Macau business daily, Feb 12, 2014 by Business Daily

MOP 6.00

Constance Hsu 1 named Altira Macau’s general manager

April 19, 2013

Editor-in-chief Tiago Azevedo

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Casino revenue tipped to rise 25 pct in Feb Page 5

Number 474 Wednesday February 12, 2014

Costly rents push out small eateries, says Chan Chak Mo

Year II

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www.macaubusinessdaily.com

SJM could be next in joining Hang Seng Index C

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SJM Holdings chief executive Ambrose So Shu Fai said that having its stock included in the index was not among his company’s main ambitions. The HSBC Securities note says SJM Holdings stock is “a potential candidate” for inclusion in the index. The note says SJM Holdings stock may replace the shares of either China Coal Energy Co Ltd or CITIC Pacific Ltd in the 50-stock index. More on page 2

Hang Seng Index 22030

21948

21866

Assembly yet to meet expectations, says Ho The new Legislative Assembly has so far failed to live up to public expectations, assembly president Ho Iat Seng has said. Mr Ho told reporters yesterday that the assembly should make more effort to supervise the government, particularly through the work of its committees. “I hope the three special committees can soon get down to work, after a four-month running-in period, so that they can assess and point out any inadequacies in government policies,” he said. Page 4

African Chamber of Commerce ready for business

21784

21702

21620

February 11

HSI - Movers Name

%Day

PING AN INSURA-H

5.12

CHINA LIFE INS-H

5.11

CNOOC LTD

4.79

CHINA OVERSEAS

4.48

AIA GROUP LTD

3.79

SUN HUNG KAI PRO

0.16

COSCO PAC LTD

CHINA MERCHANT

-0.56

TENCENT HOLDINGS

-0.66

LENOVO GROUP LTD

-0.81

Source: Bloomberg

The African Chamber of Commerce in Macau will be inaugurated next week. Its founding president, Francis Chukwunoso Nwachukwu, said the chamber would aim to promote business and cultural ties between Africa and China. “The common problems that they have are usually about the trade regulations, or which relevant departments or authority to go to. So we’re helping with that,” he said. Page 4

Arrival tax idea draws a sceptical response Imposing an arrival tax on visitors entering the city by land in an effort to reduce their numbers would be unfair and spoil Macau’s reputation among tourists, observers say. The idea of an arrival tax has yet to be floated in earnest in Macau. But in Hong Kong two groups have proposed that an arrival tax of HK$20 (US$2.60) to HK$100 be levied on visitors that enter the city by land. Macau legislator Ho Ion Sang and University of Macau academic Amy So Siu Ian think an arrival tax here could spoil the city’s reputation as a tourist spot. Page 6

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February 12, 2014 April 19, 2013

Macau Licence plates good fortune for govt The Transport Bureau has earned more than 54.7 million patacas (US$6.83 million) last year from selling and auctioning car registration plates. That’s up by 13 percent from 48.4 million patacas in 2012, Chinese-language newspaper Macao Daily News reported yesterday citing official data. The increase was mostly supported from auction of car plates, which were worth over 22.3 million patacas last year, surging by nearly one-third from a year earlier. The bureau refers to those auctioned tags as ‘special car licence plates’, a term it coined for plates marked with numbers considered auspicious in local Chinese culture.

SJM tipped to join Hang Seng Index A broker says the revised composition of the Hang Seng Index will be announced today Tony Lai

tony.lai@macaubusinessdaily.com

asino operator SJM Holdings Ltd’s stock may be a candidate to be added to the Hong Kong Stock Exchange’s Hang Seng Index. The composition of the Hang Seng Index is being revised, and HSBC Securities says in a note issued last week that and the new component shares will be announced today. The addition of SJM Holdings stock to the index would mean it would share the limelight with the shares of two rival casino operators: Sheldon Adelson’s Sands China Ltd and Lui Che Woo’s Galaxy Entertainment Group Ltd. Casino mogul Stanley Ho Hung Sun founded SJM Holdings. The company has the biggest slice of Macau’s casino market. The HSBC Securities note says SJM Holdings stock is “a potential candidate” for inclusion in the index. The note says the market value and liquidity were more than sufficient for inclusion. SJM Holdings is a component of the Hong Kong Stock Exchange’s consumer service industry index. HSBC Securities says consumer service industry shares are “underrepresented” in the Hang Seng Index. It is often thought that becoming a component of the index boosts a stock’s price. SJM Holdings chief executive Ambrose So Shu Fai said on Monday that having its stock included in the index was not among his company’s main ambitions.

“Different operators have different considerations, and we will not simply follow what others do,” Mr So told reporters on the sidelines of celebrations of the seventh anniversary of his company’s Grand Lisboa casino. Galaxy Entertainment’s shares became a member of the index on June 17 last year and Sands China’s became a component on June 4, 2012. The HSBC Securities note says the revised composition of the index will come into effect after the market closes on March 7. The note says SJM Holdings stock may replace the shares of either China Coal Energy Co Ltd or CITIC Pacific Ltd in the 50-stock index. The Bloomberg news agency says the market capitalisation of SJM Holdings was HK$138.56 billion (US$17.86 billion) yesterday, while the market capitalisation of China Coal Energy was HK$69.2 billion and that of CITIC Pacific was HK$35 billion. SJM announced last week it would break ground for its first casino-resort in Cotai tomorrow. Mr So said his company intended to open the casinoresort within three years. The company said last year it would probably develop 250,000 square metres of land, including a big plot controlled by SJM executive director Angela Leong On Kei, which is zoned for uses other than gaming. SJM said the casino-resort would cost about HK$25 billion (US$3.2 billion) and have 2,000 hotel rooms and 700 gaming tables.

Different operators have different considerations and we will not simply follow what others do Ambrose So, SJM Holdings chief executive

SJM’s flagship Grand Lisboa casino

Constance Hsu named Altira Macau’s new GM Michael Tjendra new president of Mocha Clubs Staff reporter

newsdesk@macaubusinessdaily.com

onstance Hsu Ching Hui has been appointed general manager of the Altira Macau, Melco Crown Entertainment Ltd’s first casino venture in Macau. Ms Hsu was until recently the president of Mocha Clubs, a Melco Crown subsidiary that runs slot machine parlours here. Melco Crown’s co-chairman is Lawrence Ho Yau Lung. Her transfer to the Altira is considered a promotion, a Business Daily source says.

Constance Hsu

Ms Hsu had worked for Mocha Clubs since September 2003, the year the company opened its first slot machine parlours. She was the company’s financial controller and its chief administrative officer, with functions in the finance, treasury, auditing, legal compliance, procurement, administration and human resources fields. She became its chief operating officer in 2007 and its president in December 2008.

Our source says Mocha Clubs executive Michael Tjendra has been appointed president of the company. A spokesperson for Melco Crown confirmed the appointments but declined to say anything else. Mocha Clubs is opening new slot machine parlours to replace others that it had to close. The company closed its Mocha Lan Kwai Fong, Mocha Marina Plaza and Mocha Hotel Taipa Best Western parlours on November 26 because the government now bans gaming facilities in residential areas. Ms Hsu said in December that the government had given her company permission to open two replacements elsewhere. The government now requires slot machine parlours to be in five-star hotels, in non-residential buildings within 500 metres of a casino, or in resorts in thinly populated areas.

February 12, 2014 April 19, 2013

Macau TDM chief executive to leave this month Chief Executive Fernando Chui Sai On has accepted the resignation of Leong Kam Chun, chief executive of public broadcaster TDM. The government’s spokesperson office released a press statement last night saying that Mr Leong submitted his letter of resignation on February 5. His three-year term is to come to an end this month and Mr Leong asked the government not to renew it. The government said it will announce a new administration for TDM today. Before the announcement, Mr Leong had told reporters “it is not uncommon for a family to have different opinions”. He had been asked if there was a power struggle within TDM.

Assembly yet to meet expectations, says Ho The president of the Legislative Assembly says it must do more to monitor the government Tony Lai

tony.lai@macaubusinessdaily.com

he new Legislative Assembly has so far failed to live up to public expectations, assembly president Ho Iat Seng has said. Mr Ho told reporters yesterday that the assembly should make more effort to supervise the government, particularly through the work of its committees. In October he had said the assembly would work harder to oversee the government, especially its spending, even if powerful business lobbies objected to such extra effort. Yesterday he said members were sending the government more written inquiries, but that this was insufficient to keep the government under close scrutiny. “The Legislative Assembly should be clearly aware that there is still a huge gap between what it has done and residents’ expectations,” Mr Ho said, “particularly in supervising the government.” He gave no particular examples of the assembly failing to do its best. Since the new assembly first convened in October, several aspects of the government’s work have caused

The Legislative Assembly should be clearly aware that there is still a huge gap between what it has done and residents’ expectations public concern. One aspect is the government’s handling of the arrangements for bus services. Another is the urban plan for the northern part of Taipa. “We have strengthened our powers of supervision through the three followup committees,” Mr Ho said yesterday. The assembly has three special committees: on public finances, on land grants and public concessions, and on public administration. “I hope the three special committees

can soon get down to work, after a four-month running-in period, so that they can assess and point out any inadequacies in government policies,” Mr Ho said. He said the assembly’s ability to supervise the government was limited, so it needed the cooperation of government departments and bodies such as the Commission Against Corruption and the Commission of Audit. In October Mr Ho had said the

Ho Iat Seng, Legislative Assembly president

government should quickly amend the law on public finances so that the assembly could better monitor government spending. The Financial Services Bureau has said a bill to amend the law on public finances will be drawn up this year. The law on public finances has been unchanged since 1983.

Africa poised to take firmer business foothold Macau’s African Chamber of Commerce aims to keep the city abreast of business opportunities in Africa Stephanie Lai

sw.lai@macaubusinessdaily.com

he African Chamber of Commerce in Macau will be inaugurated next week. Its founding president, Francis Chukwunoso Nwachukwu, told Business Daily that the chamber would aim to promote business and cultural ties between Africa and China. Mr Nwachukwu said specifically that one of the chamber’s purposes was to help its members get a foothold in the mainland. The chamber will have about 30 individual founding members. “We’ll be working closely with the African consulates and provide information [in response to] to enquiries about trading here or in the mainland,”

Mr Nwachukwu said. He said the chamber would advise African companies. “The common problems that they have are usually about the trade regulations, or

which relevant departments or authority to go to. So we’re helping with that.” Mr Nwachukwu said the chamber would hold events regularly to inform Macau

about the African business environment and the culture of African countries. He said the principal threads in the ties between Macau and Africa were the

Members of the African Chamber of Commerce meet members of local associations

city’s relations with the continent’s Portuguesespeaking countries. “The chamber will not just consist of members from these countries,” he said. Mr Nwachukwu said the chamber’s founders had consulted the Macau Chamber of Commerce. “They told us that there was almost no tangible investment from Macau in Africa because they don’t have sufficient information about it,” he said. “If we can provide them more information on the business environment in Africa, this could help in their business decisions.” Some of the principal members of the Macau Chamber of Commerce are involved in politics here or in the mainland. The African Chamber of Commerce will be inaugurated on February 22 in the Emperor Hotel. Its founding members say they have invited the Consuls-General of Angola, Egypt, Mozambique, Nigeria, South Africa and Zimbabwe to attend. A seminar to be held after the inauguration ceremony will outline investment opportunities in Africa.

February 12, 2014 April 19, 2013

Macau

Casino revenue tipped to rise 25 pct in Feb Strong growth in early days of the month may ease investor concerns, analysts say Tiago Azevedo

tiago.azevedo@macaubusinessdaily.com

nalysts are raising their forecast for the month, saying gross gaming revenue this month could grow by up to 25 percent from a year earlier. Gambling went into overdrive in the first six days of February, culminating in a total revenue haul of 8.3 billion patacas (US$1.04 billion), according to Portuguese news agency Lusa. Macau gross gaming revenue growth is performing better since January’s weak reading, according to Deutsche Bank AG analyst Karen Tang in Hong Kong. “Over Feb 1-6 (CNY Days 2-6), Macau casinos generated 8.30 billion patacas gross gaming revenue [GGR], or 1.38 billion patacas/day. Last year, including the very quiet Day 1, CNY Days 1-6 averaged 1.03 billion patacas/day GGR,” Ms Tang said in a note. “Hence, on a like-for-like basis, we estimate CNY GGR grew 25 percent year-on-year this year. Assuming historical seasonality, GGR for rest of February will be at least as high as December (MOP1.1bn/day), this implies that Feb GGR will likely jump at least 20-25 percent yearon-year,” she said. “This should ease investor concerns on seemingly soft Jan GGR, caused by calendar shift,” said Ms Tang. Gaming revenue grew at the

slowest pace since October 2012, raking in a lower-than-expected 28.7 billion patacas last month, up 7 percent from a year earlier. Nomura Securities also forecast an increase of up to 25 percent this month. The broker said a strong Lunar New Year should ease concerns that slowing economic growth in the mainland will impede growth of gross gaming revenue in Macau. “The strong Chinese New Year results should mitigate the recent worry of impact from China’s macro economy to Macau’s gross gaming revenue growth,” Nomura says in a note quoted by Barron’s magazine website. Last year, Macau’s casinos reported earning revenues in excess of 27.08 billion patacas in February. That figure is expected to breach the 30 billion patacas threshold this month, even considering February’s lack of days on the calendar compared to all other months. Growth in the first week of February was supported by stronger visitation. Visitor arrivals in the seven days from January 31 this year – the first day of the Year of the Horse – to February 6 rose by 12.5 percent compared to the first seven days of the Lunar New Year in 2012, according to Macau Government Tourist Office. Preliminary data show over one million people entered Macau over the first seven days of the holidays.

Revenue expected to breach the 30-billion-pataca threshold this month

Corporate Grand Lisboa donates MOP70,000 to Orbis Grand Lisboa, the flagship property of SJM Holdings Ltd, celebrated its 7th anniversary on Monday with a blindfold experience dinner aimed at helping the visually impaired. More than 280 staff of the hotelcasino attended the dinner, the company said in a statement. Grand Lisboa donated 70,000 patacas (US$8,761) to the Macau office of global humanitarian organisation Orbis “to support the sight-saving work” of the institution. “As a responsible gaming operator, our eyes are on the community, and we are more than happy to show our support by making a donation to ORBIS,” said Ambrose So Shu Fai, SJM chief executive. The hotel-casino organised a blindfold movie session and a blindfold dinner experience, reminding staff to care for their eye health through experiencing the daily lives of the patients who are suffering from eye diseases. It also said it provided free eye checking service to staff at the canteen yesterday.

Suncity to launch Sunluxe Collection Suncity Group Ltd, one of Macau’s biggest VIP gambling room investors, is launching its own luxury jewellery and watch line called Sunluxe Collection. The first shop is due to open this afternoon in One Central Macau, one of the city’s highend shopping centres, Suncity Group said. “Being Suncity Group’s first international jewellery and watch boutique store in Asia, it has assembled exquisite designs from renowned designers across the globe,” it said. International Entertainment Corporation, a Hong Kong-listed firm controlled by the family of Cheng Yu Tung, said last month it would pay up to HK$7.35 billion (US$948 million) for a 70 percent stake in an entity called Suncity International Holdings Ltd. International Entertainment Corp lists Henry Cheng Kar Shun as a director. Henry Cheng is also chairman of Chow Tai Fook Jewellery Group Ltd, one of the world’s largest listed jewellery chains by market capitalisation.

February 12, 2014 April 19, 2013

Macau Brought to you by

Arrival tax idea draws a sceptical response Observers say an arrival tax would mar the image of Macau as a place that welcomes tourists

HOSPITALITY

Stephanie Lai

sw.lai@macaubusinessdaily.com

Mainland Rising The number of passenger ferry sailings arriving at Macau’s three ferry ports has been decreasing since 2010. About 1,100 or 1.6 percent fewer ferries arrived last year than in 2012. On average, 14 fewer arrived each day last year than in 2010, the busiest year for ferry traffic. Sailings from Hong Kong made up 78.6 percent of the ferry traffic that arrived last year. The proportion has been decreasing. From 2009 to 2011 it was about 83 percent. That fewer ferries arrive here now is due solely to fewer arriving from Hong Kong.

More than 29 million people visited Macau last year

The number of ferries from Hong Kong has decreased by 11.5 percent since 2010, or by an average of about 20 each day. The greatest contraction has been in the number of sailings from Hong Kong arriving at the Taipa ferry terminal, which decreased by 14.4 percent. In contrast, the number of ferries from the mainland has increased by 13.7 percent since 2010, or by an average of about five each day. The greatest expansion has been in sailings from the mainland arriving at the Inner Harbour ferry terminal, which increased by over 20 percent. The growth in ferry traffic in the Inner Harbour is not strictly comparable with changes in the amount of traffic in the other ferry ports. The ferry services to and from the Inner Harbour are the alternative to entering or leaving Macau by land for travellers that wish to avoid the congestion at the Gongbei border crossing.

7.1 %

Decrease in ferry arrivals, 2010-2013

mposing an arrival tax on visitors entering the city by land in an effort to reduce their numbers would be unfair and spoil Macau’s reputation among tourists, observers say. The idea of an arrival tax has yet to be floated in earnest in Macau. But in Hong Kong two groups, People Power and the Democratic Party, have proposed that an arrival tax of HK$20 (US$2.60) to HK$100 be levied on visitors that enter the city by land, to curb the number of tourists, especially mainlanders. Hong Kong Chief Executive Leung Chun Ying told reporters yesterday that his government would not even consider the idea, not least because the mainland could impose an equivalent tax on visitors from Hong Kong. Macau Legislative Assembly member Ho Ion Sang and University of Macau academic Amy So Siu Ian think an arrival tax here could spoil the city’s reputation as a tourist spot. “Our economy relies a lot on the hospitality and tourism industries. We should present an image of welcome to visitors,” said Ms So, who is the director of her university’s hospitality and gaming management programme. “If we impose an arrival tax, visitors may think they are unwelcome and that may badly mar the image

of Macau,” she told Business Daily. “Besides, the idea of imposing an arrival tax on certain kinds of tourists may not be fair in principle.”

Discontent rising Hong Kong and Macau have had to cope with floods of visitors in recent years. Official data show that last year Macau had over 29 million visitors, 4 percent more than in 2012. About 64 percent were mainlanders. Business Daily invited the Macau Government Tourist Office to comment on the arrival tax idea, but the office had failed to reply by the time we went to press. Mr Ho is against an arrival tax. But be believes the flood of tourists is putting Macau under strain, particularly during peak seasons such as the Lunar New Year. More than 1 million people visited Macau in the first seven days of the lunar year than began on January 31, about 72 percent of them mainlanders, according to official data. “Discontent among residents is rising because of the visitor influx,” Mr Ho said. “Residents say that during holidays they have to use the narrow lanes

Our economy relies a lot on the hospitality and tourism industries. We should present an image of welcome to visitors Amy So, University of Macau

instead of the main roads to avoid the huge crowds,” he said. “Residents feel that their day-today lives are disrupted by the huge volume of visitors,” he said. “For instance, traffic congestion has worsened, with more tourist coaches on the road.” Mr Ho added: “The government does not have any holistic approach to solving the problem yet.”

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February 12, 2014 April 19, 2013

Macau

Rising rents set to drive restaurants from prime areas International chains are taking over the shops in tourist spots as Macau businesses face higher costs, says a business leader Tony Lai

tony.lai@macaubusinessdaily.com

Small businesses are being squeezed out of tourist areas, Chan Chak Mo says

business leader expects more Macau-owned restaurants to be driven out of prime tourist areas this year by increases in rents for commercial space. The chairman of the United Association of Food and Beverage Merchants of Macau, Chan Chak Mo, said yesterday that food and drink businesses were being squeezed by labour shortages and rent increases. “As far as I know, there will be increases of at least 50 percent in shop rents in prime areas if leases come to an end this year,” Mr Chan said. “There could even be no lease renewals in those areas for small businesses,” he said. He said leases in prime areas were usually for two to five years. Estate agency Jones Lang LaSalle (Macau) Ltd has said shop rents rose by 6.2 percent last year, on average, but that it expects rents to be stable this year. Mr Chan said: “It is a trend, around the world, for food and

beverage businesses to develop outside tourist spots.” Mr Chan told reporters: “Like in Causeway Bay in Hong Kong, apart from the ones that own premises there, most food and beverage businesses have to run their business in back streets or even outside the area.” He added: “Most shops are occupied by chains. How can a small restaurant pay monthly rents of several hundred thousand dollars?” Mr Chan owns restaurant operator Future Bright Holdings Ltd. He let his company’s sixstorey commercial building near the Ruins of St Paul’s this year to United States clothing chain Forever 21 Inc, for HK$2.4 million a month (US$309,500). The rent is more than double what the previous tenant paid. Mr Chan said his industry would also find it difficult to hire workers after the new casino-resorts in Cotai opened over the next three years.

February 12, 2014 April 19, 2013

Greater China

Stocks gain on JPMorgan forecast Gauge of financial companies in the CSI 300 Index rose 1.6 percent

hinese stocks rose, sending a gauge of Hong Kong-listed shares to its biggest gain in three months, as JPMorgan Chase & Co predicted a market rally within weeks and China International Capital Corp recommended insurers. China Life Insurance Co and Ping An Insurance (Group) Co surged more than 5 percent in Hong Kong, while PetroChina climbed 1.6 percent after its parent discovered a natural gas reserve that’s big enough to supply China’s needs for two years. China Citic Bank Corp led a surge for lenders in Shanghai as JPMorgan advised buying Chinese bank stocks and forecast a market rally of as much as 20 percent. Foshan Haitian Flavouring & Food Co jumped 30 percent in its debut. The Hang Seng China Enterprises Index rose 2.5 percent to 9,856.85 at the close, the biggest gain since November 18 and paring this year’s loss to 8.9 percent. The Shanghai Composite Index added 0.8 percent to 2,103.67, the biggest three-day gain since November. The ChiNext Index of small companies slid 1.7 percent. “We recommend a trading buy of China equities, based on seasonality and all-time low valuations,” Michael Yu, a strategist at JPMorgan in Hong Kong, wrote in a report. “We expect a 15-20 percent market rebound in the coming weeks, once growth stabilises due to seasonality and the market’s focus switches to structural reforms.” A gauge of financial companies in the CSI 300 Index rose 1.6 percent. It trades at 5.9 times projected 12-month profit, up from a 5.5

Ping An Insurance surged more than 5 percent in Hong Kong

multiple last month, the lowest since at least 2007. The CSI 300 gained 0.8 percent to 2,285.56 at the close. China Citic jumped 10 percent in Shanghai, the most since March 2013, and 4.3 percent in Hong Kong, while Ping An Bank advanced 3.7 percent in Shanghai. JPMorgan said investors should buy Chinese banks because of low valuations, large dividends and a high return on equity. Citic traded at 4.2 times projected profit last week,

the lowest level dating back to 2007, Bloomberg data showed. “The rally is led by financials today because they are very cheap now,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing. “Citic surged by the daily limit because it’s low in valuation and it’s a very small company.” The benchmark money-market rate fell on speculation cash is starting to return to the banking system after the weeklong Lunar New Year holiday.

Goldman Sachs eyes Chinese opportunities But bank won’t make overfunding mistake, says chairman

oldman Sachs Group Inc chairman and chief executive Lloyd C. Blankfein said China’s economic growth will have “huge consequences” for global expansion prospects. “The China growth story is going to be the story of the next 30-40 years,” Mr Blankfein said in an interview with Bloomberg Television from Hong Kong while attending the Goldman Sachs Global Macro conference. “We really need that growth in China to occur.” Mr Blankfein said Goldman Sachs, which became the first Wall Street firm to start underwriting securities in China after winning a licence in 2004, will be judicious in investing more in the nation. The New Yorkbased bank also has private-equity, asset management and institutional brokerage businesses in the world’s second-largest economy. “We’d be making a mistake if we overfunded it, put too many people, too much investment,” Mr Blankfein said yesterday. “We want to keep growing our business commensurate

The China growth story is going to be the story of the next 30-40 years Lloyd Blankfein, Goldman Sachs chairman

The People’s Bank of China didn’t conduct reverse-repurchase operations, according to a trader at a primary dealer required to bid at the auctions, as 450 billion yuan (US$74 billion) of those contracts mature this week. The Shanghai gauge has rallied 5.7 percent since its price-toearnings ratio fell to a record on January 20, paring this year’s loss to 0.6 percent. Bloomberg News

with opportunities set in China.” The firm was the top adviser in helping Chinese companies sell shares overseas last year, data compiled by Bloomberg show, and ranked second in advising on China domestic equity and equity-linked offerings through its joint venture. China’s economy grew 7.7 percent in 2013, the same rate as in 2012. Expansion is forecast to be 7.4 percent this year, the weakest pace since 1990, based on the median estimate in a Bloomberg News survey. Mr Blankfein said emerging markets are better able to weather an investor retreat now than in 1998, when currency turmoil spread and forced international bailouts. “There were a lot of things in ’98 that don’t exist now,” he said. Those markets now have “better reserves, more flexibility in exchange rates, better policy orientation,” he said. Emerging-market stocks posted their worst start to a year since 2009, evoking comparisons with the Asian financial crisis, as China’s economy slowed and the U.S. Federal Reserve began paring monetary stimulus. “There were tailwinds for the emerging markets over the last several years” with low interest rates globally attracting funds into those markets and commodity prices climbing, Mr Blankfein said. “The risk returns to roost, not possibly, but inevitably. It has to. It’s part of a cycle.” Bloomberg News

February 12, 2014 April 19, 2013

Greater China

Alibaba maps out bid for AutoNavi

U.S., China urged to finalise investment treaty

Chinese group in dealmaking spree ahead of IPO

libaba Group Holding Ltd, China’s largest e-commerce firm, offered to buy AutoNavi Holdings Ltd in a deal valuing the Chinese digital mapping and navigation firm at US$1.58 billion. Alibaba, which already owns 28.3 percent of AutoNavi, is bolstering its e-commerce reach with applications for smartphones and tablet computers to help compete with Tencent Holdings Ltd and Baidu Inc. The company has been valued at an average of about US$150 billion as it considers moving toward the biggest initial public offering since Facebook Inc. Baidu started offering its map software for free last August, challenging AutoNavi’s dominance in the Chinese navigation market. AutoNavi followed suit by offering its own navigation software for free. “The market for navigation and map applications and services has become increasingly challenging…” Alibaba said in a letter to AutoNavi, arguing that its proposal provided value that would be difficult for it to achieve on its own. AutoNavi, which has not reported fourth-quarter results, posted yearon-year declines in revenue in each of the first three quarters of 2013. Revenue for the first three quarters totalled about US$110 million. More than half of AutoNavi’s revenue comes from licensing map data for dashboard navigation systems used in cars. Customers include Audi, BMW and General Motors Co. AutoNavi, which went public in 2010, also provides map software for Samsung Electronics Co Ltd’s smartphones as well as services to China Mobile Ltd and Google Inc. AutoNavi said that Alibaba had

offered to buy the almost 72 percent of the company that it did not own for US$21 per American depository share, or US$5.25 in cash per ordinary share. The offer represents a premium of 27 percent to AutoNavi’s ADR close of US$16.54 on the Nasdaq on Friday. The company’s shares have risen about 47 percent in the past year. The stock was trading at 39 times earnings for the last four quarters, more than double

US$1.6 bln

Alibaba’s offer for AutoNavi

that of other navigation device makers such as Garmin Ltd and TomTom NV. The proposed buyout follows a series of deals in the fast-growing Chinese technology sector. Alibaba, which is expected to go public in the United States this year, bought a stake in Sina Corp’s microblogging service Weibo, the Chinese equivalent of Twitter, last April. Alibaba, which is 24 percent owned by Yahoo Inc, announced its 28 percent stake in AutoNavi in May. AutoNavi said it would form a committee including financial and legal advisers to consider the offer, which Alibaba plans to fund with cash on hand. Alibaba runs Taobao Marketplace, China’s largest consumer-focused e-commerce website, business-tobusiness commerce platform Alibaba. com, and Alipay, a PayPal-like online payment platform. Reuters

Pollution watchdog to get more powers Government shake-up to grant more powers to environment ministry

he central government could grant its undersized environment ministry new powers over resources, possibly allowing it to veto future projects, and more muscle to punish polluters as part of a government shake-up to tackle decades of unchecked growth. Sources with ties to the leadership told Reuters that the government was considering a sweeping reorganisation of cabinet ministries next month that will dissolve the Ministry of Land and Resources and transfer some powers to the Ministry of Environmental Protection (MEP), long regarded as too weak to punish law-breaking polluters. Amendments to China’s 1989 environmental law, likely to be rubber-stamped at the annual session of the country’s legislature next month, are expected to also give the environment ministry the powers to impose unlimited penalties on firms that fail to rectify problems and allow

regulators to suspend or shut down persistent offenders. A nationwide monitoring system will be established to force industries to disclose exactly how much pollution they cause, and it will become a criminal offence to misuse or switch off pollution control technology and misreport emission levels. China’s big polluters routinely exceed government emissions limits, say environmentalists, and high pollution levels have sparked widespread social unrest, which is a major concern for China’s leadership.

Small fines The proposals are part of Beijing’s efforts to steer the economy away from investment-led growth, which has fuelled three decades of double-digit expansion per year, towards a lower but more sustainable pace leaning more on consumption and services. Despite vows to get tough on industry, China’s ability to impose environmental safeguards on local governments and powerful stateowned firms remains in doubt following a series of toxic chemical spills, smog scares and food safety scandals. “China will not be able to stop polluters from violating the law without stronger penalties,” said Alex Wang, an expert in Chinese

environmental law at UCLA in the United States. “For companies making billions of yuan in profit each year, these fines have been less than negligible.” China has already stripped dozens of powers from ministries, including the powerful National Development and Reform Commission (NDRC), in a bid to move away from bureaucratic interference in the world’s second-largest economy and towards better regulation. The new amendments will abolish a “maximum fine” system in favour of unlimited penalties for repeat offenders. Officials say firms have preferred to pay the relatively small fines up front rather than face much higher compliance costs. “To a relatively big enterprise, the level of punishment cannot even be compared to the cost of complying with the law or even with our administrative costs,” Ji Gang, an official with the MEP’s law enforcement division, told the Xinhua-run Economic Information Daily in January. The environment ministry said last year that it planned to spend 40 billion yuan (US$6.60 billion) over 20112015 to boost its monitoring capacity, but it will not be enough unless China strengthens the bureaucratic position of the watchdog, said Mr Wang of UCLA. Reuters

The United States and China should aim to complete a planned investment treaty this year, the U.S.-China Business Council said. The world’s two biggest economies agreed in July to restart stalled negotiations on an investment treaty, with Beijing dropping previous efforts to protect certain sectors of its economy from the start. “It’s very important for us to grasp this opportunity to try to move forward and see how serious they are,” the council’s president John Frisbie said. Previously, Beijing had agreed to talks only if certain Chinese industries, especially in its service sector, were exempt. But it agreed to drop blanket restrictions for the current talks. Mr Frisbie said China had to start dismantling restrictions on foreign investment in sectors including automotive, financial services, agriculture and health to help overcome U.S. domestic resistance to greater ties with China. “He could certainly talk about a bilateral investment treaty and what it’s going to take to get it through the Senate,” Mr Frisbie said. “He will be very good at articulating that in a way that will help China understand the importance of having some meaningful reductions in the ownership restrictions and how that’s going to be critical to that treaty moving forward.”

Beijing in no hurry to open market: Visa Visa Inc chief executive Charlie Scharf said China isn’t opening as quickly as expected to foreign payment processors and must be viewed as a five- to 15-year opportunity. “It’s going to take a long time for the market to actually open up in a way that we actually do have that level playing field,” Mr Scharf told analysts yesterday in New York during an industry conference sponsored by Keefe, Bruyette & Woods Inc. Mr Scharf plans to be in China next week and said the company needs to understand why the market hasn’t become more open to foreign firms. Visa, the world’s biggest bank-card network, has been in talks with U.S. and local officials, Chinese banks and China UnionPay Co, he said. UnionPay is a payment processor founded in Shanghai by the State Council and central bank that competes globally with Visa and MasterCard Inc. Chinese law limits what Visa can do, Mr Scharf said at his company’s annual meeting in January. “If you want to issue a card locally in China, denominated in the local currency, it has to be issued by a Chinese-owned company called China UnionPay,” he said.

Cosmos Bank bought for US$760 mln Taiwan’s Cosmos Bank said it has agreed to be acquired by China Development Financial Holding Corp in a deal a source familiar with the matter said was worth about US$760 million. Taiwan’s CDF will buy the stakes of GE Capital and SAC Capital, the source said, who declined to be named because the information was not yet public. China Development Financial Holding and Cosmos did not immediately respond to messages seeking comment, but Cosmos confirmed the deal in a statement posted on the Taiwan stock exchange. It said one Cosmos share will be exchanged for 0.2 China Development share and NT$13.4 in cash, but it did not provide other details such as the total value of the deal and the sellers. “Our company’s board has agreed to sign a share transfer agreement with China Development Financial Holding Corp. We will then become China Development Financial Holding’s 100 percent-owned unit,” Cosmos Bank said in the statement.

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Greater China

Chinese firms head for U.S. IPOs Companies not fussed by accounting flap between Beijing and Washington Denny Thomas and Elzio Barreto

officer of Sydney-based Bronte Capital, said a lack of penalties for Chinese firms’ past misdeeds in the 2011 scandals meant the potential to find accounting fraud was always there. “We welcome the new bull market,” said Mr Hempton, best known for having taken short positions on several U.S.-listed Chinese companies in the past. “We hope that they issue hundreds of new shares because they will provide our future happy hunting ground.”

Regulatory row

hinese companies are flocking to the U.S. IPO market in their biggest numbers since 2010, drawn by soaring valuations for tech start-ups and undeterred by a flareup in an accounting row between Washington and Beijing. Some 30 Chinese companies could list in the United States this year, according to investment bankers interviewed by Reuters. That includes JD.com Inc, China’s second-biggest e-commerce firm after Alibaba Group Holding Ltd. It said last month it is seeking to raise US$1.5 billion, in what may be the second-biggest U.S. IPO by a Chinese company. The return to U.S. shores comes on the back of renewed investor enthusiasm for China plays, particularly for Internet stocks. The country’s online retail market by transaction volume jumped 42 percent last year to 1.85 trillion yuan (US$305 billion) and is expected to almost double in size by 2016, according to figures from iResearch. That has trumped lingering concerns about accounting irregularities and corporate governance issues that have forced many U.S.-listed Chinese firms to be delisted since 2011. The delistings have prompted investors to be more discerning about China IPO candidates this time around. The bar for Chinese companies seeking U.S. deals is higher, improving the quality of recent offerings, bankers say. But not everyone is so certain about that. John Hempton, chief investment

And bull market it is. While only eight Chinese companies listed in the United States last year, raising a combined US$1.1 billion, the returns have been spectacular. Semiconductor solution provider Montage Technology Group Ltd and 58.com Ltd, billed as China’s Craigslist, have jumped at least 70 percent since their debuts. Online sports-lottery operator 500.com has nearly tripled in value since listing in late November.

Valley and has invested in several U.S.-listed Chinese companies. The 2011 scandals sparked much tension between regulators of both countries regarding the oversight of auditors and access to company information that has continued ever since. Indeed, JD.com’s announcement came less than two weeks after a U.S. Securities and Exchange Commission (SEC) judge recommended banning Chinese units of the Big Four accounting firms from auditing U.S.listed companies. But the two sides could be close to a deal that would allow Washington to inspect the audit work of accounting firms in China, a U.S. audit watchdog said last week, which could go a long away to alleviating strains. Paul Botlz, partner at law firm Ropes & Gray said Chinese companies should not be put off by the apparent escalation of the standoff due to the SEC move. “I think this is a bit of a blip. I would advise companies: don’t be too spooked, if you want to go to U.S. markets don’t let this stop you, just check with the auditors on what’s their back-up plan,” he said.

More options

US$305 bln

China’s online retail market in 2013

Newly U.S.-listed Chinese firms rocketed an average 53 percent on their debuts last year, according to consulting firm EY. The technologyheavy Nasdaq Composite Index rallied 28 percent over the past year. “The last companies that went public, proved to the street that there’s a lot of growth still here,” said David Chao, co-founder at venture capital firm DCM, which is based in Silicon

For Chinese companies, the U.S. market affords them options not available in Hong Kong, such as dual-class structures and the ability to list without having turned a profit. It also offers far more liquidity than the newly reopened mainland China IPO market. This year, in addition to JD.com and a US$300 million offering from a security software unit of Kingsoft Corp Ltd, IPO candidates include real estate website Anjuke.com, gaming company Chukong Technologies and online cosmetics company Jumei.com, bankers said. Anjuke did not reply to an e-mail seeking comment. Representatives for Chukong were not available for comment and Jumei.com could not be reached for a comment. Companies that are likely to benefit from the boom in China consumer spending will be in greater demand than software makers facing potential piracy or companies in the heavily-

KEY POINTS Some 30 companies seen going public in U.S. in 2014 JD.com could be secondbiggest Chinese IPO in the U.S. Chinese IPOs posted 53 pct average 1st day pop in 2013 About US$36 bln raised by Chinese IPOs since 2000

regulated financial services sector, Mr Chao at DCM said. Most of the China firms that list in the United States use a structure known as variable interest entities (VIEs). This vehicle gets around Chinese rules against foreign ownership in sectors such as online retail and e-commerce. A VIE will give investors access to a company’s profits but not give them any ownership of the company. “As people see value in the stocks and deals started to perform, returns could potentially offset the additional risk, like VIE, that people take when they invest in China,” said Joaquin Rodriguez Torres, head of technology, media and telecom investment banking in Asia at Deutsche Bank, which worked on the IPOs of 500. com and travel services company Qunar Cayman Islands Ltd last year. More than 140 Chinese companies have raised US$36.6 billion through U.S. IPOs since 2000, Thomson Reuters data shows, with the peak in 2007 when they raised a record US$6.9 billion. Reuters

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Asia Bloomberry raises US$253 mln to expand Solaire Bloomberry Resorts Corp has raised privately US$253.4 million (2.03 billion patacas) to expand its Solaire Resort and Casino in Manila’s Entertainment City. The Philippine Daily Inquirer newspaper reported that the casino-resort operator had sold corporate notes to BDO Unibank Inc, China Banking Corp, Robinsons Bank Corp and United Coconut Planters Bank, among others. The Phase 1-A expansion of Solaire will include 200 more slot machines and 65 gaming tables, a 300-room hotel, mixed-use space, a 1,800-seat theatre and a nightclub.

Garuda gets bids for stake in Citilink Indonesian airline seeks partner to keep growing Kyunghee Park and Harry Suhartono

T Garuda Indonesia has bids from four companies to purchase a stake in its low-fare unit Citilink as the national airline seeks a partner to expand amid a boom in air travel. Garuda expects to take a decision on the strategic partner by June, chief executive Emirsyah Satar said in an interview in Singapore yesterday. The Jakarta-based company said on Monday it’s planning an initial public offering for Citilink. Mr Satar declined to name the four bidders. Getting a strategic partner and raising funds will help Garuda compete with PT Lion Mentari Airlines in a market where passenger numbers are expected to increase as much as 20 percent this year. From Indonesia to Vietnam to Myanmar, carriers in Southeast Asia are also buying aircraft as about 600 million people – as many as the combined population of the U.S., Germany and Brazil – fly more. “The budget market is growing quite fast in Indonesia,” Mr Satar told Bloomberg Television. “We feel we need a partner who is really experienced in terms of driving the low-cost carrier.” Citilink operates 30 aircraft for 70 routes across the Indonesian archipelago, according to company figures. Standard Chartered Bank

Plc and Bahana Securities Ltd are advising Garuda on the stake sale, Mr Satar said.

Budget carriers The emergence of low-cost carriers such as Lion Air and AirAsia Bhd. have helped fuel demand for flying in Southeast Asia as tickets get cheaper. Lion Air and Sepang, Malaysia-based AirAsia have together ordered 764 planes worth US$73.8 billion at list prices since 2011. By the end of this year, Lion Air and state-controlled Garuda will surpass Singapore Airlines Ltd as the region’s biggest carriers by fleet size, the CAPA Centre for Aviation, which advises airlines, said last year. “Ten years ago there were no lowcost carriers in Asia or Southeast Asia,” Randy Tinseth, Boeing Co’s vice president for marketing, said yesterday at a press conference. “The growth is even more dynamic in Southeast Asia, where today lowcost carriers provide 22 percent of available seats. That’ll grow to represent about 42 percent of seats” in 2032, he said. Indonesia, which maintains a growth rate of about 6 percent, will leapfrog Germany and the U.K. by 2030 to rank seventh largest economy, consulting firm McKinsey & Co predicts.

Garuda’s net income fell to US$11.04 million in 2013 from US$110.6 million a year earlier, due to depreciation in the rupiah, which weakened 21 percent last year, and higher operating costs. About half the company’s revenue was in foreign currencies and about 60 percent of its costs were in dollars, Mr Satar told a press conference. The company will try to lift dollar revenue to match expenses, he said. Citilink will do better this year and not incur a loss, Mr Satar said yesterday. Garuda plans to add 30 aircraft this year and take its fleet to about 250 by the end of 2025, from 194 planes by the end of 2015, he said. The company is looking to buy wide-body aircraft and considering Boeing’s 787 Dreamliner as it expands internationally, he added. The carrier will start flights to London and Mumbai and increase flights to China and Japan, he said. “We should not read too much on their 2013 numbers, which were affected by the rupiah,” Shukor Yusof, an analyst at Standard & Poor’s in Singapore, said. “Once they announce new orders and increase the network into Europe, things will turn around. By the end of this year I think they should be in far better shape than many other carriers in the region.” Bloomberg News

We feel we need a partner who is really experienced in terms of driving the low-cost carrier Emirsyah Satar, Garuda chief executive

Singapore loosens rules for some home owners S

ingapore will broaden exemptions from the debt limit for refinancing loans of home owners, its central bank said yesterday, in its first tweak of the policy introduced last June that was aimed at cooling down the property market. The city-state’s private homes sales in December fell to a fiveyear low, after the government broadened measures last year to curb speculation that had driven home prices to record highs fuelled by low interest rates. Under the revised rules, a borrower will be exempted from the 60 percent Total Debt Servicing Ratio (TDSR) threshold in refinancing a residential property, so long as it was purchased before the introduction of TDSR rules and it is owner-occupied, the Monetary Authority of Singapore (MAS) said in a statement. Previously, the exemption also required that the owner did not own any other property, and had no other outstanding property loan. The monetary authority said it had received feedback from borrowers facing challenges refinancing loans for such properties. “MAS has decided to broaden the existing exemption from the TDSR threshold of 60 percent for such loans to ease the debt servicing burden of these borrowers,” it said. The MAS announced the TDSR rules last June, limiting a property buyer’s monthly payment at 60 percent of his income. In the last quarter of 2013, the price index for private residential properties decreased by 0.9 percent from the previous quarter, but still hovered near a record high hit in the third quarter of that year, Urban Redevelopment Authority data showed. Analysts said the policy change would help a fair number of home owners seeking to refinance their properties, but did not signal a shift in government policy on the property market. “The revised rules would provide some relief for current home owners who bought their homes before TDSR ruling, and are genuinely seeking re-financing to ease their loan financing burden,” said Alice Tan, head of consultancy and research at Knight Frank. “Yet this exemption is not likely to create a boost in home sales for now, as the TDSR threshold still remains for buyers who bought homes and who are intending to purchase a property after the effective date of TDSR.” Reuters

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Asia Macquarie falls as M&A activity subdued Macquarie Group Ltd shares fell the most in nine months as Australia’s largest investment bank said mergers and acquisitions activity was muted even as it forecast a higher profit for the year. Macquarie slid 3.8 percent, the sharpest decline since May 16, to A$53.52 at the close in Sydney after it said in a statement that while market conditions were improving, customer activity in some capital markets-facing businesses was subdued. It continued to expect net profit for the 12 months ending March 31 would be higher than a year earlier. “Macquarie’s outlook was a lot more cautious than what the market expected,” Angus Gluskie, chief investment officer at White Funds Management, said. The outlook for each of the bank’s operating groups is unchanged apart from its fixedincome, currencies and commodities unit, where net profit for the 12 months ending March 31 has potential to be in line with the year earlier, Macquarie said. It previously forecast a fall for that unit.

Myanma Air signs nearly US$1 bln deal Myanmar’s national carrier has signed a nearly US$1 billion deal to lease 10 new Boeing 737 jets as it looks to revamp and expand its ageing fleet. Myanma Airways will be working with GE Capital Aviation Services (GECAS), the world’s largest leasing company, to upgrade its planes and flight routes. The state-run company flies mainly within Myanmar. GECAS – a unit of U.S. conglomerate General Electric – said the aircraft would be delivered by 2020. “We are pleased at GE to work with Myanma Airways to provide new, state-of-the-art Boeing aircraft,” GECAS president and chief executive Norman Liu said in a statement. “This is an important milestone for the airline and for the development of Myanmar’s aviation industry.” The deal has a list price of US$960 million and will see leasing company GECAS rent the Boeing aircraft to Myanma Airways in exchange for a monthly payment. Myanma Airways plans to expand its international routes to Japan and South Korea. Currently, its only external flight is to Buddhist pilgrim destination Gaya in India.

Retail cements hopes for S.Korea recovery Sales at South Korea’s top department and discount store chains surged in January over a year earlier, preliminary data showed yesterday, cementing hopes for a sustained recovery in Asia’s fourth-largest economy. Combined sales at the department store chains run by Hyundai Department Store, Lotte Shopping and Shinsegae Co rose 7.2 percent in January from a year earlier, the finance ministry said in a monthly report. This marked the strongest growth in sales since March 2013 and follows a revised 0.3 percent drop in December. Sales at the country’s top discount stores also rose by a sharp 18.4 percent in annual terms last month, following a revised 5.7 percent decline in December and marking the strongest gain since January 2011. Both the government and the central bank expect South Korea’s economic growth this year to accelerate to nearly 4 percent from an estimated 2.8 percent expansion last year, buoyed in part by stronger domestic demand.

Thai opposition targeting farmer’s support Government months behind on subsidised rice payments Chris Blake and Supunnabul Suwannakij

hailand’s opposition movement is reaching out to rice farmers to break a political stalemate as the nation awaits official election results, seeking to turn a source of support for Prime Minister Yingluck Shinawatra. After months of demonstrations led by her political opponents, Ms Yingluck now risks a backlash from farmers who say her government is months behind on subsidised rice payments at the heart of her Pheu Thai party’s populist platform. Ms Yingluck also faces possible impeachment over the programme, which the opposition alleges has benefited politicians more than rural communities. The demonstrators led by former opposition lawmaker Suthep Thaugsuban are looking to capitalise on a potential crack in Ms Yingluck’s rural support base, inviting farmers to speak on protest stages and raising money to help them file lawsuits against her government. Parties linked to Ms Yingluck’s brother, former Prime Minister Thaksin Shinawatra who lives in self-imposed exile over corruption charges, have won the past five elections with the backing of populous farming regions. “There is another rare window for Thailand’s grand realignment,” said Thitinan Pongsudhirak, director of the Institute of Security and International Studies at Chulalongkorn University. “If the Suthep movement reaches out to the farmers, who are already upset with Thaksin’s amnesty gambit and the government’s inability to pay them for the rice, then we could see a realignment that marginalises the Thaksin camp.” He said the last time there was such a window was in October when protests began against Ms Yingluck’s efforts to pass an amnesty bill that would have voided most political crimes dating back to a 2006 military coup that ousted Mr Thaksin. The bill angered many on either side of Thailand’s political divide.

Thaksin’s populism Ms Yingluck’s support comes from the political machine built by her brother, who lives abroad to avoid a two year jail term for a corruption conviction. With policies such as cheap health care Mr Thaksin created loyalty among rural voters, particularly in the north and northeast regions that account for about 70 percent of rice production. Mr Suthep has said policies such as the rice programme, which buys from farmers at above-market rates,

are a form of vote buying that risks bankrupting the country. While unpaid farmers have “legitimate grievances,” so far the protests appear to involve farmers from outside the Pheu Thai party’s heartland, said Kevin Hewison, director of the Asia Research Centre at Murdoch University in Perth. Even if support for the government diminishes in those areas, it is unlikely to shift to Suthep’s former party, the Democrats.

US$6.1 bln

Annual loss estimated by the World Bank

The Democrats are disliked in the north and northeast for authorising a deadly crackdown on protesting Thaksin supporters in 2010, for which Mr Suthep faces murder charges, Mr Hewison said. Some opposition figures have suggested rural people lack sufficient education to vote responsibly. Ms Yingluck’s ability to pay the farmers has been hampered by her caretaker status, which began when she dissolved parliament in December. She faces limitations on spending and new borrowing, and protesters have pressured banks not to loan the government money for the rice programme.

With the Democrats boycotting the February 2 poll and Mr Suthep’s protesters disrupting the vote in some areas and blocking candidates for registering in others, the results are incomplete. Ms Yingluck will remain a caretaker leader while the government and Election Commission wrangle over how to legally hold needed by-elections.

Seeking funds The Ministry of Finance is in the process of seeking the funds to pay farmers, Finance Minister Kittiratt Na-Ranong told reporters yesterday. “It will take a while to comply with legal processes. All farmers will then be paid.” “The government is making payments to farmers who sold rice during October and November, and will pay those who sold rice during December to January,” Mr Kittiratt said. Winai Lamnoo, from the central province of Sing Buri, said he and other farmers submitted a letter to Thailand’s anti-corruption commission asking it to speed up its investigation into the programme. The anti-corruption commission said last month that it will investigate Ms Yingluck’s role as overseer of the programme after finding enough evidence to charge 15 people, including former Commerce Minister Boonsong Teriyapirom. The government spent US$21 billion buying the grain from the two crop years starting October 2011. The World Bank estimated the annual loss at 200 billion baht (US$6.1 billion). The International Monetary Fund in November called for the programme to be replaced, while Moody’s Investors Service said in June that losses from rice subsidies were credit negative for Thailand’s sovereign rating. Bloomberg News

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

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

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Asia

Turmoil in Australia with Toyota withdrawal

“This is a very considered decision [by Toyota] and it is a final decision and it’s not as if the government could have leapt in at the 11th hour and said here’s another A$100 million or A$200 million, please, please, please stay,” he said. “We’ve tried that with the motor industry. It hasn’t worked and the best thing now is to focus on things that we can do and which are profitable.” Victoria state Premier Denis Napthine met workers at Toyota’s Altona plant in Melbourne on Tuesday and said “there was a sense of disappointment, but also a sense of where do we go from here”. He was due to meet Mr Abbott later in Canberra to thrash out a package to assist retrenched workers in the state as well as drum up more money for key infrastructure and industries of the future to help their transition. Toyota has manufactured cars in Australia since 1963 and still produces the top-selling Camry sedan and other models in the country. AFP

Unions warning 50,000 jobs could be lost down the supply chain

rime Minister Tony Abbott insisted yesterday there was nothing he could do to prevent Toyota Motor Corp halting car manufacturing in Australia as fears it will spark an economic crisis gather pace. The Japanese giant on Monday said it would stop making cars in Australia in 2017, citing high production costs, a strong local dollar and a small domestic market in a decision that kills off the country’s 66-year-old

auto manufacturing industry. It follows Mitsubishi Motors Corp shuttering plants five years ago, Ford Motor Co halting production in 2016 and U.S. giant General Motors Co announcing in December that its GM Holden offshoot would also cease local manufacturing by 2017. The demise of the industry has sparked a political firefight with the Labor opposition blaming the government for not doing enough to prevent Toyota from walking away and unions warning 50,000 jobs could be lost down the supply chain, mostly in component manufacturing and transport. Opposition industry spokesman Kim Carr compared the impact on the worst-hit states of Victoria and South Australia to the Great Depression which struck the nation in the 1930s.

“There’s likely to be, for many blue collar Australians, an economic crisis the like of which we haven’t seen since the Great Depression,” he told ABC radio. “There are going to be families that won’t be able to get work. There will be whole communities that will be savaged by this decision.”

Tough consequences Since coming to power last year, the conservative government has adopted a hard line on industry assistance, warning only last week that “the age of entitlement is over” when it comes to taxpayer-funded handouts. Mr Abbott said yesterday that tens of millions of dollars had been thrown at the ailing car industry in recent years and had not saved it.

Tata driving Indian success T ANZ profit rises as lending increases A

ustralia & New Zealand Banking Group Ltd, Australia’s thirdlargest bank by market value, said its first-quarter cash profit climbed 13 percent from a year earlier on higher lending and lower bad-debt charges. Unaudited cash profit, which excludes one-time items, rose to A$1.73 billion (US$1.55 billion) in the three months ended December 31 and unaudited net profit climbed 21 percent to A$1.64 billion, the Melbourne-based bank said in a statement yesterday. ANZ said it

plans to issue capital notes to raise about A$1 billion. The earnings increase follows five consecutive years of record profits for the lender, which has boosted its mortgage market share for the past four years, data from the Australian Prudential Regulation Authority show. ANZ’s variable mortgage rate has been the joint lowest with National Australia Bank Ltd since August. “The standout was the improvement in loan quality reflecting continued low interest rates and low levels of corporate leverage,” David Ellis, a Sydney-based analyst at Morningstar Inc said in an e-mail. “We expect solid underlying earnings growth to continue for Australian banks.” ANZ shares climbed 2.17 percent, the biggest intraday advance in more than three months, to A$30.56 in Sydney. The gain trimmed losses for the year to 5 percent, still the most among the four largest Australian lenders. Bloomberg News

ata Motors Ltd, India’s biggest automaker by revenue, saw third-quarter net profits triple to their highest in a year-and-a-half on strong demand for its luxury Jaguar Land Rover vehicles and a one-time accounting gain. British luxury carmaker JLR, which Tata Motors bought in 2008, has been propping up profits at its parent for the past two years. The unit sold a record 425,006 saloons and sports utility vehicles in 2013 in countries including Brazil, China, India and the United States. The company beat forecasts and posted a 195 percent increase in net profit for the OctoberDecember quarter of 48.05 billion

There’s likely to be, for many blue collar Australians, an economic crisis the like of which we haven’t seen since the Great Depression Kim Carr, Opposition industry spokesman

rupees (US$770.53 million), its highest quarterly profit since March 2012. Tata’s domestic operations posted a net profit of 12.5 billion rupees for the quarter, while profit from JLR more than doubled to 619 million pounds (US$1.01 billion). The domestic net profit was boosted by a 19.5 billion rupees gain the company made from selling its stake in its Korean subsidiary to its Singapore subsidiary. With the exception of the June quarter, the company’s domestic unit had been stacking up losses since the third-quarter of 2012, according to Thomson Reuters data. Tata Motors has been suffering at home as its passenger vehicles have fallen out of favour with consumers, who are struggling with high fuel costs and rising interest rates in a slowing economy. Sales of Tata trucks and buses have also plunged on the back of weak economic activity. Reuters

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

Max 72.55

average 71.677

Min 70.1

Last 72.15

72.60

106.2

31.1

71.95

105.9

30.8

71.30

105.6

30.5

70.65

105.3

30.2

70.00

Max 106.2

average 105.941

Min 105.1

Last 106

105.0

Max 31.05

average 30.543

Min 29.95

Last 30.75

25.3

58.5

34.5

58.2

34.4 25.1

57.9 57.6

34.3 34.2

24.9

57.3 Max 58.4

average 57.802

Min 57.1

57.0

Last 57.6

34.1 Max 25.25

average 24.981

Commodities PRICE

DAY %

YTD %

WTI CRUDE FUTURE Mar14

100.18

0.119928043

BRENT CRUDE FUTR Mar14

108.91

GASOLINE RBOB FUT Mar14

273.35

GAS OIL FUT (ICE) Mar14

NY Harb ULSD Fut Mar14 Gold Spot $/Oz

(H) 52W 104.5199966

84.87999725

0.257755684

-1.46566543

112.4399948

96.31999969

0.319289489

-2.091765464

287.3600006

244.6799994

917.25

-0.136091453

-2.601539687

954.5

840

4.63

1.113780301

10.42213212

5.737000465

3.469000101

300.03

0.073379807

-1.751915646

314.9999857

278.9799929

1282.41

0.725

6.624

1662.25

1180.57

Silver Spot $/Oz

20.0985

-0.4157

2.7657

31.3662

18.2208

Platinum Spot $/Oz

1389.25

-0.1524

2.471

1734.5

1294.18

720

0.0347

1.2658

786.5

629.75

1701

-1.047120419

-5.513123177

2174

1671.25

LME COPPER 3MO ($)

7095

-0.644167484

-3.600543478

8293.5

6602

LME ZINC

2010

-0.59347181

-2.189781022

2230

1811.75

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

3MO ($)

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

14200

0.424328147

2.158273381

18495

13205

15.55

0.032164683

1.800327332

16.77000046

15.12000084

443

4.976303318

582.75

406.25

587.5

0.470286447

-2.932672449

793

550

Mar14

WHEAT FUTURE(CBT) Mar14 SOYBEAN FUTURE Mar14

1325.25

-0.018860807

2.53384913

1377.75

1174

COFFEE 'C' FUTURE Mar14

136.2

0.368459838

23.03523035

159.6499939

104.1499939

SUGAR #11 (WORLD) Mar14

15.64

-0.572155118

-4.692260817

20.15999985

14.69999981

COTTON NO.2 FUTR Mar14

86.76

-0.698180153

2.504725898

90.61000061

76.65000153

World Stock Markets - Indices NAME

Last 25.05

(L) 52W

1.65398275

NATURAL GAS FUTR Mar14

METALS

Min 24.75

24.7

Max 34.5

average 34.247

Min 34

Last 34.3

34.0

Currency Exchange Rates

NAME ENERGY

29.9

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.9029 1.6414 0.8946 1.3678 102.32 7.9899 7.7573 6.0602 62.285 32.765 1.2678 30.361 45.065 12162 92.383 1.22362 0.83331 8.2916 10.9291 139.95 1.03

1.1993 0.1464 0.2795 0.3522 -0.1564 -0.0038 -0.0052 0.0017 0.2448 0.1862 0.1814 -0.0461 -0.1997 0.0904 -1.3477 -0.0711 -0.1992 -0.2798 -0.3587 -0.5002 0.0097

1.1993 -0.5272 -0.3689 -0.6248 2.6095 -0.0413 -0.0438 -0.0974 -0.7787 0.0305 -0.2918 -1.8247 -1.4867 0.074 1.3704 0.2525 0.1008 0.5958 0.5828 3.2583 0

1.0582 1.6668 0.9839 1.3893 105.44 8.0179 7.7678 6.2492 68.845 33.148 1.2862 30.426 45.485 12281 105.433 1.265 0.88151 8.4133 11.0434 145.69 1.0327

0.866 1.4814 0.88 1.2746 90.88 7.9818 7.7514 6.0393 53.605 28.56 1.2268 29.293 40.555 9620 86.41 1.21196 0.81683 7.8281 10.195 118.73 1.0289

Macau Related Stocks NAME

PRICE

ARISTOCRAT LEISU CROWN RESORTS LT

DAY %

YTD %

4.7

-1.260504

0.2132184

16.84

0.1784652

(H) 52W

(L) 52W

VOLUME CRNCY

5.12

3.49

4304558

18.22

11.45

2082775

AMAX INTERNATION

1.67

2.453988

-2.906978

2.12

0.75

746475

BOC HONG KONG HO

23.55

0.4264392

-5.23139

22.85

6515846

CENTURY LEGEND

0.47

5.617978

9.302324

0.68

0.26

1441550

CHEUK NANG HLDGS

7.49

2.18281

6.241132

7.5

117000

20.75

4.48137

-4.81651

17.7

37784430

CHINESE ESTATES

17.7

-0.7847534

-26.55602

24.7

10.384

30880

CHOW TAI FOOK JE

12.58

0.8012821

8.823525

13.2

7.44

6272939

EMPEROR ENTERTAI

4.18

1.703163

4.5

5.4

1.95

1135413

FUTURE BRIGHT

4.85

3.411513

5.3

1.758

3934128

GALAXY ENTERTAIN

72.15

3.663793

3.738313

84.5

11554713 993628

CHINA OVERSEAS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15801.79

0.04881576

-4.674464

16588.25

13784.01

NASDAQ COMPOSITE INDEX

4148.174

0.5408083

-0.6803641

4246.553

3105.365

FTSE 100 INDEX

6616.21

0.3741153

-1.968856

6875.62

6023.44

HANG SENG BK

120.1

0.9243697

-4.455049

132.8

110.6

DAX INDEX

9352

0.6689014

-2.095444

9794.05

7418.36

HOPEWELL HLDGS

26.55

0.1886792

1.142857

35.3

23.2

782156

NIKKEI 225

14718.34

1.769622

-9.655269

16320.22

11065.06

HSBC HLDGS PLC

79.7

0.6313131

-5.288178

90.7

77.85

18579742

HANG SENG INDEX

21962.98

1.778189

-5.764128

24111.55078

19426.35938

CSI 300 INDEX

2285.562

0.7950487

-1.908299

2791.303

2023.171

TAIWAN TAIEX INDEX

8430.56

0.4600838

-2.10126

8668.95

KOSPI INDEX

1932.06

0.4554672

-3.941646

2063.28

HUTCHISON TELE H

2.81

1.079137

-4.421771

4.66

2.5

2468066

LUK FOOK HLDGS I

27.55

0.9157509

-6.610169

16.88

1158943

MELCO INTL DEVEL

28.45

1.971326

-0.1754386

32.5

11.52

3387400

7663.23

MGM CHINA HOLDIN

30.75

2.159468

-7.099694

36.15

15.798

5179155

1770.53

MIDLAND HOLDINGS

3.47

3.892216

-6.97051

3.82

2.68

776000

NEPTUNE GROUP

0.31

-8.82353

0.4

0.131

65552081

NEW WORLD DEV

9.38

0.4282655

-4.187947

14.48

9.16

9663574

SANDS CHINA LTD

57.6

1.838755

-9.076557

67.15

33.5

13479880

S&P/ASX 200 INDEX

5254.496

0.6194579

-1.825673

5457.3

4632.3

JAKARTA COMPOSITE INDEX

4471.196

0.4594284

4.60952

5251.296

3837.735

FTSE Bursa Malaysia KLCI

1823.41

0.4002995

-2.332665

1882.2

1599.94

SHUN HO RESOURCE

1.65

0.6097561

1.92

1.33

NZX ALL INDEX

1020.534

0.1915406

2.166291

1048.998

904.128

SHUN TAK HOLDING

4.55

2.017937

-0.219297

5.18

3.27

4219844

PHILIPPINES ALL SHARE IX

3710.31

0.8976695

2.655824

4571.4

3440.12

SJM HOLDINGS LTD

Euromoney Dragon 300 Index Sin

581.3

-0.07

-4.94

STOCK EXCH OF THAI INDEX

1295.25

0.355632

-0.2664152

1649.77

1205.44

HO CHI MINH STOCK INDEX

553.9

-0.3597769

9.763594

564.61

459.64

Laos Composite Index

1249.14

0.1346737

-0.3343047

1446.66

1218.84

25.05

1.622718

-3.653846

17.04

5341217

SMARTONE TELECOM

8.23

0.2436054

-7.110606

14.46

7.38

1287060

WYNN MACAU LTD

34.3

1.030928

-2.418212

38.25

19.6

7840656

ASIA ENTERTAINME

#N/A N/A

BALLY TECHNOLOGI

67.76

-2.503597

-13.62651

82.67

2359021

BOC HONG KONG HO

3.04

-5.590063

3.6

2.93

3160

GALAXY ENTERTAIN

8.97

-2.753686

-0.4439537

10.81

3.8975

11780 7280998

INTL GAME TECH

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

14.49

-1.696065

-20.20925

21.2

13.91

JONES LANG LASAL

117.77

0.400682

15.021

118.04

80.86

381832

LAS VEGAS SANDS

76.04

-1.208263

-3.588186

82.48

47.95

4002807

MELCO CROWN-ADR

40.67

-0.6595017

3.69709

45.4799

17.76

2463466

MGM CHINA HOLDIN

3.81

-4.511278

-11.60093

4.66

6800

MGM RESORTS INTE

24.64

-0.6451613

4.761903

26.7

11.72

9222643

SHFL ENTERTAINME

#N/A N/A

23.25

14.54

SJM HOLDINGS LTD

3.18

-1.547988

-4.790417

3.6

2.2

23620

222.37

0.1892318

14.49976

224.62

111.3456

1905153

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

3.786816

33409375

ALUMINUM CORP-H

2.8

0.7194245

9683228

BANK OF CHINA-H

3.25

2.201258

442964514

BANK OF COMMUN-H

5.02

2.44898

29193429

BANK EAST ASIA

29.3

0.8605852

1311496

BELLE INTERNATIO

8.35

2.328431

15177037

NAME CHINA UNICOM HON CITIC PACIFIC CLP HLDGS LTD

PRICE

DAY %

VOLUME

10.48

1.158301

36665651

9.64

0.5213764

6505500

SANDS CHINA LTD SINO LAND CO

59.6

2.670112

3260704

4.793388

117362920

9.9

3152000

SWIRE PACIFIC-A

ESPRIT HLDGS

14.34

0.7022472

1907187

TENCENT HOLDINGS TINGYI HLDG CO

COSCO PAC LTD

BOC HONG KONG HO

23.55

0.4264392

6515846

HANG LUNG PROPER

22.05

1.37931

4597126

15.74

2.207792

2094515

HANG SENG BK

120.1

0.9243697

993628

CHEUNG KONG

114.3

1.419698

2656968

4.07

0.7425743

24028167

CHINA CONST BA-H

5.34

3.088803

342462063

CHINA LIFE INS-H

21.6

5.109489

57434077

CHINA MERCHANT

26.45

-0.5639098

1946265

CHINA MOBILE

41.4

0.4854369

1266727

HENGAN INTL

HENDERSON LAND D

85.25

1.851852

1961572

HONG KG CHINA GS

15.62

1.692708

9909315

HONG KONG EXCHNG

123.4

1.899257

2950886

HSBC HLDGS PLC

79.7

0.6313131

18579742

74.7

1.563562

18534968

HUTCHISON WHAMPO

99.1

2.747538

6836194

20.75

4.48137

37784430

IND & COMM BK-H

4.75

2.37069

304553844

CHINA PETROLEU-H

5.9

2.076125

123052863

LI & FUNG LTD

10.56

0.7633588

17615542

CHINA RES ENTERP

23.35

3.777778

2289615

MTR CORP

27.15

0.742115

CHINA OVERSEAS

POWER ASSETS HOL

12.68

CNOOC LTD

CATHAY PAC AIR CHINA COAL ENE-H

NAME

SUN HUNG KAI PRO

PRICE

DAY %

61.85

0.8149959

VOLUME 3714391

57.6

1.838755

13479880

10.28

0.5870841

5792407

95.3

0.1576458

2406572

83.05

0.4839685

940887

530

-0.656045

5032462

1.522843

3998223

WANT WANT CHINA

10.5

3.754941

17537763

WHARF HLDG

52.8

1.538462

4433992

MOVERS

22030

INDEX 21962.98 HIGH

22023.98

2066729

LOW

21498.09

CHINA RES LAND

18.3

3.624009

12720696

NEW WORLD DEV

9.38

0.4282655

9663574

52W (H) 24111.55078

CHINA RES POWER

18.4

0.7667032

3491537

PETROCHINA CO-H

7.78

1.434159

119648620

(L) 19426.35938

CHINA SHENHUA-H

21.15

0.7142857

15389073

PING AN INSURA-H

63.65

5.119736

25343408

21490

6-February

10-February

15 15

February 12, 2014 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Korea Herald South Korea’s Finance Ministry said that tax authorities were considering easing probes on conglomerates and other major enterprises to communicate the Park Geun-hye administration’s determination to spur the economy this year with their help. According to data released by the Finance Ministry, central government tax revenue stood at 201.9 trillion won (US$183 billion) in 2013, down 8.5 trillion won from its earlier estimate. The figure is also below the 203 trillion won in tax revenue for 2012.

Yomiuri Shimbun Japan’s government will survey all of the nation’s 3.85 million small and midsize companies after the consumption tax is raised in April. It will be the first such survey of all the nation’s small and midsize companies. It is assumed that after the tax is raised from 5 percent to 8 percent, some major companies will be reluctant to accept the inclusion of the increase in the prices of the supplies or services. This could force the smaller companies to absorb the tax increase out of fear of losing their contracts.

The Star Banks in Malaysia have been told to have a minimum collective assessment (CA) ratio of 1.2 percent by the end of next year, sending a strong signal to the industry to improve its standards of prudence. The requirement, effectively, will put a stop to the present situation where banks are left to set aside their CA ratio based on their own risk assessment of their asset profile. “Most banks have maintained a ratio of lower than 1.2 percent because there is no minimum set by Bank Negara. This circular effectively sets the standard for a minimum requirement,” said a banker.

Times of India The Indian government is set to propose a policy of mandatory recalls by auto companies. In addition, it is revamping the sampling and testing norms, with testing agencies being allowed to pick up 75 percent samples from factories and remaining 25 percent from dealers across the country. Testing agencies are being given powers to order a halt in production of a vehicle by cancelling its Type Approval Certificate in case the samples reveal major violation or deviation from the certified specifications.

Emerging markets’ submerging currencies Michael Heise

Chief Economist at Allianz SE

or many emerging economies, 2014 has gotten off to a grim start. Concern over the Chinese economy’s marked slowdown and the Argentine peso’s steep slide against the U.S. dollar has triggered heavy selling pressure on an array of emerging-market currencies. But the current volatility does not portend sustained weaker growth in emerging economies as a whole. Differentiation is needed, and that is what financial markets are now doing. The scale of the battering varies widely from country to country. For example, the problems currently dogging Argentina are anything but a surprise. On the contrary, they are the near-inevitable result of years of policy mismanagement that has spawned high inflation, a badly overvalued currency, and massive erosion of foreign reserves. By contrast, the currencies of Central and Eastern Europe’s emerging markets have remained relatively stable. For example, thanks to Poland’s robust economic performance, the złoty has essentially maintained its exchange rate against the euro, slipping 2.2 percent since the start of the year (as of the beginning of February). The Hungarian forint lost slightly more than 5 percent against the single currency over the same period, but this is less sharp than in the past, when the country’s macroeconomic problems made the exchange rate far more sensitive to shifts in market sentiment. The stabilisation of the eurozone economy and the reduction of imbalances have helped to improve the growth outlook for Central and Eastern European countries. Furthermore, most of these countries have made progress taming their own imbalances. By contrast, the Russian rubble has continued its lengthy nosedive this year, tumbling by more than 5.5 percent against the euro by the beginning of February. The reasons are mainly homegrown: a poor investment climate, heavy capital outflows, and a shrivelling currentaccount surplus.

Stable footing A look at Latin America also reveals wide regional differences. The Argentine peso, the region’s main culprit, has plummeted by 19 percent this year against the U.S. dollar. In Brazil, the real’s losses in 2014 have been comparatively

mild, but this comes on the heels of the hefty depreciation last year. Capital is also heading for the exit in Mexico and Chile. The region’s reliance on commodities is fraying nerves. If Chinese economic growth turns out to be weaker than expected, commodity prices and exports are likely to fall, undermining Latin American countries’ growth. However, with global industrial-production indicators climbing since the second half of 2013, pointing especially to improvements in the advanced economies, gloomy forecasts for commodity markets seem off the mark. So far, Asian currency losses have been limited. The South Korean won has experienced the largest slide, with a loss of 3 percent from the start of the year to the beginning of February (though this comes in the wake of a protracted upward trend). The Indian and Indonesian currencies have been weathering the storm quite well, but both fell steeply last year. The Indian rupee, burdened by a chronic currentaccount deficit, stubbornly high inflation, and a sharp slowdown in growth, lost 11 percent year-on-year by the end of 2013. Paradoxically, China, the country currently under the brightest spotlight, is the only major emerging economy whose currency rose slightly against the U.S. dollar in January. Given the enormous challenges that China faces – from rebalancing its growth model to addressing credit and real-estate bubbles – this is remarkable. Chinese officials are poised to tighten monetary policy and impose regulatory measures to

curb debt momentum, which is bound to mean sacrificing short-term economic growth in order to put growth back on a stable footing. Evidently, the markets think the authorities are up to the task.

Balancing act Turkey, a country whose enormous growth potential is marred by major imbalances, has not been so fortunate. The Turkish lira is being pilloried, sliding more than 7 percent against the euro in January and 24 percent since the middle of last year. But Turkey’s vulnerability to an abrupt shift in financial markets from risk-on to risk-off was foreseeable. Yawning current-account deficits (funded mainly by short-term capital inflows),

The financial markets are evidently punishing the currencies of countries that … are susceptible to external shocks of any kind

domestic political uncertainty, and past episodes of unorthodox monetary policy have all undermined investor confidence in recent months. As in China, the necessary adjustment processes will weigh on short-term growth, though the medium- and longterm outlook is positive. The financial markets are evidently punishing the currencies of countries that, due to macroeconomic imbalances or political instability, are susceptible to external shocks of any kind. Indeed, some players fear that the spiral of depreciation, higher inflation, and rising interest rates could broaden out into a fullscale crisis of confidence. But, while the further withdrawal of capital cannot be ruled out, not all investors swim with the tide. With prices in the affected countries at a much more favourable level, confidence-building policy measures could quickly encourage forward-looking investors to test the water. Broadly speaking, devaluations can help boost competitiveness and reduce external deficits. But in the short term, they can exacerbate economic problems by inciting higher wage demands, fuelling inflationary pressure, and boosting external-financing costs. In these circumstances, monetary policy must perform a balancing act. In order to counter a devaluation-fuelled rise in domestic inflation, the central bank needs to raise key interest rates – but without throttling the economy. Policymakers are more likely to succeed to the extent that domestic reforms address macroeconomic imbalances and other obstacles to longterm growth. © Project Syndicate

16 16

February 12, 2014 April 19, 2013

Closing Nestlé sells major stake in L’Oréal

Barclays raises bonuses, cuts jobs

L’Oreal SA, the world’s largest cosmetics maker, agreed to buy back 8 percent of its stock from Nestle SA for 6 billion euros (US$8.2 billion), the first sale of shares by the Swiss company after four decades of ownership. L’Oreal will pay 3.4 billion euros in cash for 27.3 million shares and exchange its half of the Galderma skincare joint venture for a further 21.2 million shares, the company said in a statement. The buyback will boost L’Oreal’s per-share earnings, while sharpening Nestle’s focus on nutrition and health products. Nestle considers its remaining stake to be “strategic” and will be held for the long-term, chairman Peter Brabeck-Letmathe said.

Barclays Plc plans to cut between 10,000 and 12,000 jobs this year, including 7,000 in the U.K. The bank, which has 140,000 staff in total, said it had already told about half of the staff affected. The bank set aside 10 percent more to pay bonuses at its investment bank even as the division swung into a loss in the fourth quarter. The unit had a pre-tax loss of 329 million pounds (US$539 million) in the last three months of the year. The bonus pool for 2013 increased to 2.4 billion pounds from 2.17 billion pounds the previous year. Barclays said the job cuts would hit 820 senior manager roles.

China, Taiwan agree to open offices Governments start ‘new chapter’ at historic meeting

hina and Taiwan, at odds for more than six decades, agreed at historic talks yesterday to set up representative offices as soon as possible, though sensitive political issues like a formal peace treaty were not up for discussion. The talks between Taiwan’s Mainland Affairs Minister Wang Yu Chi and China’s Vice Foreign Minister Zhang Zhijun, who heads the Taiwan Affairs Office, were the first since the 1949 creation of the People’s Republic of China. They mark a big step towards expanding crossstrait dialogue beyond economic and trade issues. China’s ruling Communist Party considers Taiwan a renegade province and has never ruled out the use of force to bring the island under its wing after taking control of the mainland at the end of a civil war. But economic ties have grown considerably in recent years. Taiwan’s Mr Wang described his meeting with Mr Zhang, in the eastern Chinese city of Nanjing, as “an unimaginable occasion in earlier years”, China’s official Xinhua news agency reported. “Being able to sit down and talk is a really valuable opportunity, considering that the two sides were once almost

at war,” Mr Wang said. The mainland’s Mr Zhang told Mr Wang that both sides should have “a little more imagination” regarding relations. “We meet under great attention and expectations and bear great responsibilities,” he said. Xinhua later reported that the two sides agreed to set up representative offices “as soon as possible” for the two semi-official organisations which deal with ties between the two. Taiwan and China also agreed to deepen economic ties and “appropriately deal with” issues on medical care for students in either place. “This will be good for regional stability,” George Tsai, a political scientist at Taipei-based Chinese Culture University, said by phone yesterday. “Even if Taiwan elects a new government in 2016, there shouldn’t be any back-pedaling on the relationship after ministeriallevel dialogue is established.” In October, Chinese President Xi Jinping said a political solution to the standoff between the mainland and the island could not be postponed forever. But Taiwan President Ma Ying Jeou later said he saw no urgency to hold political talks and he wanted to focus on trade.

China and Taiwan held their first high-level talks since 1949

Since taking office in 2008, Taiwan’s Mr Ma has signed a series of landmark trade and economic agreements with China, cementing China’s position as Taiwan’s largest trading partner. But booming trade has

not brought progress on political reconciliation or reduced military readiness on both sides. Many in democratic Taiwan fear China’s designs for their free-wheeling island. Despite the close economic

ties, U.S.-armed and backed Taiwan remains a potential flashpoint and its recovery is a priority for China’s Communist Party, which is investing billions to modernise its military. Reuters

EU proposes pay transparency for money market funds

anagers of the European Union’s trillion-euro money market funds, which give access to short-term finance at low interest rates, will need to show their pay packets do not encourage too much risk-taking under a proposal from the bloc’s lawmakers. It marks the latest EU attempt to extend pay rules for bankers to other parts of the financial sector in a bid to avoid the lure of a big bonus encouraging people to take on more risk. Money market funds in the EU are mainly based in France, Ireland and Luxembourg, with Black Rock and Legal & General among the

leading players. They are heavily used by banks for short-term funding and by companies to park cash and earn interest. The European Parliament will vote in committee on February 17 on a draft law to shine a light on money market funds and make a run on them in a financial crisis less likely. The draft law was authored by the bloc’s European Commission but lawmakers are discussing adding a new section to make pay more transparent, though stopping short of an actual cap on bankers’ bonuses that is now EU law. “Money market funds shall establish and apply remuneration

policies and practices that are consistent with and that promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the MMF they manage,” the proposed new section seen by Reuters states. “The remuneration policies and practices shall cover fixed and variable components of salaries and discretionary pension benefits,” it adds. The likelihood of the extra rules making it to the final law, which would need backing from EU member states, will likely depend

on whether an attempt to impose a similar regime on managers of mutual funds is successful. A separate draft law to revise the bloc’s mutual funds rules is being finalised. Ahead of next week’s vote, lawmakers meet privately this week to seek cross-party agreement on two divisive issues. There is disagreement over whether some money market funds must have a safety buffer of capital. The role of the European Securities and Markets Authority, an EU watchdog, in supervising money market funds is also causing splits among lawmakers. Reuters