Macau Business Daily, March 21, 2014 by Business Daily

Page 6

Government wants to care for senior officials

Year II

Number 501 Friday March 21, 2014

Publisher: Paulo A. Azevedo

MOP 6.00

Adelson covetsdaily more1 business land in Singapore

Friday April 19, 2013

Page 5

he shortfall in auditors and accountants is only calculated to worsen. As in so many other professions, it’s getting harder to find an experienced hand and staff turnover is a headache, complains the Union. Page

www.macaubusinessdaily.com

Roof over your head Secretariat for Public Works and Transport floats possibility of a public consultation next month to evaluate housing needs of residents. With a fifth of apartments already assigned to social housing, official resurrects concept of ‘Macau homes for Macau people’. Page

Foreigners more welcome

Nothing to fear

he Fed has decided to raise interest rates next year. No problem, say Macau economists, who do not fear consequences for the economy in general or for the property market, in particular. Page

An enigma called Macau Macau maintains its respectable position in the anti-corruption stakes on paper. But is everything as it seems? Political and Economic Risk Consultancy Ltd has just released its annual report and thinks the jury’s still out. Is the city almost clean or is silence more golden than ever? Page

Brought to you by

HSI - Movers March 20

Name

%Day

China Resourc Pow

2.27

CITIC Pacific Ltd

1.34

China Resources Ent

1.23

Li & Fung Ltd

0.98

China Unicom HK

0.87

China Merchants H

-3.31

China Mobile Ltd

-3.60

Sands China Ltd

-3.72

Belle International

-3.88

Wharf Holdings Ltd

-3.95

Source: Bloomberg

I SSN 2226-8294

The Shanghai stock exchange is wooing foreign capital to invest in more companies and now is permitting a 30 percent stake in a single enterprise. Asset-backed securities are also allowed to be traded. Page

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Macau More casualties from work-related accidents Work-related accidents caused 7,214 casualties last year, 1.5 percent more than the year before, preliminary data issued by the Labour Affairs Bureau show. The Portuguese-language Jornal Tribuna de Macau reports that the number of casualties from work-related accidents in 2011 was 6,425.  Last year, the authorities fined 128 employers 128 employers for lapses that led to work-related accidents. The fines amounted to over MOP500,000 (US$62,500), the newspaper says.

Supply of accounting professionals in the red Experienced hands for accounting and auditing professions no longer a dime a dozen for small and big firms alike, industry complains Stephanie Lai

sw.lai@macaubusinessdaily.com

ome 113 auditors, 172 accountants and 13 auditing firms were registered in Macau by the Committee for the Registry of Auditors and Accountants at the end of last year, official data show. In 2012, the city boasted 110 auditors and 169 accountants, and the same number of auditing firms. Despite the economic boom, the committee has recorded only fractional increases in registrations since 2007, when there were 114 auditors, 140 accountants and 10 auditing firms.

Diana Iong Weng Ian, director of the Union of Associates of Professional Accountants of Macau, noted that the figure did not include all the private firms’ in-house accountants or auditors with international accreditations that have not registered with the committee. The figure also excluded accounting and auditing professionals working in government departments. “But it’s true that whether for big accounting firms or the small-scale ones, the human resource supply for this field remains pretty tight here,”

said Ms Iong. “You can still recruit the people you need that meet the basic professional requirements,” she added, “But it’s hard to find an experienced hand in the local market, especially for small accounting firms which see a relatively large turnover of staff.” Associate professor of accounting at the University of Macau Mary Chai Lai Ping also observed the trend as Ms Iong described, saying that local fresh recruits who have worked in small accounting firms for one to two years would jump to take up jobs at private firms, such as casinos and banks. “Very few local recruits here can stick to public accounting for a long time because for public accounting you need to work long hours, and it’s a more challenging experience in dealing with different demands from different clients,” said Ms Chai, as opposed to private accounting, which refers to accountants that work in-house for corporations. Public accountants provide services to clients such as auditing, consulting and tax planning services.

The number of students who graduated with a bachelor’s degree in accounting studies from the University of Macau has been in the range of 80 to 100 in recent years, Ms Chai confirmed. The government is going to study the human resources demand for the accounting field this year, director of Tertiary Education Services Mr Sou Chio Fai told media in late January.

Letters to the Editor Dear Sir/ Madam,

I was intrigued to see the headline “Driving classes fine-tune fees” on page 4 of today’s Business Daily newspaper, in an article penned by Cynthia Wong. Never having heard the term “driving classes” before, I had visions of learner drivers sitting in their cars in a giant classroom, trying desperately to avoid colliding with other students or with the class teacher. On reading the article, however, I was disappointed not to find any reference to such a novelty, and was forced to the conclusion that the journalist may in fact have been referring to “driving lessons.” A quick check of any English dictionary beforehand would have revealed that the word “class” is a collective activity in which a group or body of many students are taught, whereas only a “lesson” can be a one-on-one activity. Yours faithfully, Henry Brockman

Dear Henry,

You are absolutely right – on one level. Driving lessons, or similar, as practiced here in Macau. But, as much as we appreciate your comments, what we wrote was intentional. The inanimate driving ‘lesson’ can’t finetune anything . . . because it’s just that – a lesson. Our understanding is that prior to lessons, a ‘class’ is convened to give would-be Fangios the low-down on rules of the road, instructors and general regulations. ‘Classes’ therefore represent the ‘establishment’ of the driving school, not the lessons themselves, and it is the establishment that fine-tunes the fees. Happy motoring! For comments and views, please email to editor@macaubusinessdaily.com

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Macau AirAsia Zest Air to launch daily Manila flights Philippine low-cost carrier AirAsia Zest Air has confirmed that it will launch daily flights between Macau and Manila starting in May this year, a press release published by Macau International Airport Company Ltd (CAM) noted yesterday. Once realising the plan in May, AirAsia Zest Air will then be following another budget carrier Cebu Pacific Air in launching daily flights between the city and the Philippines’ capital. Currently, AirAsia Zest Air flies here from Manila three times a week, on Wednesdays, Fridays and Sundays.

Discarding graft or benefiting from it? A report says figures suggest Macau has improved its stance on anti-corruption but this may be due to businesses benefiting from corruption Tony Lai

tony.lai@macaubusinessdaily.com

6th

Macau’s ranking in 16 jurisdictions

s Macau becoming more corruption-free or is it just benefiting from graft? This is the intriguing question that baffles many - including a consultancy firm that has just released a report on the subject despite successively positive figures. Hong Kong-based Political and Economic Risk Consultancy Ltd (PERC) released a report this week saying that Macau had maintained its sixth place this year among 16 jurisdictions in the ranking of corruption’s impact on the business environment. The higher the place the better the anti-graft credentials the city can claim. Macau scored 3.65 points this year on a 10-point scale with 0 points the best. The figure has improved from 4.23 points last year and was the third best score the city has achieved since Macau was included in the annual survey in 2006, according to the report Business Daily accessed. The consultancy compiled the ranking by questioning at least 100 expatriate executives working in the territory about their view on corruption’s impact on business. The company polled 15 Asia jurisdictions like Hong Kong, mainland China and Singapore, as well as the United States. “It’s unclear if [the low score]

is because corruption in Macau is relatively low and under control,” PERC concluded. “Or because, far from hurting the business environment, Macau is a major beneficiary of corruption insofar as the corruption that exists in mainland China underpins the Macau economy.”

Graft bed The report continued: “In other words, were it not for corruption elsewhere, Macau would not have been transformed … from a sleepy colony of Portugal… to an SAR [Special Administrative Region] of China with the fifth highest per capita GDP of any economy in the world.” Macau’s gross domestic product expanded 11.9 percent last year, while its gross gaming revenue raked in seven times that of Las Vegas. “In many cases, the money being laundered [here] is earned in China or other countries from corruption or other criminal activities,” PERC added. “Beijing seems more concerned about monitoring the activity and discouraging senior Chinese government officials from using public money or pledging state assets to gamble in Macau than with adopting a broad crackdown on the outflow of

funds,” the report noted. It also criticises the measures the government has adopted to monitor suspicious transactions in the gaming sector as not strict. A congressional commission in the United States called in November for all Macau betting transactions over US$3,000 (23,953 patacas) to be logged, instead of the current US$62,500. But Macau officials have constantly dispelled such changes as a low threshold that, given the volume, would be impracticable. Lou Shenghua, coordinator of the Macau Polytechnic Institute’s public administration programme, commented on the PERC report: “It’s true it’s not easy to detect irregular practices in the gaming industry.” “The gaming industry here has always been a nest of criminal activities like money laundering and corruption,” he said.

Anomaly “But I’d say Macau has become more corruption-free since the arrest of Ao Man Long as the administration has upped measures to curb graft,” he said. He refers to a former government official who was arrested at the end

of 2005 for a string of corruption and money laundering offences. The disgraced official was sentenced to 29 years in jail. PERC also mentioned an Aorelated case in the report – last week’s local sentencing of Hong Kong tycoon Joseph Lau Luen Hung and businessman Steven Lo Kit Sing. The company said Mr Lau and Mr Lo’s case “revealed another anomaly that can be exploited by corrupt individuals: Both Hong Kong and Macao might officially be part of China but they do not have an extradition treaty with each other.” The pair were each sentenced to jail for five years and three months for bribing Ao in exchange for a plot of land in Taipa. Legal scholars point out, however, that the pair can escape imprisonment as long as they do not step foot in Macau in the absence of an extradition treaty. Both appealed the guilty verdict. Business Daily asked the city’s graft watchdog, the Commission Against Corruption, for comment on the PERC report yesterday evening but at the time of going to press there has been no reply. The watchdog had cited the same survey in the past to demonstrate that Macau’s stance on anti-graft is improving. Singapore came first in this year’s PERC ranking, while Hong Kong placed fourth and the United States fifth. Mainland China occupied 10th place.

Or because, far from hurting the business environment, Macau is a major beneficiary of corruption insofar as corruption that exists in mainland China underpins the Macau economy PERC

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Macau

Housing situation ‘not bad’, official says

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The head of the Secretariat for Public Works and Transport says the government might launch a survey next month to find out if it will reserve housing for Macau people only

HOSPITALITY

Tony Lai

tony.lai@macaubusinessdaily.com

Getting higher The total number of MICE events (Meetings, Incentives, Conferences and Exhibitions) recorded in the last three years has largely stagnated, suggesting some obstacles remain in the expansion of this sector. If we look at the number of participants, however, the picture changes completely. Most are small meetings by various kinds of organisations – companies, associations, and government bodies - involving relatively small numbers of participants. Most of them reached their peak levels of total participation in 2010. However, exhibitions are the events with the highest numbers of participants and represent an overwhelming proportion of those - and that proportion has been growing noticeably since 2009. In that year, participants in exhibitions accounted for a little under 80 percent of the total number of participants in MICE events, a share that rose steadily to reach 93 percent in 2013.

The average annual figures for participants in each type of event varies a lot. They do not exhibit any clear trend and their figures vary considerably from one year to another. For all types of meetings, the general average number of participants is just about 100. The average participation in incentive-related events is somewhat unexpected. As the number of events dwindles, the total number of participants has grown significantly, while the annual average behaves quite irregularly. What is obvious is that the feature really changing the picture is the rise in the average participation in exhibitions. These figures doubled from 2010 to 2011, and rose another 25 percent in the last two years. As a result, the value for 2013 was 3.5 times larger than in 2009. But exhibitions are tricky events to account for, as they may easily lead to multiple counting situations. J.I.D.

26.1%

increase in total number of participants in 2013 MICE events against previous year

senior government official has said the housing situation in Macau is “not bad”, disputing complaints that there is not enough housing and that it costs too much. But the head of the Secretariat for Public Works and Transport, Francis Wong Chan Tong, said yesterday he understood that people were worried about the future. Mr Wong, speaking on the sidelines of a Legislative Assembly session, also said the government might begin next month soliciting public opinion on the proposal to reserve certain housing for Macau people only. “Housing is one of the issues the SAR government has paid close attention to,” he said. “According to our analysis of the data, the housing situation in Macau is not bad,” he said. “But it is understandable the public is worried about their future,” he said. He said so in the light of the Housing Bureau’s announcement this week that it had received over 42,000 applications to buy just 1,900 flats in subsidised housing. Legislative Assembly member Ho Ion Sang has described the glut of applications as “panic buying”. Statistics and Census Service

21%

Proportion of homes that are in public housing

data show the average price of residential space last year was 81,811 patacas (US$10,226.40) a square metre, 43 percent more than the year before. Mr Wong gave figures yesterday to support his assertion about the housing situation. “Macau right now has about 185,200 households, while there are nearly 210,000 finished homes here,” he said. “After analysing these figures in detail, we found the proportion of homeowners here is not really low,” he said. “But we know the public is worried about future prospects, and the government will try its best.” Mr Wong said about 21 percent

According to our analysis of the data, the housing situation in Macau is not bad Secretariat for Transport and Public Works head Francis Wong Chan Tong

of homes were in public housing. He did not say whether the government intended to increase this proportion. But he did say it would give consideration to everything. Mr Wong said the government was finishing drafting a consultation document on reserved housing that was based on two studies by academic institutions. “We hope the conditions will be right for a public consultation in April,” he said. The University of Macau and the Macau Polytechnic Institute have each done a study of ways to reserve certain housing for sale exclusively to Macau permanent residents. Both study reports, issued in December, say that housing families should take precedence over housing single people. Mr Wong commented: “We wish to stress that society as a whole should ponder whether we should give priority to helping anybody with limited resources.” He said problems associated with the ageing of the population were “getting more severe”. More elderly people were living alone, he said. But he had nothing to say about whether the government would put more effort into housing the elderly.

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Macau

Fed rate action to leave Macau unscathed Economists expect the end of easy credit in the United States to have little effect on Macau’s economy in general or its property market in particular Stephanie Lai sw.lai@macaubusinessdaily.com

conomists think it will matter little to Macau if the United States Federal Reserve begins raising interest rates next year. Fed Chairwoman Janet Yellen announced on Wednesday a further gradual step toward ending the US central bank’s ultra-easy monetary policy: a reduction in its purchases of bonds – purchases which are meant to pump liquidity into the economy and keep interest rates close to zero. The Fed had been saying since December 2012 that it would not consider raising short-term interest rates until the US unemployment rate fell to 6.5 percent, as long as inflation looked set to remain contained. But the unemployment rate has fallen faster than expected, and Fed officials now say they will look at a range of economic indicators to judge the US economy’s readiness for higher rates. Economists in Macau are unsurprised.

“This is actually not sudden news, as the market and economists already expected any rate hike to come as soon as 2015, but how the rate adjustment will go is still pretty much subject to US economic data by then,” said an assistant professor of business economics at the University of Macau, Henry Lei Chun Kwok. “Macau’s economy has been very dependent on mainland tourists to push up the city’s revenue, and is much more subject to the influence of the mainland economy,” Mr Lei said. “Hence, at most it will have only an indirect impact on Macau, as mainland exports will suffer a greater impact,” he said. “As we have seen in the past few years, the US economy has not recovered rapidly, and so it has not really had a direct impact on Macau,” he said. “The growth in the tourism market has been good, and the city can expect another round of economic growth as the new Cotai casinos are completed

in 2016 and 2017.” Economists say higher interest rates in the US will have a more direct effect on Macau’s property market. The pataca is pegged to the US dollar, so Macau interest rates track US interest rates. The benchmark six-month bank interest rate in Macau was 0.55 percent yesterday. “As Macau’s interest rate has a very strong correlation with the US interest rate, the city will have a tendency to follow rate hikes in the US,” said economist Sales Marques. “But I don’t think there will be a big impact from the US rate hike on the real estate market here,” Mr Marques said. “As long as the inflation rate here is higher than the interest rate, there’s always room for the investment we see in real estate market to continue.” He thinks property prices will keep rising because the new casinoresorts in Cotai will stimulate economic growth.

Ms Yellen emphasised that US interest rates would stay low for a while, and rise only gradually. She said rates could stay lower than normal “for some time” even after the US unemployment rate dropped to a healthy level. Of the Fed’s 16 policymakers, one now believes it will be appropriate to raise interest rates this year, 13 expect the first rate increase next year, and two expect the first increase in 2016. The Fed has held interest rates near zero since late 2008 and has pumped more than $3 trillion (MOP 24 trillion) into the US economy with its bond purchases to try to foster a stronger recovery. Fed officials now think that once interest rates start to rise they will rise slightly more steeply than they previously thought. Fed officials now expect the benchmark rate to end 2016 at 2.25 percent, half a percentage point higher than they had expected in December. With Reuters

All taken care of The government proposes to pay former officials allowances for ailments that are due to their work. Legislators have doubts Tony Lai

tony.lai@macaubusinessdaily.com

he government is proposing to give former senior officials allowances to cover the costs of illness and, if the illness kills them, to give further allowances to their next of kin. But members of the Legislative Assembly have misgivings about how the proposal would work in practice. The assembly’s second standing committee is debating a bill on welfare arrangements for officials past, present and future. If enacted, the bill would entitle former senior officials, including chief executives, to monthly allowances to cover the costs of long-term illness for

as long as they live – if the illness is due to their work before they retired. The allowances would be worth about 70 percent of their final salaries while in government. If such an illness kills a former senior official, his or her next of kin would be entitled to an allowance worth about 50 percent of the official’s final salary, for as long as the next of kin lives. The chairman of the second standing committee, Chan Chak Mo, said after members debated the bill behind closed doors yesterday that arrangements for the welfare of senior officials were needed to

attract good people to serve in the government. But Mr Chan said establishing that an illness was due to an official’s work might be hard. “We think it is difficult to prove such a direct relationship,” he told reporters. “Casino croupiers may endure second-hand smoke for a long time in their workplaces, and it is easy to establish the link if they get some lung disease a few years later,” he said. But establishing a link between an official’s work and an ailment that developed later would be difficult, he said.

Mr Chan said his committee had conveyed its misgivings to the government and was awaiting the government’s response. The government was keen to keep the allowances provision in the bill, he said. Chief Executive Fernando Chui Sai On earns 199,796 patacas (US$25,014) a month, excluding benefits. If the allowances provision became law and Mr Chui was to retire and contract a long-term illness due to his work, he would be entitled to 139,857.20 patacas a month from the government.

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Macau

Build it, they do come First Macau and now Singapore. Sheldon Adelson needs more rooms for his gaming resorts and is seeking land to add hotel rooms in the Lion City Pooja Thakur with Vinicy Chan in Hong Kong

as Vegas Sands Corp. has asked Singapore authorities for more land to increase rooms at its resort in the city-state by about 60 percent after facing almost full occupancy, billionaire Chairman Sheldon Adelson says. The world’s biggest casino operator plans to add 1,500 rooms to the 2,563-room Marina Bay Sands, Adelson said at a briefing in Singapore yesterday. The company will also add meeting rooms, ballrooms and exhibition spaces to the US$6 billion casino resort and largest hotel in Singapore, when the government releases more land, he said. “We need more rooms,” Adelson said. “We are running at a 100 percent occupancy; on a bad day it’s 98 percent, no other hotel in the world runs like this except some in Vegas.” Sands is benefiting from Singapore’s decision to overturn a four-decade ban on casinos to spur economic growth. The Marina Bay Sands resort, opened in 2010, lies in an area being developed under a government plan

Marina Bay Sands

that includes waterfront pedestrian areas, performance spaces, a museum, restaurants and one of the world’s largest Ferris wheels. Marina Bay Sands “has been a catalyst for enormous tourism

growth,” Adelson said. The executive said he met government officials yesterday and repeated his request for more land. The Singapore resort has about 1.2 million square feet of meeting and

convention space and two theatres for Broadway shows, concerts and gala events, according to a company filing. The room revenue at Marina Bay Sands rose 11 percent to US$360.3 million last year, the filing showed. The occupany rate was 98.6 percent in 2013 with an average daily room rate of US$396. Hotels in the city filled 86.3 percent of their rooms last year, according to data from the Singapore Tourism Board. Still, Sands posted fourth-quarter earnings on Jan. 30 that trailed analysts’ estimates as revenue in Singapore fell 8 percent to US$659.8 million. Gains in mass gaming and non-gaming revenue were countered by “softer VIP play,” the company said. Adelson has a net worth of US$38.5 billion, making him the world’s ninth-richest person, according to the Bloomberg Bllionaires Index. Sands is ready to invest as much as US$10 billion in Japan to build a gambling, hotels, entertainment and shopping complex that would lure tourists to Asia’s biggest economy after China, Adelson said, repeating comments made last month. Japan should allow Sands to build an integrated resort by 2020, before the Tokyo Olympic Games, said George Tanasijevich, chief executive officer of Marina Bay Sands. The Tokyo facility should have at least 200 rooms for meetings, conventions and exhibitions. Sands plans to focus on Asia after the operator abandoned a plan in December to build a US$30 billion mega-resort in Spain. “We want to develop a network of resorts around the Pacific Rim,” Adelson said. Bloomberg News

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Macau

Not even the boss escapes Wynn Resorts eliminates founder’s villa perk in pay overhaul Christopher Palmeri

teve Wynn, the founder of Wynn Resorts Ltd., will have to pay for his personal residence out of his own pocket, according to a company filing. Wynn, 72, will pay annual rent of US$525,000 for his villa at the company’s namesake property in Las Vegas, an amount that was determined by a third party appraiser, the company said on Wednesday in its annual proxy statement. His lease was previously included as part of his compensation. The changes reflect discussions with shareholders, according to the filing. Wynn Resorts is modifying its executive pay so more compensation is tied to the company’s performance. Wynn’s US$4 million base salary will shrink to US$2.5 million this year under a new plan, according to the filing. Investors will vote on the 2014 compensation plan at the company’s annual meeting, which will be held

May 16 in Macau. “This is an example of our compensation committee working very hard to ensure we continue to be current with the best market practices,” Wynn Resorts said in an e-mailed statement. Wynn, who serves as chairman and chief executive officer of the company, received US$19.6 million in total compensation last year, based on Securities and Exchange Commission reporting rules, a 10 percent increase from 2012. Under the existing plan, executive compensation is tied to adjusted earnings before interest, taxes, depreciation and amortization. The 2014 plan adds third-party recognition of the company’s quality, as well as goals related to the development of the Wynn Palace, a resort the company is building in Macau, according to the filing. Bloomberg

Low-cost hotel for Patane in the pipeline  Property developer Agência Predial Song Chai Chuen has plans to build a two-star, low-cost hotel in Patane. The Chinese-language Macau Daily News quotes company executive director Tong Ut Song as saying the hotel would have about 200 rooms. The newspaper says the company proposed the project to the government in 2012 but is still waiting for approval. Construction is forecast to take 18 months.

CSR dusts itself down . . . and starts all over again The new 10-year waste management contract for Macau won by Macau Waste Systems Co Ltd, known as CSR, will finally come into force next month following legal disputes, the Environment Protection Bureau confirmed yesterday. The new 2.07 billion patacas contract between the government and CSR was supposed to begin in October but an injunction filed by competitive Spanish contract bidder Urbaser SA stalled the process. The Spanish firm claimed that the bidding process was flawed but the court dismissed the requested injunction last month.

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Macau crime Corporate theft

n April 2013, 44-year-old Macau resident Mr Ng started working for Mr Chui, a businessman from the mainland. Mr Ng’s job was to take care of and usher his employer’s customers into gambling in Macau. On 27th September 2013, Ng accompanied a client to a casino in the Central district and withdrew 5 million patacas from his boss’s account. The game was played but ended in no wins, no losses. Consequently, Mr Chui requested that the money be returned to his account but according to the casino’s VIP club Ng only deposited 2 million. Mr Chui never managed to get his money back over several months and “chances” for his employee to repay him. In early March, Ng disappeared, which led Mr Chui to file a complaint with the police. Last Wednesday, Ng was arrested at the Gong Bei border on his way back to Macau but denied the accusations, claiming that although he had lost 3 million he never absconded with the money. The case is currently under investigation by Judiciary Police. P.F.M.

Chinese dig Portuguese “gold” Most investors taking advantage of the Portuguese “Gold Visa” scheme are Chinese. And 20 percent of them hale from Macau and Hong Kong, says Portuguese Consul in Macau

ccording to the Portuguese Consul in Macau, the majority of “gold visas” issued by Portugal have been snapped up by Chinese investors, with Hong Kong and Macau accounting for 20 percent of the total. Reporting data up until February 27th, Vitor Sereno revealed total investments of 400 million euros, underlining that 75 percent – 529 in all – of the “gold” visas were attributed to Chinese

nationals, including the special administrative regions of Macau and Hong Kong. Considering the details and specificities of both Chinese SAR’s, Vitor Sereno is “quite satisfied” with the fact that the diplomatic missions he leads are responsible for “investments of 50 to 60 million euros” entering Portugal, he told Lusa news agency. A total of 654 “gold” visas have been issued – 34 for capital transfers,

618 for real estate purchases and two for job creation – for a total of 854 residence permits. The concept of “gold” visas was created within the Residence Authorisation for Investment Activity in Portugal programme (ARI), and one of three different requisites must be fulfilled: acquisition of property worth a minimum of 500 thousand euros, capital transfer of a minimum of one million euros or the creation of at least ten job positions.

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Stocks Watch

Not a good day

hinese stocks fell, sending the Hang Seng China Enterprises Index into a bear market, and the yuan sank to a one-year low as concern deepened that the world’s second-largest economy is slowing. The gauge of Chinese companies listed in Hong Kong dropped 1.7 percent to 9,203.07 at the close, extending its retreat from a Dec. 2 high to 20 percent. BYD Co., the Warren Buffett-backed maker of electric cars, tumbled 14 percent yesterday while the CSI 300 Index of mainland-listed shares sank 1.6 percent to a five- year low. The yuan weakened 0.5 percent to 6.2275 per dollar. Stocks fell after Goldman Sachs Group Inc. cut its forecast for China’s economic growth, a troubled solar company said its bonds will be halted from trading, and the Federal Reserve signalled U.S. interest rates may rise faster than previously forecast. The Hang Seng China gauge is the world’s worst- performing benchmark index this year amid data showing falling exports, weaker manufacturing and slower retail sales. “There are continuing concerns about GDP growth, which led to brokerages like Goldman Sachs cutting their forecast,” Zhang Haidong, an analyst at Tebon Securities Co., said by phone from Shanghai. “The prospect the Fed will increase interest rates will weigh on investors’ sentiment as that will lead to liquidity problems in emerging markets. Coupled with the recent yuan depreciation, some investors are concerned.”

Slower growth Solar-cell maker Baoding Tianwei Baobian Electric Co. said its bonds will be halted from trading today, fueling concern that bad debts will increase after Shanghai Chaori Solar Energy Science & Technology Co. defaulted this month and a closely held developer with 3.5 billion yuan (US$562 million) of debt collapsed. Policy makers have responded by announcing plans to speed up construction projects and let developers raise funds by selling shares for the first time since 2010. Goldman Sachs cut its estimate for China’s economic expansion this year to 7.3 percent from 7.6 percent. The nation’s official 2014 growth target is 7.5 percent, which would be the slowest pace since 1990. “The market is focused on uncertainty about China’s overall economy,” said Michael Liang, the

chief investment officer at Foundation Asset Management (HK) Ltd., which oversees about US$150 million. “Undoubtedly, there will be more defaults coming up.”

State support China will “seize the moment to roll out already- determined measures in expanding domestic demand and stabilizing growth,” the State Council said in a statement on Wednesday night. The China Securities Regulatory Commission said yesterday that developers Tianjin Tianbao Infrastructure Co. and Join.In Holding Co. are allowed to sell yuan-denominated A shares in private placements. The Chinese currency sank in onshore and offshore trading today after the central bank weakened its reference rate by 0.18 percent, matching a March 10 cut that was the biggest since July 2012. The Fed’s bond-buying programme, which was reduced by US$10 billion to a US$55 billion monthly rate yesterday, may be wound down by year-end with a rate increase to follow within six months, Chair Janet Yellen indicated yesterday. The central bank forecast the key rate, currently near zero, would be 1 percent by the end of 2015 and 2.25 percent a year later.

Earnings reports BYD tumbled 14 percent to HK$47.60. The carmaker projected first-quarter net income of as much as 15 million yuan, which Nomura Holdings Inc. said was lower than expected. Tencent Holdings Ltd., Asia’s biggest Internet company, dropped 1.7 percent to HK$558 after posting fourth-quarter net income. Tencent, which is the best performer on Hong Kong’s benchmark Hang Seng Index since its 2004 listing, plans a 5-1 share split to boost holdings by individuals. The Hang Seng gauge dropped 1.8 percent yesterday. China Mobile Ltd., the world’s largest phone company, retreated 3.6 percent to HK$67 after posting its largest profit decline since 1999 on rising costs to build out high-speed networks and attract new users. Of the 82 companies that reported annual earnings in Hong Kong this month for which Bloomberg has estimates, 57 percent exceeded estimates. More than 400 companies are scheduled to report results through next week. Bloomberg

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Greater China Eco-pioneering Shanghai will reduce the energy intensity of its economy by 3 percent this year through by shifting from coal to natural gas and limiting the growth of carbon dioxide emissions to 8.5 million tonnes, the city government said. The city said in an energy-saving and climate-change plan for 2014 that it would curb growth in year-onyear energy consumption to 4 million tonnes of standard coal equivalent, putting it on track to meet a total consumption cap in 2015 of 34.64 million tonnes. New manufacturing facilities for iron and steel, building materials and non-ferrous metals will not be allowed in 2014.

Seven banks under the magnifying glass Taiwan’s financial regulators are checking seven banks to see if they properly advised clients about potential risks of currency investments after receiving complaints about losses related to the fall in the Chinese yuan, the Commercial Times newspaper reported yesterday. The Financial Supervisory Commission (FSC) had many complaints from investors about losses on yuan and other currency products, including from clients of banking units of Fubon Financial, Chinatrust Financial, Sinopac Financial and several others, the paper said, without citing sources. On Wednesday South Korean authorities were inspecting units of four foreign banks as well.

Global climate changes costs Climate change-fuelled storm waves and rising sea levels cost China 16.3 billion yuan (US$2.6 bln) and killed 121 people in 2013, the State Oceanic Administration (SOA) said. China is the world’s biggest emitter of greenhouse gases which scientists say is driving climate change. Southern Guangdong province was hit hardest, recording 7.4 billion yuan worth of damage, the SOA said in a new report. Storm waves caused 94 percent of the destruction, it said. Climate change-linked rising, warmer seas cause more frequent storms and typhoons, flood coastal areas, contribute to coastal erosion and salinate farmland, said SOA.

Hong Kong media executives attacked Masked men attacked two executives with a Hong Kong media start-up on Wednesday, the second assault on members of the industry in the city in the past month, the South China Morning Post reported. The assailants beat Hong Kong Morning News Media Group Vice President Lei Iun-han and news controller Lam Kin-ming with iron pipes in Tsim Shai Tsui East district just after 1 p.m. local time, according to the newspaper. One of the victims was wounded in the nose and legs, while the other was hurt on the elbow, the newspaper said.

Wider limits for foreign investors Shanghai bourse permits foreigners to invest in up to 30 percent of a single company

hina has relaxed rules to allow more foreign participation in its main stock market, in the latest step towards liberalising the financial system in the world’s secondlargest economy. From yesterday, foreign investors on the Shanghai stock exchange will be allowed to invest in more products and can invest up to 30 percent in a single company, up from 20 percent previously. The move comes just days after the People’s Bank of China, the central bank, doubled the daily trading band of its currency, and after it earlier this month provided an explicit timeframe for the liberalisation of the country’s deposit rates. The country’s stock markets showed muted reaction to the latest change yesterday but analysts said it highlighted the overall direction of the reforms. “We’re at the point where developments of this kind represent important forward steps,” said Tom Gatley, a senior analyst at GaveKal Dragonomics in Beijing. With immediate effect, the exchange raised the shareholding limit for Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) in a single company to 30 percent from 20 percent, according to new rules

Shanghai Stock Exchange

the impact of the new rules.” On Saturday, the PBOC widened the daily trading range for the yuan, which analysts said suggested regulators believe the economy is stable enough to handle more

Risk and aftermath Yuan dive arouses both positive and negative response

he slide in the yuan to near one-year lows has left it at critical levels for holders of an offshore derivatives product, exposing them to heavy losses that may fuel a further slide in the currency. The yuan’s 0.8 percent drop in the three days since the central bank widened its daily trading band has rippled into the offshore market where

Crackdown on food smuggling Chinese customs has confirmed that a nationwide crackdown on smuggling of agricultural products will include all major crops that the country produces, the official Xinhua news agency reported late on Wednesday. China’s agricultural commodities are often priced significantly higher than many international markets as a result of generous government support schemes for farmers and inefficient local production. The price gaps have spurred a burgeoning trade in unofficial imports across China’s southern border, hurting domestic markets. The yearlong campaign kicked off earlier this year and will focus on grain, sugar, cotton, edible oil and frozen foods, customs spokesman Zhang Guangzhi told Xinhua.

by the exchange published on its website late on Wednesday. The QFII and RQFII schemes are the main channels of foreign investments in China’s stock markets. As of end-February, China had issued total quotas of US$52.3 billion under the QFII programme and 180.4 billion yuan (US$29 billion) under the RQFII programme, which allows investments using offshore yuan. The Shanghai bourse also said foreign investors would now be permitted to trade asset-backed securities, when-issued debt and bonds issued by Chinese policy banks for the first time. They can now also participate in the preferred share programme, which is expected to be launched soon, it said. “The move comes at a time when China’s stock market is quite weak and regulators hope to attract more foreign investment,” said Zheng Weigang, a senior trader at Shanghai Securities. “However, compared with China’s large capitalised stock market, the overall amount of QFII and RQFII investment accounts for only a limited portion, so the impact of the new rules may be limited. Besides, because of lacklustre growth of China’s economy in recent quarters, foreigners’ interest in China’s stock market is also not that strong, and that will also limit

China People’s Bank

billions of dollars of leveraged bets were sold to Chinese companies. The derivatives - target-redemption forwards - offer regular income to the holders as long as the yuan does not weaken sharply. Deutsche Bank and Morgan Stanley estimate a total of US$350 billion of the products have been sold since last year. Originally sold as a currency

hedge, they morphed into a product providing modest income if the yuan stayed above a specific price against the dollar. For many buyers of the product, it appeared a reasonable bet because the yuan had risen against the dollar in every year since 2010. Last year, it rose 2.9 percent against the dollar. However, this year the central

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Greater China the final step in freeing up banks to set their own interest rates. Last year, China doubled the overall quota of the QFII scheme to US$150 billion and said it would expand the RQFII pilot programme to London, Singapore, Taiwan and other unnamed locations. The RQFII scheme is currently available through designated institutions in Hong Kong. However, foreign interest in Chinese equities has been tempered in recent years by concerns that onshore markets are driven primarily by speculation on policy direction and stimulus spending instead of business and economic fundamentals. Investors also cite corporate governance issues as a problem. Analysts say a lack of clarity about how Beijing will tax profits from QFII investments has also restrained more conservative investors. China is aiming to transform its commercial centre Shanghai into a global financial hub on par with the likes of London and Singapore by 2020 but analysts say there is still a long way to go. Reuters

We’re at the point where developments of this kind represent important forward steps promised reforms going forward. The PBOC’s governor said earlier in the month that the country’s deposit rates are likely to be liberalised in one to two years - the most explicit timeframe to date for what would be

Tom Gatley GaveKal Dragonomics analyst

Correcting the slow down trend China will strive to meet economic targets this year

hina will speed up construction projects and other measures to support economic growth after a slowdown in industrial output and investment boosted risks of missing an expansion target for the year. The nation will “seize the moment to roll out already- determined measures in expanding domestic demand and stabilizing growth,” the State Council, or cabinet, said in a statement on Wednesday night after a meeting. China will “accelerate preliminary work and construction on key investment projects with timely assignment of budgeted funds,” the cabinet said. The statement suggests the slowdown’s depth is testing Premier Li Keqiang’s tolerance for growth below what he says is a flexible target of “about” 7.5 percent. Li, who led the cabinet meeting, is also dealing with challenges including pollution, surging debt and increasing risks of defaults in financial products and companies. “Against the background of increasing downward pressure on growth, the pro-growth signals from the meeting are very timely and necessary,” Xu Gao, chief economist with Everbright Securities Co. in Beijing, said in a note. “Measures to stabilize growth will materialize gradually to cause a modest acceleration

in growth,” wrote Xu, who formerly worked at the World Bank.

Economic Forecasts Economists surveyed by Bloomberg News cut their projections this month for China’s growth, with the median estimate for the first quarter dropping to 7.4 percent from 7.6 percent in February. For the full year, the median estimate slipped to 7.4 percent from 7.5 percent. The survey was conducted from March 14 to March 19. Analysts are increasingly forecasting that China will loosen monetary policy to counter the slowdown. Eleven of 21 economists surveyed this month see a cut in the reserve- requirement ratio in 2014, compared with six of 18 analysts in February. China will strive to meet economic targets this year and will try to keep growth within a “reasonable” range, according to the statement from the State Council meeting, its first since the annual meeting of the National People’s Congress ended March 13. Ma Jiantang, head of the statistics bureau, said China’s economy is “off to a good start” for the year with major indexes at “relatively high levels”. Bloomberg News

Open war declared on soil pollution bank has engineered a fall in the currency to shake out hot money making a one-way appreciation bet on the currency and the decline has accelerated since the trading band widened on Monday to 2 percent either side of the daily fixing. Traders said debt jitters following the country’s first domestic bond default and worries about a slowdown in the economy are also weighing on market sentiment. In onshore trading on Wednesday the spot rate of the currency fell to more than 6.2 per dollar, while in the offshore market in Hong Kong it hit 6.1855, some of the currency’s lowest levels since last April. More importantly, that is deep in the strike zone of 6.15 to 6.20 where most of the products were sold and where holders are exposed to losses. “The offshore yuan may fall more as banks hedge their structured products exposure via the derivatives market which may exacerbate the selloff in the currency,” said Geoffrey Kendrick, head of Asia FX and rates strategy at Morgan Stanley in Hong Kong. Every pip the yuan stays below the strike levels, holders are counting

US$350 bln

derivative products sold since 2013

losses on their holdings. Five market sources estimated losses of US$3 billon had already been racked up in the past week or so. If holders of these products rush to unwind their positions, it would push the yuan down further. Banks also need to hedge their positions via the derivatives markets, and given the asymmetrical nature of the products that could also result in downward pressure on the yuan. Market players say that if the offshore yuan falls to 6.20 yuan per dollar, it will trigger major requirements for holders to make payments to their counterparties. Morgan Stanley said it expects holders to face potential losses of up to US$200 million per month if the yuan holds below 6.20 yuan per dollar. With average maturities of the structured products around 24 months, total losses could run into billions of dollars. However, the yuan would have to remain consistently below 6.2 per dollar for such heavy losses to accumulate. While one-year offshore forwards, or non-deliverable forwards, are suggesting the yuan will reach 6.22 per dollar in a year, ANZ predicts the currency will be valued at 6.08 per dollar at the end of this year. Derivative markets though are also signalling more yuan weakness. Implied volatility on one-month dollar/yuan options, a gauge of perceived price swings, headed back towards a record on Wednesday and double the levels seen in all of 2013. Forward options points indicated more selling pressure. Reuters

The plan is expected to focus on protecting food supplies

nvironmental authorities have passed a plan to tackle soil pollution as the government becomes increasingly concerned about the risk to food posed by widespread contamination of farmland. About 3.33 million hectares (8 million acres) of China’s farmland - about the size of Belgium - is too polluted for crops, a government official said in December, after decades of industrial development and poorly enforced laws allowed poisonous metals and discharge to seep into soil and water. The plan, together with a soil pollution law in the drafting stage, is expected to focus on protecting food supplies and ensuring that contaminated crops do not enter the food chain. China has time and again published policies and plans aimed at addressing environmental problems but it has long struggled to bring big polluting industries and growth-obsessed local governments to heel. The top leadership is increasingly worried about the problem, with premier Li Keqiang declaring a ‘war on pollution’ during his opening speech of parliament this month. The vice-environment minister, Wu Xiaoqing, told reporters this month the new soil pollution plan would help to create the legal mechanism to stop the soil problem worsening. Meeting this week, the Ministry of Environmental Protection said cleaning up soil was a first priority for food safety and a fundamental basis

for creating a healthy environment, according to a report published by the ministry’s official newspaper on Wednesday. The discovery last year of dangerous levels of cadmium in rice produced in Hunan, the country’s top rice-growing region, caused an outcry with members of the public venting frustration that even their staple food appeared to be unsafe. The plan proposes measures including targeting various sources of soil pollution as well as management of land for agriculture and setting up a process for cleaning damaged soil. A recent government agency survey found that restoration of contaminated soil accounted for only 3.7 percent of the environmental protection business in China, highlighting the potential for growth. Agriculture minister Han Changfu said this month pilot projects had been launched to rehabilitate farmland. Reuters

3.33 mln hectares too polluted for crops

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Asia

Hot-Money powers Southeast Asia improvement Economic and political late news entice investors in Indonesia, Philippines and Thailand

Thailand Prime Minister Yingluck Shinawatra

verseas investors have bought a net US$1.6 billion of shares in Indonesia, Philippines and Thailand in March, poised for the biggest monthly inflow since January 2013. That follows US$4.2 billion of withdrawals in the fourth quarter, which matched the largest outflow since Bloomberg began tracking the data in 1999. The combination of easing political unrest in Thailand, a shrinking current-account deficit in Indonesia and slowing inflation in the Philippines is convincing foreign investors that the economies are strong enough to weather reduced Federal Reserve stimulus. Equity gauges in the three countries are trading at valuations

at least 9 percent cheaper than their 2013 peaks even after climbing an average 9.2 percent this year. “The rapid rise in these markets is merely a catching up from last year’s decline caused by hot-money outflows,” David Ross, a managing director at Chevy Chase Trust in Bethesda, Maryland, which oversees about US$17 billion, said by e-mail. He predicted further gains in Indonesian and Philippine shares, while saying the rally in Thailand may be near an end. Indonesia’s central bank estimates the nation’s current-account deficit will narrow to 2.5 percent of gross domestic product this year from about 3.3 percent in 2013, while Philippine

Philippines says monetary tightening looms Policy adjustments may possibly involve key interest rates and other policy tools

he Philippine central bank, in its strongest hint that interest rates may be hiked soon, said yesterday that “measured” adjustments in monetary policy may be needed even though it expects inflation to stay within its target. Speaking ahead of a policy review in March, Bangko Sentral ng Pilipinas Governor Amando Tetangco told reporters an “early” and “gradual” adjustment in monetary policy stance rather than “discreet movements” would be less disruptive to businesses. “Even as domestic inflation over the policy horizon remains within target, measured adjustments may be warranted given external developments including the heightened geopolitical risks that could result in volatility in international commodity prices,” Tetangco said. Separately, Tetangco told Reuters policy adjustments may possibly involve key interest rates and other policy tools, though he did not elaborate. A f t er Philip pin e in flation unexpectedly slowed in February, economists took the view that the central bank would keep the overnight borrowing rate steady at a record low 3.5 percent next week.

But Tetangco’s fresh comments could change views. “The governor is certainly sounding more hawkish, hinting at rates normalization,” Trinh Nguyen, economist at HSBC, said after his Thursday remarks. HSBC has previously forecast two rate hikes in the second half of 2014 “but the comments suggest that they may come earlier than expected,” she said. Emilio Neri, economist at the Bank of the Philippine Islands, said it was possible the central bank would raise both the policy rate and the special deposit account rate by 25 basis points next Thursday. The consensus from a Reuters quarterly poll in January was for the central bank to start raising rates in the third quarter. The overnight rate has been at a record low of 3.5 percent since October 2012 when it was cut by 25 basis points. Tetangco’s comments came after Yellen said on Wednesday the Fed will probably end its massive bondbuying programme this fall, and could start raising interest rates around six months later. “To the extent the Fed guidance points to steadying U.S. growth, this

is positive for rebalancing in global economic growth rates, in general, and the Philippines, in particular,” Tetangco said. “What we need to be mindful of

Measured adjustments may be warranted given external developments including the heightened geopolitical risks Amando Tetangco Bangko Sentral ng Pilipinas Governor

now is that financial markets do not move excessively in one direction or the other as global interest rates normalize,” he said. On Tuesday, Tetangco said the scope for holding interest rates steady was narrowing although average annual inflation will settle within the government’s 3-5 percent target range this year. Annual inflation in the Philippine in February was 4.1 percent, above the mid-point of the central bank’s target for the third month in a row. Policymakers expect inflation to average 4.3 percent this year against 3.0 percent in 2013. On Wednesday, Barclays economist Prakriti Sofat said in a note the central bank may hike the overnight borrowing rate by 25 basis points to 3.75 percent in the second quarter, and by another 25 basis points in the third quarter. “With the BSP more watchful on liquidity, we also believe that measures such as hikes in the SDA (special deposit account) rate or potentially in reserve requirement ratios are likely in the May policy meeting, with some risk of an adjustment next week,” she wrote. Reuters

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

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Asia inflation slowed in February for the first time in six months. Thailand’s government agreed to end a state of emergency in Bangkok yesterday following months of anti-government protests and clashes that killed 23 people.

Market Turnaround The Jakarta Composite Index has climbed 13 percent this year while the Philippine Stock Exchange Index gained 9.7 percent. Thailand’s SET Index added about 5 percent as tourism-related companies including Central Plaza Hotel Pcl and Airports of Thailand Pcl rallied. The MSCI Emerging Markets Index has lost

US$1.6 bln shares traded in March in Indonesia, Philippines and Thailand

5.2 percent. That’s a turnaround from the second half of 2013, when the Fed’s move toward paring its record stimulus programme dragged down the Southeast Asian indexes by at least 8.9 percent, making them three of the world’s four biggest losers among global equity gauges tracked by Bloomberg. “TIP markets have shown impressive rebounds recently with the return of foreign funds,” Vana Bulbon, the chief executive officer of UOB Asset Management (Thailand) Co., which oversees about US$7.2 billion in Bangkok, said in an interview on March 18.

Thai Protests The potential for contagion in China’s financial markets “is my biggest concern right now,” Alan Richardson, whose Samsung Asean Equity Fund outperformed 96 percent of peers tracked by Bloomberg during the past 12 months, said by phone from Hong Kong. Stocks in the so-called TIP markets have already gotten cheaper relative to earnings prospects. The SET index is valued at about 12.5 times estimated profits for the next 12 months, down from almost 15 times before the Fed first signalled the possibility of reduced stimulus in May. The Indonesian gauge’s multiple has dropped to 15 from a high of 16, while the Philippine measure’s slipped to 17 from 21.

Sweet and sour Japanese data Many analysts project the economy will contract temporarily in April-June

apan’s consumer inflation probably hovered at a five-year peak in February while the job market likely remain solid, a Reuters poll showed, but a sales tax hike next month is clouding the outlook for the world’s third-largest economy. Household spending and retail sales likely rose, helped by last-minute buying before the tax increase on April 1, but the pace of the gains is seen as only moderate. Many analysts project the economy will contract temporarily in April-June

due to a pull back in consumption after the tax hike, but they expect it will return to moderate growth in a few months. “Energy prices such as electricity and gas remain high but upward pressure on overall prices from them is weakening gradually,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Durable goods prices are on the rise due to rush demand before the tax hike, thus both upward and downward pressure on prices are seen

Foreign investors have bought a net US$202 million of Thai equities in March, poised for the first monthly inflow since protests started in Bangkok on October 31. They pulled US$3.8 billion from the country’s stocks in the four months through February 28 as opposition groups staged demonstrations demanding the resignation of Prime Minister Yingluck Shinawatra.

Biggest Rally The Indonesian gauge posted the biggest gain this year after Jakarta Governor Joko Widodo secured his party’s nomination as a presidential candidate, fuelling speculation that his administration would boost spending on infrastructure and public welfare if he wins in July. Indonesian shares have lured US$1.2 billion in March, bringing inflows this year to US$2 billion. In the Philippines, consumer-price inflation slowed to 4.1 percent in February from a two-year high of 4.2 percent the previous month. The economy expanded at a 6.5 percent pace in the fourth quarter, the thirdfastest rate among Asian countries tracked by Bloomberg. “I don’t believe we have seen a peak in the Indonesian nor Philippine stock markets,” Chevy Chase’s Ross said. “The hot-money outflows we saw last year really were non-discriminating. The money coming back into markets has some fundamental reason behind it.” Bloomberg News

balancing out.” The core consumer price index, which excludes volatile fresh food prices but includes oil products, likely rose 1.3 percent in February from a year earlier, a Reuters poll of 28 economists showed. The index rose 1.3 percent in January and in December, which was the quickest gain since 1.9 percent in October 2008. Bank of Japan Governor Haruhiko Kuroda has repeatedly said the nation was on track to achieve the central bank’s 2 percent inflation target but he is willing to act if risks to the outlook lead to a change in the bank’s projection. Earlier this month, the BOJ maintained its massive monetary stimulus and stuck to its upbeat view on the economy but downgraded its assessment of exports. A recent Reuters’ poll showed most economists expect the central bank will ease policy again by July as prospects for higher inflation remain remote and the outlook for the economy weakens. The availability of jobs, or the jobs-to-applicants ratio, is forecast to have improved to 1.05 in February, the highest since July 2007, from 1.04 in January, according to the poll. Reuters

Kiwis enjoy healthy economy New Zealand’s economy expanded 0.9 percent quarter-on-quarter in October-December 2013, taking annual growth to 2.7 percent, official data showed yesterday. The figures, driven by a 2.1 percent rise in manufacturing, were in line with expectations and are unlikely to alter the central bank’s policy of tightening interest rates, which began earlier this month. Statistics New Zealand said manufacturing reached its highest level since March 2006 as the economy recorded its 12th consecutive quarter of growth. Finance Minister Bill English said there was solid growth across the entire economy, with the quarterly performance among the best in the developed world.

Australia central bank sells A$369 million The Reserve Bank of Australia (RBA) sold A$369 million (US$333 million) of Australian dollars on a net basis on the spot foreign exchange market during February, central bank data shows. The RBA manages the forex needs of the government, which for example may need foreign currency to buy military hardware or pay embassy wages, and that usually makes up the vast bulk of its spot transactions in any month. The RBA sold A$403 million for foreign currency on behalf of the government in February. The central bank rarely intervenes directly and typically only when the market has become disorderly.

Richest Indian beats the retail market (finally) Billionaire Mukesh Ambani’s Reliance Retail is poised to perform a rare feat in India’s notoriously complex retail market by finally turning a profit. The time and cost involved, however, could put off global and local rivals from even trying to copy it. It took Reliance Retail, part of Ambani’s conglomerate Reliance Industries Ltd, seven years of losses, bruising trial-and-error and over US$1 billion in investments to find a formula that works for India, the world’s fifth largest retail market and one of its fastest growing.

Nomura Says Buy Protection as Abe Optimism Flags: Japan Credit Nomura Holdings Inc. says investors should consider buying derivatives protecting bonds of companies focused on Japan’s economy from losses as the nation’s finances worsen. The brokerage recommends purchasing creditdefault swaps on companies such as Sumitomo Realty & Development Co. and Kintetsu Corp. as the benefits of Prime Minister Shinzo Abe’s stimulus policies wane. Sony Corp.’s declining revenue from phones and cameras and the exposure of trading companies such as Marubeni Corp. to China’s economic slowdown also pose risks.

Blogger jailed for 5 month Durable goods prices are on the rise due to rush demand before the tax hike Takeshi Minami Norinchukin Research Institute

Haruhiko Kuroda, Bank of Japan Governor

Vietnam jailed a prominent blogger for 15 months on Wednesday on a charge of antistate activity, the second such sentencing in a fortnight, prompting rights groups to condemn the alleged muzzling of dissent in the communist country. Pham Viet Dao, 61, a Communist Party member and a former official at the Ministry of Culture, was charged with “abusing democratic freedoms to infringe on the interests of the State” after a half-day trial in Hanoi. In addition to his own blogs, Dao’s popular site included links to dozens of other commentaries critical of Vietnam’s politics and society.

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International World Bank helps Rwanda combat poverty The World Bank signed off on a US$70 million financing package for Rwanda on Wednesday, the last tranche of a three-year aid programme, which will be partly used to make povertyfighting programmes more effective at combating natural disasters. The deal, which will include a US$46 million loan and a grant of US$24 million, was signed shortly after typically tropical rains lashed the hilly capital, Kigali, sending torrents of water cascading through the streets. President Paul Kagame has led Rwanda’s transformation into one of sub-Saharan Africa’s most investor-friendly nations in the two decades since the end of a genocide that killed 800,000 people.

French banks challenge local loyalty of Germany’s Mittelstand France’s big banks are embracing an unlikely challenge -to prise away some of Germany’s mighty Mittelstand’s small and medium-sized enterprises (SMEs) from their local banking partners. BNP Paribas, France’s largest bank by assets, wants to boost its German business by over a quarter by 2016. To achieve that, it will have to pick off select SMEs, which in Germany make up about 18 percent of the economy outside financial services, compared with 6 percent in France and 7 percent across the European Union.

EU tries to make banking union real The SRM is part of an EU effort to prevent future financial crises

uropean Union lawmakers struck a tentative deal on legislation to create a single agency for handling euro-area lenders in crisis after the European Central Bank warned that failure would be “close to suicide.” Negotiators including Dutch Finance Minister Jeroen Dijsselbloem and European Parliament legislators found a provisional agreement on the Single Resolution Mechanism bill after about 16 hours of talks in Brussels that ran until after 7 a.m. yesterday morning. French Finance Minister Pierre Moscovici said yesterday that details would emerge shortly. The accord still needs to be formally approved by national governments and by the full European Parliament to take effect. The deal turned out to be a signature achievement for EU leaders meeting in Brussels yesterday. Leaders have been working for nearly two years to establish a euro-area banking union

to repair the currency bloc’s financial architecture and guard against further crises sparked by contagion between banks and sovereign borrowers. Dutch Finance Minister Jeroen Dijsselbloem shepherded the debate through the night, stepping out of negotiations periodically to phone his euro-area counterparts. At one point, talks were on hold for more than an hour to wait for a response from German Finance Minister Wolfgang Schaeuble and other ministers, said Sven Giegold, a German lawmaker representing the assembly’s Green group in the talks. The SRM is part of an EU effort to prevent future financial crises by pooling responsibility for euro-area banks, a project known as banking union. In a first step, the ECB will fully assume supervision of the 18-nation currency bloc’s lenders in November. ECB Executive Board member Yves Mersch said last week that not having

the SRM “would be very close to suicide.” The parliament and the bloc’s finance ministers proposed competing visions of SRM in December. Today’s agreement retains key elements of a plan put forward last year by Michel Barnier, the EU’s financial services chief, including the creation of a central resolution board backed by a 55 billion-euro (US$77 billion) fund financed by industry levies. It also allows the EU to meet a self-set deadline of concluding talks in time to conclude work on the law ahead of EU elections in May. Yesterday’s deal on the SRM sets out a blueprint for the overall system. Further talks will be needed in the months ahead on implementing measures to flesh out some aspects, including on the methods to be used for calculating banks’ individual contributions to the central fund. The marathon talks were described by Sharon Bowles, chairwoman of the parliament’s Economic and Monetary Affairs Committee, as the longest ever on an EU financial-services law. The overnight meeting was the last one scheduled before a March 26 deadline set by Greece, which holds the EU’s rotating presidency. Dijsselbloem and his Greek counterpart, Yannis Stournaras, began discussions with top parliament lawmakers at 3 p.m. in Brussels on Wednesday, with all key points on creating the SRM still open. Bloomberg News

Three new members against energy corruption Member countries that fall short of requirements can be suspended from the process

BP in the match again after U.S. banning BP Plc re-joined bidders for exploration and production leases in the Gulf of Mexico on Wednesday and won 24 tracts after the U.S. government lifted a 16-month ban barring the company from new federal contracts. The Environmental Protection Agency in late 2012 barred BP from bidding on new federal contracts, citing a “lack of business integrity.” The action came after the company’s 2010 Macondo oil well blowout killed 11 rig workers and unleashed more than 4 million barrels of crude into the Gulf in the worst offshore oil disaster in U.S. history.

SEC US exposure to Russian advances U.S. securities regulators contacted public funds with investments in Russia to make sure they are properly managing risks and disclosing their holdings to investors as political tensions rose over Crimea, according to several people familiar with the matter. Attorneys with the U.S. Securities and Exchange Commission started to place calls to registered investment companies such as mutual funds and exchange-traded funds more than a week ago, the sources said. The calls are a routine part of how the SEC monitors asset managers through its Division of Investment Management, and are not related to any investigation.

thiopia, the United States and Papua New Guinea are on course to join the leading world initiative to combat corruption in the energy and mining industries. The Oslo-based Extractive Industries Transparency Initiative (EITI) approved their applications on Wednesday, drawing swift criticism from human rights campaigners for admitting Ethiopia. The three now have three years to comply with EITI standards. Ethiopia has no proven petroleum reserves and a small mining industry driven by potash producers. Rights activists accuse it of political repression. New York-based Human Rights Watch, which had asked the EITI board to reject the East African country’s membership bid, said the EITI’s reputation had been damaged. “The EITI’s decision to admit Ethiopia without insisting on reforms is an affront to the local activists who have been jailed or exiled for calling for a more transparent, accountable government,” Lisa Misol, a senior researcher at HRW, said in a statement. The Addis Ababa government did not comment on its successful bid. Commercial oil finds in neighbouring Kenya have raised hopes of a strike in Ethiopia. International explorers in Ethiopia include London-listed Tullow Oil and Africa Oil that are drilling along the country’s southern border with Kenya. Home to Sub-Saharan Africa’s second largest population, Ethiopia is among the continent’s fastest growing economies. But the opposition and rights campaigners there accuse the government of stifling dissent and

torturing political detainees, allegations the government strongly denies. “In its discussions, the EITI Board stressed the importance of ensuring civil society engagement in Ethiopia’s efforts to comply with the EITI Standard,” the group said on its web site. An earlier effort by Ethiopia to join was rebuffed in 2010. At the Oslo meeting Yemen, an exporter of oil and gas and one of the poorest nations in the Middle East, was suspended as an EITI member. It did not report in time its 2011 income from oil and gas, due to the turmoil of the Arab Spring, Clare Short, EITI chairwoman told Reuters. She said it was encouraged to keep trying to stay in the initiative and meet the rules.

United States United States membership commits its federal government to disclosing all the payments it receives for the exploitation of oil and minerals on federal lands, which would include the money it gets from offshore oil and gas exploration and production. “The U.S. have all sorts of different reporting in their system, which is quite complex. Some is reported at the federal level, some is at state level, and Native Americans ... have different systems,” Clare Short, chairwoman of the EITI, told Reuters. “Getting an overview and getting some figures that people can look at and scrutinise ... will help people have better transparency and accountability.” Currently energy firms active in the U.S. may break out profits and production by regions of activities, like the Gulf of Mexico.

EITI Global Conference 2013 at Sydney

But they do not break out profits made on federal land in earnings reports or in filings to the Securities and Exchange Commission. Abroad, U.S.-registered companies are already required to disclose payments made to governments for access to resources. The EITI has stakeholders in the public and private sectors and requires resource companies to disclose payments made to governments and the latter to publish what payments they receive. EITI terms are not legally binding, but member countries that fall short of requirements can be suspended from the process, leading to political embarrassment. Just 44 nations are EITI members. Reuters

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Opinion Business

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Leading reports from Asia’s best business newspapers

Korea Herald

The Poverty of Renewables Bjørn Lomborg Adjunct professor at the Copenhagen Business School

President Park Geun-hye championed deregulation as the best way to revitalize South Korea’s economy and create jobs as she held a nationally televised meeting with regulators and businesses to show how much she is determined to undo nonessential regulations she denounces as “cancer.” It is very rare for a presidential meeting to be broadcast on live TV from beginning to end, and the unusual setting was designed to send a strong message directly to the public and, more importantly, to bureaucrats handling regulations.

The Star Banks and insurance companies in Malaysia are strong enough to withstand future shocks including a sharp contraction in the economy worst than 2009 and a 40% drop in the value of stocks. The stress tests by Bank Negara also included business and consumers credit default scenarios, including loss of up to 30% in household loans that reflect sharp adjustment in property prices. According to Bank Negara, banks and insurers, both at the system and institutional levels, have sufficient earnings and capital buffer to weather extreme macroeconomic and financial condition.

The New Zealand Herald A “humbled and embarrassed” failed finance company director expects to be suspended from practising as a lawyer after appearing before a disciplinary tribunal today. Dominion Finance and North South Finance director Robert Barry Whale was acquitted of theft by person in a special relationship charges in a Serious Office case last year. But the lawyer -in his m i d 60s - w a s s e n te n c e d on separate charges to 12 months home detention, 250 hours of community service and ordered to pay $75,000 in reparations after he admitted making untrue statements in offer documents.

The Asahi Shimbun Japanese specialists who helped restore murals in ancient Japanese tombs are working with Myanmar to preserve centuries-old Buddhist images at the sprawling Bagan temple complex here. The site ranks alongside the grandeurs of Angkor Wat in Cambodia and Borobudur in Indonesia. Of the many thousands of Buddhist temples, pagodas and monasteries constructed between the 11th and 13th centuries, more than 3,000 survive in Bagan. Richly coloured murals have deteriorated in many places due to rain seeping into cracks in walls caused by earthquakes and weathering.

ccording to UN Secretary-General Ban Ki-moon, “Climate change harms the poor first and worst.” This is true, because the poor are the most vulnerable and have the least resources with which to adapt. But we often forget that current policies to address global warming make energy much more costly, and that this harms the world’s poor much more. Solar and wind power was subsidized by US$60 billion in 2012. This means that the world spent US$60 billion more on energy than was needed. And, because the total climate benefit was a paltry US$1.4 billion, the subsidies essentially wasted US$58.6 billion. Biofuels were subsidized by another US$19 billion, with essentially no climate benefit. All of that money could have been used to improve health care, hire more teachers, build better roads, or lower taxes. Forcing everyone to buy more expensive, less reliable energy pushes up costs throughout the economy, leaving less for other public goods. The average of macroeconomic models indicates that the total cost of the EU’s climate policy will be €209 billion (US$280 billion) per year from 2020 until the end of the century. The burden of these policies falls overwhelmingly on the world’s poor, because the rich can easily pay more for their energy. I am often taken aback by well-meaning and economically comfortable environmentalists who cavalierly suggest that gasoline prices should be doubled or electricity exclusively sourced from high-cost green sources. That may go over well in affluent Hunterdon County, New Jersey, where residents reportedly spend just 2% of their income on gasoline.

But the poorest 30% of the US population spend almost 17% of their after-tax income on gasoline. Similarly, environmentalists boast that households in the United Kingdom have reduced their electricity consumption by almost 10% since 2005. But they neglect to mention that this reflects a 50% increase in electricity prices, mostly to pay for an increase in the share of renewables from 1.8% to 4.6%. The poor, no surprise, have reduced their consumption by much more than 10%, whereas the rich have not reduced theirs at all. Over the past five years, heating a UK home has become 63% more expensive, while real wages have declined. Some

In 1971, 40% of China’s energy came from renewables. Since then, it has powered its explosive economic growth almost exclusively with highly polluting coal, lifting 680 million people out of poverty

17% of households are now energy poor – that is, they have to spend more than 10% of their income on energy; and, because elderly people are typically poorer, about a quarter of their households are energy poor. Deprived pensioners burn old books to keep warm, because they are cheaper than coal, they ride on heated buses all day, and a third leave part of their homes cold. In Germany, where green subsidies will cost €23.6 billion this year, household electricity prices have increased by 80% since 2000, causing 6.9 million households to live in energy poverty. Wealthy homeowners in Bavaria can feel good about their inefficient solar panels, receiving lavish subsidies essentially paid by poor tenants in the Ruhr, who cannot afford their own solar panels but still have to pay higher electricity costs. The list goes on. In Greece, where tax hikes on oil have driven up heating costs by 48%, more and more Athenians are cutting down park trees, causing air pollution from wood burning to triple. But climate policies carry an even larger cost in the developing world, where three billion people lack access to cheap and plentiful energy, perpetuating their poverty. They cook and keep warm by burning twigs and dung, producing indoor air pollution that causes 3.5 million deaths per year – by far the world’s biggest environmental problem. Access to electricity could solve that problem, while allowing families to read at night, own a refrigerator to keep food from spoiling, or use a computer to connect with the world. It would also allow businesses to produce more competitively, creating jobs and economic growth.

Consider Pakistan and South Africa, where a dearth of generating capacity means recurrent blackouts that wreak havoc on businesses and cost jobs. Yet the funding of new coal-fired power plants in both countries has been widely opposed by well-meaning Westerners and governments. Instead, they suggest renewables as the solution. But this is hypocritical. The rich world gets just 1.2% of its energy from hugely expensive solar and wind technologies, and we would never accept having power only when the wind was blowing. Over the next two years, Germany will build ten new coal-fired power plants to keep the lights on. In 1971, 40% of China’s energy came from renewables. Since then, it has powered its explosive economic growth almost exclusively with highly polluting coal, lifting 680 million people out of poverty. Today, China gets a trifling 0.23% of its energy from wind and solar. By contrast, Africa gets 50% of its energy today from renewables – and remains poor. A new analysis from the Center for Global Development quantifies our disregard of the world’s poor. Investing in renewables, we can pull one person out of poverty for about US$500. But, using gas electrification, we could pull more than four people out of poverty for the same amount. By focusing on our climate concerns, we deliberately choose to leave more than three out of four people in darkness and poverty. Addressing global warming effectively requires long-term innovation that makes green energy affordable to all. Until then, wasting enormous sums of money at the expense of the world’s poor is no solution at all.

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Closing PetroChina cuts capital spend

Portugal: Recovery to be ‘slow’

PetroChina Co. is cutting capital expenditure as it readies to invite private investment in line with the government’s push to reduce state dominance. The company’s target for capital expenditure in 2014 at 297 billion yuan (US$47.7 billion) is 7.1 percent lower than last year. PetroChina will keep investment at that level for “the next couple of years,” Chairman Zhou Jiping said at a press conference yesterday. China is pushing the most aggressive reforms in more than a decade as President Xi Jinping works to increase market forces in the economy.

Consultants Ernest&Young estimated that Portugal is going to grow 1.4% this year, but warned that although the economy is beginning to recover, this is going to be a “slow” process. In a report out yesterday, the international consultant forecast that after a 1.4% fall in Gross Domestic Product (GDP) last year, the country should make the same 1.4% back up in 2014 and then grow another 1.2% in 2015. These figures are in line with government estimates The report added that “exports are going to continue to be the main motor for growth” in the coming years.

Back to the drawing board Qatar to reschedule 15 pct of planned projects Praveen Menon

atar is likely to reschedule about 15 percent of its planned building projects for coming years and go over budget, amid a push to complete preparations for the 2022 World Cup soccer tournament, sources familiar with government policy said. After it won the right to host the World Cup in 2010, the tiny nation, with a population of about 2.1 million, announced plans for a raft of projects that would transform it over the following 15 years. They include a new airport, roads, port facilities, railways, stadiums and other infrastructure. The government has not released a comprehensive, detailed schedule of its construction plans, but analysts estimate they will cost between US$140 billion and US$200 billion through the early 2020s, paid for with the country’s vast natural gas wealth. This is expected to provide a bonanza to the foreign construction firms that will do much of the work. But so far, contract awards and work on many projects

have been slower to get started than the business community expected, apparently because of bureaucratic and planning problems. If they are not handled carefully, the projects could destabilise Qatar’s small economy, creating bottlenecks and driving up costs. A government source, declining to be named under briefing rules, acknowledged that Qatar faced pressures in pushing through the projects and would have to slow some, though he stressed that construction specifically for the World Cup would take priority and be completed on time. “About 15 percent of the projects will be rescheduled,” the government source told Reuters. “All projects associated directly with hosting the World Cup cannot be rescheduled since they have to finish by 2022. But there are others which can be moved.” The source did not give details. Qatari officials have declined to discuss changes to the construction schedule publicly. Earlier this week,

the central bank governor said the government was expected to sign contracts for construction projects worth as much as US$50 billion this year, but he did not elaborate. Yasser al-Mulla, project manager at Al-Rayyan Precinct for the Supreme Committee for Delivery and Legacy, which is handling construction of tournament venues, said this week that all World Cup projects were on track to be completed on time.

A change in Qatar’s leadership may be partly responsible for a slower pace of construction. Last June, Sheikh Tamim bin Hamad al-Thani, 33, took over from his father as emir. He has replaced some senior economic officials and in a policy speech last November, said he was particularly keen to prevent high inflation and corruption. Those purposes could be helped

by implementing projects at a more measured pace than the original plans. Another factor is the sheer difficulty of assembling enough construction workers, materials and equipment from around the world. Qatar, the world’s largest exporter of liquefied natural gas, needs an additional 400,000 workers for its next phase of development, the government source said. Reuters

Investment banks China Mobile earnings Europe strikes deal to should cut US$1 trillion drop most since 1999 complete banking union

nvestment banks must take tough decisions to quit ailing business areas and should reduce their balance sheets by $1 trillion - or almost a tenth - to lift profitability, an industry report said. European banks face a particularly challenging outlook and are likely to continue losing market share to big U.S. rivals, according to the 2014 Wholesale & Investment banking Outlook by Morgan Stanley and Oliver Wyman, released yesterday. The report said investment banks needed to cut their balance sheets by about 8 percent, even after cutting them by a fifth in the last four years, and to redeploy another 5-7 percent to business areas that were more profitable. Return on equity (RoE) across the industry should recover to 12-14 percent by 2016 if banks implement changes across fixed income, equities and advisory and cut costs by greater efficiency in areas like technology, Morgan Stanley/Oliver Wyman predicted.

hina Mobile Ltd., the world’s largest phone company, posted its biggest decline in profit since 1999 on rising costs to build out high-speed networks and attract new users. Shares dropped. Net income fell 16 percent to 30.2 billion yuan (US$4.9 billion) in the fourth quarter, according to figures derived from full-year results released by the Beijing-based company today. That missed the 33.4 billion-yuan average of three analyst estimates compiled by Bloomberg. Chief Executive Officer Li Yue is counting on a rapid shift to fourth-generation networks and introduction of popular devices like Apple Inc.’s iPhone to stem declining market share and boost data sales. The push is raising costs for everything from new equipment to smartphone subsidies as instant messaging apps like Tencent Holdings Ltd.’s WeChat cut sales from voice and texts.

uropean policymakers agreed yesterday to complete a banking union with an agency to shut failing euro zone banks, but there will be no joint backstop for a fund to pay the costs of closures. The breakthrough ends an impasse with the European Parliament, which persuaded euro zone countries to strengthen the scheme. It completes the second pillar of banking union, starting at the end of the year when the European Central Bank takes over as watchdog. The accord means that the ECB has the means to shut banks it decides are too weak to survive, reinforcing its role as supervisor as it prepares to run health checks on the still fragile sector. Thursday’s accord makes it harder for EU countries to challenge the ECB if it triggers bank closures, and establishes a common 55 billion euro back-up fund over eight years quicker than planned but far longer than the ECB’s watchdog had hoped.