Macau Business Daily, April 22, 2014

MOP 6.00 Year III

Number 523 Tuesday April 22, 2014

Publisher: Paulo A. Azevedo

Iron rice bowl filling

Macau households are becoming increasingly dependent upon government subsidies. Official data reveals that in the last five years family subsidies quadrupled from 600 to more than 2,600

patacas monthly as cash handouts and healthcare expands. Disposable income surged 72 percent in the same period. An economist says the government is buying “social peace” Page

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Chewing the options www.macaubusinessdaily.com

It used to be the government’s media watchdog but the downtown building is slated to become the site of a food production distribution centre for Portuguesespeaking countries Page

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Office, shop rentals rocket Page 6

Casino stocks could face tough times in the near future as volatility returns to the market after gambling revenues for April tracked down below estimates.

Chinese credit risk is increasing and a flat performance is predicted for the Hong Kong stock market in the second quarter, analysts warn Page

Premier Li has sketched the master lines of energy production and consumption reform.

Empowering greener means and better selfprovisioning Page 10

The city’s office and shop rental costs will continue spiralling upwards into the first half of this year. The average rental is already 10 percent higher year-onyear, a rise sparked by new companies and greater demand by firms moving to commercial buildings from street shops

Turbulent tables

Power revolution

HSI - Movers April 21

Name

%Day

Sino Land Co Ltd

2.22

CNOOC Ltd

1.42

Cheung Kong Holdin

1.26

Hutchison Whampo

1.22

China Petroleum & C

1.16

Cathay Pacific Airwa

-0.79

Hengan Internation

-0.84

Belle International

-1.05

Want Want China H

-1.90

CITIC Pacific Ltd

-3.08

Source: Bloomberg

I SSN 2226-8294

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Zhuhai zen

Brought to you by

Macau home transactions are on the decline and new supply is limited. Invest in Zhuhai, Sun City Property Co Ltd tells Business Daily, where the city’s west side is not subject to home purchasing restrictions for non-Zhuhai investors Page 7

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April 22, 2014

Macau The heaviest bridge of its kind A 3,000-ton bridge span, the heaviest of its kind in China, was hoisted onto the bridge piers of the Hong Kong-Zhuhai-Macau bridge. The 130-metre long steel bridge span is considered a critical part of the project. Two floating cranes hoisted the bridge span from a barge and put it onto the two piers. After completion in 2016, the 49.968-kilometer bridge, made from 300,000 tons of steel, will shorten the time of driving between Zhuhai and Hong Kong from three hours to half an hour.

Big fish escape net Four-year investigation tracked illicit cash flow and finds Macau and Hong Kong are bases for money laundering

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n conducting an investigation into an international drug trafficking and money laundering network, Australia’s Crime Commission found that Macau and Hong Kong were bases for the network’s activities.

According to a report in South China Morning Post, the investigation was closed down because police were reluctant to “pursue a longterm strategy in the battle against dirty money.”

The investigation ran between 2007 and 2011, during which period investigators identified a criminal organisation known as “Ong Ngoai”, comprising a number of top gang members from across the Asia Pacific region. According to the report this same group is responsible for numerous drug-smuggling activities

and uses Hong Kong and Macau to launder drug money.

The Hong Kong newspaper quotes Michael Purchas, the lead investigator, as saying police in Hong Kong weren’t being cooperative regarding their initial agreement to set up a “sting money-laundering operation”.

Macau and Hong Kong are ranked the worst places in Asia for money laundering, according to an economic crime survey released in February by accounting firm PricewaterhouseCoopers (PwC). The study found that in the past two years an average of 37 percent of companies had facilitated money laundering, well above the global average of 11 percent. These companies mainly involved banking institutions and casinos.

Mr Purchas’ investigation found that the criminal syndicate was laundering money through “companies and financial institutions in Hong Kong and Macau.” Instead of catching the big fish, however, police in Hong Kong and Australia preferred to go after “low-level prosecutions,” which in turn led to the winding down of the investigation.

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April 22, 2014

Macau

Government household subsidies quadruple since 2008 Budgets are becoming more dependent upon subsidies as the government doles out cash and healthcare vouchers to families. In 2013, each family received an average of 2,633 patacas in monthly subsidies versus 633 patacas in 2008, official data reveals Alex Lee

alex.lee@macaubusinessdaily.com

rents and subsidies ranging from 15 to 30 thousand patacas that now have a share of 24.7 per cent.

As a consequence, households with more money drive an economy with more consumption. Since 2008, the consumption of households increased 27.1 per cent with families spending on average 29 thousand patacas a month, 7 thousand more than five years ago (22.9 thousand). The 27 per cent jump in consumption was, however, lower than that of other components like wages, subsidies and rents.

Residents’ consumption patterns have also suffered changes in the last half decade. The statistics office figures underline that for the first time families are spending as much on housing, water, electricity and gas (25 per cent of total consumption) as they do on food. In 2008, food represented the biggest share of expenses at 27.6 per cent, while housing only accounted for 21.6 per cent.

M

acau household income is getting increasingly dependent upon subsidies as the government continues to expand policies like cash handouts, healthcare vouchers and social care benefits.

According to data released by the central statistics office last week, the share of government subsidies of total household income increased from 2 per cent in 2008 to 6.4 per cent last year. In 2008, a family received only 633 patacas a month in subsidies; last year, that figure quadrupled to 2,633 patacas.

If other money transfers given by the government are added to subsidies like tuition fees and scholarships, then the total amount of government receipts to households reaches 4,964 patacas. This figure is 66 per cent more than that of 2008 (3,018 patacas).

The money transfer receipts represent 12% of local resident’s income today versus 9.8% five years ago.

“It is noteworthy that the Government has raised the amount invested in social welfare and subsidies over the years, together with the implementation of policies like cash hand outs, and healthcare vouchers that have directly increased the income of local residents and

households”, writes the statistics bureau in this year’s household budget survey.

This subsidy strategy is seen by Albano Martins as a way of “buying social peace, but a very dangerous option” and believes it will be reinforced in the future. “The subsidy is the easiest solution for a government with pockets full of cash and without any idea on how to address Macau’s development problems”, the economist told Business Daily. Mr Martins also emphasised that if something goes wrong with the economy in the future, the government will have a problem filling the gap in household subsidies dependent upon budgets and risks corresponding social turbulence.

Disposable income jumps 72 per cent Even if employment still comprises the major part of household income (73 per cent of total) its weight is falling (79.4 per cent in 2008) as government subsidies and rents become more relevant. With the jump in rental prices in recent years as the booming casino industry fuels Macau’s coffers, households with houses to rent have also seen a big

jump in their income.

Monthly property income has almost doubled in five years from an average of 3,294 patacas in 2008 to 6,042 patacas in 2013, raising its share of total earnings from 10.7 to 14.6 per cent.

One of the main conclusions of the report is that Macau families are getting richer and more government and rent-dependent. Today, the average household in the territory has a monthly income of 41.4 thousand patacas, 34 per cent more than five years ago. But the median disposable income – a figure extracting taxes and other expenses paid to the government and cutting the lowest and higher values, giving the real money families get at the end of month – is 35.7 thousand patacas, 72 per cent more.

With the two-digit growth of Macau’s economy over the last decade, the middle class has been one of the main beneficiaries. The report published last week states that households with incomes of between 30 to 50 thousand patacas per month became the dominant income group in 2013, representing 30 per cent of total households. In 2008, the major segment (at 34.3 per cent) was families with gains from salaries,

Letting the Gini out of the bottle The official data shows Macau is becoming a fairer place in terms of wealth distribution. The last survey for household budget reveals that the Gini index of Macau decreased from 0.38 to 0.35 points between 2008 and 2013, a sign that residents’ incomes are better distributed and that the gap between the richer and poorer is narrowing. The Gini Index measures from 0 (equality) to 1 (inequality).

The report says that the 20% of families with less financial resources in Macau accounted for 5.6 per cent of total income, above the 5.3 per cent reading in 2008. On the opposite side, the 20% richer were getting 40.3 per cent of total income, less than in 2008 (42.9 per cent).

The difference between the monthly average income of the richer (83.4 thousand patacas) and poorer families (11.5 thousand patacas) reached 7.2 times in 2013 - less than five years ago when the gap was 8.17, according to Business Daily calculations.

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April 22, 2014

Macau Brands

Trends

Sassy Stripes and Shorts Raquel Dias newsdesk@macaubusinessdaily.com

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here are a few trends we intuitively recognise won’t go the distance. Fashion and elegance do not always walk hand in hand - just think of neon colours. There are a few times when you spot the same trend sneaking back every season with just a few simple updates. This time, it looks like “stripes” are in the frame. The effortless trend is just too good to pass.

If at first the stripe look appeared to be just black and white, lighter colours came around in Spring. You may choose to wear a single striped item or be bold and mix it up. Whichever you choose, just be sure to follow the golden rule and avoid horizontal stripes if you have a fuller body.

From blazers to skirts and shirts, there’s an array of choices this season. Few pieces, however, whisper chic as high-waist shorts. This elegant item can easily pass muster for both formal and casual depending on how you accessorise them: they will look elegant with hot high heels and flats, making your legs, if not endless, appear longer. There’s no need to be afraid to think out of the box. Many brands are even going back and doing office suits with shorts rather than skirts and trousers. A perfect fit for the hot humid weather just around the corner.

Massimo Dutti, Beige Linen Striped Shorts HK 750

Ideas that work The Effie China Awards 2014 kick off today Sara Farr

sarafarr@macaubusinessdaily.com

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t’s the biggest event of its kind for advertisers and agencies in the industry. A total of 18 of the winning works are already on display, ahead of the Effie China Awards 2014 that kicks off today at the Macao Polytechnic Institute.

Conde Group Ltd has been associated with the Effie China awards since 2011, after it was extended to Hong Kong and Macau. The group also hosts an annual exhibition of the award-winning works as well as seminars.

This year, the seminar will focus on creative advertising ideas and trends.

Rita Chan, head of Media Asia at GfK, will talk about how research data can help make a marketing campaign effective, while Tomaz Mok, chairman at McCann Erickson China, address the creativity side of big ideas.

Organisers told Business Daily that additional events such as panel discussions and advertising forums

will be held in August.

Effies were first awarded in mainland China in 2003, after the China Advertising Association and the American Marketing Association, which created the awards in 1968, agreed to introduce them there.

The 39 sets of Effies awarded around the world each year recognise the most effective advertising efforts.

The Effie judges like creativity, and advertising that delivers tangible business results.

With the fast pace of economic development in Macau, the demand for effective marketing communications has increased sharply. Organisers say that holding the Effie Awards here raises relevant industries’ awareness of creative marketing communication and gives students a better understanding of the advertising industry’s development and trends.

“Macau needs to develop this

ambience in order to compete with advertising industries in the region,” the organisers said, adding that this does not only protect the creative and advertising industry here, but also projects the territory into the industry’s ever changing platform.

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April 22, 2014

Macau

Food for thought A downtown government building will become the site of a food production distribution centre of Portuguese-speaking countries to consolidate the city’s regional platform role, govt says Tony Lai

Tony.lai@macaubusinessdaily.com

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he government will convert an office building in downtown Macau into a site for one of three business centres in order to strengthen the city’s role as a platform bridging mainland China and Portuguese-speaking countries.

The Financial Services Bureau did not provide further details of the food product centre like budget and date of establishment in a written reply to an enquiry by legislator Kwan Tsui Hang.

Ms Kwan wrote in February that she was concerned about the usage of a government-owned building next to St. Dominic’s Church in Rua de S. Domingos, which has been unoccupied since the Government Information Bureau moved out years ago.

Vitória da Conceição, the bureau’s director, responded in a written reply about the latest plan for the building, saying: “The SAR Government has already planned to use that building as the centre for distribution of food products from Portuguese-speaking countries . . . The mentioned building is a suitable venue for product display as it is located in the commercial district of Macau with concentrated visitor flow.”

Mainland Chinese Vice-Premier Wang Yang announced in November that Beijing supports Macau setting up three business centres for Portuguese-speaking countries to strengthen the territory’s role as a platform between the mainland and the Lusophone countries.

The three centres are: one for small-and-medium-sized enterprises, one for food product distribution and another for the meetings, incentives, conferences and exhibitions industry.

Secretary for Economy and Finance Francis Tam Pak Yuen said at the time: “We need to work with the [Chinese] Ministry of Commerce on the three centres.”

“Time is pressing but we hope we can show the achievements of the three centres” at the next meeting of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries in 2016.

The reply of the Financial Services Bureau, dated March 18 but only publicised last week, also outlined further details of the government’s plan for the food centre. Mr Tam’s cabinet was not immediately available for comment yesterday due to the government holiday.

Ms Conceição wrote that the government is going to arrange an “appropriate adjustment” of the appearance of the food centre building, which is “incoherent” with the appearance of the heritage

3 in 1 business centres for Portuguesespeaking countries: SMEs, food product distribution and MICE

sites nearby.

The building used to be the office of the Government Information Bureau before it moved to the China Plaza building in Nam Van district.

The government originally mulled redeveloping the building for the cultural creative industries but nothing about the latest usage of the site had been reported until Ms Conceição’s reply.

The capital value of the commercial properties in the S. Domingos area has been soaring due to the influx of visitors. French cosmetics retailer L’Occitane SA paid HK$1.4 million (US$179,487) a month to rent an 1,800 square foot store in the same area, or HK$777 a square foot, last year, according to real estate agents.

Souvenir business mulls Zhuhai opportunities The local food souvenir industry is considering other means of tapping the mainland market via other parts of Zhuhai, as there are limited opportunities on Hengqin Island

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ocal food souvenir companies are looking for opportunities to set up in Zhuhai city to tap the mainland Chinese market, with limited chances currently in view on Hengqin Island.

The Macau Pastry Specialty Association is organising a crossborder tour for its members to visit Nanping in Zhuhai, about a 10-minute drive from the Gongbei border, in order to experience the business environment there.

Lam Vai Hong, the Association president, said the tour has been organised as some souvenir companies want to explore the mainland market together by setting up store. “We’ve been in talks with one of the shopping malls there [in Nanping] but nothing

has been settled. And it’s still initial thoughts,” he said.

Mr Lam, who runs chain souvenir shop Cherikoff, declined to provide further information such as possible store size or investment figure. He only added that up to 10 companies are interested in the project.

The Association’s march to Nanping seems a departure from the local companies’ craving to invest in nearby Hengqin Island, which Beijing leaders and the Macau government deem an ideal platform for helping the territory’s development and economic diversification.

The Macau administration announced this month it will recommend to Hengqin 33 Macaubacked projects (of 87) for investment

in the 4.5 square kilometre zone set aside for Macau businessmen.

“We have talked with Hengqin before but they have quite strict and high requirements for investors, namely capital,” said Mr Lam, referring to the Henqin rules that only companies with registered capital of over 100 million yuan (129.67 million patacas) can acquire land plots.

There are also limited established developments there for the local small companies to rent at the moment.

“The Chimelong theme park is the only project open on the island at the moment, which is still in the beginning stage of development,” said Alan Wong Yeuk Lai, vicepresident of the souvenir association.

“It [Chimelong] once planned a reserved area for the Macau souvenir sector but the plan has been shelved,” said Mr Wong, managing director of Choi Heong Yuen Bakery.

The Chimelong International Ocean Resort opened at the end of January. So far, three Macau companies have been invited to run services there: Seng Fung Jewellery Co Ltd, October Fifth Bakery, and Kwan Mei Candy shop.

But Mr Wong added that they would closely follow developments on the island in order to grab any opportunities arising. “The island is positioned as a tourist destination, which is always beneficial to the food souvenir industry,” he said.

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April 22, 2014

Macau CE attending Legislative Assembly today Chief Executive Chui Sai On will attend the Legislative Assembly today to answer legislators’ questions submitted earlier in the year. Macau’s top official usually heads to the Legislative Assembly three times a year, one being for the administration’s policy address for the following year. The other two usually fall in the months of April and August. The plenary session will be broadcast live on the local television channel and radio station, as well as online on government websites and youtube to ensure the public has greater access to government information, the Government Information Bureau said in a statement released yesterday.

Surge in office, shop rentals persists: agency Key business areas in the city will still see strong growth in rental costs for both shops and offices for the first half of this year, agency says Stephanie Lai

sw.lai@macaubusinessdaily.com

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he strong momentum in rental cost growth in the city’s offices and shops will continue into the first half of this year, Centaline (Macau) Property Agency Ltd prediccts.

The average rental cost for offices has climbed by a year-on-year increase of 10 percent in the first quarter of this year, a rise sparked by the increasing establishment of new companies and greater demand by firms moving their back offices to commercial buildings from the streets as rents for shop space have increased sharply in recent terms, the agency noted in its first quarter property review.

The average rental cost for offices in NAPE has reached HK$18.78 a square foot, a rise of about 17.4 percent when compared with HK$16 a square foot in the fourth quarter of last year, data from the agency shows.

For offices in Nam Van, another key commercial area in the city, the average rental cost has climbed 9.68 percent from HK$15.7 in the last quarter of 2013 to HK$17.22 in the first quarter this year – but this rental cost data does not include commercial buildings FIT, FBC, AIA, Macau Square and Bank of China.

Meanwhile, the average selling price of an office space located in NAPE rose from HK$7,375 a square foot in the fourth quarter of last year to HK$8,600 in the first quarter, whereas that for an office space located in Nam Van also saw a rapid rise from HK$6,807 in the final quarter of 2013 to HK$8,900 in the first quarter, the agency’s data shows.

“For the long term, an office is still a type of commercial property for stable investment,” senior regional sales director of Centaline Macau Roy Ho remarks. “And as there will not be any new office buildings built in the coming years to bring up supply, the outweighing demand will still drive rental growth.”

The agency forecasts that the selling price and rental cost for offices will rise by 20 percent year-

on-year, respectively, for the first half of this year.

The selling price for office space showed the most rapid surge last year, which hit a record high level of 74,525 patacas per square metre (or 6,923.5 patacas per square foot), 60 percent more than the previous year, Statistics and Census Service data shows. The service has published transaction costs for offices dated from 2004 online.

KEY POINTS Centaline Macau’s estimates for H1, 2014 Average rental cost for offices: up by 20 pct Average rental cost for shops: up by 25 to 30 pct

However, only 542 office transactions were completed last year, 241 cases less than the previous year. Office transactions in Macau have shown a sequential fall starting from the year 2011, when 932 such transactions were recorded, the census data noted.

Centaline Macau estimates that for the first quarter, there will be about 97 office transactions to be completed, representing a year-onyear fall of 27 percent.

Expensive shops Compared with offices, shop space will show an even more rapid surge in rental costs for the first half of this year, Roy Ho told Business Daily.

According to agency records, the average rental cost for a shop space located in the east part of NAPE reached HK$60 per square foot in the first quarter, which is double the amount of a year ago and makes it one of the districts with the most rapid rental surges for retailers;

Taipa is another district that saw rentals leap, with the average rental cost amounting to HK$80 per square foot, also double the amount of a year ago.

The average rental cost in Macau’s most tourist-populated downtown zone, which covers San Ma Lou and the area around St Paul’s Ruins, also climbed by a year-on-year 62 percent to HK$300 per square foot in the first quarter. “Upon the renewal of lease terms in these districts, there could be quite a large jump in the rental cost adjustment,” said Mr Ho. For the first half of this year, the agent forecasts that rental costs will rise by a year-on-year 25 percent to 30 percent.

“But for the first half of this year, the rise in shop transaction cost will slow and not be as rapid as the rental cost,” Mr Ho said. He believes that the shop transaction will slow in the second quarter of this year, where the high cost of shops at present make the deal harder to be completed between owners and buyers.

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April 22, 2014

Macau Philippines-Macau air talks in June: report Civil aviation regulators in both Macau and the Philippines are scheduled to hold talks in June, possibly leading to more flights between the two destinations, the Philippine Daily Inquirer reports. The Philippine-based newspaper quotes Carmelo Arcilla, executive director of the Philippines Civil Aeronautics Board, as saying that they would meet with the Civil Aviation Authority of Macau on June 17-18 to talk about catering to growing demand. The two jurisdictions inked an aviation service pact in 1997, with both sides updating the agreement last year to increase seat entitlements by 1,000 to 4,500 seats per week.

Local firm seduces buyers with Zhuhai shop investments Macau-based estate agency Sun City Property Co Ltd claims home purchase restrictions in neighbouring Zhuhai have not impacted local buyers Stephanie Lai

sw.lai@macaubusinessdaily.com

for the shops located right near the border, it’s not quite as affordable as the selling price has now reached over 100,000 yuan a square metre.”

Buyers here, however, still face the problem that Macau banks are not offering mortgages for real estate purchased in Zhuhai.

“Also, the mortgage interest rate in the mainland is quite high when compared to here, which is around 6 to 7 percent,” said Ms Lee, also the vice-president of local trade chamber Macau General Association of Real Estate. “So, what buyers here usually do is apply in Macau to get a home-equity loan, or what is called a second mortgage, to support the purchase made in Zhuhai.”

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hile local home transactions are on the decline and new supply is limited, Macau-based estate agency Sun City Property Co Ltd says it is placing more focus on attracting affluent resident buyers to purchase property in Zhuhai, while its Hong Kong-based competitors are promoting overseas property.

Rainbow Lee Choi Hong, executive director of Sun City Property, said that her firm began branching out in Zhuhai in 2011 in view of the increasing number of local buyers tapping into the estate market in this neighbouring mainland Chinese city. Ms Lee’s firm is not related to Suncity Group Ltd, one of Macau’s biggest VIP gambling room investors, although the two companies share a similar name in English.

“Zhuhai is a key target

market outside Macau for us to develop,” said Ms Lee. “The Hong Kong-based estate agencies here have their own advantages to push properties in their home city to local buyers, which we don’t and so we won’t compete with them in this market.”

Despite Zhuhai’s adoption of the statewide policy on the mainland that imposes home purchasing restrictions, Ms Lee said that it has made little impact on Macau resident buyers.

Under home purchasing restrictions in Zhuhai, enforced since November 2011, non-Zhuhai residents that have contributed individual income tax or social insurance for less than a year to the Zhuhai government cannot purchase a home in its main urban area of Xiangzhou district; non-Zhuhai residents that

THERE ARE THINGS WE DON’T DO

have contributed income tax or social insurance to the local government for a year or more may purchase only one new home in Xiangzhou district.

“The west side of Zhuhai, such as the districts of Jinwan, Doumen and Tanzhou, are not covered by this home purchasing restriction,” the agent said. “Also, this property-curbing measure does not cover the purchase of shop space in Zhuhai, which has been our key sales target for some local buyers.”

“The rental yield for shops in Zhuhai can be up to 5 to 6 percent, and for those located in the west of Zhuhai, like Jinwan or Tanzhou, the lump sum [for purchase] is around 2 million yuan (2.59 million patacas or US$324,748) to 3 million yuan, which makes a relatively easy investment for locals,” Ms Lee said. “But

Shrunken sales The shrinking of home transactions in the past year has brought tough times for estate agencies, whereby some large-scale firms have chosen to cut their branches or staff, Ms Lee reflected.

According to the Financial Services Bureau, some 11,306 homes were sold last year, about 4,000 fewer than in 2012. However, the average price of housing for the whole of 2013 reached 82,776 patacas a square metre, 37.8 percent more than in the previous year.

The latest data from the bureau reveals that the average home price climbed to 90,407 patacas in February; with transactions in continuous decline, only 457 home sales were completed in the month.

“The sale of secondhand

BUT WE DO•••

Rainbow Lee Choi Hong

homes has been particularly weak as many owners have chosen not to put their homes on sale too readily, impacting the small-scale firms the most,” said Ms Lee. “So, estate agencies here have pretty much focused on the sales of shops and off-plan homes.”

Slower home transactions eclipsed the profits Sun City Property made last year but it did not prevent the firm from adding one more branch in NAPE district this year, Ms Lee said.

Sun City Property currently has 7 branches in Macau with over 70 agents, following the addition of three more branches in the past year. The firm is also engaged in sales partnerships with local developers that purchase old buildings for reconstruction.

“We did register a slower profit for the past year due to the drop in transactions,” said Ms Lee, declining to give a full figure, although noting that her firm has mainly relied on sales of unfinished flats and shops. “As the overall property transaction price is high, we still make a profit,” she said.

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April 22, 2014

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April 22, 2014

Macau

Chinese whispers work their way Less gambling revenues, increasing Chinese credit risk and flat second quarter in Hong Kong are putting the volatility back into stocks, investors fear

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asino stocks could face tough times in the near future as volatility returns to the market after gambling revenues for April tracked down below estimates, Chinese credit risk increased and a flat performance is expected for the Hong Kong stock market in the second quarter, analysts believe.

Wells Fargo said in a note to clients this week that despite the strong growth of

Macau’s gambling earnings this year, the deceleration of upward pace of earning revisions, the credit risk in China and a more mixed macroeconomic scenario are pumping increased volatility into Macau’s casino shares. Nevertheless, Fargo’s investors remain positive about Macau’s performance, adding that stocks from the casino industry are off 10 to 20 per cent from their yearto-date highs. The industry

is also underperforming against the market. Gaming shares went up 0,5 per cent last week compared to an S&P500 jump of 1.7 percent.

Another contributing factor is the less than anticipated revenue growth this month. In the first 13 days of April, the gaming sector in Macau generated 968 million patacas, trailing the 1.11 billion mark of a year ago. Wells Fargo predicts an increase in

Oz exporting greyhounds to Macau despite ban M

acau Canidrome is still accepting greyhounds from Australia despite a ban on their export imposed by the land down under.

The export ban was implemented a year ago, and while Greyhounds Australasia stopped issuing passports for dogs to be sent to Macau, a Sydney Morning Herald report found that greyhound exports continue.

Greyhounds Australasia is under criticism, however, for not having made the ban public sooner. Even though the group claim the ban was put in place because Macau “does not meet animal welfare standards,” a New South Wales minister of

Parliament, John Kaye, is quoted by the Australian newspaper as saying that “by keeping the suspension of the greyhound passports programme a secret, Greyhound Racing NSW and its federal body have turned a blind eye to the trade and failed to raise public alarm over the fate awaiting the dogs in Macau.”

Earlier this year, another international animal protection group called for the termination of greyhound racing in Macau when the exclusive concession of Macau (Yat Yuen) Canidrome Co Ltd expires next year. The company announced on its website that it had launched a greyhound adoption programme for

revenues of 5 per cent in April, the lower part of the 5 to 10 per cent interval originally advanced.

A market survey published yesterday by South China Morning Post reported that Macau casino stocks could face selling pressures and price drops in the next weeks as the Hong Kong Stock Exchange will stay flat during the second quarter.

JP Morgan, however, is adamant that the Macau

retired race dogs. In January, the site said one five-year old greyhound had been adopted. As of yesterday, that number remained the same.

The Canidrome has come under fire over the last several years for putting down dogs that can no longer race.

In January, the Macau Society for the Protection of Animals (ANIMA)

market is not overheated.

Union Gaming says it’s still impossible to show that the recent deceleration of VIP revenues is related or is a result of China’s weak macroeconomic data.

Bearing in mind that the VIP is a very opaque segment, Union analysts admit that rumours and speculation on this issue have a material impact on casino share prices on the downside.

A.L.

said that the number of imported greyhounds from Australia had dropped to 10 dogs a month from 30 previously.

Gross gaming revenue from greyhound racing totalled 36 million patacas (US$4.5 million) in the first quarter of this year, down from 46 million patacas (US$5.8 million) in the same period in 2013.

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April 22, 2014

Greater China Ex-Soros team to start HK hedge fund A former Soros Fund Management team will start a Hong Kong-based hedge fund in the third quarter of 2014 with at least US$150 million in initial capital including seed capital from HS Group, making it one of the biggest start-ups in the region this year. Co-founded by Kenneth Lee and Michael Yoshino, the long/short equity hedge fund firm, Pleiad Investment Advisors, will focus on investments in China and Japan. Hedge fund startups in Asia on average raised just over US$50 million each last year, according to data from industry tracker AsiaHedge.

Li outlines energy reform Development of electric cars and upgrade of coal burning power generators are major targets

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hina will push forward reform in energy production and consumption, and make energy use greener, said Premier Li Keqiang at the first meeting of the incumbent National Energy Commission on Friday, according to a press release issued on Sunday.

China will embark on new nuclear power plants equipped with state-ofthe-art safety measures on the eastern coast at a proper time, said Li. Other projects will mainly include construction of hydropower stations, wind and solar power stations and ultra-high-voltage transmission lines to send power from the west to the east.

China saw rapid nuclear power growth in recent years, but became cautious about the approval of new nuke programs after Japan’s Fukushima nuclear fallout in 2011.

To make energy greener, Li said China will try to boost the development of electric cars and upgrade coal burning power generators that fail to meet emission cut requirements.

“China will wage a war against smog weather and step up ecological protection measures by further saving energy and cutting emissions,” said Li. To diversify energy sources, China will work on the development of unconventional oil and gas, including shale gas, shale oil, coalbed methane and tight gas.

Chinese energy giants have long been eyeing the unconventional oil and gas and have made successful drilling mainly in southwest China.

Foreign minister on Latin America tour Chinese Foreign Minister Wang Yi was in Cuba on Sunday, the first stop on a tour of four Latin America countries.

The purpose of the stop in Havana was to pave the way later this year for a visit

by Chinese President Xi Jinping. “We are going to be working on political preparations for... the upcoming visit of President Xi Jinping to this island,” Wang said. China is Cuba’s number two economic partner after Venezuela. Beijing also is a critical source of financing for the Americas’ only Communist-run nation, which is cash-strapped and cannot get financing from most lenders.

Tax break for small firms The State Administration of Taxation (SAT) said in a statement that small firms with annual taxable income fewer than 100,000 yuan (about US$16,000) may have their business income tax halved without approvals. On April 8, Chinese authorities rolled out the tax break, which is valid from January 1 this year until the end of 2016, shortly after a cabinet executive meeting, at which the government announced an economic package to address downward pressure. Those that had fully paid business income tax before April 8 can get refunds, according to the statement.

Patent registrations increase Wang Jingchuan, a professor with the Intellectual Property School at Zhongnan University of Economics and Law, said that China recorded 4.2 valid patents of invention among every 10,000 people in 2013, beyond a 3.3 target set for the 2011-2015 period. Wang added that the figure is likely to rise to 4.7 in 2014.

China ranked third in total international patent applications to the Patent Cooperation Treaty, with over 21,000 applications, up 15.6 percent year on year. The country received 825,000 applications for patent of invention in 2013, a yearon-year increase of 26.3 percent.

Mass-line campaign recomendation A senior leader of the Communist Party of China (CPC) has urged governments to invite public supervision and to let the people speak the truth amid the Party’s on-going “mass-line” campaign. Liu Yunshan, a Standing Committee member of the Political Bureau of the CPC Central Committee, made the remarks at a meeting aimed at propelling the second phase of the mass-line campaign held in Shenyang on Sunday. Launched in June 2013, the “mass-line” campaign is aimed at making the government more accessible to the public, while cleaning up undesirable work styles.

An industrial area, with a power plant, south of downtown Yangzhou, China

Fund for foreigners to debut Although foreign investment in property is on the rise, it accounts for only a fraction of total spending

A

unit of one of China’s biggest bad-debt banks plans to woo foreign investors with a US$1 billion fund for soured property loans and distressed real-estate assets, reopening the sector to outsiders after a failed attempt last decade.

That the fund is being launched just as growth in the world’s secondlargest economy has slowed to an 18-month low and the housing market is losing strength is no coincidence.

China Orient Summit Capital, 80 percent owned by China Orient Asset Management Corp, will use its connections to help foreigners invest in an attractive but sometimes treacherous market for distressed assets, chief executive Lijian Chen said.

“We see the cycle coming,” he said, referring to an expected cooling down in the housing market. “Especially since this is synchronised with the economy.”

And China Orient Summit wants to be ready. Founded in February, it has sought regulatory approval for its new fund, which would target institutional investors and pension funds in the United States, the UK, and the Middle East.

“The best deal in any country, always, is going to be the off-market deal,” Chen said in an interview at the firm’s office in downtown Beijing.

“You have to explore the relationship,

you have to explore the off-market opportunity.”

This was especially important as deals were often sealed behind the scenes, even at open auctions, he said.

For instance, at a recent auction for a plot of land in the southern city of

Ningbo, the winning bid went to a firm that promised the local government it would move its headquarters to the city, thereby lifting future employment and tax revenues.

“So if you just go there and say OK, this is open price, so I’m going to

The best deal in any country, always, is going to be the off-market deal Lijian Chen, chief executive, China Orient Summit Capital

Property will be the fund’s core

11

April 22, 2014

Greater China

IPO conditions foster general retreat China will wage a war against smog weather and step up ecological protection measures by further saving energy and cutting emissions Li Keqiang, China’s Premier

In addition, the country will open up energy exploitation and encourage different kinds of investors to compete fairly in the sector. China’s energy sector was largely dominated by state-owned enterprises (SOEs), especially in exploration.

Sinopec, one of China’s three oil giants, proposed in February to open up its marketing arm to social and private investors, marking a major step for an SOE to move toward mixed-ownership in the energy sector.

At the meeting, Li also said China will work to export advanced energy technology and equipment to overseas markets.

China is one of the world’s largest energy consumers and a considerable part of its energy demands relies on imports.

Headed by Li, the incumbent National Energy Commission, including more than ten related authorities, aims to step up strategic policy-making and coordination on major energy issues.

Xinhua

put in my bid because I have capital, then you are just too naive.”

Local sensitivities Direct foreign investment in property is strictly controlled by the government, which fears excessive speculation in the market. As such, although foreign investment in property is on the rise, it accounts for only a fraction of total spending.

China has always stood out among investors as a compelling market for buying bad loans and distressed assets, but never lived up to its potential. An attempt to launch a market for distressed assets quickly

D

ozens of Chinese companies have abandoned plans to list in the mainland this year, as confusion reigns among executives, bankers and investors over an opaque regulatory review that’s clouding what was touted as a banner year for new stock debuts.

As China Securities Regulatory Commission (CSRC) orders underwriters to update application materials once again, there have been no new China listing applications published for the past eight weeks.

Sources at investment banks say many firms that once planned initial public offerings have given up as they wait for the CSRC to explain exactly what its listing requirements will be after publishing 16 different sets of guidelines in the last six months.

With little visibility on how the CSRC will proceed, or which companies might be approved to list, the next IPO isn’t likely before the start of May at the earliest.

The slow pace is a setback for investment bankers and underwriters who had hoped the relaunch of IPOs in China in 2014 would unlock around US$40 billion worth of new issuance, bringing profits after a 14-month freeze from late 2012 when the regulator effectively halted new listings. It’s also bad news for hundreds of companies who have been waiting, for years in many cases, to tap stock markets for funds.

“In terms of a time frame I think it (the next listing) will be the middle of the year,” said Du Changchun, an analyst at Northeast Securities in Shanghai. “It won’t happen very quickly because of the reforms and

then the annual earnings reports, and once these have concluded then these companies might have to give some supplementary materials like quarterly or annual reports.”

Since the year began, more than 24 companies have shelved applications to list, according to CSRC data released in April.

Last week’s move by the CSRC to seek updated documentation at least countered swirling local media reports of another IPO lockdown as the regulator seeks to raise the quality of companies listing on the Shanghai or Shenzhen exchanges.

CITIC Securities said in a report last week that the move meant the approval process was starting earlier than predicted, and it anticipates the first listing could start at the beginning of May.

shrivelled after in the mid-2000s.

Foreign investors said the market died because auctions were rigged, laws were opaque, and governments resisted corporate bankruptcies. In response, Chinese authorities said foreigners were trying to buy assets at unreasonably low prices.

Chen said the market is now more transparent, but investors still need to be mindful of social and political sensitivities when negotiating with governments about company closures.

As a unit of China Orient Asset Management Corp, one of four baddebt banks created by Beijing to clean up the biggest Chinese banks that were technically insolvent in the late 1990s, China Orient Summit has the advantage of state backing.

Beijing Wutong Summit Investment Managing Centre owns the remaining 20 percent of China Orient Summit.

China Orient Asset Management Corp can invest up to 20 percent of the new distressed fund.

Gold imports allowed via Beijing

Financial stress As China’s leaders slow growth rates down so they can overhaul the economy to make it more driven by consumption and less by investment, financial stress is clearly building.

Media reported on Wednesday that Nanjing Fudi Real Estate Development Co Ltd missed repayments on a 900 million yuan (US$145 million) loan borrowed from a ship builder, becoming the latest in a string of corporate credit defaults.

Data on Friday showed China’s home price inflation slowed to an eight-month low in March, and analysts expect the easing trend to continue.

Reuters

Debut deluge The current limbo will be resolved as soon as the CSRC moves decisively which it can do. The CSRC let around 50 previously approved companies list in January and February, marking the end of an IPO suspension that began in late 2012, a halt that itself was never officially confirmed.

Prior to the resumption, the regulator had committed to ultimately moving to a registration-based system for IPOs similar to that deployed in the U.S., where market reception dictates how they are priced, when companies list, and how their shares perform. Many investors read this as a signal that Beijing was preparing for a flood of new issuance this year.

Global accountancy firm PwC

KEY POINTS Dozens of planned mainland listings scrapped this year Changing regulatory guidelines, lack of visibility Questions on whether 2014 can match expected US$40 billion spree

said in a report released on January 2 that the number of IPOs could “possibly reach a record high in 2014”, raising as much as 250 billion yuan (US$40.24 billion).

But Beijing quickly qualified its statement to emphasise that the project would take time. It has kept its hands tightly on the wheel since then, closely managing IPO pricing and investigating numerous investment banks and underwriting firms.

Market participants in China always understood it would take time for firms to update corporate annual performance results to the end of 2013, a process that can last until the end of April, and assure compliance.

Reuters

PBOC could have added significant amounts of gold to its reserves

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hina has begun allowing gold imports through its capital Beijing, sources familiar with the matter said, in a move that would help keep purchases by the world’s top bullion buyer discreet at a time when it might be boosting official reserves.

The opening of a third import point after Shenzhen and Shanghai could also threaten Hong Kong’s pole position in China’s gold trade, as the mainland can get more of the metal it wants directly rather than through a route that discloses how much it is buying.

China does not release any trade data on gold. The only way bullion markets can get a sense of Chinese purchases is from the monthly release of export data by Hong Kong, which last year supplied US$53 billion worth of gold to the mainland.

“We have already started shipping material in directly to Beijing,” said an industry source, who did not want to be named because he was not authorised to speak to the media. The quantities brought in so far are small, as imports via Beijing have only been allowed since the first quarter of this year, sources said.

The People’s Bank of China (PBOC) is believed to be adding to its gold reserves, according to the World Gold Council (WGC), as it looks to diversify from U.S. Treasuries. The central bank rarely reveals the numbers.

Hong Kong jewellery and sales to mainland may be affected by Beijing

Gold’s 28 percent plunge last year and China’s record bullion imports in 2013 sparked speculation that the PBOC has added significant amounts of gold to its reserves, and could likely make an announcement this year.

Central banks tend to be very secretive about their gold purchases and sales because prices are extremely sensitive to their trades. Rumours last year of Cyprus selling its gold reserves to prop up finances sent the metal down more than 10 percent over two days - its biggest such decline in 30 years.

Gold has traditionally been imported from Hong Kong into Shenzhen, where nearly 70 percent of the Chinese gold jewellery business is located. Shanghai was opened up as a second port last year.

Reuters

12

April 22, 2014

Asia S.Korean exports increase Exports rose 4.3 percent for the first 20 days of April from the same year-ago period, customs agency data showed yesterday, slower than gains in March as global demand eased. Exports rose 8.2 percent year-on-year for the first 20 days of March, and 5.1 percent for the whole month. The April reading was higher, however than the 2.2 percent rise in exports for the January-March quarter. South Korea is the world’s seventh-largest exporter and is the first major exporting economy to report foreign trade figures each month.

Malaysia’s palm oil exports down Exports of Malaysian palm oil products during April 1-20 fell 5.9 percent to 722,170 tonnes from the 767,785 tonnes shipped during March 1-20, cargo surveyor Intertek Testing Services said yesterday.

HAGL adds Laos crops, preparing listing

Export deceleration widens Japan’s trade deficit Japan’s shipments to China rose an annual 4.3 percent in March

J

apan’s annual export growth slowed sharply in March due to weaker shipments to China, casting doubt that a recovery in external demand could help offset the impact of the April 1 sales tax hike.

Ministry of Finance data showed that exports rose 1.8 percent in March from a year earlier, following a 9.8 percent annual gain in the previous month. That was well below a 6.3 percent increase expected by economists in a Reuters poll.

The weak external shipments helped push Japan’s trade deficit to a record 13.75 trillion yen (US$134.45 billion) for the fiscal year that ended in March.

The latest data joins a recent string of soft economic reports including capital spending and private consumption, which have kept alive expectations for the Bank of Japan to offer fresh stimulus this summer to sustain growth.

After speeding past many of its developed country peers in the first half of last year, Japans’ economy has slowed in recent quarters as the effects of Tokyo’s aggressive stimulus faded. Concerns of a deeper pullback have hit investor confidence and the stock market

this year, although policymakers say they are prepared to look through short term dips in growth.

The BOJ has repeatedly shrugged

KEY POINTS

off speculation of fresh easing, insisting that the economy is on track to meet its 2 percent inflation target, but the burden may fall more on the

Japanese Ministry of Finance sees how China’s slowdown provokes shipments decrease

March exports +1.8 pct y/y; imports +18.1 pct y/y Trade deficit 1.4 trln yen, record run of 21 mths Exports not likely to be major driver of growth

The real estate developer that’s transformed itself into Vietnam’s biggest listed farmer by acreage, is expanding overseas plantations and adding corn as it plans to list the agricultural unit in Singapore next year.

The company will harvest corn in Cambodia and Laos this year, adding to its sugar cane, palm oil and rubber plantations, Chief Executive Officer Nguyen Van Su said in an April 16 interview. The company is also pursuing deals to sell its rubber to Michelin CGDE and Bridgestone Corp, he said. HAGL is focusing on growth in food commodities to meet rising regional demand.

Rajan strengthens rupee

Oriental Brewery’s merger sets record

Rising reserves and rupee gains have helped revive confidence in the economy

W Anheuser-Busch InBev NV’s US$5.8 billion purchase of Oriental Brewery Co. has vaulted Deutsche Bank AG to the top of South Korea’s merger league table, putting the firm on course for a record advisory year in the country. Deutsche Bank acted on US$8 billion of takeovers involving the nation’s companies this year, boosted by its guidance of Leuven, Belgium-based Anheuser-Busch through the country’s biggest merger of 2014, data compiled by Bloomberg show. Morgan Stanley is second with US$7.8 billion, followed

by Citigroup Inc.’s US$7.7 billion, the data show.

hen Raghuram Rajan took charge of India’s central bank in September, the rupee was near it’s weakest on record and foreign reserves were at a three-year low. In the seven months since, the currency has been a world-beater and holdings have climbed back above US$300 billion.

India’s defences against financial-market volatility are improving, according to Barclays Plc, as developing nations brace for an increase in U.S. interest rates flagged by the Federal Reserve. Rajan, who spurred dollar inflows by offering discount currency swaps to banks and reining in inflation, said April 11 that Asia’s third-largest economy is now prepared for potential fallout should the Fed raise rates in the coming year.

“It’s largely Governor Rajan’s actions by way of timely market intervention and garnering of funds that stabilized the markets,” U.R. Bhat, managing director of the India unit of U.K.-based Dalton Strategic Partnership LLP, which manages US$2 billion globally, said in

an interview on April 16. “The higher reserves are now providing the firepower to tackle any volatility and keep the currency stable.”

India’s currency hoard has risen US$34 billion since the start of September to US$309 billion, while the rupee rallied 14 percent from a record low of 68.845 per dollar in August, the biggest gain among 78 global exchange rates tracked by Bloomberg. Nomura Holdings Inc. sees the currency extend-

Raghuram Rajan

ing gains this quarter, buoyed by a combination of increased capital inflows and a narrowing current-account deficit.

Confidence revived Rising reserves and rupee gains have helped revive confidence in the US$1.8 trillion economy. Global investors, who pared holdings of local-currency debt by an unprecedented US$8 billion in 2013, have already ploughed back US$5 billion so far this year, according to exchange data. The rupee slipped 0.1 percent to 60.36 per dollar yesterday in Mumbai.

“Higher reserves not only put the central bank in a better position to manage volatility, they’re also sending a positive signal to foreign investors,” Hamish Pepper, a foreign-exchange strategist at Barclays in Singapore, said in a telephone interview on April 16.

“It won’t be surprising to see continued reserve accumulation” amid inflows, he said.

Bloomberg News

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13

April 22, 2014

Asia government to take further steps to support business investment.

“Exports are weak because Japanese products are not as competitive as they used to be,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

“This suggests the economy will struggle to recover after the sales tax hike. The government needs to do more with its growth strategy to make companies more competitive.”

The weakness in exports - a key driver of the world’s third-biggest economy - has been a concern for

policymakers, who are counting on stronger shipments to help cushion any slide in domestic demand after the sales tax rise to 8 percent from 5 percent.

Japan’s shipments to China rose an annual 4.3 percent in March, a marked slowdown from a 27.6 percent annual increase in February.

Exports have struggled to accelerate despite a soft yen, which has boosted import costs more than it promoted shipments, leading to a record 21th straight month of trade deficits.

MOF data showed imports grew 18.1 percent in the year to March, boosted by elevated import costs of fuel due to a weak yen and the lastminute demand before the April 1 tax hike.

That compared with a 16.2 percent annual gain forecast by economists and followed a 9.0 percent rise in the previous month.

The country’s trade balance stood at a deficit of 1.446 trillion yen in March, against an expected shortfall of 1.070 trillion yen, after a record trade gap of 2.79 trillion yen in January. That marked a record 21-month run of deficits.

Japan’s government cut its overall economic view for the first time since 2012 due to pullback in demand after the tax hike. But it saw no need for more stimuli, saying that the economy was on track for a moderate recovery.

Policymakers and economists expect a temporary dip in economic activity in the current quarter due to the sales tax rise, but they see the economy returning to moderate growth in the following quarters.

Reuters

ASEAN to benefit Vietnam’s exports Vietnamese enterprises have not yet taken full advantage of the close geographical distance and incentives offered by the ASEAN Trade in Goods Agreement

O

nce formed in 2015, the ASEAN Economic Community (AEC) will bring both opportunities and challenges to Vietnamese exporters, according to experts.

The Association of Southeast Asian Nations (ASEAN) consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The AEC marks the commitment of the ASEAN leaders to building and promoting a single market and production base, a highly competitive economic region tempered with equitable development, and a region fully integrated into the global economy.

The AEC would create greater opportunities for Vietnam to export goods and services to the ASEAN market, though local enterprises have faced many difficulties in production and business, said Vietnam’s Deputy Minister of Industry and Trade Do Thang Hai. According to data from the ministry, trade between Vietnam and other ASEAN member countries has quadrupled over the past decade, climbing to nearly US$40 billion in 2013 from US$9 billion in 2003.

In 2013, Vietnam took in US$18.47 billion from its exports to the bloc, the country’s third largest importer

only after the United States and the EU, which represented a rise of 4.4 percent from the previous year. In the first quarter of this year, the figure was estimated at US$4.7 billion, a year-onyear increase of 6.4 percent.

However, the growth tended to remain steady, or even slowed on occasion, as Vietnamese enterprises have not yet taken full advantage of the close geographical distance and incentives offered by the ASEAN Trade in Goods Agreement (ATIGA).

ASEAN member states are among Vietnam’s leading trade partners, accounting for 15 percent of the country’s total trade. The regional grouping made up 22.4 percent of total foreign direct investment in 2013 with Singapore, Malaysia and Thailand being key investors. The AEC and free trade agreements are expected to further promote Vietnam’s exports to other ASEAN markets.

The Vietnamese Ministry of Industry and Trade forecast that exports to these markets would continue to grow steadily as more than 99 percent of tax rates of six ASEAN countries, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, will be slashed to zero in 2015 under the ATIGA signed in Thailand in 2009.

S.Korea and Taiwan declare a currency wars cease-fire Intervention by both central banks has become less important after a slide in the currencies earlier this year

T

he Korean won and Taiwanese dollar posted the biggest gains among 11 Asian currencies tracked by Bloomberg this month on speculation their central banks have stepped back from intervening to weaken the exchange rates.

The won touched a 5 1/2year high of 1,031.55 per U.S. dollar on April 10, which allowed Taiwanese policy makers to let their currency reach a three-month high of NT$29.91 the same day.

“The won’s strength is giving the Taiwan dollar room to gain because the economies compete, to a certain extent, on exports,” Frances Cheung, the Hong Kong-based head of Asian rates strategy at France’s third-biggest bank, said April 17 by e-mail. “Korean authorities” are “less worried about appreciation,” she said.

The Asian economies compete with one another in shipping electronic components overseas, and both count China, the world’s second-largest economy, as their biggest export market.

A lower exchange rate makes a nation more competitive

Emerging-market currencies are appreciating overall, and it will be hard to guarantee intervention will be effective James Huh, Samsung Securities economist

in selling goods, and traders have speculated for years that Taiwan and South Korea have regularly entered foreignexchange markets to sell and weaken their currencies.

Emerging markets Intervention by both central banks has become less important after a slide in the currencies earlier this year.

Now, with 18 of 24 emergingmarket currencies rallying this month, there’s also less need for South Korea and Taiwan to make themselves competitive.

“There’s no great justification for Korean intervention at the moment,” James Huh, an economist at Samsung Securities Co.

in Seoul, said by phone on April 17. “Emerging-market currencies are appreciating overall, and it will be hard to guarantee intervention will be effective.”

Bank of Korea officials have warned several times since last year that they may intervene to counter the “herd behaviour” of currency speculators, and strategists speculated they moved beyond rhetoric to sell the won and defend a level of 1,050 per dollar. South Korea’s intervention has tended to be more active in the face of appreciation, and the authorities’ actions should be limited to smoothing disorderly market conditions, the International Monetary Fund wrote in a report released April 17.

Intervention has cost Korea’s central bank 39 trillion won (US$37.6 billion) since the start of 2009, Morgan Stanley estimates.

Policy makers stepped up their actions whenever the won approached 1,048 per dollar, strategists led by Hong Kong- based Geoffrey Kendrick wrote in an April 9 report.

Xinhua

South Korean exporters have become less vulnerable to exchange rates, Finance Minister Hyun Oh Seok told reporters in Seoul on April 9, while declining to comment on whether the nation intervenes. The central bank will act to stabilize markets, BOK Governor Lee Ju Yeol said at an April 10 press briefing.

Taiwan tends to intervene in the currency market minutes before daily trading ends, according to traders who asked not to be identified. The Taiwan dollar is determined by the market with the central bank helping to maintain its “stability,” Harry Yen, deputy directorgeneral of the bank’s currency department, said by phone on April 11.

“Taiwan’s central bank benchmarks itself against Korea, which it regards as a trade competitor,” Wai Ho Leong, a senior regional economist at Barclays Plc in Singapore, said in an April 14 phone interview. “They always try to underperform the won and pay attention to its day-to-day movement.”

Barclays sees Taiwan’s currency climbing to NT$30 to the U.S. dollar by yearend, from NT$30.23 on April 18, putting it in line with the median estimate in a Bloomberg survey of 24 strategists. The U.K. bank sees the won at 1,050 per dollar, compared with 1,037.58 at the end of last week and a median forecast of 1,056.

Bloomberg News

14

April 22, 2014

International

Barclays nervous about Slim’s shares

Mobile payment start-up on sale

Congress is studying President Enrique Peña Nieto’s March 24 proposal to boost competition among phone and media companies

B

onds from billionaire Carlos Slim’s América Móvil SAB are soaring to an 11-month high, a sign to Barclays Plc and SW Asset Management LLC that investors are underestimating the coming regulatory crackdown on the company.

Proposed rules in Mexico would force América Móvil to phase out long-distance charges and other fees as regulators seek to reduce Slim’s hold on 70 percent of the wireless market. Investors should sell América Móvil’s US$1.6 billion of bonds due 2022 and buy similar-maturity debt from Qatar’s state-controlled phone company, Ooredoo QSC, according to Barclays.

“Through regulation and competition, his margins are going to compress,” Ray Zucaro, who manages US$390 million of assets at SW Asset Management, said in a telephone interview from Newport Beach, California. More options for phone service is “better for Mexico, it’s better for society, but it’s not good for América Móvil.”

The Mexico City-based wireless carrier’s notes due 2022 have returned 5.8 percent this year as they jumped to 96.4 cents on the dollar. The advance is 1.6 times the average for investment-grade emerging-market debt even as analysts forecast a second straight annual drop in earnings excluding some items, according to data compiled by Bloomberg.

Mexican competition A press official for América Móvil declined to comment on the impact of the regulations on the company.

Congress is studying President Enrique Peña Nieto’s March 24

Carlos Slim

proposal to boost competition among phone and media companies with the goal of passing the bill by the end of this month.

The draft legislation restricts carriers with more than 50 percent of subscribers from charging fees to connect calls to competitors’ networks. Smaller companies, such as Telefónica SA and Grupo Iusacell SA, will still be able to collect the interconnection charges from América Móvil.

If the Federal Telecommunications Institute determines that competition has improved, it will phase out the interconnection fees altogether.

Domestic long-distance charges must be eliminated within three years.

Violating the law would be punishable by fines of as much as 5 percent of Mexican sales -or double for repeat offenses.

Slim’s fortune With a net worth of US$67.1 billion, Slim is the world’s wealthiest person after Bill Gates, according to the Bloomberg Billionaires Index.

Slim’s fortune has dropped 9 percent this year, or US$6.6 billion.

The Mexican market is América Móvil’s biggest and most profitable, contributing 47 percent of the company’s earnings before interest, taxes, depreciation and amortization.

Ebitda, which fell 3.4 percent last year, will sink 1.3 percent this year, according to the average estimate of seven analysts surveyed by Bloomberg.

Citigroup Inc. estimates the proposed legislation will cut América Móvil’s net income to 68.1 billion pesos (US$5.2 billion) in 2016 from 74.6 billion pesos last year, according to a March 26 report. Without the impact of the new regulations, profit would have increased 14 percent, the report says.

Lucio Aldworth, an equity analyst at Citigroup, declined to comment beyond the report.

Barclays also said profit will be damped by the new regulations.

“We are increasingly concerned about the effect of regulation on AMX’s business in Mexico and believe asymmetric regulation could pressure market share and margins,” analyst Christopher Buck wrote in an April 11 report.

At 3.664 percent, the yield on América Móvil’s 2022 bond is 0.05-percentage point higher than on Ooredoo’s debt due 2021, compared with an average difference of 0.22 percentage point over the past year.

Moody’s Investors Service and Fitch Ratings rate América Móvil’s bonds the equivalent of five levels above junk. Ooredoo is rated one step higher, with an A+ rating from Fitch.

Bloomberg News

Gazprom’s contract signed with Ukraine in 2009 stipulates a move to advance payments if the country falls behind on paying for supplies

T

controlled gas exporter, is supplying fuel to Ukraine with little chance of receiving payment on more than US$2.2 billion already owed to it, Dmitry Peskov, Putin’s spokesman, said April 11.

Russia “is ready to wait for a month” after not receiving “a single ruble or dollar” from Ukraine for March deliveries, Putin said April 17 during an annual call-in show.

Gazprom’s contract signed with Ukraine in 2009 stipulates a move to advance payments if the country falls behind on paying for supplies. That agreement ended a pricing dispute that led Gazprom to halt deliveries to Ukraine, which disrupted transit flows to Europe for about two weeks during freezing weather.

Sergei Kupriyanov, Gazprom’s spokesman, didn’t immediately comment about the increase in imports when reached by phone.

Aliona Osmolovska, a spokeswoman for NAK Naftogaz Ukrainy, declined to comment by phone.

AstraZeneca tempts Pfizer

Ooredoo yield

Ukraine boosts Russian gas imports he country is boosting naturalgas imports from Russia to the highest in 10 weeks after President Vladimir Putin gave the country one month to resume payments or have to start prepaying for the fuel.

Ukraine imported almost 115 million cubic meters of gas from Russia on April 19, the most since February 5, preliminary data from the Russian Energy Ministry’s CDUTEK unit show. That compares with 40 million cubic meters on April 16, before Putin’s statement.

The daily average in April last year was about 49 million cubic meters, according to Ukrainian Energy Ministry data.

Ukraine depends on Russian gas for half of its domestic needs and carries about 15 percent of Europe’s supply through its pipelines from Russia, making energy a key component in the international tensions over the smaller country’s future.

OAO Gazprom, Russia’s state-

Square Inc. has been in talks with several rivals for a possible sale as the mobile payments start-up looks to stem widening losses and dwindling cash, the Wall Street Journal reported, citing people familiar with the matter. The company spoke to Google Inc. earlier this year about a possible sale, the Journal reported, adding that it wasn’t clear whether the talks are continuing. Square, founded in 2009 by Jack Dorsey, co-creator of Twitter Inc., will likely fetch billions of dollars in a sale. Square insiders sold shares earlier this year on the secondary market, valuing the company at roughly US$5.2 billion, the Journal said.

115 million

cubic metres of gas Ukraine imported from April 19 Gas supplies to Ukraine and fuel transit to Europe through Ukrainian pipelines are proceeding as normal, a different Gazprom press official said by phone, without elaborating and asking not to be identified in line with corporate policy.

Ukraine is seeking to diversify energy supplies by buying gas from Slovakia, Poland and Hungary using east-west pipelines in reverse.

Bloomberg News

The world’s biggest drug maker held informal, now-discontinued talks with AstraZeneca Plc. about possibly buying the London-based maker of asthma and heart drugs, according to two people familiar with the matter. The companies aren’t currently negotiating, said the people, who asked not to be identified, with one specifying that the discussions happened several months ago and there are no plans to resume. According to unnamed bank and industry sources, New York-based Pfizer made a tentative approach about a takeover valuing AstraZeneca at more than 60 billion pounds (US$101 billion).

Over-donation leads to jail The chairman of a company that helps manage the Plaza Hotel in New York pleaded guilty to a scheme to raise illegal campaign contributions for political candidates using straw donors.

Sant Singh Chatwal, who has donated to Democrats including Hillary Clinton in his own name, pleaded guilty April 17 in federal court in Brooklyn, New York, to conspiring to violate federal campaign finance laws and to one count of witness tampering.

Recipients of the donations weren’t identified in court. The businessman used the scheme to raise about US$188,000 for at least three candidates.

Anglo Irish Bank executives found guilty Two former executives allowed loans to 10 clients to buy the company’s shares, the first convictions of bankers since the near collapse of the nation’s financial system. A Dublin jury found Willie McAteer, the bank’s former finance director, and Pat Whelan, its onetime head of Irish lending, guilty of authorizing or permitting 450 million euros (US$622 million) of loans to buy the shares, as executives sought to avoid a stake of about 28 percent flooding on to the market in 2008. The pair were cleared of six other charges.

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April 22, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Big Data for Poor Students

Jin-Yong Cai Executive Vice President and Chief Executive Officer of the International Finance Corporation. Member of the World Bank Group.

The Bangkok Post Thailand saw capital outflows of more than 200 billion baht in the first quarter as investors turned to high-yield overseas bonds to bet on higher returns amid the escalating political tension and the low interest rate environment at home. Local short-term, and medium to long-ended notes, however, still attracted net inflows of around 30 billion baht and 9 billion baht, respectively, during the January-to-March period, according to Morningstar Research. “Broker and fund managers suggest increasing investment weight in low-risk assets such as fixed income funds,” said Morningstar Research’s managing director Peet Yongwanich.

The Times of India Political parties may be promising a return to high growth rate over the next five years, but ratings agency Crisil has said that it may not be easy to return to 9% growth during 2014-2019 and instead settle for an average 6.5% growth, provided there is a stable government at the Centre. The forecast is lower than the average for previous five years (April 2009 to March 2014), estimated at 6.7%, although significantly higher than the 4.9% projected for 2013-14. The position is in contrast to what political parties are promising during the election campaign.

The Jakarta Post Thousands of employees of state-lender PT Bank Tabungan Negara (BTN) staged a rally on Sunday to reject the government’s plan to transfer BTN shares to fellow state lender PT Bank Mandiri (Mandiri).

Rally participants argued that the plan for Mandiri to acquire BTN would only favor Mandiri, the country’s largest bank by assets. BTN workers union chairman Satya Wijayantara said during the gathering that the possible asset merging of the two banks would result in redundancies for BTN employees.

VietNam News Viet Nam’ steel import volume experienced a modest year-on-year increase of 2 per cent to 2.2 million tonnes, valued at US$1.5 billion, in the first quarter of 2014. According to latest statistics from the General Department of Customs, in March alone the country spent $568.3 million in buying 827,000 tonnes of steel from overseas markets, up 4 per cent in volume and 9 per cent in value compared with the previous month.

Among key import markets were mainland China, Japan, Taiwan and South Korea.

WASHINGTON, DC – Countries need skilled and talented people to generate the innovations that underpin long-term economic growth.

This is as true in developed as it is in developing economies. But it will not happen without investment in education and training. If we are to end poverty, reduce unemployment, and stem rising economic inequality, we must find new, better, and cheaper ways to teach – and on a vast scale.

This goal may seem to be beyond even wealthier countries’ means; but the intelligent collection, analysis, and use of educational data could make a big difference.

And, fortunately, we live in an age in which information technology gives us the right tools to broaden access to high-quality, affordable education. Big data – highvolume, complex data sets that businesses use to analyse and predict consumer behaviour – can provide teachers and companies with unprecedented amounts of information about student learning patterns, helping schools to personalize instruction in increasingly sophisticated ways.

The World Bank Group and its private-sector lending arm, the International Finance Corporation (IFC), are trying to harness this potential to support national education systems. A recently launched initiative, called the Systems Approach for Better Education Results (SABER), collects and shares comparative data on educational policies and institutions from countries around the world.

In the private sector, the ability to collect information

about teacher-student interaction, and interaction between students and learning systems, can have a profound impact. In Kenya, for example, Bridge International Academies is using adaptive learning on a large scale. An IFC client founded by three American entrepreneurs, Bridge runs 259 nursery and primary schools, with monthly tuition averaging US$6. It is a massive learning laboratory for students and educators alike.

Bridge tests different approaches to teaching standard skills and concepts by deploying two versions of a lesson at the same time in a large number of classrooms.

The lessons are delivered by teachers from standardized, scripted plans, via tablets that also track how long the teachers spend on each lesson. Exam results are recorded on the teacher’s tablet, with more than 250,000 scores logged every 21 days.

From these data, Bridge’s evaluation team determines which lesson is most effective and distributes that lesson throughout the rest of the Academy’s network.

We know that a host of issues can cause a student’s performance to decline – scorching summer heat in classrooms without air conditioning, problems at home, or poor-quality teachers, to name a few. But when one gathers results on a large scale, variables flatten out, and the important differences emerge. That is the great value of big data.

Another case is SABIS, a provider of K-12 education in the United States, Europe, Asia, the Middle East, and North Africa. SABIS mines large data sets to ensure

In the private sector, the ability to collect information about teacherstudent interaction, and interaction between students and learning systems, can have a profound impact

high standards and enhance academic performance for more than 63,000 students.

Continuous tracking of annual student academic performance yields more than 14 million data points that are used to shape instruction, achieve learning objectives, and ensure consistency across the company’s network of schools in 15 countries.

Knewton, an adaptive learning platform that personalizes digital courses using predictive analytics, is another company at the forefront of the data revolution. With tailored content and instruction, even classrooms without privateschool resources can provide individual learning. As a result, teachers spend their time in the most effective way possible – solving problems with students – instead of delivering undifferentiated lessons.

These benefits do not come without risk. We are only beginning to grapple with how big data’s tremendous potential for learning can be harnessed while protecting students’ privacy. In some cases, data-collection technology is outpacing our ability to decide how it should be collected, stored, and shared. No matter how rigorously data are secured, there is still a need for a clear licensing structure for its use.

In many developing countries, there are no regulations for data privacy at all.

The interface between data and education holds the promise of new educational products for improved learning, with large potential benefits, especially for the poor. To realize those benefits – and to do so responsibly – we must ensure that data collection is neither excessive nor inappropriate, and that it supports learning. The private sector, governments, and institutions such as the World Bank Group need to formulate rules for how critical information on student performance is gathered, shared, and used. Parents and students deserve no less. © Project Syndicate 2014

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April 22, 2014

Closing Portugal improves jobless numbers

Six million register for Mozambique elections

The number of jobless enrolled at Portuguese employment centres fell 6.1% in March compared to the same month last year, with a total of 689,825 people out of work, said the Employment and Vocational Training Institute (IEFP). Figures for March also showed unemployment had fallen 1.6% since February, the equivalent of 11,129 fewer jobseekers.

The fall in the numbers was greater for men (-7.4%) than for women (-4.7%).

About 6 million Mozambican voters have been registered for the 15 October general elections, some 63% of the anticipated total, the election secretariat (STAE) said yesterday. Some 5.6 million are resident in the country and another 74,000 are living abroad, including almost 1,200 in Portugal.

Apart from the voters registered in this latest census, the October ballot is also going to be open to just over 3 million voters.

Pricey Copa World Cup to kick up prices in inflation-weary Brazil Alonso Soto

A

s if worrying about unfinished stadiums and overcrowded airports wasn’t enough, the upcoming soccer World Cup will give Brazilian policymakers another headache: an inflation spike.

The arrival of roughly 600,000 foreign tourists for the month-long tournament that starts in mid-June will likely cause substantial increases in the prices of airline tickets, restaurant meals and hotel rooms.

Those three areas account for about a tenth of the weighting of Brazil’s benchmark IPCA consumer price gauge. That could spell trouble for President Dilma Rousseff as the inflation rate is already at 6.19 percent.

“The World Cup will make things more difficult for the government,” said Reginaldo Nogueira, economics professor at Ibmec business school in Belo Horizonte.

The World Cup has already been bogged down by cost overruns, delays in infrastructure projects and deadly accidents.

Although the government expects the tournament to

add half a percentage point to economic growth and thousands of jobs, rising inflation and persistently weak growth has eroded Rousseff’s popularity as she seeks re-election in October.

Nogueira said that price shocks from the Cup could be the last straw that puts Brazil’s 2014 inflation target - between 2.5 and 6.0 percent - out of reach.

Estimates as to the exact impact of the World Cup on consumer prices vary. Juan Jensen, chief economist with Sao Paulo-based consultancy Tendencias, said it may add 0.35 percentage points to inflation in June alone.

Most economists agree that any spike will ease after the World Cup ends in July but some officials still worry it could scare consumers and contaminate expectations going forward, giving new impetus to price increases.

The government has tried to cap hikes in electricity and gasoline prices but not much more can be done to tame prices during the tournament, two senior officials told Reuters.

Luiz Roberto Cunha, an

A worker looks at the Arena Corinthians stadium, also known as Itaquerao, in São Paulo

economics professor who advises the government on inflation data, said that all host countries tend to see rising prices when they host the World Cup. But he said the effects could feel greater because of already high inflation in Brazil, fuelled by home-grown factors such as contracts that force annual increases in rents and other prices, as well as high government spending and even a recent drought that has caused a jump in food costs.

Since the World Cup is being held in 12 host cities across Brazil, an unusually

high number, any run-up in prices will be particularly widespread.

Brazilians have already started to complain.

A Facebook page called “Rio $urreal” was created to denounce high prices in Rio de Janeiro, which will hold the Cup’s final in July.

“It seems like drinking beer on a Friday is only for the rich now,” wrote Luiz Felipe Oliveira in a recent post that complained of a local bar charging nearly US$4 for a beer.

In the capital Brasilia, already one of Brazil’s priciest cities, tourists can pay more

than US$600 a day for a room at a four-star hotel near the stadium. A night at a fancier hotel can go for US$1,000 during the tournament.

Threats of strikes by metro, airport and hotel workers during the World Cup could also push wages higher and stoke prices even more.

Not even one of the world’s most aggressive monetary tightening cycles has been able to significantly ease the pressure. The central bank has raised its benchmark Selic rate by 375 basis points to 11 percent since April 2013.

Reuters

Toyota may expand China production

Bank of Thailand may pause on rates

Unprecedented seizure

Toyota Motor Corp is considering significantly expanding its production capacity in China as it seeks to catch up with global rivals in the world’s largest auto market, a senior executive said yesterday.

Toyota, the world’s largest carmaker, is aiming to double sales in China to 2 million vehicles, a figure its China chief Hiroji Onishi said was the “minimum level” necessary to keep up with market leaders Volkswagen AG and General Motors Co. He did not set a timeframe for the increase.

“Because of the stronger push made by the U.S. and European automakers, our sales volume has been growing but our market share has been reduced to nearly half of what it was before,” Onishi told reporters at the Auto China car show.

“Our honest feeling is that we have to do something about our reduced presence,” he added, without giving a figure for the production increase.

The Bank of Thailand may leave its key interest rate unchanged tomorrow, after it cut rates twice to support growth since political unrest hit Bangkok in November, a Reuters poll found.

All but one of 18 economists expect the monetary policy committee to keep the one-day repurchase rate steady at 2.0 percent, a level last seen in December 2010. One estimated a 25 basis-point cut.

A majority of economists saw no further easing for the rest of the year after cuts in March and late November, by a quarter of a point each, to help Southeast Asia’s second-largest economy cope with the fallout from the political turmoil.

Months of sometimes violent anti-government protests have hurt domestic demand and tourism, and delayed public works, leaving the central bank under pressure to do more to support the economy, which may have contracted in the first quarter.

A Shanghai court ordered the seizure of a Japanese ship owned by Mitsui OSK Lines Ltd. as compensation for the loss of two ships leased from a Chinese company before the two countries went to war in 1937.

The 226,434-ton Baosteel Emotion was impounded on April 19 at Majishan port in Zhejiang province as part of a legal dispute that began in 1964, the Shanghai Maritime Court and Mitsui OSK said in notices on their websites.

The holding of the ship reflects strained ties between China and Japan amid a territorial dispute over an island chain and visits by Japanese politicians to a Tokyo shrine honouring that country’s war dead. The move is the first time a Chinese court has ordered the seizure of Japanese assets connected to World War II, and could cast a pall over the countries’ trade, according to Shogo Suzuki, a senior lecturer at the University of Manchester in the U.K. who studies China-Japan relations.

Reuters

Reuters

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