Macau Business Daily, Jan 3, 2014 by Business Daily

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Vitor Quintã

MOP 6.00

Small businesses 1 to be offered extra credit

April 19, 2013

www.macaubusinessdaily.com

Year II

Number 447 Friday January 3, 2014

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

SJM gives casino staff five percent rise Page 5

‘Yellow House’ let for only two-thirds of asking price Page 6

Rent control violates free market say legislators T

he Legislative Assembly has rejected a bill aimed at controlling home and shop rent rises. It was the second time in fewer than eight months that José Pereira Coutinho, along with fellow legislator Leong Veng Chai, had presented a rent control draft law. The first time it was for homes only. Most legislators – some of them developers or

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professional landlords – voted ‘against’ yesterday. Several said that the city’s free market status could be shaken if the bill were passed as drafted. They argued it gave too much power to tenants over landlords. But a few members said the government should have a comprehensive review of the current rental regulations. More on page 2

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Casinos break US$45 bln barrier during 2013 Gaming revenue for 2013 totalled nearly 360.75 billion patacas (US$45.2 billion) – an increase of 18.6 percent compared to 2012 – according to official data released yesterday. December contributed 33.46 billion patacas to the full year numbers. That was an 18.5 percent growth compared to December 2012 said the local regulator the Gaming Inspection and Coordination Bureau. In the 11 months to November 30, the city generated around seven times as much gaming revenue (the equivalent of US$41 billion) as the Las Vegas Strip tally of US$5.8 billion reported for the same period. Most analysts are expecting Macau’s 2014 revenue to expand by 10 percent to 15 percent.

%Day

TENCENT HOLDINGS

2.00

CHINA RES LAND

1.87

GALAXY ENTERTAIN

1.37

AIA GROUP LTD

1.16

SANDS CHINA LTD

0.95

CHINA RES POWER

-1.20

CHINA LIFE INS-H

-1.65

CITIC PACIFIC

-1.85

CHINA SHENHUA-H

-2.25

CHINA COAL ENE-H

-4.13

Source: Bloomberg

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‘10 percent’ home price rise in 2014

New rules bring tighter scrutiny for insurers

Housing prices may increase by 10 percent or more this year, a slower growth compared with 2013, president of Macau General Association of Real Estate Chong Sio Kin predicts. From January to November last year, the average home price in Macau rose by 37 percent year-on-year to 81,582 patacas per square metre. The average home size was 74 square metres, data from Financial Services Bureau show.

Macau’s insurers will have to disclose more data on their business performance and staff pay under corporate governance guidelines that came into effect yesterday. The rules will encourage “sound, prudent” oversight of the insurer’s business, the Monetary Authority of Macau said in an reply to Business Daily. The financial regulator released the guidelines last month, “in line with the recent development of international standards in this area”.

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Chow aims to be casino operator and VIP promoter Casino services firm Macau Legend Development Ltd co-chaired by David Chow, has restated its ambition to be both a casino operator and to participate in VIP gambling promotion – albeit on an “indirect” basis. “…the company intends to…diversify its business

and indirectly participate in the gaming promotion business,” it said in a Tuesday filing in Hong Kong. That bumps up against regulatory boundaries previously clearly defined by the government. Page 4

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January 3, 2014

Macau

Legislators say bill gave tenants too much power

Rent control violates free market: legislators Assembly members veto plan to limit property rent rises, but call for ‘review’ of current rules Tony Lai

tony.lai@macaubusinessdaily.com

he Legislative Assembly rejected a bill aimed at controlling home and shop rent rises. It was the second time in fewer than eight months that José Pereira Coutinho, along with fellow legislator Leong Veng Chai, had presented a rent control draft law. The first time it was for homes only. Most legislators – some of them developers or professional landlords – voted ‘against’ yesterday. Some said that the city’s free market status could be shaken if the bill were passed as drafted. They argued that the draft

law gave too much power to tenants over landlords. But a few assembly members said the government should have a comprehensive review of the current rental regulations. The proposal by Mr Pereira Coutinho would allow no increases in rent during the first two years of a lease, and subsequently allow no increases greater than the annual rate of inflation as recorded in the preceding 12 months. The bill only garnered the support of seven legislators. From the 30

assembly members attending the meeting, five abstained and the rest voted against. Legislator and businessman Tsui Wai Kwan criticised the proposal: “This will impact the free-economy status of Macau and shake the city’s financial system, creating hurdles to [overseas] investment here.” Such a bill could have an impact on other sectors, he said. “Should we also regulate the price increases on vegetables, meat…? This will shock the capitalist market here.” Assembly member and developer

‘10 pct’ home price rise in 2014 Slowing from the 37 pct hikes seen year-on-year during 2013 Stephanie Lai

sw.lai@macaubusinessdaily.com

ousing prices may increase by 10 percent or more this year, a slower growth compared with 2013, president of Macau General Association of Real Estate Chong Sio Kin predicts. From January to November last year, the average home price in Macau rose by 37 percent year-on-year to 81,582 patacas per square metre. The average home size was 74 square metres, data from Financial Services Bureau show. “With quite a high base of home price we saw last year, I’d put a more conservative projection – at a 10 percent rise – for 2014,” Mr Chong told Business Daily. “This is mainly supported by the fact that the demand will continue to outweigh supply, with…existing home owners that are switching for better flats or those that are buying flats for investment purpose,” he added. But the chief executive of Midland Realty (Macau) Ltd Ronald Cheung Yat Fai predicted that local home prices could rise by as much as 30 percent this year. Only about 1,000 new homes are to be added to the market in 2014 and 2015, he stated.

In November last year the Land, Public Works and Transport Bureau said nearly 8,000 new private flats could be completed within three years. It takes time however to get that newly constructed supply into the

New homes in short supply

market, because of issues including the government’s registration process. “This year, you’ll no longer see many available high-end unfinished flats sold in the market. So basically the home price rise will not be as

Tommy Lau Veng Seng said the tenants and landlords “should have the freedom” to set up the rents based on factors like supply and demand and the city’s economy. But Mr Pereira Coutinho said that a specific rental lease regulation existed when Macau was still under the Portuguese administration and that such law required the lease contracts to be filed in the government’s records. According to the Civil Code – which was inherited from the Portuguese administration, home rental contracts should last at least two years. During that period, rents can only be raised with the tenant’s approval.

Review needed Assembly member and legal expert Gabriel Tong Io Cheng said the proposal was “not objective”. “This proposed bill is noncomprehensive… considering only interests of one side instead of pondering over different areas,” he said. Song Pek Kei, the youngest member in the assembly, also said the proposed bill mentioned fines for landlords for raising the rents but did not include fines for tenants unwilling to pay rents. Mr Pereira Coutinho explained his proposal only served as a supplement to the rules in the Civil Code. But legislator Ho Ion Sang said the draft law would harm the interests of residents leasing their properties. But he thinks, as well as many other legislators, that the government should review the current rental rules, which “are lagging behind the city’s development”. There is no official data on property rent but the latest consumer price index shows the household spending on home rents surged 15.3 percent in November from a year earlier. Yesterday, the assembly also approved the government report on the budget execution for 2012.

steep as last year,” the real estate association’s Mr Chong remarked to Business Daily. Macau saw record home prices in May last year at 98,187 patacas per square metre. That month the market saw a rush by estate agents and developers to complete off-plan sales before a new, stricter law on offplan sales came into effect on June 1. Under the housing pre-sales law, sales of flats off plan are legal only if the foundations of the development that will contain them are complete and each flat is registered with government. “Because of this law, I think the launching of the large-scale projects of unfinished flats will only be available in 2016,” said Mr Chong.

January 2014 April 19,3,2013

Macau

Regulator tightens rein on insurance industry The Monetary Authority says new rules will give policyholders greater protection

More credit guarantees for SMEs The government intends to set aside 1 billion patacas for its credit guarantee scheme

Vítor Quintã

vitorquinta@macaubusinessdaily.com

Stephanie Lai

sw.lai@macaubusinessdaily.com

New rules for insurance companies came into force yesterday

ew rules that came into force yesterday will oblige Macau’s insurers to disclose more data on their business performance and their staff pay and benefits. The Monetary Authority of Macau, which regulates the insurance industry, said the rules would encourage “sound, prudent” management and oversight of the insurance business. The authority told Business Daily in writing that insurers had already taken measures to improve corporate governance. But the authority said it had decided to lay down the rules last month “in line with the recent development of international standards in this area”. It said financial reporting would be more “reliable and transparent” and that the interests of insurance policyholders would be “better protected”. The rules say an insurance company must explain to the regulator any “significant issues” found during the preparation of its financial accounts. If the insurer finds any problems, it must say what it is doing to solve them. If it dismisses its auditors or its auditors resign, it must explain why. Auditors are required to report any suspicion of fraud or irregularity to the Monetary Authority, whether or not they have the insurer’s permission. The regulator has the power to replace an insurer’s auditors or mandate a new audit by different auditors.

Threat of punishment The Monetary Authority need not wait for an insurer to report a problem. The authority may obtain more data, including “commercially sensitive information,” make regular

KEY POINTS Auditors must report fraud or irregularities Regulator may demand ‘sensitive’ data Staff pay and benefits may be scrutinised Small insurers could be exempt from rules

inspections and do other checks. The regulator may demand meetings with the directors of an insurer to check their knowledge and ability, and order them to undergo training in their field. It may also require the board to assess its own performance regularly, or send an observer to board meetings. The Monetary Authority said the rules would encourage insurers to introduce internal controls that ensured risk was managed soundly. The rules also “clearly define” the role and responsibilities of an insurer’s directors, making it easier for the board to be held accountable for its actions, the authority said. The rules say the regulator may check the effect on an insurer’s finances of the pay and benefits of its staff – including signing-on payments, performance bonuses and severance payments or golden parachutes. They say that if the regulator

finds “significant risks” it may ask a third party to make an independent assessment of an insurer’s compensation policy. The Monetary Authority said insurers that broke the rules could be fined, have their directors suspended for between six months and five years or have their licences revoked.

Minimum standards The rules do not apply to insurers with gross premiums or technical provisions – an estimate of liabilities plus a risk margin – of under 20 million patacas (US$2.5 million) last year. Monetary Authority director Félix Pontes said only one Macau insurer might have technical provisions below that amount. “It would be unfair to ask small insurers, to wit newly created firms, to comply with all these requirements,” Mr Pontes told Business Daily. The Monetary Authority said: “After the close of the 2013 financial year, we will be in a better position to determine the number of companies which may be exempt.” Mr Pontes said the rules were for Macau insurance companies, but that branches here of insurance companies elsewhere are not necessarily exempt. “The parent companies have to meet corporate governance requirements in their home jurisdictions, which in many cases are stricter than ours,” he said. Only six of the 21 insurers doing business here are Macau companies. Business Daily invited the Macau Insurers Association to comment but we had received no reply by the time we went to press.

he government is set to raise the cap on the amount it will guarantee under its credit guarantee scheme for small and medium enterprises to 1 billion patacas (US$125 million), Executive Council spokesperson Leong Heng Teng has announced. Mr Leong told a press conference yesterday that the Legislative Assembly would discuss the change “soon”. The cap is now 500 million patacas. The 1 billion pataca fund the government will keep will include backing for its SME Special Credit Guarantee Scheme. The cap on the amount the government will guarantee under the SME Special Credit Guarantee Scheme will remain 100 million patacas. Mr Leong said the general scheme had been popular among entrepreneurs running SMEs, the government having guaranteed over 429 million patacas in credit from 2010 to last year. The government will guarantee 70 percent of a five-year loan made to an enterprise by a bank taking part in the scheme, up to a maximum amount guaranteed of 3.5 million patacas. Most enterprises that use the scheme are in construction or wholesaling and retailing, according to Macau Economic Services data. The SME Special Credit Guarantee Scheme guarantees up to 100 percent of a five-year loan made to an enterprise for a special project, up to a maximum amount guaranteed of 1 million patacas. The special scheme is meant for SMEs affected by “extraordinary or unpredictable matters”. A study commissioned by the Macau SMEs Association last year found that over 70 percent of SMEs had no sources of finance other than their own savings, while the rest had access to bank loans, government loans or the equity market. Most SMEs said bank loans or government loans were their preferred sources of finance. More sources of finance, including quicker and easier government-backed loans, ought to be available to smaller enterprises, the association said.

Leong Heng Teng says the government will increase its support to SMEs

January 3, 2014

Macau

Chow aims to be casino operator and VIP promoter Bid bumps up against boundaries previously defined by Macau government Michael Grimes

michael.grimes@macaubusinessdaily.com

asino services firm Macau Legend Development Ltd has restated its ambition to be both a casino operator and to participate in VIP gambling promotion – albeit on an “indirect” basis. “…the company intends to… diversify its business and indirectly participate in the gaming promotion business,” it said in a Tuesday filing to the Hong Kong Stock Exchange. Macau Legend, co-chaired by former Macau legislator David Chow Kam Fai, has never been issued with its own Macau gaming concession. But it is able to operate casinos in the city by virtue of a so-called ‘service agreement’ with Sociedade de Jogos de Macau SA, founded by Stanley Ho Hung Sun. Mr Chow is busy expanding his Macau operations after raising approximately HK$2.04 billion (US$263 million) net in a global share offering in July. This year his firm plans to open a new casino hotel called Prague Harbor View at Macau Fisherman’s Wharf. Mr Chow’s other assets include the Landmark Macau hotel, and the Pharaoh’s Palace casino inside it, as

well as the mass-market Babylon Casino and a 72-room hotel called The Rocks. The significance of Mr Chow’s ambition to be both a provider of casino services and a participant in VIP operations is that bumps up against regulatory boundaries previously clearly defined by the government. According to Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau, when a VIP player gambles in a Macau VIP room, he or she has a contractual relationship with one of the gaming promoters – the licensed middlemen who coordinate the supply of high stakes VIP gamblers to the city’s casinos – not with the casino concessionaire or its service agent. It is the gaming promoter and its agents and associates that has responsibility for issuing VIP gambling credit and collecting cash owed from any losses. But Macau Legend said in its June prospectus: “We plan to indirectly participate in the gaming promotion business of certain VIP rooms in our properties through a new licensed gaming promoter to be established by Mr Yip Wing Fat, Frederick, an

David Chow, co-chairman of Macau Legend Development Ltd

independent third party and a member of our senior management team.” The firm did not clarify how one of its senior managers could also be defined as an “independent third party”.

DICJ permission “The plan may or may not be approved by the relevant authorities in Macau and Hong Kong,” states the latest Macau Legend filing. Business Daily approached Macau’s gaming bureau for clarification on the status of Macau Legend’s request for “indirect participation” in the VIP promotion business. No reply was available by press time. Macau Legend has made other requests to be treated as a special case. Carl Tong Ka Wing, a co-chairman of the firm, in September repeated an assertion made in the share offer document that 350 new-to-market live dealer gaming tables – requested by Macau Legend from the government – would be outside the administration’s current cap on table inventory. Over the next decade the cap allows for three percent compound

annual growth from a starting point of 5,500 tables. Macau service agreements, a system established during Stanley Ho’s 40-year monopoly, allow gaming concessionaires to spin off their rights to other investors. All but three of the 18 currently active casinos in SJM’s Macau portfolio come under this heading, although SJM as the concessionaire, gets to share revenue.

KEY POINTS Wants to be casino op and gaming promoter Seeking permission from DICJ Prague Harbor View opening this year Firm’s bid for 350 new tables ‘outside table cap’

January 3, 2014

Macau

SJM gives its casino staff 5 pct rise But union rep criticises ‘below inflation’ hike, hopes other operators will offer more Tony Lai

Tony.lai@tacaubusinessdaily.com

Keep it coming – new casino revenue record for 2013

acau casino concessionaire Sociedade de Jogos de Macau SA announced yesterday – in a press statement – a salary increase of five percent for all its employees, effective from January 1. But a workers’ union immediately criticised the award for being below inflation. Latest official data said consumer price index inflation averaged 5.51 percent in the twelve months to November 30. “We surely think [the rise] is not enough as the inflation in the recent times has been staying at the level of six percent. But it is still better than none,” Gaming Industry Workers Association vice-president Leong Sun Iok told Business Daily. In fact additional payments promised by SJM SA in the same announcement, will push its workers’ 2014 pay increases above inflation. Nonetheless, property agency Jones Lang LaSalle Macau said in August rents for cheaper flats in Macau rose far above inflation – to 10.3 percent in the first half of 2013. Gaming revenue in 2013 expanded by nearly 19 percent year-on-year according to government data released yesterday. Workers’ representative Mr Leong expects the other five operators will at the minimum follow the example set by SJM – founded by former Macau gaming monopolist Stanley Ho Hung Sun – and offer similar salary hikes, linked to inflation, plus bonuses. “We believe the other operators will give out bonuses and have salary hikes as well,” said Mr Leong. “This can boost the morale as the workers have been going through a lot in the past year but we just hope the salary rises can be pegged with inflation,” he added. Last year the city saw two largescale protests attended by thousands of gaming employees. One – in October – was to protest against any possibility that card dealing and pit supervisor jobs might be opened to non-residents. SJM SA said yesterday that as well as offering a five percent rise in annual salary it would also give a bonus – referred to as “a living subsidy for 2014” – worth 175 percent of one month’s salary for workers earning fewer than 17,000 patacas (US$2,125) a month. Other employees will be given bonuses worth 125 percent of a month’s salary, up to a ceiling of 29,750 patacas. Angela Leong On Kei, director of SJM SA, said on the sidelines of the Legislative Assembly session yesterday that the salary hike shows that the operator “pays attention to the socioeconomic development of Macau”. SJM also understands that grass-root employees face more difficulties, thus “they are entitled to more living subsidies this time,” Ms Leong said.

Casinos break US$45 bln barrier Strong December helps to raise 2013 tally Michael Grimes

michael.grimes@macaubusinessdaily

aming revenue for 2013 totalled nearly 360.75 billion patacas (US$45.2 billion), an increase of 18.6 percent compared to 2012, according to official data released yesterday. December contributed 33.46 billion patacas to the full year numbers. That was a 18.5 percent growth compared to December 2012, said the local regulator the Gaming Inspection and Coordination Bureau. A group of six analysts quoted by Reuters had estimated 13 percent to 17 percent growth for the final month of 2013. “Macau is expensive... but it’s hard to push the ‘Sell’ button,” wrote the brokerage arm of Macquarie Securities Group in its most recent gaming report, referring to casino equity prices versus sustained revenue growth. To put Macau’s 2013 numbers in a wider context, in the 11 months to November 30, the city generated around seven times as much gaming revenue (the equivalent of US$41 billion) as the Las Vegas Strip tally of US$5.8 billion reported for the same period by the University of Nevada, Las Vegas, Center for Gaming Research.

Lust, caution Despite Macau’s strong 2013 result, some analysts are expressing more conservative estimates for 2014.

“Looking to ‘14, decelerating credit growth could weigh on mid2014 Macau growth. However, consensus estimates for next year’s growth in Macau remain conservative at around 10 percent,” said Cameron McKnight, a senior analyst at Wells Fargo & Co in New York in a note just after Christmas. The challenge of trying to grow robustly from an already high base is not the only issue. China’s local government debt jumped to 17.7 trillion yuan (US$2.95 trillion) by mid-year, up 12.7 percent from December 2012, said the country’s National Audit Office in a report on Tuesday. Official concerns about containing that leveraging trend could lead to constraints on credit in 2014 and thus on the cash available for gambling in Macau. Prospects for sustained casino revenue growth in Macau have however prompted some of the world’s biggest investment institutions, including BlackRock Inc and Allianz Global Investors, to favour casino stocks. Only around four percent of Chinese; about 52 million people, have ever visited Macau, according to some industry estimates. The population of neighbouring Guangdong – the highest ranked Chinese province by gross domestic product – was 104 million in 2011 according to China’s National

Bureau of Statistics. Deutsche Bank thinks the advent of a new segment of high stakes cash bet baccarat player in the so-called ‘premium mass’ segment – which the bank refers to as ‘Super Premium’ – will help the market to achieve 20 percent revenue expansion in 2014. “It’s going to be another strong year in 2014, while the growth rate is likely to be in the mid-teens,” Grant Govertsen, a Macau-based analyst at Union Gaming Group, said yesterday. “In absolute terms, it’s going to be magnificent growth because of the improved rail connection and infrastructure, as well as the addition of the Chimelong theme park on the neighbouring Hengqin Island.” With Reuters/Bloomberg News

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January 3, 2014 April 19, 2013

Macau Brought to you by

HOSPITALITY Hello, farewell Laws to better regulate package tours from the mainland came into force last October. One of the provisions forbids travel agencies from charging unreasonably low prices for tours and later taking tourists on enforced shopping tours or charging for hidden extras. These “zero-fee tours”, as they are known, have been a source of dissatisfaction and conflicts. It was expected that higher costs for package tours would have an impact on the tourism industry and October’s data confirmed, if not exceeded, those expectations. October is typically a good month for tourism because it is a peak time for travellers making the most of the National Day Golden Week. After August’s peak comes a trough in September, before arrivals pick up again. Except for last year.

The new tenant will probably move into the Yellow House in March (Photo: Manuel Cardoso)

Yellow House commands two-thirds of rent sought Future Bright lets most of its building near the Ruins of St Paul’s for HK$2.4 million a month Tony Lai

tony.lai@macaubusinessdaily.com

The graph shows the difference between tourist arrivals in September and October. From 2010 to 2012, there were more tourist arrivals in October than September. The seasonal increase was mostly due to mainland tourists. In 2011 and 2012, mainland tourists represented by far the biggest share of the increase. Last year’s decline could not be more dramatic. In 2012, the number of package tourists rose by more than 60,000 people between September and October, but last year that same number fell by more than 227,000 visitors. It was a huge loss of tourists from the mainland. Compared to August’s peak, there was a decline of one-third in tourists – about three times the number in 2012. J.I.D.

10.6 %

Year-on-year decline in tour group arrivals from the mainland last October

estaurant operator Future Bright Holdings Ltd will let its commercial building near the Ruins of St Paul’s to a new tenant for only two-thirds of the rent it originally asked. The new tenant will replace the Macau Government Tourist Office. Future Bright told the Hong Kong Stock Exchange last week that it would let most of the six-storey building, known as the yellow house, to an unidentified tenant for HK$2.4 million (US$309,500) a month. The company had previously described the new tenant as “a major consumer brand”. Future Bright told the stock exchange that the net floor area was 21,184 square feet. Business Daily calculates that the rent per square foot will be about HK$113.30. The rent per square foot is about two-thirds of what the company was asking last year after commissioning Hong Kong estate agent Centaline Property Agency Ltd and its Macau branch to find a new tenant. Centaline had said in August that Future Bright was seeking HK$170 a square foot, or about HK$4 million for the whole building. Even so, the rent will be over double the HK$1.17 million paid by the Macau Government Tourist Offi ce u n ti l i ts l ea s e expired last month. Future Bright said the new tenant “will be required to pay an additional

turnover rental” if its sales exceed a “certain level”. The company did not say how much extra rent the tenant would have to pay. Future Bright’s managing director is Legislative Assembly member Chan Chak Mo. Our calls to Mr Chan’s mobile phone yesterday went unanswered.

Drive into Zhuhai The new lease is for five years, beginning when the new tenant opens for business. Future Bright said it expected the tenant to occupy the premises in March but open for business only later, and that it would charge no

HK$1.17 mln Monthly rent the government paid for Future Bright’s building

rent in the interval. The company said it would retain 2,390 square feet of the premises for retailing its souvenir food. Last year Future Bright agreed to pay 4 million patacas for Macau Yeng Kee Bakery’s trademark rights in Macau and Hong Kong. Future Bright also told the stock exchange that it would expand its business in the mainland. The company said it would rent a total of 11,375 square metres of commercial space on various floors of the Huafa Mall in Zhuhai. It said the rent would be 475,000 yuan (626,900 patacas) a month for the first four years of a 10year lease. Future Bright said it would open a Chinese restaurant, a Japanese fast food restaurant, a café and a food court in the mall. At present the company runs one Japanese restaurant belonging to its Edo chain in Guangzhou. Future Bright said it was “fully aware of the challenge of operating restaurants of such big size in mainland China” but that it was seeking to exploit the increase in the number visitors to Macau and Zhuhai in the next five to 10 years. Huafa Mall will be in a commercial and office complex being built 10 minutes from the Gongbei border crossing by car. Work on the mall began in 2011 and is due to be completed this year.

January 2014 April 19,3,2013

Macau

CEPA simplifies rules on Macau employees The latest supplement cuts through mainland red tape that hinders Macau companies Stephanie Lai

sw.lai@macaubusinessdaily.com

mployees of Macau service companies exploring opportunities in the mainland are no longer required to have permits to work there temporarily. This is one of the changes to the Closer Economic Partnership Arrangement (CEPA) between Macau and the mainland that are contained in the latest supplement to the CEPA, which came into force on Wednesday. The supplement treats Macau permanent residents taken on here but temporarily working over the border as “contractual service providers” if their employer is a Macau service company without a branch in the mainland. A contractual service provider is exempt from the requirement to have a permit to work in the mainland. Changes to the bilateral trade pact give Macau investors easier access to mainland markets for several services, including banking and insurance. The latest supplement covers banking, securities, legal services, insurance, telecommunications, film production and certification. The simpler employment rules apply to 26 service industries, including architecture, engineering, construction, information technology, real estate sales, freight inspection and forwarding, cargo handling, meetings and exhibitions, translation and interpretation, tourism, wholesaling and retailing (except tobacco trading), and environmental services. The vice-president of the Macau Chamber of Commerce, Vong Kok

Seng, said: “The new rules make it more convenient for local businesses to expand their trade in mainland, as now the administrative procedure is simpler and a lot more time can be saved.” “This also boosts the chances of more local freelancers working in the mainland, which is good progress,” Mr Vong told Business Daily. The supplement also loosens rules for Macau companies setting up joint ventures in the mainland. It allows Macau-funded financial institutions and mainland enterprises to form joint fund management companies, of which the Macau partner can own up to 50 percent. It also allows the Macau and mainland partners to set up one licensed joint-venture securities firm each in Shanghai, Guangdong and Shenzhen. The Macau partners can own up to 51 percent of these securities firms. The supplement allows Macau banks operating in the mainland and authorised to do business in yuan for Macau companies to do business in yuan for foreign investors, too. It gives more room for Macau information technology enterprises to form joint ventures in Guangdong to process data and transactions online. The Macau partners can own up to 55 percent. It also allows mainland lawyers to work as consultants in representative offices set up in Guangdong by Macau lawyers. Macau and the mainland signed the original CEPA in 2003 with a view to opening up the mainland economy to Macau.

Vong Kok Seng says the simpler rules will save ‘a lot more time’ (Photo: Manuel Cardoso)

January 3, 2014 April 19, 2013

Greater China

China manufacturing at 3-month low: Survey confirms that the pace of growth among manufacturers declined last month

hinese manufacturing indexes fell in December, underscoring challenges for President Xi Jinping as he tries to sustain growth in the world’s second-largest economy while rolling out reforms. A Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics fell to 50.5 from 50.8 the previous month, according to a statement yesterday, and a separate gauge compiled by the statistics bureau and logistics federation released on Wednesday declined to 51 from 51.4. Swelling local-government debt, surging property prices in some cities and volatility in money-market rates are risks as Mr Xi embarks on reforms intended to lay the foundation for more sustainable long-term growth. Gross domestic product may have expanded 7.6 percent in 2013, the slowest pace in 14 years, according to a State Council report last week. The PMI readings “confirm our view that growth momentum has peaked and will continue slowing,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “China’s GDP growth will decelerate to 7.2 percent this year, more than expected, which will weigh on many regional asset prices.” Shares in China fell after the HSBC report. The Shanghai index fell about

7 percent in 2013, the third decline in four years, as rising money-market rates and slowing growth fuelled investor concern that corporate profits will decline. “The economy is still growing, no doubt, but the growth momentum has weakened,” said Yao Wei, economist at Societe Generale in Hong Kong. “The major factors that had helped drive the strong recovery in Q3 and the first half of Q4, such as restocking and property construction, has somewhat softened towards the end of the year,” she added. In 2013, GDP may have climbed 7.6 percent, according to the State Council report. While that would exceed the government’s 7.5 percent target, it would also be the slowest pace since 1999 when the gain was 7.6 percent. Expansion may fall to 7.4 percent in 2014, according to the median estimate of 48 economists in a Bloomberg News survey last month. “The Chinese leadership has made it clear that they want stable growth this year – neither a sharp fall nor a quick rebound,” said Zhu Haibin, Hong Kong-based chief China economist at JPMorgan Chase & Co, who spoke before yesterday’s report. “The central bank will remain neutral in its policy operations.” Yesterday’s reading from HSBC was the weakest in three months and was the same as the preliminary

Beijing has said it will accept slower growth as it tries to reshape the economy

number released on December 16. The official PMI released on Wednesday slipped to a four-month low. A number above 50 indicates expansion. Gauges of output and new orders rose at a weaker rate in the HSBC and official PMIs. Both surveys showed

Yuan pulls back from record high Central bank uses weaker midpoint to guide currency down Lu Jianxin and Gabriel Wildau

hina’s yuan pulled back slightly from a record high against the U.S. dollar yesterday after the central bank fixed a weaker midpoint, following the currency’s traditional year-end burst of appreciation. Spot yuan touched an intraday high of 6.0507 per dollar yesterday, narrowly off its all-time high of 6.0506 hit on Tuesday ahead of Wednesday’s New Year’s Day holiday. It was trading at 6.0510 by midday, slightly up from 6.0539 at Tuesday’s close. The People’s Bank of China (PBOC) set yesterday’s midpoint at 6.0990, slightly weaker than Tuesday’s 6.0969. Before yesterday, the PBOC set its midpoint at the strongest level since the Chinese market was established in 1994 for three straight sessions. It typically guides the yuan higher at year end to meet an unofficial full-year appreciation target set at the beginning of the year. “The year-end appreciation is over,” said a dealer at a Chinese commercial bank in Shanghai. “Even though there’s still a possibility the yuan will stray briefly a few times to new record highs, the currency is likely to see firm resistance at 6.05 percent in coming weeks.” “In the longer term, China is likely to continue see capital inflows including trade surplus, keeping the yuan under upward

Yuan could appreciate 3 pct this year, traders say

pressure for 2014.” Traders said they believe the yuan could appreciate as much as 3 percent in 2014, compared with a 2.9-percent rise in 2013, with the first-quarter pace relatively quick at about 1 percent.

These predictions are based on a prospect that the world’s secondeconomy will continue grow around 7.5 percent in 2014, compared with a forecast 7.6 percent in 2013, traders said. Reuters

new export orders dropped below the 50 mark that separates expansion from contraction and the employment measure in the statistics bureau’s index fell to the weakest reading since June. The PMIs for large, medium and small enterprises all dropped in the

January 2014 April 19,3,2013

Greater China

: HSBC

Beijing lends US$6.5 bln for Pakistan power

official survey, “suggesting a more broad-based deceleration in economic momentum,” Chang Jian, Hong Kong-based chief China economist with Barclays Plc said yesterday. “We continue to look for slower growth in the coming months,” Ms Chang said. Factors that will weigh on growth include reducing overcapacity, controlling local government debt and weaker corporate sentiment due to higher funding costs as market interest rates rise, she said. Housing prices are also challenging the government. A central bank survey last month showed two thirds of 20,000 households polled said property prices are “high and unacceptable”. New home prices in December jumped by the most in 2013. In Beijing and Guangzhou, prices jumped 28 percent from a year earlier, according to SouFun Holdings Ltd. The statistics bureau and logistics federation will today release their non-manufacturing PMI survey for December and HSBC will publish its services index on January 6, giving a broader picture of the strength of the economy. Service industries accounted for about 45 percent of GDP in 2012, according to statistics bureau data, and the government is seeking to increase the share to 47 percent by 2015. Bloomberg News/Reuters

Largest Chinese financing deal for single project in the country

hina has committed US$6.5 billion to finance the construction of a major nuclear power project in the port city of Karachi as it seeks to strengthen ties with its strategic partner, Pakistani officials said. Prime Minister Nawaz Sharif broke ground on the US$9.59 billion project last month but officials have provided few details of how they plan to finance it. Financing documents seen by Reuters showed China National Nuclear Cooperation (CNNC) has promised to grant a loan of at least US$6.5 billion to finance the project which will have two reactors with a capacity of 1,100 megawatts each. Two members of the government’s energy team and three sources close to the deal confirmed this. CNNC was not available for comment. “China has complete confidence in Pakistan’s capacity to run a nuclear power plant with all checks in place,” said Ansar Parvez, chairman of the Pakistan Atomic Energy Commission, which runs the civilian nuclear programme. “As things stand, the performance and capacity of nuclear power plants in Pakistan is far better compared to non-nuclear plants.” Mr Parvez declined to give more details of the funding but said it would

China has already helped supply two nuclear reactors to Pakistan

be completed by 2019 and each of the two reactors would be larger than the combined power of all nuclear reactors now operating in Pakistan. As part of the deal, China has also waived a US$250,000 insurance premium on the loan, said two sources in the Energy Ministry with knowledge of the project. They declined to be identified as they are not authorised to speak to the media about the financing. Pakistan and China, both nucleararmed nations, consider each other close friends and their ties have been

underpinned by common wariness of India and a desire to hedge against U.S. influence in South Asia. Pakistan sees nuclear energy as key to its efforts to solve power shortages that have crippled its economy. Pakistan generates about 11,000 MW of power while total demand is about15,000 MW. Under its long-term energy plan, Pakistan hopes to produce more than 40,000 MW of electricity through nuclear plants by 2050. Reuters

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Greater China

Regulator clears second batch of IPOs More than 750 companies have applications pending

Balloon to disputed islands crashes A Chinese man flying a hot air balloon to a group of disputed islands had to be rescued after his balloon crashed, Japan’s Coast Guard has said. The man, who said he was a cook, was heading to an East China Sea island chain controlled by Japan, known as Senkaku in Japan and Diaoyu in China. The man had been handed to a Chinese patrol ship, the coast guard said. The islands are close to potential oil and gas reserves, and are a source of tension between the two countries. The Japanese Coast Guard said they received a request to search for a missing person on Wednesday afternoon. They found the man and the hot air balloon around 20km (12 miles) from the islands. The man was not hurt, reports said. The 35-year-old launched the hot air balloon from Fujian province in an attempt to land on one of the disputed islands, officials said. They said the man was in Japanese territorial waters, but decided against pursuing charges as they could not determine the exact place he had landed, Japan’s Kyodo news agency reported. In 2012, the Japanese government bought three of the islands from their Japanese owner, sparking mass protests in Chinese cities. Since then, Chinese ships have repeatedly sailed in and out of what Japan says are its territorial waters. In August 2012, Japanese police arrested 14 pro-China activists, including one from Macau, who sailed from Hong Kong to the islands, with some setting foot on one of the islands.

he regulator in mainland China has approved six more companies to list on mainland stock exchanges, the second batch to get approval since regulators ended a year-long freeze on initial public offerings. The China Securities Regulatory Commission (CSRC) gave the greenlight to five companies on Tuesday, including Shanghai Liangxin Electrical Co Ltd and Being UTour International Travel Service Co Ltd, according to stock exchange filings. In addition, Shaanxi Coal and Chemical Industry Group Co Ltd, has also received approval, the official China Securities News reported yesterday, although its filing was not available on the stock

exchange website. Shaanxi Coal is the largest among the six and had already received preliminary CSRC approval for an IPO prior to the suspension. It had planned to raise around 17.2 billion yuan (US$2.84 billion). That would make it the largest Chinese IPO since Agricultural Bank of China debuted in 2010. The latest approvals follow an initial batch of five approvals earlier this week seeking to raise about US$353 million. The long-awaited resumption of the IPO market is a boon to the more than 750 companies whose applications are pending with the regulator but will bring trepidation to equity investors, who fear new listings will siphon off demand

from existing shares. The long-awaited move is a boon to the more than 750 companies whose IPO applications are pending with the regulator but will bring trepidation to equity investors, who fear that new listings will siphon off demand from existing shares. Fifty companies are expected to be ready by the end of January, the China Securities Regulatory Commission said on November 30 after pledging to move toward a U.S.-style IPO registration system. EY, the accounting firm, has estimated this initial group could raise around 40 billion yuan (US$6.6 billion), while fundraising could total 200 billion yuan overall in 2014. Reuters

Stocks decline after PMI points to slowdown

HK poll shows support for open elections More than 90 percent of people who took part in an survey organised by a pro-democracy group said China shouldn’t vet candidates for Hong Kong’s next leader. About 62,000 people took part on Wednesday in the poll commissioned by Occupy Central and published by the University of Hong Kong. They rejected any “pre-screening mechanism” for candidates to replace Chief Executive Leung Chun Ying (pictured) in 2017. The results reflect anxiety among opposition groups that China’s ruling Communist Party will exert increased control over the chief-executive selection process as it undergoes changes by 2017. China said the city’s leader should be chosen via elections, though officials have said candidates should be vetted and the post should be filled by “a patriot”. Opposition lawmakers in Hong Kong are calling for full-fledged democracy, and have threatened demonstrations unless political reforms speed up. More than 10,000 people took part in a protest on the first day of the year demanding to choose their next leader, according to estimates from the university. Mr Leung took over as the city’s leader in July 2012. He was elected by a committee made up of billionaires, lawmakers and business leaders. More than 88 percent of people participating in the poll said the nominating committee should be more representative and 94.1 percent said the public should be involved in the nominations, according to the poll results. AFP

hina’s stocks retreated, led by energy and consumer companies, after gauges of manufacturing in the world’s secondlargest economy fell. The Shanghai Composite Index dropped 0.3 percent to 2,109.39 at the close. The gauge slid 6.8 percent last year, making it the worst-performing benchmark equity index in Asia. Official data showed the official Purchasing Managers’ Index slipped to a four-month low in December, while a private report also signalled

manufacturing grew at a slower pace. “The weaker PMI probably heralds a weak start of economic growth this year as China is still finding a new growth model,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “The weaker economy will hold back stocks.” China’s equities fell last year amid concern slowing economic growth will curb profits. Property and energy companies were the worst performers among industry groups,

Beijing levies tax on biodiesel, kerosene imports C

hina started levying a consumption tax on imported biodiesel and some types of kerosene from the start of the new year, the customs office said, a move aimed at curbing imports of the fuels that have taken market share from state refiners. The tax could create a supply gap for diesel in the world’s second largest oil consumer that would force

state refiners to scale back exports. That would support Asian processing margins, which have been recently boosted by a refinery outage in Taiwan. The government imposed a consumption tax of 0.8 yuan (US$0.13) per litre on biodiesel, lamp kerosene and other kerosene grades, Chinese customs said on its website. Biodiesel imports, mostly by

while technology and drug stocks posted the biggest gains. The CSI 300 Index lost 0.4 percent to 2,321.98. Trading volumes in the Shanghai Composite were 32 percent below the 30-day average yesterday. Hong Kong shares eked out a slight gain yesterday, with the Hang Seng Index edging up 0.1 percent to 23,340.05 points. The Hang Seng China Enterprises Index of mainland companies in Hong Kong slid 1.5 percent. Reuters

private companies, surged to an estimated 1.7 million tonnes in 2013 on tax and trade incentives. But some shipments contain a far lower biofuel component than required by China, according to sources. As a result, imported biodiesel displaced local diesel sales, prompting state refiners Sinopec Corp and PetroChina Co Ltd to boost diesel exports to record highs last year. Small refiners and independent fuel dealers in late 2010 imported power kerosene, a blend not subject to consumption taxes and that could be easily turned into diesel. The practice eventually led to detention and fines for two traders. Reuters

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Asia

City-state home prices post first drop in 2-years S Singapore’s manufacturing fell 4 percent last quarter

Singapore GDP contracted last quarter Economy may benefit this year from improving demand Sharon Chen

ingapore’s economy shrank for the first time in five quarters after its manufacturing and services industries weakened, a contraction that may be short-lived as the global recovery strengthens. Gross domestic product fell an annualised 2.7 percent in the three months to December 31 from the previous quarter, when it expanded a revised 2.2 percent, the trade ministry said in a statement yesterday. Singapore’s economy could benefit this year from improving demand in the U.S. and Europe, even as companies in the city- state grapple with rising costs and curbs on cheap foreign labour. The island’s trade promotion agency said in November exports will rebound in 2014 after contracting last year, easing pressure on the central bank to allow the currency to weaken to support overseas shipments. “The global recovery is still definitely intact,” said Joey Chew, a Singapore-based economist at Barclays Plc. “2014 looks like it’s going to be much stronger than 2013 for the global economy so this will definitely support Singapore.” GDP grew 4.4 percent in the three months through December from a year earlier, compared with a median survey estimate of 4.8 percent. The economy expanded 3.7 percent in 2013, accelerating from a 1.3 percent pace the previous year. Prime Minister Lee Hsien Loong on Tuesday reiterated a forecast for growth of 2 percent to 4 percent in 2014.

Global stabilisation “The European and American economies are stabilising,” Mr Lee said in his New Year message. “Asian prospects are still positive, but there are problems and tensions,” he said, citing regional geopolitical disputes. Emerging Asian economies will probably weather the impact of reduced U.S. monetary stimulus, Asian Development Bank President Takehiko Nakao said in an interview on December 26, predicting growth of about 6 percent in 2014. “External demand will be improving,” Glenn Maguire, a

Singapore-based economist at Australia & New Zealand Banking Group Ltd, said before the report. “That we can have the U.S., Japan and Europe all expanding and growing positively in 2014 suggests that Asia, not just Singapore, should be seeing a fairly firm production and export outlook.” The Monetary Authority of Singapore, which uses the island’s dollar to manage inflation, said in October it will maintain a modest and gradual appreciation of the currency. It resisted providing stimulus as labour shortages and record home prices fuelled consumer price gains. The central bank forecasts inflation to be 2 percent to 3 percent in 2014. “The MAS will not do much to facilitate growth, it will rather err on the side of price stability,” said Vishnu Varathan, a Singaporebased economist at Mizuho Bank Ltd. However, “there’s no compelling need for them to tighten just yet,” he said. Singapore’s manufacturing fell 4 percent last quarter from the previous three months, the trade ministry said. The services industry shrank 1.7 percent in the same period, while construction contracted 6.9 percent. The figures released yesterday were computed largely from data for October and November and may be revised.

ingapore’s fourth-quarter home prices slid for the first time in nearly two years, trimming annual gains to the smallest since 2008 as housing loan curbs cooled prices in Asia’s second-most expensive housing market. The island-state’s private residential property price index fell 0.8 percent to 214.5 points in the three months ended December 31, after it added 0.4 percent in the third quarter, according to preliminary figures released by the Urban Redevelopment Authority yesterday. The index drop was the first since the first quarter of 2012. Prices increased by 1.2 percent in 2013, lower than the 2.8 percent gain in 2012, the data showed. That’s the smallest annual increase since prices slid 4.7 percent in 2008, the data showed. Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a campaign that started in 2009 to curb speculation

in the property market. Singapore unveiled new rules in June governing how financial institutions grant property loans to individuals, in addition to previous curbs including new taxes and higher down-payments. “The loan measures have been very effective, it has cut off financing for home purchases,” said David Neubronner, national director at broker Jones Lang LaSalle Inc’s residential project sales in Singapore. “The government has achieved what it set out to do.” Home prices could decline as much as 10 percent this year, Mr Neubronner said, adding that he doesn’t expect further measures from the government. The new loan framework requires that lenders take a borrower’s debt into consideration when granting mortgages, the Monetary Authority of Singapore said on June 28. Home loans should not lead to a borrower’s total debt-servicing ratio rising above 60 percent and those that do will be considered imprudent, it said. Mortgage loan growth at 11.9 percent in October was at the slowest pace since August 2009, data compiled by Bloomberg based on MAS figures showed. Apartment prices fell 2.2 percent in prime districts in the fourth quarter after sliding 0.3 percent in the previous three months, the URA data showed. Those in the suburbs slid for the first time since June 2009, falling 0.6 percent, compared with a 2.2 percent gain in the previous quarter, according to the data. Bloomberg News

Apartment prices fell 2.2 percent in prime districts

Bloomberg News

2014 looks like it’s going to be much stronger than 2013 for the global economy so this will definitely support Singapore Joey Chew, Barclays Plc

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Asia

Vietnam to approve bigger foreign stakes But government to keep control of foreign capital in some sectors Nguyen Phuong Linh

ietnam’s prime minister is expected within days to approve an amended law allowing foreigners to own up to 60 percent of shares in some listed firms, the latest incremental move towards easing tight state controls on the economy. The draft, seen by Reuters, would increase the foreign ownership limit and voting rights from 49 percent to 60 percent, but only in certain sectors and companies, and after approval of shareholders and Prime Minister Nguyen Tan Dung himself. The proposal also increases the foreign voting rights percentage in unlisted companies to 49 percent, to match the current 49 percent foreign shareholding limit. Investors have welcomed the idea as a positive step towards bringing more capital into Vietnam’s two bourses, but say the law needs to

be loosened further if the country is serious about attracting investment and boosting the performance of its companies. The main stock exchange in Ho Chi Minh City has climbed 21 percent last year, the best performer in Southeast Asia and No.4 in Asia, according to Thomson Reuters data. It is still down 57 percent from its peak in March 2007 and only a minor player in the region with a market capitalisation of US$40 billion, an eighth the size of Thailand and a tenth of Singapore. Vietnam’s Communist government has promised reforms as part of a “master plan” aimed at reviving an economy once seen as Asia’s next emerging-market star, but one hit badly by high levels of toxic debt, scant retail spending and a startling number of bankruptcies of small and medium-sized private companies.

State dominance

KEY POINTS Foreigners able to own up to 60 pct of listed company Cap of 49 pct set for shares for unlisted companies Investors say restrictions should be further loosened

Thai election commission seeks talks to end crisis T

hailand’s Election Commission plans to meet members of the nation’s biggest political parties to discuss ways to ease tension before a February 2 vote that’s being threatened by growing antigovernment protests. Groups opposed to caretaker Prime Minister Yingluck Shinawatra plan to surround government ministries and occupy 20 major intersections in Bangkok on January 13 until

Although Vietnam probably achieved economic growth of 5.42 percent in 2013, according to government data, the figure is seen as far beneath its potential. An official at the State Securities Commission, who requested anonymity, said the proposal was sent by the Finance Ministry to Mr Dung last week and was expected to be approved soon. The document was short on specifics, but said the increased foreign shareholding would not apply to sectors “in which the state needs to control foreign capital”.

she agrees to step down and allow an unelected council to reform the country’s electoral system, Suthep Thaugsuban, a former opposition lawmaker who is leading the movement, said. Ms Yingluck’s administration has endured more than two months of street demonstrations that Mr Suthep says are aimed at erasing her family’s corrupting political influence. Allies of Ms Yingluck’s brother, Thaksin Shinawatra, have won the past five elections, including two since his ouster in a 2006 coup. “At 9am on January 13 we will begin our seizure of Bangkok,” Mr Suthep told supporters at Democracy Monument late on Wednesday. “We will stay as long as it takes to achieve our goal. After the seizure, we will set up a government and a parliament of the people.” Election commissioners plan to meet with representatives of Ms Yingluck’s Pheu Thai party and the opposition Democrat party, Commissioner

The main stock exchange climbed 21 pct last year

It did not elaborate, or name the restricted sectors. Although the proposal is viewed as a positive move, investors and economists say much more needs to be done because reforms to date and those in the pipeline represent no real shift away from heavy state controls they say have stifled growth. The state’s dominance of the economy has been a sticking point in Vietnam. State-owned enterprises

Somchai Srisuthiyakorn said. Eight people have been killed in clashes between rival political groups in the past month. Mr Suthep’s supporters say Thailand’s electoral democracy must be suspended so an appointed council can rewrite the political rules to make sure Ms Yingluck and her family can’t return to power. Antigovernment groups say Mr Thaksin’s electoral dominance in the country’s rural north and northeast is based on populist policies that damage the nation’s economy. The protesters are closely aligned with the Democrat party, which plans to boycott the poll. Ms Yingluck’s offers to negotiate with the protesters have been refused. She has ruled out resigning to make way for the unelected council, saying the roughly 16 million people who voted for her in 2011 should have a say in choosing the nation’s political future at the ballot box. Bloomberg News

(SOEs) modelled on South Korea’s world-beating “chaebols” have been accused of abusing their preferred status to engage in graft and reckless borrowing that has been a drain on the public purse and has badly hurt banks, which have tightened credit lines. What has troubled wouldbe investors is a new amended constitution that took effect on January 1, reaffirming that the state

Australian home Spike in borrowing for

ome prices across Australia’s major cities rose over 2013 at the fastest pace in four years as record low interest rates fuelled demand from investors who went on a binge of borrowing in the last few months. Figures from property consultant RPData-Rismark showed overall dwelling prices rose 9.8 percent in 2013, more than reversing two years of decline. The year also ended on a bang with prices up 1.4 percent for December alone, accelerating from a 0.1 percent pace the previous month. For the fourth quarter, prices rose 2.8 percent.

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

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Asia

in firms

India scraps AgustaWestland order

sector must “play the leading role” in the economy. Tran Tai, a portfolio manager at the Japanese fund Asiavantage Global, said the stocks would likely gain at first under the new proposal, but it would take time to see any real impact. “It’s a positive sign from the government, but not as good as investors expected,” Mr Tai said. Reuters

ndia scrapped a US$753 million deal to buy helicopters from AngloItalian company AgustaWestland following a corruption investigation and said it appointed an arbitrator to protect the government’s interests. The country froze payments for the 12 AW101 helicopters after Finmeccanica SpA’s then chief executive was arrested in February for allegedly paying bribes to secure the deal, embarrassing the New Delhi government before parliamentary elections due by May 2014. The scrapping of the deal, which will now go through a probably lengthy legal process, would be a fresh setback for Finmeccanica. Delays in selling some of its money-losing assets have prompted credit rating agencies to downgrade the company to junk. But it would offer an opportunity for rivals such as United Technologies Corp’s Sikorsky Aircraft, EADS unit Eurocopter and Lockheed Martin to get a share of India’s burgeoning defence market. India’s defence minister, A.K. Anthony, has said he did not believe AgustaWestland’s denial that it paid bribes to swing the deal. Mr Anthony had a meeting with Indian Prime Minister Manmohan Singh hours before the latest decisions were announced. “The government of India has terminated with immediate effect the agreement that was signed with M/S. AugustaWestland International Ltd (AWIL) on 08 February, 2010 for the supply of 12 VVIP/VIP helicopters on grounds of breach of the Pre-contract Integrity Pact and the agreement by AWIL,” the Defence Ministry said in a statement. Finmeccanica spokesman Roberto Alatri, commenting on India’s decision, said the company would defend its position. It invoked the arbitration,

which would be conducted in India under the Indian Arbitration and Conciliation Act of 1996. “We’ll do everything that would be necessary to defend the correctness of our position,” Mr Alatri told Reuters. “We’re sure our behaviour was ethically correct.” He said India’s agreement to arbitration was a positive step. India’s Defence Ministry said it believed “integrity-related issues are not subject to arbitration” but nominated an arbitrator, it said, to safeguard its interests. Uday Bhaskar, a defence analyst at the Society for Policy Studies in New Delhi, said India’s participation in the arbitration did not represent a climb-down. “Cancelling deals and saying that we will not acquire critically-needed equipment, to my mind, is not the answer,” Mr Bhaskar said. “But there’s no climb-down on this arbitration and as a matter of fact it might be the most viable via media [middle road].”

Sri Lanka’s central bank cut one key interest rate by 50 basis points while holding another after inflation eased to the lowest level in about two years, signalling a sustained growth spurt in the island nation. The Central Bank of Sri Lanka reduced the benchmark reverse repurchase rate, which it renamed the standing lending rate, to 8 percent, governor Ajith Nivard Cabraal said in an interview in Colombo. It held the repurchase rate – now known as the standing deposit rate – at 6.5 percent to signal to commercial banks that lending rates alone need to fall, he said. “We see the time as right with inflation under control, the rupee at a stable level and growth trajectory on course,” Mr Cabraal said. “We think demanddriven inflation pressure is well contained and inflation expectations are at the right level.” The rate cut comes a month after the International Monetary Fund advised the South Asian nation of 20 million people to allow time for earlier reductions to take effect before mulling further easing.

Reuters

Hyundai, Kia brace for sluggish 2014

KEY POINTS India terminates US$770 mln contract immediately New Delhi appoints former judge as its arbitrator AugustaWestland parent says to defend position

prices power ahead in 2013 investment becomes a concern While higher prices have stirred talk of a bubble, they are considered by policymakers as necessary to encourage a much-needed revival in home building. The Reserve Bank of Australia (RBA), which cut interest rates to an historic low of 2.5 percent last August, has been counting on home construction to provide vital support to the economy as a long boom in mining investment cools. Higher prices have also boosted household wealth, confidence and spending, exactly what easy monetary policy is meant to do. Neither is the price appreciation exceptional by Australian standards. RPData’s Cameron Kusher noted that since 1996 there were seven years where prices grew faster than in 2013. “The rate of growth was not that startling given the low interest rate environment and the previous successive years in which home values fell,” Mr Kusher said. The gains have also been largely concentrated in a few hot spots, with four of Australia’s eight major cities seeing price growth of just 3.5 percent or less.

Sri Lanka cuts rate on easing prices

Hyundai Motor Co and affiliate Kia Motors Corp, South Korea’s two largest automakers, forecast their weakest sales growth in eight years as competition intensifies and the stronger won hampers exports. Hyundai and Kia’s combined deliveries will increase 4 percent to 7.86 million vehicles in 2014, Chung Mong-koo, chairman of both automakers, told employees during a new year address in Seoul yesterday. That’s the slowest growth since 2006. Mr Chung, 75, said the companies will invest in improving vehicle safety and technology as competition gets fiercer and the global economy reaches a “low growth era”. The forecast comes days after Hyundai announced a leadership change in the U.S., where sales have slumped as the won appreciated more than any major currency in the past six months, gaining 7.9 percent against the dollar and 13 percent versus the yen. In China, Hyundai’s sales rose 24 percent to 931,330 units in the first 11 months of 2013, on course to exceed its annual target of 970,000 units. Kia beat its full-year target of 500,000 with a month to spare, selling 526,525 vehicles in the January-to-November period.

Bombay Bullion group bids for MCX stake

Home prices up 9.8 pct in 2013, fastest pace in four years

In contrast values in Sydney jumped 14.5 percent last year, while Perth enjoyed gains of 9.9 percent. That growth owed much to investors attracted by relatively high rental yields, further boosted by a tax regime that allows investors to offset losses from investment property against income from other

sources, and a favourable capital gains tax setup. The value of mortgages for investment has been rising quickly for some time and reached a record high in October, up almost 29 percent on the same month a year earlier. Reuters

The Bombay Bullion Association, a traders’ group, plans to buy a stake in the Multi Commodity Exchange of India Ltd after the regulator declared its founder unfit to run the nation’s biggest commodity bourse. The association plans to buy 5 percent of MCX via a consortium led by the Universal Commodity Exchange Ltd, another Mumbai-based bourse, from Financial Technologies (India) Ltd, Mohit Kamboj, president of the group that represents about 1,000 jewellers and traders, said yesterday. The 5 percent MCX stake may be valued at 1.25 billion rupees (US$20 million), he said. Bombay Bullion has written about its interest in MCX to regulator Forward Markets Commission that last month declared Financial Technologies chairman Jignesh Shah ineligible to hold any post in the bourse. MCX’s board on December 26 advised Financial Technologies to within a month comply with the regulator’s order that the founder cut its holding to 2 percent. The regulator ordered a review of Shah and his company’s ability to run MCX in October after a payment default at the National Spot Exchange Ltd, a spot bourse for commodities founded by him, prompted the government to suspend trading.

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

Max 70.55

average 69.779

Max 64

Min 69.2

average 63.306

Last 70.5

Min 62.75

Last 63.95

70.6

101.4

70.3

101.3

70.0

101.2

69.7

101.1

69.4

101.0

69.1

Max 101.4

average 101.154

PRICE

Max 33.3

average 32.645

Min 32.2

Last 33.3

32.2

35.30

63.75

26.0

35.15

63.40

25.8

35.00

63.05

25.6

34.85

62.70

Max 26.1

average 25.681

DAY %

YTD %

(H) 52W

Min 25.45

Last 25.8

(L) 52W

98.85

0.436903068

106.2200012

BRENT CRUDE FUTR Feb14

111.22

0.379061372

112.7999954

GASOLINE RBOB FUT Feb14

279.45

0.308697369

286.9299889

243.68999

944

0.052994171

960.75

840

4.241

0.260047281

4.770000458

3.476000071

GAS OIL FUT (ICE) Feb14 NATURAL GAS FUTR Feb14 NY Harb ULSD Fut Feb14 Gold Spot $/Oz

85.56999969

306.72

0.065248597

317.8399801

278.4999847

1222.45

1.3724

1.6388

1696.2

1180.57

19.965

3.1516

2.0831

32.46

18.2208

Platinum Spot $/Oz

1390.12

1.6578

2.5351

1742.8

1294.18

Palladium Spot $/Oz

723.95

1.3652

1.8214

786.5

629.75

1800

-1.207464325

2184

1736.25

Silver Spot $/Oz

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

7360

-0.203389831

8346

6602

LME ZINC

2055

-1.486097795

2230

1811.75

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Mar14

13900

-1.592920354

18770

13205

15.275

-0.163398693

16.77000046

15.12000084

422

-0.354191263

614

418.5

WHEAT FUTURE(CBT) Mar14

605.25

0.791007494

845

599

Mar14

SOYBEAN FUTURE Mar14

1292.5

-1.241642789

1377.75

1174

COFFEE 'C' FUTURE Mar14

110.7

-3.487358326

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

16.41

0.183150183

20.71999931

15.85999966

COTTON NO.2 FUTR Mar14

84.64

-0.023623907

90.61000061

76.65000153

World Stock Markets - Indices NAME

32.5

26.2

WTI CRUDE FUTURE Feb14

CORN FUTURE

100.9

32.8

25.4

Max 35.3

average 34.997

Min 34.7

Last 35

34.70

Currency Exchange Rates

NAME

METALS

Last 101.1

33.1

64.10

Commodities ENERGY

Min 100.9

33.4

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

NAME ARISTOCRAT LEISU CROWN RESORTS LT

0.68

0.26

752000

7.28

674049

CHINA OVERSEAS

21.9

0.4587156

0.4587191

25.6

17.7

7879747

CHINESE ESTATES

24.45

1.452282

1.452281

24.5

10.334

51000

CHOW TAI FOOK JE

11.6

0.3460208

0.3460171

13.4

7.44

2246600

6732.4

-0.2472926

-0.2472917

6875.62

5873.43

HANG SENG BK

DAX INDEX

9594.03

0.4383302

0.4383314

9620.929688

7418.36

NIKKEI 225

16291.31

0.6945449

16320.22

10374.85

HANG SENG INDEX

23340.05

0.1444239

0.1444246

24111.55078

19426.35938

CSI 300 INDEX

2321.978

-0.3454039

-0.3453975

2791.303

2023.171

TAIWAN TAIEX INDEX

8612.54

0.01196074

0.01196391

8647.24

7603.27

KOSPI INDEX

1967.19

-2.195054

-2.195055

2063.28

1770.53

S&P/ASX 200 INDEX

5367.911

0.2935428

0.2935416

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4324.163

1.169488

1.169496

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1849.22

-0.9502078

-0.9502073

1882.2

1597

NZX ALL INDEX

998.895

-0.6074627

1048.998

880.669

PHILIPPINES ALL SHARE IX

3658.83

1.23149

4571.4

3440.12

1261.71

0.6686188

0.6686192

1455.82

1214.77

EMPEROR ENTERTAI

4.04

4.66

1.85

4000000

FUTURE BRIGHT

4.79

2.132196

2.132195

4.9

1.192

5998000

GALAXY ENTERTAIN

70.5

1.365924

1.365919

70.75

9294360

126.1

0.318218

0.3182204

132.8

110.6

413408

HOPEWELL HLDGS

26.3

0.1904762

35.3

23.2

293033

HSBC HLDGS PLC

84.6

0.5347594

0.5347575

90.7

77.85

10601336 4066000

HUTCHISON TELE H

2.94

4.66

2.5

LUK FOOK HLDGS I

29.5

31.5

16.88

848000

MELCO INTL DEVEL

28.55

0.1754386

29.15

9.07

1657000

MGM CHINA HOLDIN

33.3

0.6042296

0.6042342

33.5

13.335

4727227

MIDLAND HOLDINGS

3.69

-1.072386

-1.072387

4.29

2.68

2552000

NEPTUNE GROUP

0.335

-1.470588

-1.470589

0.4

0.131

144347000

NEW WORLD DEV

9.79

15.12

9.67

6618935

SANDS CHINA LTD

63.95

0.9471192

0.9471216

65.9

33.5

6050772

SHUN HO RESOURCE

1.65

1.92

1.33

30000

SHUN TAK HOLDING

4.55

-0.2192982

-0.219297

4.8

3.27

1609251

SJM HOLDINGS LTD

25.8

-0.7692308

17.04

4468517

SMARTONE TELECOM

8.79

-0.7900677

-0.7900639

14.46

7.38

2615000

WYNN MACAU LTD

-0.4267425

-0.4267469

36.9

3504269

ASIA ENTERTAINME

N/A

BALLY TECHNOLOGI

78.45

1.251936

78.5999

44.99

209466 4800

BOC HONG KONG HO

3.22

3.6

2.99

GALAXY ENTERTAIN

9.01

0.3340757

9.15

3.8975

600

18.16

1.452514

21.2

14.28

3145582

JONES LANG LASAL

102.39

-0.3988327

103.2299

80.86

158432

LAS VEGAS SANDS

78.87

0.3562794

79.25

47.95

2553789

MELCO CROWN-ADR

39.22

0.952381

39.42

17.32

3094677

MGM CHINA HOLDIN

4.31

1.891253

4.31

1.7651

2500

MGM RESORTS INTE

23.52

0.5988024

23.65

11.72

5222503

SHFL ENTERTAINME

23.19

#N/A N/A

23.25

13.88

344231

SJM HOLDINGS LTD

3.34

0.9063444

3.6

2.2

2350

194.21

0.4759688

194.53

111.3456

731522

INTL GAME TECH

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

492261

-2.325583

Laos Composite Index

1343265

10.63

FTSE 100 INDEX

408.32

3.135

17.38

-2.325581

2953.518

533.15

5.12

0.4747752

7.05

4177.728

-0.02377883

-0.6396601

0.42

-0.0237798

0.4747774

CHEUK NANG HLDGS

0.5389968

504.51

-0.6396588

CENTURY LEGEND

4176.59

4.66 16.93

VOLUME CRNCY

3135650

HO CHI MINH STOCK INDEX

(L) 52W

5871513

NASDAQ COMPOSITE INDEX

1257.06

(H) 52W

0.75

12883.89

1649.77

YTD %

22.85

16588.25

-2.84744

DAY %

-2.847441

PRICE

2.12

0.4384921

1261.73

0.8821 1.4814 0.88 1.2746 86.77 7.9818 7.7503 6.0492 52.89 28.56 1.2195 28.913 40.54 9603 86.41 1.20826 0.80855 7.8281 10.195 113.56 1.0289

-1.744188

16576.66

1.0599 1.6603 0.9839 1.3893 105.43 8.0111 7.7664 6.2492 68.845 32.96 1.2862 30.228 44.82 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

-0.402416

STOCK EXCH OF THAI INDEX

-0.3362 0.4242 -0.5468 -0.2688 -0.3228 0.0013 -0.0026 0.0578 -0.4491 -0.4707 -0.2131 -0.4841 -0.1237 0.0658 -0.0117 -0.2853 0.7002 0.4831 0.2737 -0.0622 0

-1.744186

DOW JONES INDUS. AVG

2.113 0.2298 -1.0489 -0.2543 -0.2184 0.005 0.0026 0.0727 -0.28 -0.6377 -0.2289 -0.4073 -0.1237 0.0658 -2.3148 -0.7942 0.2958 0.3867 0.2591 0.0207 0.0097

-0.4024145

(L) 52W

0.8892 1.6571 0.8962 1.3727 105.33 7.9865 7.7541 6.0508 62.0788 32.93 1.2668 29.952 44.45 12163 93.66 1.23022 0.82835 8.3009 10.9628 144.6 1.03

1.69

(H) 52W

-0.05

(L) 52W

24.75

YTD %

-0.05

(H) 52W

AMAX INTERNATION

DAY %

611.18

YTD %

BOC HONG KONG HO

PRICE

DAY %

Macau Related Stocks

COUNTRY

Euromoney Dragon 300 Index Sin

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

PRICE

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

23353.54

LOW

23138.91

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

5 23460

INDEX 23340.05 HIGH

VOLUME

23180

30-December

2-January

15 15

January 2014 April 19,3,2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Yomiuri Shimbun Bank of Japan Governor Haruhiko Kuroda indicated the central bank will keep intact its current monetary easing policy this year with prospects that the country’s economy continues to recover despite possible adverse impact from a sales tax hike in April. The BOJ chief appeared to play down a view in financial markets that the bank is likely to further ease its monetary policy as early as the first half of 2014. “As long as the economy moves as expected, we will continue with the current policy,” he said. “We will make adjustments as appropriate to achieve the price stability target.”

Unrealpolitik in Russia and China Dominique Moisi

Professor at L’Institut d’études politiques de Paris (Sciences Po), is Senior Adviser at The French Institute for International Affairs

Bangkok Post Global e-commerce service providers have put Thailand in the spotlight for business expansion thanks to the country’s burgeoning online shopping demand. Mobile internet users totalled 36.4 million in 2013 out of a population of 70 million. Smartphone users in the country numbered 22 million. “Thailand has become a centre for online shopping growth in Southeast Asia,” said Pawoot Pongvitayapanu, founder of Rakuten Tarad. com. But he warned that online shopping scams and fraud are risks, and delivery time needs improvement to sustain the industry’s prosperity.

The Age Australian commercial property sales reached more than US$17 billion in 2013, incorporating offices, retail, industrial and hotel assets. That compared with the 2012 record of US$20.6 billion. Early indications are that 2014 will be another strong year for capital transactions, although investors will find it harder to fulfil their objectives in the crowded market. According to David Rees, the Australasian head of research at Jones Lang LaSalle, the sales indicated investors were willing to increase their risk and acquire assets with shorter-weighted average lease expiries.

Inquirer Business Prices of tobacco and alcohol products went up on January 1 as the second increase of prices took effect in accordance with the Sin Tax Law. The tax on tobacco products and fermented liquor on both upper and lower price ranges shall continue to rise at their respective rates until 2017 when tobacco products are taxed 30 pesos (US$0.68) and fermented liquor 23.50 pesos. The Sin Tax Law mandates that a portion of the revenues collected will be allocated to projects that will benefit tobacco farmers and workers nationwide. A portion of the revenues will also go to health care and improvement of medical facilities nationwide.

n her recent book on the origins of World War I, The War That Ended Peace, Margaret MacMillan concludes that the only thing one can say with certainty about its causes is that leadership matters. No one really wanted war, but no one knew how to oppose it, because great statesmen like Germany’s Otto von Bismarck, whose self-restraint preserved peace in Europe for decades, were missing in Europe in 1914. A similar leadership void has become palpable in recent behaviour by Russia and China. In the run-up to WWI, political and military leaders failed to grasp how industrial production and mass transportation had altered the character of warfare. The American Civil War should have served as a warning for Europeans. But a Europe that considered itself the centre of the world, exporting its rivalries to Africa and Asia in the name of a “civilising mission,” was utterly incapable of paying attention to the harsh lessons of the New World. Today, neither Russian President Vladimir Putin nor Chinese President Xi Jinping seem to have learned those lessons, either. In Ukraine, Russia must choose what kind of relationship it wants to have with Europe. If Ukraine returns to the Kremlin’s orbit, whether through direct reintegration or some kind of “Finlandization,” Russia will end up re-enacting

an old European problem: like France from 1643 to 1815 and Wilhelmine Germany, it will be both “too much” for its neighbours and “not enough” for its ambitions. Leaving aside why Russia should want to pay so much money to sustain a Ukrainian regime that is even more corrupt and dysfunctional than its own, Ukraine, with a territory greater than France and a population of 45 million, is the de facto linchpin of Europe’s geopolitical equilibrium. Unlike Poland three times in the eighteenth century, there can be no question of partition, with western Ukraine joining Europe and the country’s east returning to Russia. As a result, Ukraine’s civilizational choice – between a democratic European Union and an autocratic Russia – will necessarily have major strategic consequences for the entire European continent.

Regional ambitions The problem that China faces in the South China Sea – and now in its airspace – is of a similar nature. Is China, too, losing the sense of restraint that characterised its foreign policy until recently? The Chinese seem now to be displaying an impatience that is contrary to their country’s long-term interests. China’s heightened global status is obvious and recognised by all. But where is the serenity

The Chinese seem now to be displaying an impatience that is contrary to their country’s longterm interests

of a great power so confident in the superiority of its civilisation, and so secure in its future, that it bides its time? By flaunting its hegemonic regional ambitions, China has managed to unify against it countries as diverse as Vietnam, Indonesia, and the Philippines. These countries now want more than ever America’s continuing presence as an Asian power. Indeed, transcending their historical enmity with Japan, they tend to show more understanding for the rhetoric of Japanese Prime Minister Shinzo Abe’s government – and its new and more muscular defence policy – than for China’s recent demonstration of force. It is sometimes said that history teaches us nothing,

for it contains everything. Yet the teachings of classical diplomacy are probably more useful today than they were in the twentieth century. The age of grand ideologies is behind us; an era marked by strict calculation of interest beckons. In the interim, war may have changed more than diplomacy – and probably for the worse. Our weapons’ destructive power has peaked at a time when the “enemy” is becoming more diffuse. How do you make war on instability? How do you fight an adversary that disappears into civil society? Even if technological progress has changed the diplomat’s job, the rules of the diplomatic game remain fundamentally the same. Success presupposes an understanding of the interests and perceptions of one’s counterparts, as well as an innate sense of moderation and self-limitation, something that both Russia and China seem to be lacking. By contrast, one may wonder whether U.S. President Barack Obama should not also learn from Bismarck – but from Bismarck the Iron Chancellor, who united Germany behind Prussia. Is he demonstrating enough toughness and clarity of vision in his policy toward Iran – or, even more to the point, toward Syria? Cold-blooded realpolitik, as Bismarck showed, is the best way to keep the peace. © Project Syndicate

16 16

January 3, 2014 April 19, 2013

Closing Qatar opens mission for HK and Macau

Wynn files trademark for Diamond Coliseum

The Middle Eastern state of Qatar is to open a Consulate General in Hong Kong. It will also represent the interests of Qatari nationals and companies in Macau, according to Macau’s Official Gazette. The arrangement to establish the mission was made with the central government in Beijing “to further promote the friendly relations between the two countries”. According to the Hong Kong government’s Protocol Division, as of January 1, the Special Administrative Region had 59 consulates-general, 64 consulates and six officially recognised bodies operating in the territory. Most also represent the interests of their respective citizens in Macau.

Gaming operator Wynn Resorts Holdings LLC is seeking to register the trademark ‘Wynn Diamond Coliseum’, according to yesterday’s Official Gazette. Company chairman Steve Wynn (pictured) told a conference call in October that a 15,000-seat entertainment venue planned for the second phase of its Cotai land would be called ‘Wynn Diamond Coliseum’. Phase two of Wynn’s Cotai site will be known as Wynn Diamond. Wynn Resorts filed six applications on November 15. The trademark could become official within two months if there are no legal challenges against it. The first phase, known as Wynn Palace, will cost US$4 billion (31.95 billion patacas).

Eurozone factories end 2013 on a high Eurozone manufacturing grew at the fastest rate since mid-2011 in December on brisk business in Germany and Italy, setting the stage for a solid start to the year after a tumultuous 2013, a survey showed yesterday. Markit’s Eurozone Manufacturing Purchasing Managers Index (PMI) rose to 52.7 in December from November’s 51.6, confirming an early estimate and marking its best reading in 31 months. Readings above 50 indicate growth in activity. New orders piled in at the fastest pace since April 2011, and a near two-year stretch of job cuts across eurozone factories almost came to an end last month. Looking at individual countries in the region, the mood was largely positive, with the exception of France. Manufacturing activity in the eurozone’s No.2 economy hit a six-month low last month. “With producers reporting further growth of new orders, exports and backlogs of work, the stage is set for a good start to 2014,” said Chris Williamson, chief economist at Markit, which compiles the PMIs. “It seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy.” Mr Williamson also noted that prices in manufacturing companies are starting to rise slightly, suggesting firms are seeing some improvement in pricing power.

November brought US$780 mln surplus

Indonesia shows progress in rebalancing economy Surprises with a sizable November trade surplus Rieka Rahadiana

ndonesia reported a surprisingly large trade surplus for November, while inflation was steady last month, which could give the central bank room to keep its benchmark rate unchanged next week. Data from the statistics bureau showed a trade surplus of US$780 million in November, compared with a projected US$70 million deficit in a Reuters poll. The rupiah strengthened slightly on the news, to 12,200 to the U.S. dollar from 12,205, compared with the previous close of 12,160. November’s exports fell 2.4 percent on an annual basis, but imports dropped 10.55 percent as demand was subdued, apparently in part because the weak rupiah has raised import costs. The Reuters poll had forecast a 1.9 percent drop in exports and a 7.4 percent decline in imports from a year earlier. In 2013, the rupiah was emerging Asia’s worst-performing currency, weakening 21 percent. In a bid to reduce Indonesia’s large current account deficit and aid the beleaguered rupiah, Bank Indonesia has raised its key reference rate by 175 basis points since June to 7.50

percent. Its next policy meeting is on January 9. “The improvement in trade will give some room for the central bank to pause in the next board meeting,” said Aldian Taloputra, economist at Mandiri Sekuritas. Still, he thinks Bank Indonesia is likely to raise its benchmark 25-50 basis points in 2014 to bring the country’s current-account deficit to a “more sustainable level”. Joshua Pardede, economist at Bank Internasional Indonesia, said it’s still possible the central bank will increase rates on January 9, given the rupiah’s sharp depreciation in 2013.

Consecutive surpluses November’s surplus was the largest since March 2012, and it lets Indonesia have consecutive monthly trade surpluses for the first time since August-September 2012. Yesterday, the statistics bureau revised the surplus for October to US$30 million from the originally-reported US$50 million. Indonesia, which for decades had annual trade surpluses, in 2012 and 2013 had trade deficits. These added to the country’s current-account deficits and contributed to pressure

on the rupiah. Also hurting the rupiah during 2013 were fears of capital outflows rooted in the U.S. Federal Reserve’s stimulus scale back due to its current account deficit. The current account, the widest measure of the flow of goods, services and money in and out of Indonesia, has remained in deficit for nearly two years. The government has said that the current-account deficit in 2013’s third quarter was 3.8 percent of gross domestic product. That was bigger than an earlier estimate for the period, but smaller than the record high 4.4 percent in April-June. Yesterday, the statistics bureau said annual inflation in December was 8.38 percent, marginally above the previous month’s 8.37 percent. Dariusz Kowalczyk, a senior economist and strategist for Credit Agricole CIB in Hong Kong, said November’s decline in imports highlights “a weakening of domestic demand and the continued impact of price hikes”. The month’s sizable trade balance “should be viewed very positively by markets” and is positive for the rupiah, he said. Reuters

Fiat strikes deal to buy rest of Chrysler Italian carmaker Fiat SpA struck a US$4.35 billion deal to gain full control of Chrysler Group LLC, ending more than a year of tense talks that have obstructed chief executive Sergio Marchionne’s efforts to combine the two automakers’ resources. The agreement, announced late on Wednesday, cements Mr Marchionne’s reputation as the industry’s consummate dealmaker about a decade after he took the helm of Fiat as a car business newcomer, analysts and bankers said. Fiat will acquire the 41.46 percent stake in Chrysler it did not already own from a retiree healthcare trust affiliated with the United Auto Workers union. The trust, known as a voluntary employee beneficiary association or VEBA, will receive US$3.65 billion in cash for the stake, US$1.9 billion of which will come from Chrysler and US$1.75 billion from Fiat. After the deal closes, Chrysler has committed to giving the UAW trust another US$700 million over three years. The deal is expected to close on or before January 20. Fiat said that because of how the deal is structured it will not need to make any capital increase through a rights issue. Mr Marchionne, who has run both automakers since Chrysler’s 2009 U.S. government-funded bankruptcy restructuring, aims to merge Fiat and Chrysler into the world’s seventh-largest auto group. Reuters