Macau Business Daily, Jan 23, 2014 by Business Daily

Year II

Number 461 Thursday January 23, 2014

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Visitor arrivals top 29 million in 2013

ore than 29 million tourists came to Macau last year, up four percent from a year earlier, Macau Government Tourist Office director Maria Helena de Senna Fernandes said yesterday. Despite an overall growth, the city saw a drop in the number of international visitors, she said. But mainland tourists numbers were up again, rising by 10 percent year-on-year

to 18 million, official data show. Li Gang, the new director of the Central People’s Government Liaison Office, stated last week there would be no “blind expansion” of tourism as it could “bring a heavy burden to the city”. Ms Fernandes said she expected “low single-digit” growth in total visitor arrivals this year. MGTO may allow a new type of budget hotel to operate during 2014. More on page 3

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CNY tours to Bangkok, Pattaya cancelled

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More than 250 local customers that booked package tours to Bangkok or Pattaya for the Lunar New Year holidays will be entitled to a full refund. The trips were cancelled amid escalating political turmoil in Thailand’s capital. The Macau administration has urged Macau residents to avoid travelling to Bangkok after the announcement of a 60-day state of emergency in the capital and its surrounding provinces. The Macau Travel Industry Council announced yesterday all travel agencies here had agreed to cancel all the package tours scheduled between the dates of January 28 and February 5 for Bangkok and the nearby beach resort of Pattaya.

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Airport operator Yellow taxi wants to offer talks drag, more routes deadline nears

New USJ campus cost jumps two-thirds

Macau International Airport Co Ltd (CAM) wants to offer extra international flights to the city after reporting a 171-percent increase in net profit last year. The company said it wants to boost the number of international routes from 12 to 18. That may start with a new Vietnam service in March. CAM recently reported a second consecutive year of profit, having previously traded at a loss since its foundation in 1995.

With a fortnight until its contract expires, Vang Iek Radio-Taxi Co Ltd is still in talks with the government to renew its licence. Its taxis – recognised by their yellow livery – can no longer be hailed in the street, and from February 7 must be ordered only by telephone, says the Transport Bureau. That was the government’s intention when the licence was issued, but the rule was never enforced.

The cost of a new campus for the University of Saint Joseph has jumped by at least two-thirds from the original estimate of 300 million patacas (US$37.5 million). The university’s management said regional inflation was a factor. USJ, led by the Roman Catholic Diocese of Macau, is seeking capital from the government and from private channels to fund its project. It’s due to be completed by April next year.

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%Day

CHINA MERCHANT

3.10

CHINA OVERSEAS

2.56

CHINA RES LAND

2.29

CHINA UNICOM HON

1.94

CHINA LIFE INS-H

1.75

CATHAY PAC AIR

-1.29

LENOVO GROUP LTD

-1.34

CNOOC LTD

-1.68

SANDS CHINA LTD

-4.11

GALAXY ENTERTAIN

-5.52

Source: Bloomberg

I SSN 2226-8294

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January 23, 2014 April 19, 2013

Macau

Casino names slip on more bearish mood MGM China down most in six months as JP Morgan cuts to ‘neutral’ on market downside risk Michael Grimes

michael.grimes@macaubusinessdaily.com

GM China Holdings Ltd fell the most in six months, leading declines among Macau casinos after JP Morgan Securities (Asia Pacific) Ltd cut its rating to neutral and recommended investors trim holdings of rival operators. The Macau operator controlled by MGM Resorts International dropped as much as 6.30 percent to HK$32.75 (US$4.22) in early trading, headed for the biggest drop since June 24. It rallied to HK$33.05 at 11.55am in Hong Kong, before slipping again, this time to close at HK$32.65, a fall on the day of 6.58 percent. “We believe the sector is at risk of entering a period where there is more room for downside rather than upside surprise,” Kenneth Fong, a Hong Kong-based analyst at JP Morgan, wrote in a research note published yesterday. On Monday Mr Fong had appeared more upbeat, saying in another note that although it was “hard to make a case that the sector is cheap at the current level”, it were possible that “positive sentiment driven by good revenue momentum” could sustain current valuations. But yesterday Mr Fong said the market has already priced in a “significant growth” assumption from future Cotai projects. He added that the possibility of insufficient labour and gaming table allocations in Macau might add risks. The bank expects the industry’s revenue growth to decelerate to a still-impressive 17 percent this year,

Lion gets tamed – for now

according to the note. All the other Macau casino names were down yesterday. Galaxy Entertainment Group Ltd fell as much as 5.20 percent to HK$77.25 before dropping further, closing down 5.52 percent at HK$76.95. Sands China Ltd and SJM Holdings Ltd dropped 3.40 percent and 2.50 percent, respectively in early trading, before declining further. Sands ended the day down 4.11 percent, at HK$61.85, while SJM finished the session down 2.70 percent at HK$25.25. Wynn Macau had declined by a more modest 1.83 percent by the end of the day, to HK$34.90. The benchmark Hang Seng Index,

which includes Sands China and Galaxy, rose 0.21 percent yesterday, to close at 23,082.25 points. Casino revenue in Macau rose 19 percent year-on-year in 2013, to 360.75 billion patacas (US$45.2 billion), about seven times that of the Las Vegas Strip.

Aristocrat earnings In other developments, JP Morgan Securities Australia Ltd upgraded normalised earnings per share forecasts for casino equipment maker Aristocrat Leisure Ltd. The bank now expects Sydney-based Aristocrat to pay 17 Australian cents (1.21 patacas) per share in financial

year 2014, up from 15 Aus cents. It followed what JP Morgan described as “better-than-expected feedback on recent releases in the U.S.,” as well as “anticipation of a better participation footprint over the next 12 months”. ‘Participation’ is a reference to the ability – in some jurisdictions – of casino slot machine makers to share with casino operators in the money generated by the equipment. The bank added that Aristocrat Leisure’s stock had been trading slightly below its valuation of A$4.68. The company’s shares on the Australian Stock Exchange closed yesterday down 1.10 percent at A$4.48. With Bloomberg News

Melco sells a stake in China lottery supplier MelcoLot distributes terminals for mainland’s Sports Lottery

elco International Development Ltd – a Hong Kong-listed investor in Macau casinos – has sold some of its shares in a mainland China lottery supplier for HK$224.81 million (US$29 million). “The directors consider that the disposal represents a good opportunity to realise profit from the group’s investment in MelcoLot,” said Melco International in a filing. MelcoLot Ltd distributes lottery terminals for the state-run China Sports Lottery Administration Centre according to Melco International’s 2013 interim report filed on September 17. According to MelcoLot’s own annual reports quoted by the parent, it made a consolidated net loss after taxation of approximately HK$215.93 million in 2011 but a consolidated net profit after tax of around HK$70.54 million in 2012. China’s two legal lottery systems – the Welfare Lottery and the Sports Lottery – in 2013 generated revenue of 309.33 billion yuan (US$50.7 billion, or 408.47 billion patacas)

Going digital…eventually – China Sports Lottery

according to Xinhua, an official Chinese news agency. That was 18 percent up on the 261.52 billion yuan achieved in 2012, which in turn was an 18 percent improvement on 2011.

Welfare Lottery sales for 2013 amounted to 176.53 billion yuan, an increase of nearly 17 percent yearon-year, while Sports Lottery sales rose 20 percent to 132.8 billion.

The Ministry of Finance said the improvement was due to the introduction of new products, including quiz-style games, as well as more sales outlets for online games. Melco International stated in its 2013 interim report: “Despite the fact that the lottery industry continues to show strong year-on-year growth as a whole, there is still enormous potential for future growth in China’s lottery market.” It added: “This situation is due to the low lottery penetration rate in China and low sales rates compared to other more developed nations in per capita terms.” At the time of Melco International’s 2013 interim report, the parent owned 50.59 percent of MelcoLot. Melco sold 172,692,000 shares in MelcoLot Ltd, representing 7.16 percent of the issued share capital. The average sale price ranged from HK$1.05 per share at the start of the exercise on September 16, peaked at HK$1.69 on December 6, then fell back slightly to HK$1.55 at the end of the exercise on January 17. M.G.

January 2014 April 19,23, 2013

Macau

Tourist arrivals top 29 million last year Rise in mainland tourist arrivals covers decline in international visitors Stephanie Lai

sw.lai@macaubusinessdaily.com

ore than 29 million tourists visited Macau last year, a 4-percent increase on 2012’s arrivals, Macau Government Tourist Office director Maria Helena de Senna Fernandes said yesterday. Despite the growth in arrivals, the number of international tourists fell last year, Ms Senna Fernandes told the annual review of the sector. Mainland tourists were again the main force driving tourism with their numbers rising by 10 percent in yearon-year terms to 18.6 million people last year. Visitors from Hong Kong, 6.7 million, and from Taiwan, 1 million, are counted separately. Ms Senna Fernandes said the tourist office was working to attract visitors from mainland provinces other than Guangdong, which is the city’s biggest source market. “Forty-four percent of our mainland visitors came from Guangdong province [last year],” said Ms Senna Fernandes. “But about 70 percent of the Guangdong visitors are day-trippers. So we need to expand the visitor source beyond Guangdong.” Even as the tourist office said it would work to increase arrival numbers, there are questions about

We need a scientific analysis of what our tourism capacity is Maria Helena de Senna Fernandes, MGTO director

the city’s ability to handle more tourists. The issue was raised last week by Beijing’s new chief representative in Macau, Li Gang. Mr Li said Beijing had no plan to expand the existing individual visa scheme that permits some mainlanders to travel to Macau independently. He said politicians were aware of Macau’s capacity to handle tourists and Beijing did not want “a blind expansion” of mainland tourism to the city.

2.92 million

International tourist arrivals last year

Last year alone, the number of visitors travelling under the individual visa scheme reached nearly 8 million, about 43 percent of the mainland visitors that came here, Ms Senna Fernandes said. “We need a scientific analysis of what our tourism capacity is.” “The Policy Research Office is doing a study about it, but we have no further news. We’ll take their analysis on the subject as our reference.” Ms Senna Fernandes said the tourist office has four new walking routes planned that would help divert pedestrian traffic away from major destinations. The routes include one that connects the Ruins of St Paul’s to Jardim de Luís de Camões, another in the

The tourist office’s director Maria Helena de Senna Fernandes expects a ‘low single-digit’ growth in arrivals this year

peninsula’s north, and two in Taipa and Coloane.

Number crunching Ms Senna Fernandes said the reasons behind the dip in international visitors would be studied. About 2.92 million international tourists visited last year, a 3 percent drop from one year earlier. South Korea was the bright spot,

with the number of tourists to Macau increasing by 7 percent to about 470,000 people. Ms Senna Fernandes said the drop in international tourist numbers was not related to the city losing its appeal. “Last year we saw a decrease in our international visitor numbers, which I think can be explained by economic factors affecting people living in those places,”

Ms Fernandes said. “Since last year we launched a series of market research surveys, based upon which we’ll draw a plan to see what we can do in our target markets.” “We’ll have an idea of why these visitors chose places other than Macau.” Ms Senna Fernandes forecast “low single-digit” growth in tourist arrivals this year.

Govt moves to regulate ‘family hostels’ T

he government will consider licensing for a new category of hotel accommodation, a kind of a family-run, bed-andbreakfast hostel. “It’s not possible to run a family hostel in our residential buildings because it may clash with proprietorship of the residents living there,” Macau Government Tourist

Office director Maria Helena de Senna Fernandes said yesterday. “So it’s more likely that these family hostels should be set in individual buildings, like older houses. “We’ll compile information based on hostel establishments in different jurisdictions and their legal basis, and we’ll also listen to public opinion.” The tourist office said it would run

a feasibility study and there was no timeline for an official policy to be formulated. By the end of last year, 46 of the city’s 102 hotels were considered budget accommodation, and they provided about 1,500 rooms. The tourist office’s deputy director, Manuel Pires, told Business Daily that two-star hotels and

guesthouses were considered budget accommodation. Currently, the tourist office is handling the licensing of five budget hotels, and the expansion of another budget hotel. These establishments will provide 462 rooms, Ms Fernandes told media yesterday. S.L.

January 23, 2014

Macau

The airport operator reported a net profit of 187 million patacas last year

Airport firm to expand after net profit takes off Operator aims to add six more international routes, with new flights to Vietnam starting on March 29 Tony Lai tony.lai@macaubusinessdaily.com

acau International Airport Co Ltd (CAM) wants to increase the number of international flights to the city after reporting a 171-percent increase in net profit last year. The company said it would increase the number of international routes from 12 to 18, starting with a new service to Vietnam. The ambitious plan comes after the airport company reported a

second consecutive year of profit, after struggling through red ink since its foundation. In an address delivered late on Tuesday night, company chairman Ma Iao Hang was quoted as saying that CAM’s unaudited net profit last year reached 187 million patacas (US$23.4 million), a 171-percent increase from a year earlier. The airport company reported revenue of 900 million patacas last year.

It had been in the red since commencing operations in 1995, finally turning the corner in 2012 with a reported profit of 66.9 million patacas, after the government bailed out the company. The extra international flights may start this year with a new route to Vietnam. The Civil Aviation Authority of Macau said it has approved the flight application from Jetstar Pacific “for operating three scheduled

services between Vietnam and Macau commencing on March 29”. Jetstar Pacific will fly to Danang and Hanoi, a spokeswoman told Business Daily. A much-anticipated route between Macau and the Indian capital of New Delhi may also be launched this year, a source within the airport company told us. The source said there could be good news “in the first half of this year”. Indian low-cost carrier SpiceJet Airlines Ltd expressed an interest in flying the route in 2012. India’s Directorate General of Civil Aviation approved the airline’s application last year, one year after it was first filed. But the Civil Aviation Authority here said it had yet to receive a formal application. “We did not receive any flight application from SpiceJet for operating air services between Macau and any Indian cities,” said the aviation regulator. The city has 12 international flights to Asian cities, including Tokyo, Seoul and Bangkok. The airport does not count flights to Taiwan as international routes. On Tuesday night, the company said there were 2,169 business jet movements last year, the first time the airport had exceeded the 2,000-mark. The company has forecast growth of 5 percent this year to bring plane movements to almost 2,270 movements. The airport operator has plans to expand its private jet offering. The construction of a hangar for business jets, spanning more than 8,000 square metres, will be completed this year, the company said. The company also plans to open the airport’s duty free and refuelling services this year. It will also liberalise the handling of private jets and ground handling. With Tiago Azevedo

Fresh push by ‘satellite’ casinos to own junket ops China Star in talks to acquire firm interested in VIP room profits Michael Grimes

michael.grimes@macaubusinessdaily.com

he drive for Macau’s satellite casino operators to acquire interests in VIP junket operations appears to be gathering pace. China Star Entertainment Group Ltd says in a Hong Kong filing it’s in talks to acquire a company entitled to profits from VIP gaming in the city. China Star is controlling entity for Hotel Lan Kwai Fong in downtown Macau, a property under a casino licence from Stanley Ho Hung Sun’s Sociedade de Jogos de Macau SA. Late last year, another SJM affiliated business – casino services firm Macau Legend Development Ltd restated in a filing its ambition to be both a casino operator and to participate in VIP gambling promotion – albeit on an “indirect” basis. The significance of the moves is that they could potentially mean defacto casino operators making commercial decisions about VIP credit issuance or

at least having a direct commercial interest in policy on such credit issuance – even if the junket room is not on their own premises. Previously those two functions have theoretically been kept separate by Macau’s gaming regulator the Gaming Inspection and Coordination Bureau. That’s because all the Macau casino concessionaires and subconcessionaires are listed companies, and the issuance and collection of credit for mainland China residents is a grey area legally. Gambling debts in themselves are not legally recognised in the People’s Republic of China. Business Daily approached the gaming bureau for a comment on the issue, but none was available by press time. Macau Legend, co-chaired by former Macau legislator David Chow Kam Fai, has never been issued with its own Macau gaming concession. But it is able to operate casinos in the

Hotel Lan Kwai Fong in Macau

city by virtue of a so-called ‘service agreement’ with SJM SA. China Star Entertainment Group Ltd – a Hong Kong-listed producer of Cantonese-language films – is chaired by Charles Heung Wah Keung. Facilities at Macau’s Hotel Lan Kwai Fong include an 18th floor suite

with eight VIP rooms according to the property’s website. China Star also invests in “operations which receive profit streams from the gaming promotion business in one of the VIP gaming rooms at the Grand Lisboa Casino in Macau,” according to another filing.

January 23, 2014

Macau

CNY tours to Bangkok, Pattaya cancelled until Feb 5 More than 250 customers hit but will be entitled to full refund, says Macau Travel Industry Council Tony Lai

tony.lai@macaubusinessdaily.com

ore than 250 local customers that booked package tours to Bangkok or Pattaya for the Lunar New Year holidays will be entitled to a full refund. The trips were cancelled amid escalating political turmoil in Thailand’s capital. The Macau administration has urged Macau residents to avoid travelling to Bangkok after the announcement of a 60-day state of emergency in the capital and its surrounding provinces. Macau Travel Industry Council announced yesterday all travel agencies here had agreed to cancel all the package tours scheduled between the dates of January 28 and February 5 for the two Thai cities. Thailand is due to have a national election on February 2, and there are fears internationally that politicsrelated violence could increase in the run-up to the poll and possibly the aftermath, depending on the result. “We do not have data on how many tour groups are involved but there are more than 250 travellers being affected,” said Andy Wu Keng Kuong, the council’s president. “They can be fully refunded or choose to join other package tours

Govt warns Macau population to defer Thai trips

with different destinations,” he said. “We have actually not offered any package tours to Bangkok for more than a month but those [250 customers] are just early bookings for the Chinese New Year times,” Mr Wu added. Hong Kong raised the outbound travel alert for Bangkok to ‘black’, the highest level in a three-tier warning system, from ‘red’ on Tuesday night. It followed the announcement by

the country’s caretaker government on Tuesday evening of the state of emergency. The Tourism Crisis Management Office of Macau subsequently released a press statement saying it “advises Macau residents to defer travel plans to Bangkok”. There is no formal outbound travel warning system here and the city usually endorses the warning signal

issued by neighbouring Hong Kong. But Mr Wu said whether or not package tours during the Lunar New Year holidays to other Thai destinations such as Chiang Mai and Phuket were cancelled depended on the individual travel agencies. “The travel alert [by Hong Kong] to other Thai areas remains amber and the situation there was better than Bangkok, so we have not brokered a mandatory cancellation for such tours,” he added. He estimated over 100 people are scheduled to visit other Thai cities during the period. Both the government and the travel council did not provide any figures for Macau residents visiting Thailand as independent travellers. The tourism office only said it “reminds Macau residents in Bangkok to remain vigilant, be aware of local security developments, elevate personal safety precautions and avoid getting close to the vicinities of demonstration areas”. According to the airport website, the flights to Thailand remained normal yesterday after budget airline THAI Smile cancelled flights on Monday and Tuesday.

Yellow taxi talks drag as contract deadline nears Government may renew some licences for dial-a-cabs that meet strict requirements Tony Lai tony.lai@macaubusinessdaily.com

ith a fortnight until its contract expires, Vang Iek Radio-Taxi Co Ltd is still in talks with the government to renew its taxi service. The Transport Bureau says that all taxis operating on a special licence, commonly known as yellow taxis, can be ordered by phone only from February 7 onwards. Vang Iek has run an on-call taxi service for more than two decades but the special licences of its 100 taxis will expire on February 6. Since 2011, it has operated under shortterm licence extensions. “We are still discussing the contract renewal with Vang Iek and we have had almost daily meetings with the company in recent times,” a bureau spokeswoman said. “We understand the time is limited.” An update may be issued today, she said. The taxi company said last year it was struggling to hire enough drivers to keep all 100 cabs on the road, and maintain its licence. Vang Iek has also been criticised for delivering a poor quality service.

Transport Bureau director Wong Wan said last year the government would grant a new contract only if all yellow taxis were fully committed to the service. Yesterday, the bureau spokeswoman did not comment when asked if all 100 yellow taxis from Vang Iek met the government’s licensing requirements. “All the taxis under special licences in Macau must take only on-call services starting February 7,” she said. One option open to the government may be to renew the licenses of some of Vang Iek’s 100 vehicles. It was unclear how much time was needed to complete the renewal process. “There may be more information after a meeting of the Traffic Consultative Committee tomorrow [today], which will also discuss the matter,” the spokeswoman said. The committee is a public body formed by officials and professionals in the industry to discuss the city’s traffic issues. Vang Iek declined to comment in detail for this report. A spokesman

There are 100 radio-controlled yellow taxis in the city

for the company said it was waiting on a reply from the government. It may prove difficult for all the 100 yellow taxis to meet the government’s requirements. Vang Iek executive director Eugenio Cheng Wing Chiu said in

September it had been “quite hard” to recruit full-time taxi drivers because of the labour shortage. At the time the company recruited between 40 and 50 fulltime drivers while a taxi requires as many as three drivers to staff one 24 hour shift.

January 23, 2014 April 19, 2013

Macau

MGM set for talks with Osaka on casino Macau investor having discussions on ‘multi-billion’ Japan scheme soon – governor the local government as well as local partners, and accordingly, have toured some of the potential sites in Osaka Bay,” said Steven Tight, president for international development at Las Vegas-based Caesars. He confirmed that the casino operator met with Osaka officials last year and said they have been in talks to pursue an integrated resort in Tokyo and Osaka for more than 10 years. Mr Tight said in September the company was talking with potential local partners including gaming machine makers Sega Sammy Holdings Inc and Konami Corp. Osaka is close to selecting Yumeshima, a reclaimed island in Osaka Bay, as the proposed casino resort site, following discussions with Mayor Toru Hashimoto, Mr Matsui said. The governor’s plan calls for completion of a casino resort before the 2020 Olympic Games in Tokyo.

Macau operators

Osaka’s Yumeshima Island – possible casino resort site

acau casino investor MGM Resorts International is due to have talks soon with the Osaka government about providing casino facilities in the Japanese city, says a senior official. It’s one of three major foreign operators to do so. Osaka officials last year met with Caesars Entertainment Corp and Genting Singapore Plc, developer and majority owner of the Resorts World Sentosa gaming resort in Singapore. Officials are scheduled to sit down with MGM in the next few months as Japan’s second-biggest metropolis expects the country to end its ban on casinos, Osaka Prefecture Governor Ichiro Matsui said in an interview with Bloomberg News. “It’s just a matter of time before casinos are legalised,” he said. Plans for a 500 billion yen (US$4.8

billion, or 38.35 billion patacas) casino resort were mentioned by the local government. A gambling complex on reclaimed land Osaka owns would attract investment and tourists to a region battling for projects that may otherwise go to Tokyo, Mr Matsui said.

Political support Lawmakers from the ruling Liberal Democratic Party and the Japan Restoration Party have said they aim to legalise casinos in a session of Japan’s parliament, known as the Diet, starting this month. “Even before the casino bill is passed, Osaka is crafting details of the resort plan so that we could embark on the project at any time,” Mr Matsui said in Osaka on Monday. “We’d need global casino operators’ involvement

and expertise as the business is new to Japan,” said Mr Matsui, who also is secretary-general of the Japan Restoration Party. The party calls among other things for a revision of the country’s pacifist post-Second World War constitution, a less apologetic approach to its imperial past, and a more vigorous approach to economic development after decades of stagnation. An Osaka gambling resort could generate gross gaming revenue of as much as US$5 billion, according to a report compiled by CLSA AsiaPacific Markets. Land in Osaka’s bayside area costs about one-tenth as much as parcels in Tokyo’s Odaiba area, where Mitsui Fudosan Co, the country’s biggest developer, is among companies proposing entertainment resorts. “Caesars takes its cues from both

Macau operators Las Vegas Sands Corp founded by Sheldon Adelson, Melco Crown Entertainment Ltd, co-chaired by Lawrence Ho Yau Lung, and Wynn Resorts Ltd started by Steve Wynn are among those expressing interest in Japan. Galaxy Entertainment Group Ltd vice chairman Francis Lui said in a November interview the casino operator would consider investing at least US$5 billion in Japan and Taiwan if allowed. Wynn Resorts Ltd said in September it would consider investing more than US$4 billion in Japan casino resorts, while MGM Resorts International President Bill Hornbuckle said his company would spend “several” billion dollars. Genting Singapore president Tan Hee Teck didn’t answer calls to his office on Tuesday. Calls and e-mail to Alan Feldman, executive vice president of global government and industry affairs at MGM Resorts were not answered outside normal business hours. Bloomberg News

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January 2014 April 19,23, 2013

Macau

New USJ campus cost jumps two-thirds University of Saint Joseph seeks public and private cash for MOP520 mln scheme, due to be finished in April 2015 Tony Lai

tony.lai@macaubusinessdaily.com

he cost of a new campus for the University of Saint Joseph has jumped by at least twothirds from the original estimate of 300 million patacas (US$37.5 million). The university’s management said regional inflation was a factor. In January 2013, the Macau government said the budget for another major tertiary education project – the University of Macau’s Hengqin campus – had risen 76 percent above its April 2010 estimate of 5.8 billion patacas. USJ, led by the Roman Catholic Diocese of Macau, is seeking capital from the government and from private channels to fund its project, which is due to be completed by April next year. The university, its contractor HCCG Building and Civil Engineering (Macau) Ltd, and supervisor Macau Professional Services Ltd held a media presentation yesterday to explain the progress of the project. It’s located at Estrada Marginal da Ilha Verde on Macau peninsula. Peter Stilwell, the university’s rector, said the scheme would now cost “500 million to 520 million patacas” excluding a 57 million patacas bill for demolishing a building currently on the site. The total cost is almost twice that estimated by the institution in 2008. “The cost has spiralled,” Mr Stilwell stated yesterday. But he said the university had secured 150 million patacas from the Macau Foundation, and was seeking further funding from the government’s Education and Youth Affairs Bureau. The university

campus will also accommodate a new Saint Joseph Secondary School campus, he said. “We have been setting up plans for getting funding also from private sources and we believe there are various private entities [which] will be interested in funding as an exchange for naming rights [of the campus buildings],” he added. But he declined to offer further details, only adding they were “close to getting replies” from some companies. The rector added: “The project is set up in the way that we only pay after [HSCC] has finished a particular phase and at any stage we could say, ‘Stop, we haven’t got enough money’.” The campus, with floor space of 38,000 square metres (409,000 sq feet) is designed to accommodate 800 secondary school students and 1,800 university students. It’s due to be completed in April 2015. Richard Kwan Kwok Wing, executive director of project supervisor Macau Professional Service, said the number of workers on the site would increase to 300 from 100 now to speed up the project. The university hopes to start next year the process of planning the move from its current site in the NAPE commercial district of downtown Macau, said Mr Stillwell. USJ currently has three locations in NAPE. Two will close, but one, which is provided rent-free by the government, will be retained. The new campus had been mulled since 2005 but there were delays due to the global economic situation and the need to get government approval.

Bossini issues positive profit alert

Ma Io Kun to lead Public Security Police

ossini International Holdings Ltd – which has fashion retail stores at major locations in Macau including Rua de São Domingos just off Senado Square and The Venetian Macao – expects a “significant increase” in profit for the six months to December 31. It said in a Hong Kong filing that was mainly due to “reduction in losses incurred from the mainland China and Taiwan operations”. The company saw its group wide profit rise 39 percent year-on-year in financial year ending June 30, 2013. In Macau, Bossini operates via a locally incorporated 100-percent owned business called Bright Star Fashion Ltd.

a Io Kun was appointed as the new commissioner of the Public Security Police Force, replacing the retiring head Lei Siu Peng, according to a dispatch published in the Official Gazette yesterday. Mr Ma will take up the position for two years starting January 31, said the dispatch signed by Secretary for Security Cheong Kuoc Va. Mr Ma served as an assistant to the director of the Unitary Police Service before being appointed to the new position. Secretary Cheong has praised the work of Mr Lei, who led the public security police since 2001.

Correction ‘Fake money menace on the rise’ On Wednesday January 22 in a story headlined ‘Fake money menace on the rise’ we reported that the Judiciary Police director Wong Sio Chak had said that the cases of bogus banknotes and credit card fraud increased to 137 in 2013. In fact, the number of those cases increased to 310 last year from 249 one year before. In one of the most recent cases, police seized 152 fake HK$1,000 notes between last month and January 3. For that error we apologise to our readers.

Seat of learning – new USJ campus at Ilha Verde

January 23, 2014 April 19, 2013

Greater China

Secret wealth of Chinese elite revealed Elite’s offshore accounts exposed in massive leak

elatives of top Chinese leaders including President Xi Jinping and former premier Wen Jiabao have used offshore tax havens to hide their wealth, according to a mammoth investigation released yesterday. The International Consortium of Investigative Journalists (ICIJ), citing information culled from 2.5 million leaked documents, said that Mr Xi’s brother-in-law and Mr Wen’s son and son-in-law were among those with offshore holdings. It is the latest revelation to shine a light on the hidden wealth of family members of China’s top officials, a topic considered off-limits by Communist Party leaders. Offshore entities can be legal and there was no evidence that the politicians were aware of their relatives’ actions. The release came days after Mr Wen reportedly penned a letter to a Hong Kong columnist proclaiming his “innocence” over previous claims that his family amassed huge wealth during his decade in power. The ICIJ cited nearly 22,000 offshore clients from mainland China and Hong Kong, including relatives of former president Hu Jintao, former premier Li Peng and late leader Deng Xiaoping, the man

Xi Jinping (front) and Wen Jiabao – relatives appear in ICIJ’s data

Li’s Power Assets raises US$3.1 bln in IPO

Leasing fuels Boeing’s China pipeline

January 29 debut in region’s biggest IPO Demand from country’s aircraft lessors since late 2012 to sustain record sales

K Electric Investments Ltd, the investment trust controlled by tycoon Li Kashing’s Power Assets Holdings Ltd, raised US$3.1 billion in a Hong Kong initial public offering priced at the very bottom of an ambitious target range. Though well below the size Asia’s richest man once hoped for, the deal means the trust carries a higher yield than other listed Hong Kong utilities. With a low price designed to foster a solid debut on January 29, it will still be the biggest IPO in Asia excluding Japan since the US$3.6 billion listing by People’s Insurance Group of China Co Ltd (PICC) in November 2012. The trust priced the IPO at HK$5.45 per unit, compared with a marketing range of HK$5.45 to HK$6.30 each, Power Assets said in a regulatory filing yesterday. Power Assets will use the funds raised, about HK$24.1 billion (US$3.1 billion), for overseas expansion. The HK Electric IPO is the first in what’s expected to be a marquee

year for Hong Kong bankers, as major economies pick up steam and companies to raise funds to tap into growth opportunities. Advisory firm PwC estimates Hong Kong IPOs could raise US$32.2 billion in 2014, the highest since 2010 and nearly double the 2013 tally of US$17.1 billion. At US$3.1 billion the amount is a long way short of the US$5.7 billion targeted at one stage. But the IPO’s value was already slashed in December by nearly a third from the original maximum target as investors sounded out for the sale balked at what they felt was an overly ambitious valuation. At the IPO price, the trust is forecast to pay 2014 dividend distribution yield of 7.24 percent, said a source with direct knowledge of the IPO, who was not authorised to speak publicly on the matter. Hong Kong’s listed utilities currently trade with annual yields between 2 percent and 4 percent. The deal will also be the biggest trust IPO in Asia ex-Japan since Mr Li listed Hutchison Port Holdings Trust for US$5.5 billion in March 2011. Goldman Sachs Group Inc and HSBC Holdings Plc acted as sponsors and joint global coordinators of the IPO, with 10 other banks including Citigroup, Credit Agricole and Morgan Stanley also hired as colead managers. Reuters

oeing Co said it delivered a record number of jets to China last year and expects to hand over a similar number of aircraft this year as growth in the world’s second-biggest economy spurs demand for air travel. Deliveries this year to China will be in the range of 140 aircraft after handing over a record 143 planes last year, Marc Allen, president of Boeing China, said in Beijing yesterday. Chicago-based Boeing, which delivered a record 648 jets worldwide, also secured orders for more than 230 new aircraft from the country last year, he said. Asian growth is lifting orders for Boeing and Airbus Group with China forecast to supplant the U.S. as the world’s largest market by 2032, the European planemaker forecast in September. China’s economic expansion is helping air travel affordable to more people, increasing demand for planes from carriers such as Air China Ltd and China Southern Airlines Co. “A really fantastic year,” Mr Allen said. “What I am even more excited about is that we see a trajectory. I can announce today that we expect to maintain that rate in 2014 and into the foreseeable future.” Aircraft sales and output are surging as carriers globally take advantage of low-cost financing to replace older models with

newer, fuel-sipping jets. Boeing’s 1,355 net orders for 2013 was the second-highest annual sales tally, and an increase from the 1,338 a year earlier. China Southern, the Guangzhoubased company that’s Asia’s biggest airline by passenger numbers, took deliveries of 37 aircraft last year, according to Boeing’s website. That was the second-most among carriers worldwide, lagging behind only American Airlines’s 39, according to the website. Of the 230 orders Boeing won in China last year, 130 were from leasing firms and the remainder from airlines, Mr Allen said. A third of those ordered by airlines have already gone through the government approval process, he said. “The low-cost carriers in China is a big emerging story in 2013,” Mr Allen said. “We are going to bring additional personnel to China, subject matter experts, to work with the low-cost carriers that are starting up.” China is easing aviation regulations and boosting infrastructure spending as carriers are forecast to require more than 5,000 planes in the next 20 years. International travel from China will grow at an annual rate of 7.2 percent in the next 20 years, faster than the 6.8 percent expansion for domestic travel, according to Boeing. Bloomberg News

January 2014 April 19,23, 2013

Greater China credited with opening up China’s economy in the 1980s. Also included were members of China’s National People’s Congress, heads of state-owned enterprises and some of the country’s wealthiest men and women, including real estate mogul Zhang Xin; Pony Ma and Zhang Zhidong, co-founders of Chinese Internet giant Tencent Holdings Ltd; and Yang Huiyan, China’s richest woman. ICIJ said that it sent letters to the government officials, wealthy individuals and others named in its report. “Their response in most cases was to not respond, a standard practice in China,” ICIJ said. The confidential files leaked to the organisation also include the names of 16,000 clients from Taiwan.

‘Covert use’ Ninety percent of the mainland Chinese clients set up offshore entities in the British Virgin Islands, often with the help of Western firms such as UBS AG and PricewaterhouseCoopers LLC, the investigation said. Seven percent were established in Samoa, and three percent in other areas. The British Virgin Islands was the destination of choice for Mr Xi’s brother-in-law Deng Jiagui, a wealthy real estate developer and investor who married Mr Xi’s older sister in 1996. According to the report, Mr Deng owns a 50 percent stake in a BVI-based company

KEY POINTS Relatives of China’s top leaders favouring tax havens ICIJ report exposes 2.5 million leaked documents Documents include relatives of Xi Jinping, Wen Jiabao Accounts linked to mainland, HK and Taiwan residents

named Excellence Effort Property Development. While such offshore trusts and companies “may not be strictly illegal”, they are often linked to “conflict of interest and covert use of government power”, Minxin Pei, a political science professor at Claremont McKenna College in California, told the ICIJ. In 2012, the New York Times and Bloomberg news agency published investigations into the vast wealth said to have been amassed by family members of Mr Wen and Mr Xi. Both news organisations have since had their websites blocked in China, and authorities have denounced the reports as an effort to “smear” China’s leadership. The ICIJ website was in turn blocked

within China yesterday. In November, the New York Times found that US bank JPMorgan hired a daughter of Wen as a consultant, part of a broader strategy that the newspaper said was aimed at accumulating influence in China by employing relatives of the nation’s leaders. According to the Times report, JPMorgan paid a total of US$1.8 million to Fullmark Consultants, a firm set up by Mr Wen’s daughter, Wen Ruchun, who also goes by the alias “Lily Chang”. The files leaked to ICIJ give further insight into how Wen Runchun was able to obscure her connection to the firm: Fullmark Consultants was set up in the British Virgin Islands in 2004 by her husband, who was its sole director and shareholder until 2006. The ICIJ said it collaborated with more than 50 partner organisations across the globe in sifting through the data, including The Guardian, Le Monde in France and Hong Kong’s Ming Pao newspaper. The websites of all three were not accessible within the mainland yesterday. One of the ICIJ partners, a mainland Chinese news organisation, withdrew in November after “authorities had warned it not to publish anything about the material”, the ICIJ report said. The ICIJ said it would announce more details on its findings in the coming days. AFP

Beijing bans new refining, coal power to curb pollution

Money rate drops as cash injections spur stocks gain

hina’s benchmark moneymarket rate fell for a second day, while stocks rallied by the most in two months, as fund injections by the central bank eased a cash squeeze in the run-up to the Lunar New Year holiday. The seven-day repurchase rate, a gauge of interbank funding availability, dropped 19 basis points to 5.25 percent in Shanghai, according to a daily fixing compiled by the National Interbank Funding Centre. It fell 88 basis points on Tuesday, after a January 20 jump of 153 basis points that prompted the People’s Bank of China to supply funds using its Standing Lending Facility and 255 billion yuan (US$42 billion) of reverserepurchase agreements. The Shanghai Composite Index rose 2.2 percent, the biggest gain since November 18. “Yesterday’s reverse repos, plus the SLF injections to both big and small banks, should have added enough liquidity to the market,” said Huang Hai, Beijing-based deputy head of the research department at SDIC CGOG Futures Co, a unit of State Development & Investment Corp. “A seven-day repo slightly higher than 5 percent is acceptable, and the central bank probably won’t inject more tomorrow.” China’s government is loosening controls on interest rates to give markets a greater role in pricing risk, driving borrowing costs higher and spurring concern defaults will climb in the world’s second-largest economy. The PBOC is using money-market operations and cash injections to prevent rates climbing to levels that would stifle growth and heighten the chance of a credit crisis. The seven-day repo rate reached this month’s high of 6.32 percent on Monday, after averaging 4.09 percent in 2013, fixings show. Money-market rates typically spike before the week-long Lunar New Year break, which begins Jan. 31 this year and is a period in which cash gifts are made and families get together for celebratory feasts. The central bank also expanded its SLF this week to allow small-and medium-sized banks in 10 regions to access funds on a trial basis. The facility was used to supply cash yesterday to such lenders, according to a statement posted on the PBOC’s verified micro-blog on Sina.com. Bloomberg News

he city of Beijing will ban the construction of new oil refining, steel, cement and thermal power plants as well as the expansion of existing projects, the local government said in its latest policy document aimed at tackling air pollution. The document, published on the Beijing government’s official website yesterday, said the ban would take effect from March. The policy document, approved by the local legislature last week, also commits China’s capital city to cut total emissions of PM 2.5, a key component of air pollution, by 5 percent this year. Beijing has been hit by weeks of hazardous smog recently, prompting the central government to pledge tough new measures to improve air quality throughout the country and head off public disquiet about the environmental costs of economic growth. The new measures are part of the

local government’s efforts to implement a pollution masterplan drawn up by the central government last September, which committed China to reduce its dependence on coal and close outdated industrial capacity. The policy document also said the city would strive to control the total number of vehicles on its roads as well as establish zones where highpolluting fuels like coal would be banned completely. Firms that fail to install emissions technology, or meet tough pollution standards could be fined up to 500,000 yuan (US$82,600) and have their emission permit allocation cut for the following year. Environment minister Zhou Shengxian said earlier this month that China was currently looking into establishing a nationwide trading system for pollution permits as part of its efforts to establish market mechanisms to clean up its environment. Reuters

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January 23, 2014 April 19, 2013

Greater China

Most of the IPOs in the pipeline are small-cap stocks

IPOs no lure as high prices keep investors at bay Number of Chinese stock accounts containing funds down to a three-year low

ao Lina, an accountant in Shanghai, says the 43 percent opening-day gain for China’s first initial public offering in more than a year isn’t enough to bring her back to the US$3.2 trillion equity market. “If they jump a lot, that means bigger risks,” Ms Yao, 34, who sold all her equity holdings in November, said on January 17 as Neway Valve (Suzhou) Co jumped in its Shanghai Stock Exchange debut. “And if they fall, that means shares are overpriced.” Ms Yao’s reticence toward Chinese stocks is being repeated across the country, a sign that the campaign by regulators to crack down on overvalued IPOs and improve corporate disclosures is failing to boost confidence among individual investors. The number of Chinese stock accounts containing funds shrank to a three-year low of 53.7 million on Friday, a drop of 3.6 million from the June 2011 peak, data compiled by Bloomberg show. The retreat, spurred by slowing economic growth and a shift toward higher-yielding wealth management products, is fuelling losses in the Shanghai Composite Index that erased US$571 billion of market value in the past four years and sent the gauge to a five-month low on Monday. While Societe Generale SA says bearish sentiment is a buy signal, Asian Capital Holdings Ltd and

KEY POINTS Investors empty three million accounts Exit by individual investors a buy signal – SocGen Bearish sentiment to weigh on stocks – analysts

Calibre Asset Management Ltd predict it will weigh on stocks in a market where individuals account for more than 80 percent of trading volume.

Record low Neway Valve, the first of what PricewaterhouseCoopers LLP estimates will be US$41 billion of Chinese IPOs this year, has tumbled 13 percent since the close on its first day of trading. Almost half of the companies that have gone public in China since June 2009 now trade below their IPO price, while the Shanghai Composite’s valuation is the lowest on record versus global equities, according to data compiled by Bloomberg. “Stocks may be cheap enough for long-term investors to consider, but they need to have holding power,” said Norman Chan, the Hong Kongbased head of investment at Calibre Asset Management, which oversees about US$115 million. Liu Xi, a 36-year-old hotel marketing official in Shanghai who hasn’t made any money since she invested 90,000 yuan (US$14,875) in the stock market two years ago, is losing patience. “I feel sad and frustrated about stocks,” Ms Liu said. “Even if IPOs rise on the first day, you’ll need to keep an eye on the movement. Why should I bother to put money in a market I need to worry about every day?” Ms Liu invests in wealth management products offered by banks that advertise returns of about 6 percent, she said. The Shanghai Composite has declined 5.1 percent this year through Thuesday, the biggest drop among benchmark equity gauges in 14 Asian markets tracked by Bloomberg. Individual investors don’t expect “large upside in the Chinese market and their investment horizons are short,” said Anthony Neoh, a visiting professor at the National University of Singapore who is part of the Chinese

US$41 bln

Value of Chinese IPOs this year, according to PwC securities regulator’s international advisory body. “Retail sentiment may come back if there is a clearer message that the markets will be better regulated.” Investments that have lured money from the stock market, including wealth management products, trusts and real estate, carry their own risks. A troubled 3 billion-yuan trust product distributed by Industrial & Commercial Bank of China Ltd that matures January 31 has fuelled speculation of looming defaults by similar products. Cities including Shanghai and Shenzhen have tightened local property policies since November to contain price increases.

Buy signal When individual investors exit the stock market, it’s usually a buy signal because it leads to lower valuations, David Poh, the regional head of portfolio-management solutions at Societe Generale’s private bank, said by phone. The Shanghai Composite trades for 1.3 times net assets, a record 35 percent discount versus the MSCI All-Country World Index, data compiled by Bloomberg show. Efforts by the China Securities Regulatory Commission to prevent overvalued IPOs may help protect investors against losses, Tai Hui, the chief market strategist for Asia at JPMorgan Asset Management, said in Singapore. The CSRC said last week it started

spot checks on IPO pricing with 13 underwriters and 44 institutional investors. The regulator said on January 12 it will suspend offerings by companies found to have disclosed information not contained in IPO prospectuses and other public releases.

IPO optimism Seven of the eight companies that started trading in Shenzhen on Tuesday surged at least 45 percent from their IPO prices, triggering trading halts under exchange rules designed to prevent excessive swings. Four of the companies fell yesterday, while Anhui Yingliu Electromechanical Co jumped 42 percent in its Shanghai debut. Xu Nan, a 26-year-old construction worker in Harbin whose 10,000 yuan of stock investments have so far lost money, says he’s still keen to buy shares in IPOs. “I am more optimistic than others, maybe because I haven’t participated in any IPOs before and would like to try,” Mr Xu said. “The point about investing is to find out what’s hot and get in there.” The CSRC crackdown on IPO pricing may encourage investors to sell on the first day of trading to lock in gains, Dai Ming, a money manager at Hengsheng Hongding Asset Management Co, said. Neway, a maker of industrial valves, had the highest turnover among companies on the Shanghai Stock Exchange in its debut, with more than 1.3 billion yuan of shares changing hands. “When the issue is launched in the market, it’s set at a peak,” Ronald Wan, chief China adviser at Asian Capital in Hong Kong, said. “If the situation doesn’t change, it’s bad for the IPO market.” Joyce Jin, who works at a bank in Shanghai, said China’s slowing economy is one reason she won’t participate in IPOs after her stock investments in 2008 lost more than half their value. Bloomberg News

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January 2014 April 19,23, 2013

Asia

RBI moves towards policy overhaul India central bank report recommends consumer prices as main inflation measure

he Reserve Bank of India should make managing inflation its main policy objective and set monetary policy by committee, a central bank panel has recommended, a shift that would bring its practices in line with many other central banks. The recommendations are widely expected to be accepted. They were issued by the panel set up by RBI governor Raghuram Rajan, which also recommended using consumer prices as the primary measure of price changes and setting an eventual inflation target of 4 percent. The reforms are aimed at making policy-setting more effective and transparent in a country that has long struggled with high inflation. Given the current high level of consumer price inflation at close to 10 percent, the change could mean interest rates stay higher for longer. “We believe the immediate implication for monetary policy could be a front-loaded 25 bps hike in the repo rate at the January policy meeting given that current headline inflation is significantly above the explicit 12-month target,” Goldman Sachs Group Inc economists wrote. If adopted, the new approach would aim to reduce consumer inflation to 8 percent in the next year. The central bank had been widely expected to keep its policy repo rate unchanged at 7.75 percent at its next policy review on January 28, following a decline in wholesale price inflation. The reforms would mark the most dramatic change implemented by Mr Rajan, a high-profile former chief economist at the International Monetary Fund, who took office on September 4 with an ambitious agenda and amid high expectations. “This is one of the most important steps taken by RBI in at least the last 15 years, when we moved away

Raghuram Rajan, RBI governor

from money supply targeting to repo, reverse repo,” said Samiran Chakraborty, head of research at Standard Chartered Bank in India, referring to the current policy rates. “Since then, there has been no proper revamp in the monetary policy framework, while the economy has moved into a different inflation, growth trajectory,” he said. “The

world has become more integrated.” In the report, the panel recommends that managing inflation take precedence over the central bank’s two other current main objectives of economic growth and financial stability. If adopted, the RBI would use consumer price index inflation, which now stands at 9.87 percent, as the

benchmark for targeting inflation. It would aim to pare CPI inflation to 8 percent over the next 12 months and 6 percent in the next 24 months. Its eventual target level would be 4 percent, plus or minus 2 percent. Some of the proposals require legislative changes, while others can be implemented by Rajan.

Default domino seen in economic slowdown Ability to generate cash at lowest level in five years, says Fitch

itch Ratings says almost 1 trillion rupees (US$16.2 billion) of Indian bank loans are at risk of turning bad as the economy cools while Goldman Sachs Group Inc sees distressed debt escalating. The nation’s top 100 businesses have a total of 2 trillion rupees of credit, equivalent to as much as 29 percent of the banking system’s net worth, due in the next five quarters and they may struggle to refinance almost 50 percent of that, according to India Ratings, Fitch’s local unit. Goldman expects a 25 percent jump in stressed assets in the current financial year, which ends March 31. “The ability of most Indian companies to generate cash and service debt is at the lowest level in five years,” Deep Narayan Mukherjee, a Mumbai-based director at India Ratings, said in a

telephone interview. “Almost a trillion rupees worth of refinancing coming up in the next twelve months are for companies that will find it tough to get new funding. This could trigger a domino effect of defaults.” Company finances are coming under increased pressure as the central bank forecasts Asia’s third-largest economy to expand 5 percent in the year ending March 31, matching the prior period pace that was the slowest in a decade. Five-year AAA corporate borrowing costs have climbed 85 basis points since mid2013 to 9.54 percent as the Reserve Bank of India raised interest rates twice to combat inflation. A similar rate in China is at 6.23 percent.

Elevated risk About 24 percent of loans due by March 2015 are from

Company finances coming under pressure

firms already in financial distress, while another 26 percent of the debt carry “elevated refinancing risk,” according to Fitch. India’s steel, construction, automobile and telecommunications industries account for about half of the funding requirements and the prospects of repayment difficulties are also mostly linked to them, according to

the credit assessor. Bad loans at Indian lenders climbed to 4.2 percent of total credit as of September 30, the highest level in at least six years, from 2.4 percent in March 2011, according to a December 30 report from the RBI. State-run banks have “distinctly higher stressed advances,” according to the report. The average gross

Reuters

non- performing asset ratio may increase to 4.6 percent of total lending by September 2014, according to the monetary authority. Stressed assets, which include bad and restructured loans, rose to 10.02 percent, the most in a decade, as of September 30, central bank data show. Banks’ profits and capital buffers are under pressure as they need to set aside higher provisions for such loans. Profitability at Indian lenders, as measured by return on equity, fell to a six-year low of 10.2 percent in the year to Sept. 30, figures compiled by the RBI show. The outlook for Indian banks remains clouded by prolonged economic weakness and political uncertainty before national elections due by mid-2014, analysts at Goldman Sachs wrote in a January 17 research note. “Investors should remain cautious on the sector as the macro problems persist with the recovery delayed and increasing uncertainty on the political front,” they wrote. Risk “provisions will likely remain high as asset quality issues have yet to peak.” Bloomberg News

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January 23, 2014 April 19, 2013

Asia DBS, SocGen in talks for Asian unit DBS Group Holdings Ltd, Southeast Asia’s biggest lender, is in advanced talks to buy Societe Generale’s Asian private bank which would help boost its private banking assets by almost a third, sources said. “The talks are advanced,” said a source with direct knowledge of the matter. A DBS spokeswoman reiterated the bank’s stance that boosting wealth management is one of its key strategic priorities but declined to comment on the possibility of talks. DBS was among five suitors short-listed in the final round of bids. Other suitors included ABN AMRO and Credit Suisse, sources earlier told Reuters.

BOJ warns of stalling inflation Central bank keeps monetary base target unchanged Leika Kihara and Stanley White

he Bank of Japan kept monetary policy steady yesterday, suggesting that no imminent monetary easing is on the horizon as the country’s economic recovery broadens. The central bank has warned that price-rises may stall at current levels, moderating last month’s guidance that hints at the prospect of further easing to banish the deflation that has plagued the economy for more than two decades. The weak yen, which inflates import costs, has helped Japan pass the halfway mark toward its 2 percent inflation target with prices in November up 1.2 percent from a year before. While market suspicion of whether inflation will accelerate further runs deep, recent price gains and signs of economic strength have made central bankers more certain that Japan is on track to meet their price target. The BOJ, which announced a huge stimulus in early 2013, prefers not to ease again unless clear evidence emerges that a sales tax hike this April causes far more damage than expected.

As widely expected, the BOJ maintained its commitment of increasing base money at an annual pace of 60 trillion yen (US$577 billion) to 70 trillion yen via aggressive asset purchases. In a quarterly review of its longterm forecasts, the BOJ maintained its forecast that core consumer inflation will hit 1.3 percent in the fiscal year beginning in April and accelerate to 1.9 percent the following year. “Japan’s economy is continuing to recover moderately with consumers recently front-loading spending ahead of the sales tax hike,” the central bank said, adding it expects consumer inflation to move around 1.0-1.5 percent for the time being. Board member Sayuri Shirai made a rare dissent to part of the BOJ’s economic assessment, saying that the slow pace of improvement in job and income conditions must be added as among the risks to the outlook.

Sales tax hike The BOJ launched an intense burst of monetary stimulus last

No change to BOJ’s consumer inflation forecasts

BHP flags higher returns for shareholders Miner has pledged to increase the amount of its dividend every year

HP Billiton Ltd posted strong quarterly iron ore, coal and copper output, putting it in a position to meet shareholder pressure for higher capital returns as spending on new projects winds down. However, any capital return may not come before the 2015 financial

year starting in July as the world’s biggest miner looks to build up more cash from recently completed projects, and as iron prices start to ease, according to analysts. “I think it’s not likely a calendar 2014 story, more likely 2015,” said Ben Lyons, an analyst at ATI Asset Management, which owns shares in BHP. “The key determinant will be commodity prices and currencies.” Investors including fund manager BlackRock Inc, have called on BHP and other miners to boost shareholder returns as the era of high construction costs to build new mines shifts into a lower-cost production phase. BHP, like its peers, has focused on reducing costs, spending less and selling unwanted businesses over the

past 18 months, after splashing out on expansions during the mining boom. Three of BHP’s four main growth drivers improved in the December quarter, with a 16 percent increase in iron ore output from a year ago and record production at its coal business in Australia’s Queensland state. Copper output also rose, but petroleum production – the secondbiggest revenue earner last year after iron ore – fell 4 percent, BHP said in its production report yesterday. Chief executive Andrew Mackenzie said the miner aimed to boost returns via financial discipline and internal competition for funds and that productivity gains would continue in the second half. “This strategy leaves us well

positioned to deliver a substantial increase in free cash flow and higher returns to shareholders,” he said in a statement. A buyback is seen as a more likely way to reward shareholders because BHP stock is listed on both the London and Australian stock exchanges. Under a buyback stockholders have the option to tender a portion or all of their shares at a premium to the market price. BHP bought back more than US$22 billion worth of its shares between August 2004 and June 2011. The miner also has a progressive dividend policy, under which it has pledged to increase the amount of its dividend every year. Reuters

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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January 2014 April 19,23, 2013

Asia Philippines’ Q4 growth seen at 5.8-6.5 pct The Philippine economy likely expanded 5.8-6.5 percent in the last quarter of 2013, with strong domestic demand and exports possibly offsetting the impact of a typhoon in November, a senior government official said yesterday. “When the November data came out, exports were much more robust than we thought,” Socioeconomic Planning Secretary Arsenio Balisacan told reporters. “The manufacturing output was also robust and remittances and even consumption and investment continue to be quite robust,” he said. Mr Balisacan also said he expected full-year 2013 GDP growth to be close to the high end of Manila’s 6-7 percent goal.

April, pledging to accelerate inflation to 2 percent in roughly two years via aggressive asset purchases in a country mired in deflation for 15 years. The economy is likely to boom until March as consumers rush to beat the sales tax hike, and many analysts take the BOJ’s view that the pain from the higher tax will be temporary. But some fret the tax hike may hit consumption harder than expected. Others doubt consumer inflation will accelerate much from here, as prices will soon lose support from the weak yen. Such sceptics have thus speculated the BOJ may act soon to pre-empt the damage from the tax hike. Governor Haruhiko Kuroda has shrugged off the likelihood of imminent action, but has repeatedly said the bank will act “without hesitation” if such risks threaten the achievement of its price target. There are some initial signs of success. A leading indicator of capital expenditure hit a five-year high in November, while Japan’s most influential business lobby has agreed to raise workers’ base pay for the first time in six years as the economy gains momentum. Still, a recent Reuters poll showed economists do not expect firms to raise wages significantly this year and project inflation will stay well below the BOJ’s target, underscoring the challenges that lie ahead for the central bank.

S.Korea economy seen slowing Shiozaki suggests 25pct corporate tax rate Japan’s government should clarify its plans for cutting corporate taxes when it revises its growth strategy in June, a senior ruling party official said, adding to calls for lower levies on profits. A rate of about 25 percent should be a “natural level for consideration,” Yasuhisa Shiozaki, deputy policy chief of the Liberal Democratic Party, told Bloomberg in an interview. The levy will be about 35 percent from April, after the end of a surcharge for disaster relief. Lower corporate taxes could provide the government with a fresh means to stimulate growth after his reflationary policies last year lifted stock prices and weakened the yen. Cuts could first be made in special economic zones where the government plans deregulation experiments, Mr Shiozaki said, adding that nationwide debate should precede this. Any reduction would require new sources of revenue, he said.

Reuters

outh Korea’s economy is forecast to have slowed in the final quarter of 2013, though rising exports on the back of improving activity in developed economies are expected to solidify a recovery this year. Government stimulus provided crucial support to Asia’s fourth-largest economy last year, but with spending set to ease off private consumption will need to pick up the slack to foster sustainable growth, analysts say. Seasonally adjusted gross domestic product in the fourth quarter is seen rising 0.9 percent from the third quarter, a median forecast in a Reuters survey of 15 analysts showed. This is below the 1.1 percent growth logged in the June-September quarter, mainly due to reduced government spending in the final quarter. On an annual basis, 18 analysts estimated South Korea’s economy expanded by a median 4.0 percent in the fourth quarter – the quickest pace of growth since an annual 4.3 percent rise in the first quarter of 2011. This underlying strength in activity is seen cementing a fairly bullish outlook for the rest of this year. Both analysts and policymakers see growth momentum picking up over the year as the trade-reliant economy gets a helping hand from improving exports and a more surefooted recovery in developed nations.

“We’re bullish on South Korea over the coming year. Its exports are highly geared into the U.S. upswing, and we expect this to underpin 2014 GDP growth of around 4 percent,” BNP Paribas economist Mark Walton said in a note to clients. overseas shipments growth to accelerate to 6.4 percent this year. The Bank of Korea and the finance ministry expect this year’s growth to come in just short of 4 percent from a projected 2.8 percent expansion in 2013. The rosy outlook is partly predicated on private consumption doing more of the heavy lifting, especially as government spending is forecast to grow at a slower rate of 2 percent this year from a 7-plus percent rise in 2013. The central bank expects private consumption to grow by 3.4 percent this year, accelerating from a projected 1.9 percent rise in 2013 due to continued jobs growth and subdued price pressures. Reuters

Australia inflation spikes, limits scope for rate cut Consumer price index advanced 2.7 percent last year

ustralian inflation rose by far more than expected last quarter as the cost of food, holiday travel and tobacco all rose, dealing a major blow to the prospects of another cut in interest rates and sending the local dollar higher. Yesterday’s figures from the Australian Bureau of Statistics showed consumer prices (CPI) rose 0.8 percent in the fourth quarter of 2013, taking annual inflation to 2.7 percent. Key measures of underlying inflation both climbed by 0.9 percent in the fourth quarter, well above forecasts of 0.6 percent and the largest rise since mid-2011. The annual pace on inflation accelerated to 2.6 percent, still within the Reserve Bank of Australia (RBA) long-term target of 2 percent to 3 percent, but a challenge to expectations it would stay contained for the next year or more. “A disappointing set

The Aussie rose as investors pared bets on further rate cuts

of numbers, which are a reminder that inflation is still a two-way story in Australia,” said Michael Blythe, chief economist at Commonwealth Bank of Australia. “The key part is we’re starting to see some import price pressures coming through from the currency, but we’re not seeing that

offsetting slowdown from domestic inflation that the Reserve Bank has in its forecasts, an indication of some upside risks to be moved through 2014.” The Australian currency hit a three-and-a-half year low on the U.S. dollar this week having been on the decline for much of the past nine months.

That was boosting prices for imported goods, a reversal of a trend that lasted from 2010 to 2012 when the currency held at historically high levels. The market reaction was immediate, with investors sharply widening the odds of another cut in rates. Interbank futures now show only a 20 percent of a cut by

July, compared to just over 50 percent before the data were released. Yields on three-year government paper shot up 12 basis points to 2.99 percent, wiping out gains made in the wake of a soft employment report released last week. That in turn lifted the Australian dollar three quarters of a U.S. cent to US$0.8864 and away from the week’s trough of US$0.8756. “There’s no doubt the figures were disappointingly high,” said Shane Oliver, head of investment strategy at AMP Capital Markets. “It does substantially reduce the chances of another rate cut.” Equally, though, he did not see much risk of the RBA reversing course and tightening. “I don’t think it’s enough given the volatility you can see in the quarter-to-quarter inflation numbers in Australia, I don’t think it would be enough to shock the Reserve Bank to hike.” Reuters

14 14

January 23, 2014 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 79.3

126.80

34.1

78.5

123.75

33.7

77.7

120.70

76.9

117.65

33.3 32.9

Max 79.30

average 77.439

Max 60.75

Min 76.15

average 61.935

Last 76.95

Min 60.75

Last 61.85

76.1

Max 126.8

average 116.929

PRICE

average 33.010

Min 32.10

Last 32.65

32.1

35.6

63.1

25.7

35.2

62.3

25.5

34.8

61.5

25.3

34.4

60.7

Max 25.90

average 25.335

DAY %

YTD %

(H) 52W

Min 25.10

Last 25.25

(L) 52W

95.62

0.684426661

-2.973110096

104.5199966

84.87999725

BRENT CRUDE FUTR Mar14

107.33

0.562166214

-2.895141591

112.4399948

96.31999969

GASOLINE RBOB FUT Feb14

264.1

0.778447684

-5.201191715

286.9299889

243.68999

910.25

-0.273897562

-3.34483674

954.5

840

4.459

0.631911532

5.413711584

4.770000458

3.476000071

GAS OIL FUT (ICE) Mar14 NATURAL GAS FUTR Feb14

303.66

0.726440442

-0.933054939

317.8399801

278.4999847

Gold Spot $/Oz

1241.33

-0.5329

3.2085

1696.2

1180.57

Silver Spot $/Oz

19.8533

-1.1255

1.5119

32.46

18.2208

Platinum Spot $/Oz

1455.37

-0.3028

7.348

1742.8

1294.18

Palladium Spot $/Oz

746.42

-0.0509

4.9817

786.5

629.75

LME ALUMINUM 3MO ($)

1798.5

-0.442845281

-0.097208721

2174

1736.25

LME COPPER 3MO ($)

7339

0.341810227

-0.285326087

8346

6602

LME ZINC

2089

0.601974476

1.654501217

2230

1811.75

NY Harb ULSD Fut Feb14

3MO ($)

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

14725

1.202749141

5.935251799

18770

13205

15.485

0.226537217

1.374795417

16.77000046

15.12000084

427.5

0.588235294

1.303317536

606.5

406.25

WHEAT FUTURE(CBT) Mar14

565.75

0.622498888

-6.526228831

845

560.5

SOYBEAN FUTURE Mar14

1285.5

0.390472472

-0.541586074

1377.75

1174

COFFEE 'C' FUTURE Mar14

116.2

-0.810926163

4.968383017

171.5500031

104.1499939

SUGAR #11 (WORLD) Mar14

15.24

0.131406045

-7.129798903

20.36999893

15.09999943

Mar14

COTTON NO.2 FUTR Mar14

25.1

88.08

-0.05673437

4.064272212

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 35.55

average 34.45

Min 34.00

Last 34.90

34.0

World Stock Markets - Indices

NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

2243.796

2.577752

-3.700816

2791.303

2023.171

8625.3

0.2953523

0.160135

8668.95

7637.2

KOSPI INDEX

1970.42

0.3325033

-2.034461

2063.28

1770.53

S&P/ASX 200 INDEX

5319.766

-0.2193957

-0.6061767

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4461.686

0.2063336

4.387027

5251.296

3837.735

2.55814

1.146793

17.7

27462159 22093 4608800

HOPEWELL HLDGS

113000

22.05

7.44

GALAXY ENTERTAIN

CSI 300 INDEX

5 10.384

HANG SENG BK

TAIWAN TAIEX INDEX

0.26

7.45 24.7

6023.44

19426.35938

0.68

2.836877

13.38

6875.62

24111.55078

1.162789

-0.2751032

2.076121

1.658007

-0.9617131

1.162791

7.25

-20.33195

3105.365

0.2133015

0.435

4227.933

23082.25

1576561

-1.993355

1.177274

1082916

11.08

19.2

0.6712912

HANG SENG INDEX

3.29

18.22

11.8

4225.76

10441.11

5.12

5.875369

CHINESE ESTATES

16320.22

-4.477613

CHOW TAI FOOK JE

NASDAQ COMPOSITE INDEX

-2.88712

-1.103753 -0.8888889

1392000

13622.96

0.1582683

4.48 17.84

2529775

16588.25

15820.96

(L) 52W VOLUME CRNCY

10127335

-0.9786091

(H) 52W

0.75

-0.2680672

NIKKEI 225

YTD %

22.85

16414.44

7418.36

DAY %

9794.05

0.8757 1.4814 0.88 1.2746 88.06 7.9818 7.7514 6.0393 52.89 28.56 1.2259 28.98 40.555 9603 86.41 1.21196 0.82146 7.8281 10.195 117.06 1.0289

2.12

DOW JONES INDUS. AVG

2.196258

1.0582 1.6603 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.247 45.375 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

0.5813937

(L) 52W

0.3271285

-0.5044 -0.2303 -2.1625 -1.5766 0.594 -0.0413 -0.0425 0.0413 -0.0808 -0.2981 -1.0799 -1.4123 -1.781 0.2306 1.075 -0.5964 1.3745 1.7456 1.5679 2.2139 0

-0.6036233

(H) 52W

9761.95

1.0933 0.1338 0.2744 0.0591 0.3353 -0.005 -0.0013 -0.0264 0.0668 -0.1004 0.1096 -0.043 0.1106 -0.0741 -0.7523 0.2196 0.0753 -0.1354 -0.0684 0.2829 0

-2.808989

YTD %

0.8877 1.6463 0.911 1.3547 104.37 7.9899 7.7572 6.0518 61.85 32.873 1.2779 30.234 45.2 12143 92.653 1.23407 0.82284 8.1979 10.8231 141.38 1.03

-0.6036217

DAY %

DAX INDEX

(L) 52W

1.73

PRICE

6860.99

(H) 52W

24.7

COUNTRY

YTD %

AMAX INTERNATION

CHINA OVERSEAS

FTSE 100 INDEX

DAY %

BOC HONG KONG HO CHEUK NANG HLDGS

0.3911177

PRICE

Macau Related Stocks

CENTURY LEGEND

NAME

Max 34.10

25.9

WTI CRUDE FUTURE Mar14

CORN FUTURE

114.60

Currency Exchange Rates

NAME

METALS

Last 114.6

63.9

Commodities ENERGY

Min 114.6

32.5

EMPEROR ENTERTAI

4.84

-6.019417

5.4

1.93

5765000

FUTURE BRIGHT

4.63

-3.138075

-1.279319

5.3

1.609

3364000

76.95

-5.524862

10.63982

84.5

30957443

124.1

0.4045307

-1.27287

132.8

110.6

854351

27.25

0.1838235

3.809524

35.3

23.2

463111 11822421

0.2915452

2.198453

90.7

77.85

HUTCHISON TELE H

HSBC HLDGS PLC

2.92

-2.013423

-0.680274

4.66

2.5

5236027

LUK FOOK HLDGS I

26.35

-2.946593

-10.67797

16.88

2115000

MELCO INTL DEVEL

30.75

-1.6

7.894737

32.5

11.52

10943162

MGM CHINA HOLDIN

32.65

-6.58083

-1.359512

36.15

15.457

10749027

3.72

-0.5347594

-0.268097

4.2

2.68

608000

0.325

-5.797101

-4.411766

0.4

0.131

84690000

MIDLAND HOLDINGS NEPTUNE GROUP NEW WORLD DEV

10.4

1.5625

6.230848

15.12

9.35

16341439

SANDS CHINA LTD

61.85

-4.108527

-2.367796

67.15

33.5

22501090

FTSE Bursa Malaysia KLCI

1812.31

-0.1669109

-2.927213

1882.2

1597

SHUN HO RESOURCE

1.67

1.212121

1.212123

1.92

1.33

192000

NZX ALL INDEX

1045.072

0.4889484

4.622808

1048.998

904.128

SHUN TAK HOLDING

4.87

-4.133858

6.798247

5.18

3.27

22502775

PHILIPPINES ALL SHARE IX

3719.03

1.547363

2.897086

4571.4

3440.12

SJM HOLDINGS LTD

25.25

-2.697495

-2.884615

17.04

9467007

8.87

1.954023

0.1128707

14.46

7.38

1409730 13168078

Euromoney Dragon 300 Index Sin

599.12

-0.04

-2.03

STOCK EXCH OF THAI INDEX

1286.38

-0.5196814

-0.9494003

1649.77

1205.44

HO CHI MINH STOCK INDEX

551.92

-1.427015

9.371218

564.61

440.48

Laos Composite Index

1238.78

-0.2038169

-1.160902

1455.82

1224.94

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

SMARTONE TELECOM WYNN MACAU LTD

34.9

-1.828411

-0.7112419

38.25

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

82.67

1.572675

5.379227

82.67

45.38

334160

BOC HONG KONG HO

3.18

0.3154574

-1.242237

3.6

2.99

42500

GALAXY ENTERTAIN

10.55

-1.979002

17.09212

10.81

3.8975

48733 7289383

INTL GAME TECH

18.14

2.082161

-0.1101313

21.2

14.75

JONES LANG LASAL

105.9

1.993643

3.42807

106

80.86

312570

LAS VEGAS SANDS

82.03

0.1220554

4.00659

82.48

47.95

5108349 3972653

MELCO CROWN-ADR

44.215

-1.678897

12.73585

45.4799

17.76

MGM CHINA HOLDIN

4.55

1.5625

5.568447

4.66

20500

MGM RESORTS INTE

26.36

-0.1893222

12.07483

26.7

11.72

15501668

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.36

0.9009009

0.598805

3.6

2.2

159280

212.27

-1.590172

9.299208

216.99

111.3456

1815601

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

30.2

1.003344

16574881

CHINA UNICOM HON

13.68

1.333333

22775492

ALUMINUM CORP-H

3.61

15433022

CITIC PACIFIC

10.12

0.1980198

6468988

BANK OF CHINA-H

3.15

1.286174

329406866

BANK OF COMMUN-H

5.87

0.8591065

37793438

0.1727116

14.5

BANK EAST ASIA BELLE INTERNATIO

NAME

CLP HLDGS LTD

NAME

PRICE

DAY %

64.4

0.625

2568679

SANDS CHINA LTD

28.75

-0.1736111

6213954

SINO LAND CO

14.28

0.990099

7686664

SUN HUNG KAI PRO

109.1

1.018519

8616634

-0.4815409

2456828

265.6

1.45149

2048509

23.9

2206357

0.8064516

5926157

52.75

1.05364

3208615

POWER ASSETS HOL

65.6

1561243

CNOOC LTD

16.32

0.4926108

46287676

1260442

COSCO PAC LTD

11.76

3138217

SWIRE PACIFIC-A

7192500

ESPRIT HLDGS

12.44

-0.48

4211743

TENCENT HOLDINGS

0.2087683

10140777

HANG LUNG PROPER

26.55

-0.1879699

7812341

TINGYI HLDG CO

CATHAY PAC AIR

13.78

0.2911208

3140232

HANG SENG BK

119.7

0.167364

1690249

WANT WANT CHINA

CHEUNG KONG

114.9

1.23348

3918568

HENDERSON LAND D

2.059087

5880582

WHARF HLDG

75.55

0.1325381

701703

1.112235

6329376

125.6

3.54493

9625332

76.5 -0.06531679

9291476

BOC HONG KONG HO

CHINA COAL ENE-H

7.7

-0.1297017

40174849

CHINA CONST BA-H

5.87

1.206897

202072100

CHINA LIFE INS-H

22.9

0.4385965

30126882

CHINA MERCHANT

25.6

0.3921569

4209584

CHINA MOBILE

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

85.45

1.064459

16569813

HUTCHISON WHAMPO

CHINA OVERSEAS

20.2

-0.2469136

19374736

IND & COMM BK-H

CHINA PETROLEU-H

8.36

0.9661836

101198904

CHINA RES ENTERP

25.2

0.8

77.35

1.243455

6697663

5.17

1.372549

317570965

LI & FUNG LTD

12.84

-0.9259259

17517410

4219717

MTR CORP

29.85

1.530612

4880670

MOVERS

VOLUME

4 23136

INDEX 23082.25 HIGH

23135.43

LOW

22902.32

CHINA RES LAND

17.16

1.179245

6849146

NEW WORLD DEV

12.98

1.564945

12528960

52W (H) 24111.55078

CHINA RES POWER

16.08

-0.618047

7490964

PETROCHINA CO-H

10.94

-1.263538

64234127

(L) 19426.35938

CHINA SHENHUA-H

33.35

-0.1497006

11160228

PING AN INSURA-H

63.35

1.198083

8338502

22902

20-January

22-January

15 15

January 2014 April 19,23, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

BANGKOK POST Business leaders called on the caretaker government yesterday to reconsider its decision to invoke a state of emergency in the capital and surrounding provinces. They said the move would only heighten the political conflict and further hurt business operators. The state of emergency takes effect from today and is intended to deal with the anti-government protests. Pornsil Patchrintanakul, vice-chairman of Thai Chamber of Commerce, said: “With curfews imposed, Silom, which has now become a walking street because of the political gatherings, will immediately have stricter inspections, causing sales for vendors there to fall.”

Ben Bernanke’s global legacy Arvind Subramanian

Senior Fellow at the Peterson Institute for International Economics and the Centre for Global Development

INQUIRER Business Davidson Bangayan, the suspected “David Tan” allegedly involved in massive rice smuggling in the Philippines, showed up at a Senate investigation on Wednesday. Other personalities invited to the hearing of the Senate committee on agriculture and food were Agriculture Secretary Proceso Alcala, Finance Secretary Cesar Purisima, Trade Secretary Gregory Domingo, Justice Secretary Leila de Lima, Customs Commissioner John Philip Sevilla, and Ombudsman Conchita Morales. The committee decided to continue its hearing into the rice smuggling “in the light of reports of payoffs involving customs officials and the identification of alleged smugglers.”

PHNOM PENH POST In the latest move to assert control over Cambodia’s saturated telecommunications industry and maintain tighter oversight, the Telecommunication Regulator of Cambodia (TRC) last week called for all industry providers to give proof of operations in a bid to snuff out inactive firms and reclaim wasted licences. The TRC appeals to internet service, mobile service, optic cable, fixed line and wireless service licensees and all other firms, not currently providing services but still holding a licence to step forward and update the regulator on their current operations by February 28.

NZ HERALD Western Bay landlords say Tauranga does not have a rental shortage, insisting that the “feral” behaviour of some prospective tenants is putting them off renting out their properties. Bay landlords say they have seen it all, from patched gang members arriving to view a property, to sex workers keen to run their business from home, families of five looking to live in a one-bedroom unit and people who urinate in gardens while viewing a property. “I have had people turn up with a rottweiler when the advertisement distinctly states no dogs,” said landlord Trevor Davies

he world is still struggling to digest Alan Greenspan’s mixed legacy as chairman of the U.S. Federal Reserve Board from 1987 to 2006. So it is too soon to assess whether his departing successor, Ben Bernanke, is headed for history’s chopping block or its pedestal. But the crucial international role that Bernanke and the Fed played during his tenure – a time when domestic economic weakness translated into relatively ineffective American global leadership – should not be overlooked. In these last five crisis-ridden years, the Fed has affected the world economy in two ways: through its hyperactive policy of purchasing long-term assets – so-called quantitative easing (QE) – and through its largely overlooked role in providing international liquidity. Let us consider each. Whatever the impact of QE on the U.S. economy, its impact on the rest of the world has been, on balance, generally benign. The first round of QE was unambiguously beneficial, because it minimised, or even eliminated, the tail risk of a global depression after the collapse of Lehman Brothers in September 2008. To be sure, subsequent action by the Fed received a mixed reception in the rest of the world. In 2010 and 2011, when QE pushed capital to emerging markets, there were complaints that the U.S. was practicing a form of currency manipulation. Since May 2013, when Bernanke signalled the possibility of unwinding QE,

emerging economies have faced the opposite type of pressure: capital outflows and sharp currency adjustments.

Domestic issues But in both cases, the problems for which blame was heaped on the Fed largely reflected macroeconomic mismanagement in the affected countries. For example, Brazil complained most vocally about capital inflows, because its currency had over-appreciated in a short period of time; but the main culprits were domestic wage increases and overheating, not the Fed’s policies. Likewise, India was severely affected by Bernanke’s suggestion that the Fed would “taper” QE, but only because its economy was characterised by high inflation and large budget and external deficits. It was as if the emerging markets had forgotten that exposure to Fed policies was part of the bargain they willingly made when they signed on to financial globalisation. Meanwhile, the Fed has been mindful of its international responsibilities, playing a constructive role by increasing dollar liquidity in times of extreme financial stress. It provided dollar liquidity (via swap lines) to the central banks of Brazil, Mexico, Singapore, and South Korea in the aftermath of the Lehman failure. And it has provided nearly unlimited amounts of similar liquidity to central banks in Europe and the Bank of Japan. These actions contributed to

easing extremely tight financial conditions and corresponding market volatility. The Fed’s support to emerging-market central banks was remarkable, because most of these countries chose not to borrow from the International Monetary Fund, which, in the aftermath of the Asian financial crisis in the 1990’s, had come to be considered an instrument of U.S. hegemony. They preferred to deal directly with the United States via the Fed, to which the IMF stigma evidently did not extend. In fact, the speed, timeliness, and effectiveness of Fed support have now led to efforts to institute similar mechanisms at the IMF.

Dollar supremacy The Fed’s support for Europe was similarly remarkable, because the rest of the U.S. government was an ineffective

Bernanke effectively leveraged his role as controller of the mighty dollarprinting machine known as the U.S. Federal Reserve

bystander at the time – able to offer cheap counsel but little hard cash to the eurozone’s distressed economies. Even efforts to augment the IMF’s resources floundered on the reef of American political dysfunction. All other major economies, including key U.S. allies, have enacted the legislation needed to strengthen the IMF; in the U.S., however, there has been no comparable action since 2010, owing to Congressional resistance. The explanation for the Fed’s exceptional role in the context of otherwise anaemic American international leadership is simple: though the U.S. economy is weak, and American politics is polarised to the point of paralysis, the dollar is still in demand. In these circumstances, Bernanke effectively leveraged his role as controller of the mighty dollar-printing machine known as the U.S. Federal Reserve. Dollar supremacy will not last forever, and it is increasingly being challenged by the Chinese renminbi, as I describe in my book Eclipse: Living in the Shadow of China’s Economic Dominance. But that vestigial source of American supremacy made Bernanke a constructive and effective international leader. As he departs from office, the assessment of his performance as “Helicopter Ben,” who dropped piles of cash on the U.S. economy, will begin in earnest. But history should not neglect “Ambassador Ben’s” crucial global role. © Project Syndicate

16 16

January 23, 2014 April 19, 2013

Closing EU halts investment talks with U.S.

Bombardier says 1,700 jobs to go

The European Commission has suspended talks on part of a far-reaching EU-U.S. free trade deal amid concern that hard-won social protections in Europe might be undermined. The trade negotiations began last year but now the Commission has launched a three-month public consultation on the proposed investment rules for firms. The aim is to close legal loopholes. An EU study last September estimated the pact could boost the size of the EU economy by 120 billion euros (US$162 billion) – equal to 0.5 percent of GDP – and the U.S. economy by 95 billion euros (or 0.4 percent of GDP).

Canada’s Bombardier Inc has said it will cut 1,700 jobs in its aerospace division in an attempt to save money. The job cuts will affect about 4 percent of the aerospace division’s workforce and come amid delays in the development of two of its aircraft. About 1,100 jobs will be lost in Canada and 600 in the U.S. Bombardier also said orders for new aircraft in 2013 fell by 15 percent from a year earlier. A company spokesperson said that both permanent and contract employees would be affected. “This is all to do with the goal of assuring our long-term success,” Bombardier spokesperson Helen Dunne told Reuters.

Two Vegas hotels to accept Bitcoin

EU urges ‘immediate end’to Ukraine violence EU’s Barroso warns Kiev of ‘possible actions’

he European Union yesterday called for “an immediate end” to the escalating violence in Ukraine, where two people were shot dead in clashes between police and pro-EU protestors. “I strongly condemn the violent escalation of events in Kiev overnight leading to casualties. The reported deaths of several protesters is a source of extreme worry,” said EU foreign policy Catherine Ashton. “The use of force and resort to violence is not an answer to the political crisis. All acts of violence must come to an immediate end and be swiftly investigated. Those responsible will have to be held to account,” she added in a statement. Two activists were shot dead as Ukrainian police stormed protestors’ barricades, the first fatalities since

the start of protests over President Viktor Yanukovych’s failure to sign a deal for closer ties with the EU. European Commission president José Manuel Barroso called for an end to violence in Ukraine and warned the authorities that the EU executive would assess “possible actions”. Mr Barroso voiced “shock” over the deaths of two pro-EU protestors and “deplored” the use of violence. “We will continue to follow closely these developments as well as assessing possible actions by the European Union and consequences for our relations with that country,” he said. Mr Yanukovych was reportedly due to meet with opposition leaders later yesterday to discuss the crisis. Saying she was deeply concerned about attacks on journalists and

reports of missing persons, Ms Ashton called on the government and the opposition to begin “a genuine dialogue at the highest level”. “The solution needs to meet the aspirations of the Ukrainian people,” she said. Joining a chorus of international protests, NATO Secretary General Anders Fogh Rasmussen also condemned the latest developments in Ukraine, saying “violence can never be the answer to a political crisis”. The foreign ministry of Lithuania, which currently holds the EU presidency, said consultations were taking place in the EU over possible actions. However, at talks between EU foreign ministers this week, there was no consensus on agreeing sanctions. AFP

Korea weighs suspending credit card firms S outh Korean regulators will consider suspending operations of three consumer finance companies next month following the country’s biggest theft of data on credit card holders. The Financial Services Commission may seek the maximum three-month suspension for the card units of KB Financial Group Inc, NH Financial Group Inc and the Lotte Group, the regulator said in a statement yesterday. It will also consider expanding suspensions to six months for future cases.

Prosecutors indicted three people this month for stealing and trading names, social-security numbers and card data tied to millions of customers at the three credit firms. FSC chairman Shin Je-yoon apologised yesterday for failing to prevent the breaches, which drove clients to cancel cards and prompted top executives at the companies to offer to quit this week. “We’re deeply sorry for causing concerns and inconvenience from the leak of precious personal information,” Mr Shin told reporters in Seoul. “Bearing in mind the deepening

public anxiety, we promise that this won’t happen again.” While there’s no evidence that the information has been misused, the companies will fully compensate victims for any damage, Mr Shin said. The leaks have riled the public and politicians in a country where consumers use plastic for more than half of their spending. President Park Geun-hye demanded a thorough investigation and told officials to prepare steps to prevent a repeat of the incident, according to a statement yesterday. Bloomberg News

Two Las Vegas casino hotels will become the first known U.S. commercial gambling houses to allow the use of the unregulated digital payment system, Bitcoin, casino officials said. The co-owned Golden Gate Hotel and Casino and The D Las Vegas Casino Hotel began accepting Bitcoins yesterday as payment for hotel rooms and related purchases, casino officials said in a statement. Bitcoin is an online currency bought and sold on a peer-to-peer network that is independent of central authority. The D will also accept the virtual currency at its gift shop, the American Coney Island restaurant and Joe Vicari’s Andiamo Italian Steakhouse. “Downtown has really become a technology hub for all of Las Vegas,” Derek Stevens, co-owner and chief operating officer for both casinos, told Reuters. “I think it is fitting that the Golden Gate and The D are the first hotels to offer [Bitcoin].” Mr Stevens said patrons increasingly had requested to use Bitcoins over the past year. By becoming the first known casino hotels to accept the virtual currency, he hoped to attract customers unable to spend Bitcoins at other local businesses. The properties will install iPads at cashier stations and use the online platform BitPay to process the currency, which can be loaded into a virtual wallet and used with a mobile device.

El-Erian leaves bond giant Pimco One of the investment world’s best-known figures, Mohammed El-Erian, says he will resign as chief executive of the U.S.-based bond giant Pacific Investment Management Co. Neither Mr El-Erian nor Pimco gave any reason for his departure, which is scheduled for March. He will, however, stay on as a consultant at Pimco’s parent company, German insurance giant Allianz. Mr El-Erian, 55, is a well-known commentator on broadcast media and the conference circuit. Two years ago, Bill Gross, the 69-year old cofounder of Pimco, named Mr El-Erian as the man he wanted to take over from him as head of the Pimco business. Allianz said Douglas Hodge, currently the managing director and chief operating officer of the firm, would be its next chief executive, with other managing directors Andrew Balls and Daniel Ivascyn acting as his deputies. The departure reverberated around the investment industry where Pimco plays an outsized role. Jeff Tjornehoj, senior research analyst at Lipper, said “Mohamed El-Erian helped set the strategic direction of the company and it certainly makes a difference when someone who is used to making such headlines leaves a company.”