MOP 6.00 Publisher: Paulo A. Azevedo Number 509 Wednesday April 2, 2014 Year II
OCBC expands empire Macau Monetary Authority is in the final stages of analyzing the biggest bank takeover of the year. Overseas Chinese Banking Corp will acquire Wing Hang Bank and Macau’s 13 branches of Banco Weng Hang for a massive HK$38.4 billion. AMCM will deliver a decision in the next few months but in principle the regulator should agree Page
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Pass for now Macau Pass new model for its planned mobile payment method is delayed. The SIM card payment format is now targeting a mid-year roll-out
Just kill that Dome elephant, legislator insists Page 2
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Macau investments in mainland slowed in February
Strapped for cash Retailer of second-hand handbags Milan Station Holdings made a net loss of HK$35.8 million last year. Hong Kong and mainland results delivered less than expected. Macau, however, helped diminish losses
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Utilities on a roll Monopoly suppliers of water and electricity had a good year in 2013. Profits for Macao Water jumped 8.4 percent, while CEM grew 6 percent. The latter imported more electricity from the mainland and saw growth slow
HSI - Movers April 1
All bets on
Name
March represented the third best result in gambling revenues. A growth of 13.1 percent and nearly 35 billion patacas. SJM regained its leadership market share, while Sands China Ltd and Galaxy Entertainment skyrocketed in the stock market.
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STDM shareholder eyes on Australia
%Day
Sands China Ltd
9.58
Galaxy Entertainm
7.93
Wharf Holdings Ltd
4.54
Tencent Holdings
4.45
Lenovo Group Ltd
3.15
China Life Insurance
-0.23
Sino Land Co Ltd
-0.35
China Construction
-0.37
Belle International
-0.39
China Merchants Ho
-3.94
Source: Bloomberg
I SSN 2226-8294
Businessmen Cheng Yu-tung is in the race to open a casino on the Barrier Reef, Australia. Owner of the world’s biggest chain of jewellers, Chow Tai Fook and a 10 percent shareholder of STDM SA, parent company of SJM, is betting against other casino heavyweights like James Packer and Echo Entertainment Group. Page 16
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April 2, 2014
Macau
Mobile payment plan on hold Macau Pass says it aims to come up with a format for mobile payment for local users by mid-year Stephanie Lai
sw.lai@macaubusinessdaily.com
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t will only be by the middle of this year that Macau Pass SA will come up with a final model for its planned mobile payment method, which enables people to use their mobile phones as Macau Pass cards, the company told Business Daily. In an interview with us last September, the company announced that its SIM cards with the functions of a stored-value card were to be launched in the local market by the fourth quarter, but the plan has not been realised so far.
The advantage with adopting the SIM card payment format is that it’s easier to be developed, and not much cost will be shifted to the end-user David Lao
“We’re still actually still reviewing the mobile payment method via using SIM cards,
alongside a few other possible solutions,” executive deputy general manager David Lao told Business Daily. “Aside from using SIM cards, there are other mobile payment methods like the scanning of a QR code [via the use of a smartphone application] or the use of an SD card,” said Mr Lao. “We’ll cautiously examine these different formats and see which fits Macau best, which is a small market and slower to react [to new technology].” “We’ve been in talks with the local telecommunication operators on the mobile payment method, and we’ll be targeting that by the middle of this year we can come
up with the model for it,” Macau Pass’s deputy general manager added. Hong Kong-based Tradelink Electronic Commerce Ltd announced last year that it was launching a plug-in device that could enable e-payment on smartphone or tablet computer, which the company said would be usable in Taiwan and Macau by the first quarter of 2014. However, in results filed with the Hong Kong Stock Exchange on March 25, Tradelink noted that the launch of the mobile wallet solution has to be delayed to the second quarter of this year, due to “a temporary shortage in the chip market during the second half of last year”.
Tradelink’s device could support as many as six credit cards along with pre-paid cards and e-vouchers, and be independent of telecommunication operators. It was not limited to any smartphone models running on most iOS or Android systems, Tradelink said in November. The product has already been adopted by Joint Electronic Teller Services Ltd (Jetco) for its over thirty member banks in Hong Kong, which has the biggest network of ATMs in both Hong Kong and Macau. “For deciding which format of mobile payment to be adopted, we’ll mainly consider end-users’ habits,”
David Lao said, “and a payment format that enables end-users to bear the least cost.” “The advantage of adopting the SIM card payment format is that it’s easier to be developed, and not much cost will be shifted to the end-user” he added. The mobile payment method via the use of SIM card is designed to enable users to check their remaining credit in their Macau Pass with a smartphone application, where at most 1,000 patacas can be stored – the same value as a Macau Pass card can be topped up with. “Our goal is that users can also recharge their Macau Pass credit by the smartphone application, if we’re adopting the use of SIM cards,” Mr Lao. He said the company did not have a confirmed budget for the launching of the mobile payment yet. He also noted that the company expected a slower profit growth for 2013 when compared with the 3.16 million profit achieved in 2012 – almost 23 times more than in the previous year. “The slower increase in profits was mainly due to our expansion of the Macau Pass terminals in the city, and the investment in our own payment system,” Mr Lao briefly remarked but refused to disclose the full profit figure. The results of Macau Pass earnings for last year have yet to be published in the Official Gazette.
The white elephant in the Dome Legislator suggests that the once iconic sporting symbol be demolished Pierre-François Metayer pf.metayer@macaubusiness.com
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egislative Assembly member José Pereira Coutinho advocates the demolition of the Macau Dome, the costly structure in the Cotai area that was built to host the Southeast Asian Games ceremonies. The area, requests the legislator in a written address to the government, should house public habitations instead. “The dome is a white elephant. In over ten years, millions have been dumped into it and mainly for its constant reparations due to poor architecture, design and structure of the stadium. The rainy season has started and problems will start again. Water is coming in from the roof and the elevators don’t even work”, Mr Coutinho told Business Daily.
The president of the Civil Servant’s Association (ATFPM), said last month “there were more than 40,000 requests for public housing but only 1,100 units are available. We cannot continue spending money for this [kind of structure without use]”. To the legislator the stadium is useless because residents “cannot even use it individually as it’s booked by associations that also end up not using it for their sporting activities”. “There are no major events held in the Dome. All major conventions are hosted by casinos now, so why keep it? ” questions Mr. Coutinho. He now expects an answer from the government within three weeks.
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April 2, 2014
Macau
The takeover of the year The HK$38.4-billion takeover of Banco Weng Hang and its parent firm Wing Hang Bank by OCBC requires approval from the financial regulator of Macau. The process here is very advanced, and a decision is expected in the next few months Tony Lai
tony.lai@macaubusinessdaily.com
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he 13 Macau branches of Banco Weng Hang, SA will remain in normal operation, while its Hong Kong-listed parent firm Wing Hang Bank Ltd is in the process of being taken over by Overseas Chinese Banking Corp. The HK$38.4-billion (US$5billion) deal to acquire all Wing Hang’s shares, unveiled yesterday, still requires nods from the financial regulators of Macau, Hong Kong and Singapore. A local banking source told Business Daily that the city’s de facto central bank will make a decision “in a short time”. The deal will give Singapore-based OCBC 13 branches in Macau under the brand name of Banco Weng Hang, as well as 57 branches in Hong Kong and mainland China. “This takeover has no impact on our operations,” a spokeswoman for Banco Weng Hang told Business Daily. “At this moment what we can say is it’s just business as usual.” Banco Weng Hang also confirmed in a press statement, quoting OCBC, that “there will be no job losses or material detrimental changes” to contracts of employees for at least 18 months once the deal is sealed. The statement also quoted Samuel Tsien, chief executive of OCBC, saying: “We are also committed to investing in Wing Hang’s business and employees to better serve our enlarged customer base.” But the takeover deal still needs to overcome the hurdles of the Monetary Authority of Macau, the Hong Kong Monetary Authority and the Monetary Authority of Singapore.
Business Daily asked the territory’s de facto central bank what criteria it will ponder when reviewing such a deal, as well as when a decision can be made. But there was no reply by press time yesterday. Business Daily, however, has learned that the deal is progressing “very smoothly” and in principle will be approved by local authorities. A source in the local industry additionally told this newspaper that the review process is now in a “very advanced stage regarding all technical details” although not yet concluded. The process is time-consuming as it involves more than one jurisdiction. It is expected that a decision will be made “in a short time”, the source said. The source described OCBC as having the necessary standing, suitability and professional expertise. Mr Tsien told a press conference yesterday that they expect the deal to be settled by August after getting necessary approvals.
Offshore yuan According to Wing Hang’s annual report for 2013, net profits of the Macau subsidiary Banco Weng Hang surged 31.2 percent year-on-year to 356.3 million patacas last year. Its net interest income rose 25.4 percent last year “on the back of strong consumer loan demand” while its loan-to-deposit ratio remained “at a healthy level of 72.5 percent”, the report said. OCBC will pay HK$125 a share in cash in exchange for all of Wing
Better late than never Macau and Hong Kong in cahoots concerning transfer of fugitives
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acau’s Secretary for Justice Florinda Chan and her Hong Kong counterpart Rimsky Yuen Kwok-Keung are working on a deal for the extradition of fugitives between the two cities in the context of mutual assistance. It will be the first agreement on the surrender of fugitives between two Chinese jurisdictions. Ms Chan and Mr Rimsky
declined to say when this measure could be effective but are confident that an agreement will be reached. This future pact follows the conviction of Joseph Lau and Steven Lo last month in Macau, sentenced to five years and three months prison for bribery and money laundering. They have yet to serve their sentences in Macau as they’re in Hong Kong.
Hang’s shares, the two lenders said in a joint filing to the Hong Kong Stock Exchange yesterday, representing a 1.6 percent premium on the last traded price of Wing Hang on March 28. The family of Wing Hang’s chairman Patrick Fung, Bank of New York Mellon Corp and other shareholders holding a combined 50.66 percent of Wing Hang have accepted the offer. It is the largest takeover of a Hong Kong bank since DBS Group Holdings Ltd, OCBC’s largest competitor in Singapore, offered US$5.3 billion for Dao Heng Bank Group Ltd in April 2001. The offer is 1.77 times Wing Hang’s “consolidated net book value” as at December 31, yesterday’s filing noted. Shares of Wing Hang went up by 0.16 percent to close at HK$123.3 per share yesterday while the Hong Kong benchmark rose 1.34 percent. The lender’s stock surged 49 percent in the year through last week. With an expanded presence on the mainland and in Hong Kong and “a
new platform in Macau”, OCBC can better capitalise “on increasing trade, investment, capital and wealth flows between Greater China and South East Asia”, the filing added. “Hopefully this gives it a valuable platform to grow its own product line. It’s still unclear how much Wing Hang will help OCBC tap into the offshore renminbi [yuan] market,” said Benjamin Ong, an analyst at Phillip Securities Pte Ltd. Asked yesterday whether the listing status of Wing Hang in Hong Kong will be scrapped after the takeover, Mr Tsien of OCBC only responded that the Singapore-based lender has no intention of listing in the Hong Kong stock market. Hong Kong lenders are proving attractive to mainland companies including China Merchants Bank Co. as they seek expansion abroad. Foreign firms are interested in the city’s lenders to tap the Chinese market as the yuan becomes more widely used for finance. With Bloomberg News
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April 2, 2014
Macau Macau granted US$500mil QFII quota The Macau government can now invest as much as US$500 million in mainland China’s capital markets to boost the investment returns on its fiscal reserve, after securing the green light from mainland authorities. The State Administration of Foreign Exchange announced late on Monday that the Monetary Authority of Macau had finally been granted the amount under the Qualified Foreign Institutional Investor (QFII) scheme. QFII allows Macau to invest in shares listed on the Shanghai and Shenzhen stock exchanges. Business Daily asked the territory’s de facto central bank for comment but there was no reply before press time.
Charming Chinese investors Chinese primarily interested in banking, maritime transportation and sea ports in Portugal, says the president of Orient Foundation
The Chinese want to have a bank [in Portugal], in order to affirm their presence in Europe, but they’re also interested in sea transportation and ports Carlos Monjardino, president of Fundação Oriente
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he president of Fundação Oriente says that maritime transportation, sea ports and banking sectors are the most attractive vehicles for Chinese investors in Portugal, besides energy, insurance and property, where they have already invested considerably, and other residual areas that might be of interest. “The Chinese want to have a bank here, in order to affirm their presence in Europe”, but they’re also, “interested in sea transportation and ports”, Carlos Monjardino told Lusa. Monjardino’s professional ties with China go back many years. Orient Foundation was during the Portuguese administration of Macau what is today Macau Foundation, the safe keeper of the money casinos needed to pay the
government as tax. The administrator of the Fundação Oriente believes that Chinese investment in the financial sector is “not only possible but also desirable”, recalling the “substantial interest from two Chinese banks that, a few years ago, wanted to expand to Portugal”. At the time, negotiations weren’t successful for reasons he is not aware of. Regarding the Chinese interest in maritime transportation and ports, he stresses that its relevance has grown since recent changes in the Ukraine. In this new context, “Portuguese ports – especially those with gas storage capability - may become a transit point for gas shipments coming from the United States en route to other countries. Before this
(the Ukrainian crisis), it was expected that the Panama Canal expansion would draw much more attention to maritime transportation and we would be in a very comfortable position to act as a distribution platform for other countries, especially from the Azores”. He adds that “golden visas have facilitated things”, enabling Chinese businesses in Portugal to grow in the past few years, in very important sectors. He also believes that “the Chinese regard our 500 years of past history in high esteem” and the fact the “Macau question was solved peacefully” adds to the overall favorable environment. Still, he is quick to admit that Portugal is more open to Chinese investments than other European countries.
Exports decline, investments slow in Feb Mainland authority registers exports from Macau as declining in February plus slower growth in new investments Stephanie Lai
sw.lai@macaubusinessdaily.com
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he value of trade between Macau and mainland China in February reveal a decline when compared to a year ago, along with decelerated growth of new investments from local enterprises on the mainland, the latest data released by the Ministry of Commerce shows. Bilateral trade value tipped US$190 million in February, 34.4 percent less than the previous month and 5 percent
lower than a year ago, according to the data. February trade value was hampered by a sharp decline in exports from Macau to the mainland in the month, which has decreased by 75 percent year-on-year to an export value of US$10 million. Meanwhile, the value of exports from the mainland to Macau had climbed mid year-on-year by 6.25
percent to US$170 million. The combined trade value between Macau and the mainland in January and February totalled some US$480 million, 16.5 percent less than a year before. During this period, exports from Macau to the mainland amounted to US$40 million, nearly 64 percent less than the previous year, while the mainland’s exports to the city in the period declined by 5.7 percent to
When asked if Portugal is considered by the Chinese as a gateway to Europe or Africa, he says: “Both for Africa and Europe but especially for Portuguesespeaking African countries”. He is quick to dismiss any drama about the golden visas which have led to the opening of two investigations from the Portuguese Public Prosecutor’s office, focusing on two Chinese nationals. He argues that the visas are sanctioned by the Immigration and Borders Bureau (Serviço de Estrangeiros e Fronteiras – SEF) and that these sorts of situations are “inevitable”. He emphasises that, “in the crisis we’re in, golden visas will greatly contribute to attracting more investment”. Lusa
US$440 million. The decline registered in exports from Macau to the mainland contrasted the growth the city witnessed in exports to both Hong Kong and the European Union in February: Macau’s exports to Hong Kong grew by 43.7 percent to 453.1 million patacas, while those to the EU grew by 57.4 percent to 19.2 million patacas, Statistics and Census Service data reveal. The ministry approved 33 investment projects from local companies in the mainland in the first two months of this year, valued at US$120 million, 54.7 percent more than a year before. But in the same period last year, Macau’s investments across the border registered an 80.5 percent increase to US$80 million. In February alone, the ministry registered nearly US$60 millionworth of investments made by Macau enterprises in the mainland, some 11.3 percent less than a month before but twice the investments made in the same period last month.
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April 2, 2014
Macau
Another great result Macau gambling revenue up 13 percent in March. Casino stocks jump in HSI Alex Lee
alex.lee@macaubusinessdaily.com
two shares rose the most on the Hang Seng Index. Market Share Per Operator (2013-2014) Low penetration and improving infrastructure developments that will shorten the journey from the Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar mainland to Macau’s location on SJM 27% 26% 23% 25% 24% 24% 25% 26% 23% 24% 23% 22% 24% China’s southern coast are likely to Sands China 21% 22% 21% 21% 23% 23% 22% 20% 22% 23% 22% 25% 22% continue to drive visitation growth and demand for gambling, say analysts. Galaxy 18% 18% 19% 19% 20% 17% 19% 21% 19% 18% 20% 21% 20% Macau’s expansion comes as Wynn 11% 9% 12% 10% 10% 12% 11% 10% 11% 11% 9% 11% 12% rival gaming destinations from the Philippines to Vladivostok in Russia MPEL 14% 16% 14% 15% 13% 14% 14% 13% 14% 14% 14% 12% 13% set up casino resorts to lure wealthy MGM 9% 9% 11% 11% 10% 10% 10% 9% 11% 10% 11% 9% 9% Asian gamblers. Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% A Union Gaming Macau analyst considers that “trends are still strong * Figures are rounded to nearest unit, therefore they may not add exactly to the rounded total across all relevant segments (VIP, premium mass, mass) despite recent macro China fears, as well as concerns While 2013 saw rapid gambling that could impact the liquidity of the about various growth drivers such as acau raked in 35.45 billion UnionPay”. patacas (US$4.4 billion) in revenue growth, analysts have high roller VIP segment. To Grant Govertsen, there are gambling revenues in March. tempered expectations for the no indications that Macau’s gaming Stocks skyrocket Growth was up 13.1 percent, at the coming year due to macro economic industry is experiencing any related top end of analysts’ revised estimates uncertainties in China and the Shares of Hong Kong-listed casino weakness. “To the contrary: being the of 10-13 percent. The total casino potential for slower credit growth companies jumped yesterday, fuelled third highest on record (only behind gross gaming revenue for the first by funds buying into the sector after February’s record and last October’s quarter of 2014 was up 19.8 percent government data showed a faster golden week), strong trends have from a year earlier to MOP102.2 than expected pick-up in revenue largely continued since Chinese New billion. over the past week. March’s monthly Year”, he concluded. SJM regained its leadership in The analyst says that if the trend haul was the third highest on record. terms of market share, with 24 Sands China jumped 9.6 percent to continues, this year’s growth might percent, having languished third in HK$63.50 and Galaxy Entertainment exceed a quite handsome 20 percent. the middle of March. Sands China With agencies Ltd stood at 22 percent, followed by Monthly haul of US$4.4 billion added 7.9 percent to HK$72.80. The Galaxy (20%) closing the top three. third-highest on record Melco (13%) was closely followed by Wynn Macau (12%) and MGM Revenue at top end returns to its 9 percent market of analyst estimates share, according to data obtained by Business Daily. Casino shares Gambling demand is seasonally skyrocket in HK more subdued in March after a surge in revenues seen during a week-long national holiday in SJM resumes lead China that marks the start of the in market share New Year. February’s revenues flew past expectations at US$4.8 billion, compared to Singapore’s 2013 annual haul of US$6 billion and Las Vegas’s US$6.5 billion.
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KEY POINTS
Live poultry imports resume tomorrow
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ocal quarantine authority Civic and Municipal Affairs Bureau pledged yesterday that it would draw more samples for inspection of the H5-type and H7-type virus when resuming live poultry imports tomorrow. This concludes the city’s 21-day ban on live poultry imports following the detection of the H7-type
avian flu virus in some batches of 1,000 live chickens in Nam Yue wholesale market. The volume of resumed imports will not be as much as the daily average of 7,000 to 8,000 live poultry imported prior to the ban, and authorities are also limiting the supply from Zhuhai to only two breeding farms, the bureau confirmed.
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April 2, 2014
Macau Brought to you by
HOSPITALITY
Abolition of dormancy charges snowballs The Consumer Council says 10 of Macau’s 28 banks do not charge for inactive accounts, and seven mean to stop charging Tony Lai
tony.lai@macaubusinessdaily.com
Rising stakes Visitors that stay overnight are the most desired type of visitor. Most of them stay at local hotels, and spend more than others in both restaurants and shops. Their numbers have increased significantly in the last few years but they are still in the minority. The majority of visitors are same-day visitors, who stay just a few hours and comparatively spend much less. Only very rarely, on just three occasions in 2012, did the number of overnighters exceed that of same-day visitors. In the summer period, June to August, the difference is usually very small; last year, recorded differences of about 1 percent or less. But most of the year the gap was bigger and even peaked in October, when the difference rose to 12.8 percent. The gap increased noticeably in the first two months of this year. In January and February it reached 15.9 percent and 17.5 percent, well above similar values for last year. Then, the figures showed differences of 7 percent and 13.5 percent, respectively.
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ver one-third of Macau’s banks now impose no charge for inactive accounts, following the lead of banks in Hong Kong, a survey by the Consumer Council has found. The council’s newsletter this week says the finding shows that Macau’s banks have promptly adjusted to the trend to abolish charges for inactive accounts. The council asked the city’s 28 banks in February whether they imposed charges for inactive accounts, which are usually savings accounts. The council received 18 replies. The survey found 10 banks make no charge for inactive accounts. The council said Industrial and Commercial Bank of China (Macau) Ltd, Tai Fung Bank Ltd and the Macau branch of Bank of China Ltd had abolished such charges in January. Six banks never had charged for
inactive accounts in the first place. Hang Seng Bank Ltd has stopped making such charges while it considers whether to abolish them. The council says seven banks expressed their intention to abolish such charges. Only businessman Stanley Au Chong Kit’s Delta Asia Bank Ltd
told the council that it intended to keep charging for inactive accounts. Usually, a bank considers an account to be inactive if the holder has made no deposits or withdrawals for more than a year, although the definition varies. Where banks charge for inactive accounts, the amount charged varies from bank to bank. Delta Asia charges 50 patacas (US$6.25) or HK$50 a year for an account that has less than 1,000 patacas deposited in it over the course of 12 months. The trend to abolish charges for inactive accounts in Macau follows a similar trend in Hong Kong. In October the Hong Kong Monetary Authority goaded 22 banks there into signing a pledge to treat their customers fairly. At least five Hong Kong banks have since abolished charges for inactive accounts.
VIP room sales lift Milan Station’s 2013 gloom It was another loss-making year in the market for secondhand handbags, but high-rollers bought a lot of them Tony Lai
tony.lai@macaubusinessdaily.com
The chart shows overnighters and their main places of origin. The seasonal patterns are quite evident and China is, as expected, the main source of this category of visitors. Its share of the total is also rising. In the first half of the period shown that share seldom reached 60 percent, while in the second half it seldom dipped below that value. The first two months of the current year have seen, for the first time, the proportion of mainlanders in the total number of overnighters exceed 65 percent. The share of visitors from outside Greater China varies typically between 12 percent and 14 percent, seldom falling outside of those limits.
67.3 %
Share of mainlanders in the total of overnight visitors, February
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etailer of second-hand handbags Milan Station Holdings Ltd says good business in Macau’s casino VIP gaming rooms limited the size of annual loss last year. Milan Station told the Hong Kong Stock Exchange this week that it had made a net loss of HK$35.86 million (US$4.62 million) last year, having lost HK$13 million the year before. The company’s revenue in Hong Kong was 1.0 percent lower than the year before and its revenue in the mainland was 18.8 percent lower. But its revenue in Macau grew by 69.6 percent to HK$82.07 million. “Although Macau’s economy was also affected by the headwinds in the global economy, the steady growth of the city’s gaming and tourism industries continued to drive its
economy in 2013,” Milan Station said. Macau’s economy expanded by 11.9 percent last year and gaming revenue here rose by 18.6 percent to over 360.75 billion patacas, official figures show. Milan Station said the growth in its revenue here had been due to sales of expensive products meant for freespending customers in what it calls its “exclusive clubhouses”. The company’s annual report for 2012 describes these clubhouses as sales counters in casino VIP gaming rooms. Milan Station told the stock exchange it had four such counters now and intended to open two more this year to increase sales. The company has one outlet in Macau city centre, in Rua de S. Domingos.
The outlet had posted “solid sales results”, the company said. Official figures show retail sales in Macau were worth 66 billion patacas last year, 23 percent more than the year before. Milan Station said last week it had signed a memorandum of understanding, which was not legally binding, to sell at least 60 percent of its shares to an unidentified party.
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April 2, 2014
Macau
Growing profits for Macao Water The profit of the water supplier jumped 8.4 pct last year after receiving more money from the government for its services Tony Lai
tony.lai@macaubusinessdaily.com
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he city’s sole water distributor saw its profits rebound last year by 8.4 percent over the previous year, after the government granted a 5.92-percent rise in payment for its services. But the government is still considering a new request from Macao Water Supply Co Ltd, asking for another hike this year. The company said in a press statement yesterday that its profit after tax totalled 53.56 million patacas (US$6.7 million) last year, growing by 8.4 percent from 49.43 million patacas last year. The profit generated by its core business, water supply services, was 48 million patacas last year, the statement noted. Such growth in profit after tax reversed the trend of declining profits of the past two years until 2012. Macao Water did not specify yesterday any reason for the rebound. But Felix Fan Xiaojun, the firm’s executive director, said in February that the improved performance was fuelled by effective cost-control measures and the 5.92-percent hike the government granted last year. The government now pays Macao Water 4.65 patacas per cubic metre of water it supplies to the city, against 4.39 patacas before the nearly 6-percent rise. This rise does not
4.65 patacas/ cubic metre
Govt now pays Macao Water for supply
Water prices to stay put during 2014
translate into the increase in water tariff paid by the public. The company, however, has already applied this year for another 16-percent increase in the payment by the government, which is now analysing the request. Mr Fan reasoned in February: “The service hike can help ease some of our financial pressures because there will be large-scale investments in the future like… the third phase of expansion of the water treatment plant [on the Peninsula].”
CEM’s profit growth slows in 2013 More of Macau’s electricity was imported from the mainland last year than ever before Tony Lai
tony.lai@macaubusinessdaily.com
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rowth in the annual profit of Companhia de Electricidade de Macau SA (CEM) slowed last year as growth in electricity consumption slowed. The electricity supplier announced in writing that it made a net profit of 581 million patacas (US$72.6 million) last year, 6 percent more than in 2012. In 2012 its net profit was 14.4 percent bigger than the year before. CEM gave no reason for the slowing of its profit growth. The amount of electricity consumed last year was 4,409 gigawatt hours, 1.5 percent more than in 2012. In 2012 the amount of electricity consumed was 8.5 percent greater than the year before. An adviser to CEM’s executive committee, Iun Iok Meng, said last month that the rate of growth in electricity consumption last year had been slower than the 7 percent he had expected because the weather had
been cooler and no big new consumer had plugged into the system. Mr Iun said he expected electricity consumption to increase by 5 percent this year, and thereafter to increase at annual rates of 10 percent or more as big new consumers such as the new casino-resorts in Cotai hooked up to the mains supply. CEM said on Monday that of the electricity consumed in Macau last year, 92 percent had been imported from the mainland, the greatest proportion yet. The proportion had been 88.8 percent in 2012. The company said it had invested 850 million patacas in its business last year, having invested 980 million patacas in 2012. CEM’s capital investment was in electricity substations to serve the Light Rapid Transit railway on Taipa, in a substation in Ilha Verde, and in hooking up the University of Macau’s new campus on Hengqin Island to the mains supply.
The company has to fork out 1-1.5 billion patacas in the next few years on infrastructure for increased water consumption, he said at the time. Macao Water said in yesterday’s statement it plans to invest over 100 million patacas in the third-phase expansion of the plant, as well as plan a new water treatment plant in Seac Pai Van in Coloane. Its investment in
Macau last year reached 61 million patacas, 10 million patacas more than the original budget, the statement added. “Driven by the population increase and positive developments in entertainment, tourism and the leisure industries of Macau,” water consumption last year also rose 4.2 percent year-on-year to 78.45 million cubic metres of water. The commercial sector accounted for over half of the water consumption last year while households accounted for 42.7 percent and government departments 6.5 percent, the company added.
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April 2, 2014
Greater China Home price growth slowing Houses inflation is likely to slow in 2014 though some small cities plagued with oversupply might see a price correction. A Reuters poll of economists and property market analysts, conducted between March 21 and 31, predicted a 4.3 percent rise in China’s house prices in 2014 and a 3.0 percent increase in 2015. The forecast rise for 2014 was below a previous estimate in a poll four months ago, which had projected an increase of 5.0 percent in 2014 after a 9.9 percent gain in 2013, pointing to a faster rate of cooling in the market.
Construction firm defaults A small construction materials company has defaulted on an interest payment on 180 million yuan (US$29 million) worth of bonds, a national newspaper said yesterday, a few weeks after China’s first-ever domestic bond default. Xuzhou Zhongsen Tonghao New Planking Co Ltd missed the interest payment on a high-yield bond issued last year, the 21st Century Business Herald reported. A default by Xuzhou Zhongsen would be the first in China’s high-yield bond market, which was launched in June 2012 in a bid to expand financing channels for small, private firms.
Shandong Molong shares slide Shares of Shandong Molong Petroleum Machinery Co Ltd slid 6 percent in resumed trade yesterday after it reported a full-year loss for 2013. Late on Monday, Shandong Molong reported a full-year net loss of 175.7 million yuan (US$28.26 million), compared with a profit of 134.3 milllion yuan a year earlier. It postponed the release of its earnings on Monday and suspended its shares pending the release. Shandong Molong’s stock fell as much as 6 percent to HK$1.91, lagging a 0.6 percent gain for the benchmark Hang Seng Index.
Evergrande reports earnings Shares in Evergrande Real Estate Group were set to open up 9 percent in Hong Kong after the developer reported a 49 percent rise in fullyear net profit and said it expected China’s property market to improve. Evergrande’s stock was set to open at HK$4.00, outpacing a 0.6 percent gain for Hong Kong’s benchmark Hang Seng Index.
Media says Philippines attitude immoral Chinese state media yesterday accused the Philippines of violating morality and international law by seeking United Nations arbitration in the South China Sea territorial dispute between the two countries. Manila at the weekend asked a UN tribunal to rule on Beijing’s claims over most of the strategically significant South China Sea, submitting nearly 4,000 pages of evidence to back its case. It argues that the Chinese stance is illegal under the UN Convention on the Law of the Sea (UNCLOS), and interferes with the Philippines’ sovereign rights to its continental shelf.
Manufacturing gauges could A Purchasing Managers’ Index fell to 48 in March, the lowest reading HSBC Holdings Plc and Markit Economics said yesterday.
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hinese manufacturing gauges pointed to weakness in the world’s second-biggest economy that could prompt the Communist Party leadership to roll out additional support measures. A separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month. The reports underscore what Premier Li Keqiang last week called “difficulties and risks” as he tries to control surging debt, default dangers and pollution that threatens to stoke public discontent. Li said the nation has policies in reserve to support economic growth after the cabinet said it would accelerate construction spending. “We expect Beijiing to fine-tune policy sooner rather than later to stabilize growth,” said Qu Hongbin, chief China economist at HSBC in Hong Kong. He added that the pace of first- quarter growth is likely to have fallen below the nation’s fullyear target of 7.5 percent. In Japan, an increase in a sales tax from yesterday is projected to cut gross domestic product this quarter, indicating that a gain in sentiment among large manufacturers may be short-lived. The Tankan index was at 17 in March, the highest level since 2007, a report showed.
‘Reasonable range’ Li said last week he was confident China will keep economic growth in
HSBC headquarters in Hong Kong expect a soon stimulus
a “reasonable range.” The nation will gradually introduce “powerful” measures, including speeding up construction of key investment projects and building railways, roads and irrigation infrastructure, he said. Government officials will
monitor power output, coal usage and crude-oil processing, after the National Development and Reform Commission said March 26 that it saw signs of economic improvement last month in those data. The median estimate of analysts
Preferred shares on the bank agenda Chinese banks are poised to issue preferred shares as soon as this year to shore up finances as slowing profit growth curbs their ability to retain earnings as capital
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CBC, China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. said in the past week they’re preparing to sell the stock as they reported a combined 12 percent increase in 2013 profit, down from 15 percent a year earlier. Preferred stock, available under a trial approved by regulators last month, permits banks to raise capital without selling dilutive common equity. The shares can be converted into common stock if capital ratios fall below a certain level. China introduced stricter capital requirements for banks in January 2013, posing another challenge for an industry facing slower loan growth and rising bad debts amid more competition and interest-rate deregulation. The four biggest lenders will face a capital shortfall of US$87 billion under the new rules by 2019, Mizuho Securities Asia estimates. “Banks might have to come to the market for equity-raising or they will have to restrict their loan growth in the next one or two years,” said Edmond Law, a Hong Kong-based analyst at UOB Kay Hian (Hong Kong) Ltd. “With the preferred share issuance, the problem will ease.
ICBC reported slower net income growth rate
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April 2, 2014
Greater China
lead to stimulus
HK tycoon’s solar assets tank
since July, from 48.5 in February,
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Deutsche Bank AG cut its projection to 7.8 percent from 8.6 percent, according to a March 28 report. Debt dangers have been marked by events this year that include China’s first onshore bond default, the collapse of a real-estate developer and the bailout of a 3 billion-yuan (US$483 million) China Credit Trust Co. product that lent money to a failed coal miner.
Credit growth
for first-quarter growth dropped to 7.4 percent in March from 7.6 percent in February, according to Bloomberg News surveys. For the full year, the median forecast slid to 7.4 percent, which would be the weakest annual pace since 1990.
Banks might have to come to the market for equity-raising or they will have to restrict their loan growth in the next one or two years Edmond Law, UOB Kay Hian analyst
That should minimize the market’s concerns and should be positive for stock valuations.” The Hong Kong-traded stock of the four biggest banks fell by an average 8.2 percent this year amid weaker earnings prospects and rising loan delinquencies. The shares were valued at an average 0.85 times net assets, or book value, the lowest level since Agricultural Bank’s initial public offering in 2010, data compiled by Bloomberg show.
Bad loans ICBC, the world’s most profitable lender, reported last week a 10 percent increase in 2013 net income,
“Li Keqiang last week basically confirmed the government is going to take some measures to support growth,” said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong. This “is also likely to affect the overall monetary stance,” said Kuijs, who added that a slowdown towards the end of 2013 has continued in the first quarter. The government “is likely going to be less forceful in reining in credit growth,” the economist said. The preliminary HSBC-Markit number released March 24 was 48.1. Estimates for the official PMI ranged from 49.8 to 51.2. The government’s PMI is based on survey responses from purchasing executives at 3,000 companies, while the HSBC-Markit report comes from more than 420 enterprises. Bloomberg News
the slowest pace since it was listed in 2006. Construction Bank said March 30 profit growth rose 11 percent, while Agricultural Bank’s expansion slowed to 15 percent. Bank of China’s 12 percent profit increase beat estimates as overseas lending rose. The four banks wrote off and sold about 51 billion yuan (US$8.2 billion) of bad debt in 2013, more than double the previous year. The total was the most since at least 2009 as lenders sought to rein in nonperforming loan ratios.
Capital shortfall Declining profit growth at the biggest lenders curbs their ability to retain earnings to fulfill capital requirements. Under rules that took effect in January 2013, systemically important banks need to have a minimum Tier 1 ratio of 9.5 percent, with overall buffers of 11.5 percent before the end of 2018, according to the China Banking Regulatory Commission. The nation’s four biggest lenders are facing a combined shortfall of 538 billion yuan in common equity Tier 1 capital by 2019 under the new requirements, Jim Antos, a Hong Kong-based analyst at Mizuho, wrote in a March 25 report. At least half the total may be raised from share sales, he said. The China Securities Regulatory Commission widened banks’ options to manage their capital when it issued March 22 rules for a trial allowing members of the Shanghai Stock Exchange 50 A-Share Index to issue preferred shares. Banks including ICBC and Agricultural Bank account for 40 percent of the index, according to data compiled by Bloomberg. Bloomberg News
Hong Kong real-estate tycoon has spent the past year accumulating stakes in failing solar companies, piecing together what may become the biggest collection of photovoltaic factories in the world. Zheng Jianming, also known in Cantonese as Cheng Kin Ming, has spent or pledged about US$533 million to buy assets that at their peak were worth almost US$20 billion, according to regulatory filings in the U.S. and Hong Kong, where he has a home and office. The transactions, if completed, would transform Zheng, a newcomer to the solar industry, into one of its most powerful leaders. Another Zheng solar investment in 2012, a 30 percent stake in Shunfeng Photovoltaic International Ltd., has surged more than 2,900 percent and is now worth more than US$745 million. “He’s a bit mysterious and not really well documented in the industry,” said Andrew Klump, managing director at the Shanghai-
US$533 million solar energy assets spending
based consulting company Clean Energy Associates. “If he wanted to be more high-profile he would be. He’s probably going to continue to stay under the radar.” Zheng declined to comment when contacted at home and through companies he owns, Faithsmart Ltd. and Fulai Investments Ltd. He didn’t respond to questions left in writing at his office and home in Hong Kong. Apple Daily said in December that he’s 48, and his age couldn’t be verified in company records.
Global oversupply Klump has never met Zheng and says he knows little of the man. Though he’s identified on press releases announcing his solar acquisitions, almost a dozen solarindustry analysts on three continents said they knew nothing beyond the name when contacted by Bloomberg. Zheng’s deals would help China consolidate factories responsible for more than half the world’s panels. The solar industry is emerging from a two-year slump that was triggered in part by expanding production capacity among Chinese suppliers. The oversupply of panels ate into margins and eroded profits, and helped push some companies into bankruptcy. The recovery is driven mainly by increasing demand that’s soaking up the overcapacity. Installations in China alone reached 12 gigawatts last year as the country became the biggest solar market, and may exceed that in 2014. Bloomberg News
Democracy clashes with reality Top businessmen say that political struggle interferes negatively in economic world
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ong Kong’s government may delay electoral reforms for the 2017 election to reduce the momentum of planned pro-democracy protests, the city’s former top civil servant said. Anson Chan, the former chief secretary, said she didn’t expect the government to introduce legislation until early next year, leaving lawmakers and residents a “take it or leave it” choice on the method to pick the city’s next chief executive. Hong Kong is gripped in a debate over how to elect its next leader, with opposition lawmakers pushing for full-fledged democracy in line with international standards while China wants candidates to be vetted by a committee. Occupy Central, a civic group started by an academic, has threatened protests in the business district should reforms not meet its demands. “We want to do our best to ensure what eventually comes out of the government is a credible set of proposals that the people of Hong Kong can support,” Chan said in an interview in New York yesterday. The threat of mass protests have been criticized by executives including Asia’s richest man Li Ka-shing and New World Development Co. Chairman
Henry Cheng, who have said the movement will hurt Hong Kong’s competitiveness. Hong Kong Chief Executive Leung Chun-ying said in an interview in June that he wants to deliver on the reforms, though increased democracy may lead to China’s refusal to appoint a leader elected by the city’s people.
Public consultation A five-month public consultation, led by Chief Secretary Carrie Lam, will end on May 3, with the government then expected to submit the proposals to Beijing for approval. The Chinese government will decide if there’s a need to amend the proposal, and then Hong Kong will start a second public consultation in the second half of the year, it said today in an e-mailed response to questions. The final proposal will then be put to lawmakers, it said. “Some of the more extreme members are getting a bit agitated over the lack of action,” Chan said, referring to Occupy Central. Organizer Benny Tai and his colleagues “need to consider between now and when the government actually rolls out its own proposal what can be done to sustain interest.” Bloomberg News
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Real estate landing Chinese real estate companies embrace US market.
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t took just one 15-minute phone call in July to persuade Ifei Chang to join Shanghai-based developer Greenland Holding Group Co. and lead a U.S. expansion. Within three months, she was running US$6 billion of projects as part of a record push by Chinese investors into American property. Greenland reached a preliminary agreement in October to buy a 70 percent stake in the US$5 billion Atlantic Yards development in Brooklyn, New York. That followed a July deal to acquire a US$1 billion residential-and-entertainment project in downtown Los Angeles. Chang, who took charge of that site upon arriving in the U.S., is now on the hunt for more investments. “In China, you climb a ladder where everything is floating and moving so fast,” Chang, 49, said in an interview at her sparsely furnished 46th-floor L.A. office overlooking the empty lot where the Metropolis project will be built. “We come from a country of 1.4 billion people and a lot of economic growth. This kind of project and investment speed is very normal in China. That’s why we are so confident we will deliver this project.” Greenland, like other Chinese companies, is committing to a growing number of multibilliondollar developments outside of its home market. Chinese investments in U.S. commercial properties jumped almost 10-fold last year from 2012, with Manhattan the biggest area for purchases, followed by other New York City boroughs and Los Angeles, according to research firm Real Capital Analytics Inc. Bloomberg News
Nixing speculation China is succeeding in making its currency less predictable. Investors are paying the price.
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lients of U.S. commercial banks have lost about US$2 billion this year on US$332 billion of options betting the yuan would appreciate, while Chinese companies lost US$3.5 billion on US$150 billion wagered on a benchmark forwards contract, according to data compiled by Morgan Stanley and the Depository Trust & Clearing Corp. in Washington. These contracts, when including bearish bets, account for more than a third of global trading in the Chinese currency. After almost a decade of gains, speculators had come to regard the yuan as a one-way trade, leading to a surge in capital inflows that stands to leave the country vulnerable to a sudden shift in investor sentiment. Policy makers responded by selling the yuan and widening its trading band, encouraging a record 2.6 percent quarterly decline that was the biggest among Asian currencies. “The depreciation was engineered to burn the fingers of speculators,” said David Loevinger, a former senior coordinator for China affairs
at the U.S. Treasury and now a Los Angeles- based analyst at TCW Group Inc., which oversees US$132 billion. “The People’s Bank of China wants two-way volatility embedded in the market.”
Quarterly loss PBOC’s press office in Beijing didn’t answer telephone calls seeking comment on the yuan’s swings. The currency started to weaken in mid-February and declined the most in any quarter since China unified official and market exchange rates in 1994, according to China Foreign Exchange Trade System prices and data compiled by Bloomberg. It slipped to a one-year low of 6.2370 per dollar on March 21 from a 20-year high of 6.0406 on Jan. 14, and has almost erased last year’s 2.9 percent advance. The currency traded at 6.1988 as of 12:30 p.m. in Shanghai, 33 percent stronger than in July 2005, when the PBOC dropped its peg to the U.S. dollar. The losses in the options market
US$2 billion
2014 loss by U.S. commercial bank clients were on outstanding yuan call options reported by U.S. banks, which clients took out to hedge or speculate on the Chinese currency. The contracts lost money as the yuan weakened beyond the median pre-arranged exchange rate, known as the strike price, of about 6.05 per dollar, data compiled by Bloomberg show. The yuan’s decline also caught out investors -90 percent of them Chinese companies- in the so-called Target Redemption Forwards market. Bloomberg News
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April 2, 2014
Asia
FX markets subject to regulatory crackdown New Zealand and Hong Kong start the investigation of suspicious banks
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egulators in Hong Kong and New Zealand said yesterday that they are investigating banks’ conduct in the foreign exchange market as part of an investigation tied to the global probe into FX markets. The move shows that the regulatory crackdown on the US$5.3 trilliona-day-market is escalating and continues to broaden from Europe to other parts of the world. The Hong Kong Monetary Authority (HKMA) said in a statement after an inquiry from Reuters that it is requiring several banks to conduct independent reviews of their FX divisions and to then send the HKMA the results. “The HKMA is investigating into a number of banks in Hong Kong,” an HKMA spokeswoman said in the statement. A spokesman for New Zealand’s Commerce Commission said it had also started looking into the matter. “We’ve got an investigation but that’s all we’re saying because it’s an active investigation,” a spokesman for the commission told Reuters. Regulators in Hong Kong, the third largest foreign exchange market in Asia after Singapore and Tokyo, said in October they were in contact with foreign regulators about the matter, but this was the first time they have confirmed actual investigations are taking place. Market watchdogs around the world are looking closely at traders’ behaviour on a number of key benchmarks, spanning interest rates, foreign exchange and commodities markets. Several banks and brokers have already been fined billions of dollars for manipulating benchmark interest rates, but the foreign exchange probe could prove to be even more costly given the size of the market and scale of investigation.
Authorities are looking at whether traders from different banks worked together to influence currency prices and if they traded ahead of their own customers or failed to accurately represent to customers how they were determining the prices. The probes are looking at whether a handful of senior traders colluded to use knowledge of client orders to move markets around the daily “fixings”, which set prices for billions of contracts and investments worldwide. Singapore’s central bank, which oversees dealers in Asia’s largest foreign exchange market, said in October that it was in contact with foreign regulators about the issue but has not provided any further comment on the matter since then.
Escalating probe News of these probes come a day after Swiss and British regulators both stepped up their investigations into the matter.
Switzerland’s competition commission WEKO said it formally opened an investigation into several Swiss, British and U.S. banks, including JP Morgan Chase & Co, Barclays PLC and Citigroup Inc. The UK Financial Conduct Authority (FCA), meanwhile, said it will assess if banks have cut the risk of traders manipulating benchmark rates in the coming year, to see if lessons have been learned from the scandal over benchmark rate rigging. Around 30 traders are known to have been placed on leave, suspended, or fired as a result of the probe. A source told Reuters on Monday that Kai Lew, a director of institutional foreign exchange sales at Deutsche Bank AG has been placed on leave as part of an internal investigation into potential manipulation. Lew was based in London and responsible for central bank FX business at Deutsche, the world’s largest currency trader. There is no evidence she has been involved in
KEY POINTS Banks asked to conduct independent reviews HKMA speaking to other regulators 30 traders globally suspended in probe so far
wrongdoing and she could not be reached for comment. Last week Swiss bank UBS AG, the world’s fourth largest FX bank, suspended up to six currency traders in the United States, Zurich and Singapore. Reuters
South and North Korean trade more than bullets North Korea makes personal attack on South Korean President
S
outh Korea urged North Korea yesterday to stop making “senseless” personal attacks on President Park Geun-Hye following a series of increasingly vitriolic diatribes published by Pyongyang’s state media. A government statement called on the North to “act discreetly” in line with a recent cross-border agreement for the two countries to stop slandering one another. “The North is showing senseless behaviour in using unspeakable language to attack our head of state’s diplomatic activities,” it said. The tone of the criticism has become pointedly more personal and coarse in recent days, both in the editorial pages of the ruling party newspaper the Rodong Sinmun and the official KCNA news agency. The attacks have ostensibly been a response to speeches Park gave during a recent tour of Europe, saying Pyongyang’s nuclear
material could end up in terrorist hands, and warning of a possible Chernobyl-style disaster at the North’s main Yongbyong nuclear complex. In Berlin, she spoke of the lessons Germany could provide for unification of the Korean peninsula and urged the North to give up its nuclear weapons.
“Park Geun-Hye’s nonsense gibberish and ugly behaviour... leave us disgusted and disillusioned,” the Rodong Sinmun said yesterday. Park’s predecessor, Lee Myung-Bak was also the target of highly personal criticism by the North’s state media, but the attacks on Park have been notable for their repeated
allusions to her gender as the South’s first woman president. “Park put thick makeup on her old, wrinkled face and rambled on,” was KCNA’s verdict on her address in Germany. “She can’t dump her true nature of the peasant woman who babbles to herself at home.
“No wonder she is being criticised by the whole world as a ‘low-quality politician’ who does not know what and what not to speak about,” the agency said. One KCNA despatch yesterday included quotes apparently harvested from random Pyongyang residents. “That talkative peasant woman needs to stop swishing her skirt,” one resident said, employing a derogatory Korean term used to criticise women seen as overly bossy or domineering. One doctor in a Pyongyang hospital was quoted as saying Park’s actions would make “even a cow tethered in a field laugh.” Since assuming office a year ago, Park has repeatedly spoken of her desire to build trust with Pyongyang, while remaining firm in the face of any provocation from the North. AFP
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April 2, 2014
Asia Telecom NZ quits Cook Islands Telecom New Zealand Ltd said yesterday it has an agreement to sell its 60 percent stake in Telecom Cook Islands for about NZ$23 million (US$19.96 million) to Digicel. The sale, which was flagged in December, was part of Telecom’s strategy to concentrate on communication and IT businesses in New Zealand, it said. The sale is expected to be completed by the end of May.
Japan’s February wages steady Japanese wage earners’ total cash earnings were unchanged in February from a year earlier and, in a possible sign of thaw in sluggish growth in salaries, winter bonuses rose for the first time in five years, data showed yesterday. Overtime pay, a barometer of strength in corporate activity, rose 3.4 percent from a year ago in February, up for an 11th straight month although the increase was slower than January’s 4.8 percent rise, the figures from the labour ministry showed. Year-end bonuses paid between November and January rose 0.3 percent from a year earlier, the first rise since a 1.0 percent gain in 2008. In 2012, bonuses fell 1.5 percent.
Australian home prices jump Home prices across Australia’s major cities jumped by 2.3 percent in March while gains became more broadbased, a strong result that will fan concerns speculative buying is running too hot for policy makers’ comfort. Figures from property consultant RPData-Rismark showed overall dwelling prices were up 10.6 percent compared to March last year, led by 15.6 percent growth in Sydney. The gains were also broader with every major city recording a monthly increase in March. Over the whole first quarter, Melbourne boasted an increase of 5.4 percent, while Sydney added 4.4 percent and Brisbane 1.5 percent.
SK’s new governor vows consistency New central bank chief promised yesterday consistent and predictable policy and effective communication as he started work on guiding a sustained recovery in Asia’s fourthlargest economy. Lee Ju-yeol, 61, a veteran technocrat who has worked at the central bank for 35 years, started his four-year term as the Governor of the Bank of Korea with the double mission of keeping stability in inflation and the financial system. Lee listed uncertainty over China’s economic growth prospects and problems arising from South Korea’s heavy household debt and weakening growth potentials as risks facing the Korean economy.
Japan marches towards In a movement that will not relax growing tensions, Japan relaxes
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he country eased its weapons export restrictions yesterday in the first major overhaul of arms transfer policy in nearly half a century, as Prime Minister Shinzo Abe allegedly seeks to fortify ties with allies and bolster the domestic defence industry. In a move likely to anger China, where bitter memories of Japan’s past militarism run deep, the government decided to allow arms exports and participation in joint weapons development and production when they serve international peace and Japan’s security. That is a shift from a decades-old policy of banning all weapons exports in principle, although quite a few exceptions to the rule have been made over the years, such as the transfer of arms technology to the United States, Japan’s closest ally. “This is beneficial for Japanese companies in that they can take part in joint development and joint production and have access to cutting-edge technology,” Takushoku University Professor Heigo Sato said. “If you live in a closed market like the Japanese defence industry does, you clearly lag behind in technological development.” But even under the new regime, Japan is to focus mainly on non-lethal defence gear such as patrol ships and mine detectors and says it has
no plan to export such weapons as tanks and fighter jets. The move comes when SinoJapanese ties have been chilled due to a territorial dispute over a group of East China Sea islets and Abe’s visit in December to Tokyo’s Yasukuni Shrine, seen by critics as a symbol of Japan’s wartime aggression. Japan’s self-imposed restrictions on arms exports have virtually excluded defence contractors such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries and IHI from the overseas market and made it difficult for them to cut costs and keep abreast of technological development.
Competition tough Japan’s defence budget slipped for a decade through 2012, raising concerns that some of the smaller and less diversified arms makers might be forced to go out of business. The new export policy alone will unlikely help Japanese defence makers establish a big presence overseas, although some high-performance Japanese components, such diesel engines for ships, stand out among potential competitors. “It’s not as if Japanese (defence) goods will start selling right away because of this. The government still needs to play a leading role in their overseas expansion. Various
Are Japan’s self defence troops concept part of the
governments are already competing fiercely out there,” said Bonji Ohara, research fellow at the Tokyo Foundation, a think tank. “Competition dictates prices. Of course, they cannot set the kind of prices they are setting for the domestic market,” said Ohara, who once served as a Japanese navy attache in China. One of Japan’s potential defence gear exports is Kawasaki Heavy’s submarine diesel engines, which do
Effect of Japan’s tax hike For evidence that Japan’s economy could avoid a steep decline after a sales tax increase took effect yesterday, consider diaper sales
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etailers across Japan have reported shortages of Kao Corp’s ‘Merries’ brand diapers in recent months, with many stores sold out even after imposing rations.
At midnight, Japan’s sales tax rose to 8 percent from 5 percent. A crush of demand ahead of the first sales tax hike in 17 years has been credited with lifting sales of everything from
Japan Prime Minister Abe Shinzo raised taxes on Monday
condominiums to luxury cars -and raised fears of a sharp downturn in spending over coming months. That was certainly the experience of 1997, when the sales tax rose to 5 percent from 3 percent -and spending promptly fell off a cliff. Economists trying to assess the payback have focused on soft goods, items such as cigarettes, office supplies and diapers, where sales surged in the final weeks of March. Sales of consumables account for about a quarter of private consumption. The thinking goes that the bigger the rush ahead of the tax hike, the bigger the drop in spending will be in this quarter, and the bigger the risk that the economy will disappoint already modest expectations of less than 1 percent growth for 2014. “Real household income will be squeezed after April by a greater degree than last time because of the bigger rise in the sales tax rate,” said Yasuo Yamamoto, senior economist
editorial council Paulo A. Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Michael Armstrong, Pierre-François Metayer, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee International editor Óscar Guijarro Brands & Trends Raquel Dias Creative Director José Manuel Cardoso WEB & IT Janne Louhikari interns Cynthia Wong, Yvonne Wong 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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April 2, 2014
Asia
militarization
Good time for Asia growth Developing countries in the region can stay on the path of growth thanks to circumstances
the limits for trading with arms
KEY POINTS Tokyo to export arms to serve peace, Japan’s security Exports to Bolster defence industry, security ties Export ban remains on armed conflicts, U.N. resolutions No plan to export lethal arms such as tanks, fighter jets
past?
not require air and allows submarines to stay submerged for an extended period. When Japanese Defence Ministry officials visited Australia last year, Canberra showed interest in them, a Japanese government official said. Another one is ShinMaywa Industries’ US-2 amphibious aircraft. India is already in talks with the Japanese government for possible procurement.
Real household income will be squeezed after April by a greater degree than last time because of the bigger rise in the sales tax rate Yasuo Yamamoto, Mizuho Research Institute economist
at Mizuho Research Institute. “As such, there’s a risk of the pullback turning out deeper this time.” A deep slump could increase the pressure on the Bank of Japan to expand an already massive program of monetary stimulus by mid-year.
Chinese demand But behind the diaper sales surge, many retailers say, is a factor that did not figure in 1997: increasingly affluent Chinese consumers. Demand from a grey market of brokers who buy Japanese-made diapers and send them to China was
Under the new rules, Japan still bans weapons exports to countries that are involved in international conflicts and shipments that breach U.N. Security Council resolutions such as exports to North Korea and Iran. In announcing the new rules, Japan stressed that it would remain a nation “striving for peace” and screen each case to see if exports should be allowed, a move to assure its neighbours that Japan is not taking a path to a military power. Reuters
behind the disappearance of Merries and other diapers from store shelves in recent weeks, according to brokers and store managers. Some stores, such as the Papasu drug store chain, found it almost impossible to keep the Merries brand on shelves. “We have Chinese customers buying packages of Merries, and even when we set a one-packageper-person limit, they come back again to buy more,” Koji Toyama, a Papasu employee, said last week. The reputation of Japanese-made products means that some Chinese consumers are willing to pay a premium for them, even preferring them over Kao’s Chinese-made Merries. And that changing nature of consumption patterns, many economists say, means the pain in Japan will be more limited than 1997, when the sales tax hike coincided with the start of the Asian financial crisis and a recession. Kenji Yumoto, vice chairman of the Japan Research Institute, said he was cautiously optimistic that the drop-off in consumer demand will not be as extreme as it was the last time. While auto sales rose by proportionally more than they did in 1997, other categories had not seen such an outsized run-up, he said. “I expect that the pullback in demand will be smaller than it was in 1997,” he said. For appliances and home electronics, for example, official data shows little change in sales over the past two years -in stark contrast to 1997. Then, ahead of the tax increase, sales rose steadily for four quarters before a spike in the final three months when they were 40 percent higher than two years earlier -and immediately crashed back to below their 1995 levels. Reuters
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eveloping Asia is poised to sustain its current growth momentum and is well positioned to manage risks coming from a slightly slower Chinese economy and possible uneven demand from major industrialised nations, the Asian Development Bank said. Asian nations can undertake pre-emptive measures to protect the region’s growing economy from unpredictable capital inflows, said the Manila-based lender as it unveiled its forecasts for the region for 2014 and 2015. The bank said it expects the region, grouping 45 counties in Asia-Pacific, to grow 6.2 percent this year, slightly faster than its most recent estimate of 6.0 percent in December, before accelerating further to 6.4 percent in 2015. “Most regional economies have strengthened their economic fundamentals. Looking ahead, strengthening macro prudential measures before the boom can help avert sudden capital reversals that accompany the bust,” the ADB said in its Asian Development Outlook 2014. While risks to the region’s growth outlook have eased, further shock to global financial markets
from the U.S. tapering of stimulus and expected policy tightening, an uneven recovery in developed economies, and the possibility of slower growth in China as it aims to curb credit expansion would weigh on the region’s economic uptrend, the bank said. Growth in China is expected to be 7.5 percent this year, the ADB said, slower than its December forecast of 7.7 percent, and will likely lose momentum further to 7.4 percent in 2015 as the country pursues policies aimed at more equitable, balanced and sustainable growth. India is forecast to accelerate to 5.5 percent this year, much faster than the 4.7 percent forecast in December, although the South Asian nation was still operating below potential which can be solved by clearing investment bottlenecks, the bank said. Improving global trade conditions will help lift Southeast Asia’s growth to 5.0 percent this year, slightly higher than a previous estimate of 4.8 percent, with Malaysia, Singapore and Vietnam leading the way. Political unrest will continue to restrain growth in Thailand, with the economy picking up speed only in 2015, the ADB said. Reuters
India retains interest rate RBI Governor Raghuram Rajan may also want to wait for a glimpse of the next government’s economic policies
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he Reserve Bank of India is expected to keep its policy interest rate unchanged after retail inflation, which has become its preferred price gauge, eased to a 25-month low in February. With India heading for elections running from April 7 to May 12, RBI Governor Raghuram Rajan may also want to wait for a glimpse of the next government’s economic policies as well as the outlook for monsoon season rains that begin in June before making a policy move, economists said. All 53 analysts in a Reuters poll released on Thursday expect the repo rate to stay at 8 percent. “We expect RBI to stay on hold at this policy given the breathing space they enjoy at the moment with the recent softening in inflation,” said Siddhartha Sanyal, India economist at Barclays. “There are two known unknowns - elections and the monsoon - and by June, Rajan will have better clarity on both.” While a stable government could mean better fiscal management and accelerated economic reforms, an unstable and fragmented coalition could trigger inflationary populist spending that may prompt the RBI to raise rates. Whichever party forms the government will need to do so with coalition partners. India’s consumer price index inflation eased to 8.10 percent in February, near the RBI’s January
Raghuram Rajan
2015 target of 8 percent, while wholesale price index slowed to a 9-month low of 4.68 percent. However, core CPI has remained stubbornly elevated at around 8 percent, reflecting demand-side pressures despite an economy growing at its slowest in a decade. “We believe core inflation will remain sticky around current levels in the near term and only decline slightly during the year. Monetary policy is currently in neutral gear but eventually needs to venture into contractionary territory,” HSBC economist Leif Eskesen said in a report on Friday. Rajan has raised the policy repo rate three times since he took over in September, including a surprise hike in January, but has recently toned down his anti-inflation rhetoric, saying the RBI has not yet adopted an internal panel report that proposes inflation targeting. Ruters
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International No further Greek bailout according to Austria Austria’s finance minister played down the idea that Greece may need another package of financial aid, saying yesterday he saw no need for more help now and hoped that would remain the case. Michael Spindelegger made his remarks as euro zone finance ministers met in Athens on Tuesday to discuss the payment of loans pledged to Greece under international rescues. “Currently, we do not expect Greece will need a third package,” Spindelegger told journalists. “I hope it will stay like this.”
Germany data keeps walking the good path Unemployment fell for a fourth month in March as companies became more confident in the health of Europe’s largest economy.
UK manufacturing cools Growth in British manufacturing unexpectedly eased to its slowest pace in eight months in March and prices paid by factories tumbled, a survey showed yesterday. The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) fell in March to 55.3, its lowest since July last year and below all forecasts in a Reuters poll of economists. February’s reading was sharply cut to 56.2 from an originally reported 56.9. It was the fourth month in a row that the index fell although it remained comfortably above the 50 mark that denotes growth.
Reinsurance prices slide A downward slide in reinsurance prices showed clear signs of accelerating in April contract renewals and is likely to feed through to property and casualty insurance prices before long, broker Willis said yesterday. Reinsurers have seen prices fall by up to 20 percent when renewing contracts with Japanese insurance companies that take effect on April 1, with declines likely to be even larger in U.S. contract renewals later in the year, said James Vickers, Chairman of Willis Re International.
Apple again seeks Samsung blood Apple and Samsung returned to federal court yesterday for opening statements in their latest patent battle, with the iPhone maker expected to present more detailed evidence in its attempt to win a U.S. ban on sales of several Samsung smartphones. Apple Inc and Samsung Electronics Co Ltd have been litigating around the world for nearly three years. Jurors awarded the iPhone maker about US$930 million after a 2012 trial in San Jose, California, but Apple failed to persuade U.S. District Judge Lucy Koh to issue a permanent injunction against the sale of Samsung phones.
Hollande presses for delaying deficit cuts President Francois Hollande signaled that France will seek another delay to its deficit cutting commitments so that his new government can try to bolster growth with tax cuts after a rout at the polls. “There can be no question of undermining growth that is just returning,” Hollande said in a televised address late yesterday, adding new Prime Minister Manuel Valls needs to convince Europe that France’s “contribution to competitiveness and growth will have to be taken into account with respect to its commitments.”
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he number of people out of work decreased by a seasonally - adjusted 12,000 to 2.9 million, after falling a revised 15,000 the previous month, the Nuremberg-based Federal Labour Agency said yesterday. Economists forecast a decline of 10,000, according to the median of 31 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent after being revised down the prior month to the lowest level in at least two decades. Falling unemployment in Germany is supporting domestic consumption just as a recovery in the rest of the euro area, the country’s biggest trading partner, bolsters exports. The Bundesbank says the German economy probably strengthened “substantially” in the first quarter, after an expansion of 0.4 percent in the three months through December that beat economists’ estimates. “The underlying trend is a gradual decline in German unemployment over the course of the year,” said Holger Schmieding, chief economist at Berenberg Bank in London. “However, unemployment cannot fall much further because the people who are still unemployed do not have the skills needed to find jobs.” The number of people unemployed fell by 2,000 in west Germany and
10,000 in the eastern part, the labouragency report showed.
Hiring plans Germany’s jobless numbers highlight how it’s faring better than the rest of the 18-nation euro area. Figures from the European Union’s statistics office to be released at 11 a.m. in Luxembourg will probably show the unemployment rate in the currency bloc held at 12 percent in February, near an all-time high, according to a separate Bloomberg survey. Hannover, Germany-based Continental AG, Europe’s secondbiggest maker of car parts, said last month that it’ll hire about 7,000 people in 2014, mostly in growth markets. Bayer AG, the country’s largest pharmaceuticals company, said it’ll create 500 new jobs at its sites in Wuppertal and Leverkusen. The tighter labour market is helping to boost employment costs. Negotiated wages will rise 3 percent this year and a national minimum wage in 2015 will increase the upward pressure, according to a report by Barclays Plc.
Labor strikes “The current wage negotiations for public sector employees have been
tough and have already led to several warning strikes,” Thomas Harjes and Francois Cabau, economists at Barclays, said in the report. “Since public sector wage agreements often serve as a floor for the private sector, there is a risk that wage costs rise somewhat faster in 2015 than what we have currently pencilled in.” Workers from hospitals to airlines have gone on strike to demand higher pay and benefits. Deutsche Lufthansa AG, Europe’s secondlargest carrier, said this week that a stoppage by pilots would cost tens of millions of euros as it cancelled thousands of flights. The company described the action as among the most severe in its history. Economists surveyed by Bloomberg predict German economic growth of 1.8 percent this year. The European Central Bank says the euro-area economy will expand 1.2 percent. ECB policy makers meet on April 3 in Frankfurt to set interest rates for the currency bloc. Consumer prices rose 0.5 percent in March, the slowest pace in more than four years, prompting speculation that the institution will add more stimulus. The central bank has pledged to return inflation to its goal of just under 2 percent. Bloomberg News
Russia raises gas price for Ukraine Ukraine will now have to pay US$385.5 per 1,000 cubic metres of gas in the second quarter
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ussian natural gas producer Gazprom announced a more than 40 percent increase in the price Ukraine must pay for gas yesterday, stepping up economic pressure on Kiev in its political standoff with Moscow. Ukraine will now have to pay US$385.5 per 1,000 cubic metres of gas in the second quarter, an increase form US$268.5 that was agreed in December, before the ouster of Ukraine’s Moscow-backed president and Russia’s annexation of Crimea from Ukraine. Gazprom’s Chief Executive Officer, Alexei Miller, said the increase was needed because Ukraine’s debt
for unpaid gas bills now stood at US$1.7 billion. “The December discount for gas cannot be applied any more,” Miller said, adding that the transportation tariff for Gazprom’s gas to Europe via Ukraine was increasing by 10 percent, in line with earlier agreements. Russian President Vladimir Putin agreed in December to cut the gas price for Ukraine and provide a financial lifeline to Kiev after its abrupt decision not to sign a trade agreement with the European Union and rebuild economic ties with Moscow instead. The discount was subject to a quarterly review. After Ukrainian President Viktor
Yanukovich was deposed in February following months of anti-government protests, Gazprom and Putin said the gas price discount would be scrapped because of the debt. The price of US$385.5 is above the US$370 Gazprom charges its clients in the European Union on average, but slightly below the price of US$386-US$387 which Kiev had said it expected. Ukrainian Prime Minister Arseny Yatseniuk has said the country will need energy from the EU to protect it from the repercussions of its standoff with Moscow, on which it depends for over half its oil and gas. Reuters
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Opinion Business
The Changing Face of Global Risk
Leading reports from Asia’s best business newspapers
Nouriel Roubini
wires
Professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics.
The Jakarta Post Twenty-eight-year-old Muhammad Fikri, an Indonesian now studying in the Netherlands, has just bought round-trip tickets from a lowcost airline for his solo trip to Italy this month. Last year when he worked in a social business institution in Jakarta, Fikri was an avid backpacker exploring Asia on low-cost carriers. Fikri is one of many rising middle-class Indonesians using their disposable income for travel. The Transportation Ministry estimated that the number of air travelers in the country will hit more than 100 million this year, 11 percent up from 2013’s estimated 93.56 million.
Financial Review BHP Billiton is considering spinning off non-core assets including aluminium, nickel and bauxite in a transaction that could create a new US$20 billion resources company that would be handed back to shareholders. It is understood a team advised by Goldman Sachs and using the name “project river” is working on a number of strategic options for non-core businesses including a demerger and individual asset sales. Multiple sources close to the process said no final decision had been made and stressed the project had been running for more than a year without a conclusion.
The Phnom Penh Post The government and industry insiders are worried about the steady decline of rubber prices over the last three years, during which the area it is cultivated in has grown. “Farmers and investors raised concern . . . over the trend of the market and the price of natural rubber, which has fallen from more than US$4,500 per ton on average in 2011 to between US$1,800 and US$2,000 per ton in 2013,” Minister of Agriculture Ouk Rabun said on Friday during an annual meeting.
Thanh Nien News Ho Chi Minh City’s cultural authorities are looking into ways to save relics that are being destroyed by the construction of a new urban area, but scientists say they cannot have their cake and eat it too. The city Department of Culture, Sports and Tourism decided to look into the matter more than one month after work on the Thu Thiem New Urban Area was launched in District 2. The 737-hectare (1822-acre) area was planned to become a new hub for the city, including part of the municipal administration.
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EW YORK – The world’s economic, financial, and geopolitical risks are shifting. Some risks now have a lower probability – even if they are not fully extinguished. Others are becoming more likely and important. A year or two ago, six main risks stood at centre stage: · A eurozone breakup (including a Greek exit and loss of access to capital markets for Italy and/or Spain). · A fiscal crisis in the United States (owing to further political fights over the debt ceiling and another government shutdown). · A public-debt crisis in Japan (as the combination of recession, deflation, and high deficits drove up the debt/ GDP ratio). · Deflation in many advanced economies. · War between Israel and Iran over alleged Iranian nuclear proliferation. · A wider breakdown of regional order in the Middle East. These risks have now been reduced. Thanks to European Central Bank President Mario Draghi’s “whatever it takes” speech, new financial facilities to stabilize distressed sovereign debtors, and the beginning of a banking union, the eurozone is no longer on the verge of collapse. In the US, President Barack Obama and Congressional Republicans have for now agreed on a truce to avoid the threat of another government shutdown over the need to raise the debt ceiling. In Japan, the first two “arrows” of Prime Minister Shinzo Abe’s economic strategy – monetary easing and fiscal expansion – have boosted growth and stopped deflation. Now the third arrow of “Abenomics” – structural reforms – together with the start of long-term fiscal consolidation, could lead to debt stabilization (though the economic impact of the coming consumption-tax hike is uncertain). Similarly, the risk of deflation worldwide has been contained via exotic and unconventional
monetary policies: near-zero interest rates, quantitative easing, credit easing, and forward guidance. And the risk of a war between Israel and Iran has been reduced by the interim agreement on Iran’s nuclear program concluded last November. The falling fear premium has led to a drop in oil prices, even if many doubt Iran’s sincerity and worry that it is merely trying to buy time while still enriching uranium.
Though many Middle East countries remain highly unstable, none of them is systemically important in financial terms, and no conflict so far has seriously shocked global oil and gas supplies
Though many Middle East countries remain highly unstable, none of them is systemically important in financial terms, and no conflict so far has seriously shocked global oil and gas supplies. But, of course, exacerbation of some of these crises and conflicts could lead to renewed concerns about energy security. More important, as the risks of recent years have receded, six other risks have been growing.
For starters, there is the risk of a hard landing in China. The rebalancing of growth away from fixed investment and toward private consumption is occurring too slowly, because every time annual GDP growth slows toward 7%, the authorities panic and double down on another round of credit-fueled capital investment. This then leads to more bad assets and non-performing loans, more excessive investment in real estate, infrastructure, and industrial capacity, and more public and private debt. By next year, there may be no road left down which to kick the can. There is also the risk of policy mistakes by the US Federal Reserve as it exits monetary easing. Last year, the Fed’s mere announcement that it would gradually wind down its monthly purchases of long-term financial assets triggered a “taper” tantrum in global financial markets and emerging markets. This year, tapering is priced in, but uncertainty about the timing and speed of the Fed’s efforts to normalize policy interest rates is creating volatility. Some investors and governments now worry that the Fed may raise rates too soon and too fast, causing economic and financial shockwaves. Third, the Fed may actually exit zero rates too late and too slowly (its current plan would normalize rates to 4% only by 2018), thus causing another asset-price boom – and an eventual bust. Indeed, unconventional monetary policies in the US and other advanced economies have already led to massive assetprice reflation, which in due course could cause bubbles in real estate, credit, and equity markets. Fourth, the crises in some fragile emerging markets may worsen. Emerging markets are facing headwinds (owing to a fall in commodity prices and the risks associated with China’s structural transformation and the Fed’s monetary-policy shift)
at a time when their own macroeconomic policies are still too loose and the lack of structural reforms has undermined potential growth. Moreover many of these emerging markets face political and electoral risks. Fifth, there is a serious risk that the current conflict in Ukraine will lead to Cold War II – and possibly even a hot war if Russia invades the east of the country. The economic consequences of such an outcome – owing to its impact on energy supplies and investment flows, in addition to the destruction of lives and physical capital – would be immense. Finally, there is a similar risk that Asia’s terrestrial and maritime territorial disagreements (starting with the disputes between China and Japan) could escalate into outright military conflict. Such geopolitical risks – were they to materialize – would have a systemic economic and financial impact. So far, financial markets have been sanguine about these new rising risks. Volatility has increased only modestly, while asset prices have held up. Noise about these risks has occasionally (but only briefly) shaken investors’ confidence, and modest market corrections have tended to reverse themselves. Investors may be right that these risks will not materialize in their more severe form, or that loose monetary policies in advanced economies and continued recovery will contain such risks. But investors may be deluding themselves that the probability of these risks is low – and thus may be unpleasantly surprised when one or more of them materializes. Indeed, as was the case with the global financial crisis, investors seem unable to estimate, price, and hedge such tail risks properly. Only time will tell whether their current nonchalance constitutes another failure to assess and prepare for extreme events. © Project Syndicate, 2014
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Closing Chief Executive to stand for re-election
Angola: Oil production falls
The head of the government in Macau said yesterday that the election of a new leader would take place on 31 August. In a working lunch with Portuguese and English media, Fernando Chui Sai On, whose first term of office ends in December, acknowledged that he would be standing for re-election. During lunch, the CE expressed his support for the local media.
The fall in Angolan oil production in March was the greatest of all Organization of the Petroleum Exporting Countries (OPEC) Bloomberg said yesterday. The drop in oil production in the second largest oil producer after Nigeria, was 167,000 barrels a day, leaving a total of 1.52 million barrels a day, mainly due to maintenance operations at BP’s Plutonio well, the agency said.
Gaming billionaires race STDM shareholder and former co-owner of L’Arc Macau, Cheng Yu-tung, in a race with Melco Crown Entertainment Australian partner, James Packer, in a bid for Barrier Reef casinos. Queensland state will allow three new casinos
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ompanies controlled by billionaires James Packer and Cheng Yu-tung have lodged bids to develop casinos in Australia’s Queensland state, as the state government plans to lure Asian tourists with new resorts. Packer’s Crown Resorts Ltd. and a venture including Cheng’s Chow Tai Fook Enterprises Ltd. are among 12 groups that have filed applications for new casinos in a state which is already home to four, Queensland deputy premier Jeff Seeney said in a statement posted on a government website yesterday. With a shoreline longer than India’s that’s lapped by the Great Barrier Reef, Queensland is seeking to emulate the success of Singapore where resorts owned by Genting Singapore Plc and Las Vegas Sands Corp. drew Asian tourists to raise about US$5.2 billion in revenue in 2013. Echo Entertainment Group Ltd., operator of the state’s two largest casinos, as well as Auckland’s Skycity Entertainment Group Ltd., Hong Kong investor Tony Fung’s Aquis Resort at the Great Barrier Reef Pty, and property companies Lend Lease Group and Greenland Investment Pty also lodged bids, Seeney said. The government wants “worldclass resorts that will revitalise the tourism and construction sectors of the economy,” Seeney said in the
Cheng Yu-tung
statement. They’ll be “draw cards for both international and domestic visitors and provide employment for thousands of Queenslanders,” he said. Six of the bids relate to a site in the center of Brisbane where Echo already operates a casino inside the sandstone former state Treasury building. Crown, which is building a A$1.3 billion ($1.2 billion) casino and hotel complex on the shores of
Sydney Harbour that will compete with Echo’s nearby site in that city, will also vie for the Brisbane site.
Rare Opportunity Lend Lease, Skycity, Greenland, a unit of Shanghai-based Greenland (Hong Kong) Holdings Ltd. and the venture with Chow Tai Fook, the parent of a Hong Kong namesake
jewelery chain, have also submitted expressions of interest for a project to redevelop the central Brisbane site, which Premier Campbell Newman has called a “once-in-a-generation opportunity.” Queensland’s government said that it’ll allow up to three new casinos in the state, with one of the licenses reserved for the central Brisbane site. The department of state development will consider the bids and prepare a final short-list by the middle of 2014, Seeney said, with a decision on the licenses expected a year later. Of the other expressions of interest, two relate to the Gold Coast south of the state capital, and four to sites close to the Great Barrier Reef in the middle and north of the state. Recently, International Entertainment Corp, controlled by the family of Cheng Yu-tung, bought a company linked to junket operator Suncity Group for HK$7.35 billion (US$948 million). Suncity is one of Macau’s biggest junket operators. Mr Cheng controls Hong Kong property developer New World Development Co Ltd and the world’s biggest chain of jewellers, Chow Tai Fook Jewellery Group Ltd. He also owns 10 percent of Sociedade de Turismo e Diversões de Macau SA, the parent company of casino operator SJM Holdings Ltd. Alex Lee with Bloomberg
China’s external debt Melco Crown to hire on the rise 5,000 in Manila
China’s leader urges faster construction
China’s outstanding foreign debt had hit US$863.2 billion by the end of 2013, up 17 percent from the figure in the previous year, data from the country’s forex regulator showed on Monday. The amount does not include the outstanding external debt of the Hong Kong and Macau or that of Taiwan, the State Administration of Foreign Exchange (SAFE) said in a statement on its website. Of the total outstanding external debt, registered external debt reached US$526.7 billion, while the balance of trade credit between businesses amounted to US$336.5 billion. Most of the debt owed to foreign creditors resulted from short-term borrowing, as outstanding external debt with a term of one year or less amounted to US$676.6 billion, while long and medium-term outstanding external debt came in at US$186.5 billion. In terms of currency structure, debt denominated in U.S. dollars accounted for 79.6 percent of the outstanding registered external debt, and that in euros and Japanese yen accounted for 5.54 percent and 5.02 percent, respectively.
China’s Vice Premier Zhang Gaoli called for faster construction of certain important projects yesterday, in remarks that may feed speculation that China will increase state spending in coming months to bolster its stuttering economy. Zhang was also quoted as saying on the government’s website that China must boost domestic consumption, speed up construction of key projects, expand private investment and stabilise trade growth. He did not name any particular construction projects or say whether the authorities would fastforward new projects or focus on those already approved. China’s economy has had a surprisingly soft start to the year, rattling investors who had expected a stable performance and who now fear China may drag on global growth. Two surveys yesterday showed China’s manufacturing sector remained weak in March. Zhang, who is touring three northern Chinese cities, described China’s economy as “stable” but said the country has to pay close attention to the risks to growth.
Xinhua
Melco Crown (Philippines) Resorts Corp., the local unit of Macau-based Melco Crown Entertainment, will hire up to 5,000 employees for the casino resort City of Dreams Manila at the Entertainment City in Paranaque, said CBN news. According to Paranaque Mayor Edwin Olivarez, the development of City of Dreams Manila plays an important role in providing thousands of career opportunities for local residents. City of Dreams Manila chief operating officer Kevin Sim, quoted by CBN news, said the complex “is not only set to bring outstanding world-class entertainment attractions to Paranaque City but is also offering the opportunity for many thousands of ‘Dream Careers.’” “We believe City of Dreams Manila offers the ultimate in world-class entertainment, gaming, hotel, retail and F&B career opportunities,” he added. The integrated resort complex, which is expected to be completed this year, will house entertainment activities, hotel, retail and dining.
Reuters