Macau Business Daily, Jan 24, 2014 by Business Daily

Vitor Quintã

MOP 6.00

April 19, 2013

Year II

Number 462 Friday January 24, 2014

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Assembly nods more free money for SMEs Page 2

SJM disposes of another private jet Page 6

Retailer Esprit sees profit return in first half Page 7

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global slump in wholesale gold prices last year saw an equivalent rise in retail sales of the product in Macau. Big jewellery retailers in Macau saw sales jump 20 to 30 percent after the precious metal’s corresponding 28 percent price-plunge in 2013. Small shops here, however, did not fare as well as bigger rivals, an industry representative says. The Macau Goldsmith’s Guild, which includes over 90 members from the gold and jewellery industry, estimates that the volume of sales last year rose by about 20 percent to 30 percent from a year before. “Sales were boosted by the frenzy buying of gold products for two months early last year, but the sales have now been normalised,” said Lei Cheok Kuan, the guild’s vice-president.

Hang Seng Index 23084

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www.macaubusinessdaily.com

Water prices to rise by 10 pct for big users

HSI - Movers Name

Large corporate consumers of water, including casinos and hotels, face a hike of at least 10 percent this year in the tariff they pay, said the director of the Marine and Water Affairs Bureau Susana Wong Soi Man yesterday. A new charging scheme will be announced in the first half of this year. Tariffs for small consumers, including most homes and small-and medium-sized enterprises, may be frozen.

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2.45

WANT WANT CHINA

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CHINA RES POWER

0.31

LENOVO GROUP LTD

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SANDS CHINA LTD

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CHINA CONST BA-H

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Source: Bloomberg

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Block bookings for VIPs fuel hotel room rates Block bookings from gaming promoters – to reserve hotel rooms for wealthy mainland gamblers during the weeklong Lunar New Year holiday – are partly responsible for a jump in room rates in the city’s four- and five-star hotels. So says the Macau Hoteliers and Innkeepers Association. Prices are expected to at least double in the peak period from regular days, travel industry representatives told Business Daily. Page 4

Yellow taxi operator to get 9-month contract The Transport Bureau is likely to extend Vang Iek Radio-Taxi Co Ltd’s contract for another nine months, starting from February 7, Kuok Keng Man, convenor of the Traffic Affairs Consultative Committee, told reporters yesterday. All taxis operated by Vang Iek, known by their yellow livery, can only be ordered by phone during the nine-month period, and not hailed in the street. Page 5

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January 24, 2014 April 19, 2013

Macau

More free money for SMEs Legislative Assembly nods through increase without discussion on whether the cash helps the economy Tony Lai

tony.lai@macaubusinessdaily.com

he government said yesterday that under one percent of money it has loaned to smalland medium-sized enterprises since 2003 had turned into bad debt. Sou Tim Peng, director of Macao Economic Service, yesterday told the Legislative Assembly that only two out of 436 cases approved between 2003 and 2013 failed to repay the loans to the banks. What Mr Sou didn’t say was how many loans had been or were currently ‘delinquent’ – i.e., had failed to make payments on time. Nor did the official indicate what benefit the loans had brought to the economy in terms of creating jobs and boosting gross domestic product. According to the government, 450 million patacas (US$56.3 million) have been loaned on an interestfree basis since the beginning of the scheme. That makes the average loan per enterprise 1.03 million patacas – equivalent to US$129,000. The Assembly yesterday overwhelmingly approved the first reading of a bill to raise the cap on the pool of money available for the SME Credit Guarantee Scheme to 900 million patacas from 500 million patacas. The ceiling for another pool of money to support local business – the SME Credit Guarantee Scheme Designated for Special Projects – remains at 100 million patacas.

The Legislative Assembly yesterday

Under the first scheme, the government guarantees 70 percent of a five-year interest-free loan made to an enterprise by a bank taking part in the scheme, up to a maximum amount guaranteed of 3.5 million patacas. Under the second, the government guarantees the full amount of loans up to one million patacas. Mr Sou said that the two SME loans that did turn into bad debt required the administration to provide the lending banks with 3.1 million patacas in compensation. He said that was under 0.6 percent of all capital advanced. Secretary for Economy and Finance Francis Tam Pak Yuen said: “This low proportion of overdue loans

shows the [application] evaluation committee has fully enacted its role.” He and his subordinate Mr Sou stressed the government has measures to monitor the companies, namely the banks would report the company’s situation to the government every six months. But some legislators were doubtful whether enlarging the pool fund’s ceiling was really so urgent. “The government established the schemes in 2003 when the city’s economy was hit by SARS [severe acute respiratory syndrome],” said legislator Kwan Tsui Hang, “but the economy has become much more ideal now”.

Assembly member and businessman Fong Chi Keong was also critical towards the two schemes, saying it was “unreasonable” to give so much support to the SMEs. Mr Tam responded: “Though there are no external factors [upon the economy] to let us make this adjustment, the [current] guarantee credits have almost been all used.” “So this change… can let more SMEs benefit from the schemes for strategic transformation and improving their business scale,” he said. The addition of 400 million patacas to the pool of available credit can help at least 110 more SMEs and should be enough to cover applications during the next two years, he added. Only 61.8 million of the 500 million patacas pooled for the SME Credit scheme remains, while the special projects pool is mostly unused, with 90.2 million out of 100 million patacas still available as of the end of last year, government data show. The assembly yesterday also gave final nods to the bill to increase the salaries of major officials including Chief Executive Fernando Chui Sai On by 10 percent. Mr Chui will earn 269,725 patacas a month, including representation expenses, after the law is gazetted. The increases will go to 149 senior officials, including Executive Council members, assembly members and judges.

Water prices to rise by 10 pct for big users A proposal for the new charge scheme on water tariff will be out in the first half of this year Tony Lai

tony.lai@macaubusinessdaily.com

arge corporate consumers of water, including casinos and hotels, face a hike of at least 10 percent this year in the tariff they pay, said the director of the Marine and Water Affairs Bureau Susana Wong Soi Man yesterday. A new charging scheme will be announced in the first half of this year. Tariffs for small consumers, including most homes and small-and medium-sized enterprises may be frozen at current levels, she added. “Our initial suggestion is that the increase for the big water users will not be less than the rise of the water cost, which is 10.6 percent,” Ms Wong said yesterday on the sidelines of a media lunch. Her bureau classifies casinos, hotels, saunas, golf courses and construction

companies as special users as they consume the most water. “Our main direction is that the hike for the households will be the lowest or there is no change,” Ms Wong added. The government first mentioned an increase in water tariffs last month after Macau agreed to pay the neighbouring mainland province of Guangdong 2.29 yuan (3.01 patacas, or 38 US cents) per cubic metre for the water it supplies. Previously Guangdong charged 2.07 yuan. Ms Wong said yesterday her department expected after the Lunar New Year holidays to receive a report from an academic institute about the new water rate proposals. A new tariff scheme is likely to finalised in the first half of this year but there is no firm timetable for its introduction, she added.

The market cost of a cubic metre of water is now more than 6.6 patacas, Ms Wong said. Households currently pay between 4.35 patacas (US$0.54) and 5.27 patacas after government subsidies. Special users pay 5.8 patacas. Separately Ms Wong said the bureau hoped to take receipt of the Taipa Ferry Terminal from the building’s construction contractors “by the middle of this year”. But she added the department would need half a year for trial operations before it’s fully opened. The Infrastructure Development Office said last month in a reply to a legislator’s enquiry that the terminal project would only be finished by the second half of this year, nine years after construction commenced.

Marine and Water Affairs Bureau director Susana Wong

January 2014 April 19,24, 2013

Macau

Smaller shops find it hard to compete against the big chains

Buying frenzy boosts sales of gold in 2013 The slump in the price of gold helps increase jewellery shop sales by about one-quarter Tony Lai

tony.lai@macaubusinessdaily.com

ales by Macau’s big retailers of jewellery jumped when the price of gold plunged by 28 percent last year. The plunge buoyed demand for gold among shoppers from the mainland, the world’s biggest buyer of the metal. But Macau’s small jewellers did not fare as well as their bigger rivals. The Macau Goldsmith’s Guild, which has 90 members in the gold and jewellery business, estimates that their sales last year were about 20 percent to 30 percent higher than the year before. “Sales were boosted by the frenzied buying of gold products for two months early last year, but sales have now normalised,” said the guild’s vice-president, Lei Cheok Kuan. After a 12-year bull run, the gold price tumbled as signs of a recovery in the global economy prompted investors to dump their gold in favour of assets with higher returns, and as government curbs on imports slashed demand in India, the world’s secondbiggest buyer of the metal. Many mainlanders rushed to Macau or Hong Kong to buy gold and jewellery as the price of gold fell to its lowest for three decades. That meant higher revenue for the gold and jewellery retailers here, including Hong Kong-listed jewellery chains Chow Tai Fook Jewellery Co

Ltd and Luk Fook Holdings (International) Ltd. Chow Tai Fook’s samestore sales of gold in Macau and Hong Kong were 78 percent higher in the second quarter of last year than a year earlier. The company’s revenue grew by 85 percent, and it attributed the growth mainly to “the increase in sales of gold products following a sharp decrease of gold price since April 2013”.

they will be cheated there,” he said. Mr Lei said smaller shops could not offer as wide a range of products as big retailers did. “They have the resources to offer their own products from their own workshops,” he said.

KEY POINTS

contracting this month as new orders decline, confirming that a mild slowdown at the end of last year is continuing. The HSBC and Markit Economics mainland purchasing managers index fell to 49.6 points this month from 50.5 in December. A reading below 50 indicates contraction.

Less for luxuries

Reuters quoted a gold trader in Hong Kong as saying: “Those Gold, jewellery sales rise Brand recognition numbers are making 20-30 pct in 2013 some people fear that Official data show the China may not buy as value of sales of jewellery Rush to buy gold as prices much gold as last year.” and watches in Macau dropped The trader added: was 14.5 billion patacas “If the economy is (US$1.81 billion) in the Price fell to its lowest slowing, then luxury and first nine months of last for three decades discretionary spending year, 25 percent more might be cut down.” What is more, the than a year earlier. Mainland demand forecast Mr Lei, who is the to ease in 2014 mainland’s imports of general manager of gold seem set to fall this Cherry Goldsmith and year from last year’s Jewellery (Group) Ltd’s record levels, according shop in the city centre, said “ B u t m o s t s m a l l to analysts, who forecast small jewellers did not reap companies here do not have that the price of the metal as much benefit from the that luxury, especially in view will decline for the second decline in the price of gold of the labour shortage and year in a row. as the big chains. the surge in rents.” Mr Lei declined to give The economic slowdown a forecast of gold sales for “Our earnings definitely did not grow by over 20 in the mainland forecast by this year. “At least, I am not very percent, like those of some analysts may mean sales of big-name chains,” he told gold and jewellery in Macau optimistic about the sales Business Daily. will not be as strong this of small jewellery retailers “ M a i n l a n d e r s a r e year as last. here,” he said. Preliminary data influenced by a strong sense Luk Fook said this month of brand recognition, and they published yesterday indicate that the annual rate of growth usually shop in the big stores that mainland manufacturing in its same-store sales in as they are less worried that is a hair’s breadth from Macau and Hong Kong had

Sales were boosted by the frenzied buying of gold products for two months early last year, but sales have now normalised Lei Cheok Kuan, Macau Goldsmiths Guild vice-president

eased to 6.3 percent in the fourth quarter of last year from 57.9 percent in the six months ended September 30. Luk Fook has 10 shops here. Now the gold-buying frenzy has passed and retailers have finished restocking, market watchers expect sales to slow. “It is unlikely that Chinese demand in 2014 will match the 2013 level, let alone expand at its typical growth rate,” said Societe Generale SA metals analyst Robin Bhar. With Reuters

January 24, 2014

Macau Nam Kwong’s profit jumps by one-fifth Macau-based state-run conglomerate Nam Kwong (Group) Co Ltd saw its profits surge last year on record revenue. Its chairman Xu Kaicheng said at a company event on Wednesday that the group experienced “healthy development” last year. Its revenue increased by 16.6 percent to a “record high” from a year earlier, he added. The firm’s profit grew by 20.9 percent from 2012, exceeding its 2013 target of double-digit growth, stated Mr Xu. But he did not provide a detailed breakdown for his group’s result. Nam Kwong, celebrating its 65th anniversary this year, will “further expand its scale and fully unleash its role of a state-run enterprise in Macau”, Mr Xu pledged. Nam Kwong’s businesses here range from hotels, travel agencies, and event and exhibition management to bus operations, petroleum imports and general trade. One of the most notable deals recently was its purchase of bus operator Sociedade de Transportes Colectivos de Macau SARL (TCM) in 2012.

Hotel room rates over the holidays are tipped to be at least double what they are usually

Block bookings for VIPs hoist hotel room rates A travel industry source says four-star and five-star hotel rooms are almost fully booked over Lunar New Year Stephanie Lai

sw.lai@macaubusinessdaily.com

jump in room rates in fourstar and five-star hotels over the Lunar New Year holidays is due in part to block bookings by VIP gaming promoters. People in the travel industry told Business Daily that they expected rates over the peak period to be at least double what they were usually. The president of the Macau Travel Industry Council, Andy Wu Keng Kuong, said four-star and five-star hotel rooms were “almost fully booked” for the Lunar New Year holidays, which begin on January 31. “The third to the sixth days of the Chinese New Year holidays are usually the period with the heaviest bookings,” Mr Wu said. “The nightly rates for four-star and five-star hotels in this period range from 3,000 patacas [US$375] to 7,000 patacas,” he said. Last February the average room rate in four-star hotels was 1,158 patacas a night and the average rate in five-star hotels was 1,905 patacas, Macau Hotel Association data show. Last year the average room rate in three-star, four-star and fivestar hotels was 1,474 patacas, 4.1 percent more than in 2012, the Macau Government Tourist Office disclosed on Wednesday. Hong Kong’s Chinese-language Apple Daily, citing the results of its own survey, reported this week that the average hotel room rate in Macau will be HK$4,000 (US$516) a night over the Lunar New Year holidays.

At any price Both Mr Wu and the president of the Macau Hoteliers and Innkeepers Association, Chan Chi Kit, believe junket operators book dozens of rooms for high rollers to stay in over the holidays. They say the block bookings reduce

the available supply of rooms and increase the price of the remainder. “For holidays like Chinese New Year, hotels usually keep 50 percent to 60 percent of their rooms for bookings by travel agencies and also VIP gaming promoters,” said Mr Chan. “It is also a period with higher room rates than other big Chinese holidays like the Labour Day golden week in May and the National Day holidays in October,” he said. “To get rooms for their gamblers during the Chinese New Year holidays, VIP gaming promoters will pay any price to make a block booking,” he said. “Even in non-gaming resorts, you can see some Chinese four-star hotels in the city centre asking for over 6,000 patacas a night, while in some four-

The nightly rates for four-star and five-star hotels in this period range from 3,000 patacas to 7,000 patacas Andy Wu Keng Kuong, Macau Travel Industry Council president

star and five-star hotels the rate can as much as 6,000 patacas to 7,000 patacas a night,” Mr Chan said. “It is a season when some sales managers can set quite high room rates when selling rooms to agencies,” he said. “And there are still customers that can pay these prices.”

No complaints Mr Wu believes the high room rates are due more to the limited supply of hotel rooms, in view of the influx visitors expected during the Lunar New Year holidays. “We’re talking about a city with only about 28,000 hotel rooms to serve the huge number of visitors coming here during the year’s peak travel season,” he said. “We cannot rule out speculation by travel agencies pushing up room rates,” he added. “But I believe the limited supply is the more important cause of the rapid surge in room rates, especially when we see that the number of mainlanders travelling here on individual visas is still growing.” The individual visa scheme gives citizens of dozens of mainland cities visas to travel to Macau as individuals rather than as members of tour groups, who travel on collective visas. The city had 29.32 million visitors last year, 4 percent more than in 2012, of which 18 million were mainlanders. Of the mainlanders, 8 million travelled here on individual visas. The Macau Government Tourist Office said it had received no complaints about hotel room rates. Of the visitors to Macau last year, 14 million stayed overnight, 5 percent more than in 2012. The average occupancy rate of the city’s 102 hotels was 82.5 percent in the first 11 months of last year.

China Overseas to launch high-end home sales here State-owned developer China Overseas Land & Investment Ltd said it plans to launch sales of another high-end residential project in Macau’s NAPE district this year. The scheme, close to its ongoing The Paragon development, could provide 414 flats varying from 600 square feet to 1,700 square feet, said Tony Yau Wai Kwong, managing director of China Overseas Property, a unit of China Overseas Land & Investment. He told Hong Kong newspaper The Sun in an interview that the project could be completed by the third quarter of next year. He did not reveal the selling price of the units. Its other project The Paragon in the same area sold for an average of more than 10,000 patacas (US$1,250) per square foot, show transaction records from local real estate agencies. The new project’s English name is not yet decided says the company’s Macau office. The Chinese name translates approximately as ‘Double Diamonds’.

Nearly 2.6 million visitors in December Visitor arrivals to Macau increased by four percent year-on-year to 2,586,829 in December says the Statistics and Census Service. Sameday visitors accounted for 51 percent of the total. Mainland visitors for the final month of 2013 totalled 1,620,434, with 43 percent travelling to Macau under the mainland’s Individual Visit Scheme. Visitors from Japan and Malaysia increased by 11 percent and eight percent year-on-year in December, but decreased by 27 percent and four percent respectively year-on-year for the whole 12 months. The average length of stay of visitors during December was 1.0 day. Overnight and sameday visitors stayed an average of 1.9 days and 0.2 day respectively. In 2013 as a whole, the average length of stay of visitors remained unchanged from a year earlier, at 1.0 day. In 2013 as a whole, arrivals totalled 29.32 million up by four percent year-on-year. There were eight million mainlanders travelling under IVS, about 44 percent of the 18 million mainland visitors.

January 24, 2014

Macau

Yellow taxi operator to get 9-month contract But government imposes tighter conditions, including on-call only operation Stephanie Lai

sw.lai@macaubusinessdaily.com

he Transport Bureau is likely to extend Vang Iek Radio-Taxi Co Ltd’s contract for another nine months, starting from February 7, Kuok Keng Man, convenor of the Traffic Affairs Consultative Committee, told reporters yesterday. All taxis operated by Vang Iek, known by their yellow livery, can only be ordered by phone during the nine-month period, and not hailed in the street. In the meantime, the government will study if it needs to launch an open tender for a new long-term on-call taxi service. The committee had a meeting with Transport Bureau officials yesterday. 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. “The decision to give them the temporary extension is based on the fact that the company did

Wong Wan vows tighter oversight over taxis operation

show it’s making efforts to fulfil the government’s requirements and improve its services,” said Mr Kuok. “And the human resource issue is another factor behind the contract extension,” he added. 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. The Transport Bureau told Business Daily that the yellow taxi operator is still struggling to hire drivers. A taxi requires as many as three drivers to staff one 24hour shift. The bureau is not yet sure whether enough yellow taxis will be in operation to fulfil the contractual requirement to run an on-call service during the extension period. But Transport Bureau director Wong Wan said: “If they cannot fulfil on-call service, we’ll end the service contract with the company immediately,” Mr Wong told media after the meeting. “These nine months is also a trial period for us to understand the local market for the on-call taxi service. We’ll collect information and see how the service can be improved,” said Mr Wong. The Transport Bureau would also study if it should launch an open tender for the on-call taxi service, a spokeswoman told us. “During this nine-month period we’ll examine the contract terms for Vang Iek, and see if Macau needs more than one company running the on-call service,” she said. A phone call by Business Daily to Vang Iek after regular business hours, seeking more information, went unanswered yesterday.

January 24, 2014 April 19, 2013

Macau

SJM disposes of fifth private jet

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Said in September conditions in corporate jet market ‘largely unsatisfactory’ Michael Grimes

michael.grimes@macaubusinessdaily.com

HOSPITALITY One city, two prices The consumer price index, which measures changes in the prices of what Macau people buy, and the tourist price index (TPI), which measures changes in the prices of what visitors buy, are not strictly comparable. The CPI comes out more frequently than the TPI, and the baskets of goods and services used in compiling each index are different. Residents and visitors often spend money on different things. For example, residents spend money on buying or renting homes, while visitors spend money on staying in hotels. But residents and visitors sometimes spend money on similar things: food, for example. So rough comparisons can be made between the respective CPI and TPI measurements of changes in the prices of food; clothes; transport and communications; and leisure and culture.

In the past five calendar years tourist prices generally rose faster than consumer prices – in some cases much faster. The difference in the rates of tourist price inflation and consumer price inflation is smallest in the case of food. Demand for food by visitors probably buoys the prices paid by residents. Greater differences between the rates of tourist price inflation and consumer price inflation in the three other cases may reflect differences between what visitors and residents buy: tourists buy more expensive goods and services available in a narrower range of choices. J.I.D.

13.9 pct pts Difference between transport and communications price inflation rates for visitors and residents, 2009-2013

asino developer SJM Holdings Ltd and its parent firm have sold the fifth of six private jets originally leased in 2007 and 2008 – via an SJM subsidiary – from Credit Suisse AG. SJM and investment holding company Sociedade de Turismo e Diversões de Macau SA (STDM) had originally acquired the jets “to ensure there were adequate chartered jet services for the group’s gaming patrons,” SJM said in a filing to the Hong Kong Stock Exchange in August last year. Private jet transfer is a perk that casino operators in all major gaming markets typically reserve for their most important high roller gamblers. Macau International Airport Co Ltd (CAM), the operator of the city’s air terminal, and the government, have both touted the idea of Macau becoming a regional centre for private jet maintenance and storage. A new private jet hangar is being built and should be ready this year. But the demand from Chinese gamblers for such perks has been limited recently. Industry sources tell Business Daily that’s in part due to the fact that many of Macau’s high rollers are based in next-door Guangdong province – meaning a helicopter ride is more convenient than private jet. Travelling in private jets also attracts the attention of the authorities on both sides of the

Jet Asia corporate jets

border. And with the central government in Beijing currently keen to crack down on corruption among officials and in state-owned companies, too much conspicuous consumption is currently out of fashion – even for wealthy mainland gamblers, the sources add. “These back to back leases were and remain economically neutral to the company,” said SJM in its August filing, but added: “Since that time, conditions in the corporate jet market have been largely unsatisfactory and Jet Asia took the decision to sell the six aircraft.” In September a source told

Business Daily that the first four jets to be disposed of – believed to be Hawker mid-sized aircraft – went to a United States-based company. SJM’s filing this week said only that the fifth was going to “the same third party”, without naming it. The same method of disposal was used this time, involving the exercise of an “early buy” option under a lease agreement with Credit Suisse, and a subsequent sub-lease deal with private jet operator Jet Asia Ltd, which is controlled by STDM, the conglomerate founded by Macau’s former monopolist for the casino industry, Stanley Ho Hung Sun.

Corporate Wynn, Galaxy, Melco Crown get Forbes five-star treatment Altira Macau and City of Dreams’ Crown Towers have been awarded Forbes’ five-star hotel rating by the 56th annual Forbes Travel Guide. Altira Macau achieved the highest rating in both the hotel category and the spa category for the fifth consecutive year, according to a press release from the two venues’ operator Melco Crown Entertainment Ltd. Wynn Macau and Encore at Wynn Macau are also part of an elite group of only 13 properties worldwide to hold the Forbes Travel Guide’s ‘Triple Five-Star’ Award, with five-star recognitions across hotel, spa and restaurant categories. This was the first time the Forbes Travel Guide has rated restaurants in Asia, including the four signature restaurants at Wynn Macau and Encore at Wynn Macau. Galaxy Entertainment Group Ltd’s flagship Cotai venue Galaxy Macau has also won Forbes five-star ratings. They are for Banyan Tree Macau and Banyan Tree Spa Macau. Melco Crown and Galaxy are among four firms on Forbes’ ‘Asia’s Fab 50 Companies’ list that have direct investments in Asian casino gaming. The others are: Alliance Global Group from the Philippines, which has a joint venture with Genting Hong Kong Ltd in the Resorts World Manila casino resort next door to Manila International Airport; and MCE and Galaxy’s Macau casino competitor SJM Holdings Ltd. This year MCE’s Altira also achieved a five-star rating for Aurora, the hotel’s Italian restaurant. Crown Towers gained five stars for all of its facilities, including the hotel, spa and restaurants.

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January 2014 April 19,24, 2013

Macau

Esprit sees return to profit in first half Clothing retailer expects to be back in black after cost cuts

sprit Holdings Ltd, the clothing retailer rebuilding its brand, forecast a return to profit in the six months ended December after cutting costs. The company’s shares surged as much as 5.7 percent, the biggest gain in more than two months, before closing at HK$15.98. Esprit expects to post a “slight profit” for its fiscal first half, compared with a loss in the same period a year ago, it said in a filing yesterday. Business during the sixmonth period that ends in June is normally weaker, it said. The casual clothing retailer in September predicted a return to profitability in the fiscal year ending June, after reporting its first annual loss since a 1993 listing amid a revenue slump and competition from Inditex SA’s Zara and Hennes & Mauritz AB. Esprit reported a loss of HK$4.39 billion (US$566 million) in the year ended June 2013. Macau was one of the few growing segments in the last full fiscal year. Esprit’s Macau operations posted a 5.5-percent rise in turnover to over HK$615 million in the year ended June 2013. The city was one of just four business segments that reported growth in the 12-month period,

whereas Esprit suffered a decline of 14.1 percent in its overall sales to HK$25.9 billion. Retail sales surged even faster here by 11.4 percent to HK$118 million as Esprit opened a new store in Macau in the first half of 2013.

Challenging environment The clothier has cut money-losing retail stores, unproductive product lines, unprofitable wholesale business and exiting countries where it was incurring losses. “This is very positive for the company,” Chris Zee, a Hong Kong-based retail analyst at HSBC Holdings Plc, told Bloomberg in a phone interview. He estimated Esprit will post a profit of HK$70 million to HK$100 million for the period. The company said its forecast profit is largely because of the reductions in operating expenses. “The operating environment remains challenging,” Esprit said in yesterday’s statement. “Due to the seasonality of the business, the performance in the second half is normally not as good as the first half,” it said, adding that, “The financial performance of the group in the second half of fiscal 2013/2014 remains uncertain.” The company is currently in the

Secondhand bag seller drops suitor, finds another Loss-making Milan Station in talks with a second party about possible takeover

Milan Station in Rua de São Domingos

he controlling shareholder of secondhand luxury bag seller Milan Station Holdings Ltd says it has ended takeover talks with one unnamed suitor but started talks with another. “The potential purchaser had ceased discussion in relation to the possible transaction,” said Milan Station Holdings in a filing yesterday to the Hong Kong Stock Exchange referring to the earlier expression of interest. Milan Station’s owner Perfect One Enterprises Ltd, holds 72.29 percent of the issued share capital. That’s according to a November 20 filing, which first revealed the original takeover talks. Now the holding company says it has “recently commenced a preliminary dialogue with another

independent third party...regarding the possibility of an acquisition of all or part of the shares of the company,” The group has 16 shops selling used handbags under the Milan Station and France Station brands in Hong Kong, mainland China and Macau and one discount outlet in Hong Kong. On December 18 the business warned it was likely to make a “significant loss for the year ending 31 December 2013” as compared to the corresponding year in 2012. According to the firm’s 2013 interim report it has only one outlet in Macau – Milan Station in Rua de São Domingos. But that single site provided nearly 11 percent of the group’s HK$328.50 million (US$42.36 million) revenue in the six months to June 30. M.G.

Esprit opened its fourth store in Macau in 2013

midst of undergoing major changes of its business model “to regain long term competitiveness and to establish a solid platform for long term growth,” it added. There are “little signs” that revenue will rebound before July to December this year, Vineet Sharma, Hong Kong-based analyst at Barclays

Plc wrote in a note to clients. Esprit had its highest annual profit, HK$6.45 billion, in the fiscal year ended June 2008, according to data compiled by Bloomberg. The company in 2011 reported profit that fell 98 percent and said its brand had “lost its soul over the past few years”. T.A. with Bloomberg News

January 24, 2014 April 19, 2013

Greater China

Chinese manufacturing contracts HSBC’s preliminary PMI for January slipped to 49.6 from 50.5 in December

hina’s manufacturing may contract for the first time in six months, adding to stresses in the world’s second-biggest economy, according to a gauge released by HSBC Holdings Plc and Markit Economics. The preliminary reading of 49.6 for January in a Purchasing Managers’ Index released yesterday was below a final figure of 50.5 in December and all 19 estimates of analysts in a Bloomberg News survey. A number above 50 indicates expansion. Asian stocks and the Australian dollar extended losses as the data pointed to weakening domestic and global demand. While Bank of America Corp cautioned that figures may have been distorted by workers’ holidays ahead of the Lunar New Year, a manufacturing slowdown would add to strains that include elevated interest rates and the risk of defaults on high-yield investment products. “The policy focus should tilt towards supporting growth,” Qu Hongbin, HSBC’s chief China economist in Hong Kong, said in a statement. Yesterday’s report “implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth,” Mr Qu said. China’s benchmark Shanghai Composite Index of stocks fell 0.4 percent. The PMI reading is “really dramatic,” Hu Yifan, chief economist at Haitong International Securities Co in Hong Kong, said in a Bloomberg Television interview. Rising funding costs are adding difficulties and the official PMI will also show a “continued declining trend,” she said. Signs in the PMI of a contraction don’t indicate that manufacturing is shrinking on an annual basis.

Factory contraction shows weak start for economy in 2014

Factory output rose 9.7 percent in December from a year earlier, compared with a 10 percent pace in November, statistics bureau data showed this week. “Such a reading highlights the deteriorating growth outlook as policymakers are tightening their monetary stance, pushing through with an austerity campaign, and withdrawing stimulus measures,” said Dariusz Kowalczyk, a senior economist and strategist for Credit Agricole CIB in Hong Kong. “The reading points to a further slowdown in manufacturing and the entire economy in Q214. We maintain our below-consensus forecast for

2014 GDP growth of 7.2 percent.” The manufacturing report gives one of the first indications of the economy’s performance in 2014 after data earlier this week showed gains in factory output eased last month, sapping momentum as a credit clampdown adds pressure on the outlook. Economic growth slowed to 7.7 percent in the fourth quarter from 7.8 percent in the July-September period, according to Jan. 20 figures from the statistics bureau. This year’s target for growth is yet to be announced, after a goal of 7.5 percent expansion in 2013. The nation’s vehicle sales growth may slow this year to 8 percent to

10 percent from 14 percent in 2013, the China Association of Automobile Manufacturers said Jan. 9. Yesterday’s report, known as the Flash PMI, is based on 85 percent to 90 percent of responses to surveys sent to more than 420 manufacturers. Economists’ projections ranged from 50.1 to 50.8, with a median of 50.3. The final reading will be released on January 30.

Official index The National Bureau of Statistics and China Federation of Logistics and Purchasing release their own survey of manufacturing purchasing managers

China races to prevent trust loan default Shanxi government may help fund bailout of soured US$500 mln product

Chinese provincial government may help bail out investors in a troubled high-yield investment product, local media reported yesterday, in a closely watched case viewed as a potential landmark precedent for defaults in China’s shadow bank sector. Shanxi province in central China, home to the struggling coal company that received a high-interest loan through an investment trust, may provide half of the funds necessary to repay investors when the trust product matures on January 31, the 21st Century Business Herald reported on its website, citing an unnamed source. China Credit Trust Co Ltd and Industrial and Commercial Bank of China Ltd may both pitch in a further 25 percent of the necessary funds, the paper reported. ICBC, which helped market the trust product to wealthy investors

through several branches, has previously said it would not bear the “main responsibility” for repaying investors. A default of the 3 billion yuan (US$496 million) product could shatter the widespread assumption that off-balance-sheet investments carry an implicit guarantee from state banks and their partner institutions. Regulators have warned that investors must assume the risks from high-yielding investments and not expect protection from losses unless such guarantees are explicit. But local governments have largely ignored these injunctions and have stepped in repeatedly in recent years with bailouts for local firms facing default on corporate bonds and trust loans. The report of a possible government rescue comes a day after China Credit Trust reported progress in its efforts to ensure that investors are repaid.

The firm told investors in its “Credit Equals Gold #1 Collective Trust Product” on Wednesday that it was in discussion with new investors to raise funds necessary to pay off current investors. “The trustee is currently in negotiations with a certain number of interested investors and is intensely discussing the specific details,” China Credit Trust said in a statement to investors that was obtained by Reuters. China Business News also reported yesterday that the trust company was in negotiations with an unnamed insurance company to purchase the collateral used to secure the trust loan to Zhenfu. The trust firm had previously told investors that it may be unable to pay out principal and interest when the high-yield product, which is based on a loan to a struggling coal company, matures on January 31.

ICBC helped market the trust product to investors

China Credit Trust also told investors on Wednesday that the coal company, Shanxi Zhenfu Energy Group Ltd, had received a key government permit that would enable it to restart production on one of its coal mines. Zhenfu also resolved a propertyrights dispute with villagers over another mine, the trust said. “The value of these two mines will now rise significantly. Basically these two assets have been revitalised,” the official China Securities Journal quoted an unnamed trust industry

January 2014 April 19,24, 2013

Greater China on February 1. The gauge’s December reading was 51.0, a four-month low and down from November’s 51.4. The government will wait for signals from its own PMI and indicators such as industrial production and electricity over the next few months before loosening monetary policy by mid-year, with the central bank likely to lower banks’ reserve requirements by 50 basis points, Nomura Holdings Inc said in a note yesterday. Gains in industrial production and manufacturing investment eased in 2013 from the previous year, while the government’s measure of services in gross domestic product surpassed that of manufacturing and construction for the first time since China opened its economy in the late 1970s, data showed this week. A shrinking workforce may push up labour costs for Chinese manufacturers in coming years, while higher interest rates may squeeze factory owners’ margins. China’s working-age population, or people age 16 to 59, fell by 2.44 million in 2013, the statistics bureau said on January 20. Bloomberg News/Reuters

The reading points to a further slowdown in manufacturing and the entire economy in Q214. We maintain our below-consensus forecast for 2014 GDP growth of 7.2 percent Dariusz Kowalczyk, Credit Agricole CIB

Xiao Gang

Stock regulator pledges more opening Aims to abolish limits on the size stakes foreign firms can take

eijing will amend its laws and regulations so as to gradually open its securities and futures industries to foreign financial institutions, its top stock regulator said, without giving a specific timetable. China will aim to abolish limits on the size of stakes foreign firms can take in Chinese securities institutions and permit them to set up wholly owned entities and branches, Xiao Gang, chairman of the China Securities

Regulatory Commission, said in speech published in the regulator’s website late on Wednesday. It will also aim to lift business restrictions on Sino-foreign joint venture securities houses, Mr Xiao told the annual meeting on securities and futures work for 2014. China currently limits foreign firms to hold up to a 49 percent stake in joint venture securities houses, and tightly limits the activities those joint ventures may engage in, in particular a ban on underwriting business. Mr Xiao also repeated in the speech that the CSRC is planning to move towards a registration-based system for initial public offerings from the current approval system, but added that the process would be gradual. January saw Chinese IPOs resume for the first time in more than a year, but multiple firms subsequently suspended their applications following criticism that the proposed listings were priced was too high and appeared to be intended to allow management teams to cash out their existing stakes at a premium. Chinese bourses have been some of the world’s worst performing equities markets in recent years, still down about 60 percent from a peak in 2007, and the resumption of IPOs has proved a fresh headache for regulators who are trying to both liberalise the system for long-term benefit while restoring confidence to improve shortterm performance. Unfortunately for both regulators and listed Chinese firms, the resumption of IPOs has further hammered domestic stock indexes, knocking 10 percent off the CSI300 Index that tracks China’s largest listed firms since early December. Reuters

Local govts Beijing eases to get more rules on banks’ approval power bad-loan write-downs C

executive as saying on Thursday. The progress on the mines could pave the way for Zhenfu or its creditors to sell the mines in order to raise the funds necessary to repay Zhenfu’s debt, though it is unclear whether China Credit Trust would be first in line among Zhenfu’s various creditors. When contacted by Reuters, China Credit Trust declined to comment. ICBC’s news spokesman did not immediately answer calls seeking comment.

hina will give local governments more power to approve some foreign investments, the country’s top economic planning agency said yesterday, the latest step to cut red tape in a bid to boost economic growth. The National Development and Reform Commission (NDRC) said it plans to triple to US$300 million the threshold for local governments approving some projects that are not under direct central government control. In a statement the NDRC also said that under the revised rules, foreign investment in property projects could be approved by provinciallevel governments, regardless of the amount of investment. The existing rules require NDRC approval for investment in property projects of more than US$50 million. The ministry is collecting public views on the planned revisions, it said in the statement on its website. In the past year, China has stripped dozens of powers from central government ministries as it bids prevent Beijing’s army of bureaucrats from micro-managing the world’s second-largest economy. China attracted a record US$117.6 billion in foreign direct investment in 2013, underlining investors’ confidence in the country’s economic outlook.

hina has issued revised rules to make it easier for banks to write off small loans, in the latest effort to help lenders deal with an expected rise in bad loans as the economy slows. The rules, issued by the Ministry of Finance and published on the website of the Jiangsu provincial finance bureau, say the aim is to “strengthen financial enterprises’ risk prevention and control ability”. Bankers and analysts have warned that non-performing loans in China’s banking system are likely to rise this year as a slowing economy, rising interest rates and policymakers’ focus on reducing new credit growth is likely to pressure weaker borrowers. The revised rules grant financial institutions freedom to write off loans to a borrower of up to 10 million yuan (US$1.65 million) without permission from the regulator, if the loans are to a small- and medium-sized enterprise or related to agriculture, and if the lender has tried for at least one year to recover the funds. Previously, the upper limit for such write-downs was 5 million yuan. The revisions also allow financial institutions to write off personal business loans to a single borrower of up to 5 million yuan if the institution has sought repayment for at least one year.

Reuters

Yuan rises among global payment currencies: SWIFT China’s yuan was ranked No. 8 for transactions in the global payments system in December, according to the Society for Worldwide Interbank Financial Telecommunication. It jumped four places from October and had a 1.12 percent market share, SWIFT said in an e-mailed statement yesterday. Usage of the yuan, known officially as the renminbi, in November and December rose 15 percent while other currencies gained 7 percent, Franck de Praetere, head of payments and trade markets for Asia-Pacific at SWIFT, said in the statement. China’s policymakers are seeking to boost the currency’s convertibility and global use. The authorities aim to reduce intervention in the market and expand the yuan’s trading band, Caixin online magazine reported on January 14, citing Wang Yu, deputy director-general of the central bank’s research bureau. The yuan can now diverge a maximum 1 percent from a daily fixing. Payments in the yuan remain concentrated in Hong Kong, which has a 74 percent market share, SWIFT said. The yuan appreciated 2.9 percent against the dollar last year, the best performance among the 11 most-traded Asian currencies tracked by Bloomberg.

Magnum rallies in HK first nightclub IPO Magnum Entertainment Group Holdings Ltd, the first nightclub operator to go public in Hong Kong, more than doubled on its first day of trading. Magnum raised US$16.3 million in an initial public offering, selling shares at the top end of a marketed range, according to data compiled by Bloomberg. The stock jumped as high as HK$3.21 from its offer price of HK$1.50, and changed hands at HK$2.84 at the closing. The company operates Beijing Club, Billion Club and Magnum Club in Lan Kwai Fong, a bar district in Hong Kong’s Central area popular among tourists and locals alike. Chairman Yip Mow Lum owns 72 percent of the company after the IPO, according to its offering prospectus. Magnum received orders for 3,559 times the stock available to retail investors, according to a filing yesterday. That makes it one of Hong Kong’s most popular IPOs among individual buyers, surpassing the 2,180 times subscription ratio for Milan Station Holdings Ltd’s May 2011 share sale.

Foxconn kickbacks probe results in arrest Taiwanese authorities, investigating allegations that Foxconn Technology Group employees accepted bribes from suppliers, on Wednesday detained one of the company’s former executives. Three other former Foxconn employees, accused of taking bribes, were released on bail, while a middleman was also detained, Chang Chieh Chin, head prosecutor at the Taipei District Prosecutors Office, said yesterday in a phone interview. The Taipei-based maker of Apple Inc’s iPhones and iPads said this week it is cooperating with Taiwanese authorities into breaches of its internal code of conduct by former members of its procurement office. Chinese authorities had arrested an executive in Shenzhen suspected of accepting bribes from suppliers, Taiwan’s Next Magazine reported on January 2013. “This is a matter that we brought to the attention of authorities in both Taiwan and mainland China in September, 2012, as we sought their help in pursuing an investigation,” Foxconn said in an e-mailed statement. “Our internal investigation found these violations to be limited.” Foxconn flagship company Hon Hai Precision Industry Co said in an exchange filing in Taiwan this week it has been requiring employees and companies they do business with to sign legal agreements promising to refrain from corrupt or unfair business dealings.

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January 24, 2014 April 19, 2013

Greater China

SEC slaps 6-month ban on auditors’ China JVs Big Four to appeal suspension of Chinese units working in U.S.

The SEC filed an action against the auditors in 2012

he “Big Four” accounting firms have said they intend to appeal against a ruling by the U.S. Securities and Exchange Commission (SEC) that recommends suspending their Chinese units for six months. In a joint statement, Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP stressed that the decision was not final or legally effective until it has been fully reviewed and approved by the SEC. “The firms intend to appeal and thereby initiate that review without delay,” the statement said. “In the meantime the firms can and will continue to serve all their clients without interruption,” it said. A U.S. judge has ruled that the Chinese units of these global accounting firms should be suspended from practicing in the United States for six months, an escalation in a long-running dispute between U.S. and Chinese regulators over access to audit documents. The firms receiving the bans are Deloitte Touche Tohmatsu CPA Ltd, Ernst & Young Hua Ming LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian

Everybody is just starting their annual audits. If the Big Four can’t sign these audits, all these companies are in a hell of a pickle Paul Gillis, accounting professor at Peking University

CPAs Ltd. BDO China Dahua Co Ltd – now called Dahua CPA – was only censured since it had already withdrawn from the U.S. market. In a harshly worded 112-page ruling, Securities and Exchange Commission Administrative Law Judge Cameron Elliot censured the firms. Judge Elliot, a SEC judge who

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operates independently, sided with the agency and said the companies “wilfully” failed to give U.S. regulators the audit work papers of certain Chinese companies under investigation for accounting fraud.

‘Unexpected’ decision Wednesday’s ruling does not go into effect immediately and the appeal would take time because it must first be made to the five-member commission before it can be heard in a U.S. federal appeals court.

The decision is not expected to be immediately disruptive to the U.S.listed Chinese companies relying on these firms to review their 2013 books. But if the decision ultimately stands, it could have a major impact on the estimated 200 Chinese companies that rely on the Big Four to audit their books. “This decision will be a huge shock in Beijing. The SEC has pushed a lot of chips out on the table,” said Paul Gillis, an accounting professor at Peking University in Beijing. “Everybody is just starting their annual audits. If the Big Four can’t sign these audits, all these companies are in a hell of a pickle,” he added. Mr Gillis noted that some of the Big Four’s smaller competitors, like Grant Thornton LLP and RSM Tenon Group Plc, do not have the capacity to handle the workload. “I think the decision came totally unexpected to the firms,” said Jason Flemmons, a senior managing director at FTI Consulting who helped bring the case against the firms when he worked in the SEC’s Enforcement Division. “That said, this will undoubtedly be appealed, which will significantly delay the institution of the six-month bars.” The judge’s decision marks a major victory for the SEC, which for years tried with limited success to gain access to audit work conducted by Chinese accounting firms for Chinese companies that list in U.S. markets. Several companies that have listed on U.S. stock exchanges have been plagued with accounting scandals. The SEC has tried to delist or deregister some troubled companies, but has said investigations into possible fraud were stymied by the firms’ failure to turn over audit work papers. The accounting firms have repeatedly declined to share their audits, saying Chinese secrecy laws forbid it. They urged the SEC to pursue a diplomatic solution with China instead. Reuters

Lenovo to buy IBM server unit

enovo Group Ltd, the world’s largest maker of personal computers, will buy International Business Machines Corp’s server business for US$2.3 billion. The deal price includes about US$2 billion of cash and the rest in Lenovo stock, the companies said in a joint statement yesterday. The purchase of IBM’s x86 server business includes System x, BladeCenter and Flex System blade servers and switches. Confronted by the worst downturn in global PC shipments, chief executive Yang Yuanqing has maintained growth by expanding into markets across Europe and South America, while adding mobile devices. Now he’s pushing into another line of business by offering storage equipment and servers that run corporate networks via his largest acquisition yet. “We are confident that we can grow this business successfully for the long-term,” Mr Yang said in the statement. The unit Lenovo will acquire makes IBM’s x86 servers, which are named for a chip design used by Intel Corp and Advanced Micro Devices Inc. Servers have become a commodity item amid increasing

competition with companies such as Hewlett-Packard Co. The price for the hardware server unit is higher than any previous Lenovo acquisition and marks the second time that Mr Yang has looked to assets from IBM to spur his company’s growth. Lenovo and IBM last year held talks on the server business that broke down when they couldn’t agree on a price. Lenovo had net cash of US$2.46 billion as of September 30, the company reported in November. Chief financial officer Wong Wai Ming in October said the company could also finance a large purchase by issuing equity. Mr Yang plans to expand the company’s share of the global server business to between 5 percent and 10 percent within three years, from 2.6 percent in the fourth quarter of 2012, he said in June. A good acquisition could help speed that process, he said at the time. IBM was the third-largest vendor of x86 servers in the third quarter, trailing Hewlett-Packard and Dell Inc, according to data from researcher IDC. Bloomberg News

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January 2014 April 19,24, 2013

Asia

Nomura sees Japanese IPOs doubling this year As many as 80 companies expected to list, says brokerage Takahiko Hyuga

US$9.6 bln Expected value of IPOs this year

Topix Index of shares climbed 46 percent in 2013

omura Holdings Inc, Japan’s top manager of initial public offerings in 2013, expects debut share sales will almost double to 1 trillion yen (US$9.6 billion) this year as buyout funds recoup investments amid a stock rally. “Exits from private equity will increase this year,” said Hiroshi Yoshihara, head of the IPO department at

Japan’s largest brokerage. As many as 80 companies in industries such as information technology, manufacturing and solar energy may list, up from 58 in 2013, he said in an interview. Japanese stocks are the best performers in the developed world over the past year, giving companies more reason to go public and buyout firms such as Bain Capital LLC and Cerberus

Capital Management LP encouragement to choose IPOs to cash in on investments. Overseas demand for Japan equities will prompt firms to market share sales internationally, said Mr Yoshihara. “We’ll see more global offerings as foreign investors have a strong appetite for Japanese stocks, not just individuals in Japan,” he said. “Funds that have been

studying M&A and equity markets to sell their stakes will go for an IPO when the stock market is in good shape.” Skylark Co, a Japanese restaurant operator controlled by Bain Capital, is considering an IPO in Tokyo as early as this year, two people with knowledge of the matter said last March. The Bostonbased firm acquired Skylark in 2011 for 160 billion yen from a group of investors including Nomura.

Seibu listing Seibu Holdings Inc, partowned by Cerberus, plans to list on the Tokyo bourse as early as April, three people familiar with the matter said last week. Seibu operates 50 hotels in Japan and abroad, including the Hawaii Prince Hotel Waikiki, as well as a

commuter rail network in the Tokyo metropolitan area. “The Japanese IPO market will probably exceed 1 trillion yen after a long interval,” Mr Yoshihara said. Initial share sales last surpassed that amount in 2010, when they totalled 1.3 trillion yen, according to data compiled by Bloomberg. Last year’s 58 IPOs were valued at 571 billion yen, the data show. There haven’t been more than 80 transactions since 2007. Tokyo-based Nomura arranged 27 sales last year, the most of any firm in Japan, according to the data. Japan’s Topix Index of shares climbed 46 percent in the past year as monetary easing and fiscal spending under Prime Minister Shinzo Abe spurred an economic recovery. Nomura jumped 71 percent as the stock rally fuelled brokerage commissions and investment banking fees. Nomura has been the No. 1 stock underwriter in Japan for the past 12 years, according to data compiled by Bloomberg. Fee income from its equity capital markets business climbed 13 percent in the three months ended September 30 from a year earlier to 11 billion yen, company presentation materials show. IPOs are set to pick up elsewhere in the Asia-Pacific region this year. Macquarie Group Ltd, Australia’s biggest investment bank, sees the most potential transactions in the country in six years, Hugh Falcon, co-head of equity capital markets, said in a January 20 interview. Bloomberg News

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Business mood up, sales tax weighs on outlook Index seen down in April, a sign of wariness on sales tax

apanese business sentiment improved for a third straight month in January but it is expected to slide after a sales tax hike in April, a Reuters poll showed, reflecting worries about the tax’s impact on private consumption. The monthly poll, which is strongly correlated with the Bank of Japan’s tankan survey, provided further evidence of the ongoing recovery in the world’s third largest economy on the back of firm domestic demand. But the poll of 400 big and midsize firms – of which 271 responded during the January 6-20 period – underlined concerns that the economy may slump,

albeit temporarily, when the consumer buying rush to beat the sales tax hike has run its course. Japan’s 5 percent sales tax will be raised to 8 percent in April. The government then aims to increase the levy to 10 percent in October 2015 to cover bulging welfare spending in this rapidlyageing society and to repair dire public finances. “In the past year our sales have been increasing over the previous year, but we are concerned about reaction after a jump in demand before the tax hike,” one retailer said in the poll. A transport equipment firm said: “The outlook for our business is murky due to

the sales tax increase.” The index of sentiment among manufacturers, derived by subtracting the percentage of pessimistic responses from optimistic ones, rose by two points to plus 19 in January,

matching a previous high seen in October 2010. The reading means that optimists far outnumber pessimists, although it remains short of the levels seen before the 2008/09

Retail sentiment seen worsening sharply in April

global financial crisis. The service-sector firms’ index edged up by two points to plus 27, matching a record high seen in August 2004, when Japan was experiencing its longest post-war economic expansion aided by a weak yen and good global growth. The sentiment indexes for manufacturers and servicesector firms are seen sliding to plus 14 and plus 23 respectively in April, pointing to slowdown in the economy. Retail’s sentiment index is seen worsening sharply from plus 9 to minus 4 in April, boding ill for private consumption, which accounts for about 60 percent of the economy. Reuters

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January 24, 2014 April 19, 2013

Asia Sony studio eliminates jobs

S.Korea records fastest growth

Sony Corp’s Hollywood film studio began cutting jobs, including its head of technology, as the unit moves forward with US$250 million in expense reductions pledged by chief executive Kazuo Hirai. Chris Cookson, president of Sony Pictures Technologies, was among those let go, Charles Sipkins, a spokesman for the studio, said in an e-mailed statement yesterday. He didn’t provide details on the number of jobs cut. “As part of the company’s previously announced efforts to evolve its operations, Sony Pictures Entertainment is absorbing the functions of Sony Pictures Technologies into various core businesses,” Mr Sipkins said. The move is the among the first in cuts promised by Mr Hirai in November, part of a plan to boost profit and keep full ownership of the movie, TV and music businesses. Sony Pictures folded the technology functions into its business groups to “accelerate creative and technological innovation,” the company said. Sony is also reducing the number of films from Columbia Pictures, shifting investment to television production and media networks, and identifying more savings, the company said in November.

Robust domestic demand powers strong growth

Hyundai Motor posts revenue drop South Korea’s Hyundai Motor Co posted its first year-on-year fall in quarterly revenue in nearly three years, as the stronger local currency weighed and imported rivals gained ground in the Korean home market. Hyundai posted a revenue of 21.94 trillion won (US$20.56 billion) in the October to December period, a 3 percent fall from a year earlier. This marked its first year-on-year fall since at least 2011 when new accounting methods were adopted. Net profit jumped 15 percent to 2.06 trillion won. The South Korean won gained 3 percent against the U.S. dollar and surged 27 percent versus the Japanese yen in the fourth quarter from a year earlier, reducing the value of Hyundai Motor’s overseas revenue in local currency terms and lifting Japanese rivals’ price competitiveness in the United States and other key export markets. In its lucrative home market of South Korea, Hyundai’s sales slumped as imported rivals boosted sales after trade deals. “Currency fluctuations – the won’s strength coupled with the yen’s weakness – weighed on our earnings,” Hyundai said in a statement.

Se Young Lee

outh Korea’s economy grew a seasonally adjusted 0.9 percent in the fourth quarter over the previous three months as capital investment grew at the fastest pace in nearly two years, meeting market expectations and boosting growth prospects for 2014. The median forecast from a Reuters survey of 15 analysts was for Asia’s fourth-largest economy to expand by 0.9 percent in the three months to December, following growth of 1.1 percent in both the second and third quarter of 2013. Over a year earlier, gross domestic product for the fourth quarter was 3.9 percent higher, marking the strongest pickup since the first quarter of 2011. This compared with a 3.3 percent gain in the third quarter and a median 4.0 percent rise tipped in the Reuters survey. While a contraction in construction investment led to slower overall growth in the fourth quarter, capital investment during the October-December period grew by a seasonally adjusted 6.4 percent from the previous quarter to mark the fastest expansion since the first quarter of 2012 and suggested firm economic momentum for the coming quarters. Private consumption also grew by

Australians in record loan spree as prices soar Housing market the fifth-most overvalued among OECD members

Abe urges Asia military restraint Japanese Prime Minister Shinzo Abe has told an audience at the World Economic Forum in Davos that “military expansion” must be restrained in Asia. “The dividend of growth in Asia must not be wasted on military expansion,” Mr Abe said. His comments are thought to refer to China, which is involved in territorial disputes with its neighbours. China expanded military spending 10.7 percent to 740.6 billion yuan (US$122 billion) in 2013 and Abe plans a second consecutive rise in Japan’s defence budget. “We must use it to invest in innovation and human capital, which will further boost growth in the region.” Speaking earlier, he compared relations with China to those between the U.K. and Germany on the eve of World War One. “Japan has sworn an oath never again to wage a war. We will continue to be wishing for the world to be at peace,” Mr Abe said in his speech, according to Reuters.

Domestic demand’s contribution to growth outstripped that of exports

ustralian homebuyers are borrowing at the fastest pace in four years amid record prices, straining debt levels already among the developed world’s highest as interest rates are set to climb. The value of new mortgage approvals jumped 25 percent in November from a year earlier, the fastest annual pace since September 2009, to a record A$26.9 billion (US$23.8 billion), according to the statistics bureau. Ten out of 29 economists surveyed by Bloomberg News forecast the Reserve Bank of Australia will raise its benchmark rate by the fourth quarter and the median forecast is for a 25 basis-point increase in the first three months of next year. Australians’ preference for variablerate loans and investor demand for rental properties is setting the stage for delinquencies to rise as interest rates climb. This could saddle banks with potentially profit-eroding impairments, according to Brian Johnson, a Sydneybased bank analyst at CLSA Ltd. “As and when interest rates turn and unemployment rises, it’s going to be savage,” said Mr Johnson. When rates

climb by about 2 percentage points, “house price escalation stops and the quantum of repayment increases, putting pressure on borrowers.” Average dwelling values in the biggest cities climbed 9.8 percent in 2013 to a record A$614,367, according to the RP Data-Rismark home value index. Sydney led the gains, with a 14.5 percent jump in prices last year to A$729,969, followed by Perth with an almost 10 percent increase to A$618,248.

Most overvalued Australia’s housing market was the fifth-most overvalued among countries in the Organization for Economic Cooperation and Development relative to rents, the International Monetary Fund said in a December report. The leader is Canada, followed by New Zealand, Norway and Belgium. Prices in Australia’s biggest cities, home to two-thirds of the population, have risen 26 percent since the start of 2009, according to the RP DataRismark index.

Anecdotal evidence suggests about half of households that borrowed when rates were higher got ahead on their obligations by maintaining repayments at the same level when borrowing costs fell, the central bank said in its Financial Stability Review in September. As more new loans at current low rates are issued, that buffer, which reduced the risk of delinquencies when borrowing costs rose in the past, will shrink, said James Zanesi, associate director for structured finance at Fitch Ratings in Sydney. “In the current environment of increasing house prices and low interest rates, new loans are more of a concern,” Mr Zanesi said. Bloomberg News

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

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January 2014 April 19,24, 2013

Asia

in 3 years

a seasonally adjusted 0.9 percent last quarter in sequential terms, in line with a 1.0 percent expansion seen in the previous period and bolstering policymakers’ expectations that domestic demand will do more heavy lifting this year. Growth for the whole of 2013 quickened to 2.8 percent from 2.0 percent in 2012, the estimate showed, while the Bank of Korea has forecast growth would further pick up to 3.8 percent this year. “Today’s figures support our view that Korea remains on track for a gradual export-led recovery,” said Ronald Man, a Hong Kong-based economist for HSBC Holdings Plc. “Trade strengthened in the final few months of last year as global economic conditions improved. That said, uncertainty surrounding yen weakness may weigh on sentiment.” Analysts and policymakers see the trade-reliant economy humming nicely this year, spurred by improving exports and a more sure-footed

KEY POINTS Economy grew 3.9 pct in Q4 from a year earlier Domestic consumption seen propping up economy Exports increased by an annual 5.5 percent Annual growth quickened to 2.8 pct in 2013

recovery in developed nations. The growth uptick in the United States is seen underpinning activity in South Korea, home to global manufacturing giants such as Samsung Electronics Co Ltd and Hyundai Motor Co. The government expects exports, which grew 2.1 percent last year, to accelerate to 6.4 percent this year. The International Monetary Fund raised its global growth forecast for the first time in nearly two years on Tuesday, saying fading economic headwinds should permit advanced nations to pick up the mantle of growth from emerging markets. South Korea’s rosy outlook for this year 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 3.4 percent this year, accelerating from a 1.9 percent rise in 2013 due to continued jobs growth and subdued price pressures. Still, subdued consumer spending points to some bumps in South Korea’s growth-recovery story. Consumers remain reluctant to open their wallets given a sizable household debt burden. The ratio of local household gross debt to gross disposable income was at 153.4 in 2012, well above the Organisation for Economic Cooperation and Development average of 121.3. Analysts say the central bank may be more inclined to keep interest rates low for longer to help drive consumption, with market consensus suggesting interest rates will only start rising towards the end of the year.

Sydney-based head of dynamic asset allocation at AMP Capital Investors, said by phone. “It will improve market stability and help build investor confidence in the market.” If the circuit breaker is triggered, investors can only trade within 10 percent of the reference price from at least five minutes earlier, according to the statement. Normal trading resumes five minutes later. “The introduction of circuit breakers and the new error-trade policy will assure investors of continued safety and transparency even under volatile market conditions,” Muthukrishnan Ramaswami, president of SGX, said in the statement. The bourse operator will also revise its erroneous trade policy, it said. Bloomberg News

Bloomberg News

Reuters

New trading restrictions to apply from February 24

the Singapore market. The exchange operator said in October that it would implement automatic price controls after declines in commodity companies Blumont Group Ltd, Asiasons Capital Ltd and LionGold Corp spurred an investigation by the Monetary Authority of Singapore. All three companies have said they don’t know what precipitated the plunge. Hong Kong Exchanges & Clearing Ltd is studying whether its market needs circuit breakers to prevent trading errors from causing large declines or surges in prices, a person familiar with the matter said this month. “Circuit breakers are very useful, especially now that many trades are computer-generated,” Nader Naeimi,

itsubishi Motors Corp, the Japanese automaker bailed out by affiliates a decade ago, will raise as much as 257.1 billion yen (US$2.5 billion) net of fees through a share sale as it plans to resume dividend payouts. The carmaker will issue as many as 241 million shares, including an overallotment of 23.25 million shares, for 1,120 yen each and use the proceeds to buy back preferred stock held by companies that rescued the Tokyo-based carmaker, according to a filing yesterday. The amount is about 6 percent more than the 241.6 billion yen target the carmaker set on January 7. The issuance is part of President Osamu Masuko’s reorganisation of Mitsubishi Motors as sales recover and as the company purchases preferred stock back from affiliates such as Mitsubishi UFJ Financial Group Inc, which extended loans to stop the automaker from collapsing a decade ago. Mitsubishi Motors received bailouts in 2004 and 2005 as revenue slumped following the company’s admission that it covered up defects. Mitsubishi Motors “should be included in a list of investable stocks once the equity offering is finished and dividends are paid at the end of this fiscal year,” Koji Endo, senior analyst at Advanced Research Japan in Tokyo, wrote in a report dated January 17. “The Mitsubishi group, mainly Mitsubishi Heavy Industry and Mitsubishi Corporation, have expressed their intention to continue supporting Mitsubishi Motors, which is certainly one of the benefits.” The carmaker last declared a dividend in September 1997, according to data compiled by Bloomberg. Net income will probably more than double to 100 billion yen as sales climb 16 percent to 2.11 trillion yen in the year ending March 31, Mitsubishi Motors said on December 20. Bailouts in 2004 and 2005 left Mitsubishi UFJ Financial Group Inc, Mitsubishi Heavy Industries Ltd and Mitsubishi Corp with billions of dollars of preferred shares, convertible into common stock in the carmaker, that never generated any dividends. The Mitsubishi companies that bailed out their car affiliate have been seeking to convert their preferred stock because the carmaker’s inability to pay dividends rendered them pointless as preferred shares don’t carry voting rights. Mitsubishi Motors has said it plans to eliminate all outstanding preferred shares before the fiscal year ending in March.

Singapore Exchange to introduce circuit breakers ingapore Exchange Ltd, Southeast Asia’s biggest bourse, will add circuit breakers next month that protect investors from excessive stock swings after a plunge in three commodity companies erased US$6.9 billion in market value. The trading restrictions will apply to Straits Times Index and MSCI Singapore Index members and all securities priced from 50 Singapore cents from February 24, according to a regulatory filing. The circuit breakers are triggered when a stock rises or falls more than 10 percent from at least five minutes earlier and cause a five-minute period where trading is limited, according to SGX’s statement. The rules cover securities that account for about 80 percent of trading on

Mitsubishi Motors to raise up to US$2.5 bln in share sale

14 14

January 24, 2014 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 114.6

76.90 76.05

Max 61.20

Min 73.55

average 60.102

Last 75.40

Min 59.05

Last 60.05

73.50

Max 114.6

average 111.137

PRICE

Last 110.1

Max 33.50

average 32.629

Min 31.15

Last 32.90

31.1

25.4

34.4

60.65

25.2

34.3

60.10

25.0

34.2

59.55

24.8

34.1

59.00

Max 25.35

average 25.010

DAY %

YTD %

(H) 52W

Min 24.75

Last 24.95

(L) 52W

96.68

-0.051690272

-1.897513952

104.5199966

84.87999725

BRENT CRUDE FUTR Mar14

107.88

-0.360210585

-2.39753913

112.4399948

96.31999969

GASOLINE RBOB FUT Feb14

266.35

-0.508012401

-4.39355325

286.9299889

243.68999

914

0.027359781

-2.94664189

954.5

840

4.742

1.130304969

12.10401891

4.770000458

3.476000071

303.73

-0.019750486

-0.91021793

317.8399801

278.4999847

Gold Spot $/Oz

1237.04

-0.2628

2.8518

1695.13

1180.57

Silver Spot $/Oz

19.7912

-0.376

1.1944

32.46

18.2208

Platinum Spot $/Oz

1446.75

-0.1381

6.7122

1742.8

1294.18

GAS OIL FUT (ICE) Mar14 NATURAL GAS FUTR Feb14 NY Harb ULSD Fut Feb14

Palladium Spot $/Oz

746.6

0.2484

5.007

786.5

629.75

LME ALUMINUM 3MO ($)

1783

-0.861829302

-0.95820025

2174

1736.25

LME COPPER 3MO ($)

7292

-0.640414225

-0.923913043

8346

6602

LME ZINC

2084

-0.239348971

1.411192214

2230

1811.75

3MO ($)

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

14795

0.475382003

6.438848921

18770

13205

15.46

-0.290228958

1.211129296

16.77000046

15.12000084

428

0.410557185

1.421800948

606.5

406.25

564.5

0.579064588

-6.73275506

834

560.5

SOYBEAN FUTURE Mar14

1281.75

0.175849941

-0.83172147

1377.75

1174

COFFEE 'C' FUTURE Mar14

114.85

-1.161790017

3.748870822

167.0999908

104.1499939

15.03

-8.409506399

20.36999893

14.96999931

Mar14

WHEAT FUTURE(CBT) Mar14

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

24.6

87.6

-0.273224044

3.497164461

90.61000061

76.65000153

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

Max 34.4

average 34.127

Min 34.0

Last 34.0

34.0

World Stock Markets - Indices

NAME

PRICE

1724998

AMAX INTERNATION

1.71

-1.156069

-0.581397

2.12

0.75

2394600

BOC HONG KONG HO

24.3

-1.619433

-2.213281

22.85

10641976

17.7

24.7

10.384

16000

CHOW TAI FOOK JE

11.68

-1.016949

1.038059

13.28

7.44

2513400

1.078372

6875.62

6023.44

HANG SENG BK

-1.509168

-2.456366

24111.55078

19426.35938

CSI 300 INDEX

2231.889

-0.5306632

-4.21184

2791.303

2023.171

TAIWAN TAIEX INDEX

8595.1

-0.3501327

-0.1905607

8668.95

7637.2

KOSPI INDEX

1947.59

-1.158636

-3.169529

2063.28

1770.53

S&P/ASX 200 INDEX

5262.988

-1.067303

-1.667015

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4489.75

0.2738365

5.04362

5251.296

3837.735

26134023

-22.24067

3105.365

22733.9

206000

0.2293613

4246.553

332000

-2.395833

1.590057

HANG SENG INDEX

0.26

7.45

-0.9070295

0.407974

10441.11

0.68

3.546096

21.85

4243

16320.22

1.162789

0.6896552

18.74

-3.654832

7.3

CHINA OVERSEAS

NASDAQ COMPOSITE INDEX

-0.7905336

0.435

CHINESE ESTATES

13710.13

15695.89

(L) 52W VOLUME CRNCY 2006175

16588.25

(H) 52W

3.3

-1.226546

NIKKEI 225

YTD %

11.08

-0.2503893

7418.36

DAY %

5.12

16373.34

9794.05

0.8757 1.4814 0.88 1.2746 88.25 7.9818 7.7514 6.0393 52.89 28.56 1.2259 29 40.555 9603 86.41 1.21196 0.81683 7.8281 10.195 117.54 1.0289

18.22

1.495684

1.0582 1.6603 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.328 45.39 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

5.044508

DOW JONES INDUS. AVG

-0.2580218

-1.4571 0.5636 -1.6225 -1.1697 0.6133 -0.0576 -0.058 0.0397 -0.2362 -0.519 -1.427 -1.7179 -1.9978 0.0247 2.0798 -0.4665 1.7678 1.3253 1.1232 1.8106 0

-3.624735

(L) 52W

9695.03

-0.9017 0.369 0.596 0.4282 -0.0479 -0.0163 -0.0155 -0.0066 -0.1958 -0.2307 -0.3275 -0.3099 -0.2208 -0.2055 0.8589 0.1671 -0.0451 -0.4155 -0.4498 -0.472 0

0.8928571

(H) 52W

0.8792 1.6594 0.906 1.3603 104.35 7.9912 7.7584 6.0519 61.9463 32.946 1.2824 30.328 45.3 12168 91.741 1.23246 0.81966 8.2319 10.8707 141.94 1.03

-0.7847534

YTD %

DAX INDEX

(L) 52W

4.52

DAY %

6821.87

(H) 52W

17.7

PRICE

YTD %

ARISTOCRAT LEISU

COUNTRY

FTSE 100 INDEX

DAY %

CROWN RESORTS LT

CHEUK NANG HLDGS

-0.06533525

PRICE

Macau Related Stocks

CENTURY LEGEND

NAME

110.1

61.20

WTI CRUDE FUTURE Mar14

CORN FUTURE

Min 110.1

Currency Exchange Rates

NAME

METALS

31.7

111.0

Commodities ENERGY

32.3

111.9

74.35

average 75.514

32.9

112.8

75.20

Max 76.85

33.5

113.7

EMPEROR ENTERTAI

4.75

-1.859504

18.75

5.4

1.95

3515000

FUTURE BRIGHT

4.59

-0.8639309

-2.132197

5.3

1.609

3480000 25276845

GALAXY ENTERTAIN

75.4

-2.014295

8.41121

84.5

123.3

-0.6446414

-1.909305

132.8

110.6

964496

HOPEWELL HLDGS

26.5

-2.752294

0.952381

35.3

23.2

629861

HSBC HLDGS PLC

85.15

-0.9883721

1.188352

90.7

77.85

16897491

2.9

-0.6849315

-1.360546

4.66

2.5

4243400

LUK FOOK HLDGS I

25.85

-1.897533

-12.37288

16.88

2171400

MELCO INTL DEVEL

30.15

-1.95122

5.789474

32.5

11.52

4299300

32.9

0.7656968

-0.604225

36.15

15.457

6929234

3.73

0.2688172

4.1

2.68

764185

0.315

-3.076923

-7.352942

0.4

0.131

81070000

HUTCHISON TELE H

MGM CHINA HOLDIN MIDLAND HOLDINGS NEPTUNE GROUP NEW WORLD DEV

10.2

-1.923077

4.187947

15.12

9.35

10698234

SANDS CHINA LTD

60.05

-2.910267

-5.209153

67.15

33.5

28323659

FTSE Bursa Malaysia KLCI

1810.46

-0.2006505

-3.02631

1882.2

1597

SHUN HO RESOURCE

1.67

1.212123

1.92

1.33

NZX ALL INDEX

1037.741

-0.7014828

3.888892

1048.998

904.128

SHUN TAK HOLDING

4.85

-0.4106776

6.35965

5.18

3.27

13474750

PHILIPPINES ALL SHARE IX

3739.36

0.5466479

3.459573

4571.4

3440.12

SJM HOLDINGS LTD

24.95

-1.188119

-4.038462

17.04

6032495

8.77

-1.127396

-1.015798

14.46

7.38

816071

WYNN MACAU LTD

-2.578797

-3.271697

38.25

12470537

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

81.5

-1.415266

3.887831

82.67

45.38

794469

Euromoney Dragon 300 Index Sin

599.39

0.05

-1.98

STOCK EXCH OF THAI INDEX

1300.48

0.7741246

0.1362906

1649.77

1205.44

HO CHI MINH STOCK INDEX

553.55

0.2953327

9.694227

564.61

440.48

Laos Composite Index

1231.42

-0.5941329

-1.748136

1446.66

1224.94

SMARTONE TELECOM

BOC HONG KONG HO

3.18

-1.242237

3.6

2.99

42500

GALAXY ENTERTAIN

9.98

-5.402844

10.76581

10.81

3.8975

31845 6684545

INTL GAME TECH

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

18.1

-0.2205072

-0.3303956

21.2

14.75

JONES LANG LASAL

106.78

0.8309726

4.287529

106.82

80.86

160149

LAS VEGAS SANDS

80.47

-1.901743

2.028651

82.48

47.95

6123975 4982898

MELCO CROWN-ADR

43.07

-2.589619

9.816417

45.4799

17.76

MGM CHINA HOLDIN

4.12

-9.450549

-4.408351

4.66

20098

MGM RESORTS INTE

25.74

-2.352049

9.438773

26.7

11.72

15975817

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.22

-4.166667

-3.592812

3.6

2.2

37100

208.79

-1.639421

7.507334

216.99

111.3456

1768281

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

PRICE

DAY %

VOLUME

AIA GROUP LTD

37.5

-2.088773

25668920

CHINA UNICOM HON

10.26

-2.285714

29544317

ALUMINUM CORP-H

2.91

0.6920415

28883823

CITIC PACIFIC

10.02

-1.377953

6693484

BANK OF CHINA-H

3.34

-2.623907

423510444

BANK OF COMMUN-H

5.08

-2.681992

37427056

BANK EAST ASIA

31.3

-0.6349206

1180313

BELLE INTERNATIO

9.14

-1.402373

14712636

ESPRIT HLDGS

BOC HONG KONG HO

24.3

-1.619433

10641976

HANG LUNG PROPER

CATHAY PAC AIR

16.68

-1.301775

2852000

HANG SENG BK

CHEUNG KONG

HENDERSON LAND D

118.3

-1.580699

4741487

CHINA COAL ENE-H

4.07

-2.163462

25394842

CHINA CONST BA-H

5.45

-3.024911

342132451

CHINA LIFE INS-H

22.9

-1.716738

36080759

CHINA MERCHANT

27.75

-1.943463

5193698

CHINA MOBILE

NAME

CLP HLDGS LTD CNOOC LTD COSCO PAC LTD

PRICE

DAY %

62.8

2.446982

8399190

SANDS CHINA LTD

60.05

-2.910267

28323659

SINO LAND CO

10.64

-2.74223

8496874

SUN HUNG KAI PRO

97.55

-1.365015

4053927

POWER ASSETS HOL

VOLUME

60.6

-0.2469136

2191687

12.74

-0.933126

107761590

10.2

-0.390625

8727741

SWIRE PACIFIC-A

86.9

-0.9122007

1292890

15.98

1.783439

9246371

TENCENT HOLDINGS

522

-0.9487666

4133125

23.1

-5.13347

11014100

TINGYI HLDG CO

21.6

-0.9174312

6778098

123.3

-0.6446414

964496

10.96

1.481481

17243787

56.8

-2.48927

7302169

44.2

-1.886792

3032044

HENGAN INTL

87.35

-0.907544

2301950

HONG KG CHINA GS

16.98

-0.1176471

7501891

HONG KONG EXCHNG

125.9

-1.022013

2144305

HSBC HLDGS PLC

85.15

-0.9883721

16897491

103.5

-0.862069

4546811

4.81

-3.413655

355306514

-0.8370895

14757197

HUTCHISON WHAMPO

21.85

-0.9070295

26134023

IND & COMM BK-H

CHINA PETROLEU-H

6.28

-2.484472

88604263

LI & FUNG LTD

11.08

-0.8944544

30508528

CHINA RES ENTERP

23.5

-2.489627

3825402

MTR CORP

28.25

-0.528169

1543677

CHINA OVERSEAS

NAME

WANT WANT CHINA WHARF HLDG

MOVERS

1 23136

INDEX 22733.9 HIGH

23135.43

LOW

22729.96

CHINA RES LAND

19.26

-1.834862

9113290

NEW WORLD DEV

10.2

-1.923077

10698234

52W (H) 24111.55078

CHINA RES POWER

19.46

0.3092784

8732143

PETROCHINA CO-H

7.93

-1.24533

88600828

(L) 19426.35938

CHINA SHENHUA-H

21.55

-1.822323

13336121

PING AN INSURA-H

66.8

-1.256467

14733273

22729

21-January

23-January

15 15

January 2014 April 19,24, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

TAIPEI TIMES A positive business outlook coupled with increased tourism from China will strengthen recruitment activity in Taiwan and deepen the skills shortage as many Taiwanese professionals live and work overseas, according to the Michael Page Salary & Employment Forecast, conducted in cooperation with the European Chamber of Commerce. Almost half of the employers surveyed are confident that hiring activity will be on the upswing this year, as Taiwan benefits from increased tourism activity and buoyant economic conditions, the annual survey found.

JAKARTA GLOBE The government plans to eliminate in May the subsidy on electricity for industries, which includes publicly traded companies, in a move that should help ease the burden on the state budget. The government secured on Tuesday an approval from lawmakers to remove the electricity subsidies for businesses. Energy and Mineral Resources Minister Jero Wacik said that the new tariff would save around 8.85 trillion rupiah (US$731 million) in subsidy costs. According to the plan, the tariff for medium-scale industries – classified as I3 consumers – would increase by 38.9 percent.

TIMES OF INDIA This year, breakfast cereal maker Kellogg India would truly mirror its parent company’s portfolio by venturing into the snacking category with Pringles, a bolt-on acquisition by Kellogg Company in the US two years ago. Bringing Pringles, an iconic American stacked potato chips brand, to India is not difficult for the company. The challenge for Kellogg India, which is trying hard to change the Indian consumer’s breakfast habits to make it more “healthy”, would be to market a snack product to the same consumer.

KOREA HERALD KB Kookmin Card, NH NongHyup Card and Lotte Card, the three companies involved in the recently detected information leak of more than 20 million customers, will be suspended for three months, starting as early as next month. The Financial Services Commission on Wednesday announced a set of preventative measures in a bid to better protect customer data. The FSC also said financial companies responsible for the leaking of customers’ personal data may in the future face a business suspension of up to six months, as well as a fine amounting to 5 billion won (US$4.7 million) or more.

The financial fire next time Robert J. Shiller

A Nobel laureate in economics and Professor of Economics at Yale University

f we have learned anything since the global financial crisis peaked in 2008, it is that preventing another one is a tougher job than most people anticipated. Not only does effective crisis prevention require overhauling our financial institutions through creative application of the principles of good finance; it also requires that politicians and their constituents have a shared understanding of these principles. Today, unfortunately, such an understanding is missing. The solutions are too technical for most news reporting aimed at the general public. And, while people love to hear about “reining in” or “punishing” financial leaders, they are far less enthusiastic about asking these people to expand or improve financialrisk management. But, because special-interest groups have developed around existing institutions and practices, we are basically stuck with them, subject to

The financial crisis, which is still ongoing, resulted largely from the boom and bust in home prices

minor tweaking. The financial crisis, which is still ongoing, resulted largely from the boom and bust in home prices that preceded it for several years (home prices peaked in the United States in 2006). During the pre-crisis boom, homebuyers were encouraged to borrow heavily to finance undiversified investments in a single home, while governments provided guarantees to mortgage investors. In the U.S., this occurred through implicit guarantees of assets held by the Federal Housing Administration (FHA) and the mortgage agencies Fannie Mae and Freddie Mac.

Sensible reform At a session that I chaired at the American Economic Association’s recent meeting in Philadelphia, the participants discussed the difficulty of getting any sensible reform out of governments around the world. In a paper presented at the session, Andrew Caplin of New York University spoke of the public’s lack of interest or comprehension of the rising risks associated with the FHA, which has been guaranteeing privately issued mortgages since its creation during the housing crisis of the 1930’s. Caplin’s discussant, Joseph Gyourko of the Wharton School, concurred. Gyourko’s own 2013 study concludes that the FHA, now effectively leveraged 30 to one on guarantees of home mortgages that are themselves leveraged 30 to

one, is underwater to the tune of tens of billions of dollars. He wants the FHA shut down and replaced with a subsidized saving program that does not attempt to compete with the private sector in evaluating mortgage risk. Similarly, Caplin testified in 2010 before the U.S. House Committee on Financial Services that the FHA was at serious risk, a year after FHA Commissioner David Stevens told the same committee that “We will not need a bailout.” Caplin’s research evidently did not sit well with FHA officials, who were hostile to Caplin and refused to give him the data he wanted. The FHA has underestimated its losses every year since, while proclaiming itself in good health. Finally, in September, it was forced to seek a government bailout.

Homeowning dream At the session, I asked Caplin about his effort, starting with his co-authored 1997 book Housing Partnerships, which proposed allowing homebuyers to buy only a fraction of a house, thereby reducing their risk exposure without putting taxpayers at risk. If implemented, his innovative idea would reduce homeowners’ leverage. But, while it was a highly leveraged mortgage market that fuelled the financial crisis 11 years later, the idea, he said, has not made headway anywhere in the world. Why not, I asked? Why can’t creative people with their lawyers simply create such partnerships for themselves?

The answer, he replied, is complicated; but, at least in the U.S., one serious problem looms large: the U.S. Internal Revenue Service’s refusal to issue an advance ruling on how such risk-managing arrangements would be taxed. Given the resulting uncertainty, no one is in a mood to be creative. Meanwhile, there is strong public demand – angry and urgent – for a government response aimed at preventing another crisis and ending the problem of “too big to fail” financial institutions. But the political reality is that government officials lack sufficient knowledge and incentive to impose reforms that are effective but highly technical. For example, one reform adopted in the U.S. to help prevent the “too big to fail” problem is the risk retention rule stipulated by the 2010 Dodd Frank Act. In order to ensure that mortgage securitises have some “skin in the game,” they are required to retain an interest in 5 percent of the mortgage securities that they create (unless they qualify for an exemption).

Government floundering? But, in another paper presented at our session, Paul Willen of the Federal Reserve Bank of Boston argued that creating such a restriction is hardly the best way for a government to improve the functioning of financial markets. Investors already know that people have a stronger incentive to manage risks better if they retain some interest in the risk. But investors also know that other factors may offset the advantages of risk retention in specific cases. In trying to balance such considerations, the government is in over its head. The most fundamental reform of housing markets remains something that reduces homeowners’ overleverage and lack of diversification. In my own paper for the session, I returned to the idea of the government encouraging privately-issued mortgages with preplanned workouts, thereby insuring them against the calamity of ending up underwater after home prices fall. Like housing partnerships, this would be a fundamental reform, for it would address the core problem that underlay the financial crisis. But there is no impetus for such a reform from existing interest groups or the news media. One of our discussants, Joseph Tracy of the Federal Reserve Bank of New York (and co-author of Housing Partnerships), put the problem succinctly: “Firefighting is more glamorous than fire prevention.” Just as most people are more interested in stories about fires than they are in the chemistry of fire retardants, they are more interested in stories about financial crashes than they are in the measures needed to prevent them. That is not a recipe for a happy ending. © Project Syndicate

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January 24, 2014 April 19, 2013

Closing Extra CNY flights approved by govt

LG Display profit misses estimates

To cope with increased demand during the Chinese Lunar New Year, Macau’s Civil Aviation Authority has approved 28 extra scheduled and charter flights between Macau and mainland China, Taiwan, Japan, South Korea and Singapore. Among the 28 flights approved, 17 serve Shanghai and two Zhengzhou, both on the mainland, three are for Kaohsiung in Taiwan, three for Sapporo in Japan and one is for Seoul in South Korea. All the extra holiday services are operated by Air Macau Co Ltd. The aviation authority also reminded travellers that high-powered lithium batteries of more than 100Wh should be carried in aircraft holds.

LG Display Co, which supplies panels for Apple Inc devices, reported profit that missed analyst estimates as sluggish demand for TVs outweighed increased sales of panels for new iPhone and iPad devices. Net income, excluding minority interests, was 71.5 billion won (US$67 million) in the quarter ended December 31 from 314.2 billion won a year earlier, the company said in a regulatory filing yesterday. That missed the 159.9 billion won average of eight analyst estimates compiled by Bloomberg. Lacklustre demand for televisions prompted panel price cuts as competition among Asian TV makers intensified.

Iran vows to push for final nuclear accord Leaders lure oil majors with new contracts pledge

economic news, it’s still struggling with the legacy of the debt crisis, including an unemployment rate of 12.1 percent. Gross domestic product probably rose 0.2 percent in the fourth quarter after a 0.1 percent increase in the previous three months, according to a Bloomberg survey of economists. “While gathering pace, the upturn remains fragile,” Chris Williamson, Markit’s chief economist, said in yesterday’s report. “Companies cut employment again, and selling prices continued to fall amid stillweak demand. Deflationary forces are clearly a concern in many countries.” Even with gradual growth, price pressures within the currency bloc remain weak. Earlier this month, ECB President Mario Draghi strengthened his pledge to keep interest rates low for as long as necessary and warned that it’s too soon to say the eurozone is out of danger. “We’re still at a critical juncture,” Greek Prime Minister Antonis Samaras said on January 15. “This crisis is in the process of being overcome.”

ranian President Hassan Rouhani said his country won’t impede progress toward a final agreement with world powers over the nation’s nuclear programme. Iran’s will to reach a comprehensive accord is “present and strong,” the president said yesterday at the World Economic Forum in Davos, Switzerland. Hurdles may arise if other parties show a “lack of serious will” to secure a deal, he said. Mr Rouhani, the first Iranian leader in a decade to visit the Swiss ski resort for the forum, is looking for investment to boost an economy that shrank more than 5 percent in the last fiscal year through March under the weight of international sanctions imposed to punish the Islamic Republic for its nuclear work. Mr Rouhani’s Davos speech follows the implementation this week of an interim deal between his nation and six world powers that curbs Iran’s atomic programme in exchange for about US$7 billion in sanctions relief. The accord, struck in Geneva on November 24 with the U.S., the U.K., France, Russia, China and Germany, marks the first breakthrough in a decade-long standoff. Iran will also have a new, attractive investment model for oil contracts by September, the president and the oil minister told some of the world’s top oil executives in Davos yesterday, part of its drive to win back Western business. Mr Rouhani and Oil Minister Bijan Zanganeh stressed the importance of fossil fuel, with global energy demand rising, executives who attended the meeting said. “The fact that the president of Iran came to the meeting today... is clearly a sign that Iran wants to open up to international oil companies,” said Paolo Scaroni, chief executive of Italy’s Eni SpA, who was at the meeting. “It was an impressive presentation,” said one of three further oil executives who were at the meeting and spoke with Reuters on condition of anonymity. The heads of oil majors Eni, Total SA, BP Plc, LUKoil OAO, Gazprom Neft OAO and several other companies were present as well as a former head of Royal Dutch Shell.

Bloomberg News

Reuters

Eurozone economy starts year at a clip Activity in January expands at fastest in two-and-a-half years Catherine Bosley

uro-area factory output expanded faster than economists forecast in January, led by Germany, as the 18-nation currency bloc’s recovery gathered momentum. An index based on a survey of purchasing managers in the manufacturing industry increased to 53.9 from 52.7 in December, Londonbased Markit Economics said in a statement yesterday. Markit’s services index rose to 51.9 from 51. A reading above 50 indicates expansion. The euro-area recovery “will continue and gradually firm, but it’s a slow process and overall the pace of growth is not very impressive,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. Yesterday’s manufacturing data add to encouraging signs that Europe’s nascent recovery is strengthening. Economic confidence improved in December to the highest level since July 2011, and industrial production increased an annual 3 percent in November. The European Central Bank forecasts 1.1 percent economic

growth in the eurozone this year, accelerating to 1.5 percent in 2015. In Germany, Europe’s largest economy, factory output surged to a 32-month high in January, “with companies reporting sharp and accelerated growth of output and new orders,” Markit said in a separate report. The French gauge rose to a three-month high. Markit’s euro-area composite index of output in the manufacturing and service industries rose to 53.2 from 52.1 in December, yesterday’s report showed.

‘Clear drags’ “There are still clear drags in Europe which mean the region will lag behind the U.S.,” Mr Kounis said. “Bank deleveraging is a big one, relatively tight lending conditions, unemployment is still high and wage growth is declining. That’s a drag on consumer demand, plus the euro is relatively strong.” While the euro area has seen an accumulation of encouraging