Macau Business Daily, Jan 14, 2014 by Business Daily

Page 4

Jewellery sales cool after April’s ‘gold rush’ days

MOP 6.00 Deputy editor-in-chief

Vitor Quintã

Luso IntERNATIONAl Bank first to land in Hengqin

Land title issues 1 cloud Taipa North build plans

April 19, 2013

Page 5

www.macaubusinessdaily.com

Year II

Number 454 Tuesday January 14, 2014

Editor-in-chief Tiago Azevedo

Forbes’ list lifts Ina Chan into super class Page 7

uso International Banking Ltd is understood to be the first Macau bank allowed to open an office on neighbouring Hengqin Island, one of China’s new special economic zones. Luso is likely to do so in late January, it told Business Daily. The office could pave the way for Luso to get its first retail banking outlet in the mainland. It currently has a network of 11 branches across Macau.

Luso is a wholly owned unit of the mainland’s Xiamen International Bank, which in turn is 10 percent owned by Beijing-based Industrial and Commercial Bank of China Ltd. The Closer Economic Partnership Arrangement with mainland China has reduced to US$4 billion (32 billion patacas) – from US$6 billion – the minimum assets Macau banks must have to open a Hengqin branch. More on page 5

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Design house visualises concept shop lease renewal

Hang Seng Index 23047

Design house MO-Design Lda hopes to keep doing business in its premises in the city centre after February, when its current lease expires. It says the location next to the New Yaohan department store, helps the enterprise attract a mixture of customers. Separately, Future Bright Holdings Ltd says it’s confirmed a deal to lease out a six-storey downtown commercial space known as the Yellow House.

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January 13

HSI - Movers Name

Monetary authority waits for Beijing on QFII quota

Budget hotels scramble to revamp marketing website

The Monetary Authority of Macau has applied to the central government for quota to trade in mainland China’s stock markets. The amount will be up to Beijing. The goal is to boost the annual returns of the government’s fiscal reserve. The QFII scheme allows licensed ‘foreign’ investors – including entities in Macau and Hong Kong – to trade in shares listed at the Shanghai and Shenzhen stock exchanges.

Macau Hoteliers and Innkeepers Association is looking for a quick fix to improve a marketing website for the city’s budget accommodation providers. Some venues are failing to update their online list of available rooms. Hotel operators will be given more technical support this quarter to encourage them to sell their services on the website, says the association. In October budget occupancy peaked at 74.2 percent said the government.

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%Day

LENOVO GROUP LTD

3.81

CHINA RES POWER

3.39

GALAXY ENTERTAIN

2.66

SINO LAND CO

1.52

HENGAN INTL

1.41

CITIC PACIFIC

-1.16

SWIRE PACIFIC-A

-1.23

POWER ASSETS HOL

-1.42

TINGYI HLDG CO

-1.56

CHINA RES LAND

-2.01

Source: Bloomberg

I SSN 2226-8294

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January 14, 2014

Macau Communist Party ex-official named BIHL director Birmingham International Holdings Ltd – owner of Birmingham City F.C. and chaired by Macau-linked businessman Carson Yeung Ka Sing – has appointed a former official of China’s ruling Communist Party as a director. Liu Enxue was also a deputy to the ninth and tenth sessions of the mainland’s government advisory body, the National People’s Congress. Hong Kong-listed BIHL’s shares have been suspended since June 2011 following Mr Yeung’s arrest on suspicion of laundering HK$721 million (US$93 million). Last year Mr Yeung faced a 53-day Hong Kong court trial. He pleaded not guilty. A verdict is expected on February 28.

MO-Design hoping for C-Shop lease renewal The design house’s two-year lease of its Nam Van premises expires next month Tony Lai

tony.lai@macaubusinessdaily.com

Future Bright closes Yellow House lease

The C-Shop is next to the New Yaohan department store in the city centre (Photo: Manuel Cardoso)

esign house MODesign Lda is hopeful that it can keep doing business in its premises in the city centre after next month, when its current lease expires. MO-Design’s co-founder and creative director, Chao Sio Leong, says having its C-Shop in the Nam Van district, next to the New Yaohan department store, helps the enterprise attract a mixture of customers from various places. “We have yet to talk to the government,” Mr Chao told Business Daily, “but we certainly hope we can continue doing business there.” MO-Design’s activities range from selling locally designed clothes and other products to event planning. It promotes upmarket fashion labels, most belonging to Macau designers. The enterprise rents its C-Shop premises from the government. Its two-year lease expires at the end of next month. “They are in the city

centre, so we see large streams of visitors,” Mr Chao said. “The customers there are also different from those in other places. There are more white-collar workers,” he said. “We are satisfied with our operations there over the past

We have yet to talk to the government, but we certainly hope we can continue doing business there Chao Sio Leong, MO-Design creative director

two years in terms of visitors and business turnover.” He gave no figures. Mr Chao said that whether MO-Design would renew its lease depended on how much rent the government asked. He declined to say how much rent the company pays now. The Chinese-language Macao Daily News quoted the chief of the Cultural Affairs Bureau’s department for the promotion of cultural and creative industries, Chan Peng Fai, as saying the next lease the government granted would be longer than two years. Mr Chan said the bureau would give details in due course.

No fixed abode MO-Design used to have other premises, called the MOD Design Store, which displayed locally designed souvenirs and accessories. The MOD Design Store was in the Yellow House, a

commercial building near the Ruins of St Paul’s. The MOD Design Store closed on December 26 after the Macau Government Tourist Office failed to renew its lease of the property from Future Bright Holdings Ltd. Future Bright has let the Yellow House to the United States fashion label Forever 21 (see box). The rent is HK$2.4 million (US$309,500) a month. The government used to pay HK$1.17 million. The tourist office used to sub-let space in the Yellow House. Its tenants included a Portuguese-style café and a showroom for industrial products made in Macau. Mr Chao said he was looking at some other premises that might be suitable. He said MO-Design wished to announce before April where it would be doing business. “It is not only local cultural and creative enterprises, but all businesses here in general that face rising rents and the

Future Bright Holdings Ltd has closed a deal to lease out a six-storey commercial space – known as the Yellow House – next to one of Macau’s tourism hotspots, St Paul’s Ruins. The restaurant operator told the Hong Kong Stock Exchange in a filing yesterday it will receive HK$2.4 million (US$309,500) per month from the tenant for an area of 21,184 square metres. The venue will host the first Macau store of United States clothing brand Forever 21 Inc, Future Bright managing director Chan Chak Mo said on Friday. Future Bright said in a filing a fortnight ago the new tenant “will be required to pay an additional turnover rental” if it exceeds “a certain level of sales” in the five-year lease. Forever 21 has three stores in mainland China and one in Hong Kong, and 500 worldwide, according to its website.

labour shortage,” he said. Mr Chao said more government support for cultural and creative industries, particularly support in finding outlets for their products, would be “helpful”. The Macao Daily News quoted Mr Chan of the Cultural Affairs Bureau as saying the bureau would ask in July for bids to renovate the glass-fronted building in Tap Seac Square. The bureau will unveil before April its plan for encouraging cultural and creative industries to use the building. He said businesses could start operating there by the end of next year. His bureau envisages the Tap Seac building as a centre for the development of cultural and creative industries.

January 2014 April 19,14, 2013

Macau

Beijing will set size of QFII quota, govt says The Monetary Authority of Macau keeps mum about how big a quota it would like

The investment quota will be known only upon approval Monetary Authority of Macau

Tony Lai

tony.lai@macaubusinessdaily.com

he Monetary Authority of Macau says it has officially asked the central government for a Qualified Foreign Institutional Investor (QFII) quota, but that the amount of the quota will be up to Beijing. Secretary for the Economy and Finance Francis Tam Pak Yuen told the Legislative Assembly last week that the government had begun the process of applying for a QFII quota for investment in the mainland stock market. The purpose of obtaining QFII status is to improve fiscal reserve’s return on its investments. QFII status allows licensed foreign investors to invest in shares listed at the Shanghai and Shenzhen stock exchanges. Outside investment in the mainland stock market is limited by quotas. In a written reply to questions from Business Daily, the Monetary Authority failed to say how big a quota it had applied for. The authority said that first

Francis Tam says investing in the mainland stock market will improve the fiscal reserve’s return on its investments

the China Securities Regulatory Commission and then the State Administration of Foreign Exchange (SAFE) would consider the application

for a QFII quota “according to their established mechanisms”. The authority did not say how long this would take.

“The investment quota will be known only upon approval,” it said. When the central government gave the Hong Kong government QFII status in 2011, it granted an initial quota of US$300 million (2.4 billion patacas). The Hong Kong government has since accumulated quotas amounting to US$1.5 billion. By December 25 SAFE had licensed 228 QFIIs to trade in mainland stocks, and had granted them quotas together worth US$49.7 billion. Observers have told Business Daily that investing in the mainland stock market would make the fiscal reserve’s investments more diverse, but that improvements in the return on its investments would be limited. Mr Tam said last week that the fiscal reserve was worth 168.2 billion patacas (US$21 billion) on December 30. The yield on its investments had been 2.9 percent last year, he said. In November Beijing increased the Macau government’s quota for investment in the mainland interbank bond market to 20 billion yuan (26.2 billion patacas) from 10 billion yuan.

January 14, 2014

Macau

Scramble to invigorate low-cost hotel website Few rooms are available on the reservations website set up a year ago Tony Lai

tony.lai@macaubusinessdaily.com

he Macau Hoteliers and Innkeepers Association is looking for a swift cure for the lukewarm response of low-cost hotels to the reservations website it set up for them. The association’s secretarygeneral, Kenny Cheung Kin Chung, says it is thinking about giving hoteliers more technical support and training for their staff to spur them to make their rooms available on the website. The association, with help from the

Macau Government Tourist Office, set up the Macau Budget Hotels Site in November 2012. The tourist office said at the time that the website could help make low-cost hotels better and more competitive, and bring in visitors from a greater variety of sources. The tourist office said the website could offer up to 500 rooms. Mr Cheung told Business Daily that, one year later, the website was struggling to achieve its purpose. Yesterday afternoon not one room

in any of Macau’s 46 low-cost hotels was available on the website. Insufficient rooms had been available “for some time”, Mr Cheung said. “The supply on the website depends on the number of rooms the hotels wish to put up. We do not coerce them,” he said. He said that not all low-cost hotels used the website because employees were difficult to find and some hotels had sufficient staff to monitor online reservations.

Macau’s low-cost hotels had fewer than 1,500 rooms at the end of October

“They don’t have the luxury of sparing staff.”

Quick fix Mr Cheung said many low-cost hotels were unfamiliar with the technology. Official data show only 51 percent of Macau’s businesses used computers last year. Among businesses with fewer than 10 employees, 44.2 percent used computers. Mr Cheung said some low-cost hotels could easily fill what few rooms they had with walk-in guests and guests booked in by travel agents. He said “a few hotels” made about 10 rooms available on the website each day. “Perhaps the hotel rooms are highly sought-after by visitors, so they all go at once,” he said. The website records all the reservations made. When the website began operating, guests were unable to pay for their rooms online. They had to pay when they checked in. Mr Cheung said that had changed in the second half of last year, so guests can now pay online. His association is endeavouring to fix the website’s problems. “We will come up with a proposal, possibly in the first quarter of this year,” Mr Cheung said. “What we are thinking about now is offering more technical support and training to staff.” Official data show that at the end of October Macau had 46 guesthouses and two-star hotels, together containing 1,471 rooms. Their average occupancy rates ranged between 61.6 percent and 74.2 percent.

Pan-democrats cry foul over Taipa North land Association fears plot merger has been approved to benefit developers Stephanie Lai

sw.lai@macaubusinessdaily.com

he New Macau Association fears the government unfairly favoured the construction sector regarding the Taipa North urban development plan. The government has denied the accusations, adding that no private projects have so far been approved for the area. Two plots covered by the plan, located at Caminho das Hortas next to Cheok Ka village, have had a sign saying ‘Land for Development’ since at least August 2012. The sign lists the developer

as Sociedade de Investimento Luen Kong Ltd and the designer as Ho Chun Kei Construction and Investment Company Ltd. The new urban plan will relax the height cap in the area to 90 metres. Previously for most plots it was lower. The government has also allowed developers to build projects with areas 20 percent bigger than the government had specified for the area since 1995. The pan-democrats accused the government of trying to “rush through” the urban plan before March,

when the city’s first urban planning law comes into force. The association also has doubts the ownership of two Caminho das Hortas plots. In a press briefing held yesterday, it called on the administration to clarify the issue. In August 2012 Paul Chan Wai Chi, then a legislator representing the New Macau Association, asked the government for information on who owned the two plots and what could be built there. Even though the Real Estate Registry showed there was no private owner

of the plots, one of them already had a sign saying ‘Land for Development’, said association president Jason Chao Teng Hei. The Land, Public Works and Transport Bureau confirmed – in a written answer to Mr Chan in October 2012 to a question lodged by Mr Chan in August that year – that the two plots were privately owned. The bureau told Business Daily yesterday that the plots have been merged into one plot measuring 2,018 square metres (21,722 sq feet), part of which will be reserved for

“public infrastructure” a spokesman said. According to a bureau briefing to the media on December 30, Taipa North’s urban plan is expected to supply 6,400 new flats from 71 plots in the area. The zone includes 33 privately owned parcels of land that remain undeveloped but that the government believes could provide 5,400 flats. Business Daily approached Mr Ho Chun Kei’s office for a comment from him, but had received no reply by press time.

January 14, 2014

Macau

Luso International Bank first to land on Hengqin The bank says it will open a representative office on the island by January 24 Tony Lai

tony.lai@macaubusinessdaily.com

Four Macau banks have expressed interest in opening branches on Hengqin Island

uso International Banking Ltd appears to be the first Macau bank to get permission to open an office on Hengqin Island – in what could be a step towards setting up a branch there. The bank said its Hengqin

office would open this month. Y este rday ’ s Offi ci a l Gazette says Secretary for the Economy and Finance Francis Tam Pak Yuen has approved the bank’s request to set up a representative office on the island.

A spokesperson for the bank told Business Daily: “The office has yet to be set up but, according to our schedule, it will open by January 24.” The spokesperson did not say whether Luso International intended to turn the office into

a branch later on. “A representative office can already tackle some of the business areas that a branch covers,” she said. The law in Macau says a representative office is allowed only to safeguard the interests of the bank it represents and “report the progress of the economic activities the institution is involved in”. The law bars representative offices from raising capital or issuing securities for other enterprises. Luso International has applied for a foothold on Hengqin since the ninth supplement to Macau’s Closer Economic Partnership Arrangement with the mainland came into effect a year ago. The supplement lowered the minimum assets a Macau bank must have before it

may open a Hengqin branch to US$4 billion (32 billion patacas) from US$6 billion. Four banks, including Luso International, were subsequently reported to be interested in setting up branches on the island. The others are Tai Fung Bank Ltd, Banco Nacional Ultramarino SA and Industrial and Commercial Bank of China (Macau) Ltd (ICBC Macau). The chairman of the Monetary Authority of Macau, Anselmo Teng Lin Seng, said last February: “It is necessary to open an office so that a branch can be created, according to the mainland Chinese regulator’s requirements.” ICBC Macau had been reported to be the frontrunner in the race to get a foothold on Hengqin. ICBC Macau chief executive Shen Xiaoqi said a year ago that the bank had asked the China Banking Regulatory Commission for permission to set up shop on the island and that it could have “good news” in the first half of last year. Nobody at the bank was immediately available for comment yesterday on the progress of its plans. Official data show Luso International had assets of 33.05 billion patacas at the end of 2012 and made a profit of 147.5 million patacas that year, 15.9 percent more than in 2011. With Vítor Quintã

Sales growth slows now gold rush over A spurt in jewellery sales ends just as an uptick in cosmetics sales begins Tony Lai

tony.lai@macaubusinessdaily.com

ewellers had slower growth in sales in the fourth quarter of last year after a gold rush caused by a drop in the world price of the metal petered out. Jewellery retailer Luk Fook Holdings (International) Ltd announced last week that its fourthquarter same-store sales in Macau and Hong Kong were 6.3 percent higher than a year earlier. In contrast, the annual rate of growth in its sales in the six months ended September 30 was 57.9 percent. During those six months the world price of gold had its deepest fall in over three decades. Visitors from the mainland snapped up gold items in Macau and Hong Kong, particularly in April and May. The gold rush may be over, but gold is still the main driver of revenue growth for Luk Fook. Luk Fook told the Hong Kong Stock Exchange that its fourth-quarter samestore sales of gold items in Macau and Hong Kong had risen by 15.4 percent. The company said its same-store sales of gem-set jewellery had increased by 5.8 percent. The retailer has 10 shops in Macau. Luk Fook rival Chow Tai Fook Jewellery Group Ltd announced last week that its fourth-quarter same-store sales in Macau and Hong Kong were 7 percent higher than a year earlier. The fourth quarter appears to have been different for cosmetics retailers.

Gold is still the main driver of revenue growth for Luk Fook

Sa Sa International Holdings Ltd announced last week that its fourth quarter same-store sales in Macau and Hong Kong were 15.8 percent higher than a year earlier. In contrast, the annual rate of growth in same-store sales in the six months ended September 30 was 13 percent. Sa Sa told the Hong Kong Stock Exchange that the pickup had been

due to greater promotion of its 109 shops here and in Hong Kong since the middle of October. “The move successfully boosted consumption sentiment of both local customers and mainland Chinese tourists in Hong Kong and Macau,” the company said. Sa Sa’s fourth-quarter turnover in all its shops in Macau and Hong Kong grew by 17.4 percent to HK$2.08

billion (US$267.9 million). Its turnover in other markets, including the mainland and Malaysia, grew by 3.8 percent. Credit Suisse Group AG said in a research note issued last week that “aggressive discount-offering” might shrink Sa Sa’s gross margin. The bank expects Sa Sa’s mainland business to make a bigger loss in the year ending March 31.

January 14, 2014 April 19, 2013

Macau

OCBC eyes indebted buyout of Wing Hang: sources Singapore institution could pay HK$39 bln to access HK lender’s mainland foothold

Singapore bank wants to borrow from third party banks in order to buy a Hong Kong bank and its Macau operation. Oversea-Chinese Banking Corp is in talks with lenders including Bank of America Corp and HSBC Holdings Plc about an all-debt financing for its acquisition of Hong Kong’s Wing Hang Bank Ltd, says Bloomberg, citing two people with knowledge of the matter. OCBC plans to sell stock later to help repay the short-term loan for Wing Hang, said Bloomberg’s sources, who reportedly asked not to be identified because the discussions are private. Talks between the companies are centring around a valuation of almost 1.9 times Wing Hang’s book value, though no terms have been finalised, one person said. At that valuation, OCBC would pay almost HK$39 billion (US$5 billion) for Wing Hang based on the Hong Kong lender’s book value as of June 30, data compiled by Bloomberg show. Bank of America, HSBC, Wing Hang and OCBC declined to comment on the financing details. Fitch Ratings’ Hong Kong office said in a note that Wing Hang’s exposure to mainland China stood at 27 percent of its assets at endJune 2013 against a Hong Kongwide average of 31 percent. Fitch didn’t give any assessment on the possible financial routes for a takeover and how that might affect OCBC’s own credit rating, which the research house cites currently as ‘AA-’ and ‘stable’. But Fitch does say of the potential deal for family-controlled Wing Hang: “With mainland China remaining difficult to access directly, these small banks offer an operating platform, a deposit base and a more stable regulatory environment for

of September 30, more than triple the minimum required under the current international standards for the banking industry. It finished the third quarter with S$14.5 billion (91.54 billion patacas) of cash and equivalents, data compiled by Bloomberg show. Fitch Ratings said in its note, and referring to potential for more mainland China business: “Strategic investment by a larger player would give it [Wing Hang] improved flexibilities in funding and capital, and potential access to clients – all necessary ingredients for further expansion in a riskier but highergrowth market.” Stephen Andrews and Khairul Rifaie, analysts from Swiss bank UBS AG, said in a note dated January 6 that a Wing Hang acquisition carried out at 1.75 times book value would dilute OCBC earnings by about five percent and require a “sizeable capital raising.”

HK$39 billion

Amount OCBC could pay for Wing Hang Bank

Wing Hang’s Macau unit is Banco Weng Hang (Photo: Manuel Cardoso)

foreign banks to build a greater China franchise.”

Long heritage Wing Hang Bank was founded as a money changing business in 1937 but has grown into a mainstream retail lender with more than 70 outlets in Hong Kong, Macau and mainland

China. The network includes 12 branches in Macau under the branding of its local unit Banco Weng Hang SA. The Singaporean lender OCBC has 16 branches in China, one in Taiwan and one in Hong Kong, its chief financial officer Darren Tan said last week. OCBC had a common equity Tier 1 capital ratio of 14.3 percent as

On January 6, OCBC said it was in exclusive talks with Wing Hang’s biggest shareholders to buy the bank. The family of Wing Hang chairman Patrick Fung Yuk Bun, its affiliates and Bank of New York Mellon Corp together hold about 45 percent of the stock. The deal would be OCBC’s largest in modern money terms since the Singapore institution was founded in 1933, and would surpass the US$2.8 billion OCBC paid in 2001 for Keppel Capital Holdings Ltd. Another family-controlled Hong Kong lender – Chong Hing Bank Ltd, was recently taken over by the Guangzhou-based Yue Xiu Group. Yue Xiu is the trading arm of the Guangzhou city government in China’s Guangdong province. M.G. with Bloomberg News

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January 2014 April 19,14, 2013

Macau

Macau Legend lifts Ina Chan into super class Stanley Ho’s third consort joins ranks of HK’s U.S. dollar billionaires says Forbes Michael Grimes

michael.grimes@macaubusinessdaily.com

Ho ally

Ina Chan Un Chan – IPO helped her join Hong Kong super rich (File photo)

t least eight people on Forbes’ latest ‘Hong Kong’s 50 Richest’ list have significant investments in Macau casinos. That’s two more than last year. Those with direct stockholdings have mostly seen them jump in value. In 2013, Galaxy Entertainment Group Ltd and Sands China Ltd – two Macau names listed on Hong Kong’s benchmark Hang Seng Index – outperformed the underlying index by 91 percent

according to Morgan Stanley Research. Macau casinos generated a record 360.75 billion patacas (US$45.2 billion) revenue in 2013, up nearly 19 percent year-on-year. One of the new entries to ‘Hong Kong’s 50 Richest’ in 2014 is Ina Chan Un Chan, third consort of Stanley Ho Hung Sun. Mr Ho and his business partners held a 42year casino monopoly in Macau. Ms Chan – born in China’s Guangdong

Int’l Entertainment slides after Suncity deal

otel operator International Entertainment Corp shares extended losses yesterday, falling more than 10 percent, as investors appeared to question a deal to buy a stake in a Macau junket business for HK$7.35 billion (US$948 million). International Entertainment, controlled by Hong Kong billionaire Cheng Yu Tung, said late Thursday it planned to buy a 70 percent interest in a VIP gaming promotions operator from Suncity International Holdings Ltd in a deal to be settled in cash and through the issue of new shares at HK$5 each, representing up to 29 percent of the enlarged share capital. The stock fell as much as 12.9 percent to HK$8.01 yesterday, the sharpest fall since November 2011.

in Mr Ho’s Sociedade de Turismo e Diversões de Macau SA. In second place on ‘Hong Kong’s 50 Richest’ – up from fifth last year – is Lui Che Woo, chairman of Macau casino concessionaire Galaxy, with net wealth of US$21 billion. That’s nearly double his US$10.7 billion worth last year, and will undoubtedly propel him up Forbes’ 2014 worldwide list of U.S. dollar billionaires.

province – is in 46th place with net worth equivalent to US$1.1 billion. Her elevation comes courtesy of the HK$2.04 billion net cash raised in a global share offering in July by Hong Kong-listed Macau casino services company and Ho family ally Macau Legend Development Ltd. She owned just under 15 percent of Macau Legend as of September 12, according to the company’s 2013 interim report. She also has a stake

Down one place in 2014’s Hong Kong list of the super rich is Cheng Yu Tung, with US$15.5 billion. His family have diversified interests including gaming, property and retailing. Mr Cheng in 1982 bought a 10 percent stake in SJM’s parent firm STDM. As recently as February last year he was described in a filing as maintaining a “beneficial interest” in STDM. Pansy Ho Chiu King – a daughter of Stanley Ho and partner in the Macau casino sub-concession controlled by MGM China Holdings Ltd – rises two places in the 2014 list to ninth, with US$6.8 billion. When MGM China floated in Hong Kong in 2011, she diluted her 50 percent stake to 27 percent but made approximately US$1.5 billion. Three places below her is sibling Lawrence Ho Yau Lung, co-chairman of Macau casino developer Melco Crown Entertainment Ltd, who joins the list for the first time, with US$3.4 billion. Angela Leong On Kei, Stanley Ho’s fourth consort and an executive director and 7.71 percent shareholder of SJM Holdings Ltd, moves from 24th to 19th place with US$2.85 billion. Pollyanna Chu Yuet Wah falls from 35th to 40th place, despite her own net worth rising to US$1.4 billion from US$1 billion a year earlier. Her Kingston Financial Group Ltd controls two Macau casinos – Casa Real and Grandview – under an SJM licence. Completing those with Macau gaming interests is Albert Yeung Sau Shing, founder and chairman of Emperor Group. He’s down from 39th to 45th, with US$1.12 billion. The group’s Grand Emperor Hotel & Casino, opened in January 2006 via an SJM Licence.

Reminders from Identification Services Bureau

It closed the day down by 10.3 percent to Hk$8.34, compared with a 0.2 percent gain for the benchmark Hang Seng Index. It had dropped 1.6 percent on Friday in resumed trade after news of the deal. International Entertainment, which has a market value of US$1.4 billion, said it may have to raise funds to finance the cash portion of the deal by way of placing shares or through convertible securities. The deal is subject to regulatory approval. The Hong Kong-listed company, which is also involved in leasing properties for casinos, is 74.8-percent owned by Mr Cheng’s Chow Tai Fook (Holdings) Ltd, the parent of Chow Tai Fook Jewellery Group Ltd. Reuters

> Please make proper arrangement and reserve adequate time for the application of the Certificate of Criminal Record. > Normal application for the Certificate of Criminal Record takes 5 working days after the date of application; in urgent cases, the application just takes 2 working days after the date of application (please note that an additional fee is required for the express service). > The Certification of Criminal Record can be applied at the Identification Services Bureau (location: No.804 Av. da Praia Grande, China Plaza, 1° andar) and the Government Services Center (location: No.52 Rua Nova da Areia Preta). > For further details of the application, please call 28370888. Appointment for the application can also be made at our official website (www.dsi.gov.mo).

January 14, 2014 April 19, 2013

Greater China US probes Honeywell’s made in China parts The United States Justice Department is investigating export and import procedures at Honeywell International Inc after the firm included Chinese parts in equipment it built for the F-35 fighter jet, three sources said. The Pentagon twice waived laws banning Chinese-built components in United States weapons in 2012 and 2013 for parts supplied by Honeywell for the US$392 billion Lockheed Martin Corp F-35 program. The case throws a spotlight on the reliance of American companies, even in sensitive areas, on China as a manufacturing base for basic components.

Five firms delay IPOs as regulator eyes spot checks Firms suspend listing plans after CSRC announces tighter supervision fresh funds outside of the already overburdened banking system. Ernst & Young has estimated these firms will raise around 200 billion yuan (US$33.05 billion) on the Chinese bourses in 2014. Initial signs were promising, with the first two IPOs attracting massive investor interest during the subscription process. In wider terms the suspensions mark a setback for reformers in Beijing who have committed to giving markets a “decisive” role in the next phase of Chinese economic development.

KEY POINTS Regulators fear overly aggressive pricing Setback for efforts to give markets ‘decisive’ role

Nearly 750 companies have been waiting since listings were frozen in late 2012

ive Chinese firms announced yesterday that they had postponed their initial public offerings (IPOs) after China’s stock regulator said overnight it would strengthen supervision of new listings. The announcements follow a similar statement by drug maker

Aosaikang on Friday which sources told Reuters was due to regulatory pressure, although the China Securities Regulatory Commission (CSRC) denied it. The five companies are NetPosa Technologies Ltd, Hebei Huijin Electromechanical Co Ltd, Nsfocus

Sinopharm ex-VP held for corruption S

inopharm Group Co, China’s biggest drug distributor, said a former vice president has been detained by Shanghai authorities as part of a probe into an allegation of corruption against the executive. Shi Jinming was detained by the People’s Procuratorate of Shanghai Pudong New District on the evening of Friday for an investigation, the company said in a statement to the Hong Kong stock exchange late Sunday, without providing details of the allegations. Yang Liu, a media officer for Shanghai-based Sinopharm, didn’t answer her office line and didn’t immediately respond to an e-mailed query about the investigation. The former executive gave up his

position on January 7 after handing in his resignation letter in December due to personal reasons, Sinopharm said. Xu Yizhong, a former general manager of the company’s Sinopharm Holding Distribution Co unit, is also involved in the investigation, according to the statement. Mr Shi and his subordinate Mr Xu had been accused by a whistleblower of misappropriating company funds and setting up illegal personal accounts, Yicai.com, the website of China Business News, reported yesterday, citing unidentified sources close to the company. Sinopharm dropped 2 percent to HK$22.55 in Hong Kong trading. The benchmark Hang Seng index gained 0.3 percent. Bloomberg News

Information Technology Co Ltd, Beijing Forever Technology Co Ltd and Ciming Health Checkup Management Group Co Ltd. “In line with the CSRC statement on January 12, the issuer and lead underwriters have decided to adjust the timetable for the company’s planned share issuance,” Ciming Health said in its announcement, without giving a new timeframe for the issue. The other four firms issued similar statements. The CSRC said on Sunday that any companies which set their IPO price to earnings ratios higher than the ratios of industrial peers in the secondary market must publish repeated risk warnings before they open subscriptions to retail investors, a move that will effectively reduce IPO prices and slow the progress of new issues. Aosaikang appeared to be a retroactive violator of this rule by putting its price-to-earnings ratio at 67, versus 55 for its industry peers. Analysts said regulators were also likely bothered by the company’s plans to dedicate most of the IPO to letting major stakeholders sell off their existing shares, instead of issuing new ones. The six suspensions comprise around one fifth of all the companies that have filed to list in Shanghai and Shenzhen since the IPO gates were lowered in early January.

Stuck waiting This marks an inauspicious beginning to the resumption of IPOs in China, which regulators hoped would help nearly 750 companies, stuck in the queue since listings were frozen in late 2012, find sources of

Follows first suspension on Friday

The aborted listings highlight the challenges the government faces in liberalising a market still dominated by companies unused to the requirements of transparent corporate governance. The China Securities Regulatory Commission (CSRC) has said it will loosen its grip on the IPO process, changing its current approval-based system – where it decides who gets to list and who does not – to a registration-based system similar to the one used in the United States. This would diminish opportunities for corruption, but it also would limit regulators’ ability to protect China’s army of retail stock investors from unethical company managers. In November, Xiao Gang, chairman of the CSRC, told a financial forum that liberalisation plans for the IPO market did not imply a free-for-all. “This does not mean that the CSRC will sit idly, which will lead to more junk stocks,” he said. Chinese equity indexes have been some of the world’s worst performers in recent years, with many domestic investors souring on Chinese stocks in general given the market’s reputation for insider trading and price manipulation. The CSI300 Index, the Shanghai and Shenzhen benchmark, has lost nearly 11 percent over the last four weeks since IPOs resumed, and it is down over 19 percent since markets peaked in February 2013 in response to the IPO freeze. Reuters

January 2014 April 19,14, 2013

Greater China

Li Ka Shing’s Power Assets is listing its HK electricity business

Li Ka Shing’s utility downsizes IPO HK IPOs expected to total US$32.2 bln in 2014, nearly double 2013 Elzio Barreto

i Ka Shing’s Power Assets Holdings Ltd slashed the size of a Hong Kong initial public offering (IPO) of its electricity business by nearly one-third because of a lower expected valuation and its decision to keep a large stake in the business. Power Assets will spin off the business into HK Electric Investments, a single-investment trust, offering 4.43 billion units in an indicative range of HK$5.45HK$6.30 each, the company added in a filing to the Hong Kong stock exchange on Sunday. That would put the deal at up to HK$27.91 billion (US$3.6 billion). The deal will be the first of several mega-sized offerings in the city in 2014, a year that could have some US$32.2 billion in new listings, advisory firm PwC estimates, nearly double the 2013 tally of US$17.1 billion. That would make 2014 the fourthbiggest year on record for IPOs in the city, Thomson Reuters data show. The company cut the expected

maximum market capitalisation of the trust to HK$55.7 billion from HK$63.4 billion announced in December. Power Assets also said it will hold about 49.9 percent of the trust, compared with as little as 30 percent in the December filing. Based on the top market valuation of the trust and Power Assets initial plan to float up to 70 percent of the business, the IPO was expected to reach up to US$5.7 billion.

reduced deal wouldn’t have a direct effect on upcoming offerings. The trust is expected to pay a distribution yield of 6.26 percent to 7.24 percent in 2014, the company said in the filing. Power Assets said in December the IPO “will enable the company to continue to pursue new acquisitions in the global power industry, while maintaining a strong financial profile.” The reduced size of the IPO is

‘Forced to reconsider’ “Sometimes you go up with pretty aggressive valuations, then you start talking with investors and realize that you don’t have a huge number of institutions that are actually supporting it,” said Philippe Espinasse, a former equity capital markets banker at both UBS and Nomura and author of “IPO: A Global Guide.” “Then you’re forced to reconsider with something that is more palatable,” he added, saying the

KEY POINTS Power Assets to spin off utility into trust HK Electric Investments to offer 4.43 bln units Trust to pay yield of up to 7.24 pct in 2014

P2P loan sites fail as fraud climbs Peer-to-peer lending has taken off as part of China’s shadow-banking system

ome Chinese peer-topeer (P2P) lending websites collapsed last year and others may need restructuring in 2014 to curb fraud in an industry that has grown rapidly with little regulatory oversight, Xinhua news agency said. About 800 such online operations emerged in China just last year with outstanding loans of 26.8 billion yuan

(US$4.4 billion), Xinhua reported, citing industry data from Wangdaizhijia. com, China’s biggest peerto-peer lending site. Meanwhile, 74 websites were either shut down or their users were unable to withdraw cash, according to the report. Peer-to-peer lending has taken off in China since 2011 as traditional methods of

private lending among family and acquaintances, part of the country’s unregulated US$6 trillion shadow-banking system, move online. Loans brokered on the Web increased to 105.8 billion yuan last year from 20 billion yuan in 2012, Xinhua said. Akin to LendingClub. com or Prosper.com in the U.S., China’s peer-to-peer

not expected to hinder its efforts as the company has executed previous acquisitions without tapping the equity markets for funding. The IPO will be only the third in the city by a single-investment trust, following HKT Trust, spun off from telecoms group PCCW Ltd, and hotel owner Langham Hospitality Investments Ltd. Power Assets said it received initial commitments worth nearly US$1.34 billion from two investors for the IPO. Government-owned State Grid Corp of China agreed to make the largest commitment as a cornerstone investor, pledging up to HK$10 billion, while Oman Investment Fund agreed to buy HK$387.5 million, the filing said. Cornerstone investors receive a guaranteed allocation in exchange for agreeing to retain their stakes for a set period. Goldman Sachs and HSBC were hired as sponsors of the IPO.

lenders let individuals invest a minimum of 50 yuan in projects ranging from smallbusiness expansion to funding newlyweds’ honeymoons with interest rates capped at 24 percent, the highest allowed under Chinese law. The average lending rate on peer-to-peer sites was 19.7 percent, Xinhua reported, citing Wangdaizhijia. That compared with the benchmark one-year lending rate of 6 percent. Liu Shiyu, deputy governor of the People’s Bank of China, in December urged people to recognize the risks associated with online financing and to be wary of fraud. He said peer-to-peer

Reuters

operations aren’t allowed to raise funds for lending or to attract deposits, and they’re also banned from operating an asset pool. China’s Cabinet is imposing new controls on shadow banking with an order that targets off-thebooks loans and shores up enforcement of current rules, people familiar with the matter said last week. The directive reflects concern at the highest levels of government that shadow banking, estimated by JPMorgan Chase & Co at 69 percent of China’s 2012 gross domestic product, may threaten the financial system’s stability. Bloomberg News

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January 14, 2014 April 19, 2013

Greater China

China has built a high-speed rail network of 11,000 km in six years

China Railway faces unpaid bills after president death Efforts to reduce debt are leaving firms short of cash to pay banks and contractors

he death of China Railway Group Ltd’s president left his successor an escalating challenge: collecting on unpaid construction-work bills in an industry plagued by record debt as borrowing costs surge. Shares in China’s second-biggest builder of railways fell 7.4 percent in Hong Kong last week after the company said January 5 that president Bai Zhongren had died in an accident and that chairman Li Changjin will take over his job before a successor is chosen. Premier Li Keqiang’s efforts to reduce leverage in the world’s secondlargest economy are leaving Chinese companies short of cash to pay banks and contractors. China Railway Group’s liabilities and accounts receivable both more than doubled in the past five years, an increase Sun Hung Kai Financial Ltd said reflects difficulty collecting payments on time from China Railway Corp, the operator of a network plagued by corruption probes and fatal accidents. “The death of Mr Bai renewed market concerns on China’s rail sector, which had project delays caused by corruption investigations and suffered from massive debts,” said Eva Yip, an analyst at Sun Hung Kai Financial. The stock fell amid a lack of details over Mr Bai’s death and concern that further probes are in the pipeline, she said.

Rail expansion China has built a high-speed rail network of 11,000 kilometers (6,835

miles) in six years as the centerpiece of a debt-fueled stimulus package after the global financial crisis. The expansion spawned abuses with former railway minister Liu Zhijun given a suspended death sentence in July for taking bribes. A high-speed crash killed 40 people in 2011, prompting the government to disband the railway ministry and hand its operations to 100 percent state-owned China Railway Corp in March last year. The similarly named China Railway Group and China Railway Construction Corp have a duopoly on building for the network and are majority owned by separate government bodies. The builder’s debt level is normal and risks are controllable, according to a statement posted to Shanghai’s stock exchange website last week.

Overdue payments The Beijing-based company had 531.6 billion yuan (US$87.8 billion) of liabilities on September 30, data compiled by Bloomberg show. Its long-term debt to equity ratio of 129 percent is among the worst 3 percent on the Hang Seng Index, while its ability to cover interest payments with earnings is in the worst 1 percent. China Railway Group’s increasing accounts receivables is mainly caused by overdue payments from its main customer China Railway Corp, Sun Hung Kai Financial’s Ms Yip said. Separately, Ms Yip said that China Railway Construction told her on January 7 that payment delays are normal and usually it has to chase its railway customers several times

before it gets paid. “Certain individual customers” of China Railway Construction haven‘t been able to pay on time for years and there’s no obvious change at the moment, according to an e-mailed statement on January 9 by Wonderful Sky Financial Group, which handles media relations for the construction company.

Debt-fueled “China Railway Corp is the worst customer in terms of difficulties to get paid on time,” said Wang Mengshu, chief deputy engineer of China Railway Group, citing his inspection trip to a line it is building between the cities of Lanzhou and Chongqing. The massive debt of the network operator is one reason for the delayed payments, he said. The company’s total liabilities reached a record high of 3.1 trillion yuan as of the end of September, equivalent to the government debt of Brazil. It sold 190.4 billion yuan of notes last year, the most for any corporate borrower, as premier Mr Li vowed to accelerate network expansion to help develop inland cities and bolster economic growth. “Because China Railway Corp’s existing projects can’t bring positive returns, it has to rely on loans and bond sales to fund new projects,” said Ivan Chung, a Hong Kongbased senior credit officer at Moody’s Investors Service. “Growth in the debt will only go faster as China pushes forward the urbanisation drive.” Haitong Securities Co, China’s

second-biggest brokerage, said earlier this month that a “debt snowball” threatens to trigger a financial crisis as more companies borrow to fund maturing obligations and unpaid bills. Liabilities at non-financial corporates may rise to more than 150 percent of gross domestic product in 2014, raising default risks, according to Haitong. The ratio of 139 percent at the end of 2012 was already the highest among the world’s 10 biggest economies, according to the most recent data.

Cash flows “Compared with other sectors, rail companies are definitely more vulnerable to any sort of tight liquidity in money markets,” said Gary Wong, a Hong Kong-based analyst at Guotai Junan Securities Co. “That’s because they have huge debts and difficulties in getting project payments on time.” China Railway Group had a negative cash flow of 18.5 billion yuan in the first nine months of 2013, heading for a fourth consecutive year of outflows. The government has previously provided support to make sure the network operator makes good on overdue payments, said Cosmo Zhang, Hong Kong-based director at Corporate Ratings Group at Fitch Ratings, which rated the 2023 debt BBB+ with a stable outlook. Standard & Poor’s said its similar rating also focused on the prospects of a bailout for the industry if required. Bloomberg News

11 11

January 2014 April 19,14, 2013

Asia

Singapore labour shortage limits export recovery Country at risk of losing out as overseas demand strengthens Sharon Chen

when you don’t have enough workers, how are you going to meet that order?” Manufacturing accounted for 19.9 percent of Singapore’s gross domestic product in the third quarter of 2013, down from nearly 21 percent in the same period two years earlier. The sector’s share was 27.3 percent in 2005, official data show. The government said in a 2010 report that manufacturing should still account for about 20 percent to 25 percent of Singapore’s economy. Still, there is a lag as laborintensive factories relocate and new industries the island is keen to attract – from aerospace to research and development – take time to replace them, according to Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “The pain is being felt by companies,” acting Manpower minister Tan Chuan-Jin said in a Bloomberg Television interview on December 13. “Companies will restructure, some companies will have to close, it will release labor back into the market.”

Productivity drive

Singapore’s factories are struggling to meet all export orders

lcotec Precision Engineering Pte owner Colin Kua turned down almost a third of his customers’ orders last year as he grappled with Singapore’s labor shortage. This year may be tougher. “In the future it may be worse – to venture out to other countries may be the only solution,” said Mr Kua, who had to cut the number of foreign employees making items from sockets to semiconductors by half as the government tightened the inflow of overseas workers. “We don’t really dare to bring in more orders because the manpower isn’t enough.” Singapore’s move to reduce its reliance on cheap overseas labor and boost productivity is crimping the ability of manufacturers like Mr Kua to produce on the island. The fallout puts the Southeast Asian nation at risk of losing out as overseas demand strengthens this year, with recoveries in the United States and Europe spurring the International Monetary Fund to say it will raise its global growth forecast.

Prime minister Lee Hsien Loong has over the past four years prodded companies to produce more with fewer workers as the island confronts an aging population and voter discontent with foreigners in the country. The impact of those policies, ranging from higher levies for overseas labor to tighter limits on non-Singaporeans in some industries, may become more apparent in 2014 as the economy loses some of the manufacturing capacity that helped boost exports and growth in past recoveries.

Export decline “This manufacturing recovery that we’re all hoping for seems to be sputtering again,” said Chua Hak Bin, a Singapore-based Bank of America Corp economist who worked at the country’s central bank for six years. “Foreign-worker restrictions will be tightened further in July. We think Singapore may not be able to fully capitalize on a global demand upswing because of these constraints.” Singapore in February said it will

tighten rules for companies hiring foreign workers for a fourth straight year, with the next round of measures scheduled to take effect July 1. Manufacturers including Western Digital Corp have moved operations to other Southeast Asian nations, as employers on the island grappled with the restrictions that raised costs and helped push unemployment to a five-year low in the fourth quarter of 2012. Singapore’s exports declined in nine out of 11 months last year, faring worse than neighbors from South Korea to Malaysia. Manufacturing output shrank in the fourth quarter from the previous three months, and has grown at about 60 percent the pace of the services industry in the past two years as companies struggled to expand, data compiled by Bloomberg show. “The restructuring has diluted our overall competitiveness,” said Irvin Seah, an economist at DBS Group Holdings Ltd in Singapore. “It’s not just higher labor costs but it’s also the labor crunch, because

Singapore in November said exports will contract in 2013, and the government predicts export growth will increase at a slower pace than gross domestic product expansion in 2014. The nation’s economy, which has grown an average of about 6.4 percent annually over the last three decades, expanded 3.7 percent last year and is estimated by the government to grow 2 percent to 4 percent in 2014. “The government is trying to do what it can to help with productivity,” said Kurt Wee, president of the city’s Association of Small and Medium Enterprises. “This productivity drive takes time; I’m not so confident the companies can ramp up productivity so fast.” Sigma Cable Co began using contract manufacturers to make about 30 percent of its products from early last year. Those who haven’t changed their strategy to account for fewer workers are suffering, according to deputy general manager Samuel Peh. “The demand for our sector is improving because our neighboring countries are doing quite OK,” said Mr Peh. “I can see my competitors, their hands are really tied.”

Best performer Compounding their woes is the Singapore dollar, which was the best performer last year among five major Southeast Asian currencies tracked by Bloomberg, weakening only about 3.3 percent against the United States dollar. The central bank, which guides the local dollar against a basket of currencies, said in October it would maintain a modest and gradual appreciation. “They have accepted that in the next three to five years while they are trying to pursue productivity gains, they will see softer growth,” said Mizuho’s Mr Varathan. Bloomberg News

12 12

January 14, 2014 April 19, 2013

Asia

Park eyes bonanza from unified Korean economy Seoul studying whether economy is too reliant on big conglomerates

resident Park Geun Hye, who became South Korea’s first woman leader by promising a more “creative economy,” begins her second year vowing to pursue the unprecedented prosperity she said will result from unification with North Korea. It’s despiteflagging interest from many citizens more than six decades after the peninsula’s war. As the aging workforce threatens the nation’s productivity, Ms Park plans a public campaign extolling the business opportunities from the combination of capital and technology in Asia’s fourth-largest economy with the North’s human and natural resources. “People would even sing, ‘we dream of unification even in our dreams,’” Ms Park said in an interview at the presidential Blue House office in Seoul. “As the state of division continued to persist and drag on, it’s true the recognition of importance of unification has admittedly declined and fallen.” “Unification will allow the Korean economy to take a fresh leap forward and inject great vitality and energy,” said Ms Park, 61. The president said in the Friday interview that this year the government will establish “creative economy centres” that provide assistance to small and medium companies. She said the goal is to help people with fresh ideas get financial aid without collateral. At the same time, she said it’s important not to yield to “populism” as part of a drive for stronger legislative steps to rein in the influence of the chaebols, huge conglomerates. The government is studying whether the economy is too dependent on a handful of companies, including Samsung and Hyundai, Finance minister Hyun Oh Seok told reporters yesterday in Seoul.

“The big story in Korea is the move from the chaebols to the small and medium enterprises that are going to be more and more creative, very fast growing,” Mark Mobius, chairman of Templeton Emerging Markets Group, said in an interview last week in Hong Kong. “Government policy has been to try to encourage this more and more and now it’s coming to fruition. It’s going to be quite exciting.” Ms Park last week released a three-year economic plan targeting an acceleration in potential growth to 4 percent. The finance ministry projects gross domestic product will rise 3.9 percent this year, after a 2.8 percent gain in 2013. Among the risks to the forecast is a strengthening won, which gained 23 percent against the yen in 2013. The president said South Korea will seek to join the Trans-Pacific Partnership trade talks and wants progress toward a commercial deal with China this year, offering fresh opportunities for the nation’s exporters. She also plans policies to address the underrepresentation of women in the economy, to help ensure females don’t suffer interruption in their careers due to childbirth and bringing up children.

Unification cost With the South’s finance ministry in February calculating the cost of uniting the Korean peninsula at as much as US$591 billion over a decade if it occurred in 2020, surveys show younger voters aren’t enthused at the prospect. “We will also work to make more widespread the shared recognition on the need for unification,” Ms Park said. “There’s no knowing when unification will actually take place, but we will do our best to hasten the day.”

Japan PM eyes Mozambique energy As country tries to catch up to China in Africa trade and investment

apan’s prime minister Shinzo Abe, who is on his first visit to Africa, on Sunday pledged to boost ties with resource-rich Mozambique, signing a raft of agreements on key sectors including energy.

Mozambique is seen as Africa’s emerging frontier for natural gas, with several offshore discoveries in recent years. “The relationship that we have maintained with Mozambique has

Park Geun Hye has released a three-year economic plan targeting faster growth

A single Korea also would allow for a decline in the military spending currently needed to defend against the North’s 1.2 million troops and nuclear arms program, she said. “Benefits will outweigh costs, considering that costs are temporary while benefits last as

long as one Korea remains,” said Jo Dong Ho, a professor of North Korean economic studies at Seoul’s Ewha Womans University. “The worry over costs has long dominated debate on unification. Now that’s changing.”

evolved over the years and there has been much progress,” Mr Abe said after meeting with his Mozambican counterpart president Armando Guebuza. The Japanese prime minister, who was accompanied by a large delegation of business leaders, said Tokyo wanted to “broaden cooperation with Mozambique.” Mr Abe mentioned natural gas, education and science and technology “as priority areas for future cooperation with Mozambique.” Agreements were also signed in the area of health care and construction. Despite its newfound resources, Mozambique still suffers from poor infrastructure development, a legacy of a brutal, nearly 16 year civil war

that ended in 1992. Mozambique has over the last year pumped money into the development of roads and rail routes, crucial for the import and export of goods. Several Japanese firms have been involved in the development of natural gas fields and coal fields in Mozambique. Mr Abe’s Africa tour also took him to Ivory Coast and his last stop will be Ethiopia next week. Despite relatively longstanding connections, Japan’s importance to Africa has slipped behind that of China, with Beijing becoming in 2009 Africa’s top trading partner at 13.5 percent, compared with Japan at 2.7 percent, according to the Organisation for Economic Co-operation and Development.

Bloomberg News

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

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13 13

January 2014 April 19,14, 2013

Asia

CIMB in cash call to cut debt Bank braces for growing credit demand amid Malaysia’s rapid growth

alaysian bank CIMB Group Holdings Bhd is raising as much as US$1.1 billion through new shares to boost its core capital as Southeast Asia’s fifth largest lender takes on its rivals in credit and equity markets at home and abroad. CIMB is bracing for more credit demand on the back of rapid economic growth in Malaysia and a pipeline of large initial public offerings in the country this year. Its consumer and corporate loan businesses have also been growing at double-digit rates, fuelled by strong economic growth in Southeast Asia, where it counts Singapore, Indonesia and Thailand as its major overseas markets. “They are taking a dual direction, to invest in their home market as well as the overseas growth drivers. In order to continue both ways, the capital required is quite high,” said Chan Ken Yew, head of research at Kenanga Research in Kuala Lumpur. CIMB’s core capital has lagged larger regional peers. Its common equity tier 1 ratio was 8.2 percent at the end of September. DBS Group Holdings, Southeast Asia’s biggest lender, had a common equity tier 1 ratio of 13.3 percent at the end of September.

KEY POINTS CIMB looking overseas New shares offered at a discount Capital ratio below larger banks

CIMB has under chief executive officer Nazir Razak boosted regional operations

The capital raising would boost CIMB’s common equity ratio by 1.0 to 1.5 percentage points, UBS said in a research note. “We view the increase in capital as positive as it removes the overhang on its challenging capital position,” said UBS analyst Khairul Rifaie in the note. CIMB has under chief executive officer Nazir Razak boosted regional operations over the past decade. The CIMB share sale is the biggest in Malaysia since Malayan Banking Bhd, or Maybank, tapped equity

markets with a US$1.2 billion offering in October 2012, Thomson Reuters data showed. CIMB is selling 400 million new shares for 7.10 ringgit to 7.25 ringgit each, representing a discount of 2.7 percent to CIMB’s Friday closing price, according to a term sheet of the deal seen by Reuters yesterday. Underwriters of the offering have the option to increase the deal by up to US$222 million to meet additional demand, taking the total deal size to US$1.1 billion.

“The base deal size shares is covered at the wide end of the range. Large orders from existing shareholders, key local institutions and international investors,” said a person with direct knowledge of the matter who declined to be named due as they were not authorised to talk to the media. The bank will use the proceeds to fund growth in subsidiaries, reduce debt and for working capital needs, the term sheet said. Reuters

Vietnam scraps tax on coffee Move could help the world’s biggest producer of the robusta variety

ietnam has abolished a controversial 5 percent value added tax (VAT) on agricultural products, including coffee, but traders said some provinces were still awaiting detailed guidelines for its implementation. The move could help bring more coffee from the world’s biggest producer of the robusta variety to the global market. Delays in processing tax refund claims on exports of coffee, rubber and cocoa last year had held up shipments, and despite the government pledging a relaxation of rebate procedures, confusion over the process has deterred buyers. As of January 1, raw and semiprocessed agricultural, husbandry and aquatic produce are exempted from the VAT payment, prime minister Nguyen Tan Dung said in a decree. The 21-page decree, seen by Reuters, did not mention the word ‘coffee’ or name any specific products.

It said the Finance Ministry would guide the implementation. “It’s not clear, so only some provincial authorities have implemented it while others have not,” said a coffee trader in Daklak,

Vietnam’s largest growing province. “They are still waiting for the Finance Ministry’s detailed guidance.” In the Central Highlands coffee belt comprising five provinces, Lam Dong, Gia Lai and Kontum have been

applying the exemption, while Daklak and Dak Nong have yet to abolish the 5 percent tax, traders said. In Gia Lai province the tax authority listed coffee, pepper and cassava among agro-products for VAT exemption, the provincial tax department said in a letter seen by Reuters. “This is a good policy, it reduces the time for paperwork and also the cost of coffee,” another trader at a European trading firm in Ho Chi Minh City said. But he said the export market has not moved swiftly due to thin foreign buying demand, and also as buyers were seeking lower prices than exporters could accept. Vietnamese robusta grade 2, 5 percent black and broken beans were quoted at discounts of US$20-US$25 a tonne to London’s March contract, while bids stood at discounts of US$30 a tonne to the March contract, unchanged from last week. Reuters

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January 14, 2014 April 19, 2013

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

Max 77.05

average 76.277

Min 75.10

Last 77.05

77.1

111.5

76.7

111.2

76.3

110.9

75.9

110.6

75.5

110.3

75.1

Max 111.5

average 110.633

Min 110.0

Last 110.9

64.2

63.4

Max 25.40

average 25.345

Commodities PRICE

DAY %

YTD %

(H) 52W

92.25

-0.506902502

-6.269051006

106.2200012

BRENT CRUDE FUTR Feb14

106.94

-0.289044289

-3.483754513

112.7999954

GASOLINE RBOB FUT Feb14

266.59

-0.1198906

-4.307405147

286.9299889

243.68999

GAS OIL FUT (ICE) Feb14

905.5

0.667037243

-4.027556969

960.75

840

NATURAL GAS FUTR Feb14

4.151

2.417962003

-1.867612293

4.770000458

3.476000071

85.56999969

293.8

-0.091814874

-4.149810779

317.8399801

278.4999847

Gold Spot $/Oz

1245.89

-0.2091

3.5876

1696.2

1180.57

Silver Spot $/Oz

20.0822

-0.3563

2.6823

32.46

18.2208

Platinum Spot $/Oz

1433.63

-0.2345

5.7444

1742.8

1294.18

Palladium Spot $/Oz

738.15

-0.6581

3.8186

786.5

629.75

1765

0.857142857

-1.95806138

2174

1736.25

7302.5

1.240815195

-0.78125

8346

6602

2032

1.094527363

-1.119221411

2230

1811.75

13860

3.332587788

-0.287769784

18770

13205

15.64

-0.031959092

2.389525368

16.77000046

15.12000084

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

3MO ($)

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

435.25

0.577700751

3.139810427

606.5

406.25

575.5

1.142355009

-4.915324246

845

560.5

SOYBEAN FUTURE Mar14

1275.25

-0.254204145

-1.334622824

1377.75

1174

COFFEE 'C' FUTURE Mar14

120.15

-0.414421881

8.536585366

172.25

104.1499939

15.63

0.385356455

-4.753199269

20.57999992

15.40999985

CORN FUTURE

Mar14

WHEAT FUTURE(CBT) Mar14

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

82.84

0.302700085

-2.126654064

90.61000061

76.65000153

World Stock Markets - Indices NAME

Min 25.25

Last 25.35

(L) 52W

WTI CRUDE FUTURE Feb14

NY Harb ULSD Fut Feb14 METALS

average 33.668

Min 33.25

Last 33.85

33.2

36.8

36.7

36.6

25.20

Max 36.80

average 36.679

Min 36.55

Last 36.70

36.5

Currency Exchange Rates

NAME ENERGY

Max 34.00

25.25

63.6 Last 63.50

33.4

25.30

63.8

Min 63.45

33.6

25.35

64.0

average 63.597

33.8

25.40

64.4

Max 64.40

110.0

34.0

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9043 1.6447 0.903 1.3665 103.39 7.9875 7.7549 6.044 61.555 32.953 1.2659 30.063 44.588 12050 93.495 1.23391 0.83086 8.2634 10.9148 141.29 1.03

0.5336 -0.2184 -0.0664 -0.0366 0.7641 -0.0088 -0.0077 0.134 0.5686 0.173 -0.1422 0.0632 0.2736 0.9295 0.2225 -0.0227 -0.1745 -0.3159 -0.5451 0.7785 0

1.3562 -0.3273 -1.2957 -0.7193 1.5475 -0.0113 -0.0129 0.1704 0.398 -0.5402 -0.1422 -0.8515 -0.4329 1.0041 0.1647 -0.5835 0.396 0.9391 0.7146 2.279 0

1.0582 1.6603 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.228 44.86 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

0.8821 1.4814 0.88 1.2746 87.79 7.9818 7.7514 6.0424 52.89 28.56 1.2228 28.918 40.54 9603 86.41 1.21196 0.82307 7.8281 10.195 116.47 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

4.4

-3.0837

-6.18337

5.12

3.265

992256

17.21

0.2329645

2.136496

17.38

11.08

751796

AMAX INTERNATION

1.78

2.890173

3.48837

2.12

0.75

1850875

24.3

-2.213281

22.85

5238414

CENTURY LEGEND

0.42

-1.176471

-2.325583

0.68

0.26

1164000

7.3

-1.084011

3.546096

7.45

82627

22.1

-0.896861

1.37615

25.4

17.7

19819590

CHINA OVERSEAS CHINESE ESTATES

20.2

-9.41704

-16.18257

24.7

10.384

124000

CHOW TAI FOOK JE

12.1

-3.044872

4.671276

13.38

7.44

12329054

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16437.05

-0.04688424

-0.8422045

16588.25

13439.97

NASDAQ COMPOSITE INDEX

4174.665

0.444421

-0.04608556

4182.742

3093.324

GALAXY ENTERTAIN

77.05

2.66489

10.7836

-0.02252184

6875.62

6023.44

HANG SENG BK

122.5

-0.2442997

-2.545741

HOPEWELL HLDGS

26.1

0.5780347

-0.5714286

FTSE 100 INDEX

6747.57

DAX INDEX

9504

0.3247041

-0.5041808

9620.929688

7418.36

NIKKEI 225

15912.06

0.1998069

-2.327928

16320.22

10432.97

HANG SENG INDEX

22888.76

0.1860699

-1.791916

24111.55078

19426.35938

CSI 300 INDEX

2193.679

-0.5067009

-5.851735

2791.303

2023.171

TAIWAN TAIEX INDEX

8566.2

0.4320376

-0.5261513

8647.24

7603.27

KOSPI INDEX

1948.92

0.5354545

-3.1034

2063.28

1770.53

S&P/ASX 200 INDEX

5292.075

-0.3822954

-1.12355

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4390.771

3.191561

2.727876

5251.296

3837.735

(L) 52W VOLUME CRNCY

BOC HONG KONG HO CHEUK NANG HLDGS

0.1132058

(H) 52W

EMPEROR ENTERTAI

4.14

3.5

4.66

1.93

1000000

FUTURE BRIGHT

4.54

4.367816

-3.198295

4.9

1.46

2742000

78.7

7747213

132.8

110.6

756254

35.3

23.2

464938 17675238

0.7025761

2.198453

90.7

77.85

HUTCHISON TELE H

HSBC HLDGS PLC

2.83

-2.413793

-3.741498

4.66

2.5

1855476

LUK FOOK HLDGS I

28.15

-6.322795

-4.576271

16.88

9761894

28.6

-0.8665511

0.3508772

30.55

10.76

2152434

33.85

0.5943536

2.265866

15.154

6171182

MELCO INTL DEVEL MGM CHINA HOLDIN MIDLAND HOLDINGS NEPTUNE GROUP

3.63

-1.358696

-2.680966

4.29

2.68

753792

0.325

-1.515152

-4.411766

0.4

0.131

35570000

NEW WORLD DEV

9.92

-0.7007007

1.327886

15.12

9.35

9057573

SANDS CHINA LTD

63.5

-0.7036747

0.2367822

67.15

33.5

9758801

FTSE Bursa Malaysia KLCI

1834.97

0.4576784

-1.71348

1882.2

1597

SHUN HO RESOURCE

1.66

0.6060606

0.6060621

1.92

1.33

50000

NZX ALL INDEX

1034.849

0.7804565

3.599375

1048.998

892.282

SHUN TAK HOLDING

4.45

-0.6696429

-2.412279

4.8

3.27

2911546

PHILIPPINES ALL SHARE IX

3628.57

0.8689827

0.394265

4571.4

3440.12

SJM HOLDINGS LTD

25.35

-0.7827789

-2.5

17.04

4662359

8.99

-0.5530973

1.467273

14.46

7.38

2714500 3969102

Euromoney Dragon 300 Index Sin

605.12

0.23

-1.04

STOCK EXCH OF THAI INDEX

1283.56

2.239038

-1.166535

1649.77

1205.44

HO CHI MINH STOCK INDEX

521.11

0.4181601

3.265755

533.15

440.48

Laos Composite Index

1261.81

-0.1211075

0.6766058

1455.82

1224.94

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

SMARTONE TELECOM WYNN MACAU LTD

36.7

0.8241758

4.409668

38.25

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

79.14

0.4952381

0.879545

79.6361

45.38

356336

BOC HONG KONG HO

3.17

3.257329

-1.552796

3.6

2.99

9350

GALAXY ENTERTAIN

9.72

-1.319797

7.88013

10.11

3.8975

47449

INTL GAME TECH

17.5

-0.2849003

-3.63436

21.2

14.75

4021364

JONES LANG LASAL

104

1.216545

1.57242

104.33

80.86

224079

LAS VEGAS SANDS

80.59

-0.02481082

2.1808

81.85

47.95

3617106 2460771

MELCO CROWN-ADR

43.01

0.9387468

9.663434

43.68

17.76

MGM CHINA HOLDIN

4.4

-1.123596

2.088168

4.66

8480

MGM RESORTS INTE

25.36

1.521217

7.823127

25.39

11.72

11667765

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.28

-2.670623

-1.796405

3.6

2.2

35181

206.86

1.020657

6.513564

207.24

111.3456

1153304

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

37.2

-1.06383

22259848

CHINA UNICOM HON

ALUMINUM CORP-H

2.77

6.949807

67847951

BANK OF CHINA-H

3.44

-0.5780347

256847135

BANK OF COMMUN-H

5.2

0.3861004

19868184

BANK EAST ASIA

31.6

-0.1579779

689122

BELLE INTERNATIO

9.61

1.051525

25114157

BOC HONG KONG HO

24.3

5238414

NAME

PRICE

DAY %

VOLUME

10.96

-0.5444646

24689276

CITIC PACIFIC

10.2

-1.162791

7557481

CLP HLDGS LTD

60.2

-0.4135649

1501998

CNOOC LTD

10.7

1.518027

11775064

96.9 -0.05157298

3833645

88.15

-1.232493

3336594

TENCENT HOLDINGS

496.6

-0.1608363

2665064

HANG LUNG PROPER

23.95

0.8421053

3730551

TINGYI HLDG CO

22.15

-1.555556

2641847

122.5

-0.2442997

756254

WANT WANT CHINA

10.78

0.5597015

11532649

44.5

-0.3359462

1618757

59.6

-0.0838223

3533426

HENGAN INTL

89.95

1.409245

1234645

HONG KG CHINA GS

17.16

-0.6944444

4914217

HONG KONG EXCHNG

126.9 -0.07874016

ESPRIT HLDGS

3928865

HANG SENG BK HENDERSON LAND D

CHINA COAL ENE-H

4.21

-0.9411765

34302252

CHINA CONST BA-H

5.58

0.5405405

228903324 4986585

9758801

SINO LAND CO SWIRE PACIFIC-A

3679539

18375543

-0.7036747

4902577

0.3525264

63.5

55234213

-0.3319502

-0.1872659

5451429

SANDS CHINA LTD

1.165049

17.08

22.05

VOLUME

-1.416667

1.017442

120.1

26.65

DAY %

59.15

13.9

CATHAY PAC AIR

CHINA LIFE INS-H

PRICE

POWER ASSETS HOL

10.42

COSCO PAC LTD

CHEUNG KONG

CHINA MERCHANT

NAME

HSBC HLDGS PLC

0.7025761

SUN HUNG KAI PRO

WHARF HLDG

MOVERS

1139353 17675238

CHINA MOBILE

77.8

11446798

HUTCHISON WHAMPO

106.4

1.044634

4693212

CHINA OVERSEAS

22.1

-0.896861

19819590

IND & COMM BK-H

4.95

134921061

CHINA PETROLEU-H

5.87

1.032702

80350911

LI & FUNG LTD

10.6

-0.3759398

22065716

CHINA RES ENTERP

24.9

0.4032258

1504788

MTR CORP

28.55

1612066

6 23046

INDEX 22888.76 HIGH

23046.41

1402490

LOW

22715.16

CHINA RES LAND

19.52

-2.008032

4809376

NEW WORLD DEV

9.92

-0.7007007

9057573

52W (H) 24111.55078

CHINA RES POWER

19.54

3.386243

16424741

PETROCHINA CO-H

8.03

0.375

37471657

(L) 19426.35938

CHINA SHENHUA-H

22.2

7780035

PING AN INSURA-H

67.3

0.2233805

6184861

22715

9-January

13-January

15 15

January 2014 April 19,14, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Korea Herald Speculation is mounting on Hyundai Motor’s possible acquisition of Dongbu HiTek, a Dongbu group semiconductor foundry that is on the sales block. The move would reflect Hyundai’s aims to reinforce its car electronics, insiders said. “Hyundai Motor is seriously weighing the move, and there have been reports within the company of a possible marriage,” said one source, declining to be identified. An anonymous source from Dongbu’s main creditor bank Korea Development Bank said, “If Hyundai acquires Dongbu HiTek, it will create positive synergy.” Bidders will be decided within the month. Hyundai Motor is planning to soon scrap its electronics arm, Hyundai Autron.

Asahi Shimbun Fresh crab and prawns sent from Japan the previous day are now available in Hong Kong. The “next-day delivery” system works well because air links deliver the seafood at the right time of day. But it is not just Hong Kong that benefits from this service. Across Asia, next-day overnight delivery of perishable marine products is taking hold. One such service, the brainchild of Yamato Transport Co’s International Cool Ta-Q-Bin division, began in October. Items sent the morning of the previous day arrive in Hong Kong the following afternoon by using All Nippon Airways’ late night flights.

Jakarta Globe Bumi Resources, the largest coal miner in Indonesia, will start the conversion process of some of its debt later this month after securing approval from shareholders. At an extraordinary shareholders meeting in Jakarta on Friday, shareholders representing about 33.4 percent of Bumi Resources’ stake approved its plan to pay some of its debt to China Investment Company with shares in its coal miner Kaltim Prima Coal and its non-coal miner Bumi Resources Minerals. Last October, Bumi struck a deal with CIC to accelerate its US$1.3 billion debt payment.

Times of India United States retail giant Wal-Mart has asked the government to reduce the mandatory local sourcing norm to 15 per cent, saying it cannot meet the stipulated level required to open multibrand stores in India. “The company had said that it cannot meet the mandatory 30 per cent sourcing norm and can procure only about 20 per cent from small units. But it has asked to reduce it to 15 per cent,” sources said. WalMart’s demand comes after the government diluted the contentious sourcing clause last year.

The eurozone’s crossroad Jean Pisani-Ferry

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

eading into 2014, financial markets are quiet and Europe’s politicians are relieved, but the fundamental problems that have driven the euro crisis for the last four years remain, and now is the time to address them. That is the claim of two important recent papers, one by a bipartisan group of German economists, lawyers, and political scientists called the Glienicker Gruppe, and the other by Ashoka Mody, a former International Monetary Fund official who is now at Princeton University and the European think tank Bruegel. Aside from the need to act, however, the authors agree on little else. The German group argues that the eurozone’s survival requires a political union equipped with a common budget. Mody says that the European Union’s federalist plans have been disappointed for five decades, and that the only way forward is to abandon efforts to fine-tune national policies set in Brussels and instead pursue a decentralised union. Their shared premise is correct: complacency about the euro crisis is misguided, the fixes adopted so far do not go far enough to ensure lasting stability, and the current respite should be used to design the bloc’s permanent architecture. Furthermore, the advent of a bipartisan government coalition in Germany, together with the appointment of a new European administration following the European Parliament election in May, creates a window for new thinking.

The two papers’ disagreement is political, not economic. The Glienicker Gruppe argues that a stable monetary union needs a transfer mechanism to help cushion severe economic downturns and a legitimate government to ensure that democracy and the rule of law prevail at all times and in all countries.

Political disagreement Their point is that the EU has passed the integration threshold beneath which EU members could behave independently. The degree of interdependence that the euro has created calls for proportionate instruments to manage common public goods. Their idea is that the eurozone could not afford a neo-fascist government in a member country, and that preventing such an outcome requires both carrots (transfer mechanisms) and sticks (supranational powers). Mody concurs that a political union would enhance the eurozone’s functioning. But he argues that it will not be established, because there is no appetite for it. Grand plans, he says, will only end in a muddle, so it would be wiser to accept reality and draw the right conclusions from it: Europe should abandon efforts to create a federation. Furthermore, it should rid itself of its technocratic surveillance apparatus, which lacks both legitimacy and effectiveness. It should acknowledge that, except in emergencies, international bureaucrats cannot dictate

The fixes adopted so far do not go far enough to ensure lasting stability, and the current respite should be used to design the bloc’s permanent architecture

sovereign choices. The arrangement that Mody proposes is one whereby states decide by themselves which fiscal policy they prefer and default if they become insolvent; banks know that public debt is risky and behave accordingly; and governments force banks to shrink by refusing to stand behind them and socialize their losses. In short, Europe should emulate the late-nineteenthcentury United States (or, perhaps more accurately, the early-twentieth-century gold standard). Mody’s solution is logically coherent and looks attractive. But it is not clear that it would pass the test of reality. First, a default by a major European sovereign would

be a true financial catastrophe. The state of California’s debt today amounts to about 1 percent of U.S. GDP, whereas Italy’s debt represents 18 percent of eurozone GDP. California’s default would be a secondary event in the U.S., whereas in the eurozone, an Italian default would impoverish debt holders massively, bring down several banks, and set in motion a dangerous chain reaction. To be sure, investors, anticipating such a catastrophe, would refrain from holding Italian bonds, forcing Italy to reduce its public debt. But this would happen only in the long run. In the meantime, the entire eurozone would be vulnerable, while the very transition to the new, lower-debt steady state would add to Europe’s woes. Second, a union of the kind imagined by Mody might not be very resilient. Deprived of their partners’ assistance, member countries could choose to quit. Indeed, Greece might have exited by now, had it not received massive financial assistance. The two papers thus advance opposite templates for the eurozone’s future, neither of which is without risks. If, as they both suggest, Europe’s preference for the middle road is mistaken, and one or the other of the proposed solutions must be chosen, a true dilemma will have to be confronted. That would be one more reason to use the current respite to think hard, lay out options, and be candid about preferences and their consequences. © Project Syndicate

16 16

January 14, 2014 April 19, 2013

Closing Regulators ease Basel rules to aid economy

Fed to probe banks over forex fixing

Global banking regulators agreed on Sunday to ease the way a new rule, meant to rein in risky balance sheets from 2018, is compiled to try to avoid crimping financing for the world’s economy. The decision as the latest sign of how regulators have become more willing to accommodate banks as the focus switches to helping economies recover. The relief to lenders may, however, be temporary as the regulators signalled there is still no agreement on the new leverage ratio, which measures how much capital a bank must hold against its loans and assets.

The Federal Reserve is investigating whether traders at the world’s biggest banks rigged benchmark currency rates, raising the risk that firms will be penalised for lax controls as regulators look for wrongdoing. The Fed, which supervises United States bank holding companies, is among authorities from London to Washington probing whether traders shared information that may have let them manipulate prices in the US$5.3 trillion-a-day foreign-exchange market to maximise their profits, said a source. The foreign-exchange inquiry looks at benchmark WM/Reuters rates used by companies and investors around the world.

Beijing’s food security draft could boost imports China’s farm output unlikely to keep pace with growing food demand

hina is poised to allow more agricultural imports as it reassesses food security in a shift that would help exporters from the United States to the Ukraine, according to two people with knowledge of the plan. A draft of the annual agricultural policy statement shows the government is considering cutting the ratio of the nation’s total food crop relative to consumption to 80 percent from 95 percent, said the people, who asked not to be identified as the document is still under review. China would continue to grow and stockpile enough rice and wheat to feed itself during any time of war or trade embargo, they said, before the possible release of the final paper later this month. Farm output is unlikely to keep pace with food demand over the next 10 to 20 years as more arable land and water are diverted to the industrial economy, the official People’s Daily said last month, citing Han Jun, the

deputy head of the State Council’s Development and Research Center. Even as policy makers in Beijing seek to maintain strategic stockpiles of staple grains, the United States Department of Agriculture projects China to be the biggest buyer of soybeans and rice this year, the second-largest purchaser of wheat and fourth-ranked corn importer. “China recognises the difficulty of continuing to boost output and needs some imports of corn, rice and wheat to help cushion shortages in bad crop years,” said Feng Lichen, the general manager at Yigu Information Consulting Ltd in Dalian. Purchases from overseas will be less consistent compared with Japan, the biggest corn buyer, Mr Feng said.

‘Structural difficulties’ The United States is the biggest supplier of corn to China, which last year also took first its bulk shipments from Ukraine and Argentina. North

China is expected to be the biggest buyer of rice this year

America is a top seller of wheat, along with Australia, while the largest sources of rice to China are Vietnam, Pakistan and Thailand. China’s food imports by volume increased in 2013 while output of grains advanced for the 10th straight year, data from the National Bureau of Statistics and the General Administration of Customs show. Much of a 5.9 percent gain in corn production last year went into animal feed along with domestic soybean output and imports, as the Chinese adopted higher-protein diets and ate more meat, according to official forecaster China National Grain & Oils Information Center. “The structural difficulties facing China’s grain supply are more and more obvious,” said Han Jun, according to the People’s Daily. China is likely to continue accepting a high level of soybean imports, which rose 8.6 percent in 2013, Mr Feng said. Bloomberg News

Sinopec faces compensation over pipeline blast Oil giant did not say how much it would pay over Qingdao explosion

hinese state-owned oil giant Sinopec will pay compensation over a November pipeline explosion at its facility in the city of Qingdao that killed dozens of people, it said. Sinopec is listed in Hong Kong and in a filing to the stock exchange there, said that an official Chinese government investigation determined that “direct economic loss” from the accident totalled 751.72 million yuan (US$124.3 million). The company said it “will pay its share of the compensation”, although it did not say how much that would be, or what proportion of it would go directly to victims of the disaster, which killed 62 people and injured 136. Sinopec said in the statement late Sunday that its pledged compensation would come mostly from company insurance policies, adding that its “production, operation and financial position are currently stable”. Citing the probe by China’s State Administration of Work Safety, it said the direct cause of the explosion was vapours from oil leaking from an underground pipeline, which were ignited by sparks from a hydraulic hammer. The investigation also found that Sinopec’s failure to ensure safe operations contributed to the accident, as did local authorities’ failure to properly conduct safety inspections and identify risks. The huge blast happened seven hours after an oil leak was first spotted. According to state media 15 people, including Sinopec employees and Qingdao city staff, have been detained in connection with the explosion. AFP