Macau Business Daily, Jan 17, 2014 by Business Daily

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Vitor Quintã

MOP 6.00

Early CNY aids sales1 of high-end retailers says fashion house

April 19, 2013

Year II

Number 457 Friday January 17, 2014

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

New ‘trick’ for old dogs? Canidrome rehoming faces criticism Page 5

I’m no ‘tough cop’ says Beijing’s new man in Macau T

he new boss of the central government’s representative office in Macau made his first public comments yesterday. Li Gang took the opportunity to reassure listeners that he was not a ‘tough cop’ focused on

some clampdown on the local casino industry. “When I first arrived Macau, I remembered reading a report that said I was a ‘tough cop’ and I was a member of the Central Commission for Discipline Inspection that was

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ordered to come here to catch officials that gambled in casinos here,” Mr Li said, “This is not true.” He added there would be no ‘blind expansion’ of Chinese tourism to Macau.

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www.macaubusinessdaily.com

LRT in Taipa not open until 2016: government The Taipa section of the Light Rapid Transit (LRT) railway will start operating in 2016, not next year as previously announced, the government admitted yesterday. The administration has asked the contractors to hire more people and equipment to get back on schedule. But the head of the Transportation Infrastructure Office, Lei Chan Tong,

HSI - Movers Name

acknowledged there is “a six-to-eightmonth delay” in the construction works. The official blamed bad weather in the past two years and heavy traffic on the island’s roads for the latest delay. The railway budget has risen above 11 billion patacas (US$1.38 billion), almost three times the initial estimate.

%Day

LENOVO GROUP LTD

5.02

AIA GROUP LTD

2.29

COSCO PAC LTD

1.98

CLP HLDGS LTD

1.67

LI & FUNG LTD

1.66

CHINA SHENHUA-H

-2.25

CHINA UNICOM HON

-2.39

CHINA RES POWER

-2.45

CHINA COAL ENE-H

-3.01

BELLE INTERNATIO

-4.71

Source: Bloomberg

I SSN 2226-8294

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Mass market casino revenue up 35 pct in 2013

Don’t let politics affect verdicts in La Scala trial: defence

Casinos’ mass-market table revenue grew 35 percent in 2013, to 107.84 billion patacas, aided by a 40 percent year-on-year surge in the fourth quarter. Slot revenue grew by nine percent for the year, to 14.38 billion patacas, and by just over seven percent for the final quarter, to nearly 3.77 billion patacas. In 2012 as a whole, the latter segment grew by nearly 16 percent year-on-year.

Lawyers defending two Hong Kong businessmen yesterday urged Macau’s Court of First Instance not to let political pressures and verdicts in other cases affect the outcome of the La Scala housing scheme corruption trial. In the last day of the seven-month trial, advocates for Joseph Lau Luen Hung and Steven Lo Kit Sing criticised the evidence presented by Macau’s corruption watchdog as “weak” and “edited”.

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January 17, 2014 April 19, 2013

Macau

I’m no ‘tough cop’ says Avoidable lightness Beijing’s new man in Macau opinion

Li Gang denies drafted in to crack down on officials gambling, adds will be no ‘blind expansion’ of tourism José I. Duarte Economist

Stephanie Lai

sw.lai@macaubusinessdaily.com

he political scene is going through a relatively quiet time, fitting for this period between the Gregorian and lunar new years. However, this relative calm does not seem to contribute to more careful and reasoned debate. The few topics making the headlines suggest the opposite. One example illustrates this. The Legislative Assembly welcomed, questioned and heard the official in charge of the Transport Bureau. Several issues were touched on. According to reports in the news media, assembly members complained about the rising number of motor vehicles, the scarcity of parking and the government’s target for annual growth in the number of vehicles. Transport Bureau director Wong Wan acknowledged that the 4 percent growth target had been missed and that growth was running at 5.6 percent. These seem relatively minor issues. They are essentially about the implementation of policy, which is not questioned here. And yet several notso-minor questions spring to mind. The basis for the target of 4 percent was never clear to start with. I cannot remember seeing that figure supported by any solid research or analysis. It is not even clear what it really implies in terms of growth in the various types of vehicle and their effect on traffic. Besides, this target would mean about 50,000 more vehicles in the next five years. Is that desirable or acceptable? These issues were apparently never brought to the fore. The figure put forward for the actual growth in the number of vehicles, 5.6 percent, is also puzzling. It matches neither the figure for growth in 2012, the last full year for which data are available, nor the figure for growth in November (4.9 percent), nor the figure for year-on-year growth in the first 11 months of last year (4.4 percent). If we assume this is the final figure for last year, it such would mean that last month there was an explosion in sales of vehicles, 12 times more having been sold in December than a year earlier. That is highly unlikely. We are left in the dark. Either the published data are untrustworthy or the bureau is quoting data unavailable to the public. That is something that should be clarified, otherwise we will not know what we are comparing. Again, it appears no clarification was requested or made. The issue of parking is also worth comment. The general perception is that there is a scarcity of parking, especially acute in certain districts and at certain times of the day. The Transport Bureau director said 70 percent of the capacity of car parks was used. That seems to contradict any perception of scarcity. Consequently, it required qualification that was not forthcoming. Is the percentage the average, including nights? Is it the general figure for the whole city, regardless of significant asymmetries in demand in different areas and at different times? Is the promise to build car parks in public housing areas, mentioned as a solution, an appropriate answer to the parking problems? That is certainly not obvious. Again, these questions were apparently not asked. Not only government officials are prone this airiness of approach. According to reports in the news media, Legislative Assembly member Lam Heong Sang said there were over 208,000 vehicles in Macau, 500 more than there should be. I have to presume there was a translation or typing mistake there. It would mean that the member said the right number of vehicles for Macau was 207,500, a degree of precision that one would struggle to find any rational basis for. Moreover, the figure mentioned was reached early in 2011. Regardless, the implicit idea that seems to be shared by many is that there is a “right” amount of vehicles, independent of their characteristics, their typical usage and overall economic and social conditions. This is to reduce complex matters to the abstract and, in the end, to a fruitless debate about numbers, instead of the principles and objectives that should underpin them. It reflects a number fetishism, which helps – perhaps too conveniently – to eschew discussion of the substance of the issues, especially when accuracy is not one of the strengths demonstrated in the debate. Legislative Assembly sessions with senior government officials should be seen as opportunities to discuss and clarify matters of public interest. They should serve as channels for conveying the needs of the people the members are supposed to represent. They should be tools for gauging and monitoring the effective implementation of government policies. Both purposes fall well within the scope of the assembly. One cannot, however, help feeling that we are watching a ritual performance, in which some pretend to ask while others pretend to answer.

Li Gang speaking to media yesterday

he new boss of the central government’s representative office in Macau made his first public comments yesterday. In a 15-minute question and answer on the sidelines of a previously scheduled cocktail reception, Li Gang took the opportunity to reassure listeners that he was not a ‘tough cop’ focused on some clampdown on the local casino industry, and also that there would be no ‘blind expansion’ of tourism to Macau. “When I first arrived in Macau, I remembered reading a report that said I was a ‘tough cop’ and I was a member of the Central Commission for Discipline Inspection that was ordered to come here to catch officials that gambled in casinos here,” Mr Li said, “This is not true.” “My role as a [discipline] commission member is to participate in the anti-corruption works in mainland China, and that does not have to do with the local gaming industry,” he added. Mr Li – who officially took over on January 8 as the new director of the Central People’s Government Liaison Office – also said Beijing has no plans currently to expand the existing individual visit scheme allowing mainland residents from select cities to travel independently to Macau. “Last year, there were 28 million mainland visitors coming here under

the individual visit scheme,” Mr Li said on the sidelines of a cocktail reception for Chinese New Year. He added: “This number could exceed 30 million this year.” The IVS system, first launched in 2003, allows mainlanders to visit Macau and Hong Kong as individuals rather than as part of tour group or under business visas. A total of 270 million people in 49 mainland cities – about a fifth of China’s population – are currently eligible to apply according to Hong Kong’s Tourism Commission. “Considering the [tourism] capacity of Macau, the current scale [of the individual visit scheme] is a moderate one,” Mr Li added, “But in future we can further develop the scheme if there is a need to.” “There are currently about 22,000 hotel rooms in Macau only, but in Las Vegas they have six times the hotel rooms than we have to serve an annual visitor number of 36 million,” Mr Li stated. “It’s important to provide good-quality service to tourists…A blind expansion of visitors travelling under the scheme can bring a heavy burden to the city and affect people’s lives here,” he added. Macau’s Policy Research Office said in February last year – shortly after scuffles among crowds at the Gongbei border gate at the end of the Lunar New Year festivities – that it would review the impact of the individual

visit policy. No announcement has been made since then.

Soft cop? Mr Li – who takes over from Bai Zhijian – arrived in Macau in December 2012 as the deputydirector of the Liaison Office, after serving in a senior role in the Hong Kong office. Mr Li has been a member of the ruling Communist Party’s Central Commission for Discipline Inspection since November 2012. The commission is responsible for investigating and if necessary sanctioning party members for wrongdoing, including graft. However, speaking to the media yesterday, Mr Li downplayed the idea he had been brought in to supervise mainland officials’ gambling activities in Macau. “Not only I, but any other officials in the Liaison Office have the responsibility to stop officials from gambling here, just as any other law enforcement units in mainland should do,” Mr Li stressed. The new Liaison office director said that its new mission this year is to make more frequent visits to the different social groups in Macau, in particular the low-income groups, and seek their opinions on both the central government and the local administration.

January 2014 April 19,17, 2013

Macau We have urged the contractors to increase their workforces and equipment to catch up with the construction schedule Lei Chan Tong, Transportation Infrastructure Office head

The foundations of the Taipa stretch of the LRT are complete

Govt expects first LRT train will run in 2016 The train will start on Taipa months late, and will not even get off the island Stephanie Lai

sw.lai@macaubusinessdaily.com

he Taipa section of the Light Rapid Transit (LRT) railway will start operating in 2016, the government says. The head of the Transportation Infrastructure Office, Lei Chan Tong, said yesterday: “We have reported before that there will be a certain delay in the overall progress of the construction of the Taipa LRT.”

Mr Lei told reporters: “We estimate there will be a six-to-eight-month delay in our initial schedule.” Early last year the government said the Taipa section of the elevated railway could open in 2015. “Our target is to have construction of the Taipa railway gradually completed from the end of 2015 to 2016, followed by trial runs,” Mr

Lei said. “We expect the Taipa section to begin operating in 2016, but when exactly that will happen depends pretty much on the progress of the construction work and the trial runs.” He blamed the delays in the construction work on bad weather in the past two years and heavy traffic on the island’s roads.

“We have urged the contractors to increase their workforces and equipment to catch up with the construction schedule,” he said. Mr Lei did not say how much the delays would cost. “We will try to follow the budget stated in the contracts,” he said. In July 2012 the Commission of Audit criticised the Transportation Infrastructure Office for allowing the cost of the railway to rise above 11 billion patacas (US$1.38 billion), almost three times the initial estimate. The office said last August that the LRT contracts limited any extra spending due to inflation to 5 percent of the budgeted amount. Mr Lei said yesterday: “There is now less uncertainty about the progress of construction work as we have moved on from the foundation work to erecting the railway spans and pillars.” His office said the first 12 prefabricated pillars for the stretch of the LRT near the airport had arrived in Macau on Wednesday. Mr Lei said work on the elevated section would begin after the Lunar New Year. He was speaking on the sidelines of a meeting in which his office showed the Traffic Advisory Committee the government’s proposals for extending the LRT to Seac Pai Van.

Don’t let politics affect La Scala trial outcome: defence ‘No corruption’ in 2005 land tender for site near airport, defence lawyers say Tony Lai

tony.lai@macaubusinessdaily.com

awyers defending two Hong Kong businessmen yesterday urged Macau’s Court of First Instance not to let political pressures and verdicts in other cases affect the outcome of the La Scala housing scheme corruption trial. In the last day of the sevenmonth trial, advocates for Joseph Lau Luen Hung and Steven Lo Kit Sing criticised the evidence presented by Macau’s corruption watchdog as “weak” and “edited”. Mr Lau, the chairman of Hong Kong-listed developer Chinese Estates Holdings Ltd, and Mr Lo each face one charge of corruption and one of money laundering. The verdict will be read on March 14. They are accused of paying nowjailed former government official Ao Man Long a total of HK$20 million (US$2.58 million) in 2005 in return

for advance information on the sale of land near the Macau airport and to ensure the success of their bid. Chinese Estates had planned to build a high-end housing project called La Scala on the site. Delivering his closing argument yesterday, Luís Melo, Mr Lau’s lawyer, said: “I hope this case will not be linked to Ao Man Long’s [previous] trials, succumb to political or social pressure and allow the accused to receive uncalled for punishment.” He urged the public to understand that the court should give its ruling based only on the evidence presented. Mr Lo’s lawyer, Jorge Neto Valente, made similar arguments yesterday, saying Mr Ao has been “stigmatised”. Mr Ao has already been sentenced to 29-and-a-half years in jail in

previous trials. Mr Neto Valente said: “No single witness in this trial could point out any irregularities [committed] by Steven Lo, not even the witnesses summoned by the prosecution, with the exception of the two Commission Against Corruption investigators.” The investigators tried to make their claims by presenting the evidence “according to their own interpretation,” stated the lawyer. Assistant prosecutor-general Paulo Martins Chan had admitted on Wednesday that some government officials had changed their testimonies from previous trials or from the investigation phase. Mr Neto Valente said the sale of the airport land was “no secret in the real estate industry” because Lei Pou Fat Development Co Ltd, the umbrella firm managing the

airport land, was formed in the 1990s precisely to sell those assets. The government holds an 88-percent stake in the firm. Mr Melo argued that only gaming mogul Stanley Ho Hung Sun’s conglomerate Sociedade de Turismo e Diversões de Macau, SA could be said to have had advance information on the land sale. STDM was a shareholder of Lei Pou Fat and one of the land bidders at the same time, the lawyer said. Mr Ho’s firm held a five percent share in the land company. Mr Lau’s defence argued there was no evidence to prove any contact between Mr Lau and Mr Ao, with the exception of two dinner meetings in 2005 and 2006. It is “common practice” for officials to have meals with businessmen here, argued Mr Neto Valente.

January 17, 2014

Macau

China State sets sights on big year after fine 2013 State-owned builder increases revenue target by one-third Tony Lai tony.lai@macaubusinessdaily.com

Burberry has just one Macau outlet on the high-end shopping centre One Central

Early Chinese New Year helps Burberry sales here Revenue of British luxury brand beats estimates thanks to growth in Asia Vítor Quintã

vitorquinta@macaubusinessdaily.com

ales of Burberry’s luxury handbags and clothing soared over the crucial festive trading period, boosted by impressive growth in Macau and Hong Kong, the British fashion group revealed on Wednesday. Retail revenues jumped 14 percent to 528 million pounds (6.9 billion patacas) in the final three months of 2013, compared with the same period a year earlier, Burberry said in a results statement. Comparable sales from stores open at least a year increased by 12 percent – with double-digit growth in the Asia Pacific region. Finance chief Carol Fairweather told a conference call with journalists comparable store sales in Macau and Hong Kong were up by a “double-digit” percentage in the last quarter of 2013. She said sales may have got a boost from consumers buying in advance of the Chinese New Year, the timing of which played in favour of Burberry’s reporting period this year. Sales growth had just returned to double-digit levels in mainland China in the fourth quarter, Ms Fairweather added. “We are pleased with our performance in China.” “But as important is what is happening outside of China,” the executive stressed. Sales to tourists increased in the last three months of 2013, according

to Ms Fairweather. “That is very much underpinned by the Chinese luxury traveling consumer,” she said. Burberry shops in the mainland can help the brand profit more from the growing number of Chinese tourists travelling overseas, the finance chief said.

New Year hopes Over 17 million mainland visitors came to Macau in the first 11 months of last year, official data show. In the third quarter of 2013 Chinese tourists spent an average of 448 patacas (US$56) on shoes, clothing, handbags and wallets here, according to Business Daily calculations on official data.

KEY POINTS Q4 retail revenue up 14 pct HK, Macau sales up by ‘double digit’ Chinese tourists boosting brand

Burberry, which has just one Macau outlet on the high-end shopping centre One Central, is optimistic on sales during the upcoming Lunar New Year. “We are well set up for Chinese New Year, wherever that luxury Chinese consumer wants to be during that period, be it at home at travelling elsewhere,” Ms Fairweather said. Investors welcomed the strong sales in an industry jittery about volatile demand in China – until recently its engine of growth. The jury is out on whether sales growth in the luxury goods industry this year will match, drop or slightly outpace the 10 percent rise recorded last year at constant currencies. Analysts at Bank of America Merrill Lynch and HSBC are forecasting a slight slowdown to 9 percent while others are expecting growth of 11 percent. Much will depend on China, where slowing economic growth and a government crackdown on conspicuous consumption have cooled demand in recent quarters. Burberry’s comments on the subject are closely monitored since it was one of the first major luxury brands to warn of a slowdown in China back in September 2012, sending tremors throughout the whole luxury industry. With agencies

hina State Construction International Holdings Ltd has raised its revenue targets after exceeding last year’s goal for large-scale building projects. The builder of public housing and casino-resorts said its “target for new contracts to be awarded in 2014 is no less than HK$55 billion (US$7.09 billion)”. That represents a 27.9-percent jump from last year’s HK$43 billion in revenue, based on calculations by Business Daily using figures from a filing to the Hong Kong Stock Exchange last week. The state-owned contractor had its fastest growth in Macau. It also operates in Hong Kong. New construction contracts won here by the company totalled HK$2.79 billion last year, more than three times higher than 2012’s HK$880 million in work. The company won a HK1.89billion contract for a public housing project in Ilha Verde in the first half of last year, which it said was “the largest government project” for housing. The project will provide more than 2,350 flats and more than 2,790 car parking spaces, according to data from the Macau Infrastructure Development Office. China State Construction also won a deal in May to become the main contractor on MGM China Holdings Ltd’s Cotai casino-resort. The HK$10.48-billion project is the biggest single project in the company’s portfolio. MGM China told the stock exchange that construction would start this month and end by April 2016. The Fitch Ratings agency upgraded China State Construction last week from BBB- to BBB, eight notches from its highest rating. The upgrade was due to “the continued strong performance” of its parent firm China Overseas Holdings Ltd. “In the past year, CSCI [China State Construction] maintained its solid orderbook growth and leading positions in the Hong Kong and Macau construction markets,” it said.

January 17, 2014

Macau Telecom continue to fuel complaints Over one in five complaints filed by consumers in September involved telecommunication devices or services, the Consumer Council said in its latest newsletter published this week. In August the council received 134 complaints, according to the newsletter. The number of complaints over telecommunication equipment or services hit 29, accounting for more than a fith of all cases. Most telecommunication complaints concern smartphone malfunction, repair services or tariff disputes, the council said in October. Mainland Chinese visitors like to buy smartphones here because there is no sales tax.

Canidrome introduces dog adoption scheme But animal rights campaigners are sceptical, in view of the canidrome operator’s need to renew its concession Tony Lai

tony.lai@macaubusinessdaily.com

reyhound racing company Macau (Yat Yuen) Canidrome Co Ltd has begun a dog adoption scheme in response to criticism of its treatment of its animals. But an animal rights campaigner has said the company is not acting in good faith. Macau (Yat Yuen) Canidrome advertises its greyhound adoption programme on its website. The website says anybody can apply to give a home to a retired racing greyhound. The company has formed a team to evaluate the suitability of retired greyhounds to become pets, and to train them accordingly. “We have always striven to safeguard the rights of greyhounds,” the website says. It says one five-year-old dog has been adopted so far. Animal rights campaigners have often criticised the canidrome operator, accusing it of treating its dogs cruelly and putting down those that can no longer race. A former member of the executive

They can maybe earn more money by building something else there than by running dog races Fátima Galvão, Animal rights campaigner

board of the Macau Society for the Protection of Animals (ANIMA), Fátima Galvão, is sceptical about the canidrome operator’s intentions. “A friend of mine applied to adopt one a year ago,” Ms Galvão said.

Revenue from betting on greyhound racing fell for the fourth year in a row last year

“He gave them all the papers and information required but there has still been no reply,” she said. “I really don’t believe they are acting in good faith. They put a lot of obstacles in the way of people willing to adopt.” The canidrome operator’s website says an applicant must fill in a form and show proof of identity and proof of address. The owner of an adopted dog must renew its pet licence every year if he or she wishes to keep the animal, the website says. Macau (Yat Yuen) Canidrome’s exclusive concession to run greyhound racing expires at the end of next year. ANIMA has demanded that the government refuse to renew the concession.

Dogged by controversy The company has had the right to run greyhound racing here since 1963. Its concession was last renewed in 2006. Ms Galvão was asked whether the

adoption scheme was a just a ploy to improve the Canidrome’s image and so improve the operator’s chances of having its concession renewed. “I don’t know… but it is so strange,” was her reply. “That place, in the middle of the Macau peninsula, is worth hundreds of millions,” she said. “They can maybe earn more money by building something else there than by running dog races.” Gaming mogul Stanley Ho Hung Sun’s Sociedade de Turismo e Diversões de Macau SA (STDM) is reputedly the biggest shareholder in Macau (Yat Yuen) Canidrome. Mr Ho’s fourth consort, STDM director Angela Leong On Kei, is the managing director of the canidrome operator. Macau (Yat Yuen) Canidrome’s latest financial report says its annual profit shrank by 17.7 percent to 85 million patacas (US$10.6 million) in 2012. Revenue from betting on greyhound racing has been falling since 2009. Gaming Inspection and Coordination Bureau data show annual revenue from betting on the dogs fell by 13.2 percent to 178 million patacas last year. Ms Galvão said that every year 400 to 500 greyhounds that could no longer race were put down. Business Daily invited Macau (Yat Yuen) Canidrome to comment but the company had failed to reply by the time we went to press. The Sydney Morning Herald has reported that international animal rights group Grey2K has urged the Australian government to ban the export of Australian greyhounds to Macau, saying they are mistreated here.

January 17, 2014 April 19, 2013

Macau Brought to you by

HOSPITALITY Visitors from afar The Statistics and Census Service gives figures for the numbers of visitors to Macau from 28 places around the world, 15 of them outside Asia. A tiny proportion of Macau’s visitors come from outside Asia. Our seven main sources of non-Asian tourists sent us, on average, just over 51,000 visitors a month over the past six years. The principally anglophone countries are Macau’s biggest sources of non-Asian tourists. The biggest of all, the United States, sent us about 15,000 visitors a month. US ownership of several Macau casinos is certainly one cause of the predominance of Americans. The US and Australia together sent over half our nonAsian visitors. None of Macau’s other main sources of tourists outside Asia – France, Germany and Russia – sent us over 3,500 visitors. Only France ever sent over 4,000 in any one month, and it seldom did so. France, Germany and Russia combined never sent as many visitors in any one month as the United States.

Fosun is buying the insurance unit of Portugal’s Caixa Geral de Depósitos

Fosun profit soars amid insurer expansion Chinese firm got foothold in Macau through Fidelidade Vítor Quintã

vitorquinta@macaubusinessdaily.com

The flows of visitors from Macau’s seven main sources of non-Asian tourists have been remarkably stable over the years. Together, the seven tend to send us as many visitors each year as they did the year before. The seven also tend to send more visitors as each year progresses. The peak seasons are April and November, and the low season is June – so the plot for each year follows a pattern similar to that for the year before.

1.87 pct

Proportion of visitors from the seven main non-Asian sources in the past three years

hina’s Fosun International Ltd, which last week closed a deal that will grant the company access to the Macau insurance market, said its profit rose fast last year. The conglomerate with interests in steel, property and retail said on Tuesday after the Hong Kong Stock Exchange closed it expects full-year profit to “increase remarkably” from a year earlier. The market welcomed the filing, with Fosun’s surging 5.6 percent to HK$8.15 on Wednesday. The group is yet to release its audited results for last year. Fosun said its results were driven by “steady growth in profit” of its industrial operations and by the “sound performance” of its rapidly growing insurance business. Fosun has an insurance venture with United States life insurer Prudential Financial Inc and operates Peak Reinsurance in Hong Kong. But the group’s insurance business is set to expand further. Fosun is buying 80 percent of Portugal’s Caixa Geral de Depósitos SA’s insurance unit for 1 billion euros (10.9 billion patacas), Portugal’s Secretary of State for Finance Manuel

Rodrigues said on January 10. Fosun is acquiring 80 percent of Fidelidade – Companhia de Seguros SA, Multicare – Seguros de Saúde SA and Cares – Companhia de Seguros SA, all of which subsidiaries of Caixa Seguros e Saúde SA, the insurance arm of state-owned Caixa Geral de Depósitos. Together they together make up about a third of the Portuguese insurance market. The parties will enter into the agreement “in approximately 30 days from the date of this announcement”, Shanghai-based Fosun said. Portugal is selling the company as a condition for a 78 billioneuro (US$106 billion) European Union bailout, which requires the government to dispose of assets and raise revenue.

Macau market Although details are still scarce, Fosun – the investment arm of China’s biggest closely-held industrial group – is likely to get access to the Macau market through Fidelidade. The insurer is a branch of Portugal’s Companhia de Seguros Fidelidade Mundial SA and offers

some of its products here through Banco Nacional Ultramarino SA. Caixa Geral de Depósitos owns both the bank and Fidelidade Mundial. Fidelidade’s non-life division here posted a profit of 11.1 million patacas in 2012, a 26.5-percent increase on 2011. Data for last year is not available yet. The insurer’s market share increased to 8.3 percent in 2012 and was “close to 9 percent” in the first quarter of last year, general manager, Paulo Barbosa, said in an interview in July. The acquisition may be good news to Fidelidade as it might enjoy a higher credit rating, which would allow it to grab part of the casino business and boost its growth. But Moody’s Investors Service says that Fosun’s bid for Caixa Seguros e Saúde “is credit negative”. The rating agency downgraded Fosun to Ba3 last year, with a stable outlook. “Fosun’s ability to fund its overseas investments through offshore funding is still developing,” said Alan Gao, a Moody’s vice president and senior analyst, in a December report sent to Business Daily on January 10. With agencies

January 2014 April 19,17, 2013

Macau

Fast action from VIP baccarat, but mass faster Mass-market table games revenue rise confirmed at 35 pct for 2013 after Q4 data released Michael Grimes

michael.grimes@macaubusinessdaily.com

KEY POINTS VIP revenue up 13% y-o-y in 2013 Mass-market revenue up 35% y-o-y Live dealer electronic games rev. up 66% y-o-y Slot machine revenue up 9% y-o-y Deal me in – most games categories saw quickening of growth in 2013

he pace of growth in Macau VIP gambling picked up gradually during 2013 according to data released yesterday by the government. Earlier this month the local regulator the Gaming Inspection and Coordination Bureau gave the headline numbers for last year – 360.75 billion patacas (US$45.2 billion), but it took until yesterday to give the breakdown of exactly from where the revenue came. In the fourth quarter, the expansion of high roller revenue reached 18 percent judged yearon-year, at 64.89 billion patacas. That may soothe investor fears that a combination of a campaign to control corruption on the mainland and a tightening of China’s credit markets had created a long-term dampening in demand for high roller play.

VIP comeback The VIP tally for the final three months of 2013 was 15 percentage points higher than the year-on-year growth seen in the fourth quarter of 2012, and eight percentage points higher even than the expansion registered in the first quarter of 2013, when the high roller market started to recover from the insipid performance seen in 2012. The VIP tally for the whole year was 238.52 billion patacas, up 13 percent on 2012. But mass-market table revenue grew at an even faster rate than VIP during 2013. It was up 35 percent for the 12 months, to 107.84 billion patacas, aided by a 40 percent yearon-year surge in the fourth quarter

amounting to 31.46 billion patacas. Slot revenue grew by nine percent for the year, to 14.38 billion patacas, and by just over seven percent for the final quarter, to nearly 3.77 billion patacas. In 2012 as a whole, the segment grew by nearly 16 percent year-on-year. In likelihood much of the massmarket table revenue gain was driven by the so-called premium mass of high stakes cash bets. It’s hard to be sure. The gaming bureau doesn’t distinguish between the lower stakes ‘mass mass’ (a relative concept at typically HK$300 or roughly US$39 per hand) and ‘premium mass’ (up to HK$4,000 or US$516 per hand). The operators don’t give a breakdown either. The statistical waters for massmarket table revenue are further muddied by the fact the gaming bureau counts revenue from socalled hybrid tables – those with a live dealer but electronic betting and bet settlement – as table revenue, not slot revenue, while at least some of the operators count the actual hardware as slots. The hybrid segment – listed by the gaming bureau under the heading ‘Live multi game’ has grown rapidly. In 2013, revenue from the product category rose 66 percent to nearly 1.49 billion patacas, compared to 895 million patacas in 2012. In the fourth quarter, the rise was a more modest 36 percent year-on-year, to 428 million patacas. The government recently hinted it might place some kind of cap on the expansion of the electronic games segment, and the official in charge – Francis Tam Pak Yuen, the Secretary for Economy and

Finance – made specific reference to electronic tables when doing so. Union Gaming Research Macau said in a note on the fourth quarter numbers: “…the DICJ report [the] number of slot machines in Macau continues to decline – even though the reported number of slot machines (and other electronic gaming devices) as reported by casino concessionaires is significantly higher (and growing).” The research house adds: “We believe this is a function of most casino concessionaires reporting ETGs (electronic table game seats) as part of their respective slot floors, while the DICJ counts these games

as live tables.” Union Gaming suggests that the regulator allows between 50 and 60 electronic terminal seats to count as one table, compared to the nine seats provided by a traditional table. Separately, the regulator said Macau finished the year with 5,750 traditional live dealer gaming tables, compared to the 5,485 it recorded in the fourth quarter of 2012. That means year-on year growth in 2013 of 4.83 percent for traditional tables. It’s 183 basis points ahead of the government’s stated target of three percent compound growth until end-2022. And that’s in a year of no full openings for new venues.

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January 17, 2014 April 19, 2013

Greater China

Foreign investment rebounds in 201 Mainland firms also buying foreign assets in energy and natural resources

verseas investment into China rose 5.3 percent last year, official data showed yesterday, bouncing back after declining in 2012 for the first time in three years. Foreign direct investment (FDI), which excludes financial sectors, totalled US$117.59 billion last year, the commerce ministry said. The figure is up from the US$111.72 billion posted in 2012, when it skidded 3.7 percent in the face of economic weakness in developed markets and a growth slowdown at home. For December alone FDI increased 3.3 percent year on year to US$12.08 billion, the ministry said. “In 2013, China’s foreign direct investment steadily rebounded,” the ministry said in a statement, adding that it had increased for 11 straight months from February. The ministry said FDI in the services sector made up more than half the total for the first time, accounting for 52.3 percent. Services industry investment reached US$61.45 billion, a gain of 14.2 percent, it said. Chinese overseas investment rose 16.8 percent to US$90.17 billion last year, the ministry said as mainland firms continue to buy foreign assets, particularly energy and resources, to power the world’s number two economy. “China’s overseas investment will probably exceed FDI next year or in 2016, if not this year,” ministry spokesman Shen Danyang

told reporters. FDI from the European Union jumped 18.1 percent to US$7.2 billion in 2013, while that from the United States rose 7.1 percent to US$3.35 billion. But by far the most investment into China comes from a group of 10 Asian countries and regions including Hong Kong, Taiwan, Japan, Thailand and Singapore. FDI from those economies rose 7.1 percent to US$102.52 billion. FDI from Japan, however, fell 4.3 percent to US$7.1 billion, the figures showed, as Asia’s two largest economies remain engaged in territorial disputes that have led to a frosting of relations. Among China’s outbound investment destinations, Russia soared 518.2 percent to US$4.08 billion last year with a raft of projects under way, including in the energy sector. Chinese investment to the United States also surged, 125 percent to US$4.23 billion. In September, shareholders of United States pork giant Smithfield Foods agreed a takeover by China’s Shuanghui International, the biggest ever Chinese acquisition of an American company. Investment to the European Union, however, fell 13.6 percent owing to trade disputes between Beijing and Brussels, including over Chinese solar panels and European wine. Investment to Japan fell a sharp 23.5 percent, while to Hong Kong it slipped six percent, the ministry said, without providing totals. AFP

FDI in China’s services sector made up over half the total for the first time

Tencent to buy stake in logistics operator Shares of Asia’s largest Internet firm jump to record Lulu Yilun Chen

The owner of WeChat wants to boost its e-commerce business

encent Holdings Ltd, Asia’s largest Internet company by market value, rose to a record after announcing an investment in a Chinese logistics center operator to boost its e-commerce business. China South City Holdings Ltd, which sold a 9.9 percent stake for HK$1.5 billion (US$193 million), jumped as much as 83 percent in Hong Kong trading. Tencent may use China South City’s logistics and trade center network to compete against Alibaba Group Holding Ltd for China’s 608 million Internet users who spend money online. Shenzhen-based Tencent said it’s also working with China South City to help small- to medium-sized companies move their operations online. “Tencent will probably use this investment to expand its e-commerce business using China South City’s logistics network,” said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong. “Tencent is trying to play catch up with Alibaba.” Tencent will pay HK$2.20 each for 680.3 million new shares in Shenzhen-based China South City, a price that is 1.4 percent higher than the

January 2014 April 19,17, 2013

Greater China

Shaanxi Coal cuts IPO as regulator tightens pressure Chinese firms selling shares at a discount despite firm demand Kazunori Takada

haanxi Coal Industry Co Ltd has slashed its initial public listing (IPO) target by half, seeking to raise up to US$660 million – a move that comes amid regulatory pressure on listing companies to ensure that the resumption of IPOs in China is not marred by unrealistic valuations. The China Securities Regulatory Commission said late on Wednesday that it has begun inspections of IPO pricing behavior, targeting 13 underwriters and 44 institutional investors. That follows an announcement by the commission on Sunday that it would step up supervision of IPOs. Since then, companies have been selling shares at a discount despite firm demand. The Shaanxi Coal IPO will still be the biggest mainland China listing since 2012 and comes after the securities regulator resumed public listings after a hiatus of more than a year. Shaanxi Coal, which will list in Shanghai, aims to sell up to 1 billion shares at 4 yuan a piece, the company said in a statement, meaning it would raise 4 billion yuan if it is fully subscribed. The company said this month it was hoping to use its IPO proceeds

Monday closing price. Tencent has an option to buy 244.8 million more new shares at HK$3.50 each, according to China South City’s filing to Hong Kong’s stock exchange Wednesday. The two companies will also work on integrating online and offline retail businesses, according to the statement. Tencent, whose biggest shareholder is Naspers Ltd, rose as much as 5.4 percent to HK$536 before closing at HK$524 in Hong Kong. The company is now up about 6 percent this year after surging 99 percent in 2013. China South City rose 54 percent to HK$3.34. Tencent and Alibaba are making acquisitions and investing to strengthen their mobile and e-commerce businesses. Online retailing in China more than doubled each year from 2003 to 2011 and is projected to more than triple to US$395 billion in 2015 from 2011, according to a McKinsey & Co report in March. Tencent recently invested in China cab booking app Didi Taxi and began allowing users to pay fares using its payment system Weixin Payment, Jerry Huang, a director of investor relations at Tencent in Shenzhen, said in an e-mail on January 8. Tencent also completed its acquisition of a stake in Activision Blizzard Inc in October and invested in Korean messaging-app company Kakao Corp in April 2012, according to its annual report. Alibaba in May announced a US$294 million purchase of a 28 percent stake in Beijing-based mapping company AutoNavi Holdings Ltd. Bloomberg News/Reuters

Generic drugmaker exits China Actavis Plc, the second-biggest generic drugmaker by market capitalisation, said it will end its presence in China because of the difficult business climate. While the country has more than 1.3 billion potential customers, the government has made it a difficult place to conduct business, Actavis chief executive officer Paul Bisaro said in. The company has sold one operation there and is in talks to sell another. “If we’re going to allocate capital, we’re going to do so where we can get the most amount of return for the least amount of risk. And China is just too risky.”

KEY POINTS Regulator to begin checks on IPO pricing Biggest mainland China IPO since 2012 Neway Valve’s Shanghai debut today to fund 9.8 billion yuan of projects. Before the IPO market was frozen in late October 2012, Shaanxi Coal had filed a plan to raise 17.2 billion yuan. Investors will get the first-hand look of appetite for new shares in the secondary market when Neway Valve (Suzhou) Co Ltd, a major industrial valve maker, debuts on the Shanghai stock exchange today. The company raised 1.46 billion yuan after selling 82.5 million shares at 17.66 yuan apiece, equivalent to 46.47 times its 2012 profit – more than double the average price to earnings ratio of 21.25 for manufacturers listed on the Shanghai exchange. Neway will trade under the ticker. Shaanxi Coal’s IPO was valued at a price to earnings ratio of 6.23 times its 2012 profit on a diluted basis, compared with an average of 10.31 times for mining firms listed on the Shanghai stock exchange. Shaanxi Coal, which will trade under the ticker, will announce the results of subscriptions on Monday. China Securities, CICC and BOC International are the underwriters for the Shaanxi Coal IPO.

ICBC drops troubled shadow bank product Industrial and Commercial Bank of China, the world’s largest bank by assets, said yesterday that it has no plans to use its own money to repay investors in a troubled off-balance-sheet investment product that it helped to market. ICBC’s shares have fallen this week amid speculation that the bank would be forced to help repay investors in a 3 billion yuan (US$496.20 million) high-yield investment product issued by China Credit Trust Co Ltd but marketed through ICBC branches. The product is due to mature on January 31. An ICBC spokesman said the rumour was “unsubstantiated”.

Reuters

China to probe Nu Skin’s operations T

he Chinese government will investigate the operations of Nu Skin Enterprises Inc after the People’s Daily said the maker of skin-care and nutritional products is operating a “suspected illegal pyramid scheme.” The State Administration for Industry and Commerce is treating the allegations seriously and has asked for an immediate investigation, it said in a statement on its website. “If the situation proves to be true, the commerce department will deal with it according to the law and regulations,” the department said. Shares of the Provo, Utah-based

ZTE aims to ship 60 mln smartphones company plunged 16 percent in New York Wednesday, the largest decline since October 2004, after the report by the People’s Daily. The newspaper said Nu Skin brainwashes its trainees and sells 104 products in China, 20 more than the government allows. Nu Skin said the article “contains inaccuracies and exaggerations that are not representative of our business in China.” The company has a direct-sales licence in China, the newspaper said. In 2012, 20 percent of its sales came from China and Hong Kong. As of July, Nu Skin has the licenses to operate its direct selling network in 19 of the country’s 32 provinces and municipalities. Network marketers such as Nu Skin “have always been questioned,” causing “outsized share price movements,” Olivia Tong, an analyst at Bank of America Corp, wrote in a note. “There does not seem to be tangible evidence to validate negative claims targeted at the company thus far.” Bloomberg News

Chinese smartphone maker ZTE Corp aims to ship more than 60 million smartphones globally this year, as it tries to grab more share of a highly competitive market dominated by Samsung Electronics and Apple. The Shenzhenlisted company shipped around 40 million smartphones last year, senior vice president Zhang Renjun told reporters at a company event on yesterday. ZTE, which competes with cross-town rival Huawei Technologies Co Ltd in the telecom equipment and mobile device businesses, fell out of the top five global smartphone vendors list last year, according to researchers IDC and Gartner.

China says trade growth may slow Growth in China’s exports and imports may be volatile in the first three months of this year but the government is cautiously optimistic about the outlook for all of 2014, the Ministry of Commerce said yesterday. Shen Danyang, the spokesperson for the ministry, also noted that it may be difficult for growth in China’s trade sector this year to exceed that of last year. China’s exports grew 7.9 percent for all of 2013 compared with the previous year, while imports rose 7.3 percent, missing an official 8 percent growth target.

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In some areas manufacturers have already begun closing for the Lunar New Year break

Small factories close early amid grim outlook Spiralling wages and yuan appreciation continue to hit exporters

cores of factories in China’s manufacturing heartlands have closed earlier than usual for the country’s biggest annual holiday due to weak orders and rising costs, workers and owners say, suggesting a rocky outlook for a key sector of the economy. While official trade data remains mildly positive, visits to five factory towns in coastal industrial hubs found that in some areas perhaps a third of manufacturers had already begun closing weeks before the Lunar New Year break in late January. In some cases anaemic orders from key markets such as the United States and Europe were blamed. Others were being forced to curtail production because of a labour shortage, a symptom of shifting demographics, that has afflicted manufacturers for several years and many say is getting worse. “Lots of people have left already. I would say around a third of the workers,” said Ren Lipeng, a factory worker riding a rusty bicycle along a dusty avenue where many shops and restaurants were shuttered in Changping, southern China. Factories in the sprawling Pearl River Delta, in southern Guangdong province, and the eastern Yangtze River Delta industrial hinterland near Shanghai – which churn out well over half of China’s exports – were noticeably quieter this week than during previous visits by Reuters. In the south, many smaller plants had closed, with a stream of migrant workers crowding train and bus stations as they headed home to inland provinces in an annual exodus for up to six weeks of unpaid leave, far longer than in previous years.

With analysts expecting China to soon announce its slowest annual economic growth rate for more than a decade, Beijing has stepped up efforts to wean the economy off its heavy reliance on investment and exports in favour of higher domestic consumption. Trade, however, remains a hugely important economic engine as China attempts the difficult balancing act of maintaining its official target rate of growth at 7.5 percent while shifting the economy away from lower-end manufacturing. Official export numbers showed mild growth in December. But economists have long queried the numbers as skewed and misleading, partly given the widespread overstating of export orders as a means to bring more currency into China for speculation on the appreciating yuan. “Bus i n es s h a s b een q u i te sluggish still in terms of exports,

KEY POINTS China factories face weak orders, spiralling costs Less overtime work a sign of laggard production Worker supply tightens in potential labour bottleneck

manufacturing, and most orders have been delivered,” said Kevin Lai, economist at Daiwa Capital Markets in Hong Kong. “I would be very careful reading the headline numbers because in November it was very strong at 12.7 percent but I believe much of that was inflated.”

Complaining bosses At the Heng Fa Plastic products factory in the Pearl River Delta city of Dongguan, just a handful of workers were manning moulding machines making frames for flat screen televisions. Owner Huang Peijiang said orders for the Christmas holiday season had been down 30 percent compared with 2012. “For every 100 factory owners here, I’d say 80 are struggling,” he said with a shake of his head. “To be honest, when I get together with other bosses we complain so much that the leaves fall off the trees.” In the Yangtze River Delta town of Kunshan, those still working in some major plants, including a Foxconn facility that assembles an array of Apple products, said they had worked less overtime than last year. “This year was pretty bleak for Foxconn,” said Du Xiaoying, manager of Hongda Labor Dispatch Co Ltd, one of a dozen or so tiny employment agencies across the street from the Foxconn factory. “They did not offer much overtime.” Interviews with half a dozen factory bosses and suppliers suggested that certain sectors, including construction materials and low-end, labour intensive industries such as toys and

textiles, seem to be struggling more. “Besides high-end electronics, the situation is bad. Toys are bad, clothing too in terms of orders,” said Danny Lau, the honorary chairman of Hong Kong’s Small and Medium Enterprises Association whose members run thousands of China factories.

Labour bottleneck One increasingly severe long-term challenge for Chinese manufacturing has been its shifting labour market demographics as more, better paid jobs inland mean fewer younger people migrating to coastal industrial hubs in search of factory work. In the Pearl and Yangtze River Deltas, some expect the labour market to tighten even more after the Lunar New Year, representing a potential bottleneck for factories with fresh orders but not enough workers to cope. “Orders aren’t the biggest problem. The biggest difficulty is workers,” said He Songping, a maker of plastic Christmas trees in Yiwu. “Wages have been rising by 20-30 percent a year, while the number of workers is shrinking.” Ben Schwall, president of Systems Technology Group, which exports lighting fixtures and works with around 25 factories in China, estimates since the start of January 80 percent of them have had problems with workers leaving early for Lunar New Year. “They’re saying: ‘You know what? I can come back here any time, and I know you’re going to re-hire me,” he said. “’And if you don’t the guy across the street’s going to hire me, and that’s if I even choose to come back’.” Reuters

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Asia Maeda weighs bids for airport operations Maeda Corp, the 95-year-old Japanese construction and engineering firm, is considering bidding for airport operation rights in the country through a joint venture it is forming with Macquarie Group Ltd. Maeda may bid for the rights to operate two airports in western Japan’s Osaka prefecture, which could raise as much as 1.2 trillion yen (US$11.5 billion) for the government, Kazunari Kibe, head of the company’s strategic business development division, said in an interview Wednesday. It is also interested in the Sendai airport in northeastern Japan, Mr Kibe said.

Saputo takes lead Aussie falls to 3-year low in Australia dairy war as employment shrinks Growing interest in agriculture assets amid surging demand from Southeast Asia

Analysts expect Australia Reserve Bank to lower benchmark rate

Candice Zachariahs

ega Cheese Ltd said yesterday it would sell its stake in Warrnambool Cheese and Butter Factory Holdings Co, all but handing victory to Canada’s Saputo Inc in the battle for Australia’s oldest dairy company. The sale lifts Saputo to just short of majority control, and is expected to prompt other investors to follow suit. That would allow the Canadian company to claim a win for its base offer of A$515 million (US$460 million), ending one of Australia’s most competitive takeover battles in recent years. Bega’s decision to sell its 18.8 percent stake gives Saputo 45.2 percent of Warrnambool, based on its most recent shareholding disclosure. “If I was a punter on this, I would be feeling quite happy for adding my money on Saputo winning this,” said Michael Heffernan, senior client adviser at brokerage Lonsec. The move by Bega leaves rival suitor Murray Goulburn Co-operative Co Ltd with a 17.7 percent stake for now – and little hope of reaching the 50.1 percent stake it needs to make its own A$530 million bid unconditional. Saputo declined to comment. Murray Goulburn said it would “assess the ramifications” of Bega’s move on both its bid and

its shareholding. The battle for Warrnambool reflects the huge interest in Australia’s agriculture assets amid surging demand from increasingly affluent southeast Asia. Warrnambool’s portfolio includes popular high-tech milk extracts as well as traditional dairy products.

Expensive target A total of nine bids and counter-bids since Bega made the first approach in September has made Warrnambool the world’s

KEY POINTS Bega to sell Warrnambool stake Sale to boost Saputo’s holding Rival Murray Goulburn losing hope

most expensive dairy company on a price-to-earnings basis. It is trading at 38.2 times its 12 months trailing earnings, according to

Canadian firm gets offer accepted for Australia’s oldest dairy company

Thomson Reuters data. Among Warrnambool’s investors is Japanese beverage giant Kirin Holdings Co Ltd, with a 10 percent stake. Saputo raised the stakes last Friday when it extended its offer until January 22, but said that extension would be final. Bega said it had decided the risk in continuing to hold its stake was too great, with no guarantee of regulatory approval for the Murray Goulburn bid or any other suitors emerging. Murray Goulburn’s is conditional on clearance by a competition tribunal, with a ruling not due until the end of next month. “Bega Cheese’s takeover offer was the catalyst for a process which has highlighted the value of the Australian dairy industry, a rerating of Bega Cheese’s share price and a substantial profit for Bega Cheese,” chief executive Barry Irvin said in a statement. S a p u t o ’ s unconditional offer rises in increments as more shareholders accept. It will reach a peak value of A$549 million if the company receives acceptances of 90 percent or more. Reuters

The Australian economy lost 22,600 jobs in December

ustralia’s dollar plunged to a threeyear low after employers unexpectedly cut jobs, increasing chances of further central bank stimulus. It slid to the weakest since 2005 versus New Zealand’s kiwi. The Aussie declined against all its 16 major peers after data showed the biggest job losses in December since the first quarter. Bets that the Reserve Bank of Australia will lower its record-low benchmark rate by July rose to 42 percent from 24 percent yesterday. The nation’s three-year bond yield dropped nine basis points, the most in three months, to 2.90 percent. “Aussie and Australia are still expensive relative to things such as productivity as well as its commodity prices and we continue to estimate the fair value of the Aussie in the low to mid 80s,” said David Forrester, a senior vice president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd in Singapore. “The RBA will maintain an easing bias but it will want to sit back and let the Aussie

dollar do some of the work.” Australia’s dollar reached the least since August 2010 at 87.96. Data in Australia yesterday showed jobs dropped by 22,600 last month and the unemployment rate held at a four-year high of 5.8 percent. Economists in a Bloomberg News survey had forecast 10,000 additions. The decline capped the worst year of full-time losses since 1992 and added to concern that the nation’s economy isn’t able to find new drivers of growth as record mining investment declines. The jobs report “includes no silver linings,” Sean Callow, a Sydney-based currency strategist at Westpac Banking Corp wrote in a note to clients. “This is another blow for already vulnerable Australian dollar,” with no obvious technical support until 87.20 cents, he wrote. The Aussie has dropped 15 percent in the past year, the worst performance among 10 developed nation currencies tracked by Bloomberg Correlation Weighted Indexes. The New Zealand dollar has climbed 3.2 percent.

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Cautious Asian retailers crimp Richemont sales Third-quarter sales of Cartier jewellery maker up by nine percent

ichemont, the maker of highend IWC watches and Cartier jewellery, said Asia Pacific retailers had been cautious in the three months to December, limiting sales growth to 9 percent at constant exchange rates, below forecasts. Luxury watch makers are grappling with weak demand in China, where the government’s fight against illegitimate gifting has hurt sales of Richemont’s expensive timepieces more than more affordable watches made by peer Swatch Group. “Compared to retail, slower growth in the wholesale channel reflected caution amongst the group’s business partners, primarily in the Asia Pacific region,” the Geneva-based company said in a statement yesterday. Sales rose to 2.941 billion euros (US$4 billion), short of a forecast for 3.049 billion euros in a Reuters poll. Analysts in the poll expected sales growth at constant exchange rates of 11.9 percent. Sales growth in Asia Pacific, the group’s biggest geographical zone just before Europe/Middle East, stood at 6 percent, a slight acceleration from 4 percent in the first half that Richemont attributed to an easier comparison base. Mainland China was the only major market in Asia Pacific to report lower sales, Richemont said.

Mainland China was the only major market in Asia Pacific to report lower sales

“A miss on consensus with Japan decelerating and China still weak,” said Kepler Cheuvreux analyst Jon Cox. “However retail sales are strong and sell out trends encouraging – it is just a matter of time before independent retailers start ordering again. We are closer to dawn than dusk in China.” Sales via the retail channel, meaning the group’s own stores, rose 14 percent, while wholesale

distribution was only up 3 percent, Richemont said. Swatch said last week it expected double-digit sales growth in 2014 after sales rose 9.1 percent in 2013. In the 11 months to November, Swiss watch exports to Hong Kong and China, which absorbed a quarter of total exports, were down 6 and 15 percent respectively. Richemont published its trading update before the year’s first big trade show that opens its doors in Geneva

on Monday and brings together Richemont’s watch and jewellery brands and a handful of independent niche players. Richemont shares have lost almost 10 percent of their value since early December after media reported very cautious comments on the outlook for the world economy by the company’s main shareholder, Johann Rupert, but have recovered since Swatch’s upbeat comments last week. Reuters

Singapore Airlines, Air NZ form alliance Carriers have deepened ties in a partnership on shared codes and flights

ingapore Airlines (SIA) and Air New Zealand yesterday announced an alliance to expand services to both countries and boost their global reach as they look to capitalise on growing tourism traffic.

The alliance will enable SIA to operate its Airbus A380 superjumbos to New Zealand for the first time, progressively replacing daily services using the smaller Boeing 777-300ER, the firms said in a joint statement. Air New Zealand will launch

Flights under the new alliance could start as early as December this year

daily services between Auckland and Singapore using newly refitted Boeing 777-200ER aircraft, the statement said, replacing five flights currently operated by SIA. Air New Zealand last operated flights to Singapore in 2006. Singapore’s affluent population has become a key target for global tourist destinations. “Singapore’s luxury travel market appears to offer a huge opportunity for New Zealand, with local demand for high-end travel matching the Asian-wide upswing,” Tourism New Zealand said on its website. The two carriers are aiming to boost their capacity between Singapore and New Zealand by up to 30 percent. SIA’s daily Singapore-Christchurch service will continue as part of the alliance. The deal will also expand Air New Zealand’s connectivity to the rest of the world through SIA’s

extensive network. Air New Zealand passengers will be able to access codeshare travel on the SIA network to Europe, Southeast Asia and Africa, as well as on the network of SIA’s regional subsidiary, SilkAir. SIA customers will in turn enjoy codeshare travel across the Air New Zealand domestic network and to the Pacific islands. “This alliance is another example of our commitment to the important Southwest Pacific market, and our commitment to the further enhancement of our network,” said SIA chief executive Goh Choon Phong. Air New Zealand chief executive Christopher Luxon said the tie-up “clearly fits our business objectives of working with the right partners in the right markets to deliver seamless customer journeys”. The two carriers said flights under the new alliance could start as early as December this year.

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

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Asia

Rio Tinto hits iron ore records on China demand Mining firm announced dramatic spending cuts amid soft prices

ining giant Rio Tinto unveiled fresh production and shipment records for its flagship iron ore business yesterday, with both up five percent on-year in 2013 on increased Chinese demand. Anglo-Australian Rio said iron ore shipments were up six percent quarter-on-quarter in the final three months of 2013 and production was three percent higher, boosting annual readings for both by five percent compared with 2012. Iron ore output for 2013 was 266 million tonnes, one million tonnes ahead of guidance despite a cyclone forcing operations to shut down for several days in December. “These are excellent fourth quarter operational results, demonstrating

continued delivery on our commitments,” said Rio chief Sam Walsh. “We have set new records for iron ore production and shipments as we ramp up our 290 (million tonnes per annum) expansion, as well as achieving an impressive recovery in copper volumes and record annual production for both bauxite and thermal coal.” Production was up across the board for Rio, with steelmaking coal ahead two percent at 8.2 million tonnes and thermal coal burned to produce electricity 12 percent better at 26.8 million tonnes. Bauxite was up 10 percent (43.2 million tonnes) and aluminium three percent (3.5 million tonnes), with a significant 15 percent boost to copper, where production (631,500 tonnes)

Bloomberry suspended after partner stake sale

rading in the shares of Bloomberry Resorts Corp has been suspended after the casino operator said shareholder Global Gaming Philippines LLC (GGAM) had sold its entire stake. Trading will resume on Januarty 24, the Philippine Stock Exchange said following Bloomberry’s disclosure before the start of trade yesterday. Bloomberry, which has a market value of US$2.1 billion, did not disclose the price, buyers or number of shares in GGAM’s sale of its minority stake. Bloomberry in September said it had ended a management deal for its US$1.2 billion Solaire casino resort in Manila with Las Vegas-based GGAM, which owned 8.7 percent of the venture. GGAM sought arbitration over the issue, and Bloomberry and Solaire developer Sureste Properties Inc filed a counterclaim. “We need to clarify the impact of the arbitration on the sale of the GGAM shares and confirm that the buyers of the GGAM shares will not be affected by the arbitration claim,”

beat guidance (590,000 tonnes). China, the world’s biggest buyer of raw materials, increased iron-ore imports 10 percent last year, peaking at a monthly record in November as demand held up amid slowing economic growth. Investors welcomed the news, with Rio’s shares jumping more than two percent in the morning session to Aus$65.60. The robust production update follows Rio publishing dramatic spending cuts last month due to soft commodity prices and a volatile outlook, with plans to halve capital expenditure by 2015 in a bid to bolster the bottom line. Rio posted a 72 percent slump in first-half profit to US$1.72 billion

in August, off the back of a loss in 2012 – Rio’s first in 18 years – that cost then-chief Tom Albanese his job. Mr Walsh was brought in with orders to bring the company back into the black, despite softening commodity prices as China’s economy slows and greater supply comes online. He has reduced Rio’s workforce by 3,800 since June 2012, with another 3,000 jobs divested out of the company as part of a US$3.3 billion sell-off of various coal, gold, copper and nickel assets. Operating costs were slashed by some US$2 billion in 2013 and exploration and evaluation spending was halved to US$948 million from US$1.97 billion the previous year. AFP/Bloomberg News

Warmer Pacific worsened typhoon risk for East Asia

Bloomberry said yesterday. Bloomberry, owned by the Philippines’ fourth-richest person, Enrique Razon, opened the first phase of Solaire in March. The resort is the first of four government-approved casino projects at Entertainment City in Manila Bay. Reuters

The first phase of Solaire casino resort opened in March

Global warming could lead to more typhoons in the future: study

hina, Korea and Japan have been placed in the firing line of powerful typhoons by a warming of water in the western Pacific, according to a three-decade study published yesterday. Researchers led by Chang-Hoi Ho from Seoul National University in South Korea looked at five sets of background data for tropical cyclones that occurred in the northwest Pacific between 1977 and 2010. During this time, the surface waters of the western Pacific were much warmer than the central and eastern parts of the ocean, they found. This temperature difference, also called a gradient, went handin-hand with changes to a strong wind system over the Pacific called the Walker circulation. The result was that typhoons tended to follow the line of the East Asian coast, from the South China Sea upwards, before making landfall in China, Japan and Korea – by

which time they had reached their maximum punch. The change also meant that more cyclones generated in the northern part of the South China Sea. As a result, storms headed for southern China, Vietnam or Taiwan began life too close to land to build up to maximum speed by the time they reached the coast. More work is needed to confirm whether the temperature gradient is a result of man-induced global warming or a natural variation of a kind that lasts decades. “If the past changes of large-scale environments are evidence, or a result of, global warming, it can be assumed that in the future more catastrophic tropical cyclones will strike East Asia than ever before,” said Mr Ho. The investigation appears in Environmental Research Letters, a journal published by Britain’s Institute of Physics. AFP

14 14

January 17, 2014 April 19, 2013

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

Max 79.05

Average 78.693

Min 77.75

Last 79.00

79.10

116.8

78.75

116.2

78.40

115.6

78.05

115.0

77.70

33.9

33.7

Max 116.8

Average 115.762

Min 114.4

Last 115.4

114.4

33.5

Max 33.85

Average 33.631

Min 33.35

Last 33.65

25.6

64.2

36.60

63.9

36.05

25.4

63.6

35.50

63.3

25.2

34.95

63.0 Max 64.15

Average 63.147

Min 62.70

Last 62.75

62.7

Max 25.60

Average 25.287

Commodities PRICE

DAY %

YTD %

(H) 52W

93.98

-0.201762769

-4.511278195

106.2200012

BRENT CRUDE FUTR Feb14

106.65

-0.448053766

-3.745487365

112.7999954

GASOLINE RBOB FUT Feb14

261.39

-0.475936643

-6.173947378

286.9299889

243.68999

GAS OIL FUT (ICE) Mar14

901.25

-0.825309491

-4.30050438

954.5

840

4.388

1.456647399

3.735224586

4.770000458

3.476000071

297.11

-0.285273191

-3.069946496

317.8399801

278.4999847

1237.81

-0.0493

2.9158

1696.2

1180.57

NY Harb ULSD Fut Feb14 Gold Spot $/Oz

85.56999969

20.041

-0.225

2.4717

32.46

18.2208

Platinum Spot $/Oz

1419.88

0.1948

4.7302

1742.8

1294.18

Palladium Spot $/Oz

739.75

0.5532

4.0436

786.5

629.75

1784

1.306076093

-0.902652409

2174

1736.25

7352.5

0.995879121

-0.101902174

8346

6602

2081

0.726040658

1.265206813

2230

1811.75

Silver Spot $/Oz

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

3MO ($)

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

14535

1.359832636

4.568345324

18770

13205

15.655

0.095907928

2.487725041

16.77000046

15.12000084

426

0.058719906

0.947867299

606.5

406.25

568

0.044033465

-6.154481619

845

560.5

SOYBEAN FUTURE Mar14

1321.5

0.265553869

2.243713733

1377.75

1174

COFFEE 'C' FUTURE Mar14

117.7

0.42662116

6.323396567

172.25

104.1499939

SUGAR #11 (WORLD) Mar14

15.15

-0.525279054

-7.678244973

20.42000008

15.10000038

CORN FUTURE

Last 25.20

(L) 52W

WTI CRUDE FUTURE Feb14

NATURAL GAS FUTR Feb14

METALS

Min 25.05

Mar14

WHEAT FUTURE(CBT) Mar14

COTTON NO.2 FUTR Mar14

84.9

0.12973228

0.307183365

90.61000061

76.65000153

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

Max 36.55

Average 35.858

Min 35.45

Last 35.60

34.40

World Stock Markets - Indices

NAME

PRICE

8760257

AMAX INTERNATION

1.7

-1.162791

-1.162792

2.12

0.75

1586550

BOC HONG KONG HO

24.2

-0.4115226

-2.615696

22.85

5955214

0.425

-1.162792

0.68

0.26

746500

7.31

0.8275862

3.68794

7.45

83147

21.85

0.2293613

25.2

17.7

18616805

CHINESE ESTATES

18.94

-2.772074

-21.41079

24.7

10.384

23500

CHOW TAI FOOK JE

11.98

3.633214

13.38

7.44

4066061

16588.25

13468.96

NASDAQ COMPOSITE INDEX

4214.884

0.7618427

0.9168711

4218.795

3105.365

1.153787

6875.62

6023.44

HANG SENG BK HOPEWELL HLDGS HSBC HLDGS PLC

15747.2

-0.3892153

-3.339875

16320.22

10432.97

HANG SENG INDEX

22986.41

0.3685704

-1.37293

24111.55078

19426.35938

CSI 300 INDEX

2211.844

0.1314204

-5.072128

2791.303

2023.171

TAIWAN TAIEX INDEX

8612.11

0.1111298

0.006974224

8668.95

7603.27

KOSPI INDEX

1957.32

0.2068316

-2.685773

2063.28

1770.53

S&P/ASX 200 INDEX

5309.072

1.213304

-0.8059883

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4412.489

-0.6552828

3.235992

5251.296

3837.735

(L) 52W VOLUME CRNCY 2087992

-0.5714101

(H) 52W

3.265

0.6600765

NIKKEI 225

YTD %

11.08

16481.94

7418.36

DAY %

5.12

9747.4

0.8777 1.4814 0.88 1.2746 87.97 7.9818 7.7514 6.0393 52.89 28.56 1.2228 28.926 40.555 9603 86.41 1.21196 0.82307 7.8281 10.195 116.67 1.0289

18.22

DOW JONES INDUS. AVG

1.881671

1.0582 1.6603 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.228 45.17 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

6.231452

(L) 52W

-0.01962233

-1.4122 -0.9212 -1.6876 -1.0244 0.277 -0.0075 -0.0116 -0.0281 0.445 -0.131 -0.7147 -0.9833 -1.6068 0.3794 1.683 -0.6721 0.1056 1.2036 1.0349 1.3181 0

-5.330492

(H) 52W

9731.9

-1.2351 -0.4809 0.0662 0.0147 -0.3438 -0.0075 -0.0064 -0.1618 0.0325 0.1432 -0.0471 0.0233 -0.266 -0.3299 0.9034 0.0575 -0.492 -0.0437 -0.0165 -0.3506 0

2.304147

YTD %

0.8796 1.6349 0.9066 1.3623 104.7 7.9872 7.7548 6.056 61.5262 32.818 1.2732 30.103 45.12 12125 92.099 1.23501 0.83327 8.2418 10.8802 142.63 1.03

1.359003

DAY %

DAX INDEX

(L) 52W

4.44

PRICE

6826.96

(H) 52W

17.9

COUNTRY

YTD %

ARISTOCRAT LEISU

CHINA OVERSEAS

FTSE 100 INDEX

DAY %

CROWN RESORTS LT

CHEUK NANG HLDGS

0.1041077

PRICE

Macau Related Stocks

CENTURY LEGEND

NAME

25.0

Currency Exchange Rates

NAME ENERGY

33.3

EMPEROR ENTERTAI

4.44

2.304147

4.66

1.93

3978040

FUTURE BRIGHT

4.86

-1.419878

3.624732

5.3

1.49

11822800

1.607717

13.58734

79.25

8345970

122.8

0.08149959

-2.307078

132.8

110.6

677040

26.35

0.7648184

0.3809524

35.3

23.2

818000 11357793

GALAXY ENTERTAIN

86.05

0.4670169

2.257871

90.7

77.85

HUTCHISON TELE H

2.91

-1.020408

-1.02041

4.66

2.5

5587000

LUK FOOK HLDGS I

27.25

-2.329749

-7.627119

16.88

2051000

MELCO INTL DEVEL MGM CHINA HOLDIN MIDLAND HOLDINGS

29.8

0.6756757

4.561404

30.55

11.06

3735000

33.65

-0.8836524

1.661636

15.229

3833173

3.71

-0.802139

-0.5361935

4.29

2.68

1362000

0.315

-4.545455

-7.352942

0.4

0.131

89290000

NEW WORLD DEV

10.2

-0.5847953

4.187947

15.12

9.35

10418516

SANDS CHINA LTD

62.75

-1.799687

-0.9471168

67.15

33.5

12325726

NEPTUNE GROUP

FTSE Bursa Malaysia KLCI

1813.01

-0.6041567

-2.889722

1882.2

1597

SHUN HO RESOURCE

1.67

0.6024096

1.212123

1.92

1.33

2000

NZX ALL INDEX

1040.342

0.1019935

4.149287

1048.998

904.128

SHUN TAK HOLDING

4.74

-1.043841

3.94737

4.85

3.27

17978774

PHILIPPINES ALL SHARE IX

3649.4

0.380408

0.970579

4571.4

3440.12

9094676

Euromoney Dragon 300 Index Sin

604.21

0.28

-1.19

STOCK EXCH OF THAI INDEX

1301.68

1.93026

0.2286956

1649.77

1205.44

HO CHI MINH STOCK INDEX

533.54

1.302499

5.728944

533.54

440.48

Laos Composite Index

1244.8

-0.04496692

-0.6805795

1455.82

1224.94

SJM HOLDINGS LTD

25.2

-2.135922

-3.076923

17.04

SMARTONE TELECOM

8.82

0.5701254

-0.4514634

14.46

7.38

786900

WYNN MACAU LTD

35.6

-1.928375

1.280223

38.25

6091588

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

81.27

2.04671

3.59465

81.34

45.38

466430

BOC HONG KONG HO

3.17

-1.552796

3.6

2.99

15478

GALAXY ENTERTAIN

10.07

-0.4940711

11.7647

10.12

3.8975

13624 5287986

INTL GAME TECH

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

17.46

-0.1144165

-3.854625

21.2

14.75

JONES LANG LASAL

104.79

-0.01908215

2.34398

105.69

80.86

282022

LAS VEGAS SANDS

81.01

0.8841843

2.713322

81.85

47.95

2643885 2781922

MELCO CROWN-ADR

44.26

2.21709

12.85058

44.43

17.76

MGM CHINA HOLDIN

4.33

-1.814059

0.4640385

4.66

16050

MGM RESORTS INTE

25.72

-0.2327386

9.353739

26.25

11.72

11647632

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.35

0.9036145

0.2994038

3.6

2.2

70350

WYNN RESORTS LTD

210.1

1.204239

8.181861

210.41

111.3456

1025836

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

2.288022

16133673

CHINA UNICOM HON

ALUMINUM CORP-H

2.78

2.205882

22648073

CITIC PACIFIC

BANK OF CHINA-H

3.42

200615446

BANK OF COMMUN-H

5.22

-0.1912046

31412607

BANK EAST ASIA

31.6

-0.6289308

1256203

9.1

-4.712042

56568617

AIA GROUP LTD

BELLE INTERNATIO

NAME

CLP HLDGS LTD CNOOC LTD COSCO PAC LTD ESPRIT HLDGS

PRICE

DAY %

VOLUME

10.6

-2.394107

42176018

10.14

-0.3929273

7829154

0.7866273

5257546

TINGYI HLDG CO

21.45

3422400

10.7

8710192

56.85

-1.728608

6719510

120 -0.08326395

3466462

HENDERSON LAND D

44.2

0.913242

1512266

CHINA COAL ENE-H

4.19

-3.009259

59694270

CHINA CONST BA-H

5.55

0.1805054

169667519

CHINA LIFE INS-H

22.9

0.6593407

27293622

CHINA MERCHANT

26.65

0.3766478

2203268

HENGAN INTL

90.45

1.005025

1858990

HONG KG CHINA GS

17.06

0.2350176

7707307

HONG KONG EXCHNG

127.7 -0.07824726

HSBC HLDGS PLC

86.05

0.4670169

106.1

1.047619

3552202

4.94

188880519

LI & FUNG LTD

11.04

1.657459

28413182

28.15

-0.177305

2230351

121146486

CHINA RES ENTERP

24.3

-1.01833

2306053

MTR CORP

CHINA RES LAND

943649

512.5

CHEUNG KONG

0.3372681

-0.3993155

TENCENT HOLDINGS

677040

5.95

3480057

87.3

2886616 2529194

CHINA PETROLEU-H

5883597

0.7763975

0.1254705 1.046025

HUTCHISON WHAMPO

97.35

15.96

0.08149959

IND & COMM BK-H

10.76

SWIRE PACIFIC-A

24.15

12286160

SINO LAND CO SUN HUNG KAI PRO

6827633

122.8

18616805

12325726

1.980198

HANG LUNG PROPER

-1.799687

10.3

HANG SENG BK

0.5832793

62.75

3026106

5955214

77.6

2641801

SANDS CHINA LTD

51727064

2424502

21.85

VOLUME

1.666667

-0.4115226

CHINA OVERSEAS

-0.2516779

-0.4341534

-0.3529412

CHINA MOBILE

DAY %

59.45

24.2

CATHAY PAC AIR

PRICE

POWER ASSETS HOL

13.76

16.94

BOC HONG KONG HO

NAME

WANT WANT CHINA WHARF HLDG

MOVERS

1652483 11357793

6 23086

INDEX 22986.41 HIGH

23085.14

LOW

22637.55

19.5

-1.115619

4973690

NEW WORLD DEV

10.2

-0.5847953

10418516

52W (H) 24111.55078

CHINA RES POWER

19.12

-2.44898

7471969

PETROCHINA CO-H

8.05

0.4993758

77083684

(L) 19426.35938

CHINA SHENHUA-H

21.7

-2.252252

16051088

PING AN INSURA-H

68.8

0.2184996

13743243

22637

14-January

16-January

15 15

January 2014 April 19,17, 2013

Opinion Business

wires

Advanced Malaise

Leading reports from Asia’s best business newspapers

India Times India’s government expects to exceed its budgeted target of about Rs 113 billion (US$1.84 billion) from a spectrum auction due next month, the telecommunications secretary said on Wednesday. The government received a p p l i c a t i o n s f r o m eight companies to participate in the auction slated for February 3, M.F. Farooqui said. Vodafone had filed the first application, followed by Airtel, Aircel, Tata Telservices, Idea Cellular, RJIL, Telewings (Uninor), Reliance Communications, an official source said. Companies have the option to withdraw their applications until January 27.

Korea Herald The Fair Trade Commission, South Korea’s regulatory authority for fair competition, said Tuesday it would draw up measures and revise patent-related laws to protect domestic tech companies from an increasing number of abusive practices by nonpracticing entities. The country’s toughened stance follows a global move against NPEs, known as patent trolls whose only purpose is to seek profit through patent infringement lawsuits against global tech giants. NPEs purchase and hold as many patents as they can and target tech companies for infringement to enforce patent rights through litigation.

Business Inquirer Philippines Economic Planning secretary Arsenio Balisacan has acknowledged that the electricity situation has become a key concern for the government, saying this could pose risks to the attainment of the country’s growth targets. Mr Balisacan said the government’s 2014 economic growth target of 6.5 to 7.5 percent did not take into account the potential effects of problems related to the country’s power supply. “Obviously, the power problem will have an implication on inflation and growth of the economy [if left unresolved],” Mr Balisacan said.

Myanmar Times Myanmar ranked 162 out of 178 countries on the 2014 Index of Economic Freedom compiled by The Heritage Foundation and Wall Street Journal. “Over the 20-year history of the Index, Burma’s progress toward greater economic freedom has been patchy and modest,” the index stated. “The overall score improvement has been merely 1.4 points, with gains in trade and monetary freedoms offset by deteriorations in four of the 10 economic freedoms including property rights and financial freedom.”

Joseph E. Stiglitz

Nobel laureate in economics, is University Professor at Columbia University

conomics is often called the dismal science, and for the last half-decade it has come by its reputation honestly in the advanced economies. Unfortunately, the year ahead will bring little relief. Real (inflation-adjusted) per capita GDP in France, Greece, Italy, Spain, the United Kingdom, and the United States is lower today than before the Great Recession hit. Indeed, Greece’s per capita GDP has shrunk nearly 25 percent since 2008. There are a few exceptions: After more than two decades, Japan’s economy appears to be turning a corner under Prime Minister Shinzo Abe’s government; but, with a legacy of deflation stretching back to the 1990’s, it will be a long road back. And Germany’s real per capita GDP was higher in 2012 than it was in 2007 – though an increase of 3.9 percent in five years is not much to boast about. Elsewhere, though, things really are dismal: unemployment in the eurozone remains stubbornly high and the long-term unemployment rate in the U.S. still far exceeds its prerecession levels. In Europe, growth appears set to return this year, though at a truly anaemic rate, with the International Monetary Fund projecting a 1 percent annual increase in output. In fact, the IMF’s forecasts have repeatedly proved overly optimistic: the Fund predicted 0.2 percent growth for the eurozone in 2013, compared to what is likely to be a 0.4 percent contraction; and it predicted U.S. growth to reach 2.1 percent, whereas it now appears to have been closer to 1.6 percent. With European leaders wedded to austerity and moving at a glacial pace to address the structural problems stemming from the eurozone’s flawed institutional design, it is no wonder that the continent’s prospects appear so bleak.

reserves of shale energy has moved America toward its long-sought goal of energy independence and reduced gas prices to record lows, contributing to the first glimmer of a manufacturing revival. And a booming hightech sector has become the envy of the rest of the world. Most important, a modicum of sanity has been restored to the U.S. political process. Automatic budget cuts – which reduced 2013 growth by as much as 1.75 percentage points from what it otherwise would have been – continue, but in a much milder form.

With Europe’s Great Malaise continuing in 2014 and the U.S. recovery excluding all but those at the top, count me dismal

Muted optimism But, on the other side of the Atlantic, there is cause for muted optimism. Revised data for the U.S. indicate that real GDP grew at an annual pace of 4.1 percent in the third quarter of 2013, while the unemployment rate finally reached 7 percent in November – the lowest level in five years. A half-decade of low construction has largely worked off the excess building that occurred during the housing bubble. The development of vast

Moreover, the cost curve for health care – a main driver of long-term fiscal deficits – has bent down. Already, the Congressional Budget Office projects that spending in 2020 for Medicare and Medicaid (the government health-care programmes for the elderly and the poor, respectively) will be roughly 15 percent below the level projected in 2010. It is possible, even likely, that U.S. growth in 2014 will be

rapid enough to create more jobs than required for new entrants into the labour force. At the very least, the huge number (roughly 22 million) of those who want a full-time job and have been unable to find one should fall.

New problem But we should curb our euphoria. A disproportionate share of the jobs now being created are low-paying – so much so that median incomes (those in the middle) continue to decline. For most Americans, there is no recovery, with 95 percent of the gains going to the top 1 percent. Even before the recession, American-style capitalism was not working for a large share of the population. The recession only made its rough edges more apparent. Median income (adjusted for inflation) is still lower than it was in 1989, almost a quarter-century ago; and median income for males is lower than it was four decades ago. America’s new problem is long-term unemployment, which affects nearly 40 percent of those without jobs, compounded by one of the poorest unemploymentinsurance systems among advanced countries, with benefits normally expiring after 26 weeks. During downturns, the U.S. Congress extends these benefits, recognising that individuals are unemployed not because they are not looking for work, but because there are no jobs. But now congressional Republicans are refusing to adapt the unemployment system to this reality; as Congress went into recess for the holidays, it gave the long-term unemployed the equivalent of a pink slip: as 2014 begins, the roughly 1.3

million Americans who lost their unemployment benefits at the end of December have been left to their own devices. Happy New Year.

Labour force Meanwhile, a major reason that the U.S. unemployment rate is currently as low as it is, is that so many people have dropped out of the labour force. Labour-force participation is at levels not seen in more than three decades. Some say that this largely reflects demographics: an increasing share of the working-age population is over 50, and labour-force participation has always been lower among this group than among younger cohorts. But this simply recasts the problem: the U.S. economy has never been good at retraining workers. American workers are treated like disposable commodities, tossed aside if and when they cannot keep up with changes in technology and the marketplace. The difference now is that these workers are no longer a small fraction of the population. None of this is inevitable. It is the result of bad economic policy and even worse social policy, which waste the country’s most valuable resource – its human talent – and cause immense suffering for affected individuals and their families. They want to work, but the U.S. economic system is failing them. So, with Europe’s Great Malaise continuing in 2014 and the U.S. recovery excluding all but those at the top, count me dismal. On both sides of the Atlantic, market economies are failing to deliver for most citizens. How long can this continue? © Project Syndicate

16 16

January 17, 2014 April 19, 2013

Closing United Airlines to cut attendants

Yahoo chief operating officer out

United Airlines is preparing to furlough 685 flight attendants after offers of leaves and part-time work failed to produce enough volunteers at the world’s second-largest carrier. Negotiations with the Association of Flight Attendants are still under way, and the current furlough total may fall, a United spokeswoman said. The cuts come as parent United Continental Holdings Inc works to make good on a promise to investors to pare annual spending by US$2 billion. The company, created in a merger with Continental Airlines in 2010, has struggled to curb expenses growing faster than revenue.

Yahoo chief operating officer Henrique de Castro is walking away with a stock award of US$20 million as the company struggles to boost revenues. Mr Castro will be out effective today, having served in the post about 15 month’s since being hand-picked by chief executive Marissa Mayer. Yahoo did not reveal the reason for the departure, but speculation was strong that the company’s advertising revenues were not improving quickly enough. Despite many investments, Yahoo last year lost its number 2 position in the United States digital ad market to social networking titan Facebook.

European auto sales surge most in four years Lower prices help makers lure consumers seeking to replace old cars Mathieu Rosemain

uropean new-car sales surged the most in almost four years as price cuts by producers such as Renault SA and Ford Motor Co helped generate a recovery that industry executives say will last in 2014. Deliveries last month jumped 13 percent to 948,090 vehicles from 839,027 a year earlier, the Brusselsbased European Automobile Manufacturers Association, or ACEA, said yesterday. That pared the decline for the year to 1.8 percent for a total of 12.3 million autos, the lowest number since 1995. Carmakers are predicting a gradual increase in European demand this year after a sovereign-debt crisis and recessions led to a sixyear contraction in deliveries through 2013. Consumers replacing old cars may account for some of the recovery, though gains are also being fed by continued

Carmakers are predicting a gradual increase in European demand this year

incentives from automakers and a government program in Spain to encourage trade-ins of old vehicles for scrapping. “There’s a good case to say that the car market is improving on an underlying basis,” Sascha Gommel, an analyst at Commerzbank AG in Frankfurt, said by phone.

“The fleet aged a lot in Europe over the last years because demand was so low, and you still have very low interest rates.”

Confidence climbs The sales increase in December was the steepest

since a 13 percent jump in January 2010. It marked the fourth successive month of growth, the longest stretch since the June 2009 through March 2010 period. Among countries using the euro, economic confidence rose in December to a 2 1/2year high after an 18-month

recession ended in the second quarter. Inflation in the United Kingdom slowed in December to 2 percent from 2.1 percent in November, which may allow the Bank of England to maintain interest rates at a record low. Registrations rose in Europe’s five biggest auto markets, with jumps of 24 percent in the United Kingdom and 18 percent in Spain, where the government revived a cash-for-clunkers incentive program in October. Growth in another 11 countries exceeded 10 percent, including a doubling of demand in the Netherlands that was propelled by buyers seeking to avoid a government surcharge taking effect in January. French carmakers PSA Peugeot Citroen and Renault together ranked among the three biggest vehicle discounters in Germany all year, according to industry publication Autohaus PulsSchlag. Ford, which posted a 20 percent European sales surge in December, widened its German price reductions to 12.2 percent that month from 11.5 percent in November. Fiat SpA’s namesake brand, which sold 2.3 percent more cars in the region, pushed its average discount to 14 percent from 13.5 percent. Bloomberg News

Wall Street eyes Bitcoin as payment system Even as governments try to ban virtual currency John Detrixhe

hile a Texas Senate candidate is accepting Bitcoin campaign donations, and Overstock.com customers can use the technology to buy engagement rings, Wall Street sees its future more as a payment system than a currency. Either way, it’s been a profitable investment. Created in 2008, Bitcoin’s value took off last year, leaping about 60-fold in the past 12 months to US$936.51 Wednesday, according to bitcoincharts.com. Even as its supporters have embraced Bitcoin as an alternative to currencies that are vulnerable to sovereign debasement, China’s central bank has banned lenders

from handling the virtual money and Finland’s authorities said it lacks characteristics of a real currency. Citigroup Inc, the second-largest foreign-exchange trader, said Bitcoin could benefit society if it eases transactions, even though about 1 percent of owners hold some 80 percent of the digital money. “Bitcoin, in essence, is just an evolution of a payment system,” Sebastien Galy, a New York-based senior foreign-exchange strategist at Societe Generale SA, said by phone Tuesday. “The ultimate concept of transaction, the innovation, is certainly progress in the means

of transaction.” “The original Bitcoin was designed to operate outside the financial system,” Steven Englander, the head of currency trading for major industrialized nations at Citigroup in New York, said by e-mail Monday. “There is nothing to stop existing payments processors from adopting generic Bitcoin payments technology.” Bitcoin’s market value has expanded to about US$10.6 billion. The supply will be capped at 21 million, with about half of that already in circulation, according to Bitcoin. org, a repository for information on the system. Bloomberg News