MOP 6.00 Closing editor: Alex Lee Publisher: Paulo A. Azevedo Number 549 Thursday May 29, 2014 Year III
Second round T
he city’s first-ever bill to award a welfare package to the outgoing Chief Executive and principal officials is on hold. The controversial legislation will be reviewed by a permanent committee of the Legislative Assembly. More than 7,000 protesters participated in a sit-in outside the LA on Tuesday, calling for the bill to be scrapped
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CEM’s consultative unit warns that relying too much on mainland China for power supply may risk the stability of the city’s power distribution
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Wizard of Oz The price of coal is falling in Oz. Australia’s Queensland state is betting casinos are the answer to dwindling income. Politicians plan to lure Asian gamblers to the Gold Coast using Macau and Singapore’s tried and trusted formula Page 6
Banking Bonanza Several Macau banks revealed record results in 2013. The booming economy lifted credit, deposits and profits for a bumper year Pages 6 & 7
Solid MICE In the first quarter, revenues from exhibitions in Macau almost doubled and MICE participants increased 50 percent Page 3
Full gas
Evaporating VIPs
Macau, Hong Kong and Taiwan’s industrial companies’ profits have outpaced mainland China. The tigers claw up 12.7 percent in the first four months of the year versus a 10 percent jump by the mainland dragon
The smoking ban and a slowing economy in China are cause for concern. But not as much as evaporating VIP revenues for Asian casino investors, a Morgan Stanley report says
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%Day
China Life Insurance
2.95
Hong Kong Exchang
2.49
Tencent Holdings Ltd
1.71
Industrial & CommerC
1.61
China Petroleum & Ch
1.57
China Merchants H
-1.45
PetroChina Co Ltd
-1.70
Sands China Ltd
-2.06
Want Want China H
-2.18
Belle International
-3.23
Source: Bloomberg I SSN 2226-8294
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2014-5-29
2014-5-30
2014-5-31
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May 29, 2014
Macau
Committee to review perks bill The controversial bill offering monthly subsidies and one-off payout to top officials has not been scrapped, but progresses to another review Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he city’s first-ever bill to award a welfare package to the outgoing Chief Executive and his principal officials is to be reassigned to a permanent committee of the Legislative Assembly for review. This follows heated protests by a 7,000-strong crowd in a sit-in outside the lawmakers’ building on Tuesday requesting the bill be scrapped. The controversial bill, which features a set of subsidy terms for outgoing principal officials including the Chief Executive and secretaries, may not be reviewed and discussed by the Assembly’s second permanent committee again, Legislative Assembly president Ho Iat Seng said late Tuesday. The second permanent committee, headed by businessman Chan Chak Mo, was previously responsible for reviewing the bill’s content after it had undergone a general approval on December 16 last year. According to Mr Ho, one of the three permanent committees of the Assembly – depending on their assigned bills to review – will get to discuss the official compensation bill again as long as the government can deliver an amended version. The Assembly head acknowledged that the huge public outcry against the bill was due to a lack of public consultation but he also noted that the Assembly had no right to scrap it as the bill was proposed by the government, not the legislators. In a written statement, Chief Executive Fernando Chui Sai On said that he would like to ‘thank the
Legislative Assembly’ for cancelling the final voting of the bill originally scheduled for Tuesday, promising that he and his team would continue to listen to public opinion on the issue. The latest version of the bill, which incited an unprecedented public outcry on Sunday, awards a monthly payout to a Chief Executive that has served for five years or more the equivalent of 70 percent of his salary until finding a new paid job. The Chief Executive would also be granted immunity from criminal charges during his term of office. As the bill stated, the retiring principal officials are also entitled to receive a one-off payment. Those with a civil service background would receive 14 percent of their monthly salary for each month they had served; those who were not from the civil service would get 30 percent of their salary.
The bill also proposed an additional monthly payment equivalent to 70 percent of salary for outgoing officials for one year – the period they are barred from taking jobs in the private sector.
Retirement package “The bill can actually be understood as a pension package for MSAR’s top officials,” said University of Macau’s associate professor of public administrations of Hong Kong and Macau Eilo Yu Wing Yat. “The subsidy terms that it offers look like a gratuity to be paid to the retiring officials.” The opinion signed by legislators of the second permanent committee on the bill notes the importance of offering ‘corresponding benefits’ to the Chief Executive for his or her ‘high political status’. The opinion is an official document that records the major points
of view expressed by the government and legislators on the bill. ‘It seems unnecessary to devise a special retirement system for the one-man top official post [of Chief Executive]’, the opinion stated. ‘And in fact it is very hard to devise a retirement system that can suit all the elected and appointed personnel [the principal officials].’ The Chief Executive and leading officials from neighbouring Hong Kong earn a higher monthly salary than their Macau counterparts but do not enjoy a similar retirement package as proposed by the bill. The Chief Executive of Hong Kong is currently entitled to a monthly salary of HK$351,880 (US$45,387), whilst the basic monthly salary of Macau’s Chief Executive amounts to 269,725 patacas (US$33,777). The salary level of Hong
Kong ministers reaches a monthly HK$282,080, whilst the MSAR’s secretaries draw 187,309 patacas each month. “Actually, before Hong Kong established the accountability system for its officials, it had already concluded in 2001 to tie up the pension for the top officials with the mandatory provident fund, and they also decided not to grant a gratuity to them,” Mr Yu remarked to Business Daily, adding that an advantage in Hong Kong’s case is that it has incited less public disputes over the issue. Both Mr Yu and prodemocrat legislator Antonio Ng Kuok Cheong reckon that the government can consider devising the pension for the city’s Chief Executive and the secretaries by referencing the central provident fund contribution system for the pension of civil servants, for which the government can suggest a new contribution ratio.
Committee wants more locally generated power Relying too much on mainland China for power supply may risk the stability of the city’s power distribution, CEM’s consultative unit says Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he over-reliance on power imported from mainland China may impose a ‘certain risk’ to the stability of Macau’s power supply, especially when the city sees higher demand for electricity once the new round of Cotai casino projects enter into competition in the coming years, the Customer Liaison Committee of the city’s sole power supplier Companhia de Electricidade de Macau SA (CEM) concluded in a meeting on Tuesday.
The conclusion was made by the committee’s vice president Mr Iun Iok Meng, also an advisor to CEM’s Executive Committee, who noted that over 95 percent of the city’s power supply comes from mainland China in current terms. The state-owned China Southern Power Grid has been supplying electricity to Macau since July 1984. The approximately five percent of power generated locally comes from three power stations – one on the
Macau Peninsula and two in Coloane – where the power generation capacity is 472 megawatts (MW) in total. The power station on the Macau Peninsula, located in Areia Preta, will have to be moved away as the site is reserved for a public housing project. The consultative committee of CEM noted to media that many current power generators used in local stations have been in use for over 30 years, and are of low efficiency. The government should take heed of local power generation capacity, taking
into consideration if the electricity generated locally is sufficient to match local power consumption in case of any dysfunctions in external power grids, the committee urged. Vong Kok Seng, President of CEM’s Customer Liaison Committee, suggested the city also enhance power generated by natural gas, of which the supply now only serves the Hengqin campus of the University of Macau, Seac Pai Van public housing estate and a few local buses.
3
May 29, 2014
Macau
The MICE that roared In the first quarter, revenues from exhibitions in Macau almost doubled, reaching MOP16.22 million. MICE participants and attendees also increased 50 percent to 304,000 persons, while the number of events climbed 20 percent.
E
xhibition organisers’ revenue reached MOP16.22 million, increasing 88 percent yearon-year, according to the Statistics and Census Service (DSEC) yesterday following an interview with 10 organisers. The revenue came primarily from the rental of exhibition booths (52 percent) and financial support from the government and other organisations (47 percent). The amount invested by exhibition organisers went up as well to MOP37.48 million and
9 percent. The major expenditures were related to publicity and public relation (26 percent), production, construction and decoration services (22 percent) plus accommodation, food and beverages (16 percent). The report also mentions that 7 exhibitions were held in the same quarter of 2013, employing 247 persons. In the first quarter of the year the number of participants and attendees at meetings, incentives, conferencing and exhibitions (MICE) went up by 50 percent year-on-year, involving
304,000 persons. The number of MICE events was 276, an increase of 20 percent year-on-year. In total, some 40,000 participants attended 263 meetings and conferences held in the first quarter. The number of attendees at the 13 exhibitions increased 51 percent yearon-year reaching 264,000. The total floor area occupied for MICE events was 223,000 square metres, while the events had an average duration of 2.1 days. The first quarter of the year welcomed 953 exhibitors, with 34 percent coming from Hong Kong, 31 percent from Macau and 20 percent from Mainland China. Professional visitors accounted for 5,028 coming mainly from Macau (42 percent) and Mainland China (27 percent). In an interview by DSEC, 145 exhibitors indicated that sales of products accounted for 79 percent of revenue, while the rental paid for exhibition booths shared 72% of the expenditure. As for MICE venue and services, 19 percent stated that event promotions and venue facilities needed to be improved. However, 69 percent were pleased with the efficiency and attitude of the venue staff and 68 percent were satisfied with their language skills.
Ma Man Kei’s public memorial to be held on Sunday
T
he public memorial service for Macau’s renowned entrepreneur and political advisor Ma Man Kei will be held in the Macao Forum on Sunday June 1, the funeral committee has informed local media. The influential 95 year-old businessman passed away in Beijing on Monday night; his coffin will be transported to Macau today (May 28). The ‘patriotic’ businessman, known as the permanent president of the local Chamber of Commerce, also served as the vice-president of the committee in charge of drafting the MSAR’s Basic Law. Along with Hong Kong businessman Henry Fok Ying Tung, Mr Ma was among the first batch of Hong Kong and Macau businessmen to invest in mainland China during the early days of Beijing’s ‘Reform and Opening Up’ policy.
SPECIAL OLYMPICS GOLF MASTERS Press Conference 记者招待会 Special Olympics Golf Masters 2014 incl. the premiere of the documentary “Zero Handicap”
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Teatro Clementina Leitão Ho Brito
Address
何黎婉华庇道演艺剧院 Av. de Artur Tamagnini Barbosa, Centro Comercial Jardim da Cidade, 3 andar, Macau
台山巴坡沙大马路新城市商业中心三楼
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4
May 29, 2014
Macau
VIPs a major concern for Asian investors A survey by Morgan Stanley reveals that almost every Asian investor is expecting a negative impact on gaming stocks in the next three months due to the slowdown in high roller revenue. On the other hand, Cotai and the mass market are driving a bullish outlook Alex Lee
Alex.lee@macaubusinessdaily.com
T
he slowing of VIP revenues is the biggest concern for Asian casino investors – ahead of issues like the smoking ban or the less positive economic outlook in China, a Morgan Stanley report says. According to a survey conducted this month by the US-based bank, almost all Asian investors (97 percent) expect a negative impact on gaming stocks due to the slowdown of the VIP segment in the next three months. If the near-term is pessimistic, the long term doesn’t bring good news, either. Twothirds of Asian investors questioned by Morgan Stanley underlined that they’re expecting a decrease in stocks in the next 12 months with the VIP deceleration. Regarding the high rollers, Morgan Stanley stated that Asian investors are much more worried than their US counterparts, only 30 percent of whom expect a drop in shares through a VIP slowdown. After peaking in 2013, VIP revenues are growing much slower this year -
for some operators they are already decreasing – after casinos started shifting tables to the higher margin, higher profit mass premium market. The VIP segment is also more exposed to economic cycles, political shifts and scandals affecting junkets than the mass gaming market. According to Business Daily calculations, VIP revenues from the Big Six in Macau - Sands, MGM, Melco Crown, Galaxy, SJM and Wynn - in the first quarter improved 14 percent from a year ago, a solid performance but miles away from the mass market, whose revenues skyrocketed 40 percent in the same period. Besides growing three times faster than the VIP segment, mass gamers are also much more profitable for operators even if VIP revenues are much bigger and still have a huge influence on performance. Investors also told Morgan Stanley that they believe that the operators of Wynn Macau and Galaxy will suffer
most on profits if VIP slowdown deepens. In this scenario, Sands China is the least vulnerable.
Cotai factor Even if cautious with VIPs, investors are still bullish on Macau’s overall success in the next 3 and 12 months, Morgan Stanley said. The new casino wave in Cotai is pushing up the confidence of the market. More than 80 percent of Asian and US investors are expecting a positive impact on stocks in the next year with
Cotai property openings and news, devaluating issues like delays, high expectations and cannibalisation of existing resorts and casinos. The mass market is another driver behind investors’ optimism. More than half (56 percent) said they’re waiting for gaming stocks to evaluate in the next 3 months with the mass market’s positive performance, while 75 percent are expecting the same for the next twelve months. According to the Morgan Stanley report, the impact of the new casino openings in Japan is neutral on casino stocks.
Market Share ( percentage) Operator
May (until 25)
April
Variation (p.p)*
SJM
23.3
25.3
-2
Galaxy
21.6
19.1
2.5
Sands
23.2
21.8
1.4
Melco Crown
12.2
14
-1.8
Wynn
10.9
10.6
0.3
MGM
8.8
9.2
-0.4
Source: Sterne Agee *in percentage points
Sands investor transfers stake from Macau to Las Vegas Billionaire Sheldon Adelson’s Sands China Ltd. (1928) fell the most in three weeks yesterday after investor Waddell & Reed sold a US$1.38 billion stake and moved its position to the Macau casino operator’s parent company
S
ands China dropped as much as 3.9 percent to HK$56, headed for the biggest loss since May 8, before trading at HK$57.2 at the 12:00 noon break in Hong Kong. Waddell & Reed sold its shares at HK$55.45 each, or a 4.8 percent discount to yesterday’s close, according to a term sheet obtained by Bloomberg News. Investors including Waddell & Reed are selling their holdings in the Macau casino operator for a stake in its parent company Las Vegas Sands Corp. (LVS), which also runs casinos in Singapore and is planning projects in Japan outside its home base in the U.S. The Hong Kong-listed unit, whose revenue accounted for more than 60 percent of the group, reported a 50 percent increase in first-quarter earnings. “I don’t think that means the fund is turning less bullish on Sands China,” Alison Law, head of consumer research at Daiwa Securities Co. Ltd., said by
phone today. “It looks like the fund is diversifying as LVS offers it an opportunity to invest in Singapore, the gradually-recovering Las Vegas and possibly new markets, like Japan.” The investors are swapping the stakes because of “the greater market liquidity of Las Vegas Sands compared to Sands China,” according to a Business Wire statement. “They continue to have a positive view on the investment outlook of Las Vegas Sands and its ability to generate revenue in China and elsewhere around the world.”
Currency Controls The investment switch is taking place as Macau regulators and police crack down on attempts by gamblers to circumvent Chinese currency controls. Macau police have made 12 arrests involving pay card fraud cases in February and March. Funds obtained
illegally through card-swiping by Chinese gamblers come to an estimated $6 billion, according to Deutsche Bank AG. Sands China hasn’t heard from regulators on the crackdown and doesn’t expect possible government action would affect gaming revenue, Chief Executive Officer Edward Tracy said this month. Net income at the Las Vegas-based company grew 36 percent to $776.2 million in the first quarter as its Macau casinos added shopping malls, hotel rooms and entertainment shows to capture more Chinese gamblers who are vacationing in the world’s biggest casino hub. Sands China posted a 50 percent gain in first-quarter earnings. Adelson said in February that Las Vegas Sands is ready to invest $10 billion in Japan, projected to be Asia’s second-largest casino market after Macau. Japan currently bars casinos in
the country and lawmakers are pushing to open up the market. Bank of America Corp’s Merrill Lynch & Co. unit is the sole bookrunner on the deal, according to the terms. Bloomberg
5
May 29, 2014
Macau
Queensland to copy Macau’s casino model The government of Australia’s Queensland state will study proposals for new casinos challenging Echo’s monopoly, with billionaires James Packer and Cheng Yu-tung already shortlisted to develop a new resort in Brisbane. The Aussie state wants to attract Asian gamblers who’ve fuelled investment in Macau and Singapore
H
it by falling prices for its largest export, coal, Queensland state is considering a bet on the A$15.65 billion ($14 billion) casinos to lure Asian gamblers who’ve fuelled investment in new resorts in Macau and Singapore. The state’s royalties from resource extraction will fall by A$324 million over the four years to June 2017, the government said last December. “These projects have the potential to create thousands of new jobs in these two key tourism centres,” state’s Deputy Premier Jeff Seeney said in a statement. “We promised to grow the construction and tourism sectors of the Queensland economy and yesterday’s announcement paves the way for this to happen.” Aquis at the Great Barrier Reef Pty and ASF Consortium Pty will be allowed to submit detailed plans for new resorts in Cairns and the Gold Coast, Jeff Seeney said in an e-mailed statement yesterday. Echo has the only casino on the Gold Coast and would have to reduce investment in the site if a second project was allowed in the city, former Chief Executive Officer John Redmond said in an April 2013 interview. With a shoreline longer than India’s that’s lapped by the Great Barrier Reef, Queensland is seeking to emulate the success of Singapore, where resorts owned by Genting Singapore Plc and Las Vegas Sands Corp. attracted enough Asian tourists to raise about $5.2 billion in revenue in 2013.
Chinese and Hong Kong-based investors planning new casinos in Cairns and the Gold Coast valued at about $14 billion will also be allowed to submit detailed proposals, Seeney said yesterday. The Aquis proposal, backed by Hong Kong investor Tony Fung, is valued at A$8.15 billion and could create more than 3,700 construction jobs as well as 10,000 operations jobs, according to the statement. The Broadwater Marine project, which includes ASF Group Ltd., China State Construction Engineering Corp., and CCCC Guangzhou Dredging Co., is worth A$7.5 billion and could create 1,300 construction jobs and more than 10,000 operational jobs, Seeney said.
These projects have the potential to create thousands of new jobs in these two key tourism centres Jeff Seeney
Packer and Yu-tung Also in the race for Queensland’s gaming gold rush are companies controlled by billionaires James Packer and Cheng Yu-tung, who have been shortlisted to develop a new casino resort in Brisbane. Packer’s Crown Resorts Ltd. and a venture including Cheng’s Chow Tai Fook Enterprises Ltd. in Hong Kong have been picked to submit detailed proposals for the riverside site in the centre of Brisbane, alongside Echo Entertainment Group Ltd. and an affiliate of Chinese property developer Greenland Holding Group Co., the state’s Deputy Premier Jeff Seeney said in a statement posted on its website today. The development will include
6-star hotels, shops, restaurants, entertainment zones, convention facilities and public open spaces, Seeney said. The bidders will have to lodge fully developed proposals later this year, and a winning bidder will be picked in early 2015, he said. Queensland is looking for new sources of state income amid a slump in prices for its largest export, coal. The state’s royalties from resource extraction will fall by A$324 million ($300 million) over the four years to June 2017, the government said last December. Shares in Echo, which currently operates the only casinos in Brisbane
and the Gold Coast, have climbed about 4 percent since Oct. 14, when Queensland said it may issue as many as three new licences for gambling resorts. That trailed the 6.2 percent gain in the benchmark S&P/ASX 200 index over the period. Competing bids from Lend Lease Group and Skycity Entertainment Group Ltd. were excluded from the running for the site at Queen’s Wharf on the Brisbane River. Echo already has a casino on part of the site, operating inside Queensland’s former state Treasury building with a lease expiring in 2070. Aquis at the Great Barrier Reef Pty, controlled by Hong Kong investor Tony Fung, will be allowed to submit detailed plans for a new resort in the Great Barrier Reef gateway of Cairns, Seeney said in an e-mailed statement yesterday. A consortium led by Australianlisted Chinese investor ASF Group Ltd. will also be able to make a detailed proposal for a proposed casino and cruise ship terminal on the Gold Coast, where Echo currently has the only casino, Seeney said. Crown is also building a A$1.3 billion casino and hotel complex on the shores of Sydney Harbour that will compete with Echo’s nearby site in that city. The government has yet to decide on a site in the centre of Brisbane, where Echo already has a casino and investors, including Crown Resorts Ltd., have submitted bids. Bloomberg
6
May 29, 2014
Macau
BCM posts record 2013 The bank reported MOP139 million profit last year, a 54 percent increase on 2012 and a record performance
AMCM doubles profits, hands Gov’t MOP100 million
Sara Farr
sarafarr@macaubusinessdaily.com
T B
anco Comercial de Macau, SA (BCM) recorded a net profit of 139 million patacas for the whole of 2013. Announcing its annual report yesterday, BCM said that this represents a 54 percent increase over that of the previous year. “Macau’s good economic level brings on considerable development opportunities for the banking sector here, and this bank has achieved a historic record this year,” the bank’s executive director Yiu Fai Kong said. Net assets increased by 16 percent to 15.7 billion patacas from 13.5
billion patacas the previous year. The total value of deposits was 13.6 billion patacas, a 14 percent increase over the previous year, while loans totalled 10.3 billion patacas, up 17 percent on 2012. “Looking at 2014, while the economies of the United States and Europe have been relatively stable, the global financial market is still full of uncertainties,” Mr Yiu said, adding that this includes the impact of the future hike in American interest rates, the pace at which the economy recovers, as well as a number of other factors.
Mr Yiu also said that the government had implemented policies, such as that of the investment plan for Hengqin Island, the platform for China and Portuguese-speaking countries and incentives to diversify the local economy which were all positive steps towards Macau’s “sustainable economic development.” This is the 40th year BCM has been operating in Macau. Dah Sing Financial Holdings Ltd controls commercial bank Banco Comercial de Macau, SA, Macau Insurance Co Ltd and Macau Life Insurance Co Ltd.
he profit of Monetary Authority of Macau (AMCM) has increased to MOP4.306 million, a growth of 101.1 percent in comparison to its 2012 results (MOP2.141 million). Total revenues had the biggest increased rate, reaching an 82.3 percent increase from MOP3,008 million to MOP5,484 million. Total net assets posted a growth of 9.7 percent in the last year from MOP278,1 million to MOP305,270 million. Foreign exchange reserves, however, dropped 2.7 percent from MOP132,5 million to MOP128,9 million. As for the appropriation of net revenue, the Monetary Authority of Macau Board of Directors proposed that the Macau Government receive MOP100 million, while MOP84 million be kept for the general reserve for other risks, as happened in the previous year. AMCM also proposed that the Authority retain the remaining profit which accounts for MOP4,122 million.
Sponsored Feature Toasting ceremony of MECC 2014 Gala Dinner
´Europe Day’ Gala Dinner calls for strong and diverse Europe-Macau relationship
T
he Macau European Chamber of Commerce (MECC) held its inaugural Gala Dinner on 23rd May at the Grand Lisboa, its first large-scale function following the inauguration of the Chamber in November. European Commission President José Manuel Durão Barroso and Secretary for Economy and Finance Francis Tam Pak Yuen were in attendance. Themed ‘Europe Day’, the dinner was substantiated by the remarks of Dr. Ambrose So, Honorary Chairman of MECC and Chairman of the Board of Directors of SJM, who said that MECC has made very good progress since its inception with effective working relationships forged with the government, the Office of the EU in Macao and Hong Kong, consuls general and members.
“We are certain that MECC can act as one of the main platforms for bridging Macau and Europe’s business interests and needs, and we aim thereby to help bring diversity to Macau’s economy.” According to European Commission President José Manuel Durão Barroso in his congratulatory message presented by Vincent Piket, Head of Office of the EU to Hong Kong and Macao, EU-Macao bilateral relations are growing fast, especially in the commercial area. Bilateral trade broke another record last year with total trade increasing 28% to reach EUR655 million. “But the EU and Macao are looking beyond the trade figures. We are looking towards building a strong and diverse economic partnership for the long term,” said Barroso. Vitor Sereno, Honorary Chairman of MECC and the Portuguese consul-general here, added that European companies can benefit from the special collaboration agreements that Macau has with the Mainland, which will further deepen economic integration between Macao and the Mainland and promote closer co-operation between Guangdong Province, Hong Kong and Macao.
He also stressed the commitment to reinforcing ties between both regions, not only in the business sector but also in the promotion of the Portuguese language. “The overwhelming response of the Gala Dinner is a strong boost to MECC’s profile and recognition among Macau and European communities,” concluded Franklin Willemyns, President of the Board of Directors of MECC. “We will strive to expand our reach to more associations, companies and individuals with interests in Europe. Apart from drawing more European companies to Macau, we will also help local business extend their presence in a European context.” Over 350 distinguished guests from Macau and Hong Kong attended the dinner including Gao Shangde, Senior Assistant Director-General of the Economic Affairs Department of the Central People’s Government Liaison Office in Macau, Nie Quan, Director-General of the Policy Research Department of China’s Ministry of Foreign Affairs in Macau, Jackson Chang, President of the Macao Trade and Investment Promotion Institute, European consuls general, government officials and business leaders.
7
May 29, 2014
Macau
HSBC Macau profits dip 11pct in 2013 The bank says this was mainly due to consolidated activities Sara Farr
sarafarr@macaubusinessdaily.com
T
he Macau branch of the Hongkong and Shanghai Banking Co Ltd recorded an overall loss of 11 percent bringing the bank’s profits before tax to 283.3 million patacas in 2013 from 319.3 million patacas the previous year. Revenues, however, remained unchanged at 522 million patacas, according to the bank’s 2013 annual report released yesterday. HSBC Macau’s net interest income, however, increased by 7 percent mainly due to credit to clients and credit impairment, which resulted from improved asset quality. Assets grew 11 percent year-on-year to just under 18 billion patacas from 16.3 billion in 2012. “In 2013, in line with our global
strategy to come up with a new business model that is differentiated and sustainable, we interrupted the commercial side of our products and banking services,” Lau Pak Hung, the bank’s executive director, said. This resulted in a decrease in net income of 11 percent, and a decrease of 2 percent in treasury profit. “Nonetheless, we believe we are in a better position now to provide solutions and adequate services to our clients, given our capacities in Macau,” Mr Lau added. In addition, credit to clients increased 21 percent, while deposits increased 3 percent. Both increases were mainly due to the ‘dynamism of the Macau economy,’ the annual report said.
Luso Int’l almost triples profits The bank says assets remained at a ‘good’ level, while deposits and credit granted almost doubled Sara Farr
sarafarr@macaubusinessdaily.com
L
uso International Banking Ltd’s net profit increased almost three-fold by 174.8 percent to 450 million patacas for the twelve months ended December 31, 2013. The bank said in its 2013 annual report released yesterday that assets remained at a ‘good level’, while several of the bank’s other activities recorded an increase. This is true for deposits, which jumped 52.8 percent to 38.3 billion patacas, and credit granted with an increase of 42.2 percent to 29 billion patacas. Last year, the bank issued 800 million patacas in subordinated debt and 330 million patacas in capitalization of reserves. This, in turn, “created favourable conditions for future development,” Luso International’s president Lu Yao Ming said. Profit after tax for the whole of 2013 totalled 405.3 million patacas. Luso International was the first
Macau bank to get permission to open an office on Hengqin Island. The bank opened its first representative office there at the end of January, making it the first foreign currency banking institution to set up in the new Hengqin area. “This opens up the way into mainland China and gives this bank greater business opportunity,” Mr Lu said. In January, a bank spokesperson told Business Daily that the representative office would become a proper branch in due course. Luso International had been applying for a foothold on Hengqin since the ninth supplement to Macau’s Closer Economic Partnership Arrangement with the mainland came into effect a year ago. The supplement lowered the minimum assets a Macau bank must have before it may open a Hengqin branch to US$4 billion (32 billion patacas) from US$6 billion.
8
May 29, 2014
Macau
Postal Savings deposits dive
T
he total deposits of Macau Postal Savings recorded last year are 35 percent lower than in the previous year. According to the annual report released yesterday, deposits totalled 658.4 million patacas, while new loans granted increased by 6 percent to 188 million patacas. Net interest income totalled 28.2 million patacas and services and commissions were 6.8 million patacas, with operating costs totalling
15.7 million patacas. Total profits decreased by 8 percent to 19 million patacas in 2013 over that of the previous year, according to the annual report. Macao Postal Savings is a credit institution, which can operate bank related activities, in accordance with the Financial System Act as approved by regulations. The Postal Savings Office is run as part of Macau Post and its board includes a representative of the Financial Services Bureau.
Le Saunda SAR sales step up
S
hoe company Le Saunda increased its sales some 13.6 percent year-on-year in Macau and Hong Kong to HK$234.5 million. In Macau, Le Saunda achieved HK$38.7 million revenue, trumping 2012 when it reached HK$31.2 million. During the last financial year, Le Saunda opened three new outlets in Macau and Hong Kong and now has a total of 22 shops - 9 street stores and 13 shopping mall stores - in the Special Administrative Regions. All in all, the company posted
HK$288,633 million which represents an increase of 61.4 percent over 2012. Le Saunda, however, is cautious about the future given the slowdown in China’s economy. ‘The further slowdown in China’s economic growth in the past year signifies the end of a high-growth period for the retail sector. Traditional department stores are losing their customers’, it wrote in a report, although it added that ‘The Group remains cautiously optimistic about the coming year, with the view that opportunities always exist amid crises’.
We are deeply saddened by the news of Dr. Ma Man Kei’s passing. Our thoughts and prayers are with his bereaved family. Macau International Airport Co. Ltd.
9
May 29, 2014
Greater China
Hong Kong banks offer products to depreciation followers The yuan has fallen 3.2 percent so far this year, wiping out all its gains in 2013 Michelle Chen
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anks in Hong Kong have started to provide yuan structured deposit products to investors who are betting the Chinese currency will depreciate in coming months, amid weak sentiment over the outlook for China’s economy and currency. The products come at a time when the yuan experienced its most sustained depreciation ever at the beginning of this year, after China’s central bank engineered a sharp fall to shake out hot money speculating on non-stop yuan appreciation. Bank of China Hong Kong, the yuan clearing bank in the former British colony, launched a yuan structured product last week that will give investors an annual return of 5 percent if the yuan falls about 1.7 percent in nine months. The target level to obtain the maximum potential interest rate is for the yuan to reach the USD/CNH spot rate on May 30 plus 0.1080, a spokesperson at the bank told Reuters late on Tuesday. Hang Seng Bank has also offered a product called “currency-linked capital protected investment deposit”, which shows that if investors deposited yuan on May 27, they will enjoy an annual return of 5 percent if the yuan falls to 6.4180 by February 12, 2015. However, if the yuan does not reach the trigger level, investors will only obtain an annual return of 0.1 percent, much lower than those of vanilla yuan deposits that carry interest rates of more than 3 percent in the market. “There were structured deposits to short currencies before, but not for the yuan, as it had shown oneway appreciation until the end of last year,” said Daniel Chan, wealth management director at Brilliant & Bright Investment
Hong Kong Monetary Authority will release the April data on Friday
Consultancy Limited. “For these yuan bearish products, we saw some interest among our clients who want to diversify their investment portfolios and manage currency risks,” Chan said. The yuan has fallen 3.2 percent so far this year, wiping out all its gains in 2013 and becoming one of the worst performers among its emerging market peers. Bearish sentiment on the yuan has risen slightly on concerns that economic growth may be cooling more rapidly than expected. Investors have been taking bearish bets against the currency since mid-March, according
to a Reuters bi-weekly survey. In the offshore non-deliverable yuan market where global investors bet on future yuan direction, ninemonth contracts traded at 6.2430, implying the currency may depreciate 1.2 percent in nine months’ time. China’s annual economic growth slowed to an 18-month low of 7.4 percent in the first quarter, raising the risk that the world’s second-largest economy could miss its growth target of 7.5 percent this year, for the first time in 15 years. Market participants say that in addition to the products offered by Bank of China Hong Kong and Hang
Seng Bank to retail investors, some other banks are also providing similar products to their private bank clients. Competition for yuan deposits in Hong Kong has intensified in the past few months as banks increased interest rates to attract new yuan funds that can be used for investments in broader channels and markets. Yuan deposits in the world’s largest offshore yuan centre amounted to 945 billion yuan at the end of March, accounting for more than 10 percent of Hong Kong’s total deposits. The Hong Kong Monetary Authority will release the April data on Friday. Reuters
Shenzhen to hold its first carbon permit auction The fresh supply will help companies meet their carbon reduction targets under the scheme
Shekou industrial zone in Shenzhen pictured. The highly industrialized city is in big need of carbon permits
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henzhen in southern China will auction 200,000 carbon permits to help the city’s big emitters meet their targets under an emissions trading scheme. But speculators, who had bought permits in the market in hope of selling them to emitters at a profit, said the minimum auction price was too low and could scupper their resale plans. China, the world’s biggest emitter of climate-changing greenhouse gases, has launched six regional carbon markets as a low-cost approach to slowing the rapid growth in emissions.
The Shenzhen auction, the first such sale in the city, will come on June 6, with permits sold at a minimum price of 35.43 yuan (US$5.67), according to a statement by the China Emissions Exchange, which runs the market. “The auctioned permits can only be used for compliance, they cannot be traded in the market,” it said. The fresh supply, taken from a reserve set aside by the city government last year, will help companies meet their carbon reduction targets under the scheme. But speculators complained the minimum price was unfair as it was
half the average price of permits since the market launched in June last year. The note from the China Emissions Exchange said the 200,000 permits would not be enough to cover the total shortfall at companies. Individual emitters will not be allowed to buy more than 15 percent of their shortfall in the auction, meaning they would still need to buy more in the secondary market, which traded at 74.99 yuan on Tuesday. Shenzhen, the smallest of China’s six pilot markets, issued around 33 million carbon permits for 2013.
Some 10 percent were set aside in government reserves, with the rest handed out to emitters for free. Around 3 million of the permits have since been cancelled as the government adjusted allocation levels based on reported production data after the year ended. The June auction will be limited to the nearly 200 companies that had their allocation levels adjusted. The 635 companies covered by the scheme have until June 30 to hand over permits to the government to cover for their 2013 emissions. Reuters
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Greater China
Premier Li sketches out the monetary route for CDB bonds Li’s innovative policy has been compared by local brokerages to the Federal Reserve’s buying of financial assets in so-called quantitative easing unit will serve several purposes,” said Zhang Lianggui, a Beijingbased analyst at China Chengxin International Credit Rating Co. “It will help achieve economic growth, mitigate the impact of the property market downturn and alleviate the debt burden of local governments. At the same time, it helps CDB, whose borrowing costs climbed along with risk-free rates.”
PBOC help
Premier Li in a parliamentary session
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rime Minister Li Keqiang has outlined plans for targeted monetary easing involving forced purchases of low-yield housing bonds, cutting borrowing costs for China’s biggest policy bank. An April 2 State Council meeting approved plans for China Development Bank Corp. to set up a unit to issue the securities at belowmarket rates to the postal bank and other state institutions. CDB bonds rallied in response to the show of support from the government, with the yield premium on its seven-year debt over the sovereign falling to 100 basis points on Tuesday, down from a record 135 on January 20, according to ChinaBond data going back to 2007. The average spread this month is the lowest since October. Li’s innovative policy, which has been compared by local brokerages to the Federal Reserve’s buying of financial assets in so-called quantitative easing, was a response to a surge in CDB’s borrowing costs above 2013’s rate of return this January, which made its financing model unprofitable. Premier Li is counting on a US$160 billion plan to build 4.75 million urban homes to boost investment and spur consumer spending amid the slowest economic growth in 24 years. “Recent news about CDB’s bigger role in China’s economic
CDB bond yield premiums are still high by historical standards, reflecting market concerns from earlier this year Yang Feng analyst at Citic Securities
development and urbanization looks like a reversal of the plan to change it into a more commercialized bank in the past couple of years,” said Wang Ming, marketing director at Shanghai Yaozhi Asset Management LLP, which oversees 2 billion yuan (US$320 million) of fixed-income investments “But for investors, it is government support like this that makes its bonds attractive.”
Development lifeline The State Council, China’s cabinet, said the special CDB securities will be sold to Postal Savings Bank Co., a cash-rich lender which has the
highest number of branches in the nation, and that it will “encourage” commercial banks, pension funds and insurers to “actively participate.” The intention is to ensure CDB can be the lifeline for development financing, according to a statement on the central government website. CDB earned an average of 5.44 percent on its interest-bearing assets last year, according to its annual report. Its five-, seven- and 10-year bonds were sold at a 5.8-5.9 percent yield range in a January auction. The rates on similar maturities in another auction yesterday fell to around 5 percent. “Setting up the special CDB
Macau outperforms mild start of the year for Mainland industry Combined profits of foreign-funded enterprises and companies with funds from Hong Kong, Macao and Taiwan stood at 422.3 billion yuan in the first four months, up 12.7 percent year on year
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hinese industrial businesses reported higher profits in the first four months from a year earlier, but the growth rate was down slightly from that of the first three months. Chinese industrial businesses saw their profits rise by 10 percent year on year in the first four months of 2014, the National Bureau of Statistics said in a statement yesterday. Total profits of industrial companies with annual business revenue of more than 20 million yuan (US$3.2 million) reached 1.76 trillion yuan from January to April. Profit growth was 0.1 percentage point lower than that in the first three months.
The slight slowdown was caused by industrial business performance in April, when industrial firms raked in 468.63 billion yuan in profits, up 9.6 percent year on year, but the growth rate was down 1.1 percentage points from March. In the first four months, profits of private firms raised the most by 13.8 percent year on year to 571.76 billion yuan. State-owned and state-holding industrial enterprises reached 471.6 billion yuan in profits, up 2.6 percent year on year. Combined profits of foreignfunded enterprises and companies with funds from Hong Kong, Macao and Taiwan stood at 422.3 billion
There is talk in the market that the People’s Bank of China has decided to grant CDB a 300 billion yuan relending facility to support the shantytown project, China Business News reported on May 23, citing people it didn’t identify. The policy bank obtained 100 billion yuan in April and another 100 billion yuan this month, according to the report. CDB’s 10-year bond traded at a discount to indicated yields for Agricultural Development Bank of China and Export-Import Bank of China, the nation’s other two policy banks, for two weeks this month, compared with a premium since Bloomberg started compiling the data almost two years ago. The spread was at a one basis point advantage yesterday. “CDB bond yield premiums are still high by historical standards, reflecting market concerns from earlier this year,” said Yang Feng. a Beijing-based fixed-income analyst at Citic Securities Co., China’s largest brokerage. “They’ll probably narrow further as the central government gives the bank preferential policies to use cheap funding to boost growth.” Bloomberg News
yuan in the first four months, up 12.7 percent year on year. Joint-stock enterprises took in total profits of 1.04 trillion yuan in the first four months, up 9.1 percent year on year. By sector, industrial enterprises in the mining industry reached profits of 221.29 billion yuan in the first four months, down 16 percent year on year. Companies in the manufacturing sector saw 14-percent year-on-year growth to hit 1.40 trillion yuan in the period. Of the total 41 industrial sectors, 30 rose, one was flat and ten dropped in the first four months from the same period last year. Xinhua
10 pct year on year China’s industry growth in the first four months of 2014
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Greater China Local bond market pending risk assessment The bonds would have to be rated and benchmarked against central government bonds Umesh Desai
Beijing-Tianjin-Hebei development plan drafted Intensive efforts are being made to draft an integration development plan for Beijing, Tianjin and Hebei Province, a senior official of China’s top economic planning body said yesterday. “The drafting work of the Beijing-TianjinHebei Coordinated Development Program has been deepened as we, together with other ministries, completed a research report after thorough studies,” said Fan Hengshan, deputy secretary general of the National Development and Reform Commission (NDRC), at a press conference in response to media questions. The reason behind such a program is that the three neighbouring areas are faced with problems in coordinating development, Fan said.
Online personal credit database expanded China will extend a pilot online personal credit database to cover the whole country this year, the central bank said yesterday, in the latest effort to build up a credit culture as the government looks to make the economy more consumption driven. The system, which tracks individuals’ private credit information, was first launched in Jiangsu and Sichuan provinces and Chongqing city in March 2013 and currently covers 18 provinces, the People’s Bank of China said in a statement on its website. People who want to check their own information can log on to the website. The first two checks are free and there is a 25 yuan (US$4) charge for each subsequent check.
Senior energy official sacked after corruption charges The deputy director of China’s National Energy Association (NEA) has been sacked as a crackdown on the power body widens, state media reported yesterday. Xu Yongsheng was placed under investigation last week, one of a series of probes into the energy sector. The official Xinhua news agency reported on its microblog account on Wednesday that Xu had been removed from office. Three other officials, including Wang Jun, head of the NEA’s renewable energy department, Hao Weiping, director of the nuclear power department, and Wei Pengyuan, deputy director of the coal department, are under investigation, Xinhua has said.
CNPC sees more investment in Peru The China National Petroleum Corporation (CNPC) expects to invest at least US$2 billion in Peru over the next 10 years, after having recently bought Petrobras’ assets in the country, a top CNPC executive told Reuters yesterday. “We are looking for more opportunities in Peru, to acquire companies or to participate in the bidding of oil fields,” Gong Bencai, head of CNPC’s Latin America division, said in an interview at CNPC’s Lima offices.
Fonterra fears dairy prices to affect Chinese demand Fonterra, the world’s largest dairy exporter, yesterday said that a significant rise in global dairy prices could trim demand for milk formula and other dairy products in China, its biggest customer. After announcing a record high milk pay-out price to its farmers of NZ$8.40 (US$7.17) per kilogram of milk solids for the season ending this month, Fonterra CEO Theo Spierings said that demand in the world’s second largest economy may suffer if prices rise much beyond that.
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hina’s push for a municipal bond market could increase the pressure on those provinces already struggling to fund massive debt piles, effectively creating a twotier market dominated by its major cities and financially strong regions. The challenge for investors will be how to assess risks of different provinces in the world’s thirdlargest bond market as the central government tries to withdraw its implicit guarantee on their debts and introduces market discipline to fundraising. Beijing has permitted 10 cities and provinces to sell municipal bonds, an expansion of an existing pilot programme with one significant change - the local governments will be responsible for repayments. “Those guys who have been given permission don’t need to raise money. The idea is for them to get their own rating, unlike loans where it is the sovereign’s backing,” said Daiwa Capital Markets economist Kevin Lai. “The guys who really need to raise money are the guys in the red and in fiscally bad shape.” The bonds would have to be rated and benchmarked against central government bonds. That is something the local ratings industry has not previously had to do, so could provide its own challenges in developing the market. “In the U.S., leading up to the
sub-prime (crisis) there was rating inflation even though there were just 3 agencies. Imagine if all 6 local agencies in China were to compete for market share,” said David Cui, an analyst with Merrill Lynch in Hong Kong. Currently, the Ministry of Finance sells bonds on behalf of local governments, an arrangement that left it responsible for repayments and gives even the weakest provinces an effective sovereign guarantee on their borrowing. “In China, not only do you need to see reform allowing bonds as well as loans, you will also need to find investors other than banks to provide that funding. Those are the true reforms,” said Viktor Hjort, the Hong Kong-based head of Asia Fixed Income Research at Morgan Stanley. “The funds available in China’s bond market are finite; first movers have an advantage.”
First step Official estimates put local government debt at about US$3 trillion, equivalent to one-third of China’s annual output, and private sector estimates are even higher. Analysts welcome the move to develop a domestic government bond market as the start of a long-term reform that will improve financing through the economy.
“Such a market is vital to reducing the risks to China’s sovereign creditworthiness stemming from local governments’ use of off-balance-sheet debt,” Standard & Poor’s analysts said in a report. Guangdong, Qingdao and Shandong are taking part in the pilot programme and, with debt-toGDP ratios in the teens, are unlikely to be worried about the need for disclosures. The test of the market will come when those with weaker balance sheets have to tap the market on their own. “The problem is whether the local governments will fully disclose their financial positions, particularly those with weak metrics. The higher the debt/GDP ratio, the greater the urgency for them to raise money,” said Merrill Lynch’s Cui. Much of that existing debt has been raised through local government financing vehicles (LGFV), opaque entities that help regional authorities skirt the ban on municipal bonds. Beijing has tried to curtail the LGFVs, but the debt still needs to be serviced. “As the central government has sought to limit bank loans to LGFVs, local governments have turned to issuing riskier, more expensive forms of debt,” Debra Roane, a senior credit officer at Moody’s Investors Service, said in a report. Reuters
Vanke sees property “golden era” over Company’s president said he believed government measures to curb speculation in the property sector had worked and prices were now more sustainable Clare Jim
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he days of rapid growth in China’s real estate sector are over, but the government’s urbanisation drive will continue to drive demand for the next 15 years, the country’s biggest residential property developer China Vanke Co Ltd said. After climbing 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. Vanke president Yu Liang said the slowdown heralded the end of the golden era for Chinese real estate, but said the outlook remained healthy thanks in part to urbanisation. “The white silver era has just begun,” Yu told reporters at its research and development centre in the southern Chinese city of Dongguan this week. “The industry is now after quality and service and back to real demand...
The industry was worth 8.1 trillion yuan (US$1.30 trillion) last year, even growing at a single-digit rate, it’s still large enough for us.” His comments came nearly a week after ratings agency Moody’s lowered its outlook for China’s property sector and forecast flat to 5 percent yearly growth over the next 12 months, compared to 26.6 percent growth at
KEY POINTS Vanke president says property market being driven by real demand Confident in strong outlook thanks to urbanisation drive Says aims to list in Hong Kong in second half of June
the end of 2013. Yu said he believed government measures to curb speculation in the property sector had worked and prices were now more sustainable. “I don’t agree there’s a bubble. Since the tightening measures in 2008, financial leverage of developers and individual investors has dropped significantly,” Yu said. Analysts said the latest land transaction prices have shown that the market is becoming more rational. “Land sales in first-tier cities weakened in April as housing prices softened. It’s important for developers to time and source the land purchase better because land cost is a big factor to determine margins,” said Kim Eng analyst Karen Kwan, based in Hong Kong. Kwan said developers in April were bidding on average 40 percent higher than the asking price at land auctions, compared to 80-100 percent above opening bids last year. Transaction prices in April were also 1 percent lower than the previous month. Reuters
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Asia Australia to boost resources exploration Australian government will continue its effort in making mineral and energy exploration in Australia more globally competitive and economically attractive, Minister for Industry Ian Macfalane said yesterday. Releasing the government’s interim response to the Productivity Commission Inquiry Report into Mineral and Energy Resource Exploration, Macfarlane said the government would work with the States and Northern Territory on implementing the report’ s recommendations. The commission made 22 recommendations to increase the efficiency and effectiveness of exploration approvals and processes and reduce costs associated with government processes and regulatory duplication.
JGBs steady as BOJ purchases underpin market Japanese government bond prices were steady yesterday, underpinned by the Bank of Japan’s purchases under its massive asset buying programme. Besides the central bank’s buying, cash activity was limited to transactions among dealers, traders said. The BOJ offered to buy 170 billion yen (US$1.67 billion) in JGBs maturing beyond 10 years in addition to 250 billion yen in the 3-year to 5-year zone. The BOJ did not reduce its purchase amount in the super long zone as some investors had expected.
Philippine sees annual inflation rise
The Philippine central bank expects annual inflation in May to be anywhere between 3.9 and 4.7 percent, with the main price pressure in the month likely coming from higher food costs, its governor said yesterday. Annual headline inflation in April was 4.1 percent, slightly faster than the market consensus on higher food and utility costs. The forecast for May takes into account higher rice and sugar prices, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said in a mobile text message to reporters. He also said these could be offset by lower petroleum costs and electricity rates.
NZ business confidence tumbles New Zealand business confidence slid to its lowest level in seven months in May, as higher interest rates, softer commodity prices, and a strong exchange rate depressed sentiment, an ANZ Bank survey showed yesterday. The survey’s headline measure of sentiment showed a net 53.5 percent of respondents expected the economy to improve over the year ahead, from a net 64.8 percent in April. The monthly business outlook poll showed a net 51 percent of companies expect their own business to grow in the next 12 months, from 52.5 percent.
Stockland lifts Australand takeover bid Australian property group Stockland Corp Ltd said yesterday it was increasing its takeover offer for smaller rival Australand to A$2.52 billion (US$2.33 billion). Stockland’s revised all-scrip offer came a month after Australand rejected its A$1.95 billion offer as undervalued.
Japanese claim for Russian gas pipeline The shutdown of Japan’s nuclear reactors after the 2011 Fukushima disaster has spurred renewed interest in the Russia-Japan pipeline link
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apanese lawmakers are reviving efforts for a 600 billion yen (US$5.9 billion) natural gas pipeline from Russia, which last week signed a supply deal with China, to cut energy costs after the Fukushima nuclear disaster. A group of 33 lawmakers is backing the 1,350-kilometer pipeline between Russia’s Sakhalin Island and Japan’s Ibaraki prefecture, northeast of Tokyo, Naokazu Takemoto, the secretary general of the group, said in an interview on May 23. He plans to propose the project to Prime Minister Shinzo Abe as early as June so it’s on the agenda when Russian President Vladimir Putin visits in autumn, he said. The shutdown of Japan’s nuclear reactors after the 2011 Fukushima disaster has spurred renewed interest in the Russia-Japan pipeline link, which has been discussed for more than a decade, Takemoto said. The effort also highlights Russia’s expanding role as a energy supplier to Asia after the country signed a US$400 billion deal last week to sell China 38 billion cubic meters of gas annually for 30 years. Japan spent a record 7 trillion yen last year on liquefied natural gas imports, more than double the cost three years ago, according to the Ministry of Finance. The country could lower its energy bill by getting gas directly by pipeline rather than more-expensive LNG, which is shipped by tankers, Takemoto said. “Building an LNG plant requires a lot of money and makes the per unit cost of gas very expensive,” said Takemoto, who serves in the House
Pipes terminal to receive liquefied natural gas near Shizuoka, Japan, Mount Fuji in the background
of Representatives as a member of the ruling Liberal Democratic Party. “Japan would be better off” buying gas via pipeline, he said.
China deal The Russia-China accord for gas supplies by pipeline from eastern Siberia was probably reached at a price of US$10.50 to US$11 per million British thermal units, Bank of America Corp. said in a report yesterday. That compares with a current spot price of US$13.30 for liquefied natural gas cargoes delivered to Northeast Asia. Spot LNG prices are at a 19-month low after falling from a record of US$19.70
Russia wants to extend its market. It made a deal with China, and Japan is the next target. Then, Russia doesn’t have to rely on Europe Osamu Fujisawa independent energy economist
NZ dollar eases on low business sentiment The kiwi is sensitive to news about the economically vital dairy sector
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he New Zealand dollar eased yesterday after a private survey showed a sharp slide in business sentiment, while the Australian dollar held steady.
Reserve Bank of New Zealand headquarters in Wellington
The New Zealand dollar softened to US$0.8546 from US$0.8564 earlier, after New Zealand business confidence slid to its lowest in seven months in May. Earlier, the kiwi had perked up to a high of US$0.8572 even as dairy giant
Fonterra cut its initial forecast pay-out for the 2014/15 season by 17 percent on the back of falling global prices. The kiwi is sensitive to news about the economically vital dairy sector, but the forecast pay-out of NZ$7.00 a kilo
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk Alex Lee, Luciana Leitão, Michael Armstrong, Sara Farr, Stephanie Lai, Tony Lai International editor Óscar Guijarro GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso WEB & IT Janne Louhikari interns Cynthia Wong, Yvonne Wong Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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Asia in February, according to data compiled by Bloomberg from New York-based Energy Intelligence Group. While Japan could buy Russian gas at a cheaper price similar to the China deal if the pipeline is built, Russia would also benefit from the project, said Osamu Fujisawa, a Tokyo-based independent energy economist. “Russia wants to extend its market,” Fujisawa said in a phone interview today. “It made a deal with China, and Japan is the next target. Then, Russia doesn’t have to rely on Europe,” which is trying to reduce dependence on the country’s gas supplies amid the crisis in Ukraine, he said.
Post-Fukushima The proposed Russia-Japan pipeline is designed to transport as much as 20 billion cubic meters of natural gas annually, according to proposals by the group consisting of lawmakers from ruling parties LDP and New Komeito. That’s equivalent to about 15 million metric tons of LNG, or 17 percent of Japan’s imports. All of Japan’s 48 reactors are shut for safety checks after the magnitude-9 quake and ensuing tsunami in March 2011 caused a triple meltdown at Tokyo Electric Power Co.’s Fukushima DaiIchi plant, shaking public confidence in nuclear energy. Power companies have applied for the Nuclear Regulation Authority’s safety review of 18 reactors. About half of Japan’s reactors may never be restarted because of the nation’s tougher safety standards, Yuji Nishiyama, a Tokyo-based analyst with JPMorgan Securities Japan Co., said in a May 26 phone interview. That means the utilities would have to keep importing a large amount of natural gas to fill the gap left by the shutdown, he said. Japan, the world’s biggest LNG importer, bought 87.49 million metric tons of the fuel in 2013, according to finance ministry data. Russia accounted for 9.8 percent of the country’s gas and was the fourth-biggest supplier after Australia, Qatar and Malaysia. Bloomberg News
Baby boomer bulls cap Aussie yields Bond markets in both the U.S. and Australia have rallied this year
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effrey Gundlach’s prediction that retiring baby boomers will hold down U.S. Treasury yields is being echoed in Australia’s sovereign bond market. The post-war bulge in Australian births occurred from 1946 to 1961, according to the government, so the earliest offspring turn 68 this year. People 65 years and older will comprise 22 percent of the population in 2061, versus 14 percent in 2012, the Bureau of Statistics estimates using current trends. The shift can slow the economy as the workforce shrinks and retirees seek safety in government debt instead of equities or property. “We’ve got the same situation as the U.S.,” said Roger Bridges, the head of fixed income in Sydney at Tyndall Investment Management Ltd., which oversees the equivalent of US$21.2 billion. “It’s a general headwind for economies going forward. People expecting a massive selloff in bonds will not get it.” Bond markets in both the U.S. and Australia have rallied this year even as the pace of economic growth has allowed the Federal Reserve to trim its bond purchases and the Reserve Bank of Australia to stop cutting interest rates. Gundlach, who oversees more than US$47 billion as
3.6 pct 2014 Australian government bonds gain
of milk solids was still the fourth highest. “The market had expected a lower number ... so when the number came out at NZ$7 there was a bit of a relief rally that it was not as bad as some had feared,” said BNZ senior strategist Kymberly Martin. The kiwi was seen staying within recent ranges, supported at US$0.8530, and more substantially at $0.8517, with resistance at US$0.8600. The NZ dollar also gave ground to the yen, falling 0.3 percent to 87.04, and the Aussie, which gained 0.2 percent to NZ$1.0833. The Australian dollar held firm at US$0.9255, having touched a oneweek high of US$0.9278 overnight. It continued to gradually recover from this month’s fall from above 94 U.S. cents. It has shed 0.3 percent so far in May. It found some support following a surprising rise of 0.3 percent in Australian construction done against forecasts of a 0.2 percent fall. Ray Attrill, strategist at National Australia Bank, said the reading will come as no surprise to the Reserve Bank of Australia. “They are already suggesting that non-mining capex outside housing construction is not showing signs of life.” He said the results could move the Aussie although he added it was more likely to react to U.S. data such as inflation. Support for the Aussie is seen around US$0.9200, then US$0.9150, with resistance at US$0.9278. Reuters
the co-founder and chief executive officer of DoubleLine Capital LP, said the demographic shift will help keep benchmark U.S. yields down for years. Australian government bonds have gained 3.6 percent this year and Treasuries advanced 3.3 percent, based on Bloomberg World Bond Indexes. Ten-year yields in the South Pacific nation have fallen to 3.71 percent from 4.24 percent at the end of 2013 and touched 3.65 percent on May 21, the least since August 6.
Economists surprised Th e b o n d r a l l y s u r p r i s e d economists, who began 2014 predicting the yield would rise to 4.64 percent by December 31, based on Bloomberg surveys. The latest projection is still for an increase to 4.52 percent. Gundlach, the fixed-income manager whose mutual fund beat 97 percent of its rivals the past three years, said the aging population is going to keep U.S. yields from surging higher, in an interview this month with Bloomberg’s Tom Keene. Benchmark U.S. 10-year yields have fallen to 2.51 percent from 3.03 percent at the close of last year.
Bond correlation Australian and U.S. bonds move together, with a correlation of 0.87 for securities due in 10 years and longer, according to data compiled by Bloomberg. A figure of 1 means they move in tandem. Bond yields have fallen even as a Bloomberg survey of banks and securities companies projects Australia’s economic growth will quicken to 2.8 percent this year from 2.43 percent in 2013. The Reserve Bank of Australia fostered both the debt-market rally
Thai factory output falls again Growth forecasts for Thailand have been cut steadily since the unrest began in November
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hailand’s factory output dropped for a 13th straight month in April, underscoring the damage political unrest has caused and the tough job the new military government faces reviving an economy that shrank in the first quarter. The decline was less than forecast. Industrial output in April was 3.9 percent lower than a year earlier, the Industry Ministry said. That compared with March’s revised drop of 10.5 and a 6.4 percent decline seen in a Reuters poll. In April, overall capacity utilisation at factories was 56.6 percent, compared with 64.3 percent in March. The army seized control of the country on May 22, saying it would restore order after nearly seven months of anti-government protests that have hurt confidence, domestic demand, tourism and delayed public works. The junta is moving to tackle
economic problems to get Southeast Asia’s second biggest economy moving. The economy contracted 2.1 percent in the first quarter from the previous three months, and some economists feel a recession is unavoidable. The Commerce Ministry later on Wednesday will release customscleared trade data for April, expected to show a small annual rise in exports and a further slump in imports. Tourism, which accounts for about 10 percent of the economy, has taken a hit. Consumer confidence is at a 12-year low, weaker than it had been even after the bad floods of late 2011, violent political unrest in 2010 and a deadly tsunami in late 2004. This month, the Federation of Thai Industries (FTI) said its index of industrial confidence hit a 58-month low in April. Growth forecasts for Thailand have been cut steadily since the
This Government poster was displayed between 1949 and 1951 for immigration purposes and reflects the feeling of prosperity that led to the post-war baby boom
and the economy by cutting its main interest rate to a record low of 2.5 percent last year and keeping it there. Governor Glenn Stevens said this month that a period of stable interest rates was likely “the most prudent course.” One result has been a surge in the nation’s housing market, spurring a record monthly advance in home prices for capital cities in March. The opposite will happen in the coming years as baby boomers retire, said Catherine Cashmore, a real estate agent and analyst in Melbourne who writes about property for the Macro Business website. Aging boomers hold about 50 percent of Australia’s realestate wealth, she said in a telephone interview May 23. “The fear has been that we’re going to have a tsunami of people that are downsizing,” Cashmore said. “If current policy continues, the risk of a housing crash is inevitable. At some point prices will get too high for productivity to be able to sustain it.” Bloomberg News
unrest began in November. But some economists think the outlook may improve under the military council that this week started paying money owed to rice farmers. The council said it will speed up spending and that a new state budget will be on time. “Its actions on the rice-buying scheme, the budget and investment plans should bode well for the economic outlook, at least in the short term,” said Thammarat Kittisiripat, an economist with TMB Bank. Reuters
KEY POINTS April factory output -3.9 pct y/y vs -6.4 pct in Reuters poll Annual output falls for 13th consecutive month Investment, consumption hurt by prolonged political unrest January-April output -6.36 pct y/y
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International GE pledges 1,000 jobs in Alstom deal U.S. conglomerate General Electric is committed to creating 1,000 industrial jobs in France within three years to seal a deal to take over Alstom’s power arm, a source close to the talks told Reuters. GE’s Chief Executive Jeff Immelt himself made the commitment when he met French President Francois Hollande earlier yesterday, the source said. GE currently employs around 10,000 workers in France, and Alstom’s power business around 9,000.
Eurozone loans to private sector still contracting Loans to the private sector in the euro area -a gauge of economic health- are still contracting, but at a slower rate than before, European Central Bank data showed yesterday. The volume of loans to private businesses and households declined by 1.8 percent in April, after falling by 2.2 percent the previous month, the ECB said in a statement. At the same time, the overall Eurozone money supply grew by just 0.8 percent in April, down from growth of 1.0 percent in March.
Seadrill turns gloomy due to spending cut The world’s biggest offshore rig firm by market capitalisation has turned gloomy about prospects for the global drilling market and expects falling charter rates as oil firms cut capital spending to protect margins. Oil firms have for several months been cutting costs following a decade-long surge in investments. But Seadrill, the crown jewel in shipping tycoon John Fredriksen’s business empire, had been more upbeat than peers due to its modern fleet and its specialisation in high-demand segments, such as drilling in deep and ultra-deepwater.
German unemployment rises as growth slows Business confidence decreased this month on concern growth will slow Jana Randow
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erman unemployment unexpectedly increased for the first time in six months amid signs of a slowdown in Europe’s largest economy. The number of people out of work rose a seasonally adjusted 23,937 to 2.905 million in May, the Nurembergbased Federal Labour Agency said today. Economists forecast a decline of 15,000, according to the median of 31 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent, the lowest level in more than two decades. German business confidence decreased this month on concern growth will slow as the 18-nation euro area, the country’s biggest export market, struggles to sustain its recovery. The Bundesbank has said the nation’s economic expansion this quarter is unlikely to match the pace of the first three months, which was boosted by unusually warm weather. “The mild winter, which had flattered German economic data a bit in the first quarter with strong gross domestic product growth and jobmarket gains, is now striking back,” said Christian Schulz, senior economist at Berenberg Bank in London. “Germany’s labor market remains on a strong positive trend despite the slight May setback, however.” The German economy expanded 0.8 percent in the first quarter, up from 0.4 percent in the previous three months, after the warmer weather boosted construction and domestic spending. The number of unemployed in May rose by 16,018 in western Germany and 7,919 in the eastern part of the country, today’s report showed. The
European Central Bank President Mario Draghi identified joblessness across the region this week as “a slowly consolidating recovery”
total number of jobless declined by 24,798 the previous month. “We have to acknowledge that the peak of economic momentum is behind us,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “We’ve achieved a lot and it’ll be difficult to continue at the same speed. But at the moment, everything’s still fine economically speaking.” Germany’s labour market is still at odds with those of its peers in Europe’s south and the currency bloc as a whole. More than one in four people in the Spanish workforce is without a job, and unemployment in the euro area was 11.8 percent in March, just below an all-time high.
Bank lending Joblessness across the region is one sign of what European Central Bank
President Mario Draghi identified this week as “a slowly consolidating recovery” that isn’t strong enough to boost prices to a level policy makers are comfortable with. Inflation has remained below 1 percent since October, compared with the central bank’s goal of just under 2 percent. ECB data today showed bank lending in the euro area shrank 1.8 percent in April from a year earlier, the 24th straight month of declines. Lending increased 0.2 percent from March. The growth in M3 money supply slowed to 0.8 percent from 1 percent. The central bank is working on a package of measures to fuel price growth and stimulate the economy that may include a negative deposit rate, liquidity measures or asset purchases. Officials will gather in Frankfurt on June 5 for their next policy meeting. Bloomberg News
UK probes GSK after foreign bribery claims Britain’s fraud office has launched a formal criminal investigation into GlaxoSmithKline , posing a new challenge to the drug maker, which already faces claims of bribery in China and four other countries. The Serious Fraud Office (SFO) said that its director had “opened a criminal investigation into the commercial practices of GlaxoSmithKline and its subsidiaries”, confirming an earlier brief statement from the company. The SFO action comes less than two weeks after Chinese police announced on May 14 that they had charged the former British boss of GSK’s China business and other colleagues with corruption.
BP loses bid to halt Gulf oil spill payment A U.S. court of appeals rejected on Tuesday the request of Britain’s oil giant BP to extend a halt of disputed payments to businesses claiming damages in the 2010 Gulf of Mexico oil spill. The Court of Appeals in New Orleans earlier rejected to reconsider its previous ruling that businesses seeking money as part of the oil spill settlement need not prove they directly collect payments. In response, BP decided to take the case to the U.S. Supreme Court.
Ethiopia to delay WTO access Addis Ababa, with its strong state-interventionist policies, has one of sub-Saharan Africa’s fastest growing economies and its fifth biggest Binyam Tamene
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thiopia may delay plans to join the World Trade Organisation in 2015 if the country is required to liberalise its tightly regulated telecoms and banking industries sooner than it would like, the trade minister said. Kebede Chane told lawmakers that member countries had raised dozens of questions with Prime Minister Hailemariam Desalegn’s government, focusing on the time frame for opening up the service sector to international competition. Ethiopia’s fast-growing market of 90 million people has lured foreign investors from Sweden, China and Turkey to its manufacturing sector. But laws deny outside firms access to
areas viewed domestically as cashcows or politically sensitive. “A lot of issues are being raised regarding the service sector,” Kebede said in parliament, referring to the telecoms, banking and power industries. “We are being asked to clarify our timetable for privatising these sectors.” Addis Ababa, with its strong stateinterventionist policies, has one of sub-Saharan Africa’s fastest growing economies and its fifth biggest. But it has spurned the liberalising approach of other African markets to shield its infant private sector from foreign competition and to keep profits at home. Reuters revealed this week that
Ethiopia -once run by communistswas pushing the door ajar to outside investors by offering management of government-owned enterprises while leaving the state in full control. U.S. retail giant Walmart told Reuters Ethiopia offered a “compelling growth opportunity”. Other big brands are prising open the door in areas opened up by the government. Drinks giant Diageo DGE.L bought a brewery and fashion retailer Hennes & Mauritz makes garments in Ethiopia. Trade officials said last year that Unilever and Nestle were both sniffing around. However, Ethiopia has held onto control of its telecoms monopoly and kept foreigners out of retail and banking. A U.S. management consultancy firm this week announced its deal to run Ethiopia’s just-launched stateowned cash-and-carry chain, the first such concession in the retail sector. Kebede said Addis Ababa was under pressure to deepen reform to liberalise its service industries before the conclusion of its current five-year economic plan ending in 2015. The minister cited Asian powerhouse China, which he said took 50 years to accept membership into the global trading club. Reuters
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Opinion Business
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Leading reports from Asia’s best business newspapers
THE JAKARTA POST Publicly listed plantation firm PT Jaya Agra Wattie (JAWA) is targeting a new contract for exports to South Korea, despite a downward trend in rubber prices since the beginning of this year that has disrupted rubber producers’ sales. JAWA finance director Bambang S. Ibrahim told kontan.co.id that PT Haein Resources Co. Ltd., a Seoul-based company that engages in construction and agricultural equipment businesses has expressed an interest in importing natural rubber from JAWA. Bambang added that JAWA was not certain about when it would start exporting rubber to the South Korean company.
TAIPEI TIMES The score of economic monitoring indicators rose to its highest level in about three years, suggesting that the country’s economy is on track for a steady growth, the National Development Council said yesterday. The indicators score rose four points to 29 last month, from 25 points the previous month, on the back of higher year-on-year growth in stock prices, industrial production, exports and sales of trade and food services, according to a council report issued on Tuesday. As a result, the council’s index of monitoring indicators flashed “green” for the third month last month, the report showed.
THE STRAITs TIMES Rents for prime shops in Orchard Road remained firm in the first quarter this year but they could soften in the near future, property consultancy Savills said in a report yesterday. Prime retail space rent in the area was unchanged at US$34.60 per square foot per month on average in January through March from the previous three months, it said. However, the consultancy added that Orchard Road prime shop rents may “face difficulties in the near future”. This is because inflation and a manpower crunch will further increase the already high business costs.
PHILSTAR Economic gains being enjoyed by the Aquino administration will likely be sustained beyond 2016, Finance Secretary Cesar V. Purisima said in a statement. “The question in many people’s minds is whether the positive things happening in the Philippines at the moment can be sustained after this administration. The answer to this is a resounding yes,” he said. The Cabinet official trumpeted “significant increases” in the budget for infrastructure, education, and health services implemented during the administration’s first four years. Purisima noted that these investments would be best felt in the long-term.
Living Big Data Alex Pentland
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Professor of Media Arts and Sciences, and Director of the Media Lab Entrepreneurship Program, at MIT Media Lab
AMBRIDGE – Big data is made from the digital trail that we leave behind when we use credit cards, mobile phones, or the Web. Used carefully and accurately, these data give us unprecedented scope to understand our society, and improve the way we live and work. But what works in theory may not translate well in the real world, where complex human interactions cannot always be captured, even by the most sophisticated models. Big data requires us to experiment on a big scale. My own laboratory, for example, is building a Web site which, based on Google maps, uses society’s digital trail to map poverty, infant mortality, crime rates, changes in GDP, and other social indicators, neighbourhood by neighbourhood – all of which will be updated daily. This new capability allows viewers to see, for example, where government initiatives are working or failing. But, while such impressive visualization tools can dramatically enhance transparency and public knowledge, they are surprisingly limited when applied to solving society’s problems. One reason is that such rich streams of data encourage spurious correlations. Even the use of the normal scientific method
no longer works; given so many measurements, and so many more potential connections among what’s being measured, our standard statistical tools generate nonsensical results. Without knowing all possible alternatives, we cannot form a limited, testable set of clear hypotheses. And if we can no longer rely on laboratory experiments to test causality, we must test it in the real world, using massive volumes of real-time data. This involves moving beyond the closed, question-and-answer process typical of the lab, and applying our ideas in society, earlier and more frequently than ever before. To see how things work in reality, we must construct living laboratories – that is, communities willing to try new ways of doing things (to be blunt, to act as guinea pigs). An example of such a living lab is the “open data city,” which I launched with the city of Trento in Italy, along with Telecom Italia, Telefónica, the research university Fondazione Bruno Kessler, the Institute for Data Driven Design, and local companies. Importantly, this living lab has the approval and informed consent of all involved; they understand that they are participating in a gigantic experiment whose goal is to create a better way of living. One major challenge for a living lab is to protect
Even the use of the normal scientific method no longer works; given so many measurements, and so many more potential connections among what’s being measured, our standard statistical tools generate nonsensical results
individual privacy without diminishing the potential for better government. The Trento lab, for example, will pilot my proposed “New Deal on Data,” which gives users greater control over their personal data through trust-network software such as our open PDS (Personal Data Store) system. We hope
that the ability to share data safely, while protecting privacy, will encourage individuals, companies, and governments to communicate their ideas widely, and so increase productivity and creativity across the entire city. But the biggest difficulty in using big data to build a better society is being able to develop a human-scale, intuitive understanding of social physics. Although dense, continuous data and modern computation allow us to map many details about society, and to explain how communities might work, such raw mathematical models contain too many variables and complex relationships for most people to understand. What is needed is some kind of dialogue between human intuition and the compelling reality of big data – a dialogue that is currently absent from management and government systems. If big data is to be deployed effectively, people must be able to understand and interpret the relevant statistics. This calls for a new understanding of human behaviour and social dynamics that goes beyond traditional economic and political models. Only by developing the science and language of social physics will we be able to make a world of big data a world in which we want to live. The Project Syndicate 2014
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Closing BMW says China to be biggest electric car market WHO recommends China raise tobacco tax China will become the world’s largest market for electric vehicles as more charging infrastructure is built and the government promotes cleaner cars to cut pollution. China will reach that target in at most five years, said Karsten Engel, BMW’s China head. As part of the partnership, the State Grid will build public charging points at the former World Expo site, one of 46 such areas the city is targeting by the end of the year, according to Fan Ye, general manager of electric vehicles at State Grid Shanghai.
China should raise taxes on tobacco products to lower smoking rates and save lives, a World Health Organization (WHO) official said yesterday. “Policy makers should substantially increase taxes on tobacco, while ensuring that the increase is passed on to the retail price of tobacco products,” said Dr Bernhard Schwartlander, WHO Representative in China. “This is the single most effective measure authorities can take to reduce the death, disease, and economic harm tobacco is causing China’s society and economy,” he said. Earlier reports citing China’s health authorities said tobacco consumption kills some 1 million people in China each year.
Nike and Adidas play World Cup’s first economic match Adidas, which has long dominated the market for soccer boots, shirts and balls, is facing a fierce challenge from Nike, the world’s biggest sportswear company Emma Thomasson
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.S. sportswear group Nike is banking on its sponsorship of more of the world’s best-known soccer stars than Adidas in its battle to overtake the German firm as the sport’s top-selling brand at its World Cup this summer. Nike has signed six of the 10 most marketable footballers in the world, to just three for Adidas and one for smaller German brand Puma, according to a new ranking by sports marketing research group Repucom published yesterday. Portugal’s Cristiano Ronaldo, sponsored by Nike, tops the Repucom ranking, with almost 84 percent of people around the world saying they recognise the Real Madrid striker, helping to sell over one million shirts with his name on the back in 2013. In second place is Lionel Messi of Argentina, front man for the Adidas campaign who scores 76 percent global awareness according to
Repucom - his marketability little dented by a mixed run of form for Barcelona this season. The appeal of the extrovert Ronaldo, who took the crown as the world’s best player from Messi in January, is helped by his use of Twitter, where he has 26 million followers to just two million for the more retiring Argentine. Ronaldo probably helps sell shirts even when he isn’t wearing one - he poses nude on the cover of the latest Spanish Vogue with his model girlfriend Irina Shayk - though the branding benefits are shared as Adidas sponsors Real Madrid. Nike tries to do just that with a glitzy ad featuring Ronaldo -and Shayk- in which boys playing football in the local park end up scoring a penalty in a huge stadium against their heroes, including others from the Repucom top 10 such as England’s Wayne Rooney and Brazil’s Neymar. Adidas has retaliated with a
new ad launched last Saturday which shows Messi dreaming about his rivals such as Bastian Schweinsteiger of Germany, Luis Suarez of Uruguay and Dani Alves of Brazil, none of whom feature in the Repucom top ranking.
Adidas on the run Adidas, which has long dominated the market for soccer boots, shirts and balls, is facing a fierce challenge from Nike, the world’s biggest sportswear company that has only been a serious player in soccer for the last 20 years. While Adidas has supplied the match ball for the World Cup since 1970 and has extended its sponsorship of the competition to 2030, Nike is for the first time kitting out more teams - 10 out of 32 finalists - including hosts and favourites Brazil. “Nike’s sponsorship of the host’s national football team alone gives it a
massive competitive edge,” said Euromonitor analyst Magdalena Kondej, predicting it would allow the U.S. firm to extend its share of the Brazilian sportswear market from 12.1 percent now, with Adidas currently only on 5.5 percent. Adidas, which is supplying nine teams including reigning champions Spain, as well as Argentina and Germany, expects to make a record 2 billion euros (US$2.7 billion) from football this year, still exceeding Nike’s US$2 billion of soccer turnover. “Football is the DNA of our company. We want to clearly show that we are number one in football,” Adidas Chief Executive Herbert Hainer told journalists last week. Hainer acknowledged that Adidas faced a “head-to-head” race with Nike in the soccer shoe market, but predicted Adidas would still sell 2 million pairs of special World Cup boots and significantly more balls than at the last World
Cup in 2010. Nike believes it has already overtaken Adidas in boots, including in its rival’s home market Germany. While Adidas will be supplying the German kit, many of the country’s top players now wear Nike boots, with nine members of the team that started against Poland this month sporting Nike. However, Hainer dismissed suggestions Adidas had not signed the right stars, saying 14 of the 27 members of the German squad would be wearing boots with Adidas’ trademark three stripes. Meanwhile, Puma, whose only player in the Repucom top 10 is former France striker Thierry Henry, is resorting to a stunt to attract attention: it has persuaded players such as Italy’s maverick Mario Balotelli, Marco Reus of Germany and Cesc Fabregas of Spain to wear one pink and one blue “Tricks” boot. Reuters
Tencent US$1 billion game shows the path
Beijing urges local governments to spend
Brunei hosts special ASEAN Digital Broadcasting meeting
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he firm wants to conquer half a billion Chinese smartphones. The online game CrossFire shows how the company plans to do it. Lacking enough home-grown titles to satisfy the appetites of China’s players, Tencent imported the combat survival game from South Korea in 2008. Last year, CrossFire raked in US$957 million, making it the world’s top-grossing free-to-play video game, according to SuperData Research Inc. It’s one of several foreign-made games, including League of Legends and Dungeon Fighter Online, that helped make Tencent Asia’s largest Internet company. Now, as China’s gamers go mobile, Tencent is looking everywhere from the U.S. to Japan for content that might fend off challenges from rivals such as Alibaba Group Holding Ltd. and Baidu Inc. In recent months, Tencent agreed to buy a US$500 million stake in Seoul-based mobile game developer CJ Games and purchased exclusive rights to the Chinese version of Candy Crush Saga from King Digital Entertainment Plc., of Dublin. Bloomberg News
hina urged local governments yesterday to quicken the pace of budgetary spending to guarantee construction of key projects and boost the slowing economy. The finance ministry also said local fiscal agencies must finish allocating 2014 budget money by the end of June, or risk the money being called back by the central government by the end of September. “The move is to further push ahead economic structural reforms, improve people’s livelihood and make the fiscal spending an important boost to the economy,” the ministry said in a statement on its website. It also said the central government would consider cutting next year’s budget quota for those local departments which failed to spend the amount allocated for this year. “We noticed problems that the fiscal payment is relatively slow, with large amounts of budget money being carried over to next year, which leaves a big amount of treasury deposits in the coffers,” it added. Reuters
he country chaired yesterday the special ASEAN Digital Broadcasting (ADB) meeting as it serves as a platform for ASEAN member states to share knowledge and experiences, and formulate plans to facilitate the adoption and implementation of digital terrestrial broadcasting. Haji Mohd Rozan, permanent secretary (media and cabinet) at the Prime Minister’s Office of Brunei said in his opening remark that media can play an important and catalytic role in creating a meaningful ASEAN Community where public broadcasters have kept the audiences informed, bonding the communities and shaping culture and identity. He pointed out that the information sector has helped ASEAN to connect each other beyond the borderlines, bride cultural gaps and articulate the benefits of regional integration in the road towards the establishment of the ASEAN Community in 2015. The meeting, co-chaired with Singapore, was attended by delegates from ASEAN member states including the host country Brunei, Singapore, Malaysia, Myanmar, the Philippines, Vietnam and the ASEAN Secretariat. Xinhua