Macau Business Daily, May 22, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 544 Thursday May 22, 2014 Year III

FAST BUCK

Page

Construction wars

Ready to go Galaxy assures investors that construction of Phase II of its Cotai property is coming along nicely and is slated to open on schedule in 2015 www.macaubusinessdaily.com

Guangdong authorities received at least 10,000 applications on the first day of the E-permit pilot scheme. Just seconds for mainland travellers to pass through Customs now when entering Macau. And E-permits mean more income for the gaming industry, analysts say 2

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Macau’s tenuous hold on the supply of engineers is not likely to improve any time soon. The city is battling it out with Hong Kong and mainland China for professionals in the sector, industry sources tell Business Daily. Project managers are most in demand Page 3

HSI - Movers May 21

Page 5

Name

%Day

Lenovo Group Ltd

3.40

China Petroleum & Ch

2.15

Going up

China Unicom HK

1.58

Galaxy Entertainm

1.57

Bank of China Ltd

1.42

The average price of hotel rooms increased 10.3 percent in April over that of a year ago, 4-star units climbed more than 15%

AIA Group Ltd

-0.91

MTR Corp Ltd

-1.04

China Merchants Ho

-1.04

Hutchison Whampoa Lt

-1.35

HSBC Holdings PLC

-2.00

Source: Bloomberg

Page 4

I SSN 2226-8294

Great walls of China crumbling Moody’s has reduced China’s property ranking to negative. Latest sector results have tipped a stable situation into negative territory Page 10

Spending Frenzy

Brought to you by

In the first quarter, CEM has already spent more than 70 percent of its annual government-approved investment budget Page 4

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2

May 22, 2014

Macau

Over 10,000 apply for e-permits to Macau The first day of the pilot scheme in Guangdong of applying for e-permits to Macau, Hong Kong drew 10,000 applications, with number expected to climb Tony Lai

tony.lai@macaubusinessdaily.com

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uangdong authorities received at least 10,000 applications on the first day of the pilot scheme that can shorten the time of mainland travellers in Customs procedures, and purportedly be beneficial to Macau’s gaming revenue.

Starting May 20, Guangdong became the first province in mainland China to handle applications from its residents getting electronic permits to Macau and Hong Kong instead of using the traditional booklet format.

The mainland authorities have so far not laid down any timetable for when this pilot scheme will be extended to other provinces.

Newspaper The Guangzhou Daily reported that Guangzhou, the capital and largest city of Guangdong province, received 3,901 applications on the first day of the scheme.The administration there issued the first e-permit on the mainland to a woman surnamed Deng

quoted an unnamed official in Dongguan as saying that the number of applications will peak next month as more mainlanders travel to the two Special Administrative Regions in summer.

Beneficial for Macau

on Tuesday, having assessed her application within a day, the newspaper added.

Other major Guangdong cities, according to mainland media, also received thousands of applications.

Macau’s nearby Zhuhai City fetched 697 applications in

the first day, with 3,036 forms for Hong Kong’s neighbour Shenzhen, 1,046 for Dongguan and over 1,400 for Jiangmen. Authorities are expecting to receive more applications in the coming weeks. Guangdong newspaper Southern Metropolitan Daily

The new permit will provide more convenience for mainlanders during the Customs clearance process as they can use the e-channels with the e-permits instead of the manual checkpoints.

It is expected to take only eight seconds for mainlanders to undergo immigration procedures using the e-permits, compared to about 30 seconds using the paper format.

Research house Union Gaming Research Macau Ltd released a note this week saying that ‘we view a smartcard system for Guangdong IVS [individual visit scheme] visitors as very beneficial to Macau,

especially as it seems that IVS visitation is likely to increase at a much faster rate than non-IVS visitation.’

‘In our view, IVS visitors are a much higher quality visitor from a GGR [gross gaming revenue] perspective than non-IVS visitors,’ analysts Grant Govertsen and Felicity Chiang wrote in a note.

The e-permit scheme applies to both Guangdong travellers visiting Macau under the individual visit scheme and tour group visas.

Guangdong travellers accounted for 68 percent of mainland visitors under the individual visit scheme to Macau last year and 41 percent of mainland package tour visitors, Union Gaming said. In the first three months of this year, Guangdong visitors accounted for 43.1 percent of all mainland visitors to Macau and 29 percent of the territory’s overall visitors, official figures said.

3

May 22, 2014

Macau

City battling neighbours for engineers Both Macau and Hong Kong are locked in fierce competition for engineers, given the growing volume of public and private projects Stephanie Lai

sw.lai@macaubusinessdaily.com

when following a project,” Mr. Wu added. “And this condition can pose a negative influence on the construction quality of the project when you don’t have a stable team to get engaged with it.”

Labour cost

M

acau’s tenuous hold on the supply of engineers is not likely to improve any time soon as neighbouring Hong Kong and mainland China fiercely compete for professionals in the sector, industry sources tell Business Daily.

Engineers here, just as with many other sectors in the city, are in short supply, with companies constantly competing for employees, director of Macau Institution of Engineers Wu Chou Kit said.

“Amid all the ongoing government infrastructure projects and Cotai casino projects, Macau is still in urgent need of engineers now,” Mr. Wu remarked. “Ten years ago, some Hong Kong-based construction companies constantly sent trainee engineers as well as the more experienced ones

to work on projects here,” he noted.

“But since two to three years ago, we haven’t seen as many of these kinds of Hong Kong engineers dispatched here as before because the growing construction volume back there has [resulted in] a huge demand for engineering professionals.”

The growing volume of both public and private construction projects in Hong Kong has driven up demand for engineers. The city is in most urgent need of professionals in the civil engineering, structural engineering and building services engineering domains, Chinese-language newspaper Sing Tao Daily quoted the president of Hong Kong Institution of Engineers Chan Kin Sek as saying.

The Hong Kong newspaper further quoted two medium-scale construction

companies there saying that the competition with projects in mainland China and Macau has further fuelled competition for engineers, where they have faced turnover issue of engineers and a ceaseless spiral of salary hikes to fight for the recruitment of employees.

“In Macau, the human resources situation for engineers is similar to Hong Kong,” said Mr. Wu Chou Kit. “Firms are poaching employees from their competing firms. As for the turnover issue, we see young engineers with three to five years experience changing from three to four firms within a five-year span.

“We’re actually a bit worried about this turnover issue because these young engineers are actually leaving their companies without thoroughly grasping the techniques

Every year, a supply of about 100 to 200 graduates of engineering studies from the University of Macau or from universities in mainland China and Taiwan can be absorbed by the market here, Mr Wu noted. Currently, the starting monthly salary for a graduate of engineering studies is about 13,000 patacas (US$1,628) to 15,000 patacas in the city, industry sources told Business Daily. For engineers with five years of experience, the average salary level rises to 40,000 patacas or more.

“We need basically every type of engineer here – whether mechanical, civil or structural engineers,” said a source from a Hong Kong-based construction company. “But demand for experienced project managers is actually much more urgent.

“An experienced engineer with five years of experience can now earn a monthly salary of about 45,000 patacas, while for an electrical or mechanical engineer the salary level is at about 40,000 patacas to 43,000 patacas,” said the source.

The overwhelming competition for labour is driving smaller-scale construction and engineering firms to scale down the number of construction bids they submit, Mr Wu said.

“But after 15 years or so, when most of the public and private constructions here are pretty much completed, we’ll fall to another extreme for the human resource issue with engineers and face excess labour in the local market,” said Mr. Wu.

April inflation hangover The consumer price index of last year hit 6.36 pct, driven by home rents, Easter holiday travel and an influx of tourists Tony Lai

tony.lai@macaubusinessdaily.com

L

ast month’s inflation continues to hover at a two-year high driven by expensive home rentals and a continuous influx of visitors but residents may find breathing space in the remaining months given the sluggish mainland Chinese economy, an economist suggests.

The Statistics and Census Service announced yesterday that the consumer price index in April rose 6.36 percent from the previous year, the same rise as in March. This

figure represents the highest since May 2012 when the consumer price rose 6.76 percent from the previous year.

‘Higher rentals for dwellings, dearer charges for eating out and package tours during Easter holidays’ were cited as the impetus behind the April rise, the statistics bureau said.

Restaurant and eatery expenses, accounting for one-fifth of the index, rose 7.7 percent year-on-year last month, the figures show,

whilst the cost of home rentals surged by 14.23 percent from the previous year. The cost of travel tours surged the most last month at 21.32 percent.

“It’s really expensive to rent homes right now with the growing employed population of non-residents,” said Jack Chang Chak Io, vice-president of the Macau Association of Economic Sciences. Figures from the Human Resources Office show that the number of non-resident workers here hit 145,692 in March, surging 27 percent year-on-year.

“The rise [in rents] is not only limited to homes but also shops, the extent of which businessmen will transfer to the consumer in their goods and service prices like restaurants,” Mr Chang said.

“The faster growth of visitor arrivals so far this year is also helping push up inflation,” he added, referring to the 9 percent rise in visitors in the first three months of this year versus a growth of 1.9 percent in the same period of last year.

Secretary for Economy and Finance Francis Tam Pak Yuen said in November last year that 70 percent of the rise in inflation here is now driven by internal demand like tourism spending and home rents.

Mr Chang added that inflation has room to go down if the mainland Chinese economy remains sluggish for the rest of the year, cutting mainland import prices and curbing mainland travellers’ expenditure.

He added that the downside pressure on inflation is “limited” as consumer prices so far this year still remained high against the backdrop of the depreciating yuan and slower mainland economy.

Mainland China’s economic growth slowed to 7.4 percent in the first three months from 7.7 percent in the fourth quarter of last year.

Analysts say that the official whole-year growth target of 7.5 percent might be out of reach.

4

May 22, 2014

Macau

CEM spends 70 pct of budget in 1Q The electricity company forked out over 455 million patacas in the first quarter, over 70 percent of its approved 640 million-patacas annual budget Tony Lai

tony.lai@macaubusinessdaily.com

T

he city’s sole electricity supplier, Companhia de Electricidade de Macau SA (CEM), has, in the first quarter, spent over 70 percent of its annual governmentapproved investment budget, official figures suggest.

The Office for Development of the Energy Sector announced yesterday in a statement that CEM had forked out 455.4 million patacas (US$56.93 million) in capital investment in the first three months of this year, 2.3 percent more than in the previous quarter. The figure represents a six-fold increase from the 68.3 million patacas expended in the January-March period of last year.

Nearly three-quarters of the first quarter’s capital spending, or 338.9 million patacas, was spent on the construction of a power dispatch system and its maintenance, the statement added.

But the first quarter’s investment already represents 71.2 percent of the whole year’s budget of 640 million patacas that the energy office has approved for CEM. The company originally asked for 1.2 billion patacas

from the administration in response to a potentially increased demand for power.

CEM invested 853 million patacas last year, mostly on power infrastructure. The energy office, however, cut the budget half in January after assessing ‘the urgency of its proposed investments, and whether the investment project is economically efficient’.

In January, Franklin Willemyns, CEM’s chief executive, described the cut

Gov’t to introduce procurement law

as “normal” because some projects like the power stations for the Light Rapid Transit railway in the Peninsula may be delayed. The construction of the Macau section of the railway has yet to be launched and the government has hinted that the first phase of the railway may only become fully operational in 2018-19.

Yesterday’s figures also revealed that the electricity consumption in the first three months reached 894.2 gigawatt

hours, increasing slightly by 0.67 percent year-on-year.

CEM’s revenue from electricity sales stay flat compared to last year at 1.14 billion patacas, the energy office statement added.

Most of the electricity consumed in the period, or 94.4 percent of the total, came from the importation of electricity from the mainland.

Last week, Hong Konglisted NWS Holdings Ltd said its joint venture with Suez Environment will sell its shares

in CEM to Nam Kwong Group Co for US$612 million (4.9 billion patacas). Nam Kwong, a Chinese state-owned firm with a presence here in property, the travel business and bus service, will then have a 90 percent stakes in a company that holds 42 percent of the shares of CEM. CEM’s net profit growth slowed last year to 6 percent with 581 million patacas, compared to a 14.4-percent rise in 2012.

Hotel prices up 10 pct in April Room rates in 4-star hotels increased the most by 15pct Sara Farr

T

he government aims to turn a dispatch about the procurement rules public bodies have to follow into a bill to accommodate the changes in the society, a special committee of the Legislative Assembly on public finance said.

The comment by Mak Soi Kun, who leads the committee, came yesterday after a meeting with officials led by the Financial Services Bureau.

Mr Mak told the media after the closed-door meeting: “The government has yet to have a timetable for setting up such legislation but it strongly acknowledges, a view also shared by us, that there is a need to turn the dispatch into law.”

The city has a dispatch, enacted in the 1980’s, for government departments to follow when purchasing goods and services but both the government and legislators think that the rules lag current development, he said.

Legislators are concerned about how the rules can be amended to better ensure the use of public money, Mr Mak added, without revealing details.

He added that he hopes the government can also quickly finish drafting amendments to the bill of the government’s budget framework, which officials aim to complete by this year.

T.L.

sarafarr@macaubusinessdaily.com

T

he average price of hotel rooms increased by around 10.3 percent in April over that of a year ago, unofficial figures from the Macau Hotel Association show.

Of these, the biggest increase was by 4-star hotels, whose rates went up to an average of 1,026 patacas per night from 890 patacas in the same month last year, an increase of around 15.3 percent.

Prices for 3-star hotel rooms also increased by around 11.1 percent last month over that of 2013 to 1,208 patacas per night from 1,087 patacas, while those of 5-star hotels increased by 9.5 percent to 1,547 patacas from 1,403 patacas a night.

While room rates increased the most for 4-star hotels, it was 3-star hotels that saw the biggest increase in occupancy, going up by as much as 6 percent in April over that of the same month last year. Overall, occupancy rates in 3-star hotels nudged 92 percent, followed by that of 4-star hotels with an occupancy rate of 90 percent and 5-star hotels with 89.8 percent. The latter two were also up by 2.8 percent and 1.5 percent, respectively, from April 2013.

Overall, occupancy rates in April increased by 2.3 percent to 90 percent

throughout all 3- to 5-star hotels, while occupancy rate increased 10.3 percent to an average of 1,547 patacas per night.

In addition, between January and March, the overall occupancy rate increased by 4.5 percent to 90.7 percent, while room rates increased 11.5 percent to an average of 1,615 patacas per night.

According the Statistics and Census Service, at the end of March the average occupancy rate of hotels and guesthouses increased by 6

percentage points to 85 percent, with 3-star hotels leading at 89 percent.

There were also around 99 hotels and guesthouses operating here at the end of last quarter, providing as many as 28,000 guest rooms, down by 1 percent year-on-year.

However, 5-star hotels accounted for the majority at 66 percent of the total supply, with 18,000 rooms.

A total of 41 hotels are affiliated to the Macau Hotel Association, of which 21 are 5-star hotels, 11 4-star hotels and 9 3-star hotels.

5

May 22, 2014

Macau

Stephen Cootey new Wynn CFO

Galaxy expects ‘high single digit’ growth in VIP sector The company’s COO said that the construction of Phase II of its Cotai property is coming along and is slated to open in 2015 Sara Farr

sarafarr@macaubusinessdaily.com

J W

ynn Resorts Ltd’s vice president and treasurer, Stephen Cootey, has been named the company’s new chief financial officer. According to a company regulatory filing, Mr Cootey replaces Matt Maddox, who remains as president.

Mr Cootey joined Wynn Resorts earlier this year as vice president and treasurer, two roles he will retain after taking up his CFO duties. Prior to Wynn, Mr Cootey was a senior vice president for Las Vegas Sands Corp.

In the first quarter, Wynn profits rose to US$1.51 billion, up 9.8 percent from a year earlier. The majority of this growth, the company said, was driven by its Macau property. The company’s latest project is a US$4 billion resort in Cotai named Wynn Palace, which is slated to open in less than two years.

ust days after releasing its quarterly results, Galaxy Entertainment Group’s president and chief operating officer, Michael Mecca, said that the company could record “high single digit growth in VIP gaming revenue this year,” according to a filing.

For the first three months of the year, Galaxy reported a 38 percent increase in earnings, with adjusted earnings before interest, taxes, depreciation and amortization increasing to HK$3.8 billion. This figure was slightly lower than analysts’ estimates of HK$3.94 billion. Revenue, however, grew by 33 percent to HK$20.2 billion.

As a result, a number of analysts have lowered their target price for Galaxy between 2014 and 2016. JP Morgan said the lower-than-expected results were ‘mainly due to poor win rate and high corporate expenses.’

Investment banking firm Goldman Sachs lowered its EBITDA forecast for the next two years by 1 percent to 5 percent. However, the buy rating

remained ‘as the Cotai project will be put into operation sooner than its peers, while it has more projects in general to come,’ its analysts said in an investors’ note.

Credit Suisse also lowered its earning forecast, and cut the target price to HK$83 from HK$88.1.

JP Morgan, on the other hand, maintained a neutral rating ‘amid slowdown non-VIP business growth,’ the investment firm said.

Record VIP Galaxy’s Mr. Mecca, however, said he projected that the company would still record growth in its VIP segment this year.

Analysts at Union Gaming Group said they ‘remain big believers in the long-term Galaxy story’ and raised their forward estimates, maintaining a buy rating and target price of HK$89.

‘Our price target of HK$89 suggests a 12-month return of 47 percent based on [Tuesday’s] closing price of HK$60.35.’

‘No other Macau casino concessionaire has a similarly sized developable land bank as Galaxy,’ analysts at Union Gaming led by Grant Govertsen said in a client note, adding that this ‘gives them a future pipeline of no less than four new projects, including the nearly topped out Galaxy Macau Phase II.’ Other reasons for being bullish are Galaxy’s projects over the coming years, mainly Phases II and III of Cotai, as well as the refurbishment and rebuilding of Grand Waldo casino.

Galaxy recently announced 10 billion yuan project on Hengqin Island with a land area of around six times the company’s Cotai property.

‘This longer-dated and multi-phased Hengqin project could bring online several thousand additional hotel rooms, as well as many other nongaming amenities,’ analysts at Union Gaming said, adding that this could ultimately put Galaxy in the leading position as measured by whollyowned hotel rooms, table games and slot machines.

6

May 22, 2014

Macau Brands

Trends

Say it with flowers Raquel Dias newsdesk@macaubusinessdaily.com

Chinese middle-class key, says Melco VP Kelvin Tan, Chief of International Marketing of Melco Crown, believes that the growing Chinese middle-class will continue to boost Macau’s economy and does not fear competition from other Asian countries Alex Lee

Alex.lee@macaubusinessdaily.com

S

o you still remember what Meryl Streep said about flowers and Spring, and you still remember her face when she said “Flowers? For Spring?

Groundbreaking”. Her character was probably right but clichés work for a reason.

They make sense.

This year, flowers seem to be staying for summer as well, as a lot of designer brands choose to go really bold with their prints. Burberry and Dolce Gabbana were all about the big, bright and brave florals. It was not just about the expensive brands, either. Adidas blossomed as well with their new Original’s collection that includes tracksuits, sneakers, caps, T-shirts and many more completely covered in pink and red roses. Whether you like the pop-out applications like we’ve seen in the many Burberry purses or the sweet lace of their dresses and skirts, this is the time to go all out.

Nature themed clothing does not stop here as birds and ‘forest animals’ are also big.

So whatever you do, just keep in mind that colour is here to stay as is the edgy interpretation of Nature, which seems to bring back a little of that feminine touch but just the right amount.

No matter what they say, flowers just work well with Spring. I wonder why…

“U

ntil 2022, I think the number of visitors from Mainland China will increase between 5 and 10 percent.

However, it’s important that Macau finishes the new Ferry Terminal in Taipa, increases the working hours of the border and finishes the Macau Light Rail Transit”, Kelvin Tan, Chief of International Marketing and Executive Vice President of Melco Crown Entertainment, said yesterday.

At G2E Asia, Mr. Tan said that the growth of the middle-class in China will result in a larger number of visitors to Macau. “The government of China has achieved very good results in taking people out of poverty and enlarging its mediumclasses. The growth in Macau will be definitively in the mass-market more than the VIP market”, he said.

“In the coming years, VIP market share will decrease from 65 percent

to about 55,” he posited.

“The market penetration of Macau casino market in China is 1.5 percent, while Las Vegas has a penetration rate of 16 percent in the United State. There’s potential for it to continue to grow”, he said.

Another reason to point to the increased mass-market was the development in China of the high speed rail. “China already has the longest high-speed rail network in the world and it’s likely to double in the future. It’s bigger than the network of all other countries in the world combined. And this definitely benefits Macau”, he explained.

As for the crackdown on UnionPay devices by the Chinese Government, Tan does not believe the impact will be negative. “Beijing policies will not have a negative impact on Macau.

They’ve shown that they want to help Macau especially with the shortage of land”, he said.

“The increasing middle class will bring a lot of new opportunities to everybody. Japan will be tempted to legalise gambling, South Korea is probably going to distribute a number of licences. And Japan will be closer and more convenient than travel to Macau when we’re talking about northern Chinese”, he said.

“Also, Japanese food will be very attractive to tourists. There’re the visa problems but Japanese leaders are very wise and I think they’ll facilitate the entry of tourists”, he said.

However, and despite the growing competition, the Chief of International Marketing and Executive Vice President of Melco Crown was not concerned. “If we continue to develop our structures there is no reason to be worried.

We’re prepared for the competition” he replied when queried by Business Daily.

Macau bank profits slow down DBS suffered a 30 percent slump in net income, while Macau Chinese Bank saw profits slide 6 percent in 2013

D

BS and Macau Chinese Bank reported a decrease in profits last year after companies faced a rise in general costs and more provisions to protect against non-performing loans and a surge in credit and deposits. The 2013 financial results of both institutions were published yesterday in the official gazette.

Last year, the Macau branch of Singapore-based DBS bank registered a profit of 33 million patacas, a 30 percent drop compared to 2012. The bank justified the drop by ‘general costs in the amount of eight million patacas and increased

provision to cover bad loans in the amount of five million patacas’.

DBS interest income totalled 62 million patacas, less 7 percent, with other income for the year reaching thirty million patacas, a growth of 9 percent. Credit jumped 3 percent with loans amounting to 3,160 million patacas and deposits increasing 27 percent to 2,970 million patacas.

Macau Chinese Bank also saw its profits decrease in 2013. The institution recorded 9.66 million patacas in profits, 6 percent less than in 2012. The bank - which made a capital increase last year of

80 million patacas to support future expansion - said that it had achieved a ‘remarkable’ growth in credit and deposits. The credit accelerated 5.94 percent to 328 million patacas and deposits climbed 28 percent to 337 million patacas from a year ago. In 2014, the bank will ‘continue to refine policies relating to company management and risk management, to adapt to changing operating environment, to strengthen the functioning of the automatic system , to increase employee awareness of the activities of the bank, improve operational processes and increase the capacity of serving customers’.

Tourist arrivals to grow Air pollution worsening by up to 5 pct in Macau

T

he territory’s top tourist official expects this year’s growth in the number of visitors will only be up to 5 percent. The comment by Maria Helena de Senna Fernandes, director of the Macau Government Tourist Office, implies that growth will slow in the remaining months of this year, given that Macau received over 7.69 million visitors in the first three months, up 9 percent year-on-year. Ms Senna Fernandes also said on the sidelines of gaming expo G2E Asia that the Office will work harder to appeal to more long-haul travellers.

T

he President of the Macau Construction Industry Environmental Protection Society warned yesterday that the levels of pollution in the air will pose a problem for the SAR in the future. Antonio Trindade also said that Macau inhabitants have already felt the consequences of the deterioration in air quality. Mr. Trindade stated that air pollution is not yet a serious problem but that it has to decrease in the short to medium term. He pointed to a different management system of the public transportation network as a solution to the problem.

8

May 22, 2014

Macau

Macau casino stocks flu spreads to China Chinese stock investors are running out of places to hide

F

irst, it was the Macau casinos, which began tumbling in January following an average 217 percent rally in the previous two years. Then came the selloff in Internet shares, which dragged down Tencent Holdings Ltd. and Sina Corp. more than 15 percent since March. Smallcap stocks were the latest to buckle, with the ChiNext Index entering a bear market last week.

The few pockets of strength in the $3.2 trillion stock market are disappearing as China’s weakening economy reduces investor appetite for even the fastest-growing companies.

All 10 industry groups in the CSI 300 Index of mainland-traded shares have retreated this year, while just 1 percent of the 170 Chinese stock funds tracked

by Bloomberg recorded gains versus more than 70 percent last year.

“If I were a non-emerging market investor and I had a choice, I wouldn’t be investing in China at all at the moment,” John-Paul Smith, the London-based emerging-market strategist at Deutsche Bank AG (DBK), said by phone yesterday. He warned in March that risks in the Chinese market were increasing as investors piled into a diminishing number of rising stocks.

Small-cap stocks, casinos and

Internet companies had attracted money managers because the companies were seen as ways to tap into China’s growing consumer sector while being relatively sheltered from state intervention.

Speculation Rally Galaxy Entertainment Group Ltd. (27) billionaire Lui Che Woo’s casino company surged 129 percent last year even as declines in state-owned companies such as PetroChina Co. dragged down the CSI 300 by 7.7 percent.

The index has dropped another 9.2 percent so far this year, while the Hang Seng China Enterprises Index of Hong Kong-listed shares has declined 8.6 percent and the Bloomberg ChinaUS Equity Index slid 4.9 percent. The ChiNext index of shares in Shenzhen has retreated 4.6 percent.

“With small-caps retreating and big-caps in the doldrums, there’s no sector in China’s stock market investors can find now to put their money in,” said Wang Zheng, the Shanghaibased chief investment officer at Jingxi Investment Management Co. Many ChiNext companies “don’t have solid fundamentals or growth prospects and

the rally was pretty much based on speculation.”

The ChiNext jumped 163 percent from a low on Dec. 3, 2012 to Feb. 17 this year as the government took steps to boost the technology and services industries. The rally drove valuations to 5.8 times net assets, more than twice the level of U.S. small-cap stocks in the Russell 2000 Index, data compiled

by Bloomberg shows.

New IPOs The ChiNext rose 1.3 percent at the close today, the biggest gain in a week, after the government announced it plans to float about 100 initial public offerings from June through the end of the year. UBS AG (UBSN) strategist Chen Li said in a report that small-cap stocks may rebound as the number was less than his estimate of 350 to 400 IPOs. Investors have become too bearish on small-caps, Aaron Boesky, the chief executive officer of Marco Polo Pure Asset Management in Hong Kong, said in a phone interview on May 16.

“Valuations have run up but that’s justified given China’s future growth story,” Boesky said. “Services and technology will drive growth in the economy. That’s not just a short-term

story but also a next decade story. You have to buy on the dips.”

‘New Normal’ China’s President Xi Jinping said this month that the nation needs to adapt to a “new normal” in the pace of economic growth. Industrial-output and investment growth unexpectedly decelerated last month, while new building construction fell 22 percent in the first four months of the year.

New-home prices rose in April in the fewest cities in a year and a half as developers offered discounts.

Chinese money managers have reduced their positions in small-cap stocks to 32.9 percent of holdings as of May 15, from 36.6 percent on March 24, according to Hao Hong, the Hong Kong-based China equity strategist at Bocom International Holdings.

Some Chinese stock pickers have managed to skirt the selloff. The Aberdeen Global-Chinese Equity Fund, which has $2.3 billion in assets, climbed 0.5 percent, according to data compiled by Bloomberg. PetroChina, the fund’s fifth-biggest holding at the end of March, rallied in Hong Kong after its chairman said the company is considering opening up to private investment.

It’s ‘not a bad time to look into investing’ in China for those with a long-term time horizon, Nicholas Yeo, a money manager at Aberdeen in Hong Kong, said by e-mail.

Still, it’s becoming harder to find stock market winners. Of the 300 shares in China’s large-cap index, about 245 have fallen so far this year.

Tencent, Sina Tencent, Asia’s largest Internet company, lost 12 percent in Hong Kong since March 6, following a 1,266 percent surge during the previous five years sent its price-to-earnings ratio to the highest level since 2008. Sina, operator of a web portal in China, has fallen 43 percent in New York trading this year.

Shares of the six-biggest listed Macau casino operators tumbled amid speculation that China will crack down on illegal fund transfers and tighten visa rules. MGM China Holdings Ltd. and Galaxy Entertainment have both dropped at least 13 percent.

‘Both tech and casino stocks have been the winners over the past few years but have since underperformed,’ Audrey Goh, a Singapore-based investment strategist at Standard Chartered Plc (STAN), said in an e-mailed response to questions. ‘The market is still trying to figure out where the next big winner would be.’

Govt appoints HR office’s new Expert tips slot revenues deputy chief to grow 10 pct

T

he government has appointed Chan Un Tong as the assistant coordinator of the Human Resources Office for a year starting May 26, according to a dispatch published on the Official Gazette. Serving in the office since its establishment in 2007, Mr Chan has acted as acting

assistant coordinator of the office since the original deputy chief, Lau Wai Meng, was transferred to the Labour Affairs Bureau in last December. The Human Resources Office is a government department that handles and reviews companies’ applications for imported labours.

T

he revenue raked in from slot machines here is expected to keep growing this year despite fewer machines available on the casino floors, said industry veteran Marcus Prater. The executive director of the Association for Gaming Equipment Manufacturing said in a media briefing at gaming expo G2E Asia that slot

revenues can climb 10 percent this year having grown 8.6 percent last year.

Official figures show that slot revenues went up 10.4 percent from the previous year to 3.94 billion patacas (US$492.5 million) in the first three months. The number of slot machines in this year’s first quarter, however, declined by 19.3 percent to 13,232.

9

May 22, 2014

Greater China

Banks’ funding spree to find hurdles

Lenovo’s profit follows estimates

Analysts say the flood of regulatory capital will help investors diversify their portfolio

Company’s smartphone shipments jumped 63 percent in the period to 12.9 million units

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hinese banks are poised to raise a record US$120 billion in the next two years to shore up their balance sheets in the face of slowing growth and rising bad debts, but the funds could prove expensive and hurt earnings as investors demand a premium.

For the first time, banks will raise capital by issuing preference shares and other so-called hybrid securities, a funding technique that avoids the need for issuing ordinary shares into a badly hit stock market.

Just in the past two weeks, Agricultural Bank of China and Bank of China announced plans to raise about US$29 billion in preferred shares between them.

As growth slows and bad debts build up, the banks are rushing to replenish their balance sheets to meet new global capital rules known as Basel III. The Chinese government has been rigorously enforcing these regulations in its efforts to ward off a financial crisis following a huge runup in debt since 2008 and a marked slowdown in the economy.

Analysts say the flood of regulatory capital will help investors diversify their portfolio, but they are expected to drive a hard bargain given the concerns about transparency in China’s opaque financial system and the worrying rise of toxic debt in recent years.

“Given the size of the proposed capital issues and the concerns about transparency in the Chinese banking system, it may be hard to price aggressively versus the western structures currently out there,” said Ivan Vatchkov, chief investment

officer of Algebris Investments (Asia).

The first few deals should give banks an idea of returns that investors will demand on hybrid capital securities.

China CITIC Bank International, a Hong Kong-based affiliate of China CITIC Bank, in April sold capital securities in the offshore market at an interest rate about 100 basis points over the same bank’s subordinate bonds.

Benchmark five-year subordinate debt from China’s top-rated banks currently trades at a yield of 5.25 percent, suggesting banks will have to price yields at around 6.3 percent for preferred shares to lure investors - a side effect of an economy growing at its slowest pace in decades.

trillion at the end of 2013, according to the China Banking Regulatory Commission - at more than twice the size of the country’s economy it shows why investors are confident the government will prevent a Greek-type debt crisis from ever emerging.

China’s big four lenders enjoy the equivalent of single-A ratings from credit ratings agencies such as Standard & Poor’s and can fund relatively cheaply in the straight bond markets.

Investors in preference shares, however, demand a premium for the added risk that they may see their holdings converted into common equity if the bank’s capital ratio falls below the trigger level.

Reuters

Pressure on lending, earnings?

Some analysts warn that forcing banks to pay hefty yields on new hybrid capital instruments would not only pressure their profitability, but also threaten their ability to continue lending aggressively as bad loans rise in a slowing economy. Chinese banks’ non-performing loan figures rose to a two-year high at the end of 2013, according to official data.

However, the risk that investors may lose their money in a potential banking collapse is slim as many of the state firms have an implicit government guarantee - a back-stop that is similar to a deposit guarantee scheme, which China is planning to introduce later this year in line with a market reform drive.

Total assets of China’s banking industry reached around US$24

KEY POINTS China banks turn to hybrid securities to boost capital Banks prepare for slowing economy, rising bad loans Pressure from Basel III capital rules drives fundraising Investors concerned on yield, liquidity, economic risk

T

he world’s largest maker of personal computers, reported fourth-quarter profit that missed analyst estimates as costs to boost sales of smartphones outside its home base of China increased.

Net income climbed to US$158.3 million in the three months ended March from US$126.9 million a year earlier, according to figures derived from full-year results reported today. That lagged behind the US$163.6 million average of nine analysts’ estimates compiled

by Bloomberg.

With the global PC market on course for its third annual contraction, Lenovo Chief Executive Officer Yang Yuanqing is trying to expand sales of smartphones and tablet computers. In November, Yang announced plans to triple the number of countries where Lenovo sells phones by adding 20 new markets in the Middle East, Africa and Latin America.

“As domestic competition is getting fiercer, the main growth driver is likely to be the overseas markets” for smartphones, Kai Qian, a Beijing-based analyst at China International Capital Corp., wrote in a May 8 report to clients.

Lenovo’s sales climbed to US$9.4 billion from US$7.83 billion a year earlier, according to the derived figures. That beat the US$9 billion average of 21 analysts’ estimates compiled by Bloomberg.

Boosting smartphones While worldwide PC shipments dropped 1.7 percent in the three months ended March, Lenovo expanded market share as sales rose 11 percent, market researcher Gartner Inc. reported last month.

Lenovo maintained the No. 1 spot in the global PC market in the period with 17 percent of shipments, while Hewlett-Packard Co. was second with 16 percent, Gartner said.

Lenovo’s smartphone shipments jumped 63 percent in the period to 12.9 million units, researcher International Data Corp. reported last month. That lifted its global market share for the devices to 4.6 percent, from 3.6 percent a year earlier, IDC said.

Lenovo ranks fourth globally behind Samsung Electronics Co., Apple Inc. and Huawei Technologies Co., IDC said.

Yang plans to keep the smartphone business growing in part through acquisitions. In January, the company announced plans to buy Google Inc.’s Motorola Mobility handset unit for US$2.91 billion in cash and stock.

Bloomberg News

US$158.3 million Agricultural Bank of China (Guangzhou branch pictured) wants to issue preferred shares

Lenovo’s 1Q net income

10

May 22, 2014

Greater China

Consumer, energy sectors to lead 2014 earnings Lee Chyen Yee and Meg Shen

the government to try and re-balance the economy,” said Steve Brice, chief investment strategist at Standard Chartered Bank in Singapore.

The three sectors, which comprise big names like oil and gas firm PetroChina Co Ltd and airline Air China Ltd , as well as Peking duck restaurant chain China Quanjude Group Co Ltd, are expected to log the fastest profit rises since 2010.

Betting on consumers

KEY POINTS Overall pft at mainland listed firms seen up 19 pct y/y Growth as Beijing tilts economy to consumptionled model Financial firms, utilities expected to post slower growth

The landmark of Dongzhimen, headquarters of PetroChina in Beijing. PetroChina is supposed to be one of the most profitable companies in the country

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hina’s companies are forecast to turn in their biggest earnings increase in four years in 2014 as strong growth in the consumer, energy and industrial sectors propels overall profit at mainland-listed firms 19 percent higher than a year earlier.

The expected improvement from an already solid 2013 showing comes as Beijing seeks to steer the world’s second-biggest economy to a

consumption-led model from reliance on trade. Just completed earnings reports for January-December 2013 showed overall income climbed 13.8 percent, boosted by consumer goods, materials and information technology firms.

The consumer discretionary, energy and industrial sectors together make up around a quarter of total earnings for mainland Chinese firms.

They are expected to see 2014 net profit grow by an average of 42 percent, 5 percent and 44 percent respectively in 2014, according to Thomson Reuters data based on analysts’ forecasts for more than 1,500 Shanghai and Shenzhenlisted companies.

“Areas that we expect to do a little bit better obviously are the consumer area. That’s a big focus for

Moody’s cuts outlook for property sector After increasing at double-digit rates through most of last year, home prices in China started cooling in late 2013

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he rating firm lowered its outlook for China’s property industry to negative from stable, reflecting expectations of slower residential property sales growth, high inventory levels and weakening liquidity over the next 12 months.

Most of the rated developers have good cash buffers and manageable refinancing risk, however, the rating agency said, as they benefit from waves of bond issues and solid demand for their mass market properties.

“The weaker sales growth for the sector is driven mainly by tighter onshore liquidity, increased mortgage rates, buyers’ expectation of further easing of property prices and slower GDP growth in China,” Moody’s said.

After increasing at double-digit rates through most of last year, home prices in China started cooling in late 2013, with the annual growth in average new home prices slowing to an 11-month low in April, as a sustained campaign to clamp down on speculative investment and easy credit gained traction.

An abrupt correction in the real

China’s central bank (headquarters pictured) has asked commercial banks to speed up the granting of home loans and to set mortgage rates at reasonable levels

estate market would pose risks to the banking system and the already-cooling economy. China’s central bank has asked commercial banks to speed up the granting of home loans and to set mortgage rates at reasonable levels, sources told Reuters last week.

Moody’s assistant vice president Franco Leung told a roundtable that Moody’s expects China’s property sales value will see flat to 5 percent yearly growth over the next twelve months, compared to a 26.6 percent growth at the end of 2013.

Companies such as Air China and highway operator Shenzhen Expressway Co Ltd, as well as Beijing Wangfujing Department Store Group Co Ltd and home appliances maker Midea Group Co Ltd are all expected to see better profit growth this year, Thomson Reuters data showed.

“Consumers have been a long-term source of strength in the economy and there are still some cheap parts of the consumer market that we think you could find as an investor,” said Stuart Rae, chief investment officer at AllianceBernstein, a qualified foreign institutional investor in China.

At financial and utilities companies, though, slower growth is expected this year. China’s easing economic growth is bringing caps on lending at banks, while government policies like electricity grid tariff cuts are weighing on power firms’ bottom lines.

The financial sector, which contributes more than half of overall earnings among mainlandlisted companies, is expected to post an average net profit growth of 10.3 percent in 2014, according to Thomson Reuters data.

That growth in financials, which consists of names like Industrial and Commercial Bank of China Ltd and China Life Insurance Co Ltd., will be the slowest in six years.

“The weaker economy is expected to sap demand for fund-raising, which will cast a shadow on banks’ earnings this year,” said Cao Xuefeng, head of research at Huaxi Securities in Chengdu city, capital of Sichuan province.

Reuters

He expects nation-wide property prices to grow at the same rate, with a correction in the lower-tier cities weighing on the growth of their firsttier peers.

Yet, the agency said it expects the credit quality of most of the 52 developers that it rates to remain stable due to their good liquidity and access to funding. Favourable operating conditions in 2013 boosted the liquidity of many rated developers, it said.

“Their financial matrix are stabilizing in 2014 because they’re booking their record sales from 2013,” said vice president Kaven Tsang, adding the large scale and high demand for the mass market properties help these developers to withstand the current market downturn.

Tsang said growth of trust financing in the first quarter has slowed as some developers repaid the trust loans with sale proceeds in order to lower the refinancing cost.

Referring to the recent proposed stake purchase in Greentown China Holding Ltd by Sunac China Holdings Limited, Leung said he expected to see more of such consolidation as developers count on bigger scale to win loans from banks.

The last time Moody’s downgraded China property sector’s rating to negative was in April 2011, when Beijing introduced restrictions on home purchases in order to curb the over-heating market.

Reuters

11

May 22, 2014

Greater China

Asia for Asians President Xi said Asian countries should “pro-actively” seek to build an Asian security concept with a regional framework

Gas deal expected in due course Russia’s Gazprom told doubters yesterday not to jump to any conclusions over President Vladimir Putin’s failure so far to sign a long-awaited gas deal with China, saying all would become clear in due course. Responding to speculation the two sides might not reach a deal after they failed to sign the US$400 billion gas supply agreement on the first day of Putin’s two-day visit to China on Tuesday, spokesman Sergei Kupriyanov said on: “You will know everything in due course. Don’t jump to any conclusions.”

Yue Yuen estimates staff benefits provision Chinese shoe manufacturer Yue Yuen Industrial Holdings Ltd said it would make a preliminary provision of some US$37 million to an employee benefit programme at its Gaobu factory, part of an agreement that resolved a major strike there.

Thousands of shoe factory workers who staged one of China’s biggest strikes returned to work in April after the maker of footwear for companies such as Nike Inc. and Adidas agreed to meet some of their demands for better social benefits.

Employment situation stable Employment in China was basically stable in the first four months of this year, with some 4.7 million new jobs created in cities, the labour ministry said yesterday. The ministry said in a statement before a briefing by Vice Labour Minister Xin Changxing that its priority is to help new graduates find work.

Beijing has repeatedly stressed that employment is the first priority for the government, and economists also say it is the top factor that may trigger big-scale stimulus measures if the economy continues to lose momentum.

Soy demand rebounds

Front row, L-R) Azerbaijan’s first lady Mekhriban Aliyeva, Azerbaijan’s President Ilham Aliyev, Afghan President Hamid Karzai, Russian President Vladimir Putin, Chinese President Xi Jinping, Chinese first lady Peng Liyuan and Kazakhstan’s President Nursultan Nazarbayev, pose for a picture during the fourth Conference on Interaction and Confidence-Building Measures in Asia (CICA) summit

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hina’s President Xi Jinping said Asian problems should be solved by Asian people as he outlined his vision for regional stability at the opening of an international security summit in Shanghai.

Xi said Asian countries should “pro-actively” seek to build an Asian security concept with a regional framework, in a speech to an audience including Russian President Vladimir Putin and UN Secretary-General Ban Ki-moon at the fourth Conference on Interaction and Confidence Building Measures in Asia. CICA is a group of more than 20 mostly Asian nations from Turkey to South Korea that aims to improve cooperation on peace and security in the region. Japan and the U.S. are observers.

“Regional security cooperation work has reached a key phase,” Xi said. “We should keep up with the changing times, and cannot allow it to happen that your body has entered the 21st century but your mind still sticks to the old era of Cold War and zero-sum mentality.”

China, which today assumed

chairmanship of CICA until 2016, is seeking to raise the significance of the organization as one of many initiatives to place itself at the centre of Asian affairs. The soft power push comes as it faces increased tensions with Vietnam and U.S. allies the Philippines and Japan over its more assertive claims to maritime territory.

Putin and Xi yesterday launched joint, week-long Chinese-Russian naval exercises near the disputed East China Sea islands controlled by Japan. China declared a temporary no-fly and no-sail zone across swathes of the ocean that prompted South Korea to lodge a diplomatic protest.

Firm implementation China is an “active promoter” of the Asian security concept and is also firm in its implementation, Xi said. Key regional security issues that the government in Beijing has been working on include restarting the sixparty nuclear talks on North Korea, the reconstruction of Afghanistan, and

building an Asian security emergencymanagement mechanism, Xi said.

He also warned against any single power’s attempt to dominate regional security matters. “One country’s national security should not be at the expense of others,” he said.

CICA was first mooted by Kazakhstan in 1992 to promote peace and security in Asia and a summit is held every four years.

The organization upholds China’s principle of non-interference in the internal affairs, a point emphasized

by Xi in his speech.

Iranian President Hassan Rouhani and Afghan President Hamid Karzai are among 11 heads of state gathered in Shanghai, along with representatives from 46 countries. The admission of Qatar and Bangladesh today will take the number of CICA member states to 26.

China is seeking a more assertive international role as it tussles with neighbours over maritime territory, and faces off with a U.S. that is shoring up its alliances in the region Bloomberg News

April crude imports from Iran hit record China’s soybean demand is rebounding as surging prices of eggs and pork help the world’s biggest meat producer recover from first-quarter losses for oilseed producers, feed makers and farmers. Chinese crushers last week ordered about 600,000 metric tons to be shipped after September 1 when the new-crop year begins for U.S. marketing, according to a Bloomberg News survey of seven China-based traders and researchers. Since April 1, egg prices in China have surged about 26 percent while hogs jumped 20 percent, according to data from Shanghai JC Intelligence Co.

Four staff killed in Vietnam unrest Metallurgical Corp of China Ltd (MCC) said yesterday four of its employees working on a construction project in Vietnam were killed and 126 injured during anti-China protests over a disputed area in the South China Sea. The four MCC workers killed were double the number of fatalities previously confirmed by the Vietnamese and Chinese governments.

Thousands of Vietnamese set fire to factories and stormed industrial zones in the south to protest against Chinese oil drilling in a part of the sea claimed by Hanoi.

Under the temporary deal, Iran’s exports are supposed to be held at an average 1 million bpd for the six months to July 20

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rude imports from Iran more than doubled from a year ago to a record of nearly 800,000 barrels per day (bpd), pushing imports in the first four months of 2014 above levels seen before tougher Western sanctions were applied in 2012.

China’s crude imports from Iran in April rose 115.3 percent to 799,865 bpd, customs data showed yesterday, accelerating a rise in its intake from the OPEC member after the November nuclear deal that eased some sanctions on Tehran.

Under the temporary deal, Iran’s exports are supposed to be held at an average 1 million bpd for the six months to July 20, but shipments to Asia have topped that level since November, according to customs and ship tracking data.

China’s imports, added to India’s intake of about 225,000 bpd in April and South Korea’s 135,000 bpd, have put Asia’s shipments of Iranian

crude over the 1 million bpd limit for another month.

China’s imports from Iran have been higher this year largely due to new volumes of condensate, a super light crude, and also because top refiner Sinopec Corp may have boosted lifting under a long-term agreement, traders said.

On a daily basis, China’s April imports of Iranian oil rose 44 percent from March’s 555,182 bpd. China’s oil arrivals from Iran in the first four months of this year were at 618,170 bpd, up 54.5 percent from a year ago.

China may have trouble holding down its Iranian oil imports in 2014 as state-run trader Zhuhai Zhenrong Corp is negotiating a new condensate contract to supply an independent petrochemical firm Dragon Aromatics, Reuters has reported. Dragon Aromatics has since the second half of 2013 been buying condensate from Iran as feedstock.

KEY POINTS April Iran imports at 799,865 bpd, up 115 pct on yr, 44 pct on mth China’s Jan-April Iran oil imports at 618,170 bpd, up 54.5 pct on yr

Sinopec, under a new push to cut crude purchase costs, may have stepped up Iranian oil lifting since late 2013 as the supplies are deemed competitive versus similar grades from Saudi Arabia, traders have said.

Reuters

12

May 22, 2014

Asia S.Korea external debt inches up South Korea’s ratio of short-term external debt to its foreign reserves inched up during the first quarter as borrowings led by banks grew faster than the foreign reserves, central bank data showed yesterday. The ratio of short-term external debt inched up to 34.9 percent of the country’s foreign reserves by the end of March from a revised 33.3 percent at the end of December, the quarterly data showed.

Short-term external debt owed by South Korea rose to US$123.8 billion by the end of March from US$115.3 billion three months earlier.

Australian consumer sentiment falls A measure of Australian consumer sentiment slumped in May to the lowest in over two years as households fretted about their own finances a week after the government unveiled a string of spending cuts and new levies in a tough fiscal budget. The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed the index of consumer sentiment fell a seasonally adjusted 6.8 percent in May from April, when it rose 0.3 percent. The index reading of 92.9 was down 4.8 percent on May last year. A reading below 100 means pessimists exceeds optimists.

Singapore worried about overseas property Central bank has issued a warning to investors about the risks posed by buying property overseas, as high house prices at home prompt a growing number of its residents to invest in real estate abroad. A strong Singapore dollar and curbs on mortgage lending at home have encouraged more Singaporeans to buy property in the likes of Britain and Australia, with the Monetary Authority of Singapore (MAS) reporting a 43 percent rise in the value of overseas property transactions handled by local real estate agencies in 2013 compared with 2012.

Woodside abandons Israel stake plans Australia’s top gas producer has ditched long-awaited plans to take a stake worth up to US$2.7 billion in Israel’s flagship Leviathan gas project after failing to resolve a tax dispute.

Woodside’s decision to end an agreement to buy a 25 percent stake in the project leaves the venture without the expertise in liquefied natural gas (LNG) that was key to helping Israel expand its gas export options beyond the Middle East to Asia. Leviathan, which holds 540 billion cubic meters of gas reserves, was seen as critical to Woodside’s growth prospects.

Dependency still dogs Jap export figures Analysts say the Bank of Japan may act if the trade performance

J

apan’s exports rose for the 14th straight month in April but shipments to the United States slowed, underlining concerns that the world’s third-largest economy remains vulnerable to any fall in external demand.

Ministry of Finance data released yesterday showed exports rose 5.1 percent in the year to April, compared with a 4.8 percent gain seen by economists and a 1.8 percent rise in March. On a seasonally adjusted basis, exports rose a meagre 0.6 percent in April from the previous month.

With export growth below last year’s levels as the effect of a weak yen wears off, policymakers are becoming less confident of a lasting export upturn that would cushion a dip in domestic spending after Japan raised its sales tax to 8 percent from 5 percent on April 1.

Analysts say the Bank of Japan may act if the trade performance falls short - a side effect of many firms moving production facilities offshore to escape years of the yen’s strength.

“Exports picked up just a tad from March but they still lack momentum. U.S.-bound shipments were unexpectedly poor,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

Shipments to the United States - a key market for Japanese products rose 1.9 percent on an annual basis.

That was a slowdown from a 3.6 percent gain in March, with steel shipments falling in April.

“I expect the U.S. economy to drive the global economy this year but if that scenario fails, that could raise the chance of fresh BOJ stimulus,

Current results suggest Bank of Japan (headquarters pictured) will not change its policy

although the bank is focusing more on prices,” said Minami.

The Bank of Japan is expected to keep its monetary policy unchanged when it announces its decisions later in the day, likely sounding upbeat on the economy in a sign that no additional monetary stimulus is on the horizon.

The central bank is expected to take heart from surprisingly strong first-quarter capital investment and buoyant machinery orders for March, which some economists took as a sign companies are optimistic that overseas sales will eventually pick up.

Japan’s exports had grown at double-digit pace in the second half

of last year, but growth has slowed to below 10 percent this year as effects of a weak yen wear off.

Prime Minister Shinzo Abe’s aggressive stimulus policies weakened the yen by some 20 percent annually since he took power in late 2012, boosting exporters’ profits and share prices.

But the yen’s slide slowed this year to about 6 percent year-on-year in April, limiting gains in the value of exports.

More worryingly, the yen’s fall failed to shore up export volumes, which peaked in 2007 and have been falling for a third straight year in 2013.

Export volumes edged up 2 percent in April from a year before - the first gain in two months - illustrating the

Philippines to showcase economic comeback The Philippines will be welcoming from today hundreds of business chiefs and government leaders for Asia’s edition of the World Economic Forum

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fter decades of lagging behind many of its neighbours, the Southeast Asian nation has in recent years won investment-grade ratings and recorded stock market highs as its economy has expanded at one of the fastest rates in the region.

President Benigno Aquino, who has earn international plaudits for his economic stewardship and a bruising anti-corruption campaign, is now intending to use the three-day WEF on East Asia as a form of coming-out party for the Philippines.

“Holding WEF East Asia in our

country is a clear recognition of the strong macroeconomic fundamentals in the Philippines, brought about by the many reforms in our society and governance,” presidential spokesman Herminio Coloma said.

About 600 political and business heavyweights from around Asia and beyond will gather in Manila’s increasingly glitzy financial district of Makati for the event, which will focus on sustainable and equitable growth for Asia’s dynamic economies.

Indonesian President Susilo Bambang Yudhoyono and Vietnamese

Prime Minister Nguyen Tan Dung will also attend what is commonly known as “Asia’s Davos”, in reference to the WEF’s annual global gathering in Switzerland.

WEF Southeast Asia head Sushant Palakurthi Rao endorsed the Philippines’ economic credentials, citing policies promoting good governance that he said were an example for the region as well as economic growth bettered in Asia only by China.

“This is the right moment to shine the spotlight on a country which has

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13

May 22, 2014

Asia

an’s falls short plight of the export sector as a weak yen has boosted import costs more than export income, the data showed.

Imports have surged in part due to a spike in demand for oil and gas after nuclear power plants were shut down following 2011’s Fukushima crisis. Recently imports got a further boost from Japanese shoppers’ rush to beat the tax hike.

Reflecting a pullback in demand after the tax hike, imports grew an annual 3.4 percent in the year to April, slowing sharply from a 18.1 percent increase in March, the MOF data showed.

That brought the trade deficit to 808.9 billion yen (US$7.98 billion), versus a shortfall of 646 billion yen expected, narrowing from a 1.45 trillion yen gap in March. Still, it marked a record 22nd straight month of deficits.

Reuters

India’s prime minister-designate Narendra Modi (L) with the Indian president Pranab Mukherjee (R), who formally invited Modi to form a government

Economists improve India outlook Modi’s win has sparked optimism that India’s economy will lead a rebound in the biggest emerging markets

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he prospect of Prime Ministerdesignate Narendra Modi leading India’s most stable government in three decades has prompted economists to raise growth forecasts in the world’s second-most populous nation.

Morgan Stanley, Citigroup Inc. and Nomura Holdings Inc. see faster expansion in the next few years on Modi’s plans to attract investment and build more ports, roads and bridges.

Gross domestic product will expand at a four-year high of 6.5 percent in the year through March 2016, Morgan Stanley predicts, compared with a previous estimate of 6.2 percent.

“The election results could be an inflection point for India’s story,” said Chetan Ahya, Morgan Stanley’s Hong Kong based chief Asia economist.

“The decisive election outcome suggests the new government will be able to implement reforms at a faster than previously expected pace.”

Modi’s win has sparked optimism

KEY POINTS April exports +5.1 pct y/y; imports +3.4 pct y/y Trade deficit narrows; record run of 22 mths Slowing export growth unnerves policymakers Weak yen Affects fading without boosting volumes

that India’s economy will lead a rebound in the biggest emerging markets, as Russia grapples with Ukraine tensions and China contends with rising bad loans and slowing growth. Modi should use his mandate to cut subsidies and increase spending on infrastructure to spur private investment from a nine-year low, Ahya said.

Citigroup and Nomura both raised their forecasts for India’s US$1.8 trillion economy, saying it will expand 6.5 percent in the 2016 financial year - up from 6.2 percent and 5.7 percent, respectively. India will have growth of 6.1 percent in fiscal 2016, according to a Bloomberg survey published April 30, compared with China’s 7.25 percent, Brazil’s 3.2 percent and Russia’s 2.5 percent.

Political clarity “With political clarity emerging, business and household confidence

Widodo to split energy between slums and business Philippines’s president Benigno Aquino

turned itself around remarkably after years of unfulfilled promise,” Rao wrote in a WEF blog.

After social events to open the forum, the first official session on Thursday morning will focus on the hosts and is entitled: “Philippines: The Next Asian Miracle”.

Nevertheless, economists say the Philippines’ growth model still has many flaws, with the elite soaking up much of the country’s new wealth while roughly a quarter of the nation’s 100 million people continue to live in deep poverty.

Within a few kilometres of the five-star hotel that is hosting the WEF event, brutal slums are home to hundreds of thousands of desperate people who have largely missed the country’s economic boom.

AFP

The party agrees fuel subsidies should be cut gradually to divert state funds to education

I

ndonesian presidential frontrunner Joko Widodo’s government would balance the interests of the country and its people with business needs if he wins the vote, his party said as it unveiled his official policy platform.

“We need to make a balance,” Tjahjo Kumolo, secretary-general of Widodo’s Indonesian Democratic Party of Struggle, or PDI-P, said in an interview in Jakarta on Tuesday.

“When we talk about the economy we’re not only talking about poor people but we also need to hear from businessmen so that decisions won’t hurt poor people or businessmen.”

Widodo would need to ensure Indonesia’s economic independence

without being anti-foreigner, Kumolo said, citing an aim of boosting domestic food supplies to reduce imports of rice, salt, fruits and chilli. At the same time, the party agrees fuel subsidies should be cut gradually to divert state funds to education, healthcare and infrastructure, as long as kerosene and gasoil prices are maintained to avoid hurting the poor and industries that rely on those fuels, he said.

The stance underscores the challenge for Indonesia’s next government as politicians grapple with the need to revive slowing investment growth with businessfriendly measures without alienating the voters that will put them in office.

is likely to rise,” said Sonal Varma, an economist at Nomura in Mumbai.

India’s economy probably grew 4.9 percent in the year ended March 31, near the previous period’s 4.5 percent that was the slowest since 2003. The government and Reserve Bank of India don’t have official growth forecasts for 2016.

Modi will probably simplify approval and implementation policies for infrastructure and industry, help companies improve their balance sheets and boost bank’s capital, according to Morgan Stanley’s Ahya.

The policy overhaul will improve business sentiment and corporate profits, incentivizing them to spend more, he added.

Investments by private companies fell to 9.2 percent of GDP in the year ended March 2013, the lowest in data going back to 2005, according to estimates from the Ministry of Statistics and Programme Implementation.

Possible roadblocks Boosting this and controlling Asia’s second-fastest inflation is crucial to spur growth from near a decade low, according to Nomura.

The BJP-led bloc won 336 of 543 seats up for grabs, more than the 272 required for a majority. The party alone garnered 282, with the Congress getting 44 seats and smaller regional parties got 148.

While this guarantees smoother progress for bills in the lower house, India’s federal system means negotiating through the upper house and with state governments may hobble efforts for faster implementation of key policies, according to Citigroup.

HSBC Holdings Plc predicts that another roadblock might be presented by the bureaucracy, which was rated the worst among 12 Asian economies tracked by Political & Economic Risk Consultancy Ltd. in 2013. The BJP has only 61 of the 245 members in the upper house, and forms governments in just six of 28 Indian states.

“The revival will be investment-led but gradual,” said Rohini Malkani, Citigroup’s Mumbai-based economist.

“We are optimistic but believe the path will be more gradual than sharp.”

Risks to economic growth emanate from the threat of higher interest rates if El Niño weather effects damp farm output and stoke inflation, Malkani said.

Bloomberg News

In his 41-page policy platform this week, Widodo’s pledges ranged from easing the issuance of business permits and building 2,000 kilometres of new roads, to restricting the sales of national banks’ stakes to foreign investors.

Legal certainty “We understand investors need legal certainty when they want to invest in Indonesia,” Kumolo said.

“We need to be clear in the rules and the cost that they need to pay to the government or local government.

We also need to provide clarity in industry sectors, especially between employers and workers,” he said, citing conflict regarding wage costs.

Widodo may face rising pressure to show a more nationalist approach after rival Prabowo Subianto formed a coalition with the country’s secondbiggest party. The agreement confounded expectations Golkar would tie up with Widodo’s party.

Widodo has been finalizing his coalition for the ballot to lead Southeast Asia’s largest economy, getting the support of three other parties.

Bloomberg News

14

May 22, 2014

International

Rwanda to promote foreign firms activity Duncan Miriri

R

wanda’s finance minister said the country will soon allow derivatives trading on its stock exchange and a new investment code, which could offer tax breaks for foreign investors, has been sent to parliament.

The tiny African state has ambitions to become a regional financial hub and wants to develop its capital markets and attract fund management and technology firms, although its threeyear-old stock exchange has just five listings so far.

Finance Minister Claver Gatete said the country had just passed a law allowing the trading of derivatives on the Rwanda Stock Exchange to give local and foreign investors a chance to hedge risk through futures and options.

“The capital markets authority is now working with investors to see how they can start because now the rules and regulations are in place,” he told reporters on the side-lines of the African Development Bank’s annual meeting, being held in Kigali.

The cabinet had also approved an investment code offering incentives to firms investing in Rwanda and the code was now being considered by parliament, the minister said.

He did not provide details of the incentives but a Rwanda Development Board official said in March that the investment code might offer reduced tax rates for investors in energy, transport and logistics, as well as to fund managers and export-oriented projects.

Gatete also said Rwanda planned to issue another dollar bond in future after its successful US$400 million Eurobond last year.

“Definitely we will be in the market but we will let you know when we are ready,” he said.

Gatete said the International

Google overtakes Apple as world’s top brand US search engine Google has overtaken rival technology titan Apple as the world’s top brand in terms of value, global market research agency Millward Brown said yesterday. Google’s brand value shot up 40 percent in a year to US$158.84 billion (115 billion euros), Millward Brown said in its 2014 100 Top BrandZ report. “Google has been extremely innovative this year with Google Glass, investments in artificial intelligence and a range of partnerships,” said Benoit Tranzer, the head of Millward Brown France. Apple, which dominated the top position for three straight years, saw its brand value fall by 20 percent to US$147.88 billion.

KEY POINTS Rwanda bourse to offer trading of derivatives Parliament considering proposed investment code Govt sees inflation at under 5 pct at end 2014

President Paul Kagame’s government has won praise for its economic reforms

Finance Corporation, the World Bank’s private sector financing arm, had successfully issued a US$22 million bond in the local franc currency last week, in a move aimed at deepening the local capital market.

The central bank forecast last month that Rwanda’s economy would grow by 6 percent this year, but Gatete said the first-quarter performance suggested growth would exceed 6 percent, helped by a strong agricultural sector.

“From the indications of the first quarter I think we are getting a bit better (than) what we hoped,” he said.

The east African nation saw growth slip to 4.6 percent last year, from 7.3 percent in 2012, after donors cut aid over Rwanda’s alleged involvement in a conflict in the neighbouring

Democratic Republic of the Congo.

Donors have mostly resumed bilateral assistance and President Paul Kagame’s government has won praise for its economic reforms although his opponents and rights groups accuse him of trampling political and media freedoms, something the government denies.

“Inflation is 2.4 (percent) now.

It has been in that range, it has not exceeded 5 percent. We are targeting not to exceed 5 percent by the end of this year,” Gatete said.

Revenue collection had fallen below target in line with the economic slowdown last year but Gatete said the government had enough resources to fund its programmes.

Maersk expects P3 to delay Danish shipping and oil group A.P. MollerMaersk said yesterday it expected the so-called P3 container shipping alliance to start operations in autumn and not in the second quarter as previously expected.

“We are waiting for regulatory approval in several countries,” chief executive Nils Smedegaard Andersen told reporters on a media teleconference. Maersk Line, the container shipping unit in A.P. Moller-Maersk, Switzerland-based MSC Mediterranean Shipping Company S.A and France’s CMA CGM announced the alliance last year. They already have regulatory approval in the United States but are still waiting for approvals in China and many other countries.

Reuters

Volvo April truck shipments drop

Leica opens new headquarters The site incorporates Leica’s main factory, as well as a precision optics site and another for precision tool engineering

L

eica, the iconic German maker of high-end photographic equipment, will officially inaugurate its new headquarters in Wetzlar this week, marking a return home to the site where it began making cameras 100 years ago.

The opening of the new state-ofthe-art site “marks both a return to the roots and a new beginning”, says Leica Camera, which had relocated to the nearby town of Solms in the 1980s following a split of its activities.

The spanking new buildings, with their flowing curves and environmentally friendly technology, are designed to resemble a gigantic camera lens and film spools.

They are situated in Leitz Park, which takes its name from Leica’s founder Ernst Leitz.

The site incorporates Leica’s main factory, as well as a precision optics

site and another for precision tool engineering.

To mark the official inauguration of the 60-million-euro (US$82-million) project, the prestigious Austrian auction house WestLicht is organising an auction of one hundred rare cameras and pieces of equipment, including a telescope dating back to 1852.

Situated in the central state of Hesse, Wetzlar is the birthplace of Ernst Leitz’s business.

It was in here in 1914 that optical engineer and precision mechanic Oskar Barnack, in his drive to maker smaller, lighter cameras, built the first prototype of the Ur-Leica, which spawned a long line of models, including the legendary “Leica M”.

“The M model was what made Leica’s reputation. It long stood for purity of form,” said French photogapher, Guy Le Querrec,

member of Magnum Photos.

Favoured by the pioneers of photojournalism, such as Robert Capa and Henri Cartier-Bresson, Leica, with its distinctive red button logo, carefully cultivated its exclusive image.

It singled out talented photographers and gave them a Leica camera to work with, Le Querrec said.

One of the most famous photos taken with a Leica camera was a portrait of Cuban revolutionary leader Che Guevara by Alberto Korda.

“Leicas were distinguished by their robustness, their high-quality lenses and because they were easy to use,” said another French photographer Cyprien Clement-Delmas. “In addition, their aesthetic left its mark on generations of photo-reporters,” he said.

AFP

World number two truck maker Volvo posted a surprise drop in deliveries of its trucks in April on weaker demand in South America, where shipments fell twice as much as expected. Total shipments at the maker of Volvo, Mack, UD Trucks and Renault trucks were down one percent year-on-year against a mean forecast in a Reuters poll of analysts for an increase of 4 percent. In South America, deliveries plunged 30 percent.

In Volvo’s top market, Europe, they also declined, dipping 8 percent.

Egypt business pushes for energy subsidy cuts Former army chief Abdel Fattah al-Sisi has kept Egyptians guessing about how he will handle energy subsidies, one of the most explosive issues coming his way if, as seems certain, he is elected president next week. Cautious campaign language shows he is well aware subsidy cuts that would help repair ruinous government finances might also spark the kind of unrest that helped topple two presidents in three years. Yet he may find his resolve to stem the expense stiffened from an unlikely quarter - some of Egypt’s wealthiest, whose businesses have benefited greatly from state largesse.

15

May 22, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

INQUIRER.NET If there’s anything that would put detained real estate magnate Delfin Lee in jail for good, it would be of his own doing.

Vice President Jejomar Binay had this response to remarks that Lee made in a recent Inquirer interview, where the housing developer accused the official of bias in pursuing the alleged multibillion-peso realty scam involving the businessman’s firm, Globe Asiatique (GA). “If we base it on the evidence, I think after due process, he will definitely be found guilty,” Binay said in a statement.

TAIPEI TIMES The Financial Supervisory Commission (FSC) yesterday tightened its requirements for the sales of financial derivatives, but allowed banks room for self-discipline, in measured a bid to curb irresponsible promotion of risky investment products without hurting product innovation.

The move came after local banks sold NT$160.8 billion (US$5.32 billion) in yuan-linked target redemption forwards (TRF), accounting for 24 percent of global sales and incurring significant losses on the part of customers after the Chinese currency lost 3.3 percent of its value last month, giving up all of its gains from last year.

VIETNAM NEWS The seventh session of the 13th National Assembly (NA) opened in the capital city yesterday in the context of complicated regional and global developments, Chairman Nguyen Sinh Hung said in his opening remark. The domestic economy, despite positive changes such as a higher year-on-year growth in the first months of the year, reduced inflation, falling interest rates, stable foreign exchange rates and increased exports, still had many shortcomings. Among these were an unstable macroeconomy, slow economic restructuring and numerous difficulties in production and business activities.

MYANMAR TIMES State-owned Myanmar Petroleum Products Enterprise (MPPE) announced it is seeking a joint venture partner for jet fuel distribution in Myanmar. The JV will initially operate and improve existing facilities at Yangon International airport, with intentions to later expand to 10 airports in Myanmar, the Ministry of Energy said in a statement on its website.

MPPE intends to retain at least 51 percent ownership of the JV, which is to last initially for 30 years, the statement said. The tender is set to close on June 14.

An economist for the ages

Michael J. Boskin

Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution. He was Chairman of George H. W. Bush’s Council of Economic Advisers from

1989 to 1993, and headed the so-called Boskin Commission

S

TANFORD – Like many others, I first met the Nobel laureate economist Gary Becker, who died earlier this month, by reading his seminal works Human Capital and The Economics of Discrimination.

Several dozen outstanding economists have won the Nobel Prize in Economics since Sweden’s central bank began awarding it in 1969, but Becker is among the handful that have fundamentally transformed how economists (and social scientists more generally) think about a wide array of important economic issues.

Becker was remarkable for applying his penetrating insights, especially concerning economic incentives, to issues that had been mostly underexplored by economic analysis. This included viewing education as an investment, asking who gained and lost from discrimination, examining how families allocated their time, and explaining women’s fertility decisions.

His research on any one or two of these issues might well have won him a Nobel Prize on its own; to develop important insights into such a wide range of questions is truly remarkable. He amply deserved the rare accolade accorded to him by his longtime mentor and friend, the late Milton Friedman (himself a Nobel laureate who, like Becker, transformed economists’ thinking in many areas). Becker, declared Friedman, was “the greatest social scientist who has lived and worked in the last halfcentury.”

Becker’s constant focus was on the main forces driving human behaviour and people’s interaction both in markets and in non-market activities.

Early in his career, his work was often criticized for being overly dependent on economic analysis in dealing with big social problems, sometimes touching raw nerves on very sensitive issues.

For example, the notion of modelling children as a durable good seemed crass to some but led Becker to analyse the allocation of parental time and financial resources.

He showed how this insight could predict trends in female labour-force participation and birth rates, and led to the policy conclusion that the best way to lower high birth rates in poor countries was to educate women. Better education would raise women’s wages, making staying at home more costly, and would lead to higher female labour-force participation and a voluntary decline in birth rates.

This analysis reflected Becker’s deep belief in the power of incentives to lead people, in pursuit of their own interest and interacting within and outside markets,

Becker was a great economist and a truly remarkable social scientist.

His work stands as a testament to the power of deep thinking and the courage to follow it to its logical conclusions

to achieve great things with minimal government input.

In this sense, he was very much in the tradition of the great eighteenth-century Scottish economist Adam Smith, whose writings Becker regarded as one of the greatest influences on his career.

Equally off-putting to some was the notion that education was an investment – that an important reason to pursue post-secondary schooling, for example, was to raise one’s future earnings. The education establishment recoiled at what it considered a less-thannoble reason to seek higher education.

And the idea that one could model the economics of racial discrimination as rational, if deplorable, behaviour and trace out the implications was sometimes misconstrued as paying insufficient attention to the character and behaviour flaws of those who discriminate.

Truth will out, as Shakespeare reminds us, and eventually even Becker’s harshest early critics came around to appreciating his deep insights and conclusions. For example, the education industry now touts the economic value of a college degree. And governments around the world conduct vast surveys of households’ time use.

Few economists today work on these and related problems without building on Becker’s foundations or labouring under his strong influence.

On a personal note, some of my early research on the best way to tax families and on the effects of taxes on humancapital investment built on Becker’s insights.

Becker was a rarity among economists in recent decades.

He often looked at broad, long-range trends and data, comparing things like family structure, number of children, and women’s roles in the home and the market across many decades and even from one century to the next, or across very different societies.

Cumulatively, his work yielded powerful conclusions, not only explaining trends in birth rates, but also showing that preferences for discrimination led to a trade-off with profits.

Workers who did not face discrimination in sectors where animus was rife would win, while the losers would include

not just those directly being discriminated against, but also workers forced to compete when those workers sought employment elsewhere.

Becker relied on rigorous standards in evaluating government policy. He knew, and documented, that government solutions to market failures could themselves fail, with the cure turning out to be worse than the disease. He sought to compare what was likely to be the actual government program, tax, or regulation to the problem it purported to solve, not to the idealized textbook solution academics favour but that is rarely adopted.

The basic economic analysis that Becker developed was applicable everywhere, for everyone, and for all time.

Conditions in the US in the nineteenth and late twentieth centuries – or in North America and Europe and developing Asia, Africa, or Latin America – might differ; but the same economic models could be used to understand changing events and circumstances.

In this sense, Becker was a great economist and a truly remarkable social scientist. His work stands as a testament to the power of deep thinking and the courage to follow it to its logical conclusions. That seems especially relevant in today’s world, in which technology tempts us merely to scratch the surface of so many issues. He was a tremendous colleague at the Hoover Institution, a true and supportive friend, and admirably humble despite his incredible intellectual influence.

He will be sorely missed.

The Project Syndicate 2014

16

May 22, 2014

CLosing China signs gas supply deal with Gazprom

EU calls on Putin to maintain gas supplies

Russia’s state-controlled Gazprom signed a long-awaited gas supply agreement with China yesterday. There were no pricing details on the deal, which is believed to involve Russia supplying 38 billion cubic metres of gas per year to China via a new eastern pipeline linking the countries. It has been unofficially valued at over US$400 billion.

The European Commission called yesterday on Russia to live up to its commitment to ensure continued gas supplies to Europe via Ukraine as long as talks on their future continued. It is “imperative” that negotiations continue and that while they “are on-going, gas flows should not be interrupted,” Commission head Jose Manuel Barroso said in a letter to Russian President Vladimir Putin.

Questions build over China’s architectural copies Carol Huang

A

lready renowned for copying Western goods from trainers to champagne, China is building up its replica reputation with a miniature Mount Rushmore, Eiffel Tower and an entire Austrian village.

The reproduced structures -also dubbed “duplitecture”can appear bizarre to outsiders but make sense to many in the country.

“I think it’s a good thing.

I can see things from places that I’ve never been,” said a man surnamed Fu, sitting in a Chongqing park scattered with sculptures including Michelangelo’s David, Rodin’s Thinker and the gigantic heads of four American presidents.

Elsewhere in the southwestern city a set of curved white buildings under construction have sparked controversy for their striking resemblance to a Beijing development by star British architect Zaha Hadid.

Copying was “something China does”, a retired judge said as she walked past the site, adding: “I think it’s a good thing -we can learn from the experience of others.”

The director of Hadid’s

Window of the World park in Shenzhen reproduces some of the world’s most famous architectural masterpieces

Beijing project was less positive, reportedly calling the property company “pirates”.

It has denied copying and told AFP it had reached an agreement with the original developer, which declined to comment.

‘A really practical solution’ The “duplitecture” trend developed alongside China’s real estate boom in recent decades, especially for creations conveying prestige and success, said Bianca Bosker, the New York-based author of “Original Copies: Architectural Mimicry in Contemporary China”.

HK fines ICBC units

H

ong Kong’s securities regulator fined and reprimanded two units of the world’s third-largest bank by value, Industrial and Commercial Bank of China (ICBC), for their roles in the 2009 initial public offering of Powerlong Real Estate Holdings Ltd. The Securities and Futures Commission (SFC) fined ICBC International Capital Ltd and ICBC International Securities Ltd HK$12.5 million (US$1.61 million) each, a tiny fine compared to the bank’s $201.4 billion market value.

The SFC said the two units of ICBC failed to conduct so-called “know-your-client” due diligence on some buyers of Powerlong shares to make sure they were independent of the issuer.

The regulator also said that some buyers were offered margin financing in excess of the buyers’ net worth in a bid to prevent the listing from falling through.

“These failings go to the heart of the sponsor’s obligation to help ensure the integrity of the initial public offering market,” said Mark Steward, the SFC’s head of enforcement said in the statement.

Reuters

Among the most eyepopping examples are a copy of the Austrian alpine village and Unesco World Heritage Site of Hallstatt in the southern province of Guangdong, which even the official news agency Xinhua called “a bold example of China’s knock-off culture”.

The imitations are open to mockery, but Bosker says that such replicas provide an easy way to convey prestige on a huge scale.

That pragmatic streak also drives the mass production of knockoffs including Italian handbags, Swiss watches, French wine, Hollywood films and iPhones, while the southwestern city of Kunming once

even hosted a fake Apple store.

In Dafen, part of the boom town of Shenzhen next to Hong Kong, an army of artists duplicate masterpieces ranging from Vincent van Gogh to Jackson Pollock.

The fakes allow Chinese to enjoy what they could not otherwise afford, said a young man strolling at an amusement park in Chongqing featuring a miniature New York, Venicelike canals and Rio de Janeiro’s Christ the Redeemer statue rotating atop a ride.

“In terms of respecting others’ creativity, it’s not okay. But for a China that’s still developing, for a certain time there’s a use for it,” he said.

“When China’s economy becomes developed enough, then there won’t be a market for copied goods.”

Even so the rampant imitation raises questions of national pride in a country boasting a rich history and now regaining global clout.

In March Renmin University president Chen Yulu urged his countrymen to “refrain from copying European architectural styles and work harder to promote local culture”, Xinhua paraphrased him as saying, while itself warning of an “eerie copycat architectural landscape”.

As China rises in stature and wealth it will increasingly seek inspiration from within, said Bosker, adding that already “there seems to be a new confidence and interest in their own indigenous styles”.

At the park with the Mount Rushmore replica, a man in his 20s surnamed Mao argued that China’s neighbours mimicked its culture when it held greater sway in the past, and would do so again as the country reclaims the stage.

“If people have something good then we will copy it,” he said. “This is something every country, every society does, not only China.”

But a 27-year-old woman surnamed Huang, walking past the fake Manhattan with a friend, said her compatriots should embrace their own heritage.

“China is not inferior to anyone, but nobody really cares a lot about China’s ancient past.”

Trains bigger than station make French blush

Turkmenistan eyes oil investment

C

W

ash-strapped France will have to trim back some 1,300 rail platforms at a cost of 50 million euros after realising a brand new fleet of trains are too big to fit its stations, rail operators admitted yesterday.

The problem affects 182 regional trains supplied

by French manufacturer Alstom and 159 from Canada’s Bombardier, due to come into service by 2016.

Two state rail bodies, the Societe Nationale des Chemins de Fer (SNCF) and the Reseau Ferre de France (RFF), acknowledged the embarrassing situation in a joint statement yesterday after it was revealed by satirical weekly Le Canard Enchaine.

Introducing “wider trains in response to the needs of the public requires us to modernise 1,300 of the 8,700 platforms in the French rail network,” they said.

France’s secretary of state for transport, Frederic Cuvillier, called it a “tragically comical”, “mindboggling” mix-up, blaming a lack of coordination between the SNCF and the RFF. AFP

AFP

ith the world’s fourth largest natural gas reserves, the country expects more than US$3 billion in direct foreign investment from companies looking at its Caspian Sea oil reserves, a senior official said yesterday. While gas output is rising fast on growing exports to China, oil production has been relatively modest, staying barely changed at around 10 million tonnes a year. Malaysia’s Petronas and London-listed Dragon Oil are producing oil, while Germany’s RWE, Russia’s Itera and Cyprusheadquartered Buried Hill are prospecting for oil on the sea shelf. “In 2013, (foreign) contractors’ investments in the Turkmen sector of the Caspian totalled more than US$2.5 billion,” Yagshigeldy Kakayev, head of the Turkmen state agency on management and use of hydrocarbon resources, told a gas congress in the Caspian resort of Avaza in western Turkmenistan.

“Our preliminary data show that already this year these investments are set to exceed US$3 billion.”

Kakayev said the Caspian Sea shelf accounted for 55 percent of total foreign investment in the development of Turkmenistan’s hydrocarbons.

Reuters