Macau Business Daily, Jan 15, 2014 by Business Daily

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PRC bird ‘flu rings changes in live chicken trade

MOP 6.00 Deputy editor-in-chief

Vitor Quintã

City’s yuan loans up as Beijing squeezes credit

Cement makers 1 mixing to meet Cotai demand

April 19, 2013

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Year II

Number 455 Wednesday January 15, 2014

Editor-in-chief Tiago Azevedo

Virgin territory promises riches for VIP junkets Page 7

emand for offshore financing here will rise further this year, banking executives predict, as Chinese firms seek financing alternatives amid tighter credit controls on the mainland. “Securing financing [in the mainland] could prove to be difficult, in particular for the larger Chinese companies, and some of them will seek to secure offshore financing in Hong Kong or Macau,” Wilfred Lei, general manager of

Industrial and Commercial Bank of China (Macau) Ltd’s risk management department told Business Daily. At present, Macau banks offers interest rates on yuan-denominated loans that are two percentage points to four percentage points lower than their mainland rivals, Iris Pang Ai Jao, a Hong Kong-based economist at Wing Hang Bank Ltd, told this newspaper. More on page 6

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Economic freedom ‘stagnating’ in Macau: report Macau slipped down an international ranking on economic freedom for the third year in a row and now sits at 29th place. The 2014 Report on the Index of Economic Freedom says the city’s progress in implementing more targeted reforms to advance economic freedom “has been stagnant at best”. It also warns the government is spending via subsidies too much of the wealth created in the city. Page 2

Hang Seng Index 22862

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22772

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January 14

HSI - Movers Name

Retailers in prime zone Package tourists down, but indy travellers vote with feet make up the numbers on rent rise fears One of Macau’s prime shopping locations, in the heart of the World Heritage Site zone and tourist hotspot, has empty shops for the first time in several years says a property firm. Rent hikes last year reached hundreds of percent for some busy areas. “…we are starting to see some empty stores in the Largo de São Domingos,” said Gregory Ku of Jones Lang LaSalle (Macau) Ltd.

Macau had fewer visitors on package tours in November, official data suggest, as the mainland’s restrictions on free tours took effect. But a tourism boss says the opening of the Chimelong International Ocean Resort on Hengqin Island could reverse the decline. Separately, state-run China News Service said tourists from Guizhou province visiting Macau and Hong Kong on individual visas rose by more than one-third last year.

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%Day

TINGYI HLDG CO

-2.48

WANT WANT CHINA

-1.86

HUTCHISON WHAMPO

-1.41

CHINA RES ENTERP

-1.20

COSCO PAC LTD

-1.15

CHINA SHENHUA-H

1.13

POWER ASSETS HOL

1.35

CHINA RES LAND

1.54

LI & FUNG LTD

1.70

CHINA LIFE INS-H

1.81

Source: Bloomberg

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January 15, 2014 April 19, 2013

Macau

Economic freedom ‘stagnating’: report City needs ‘serious reform’ to its labour market, says US-based Heritage Foundation Tony Lai

tony.lai@macaubusinessdaily.com

HK economy world’s freest for 20th year Hong Kong yesterday retained the title of the world’s freest economy for the 20th year in a row, with rival Singapore closing the gap between the two cities. The rating shows how the city remains one of the world’s friendliest places to do business but there were concerns populist government policies and the perceived level of corruption could tarnish that reputation. The Index of Economic Freedom for 2014 showed that Hong Kong, along with Singapore, Australia and Switzerland were judged the freest economies in the world. Hong Kong’s overall score rose “due to improvements in government size and regulatory efficiency that offset a decline in freedom from corruption,” the Heritage Foundation said. The city recorded its second highest score of 90.1 out of 100 and has now topped the table every year since the index was launched in 1995. Mainland China was ranked 137th. AFP

acau slipped down an international ranking on economic freedom for the third year in a row and now sits at 29th place. The 2014 Report on the Index of Economic Freedom was released yesterday by the United States-based conservative think tank The Heritage Foundation. It scores Macau at 71.3 out of 100 points – the lowest tally since the city was included in the ranking in 2009. But the authors add that Macau still has a “mostly free” economy. The territory’s ranking this year is also the seventh highest among 42 jurisdictions in the Asia-Pacific region. “Its overall score is 0.4 point lower than last year due to declines in fiscal

freedom, monetary freedom, and freedom from corruption,” states the report. The foundation – along with the newspaper The Wall Street Journal – has compiled the annual ranking since 1995. It measures 10 indicators related to property, business, investment, labour and tax, using statistics from organisations such as the World Bank and the International Monetary Fund. This year’s report says the city lacks determination in pushing for a more open economy, saying “its progress in implementing more targeted reforms to advance economic freedom has been stagnant at best”. “The lack of a broad-based labour market is due in part to the absence of

serious reform,” the report points out. The city’s sub-score on labour freedom, measuring the regulatory framework of the labour market, was 55 out of 100 points this year, ranking 120th out of 178 countries. There is still no citywide minimum wage here, with the government still pondering when to introduce one for cleaners and security guards. Minimum wages are however often criticised as job killers by economic liberals both in Macau and in the U.S. The report warns that, even though monetary stability is “relatively well maintained [here],” the government is spending via subsidies too much of the wealth created in the city. The administration increased

Cement makers rush to meet Cotai demand

he city’s cement manufacturing business is expected to reach another peak in 2014 and 2015 to cater to the second wave of Cotai resorts’ development, the industry says. The newly founded Macau ReadyMix Concrete Association said the production of cement last year here was about 1.63 million cubic metres. “We expect the production volume will grow further and reach a new high this year and next year over the Cotai construction,” association president U Kin Cho told the media earlier this week. He expects the annual production to exceed 2 million cubic metres in each of these two years, up by 22.7 percent from last year. All of the city’s six gaming operators are now either expanding their premises on Cotai or building their maiden properties on the area.

The second phase 2 of Galaxy Macau resort is among the projects that could be ready earliest, by mid-2015. Mr U said the annual volume of cement production reached the benchmark of 2 million cubic metres a year in 2006 and 2007, when the city saw the first signs of development on Cotai. The cement association was set up this week and it includes all six Macau cement manufacturers that have obtained quality certification from the government for their products. The association was established to “better present” the opinions of the sector to the administration, Mr U added. The cement manufacturers, like other businesses, also face operating difficulties including labour shortage, he said. T.L.

the cash handout it is granting to permanent residents this year to 9,000 patacas (US$1,125) from 8,000 patacas last year. Macau’s freedom from corruption score fell to a ‘fail’ mark of under 50 percent. It was 49.7 points, down from 51 points last year. However, the report acknowledges that China has “pressed Macau to step up efforts against money laundering in casinos and adopt other anticorruption measures”. In July the Financial Intelligence Office said it was pondering whether to compel arriving visitors to declare how much cash they had with them. There’s been no further government announcement on the topic.

January 2014 April 19,15, 2013

Macau Power usage below expectations Electricity consumption grew by “less than 2 percent” last year, according to the city’s sole electricity distributor Companhia de Electricidade de Macau SA (CEM). The company had predicted an increase of 7 percent. Iun Iok Meng, advisor to CEM’s executive committee, told media yesterday the slight increase was due to the lack of large-scale construction works and the cooler temperature in the first half of last year. He also said the new electricity tariff scheme, under which bigger users would pay more, could be implemented in the first half of this year.

Shop rents flat in 2014, estate agency predicts Jones Lang LaSalle Macau expects some relief this year for long-suffering retailers Tony Lai

tony.lai@macaubusinessdaily.com

Jones Lang LaSalle Macau expects prices of cheaper flats to rise by 15 percent this year

he red-hot property market may give shopkeepers less of a roasting this year, an estate agency predicts. Jones Lang LaSalle (Macau) Ltd forecasts that shop rents will be stable in the next 12 months. The estate agency believes housing and office prices and rents will keep rising. But it says this year’s increases will be milder than last year’s because of uncertainty about interest rates and whether the government will impose new curbs on the property market. Jones Lang LaSalle Macau managing director Gregory Ku says in his agency’s annual property review, issued yesterday: “Shop rents are at a relatively high level right now, and we are beginning to see some empty stores in Largo de São Domingos.” Largo de São Domingos is in the city centre. “So we believe shop rents will be stable, as it is not easy to afford any further increase.” Jones Lang LaSalle Macau data indicate that shop rents rose by an average of 6.2 percent last year, having risen by 99.1 percent in 2012. The estate agency expects capital values of commercial premises to grow by 10 percent this year.

Its review says the retailing boom has supported rents and capital values of commercial premises. The price of the average shop was 9.8 million patacas (US$1.22 million) in the first nine months of last year, 35.7 percent more than in the equivalent period of 2012, according to Business Daily calculations based on government data.

Uncertain future Jones Lang LaSalle Macau associate director for research Alvin Mak says: “We expect Macau’s property market to maintain substantial growth throughout 2014 amid robust gaming performance, sufficient capital flows in the market, and strong demand.” The estate agency predicts that capital values of upmarket homes will grow by 10 percent and that capital values of cheaper flats will grow by 15 percent. It predicts that housing rents will rise by one-fifth. But Jones Lang LaSalle Macau head of residential sales Jeff Wong Chi Wai said uncertainty about interest rates and whether the government would impose new curbs on the property market would keep a lid

Shop rents will be stable, as it is not easy to afford any further increase Gregory Ku, Jones Lang LaSalle Macau managing directo

on the housing market. Mr Wong said any increase in interest rates in the United States and, consequently, in Macau would dishearten buyers. He said any change in central government policy on Macau would have the same effect. Housing prices in Macau were nearly as high as prices in Hong Kong and important mainland cities, so a big increase here this year was unlikely, he said. The average price of housing here was 85,331 patacas a square metre in November, 29.3 percent more than a year earlier, official data show.

Mr Wong believes increases in prices of upmarket homes could match increases in prices of small flats in future, as more casino-resorts open in Cotai from next year onwards. “Cotai resorts will bring more middle-to-high-level management professionals to work here,” he said. Mr Ku says fewer homes will be sold this year than last. Last year about 30 percent fewer homes were sold than in 2012 because the supply was limited. Since June the law has allowed the sale of unfinished flats only once the foundations of the building that will contain them are completed, and each flat is registered with the government. Jones Lang LaSalle Macau predicts that capital values of office premises will grow by 20 percent this year because of strong demand. The estate agency predicts that office rents will rise by between 10 percent and 15 percent. Mr Ku says the government could give the Fortune Business Centre in Nam Van its occupancy permit this month, so adding 280,000 square metres of office space to the market. Jones Lang LaSalle Macau says about 11 percent of Macau’s office premises are vacant.

January 15, 2014

Macau

The Chimelong resort will reportedly begin trial operations on Saturday

Drop in package tourism persists The tourism industry expects Hengqin Island’s Chimelong resort to help reverse the trend Tony Lai

tony.lai@macaubusinessdaily.com

acau had fewer visitors on package tours in November, official data show, as the mainland’s restrictions on free tours took effect. But a tourism industry chief says the opening of the Chimelong International Ocean Resort on Hengqin Island could reverse the decline. The Statistics and Census Service said yesterday that 769,000 package tourists visited in November, 9.9 percent fewer than a year earlier. The number of package tourists from the mainland, the city’s biggest source of visitors, fell by 11.7 percent to about 567,900. The decline began in October, when the mainland imposed curbs on free or excessively cheap package

We originally thought higher package tour prices would scare away many mainlanders, but cities there have adjusted to the new law and prices more quickly than we expected Cheong Chi Man, Macau Travel Agency Association vice-president

tours run by operators that recoup their costs by making tourists shop in shops that pay commission. About 716,000 package tourists came in October, 11.5 percent fewer than a year earlier. Macau Travel Agency Association vice-president Cheong Chi Man said: “The extent of the decline has actually been better [lower] than we expected.” Mr Cheong told Business Daily: “We originally thought higher package tour prices would scare away many mainlanders, but cities there have adjusted to the new law and prices more quickly than we expected.” But the number of package tourists would continue to be lower than a year earlier “for some time”, he said. The director of the Macau Government Tourist Office, Maria Helena de Senna Fernandes, said last week that the government expected fewer package tourists to come over the Lunar New Year holidays, which begin at the end of this month. Mr Cheong said the mainland’s restrictions on free tours would pare the earnings of travel agencies “somewhat”. But the boom in travel over the Christmas and New Year holidays had been good for their business, he said.

take in both Macau and Hengqin.” Mr Cheong said the Chimelong resort might also lure more international package tourists. A Union Gaming Research Macau Ltd note issued earlier this month says the Chimelong resort “represents the first major Hengqin-related driver of visitation to Macau”. The resort will reportedly begin trial operations on Saturday. No official opening date has been set. Hong Kong’s Ming Pao Daily News reported that an adult will have to pay 380 yuan (497 patacas) for admission to the resort’s ocean theme park. Mr Cheong said: “We cannot currently offer any tourism products related to Chimelong, as the details have not been finalised. But we could possibly start launching such products after the Chinese New Year.” In the first 11 months of last year just over 8.9 million package tourists visited Macau, 8.1 percent more than a year earlier, and 6.8 million of them were mainlanders, 15.9 percent more. About 604,000 package tourists came from Taiwan, Macau’s secondlargest source, 16.2 percent fewer

Family appeal Mr Cheong said the opening of the Chimelong International Ocean Resort on Hengqin Island could mean a rebound in the number of package tourists. “As Macau has limited space, there are not many appealing tourist spots, particularly for families,” he said. “But the opening of Hengqin’s Chimelong theme park may draw more visitors on package tours that

KEY POINTS Curbs make package tours more expensive Fall in package tourism smaller than expected Macau travel agents to offer tours of Hengqin

than a year earlier. The number of Japanese package tourists plunged by nearly half to about 120,000. The numbers of package tourists from European countries fell by between 1.6 percent and 38.2 percent. Official data show the average occupancy rate of Macau’s 98 hotels and guesthouses was 87.9 percent in November, 0.7 percentage point more than a year earlier.

Guizhou a growing tourist source The number of people from Guizhou that visited Macau and Hong Kong on individual visas rose by more than one-third last year, the state-run China News Service has reported. The news agency quotes the customs service in the province as saying over 200,000 Guizhou residents visited the two cities, 35.3 percent more than in 2012. About 890,000 Guizhou residents travelled outside the mainland last year. Nearly one in four went to Macau and Hong Kong. Citizens of the provincial capital, Guiyang – like the citizens of dozens of other mainland cities – are allowed visas to travel to Macau or Hong Kong as individuals rather than as members of tour groups, who travel on collective visas. The Macau Guizhou Chamber of Commerce called in November for direct flights between Macau and Guizhou to increase trade and tourism.

January 15, 2014

Macau

PRC bird ‘flu outbreak hits live chicken trade here Importers say H7N9 cases in mainland China hit business last year Stephanie Lai

sw.lai@macaubusinessdaily.com

onsumer demand for live chickens slumped in December on shoppers’ concerns about H7N9 bird ‘flu outbreaks on the mainland. In a press briefing held yesterday, Nam Yue Food Stuff & Aquatics Co Ltd and Nam Kwong Commercial Co Ltd – Macau’s two main food importers – said bird ‘flu was a major factor behind a 7.5 percent drop in the number of live chickens supplied from mainland China last year. About 2.69 million live chickens were supplied to Macau during 2014, Nam Yue executive deputy general manager Tony Chen Wei said in the briefing. The average wholesale price for live chickens last year was 16.8 patacas per catty (or about 500 grams), 6.2 percent more than a year ago, Mr Chen added. According to Nam Yue, the onset of avian ‘flu cases in late March and April and the return of the H7N9 virus last month had an impact on

live chicken demand in the market here. “In December, the daily supply of live chickens dropped by 10 to 15 percent year-on-year to only about 6,000,” Mr Chen said. “That month we reduced the supply amount because the avian ‘flu did weigh on the minds of consumers and weaken demand.” A more serious drop of 30 percent was recorded from late March to April, where only about 5,000 chickens were supplied to wet markets here every day.

Macau consumers have been wary of live chickens

New Year hopes The trade eventually picked up and stabilised in June, the company told Business Daily. On January 4 the mainland authorities identified an H7N9-virus case in a wet market in Zhuhai’s Jing’an county, which was closed for three days and sterilised. In response to the case, Macau’s Civic and Municipal

Affairs Bureau ordered all vehicles carrying live poultry to avoid Jing’an county, located in Doumen district. The bureau also reiterated that all poultry must be killed at wet markets. So far no avian flu virus has been found in live poultry imports, a bureau spokesman told Business Daily. There are about 10

breeding farms in Zhuhai, Zhongshan and Jiangmen that are qualified to export live poultry to Macau. Five of the farms are in Doumen district, Nam Kwong told Business Daily. “Now the mainland authorities are carrying out inspections on live poultry twice before they cross the border here, instead of only

once,” Huang Jia Zhu, deputy general manager of Nam Yue Food Stuff and Aquatics told Business Daily. “If there are no other outbreaks of avian flu, we hope business can be better during Chinese New Year, where we can supply at least 10,000 live chickens [every day] to the wet markets,” Mr Huang added.

January 15, 2014 April 19, 2013

Macau Brought to you by

HOSPITALITY Consolidating trends As a rule, more than half of Macau visitors are same-day visitors. In the 2009-2012 period, their share of the total has fluctuated within a narrow band, between 51.7 percent and 53.8 percent. Although the full 2013 figures are not yet known – the December data has not been published yet – a rough estimate based on the corresponding figure for last year suggests its value will stand at a comparable level. The new restrictions on cheap or free package tours in mainland China after October might have an impact. The relative slowdown in the number of tour visitors since then – if confirmed in December – is likely to result on a proportion of same-day visitors slightly smaller than in previous years. Those restrictions will mainly impact same-day visitors. Their share of the total will possibly be 0.25 percentage points lower than in 2012.

Greater demand for credit in the mainland could give Macau banks a more lucrative use for their yuan deposits

More yuan loans expected as Beijing tightens liquidity Macau banks think mainland companies are more likely to borrow here this year Stephanie Lai

sw.lai@macaubusinessdaily.com

D The data clearly shows that only the number of Chinese visitors is growing, both on the overall and when it comes to same-day visitors, the tour restrictions notwithstanding. The number of same-day visitors from the mainland exceeded the total number of visitors from Hong Kong for the first time in 2011, and the gap has continued to widen ever since. The number of Hong Kong and Taiwan visitors has decreased in the period, a feature that is more pronounced in the case of Taiwan, particularly in the case of same-day visitors, which saw a decrease of 40 percent. The number of same-day visitors from all other countries rose a bit faster than the total number of visitors, which may result from a somewhat stronger participation of Macau in regional transfer flows of passengers and in multi-destination package tours.

13.74 mln same–day visitors in first 11 months of 2013

emand for loans will increase here this year as tighter credit across the border limits the borrowing options of mainland companies, bankers predict. A Wing Hang Bank Ltd economist in Hong Kong, Iris Pang Ai Jao, believes mainland companies will find it harder to obtain loans at home. Ms Pang told Business Daily that tighter monetary policy over the border was squeezing the liquidity of mainland banks. So demand by mainland companies for financing in Macau or Hong Kong would increase, she said. The general manager of Industrial and Commercial Bank of China (Macau) Ltd’s risk management department, Wilfred Lei, said: “Securing financing could prove to be difficult, in particular for the larger Chinese companies, and some of them will seek to secure offshore financing in Hong Kong or Macau.” Mr Lei believes this will put little upward pressure on the rate of interest banks here charge on offshore loans denominated in yuan. “The offshore loan interest rate is much more dependent on the influence of the onshore interest rate in the mainland,” he told Business Daily. Ms Pang said Macau and Hong Kong banks charged interest

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at rates that were 2 percentage points to 4 percentage points lower than those charged by their mainland counterparts. Demand for loans in the mainland could give Macau banks a more lucrative use for their growing yuan deposits. Banks here held 72.64 billion yuan in yuan deposits at the end of October, 81.5 percent more than a year earlier, official data show.

Main tool The People’s Bank of China undertook in its third-quarter monetary policy report, published in November, to reduce the degree of leverage in the mainland economy.

KEY POINTS Central bank tightening credit Yuan loans cheaper here Interest rates unaffected

Ms Pang says in a report on the outlook for the mainland economy this year: “The market believes that there will be more measures regulating interbank products. That will further tighten the banks’ liquidity.” She says that at the same time the central government will continue to restrict credit expansion, especially targeting the activities of shadow banks. “We forecast that China will be tightening its monetary policy, though not to the extent to where it would lift the interest rate or the required reserve ratio,” she says. “Open-market operations will still be the main tool for the People’s Bank of China to stabilise mainland banks’ liquidity.” The head of BNP Paribas’s Hong Kong financial coverage team, Dominic Chan, forecasts that the annual rate of growth in lending in the mainland will slow to 12.8 percent this year. Mr Chan says in a report on the outlook for banking in the AsiaPacific region, published last week, that Beijing’s endeavour to liberalise interest rates will put more pressure on the net interest margins of banks. This will make it more expensive to borrow in the mainland, he says.

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With Reuters

January 2014 April 19,15, 2013

Macau

Virgin territory brings riches for junkets Neptune announces purchase of profit stream from an offshore company with interests in Macau VIP gambling Michael Grimes

michael.grimes@macaubusinessdaily.com

eptune Group Ltd – a Hong Konglisted investor in casino junkets – says it has completed a HK$208.33 million (US$27 million) deal to buy five percent of a British Virgin Islands firm entitled to profits from “no fewer than” 11 Macau VIP tables. One of the challenges for investors and analysts in understanding Macaulinked business deals by stock market-listed companies pursuing junket intangibles – i.e. profit streams – is in fathoming precisely what rights accrue, from where and to whom. The deals commonly involve a web of offshore companies – often with names that don’t quite conjugate correctly in English. (‘Essence Gold Ltd’, and ‘Ability Wealth Ltd’ are two recent examples.) Such offshore entities effectively screen from financial regulators in the listing jurisdictions what happens between the moment the VIP gambler leaves home; the time they pay back the advanced money they (generally) lost at the Macau VIP tables; and the time profits from this process pop up in the accounts of the junket firms, whether the latter are listed or not. An example is last week’s eight-page filing by Hong Kong-listed International

Caribbean cruise – Neptune buying in to another BVI

Entertainment Corp – announcing a plan to spend up to HK$7.35 billion (US$948 million) to buy a share in the interests of Alvin Chau Cheok Wa, chairman of junket investor Sun City Group Ltd. At no point was it spelt out which of Sun City’s moving or nonmoving parts – if any – Mr Chau actually owned. The only reference was to some “economic interest” in certain defined minimum rolling

chip turnover and certain minimum defined EBITDA (earnings before interest, taxation, depreciation and amortisation).

Sizzling market All that’s usually visible to the public in many junket deals is what comes out of the sausage machine – i.e. “profit stream”. And as the American writer Mark Twain is quoted as saying: “Those

that respect the law – and love sausage – should watch neither being made.” Neptune has helpfully provided two flow diagrams in its latest filing to show how its new acquisition deal will work. It involves interaction between no fewer than three BVI companies and one that is Macau-incorporated. A gentleman called So Wai Chi appears to be the one doing the selling – though technically what he’s selling

is only a five percent stake in a BVI entity called Superiority Wealthy Ltd, which was only registered there in October. Nonetheless, Mr So promises via that five percent interest to provide Neptune in the first year of the deal with at least HK$11.57 million in net profit before tax from the profit stream of Superiority Wealthy. It will come from a minimum of 11 VIP tables at “COD Neptune Guangdong VIP Club” in Melco Crown Entertainment Ltd’s City of Dreams casino resort on Cotai according to the filing. In the meantime gaming analysts and industry watchers wait to see what impact the sale of an interest in Neptune’s market rival Suncity will have on the Macau casino industry. One talking point is the de facto listing of the Suncity interests via the already-listed prospective buyer International Entertainment Corp (without the need for a regulatory assessment by Hong Kong Stock Exchange’s listing committee). Another is that International Entertainment Corp is controlled by Hong Kong billionaire Cheng Yu Tung and his family. Mr Cheng and clan have had business ties to Stanley Ho Hung Sun’s Macau gaming interests dating back 32 years. No offshore-registered vehicle could ever keep that news in the dark.

Louis XIII gets HK$3.05 bln bank loan Boutique casino scheme hoping to open in ‘early 2016’ according to management

he developer of boutique Macau casino project Louis XIII says it has accepted a loan offer from the Hong Kong branch of an undisclosed mainland bank. It is for a six-year debt facility of up to approximately HK$3.05 billion (US$393 million) and will be used “principally for construction of the hotel” said the parent company Louis XIII Holdings Ltd in a filing to the Hong Kong Stock Exchange. The firm said in a November filing it also hoped to negotiate a working capital bank facility of about HK$1 billion. The confirmed term loan was contracted by the holding company’s wholly owned subsidiary New Concordia Hotel Ltd. Union Gaming Research Macau said in a note that the transaction completes the funding for the scheme. The research house said in November that the project had previously raised the equivalent of US$411 million in proceeds from the company’s initial public offering in Hong Kong early last year and US$133 million

from a combined sale of equity and convertible bonds later in 2013. Union Gaming said of the bank loan confirmation: “…we view the announcement of the debt deal as the best indicator – short of a comfort letter – that the project should ultimately receive an allocation of table games at the appropriate time.” That’s a reference to the fact that Louis XIII has not yet announced on which gaming concessionaire or sub-concessionaire it will be relying in order to offer casino gaming. According to filings and company guidance, the property will include 66 gaming tables (50 premium mass, 16 VIP) and 236 hotel rooms all of which are at least 2,000 square feet (186 sq. m.) or larger. Construction of the casino resort – located on the Cotai-Coloane border – should be finished by the second quarter of 2016, said Tom Lau Ko Yuen, deputy chairman of the developer, speaking in December after a special general meeting of the firm in Hong Kong. M.G.

Architect’s impression of Casino Louis XIII

January 15, 2014 April 19, 2013

Greater China

Acer new CEO eyes hardware tu PC maker is set to post third annual loss as shipments decline Tim Culpan

Richard Li to sell Beijing complex Pacific Century Premium Developments Ltd, the real estate unit of billionaire Richard Li’s PCCW Ltd, is in advanced talks to sell an office, retail and residential complex in Beijing. The developer is negotiating the sale of Pacific Century Place in Beijing with no binding agreement having been reached, the Hong Kong-based company told the city’s stock exchange Monday, without identifying the buyer. Pacific Century Premium said in October it was approached by potential buyers for its stake in the development. Shares of Pacific Century Premium surged to an almost 10-year high after the trading resumed.

Wing Lung Bank to grow in California The Federal Reserve will allow Hong Kongbased Wing Lung Bank Ltd to expand in California as Chinese lenders boost their United States presence. Wing Lung plans to establish a San Francisco branch and upgrade its existing office in Alhambra, California, to a full-service operation, the Fed said yesterday in a statement. The company has total assets of about US$27.2 billion and ranks as the 10thlargest bank in Hong Kong, according to the Fed. It also has a branch in Macau. China Merchants Bank Co, based in Shenzhen, owns all of Wing Lung’s shares.

US challenges China steel duties The United States on Monday challenged China’s claim that it has complied with World Trade Organization (WTO) rules regarding duties on certain American steel products. US Trade representative Michael Froman announced that it was requesting that China enter into consultations over Beijing’s claim that it has brought its duties on US exports of grain oriented flat-rolled electrical steel into compliance with WTO rules. The request marks the first time the United States has launched a proceeding in the international trade body to challenge a claim by China that it has complied in a WTO dispute.

Ghana to allow yuan trading Ghana will allow banks to quote yuan rates and sell the Chinese currency this year as more businesses in West Africa’s second-biggest economy trade with the Asian nation. “Many more people are traveling to China to do business and we think we should make life a bit easier for them,” Bank of Ghana governor Kofi Wampah said by phone yesterday from the capital, Accra. “It will also ease pressure on the cedi as this will decrease the demand for dollars.” Ghana’s cedi has dropped 20 percent against the dollar since the start of 2013.

cer Inc, the Taiwanese personal computer (PC) maker that is set to post a third-straight annual loss, plans to build on its hardware background to turn the company around, chief executive officer Jason Chen said. “We need to dig ourselves out of a hole,” Mr Chen, who took over as chief executive officer (CEO) and president on January 1, told reporters at the company’s headquarters in Taipei Monday. “Operational excellence” will be the key to doing so, he said. Founder Stan Shih, 69, in November returned as chairman at the company he started after declining market share and losses at Acer led to the departure of J.T. Wang, the man who replaced him more than a decade ago. Last month the PC maker announced a strategic change toward providing hardware, software and services, harking back to an offering called MegaMicro first unveiled when Mr Shih previously led the company. Acer was the worst hit among the top-five vendors by the largest annual PC shipment decline in history as its sales volume dropped 28 percent last year, according to Gartner Inc. Only Lenovo Group Ltd among the leading computer makers posted an increase in shipments in a market that slid 10 percent, the Stamford, Connecticut-based researcher said. Shares of Acer have slumped for four straight years after more than doubling in 2009. A NT$13.1 billion (US$437

million) third-quarter loss, spurred by the writedown on past acquisitions, means Acer is set to post its third annual loss. The average of 25 analyst estimates compiled by Bloomberg is for a net loss of NT$14.3 billion in 2013. Full-year 2013 sales fell 16 percent to NT$360.2 billion, the company said Friday, or 43 percent less than the peak in 2010.

Ultrabooks misstep Acer’s biggest mistake was to invest too early in ultrabooks – thin, light notebooks that mimic Apple Inc.’s MacBook Air – as well as touchscreen technology at a time when the market for such devices didn’t yet exist, Mr Chen said. To turn the company around, Acer plans to build on its existing hardware and software skills. Its new business model will debut on April 1 when notebooks will be released offering its forthcoming Build Your Own Cloud service, he said. “We need to find how to add value to hardware with mail, photo, video and other things we haven’t even seen yet,” he said. “We’ll start from our competitive advantage and go from there.”

Data centers Acer is already strong in datacenter services and security, said Mr Chen, an MBA graduate from the University of Missouri who previously

Jason Chen, the new CEO of Taiwan’s computer gian

worked as vice president of sales and marketing at Taiwan Semiconductor Manufacturing Co. Among Mr Shih’s first decisions after returning to the company was to buy a 15.6 percent stake in the online payments unit of Taipei-based PChome Online Inc, a Taiwanese website and e-commerce provider. The companies didn’t disclose the value of the investment when it was announced last week, while Mr Shih said he expects Acer to offer the venture’s services within a year.

Great Wall Motor delays launch of new m

Technical issues with Haval H8 model raise fears over carmaker’s a

reat Wall Motor Co, China’s biggest maker of sport utility vehicles, said it delayed the introduction of its Haval H8 model for three months to address technical deficiencies. Issues include an engine setting with no significant difference between sport and economy modes, low steering resistance, long brake-operating distance and engine, tire and wind noise, the company said in a Hong Kong stock exchange filing Monday evening. Great Wall said it had exhibited the SUV at the Guangzhou Auto Show on November 21. “The company has decided to perfect and improve Haval H8 in order to further enhance the quality of the company’s products,” Great Wall said in the statement. “The launch will be deferred for three months from the date of this announcement and pre-orders will not be accepted.” “Great Wall’s ambitions to move up a league in the auto industry rest on this vehicle,

which has already been delayed unofficially in the last year,” Max Warburton, an analyst at Sanford C. Bernstein, said in a report. “The latest and very public delay will not be taken well by the market as it confirms Great Wall is struggling with technology and quality.” Great Wall fell the most in more than five years in Hong Kong trading yesterday. Shares tumbled 18 percent to HK$32.20, the biggest decline since October 2008. The company’s Shanghaitraded shares fell 9.1 percent. Great Wall plans to sell 17 percent more vehicles this year, for a total of 880,000, a slower pace than last year’s 21 percent growth rate, according to a January 7 posting by Shang Yugui, a spokesman of the company, on his personal Weibo page. Recommendations on the company’s shares were cut to underperform from hold at Jefferies Group LLC and to neutral from overweight at HSBC Holdings Plc. Bloomberg News

Great Wall Motor plans to sell 17 percent more vehic

January 2014 April 19,15, 2013

Greater China

urnaround

HK, mainland close in on fund mutual recognition Deal would give foreign firms new path to reach Chinese household savings

nt Acer Inc

The PC maker plans to reallocate resources and boost spending on marketing as well as research and development, Mr Shih said last week. Speaking to reporters for the first time since he took office, Mr Chen said it’s too early for him to outline the company’s new strategy. He declined to say if he will spend more on research and development or on marketing. “We aren’t excluding any possibilities to get where we want to go,” he said. “We want to get to Build Your Own Cloud.”

ong Kong is in the “final stretch” of talks with China on mutual recognition of funds, which will pave the way for crossborder sales, said Alexa Lam, deputy chief executive officer at the city’s Securities and Futures Commission. Both sides reached broad agreement on the scope of the project, including what funds will qualify, eligibility requirements of the managers, disclosure and investor protection, Ms Lam said at a financial forum in Hong Kong yesterday. The deal would open a new channel for international companies to access more than 45.6 trillion yuan (US$7.5 trillion) of household savings in China, which retains tight capital controls. The country’s mutual-fund industry may more than double to 6 trillion yuan by 2015, Shanghaibased consulting firm Z-Ben Advisors estimated. “It is the biggest opportunity for

fund companies in this market,” said Stewart Aldcroft, Hong Kongbased chief executive officer in the Asia-Pacific region at CitiTrust Ltd in December. “There’s very significant pentup demand, particularly among the medium- and higher-net-worth individuals, to be able to access foreign markets.” CitiTrust is a unit of Citigroup Inc that provides trustee services to funds in Hong Kong. China’s savings rate of more than 50 percent of gross domestic product is the highest among major economies, according to a June 2010 Bank for International Settlements report.

Asia regulators Regulators in Asia have been working on three separate crossborder fund sale initiatives to keep wealth within the region, and help develop and retain control over the local financial industry in the face

of mounting European and United States market access rules, according to a Citigroup report last year. Talks between the China Securities Regulatory Commission and the Hong Kong regulator were made public by officials in December 2012 and January 2013. Hong Kong is one of the region’s largest fund importers with vehicles domiciled in offshore centers such as Cayman Islands, Luxembourg and Dublin accounting for almost 95 percent of sales, according to the Citigroup report. International managers previously tapped China’s growing personal wealth by teaming up with local companies for mutual-fund joint ventures in the country. More than half of the 89 mutual fund companies in China have foreign stakeholders, according to the commission’s data. The deal under negotiation will also allow Hong Kong investors to buy Chinese mutual funds. Bloomberg News

Bloomberg News

model

ambitions

cles this year

Fast-food giant still recovering from probe on former supplier

Yum’s sales slowdown as China rivals step up Y

um! Brands Inc, owner of the KFC and Pizza Hut brands, said same-store sales rose 2 percent in China last month, trailing analysts’ estimates, as its fried-chicken and pizza chains face more rivals there. Analysts estimated a 6 percent increase, the average of 10 projections from Consensus Metrix. Sales at KFC stores open at least 12 months in China rose 5 percent in December, the Louisville, Kentuckybased company said yesterday in a filing with the United States Securities and Exchange Commission. Samestore sales at Pizza Hut fell 3 percent.

KFC, which has about 4,460 locations in China, is facing more competition from local dining chains such as Dicos and Hua Lai Shi. The company also is trying to bring back Chinese diners following an outbreak of avian flu and the investigation of a former supplier for selling food with too much antibiotics. In November, Yum’s same-store sales rose 1 percent in China after a half-priced chicken deal boosted sales at KFC. Yum shares advanced 14 percent last year in New York, trailing the 23 percent increase for the Standard &

Poor’s 500 Restaurants Index. Comparable-store sales are considered an indicator of growth because they include only older, established locations. Yum, which also owns Taco Bell, has more than 39,500 restaurants worldwide. Pizza Hut has five outlets in Macau and KFC just one, at Sands Macao hotel-casino. Hong Kong’s Jardine Restaurant Group bought the KFC franchise for Macau and Hong Kong from Yum! Brands Inc in November for an undisclosed amount. Bloomberg News

10 10

January 15, 2014 April 19, 2013

Greater China

Tech upstarts raise interest to challenge big banks China’s banking system is already feeling the impact from mobile banking

ebecca Ning, along with 43 million other Chinese, has found a way to make about 6 percent annually, or 17 times her usual interest rate, by tapping her phone and using technology that’s disrupting China’s banking status quo. Employing Alibaba Group Holding Ltd’s affiliate Alipay, an Internet payment system similar to PayPal, Ms Ning pokes a silver icon with the first Chinese character for “pay” to transfer money from her bank account in Beijing to Alipay’s investing platform, Yu’E Bao. She earned 430 yuan (US$71) in interest on 30,000 yuan in almost three months last year instead of 26 yuan had she left the money in her checking account. “I put any spare cash I have into Yu’E Bao,” said Ms Ning, 24, a graduate student from southern Guangxi province who raves about the process. “I’m basically losing money if I leave it as a bank deposit, as it’s depreciating in value every day.” Moving money around with a smartphone to earn higher returns has become so popular in China that Yu’E Bao, which means “leftover treasure,” drew US$31 billion from 43 million customers – more than the population of Argentina – in the six months after it started in June, the company reported. While that’s only 0.4 percent of the country’s total household savings, other technology firms, including Baidu Inc, are jumping in with products. Banks are responding by setting up their own mobile and e-banking services.

Market forces The money is being siphoned out of China’s state-controlled banks, which pay 0.35 percent annual interest on checking accounts, one-seventeenth of the 6 percent Ms Ning earned by investing in a mutual fund paying market-based rates. Had she kept her money in a oneyear time deposit, she would have made China’s benchmark rate of 3

percent, slightly more than last year’s lower-than-expected inflation rate of 2.6 percent. With no minimum deposit or time frame required, the new technology brings interest-chasing to China’s masses and challenges an industry facing increased competition. “It’s disruptive to traditional ways” of raising deposits, said Zhang Zhiming, head of China research at HSBC Holdings Plc in Hong Kong. “Traditional banks will be challenged. That’s not necessarily bad news.”

Drawing cash Banks have started offering wealthmanagement products, defined by the government as shadow banking, to keep money from flowing out the door. Most carry restrictions. Unrestricted Internet-based investing, in which savers can move as little as 1 yuan at any hour of the day for any length of time, is China’s next evolution.

US$31 bln capital raised by Yu’E Bao

Yu’E Bao’s cash is invested in a money-market fund run by Tian Hong Asset Management Co, in which Hangzhou-based Alibaba, the nation’s largest e-commerce company, owns a majority stake. The money goes into negotiable bank deposits as well as government an d co r p o r a te b o n d s o n th e interbank market. Volatile yields there climbed as high as 10.8 percent in late June and

Alibaba’s Internet payment system Alipay is luring savings from banks

hit 8.8 percent last month, according to data compiled by Bloomberg. As a result, Yu’E Bao’s return has varied between 4.3 percent at its June 17 debut and a high of 6.8 percent on January 2.

Implicit guarantee Investors in money-market funds, like those who have bank savings accounts with fixed returns, rely on implicit government support to protect their principal. They shoulder the risk of fluctuating returns, which can drop to negligible levels. China is the world’s biggest mobile-banking market, with 60 percent of bank customers completing some transactions with a smartphone or tablet, compared with 45 percent in the United States, according to a December survey by consulting firm Bain & Co. The government is encouraging innovation in Internet financing and sees it supplementing the traditional financial system, Liu Shiyu, a deputy governor of China’s central bank, said last month. “Alibaba and genuine Internet banks are a force to be reckoned with in future years,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. “If e-commerce-based banking services are able to develop sizable cash flows and transaction volumes over the next few years, then the commercial banks are going to have to take actions to counter the new competition.”

Few options China’s savings rate of more than 50 percent of gross domestic product was the highest among major economies as of 2012, exceeding 31 percent in India and 13 percent in the United States, according to the International Monetary Fund. Even so, Chinese have few legitimate investment options for their deposits.

“Undoubtedly, a group of new entities like Alibaba have marched ahead of traditional institutions like us, but we won’t just sit back,” Zhang Jianguo, president of China Construction Bank Corp, the nation’s second-largest lender, told investors in August. Construction Bank, based in Beijing, began an e-commerce platform in November 2012 that allows users to buy products including digital gadgets, cosmetics, books and food in addition to financial services. China Minsheng Banking Corp plans to offer electronic cards that allow holders to receive a 5 percent expected rate of return on savings, Xinhua news agency reported in November. As Internet financial products gather momentum, China’s statecontrolled banks are losing share of the nation’s 44.8 trillion yuan in household deposits. “Given time, such a combination of the Internet technology-business model and financing products could meaningfully change the entire industry’s landscape and the rules of the game,” Victor Wang, a Hong Kong-based analyst at Credit Suisse Group AG, wrote in a November 18 note to investors. Bloomberg News

The Internet technologybusiness model and financing products could meaningfully change (…) the rules of the game Victor Wang, analyst at Credit Suisse Group AG

11 11

January 2014 April 19,15, 2013

Asia

Kingfisher air order canceled as revival hopes vanish Indian carrier that once sought to fly to Macau remains a long shot for survival

irbus SAS canceled Kingfisher Airlines Ltd’s order for superjumbos, reducing chances for resumption of services by the grounded Indian carrier. The orders for five A380s and another five A350-800 planes were scrapped by Airbus, John Leahy, chief operating officer of the Toulouse, France-based planemaker, said Monday in an interview. Prakash Mirpuri, a spokesman at the carrier, said Kingfisher is trying to restart operations and the orders were canceled as it has no plans for long-haul services. Kingfisher, which lost its airline license last year, said it doesn’t have any source of revenue and is in talks with an investor for funds. “It is very difficult to restart, given the extreme circumstances that they are in, you have to pay a lot of debt, pay employees and the whole process requires massive funding,” said Kapil Kaul, chief executive officer for South Asia, CAPA Center for Aviation in New Delhi. “It doesn’t seem to be a feasible case.” Kingfisher, the only Indian carrier to order A380s, has grounded planes since October 2012. The airline lost its operating licence in January last year after failing to convince authorities it has enough funds to restart flights. The airline defaulted on payments to lessors, creditors and airports as losses widened amid rising fuel costs and competition. Mr Mirpuri said in an e-mail the airline continues its efforts to recapitalise and restart services.

‘No revenue’ “There is absolutely no source of revenue/income for the company as a result of which the company does not have the means and is not in a position to pay employees dues,” Mr Mirpuri said in a separate e-mailed statement. “We are doing our best to revive the airline.” Kingfisher had total debt of 91.4

Kingfisher had ordered five A350-800 planes and five A380s from Airbus

billion rupees (US$1.5 billion) as of September 30, according to data compiled by Bloomberg. Shares of Kingfisher fell 71 percent last year, compared with the 9 percent gain in the benchmark S&P BSE Sensex. Kingfisher has yet to take delivery of 24 A320 single aisle planes and 15 A330-200 aircraft as of the end of November, according to the Airbus website. The Indian carrier, which once had as many as 68 aircraft in its fleet, now has just one active plane, an Airbus A319 corporate jet, according to aircraft tracking website planespotters.net and regulator data. It was a fast decline for the airline,

which once sought to launch the first direct flights between India and Macau. In November 2011 Sands China Ltd president Edward Tracy said: “I think [Indian carrier] Kingfisher [Airlines] will end up coming directly to this market.”

Second cancellation The cancellation of the A380 superjumbo by Kingfisher was the second suffered by Airbus last year as the Indian airline followed Deutsche Lufthansa AG in dropping commitments. The aircraft maker has an order backlog of 5,559 jets at the end of 2013,

and its net order intake was 1,503 after cancellations, it said yesterday. Indian carriers are struggling with high levels of debt and the region’s most expensive fuel tariffs. Jet Airways (India) Ltd, the country’s biggest publicly traded airline, posted a record quarterly loss in the three months ended September as demand declined and fuel costs increased. India’s cabinet in October approved a proposal by Abu Dhabibased Etihad Airways to buy a 24 percent stake in Jet, paving the way for the first share sale by a carrier in the Asian nation to a foreign airline since restrictions were eased. Bloomberg News

Fresh scare for Kiwi dairy giant New Zealand’s Fonterra forced to recall bottles of cream

ew Zealand dairy giant Fonterra faced a new contamination scare Tuesday with the forced recall of nearly 9,000 bottles of cream which had been tainted with E.coli bacteria. The fresh cream had been produced for domestic consumption in the North Island. Fonterra Brands New Zealand managing director Peter McClure said he did not want to speculate on how the contamination occurred. But he told Radio New Zealand it was unlikely to have come in with the milk from the farms, and it was “almost impossible” the contamination could have been deliberate. It was the first time in 18 years a

Fonterra product had tested positive for E.coli, which is found in human and animal faeces and can cause infections and symptoms similar to food poisoning. “We wouldn’t want this at any time and certainly now is not a good time for us either, but we’re doing everything we can,” Mr McClure said. The E.Coli contamination follows a botulism scare last year which forced a global recall of Fonterra infant formula products. In Macau retailers took Karicare and Dumex infant formula off their sheleves in August. Two batches of another brand of infant formula, Cow & Gate, were recalled here and in Hong Kong. That scare turned out to be a false

A contamination scare was the latest incident involving Fonterra

alarm, but French dairy giant Danone announced last week it was suing Fonterra for compensation. The company, which has since cancelled its supply contract with Fonterra, had estimated the crisis had cost it 300 million euros

(US$407 million). In 2008, six children died and another 300,000 fell ill in China after a local company part-owned by Fonterra illegally laced milk with the chemical melamine. AFP

12 12

January 15, 2014 April 19, 2013

Asia

Japan’s Suntory nets US spirits maker Beam deal latest example of Japanese beverage firms seeking growth overseas

untory Holdings Ltd on Monday said it would buy United States spirits company Beam Inc for US$13.6 billion cash in a deal that would make the Japanese company the world’s third-largest spirits maker. Including the assumption of Beam’s net debt, the deal is valued at US$16 billion. It brings together Beam’s Jim Beam and Maker’s Mark bourbons, Courvoisier cognac and Sauza tequila with Suntory’s Yamazaki, Hakushu, Hibiki and Kakubin Japanese whiskies, Bowmore Scotch whisky and Midori liqueur. Once the acquisition is completed, Suntory will become the third largest whiskey company and the fifth largest malt whiskey company by volume, according to International Wine & Spirit Research. The deal is the latest example of how Japanese beverage companies are seeking to quench their thirst for overseas growth as the population in their home market shrinks. “All Japanese beverage companies have been focused on getting growth outside Japan,” said Bernstein Research analyst Trevor Stirling. The deal boosts Suntory’s market share in the United States to 11 percent from less than 1 percent, according to Stifel Nicolaus analyst Mark Swartzberg. The proposed acquisition is also Japan’s third-largest announced outbound deal of all time, according to Thomson Reuters data. Las t year , private ly h eld Suntory floated its food and nonalcoholic drinks company, Suntory Beverage & Food, to raise money for overseas acquisitions.

Ackman wins big One of the biggest winners in the Suntory deal will be Pershing Square Capital Management. The US$12 billion hedge fund owned by William Ackman owned 12.8 percent, or 20.8

Suntory last year floated its non-alcoholic drinks unit to raise cash for overseas acquisitions.

million shares, of Beam at the end of the third quarter. At that time, Beam was Pershing’s third-biggest position, and it has helped boost the hedge fund’s performance in a year overshadowed by a US$500 million loss on J.C. Penney Co Inc and climbing losses on Herbalife Ltd. Suntory said on Monday that it would pay US$83.50 per share in cash, a 25 percent premium to Beam’s closing stock price of US$66.97 on Friday. The purchase price is more than 20 times Beam’s earnings before interest, tax, depreciation and amortization. But there are few cost-saving opportunities in Monday’s deal, Mr Stirling said, since more than 90 percent of Suntory’s business is in Japan, and the Beam business will continue to operate in the United States.

If the deal falls through, Beam must pay Suntory a US$425 million termination fee. The deal between Suntory and Beam came together quickly – in less than two months, according to a person close to the transaction.

Emerging markets Analysts believe a counterbid by the likes of larger rivals Diageo Plc or Pernod is unlikely, citing the deal’s high multiple, termination fee and approval by both boards. Suntory already distributes Beam products in Japan, and Beam distributes Suntory’s products in Singapore and other Asian markets. Suntory already has a portfolio of Japanese whiskies and one Scotch that are strong in its home market, but the

acquisition of Beam gives it bourbon, Scotch, Irish and Canadian whiskies and access to a stronger distribution network not just in the United States but in key emerging markets such as India, Russia and Brazil. The combined company will have annual sales of about US$4.3 billion. Beam has been viewed as an attractive takeover target since becoming a stand-alone public spirits company in October 2011. So-called brown spirits, like whiskey, have experienced a resurgence in recent years, helped by the growing popularity of classic cocktails. United States sales volume of bourbon and Tennessee whiskey have grown 13.2 percent in the five years to 2012, according to the Distilled Spirits Council of the United States. Reuters

OCBC injects capital in Bank of Ningbo Singapore financial group looks to increase its footprint in China

versea-Chinese Banking Corp, Southeast Asia’s secondlargest lender, will spend about 1.8 billion yuan (US$298 million) buying new shares in Bank of Ningbo Co to help its Chinese affiliate boost capital. OCBC will increase its stake in the Shenzhen Stock Exchange-listed bank to 20 percent from 15.34 percent as part of a private placement, the Singapore-based lender said in a

statement to the stock exchange yesterday. The share subscription, expected to be completed in the third quarter, comes as OCBC looks to increase its footprint in China to tap growing regional trade flows and the increasing use of yuan as an international currency. OCBC is in exclusive talks through January 31 with the largest shareholders of Wing Hang Bank Ltd to buy the Hong Kong-based bank in

what would be its largest acquisition. Banco Weng Hang SA, a unit of Wing Hang, has 12 outlets in Macau. “Banking with Chinese companies, onshore and offshore, and developing the ability to tap into the fast-growing offshore yuan market will remain a key focus for us,” Darren Tan, chief financial officer of OCBC, said in an e-mailed statement yesterday. Bank of Ningbo plans to raise 3.2 billion yuan from the private

placement to its two largest shareholders OCBC and Ningbo Development & Investment Group Co to bolster capital, the lender, based in Zhejiang province, said in a statement dated yesterday. OCBC will buy no more than 207.5 million shares and Ningbo Development will subscribe to 158.5 million shares at 8.85 yuan each, Bank of Ningbo said. 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 19,15, 2013

Asia

Japan current-account deficit widens to record Weakness in the yen and extra demand for energy are driving up Japan’s import bill

apan’s current-account deficit widened to a record in November as imports climbed, underscoring challenges for prime minister Shinzo Abe as he tries to drive a sustained economic rebound. The 592.8 billion yen (US$5.7 billion) shortfall in the widest measure of trade, reported by the Ministry of Finance in Tokyo yesterday, was larger than the median forecast of 368.9 billion yen in a Bloomberg News survey of 24 economists. The deficit is the biggest in comparable data back to 1985. Weakness in the yen and extra demand for energy because of nuclear-plant shutdowns are driving up Japan’s import bill, highlighting drags on the recovery that will also include a sales-tax increase in April. A longer-term risk for the nation is any shift to a sustained deficit that would undermine investor confidence in Japanese government debt. “The record deficit reflects a change in Japan’s current economic make-up” with its lack of nuclear power and a weaker yen, said Junko Nishioka, chief Japan economist at Royal Bank of Scotland Group Plc in Tokyo, adding that the shortfalls in the balance may provide further cause for the yen to fall. Yesterday’s numbers underscore the risk that Japan could switch in coming years to becoming a deficit nation that needs funding from abroad to service a debt burden that is more than twice the size of the economy. For now, a surplus in income from overseas is preventing such a shift. “We have to take this problem seriously and solve the underlying causes,” Economy minister Akira Amari told reporters after the release. “Japan would have to depend on foreign investment to finance its budget shortfall if it allows its currentaccount balance to remain in deficit.” Naohiko Baba, an economist at Goldman Sachs Group Inc in Tokyo,

says that export volumes and wages will be key economic indicators in a “critical year for Abenomics.” Growth in shipment volumes as a result of weakness in the yen is weaker than “would be expected by the market so far,” Mr Baba said in a note Monday. While Mr Baba expects

improvements in exports because of a United States-led global recovery, risks include Japan’s continuing shift to offshore manufacturing, he said in the note. The balance on a seasonallyadjusted basis was in deficit for a third-straight month, the longest run of shortfalls on record. Japan’s

income from overseas investment tends to be lower in November than in other months. “The deficit should start to gradually shrink on the back of a global recovery,” Kazuhiko Ogata, chief Japan economist in Tokyo at Credit Agricole, said before the release. Bloomberg News

Japan’s deficit could challenge prime minister Shinzo Abe’s stimulus programme

Mongolia eyes first dim sum bond Bank tries to reduce borrowing costs after rating downgrade Tanya Angerer

rade & Development Bank of Mongolia is offering what would be the country’s first offshore yuan bond just one week after Moody’s Investors Service downgraded the ratings outlook of the lender. The Ulaanbaatar-based bank is marketing the three-year securities to yield about 10.25 percent, a person familiar with the matter said, asking not to be identified because the matter is private. Dollar borrowing costs for Mongolian issuers climbed to a four-month high of 8.97 percent on Monday, according to JPMorgan

Chase & Co indexes. That compares with an average yield of 4.05 percent for Dim Sum notes, a HSBC Holdings Plc index shows. Moody’s on January 8 changed the ratings outlooks for three Mongolian banks to negative from stable, reflecting “intensifying adverse developments in their operating environment.” Khan Bank LLC and XacBank LLC were downgraded as well as Trade & Development Bank, which also had its baseline credit assessment lowered to B2 from B1 because of the high credit risks

evident in its portfolio. “The banks remain vulnerable to a deterioration in asset quality and high borrower concentration,” Moody’s said. “Given the resourcebased nature of the economy and a large lending concentration in mining, there’s the risk of boom-bust cycles.” Trade & Development Bank has the equivalent of US$407 million of bonds and loans outstanding, and a weighted average fixed-coupon of 8.81 percent, according to data compiled by Bloomberg. It sold US$300 million of 8.5 percent 2015 notes in September 2012

which are now yielding 9.81 percent, prices compiled by Bloomberg show. Offerings of yuan bonds and certificates of deposit outside mainland China will rise to as much as 570 billion yuan in 2014, compared with 350 billion yuan in the first 11 months of 2013, according to HSBC, the top underwriter in the market last year. Peking University Founder Group sold 1.2 billion yuan of three-year bonds at 5.875 percent last week. It priced a further 800 million yuan of the 2017 bonds Monday. Bloomberg News

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January 15, 2014 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 111.1

25.0

34.4

24.9

34.2

110.9

24.8

34.0

24.7

110.7 33.8

24.6 Max 24.95

average 24.697

Min 24.55

Last 24.55

24.5

Max 111.1

average 110.733

Min 110.5

Last 110.5

62.20

PRICE

Max 25.95

average 25.747

DAY %

YTD %

(H) 52W

0.37037037

-6.380816907

106.2200012

92.14

BRENT CRUDE FUTR Feb14

106.93

0.168618267

-3.492779783

112.7999954

GASOLINE RBOB FUT Feb14

263.26

-0.056945446

-5.502710076

286.9299889

243.68999

905.5

-0.165380375

-4.027556969

960.75

840

4.3

0.608329434

1.654846336

4.770000458

3.476000071

294.01

0.231820816

-4.081299752

317.8399801

278.4999847

Gold Spot $/Oz

1249.06

0.2062

3.8512

1696.2

1180.57

Silver Spot $/Oz

20.2874

1.0253

3.7315

32.46

18.2208

Platinum Spot $/Oz

1431.13

-0.1827

5.56

1742.8

1294.18

GAS OIL FUT (ICE) Feb14 NATURAL GAS FUTR Feb14 NY Harb ULSD Fut Feb14

85.56999969

736

-0.2142

3.5162

786.5

629.75

1779.5

0.821529745

-1.152617692

2174

1736.25

LME COPPER 3MO ($)

7329

0.362889421

-0.421195652

8346

6602

LME ZINC

2064

1.57480315

0.437956204

2230

1811.75

14210

2.525252525

2.230215827

18770

13205

15.635

2.356792144

16.77000046

15.12000084

Palladium Spot $/Oz LME ALUMINUM 3MO ($)

3MO ($)

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

431.5

-0.690448792

2.251184834

606.5

406.25

573

-0.087183958

-5.328376704

845

560.5

WHEAT FUTURE(CBT) Mar14 SOYBEAN FUTURE Mar14

1298.25

0.309059301

0.444874275

1377.75

1174

COFFEE 'C' FUTURE Mar14

119.6

-0.208594076

8.039747064

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

15.55

-0.320512821

-5.240706886

20.57999992

15.40999985

COTTON NO.2 FUTR Mar14

83.57

-0.131453155

-1.264177694

90.61000061

76.65000153

World Stock Markets - Indices NAME

Min 25.00

Last 25.80

(L) 52W

WTI CRUDE FUTURE Feb14

CORN FUTURE

36.5 36.3 36.1

25.0

Max 36.70

average 36.306

Min 35.95

Last 36.00

35.9

Currency Exchange Rates

NAME

METALS

33.6

36.7

25.2

Commodities ENERGY

Last 33.90

25.4

62.65

Last 63.35

Min 33.65

25.6

63.10

Min 62.25

average 33.947

25.8

63.55

average 63.25

Max 34.25

26.0

64.00

Max 63.90

110.5

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

0.9014 1.6403 0.9011 1.3675 103.59 7.9868 7.7542 6.0406 61.515 32.745 1.2673 30.1 44.815 11990 93.375 1.23228 0.83369 8.267 10.9208 141.66 1.03

-0.5736 -0.2918 0.222 0.0878 -0.2606 0.0088 0.0077 0.0563 0.634 0.6902 -0.1657 -0.1229 -0.5065 1.4345 0.317 0.1298 -0.385 -0.0435 -0.0632 -0.353 0

1.0312 -0.5939 -1.0876 -0.6466 1.3515 -0.0025 -0.0039 0.2268 0.4633 0.0916 -0.2525 -0.9734 -0.9372 1.5096 0.2934 -0.452 0.0552 0.8951 0.6593 2.0119 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 6.0393 52.89 28.56 1.2228 28.923 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 %

(H) 52W

(L) 52W VOLUME CRNCY

4.22

-4.090909

-10.02132

5.12

3.265

2804124

17.09

-0.697269

1.42433

17.38

11.08

1904992

AMAX INTERNATION

1.75

-1.685393

1.744184

2.12

0.75

1938650

BOC HONG KONG HO

24.25

-0.2057613

-2.414488

22.85

5656285 880000

CENTURY LEGEND

0.42

-2.325583

0.68

0.26

CHEUK NANG HLDGS

7.37

0.9589041

4.539004

7.45

3422

CHINA OVERSEAS

21.9

-0.9049774

0.4587191

25.4

17.7

19367800

CHINESE ESTATES

19.58

-3.069307

-18.75519

24.7

10.384

111000

CHOW TAI FOOK JE

12.1

4.671276

13.38

7.44

4355400

EMPEROR ENTERTAI

4.17

0.7246377

4.25

4.66

1.93

1715000

FUTURE BRIGHT

4.59

1.101322

-2.132197

4.9

1.46

4758000 7807961

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

16257.94

-1.089672

-1.922702

16588.25

13445.8

NASDAQ COMPOSITE INDEX

4113.305

-1.469819

-1.515224

4182.742

3093.324

77.6

0.7138222

11.5744

78.95

-0.2410698

6875.62

6023.44

HANG SENG BK

122.4

-0.08163265

-2.625296

132.8

110.6

728340

HOPEWELL HLDGS

26.15

0.1915709

-0.3809524

35.3

23.2

686932 10774698

FTSE 100 INDEX

6732.82

-0.360063

DAX INDEX

9450.22

-0.6303778

-1.067198

9620.929688

7418.36

NIKKEI 225

15422.4

-3.077289

-5.333575

16320.22

10432.97

HANG SENG INDEX

22791.28

-0.4258859

-2.210172

24111.55078

19426.35938

CSI 300 INDEX

2212.846

0.8737377

-5.029126

2791.303

2023.171

TAIWAN TAIEX INDEX

8548.14

-0.2108286

-0.735877

8647.24

7603.27

KOSPI INDEX

1946.07

-0.1462348

-3.245101

2063.28

1770.53

S&P/ASX 200 INDEX

5212.049

-1.512186

-2.618752

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4390.771

3.191561

2.727876

5251.296

3837.735

GALAXY ENTERTAIN

HSBC HLDGS PLC

85.2

-0.9302326

1.24777

90.7

77.85

HUTCHISON TELE H

2.88

1.766784

-2.040818

4.66

2.5

3398000

LUK FOOK HLDGS I

27.65

-1.776199

-6.271186

16.88

3798743

MELCO INTL DEVEL MGM CHINA HOLDIN

1.398601

1.754386

30.55

10.76

4724040

33.9

0.1477105

2.416923

15.154

2782283

MIDLAND HOLDINGS

3.63

-2.680966

4.29

2.68

2174000

NEPTUNE GROUP

0.33

1.538462

-2.941177

0.4

0.131

53750000

NEW WORLD DEV

10.02

1.008065

2.349336

15.12

9.35

9529418

SANDS CHINA LTD

63.35

-0.2362205

67.15

33.5

11242073

FTSE Bursa Malaysia KLCI

1834.97

0.4576784

-1.71348

1882.2

1597

SHUN HO RESOURCE

1.68

1.204819

1.818183

1.92

1.33

12000

NZX ALL INDEX

1028.594

-0.604436

2.973183

1048.998

896.792

SHUN TAK HOLDING

4.43

-0.4494382

-2.850876

4.8

3.27

3351024

PHILIPPINES ALL SHARE IX

3621.25

-0.2017324

0.1917354

4571.4

3440.12

Euromoney Dragon 300 Index Sin

604.14

-0.16

-1.21

STOCK EXCH OF THAI INDEX

1295.87

0.9590514

-0.2186759

1649.77

1205.44

HO CHI MINH STOCK INDEX

522.31

0.2302777

3.503556

533.15

440.48

Laos Composite Index

1248.27

-1.073062

-0.4037195

1455.82

1224.94

SJM HOLDINGS LTD

25.8

1.775148

-0.7692308

17.04

7112092

SMARTONE TELECOM

8.93

-0.6674082

0.7900716

14.46

7.38

1126000 4218333

WYNN MACAU LTD

-1.907357

2.418203

38.25

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

78.25

-1.124589

-0.2549356

79.6361

45.38

380537

BOC HONG KONG HO

3.1

-2.208202

-3.726709

3.6

2.99

12000

GALAXY ENTERTAIN

9.93

2.160494

10.21087

10.11

3.8975

8222

16.95

-3.142857

-6.662995

21.2

14.75

5086856

INTL GAME TECH

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

JONES LANG LASAL

104.24

0.2307692

1.806818

104.8

80.86

461007

LAS VEGAS SANDS

79.17

-1.762005

0.3803693

81.85

47.95

3789523 2792711

MELCO CROWN-ADR

42.63

-0.8835155

8.69454

43.95

17.76

MGM CHINA HOLDIN

4.3

-2.272727

-0.2320172

4.66

11260

MGM RESORTS INTE

25.25

-0.4337539

7.35544

26.106

11.72

18590328

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.26

-0.6097561

-2.395207

3.6

2.2

22789

203.47

-1.63879

4.768031

209.74

111.3456

1619351

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

36.95

-0.672043

15311964

CHINA UNICOM HON

10.84

-1.094891

20731603

ALUMINUM CORP-H

2.71

-2.166065

20294000

CITIC PACIFIC

10.14

-0.5882353

BANK OF CHINA-H

3.42

-0.5813953

161354380

5.2

19459121

BANK EAST ASIA

31.4

-0.6329114

983725

BELLE INTERNATIO

9.52

-0.9365245

23477197

AIA GROUP LTD

BANK OF COMMUN-H

NAME

PRICE

DAY %

POWER ASSETS HOL

59.95

1.352494

3230783

6719353

SANDS CHINA LTD

63.35

-0.2362205

11242073

SINO LAND CO

10.82

1.121495

5150834

SUN HUNG KAI PRO

96.75

-0.1547988

3318094

CLP HLDGS LTD

60.05

-0.2491694

2280419

13.84

-0.4316547

44320323

COSCO PAC LTD

10.3

-1.151631

4184746

SWIRE PACIFIC-A

87.7

-0.5104935

920867

ESPRIT HLDGS

16.1

0.625

4910597

TENCENT HOLDINGS

493

-0.7249295

2708444

TINGYI HLDG CO

BOC HONG KONG HO

24.25

-0.2057613

5656285

HANG LUNG PROPER

23.85

-0.4175365

3592312

17.04

-0.234192

2162127

HANG SENG BK

122.4 -0.08163265

728340

CHEUNG KONG

HENDERSON LAND D

119.9

-0.1665279

2855272

4.23

0.4750594

33950311

CHINA CONST BA-H

5.55

-0.5376344

238898267

CHINA LIFE INS-H

22.45

1.814059

29651275

CHINA MERCHANT

26.65

2498046

CHINA MOBILE

VOLUME

CNOOC LTD

CATHAY PAC AIR CHINA COAL ENE-H

NAME

44.5

1875612

HENGAN INTL

89.05

-1.000556

1612150

HONG KG CHINA GS

17.08

-0.4662005

7631207

HONG KONG EXCHNG

126.4

-0.394011

1609498

85.2

-0.9302326

10774698

HSBC HLDGS PLC

77.55

-0.3213368

12960381

HUTCHISON WHAMPO

CHINA OVERSEAS

21.9

-0.9049774

19367800

IND & COMM BK-H

CHINA PETROLEU-H

5.88

0.1703578

76630653

LI & FUNG LTD

CHINA RES ENTERP

24.6

-1.204819

2159300

MTR CORP

104.9

-1.409774

4517770

4.93

-0.4040404

162756512

10.78

1.698113

33108117

28.3

-0.8756567

21.6

-2.48307

5123748

WANT WANT CHINA

10.58

-1.855288

11096050

WHARF HLDG

59.15

-0.7550336

4347697

MOVERS

4 23047

INDEX 22791.28 HIGH

23046.41

1451666

LOW

22637.55

CHINA RES LAND

19.82

1.536885

5882000

NEW WORLD DEV

10.02

1.008065

9529418

52W (H) 24111.55078

CHINA RES POWER

19.44

-0.5117707

8048300

PETROCHINA CO-H

7.98

-0.622665

54925700

(L) 19426.35938

CHINA SHENHUA-H

22.45

1.126126

18305157

PING AN INSURA-H

67.7

0.5943536

12495796

22637

10-January

14-January

15 15

January 2014 April 19,15, 2013

Opinion Business

wires

Foreign-aid follies

Leading reports from Asia’s best business newspapers

Bangkok Post The auctions for 24 digital television channels on December 26-27 last year were the most exciting yet in a country that is a latecomer to levelling the telecom playing field. Unlike the 3G mobile licence auction in midOctober 2012, in which only one operator placed a bid substantially higher than the reserve price, competition was intense this time. A month later and the dust settled, industry observers have begun to question the viability of operations, given the high licence costs. Indeed, there are doubts about whether the winners will ever be able to break even.

Philippines Inquirer The Philippine Electricity Market Corp (PEMC) announced Monday it would complete this month a study on the “appropriate” price cap in the Wholesale Electricity Spot Market. The cap refers to the highest possible price that can be offered by power generation firms trading excess capacity. It is one of the factors linked to the record increase in power rates in December. The Supreme Court has issued a temporary restraining order on the increase. “We were given one month to complete the study so we will do it as directed,” said PEMC president Melinda Ocampo.

Straits Times Singapore’s Ministry of Law is considering additional measures to strengthen the moneylenders’ regulatory regime, as well as complement an income limit on unsecured borrowings, Law and Foreign Affairs minister K. Shanmugam said. There are now 206 licensed moneylenders in Singapore, compared with 173 five years ago. “I agree with the concern about not making credit too accessible. At the same time if legal access to credit is completely cut off, then borrowers will seek loans from unlicensed moneylenders,” Mr Shanmugam wrote.

Myanmar Times Outdated policies, uncompetitive premiums and restrictive procedures are hindering efforts by new insurers ahead of a plan to open the market to international firms next year, according to industry sources. Several private insurers have opened for business since June when 12 companies were granted licences. The opening of the market broke a six-decade monopoly held by state-run Myanmar Insurance. But with international firms waiting to enter the market, local insurers are worried that restrictive policies will make it difficult for them to succeed.

Kenneth Rogoff

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

he huge gap between the world’s richest and poorest countries remains one of the great moral dilemmas for the West. It also presents one of the greatest challenges for development economics. Do we really know how to help countries overcome poverty? In his eloquently written and deeply researched new book The Great Escape: Health, Wealth, and the Origins of Inequality, Princeton University’s Angus Deaton urges caution. For those interested in world poverty, it is unquestionably the most important book on development assistance to appear in a long time. Deaton suggests that far too often, Western aid serves to assuage donors’ guilt rather than improve recipients’ plight. This is particularly the case when naïve assistance serves to reinforce a dysfunctional status quo. Although Deaton supports select initiatives, particularly for delivering medical and technological knowledge, he questions whether the vast majority of aid passes the basic Hippocratic litmus test of “first do no harm”. For starters, assessing and implementing aid policy requires developing tools to gauge accurately where need is greatest. Economists have developed some useful indicators, but they are vastly less precise than politicians and the media seem to understand. Most experts agree, and Deaton concurs, that at least a billion people on the planet live in desperate circumstances resembling conditions that prevailed hundreds of years ago. Our failure to alleviate their plight is morally reprehensible. But where, exactly, are the greatest concentrations of poor people? Data are hard to come by and even harder to interpret.

Measuring progress Attempts to convert national incomes into a common denominator are fraught with complications. To take one prominent example, there is a 25 percent margin of error on purchasing-power-parity comparisons between GDP in the United States and China. In other words, we cannot say whether Chinese output today equals 55 percent of US GDP or 92 percent. So much for precise forecasts of the date when China will overtake the U.S. as the world’s largest economy; we won’t even know for sure when it happens! This problem is hardly unique to comparisons of China and the U.S.; it applies with perhaps even greater force

when comparing incomes of the poor in Mumbai with those of the poor in Freetown. Another major problem is measuring progress in a given country over time. How can one compare costof-living indices in different periods when new goods are constantly upending traditional consumption models? Consider the impact of cell phones in Africa, for example, or the Internet in India. Deaton goes on to offer a revealing critique of some of the most hyped and fashionable approaches to improving aid. For example, the “hydraulic model” of aid – the idea that if we simply pumped in more aid, better results would gush out – ignores the fact that funds are often fungible. Even if aid is narrowly targeted at say, food or health, a government can simply economise on expenditures that it might have made anyway and redirect them elsewhere – for example, to the military. Direct delivery of medical help is one of the best options, but it still can be a huge drain on already-scarce local resources – hospitals, doctors, and nurses. An influx of Western NGOs often bids talent away from nascent businesses that could help the country long after the NGOs reset their priorities and move on.

Governance problems Indeed, there is a striking parallel between the problems caused by aid inflows and the “natural resource curse” (or “Dutch disease”

as it is termed in Western countries), whereby inflows into one economic sector – typically oil or minerals – drive up economy-wide prices (including the exchange rate), rendering other sectors uncompetitive. Moreover, a great deal of this aid is delivered in kind and for strategic reasons, often supporting ineffective and kleptocratic governments. Deaton observes that, in general, Western countries developed without receiving any aid. (Perhaps America’s post-World War II Marshall Plan in Europe is an exception, but that aid was intended more for reconstruction than for development.) China and India, too, have

Highly targeted Western aid and advice can help, but donors must take more care not to stand in the way of the beneficiaries in assisting them

succeeded in lifting hundreds of millions of people out of poverty with relatively little Western aid (particularly China). Deaton argues that aid providers must be extremely careful not to interfere with political and social forces that, over time, can generate organic – and therefore more lasting – internal change. Another intellectually fashionable approach is to conduct small randomised trials to examine, say, the effectiveness of schoolattendance incentives or immunization campaigns. Deaton rightly argues that this approach, now enshrined in World Bank procedures, is of very little use for understanding how to help a country develop more broadly. The results are often specific to a particular country’s circumstances, and there is no reason to presume that they would scale up when fully confronted with a developing country’s governance problems. The fact that people in several African countries appear to be worse off now than in 1960 is far more related to despotism and internal conflict than it is to the effectiveness of aiddelivery programmes. Despite these caveats, Deaton’s message is fundamentally positive. For most of mankind, now is a better time than ever before to be alive. The path to development remains for others to follow. Highly targeted Western aid and advice can help, but donors must take more care not to stand in the way of the beneficiaries in assisting them. © Project Syndicate

16 16

January 14, 2014 April 19, 2013

Closing India eases restrictions on outbound flights UK inflation cools to hit 2pct target India could ease restrictions that prevent some of its domestic airlines from flying on international services within a month, potentially benefiting start-ups set up by Singapore Airlines and Malaysia’s AirAsia that aim to begin operations in 2014. New Delhi is also considering a proposal to allow Airbus’s A380 planes to land at local airports, aviation minister Ajit Singh said yesterday. Under existing rules, Indian carriers are required to be in operation for at least five years and have 20 aircraft to be eligible to fly international routes.

Britain’s 12-month inflation slowed to the target rate of 2.0 percent in December and to the lowest level for more than four years, official data showed yesterday. At 2.0 percent, the rate was the lowest level since November 2009, when it last hit the target. “The largest contributions to the fall in the rate came from prices for food & non-alcoholic beverages and recreational goods & services. These were partially offset by an upward contribution from motor fuels,” said a statement by the Office for National Statistics.

Chinese IPOs at discount as Chinese New Year regulator tightens crackdown travels to top 3.6 billion: official More favourable terms for investors as regulators tackle overpriced deals

Transport capacity still not enough to meet peak demand, govt says

CSRC said Sunday it is planning spot checks of IPO investor roadshows

hinese companies marketing initial public offerings are settling for lower valuations than most investors were willing to pay, evidence that a government crackdown on overpriced deals is yielding results. Beijing Utour International Travel Service Co, Hebei Huijin Electromechanical Co and Yangzhou Yangjie Electronics Technology Co priced IPO shares at below-average valuations for their respective industries after rejecting most investor bids for stock as too high, according to statements on the Shenzhen Stock Exchange’s website yesterday. The announcements suggest the China Securities Regulatory Commission’s decision over the weekend to tighten IPO supervision is yielding more favorable terms for investors. Cracking down on overpriced sales was the centerpiece of an IPO reform the regulator announced in

November before it ended a more than yearlong deal freeze, as it seeks to shore up investor confidence. “We need to be prudent during the pricing and marketing procedures,” Ding Xiaowen, co-head of investment banking at UBS AG’s Chinese securities joint venture, said Monday at a press conference in Shanghai when asked about the CSRC measures. “We will try our best to make sure all market participants will be happy about our pricing. This may not always achievable but this is our goal.” Utour International, Hebei Huijin and Yangjie Electronics – among the first batch of companies approved to list in China after the IPO freeze ended – are raising a combined 1.03 billion yuan (US$170 million). The securities regulator said November 30 it will crack down on practices that led to overpriced deals, including investors colluding with

companies to drive up valuations by making high bids with no plans to actually buy the stock. Chinese companies marketing IPOs meet investors during road shows lasting typically up to a week, a process in which fund managers are asked to indicate how much they’re willing to pay. After examining the bids, the company announces a price for its shares and starts taking orders. Utour International, a travel agency based in the nation’s capital, plans to sell stock at a 42 percent discount to average valuations in the leisure industry, according to a Shenzhen exchange filing. The CSRC said Sunday it is planning spot checks of investor roadshows held for first-time sales and will suspend offerings by companies found to have disclosed information not contained in IPO prospectuses and other public releases. Bloomberg News

total of 3.6 billion trips are expected to be made during the Chinese New Year holiday, officials said yesterday, as workers head home in the world’s largest human migration. Officials anticipate 200 million more journeys will be made than last year and warn there will be significant strain on the transport system, with some travellers as usual struggling to get a ticket. The Spring Festival, which falls on January 31 this year, is the most important traditional holiday in China and often the only chance in a year for the country’s large pool of poorer migrant workers to go home to see their children and parents. Students also do so, and it is a peak tourism period as travellers take advantage of the holidays. “Our current transport capacity cannot fully meet the peak demand during the Spring Festival despite the rapid development of infrastructure in recent years,” said Lian Weiliang, a vice chairman of the National Development and Reform Commission, China’s top economic planning body. “Therefore it will still be difficult to get a ticket in some areas during the period,” he told reporters at a briefing, according to a transcript. Peak travel for the holiday period begins this Thursday and lasts for 40 days, Mr Lian said. Most journeys – 3.2 billion – are expected to travel by road, up 5.8 percent year on year, transport ministry spokesman Liang Xiaoan said. The railway system is expected to see 258 million passenger trips, up 7.9 percent from a year ago, said Hu Yadong, a vice general manager of the newly established China Railway Corporation. AFP