Macau Business Daily, April 30, 2014 by Business Daily

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 529 Wednesday April 30, 2014

Up-tick in March exports

Year III

Macau exports jumped 10 percent in the month of March, mainly due to the high demand for watches

and clocks in the Hong Kong market. Exports of such goods went up more than three-fold year-on-year to 100.6 million

patacas last month, while the total value of exports reached 831.7 million patacas (US$104 million) Page

www.macaubusinessdaily.com

Low expectations April gaming revenue growth will slow down, investors predict, in anticipation of May’s Golden Week Page 2

Retiring gracefully

MGM first quarter results hit new high Page 16

The office for the Secretary for Public Administration and Justice has agreed to legislators’ suggestions regarding the one-off compensation for the city’s outgoing principal officials who are not from a civil service background. This means such officials could receive a higher compensation ratio of the salary for their official post Page 5

Kowloon Development revenue surges The upsurge in the company’s revenue here was due to presales of its Pearl Horizon and Lotes T+T1 in Areia Preta. The pre-sales of the two projects raked in over HK$10 billion. As many as 260 flats from the Lotes T+T1 complex have already been sold Page 8

Income disparity widens China’s income gap between rich and poor is among the largest in the world, and has already surpassed that of the U.S. An added challenge for President Xi Jinping as growth noticeably slows Page 9

VIP revenue slowdown Page 3

Brought to you by

HSI - Movers April 29

Name

No flights to India yet

%Day

China Unicom Hong K

6.44

China Mobile Ltd

4.57

Hang Lung Propertie

4.48

Sino Land Co Ltd

3.66

AIA Group Ltd

3.60

Bank of East Asia Lt

3.49

China Resources Ent

3.20

Hong Kong & China G

3.11

Sands China Ltd

-2.61

Galaxy Entertainme

-4.59

Source: Bloomberg

Air links between Macau and India are far from becoming a reality in the near future due to “commercial reasons”. This despite the number of Indian tourists to Macau increasing 8.8 percent in the first quarter of the year

I SSN 2226-8294

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April 30, 2014

Macau

The calm before the storm? Investors trimmed growth forecasts for April in anticipation of lower revenues from VIP slowdown and the upcoming Golden Week. Macau casino stocks plunge but markets expect a bright and profitable May with 15 percent gain in revenues Alex Lee

Alex.lee@macaubusinessdaily.com

nvestors are downgrading their estimates for casino revenue growth for April as gamblers are playing and spending less in anticipation of Golden Week. In addition, the VIP market slowdown only serves to consolidate expectations of a mere 5 percent jump, down from the previously anticipated 10 percent increase. Yesterday, Wells Fargo published a client note saying they expect gaming revenue in Macau to rise between 6 to 8 percent in April, below the original forecast of 7 to 10 percent. The weekly earnings this week in Macau are 15 percent down from the previous week reaching 980 million patacas, while

May growth could rebound to the mid-teens Wells Fargo

Corporate MGM Macau Chef “Pastry Chef of the Year” Günther Wolfsgruber, MGM Macau’s executive pastry chef, has been awarded “Pastry Chef of the Year” (Regional Awards) at the 2014 World Gourmet Series Awards of Excellence. Founded in 2001, the accolade celebrates outstanding accomplishments in the food and beverage industry. AOE seeks to recognise exemplary individuals who make a mark in the industry, delivering the best dining experience and products to their guests. Mr Wolfsgruber, who has chalked up over two decades of experience in creating pastry and desserts, said the award “sends a very positive and encouraging message to young, aspiring chefs… [and] is also an extra motivation for me to keep doing what I’m doing.” He has worked in kitchens around the world, including the Bahamas, Korea, Malaysia, the Philippines and Fukuoka, Japan.

month-on-date revenues are growing at an 8.8 percent rate compared to the same period last year. Despite being positive on Macau’s secular history, the US bank emphasised that “2014 continues to be choppy due to a potential slowdown in VIP [business] driven by decelerating credit growth and a softer macro environment.” Wells Fargo’s median estimate for April – a 7 percent rise – implies a 1 percent drop in VIP revenues from a year earlier and 25 percent growth in the mass market. The bank also predicts that gains from the last three weekdays of this month total from 750 to 915 million patacas. Sterne Agee has also downwardly revised its estimates for gaming revenues. The US brokerage tightened its April expectations to a 5 to 8 percent growth behind the previous 5 to 10 percent expectations, said the company in a note to clients.

No room at the inn for May The declining revenues are no surprise to Sterne Agee given the upcoming 3-day Golden Week holiday beginning May 1, wrote the brokerage yesterday. Credit Suisse lowered its figures despite expecting a more optimistic April than its peers with revenues going up 8 percent year on year. This compares with an estimated 9 to 13 percent revenue growth. Following a weak April, investors are confident that May will bring good news for gaming operators with revenues set to improve around 15 percent. In the last 9 years May gains have, on average, been 11.3 percent higher than in April, Sterne Agee says. In one of those years revenues peaked at a 20.4 percent jump. The brokerage outlook for May now sits

at 10 to 15 percent growth. “May growth could rebound to the mid-teens”, says Wells Fargo. The bank estimates a revenue increase of 15 percent based on 30 percent rise in the mass market segment and 9 percent on VIP clients. “Heading to the Labour Day holiday, hotel rooms of the six casino operators in Macau are almost fully reserved. We believe that traffic and the robust momentum of the mass market business is likely to continue”, stated Credit Suisse.

Casino stocks drop to 6-month low The trimmed forecasts for gaming revenue in Macau for April took a toll on casino operators stock prices yesterday. Galaxy Entertainment suffered the biggest drop in a year, devaluing 4.7 percent in a single session from HK$65.3 to HK$61.95. Galaxy stock traded at a 6-month low. Sands China, Macau’s Venetian operator, which this week reported a 50 percent increase in its first quarter profits, saw its shares plunge 3,2 percent yesterday in Hong Kong to HK$57.55 and an accumulated 10 percent decrease since Friday. A 10 percent loss in three sessions also struck Melco Crown’s shares, quoting yesterday at HK$33.2, the lowest since December 2 and a decrease of 5.8 percent compared to Monday’s price.

April 30, 2014

Macau

Timely watch re-exports propel March The city’s exports continued to rise for a second consecutive month in March by 10 percent, fuelled by the re-export of watches and clocks to Hong Kong Tony Lai

tony.lai@macaubusinessdaily.com

he territory’s exports jumped for the second month in a row in March with strong demand for watches and clocks by the Hong Kong market, official figures suggest. The Statistics and Census Service announced yesterday that the value of exports was up 10 percent from the previous year to 831.7 million patacas (US$104 million) last month. Re-exports – goods shipped in and out of Macau with no value added - were the main driver for growth, surging 13 percent last month to 660.1 million patacas. The shipment of domestically-generated goods, or domestic exports, stood at 171.7 million patacas last month. In an analysis of the official figures, the reexports last month were particularly fuelled by shipments of watches and

clocks to Hong Kong. Exports of such goods went up more than threefold year-on-year to 100.6 million patacas last month. Exports of machines and apparatus also jumped 10 percent to 134.3 million patacas, whilst shipments of diamonds and jewellery, most re-exported to Hong Kong, decreased by 18 percent to 39.5 million patacas. The territory’s imports continued to rise with a one-fifth growth last month to 7.22 billion patacas, widening the trade deficit by 22 percent year-on-year to 6.39 billion patacas. The robust imports were supported by the retail sector here, as imports of watches, primarily from Switzerland, surged 131 percent yearon-year to 766.7 million patacas last month. Imports of gold jewellery were also inflated by more than half to 746.7 million patacas. On-going construction

Junket incidents damage VIP revenues Less credit available, tight control by authorities and lower profile of junkets are set to pressure VIP revenues, says Credit Suisse Alex Lee

Alex.lee@macaubusinessdaily.com

wo recent incidents involving junket operators could affect the already decelerating revenues of the VIP market in Macau in the near term, Credit Suisse warned yesterday. The disappearance of a small junket in Hong Kong with at least HK$8 million to HK$10 million on April 19 and the detention of the wife of a Neptune shareholder, one of the three biggest junket operators in Macau, on suspicion of money laundering nine days later has fuelled growing concern about the impact of these events on the VIP market. “In our view, the incidents are likely to adversely affect the high roller business”, says Credit Suisse. Three reasons are identified: loss of funds from the capital pool, tightening control in lending money by junkets, and the latter maintaining a lower profile while investigations are underway. “The more active and extensive investigation into junkets are likely to prompt the junkets to remain low key in the near term and adopt a more

careful background check in dealing with new clients. This is likely to slow their activity in the high roller business”, wrote the Swiss bank.

Encore? In 2012, a liquidity scare in China and Central Government transition caused VIP revenues to drop more than 30 percent in a single quarter, events that could have worked as a precursor to recent junket incidents in Hong Kong. Credit Suisse notes, however, that the biggest disappointment arises from the lower margin VIP segment (3 times less profit margin than mass gamers). With the robust growth of the mass market segment, casino earnings have limited downside risks. The two incidents could be just the tip of the iceberg. Media outlets reported this month that investigators have compiled a list of 20 junket operators who are allegedly assisting corrupt mainland officials; some 40 others connected with the Neptune group were questioned.

projects like the Light Rapid Transit (LRT) railway and mega casino-resorts in Cotai spiked the import of construction materials by 57 percent to 348.9 million patacas last month. In the first three months, exports went up by 6 percent from the previous year to 2.48 billion patacas with a 1-percent hike in domestic goods and a 7-percent jump in re-exports. Imports surged even faster at 18 percent to 21.92 billion patacas. Exports to Hong Kong, the city’s biggest goods destination, soared by 12 percent to 1.53 billion patacas in the first quarter, while shipments to the European Union jumped 29 percent to 86 million patacas. Shipments to mainland Chi na a nd the Un ited Stated, on the other hand, declined by 5 percent and 19 percent, respectively, to 311 million patacas and 86 million patacas.

April 30, 2014

Macau

Macau veteran appointed Sydney casino chief

eteran Macau gaming industry executive Greg Hawkins has been appointed managing director of The Star casino resort in Sydney, its operator Echo Entertainment Group Ltd recently confirmed. Hawkins is expected to take up the role in September, after getting necessary regulatory approvals, the company said yesterday, according to Australian media reports.

He replaces Frederic Luvisutto, who resigned in December to pursue new career opportunities. “Having managed both a premium VIP hotel and casino and a largescale integrated resort in Macau, Greg also brings experience in the Asian VIP and premium mass market where we see further growth opportunities for Echo,” Australian newspaper Brisbane Times quoted

Greg Hawkins

T.L.

Refurbished Jockey Club re-opens betting centre

Chow Tai Fook denies price-fixing

acau Jockey Club Co Ltd said it will re-open part of the betting centre located on the ground floor of its racecourse in Taipa today, following renovation. The company said in a statement released this week that the ground floor centre will feature 10 betting counters to serve

Matt Bekier, Echo’s chief executive, as saying. Prior to this appointment, Mr Hawkins served from 2011 until last August as chief executive for a Crown Resorts Ltd casino in Melbourne, controlled by Australian billionaire James Packer. He also served as chief executive in Altira Macau for two years from 2006 before assuming his role as president of City of Dreams in 2008. Both Altira Macau and City of Dreams are local properties of Melco Crown Entertainment, a gaming venture formed by Mr Packer and Lawrence Ho Yau Lung, son of Macau gaming tycoon Stanley Ho Hung Sun.

gamblers. But the Club, with gaming executives from SJM Holdings Ltd like Ambrose So Shu Fai and Angela Leong On Kei on its board, did not mention its plan to re-install gaming tables. The Club previously declared that a detailed plan will be unveiled for the re-opening of the casino, which was closed in 2004.

he world’s biggest jewellery retailer, Chow Tai Fook Jewellery Group Ltd, denies reported price-fixing practice in mainland China to squeeze out small players. Mainland media China Economic Net reported this week that 13 big jewellers including Chow Tai Fook adjusted their gold prices in a unified approach on the mainland, making it

difficult for small businesses to attract customers. Chow Tai Fook released a press statement on Monday decrying the report as false. The statement stressed that the company had its own pricing mechanism for its products considering raw material cost, design and international gold price. Chow Tai Fook and other jewellers were involved in a similar furore last July.

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April 30, 2014

Macau

Bigger one-off compensation for top officials Top officials from private sector to see bigger slice of one-off compensation upon departure, secretary agrees Stephanie Lai

sw.lai@macaubusinessdaily.com

MOP 270,000 Chui Sai On’s monthly salary

he cabinet of the Secretary for Public Administration and Justice has agreed to legislators’ suggestions that the one-off compensation for the city’s outgoing principal officials who are not from a civil service background should receive a higher compensation ratio of the salary for their official post, the cabinet confirmed in a press release yesterday. The statement issued from the cabinet is a response to the bill on the welfare of incumbent, appointed and outgoing principal officials, which is currently being discussed between the government and the second permanent committee of the Legislative Assembly. The “principal officials” referred to include the MSAR’s Chief Executive and the secretaries. As stated in the press release, the cabinet said it has agreed with the majority of opinions of the legislative committee that outgoing principal officials who are not from a civil service background shall receive 30 percent of their monthly salaries in their official post; for those that

MOP 187,000 Each of the five secretaries monthly salary

KEY POINTS 30pct of their monthly salaries for outgoing principal officials without a civil service background 14pct of their monthly salaries for outgoing principal officials from the civil service

are from the civil service the oneoff compensation should amount to 14 percent of the outgoing official’s monthly salary, as recommended in the initial version of the bill. Accounting for the higher compensation terms designed for non-civil servants that assume a top official post, the cabinet explained in the statement that the measure was meant to “attract professionals to work for the government”. President of the second permanent committee Chan Chak Mo, also the managing director of restaurant operator Future Bright Holdings Ltd, commented that the 30 percent compensation ratio has been suggested by “some legislators” to attract professionals from private companies to work for the government; he refused to speak further on the issue. The initial version of the bill stated that the one-off compensation for outgoing top officials, whether or not from a civil service background,

should be calculated on only 14 percent of their monthly salary; the government submitted the latest version of the bill last week raising the compensation ratio from 14 percent to 30 percent. Pro-democrat legislator Antonio Ng Kuok Cheong, also a member of the second permanent committee of the Assembly, is not happy with the latest response from the secretary cabinet.

Fat cheque “I would suggest that the initial ratio set at 14 percent of the top officials’ monthly salaries remain unchanged, whether or not they are from a civil service background,” Mr Ng commented to Business Daily. “We can comprehend that this 14 percent is counted on the basis of the monthly contribution ratio for civil servants’ provident fund,” the legislator noted, “but the reason why this ratio was raised to 30 percent has never been explained.” “Also, on top of the one-off compensation, the bill stated that outgoing officials can receive an additional compensation for the suspension of their [official] duties, which I found overlapping,” said Mr Ng. “The one-off compensation, taking into account the current salary scale for the officials, is good enough to save losses for the officials that are kept from taking posts at private institutions for a year.” The additional compensation Mr Ng referred to is calculated on 70 percent of the monthly salaries the outgoing top officials received,

…the reason why this ratio was raised to 30 percent has never been explained Ng Kuok Cheong, pro-democrat legislator

where the compensation period shall cover the period when these officials are prohibited from assuming posts with private entities. The Chief Executive and the secretaries are not allowed to work for any private entity for one year following their departure from their official posts, local regulations state. The current pay for the Chief Executive and the secretaries, approved by the Legislative Assembly on January 23, allows a 10 percent monthly pay rise: Chief Executive Fernando Chui Sai On’s salary is raised to 270,000 patacas (US$34,428), while that for the five secretaries is 187,000 patacas. “So, take any incumbent secretary that has served in the post for 15 years, for instance Francis Tam Pak Yuen [Secretary for Economy and Finance - the 30 percent raise would see his one-off compensation grow by about 5 million patacas, which is a very huge rise,” said Mr Ng.

April 30, 2014

Macau Brought to you by

HOSPITALITY Short visits Greater China – mainland China, Hong Kong and Taiwan - accounts for the bulk of visitors to Macau. Their combined share of the total number of visitors stood at 90 percent last year. A permanent and distinctive feature of the respective flows of visitors is the dominance of same-day visitors. In all three cases their number of visitors is bigger than the number of those who stay at least one night. That puts a burden on infrastructure and services that are possibly not fully compensated by the revenue generated by these short-term visitors. But the pattern is stubbornly consistent. Overnighters, who typically bring more revenue and demand a wider gamut of services, are consistently in the minority. The chart below, where same-day visitors are represented by hyphons, makes that feature perfectly visible.

AirAsia sets course for new destinations

irAsia flights between Macau and popular Southeast Asian tourist spots such as Boracay in the Philippines, Sabah in Malaysia and Krabi in Thailand could commence in August. Portuguese-language newspaper Jornal Tribuna de Macau quotes the low-cost carrier’s general manager of airport and network planning for Greater China, Celia Lao, as saying that flights to the three destinations will start in the second half of the year, “most likely in early August.” The number of passengers flying

In the first quarter, the number of same-day visitors from the mainland actually reached a historical high. Although by late 2011 and early 2012 the numbers for the two types of visitor were getting closer, later figures reversed that trend, and the gap is increasing. But both figures are rising neatly. Last quarter, overnighters and same–day visitors from the mainland were, respectively, 14 percent and 20 percent higher than one year earlier. In the case of Hong Kong, the overall trend for both types of visitor is one of slow decline. Over the last four years, figures for both types of visitor declined by about 10 percent. Taiwan seems to be the only instance in which the dominance of same-day visitors may yet be overcome. The progressive decline in the number of sameday visitors, associated with a slow rise in the number of overnighters, has brought their figures to almost parity.

2.786 mln

mainland same-day visitors in first quarter

with AirAsia increased by around 15 percent last year compared to 2012. And the airline is planning expanding farther to include new destinations. Talks are scheduled “soon” with Macau’s airport authority and government as to what destinations can be added to its existing schedule. Earlier in the year, Ms Lao said that AirAsia would like to launch daily flights to destinations “because frequency really matters to visitors alongside factors such as fares and on-time arrivals.” According to the Portugueselanguage newspaper, the low-cost

carrier is completing a feasibility study on which destinations to fly to in order to better meet demand, Ms Lao is quoted as saying. In February, Ms Lao told Business Daily that “the increasing number of expats working in Macau - in particular, the fact that their number will rise following the second phase of construction on Cotai - are some of the reasons when considering expanding our network”. At that time, Ms Lao added it was all a “matter of market demand, as we definitely have the flight capacity to cope with this expansion.”

MOP12.4mln goes no summer activities The number of parents and children participating in these activities has also increased by 50pct

he education bureau is about to invest as much as 12.4 million patacas in 10 different categories of summer activity, an increase of 10.5 percent over that of the previous year. A total of 944 classes are being planned for this year’s summer activities organised by the Education and Youth Affairs Bureau (DSEJ). This is an increase of 78 percent compared to 2013, Portugueselanguage newspaper Jornal Tribuna de Macau reports. According to the newspaper, the summer activities will focus primarily on nature, with special emphasis on camping. There will

also be a youth guided visit to Hong Kong. This is one of the new activities planned for this summer, and meant to “strength team spirit” amongst participants. The number of parent-child activities has also increased to 24, with a total of 38 new courses offering 501 places. Due to its popularity and in order to diversify such activities, these increased by about 50 percent compared to those of 2013. One of the summer courses on offer is 3D printing, which seeks to develop children and teenagers’ interest in the sciences. There will also be a number of finger painting and fashion courses, as well as a financial

management course. In addition, special needs was an area into which the education bureau put some thought by creating 19 courses designed specially for children and teenagers with intellectual and developmental disabilities. The Sports Development Board will be responsible for organising 132 different activities, which will offer as many as 23,979 places. Some of the sports activities on offer include rugby, sailing, boxing and belly dancing. Registration for the summer courses is now open until May 12, the Portuguese-language newspaper said.

April 30, 2014

Macau

Macau-India flights not yet viable Despite an 8.8-percent rise in the number of Indian tourists to Macau, obstacles like operation models still make it difficult for airlines to fly between Macau and India, a local official claims Tony Lai

tony.lai@macaubusinessdaily.com

uch talked about since last year but an aviation official here confirms that the city will still not see any direct flights linking to India in the near future for commercial reasons. The director of the Civil Aviation Authority of Macau, Simon Chan Weng Hong, said yesterday that they had not yet received any application from carriers to run direct flights between the city and the sub-continent. His comments come after Indian-based low-cost carrier SpiceJet Airlines Ltd said last summer that it had gained the approval of Indian authorities to fly between Macau and New Delhi, the nation’s capital. The carrier said at the time that the flight could be launched as soon as last month after obtaining the green light from the Macau side. Mr Chan confirmed yesterday, however, that the application was never made apart from some enquiries, adding that there were obstacles such as commercial considerations preventing the launch of flights between Macau and India in general.

The four-to-five hour flight between the two places is not quite suitable for small-sized aeroplanes, and operating costs may “double or triple” if larger planes were used, the aviation director explained. Official figures show that there was an 8.8-percent rise in the number of Indian tourists to Macau to over 30,400 in the first three months of this year, mostly visiting by sea from nearby Hong Kong. Mr Chan also noted that the recent ‘Occupy’ movements in the Taiwan parliament have delayed the Legislative Yuan’s review of the aviation pact signed between Macau and Taiwan in February. He said he hopes the pact can come into force soon. The pact will allow more airlines to fly the route carrying unlimited passengers and freight between here and the island. A newly established, Taiwan-based budget carrier - Tigerair Taiwan - said earlier this month that it plans to fly to Macau in the fourth quarter. Mr C han a d d r es s ed questions yesterday on the sidelines of a signing ceremony

Tax pact with Japan effective May 22

8.8pct Rise in number of Indian tourists to Macau in Q1 of agreements between the regulator, local-based flagship carrier Air Macau Co Ltd, and the Administration of Airports Ltd (ADA) on safety information exchange. The two memoranda of understanding mandate that Air Macau provide the government with monthly reports of its analysis of flight data and that ADA offer monthly ramp safety reports, according to a press statement from the civil aviation authority. “We hope to establish identical cooperation with all operators to extend the scope of safety data collection. Therefore, we will continue to liaise with the other operators,” Mr Chan said, stressing the aviation safety level here is at international level.

Viva Macau wins court appeal

The authorities of Macau and Japan signed the tax information exchange pact on March 13

he Tax Information Exchange Agreement (TIEA) signed by Macau and Japan comes into force on May 22, the Ministry of Finance of Japan said in a press release published yesterday. Starting from May 22, both contracting parties can request information for criminal tax matters without regard to the taxable year to which the matter relates, the ministry noted in the statement issued yesterday. The authorities of Macau and Japan inked the pact on March 13,

which conforms to criteria compiled by the Organisation for Economic Cooperation and Development against tax evasion. Macau passed the body’s secondphase review on transparency of tax information last year. Following the signing of the tax information exchange agreement with Japan, the number of jurisdictions that have signed TIEA or Double Taxation Conventions with Macau has increased to 17, the Financial Services Bureau noted previously.

iva Macau, the low-cost airliner that filed for bankruptcy in 2010, has won its appeal against its former proprietor. The court ruled that the company could deduct the deposit paid at the start of the contract from the total amount of rent due, the Court of Second Instance ruled yesterday. With this decision, the bankrupt administrator of the company skipped paying an extra HK$284,864, the equivalent of two months rent deposit.

Despite this, the court ordered the former aviation company to pay the proprietor HK$427,296, equivalent to five months rent from December 2009 to April 2010. The Court of Second Instance considered the decision taken by the Court of First Instance to deduct the original deposit from the amount of rent owed to be legitimate. As Viva Macau continued to occupy the leased space after it went bankrupt, the court decided that the administrator should pay the rent until April 2010.

April 30, 2014

Macau Public housing land in planning stage The land plots zoned for 4,400 new public homes are still undergoing legal procedures and negotiations with land owners, making it “difficult” to start construction this year, the government has said. Secretary for Transport and Public Works Lau Si Io told media yesterday on the sidelines of a Legislative Assembly meeting that four plots of land are involved – one on the Macau Peninsula and three in Taipa. He stressed that the government will start planning the 4,400 homes at the same time with ongoing negotiations, adding that the government will promptly announce details of any progress.

Macau loan sours investor confidence Huishan Dairy plunges on concerns over investors’ stake sales

hina Huishan Dairy Holdings Co., the milk producer backed by billionaire STDM shareholder Cheng Yu-tung, plummeted by a record amount in Hong Kong trading on concerns that investors’ share sales may continue. The shares retreated as much as 18 percent to HK$1.50, the biggest intraday drop since they started trading in September. While the stock succeeded in recovering it was not enough to send a clear signal about lingering concerns. Huishan fell for a fourth day, closing at a loss of 9.84 percent and trading at HK$1.65. As Business Daily went to press yesterday, the company, based in Shenyang City in northeast China, signed a facility letter with the Macau branch of the Bank of China Ltd. to borrow US$50 million to refinance its bank loans with higher interest rates in China. “Huishan Dairy is extending its decline because some pre-IPO investors sold their stakes after the lockup period expired,” Kenny Tang, an analyst at AMTD Financial Planning Ltd., said by telephone yesterday. “Concern by other investors about the recent disposals is the reason” for [today’s] decline, said Tang, who

recommends buying the stock. The dairy company’s stock fell 5.6 percent on April 25 after shareholder An Yu Investments sold 284.6 million shares in Huishan at HK$2.03. In March, Swiss food company Hero sold shares at between HK$2.21 and HK$2.27 each, the Standard newspaper reported. Hero had a 3.6 percent stake in Huishan, the newspaper said. Investors in the company, including An Yu, had agreed not to sell their shares within six months of the Sept. 27 listing, according to Huishan’s prospectus. Huishan, which raised US$1.3 billion from its IPO last year, was established in 2009 as a raw milk producer, and has moved into the business of selling liquid milk and milk powder products, grain processing and trading. The company owned more than 106,000 dairy cows, the second largest herd in the nation, as at the end of 2012, the company said in its prospectus, citing researcher Frost & Sullivan. Cheng Yu Tung, whose family controls Chow Tai Fook Jewellery Group Ltd, is another major shareholder, with 8.98 percent of the shares of the dairy company.

Cheng Yu-tung

A.L. with Bloomberg

Stay in the finest hotels in Macau and read Business Daily news where it matters

Kowloon Development revenue surges

evenue from the Macau operation of Kowloon Development Co Ltd surged more than 40-fold last year due to the pre-sales of its two projects in the Areia Preta region. Kowloon Development said its revenue from Macau hit HK$125.56 million (US$16.1 million) last year, against HK$3.1 million in 2012. The upsurge in the company’s revenue here was due to the pre-sales of its Pearl Horizon and Lotes T+T1 in Areia Preta, which raked in over

HK$10 billion, the company added. Pre-sales of the two projects will only resume, however, in two years time, following the introduction of the city’s new law on the pre-sale of unfinished flats, the Hong Konglisted developer said in its annual report released this week. The firm holds 73.4-percent stake in Polytec Asset Holdings Ltd, which controls 80 percent of the projects, or equivalent to 58.8-percent interest in both projects. With pre-sales on hold, they could

be resumed in two years’ time based on the progress of construction, Kowloon Development said. The report added that the company expects the two projects will only be completed by 2017 at the earliest. Since June last year, the pre-sales of unfinished flats are legal only if the foundations of the development that will support them are complete and each flat is registered with the government. The Pearl Horizon project -

occupying floor space of nearly 700,000 square metres - is expected to provide over 5,000 homes while the Lotes T+T1 project with 195,600 square metres of floor space is likely to offer more than 1,800 homes. Figures from the Land, Public Works and Transport Bureau as at April last year reveal that 260 flats from the Lotes T+T1 complex had already been sold, as had some 2,000 flats for the Pearl Horizon project. T.L.

April 30, 2014

Greater China

Premier Li unveils Yangtze economic belt plan The programme will include a mixture of reforms and investment projects

We’ve had similar plans to construct ‘economic belts’ in the past, but implementation is going to take time Tian Weidong, Kaiyuan Securities head of research

Bridge on the Yangtze river in Anqing, Anhui, one of the zones included in the plan

hinese premier Li Keqiang has called for the creation of an “economic belt” along the Yangtze river, the government’s official website reported, a sign Beijing could be expanding the recent dose of small stimulus measures to support a slowing economy. The programme will include a mixture of reforms and investment projects that

would provide “huge new development stimuli for more than a fifth of the country’s land and about 600 million people,” the report said. The Yangtze river delta hosts some of China’s most economically dynamic provinces but also onethird of the country’s loan delinquencies. Beijing has been at pains to play down market speculation

that it might launch a large stimulus package to support a slowing economy, saying instead that it would finetune policies to ensure unemployment does not rise. Earlier this month, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks, much of it stemming from

the massive stimulus China launched in the aftermath of the global financial crisis. Still, authorities have taken some smaller steps to bolster growth, and Li’s remarks appear to underscore Beijing’s desire to buffer the economy against a hard landing while continuing to pursue reforms. Mainland stock markets, which typically react strongly

Rich-poor gap in China surpasses US The growing wealth disparity has increased the risk of social instability in the world’s most populous nation

he income gap between the rich and poor in China has surpassed that of the U.S. and is among the widest in the world, a report showed, adding to the challenges for President Xi Jinping as growth slows. A common measure of income inequality almost doubled in China between 1980 and 2010 and now points to a “severe” disparity, according to researchers at the University of Michigan. The finding conforms to what many Chinese people already say they believe -in a 2012 survey, they ranked inequality as the nation’s top social challenge, above corruption and unemployment, the report showed. The growing wealth disparity that accompanied China’s breakneck growth in the decade through 2011 has increased the risk of social instability in the world’s most populous nation. Xi is engineering a slowdown in economic expansion to below 8 percent and leading a campaign against corruption as he grapples with rising unrest, credit risks, and pollution choking the country’s biggest cities. “The main economic risk of the growing income equality in China is that it will spill over into popular

political dissent,” said Glenn Levine, an economist at Moody’s Analytics in Sydney. “The challenge for the administration and Xi Jinping is to keep the economy growing and keep employment growing at a rate that keeps the populace satisfied with the existing political and economic model.”

Chinese data Using data from six surveys conducted by five universities in

China, the University of Michigan researchers calculated a measure of income inequality, the Gini coefficient, and compared it to earlier estimates. In 2010, the Gini coefficient for family income in China was about 0.55 compared with 0.45 in the U.S. In 1980, the gauge in China was 0.30. A coefficient of 0.5 or higher indicates a severe gap between rich and poor, according to the report, which also said the Chinese government stopped releasing the data in 2000 when the gauge reached 0.41.

University of Michigan (Student Publications Building pictured)

to signs of stimulus spending, rose slightly in morning trade, but the lack of details about investment or projects in the statement seemed to check enthusiasm. “We’ve had similar plans to construct ‘economic belts’ in the past, but implementation is going to take time,” said Tian Weidong, head of research at Kaiyuan Securities in Xi’an, adding that the bureaucratic obstacles to such a programme would be formidable. “Getting 11 provinces to work together is a pretty difficult task, their objectives are too wide, the group is too big, so it’s going to be very difficult. That’s why the market reaction has been quite scattered.” The report said that officials from the National Development and Reform Commission (NDRC) were planning to “invigorate” 11 provinces both within the relatively wealthy delta region and in city clusters further up river, including the Chengdu-Chongqing economic zone in Sichuan province. The provinces and municipalities named were Shanghai, Jiangsu, Zhejiang, Anhui, Jiangxi, Hubei, Hunan, Sichuan, Chongqing, Yunnan and Guizhou. The plan would also facilitate economic integration between the more developed river delta provinces and the interior, the report said, long an economic goal for Beijing, which is concerned about wide wealth disparities between the coast and the interior. Reuters

A reading of zero means all income is evenly distributed and 1 represents complete concentration. “Since the 1980s, the rise of income inequality has been far more dramatic in China than in the U.S.,” the researchers wrote. Government policies that favour urban over rural residents and coastal over inland regions have contributed to the gap’s rapid growth in China, the report found.

Unrest predictor The official estimate for the income gap last year was about the same as in 2012, with the statistics bureau giving a Gini coefficient of 0.473, after 0.474 the previous year. That’s above the 0.4 level that the United Nations has said is a predictor of social unrest. “It’s not clear at this point how big of an issue inequality is to the average Chinese peasant or factory worker,” Levine said. “At the moment the main gripe of the broader population appears to be around corruption of the elites” and the environment, he said. China is minting more millionaires than any other emerging economy, according to a 2013 Asia-Pacific Wealth Report from Capgemini and RBC Wealth Management, which put their ranks at 643,000, up 14.3 percent from 2012. The University of Michigan study will be published online this week in the Proceedings of the National Academy of Sciences of the United States of America. Bloomberg News

April 30, 2014

Greater China Illegal Tobacco destroyed China’s customs and tobacco authorities destroyed 375,890 cartons of smuggled cigarettes worth 22 million yuan (US$3.6 million) in Zhanjiang City in south China’s Guangdong Province yesterday. The cigarettes involved more than 30 brands including Marlboro, 555, and Double Happiness. They were shredded before transported to a local power plant to be used as burning material. Officials said the destruction illustrated China’s firm stance in abiding by the World Health Organization’s Framework Convention on Tobacco Control. It also showed the country’s achievements in cracking down on the illegal trade of tobacco.

Vanke profits drop The nation’s biggest developer by market value traded on mainland exchanges said first-quarter profit dropped 5 percent as revenue slumped after it completed fewer new projects than planned. Net income declined to 1.53 billion yuan (US$245 million), from 1.61 billion yuan a year earlier, the Shenzhen, China-based company said in a filing to the city’s stock exchange yesterday. Housing projects completed in the first quarter accounted for 7 percent of its full year target, dragging revenue down by 32 percent from the same period in 2013, Vanke said.

Disney increases investment in China Walt Disney said on Monday it has struck a deal with its Chinese joint venture partner to increase investment in its upcoming resort and theme park, Shanghai Disney, by an additional US$800 million. The expansion comes with an eye on China’s fast-growing entertainment and media market, which is expected to grow to US$148 billion by 2015 from around US$120 billion in 2013, according to PricewaterhouseCoopers’ outlook for the global entertainment and media business 2011-2015. The increased investment will be used primarily to fund additional attractions to increase capacity at the park

Harbin is the capital of Heilongjiang, the province with the worst results

Provinces miss growth Anhui was the only province to surpass goal

lmost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions as the government instructs officials to focus on reining in debt and curbing pollution. Thirty of 31 provinces and municipalities reported missing their goals, with the biggest shortfall in north-eastern Heilongjiang, where an expansion of 4.1 percent compared with an 8.5 percent target for the year. Most localities’ targets are lower than in 2013. Government websites and newspapers released the latest data. Premier Li Keqiang risks the nation sliding into a deeper

slowdown as the government cracks down on overcapacity in the steel industry, wrestles with shadow banking risks and rolls out economic restructuring measures. While the government has supported expansion with measures such as reserve-ratio cuts for rural banks, it has so far avoided broader stimulus as Li chases a national growth target of about 7.5 percent. “The central government will continue to refrain from all-out stimulus and the slowdown pressure may continue to rise,” said Zhu Haibin, the chief China economist with JPMorgan Chase & Co. in Hong Kong. After a 7.4 percent expansion

in the first quarter, growth may sink closer to 7 percent during the second half of this year, Zhu said. The Shanghai Composite Index is down about 5 percent this year amid concern a slowdown will curb earnings. Six provinces missed their goals by more than 3 percentage points. In Shanxi, a region hit by slumping coal prices and mine closures, an expansion of 5.5 percent compared with a full-year target of 9 percent. Heilongjiang, Hebei and Shanxi are “all provinces which suffer relatively severe overcapacity,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.

Mongolia gambles on horseracing

Legalising betting would mark the first time Mongolia has Sinopec results decline allowed gambling since a Macau-operated casino closed in 1999 China Petroleum & Chemical Corp., Asia’s biggest refiner, reported a greater-than-estimated 15 percent decline in first-quarter profit as lower crude prices and higher exploration costs crimped earnings. Net income fell to 14.1 billion yuan (US$2.26 billion), or 0.12 yuan a share, in the three months ended March 31 from 16.7 billion yuan, or 0.14 yuan, a year earlier, the Beijing-based company said in a statement to the Shanghai Stock Exchange on Monday. The average of five analyst estimates compiled by Bloomberg was 15.9 billion yuan.

Ping An quarterly net income jumps China’s second-biggest insurer said first-quarter profit rose 46 percent as premium income and banking revenue grew and investment returns climbed. Net income increased to 10.8 billion yuan (US$1.7 billion), from 7.39 billion yuan a year earlier, the company said in a filing to the Shanghai stock exchange on Monday. A 41 percent profit increase at the banking unit helped Ping An bolster profit even as declines in the benchmark Shanghai Composite Index reduced the value in its equity holdings. Net premiums earned rose 25 percent, the Shenzhen- based company said.

ongolia’s government will propose laws to set up a professional horse-racing league and legalize betting to compete for the Chinese gambling market. The government may approach the Hong Kong Jockey Club with a proposal to have jockeys and horses race in Mongolia when they’re not competing in the former British colony, Culture Minister Oyungerel Tsedevdamba said in an e-mail. The Hong Kong horse racing season runs from early September to mid-July. “Our priority is to make the legal environment for a jockey club operation so that we can have a market share” of the Asian jockey business, Oyungerel said, adding that she hopes to submit the draft in parliament within three months. “Our law is heavily based on Hong Kong Jockey Club rules.” Legalized gambling would help diversify Mongolia’s resource-reliant economy as prices for commodities such as copper and coal languish at multiyear lows. Economic growth fell for the second straight year, to 11.7 percent in 2013. Wagering on horses might give Mongolia access to a piece of the Chinese gambling market that’s made Macau the world’s biggest gambling

hub. Revenue in Macau, the only place in China with legalized casino gambling, will double by 2018, according to Aaron Fischer, an analyst with Hong Kong-based brokerage CLSA. Asked about the Mongolian idea, Hong Kong Jockey Club spokesman Andy Clifton said in an e-mail jockeys are given a “short break” between mid-July and September.

New season “During the off-season, horses and jockeys remain in training for the majority of time to be ready for the start of the new season,” Clifton said. In its latest annual report for the 2012-2013 season, the Hong Kong Jockey Club said racing, the Mark Six Lottery and football betting amounted to HK$152 billion (US$19.6 billion), resulting in revenue for the Jockey Club of HK$27.2 billion. A law to allow betting would mark the first time Mongolia allowed gambling since a Macau-operated casino closed in 1999 and three lawmakers were convicted of helping rig the tender to build it in exchange for gifts including cash and vehicles. “Mongolia is developing,” said Jan Wigsten, founder of Nomadic

Journeys, an Ulaanbaatar-based tour company. “It is normalizing in the global sense and the institutions are becoming stronger, which is necessary with gambling.” The government is seeking to build a horseracing track near the site where the country is building a new airport, 54 kilometres south of the capital Ulaanbaatar. Oyungerel said more than 50 horse trainers

April 30, 2014

Greater China gross domestic product. Localgovernment borrowing will be an “important indicator” in regional officials’ performance reviews and people should be punished for decisions that “result in huge losses to the country,” waste resources or cause ecological damage, the official Xinhua News Agency reported in December, citing the Communist Party’s Organization Department. “Most important is the environment,” said Hou Liang, the mayor of Zhangjiakou, a city in Hebei, as he came out of a regional session of the National People’s Congress in Beijing in March. “We no longer rely on gross domestic product as in the past, yet dealing with the environment is much tougher.”

targets JPMorgan’s Zhu said provincial goals remain “too high” and that all provinces except Beijing and Shanghai had targeted growth above 7.5 percent. “The GDP target is no longer the only thing that matters,” said Zhu. “But missing the targets too much will certainly put heavy pressure on local governments to stabilize growth.”

Inflated figures Regions have an incentive to avoid inflating growth figures now that officials are being judged on an array of issues including debt and the environment, not only

Output gap The eastern inland province of Anhui reported a 9.6 percent economic expansion in the first quarter, exceeding a goal of 9.5 percent for the year - the sole region to beat its target. Guangdong, the biggest provincial economy and a hub for exports, reported growth of 7.2 percent in the first quarter, compared with a target of 8.5 percent. A gap in reported economic output between provinces and national statistics narrowed for the first time in six years in 2013. The combined nominal economic output of the 31 provinces expanded about 9.2 percent to 62.9 trillion yuan (US$10 trillion), according to data reported by local governments and compiled by Bloomberg News. That exceeded the national figure by 6.06 trillion yuan, or 10.7 percent, after an 11 percent margin in 2012. Bloomberg News

from Mongolia will visit Hong Kong to study the business.

More legislation

Our priority is to make the legal environment for a jockey club operation so that we can have a market share Oyungerel Tsedevdamba, Mongolia Culture Minister

Oyungerel said one law to legalize online gambling and lotteries and a second law to allow horse betting and jockey clubs are in draft form. After the first two drafts are submitted to parliament, the government will decide if more legislation is needed, including a bill to allow casinos, said Oyungerel. Mongolia has its own tradition of horse racing. Courses are set on the open plains and run more than 15 kilometres, and many jockeys are children under 10 years old. Oyungerel represents a district of Ulaanbaatar that’s home to many young jockeys, she said. “I see their future in the horse business and I would like to provide a viable business for today’s horse boys,” she said. Bloomberg News

Horses are part of the cultural heritage of Mongolians and horse races are part of it as well

Bank of Beijing plans to go public The Bank of Beijing plans to convene a shareholders’ meeting on May 20 to discuss the plan

hina’s state-backed Bank of Beijing Co Ltd is planning a Hong Kong share offering that could raise more than US$4 billion, the latest mainland bank seeking to boost its capital as new rules are phased in. Chinese lenders are also under pressure to bolster capital bases as slower economic growth in the first quarter saw non-performing loan ratios rise at many Chinese banks. The medium-sized lender, which counts Dutch banc assurer ING as its biggest shareholder, plans a base offering of up to 3.4 billion H-shares on the Hong Kong Stock Exchange’s main board, pending approval by shareholders and regulators, it said in a filing late on Monday. Based on the bank’s Shanghai shares, the offering could raise around 26 billion yuan (US$4.2 billion). Its shares in Shanghai were 0.9 percent weaker in early trade. There is also an overallotment option if demand proves strong. China Banking Regulatory Commissions began phasing in stricter capital adequacy requirements last year to get the domestic banking system in compliance with global rules on bank capital known as Basel III. Last year, Bank of Chongqing Co Ltd and Huishang Bank Corp Ltd raised funds through listing in Hong Kong. Qiang Xin, Bank of Beijing’s

KEY POINTS Lender plans to issue as many as 3.4 bln H-shares Plans overallotment if demand good Smaller China banks seeking to boost capital in face of new rules

chairman of its board of supervisors, was quoted by the official China Securities Journal as saying that the Hong Kong offering could raise its capital adequacy ratio by 3 percentage points and could satisfy the bank’s capital demand for 5 years. The Bank of Beijing plans to convene a shareholders’ meeting on May 20 to discuss the plan, and it will complete the issue within a period granted by shareholders, which is typically one year in China. Bank of Beijing listed in 2007 and conducted another fund-raising via a private placement in Shanghai, raising 11.8 billion yuan in 2012. Reuters

Factory records improve in April The latest Reuters poll found respondents believed economic growth could slow to 7.3 percent

hina’s factory activity may have picked up slightly in April as the government uses targeted measures to support the economy, a Reuters poll found, but the slowdown could continue due to a cooling property sector and the impact of structural reforms. The median forecast of 12 economists expected China’s official manufacturing purchasing managers’ index (PMI) to creep up to 50.5 from March’s 50.3. That would match January’s level and get further above the 50 line that separates expanding activity from a contraction. “The government is trying to stabilise growth by introducing targeted easing, but I think it’s not enough and further slowdown is possible,” said Minggao Shen, China economist at Citigroup in Hong Kong. The government has hastened construction of railways and affordable housing and cut taxes for small firms in a bid to underpin growth, while the central bank has cut its required reserve ratios for rural banks. Chinese leaders, while avoiding a forceful response to the slowdown, have been focusing on market-based reforms to deal with structural distortions and put the world’s secondlargest economy on a more sustainable footing, over time. A preliminary PMI survey by HSBC

50.5

April PMI forecast and Markit Economics showed that factory sector activity ticked up in April but still shrank for a fourth straight month. The official PMI is weighted more towards bigger and state-owned enterprises and tends to paint a rosier picture than the HSBC/Markit survey, which focuses more on smaller private firms. Analysts believe the property market could be one threat to Beijing’s plan to arrest a slowdown, as evidence mounts of a rapid cooling in what had been one of the few strong spots in the economy. The latest Reuters poll found respondents believed economic growth could slow to 7.3 percent in the second quarter from 7.4 percent in the previous three months. Respondents also expected the central bank to cut the amount of deposits that banks must hold as reserves by 50 basis points in the third quarter. Reuters

April 30, 2014

Asia

Inflation spiralling upwards in

Basel III rupiah debuts The debut Basel III-compliant rupiah bond issue, by Singapore’s United Overseas Bank Ltd., is highlighting the success of global lenders in expanding in Southeast Asia’s largest economy. Banks including DBS Group Holdings Ltd. and CIMB Group Holdings Bhd. may follow UOB’s 1 trillion rupiah (US$86.4 million) offer as they seek to boost funds amid curbs on their offshore parents’ capital injections, said PT Danareksa Sekuritas, Indonesia’s third-largest underwriter. Lending by overseas banks in the nation grew 32 percent last year, outpacing the 21.8 percent overall growth.

US stresses Japan on trade A Pacific-rim trade agreement may have to proceed without Japan if the Asian nation doesn’t open its agricultural markets to imports, U.S. Agriculture Secretary Tom Vilsack said. “It is incumbent upon us to have market access, and if the Japanese are unwilling and unable to provide that market access, then the other alternative is that you have a less comprehensive agreement in which the Japanese are not part,” Vilsack told reporters and editors at Bloomberg Government yesterday in Washington. Negotiators are at odds over Japan’s market restrictions for imports of agricultural goods including rice and beef.

Vietnam Air expects approval for IPO The national carrier said it expects to get approval in June for the number of shares to be sold at an initial public offering as the government speeds share sales to win overseas investors. The airline has been valued at US$2.74 billion and will offer a “suitable” stake based on market demand, Chief Executive Officer Pham Ngoc Minh said in an e-mailed response to questions. Approval for the valuation as well as the amount of stake to be offered in the IPO, planned for September, will be sought from Prime Minister Nguyen Tan Dung, he said.

S.Korea current account surplus narrows South Korea’s current account surplus narrowed to a seasonally adjusted US$6.65 billion in March from a revised US$7.54 billion in February as exports edged down while imports grew, central bank data showed yesterday. Exports fell 0.2 percent to US$52.36 billion in March from February on a seasonally adjusted basis, and imports rose 1.4 percent to US$45.13 billion, the Bank of Korea data showed, resulting in a goods account surplus of US$7.23 billion. South Korea has been enjoying current account surpluses every month since June 2011 on a seasonally adjusted basis.

Rises in the headline consumer price index (CPI) will be more moderate, in the cost of car permits and housing rentals

ingapore’s core inflation will probably rise in the second half of this year as firms pass higher labour costs on to consumers amid a “cyclical” economic recovery, the citystate’s central bank said yesterday. “Domestic business cost pressures are expected to persist and firms are likely to pass on accumulated costs, leading to broad-based price increases across the economy,” the Monetary Authority of Singapore (MAS) said in its half-yearly macroeconomic review. As a result, core inflation -which excludes changes in the prices of cars and accommodation- could rise to around 2.5 percent on a year-on-year basis in the second half of 2014, the central bank said. In March, core inflation was 2.0 percent year-on-year. Core inflation for all of 2013 was 1.7 percent, according to MAS. “Given sustained labour demand in the domestic-oriented sectors and more binding constraints in hiring foreign workers, resident wage growth should remain firm this year,” it said, adding that Singapore’s unit labour cost is expected to rise by another 3 percent in 2014. Compared with core inflation, rises in the headline consumer price index (CPI) will be more moderate, due to weakness in the prices of car permits and housing rentals, though annual changes in headline CPI will

Monetary Authority of Singapore (MAS) headquarters made new forecast

NZ opposition proposes a more powerful central bank The proposed measure would ask the RBNZ to recommend changes to the rates at which residents would have to save

ew Zealand’s opposition Labour Party, ahead of general elections in September, yesterday published a proposal to expand the central bank’s remit beyond inflation targeting to include boosting savings and weakening the exchange rate. The Reserve Bank of New Zealand (RBNZ) has had an inflation-fighting remit since it pioneered inflation targeting in the 1980s, but the broader remit would make it easier for the central bank to act in the currency market to weaken the New Zealand dollar if needed. Centre-left Labour, which is trailing badly in election polls, said the plan would also make it mandatory for residents to contribute to New Zealand’s retirement savings plan. The proposed measure would ask the RBNZ to recommend changes to the rates at which residents would have to save into the scheme as an alternative to adjustments in official interest rates. Labour said mandatory

contribution to the retirement scheme would raise the national savings rate to combat New Zealand’s chronic current account deficit, currently 3.4 percent of GDP, which it said was caused by low savings levels. Labour said the proposal would limit rate rises and increase the New Zealand dollar’s competitiveness while reducing demand from foreign investors, who tend to flock to the currency when yields are rising. “Reducing the reliance on the official cash rate, thereby reducing the

differential between New Zealand and overseas interest rates, will alleviate the carry-trade consequence of the differential between NZ and overseas interest rates,” Labour party finance spokesperson David Parker said in the announcement. A Reuters survey of six polls shows Prime Minister John Key’s National Party, which has been in power since 2008, heading towards another minority victory with 48 percent support, against 32 percent for Labour. “The market reaction was zero, and it reflects the less than certainty that the Labour Party will be elected come September, and even if they are, they will consult with the Reserve Bank and the Treasury, meaning that the policy won’t be implemented immediately,” said Deutsche Bank senior economist Darren Gibbs said. “Even if it is implemented ... chances are it won’t have a big impact on the interest rate or the exchange rate.” Reuters

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April 30, 2014

Asia

Singapore due to weakness

be “volatile”, the central bank said. Headline consumer inflation could surge to 2.5-3.0 percent year-onyear in the second quarter due to comparisons against a low base a year ago when the prices of car permits fell back from earlier peaks, before slipping to below 2.0 percent in the fourth quarter, it said.

2.0 pct

year-on-year Singapore’s March core inflation Earlier this month, MAS announced it would maintain its tight monetary policy stance of allowing a “modest and gradual” appreciation of the Singapore dollar even as economic growth slowed in the first quarter. It said core inflation will be “elevated” as a recovery in advanced economies spurs a rebound in the city-state, and due to wage cost pressures from a tight labour market. In the April 14 policy statement, the MAS trimmed its headline inflation forecast for 2014 to 1.5-2.5 percent from 2-3 percent, but kept its forecast

for core inflation unchanged at 2-3 percent. The MAS made no changes to those inflation forecasts in Tuesday’s macroeconomic review, which provides the analysis of Singapore’s economy that forms the basis for the central bank’s policy decisions. Singapore’s tight labour market is partly a result of the government’s efforts to boost productivity and cut reliance on foreign labour. Singapore’s cyclical recovery is likely to continue, helped by better prospects among major developed economies, especially the United States, the MAS said. Still, it said domestic demand in Southeast Asian economies will stay soft, while China is expected to see slower growth this year. “The more favourable external environment, including the mild improvement in the global IT industry, should provide support to Singapore’s external-oriented industries as a whole,” MAS said. Domestic-oriented industries such as the construction sector are likely to stay resilient this year, supported by investment in transportation, housing and social infrastructure, it added. “Barring any unforeseen circumstances, the cyclical recovery in the Singapore economy is expected to continue,” the central bank said. “Nonetheless, supply-side constraints due to higher labour costs and tighter profit margins could continue to weigh on growth this year. On balance, GDP is expected to rise by 2-4 percent in 2014,” the central bank said. Last year, Singapore’s gross domestic product expanded 4.1 percent. Reuters

Samsung profit beats estimates The company boosted its smartphone market share in China to 19 percent in the fourth quarter from 17 percent a year earlier

he world’s largest maker of smartphones, posted firstquarter profit that beat analysts’ estimates as demand rose for cheaper Galaxy devices and soccer’s World Cup boosted TV sales. Net income, excluding minority interests, rose 7.3 percent to 7.48 trillion won (US$7.2 billion) in the three months ended March, the Suwon, South Korea-based company said in a filing yesterday. That compares with the 6.75 trillionwon average of 19 analyst estimates compiled by Bloomberg. Selling smartphones from less than US$150 to more than US$900 and expanding its range of tablet computers helped Samsung weather slowing growth in the high-end smartphone segment before releasing its marquee Galaxy S5. New models are helping revive TV sales as global sports events, including the Winter Olympics, drive demand, while chip earnings surge on higher shipments of lower-priced devices in China and India. “The chip and display businesses will likely lead the earnings improvement going forward,” said Lee Seung Woo, an analyst at IBK Securities Co. “Earnings look better than expected.” Samsung is offering more than

US$600 worth of incentives for the Galaxy S5 to spark demand. S5 sales are expected to surpass those of the S4, the company said without providing details. Samsung shipped 63.5 million units of the S4 through February, according to the median of three analyst estimates. The company shipped 113 million mobile phones and tablet computers in the first quarter, it said. The company boosted its smartphone market share in China to 19 percent in the fourth quarter from 17 percent a year earlier, according to researcher Canalys. India sales grew by almost 37 percent in the fourth quarter compared with the previous quarter, according to International Data Corp. figures. First-quarter operating profit at the mobile unit, which is responsible for more than 60 percent of the company’s total profit, was 6.43 trillion won. That is down 1.2 percent from a year earlier and compares with a record 6.7 trillion won in the quarter ended September 30. The mobiles unit was expected to post profit of 5.9 trillion won, according to the median estimate of six analysts surveyed by Bloomberg News. Bloomberg News

Bank of Korea raises interest rate swap The central bank raised its 2014 growth projection to 4 percent from 3.8 percent on April 10

outh Korea’s swaps market is pricing in bets for the first increase in benchmark borrowing costs since 2011 as central bank Governor Lee Ju Yeol raises his guard against inflation. The one-year interestrate swap, the fixed payment needed to receive the floating rate on three-month certificates of deposit, rose to 2.71 percent on April 23, the highest since Jan. 3. The Bank of Korea, which has held its seven-day repurchase rate at 2.50 percent since May, will lift it to 2.75 percent in the fourth quarter, according to the median estimate in a Bloomberg survey of 27 analysts. Asia’s fourth-largest economy expanded at the fastest pace in three years last quarter as recoveries from the U.S. to Europe boosted exports. Governor Lee said April 10 the benchmark rate, currently the lowest since December 2010 and below the 3.27 percent average for the past decade, may rise if price pressures build. Inflation will quicken to 1.5 percent this month, the fastest since August, according to Bloomberg survey before data due May 1. “South Korea’s interestrate cycle needs to be normalized,” Arthur Lau,

who helps oversee US$71.4 billion as the Hong Kongbased head of Asia ex-Japan fixed income at PineBridge Investments Asia Ltd., said in an April 24 telephone interview. “If the economy starts to pick up, it’s highly likely the benchmark rate will point upward. Inflation is very subdued at the moment, and the earliest rate increase will come in the fourth quarter.”

Faster growth South Korea’s gross domestic product growth accelerated for a fourth straight quarter, increasing 3.9 percent in the three months ended March 31 from a year earlier, an official report showed April 24. The

central bank raised its 2014 growth projection to 4 percent from 3.8 percent on April 10, saying the global economic recovery will support demand for exports and domestic demand will rise as companies boost investment. The BOK cut its 2014 inflation projection to 2.1 percent from 2.3 percent on April 10. Lee said the same day that recent low figures were due to “temporary supply factors.” Speaking in Washington two days later, he said surprise interestrate actions aren’t desirable and predictability helps businesses make decisions months in advance, Yonhap News reported. Lee became central bank governor on April 1.

Investors can benefit from betting on further increases in the swap rate, according to Wee-Khoon Chong, Nomura Holdings Inc.’s Singaporebased head of rates strategy for Asia ex-Japan.

Rate forecasts The 12-month swap contracts starting in a year may rise to 3.10 percent by the end of this year from the current 2.91 percent as the bank expects the BOK to raise its benchmark rate in December, Chong said in an April 24 e-mail interview. Fourteen of the 27 economists surveyed by Bloomberg expect South Korea to raise borrowing costs at least once this year.

ING Groep NV is the only bank to forecast a cut of 25 basis points, 0.25 percentage point, while the rest expect no change. The rate increases will be gradual rather than steep, according to Lau at PineBridge. “We have a neutral position on Korean government bonds and have no plan to reduce holdings in the next few months,” he said. The yield on three-year government bonds has climbed five basis points from this year’s low on March 14 to 2.88 percent yesterday, data compiled by Bloomberg show. Daewoo Securities Co. predicts it will reach 3.1 percent this quarter as the economy improves. Bloomberg News

April 30, 2014

International

Oi recapitalizes to strengthen strategy with Portugal Telecom Proceeds from the offering will help Oi reduce a stifling debt load

razilian wireless and fixedline carrier Grupo Oi SA took the biggest step yet toward combining with partner Portugal Telecom SGPS SA on Monday by completing Brazil’s largest follow-on share offer in almost four years at the lowest price expected. Oi raised a total 8.25 billion reais (US$3.7 billion) from selling common and preferred stock to local and foreign investors as well as a fund led by Grupo BTG Pactual SA, the deal’s main adviser, according to a source with direct knowledge of the transaction. Including an asset swap with Portugal Telecom, the transaction was worth 13.95 billion reais. The amount fetched was the largest for a follow-on offering in Brazilian equity markets since Petróleo Brasileiro SA’s 120 billionreal capital increase in September 2010, according to Thomson Reuters data. The transaction was also the first share sale completed in Brazil since mid-December. Oi lured European and U.S. funds, who bought 85 percent of the 5 billion reais in stock sold to minority investors, by pricing the securities at the lowest level possible. The cut-off price for preferred shares was 2 reais, at the bottom of the 2 reais to 2.30 reais suggested tag. Common shares were priced at 2.17 reais each, in line with a proposed premium of about 8 percent to the preferred stock. Proceeds from the offering will help Oi reduce a stifling debt load. The recapitalized Oi, which also controls Brazil’s fourth-largest mobile phone carrier, plans to use its stronger balance sheet to form CorpCo, the proposed name of the company after the tie-up with Portugal Telecom. Executives at Oi and Portugal Telecom say CorpCo will have more clout to compete in Brazil with bigger rivals such as the local unit of Spain’s Telefonica SA , Telecom Italia SpA’s

Oi phone booths

TIM Participações SA and Mexico’s America Movil SAB. Oi’s preferred shares closed at a record low on Monday, shedding 5.6 percent to 2.37 reais, while common shares were down 0.4 percent to 2.52 reais.

Deal drought Before Monday, stock offerings in Brazil had their worst start this year in more than a decade, the latest sign of eroding investor confidence in Latin America’s largest economy. So far until Monday, no initial public offering or follow-on sale had been filed with the CVM this year, which is unheard of since at least 2004. A truncated capital markets calendar, rising political risks and the emergence of attractive investments elsewhere have left investment bankers struggling after they thrived for years with easy-to-sell IPOs. Grupo BTG Pactual SA, the largest listed Latin American investment bank, is handling the Oi transaction, along with the investment-banking units of Bank of America Corp ,

Barclays Plc, Citigroup Inc, Credit Suisse Group AG, Banco Espírito Santo SA and HSBC Holdings Plc. Banco do Brasil SA. Banco Bradesco SA, Banco Caixa Geral de Depósitos SA, Goldman Sachs Group Inc, Itaú Unibanco Holding SA, Morgan Stanley & Co and Banco Santander SA are also joint book runners. The Oi offering took off, according to investors heard by Reuters and the IFR, because BTG Pactual structured the deal with a series of guarantees to lure buyers. A fund controlled by the São Paulo-based bank subscribed 2 billion reais worth of shares in the offering, the source noted. Oi and bankers increased the amount of available stock to buyers by 500 million reais, while a supplementary allotment worth 750 million reais was also placed. By early Monday afternoon, investors had pledged to buy more than 10 billion reais worth of stock in the offering, another two sources told Reuters. Reuters

The implosion of a decade-long property bubble in 2008 flooded the country in debt

Britain’s economy grew by 0.8 percent in the first quarter of 2014 compared with the final three months of last year, official data showed yesterday. Gross domestic product had expanded by 0.7 percent during the fourth quarter (Q4) of 2013, the Office for National Statistics said in a statement. Analysts’ consensus forecast had been for GDP output of 0.9 percent in the first quarter, according to a survey by Dow Jones Newswires. “Output increased in three of the four main industrial groupings within the economy in Q1 2014 compared with Q4 2013,” the ONS said.

Cuba to update state companies

Spanish jobless nears 26% pain’s unemployment rate climbed to nearly 26 percent in the first quarter of 2014, official data showed yesterday, as millions searched in vain for a job in a sluggish recovery from recession. Despite emerging gingerly from a two-year downturn in mid-2013, the figures showed Spain still failing to significantly dent one of the highest jobless rates in the industrialised world. The unemployment rate climbed to 25.93 percent in the first three months of 2014, up from 25.73 percent in the previous quarter, the National Statistics Institute said. It was not all bad news for the Eurozone’s fourth largest economy. The jobless queue shrank fractionally, by just 2,300 people, to 5.93 million. But the ranks of the unemployed

UK grows 0.8%

nevertheless made up a bigger share of the total as 187,000 people dropped out of the workforce, many of them fleeing the country or simply giving up the search for a job. Unemployment remains a daunting challenge for Prime Minister Mariano Rajoy’s conservative government, which has made job creation a priority. The implosion of a decade-long property bubble in 2008 flooded the country in debt, tipped the economy into a double-dip recession, and wiped out millions of jobs.

‘Wind blowing in our favour’ By the first quarter of 2013, the unemployment rate had soared to an unprecedented 26.94 percent, according to latest official figures. Despite signs of a gathering economic

recovery, however, no-one is predicting a return any time soon to the pre-crisis days in 2007 when Spain enjoyed a jobless rate of less than eight percent. The Bank of Spain has forecast an unemployment rate of 25 percent this year, and 23.8 percent in 2015. Nevertheless, there are gathering signs that the broader economy is on the mend. Spain’s total economic output grew at the fastest rate in six years in the first quarter of this year, rising by 0.4 percent on a quarterly basis, the central bank has estimated. “The wind is blowing in our favour,” Rajoy declared last week, boasting that his government’s labour market reforms and deficit-cutting efforts had rebuilt the economy in record time. AFP

Cuba has granted greater autonomy to its state-owned companies to modernize and decentralize the country’s aging economic model. Taking effect on Monday, the move will affect some 2,800 state companies that represent 80 percent of the country’s economy, according to the official Cuban daily Granma. New regulations allow state companies, whose profits have been on decline due to misguided administrative policies, to sell any surplus at market prices after meeting their state commitments, and all restrictions on wages have also been lifted.

Eni results fall Italian energy giant Eni reported a 14.3-percent drop in its adjusted net income for the quarter yesterday, due to weak European demand and reduced output from Libya. The first-quarter profit of the group, known for its logo of a dog with six legs, fell to 1.19 billion euros (US$1.65 billion) from 1.39 billion euros a year earlier. “Eni delivered solid results in the first quarter 2014, despite a difficult market environment” including “continued volatility in Libya and weakness in European demand,” oil and gas chief Paolo Scaroni said in a statement.

Eurozone business lending contracts Lending to businesses in the debt-mired Eurozone contracted again in March, data published by the European Central Bank showed yesterday. Private sector loans dropped by 2.2 percent last month on a year-on-year comparison, the ECB said, after already contracting in January and February. The Frankfurt-based ECB also published its latest money supply figures, a preliminary indicator of inflation, showing a 1.1-percent increase in March after rising 1.3 percent a month earlier.

Libya reopens oil trade port

Libya’s National Oil Corporation is to resume exports from Zueitina port after declaring an end yesterday to a force majeure imposed on the terminal blocked by rebels for nine months. “NOC has announced the lifting of the state of force majeure at the port of Zueitina” which has an export capacity of 100,000 barrels per day (bpd), the company said on its website. The measure was imposed in August to clear NOC of any liability for failure to honour contracts.

April 30, 2014

Opinion BUSINESS

WIRES

Re-Governing China

Leading reports from Asia’s best business newspapers Andrew Sheng

Xiao Geng

Adjunct professor at Tsinghua University in Beijing

Director of Research at the Fung Global Institute

THE ASAHI SHIMBUN Panasonic Corp. returned to profit after deep losses for the past two fiscal years, as a weak yen and restructuring efforts helped a gradual recovery, and forecast a 16 percent increase in gains for the coming year. Prices of gadgets have been falling, adding to Panasonic’s woes. The Osaka-based maker of the Lumix camera and Evolta batteries reported on April 28 120.4 billion yen ($1.2 billion) in profit for the fiscal year through March 2014, a reversal from a 754.3 billion yen loss the previous fiscal year.

is to examine the matrix of relationships among institutions, the tiao tiao kuai kuai – literally, “lines and pieces.” Tiao tiao refers to the vertical lines of control from the central government through national ministries or agencies to local-level institutions. They include central planning concerning development and reform; the nomination and promotion of officials to important posts in ministries, stateowned enterprises, and local governments at all levels; and macroeconomic tools, particularly fiscal, monetary, exchange-rate, and regulatory policies. Kuai kuai refers to the lateral, highly competitive relationships among regional entities, to which the central government delegates a certain amount of autonomy.

MYANMAR TIMES The only bank with branches in border areas is Myanma Economic Bank, forcing traders with accounts elsewhere, such as Myanma Investment and Commercial Bank (MICB) or Myanma Foreign Trade Bank (MFTB), to use MEB. Time-consuming manual fund transfers between banks are a major cause of delay, said a Ministry of Commerce official connected to the Myawaddy border trade. This has prompted import-export companies to use other informal methods, particularly hundi, an informal remittance system used by traders that works outside of the traditional financial system.

TAIPEI TIMES Former Democratic Progressive Party (DPP) chairman Lin I-hsiung (林義雄) on Monday was hospitalized on the seventh day of his hunger strike against the Fourth Nuclear Power Plant and whether he could continue his protest remained unknown. Lin was taken to National Taiwan University (NTU) Hospital emergency center at about 3:40pm for an examination after briefly leaving the site of his hunger strike in Taipei and paying tribute to his deceased family members in a cemetery in his hometown in Yilan County earlier in the day.

THE STAR State-back private equity firm Ekuiti Nasional Bhd (Ekuinas) is looking to realise its investment in the education group Ilmu by next year, said CEO Datuk Abdul Rahman Ahmad. “Ilmu is entering its fifth year of investment and the asset divestment phase. Our options are open as to the exit strategy. “We could list it on Bursa Malaysia, which is preferred by the Government, but we will also look at a strategic sale, as long as it maximises value and meets our social objectives,” he told a media briefing on the group’s 2013 performance on Monday.

EIJING – This year’s China Development Forum in Beijing revealed the clearest vision yet of how China’s leaders intend to deliver the “Chinese Dream,” which President Xi Jinping has described as “national rejuvenation, improvement of people’s livelihoods, prosperity, construction of a better society, and military strengthening.” The question is whether the government can follow through on its ambitious reform and development plans. Last November’s Third Plenum of the 18th Central Committee of the Chinese Communist Party produced more than 330 major reforms in 60 areas for implementation by 2020 – a package of unprecedented scale, depth, and complexity. Orchestrating China’s transformation from a manufacturing- and exportbased economic model to one driven by consumption and services – and that is inclusive, environmentally sustainable, and creates more than 13 million jobs annually – is a massive undertaking. Add to it the challenge of upholding financial and social stability – and accomplishing all of this while managing one of the world’s largest bureaucracies – and the task ahead becomes truly mind-boggling. Consider the effort last

summer to assess the government’s financial condition. The National Audit Office had to mobilize 55,400 staff members to review the central government’s accounts, but also those of 31 provinces and autonomous regions, five central municipalities, 391 cities, 2,778 counties, and 33,091 rural communities. The investigation covered 62,215 government departments and agencies, 7,170 localgovernment financing vehicles, 68,621 public finance-supported reporting units, 2,235 public business units, and 14,219 other entities – responsible, altogether, for 730,065 projects and 2,454,635 items of debt. Clearly, public-sector governance in China is radically different from that in the West, where the rule of law, democratic elections, and free markets are structural norms. And, though 35 years of major reforms have brought about considerable change, with the private sector now accounting for the bulk of job creation, there remains much to be done – exemplified in the fact that the state, especially local governments and state-owned enterprises, still command most of China’s credit resources. One way to appreciate the complexity of China’s governance ecosystem

With the creation of free-trade zones – which entail lower tariffs, reduced customs barriers, and less administrative intervention – the government is attempting to give market forces a decisive role in resource allocation

In order to achieve genuine stability, China’s leaders must strike a delicate balance between tiao tiao control and kuai kuai autonomy. But this has proved difficult, with relaxation of tiao tiao often leading not just to rapid regional growth and improvements in local public services, but also to widening imbalances and a heightened risk of overheating, owing to pro-cyclical herding behavior, such as excessive fixed-asset investment. The government is then forced to re-impose central control abruptly, bringing about a sudden stop. If China’s economy were a car,

the country’s leaders would always be either flooring the accelerator or slamming on the brakes. With its latest set of reforms, China’s government is attempting finally to finetune its approach. The package centralizes some responsibilities, such as managing resistance from vested interests, while expanding local-government autonomy in other areas, including procedures for licensing and planning approval. With the creation of free-trade zones – which entail lower tariffs, reduced customs barriers, and less administrative intervention – the government is attempting to give market forces a decisive role in resource allocation. This effort to ease unnecessary constraints on regional entities will lead to market and institutional innovations. These innovations, together with increased transparency and the implementation of cuttingedge technologies, are likely to reduce rent-seeking and corruption, while boosting productivity and employment significantly. The government’s recent decision to phase out the household registration (hukou) system will augment these gains further, as it gives workers and private businessowners alike the opportunity to choose where to live, work, and invest. As China’s leaders explicitly recognized at the Third Plenum, the removal of arbitrary tiao tiao controls can enable cities and local communities to evolve according to their own comparative advantages. But China’s gradual opening up will increasingly allow companies and individuals to cross national borders in search of more lucrative opportunities, complicating the country’s governance matrix further. Indeed, coping with global competition for markets, resources, talent, and respect will require a two-way interaction between Chinese and global governance systems. China’s leaders have already demonstrated that they understand the need to implement modern management techniques, and that doing so requires them to update and recalibrate the tools of central control on which they have long relied. With the right adjustments, China’s governance system can effectively address market failures like air and water pollution, food safety, energy efficiency, and social inequality, while ensuring the country’s long-term prosperity. This process is only beginning, but it is off to a strong start. The Project Syndicate 2014

April 30, 2014

Closing American-made electric bus makes debut China CB to liberalize interest rate Chinese automaker BYD unveiled its first allelectric bus made entirely in California. The zero emission, environmentally friendly bus, which can hold a charge for 24 hours and run for 155 miles (249 km) before recharging, was delivered to the Antelope Valley Transit Authority in northern Los Angles County. The world’s largest producer of electric buses also has a deal to provide up to 25 electric buses for Los Angeles County Metropolitan Transportation Authority.

China will step up efforts to quicken interest rate liberalisation and the opening up the capital account of its currency, the country’s central bank said in its annual financial stability report released on Tuesday. The People’s Bank of China also reiterated the urgency to establish a deposit insurance system, while pledging to speed up yuan exchange rate reforms.

EU joins U.S. with new Russian sanctions

he European Union put Russian Deputy Premier Dmitry Kozak on an expanded sanctions list, joining the U.S. in protesting Russia’s actions in Ukraine. The list of individuals subject to travel bans and asset freezes also includes proRussian separatist leaders, according to a statement today in the EU’s Official Journal. The U.S. yesterday named seven individuals, including Igor Sechin, head of oil giant OAO Rosneft, and 17 companies linked to allies of President Vladimir Putin, such as InvestCapitalBank. The EU and the U.S. say Russia hasn’t lived up to an accord signed April 17 in Geneva intended to defuse the confrontation between the Ukrainian government and pro-Russian separatists supported by the authorities in Moscow. The U.S. and the EU warned they’ll levy penalties on Russian industries if Putin escalates by sending troops into Ukraine. “We’re in this for the long haul,” said Gary Hufbauer, an economist and sanctions specialist at the Peterson Institute for International Economics in Washington who predicts U.S. and EU measures will continue to “dribble out” to allow for a diplomatic solution. “From Putin’s standpoint, it could go for the next two years. He’s got staying power on this;

whether the West has staying power, we don’t know.” Market Cheer Russian markets rallied after the penalties. The Micex Index advanced 0.9 percent as of 12:36 p.m. in Moscow after snapping a five-day losing

streak to end 1.5 percent higher yesterday. The ruble strengthened for a second day against the dollar with a 0.3 percent gain. Rosneft, which isn’t a sanction target, rose 1.6 percent after hitting a 10-month low yesterday.

The EU action is “a relatively weak step compared to what’s happening on the ground in Ukraine,” Jan Techau, head of the Brussels office of the Carnegie Endowment, said by phone. “It’s really quite

a timid response. It reeks of compromise.” The bloc said yesterday that the people on the list are “responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.” The latest action, which also includes Valery Gerasimov, chief of the general staff of Russia’s armed forces, and Igor Sergun, head of the main intelligence directorate, brings the number of people blacklisted to 70. Kozak, 55, is overseeing the development of Crimea, the Black Sea peninsula that Russia annexed from Ukraine. EU preparations for “stage three” measures that would affect broader sectors of the Russian economy are “very advanced,” Maja Kocijancic, spokeswoman for European foreign- affairs chief Catherine Ashton, said yesterday in Brussels. An Obama administration official, who briefed reporters in Washington yesterday on condition of anonymity to discuss internal deliberations, said the U.S. doesn’t expect immediate change in Russian policy toward Ukraine. The strategy is to steadily ratchet up sanctions that would impose more economic pain and political isolation for Russia, the official said.

Toyota moves HQ from California to Texas

U.S. removes Philippines from piracy watch list

MGM China revenues up by 26pct

oyota Motor Corp. said it will move its U.S. sales headquarters from southern California to suburban Dallas, delivering the latest blow to California in a fight for jobs with archrival Texas. The relocation from Torrance, a Los Angeles-area city of about 150,000, will bring much of the Japanese automaker’s U.S. operations under one roof in Plano, Texas, including sales, service, marketing, advertising and quality. Also moving to Texas will be some manufacturing staff now based in Erlanger, Kentucky, and corporate operations staff based in New York City. Toyota is the largest employer in Torrance, accounting for more than 5 percent of all jobs in the city with 3,837 workers in 2013, according to the city’s annual financial report. About 2,000 people from Toyota Motor Sales in Torrance will be affected by the move, and about 4,000 U.S. employees in all, the company said. Toyota’s move will take place in stages between this summer and the end of 2016. Reuters

he United States said it has removed the Philippines from its piracy watch list after two decades following significant reforms put in place by Manila, raising prospects for increased trade and investment between the two allies. The announcement, posted on the website of the Office of the U.S. Trade Representative (USTR) on April 28, came during the first state visit of U.S. President Barack Obama in the Philippines, the United States’ oldest ally in the Asia-Pacific region. In its statement, the USTR said the Southeast Asian country, which had been consistently on the watch list since 1994 and was first listed in 1989, had undertaken in recent years “significant legislative and regulatory reforms” to protect and enforce intellectual property rights rules. Officials said the USTR decision would boost investor confidence in the Philippines. The United States is among of the country’s top three trading partners. Reuters

Bloomberg

GM China Holdings Ltd’s net revenue grew 26 percent to 7.3 billion Hong Kong dollars in the first quarter of this year over the same period a year ago, the company announced last night. This marks the highest net profit the company has recorded so far. Adjusted EBITDA before license fees also increased by 32 percent to 2 billion Hong Kong dollars. MGM China’s main floor table win increased by 45 percent year-on-year, outperforming the market’s growth of 40 percent. The company said in its statement that just on the peninsula alone, the main floor table win increased 31 percent. Slot machines handle increased by 12 percent in the first three months of the year over the same period in 2013, and revenue was up 5 percent. The company’s VIP turnover was 12 percent higher, while win increased 22 percent from the first three months last year. In addition, occupancy rate at the MGM Macau reached 98.5 percent, with revenue per available room recording an increase of 12 percent to 2,335 Hong Kong dollars.