FUTURE BRIGHT

3.83

215.9998

3.96

1.103

2412000

GALAXY ENTERTAIN

63.5

-0.7036747

109.2257

64.3

7716282

126.6

6.655437

132.8

110.6

413130

-0.3831418

-21.80451

35.3

23.2

703826

83.9

-0.3562945

3.198028

90.7

77.85

11599975

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16025.53

0.0332705

22.29365

16174.51

12883.89

NASDAQ COMPOSITE INDEX

4068.751

0.1533531

34.74855

4081.784

2951.036

FTSE 100 INDEX

6557.05

-0.03704562

11.1777

6875.62

5873.43

HANG SENG BK

DAX INDEX

9192.63

-0.0276232

20.75879

9424.83

7418.36

HOPEWELL HLDGS

NIKKEI 225

15611.31

-0.248559

50.17836

15942.6

9487.95

HSBC HLDGS PLC

HANG SENG INDEX

23744.19

-0.2812966

4.798841

24111.55078

19426.35938

CSI 300 INDEX

2453.322

0.09996442

-2.759858

2791.303

2023.171

TAIWAN TAIEX INDEX

8443.39

-0.01456549

9.661532

8477.87

7491.52

KOSPI INDEX

1993.45

-0.3464342

-0.1802708

2063.28

1770.53

S&P/ASX 200 INDEX

5143.554

-0.01689208

10.63905

5457.3

4552.2

JAKARTA COMPOSITE INDEX

4267.719

1.266556

-1.134383

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1844.81

0.1596204

9.228225

1846.92

NZX ALL INDEX

989.497

-0.149146

12.18113

PHILIPPINES ALL SHARE IX

3612.58

-1.853401

-2.335776

HUTCHISON TELE H

2.72

2.255639

-23.5955

4.66

2.65

12278150

LUK FOOK HLDGS I

27.95

-0.7809727

14.54918

31.5

16.88

1866243

MELCO INTL DEVEL

27.65

-0.1805054

206.8812

28.2

8.2

1830687

MGM CHINA HOLDIN

28.5

-2.39726

114.6362

13.013

5869135

MIDLAND HOLDINGS

3.26

-0.6097561

-11.89189

4.29

2.68

2502000

NEPTUNE GROUP

0.33

-1.492537

117.1053

0.4

0.131

150134000

NEW WORLD DEV

10.1

-0.1976285

-15.97338

15.12

9.98

11434410

SANDS CHINA LTD

62.3

-0.9538951

83.50515

63.85

32.05

7728357

1597

SHUN HO RESOURCE

1.57

12.14286

1.92

1.33

1048.998

858.253

SHUN TAK HOLDING

4.51

-0.660793

7.63723

4.8

3.27

4823382

4571.4

3440.12

SJM HOLDINGS LTD

25.3

-1.55642

42.55402

16.781

7201954

SMARTONE TELECOM

8.19

0.862069

-41.83239

14.52

8.03

3138807

WYNN MACAU LTD

32.6

-2.102102

55.60859

33.9

7142910

ASIA ENTERTAINME

N/A

BALLY TECHNOLOGI

75.79

0.5439109

69.51465

78.03

43.57

469046

Euromoney Dragon 300 Index Sin

607.13

0.2

-2.25

STOCK EXCH OF THAI INDEX

1367.42

0.4296511

-1.760865

1649.77

1260.08

HO CHI MINH STOCK INDEX

511.6

0.07237447

23.65552

533.15

383.53

Laos Composite Index

1247.33

2.680337

1455.82

1196.44

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

BOC HONG KONG HO

3.28

6.840393

3.6

2.99

6601

GALAXY ENTERTAIN

8.24

-0.1212121

107.5567

8.28

3.65

2869 7282320

INTL GAME TECH

18.11

1.343033

27.80522

21.2

13.58

JONES LANG LASAL

99.55

0.2013085

18.59661

101.46

80.86

195707

LAS VEGAS SANDS

76.88

1.46496

66.55113

77.43

43.5

5263108 2996061

MELCO CROWN-ADR

37.47

1.903726

122.5059

38.09

14.99

MGM CHINA HOLDIN

3.8

1.333333

117.1067

3.88

1.703

8650

MGM RESORTS INTE

20.73

2.776401

78.09278

20.98

10.81

10995781

SHFL ENTERTAINME

23.19

#N/A N/A

59.93103

23.25

12.98

344231

SJM HOLDINGS LTD

3.33

2.904821

46.2055

3.6

2.1494

19088

178.53

3.101178

61.62146

179.12

106.9562

2597985

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.2

1.003344

16574881

CHINA UNICOM HON

13.68

1.333333

22775492

ALUMINUM CORP-H

3.61

15433022

CITIC PACIFIC

10.12

0.1980198

6468988

BANK OF CHINA-H

3.15

1.286174

329406866

BANK OF COMMUN-H

5.87

0.8591065

37793438

0.1727116

14.5

BANK EAST ASIA BELLE INTERNATIO

NAME

CLP HLDGS LTD

NAME

PRICE

DAY %

64.4

0.625

2568679

SANDS CHINA LTD

28.75

-0.1736111

6213954

SINO LAND CO

14.28

0.990099

7686664

SUN HUNG KAI PRO

109.1

1.018519

8616634

-0.4815409

2456828

265.6

1.45149

2048509

23.9

2206357

0.8064516

5926157

52.75

1.05364

3208615

POWER ASSETS HOL

65.6

1561243

CNOOC LTD

16.32

0.4926108

46287676

1260442

COSCO PAC LTD

11.76

3138217

SWIRE PACIFIC-A

7192500

ESPRIT HLDGS

12.44

-0.48

4211743

TENCENT HOLDINGS

0.2087683

10140777

HANG LUNG PROPER

26.55

-0.1879699

7812341

TINGYI HLDG CO

CATHAY PAC AIR

13.78

0.2911208

3140232

HANG SENG BK

119.7

0.167364

1690249

WANT WANT CHINA

CHEUNG KONG

114.9

1.23348

3918568

HENDERSON LAND D

2.059087

5880582

WHARF HLDG

75.55

0.1325381

701703

1.112235

6329376

125.6

3.54493

9625332

76.5 -0.06531679

9291476

BOC HONG KONG HO

CHINA COAL ENE-H

7.7

-0.1297017

40174849

CHINA CONST BA-H

5.87

1.206897

202072100

CHINA LIFE INS-H

22.9

0.4385965

30126882

CHINA MERCHANT

25.6

0.3921569

4209584

CHINA MOBILE

HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC

85.45

1.064459

16569813

HUTCHISON WHAMPO

CHINA OVERSEAS

20.2

-0.2469136

19374736

IND & COMM BK-H

CHINA PETROLEU-H

8.36

0.9661836

101198904

CHINA RES ENTERP

25.2

0.8

77.35

1.243455

6697663

5.17

1.372549

317570965

LI & FUNG LTD

12.84

-0.9259259

17517410

4219717

MTR CORP

29.85

1.530612

4880670

MOVERS

23970

LOW

23620.31

CHINA RES LAND

17.16

1.179245

6849146

NEW WORLD DEV

12.98

1.564945

12528960

52W (H) 24111.55078

CHINA RES POWER

16.08

-0.618047

7490964

PETROCHINA CO-H

10.94

-1.263538

64234127

(L) 19426.35938

CHINA SHENHUA-H

33.35

-0.1497006

11160228

PING AN INSURA-H

63.35

1.198083

8338502

3 23970

INDEX 23744.19 HIGH

VOLUME

23620

6-December

10-December

15 15

December 11, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Taipei Times Taiwan’s exports for last month came in lower than expected, although the figure increased slightly by US$100 million from a year earlier to end two straight months of annual declines, the Ministry of Finance said. Outbound shipments totalled US$24.89 billion last month, down 4.7 percent from October, the ministry said. “Demand from the ASEAN block was lower than expected,” Yeh Maan Tzwu, director of the ministry’s statistics department, told a press conference. Exports to ASEAN countries dropped to US$4.37 billion last month, down 9.3 percent from a year earlier.

What’s the problem with advanced economies? Kenneth Rogoff

Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University

China Daily The best scenario for the Chinese economy in 2014 would be to achieve 7.8 percent GDP growth, a major think tank said on Monday. That could be obtained if all the recently proposed reform initiatives are carried out and the global market shows a more robust recovery, said the National Academy of Economic Strategy under the Chinese Academy of Social Sciences. If only the same strategies are pursued, there could be more complications to even sustain the 2013 growth rate, which is expected to come in at about 7.5 percent.

Yomiuri Shimbun The Japanese government and ruling parties have agreed on the outlines of a plan to allow major companies to count up to 50 percent of social costs such as entertaining business partners as deductible expenses, a move expected to help cushion the blow of next year’s consumption tax hike. Under the scheme, major companies will be allowed to report part of their social expenses, which are used for such purposes as entertaining the executives of business partners, as costs under taxation laws. No upper limit on the amount of social expenses not subject to tax will be set.

Times of India India’s S&P BSE Sensex jumped 1.6 percent and the currency touched 60.8475 per dollar, the strongest level since August 12. Victories by the Bharatiya Janata Party in areas holding about a sixth of the nation’s 1.2 billion people would give it momentum to end the ruling Congress party’s decade-long rule in polls due by May and install Narendra Modi as prime minister. Despite recent policy action by Congress, markets have been clamouring for more measures to bolster an economy growing at its slowest in a decade and to ease infrastructure bottle necks that keep inflation high.

s today’s slow growth in advanced economies a continuation of long-term secular decline, or does it reflect the normal aftermath of a deep systemic financial crisis? More important, do we need to answer that question definitively in order to boost the pace of economic recovery? At a recent International Monetary Fund (IMF) conference, former U.S. Treasury Secretary Lawrence Summers argued that today’s growth blues have deep roots that pre-date the global financial crisis. Summers placed particular emphasis on the need for more infrastructure investment, a sentiment that most economists wholeheartedly share, especially if one is referring to genuinely productive investment. Others also certainly worry about secular decline, though most have emphasised the supply side rather than the demand side. The economist Jeffrey Sachs, for example, has argued that the U.S. economy needs to confront a plethora of structural impediments to sustained growth, including offshoring, skill mismatches, and decaying infrastructure. The Internet entrepreneur Peter Thiel and the legendary chess champion Garry Kasparov have suggested that the malaise runs even deeper, as has the economist Robert Gordon. They argue that the technology engine that has driven mankind from one economic plateau to the next over the past 200 years is running out of steam. Simply put, the Internet may be cool, but it is hardly as essential as running water, electrification, or the internal combustion engine. The Gordon-Kasparov-Thiel thesis is extremely interesting,

though I have challenged their negative conclusions, both in print and in a debate at Oxford. Personally, I think the greater risk is that the pace of technological progress will accelerate too much for societies to adapt, though the experience so far has basically been positive.

Ideological distraction Certainly, today’s advanced economies urgently need to address all kinds of technological, social, and political deficiencies. Nevertheless, the subpar growth of the past half-decade still bears all the hallmarks of a typical sluggish recovery from a deep systemic financial crisis, as Carmen Reinhart and I documented in our 2009 book This Time is Different.

I think the greater risk is that the pace of technological progress will accelerate too much for societies to adapt

Of course, structural reform is essential after a financial crisis, as are policies to maintain aggregate demand while the economy heals. To my mind, the biggest failure of post-2008 economic policy has consisted in governments’ inability to find creative ways to write down unsustainable

debts, for example in U.S. mortgage markets, and in Europe’s periphery. This includes the failure to issue public debt where necessary to facilitate restructuring, particularly if overall economy-wide (or eurozone-wide) debt could be reduced in the same operation. But Summers is certainly right that productive infrastructure investment is the lowhanging fruit. Of course, governments should be concerned about the long-term trajectory of public debt, all politically charged and polemical nonsense to the contrary. But productive infrastructure investment that generates long-term growth pays for itself, so there need not be any conflict between short-term stabilisation and risks to long-term debt sustainability. With today’s ultra-low interest rates and high unemployment, public investment is cheap and plenty of projects offer high returns: fixing bridges and roads, updating badly outmoded electricity grids, and improving mass-transportation systems, to take just a few notable examples. I appreciate that there are those who take on faith that Keynesian multipliers are much bigger than one, implying that even wasteful government spending is productive. But, given thin empirical evidence and legitimate concerns about undermining trust in the effectiveness of government, and with so many options for the productive use of resources, this seems like a titanic ideological distraction.

Political gridlock It is also far from clear why virtually all infrastructure needs to be publicly financed. There are still huge pools of private

wealth sitting on the sidelines that can be rapidly mobilised to support productive infrastructure. The government needs to help with rights of way before construction, and with strong regulation to protect the public interest afterwards. In his first term in office, U.S. President Barack Obama suggested the creation of an infrastructure bank to help promote public-private partnerships. It is still a good idea, particularly if the bank maintained a professional staff to help guide public choice on costs and benefits (including environmental costs and benefits). Even if Keynesian multipliers are truly at the upper end of consensus, mobilising private capital for investment has most of the advantages of issuing public debt. One qualification is in order. Some commentators have suggested that the root cause of secular decline, as well as the main explanation of ultra-low interest rates, is low fertility throughout the advanced world. If true, the case for any kind of investment, public or private, would be more mixed; there must be labour to use the capital. But I suspect that the drivers of today’s slow growth and low interest rates go far beyond low fertility rates, in which case this should not be an obstacle. The important point is that the case for expanding productive infrastructure investment does not rest on one narrow ideological viewpoint or economic theory. Whether Summers is right about secular stagnation in advanced economies, or whether we are still mainly suffering the aftermath of the financial crisis, it is time to break the political gridlock and restore growth. © Project Syndicate

16 16

December 11, 2013 April 19, 2013

Closing Philippine congress approves 2014 budget U.S. Treasury lost US$10b on GM bailout A joint congressional panel approved the Philippine government’s 2.26 trillion peso (US$51 billion) budget for 2014 yesterday, which includes a 100 billion peso fund to rehabilitate communities ravaged by last month’s super typhoon. Next year’s budget is 3.2 billion pesos lower than the government’s original proposal, Francis Escudero, head of the Senate finance panel said. The difference represents “pork barrel” spending which some lawmakers gave up after a scandal over the misuse of these funds erupted later this year. The cost of rebuilding typhoon-devastated communities could reach 250 billion pesos, according to government estimates.

The U.S. government has sold its remaining shares in General Motors Co, leaving it with a loss of around US$10 billion on the bailout of the car maker. The U.S. Treasury spent US$49.5 billion bailing out GM in 2008 and 2009, and took a 61 percent stake in the carmaker. Treasury Secretary Jack Lew said the move prevented the collapse of the U.S. auto industry. “With the final sale of GM stock, this important chapter in our nation’s history is now closed,” he said. GM filed for bankruptcy protection in 2009 and the reorganisation saw it slash 13 car plants and 27,000 employees in the U.S.

Chinese banks to offer certificates of deposit Offer to start this week as Beijing loosens grip on interest rates

hina’s biggest banks will launch the sale of negotiable certificates of deposit this week, eight sources with knowledge of the situation said, in a decisive move to free up the country’s interest rates market. Banks that include China’s five biggest lenders will be allowed to issue up to 5 billion yuan (US$823.41 million) worth of certificates of deposit each, the sources said. This would be a quick followup to China’s newly released rules for the budding NCDs market. The

People’s Bank of China had published guidelines for the NCDs market just on Sunday, listing among rules that certificates of deposit cannot be less than 50 million yuan per issuance. “The central bank had a meeting about NCDs this afternoon. Issuance of the NCDs is imminent,” one of the sources said. A spokesperson for the central bank declined to comment when contacted. Banks that will get the green light to issue NCDs include the Industrial and Commercial Bank of China Ltd, Bank

of China Ltd, China Construction Bank, Agricultural Bank of China and the Bank of Communications. Most of the NCDs will have maturities of three months with fixed interest rates that use SHIBOR as a reference rate, the sources said. But the final NCDs rates may be revised upon request by regulators. Capital raised by NCDs will be regarded as a form of interbank financing and will not be used in the calculation of loan-to-deposit ratios and reserve requirement ratios, the sources.

The interest rate on the certificates will be determined by the market, unlike ordinary deposits, which are subject to rate caps in mainland China. The move is also likely to help improve cash circulation in interbank market. In June, the overnight lending rate between banks jumped to exceed 25 percent at one point as banks became reluctant to lend to each other amid a cash crunch, before falling in subsequent days.

No Pacific trade pact this year Trade pact misses deadline as more talks planned for January Kevin Lim and Masayuki Kitano

n ambitious trade pact between a dozen countries around the Pacific Rim will not be finalised this year as hoped, with no agreement on thorny issues like intellectual property, agricultural tariffs and state-owned enterprises. “We identified potential landing zones for the majority of key outstanding issues in the text,” U.S. Trade Representative Michael Froman told reporters after four days of talks in Singapore, reading a joint statement from ministers and delegation heads. “We intend to meet again next month,” he said, with market access issues yet to be resolved. The TPP, which would link an area with about US$28 trillion in annual economic output, has been bogged down by differences over issues from agricultural tariffs to intellectual property. But differences over farm tariffs between the United States and Japan proved to be one of the major roadblocks. “None of us have agreed on anything,” Tim Groser, New Zealand’s trade minister, told a news conference in Singapore yesterday at the end of a four-day meeting of

Japan’s defence of its automobile industry among issues impeding progress

the Trans-Pacific Partnership (TPP). However, he added: “The outline of a genuine 21st century agreement is coming into view and, as is always the case in life, the toughest political decisions will be taken at the end.” The ministers said they had found possible areas where they might agree, known as “landing zones” but need to continue discussions and will meet again next month. More far-reaching than other deals, the TPP pact is aimed at going beyond

tariffs on physical trade and it will try to regulate sensitive areas such as government procurement and give companies more rights to sue.

No deadline One problem area is the United States and Japan’s disagreement over Japan’s long-stated aims to exempt five sensitive farm products – rice, wheat, beef and pork, dairy products and sugar – from the scrapping of tariffs. The two countries held bilateral talks during the

Singapore meeting to try to discuss the issue but have not yet come to any agreement. “Resolving the U.S.-Japan market access questions will be critical to the success of TPP,” said Mr Froman in a news conference on the sidelines of the meeting. “There is a line on which Japan can absolutely not compromise,” Japan’s Chief Cabinet Secretary Yoshihide Suga told reporters yesterday in Tokyo of the TPP. Still, Japan’s team “will continue to put all their energies into the negotiations until

Reuters

the end for the sake of the national interest.” The TPP negotiations, which have run for three years, have been mired in controversy over a lack of transparency, and slowed by the conflicting interests of the negotiating countries, U.S. lawmakers and advocacy groups. No full draft text of the text has been released and few media briefings by the governments involved have been held to explain what’s left on the table. Also, no new timeline has been set to reach an agreement on the TPP. The intellectual property chapter has also sparked disagreement, particularly in relation to increased protection for pharmaceutical patents due to concerns it could limit access to affordable drugs in developing countries. Australia and New Zealand dismissed earlier media reports that they had given away significant amounts of ground over the issue. “Our position remains clear, not to agree on a TPP outcome that undermines our pharmaceutical benefit scheme,” said Australian trade minister Andrew Robb. “Within that construct, I think we’ve been very constructive in terms of the discussions that we’ve had today,” he added. The full list of those already in the talks is the United States, Canada, Japan, Australia, New Zealand, Singapore, Malaysia, Brunei, Vietnam, Chile, Mexico and Peru. Reuters