Macau Business Daily, Jan 28, 2014 by Business Daily

Taipa shop rents likely to rise above city average

Deputy editor-in-chief Editor-in-chief Tiago Azevedo Number 464 Tuesday January 28, 2014 Year II

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Vitor Quintã

MOP 6.00

April 19, 2013

Sands China to pay a ‘bonus’ next month Page 6

Uniqlo owner to offer secondary listing in HK

Alipay to bring payment service to Macau T

he mainland’s leading online payment service Alipay.com Co Ltd is planning to launch in Macau one of its payment services – an application installed on users’ mobile phones that enables instant payment. The firm is seeking partners to offer up integration with Alipay Wallet’s offlineto-offline technology, the company told Business Daily yesterday. Alipay, the payments branch of Chinese

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e-commerce giant Alibaba Group Holding Ltd, announced last Thursday it would provide its offline payment services to some retailers in Hong Kong and Taiwan. The users of Alipay Wallet can purchase goods just by opening the app and presenting an auto-generated barcode to the cashier, who then scans it with a standard barcode scanner to complete the transaction. More on page 3

Nobu may star at City of Dreams Macau www.macaubusinessdaily.com

The luxury hotel and restaurant chain Nobu co-founded by actor Robert De Niro, would like to open a Macau restaurant – possibly at Melco Crown Entertainment Ltd’s City of Dreams casino resort on Cotai – said the brand’s principal Meir Teper. There was no mention of a hotel from the brand, despite earlier rumours. But Nobu will create a hotel at MCE’s City of Dreams Manila. Page 2

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January 27

HSI - Movers Name

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GALAXY ENTERTAIN

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SANDS CHINA LTD

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MTR CORP

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SUN HUNG KAI PRO

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POWER ASSETS HOL

-0.72

WHARF HLDG

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PING AN INSURA-H

-4.25

HENGAN INTL

-4.99

LENOVO GROUP LTD

-5.17

BELLE INTERNATIO

-5.22

Source: Bloomberg

Committee to greenhouse local professionals

Pay climbs as jobless rate decreases in Q4

Chief Executive Fernando Chui Sai On yesterday announced via the city’s Official Gazette a “Talent Development Committee” to advance the careers of local professionals. Mr Chui had pledged – in his Policy Address for 2014, given in November – to do so before the end of this month. The committee will consider incentives to persuade local students that have been educated at tertiary level abroad, to stay and work in Macau.

The shortages of labour drove up the median earnings of people in employment to the highest level ever in the fourth quarter of last year, official data indicate. Median monthly earnings rose to 12,300 patacas as the unemployment rate fell 10 basis points to 1.8 percent. Separately, 149 senior officials including the city’s Chief Executive, will get an above-inflation pay rise next month.

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January 28, 2014 April 19, 2013

Macau

Nobu may star at City of Dreams Macau Hotel and restaurant chain would like to open an eatery in Macau, says principal Michael Grimes

michael.grimes@macaubusinessdaily.com

he luxury hotel and restaurant chain Nobu co-founded by actor Robert De Niro, would like to open a Macau restaurant – possibly at the City of Dreams casino resort on Cotai – said the brand’s principal Meir Teper in an interview with the business television channel CNBC. “We’re looking in Singapore to do a hotel, and a restaurant in Macau, after Manila. Maybe we’ll do one with the City of Dreams in Macau, [it] would be a great thing to do but we’ll see,” said Mr Teper in comments to CNBC’s Susan Li. Melco Crown Entertainment Ltd, the developer of City of Dreams, hadn’t by press time returned a Business Daily request for comment. In late November it was announced that MCE had started construction on its fifth hotel tower at MCE’s City of Dreams casino-resort on Cotai. But no announcement has been made so far on the hotel brand partner for the tower. In November Bouygues Construction SA of France issued a statement saying only that subsidiary Dragages Macau Ltd has been awarded a contract worth HK$3.68 billion (US$474.3 million) to build “a six-star luxury hotel” at City of Dreams on Cotai.

City of Dreams Macau – home to a new Nobu restaurant

“There have been rumours that the fifth hotel tower was going to be Nobu,” Shaun Rein, founder and managing director of Shanghaibased China Market Research Group told Business Daily yesterday. Asked about the reference to a six-star hotel at City of Dreams, Mr Rein added: “It’s common now on boutique hotel projects in China to refer to ‘sixstar hotels’. Chinese consumers are getting a bit bored about standard

five-star hotels. That could be the reason.” MCE did confirm yesterday that it would be Nobu that will provide the second major hotel brand – with 321 rooms – at the casino resort it is creating via a joint venture in Manila, Philippines. The resort, to be known as City of Dreams Manila, has already announced it will have a Crown Towers hotel. MCE’s co-chairman Lawrence

Ho Yau Lung said yesterday his firm had boosted its contribution to the Manila scheme to US$680 million. In October it had raised its bet to US$630 million from an original US$500 million commitment. According to MCE announcements it will have six hotel towers, including an approximately 260-room Crown Towers hotel and “other hotels with VIP and five-star luxury rooms and high-end boutique hotel rooms”. The 6.2-hectare (15-acre) site – by Manila Bay in a zone titled by the Philippine authorities as Entertainment City – will include approximately 365 gaming tables, 1,680 slot machines and 1,680 electronic table games upon opening. Nobu’s Hong Kong restaurant at the Intercontinental Hotel in Tsim Sha Tsui, Kowloon, is currently listed in Michelin’s Hong Kong Macau 2014 guide. Its food – described by Nobu as inspired by Japanese chef Nobu Matsuhisa – is characterised by Michelin as a “beguiling blend of Japanese and South American tastes”. Nobu already operates a 163room, 18-suite hotel at Caesars Entertainment’s Caesars Palace casino resort in Las Vegas.

Taipa’s shop rents set to rise 20 pct in 2014 Estate agents expect the increase in rents for commercial property to be faster on Taipa than on the peninsula Tony Lai

tony.lai@macaubusinessdaily.com

hop rents on Taipa will increase by up to 20 percent this year, rising faster than shop rents elsewhere in the city, estate agents say.

“The supply of shops on Taipa has been limited in the past few years and there are not many alleyways, compared with the districts of NAPE and Largo de São

Sky-high rents in prime shopping areas are squeezing out some retailers

Domingos,” said Centaline (Macau) Property Agency Ltd senior regional sales director Roy Ho. “So this means that businesses cannot relocate

from first-tier shops to thirdtier space in the same area on Taipa, as no such option is available,” Mr Ho said. He said shopkeepers would just have to pay more rent if they wished to keep doing business on Taipa. Mr Ho estimates that shop rents in Taipa will rise by up to 20 percent this year. But he believes the rate of increase in shop rents generally will “further ease this year after the rapid increase in the past”. Jones Lang LaSalle (Macau) Ltd says in a property preview it released this month that shop rents rose by an average of 6.2 percent last year, having r i s en b y 9 9 . 1 p e r c e n t in 2012. Midland Realty (Macau) Ltd’s chief executive, Ronald Cheung Yat Fai, said: “Not only can some vacant stores be spotted in the Largo de São Domingos area, but this situation can also be seen in the NAPE area.” Mr Cheung told Business Daily: “Shop rents in the first-tier and second-tier locations will be flat, but

whether there is room for correction depends on the number of visitors and their average spending this year.” Official data show Macau had 29.3 million visitors last year, 4.4 percent more than in 2012. About 18.6 million of them were mainlanders. Average spending per head by visitors rose to 1,905 patacas (US$238) in the third quarter of last year, 5.5 percent more than a year earlier. The Reuters News agency quoted a report by the Hurun Research Institute this month as saying spending by wealthy mainlanders had fallen by 15 percent last year, declining for the third year in a row. Mr Ho of Centaline said he was optimistic about the market for commercial property to let, assuming that “the shop owners are not very aggressive”. He added: “There have still been a lot of enquiries about shops recently, showing there is still demand for commercial space.” No official data on shop rents are available. With Reuters

January 2014 April 19,28, 2013

Macau

Alipay has plans for offline payment service in Macau Alipay.com has launched Alipay Wallet in Hong Kong and Taiwan for the benefit of tourists from the mainland Stephanie Lai

sw.lai@macaubusinessdaily.com

he mainland’s leading online payment service company, Alipay.com Co Ltd, intends to launch in Macau an application for mobile phones that can make payments instantly. Alipay.com told Business Daily yesterday that it was seeking partners in its venture to offer its Alipay Wallet offline, stored-value payment service here. Alipay.com announced last Thursday that some retailers in Hong Kong and Taiwan would begin accepting Alipay Wallet payments. A user of Alipay Wallet can pay for goods or services by opening the app in his or her phone and showing the barcode that appears on the screen to the cashier, who then uses an ordinary barcode scanner to read it. This deducts the payment from value stored in the app, completing the transaction. The value stored in the app is denominated in yuan. The exchange rate used to convert payments in other currencies into yuan is the spot rate provided by settlement banks taking part in the venture. “We do have plans to launch the offline payment service in Macau,” a spokeswoman for Alipay.com told Business Daily. “But so far we don’t have an exact schedule for when this service will be made available.” The spokeswoman said her company was looking for suitable partners here. She declined to

identify any potential partners it had approached. Any partnership would serve mainly tourists from the mainland. Some retailers here have reported increases in purchases paid for in yuan. Chow Tai Fook Jewellery Group Ltd said this month that 59.6 percent of its revenue in Macau and Hong Kong in the third quarter of last year had been from sales to customers that paid in yuan, using either cash or the China UnionPay system.

Regulatory doubts Alipay.com said last year that Alipay Wallet had over 100 million registered users in November. Alipay. com is a Hangzhou company. It is the payments arm of mainland e-commerce company Alibaba Group Holding Ltd. In Hong Kong, payments made through the Alipay offline service are now accepted in over 330 OK Mart outlets of Circle K Stores Inc, 90 outlets of cosmetics retailer Bonjour Holdings Ltd and 19 outlets of clothes retailer Giordano International Ltd. Alipay.com has a partnership with Uni-Hankyu Department Store in Taipei, but their venture has encountered regulatory hurdles. Taiwan news media have reported that the Alipay offline service was suspended there on Thursday night after the island’s Financial Supervisory Commission questioned the legal validity of Alipay Wallet transactions.

Alipay Wallet is accepted in over 330 OK Mart outlets in Hong Kong

They quoted Uni-Hankyu Department Store as saying Alipay Wallet used cross-border payment agent Neweb Technologies Co Ltd and was meant to give shoppers from the mainland another way of paying for their purchases. It was not immediately clear when the department store will resume accepting Alipay Wallet payments. Another spokeswoman for Alipay. com told us that her company “will respect government policies in Taiwan” and “will comply with

relevant regulations on the matter”. The launch of Alipay Wallet in Hong Kong went smoothly. However, news media there have quoted the Monetary Authority of Hong Kong as saying it will soon increase its regulation of stored-value means of payment. We tried to get the Monetary Authority of Macau to tell us about any regulatory concerns it had about means of payment such as Alipay Wallet, but we had received no reply by the time we went to press.

Macau’s got a talent committee Chief Executive to head new body to develop local professionals Stephanie Lai

sw.lai@macaubusinessdaily.com

hief Executive Fernando Chui Sai On yesterday announced via the city’s Official Gazette a “Talent Development Committee” to advance the careers of local professionals. Mr Chui had pledged – in his Policy Address for 2014, given in November – to do so before the end of this month. The committee will consider incentives to persuade local students that have been educated at tertiary level abroad, to stay and work in Macau. In the past the city has suffered a brain drain. The committee will also formulate a long-term policy to help train locals and complement the city’s economic development, said government spokesman Alexis Tam Chon Weng in a press

Press briefing for yesterday’s announcement

briefing yesterday. According to the official dispatch yesterday, the committee will look at what types of technical professionals will be urgently needed by Macau in the coming years.

“The technical professionals are the ones that are most needed by the city at present,” the deputy-director of the Policy Research Office Mi Jian said in the press briefing. “But how many profession-

als from the fields of gaming, tourism, or even convention and exhibition industry and traditional Chinese medicine are needed – this will be our upcoming task,” he added. Another attendee of yesterday’s press briefing, the director of the Tertiary Education Services Office Sou Chio Fai, said the committee will this year consider future labour demand in the fields of accounting, translation and interpretation, engineering and the hotel industry. The committee will also work on an incentive scheme to train top local professionals – a group referred to as the community’s “elite” in the official dispatch and in previous government announcements. Exactly who qualifies for that grouping

wasn’t specified yesterday. The Chief Executive will serve as the chairman of the Talent Development Cw wwommittee, while Secretary for Social Affairs and Culture Cheong U is the vice-chairman. Government representatives from the education departments, Policy Research Office, and the rectors respectively of the University of Macau, Macau Polytechnic Institute and the Institute for Tourism Studies will also sit on it. A maximum of 24 “prominent professionals” from the city will also be appointed to serve on the policy-making committee. The government will release the roster of names soon, Mr Tam told media yesterday.

January 28, 2014

Macau

Pay climbs as jobless rate decreases in Q4 Median monthly earnings rise to 12,300 patacas as the unemployment rate falls to 1.8 percent Tony Lai

tony.lai@macaubusinessdaily.com

Wages are increasing as employers scour the market for workers

he shortages of labour drove up the median earnings of people in employment to the highest level ever in the fourth quarter of last year, official data indicate. Statistics and Census Service data published yesterday show that median monthly pay rose to 12,300

patacas (US$1,537) in the fourth quarter, 2.5 percent more than in the third. The labour force numbered 377,000 and the labour force participation rate was 73.2 percent. The monthly earnings of Macau permanent residents were unchanged

at 15,000 patacas. The unemployment rate dipped to 1.8 percent, the least ever. The number of unemployed fell by 2,000 to 6,800. The unemployment rate for the whole of last year was 1.8 percent, 0.2 percentage point less than in 2012.

A written statement issued by the Statistics and Census Service says: “In 2013 the average number of the employed per household held stable at 1.8 and the median monthly employment earnings per household increased by 13.2 percent year-on-year to 24,000 patacas.” Recruitment agencies and small businesses have said they expect pay rates to rise by up to 10 percent this year. “Because of the strong demand for labour in the market, employers have to keep the pay they offer at a competitive level to hold on to workers,” the managing director of EvolutionHR Consultancy Ltd, Jennifer Liao, told Business Daily this month. The vice-chairman of the Macau Small and Medium Enterprises Association, Daniel Iong Ieng Chun, told us: “It is not a matter of whether there will be a pay increase, but of how much the increase should be.” Official data show that the gaming industry remained the biggest employer in the fourth quarter. The industry took on 1,300 more workers, bringing its combined workforce to 86,600.

Top tier’s pay packets to thicken next month The chief executive’s pay rise will put him among the highest-paid heads of government in the world Tony Lai

tony.lai@macaubusinessdaily.com

tarting in February, the government will fork out 39.27 million patacas (US$4.9 million) more each month for increased pay for senior officials and other public office-holders, and for higher allowances for civil servants. Chief Executive Fernando Chui Sai On’s pay will rise by 10 percent next month, according to yesterday’s Official Gazette. Mr Chui’s salary will rise to 199,796 patacas and his representation expenses will rise to 69,929 patacas a month, meaning he will pocket 269,725 patacas each month. That means he will be paid about 3.8 million patacas a year, making him one of the highest-paid heads of government in the world. The pay of 148 senior officials and other public office-holders whose remuneration is linked to the chief executive’s will rise proportionately. They include the five government secretaries, judges and members of the Legislative Assembly.

The five government secretaries and the heads of the Commission Against Corruption, the Commission of Audit and the prosecutor-general are paid 75 percent of the chief

executive’s salary, which means their salary will rise to 149,847 patacas a month. Add their representation expenses and their monthly remuneration

Restaurants took on 800 more workers, bringing their combined workforce to 27,900. In contrast, retailers cut their combined payroll by 1,300 workers to 34,200.

Migrant labour force now nearly 138,000 The migrant labour force increased to 137,838 workers last month, 1,952 more than in November. Employers in Macau hired 27,286 workers from elsewhere last year, according to Human Resources Office data. Macau had 110,552 migrant workers at the end of 2012. The data show that migrant workers made up 36.6 percent of the city’s labour force of 377,000 in the fourth quarter of last year. More than 87,000 of the migrant workers were from the mainland. The hospitality industry was the biggest employer of migrant workers, employing about onethird of the total.

comes to 187,309 patacas. The government told members of the Legislative Assembly this month that these increases would cost it an extra 1.27 million patacas a month, or an extra 17.2 million patacas a year. The increases are the first for senior officials and other public officeholders since the handover in 1999. The Official Gazette also says the government will increase allowances for civil servants next month. The government will increase their housing allowance by 40 percent, to 2,100 patacas from 1,500 patacas. It will increase their allowances for births, marriages and deaths in their households, their family allowances and their seniority allowances by between 37 percent and 42.6 percent. The amount of each of these allowances is linked to the civil service pay scale. The government has said these increases will cost it an extra 38 million patacas a month, or an extra 456 million patacas a year.

MOP269,725

Civil service allowances will rise in February

Chief Executive’s remuneration, including representation expenses

January 28, 2014 April 19, 2013

Macau

Sands China to pay a ‘bonus’ next month Casino firm didn’t give details on whether part of wider pay deal for 2014 Michael Grimes

michael.grimes@macaubusinessdaily.com

(approximately HK$7.30 billion). Given Macau’s labour market squeeze, with only 1.8 percent unemployment for calendar year 2013 – according to official figures yesterday – and the current profitability of the gaming companies, gaming workers appear keen to gain as many concessions as possible from the operators. “We believe the other operators will give out bonuses and have salary hikes as well,” Gaming Industry Workers Association vice-president Leong Sun Iok told Business Daily earlier this month. “This can boost the morale as the workers have been going through a lot in the past year,” he added.

Work-to-rule Staff ‘commitment and dedication’ earns bonus from Sands China

acau casino investor Sands China Ltd said yesterday it would pay its staff “a bonus in early February”. It didn’t mention how much or how many would get it. Nor was there any information on whether there would be an increase in basic pay for 2014 above and beyond any “bonus”. But the firm did quote Sands China president Edward Tracy saying the award was a reward for the “commitment and dedication” of its staff. Business Daily asked the firm about the size of the bonus, how many people would be eligible, and whether it was separate to any pay increase for 2014. No reply was available by press time. Sands China had 24,324 fulltime employees as of June 30, 2013, according to the firm’s interim report filed in late August. In February last year, this newspaper reported that Sands China

had announced a salary increase of five percent for all full-time employees in 2013, effective from March 1, that year. A further five percent increase for 2014 would – if enacted – be in line with what’s already been announced for this year by concessionaire Sociedade de Jogos de Macau SA. Macau’s former monopolist in the gaming industry, Stanley Ho Hung Sun, founded SJM. In recent years SJM has set the pay benchmark for the industry as a whole by being first to announce any gaming staff bonuses or pay rises for the following 12 months. Latest official data said consumer price index inflation for the city averaged 5.5 percent in the twelve months to December 31.

SJM fragmented But SJM’s pay settlement for 2014 can only definitively be said to

apply to its three core, self-managed properties currently active. There are a further 16 currently active SJM-licensed properties managed by third parties that may or may not follow those guidelines. At least one management at an SJM-licensed satellite casino appears to have its own pay policy for gaming staff, as Business Daily reported yesterday. SJM has also arguably further confused the pay issue for 2014 by adding an above-inflation element for its core staff that it refers to as “a living subsidy for 2014” – worth 175 percent of one month’s salary for workers earning fewer than 17,000 patacas (US$2,125) a month. SJM’s full 2013 operating numbers are not yet out, but in the first half its net profit rose 12.2 percent yearon-year to HK$3.8 billion, according to a Hong Kong filing. Sands China said in its interim results to June 30 that profit rose 113.8 percent to US$940.5 million

But on Friday and Saturday casino staff at the SJM SA-licensed Grand Emperor Hotel held a work-to-rule, suggesting it might be difficult to maintain a harmonious approach citywide across the industry. On each day the action at Grand Emperor lasted for one hour and involved on-duty staff declining to cover for any late arriving colleagues at shift change times, a workers’ representative told Business Daily. Union Gaming Research Macau said in a note over the weekend that terms reported in the Chineselanguage media as agreed between Grand Emperor gaming employees and the venue’s management were “equivalent to a 16.7 percent annual bonus”. The research house added that was “double the typical one-month bonus (8.3 percent) that many gaming operators have historically offered”. Union Gaming added: “With Macau GGR [gross gaming revenue] continuing to inflect positively – and the casino employees keenly aware of this – we believe this could result in a growing chorus for higher wages and bonuses throughout the industry.”

Shoe retailer Le Saunda Police prepare for CNY visitor surge on better footing

ootwear manufacturer and retailer Le Saunda Holdings Ltd said yesterday it expected to record a “significant increase” in consolidated profit for the financial year ending February 28, 2014 as compared to the corresponding period in 2013. The firm stated in a filing to the Hong Kong Stock Exchange the expected improvement was due mainly to an increase in same-store sales growth; an increase in gross profit margin; and an accounting gain from the disposal of group properties. Le Saunda had said in an August filing that move involved five commercial properties in in Hong

Kong. The transaction was completed on January 25. The company’s overall gross profit increased by 21.3 percent year-on-year to HK$577.50 million (US$74.4 million) in the six months to August according to an earlier filing. Le Saunda said in October it would not open any new stores in Macau or Hong Kong due to a spike in rents. It has two shops in Macau, one of them at Rua da Palha, near the Ruins of St Paul’s. In January last year it agreed a 60 percent increase in the rent of its other outlet at Rua de São Domingos, in the touristheavy Senado area. M.G.

acau’s Public Security Police say they will have extra officers on duty at border crossing points during the Chinese New Year holidays starting later this week. During last year’s equivalent holiday period, scuffles broke out and there was pushing as crowds attempting to go back to the mainland massed on the Macau side of the main Gongbei border at the end of the festive period. The PSP said last year that lessons had been learned from the incident. The PSP stated in a press release yesterday it “predicts a growth between seven

percent and nine percent in the number of visitor arrivals and departures in the Lunar New Year holidays”. The forecast was based on the equivalent holiday p er i o d l a s t y e a r w h e n there were 1.2 million visitors in a nine-day period, a spokesman told Business Daily. “There may be floods of visitors particularly in the Border Gate terminal [Gongbei] and the Outer Ferry Harbour Terminal [in the holiday times] so the police force will flexibly arrange its back office staff and increase the [number of] immigration counters available,” the prepared

police statement added. Crowd control measures will be adopted as and when visitor volumes increase, the police said. The PSP also urged residents and visitors to use other border terminals in Taipa to avoid overcrowding the checkpoints in the peninsula. Seasoned observers of the Macau gaming market note that Chinese consumers typically reserve the first two days of the official Lunar New Year holiday for visiting family and friends, with trips to Macau and its casinos ramping up on the third holiday day. T.L.

January 2014 April 19,28, 2013

Macau

Uniqlo owner won’t issue new shares

Fast Retailing to offer secondary listing in HK Plans to list depository receipts on the Hong Kong Exchange on March 5

niqlo owner Fast Retailing Co Ltd, the Japanese clothing company on an overseas expansion drive, plans to list depositary receipts in Hong Kong to help promote its brand to investors and customers in the region. Fast Retailing doesn’t plan to sell new shares or raise funds through the listing, it said in a statement. The receipts will trade on Hong Kong’s stock exchange on March 5, it said. Uniqlo opened its first outlet here on December 19, at the Venetian Macau shopping mall. “We chose Hong Kong among the many bourses out there because Hong Kong is the centre of financial markets in Asia,” chief financial officer Takeshi Okazaki told reporters yesterday in Tokyo. “By increasing brand awareness further, we’re aiming to accelerate our overall expansion.” President Tadashi Yanai has invested in building the business overseas, expanding in the U.S., China and Indonesia and hiring executives from Wal-Mart Stores Inc, Esprit Holdings Ltd, Express Inc and Juicy Couture. Profit in the three months through November rose 8.8 percent, beating analyst estimates, as Uniqlo sales overseas surged 77 percent, more than 40 times the Japan growth rate. “The China region is growing, so this makes sense for the company,” Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management Co, said by phone. “Their investor relations activities and disclosures will be more vigorous.” Fast Retailing fell 1.61 percent to close at 37,600 yen (2,929 patacas) in Tokyo trading. The stock almost doubled in value last year. The plan to sell depositary receipts in Hong Kong is subject to regulatory approval. Listing shares in other markets is “a possibility,” Mr Okazaki said yesterday. There is no specific plan for such a listing, he said.

Branding strategy Listing in Hong Kong for branding purposes has been popular among companies looking to appeal to investors and consumers in the city and the rest of Greater China.

Two companies have already taken that road in January, compared with five for all of 2013 and just two in 2012. Those listing without selling shares in the past few years include U.S.based luxury group Coach Inc and Macau casino operator Melco Crown Entertainment Ltd. Such listings – known as listing by introduction – have had limited success compared with typical initial public offerings because there are no new shares to trade. Coach’s depositary receipts were not traded over three straight days last week. Companies and investment bankers have said listing by introduction could serve as a platform to raise capital in the future, but since 2010, only three of 24 companies have raised funds after introductions.

No. 1 goal Mr Yanai, Japan’s richest person, has ambitions for Fast Retailing to overtake Zara owner Inditex SA and become the world’s top clothing retailer. He has opened stores in New York, Paris, Shanghai and Jakarta, more than quadrupling overseas sales in the five financial years through August 2013. “We expect high growth in the Asia region,” Mr Okazaki said. Morgan Stanley is sponsoring the Hong Kong listing, which is pending approval from the bourse. Fast Retailing has said it plans to open 200 to 300 outlets overseas annually and aims to open its first stores in Australia and Germany this year. The retailer targets opening between 20 and 30 stores a year in the U.S. and hopes to reach 100 stores there in the next few years, Mr Yanai said last year. The company is also adding stores in China and Indonesia as it bets on global expansion to boost sales to 5 trillion yen by 2020. Its brands include Comptoir des Cotonniers, GU, Helmut Lang, J Brand, Princesse tam.tam, Theory and Uniqlo. The clothier surged 99 percent last year in Tokyo trading, boosting the company’s market value to 4.6 trillion yen as of December 30, compared with 2.3 trillion yen a year earlier. Reuters/Bloomberg News

MGTO

January 28, 2014 April 19, 2013

Greater China

Chinese growth to ease amid reform p Leaders have repeatedly said they will accept lower growth Kevin Yao

he mainland’s economic growth will slow gradually over the next two years as the government forges ahead with structural reforms and seeks to curb elevated debt levels to help create long-term sustainable growth, a Reuters poll showed. Growth for 2014 may come in at 7.4 percent, according to the median forecast in a poll of 38 economists conducted between January 20 and 24. That is unchanged from a forecast in the same poll in October, and would be a slowdown from 2013’s 7.7 percent. It would also mark the slowest expansion for the economy since 1990, a 24-year low. Despite signs that global demand may improve this year, a drive by Chinese regulators to rein in the shadow banking sector is likely to cool credit and investment growth while Beijing’s continuing anticorruption campaign could put a lid on consumption, analysts say. The growth slowdown has been well telegraphed by authorities, who have repeatedly said they will accept lower growth as they push through their reform agenda. Growth in the

October-December quarter fell to a six-month low of 7.7 percent. “Looking ahead, we expect economic growth to moderate from 7.7 percent in 2013 to 7.4 percent in 2014,” Haibin Zhu, chief China economist at JPMorgan Chase & Co in Hong Kong, said in a research note. “Amongst the major components of growth, we look for modest easing in fixed investment growth, relatively solid consumption growth and some moderate upturn in the export sector, supported by the global economic recovery.”

Price gains After 30 years of sizzling doubledigit economic growth that lifted many millions of Chinese out of poverty but also devastated the environment, China wants to change tack by embracing sustainable and higher-quality development instead. That means reducing government intervention to allow financial markets to have a bigger say in allocating resources, and promoting domestic consumption at the expense of investment and exports. Rising money market rates and

bond yields since the middle of last year indicate China’s central bank is committed to deleveraging in the economy to fend off potential risks, but it has so far refrained from tightening policy abruptly. Experts at government think tanks have told Reuters that the government is likely to keep an official growth target of 7.5 percent this year, unchanged from last year. The poll showed that consumer inflation may pick up to 3.1 percent in 2014 from 2.6 percent in 2013, the same as the forecast in the October poll. Inflation will tick up to 3.2 percent in 2015. Inflation hit a seven-month low of 2.7 percent in December, and the 2013 figure was well within the government’s target limit of 3.5 percent. Analysts believe the government will also stick with the 3.5 percent inflation target this year, but note that prices may rise as the reform drive loosens state controls over energy and utility prices and allows markets to determine prices. Economists in the poll also believe that China’s central bank will keep the benchmark lending rate unchanged

Beijing aiming to promote domestic consumption

at 6 percent until the end of 2015, though the required reserve ratio for banks may start to come down from the second half of 2015. The central bank has pledged to keep policy stable and consistent

HK may lure New York IPOs after audit ban Firms caught in the crossfire of the SEC and the Chinese government

he U.S. ban on Chinese affiliates of the four biggest accounting firms stands to undermine a pickup in initial share sales by Chinese companies in New York. While the auditors said they’ll appeal the six-month ban imposed by a U.S. judge, the ruling will probably push Chinese companies to opt for a listing in Hong Kong instead of New York, said Bruno del Ama, chief executive officer of Global X Funds. Chinese companies had begun lining up to sell in New York this year after eight initial public offerings were carried out in 2013, up from three the year before. Beijing Jingdong Trading Co and Zhaopin Ltd wanted to go public in the world’s biggest stock market, people familiar with the matter said this month. Alibaba Group Holding Ltd, China’s largest e-commerce company, said in November that it’s deciding whether to sell shares in the U.S. or Hong Kong. “Some of the sexiness of IPOs in the U.S. may be going away because of some of the perception issues,” del Alma, who helps manage US$2.8 billion in exchange-traded funds, said in an interview at Bloomberg’s headquarters in New York. “When you think about

it, five years ago technology companies were looking at an IPO in Nasdaq because that’s the global technology exchange. Then all of sudden these accounting issues started to come up.” The Bloomberg ChinaUS Index of the most-traded Chinese stocks in the U.S. dropped 4.3 percent to 98.03 last week, the biggest slump in three months, after the U.S. Securities & Exchange Commission barred the four largest accounting firms from conducting audits of New York-listed companies. The decision to ban the affiliates of the largest

The one thing investors dislike most is uncertainty and that uncertainty will be priced in Bao Fan, CEO of China Renaissance

accounting firms for six months “ignored” China’s efforts and progress made on cross-border rules cooperation, the nation’s securities regulator said on Friday on its microblog. Deloitte Touche Tohmatsu CPA Ltd, PricewaterhouseCoopers Zhong Tian CPAs Ltd, Ernst & Young Hua Ming LLP and KPMG Huazhen have 21 days to file a so-called petition for review with the SEC before the January 22 ruling would become final. The SEC ruling could also mean lower valuations for the IPOs, said Bao Fan, chief executive of technologyfocused boutique investment bank China Renaissance. “The one thing investors dislike most is uncertainty and that uncertainty will be priced in,” Mr Bao said in an interview. “It is the companies, the issuers, that are going to pay the price.” Underscoring investor skittishness, all but one of the Chinese companies that listed in the U.S. in 2013 fell on January 23. Sungy Mobile, which runs a Chinese mobile web portal, tumbled 9.7 percent, while online sports-lottery operator 500. com Ltd dropped 10 percent. The firms receiving the bans said in an e-mailed statement that they will

Auditors said they will appeal the six-month ban

appeal the decision by U.S. Administrative Law Judge Cameron Elliot. “The companies are getting caught in the crossfire of the SEC and the Chinese government,” Jay Ritter, a finance professor at the University of Florida at Gainesville, who studies IPOs, said by phone. “The most appealing option for the handful of

Chinese companies that were planning on listing in the U.S. in the next six months will be to postpone until the ban ends.” Judge Elliott ordered the ban after the accounting firms’ Chinese units failed to comply with SEC orders for documents needed for a series of accounting fraud probes. Bloomberg News

January 2014 April 19,28, 2013

Greater China

push

Switch to high-grade materials to boost miners Beijing under heavy public pressure to cut pollution

this year, but may face pressures as it attempts to keep growth on track while dealing with the country’s growing debt pile and cracking down on risky bank lending. Reuters

hinese steelmakers and power plants are being forced to shop around for higher-quality raw materials to meet tougher air pollution standards, a move that will be a boon for global mining giants that produce premium-grade iron ore and coal. The central government, under pressure to cut pollution after a series of hazardous smog crises in many major cities last year, has vowed to raise emission standards and shut polluters in big industrial sectors like steel, cement and power. The air pollution campaign could squeeze out iron ore suppliers from Iran, Mexico and Vietnam, but would be good news for others from Brazil and Australia, like Vale SA, BHP Billiton Plc and Rio Tinto Group as well as Australian coal exporters that supply top grade raw materials. It could also undermine China’s efforts to diversify its sources of iron ore away from Australia and Brazil, which account for more than 70 percent of imports and – according to Beijing – have an undue influence on the way prices are set. “Mills used to take cargoes with various grades as long as they are cheap and never questioned about minor ingredients, but more and more customers are starting to look into the specs before buying,” said an iron ore trader in Beijing. Higher-grade iron ore is more

Top Taiwan-China officials to meet in Feb: report C hina and Taiwan officials set a date for talks next month, the United Daily News reported yesterday, paving the way for the first official government-to-government meetings in six decades. The head of Taiwan’s Mainland Affairs Council, Wang Yu Chi, will meet with the head of China’s Taiwan Affairs Office, Zhang Zhijun, on February 16 in the mainland city of Nanjing, the Taipei-based newspaper reported, citing an unidentified person. Taiwan and the mainland have been governed separately since 1949, with the island’s constitution retaining the Republic of China’s name and territorial claims. “The meeting is a considerable breakthrough because this is the first time that two government officials are going to meet in their formal capacities, representing a certain level of mutual recognition,” said Joseph Cheng, a political science professor at the City University of Hong Kong. Taiwan’s President Ma Ying Jeou, speaking on an official visit to Honduras, said the meeting is an “inevitable” step in cross-strait relations, the Central News Agency reported on Sunday. A Nanjing meeting would be the latest sign of reconciliation in a relationship that saw the mainland fire missiles into the stretch of water between them in 1996 before Taiwan’s first democratic presidential election. Mr Ma’s presidency, which began in 2008, ushered in warmer ties as he moved away from the independenceleaning policies of his predecessor,

efficient for steel makers and contains fewer additives, which cuts down on emissions. Smaller iron ore exporters have become popular sources of cheap supplies in recent years. Iran ranked fourth on China’s list in 2013, behind Australia, Brazil and South Africa, with deliveries up 29 percent in a year. But while Iranian ore can be as high as 65 percent iron, some of it contains up to 1.5 percent sulphur, which generates high levels of pollutants when removed during processing. Sulphur levels can reach 2 percent in Indonesian and Mexican ore. By contrast, iron ore from the big three mining firms grade above 57 percent but with just 0.05 percent sulphur.

Stricter checks Smaller exporters are already losing their competitive edge as Chinese demand slows and supplies from Australia surge. Australia’s market share rose by 4 percentage points to account for 51.2 percent of China’s total imports in 2013, while Brazilian miners claim a near 19 percent market share, up from just 8.6 percent a year earlier. Miners in both countries are in the midst of multi-billion dollar expansion work to dig hundreds of millions more tonnes of ore in the

next few years. “More supplies from Australia and tougher environment protection measures will eventually force nonmainstream suppliers to either cut prices or shut down production,” said an iron ore purchasing mill official. The step-up in environmental checks has also prompted some power plants to switch to higher grades of coal. “Many power plants are beginning to worry about the inspections and have begun to switch to higher-quality coal with lower sulphur and ash content,” said a Beijing-based trader. Expectations that Beijing may soon introduce even more stringent requirements on coal use at power plants have also led miners to hold off on signing fresh contracts with Indonesian suppliers, trade sources said. Reuters

Foxconn eyes factories in U.S., Indonesia Chairman Gou sees annual revenue surge to US$333 bln in 10 years

T China’s Taiwan Affairs Office, Zhang Zhijun (2nd, left)

Chen Shui Bian. Mr Wang, Taiwan’s Mainland Affairs Council minister, declined to comment when contacted by telephone yesterday. The ruling Kuomintang Party said earlier in December that Mr Wang was planning to meet his China counterpart in February. At the Nanjing meetings, officials will discuss topics including the establishment of cross-strait representative offices, access for each side’s news media, and cross-strait economic restructuring, according to United Daily News. Chinese President Xi Jinping said at the summit that China and Taiwan should avoid passing on their political impasse from one generation to the next. “This is a step toward recognising each other’s government and its legitimacy, which hasn’t happened in the past,” said Ting Jen Fang, professor of politics at Taiwan’s National Cheng Kung University, said. Bloomberg News

aiwan’s Foxconn Technology Group, the major supplier of Apple Inc’s iPhone and iPad products, said it’s considering expanding manufacturing to the United States in a move that could open up new prospects for business with Apple. Chairman Terry Gou also said Indonesia will be a top priority for investment this year. That would tie in with Foxconn’s deal to design and market phones in the country with BlackBerry Ltd as the Canadian company seeks to reverse its decline in the smartphone business. “The U.S. is a must-go market,” said Mr Gou, speaking at the group’s annual year-end party. He said many customers and partners hope Foxconn, the world’s largest contract manufacturer of electronic goods, will set up manufacturing facilities in the U.S. Foxconn’s ambitious growth plans could see it lift annual revenue to T$10 trillion (US$333 billion) a decade from now, from T$4 trillion in 2013. The group, which includes flagship unit Hon Hai Precision Industry Co Ltd and Foxconn Technology Co Ltd, could take advantage of geographical proximity to open up new deals with partners like Apple as they develop new gadgets. Best known for putting together

Indonesia investment ‘a top priority’, Terry Gou says

iPhones, Foxconn honed its skills by meeting Apple’s exacting standards and supply chain rigour. It boasts a workforce of more than 1 million, and the scale to negotiate cheaper component prices than BlackBerry could obtain on its own. Mr Gou placed emphasis on Indonesia for future development. He said the country, rather than India, will be best able to replace China as the world’s manufacturing hub in the future. Indonesian government officials have said Hon Hai wants to gradually invest as much as US$10 billion over 5 years with local partner Erajaya Swasembada, and Indonesia will offer the Taiwanese firm a tax package aimed at kickstarting the plan. Hon Hai has yet to confirm these details. Reuters

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January 28, 2014 April 19, 2013

Greater China

Trina sees Zhou risks turmoil solar mergers in easing interest-rate controls quickening Looser rates could worsen problems for existing debt, says analyst pace T

Zhou Xiaochuan – overseeing China’s financial transformation

hina central bank Governor Zhou Xiaochuan faces an obstacle in his efforts to tame financial market volatility: his own plans to free up interest rates. The benchmark money-market rate remains above the average for January even after the People’s Bank of China last week injected more than US$62 billion following the biggest jump since June. At the same time, Mr Zhou’s planned removal of interest-rate controls may make volatility tougher to prevent, with Standard Chartered Plc economist Stephen Green saying that crisis is a “rule of financial liberalisation”. Mr Zhou, reappointed last year to oversee China’s financial transformation, is working to free up rates to push the nation toward a more sustainable and market-driven model for economic growth. Moving too slowly raises dangers of a crisis from shadow banking outside of regulations, while mishandling liberalisation risks worsening debt burdens and sparking turmoil seen in nations from South Korea to Sweden and the U.S. “China is facing a dilemma,” said Dong Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “If interest rates are not liberalised, shadow-banking activities spread like wildfire. If rates are freed up, it will worsen problems for existing debt.” The seven-day repurchase rate rose at the end of last week following a two-day drop after the PBOC injected cash to relieve funding pressures ahead of the week-long Lunar New Year festival. The rate advanced 5 basis points to 5.3 percent, according to a daily fixing compiled by the National Interbank Funding Centre, compared with the month’s 4.66 percent average. The PBOC added 120 billion yuan (US$19.9 billion) to markets via 21day reverse-repurchase agreements

on Friday, taking last week’s net injection via open-market operations to 375 billion yuan, the most since February 2013. Money-market rates in China typically rise before the week-long Lunar New Year break, which begins on Friday this year and is a period in which cash gifts are made and families get together for celebratory feasts. Allowing markets to set deposit and lending rates should be a top priority as part of efforts to generate new sources of growth and stop financial risks from building up, the International Monetary Fund said in its annual report on China in July.

US$62 bln

THE CENTRAL BANK ADDED TO MARKETS LAST WEEK

Mr Zhou, who has been PBOC chief for a record 11 years, wrote in a November article that China will “fully realise market-based interest rates” in the “medium term”. The Communist Party has pledged to give markets a “decisive” role in allocating resources as part of the broadest policy transformation since the 1990s. The PBOC in June 2012 let banks for the first time pay a premium over government-set deposit rates. Authorities in July 2013 scrapped a floor on borrowing costs while saying that further changes to deposit rules were the “most risky” part of

liberalisation. The PBOC’s next step, in December, was to authorise the trading of certificates of deposit on the interbank market.

Shadow banking Increasing competition for bank deposits may help curb shadow banking estimated by JPMorgan Chase & Co at 69 percent of China’s 2012 gross domestic product. The industry encompasses entrusted loans, wealth-management products and other resources where borrowers can obtain funds unavailable through banks and depositors can get higher returns. China’s rapid buildup of credit has evoked comparisons to Japan’s debt surge before its lost decade and to that in Thailand and Malaysia ahead of Asia’s financial crisis. China’s creditto-GDP ratio rose to 187 percent in 2012 from 105 percent in 2000, compared with Japan’s increase to 176 percent in 1990 from 127 percent in 1980, JPMorgan said in a July report. “The best sign of how fragile the system is, is what’s been happening in the interbank market,” said Charlene Chu, a former analyst at Fitch Ratings who warned that China’s debt could spark a crisis. Officials should “address the underlying fragility in the system” to minimise risks of turmoil from rate liberalisation, Ms Chu said in an interview yesterday. Chinese officials are trying to avoid repeating mistakes that fuelled crises in other nations when rate controls were eased. “The problem is deposit rates,” Standard Chartered’s Mr Green said. “If you go up too quickly, everyone competes to justify the rising costs” and banks chase higher-yielding, and riskier loans, he said. While China is likely to need to re-capitalise its banks within the next five years, PBOC leaders are well aware of other countries’ experiences with interestrate liberalisation, he added. Bloomberg News

he pace of consolidation in the solar manufacturing industry will accelerate in the next three years as the cost of the technology declines and installations surge, the founder of the fourth-biggest solarpanel maker said. Trina Solar Ltd chairman Jifan Gao said he expects three to five “leading” solar companies to remain in China by 2017, with 80 percent of the country’s market share. Currently, there are about a dozen companies with capacity to produce more than 1 gigawatt of solar cells a year. “Consolidation will continue,” Mr Gao said in an interview. “We’ve only seen the first stage. That will be a good situation. This will be achieved by mergers and acquisitions.” Solar-cell prices have fallen 70 percent since 2010 as the expansion in production capacity outpaced growth in demand. That squeezed profit margins across the industry and pushed the world’s biggest manufacturer, Suntech Power Holdings Ltd, into bankruptcy proceedings in China. Trina posted a profit for the first time in more than two years in the third quarter. Mr Gao said he expects earnings to increase as sales climb and cost-controls hold. The company’s shares have more than tripled since November. “I see a 20 percent to 25 percent annual increase in installations across the industry, and Trina will certainly beat the average,” Mr Gao said. “Our revenue and profits should also grow, in line with such market expansion.” The shakeout of the past three years forced Q-Cells SE of Germany to sell itself and U.S. Treasury-backed Solyndra LLC into liquidation. Chinese manufacturers survived because they cut costs more quickly, according to Mr Gao. “It’s not about government subsidy,” he said. “We don’t get as much subsidy as for example German companies. It’s also a mistake to think that China Development Bank loans are cheaper than loans from commercial banks. It’s about the same.” While Trina isn’t considering selling itself, other solar manufacturers may favour a merger with a company such as Guodian Technology & Environment Group Corp, a supplier of renewable-energy equipment to power generators, Mr Gao said. That would be more logical than a takeover by a major oil company such as China Petroleum & Chemical Corp, or Sinopec, he said. Bloomberg News

Solar-cell prices have fallen 70 percent since 2010

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January 2014 April 19,28, 2013

Asia

Japan in record annual trade deficit Trade gap to persist due to weak yen, high fuel imports

apan’s trade deficit widened sharply to a record in 2013 as import costs outpaced export receipts due to a weaker yen and higher fuel bills, and the third straight annual shortfall was a reminder of the challenge facing Prime Minister Shinzo Abe. The record run of annual deficits by a nation that for decades had racked up hefty trade surpluses has raised questions about how Japan can fund and contain public debt of more than US$10 trillion, or more than twice the size of its economy. Mr Abe’s reflationary policies have weakened the yen, driving up the value of export receipts in yen terms and boosting exporters’ earnings, but so far have failed to shore up volumes. Economists have anticipated a so-called “J-curve” effect from the weak yen, where a spike in import costs would over time be more than offset by gains in exports.

US$112 bln

JAPAN’S RECORD 2013 TRADE DEFICIT

But the currency’s decline has not led to the export turnaround needed to bring the trade balance back into the black, in part because exporters have not yet passed on their price advantage to customers overseas. “If corporate Japan now comes to

Exports rose 9.5 percent last year

believe that the yen will stay weak or even continue to wobble, export prices may tumble,” HSBC Holdings Plc economists said in a report. “Then shipments would soar and Japan’s competitors, like Korea, may finally feel a squeeze.” Ministry of Finance data yesterday showed exports rose 9.5 percent in 2013, the first gain in three years, but export volumes fell 1.5 percent, a third consecutive fall. Japan’s annual trade gap was a record 11.47 trillion yen (US$112 billion), about two-thirds larger than 2012’s 6.94 trillion yen shortfall. It was the third straight annual deficit, the longest run in the data that goes back to 1979.

Monthly deficit Analysts say monthly trade deficits may narrow in coming months as a global recovery boosts export demand

and a surge in consumer spending eases after a sales tax increase in April. The ministry data showed exports rose 15.3 percent in December from a year earlier, led by car exports to the United States, a key market. While below economists’ median forecast for a 17.8 percent gain, it was a 10th straight month of gains. Imports rose 24.7 percent in December from a year earlier, against an expected 26.1 percent gain. Import costs have risen both due to the weaker year and higher fuel imports after Japan shut down nuclear power plants following the Fukushima disaster in 2011. Japan’s current account logged a record deficit in November, remaining in the red for second month. “Fuel import volumes will decrease if nuclear power plants are restarted, but not immediately as it depends on the pace and timing of restarts,” Kazuyoshi Nakata, an economist at

Mitsubishi UFJ Research & Consulting Co, said before the data. Some analysts say trade shortfalls could pull the current account into the red in coming years, meaning that Japan may start chipping away at its vast pool of domestic savings and increasing the need to rein in its huge public debt. “It’s hard to anticipate when Japan can emerge from trade deficits at this point,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “If a trade deficit as a result of high energy import costs makes Japan look like a high- cost country, it may discourage moves by companies to have production centres in Japan and undermine Abenomics.” The lack of export momentum may also be affected by Japanese firms developing business overseas and also their falling competitiveness, some Bank of Japan board members said in the minutes released yesterday of its December policy meeting. Reuters

It’s hard to anticipate when Japan can emerge from trade deficits at this point Takeshi Minami, Norinchukin Research Institute

S.Korea consumer sentiment hits near 3-year high S

outh Korea’s key consumer sentiment index rose to its highest in nearly three years in January, a central bank survey showed yesterday, suggesting private consumption in Asia’s fourth-largest economy would hold firm. The Bank of Korea said in a statement its composite consumer sentiment index, compiled from its monthly survey, climbed to 109 in January from 107 in both December and November. It was the highest since setting the same 109 level in February 2011. A reading above 100 indicates positive consumer sentiment about conditions over the coming months compared with the long-term average sentiment accumulated from 2003 to

2013. The index has stayed above 100 since January last year. The central bank estimated last week the trade-reliant economy expanded by a seasonally adjusted 0.9 percent in the final quarter of 2013 over the previous three-month period, led by private consumption. Meanwhile, the central bank said in the same statement yesterday that the median expected consumer inflation rate for the next 12 months stood at 2.9 percent for a fifth straight month, well above the actual inflation rate of 1.1 percent set in December. The Bank of Korea said it surveyed more than 2,200 households across the nation from January 13 to 20. Reuters

Consumer sentiment the highest since February 2011

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Asia

Unrest deals new blow to Thai tourism As Chinese visitors cancel Lunar New Year trips Anuchit Nguyen and Suttinee Yuvejwattana

hai anti-government protests that have shut down parts of Bangkok may cost the nation’s tourism industry as Chinese visitors cancel trips during the Lunar New Year holiday that starts this week. Arrivals will fall by half to 1 million this month, Minister of Tourism and Sports Somsak Phurisisak said, with some hotels in the capital and nearby Pattaya and Hua Hin 30 percent full. The revenue loss could amount to 22.5 billion baht (US$685 million), the Tourism Council of Thailand said, with China last week warning its citizens to avoid protest sites and reconsider non-essential travel to the country. Prime Minister Yingluck Shinawatra imposed a state of emergency in Bangkok on January 22 as attacks on protesters escalated and demonstrators blockaded Bangkok’s busiest intersections. Concerns about a slump in tourism, which contributes about 10 percent to gross domestic product, sent the Stock Exchange of Thailand’s Tourism and Leisure Index down 3 percent last week, the worst performer among the bourse’s 27 industry groups, according to data compiled by Bloomberg.

US$685 mln REVENUE LOSS ESTIMATED BY THE TOURISM COUNCIL OF THAILAND

“The biggest concern now is the prolonged protest begins to significantly affect the tourism industry, which was the only bright spot for the economy in 2013,” said Porranee Thongyen, head of research at Asia Plus Securities Pcl. “With sluggish consumption and investments, a slump in tourism revenue would further worsen the overall economy.”

Flights cancelled The baht has slipped almost 6 percent in the past three months, the

Political protests since November have dented confidence

worst performer after the Indonesian rupiah among 11 most-traded Asian currencies tracked by Bloomberg. Bangkok attracted almost 4.2 million visitors from China, Hong Kong and Taiwan in 2013, a 46 percent jump from the year before, according to government data, and Mr Somsak said about 300,000 Chinese

tourists traditionally visit the country during the lunar new year holiday, which begins on Friday. “We expect to see more flight reductions by airlines, especially from China,” he told reporters in Bangkok. Singapore Airlines Ltd will cancel 43 flights between Singapore and Bangkok between January 14 and

India to review gold restrictions by end-March Current account deficit expected sharply lower in 2013/14

Gold imports higher in December, says revenue secretary

ndia will review its tight curbs on gold imports by the end of March, the finance ministry said yesterday. India used to be the world’s biggest buyer of bullion until last year when a swollen current account deficit prompted the government to slap a record 10 percent duty on imports and the central bank to tie imports to exports. With the current account deficit now expected to be sharply down in the current fiscal year and the leader of the Congress party, which heads the government, reportedly asking for a reprieve, a change was increasingly on the cards. Any easing of curbs could boost imports and might make smuggling less attractive. Revenue Secretary Sumit Bose said yesterday a review of gold curbs would come by the end of March, which coincides with the end of India’s fiscal year and collating of budget figures. Finance Minister P. Chidambaram had said earlier yesterday there could be a review of curbs by the end of this year but had not clarified whether he meant the fiscal or calendar year. The government has often linked any relaxation of the rules with an

improvement in the current account deficit but last week, Congress party leader Sonia Gandhi asked for consideration of complaints from the industry, according to media reports. The Reserve Bank of India, which has said 20 percent of all imports must be used for exports, is unlikely to review its rules until after the end of March, a policymaker directly handling gold import regulations said last week. Gold imports have dropped by more than half in recent months under the restrictions and touched 21 tonnes in November. Mr Bose added that imports in December were higher than in November but did not give any details. India’s current account deficit is now expected to be below US$50 billion in this fiscal year compared with earlier estimates of about US$70 billion. Last year it was a record US$87.8 billion. “[If the curbs are eased], official numbers will definitely increase and smuggling will reduce,” said Helen Lau, senior analyst at UOB-Kay Hian Securities in Hong Kong, adding that pent up demand from retailers could boost imports. Reuters

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January 2014 April 19,28, 2013

Asia February 27, and Thai Airways International Pcl plans to scrap 25 flights between Hong Kong and the capital, the carriers said last week. Tourist arrivals will decline by 7.3 percent to 6.5 million in the first quarter compared with a year earlier, the Tourism Council said in a statement. Bangkok arrivals have fallen 5 percent in January from a year earlier, it said. Since the protests began in October, more than 550 people have been wounded and 10 killed. Advance bookings have been crimped by travel warnings from countries such as China, Malaysia, Hong Kong, Australia, the Philippines and the U.S., whose authorities have warned citizens to avoid Bangkok’s protests hotspots. Tour guides from China are in close contact with counterparts in Thailand, Ying Chang Tian, a spokesman for Shanghai-based travel agency Ctrip.com International Ltd, said by phone. “Our local agency in Bangkok will report to our company if the situation affects our schedule.” Still, with tourists from China, Taiwan and Hong Kong making up almost a quarter of all arrivals at Bangkok’s two international airports, salvaging the city’s traditional tourist high season will be a challenge, according to a group that represents the nation’s travel agents. “The second quarter and the third quarter are the low season, so the next chance for Thailand to boost tourists is the fourth quarter,” said Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents. Bloomberg News

World Bank pledges US$2 bln for Myanmar

Google, Samsung sign patent deal

Development aid for projects including energy supply and healthcare

he World Bank announced a US$2 billion development programme for Myanmar, including projects to improve access to energy and healthcare in the impoverished former militaryruled nation. Bank president Jim Yong Kim, on his first visit to the former pariah state, said half of the funds would be used to expand power supplies, in a country where more than 70 percent of the population does not have access to reliable electricity. “We are increasing our support for the huge reform effort underway in Myanmar because we want to help the government bring benefits to poor people even more quickly,” Mr Kim said in a statement. “Expanding access to electricity in a country like Myanmar can help transform a society – children will be able to study at night, shops will stay open, and health clinics will have lights and energy to power life-saving technology. Electricity helps brings an end to poverty,” he said. The programme also includes US$200 million to help Myanmar achieve universal health coverage

by 2030, the Bank said, noting that only one in four people in the once-isolated country has access to quality healthcare. The Washington-based institution closed its Yangon office in 1987 and ceased new lending after the then-ruling junta stopped making payments on debts worth hundreds of millions of dollars left from previous programmes. Myanmar last year cleared its arrears to the World Bank and the Asian Development Bank with the help of a Japanese bridge loan, enabling the two lenders to resume assistance to the country. President Thein Sein has overseen a series of dramatic reforms since taking office in 2011, including the release of political prisoners and the election of Nobel Peace Prize winner Aung San Suu Kyi to parliament. In response, the West has begun rolling back sanctions and foreign firms are lining up to invest in the country, eyeing its huge natural resources, large population and strategic location between China and India. AFP

Vietnam stocks seen extending gains Economy showing signs of improved health

ietnam’s stock index, Asia’s best performer this year, is poised to extend gains as economic growth quickens and the government relaxes foreign ownership limits, according to a Bloomberg poll. The benchmark VN Index will advance about 8 percent from its closing level on January 24 to 603 by year-end, according to the average of 10 analyst estimates in a Bloomberg survey. The gauge has increased 11 percent this year, trailing only Dubai among measures in the world’s 50 biggest markets. The MSCI Asia Pacific Index has declined 2.8 percent. Vietnam’s government says the economy will expand at the fastest pace since 2011 this year as exports jump and the state buys bad loans from banks. Foreign investors poured a net US$263 million into the nation’s stocks last year amid growing appetite for the least-developed markets, and analysts predict Prime Minister Nguyen Tan Dung will give overseas money managers more room to boost holdings in 2014. “We are very positive for this year as the macro environment looks very stable, with a lot of potential upside,” Tran Thi Kim Cuong, the Ho Chi Minh City-based head of equities at Manulife (Vietnam) Asset Management, said in a phone interview. She predicts the VN Index will reach about 605 by December. The benchmark gauge for Vietnam’s US$50 billion stock market rose 1.2 percent to 560.19 on Friday, the highest level since November 2009. The country’s shares are

Google Inc and Samsung Electronics Co Ltd, which are frequently involved in patent infringement lawsuits but not against each other, announced that they have reached a global patent cross-licensing agreement. The deal covers patents currently owned by the companies, as well as any filed in the next 10 years, the companies said in a release. Financial terms were not disclosed. The companies said the deal “would lead to deeper collaboration on research and development of current and future projects.” “By working together on agreements like this, companies can reduce the potential for litigation and focus instead on innovation,” said Allen Lo, deputy general counsel for patents at Google, in a statement. Samsung’s Seungho Ahn, head of the company’s intellectual property centre, said the deal showed “the rest of the industry that there is more to gain from cooperating than engaging in unnecessary patent disputes.” Ericsson AB also said yesterday it had signed a cross-licensing deal with Samsung, ending a long-running patent dispute and boosting fourth-quarter sales by 4.2 billion crowns (US$652 million).

Moody’s cuts Sony’s credit rating to junk Moody’s Investors Service cut its credit rating on Sony Corp to junk yesterday, saying the Japanese electronics giant had more work to do in repairing its battered balance sheet. The international ratings agency lowered its view of the company to Ba1 from Baa3, meaning its debt is now seen as below investment grade, a move that threatens to push up Sony’s borrowing costs. “While Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments, it still faces challenges to improve and stabilise its overall profitability,” Moody’s said in a statement. “Of primary concern are the challenges facing the company’s TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence.” The downgrade was the latest to hit Japan’s embattled electronics industry, which has continued to lose ground to overseas rivals even as a weak yen helped boost their profitability. “Sony’s profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses to continue to face significant downward earnings pressure,” Moody’s said.

LG Electronics posts surprise loss Vietnam’s shares inexpensive relative to regional peers

inexpensive relative to regional peers even after this year’s rally. The VN index is valued at about 12 times estimated earnings, the lowest level in Southeast Asia. Profits at VN index companies are projected to rise 20 percent in 12 months, compared with a 17 percent increase in the MSCI Frontier Markets Index, according to analyst estimates compiled by Bloomberg. Vietnam’s economy is showing signs of improved health. The government projects gross domestic product will climb 5.8 percent this year, compared with 5.42 percent last year and 5.25 percent in 2012. Exports jumped 15 percent in 2013 and disbursed foreign direct

investment grew 10 percent to US$11.5 billion, according to the General Statistics Office. The central bank has cut its benchmark refinancing rate eight times since the beginning of 2012. Inflation has slowed to a 5.45 percent pace as of January from 23 percent in August 2011. “Macroeconomic stability, coupled with growing companies and decent valuations, makes Vietnam attractive,” said Michel Tosto, the head of institutional sales at Viet Capital Securities, the country’s thirdlargest brokerage. “We are bullish,” he said, forecasting the VN index will reach 620 by the end of the year. Bloomberg News

LG Electronics Inc, the world’s second-largest maker of televisions, posted an unexpected fourth-quarter loss on the impact of a rising South Korean won and marketing costs for its high-end G2 device. The net loss, excluding minority interests, was 63.4 billion won (US$59 million) in the three months ended December 31, the Seoul-based company said yesterday. LG boosted promotion of the G2 as it targets increased sales of more profitable high-end devices, a market that is slowing amid near saturation and competition from Apple Inc, Sony Corp and Samsung Electronics Co Ltd. The company is adding new ultra high definition TV sets as its range of cheaper smartphones face new competition from Chinese producers and the Korean won strengthened. Operating income, or sales minus the cost of goods sold and administrative expenses, was 238.1 billion won in the fourth quarter. That beat the 210.8 billion won average of analyst estimates. The company is targeting sales of 62.3 trillion won in 2014 after posting revenue of 58.1 trillion won last year.

14 14

January 28, 2014 April 19, 2013

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

Max 73.95

Average 71.572

Min 69

103

102

101

100

Last 73.95

Max 103

Average 100.377

Min 98.05

Last 101.3

56.20

PRICE

Max 23.8

Average 23.25

DAY %

YTD %

(H) 52W

97.04

0.413907285

-1.532217149

104.5199966

84.87999725

BRENT CRUDE FUTR Mar14

107.76

-0.111234705

-2.506106939

112.4399948

96.31999969

GASOLINE RBOB FUT Feb14

266.05

-0.101381796

-4.501238379

286.9299889

243.68999

GAS OIL FUT (ICE) Mar14

919.5

0.464354002

-2.362622777

954.5

840

NATURAL GAS FUTR Feb14

5.382

3.859513701

27.23404255

5.442000389

3.476000071

317.61

1.23350545

3.618034712

318.3500051

278.4999847 1180.57

NY Harb ULSD Fut Feb14 Gold Spot $/Oz

1269.05

-0.0795

5.5132

1684.87

Silver Spot $/Oz

19.9106

-0.1935

1.8049

32.2588

18.2208

1436

0.5074

5.9192

1742.8

1294.18

Platinum Spot $/Oz

736

0.1361

3.5162

786.5

629.75

1762

-0.056721497

-2.124704902

2174

1736.25

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

7180

-0.360810436

-2.445652174

8346

6602

LME ZINC

2020

-1.246638964

-1.703163017

2230

1811.75

14490

-1.226993865

4.244604317

18770

13205

15.45

0.162074554

1.145662848

16.77000046

15.12000084

429

-0.116414435

1.658767773

606.5

406.25

566

0.132684653

-6.484923585

834

560.5

3MO ($)

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

WHEAT FUTURE(CBT) Mar14 SOYBEAN FUTURE Mar14

1286.25

0.116754232

-0.483558994

1377.75

1174

COFFEE 'C' FUTURE Mar14

114.4

-0.694444444

3.342366757

165.3999939

104.1499939

SUGAR #11 (WORLD) Mar14

15.12

0.066181337

-7.861060329

20.36999893

14.96999931

COTTON NO.2 FUTR Mar14

86.84

-0.424263273

2.599243856

90.61000061

76.65000153

World Stock Markets - Indices NAME

Min 22.85

Last 23.5

(L) 52W

WTI CRUDE FUTURE Mar14

CORN FUTURE

Min 29

Last 31.25

28.9

33.4 32.8 32.2 31.6

22.8

Max 33.4

Average 32.435

Min 31.1

Last 33.4

31.0

Currency Exchange Rates

NAME

METALS

Average 30.533

23.0

Commodities ENERGY

Max 31.25

23.2

57.15

Last 59.95

29.5

23.4

58.10

Min 56.3

30.1

23.6

59.05

Average 58.325

30.7

23.8

60.00

Max 59.95

31.3

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

NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT AMAX INTERNATION

1.64

0.6134969

-4.651164

2.12

0.75

2020450

BOC HONG KONG HO

23.85

-1.037344

-4.024146

22.85

13081725

CENTURY LEGEND

792000

0.395

-7.058824

-8.139536

0.68

0.26

CHEUK NANG HLDGS

7.23

-0.1381215

2.553189

7.45

20005

CHINA OVERSEAS

21.1

-2.540416

-3.211006

17.7

32075783

CHINESE ESTATES

18.1

-1.308615

-24.89627

24.7

10.384

15500

CHOW TAI FOOK JE

11.6

-2.027027

0.3460171

13.2

7.44

8343509

EMPEROR ENTERTAI

4.27

-7.375271

6.75

5.4

1.95

4955000

4.3

-4.656319

-8.315566

5.3

1.609

5627000

73.95

0.5438477

6.326379

84.5

32776638

121.3

-0.9795918

-3.500395

132.8

110.6

2128054

1.34357

0.5714286

35.3

23.2

1495066 35328077

NASDAQ COMPOSITE INDEX

4128.173

-2.14991

-1.159247

4246.553

3105.365

GALAXY ENTERTAIN

-2.337056

6875.62

6023.44

HANG SENG BK HOPEWELL HLDGS

26.4

15005.73

-2.506763

-7.891195

16320.22

10751.01

HANG SENG INDEX

21976.1

-2.111175

-5.707838

24111.55078

19426.35938

(L) 52W VOLUME CRNCY 1560333

13784.01

(H) 52W

3120930

16588.25

NIKKEI 225

YTD %

3.49

-4.208024

7418.36

DAY %

11.08

-1.964766

9794.05

0.866 1.4814 0.88 1.2746 90.33 7.9818 7.7514 6.0393 52.89 28.56 1.2268 29.259 40.555 9603 86.41 1.21196 0.81683 7.8281 10.195 118.73 1.0289

5.12

15879.11

-2.002267

1.0582 1.6668 0.9839 1.3893 105.44 8.0111 7.7664 6.2492 68.845 33.148 1.2862 30.426 45.455 12281 105.433 1.265 0.88151 8.4957 11.0434 145.69 1.032

18.22

-0.3313451

-2.3201 0.1151 -0.3466 -0.5304 2.4393 -0.1051 -0.1069 0.1174 -1.8601 -0.4737 -0.9947 -1.9216 -2.1706 -0.5475 4.8408 0.1707 0.6479 0.7258 0.4202 2.986 0

-6.18337

DOW JONES INDUS. AVG

9360.9

0.3685 0.2306 0.0112 0.095 -0.1756 0.015 0.0064 0.0198 -0.4547 -0.2763 0.1331 -0.2632 -0.1543 -0.4658 -0.5598 -0.089 0.1424 -0.0531 -0.1087 -0.2423 -0.0097

2.136496

(L) 52W

0.8715 1.652 0.8944 1.3691 102.49 7.995 7.7622 6.0472 62.9713 32.931 1.2768 30.391 45.38 12238 89.325 1.22462 0.82878 8.2809 10.9468 140.32 1.03

-2.654867

(H) 52W

DAX INDEX

(L) 52W

-2.768362

YTD %

6591.36

(H) 52W

4.4

DAY %

YTD %

17.21

PRICE

FTSE 100 INDEX

DAY %

Macau Related Stocks

COUNTRY

-1.086177

PRICE

FUTURE BRIGHT

HSBC HLDGS PLC

82.1

-2.725118

-2.436128

90.7

77.85

HUTCHISON TELE H

2.81

-2.090592

-4.421771

4.66

2.5

4424000

LUK FOOK HLDGS I

24.95

-2.348337

-15.42373

16.88

2130400 12411050

CSI 300 INDEX

2215.919

-1.325168

-4.897239

2791.303

2023.171

28.2

-1.913043

-1.052632

32.5

11.52

TAIWAN TAIEX INDEX

8462.57

-1.578682

-1.729539

8668.95

7637.2

MGM CHINA HOLDIN

31.25

-0.9508716

-5.58912

36.15

15.457

7108554

KOSPI INDEX

1910.34

-1.557282

-5.021528

2063.28

1770.53

MIDLAND HOLDINGS

3.52

-4.864865

-5.630027

3.98

2.68

1696000

S&P/ASX 200 INDEX

5240.932

-0.4190775

-2.079101

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4325.655

-2.517002

1.204396

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1781.49

-1.169441

-4.578029

1882.2

1597

SHUN HO RESOURCE

NZX ALL INDEX

1025.242

-0.4357457

2.637607

1048.998

904.128

SHUN TAK HOLDING

PHILIPPINES ALL SHARE IX

3691.75

-1.521032

2.14231

4571.4

3440.12

Euromoney Dragon 300 Index Sin

587.04

-0.9

-4

STOCK EXCH OF THAI INDEX

1291.4

-1.767037

-0.5628614

1649.77

1205.44

HO CHI MINH STOCK INDEX

556.52

-0.6551349

10.28278

564.61

455.25

LAOS COMPOSITE INDEX

1257.54

3.01119

0.3359118

1446.66

1219.81

MELCO INTL DEVEL

NEPTUNE GROUP

0.3

-3.225806

-11.76471

0.4

0.131

65449866

NEW WORLD DEV

9.92

-1.976285

1.327886

14.98

9.35

12464327

SANDS CHINA LTD

59.95

0.334728

-5.367006

67.15

33.5

24091399

1.63

-1.21212

1.92

1.33

4.51

-3.632479

-1.09649

5.18

3.27

16973585 16464066

SJM HOLDINGS LTD

23.5

-3.49076

-9.615385

17.04

SMARTONE TELECOM

8.62

-1.372998

-2.7088

14.46

7.38

1656000

WYNN MACAU LTD

33.4

-1.037037

-4.978667

38.25

7892952

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

75.68

-5.858938

-3.530908

82.67

45.38

1339590

BOC HONG KONG HO

3.05

-4.08805

-5.279504

3.6

2.99

28565

GALAXY ENTERTAIN

9.25

-3.343783

2.663704

10.81

3.8975

48595 25709784

INTL GAME TECH

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

15.04

-14.78754

-17.18062

21.2

14.925

JONES LANG LASAL

104.75

-1.513727

2.304913

106.82

80.86

565333

LAS VEGAS SANDS

73.91

-6.110264

-6.288833

82.48

47.95

10544002 8727061

MELCO CROWN-ADR

38.2

-8.459142

-2.600717

45.4799

17.76

MGM CHINA HOLDIN

-2.912621

-7.192574

4.66

5900

MGM RESORTS INTE

23.78

-5.559968

1.10544

26.7

11.72

20361867

SHFL ENTERTAINME

#N/A N/A

23.25

13.88

SJM HOLDINGS LTD

3.14

-0.3174603

-5.988022

3.6

2.2

32150

193.14

-5.904706

-0.5509534

216.99

111.3456

3093851

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

36.5

-1.351351

41797130

CHINA UNICOM HON

ALUMINUM CORP-H

2.82

-3.424658

21676660

CITIC PACIFIC

BANK OF CHINA-H

3.25

-1.812689

489868185

-1.768173

37005994

29.85

-1.809211

2498668

8.53

-5.222222

30097863

ESPRIT HLDGS

23.85

-1.037344

13081725

HANG LUNG PROPER

BANK OF COMMUN-H BANK EAST ASIA BELLE INTERNATIO BOC HONG KONG HO

NAME

CLP HLDGS LTD CNOOC LTD COSCO PAC LTD

PRICE

DAY %

VOLUME

PRICE

DAY %

10.06

-2.51938

25566291

NAME POWER ASSETS HOL

61.95

-0.7211538

4402389

9.68

-1.725888

10464758

SANDS CHINA LTD

59.95

0.334728

24091399

SINO LAND CO

10.48

-2.238806

7318840

96.2

-0.6711409

3858687 1695237

59.2

-1.333333

3484115

12.22

-3.475513

125816341

9.98

-2.156863

5709264

SWIRE PACIFIC-A

85.15

-1.160766

14.84

-4.010349

5444517

TENCENT HOLDINGS

489.4

-2.315369

8738875

-1.287554

8151928

TINGYI HLDG CO

21.25

-2.073733

7799000

10.66

-3.090909

14583293

-4.072398

8690725

SUN HUNG KAI PRO

CATHAY PAC AIR

16.02

-3.143894

5141454

HANG SENG BK

121.3

-0.9795918

2128054

WANT WANT CHINA

CHEUNG KONG

115.7

-1.865988

3755444

HENDERSON LAND D

42.55

-2.853881

2940924

WHARF HLDG

CHINA COAL ENE-H

3.93

-1.995012

70722157

78.1

-4.987835

6705890

CHINA CONST BA-H

5.3

-1.851852

328482454

HONG KG CHINA GS

16.24

-1.575758

22789602

CHINA LIFE INS-H

21.8

-2.895323

41002018

HONG KONG EXCHNG

CHINA MERCHANT

26.65

-2.91439

3800166

CHINA MOBILE

HENGAN INTL

122.6

-1.998401

4569764

HSBC HLDGS PLC

82.1

-2.725118

35328077

74.95

-1.575837

26412664

HUTCHISON WHAMPO

98.8

-3.042198

10255103

CHINA OVERSEAS

21.1

-2.540416

32075783

IND & COMM BK-H

4.67

-1.890756

407626944

CHINA PETROLEU-H

6.22

-1.112878

134551938

10.78

-1.821494

23846412

CHINA RES ENTERP

22.7

-3.404255

5006500

MTR CORP

27.9

-0.3571429

3615548

CHINA RES LAND

LI & FUNG LTD

VOLUME

MOVERS

23090

INDEX 21976.1 HIGH

23082.01

LOW

21928.87

18.38

-2.854123

10110841

NEW WORLD DEV

9.92

-1.976285

12464327

52W (H) 24111.55078

CHINA RES POWER

19.1

-1.240951

8181877

PETROCHINA CO-H

7.74

-1.651842

95962618

(L) 19426.35938

CHINA SHENHUA-H

20.55

-3.294118

20996243

PING AN INSURA-H

63.15

-4.245641

25796309

21900

23-January

27-January

15 15

January 2014 April 19,28, 2013

Opinion BUSINESS

WIRES

Leading reports from Asia’s best business newspapers

STRAITS TIMES When construction takes place next door, homeowners often close their windows and turn on the air-conditioner to block out the noise and dust. But exactly how much more energy do they consume by doing so? Researchers from the National University of Singapore and the Future Cities Laboratory, a tie-up between Singapore’s National Research Foundation and the Swiss Federal Institute of Technology, found that on average, people here use six per cent more electricity when there is construction near them. What is more, the increase becomes permanent.

ASAHI SHIMBUN A urinal that uses recycled water for flushing has won an eco-products award. Jointly developed by West Nippon Expressway Co. and Toto Ltd., a leading manufacturer of bathroom products, the urinal took home the 2013 Eco-Products Awards Steering Committee Chairperson’s Award in the eco-services category in December. The urinal has a water basin at the top where users can wash their hands. The water from the basin is then recycled for flushing. The first such urinals were installed at the Yamada Service Area on the Oita Expressway in November 2012.

THANH NIEN DAILY Vietnam’s large state-owned firms have announced large profit increases for 2013, but economists say the gains came from monopolies and pricing privileges, not good business practices. Experts said successful giants like power provider EVN (Electricity of Vietnam), fuel retailer Petrolimex, coal and mineral group TKV, or telecommunication service providers Viettel and VNPT (Vietnam Post and Telecommunications Group) are either the dominators or sole occupiers in their economic sector, and tend to raise prices anytime they like, according to a Tuoi Tre (Youth) newspaper report.

TAIPEI TIMES The launch of “free economic pilot zones” in Taiwan will help it attract more investment from foreign firms and Taiwanese businesses based in China, according to British banking group Barclays PLC. The project can help Taiwan draw in US$12 billion of foreign direct investment this year, including US$10 billion from Taiwanese “returnee companies” that had previously moved production to China, the bank said in a research note on Thursday. Last year, Taiwan attracted US$10.5 billion in such investment, including US$7.9 billion from returnee companies during the first 11 months of the year.

Making sense of China’s

growth model Zhang Jun

Professor of Economics and Director of the China Center for Economic Studies at Fudan University, Shanghai

lthough China’s economy has expanded at a staggering pace over the last three decades, its growth model is now widely agreed to be exhausted. Even China’s top leadership acknowledges the need for change – a belief that culminated in the far-reaching reform agenda presented two months ago at the Third Plenum of the Chinese Communist Party’s 18th Central Committee. While not everyone agrees on exactly what the new growth model should look like, proposals do not differ drastically, given the prevailing consensus that the current model rests on an unsustainable foundation. On the demand side, many economists endorse a shift from investment-led to consumption-driven growth. Even more popular is the supply-side recommendation of a shift from extensive to intensive growth – that is, from a model based on capital accumulation to one propelled by gains in efficiency, measured by total factor productivity (TFP). These recommendations are presumably influenced by Paul Krugman’s criticism in 1994 of Soviet-style extensive growth in East Asian economies (especially Singapore).

Sachs’ appeal At the time, Jeffery Sachs disagreed, asserting that the East Asian model included far more efficient market-based investment allocation than the Soviet model did, and thus was unique; nonetheless, the criticism stuck. It was not long before some Chinese economists began to categorise the growth pattern brought about three decades ago by Deng Xiaoping’s reforms as “extensive” – and thus problematic. A consensus has gradually emerged around this idea, with calls for a shift toward intensive, efficiency-driven growth intensifying since China’s GDP growth began to slow in 2011. But empirical research reveals a fundamental problem with this argument: China’s TFP has grown at an average annual rate of nearly 4 percent since Deng’s reforms began. If the United States’ economy, with a TFP growth rate of only 1-2 percent annually, is considered efficiencydriven, why is China’s not? More important, if China’s TFP growth is expected to slow, as major drivers like the convergence effect wane,

what does it mean to say that efficiency gains should propel China’s future growth? Consider the facts. A conservative assessment by Louis Kuijs, working with the World Bank, shows that, from 1978 to 1994, China’s GDP grew by an average of 9.9 percent annually, labour productivity increased by 6.4 percent, TFP rose by 3 percent, and the capital-labour ratio increased by 2.9 percent. In the period from 1994 to 2009, annual GDP growth averaged 9.6 percent, labour productivity increased by 8.6 percent, TFP increased by 2.7 percent, and the capital-labour ratio rose by 5.5 percent. Similarly, Dwight Perkins and Tom Rawski found that from 1978 to 2005, China’s GDP grew by 9.5 percent, while capital investment grew by 9.6 percent, contributing 44.7 percent to GDP. The share of tertiary graduates in the labour force rose to 2.7 percent by 2005, accounting for 16.2 percent of GDP growth. And TFP grew by 3.8 percent, adding 40.1 percent to GDP growth. While capital has been the largest contributor to China’s GDP, the economy’s TFP performance has been impressive – something that cannot be explained by an extensive growth pattern. Indeed, Japan’s rate of TFP growth never reached such high levels, even at the country’s economic peak. Even Hong Kong – the East Asian economy with the best TFP performance – registered only 2.4 percent average annual TFP growth from 1960 to 1990.

China efficiency? But annual TFP growth is not the only relevant figure. China’s TFP has contributed 35-40 percent to GDP growth, compared to an estimated 2030 percent in East Asia’s “four tigers” (Hong Kong, Singapore, South Korea, and Taiwan). As for the Soviet Union, even in

its best years, TFP accounted for only about 10 percent of GDP growth. Though China’s TFP contribution to GDP growth is much greater than in the other so-called “extensive” economies, it remains well below levels in the intensive US economy, where the figure exceeds 80 percent – a divergence that some might use to justify their refusal to define China’s economy as “efficiency-driven.”

Do extensive- or intensive-growth models really exist? Perhaps there is only fast versus slow…

But this argument ignores the fact that China has been experiencing double-digit annual GDP growth, owing largely to capital expansion, while America’s annual GDP growth has averaged only 2-3 percent. If transforming China’s growth pattern were simply a matter of increasing TFP’s contribution to GDP to US levels, China’s annual GDP growth would have to drop to below 5 percent – three percentage points lower than its potential growth rate. Given 8 percent GDP growth, TFP would have to grow 6.4 percent annually. This is almost certainly impossible, owing to the gradual diminution of the major drivers – including market-oriented economic reforms, the convergence

effect on per capita income, and the adoption of foreign technologies – of China’s extraordinary TFP growth over the last 30 years.

Fast v. slow All of this raises a simple question: Do extensive- or intensive-growth models really exist? Perhaps there is only fast versus slow, or extraordinary versus ordinary. According to this view, if a developing economy can realise extraordinary growth, it must be because it offers greater opportunities for capital expansion than a developed economy. After all, investment opportunity is inversely proportional to per capita capital stock. On this point, Krugman is right: such investment-fuelled growth is achieved largely through perspiration, rather than inspiration. But so what? The fact that some of Asia’s most dynamic economies – including China, Japan, and the four tigers (Hong Kong, Singapore, South Korea, and Taiwan) – have experienced investment-propelled growth and improvements in TFP simultaneously can be explained by the fact that TFP gains increase investment returns, accelerating capital expansion further. Though further analysis is needed to elucidate the longterm relationship between capital expansion and TFP, it is clear that the long-accepted theory that they cannot coexist is seriously flawed. In short, when it comes to Asian economies, the dichotomy of extensive and intensive growth is a red herring. A far more meaningful consideration is what drove these TFP gains; understanding that would enable China’s leaders to design a more effective plan for strengthening the economy’s long-term growth prospects. © Project Syndicate

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January 28, 2014 April 19, 2013

Closing ‘Family hostel’ study ready by year-end

Best Western Hotel to be revamped

Macau Government Tourist Office director Maria Helena de Senna Fernandes said her office would finish studying the possibility of licensing a new category of hotel accommodation by year-end. It’s for a kind of a familyrun, bed-and-breakfast hostel, which the office labelled “family hostels”. But Ms Senna Fernandes said several conditions have to be met first. “We will have to take into consideration how the public feels about this,” she told reporters yesterday. Her comments came after some people voiced concerns over the proposal during Sunday’s discussion programme organised by TDM.

Emperor International Holdings Ltd said it has applied with the Macau government to renovate the Best Western Hotel Taipa, which it recently bought. Donald Cheung, the company’s executive director, told reporters yesterday in Hong Kong that the number of rooms available will increase to 285 from the current 262 once the renovation is completed. Emperor International and its hotel unit, Emperor Entertainment Hotel Ltd, announced last month the deal to buy Best Western for HK$900 million (US$116 million). The group already runs the Grand Emperor hotel-casino here.

Beijing raises foreign institutional investor quota China granted US$3.4 billion in fresh quotas to licensed overseas institutional investors this month as of yesterday, according to data released by the State Administration of Foreign Exchange (SAFE). Half of that amount was issued under the dollar-denominated Qualified Foreign Institutional Investor (QFII) programme, with the other half issued under the Renminbi Qualified Foreign Institutional Investor (RQFII) programme. CSOP Asset Management, which earlier this month announced the launch of the first first RQFII exchange-traded fund (ETF) listed in London, received 4 billion yuan (US$661.3 million) in fresh RQFII quotas in January alone. It now has 34.1 billion yuan in total, the largest under the renminbi-denominated programme. This takes the total quotas issued under the QFII programme to US$51.4 billion as of yesterday from US$49.7 billion at the end of December, and to 167.8 billion yuan (US$27.74 billion) from 157.5 billion yuan under the RQFII programme, according to SAFE data. Institutional investors need to apply for a licence from the securities regulator to be eligible to seek investment quotas from the foreign exchange regulator. According to data released on January 20, the China Securities Regulatory Commission did not grant any new QFII licences in December, keeping the total at 251. Four RQFII licenses were issued in December, bringing the total to 43.

Hong Kong’s imports from China fell 1.9 percent in December

China’s trade data under renewed scrutiny As Hong Kong December imports diverge by about 70 percent

Chinese trust fund avoids default China Credit Trust Co said it reached an agreement to restructure a high-yield product that sparked concern over the health of the nation’s US$1.67 trillion trust industry and contributed to a global selloff in emergingmarket assets. The agreement includes a potential investment in the 3 billion-yuan (US$496 million) product, Beijing-based China Credit Trust said on its website yesterday, four days before payment is due. The two-line statement didn’t identify the source of funds, or say whether investors would get their money back. The threat of a default looms over the fastestgrowing part of China’s shadow-banking system, adding to challenges to the Communist Party’s ability to ensure stable growth in the world’s second-biggest economy. The Credit Equals Gold product, distributed by Industrial and Commercial Bank of China Ltd, was structured to raise funds from wealthy investors for a coal miner that collapsed in 2012. “The problem was properly handled,” Yang Feng, a Beijing-analyst at Citic Securities Co, China’s largest brokerage, said by telephone yesterday. “It indicates the government still won’t tolerate any ultimate default and retail investors will continue to be compensated in similar cases.” Credit Equals Gold was used to raise funds for Shanxi Zhenfu Energy Group, which collapsed after its owner Wang Pingyan was arrested in 2012 for illegally collecting deposits.

hina’s trade numbers, distorted by fake exports last year, are set to come under renewed scrutiny after a discrepancy between Hong Kong and Chinese figures for bilateral trade widened to the largest in eight months. Hong Kong’s December imports from China fell 1.9 percent from a year earlier to HK$176 billion (US$22.7 billion), the city’s statistics department said yesterday. That compares with US$38.5 billion in exports to Hong Kong reported earlier this month by China’s customs administration, up 2.3 percent, based on data compiled by Bloomberg. Economists split on how to interpret the latest numbers, which follow reports earlier last year that invoices for fake exports were used to disguise capital inflows, inflating China’s trade data before regulators in May cracked down on the practice. Exaggerated overseas shipments would mean that global demand is weaker than China’s statistics indicate. “From the last few months’ data, we have seen hints that some Chinese exports are fake and in fact that reflects hot money inflows,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc

in Hong Kong. The discrepancy will abate as yuan appreciation slows in January and February, said Mr Zhang. China’s exports to Hong Kong in December exceeded the city’s reported imports from the mainland by about 70 percent, the biggest difference since April. Hong Kong reported yesterday that its total imports rose 1.8 percent in December from a year earlier, trailing the median estimate of 3 percent among analysts surveyed by Bloomberg News. Exports were unchanged, compared with the median projection for a 3.6 percent gain.

Biggest trader China said on January 10 that its exports rose 4.3 percent in December from a year earlier while imports advanced 8.3 percent, helping it claim the title of the world’s biggest trading nation in 2013, passing the U.S. Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong, said the gap between China’s reported increase in exports to Hong Kong and the city’s reported decline in imports isn’t big enough to raise any red flags when

compared to the difference earlier in 2013. That’s because China records exports when goods leave, while Hong Kong waits 14 days after items arrive in port to record them as imports, Mr Shen said. “The data are highly consistent now,” said Mr Shen, who previously worked at the IMF and the European Central Bank. The issue of fake exports has “almost disappeared,” he said. The yuan rose about 0.7 percent against the U.S. dollar in December, the biggest monthly gain since April. “We can definitely not rule out there is very creative accounting and data reporting going on to again dress up additional inflows as exports because the incentives are there again” with the exchange rate and Chinese borrowing costs, said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. At the same time, other sources indicate that the “improvement is real” in global demand for Chinese exports, said Mr Kuijs, who previously estimated that fake invoices inflated China’s 2013 export gains by about 2 percentage points. Bloomberg News