MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 552 Tuesday June 3, 2014 Year III
Golden goose gamble O
ur neighbouring SAR is mulling a cap on the number of Mainland Chinese visitors. Macau tourism experts are wary of following in their footsteps for fear of damaging the economy. It depends too heavily on tourism, thus SMEs would suffer most, they say. Would the proposed cut in Mainland Chinese visitors to Hong Kong benefit Macau? Debateable, say the experts
www.macaubusinessdaily.com
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Pachinko, perhaps
3
Been here before
Japanese pachinko hall operator Dynam Japan Holdings Co Ltd is eyeing Macau. Up to 100 of the ‘next generation pachinko machines’ await the government’s nod. They would be installed in a new hotel scheduled to open in September
Less people want to buy a home as prices increase. But they have “no other option,” economist Albano Martins tells Business Daily. Fewer sales at higher prices harks back to the 1994-2003 property market. But the bubble is not about to burst any time soon, he says
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HSI - Movers May 30
Name
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Catching up A choppy year ahead and a confirmed weak May. The casino industry has to pump revenue growth in June to push up shares. Investors have high expectations for the second quarter
%Day
Galaxy Entertainme
4.65
China Unicom HK
2.47
Want Want China H
2.08
New World Develop
1.95
Bank of China Ltd
1.93
COSCO Pacific Ltd
-1.54
China Resources Ent
-1.58
Cathay Pacific Airwa
-1.67
CNOOC Ltd
-2.06
Belle International
-2.53
Source: Bloomberg
I SSN 2226-8294
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New poultry import rules
Fuelling demand
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Chinese manufacturing’s positive figures are galvanising oil prices. Every oil market strengthened on the news that oil demand in China is on the up
Live poultry sales resumed yesterday. Macau underwent a second round of import bans following the detection of H7-type avian flu virus in a sample collected at a local market. New rules have been put in place
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June 3, 2014
Macau
Albano Martins: “Real estate bubble entering advanced phase” The housing market is edging ever closer to implosion as there are less sales but prices continue to rise, the economist told Business Daily. The rental market is a safer bet at this point in time Alex Lee
alex.lee@macaubusinessdaily.com
“W
hen a real estate bubble enters an advanced phase before bursting, prices go up even when sales are going down. But this does not mean the bubble will burst soon,” economist Albano Martins told Business Daily, in explaining the latest data from the housing market. According to the Portuguese news agency Lusa, in the first quarter of the year the number of house sales dropped 41.9 percent to 2,906 housing units. Nevertheless, prices increased by 24.5 percent in the same period compared to the first four months of last year. “The closer the bursting point of the market is, the more people will pay to join it,” he added. “As prices increase, less people are interested in entering the real estate market. Many only do it during a phase such as this occurring in Macau because they have no other option,” Mr. Martins explained. The present situation in the real estate market is similar to the one from 1994 to
House owners will not drop the price of houses unless they have no option. Otherwise, they will lose money 2003. “In that time, prices went up to a point that in 2003 there were almost no transactions in the housing market,” he recalls. “The low point of the market was only inverted when the gaming industry was liberalised and more people, that were going to work in casinos, entered the market and were willing to buy houses,” the economist recalled. Mr Martins, however, does not anticipate a drop in the price of housing
any time soon, saying, “House owners will not drop the price of houses unless they have no option. Otherwise, they will lose money,” he stated. Asked if sales drops can be justified by house owners preferring to rent instead of selling, he said it could be an interpretation of the data. “In theory that may be what’s happening. The house rental market has bigger profit margins and it’s seen as more stable. So, in some cases people will
Albano Martins, economist prefer to rent their houses instead of selling them,” he said. For the economist, the rental market will continue to expand because of the new wave of casinos that is going to open on the Cotai Strip. “The market will continue to grow because more casinos are being built. Around 50,000 people will join the market looking for places to live,” he said.
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June 3, 2014
Macau
Welcome mat should remain, say tourism experts As Hong Kong discusses the possibility of cutting the number of Mainland Chinese visiting the city, tourist experts counsel Business Daily that Macau has no need to adopt a similar policy Alex Lee
alex.lee@macaubusinessdaily.com
E
very year, around 40 million Mainland Chinese visit Hong Kong and it is projected that the number will increase to 100 million annually by 2020. To deal with its population’s perception that the quality of life is decreasing due to the number of visitors, the Hong Kong Executive Government is studying the possibility of controlling the influx. The debate about the number of tourists entering Macau also took shape last year, when the leader of the Executive Government, Chui Sai On, said that according to the results of a study commissioned by the Macau Government Tourist Office the city’s capacity to receive tourists was 81,000 per day, a figure that implies a capacity of 29.6 million a year. However, last year the city received 29.3 million tourists and the number went up by 10 percent in the first quarter of the year. If this trend continues in 2014 the general capacity identified by the study will be overwhelmed. Business Daily talked to tourism experts Edmund Loi Hoi Ngan, lecturer at the Social, Economic and Public Policy Research Centre at Macau Polytechnic Institute, and Andy Wu Keng Kuong, president of the Macau Travel
Industry Council, about the possibility of adopting similar measures here. “Macau has no need to seek any initiative to impose visa restrictions on Mainland visitors. We’re different from Hong Kong on the issue because the travel pattern and its pressure on the city is different in both places: visitors tend to stay for two days or more in Hong Kong but they only spend one day or so here,” Mr. Wu said. Mr. Loi does not believe that the Macau Government will be interested in taking such measures: “The two SARs are different: the Hong Kong administration is always more active in forming policy and seeks a methodology for it. Macau’s economy is very dependent upon tourism; without a detailed report on the city’s capacity to receive visitors, I think the MSAR Government has no will and no capacity to impose any further restrictions on controlling the number of Mainland visitors”. If such measures were to be adopted, Mr. Wu believes that SMEs would be the most affected. “The SMEs here, such as the restaurants and retailers on streets, will suffer much more than the casinos because the latter still have their own way to generate client sources,” he said.
However, all industries in Macau are likely to be affected. Last month, when it came to light that a 20 percent cut in the number of visitors to Hong Kong was being mooted, most property and retail investors’ shares fell steeply.
HK policy impact on Macau economy The intention of Hong Kong to tighten terms on the Individual Visit Scheme (IVS) policy for Mainland
visitors may have an impact on the number of visitors to Macau. “At the moment, it’s still hard to pinpoint whether there will be more or less Mainland visitors heading for Macau if it does not impose any visa restrictions while Hong Kong does. The travel purpose of the [Mainland] visitors is also quite different for Hong Kong and Macau, as the former provides more diversified travel attractions, MICE events and has more [tourism] spots for family visitors,” Mr. Loi said. “But
if Hong Kong really tightens the terms of the IVS scheme to restrict Mainland visitors from going there, I’d say that Macau’s image as a more friendly tourism city will stand out stronger to these visitors,” he said. This opinion is shared by Mr. Wu: “If Hong Kong is to impose such a measure, it’s still hard to say that it’d prompt a [Mainland] visitor boost to Macau because these two cities present two different tourism markets.” with Stephanie Lai
Live poultry trade resumed: New import rule The quarantine authorities have enacted a new policy that imposes a partial ban on live poultry imports from the mainland once avian flu virus is detected Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he sales of live poultry resumed yesterday in local wet markets after the city had undergone the second round of an import ban for more than a month following the detection of an H7-type avian flu virus from an environmental sample collected from Patane wet market on April 18. A batch of 14,400 live chickens and 2,000 pigeons were imported to Macau on June 1 (Sunday) with no avian flu virus detected, the quarantine authority, Civic and Municipal Affairs Bureau, announced on Sunday. The resumed imports amount was more than the daily average of about 7,000 to 8,000 live poultry, a decision reached by the local vendors
and importer to meet a big feasting demand for live chickens on the traditional Chinese holiday of Tuen Ng Festival celebrated yesterday, the Bureau told Business Daily. The authority suspended imports of live poultry from mainland China starting on April 19 following the discovery of an H7-type virus in one of the poultry vendors’ area in the Patane wet market. The import ban, which was originally meant to last for only 21 days, only ended Sunday. “Business today was quite good,” secretary-general of Macau Poultry Dealers Association Mr. Un Hon Sang told us yesterday. “We expect that the sales of live poultry will pick up
well and resume to normal as before.” Accompanying the resumption of sales is a new policy regarding the live poultry import rule: the Bureau announced over the weekend that any detection of a positive H5 or H7-type avian flu virus from environmental samples collected from local wet markets, shops or wholesale markets - having once confirmed its origin is from live poultry - will result in the order that the breeding farm that provided that particular poultry would be banned from exporting to Macau until the quarantine units in both the mainland and Macau confirm that the farm is fit to supply live poultry again; exports from other breeding farms will also be suspended
for three days while the venues are sterilised before resuming trade. “The new policy is better than the 21-day import ban against all poultry farms imposed previously,” said Mr. Un, “This could help narrow our losses whenever avian virus strikes.” Macau imposed its first 21-day live poultry import ban on March 13, following the detection of the H7type avian virus in a batch of 1,000 live chickens in Nam Yue wholesale market.The detection has resulted in the culling of altogether 7,500 live poultry remaining at the wholesale market. According to the Health Bureau, no persons in the city have been infected with the H7-type avian virus thus far.
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June 3, 2014
Macau SO - SPONSORED FEATURE
Mission accomplished
A
gain, Macau has been a great host; this time, of the 2014 Special Olympics Golf Masters. Some 16 teams from 11 different countries and Special Administrative Regions gave their all on the Caesars Golf Course from May 26th to 31st. A total of 67 athletes and coaches were accompanied by 41 guardian players in the three-day golf tournament. The Special Olympics Golf Masters is the only international competition in the world that gives mentally challenged golfers the opportunity to participate at Beginner Level 1 & 2 in this sport. Its unique format – in which Special Olympics athletes meet regular golfers – serves as a perfect example of how mentally challenged players can be easily integrated and accepted in modern society. The interaction and communication on and off the golf course was again the major concern of the event organisers – the local Charity Association of Macau Business Readers. A full week packed with joy, happiness, love and hope saw a great number of local individuals and corporations getting involved. Following the arrival of teams from China, Chinese Taipei, India and Bharat, Hong Kong, Macau, Malaysia, South Africa, South Korea, Spain, South Africa and Zimbabwe on Monday, the Special Olympics delegation was whisked off on a World Heritage Tour of Macau on Tuesday, May 27th. But that was not the most exciting part of it: after a couple of hours of sightseeing, teams
THERE ARE THINGS WE DON’T DO
were treated to the premiere of a documentary entitled ‘Zero Handicap’ in the classic Teatro Clementina Leitão Ho Brito Theatre. This documentary - directed and produced by Gremlin Productions, with voice-over by English for Asia - was filmed last year during the Special Olympics 2013. The involvement of Tali Kornhauser - a renowned artist and Vice President of the Special Olympics Israel - made this event not only a sport but a cultural exchange programme. Before and after the three-day golf competition on the perfectly prepared greens of Caesars Golf Macau the Special Olympics athletes were invited to paint various canvasses in the garden of Westin Resort Macau, creating a wish tree (where dreams, hopes, feelings and wishes were featured on greeting cards and hung on a tree). A donated sculpture - an item from MGM Macau’s Biennial of the Lions symbolising ‘strength’ and ‘courage’ in Europe, and ‘prosperity’ and ‘protection’ while in China – perfectly fit into this event, and the Special Olympics delegation were invited to paint and design the lion sculpture. Blessed by great weather, the golfers enjoyed the manicured greens and fairways of Caesars Golf Macau where the Guardianship again was the pivotal concept, employed to guide, teach and encourage the Special Olympics athletes in order to improve their skills and ensure a great time. A primary concern of the organisers was not to establish yet another
golf competition. The courage and commitment to take such long trips and compete in Macau made everyone a winner already – thus, the Special Olympics Golf Masters has to be considered a high quality training camp. Level 1 saw most of the athletes in an individual skills test to evaluate their level in the short and long putt, chipping and pitching, iron and wood shots on the driving range. Best Performance trophies were landed by Huang Wei Han from Chinese Taipei in 1st position, followed by Kim Sun Young (South Korea) and Kim Doo Hyun (South Korea). Level 2 competition was the tournament’s main event – a tworound 9 hole play in which a guardian player takes two Special Olympics golfers around the course, advising on club choice, giving direction and adjusting the athletes’ play. With the sponsorship of a brand new Nike golf club set, individuals could qualify to become such a guardian player. This specific programme was introduced in 2012, with golf clubs then taken home by the athletes; this, in turn, helped, and still helps, to develop golf in the Asia Pacific region within the Special Olympics programmes – attracting new teams to embark upon the journey to Macau with new players and teams every year. Two rounds of 9 holes Best Performance trophies were handed over to Team India in 1st, Zimbabwe in Runner-up position and Chinese Taipei in third. Again, the Special Olympics Golf
BUT WE DO•••
Masters in Macau saw some of the finest athletes in Level 5. Three-time Special Olympics Champion Thomas Lugg from South Africa was top seated but due to his zero-handicap he missed the Best Performance trophy by just 2 points after two rounds of 18 holes in Stableford format. South Korean Kim Hyung Hwan lifted the trophy with 62 points, followed by Thomas Lugg on 60 points and Jo Won Ki (59 points). This year the event organisers invited sponsors, partners and friends to a special challenge on the last day of the event – and it turned out to be a great success. Top Special Olympics golfers introduced golf to novices and non-regular players. MGM China’s CEO and Executive Director Grant Bowie enjoyed a personal lesson with Special Olympics golf champion Thomas Lugg. But all athletes had a blast in this particular set up as they were able to ‘show off’ their skills, skills that took all the event guests by surprise as they came to recognise what professional levels these special athletes have reached. With 155 guests attending the prize-giving dinner at The Westin the event rounded off perfectly. The artwork (80 canvasses) created throughout the whole event week – forming a huge billboard painting – were separated and personally given by the athletes to the sponsors and new friends they had made in Macau. A great conclusion to this year, and a great incentive for returning in April 2015. We can’t wait . . .
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June 3, 2014
Macau
Investors bet against Las Vegas Sands on Macau concerns The relative cost of bearish contracts versus bullish ones has surged about ninefold from a low in January to an 18-month high, a sign that Macau’s recent crackdowns are not minor events for investors, at least in the US
“It’s
S
tricter regulations in one of the world’s biggest gambling destinations are prompting traders to bet against casino owner Las Vegas Sands (LVS) Corp The relative cost of bearish contracts versus bullish ones has surged about ninefold from a low in January to an 18-month high, data compiled by Bloomberg show. Las Vegas Sands has tumbled 12 percent after reaching the highest level in six years on March 6. In the same period, the Russell 1000 Index has gained 1.9 percent. In Macau, the biggest market for Las Vegas Sands, authorities are cracking down on illegal money transfers and are considering tighter visa rules for mainland tourists. The measures, coupled with China’s slowing economy, may crimp growth for companies such as Las Vegas Sands, according to Matthew Beesley at Henderson Global Investors Holdings Ltd. His firm has sold shares in the casino operator. “People are worrying about the business in Macau and for the right reason,” Beesley, who helps oversee $125 billion at Henderson, said by telephone. “There’s fear that you’ll see increased regulation from the mainland. It’s very easy for U.S.centric investors to express a short view on China through Las Vegas Sands, as it’s a U.S.-listed company.”
Macau regulation Macau’s regulators and the police are stepping up measures to curb attempts by gamblers to circumvent Chinese currency controls. In February and March, police of the Chinese enclave made 12 arrests involving the use of card-swiping machines to transfer illicit funds to casinos from
the mainland. Such frauds by Chinese gamblers could amount to $6 billion, Deutsche Bank AG wrote in a report earlier this month. Separately, the Macau Secretariat for Security indicated this month that it may introduce stricter measures in July to check visa papers of those traveling to the enclave. Nomura Holdings Inc. cut on May 21 its estimate for full-year revenue growth in Macau to 14 percent from 17 percent. Short seller Jim Chanos of hedge fund Kynikos Associates LP said this month on CNBC that he’s concerned about Macau casinos amid the campaign against corruption. While short interest was at 0.4 percent of Las Vegas Sands’ shares outstanding, lower than the average for Russell 1000 stocks, it reached the highest level in 15 months on May 19, according to Markit data.
Legal casinos The former Portuguese colony, the only place in China where casinos are legal, made up 64 percent of Las Vegas Sands’ revenue in 2013, data compiled by Bloomberg show. That’s up from 33 percent in 2004, the last year when revenue from the U.S. accounted for a greater share of sales than the Chinese enclave. Bearish bets on Las Vegas Sands reflect concern that the company has more at stake in China, where growth is slowing, than in the U.S., where it’s picking up, Beesley said. China’s economy will expand 7.3 percent this year, the slowest pace since 1990, according to economists’ forecasts compiled by Bloomberg. The U.S. economy will expand 2.5 percent in 2014, the fastest pace since 2012, the projections show.
very easy for U .S.centric investo rs to express a short view o n China throug h Las Vegas Sand s, as it’s a U.S.listed company ”
Billionaire Chairman and Chief Executive Officer Sheldon Adelson also faces obstacles in his plans for expansion in Japan. A lawmaker in the nation said earlier this month that a bill to legalize casinos, which would allow operators to set up resorts in time for the 2020 Olympics in Tokyo, may not pass in the current parliamentary session that ends June 22.
Puts, calls Options giving the right to sell Las Vegas Sands shares cost 3.8 points more than calls to buy, according to three-month implied-volatility data compiled by Bloomberg. The difference was 4.4 on May 21, the widest since November 2012. Ron Reese, a spokesman for Las Vegas Sands, said the company would not comment on the options trading. Las Vegas Sands has fallen 2.4 percent this year after a 71 percent surge in 2013. The shares trade at 19.8 times estimated earnings, down from 21.4 at the end of last year, data compiled by Bloomberg show. The selloff in Las Vegas Sands is a buying opportunity, and concern over a government crackdown is overdone, according to a Citigroup Inc. note on May 27. Instead, gambling revenue should jump, with the number of hotel rooms in Macau more than doubling in the next few years, analysts led by Anil Daswani wrote, adding the stock to a list of Asia-focused companies to buy. They also said the Japanese gaming law that will establish locations and bidding rules should be passed this year. “These concerns are overblown,” the analysts wrote of the potential
Matthew Bee sley Henderson G lobal Investo rs Holdings Ltd
regulatory restrictions. “LVS is one of our top picks on this theme and is a favored candidate for the license in Tokyo,” they said.
VIX, VStoxx The Chicago Board Options Exchange Volatility Index, the gauge of Standard & Poor’s 500 Index options prices known as the VIX (VIX), fell 0.9 percent to 11.57 yesterday. The VStoxx Index, its European counterpart, rose 2.3 percent to 15.87 at 8:39 a.m. in London today. Las Vegas Sands puts outnumbered calls for the first time since March this month. The ratio of options to sell versus wagers to buy reached 1.03to-1 on May 19, data compiled by Bloomberg show. It was at 0.99 on May 28. “There will be hiccups along the road,” Bryan Maher, a senior analyst at Craig-Hallum Capital Group LLC, said by phone. He has a hold rating on Las Vegas Sands. “When the stock ran away earlier this year, it was based on outlook for complete blue skies ahead and that legalization in Japan was coming sooner rather than later. It may happen, but you need to have a disciplined approach.” Bloomberg
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June 3, 2014
Macau Brands
Trends
Going Green, burning calories
Dynam plans pachinko machines for Macau The Japanese pachinko hall operator plans on placing 100 of its ‘next generation’ machines in a Macau hotel scheduled to open this summer Sara Farr
Raquel Dias
sarafarr@macaubusinessdaily.com
newsdesk@macaubusinessdaily.com
G
oing green has to be one of the great trends of the decade. A greener consciousness together with healthier lifestyle choices has moved the market in ways we did not expect. Go to any supermarket and see what I mean; the choice of organic ingredients together with promises of low cholesterol food and low salt snacks have enjoyed a big boom. The same goes for the ‘bio detergent’, recycled packaging and so forth. Even in fashion, movements to use sustainable and organic cotton and put an end to the usage of fur have come a long way in the past decade. The need to exercise goes along with these trends as well. More time spent in the gym taking care of your appearance and health seems to be one of the great priorities of both men and women nowadays. Cycling to your job is no longer a thing of the past. Go to any European city and notice the fleet of bicycles for rent available. In neighbouring Mainland China these have appeared as well; put a few coins in, take the bike and return it to another drop point in the city, and there are several. If borrowing bikes isn’t for you (or if you live in Macau), fear not. As usual there’s an option coming up soon in the upper-scale market. The Sada Bike is a completely collapsible bicycle. Unlike most of its kind, it ditches spokes altogether to give you a more compact alternative. The bike, which is currently just a working prototype, has the dimensions of a standard bicycle (26-inch wheels), but can fold up with a single movement. A good option for those who want to protect the environment, while doing some cardio.
J
apanese pachinko hall operator Dynam Japan Holdings Co Ltd is still waiting for the government here to approve an application to operate ‘next generation pachinko machines’. The plan, according to Dynam’s chairman Yogi Sato, who was quoted by Hong Kong financial wires and media, is to place up to 100 of these new machines in a new hotel that is scheduled to open in September. While Mr. Sato did not name the property to open in September, Dynam said previously that it belongs to Macau Legend Development Ltd. The group’s Prague Harbourview hotel in Fisherman’s Wharf is their only property slated to commence operations in the third quarter of this year. Mr. Sato said, however, that should his company not gain approval from the Macau Government, he would “halt” the plan. Dynam last month entered into a six-month extension agreement of its memorandum of understanding with I Got Games Inc (IGG) Singapore. According to a company filing with the Hong Kong Stock Exchange, the MOU amendment and extension
expires November 25, 2014. In the filing, Dynam Japan declares it has finished making a prototype of the next generation pachinko machines. ‘The company is now in discussions with, and is undergoing preparation for making an application for the approval of the Gaming Inspection and Coordination Bureau of Macau [DICJ] and other competent authorities,” the filing reads. Last October, Dynam Japan announced it would invest US$15 million (119.8 million patacas) in the Singapore-based online games provider IGG to help it develop software for ‘next generation pachinko machines’ to be operated in Macau.
Japan confidence Last week, Japan’s lower house said it will not be discussing a bill to legalise casino gambling in Japan this month, leading analysts to believe that the bill will not be discussed at all this year. However, Mr. Sato previously had said he expected the bill to have an 80 percent chance of passing in June, after which Dynam would consider investing in developing casinos in its home country.
Mr. Sato added that even if the bill could not be passed this month, there is still a chance that a special meeting on the issue could be held in August, when the chance to get the bill passed could be 100 percent. He also said he expects Japan to issue as many as 10 casino licences for the country. According to Hong Kong media, Mr. Sato “noted that his company would like to gain the licence to operate casinos on its own,” and he “does not see” a large chance of cooperating with Macau Legend in developing casinos in Japan. Dynam’s preferred site for casinos would be away from Tokyo and Osaka due to it being an earthquake area and where investment capital could be as much as US$5 billion. Places like Yamaguchi prefecture are preferred, Mr. Sato said, because investment needed to establish a casino there ranges between US$1.5 billion and US$2 billion. This prefecture is also served by the nearby airports of Hiroshima and Fukuoka prefectures. The company would need another round of equity financing to support the plan to build a casino if it can gain the licence to operate one, Mr. Sato added.
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June 3, 2014
Macau
A green shot for gaming shares Last week, major gaming stocks outperformed market valuations by 1.9 percent; the hike, however, was not enough to disguise a weak May. Revenues have to increase 17.8 percent in June to meet investors’ Q2 expectations, Wells Fargo says Alex Lee
Alex.lee@macaubusinessdaily.com
G
aming stocks are not yet out of the woods, despite outperforming the market last week. With a choppy year ahead and a confirmed weak May, the casino industry has to pump revenues growth in June to push up shares and reach investors’ estimations for the second quarter. Last week, the major gaming stocks outperformed the market, growing 1.9 percent against a 1.2 percent hike recorded by S&P500, the world’s biggest financial index. This was the exception last month, whereby casino shares far underperformed the median of the rest of the industries in May, still suffering the effects of negative headlines from illegal UnionPay transfers and junket arrests in Macau. In May, gaming stocks lost 0.4 percent from April, in stark contrast to an S&P performance that increased 2.5 percent in the same period. Compared to May 2013, the major gaming shares also lagged the median of the largest 500 companies listed in the US, losing 1.9 percent against a 5.9 percent jump of the latter. One of the factors affecting stocks was May’s revenue performance in Macau. With an expected 13 to 15 percent year-on-year based on data available until May 25, US bank Wells Fargo estimates that May revenues could climb 14.2 percent year-onyear. This is a weaker performance compared to a year ago when revenues
2014 could be choppy due to a potential slowdown in VIPs driven by decelerating credit growth and a softer macro environment US bank Wells Fargo
from casinos in Macau rose almost 20 percent (19.8 percent). Wells Fargo stressed that to achieve the second quarter estimations for revenues in Macau – a growth of 14 percent yearon-year – it implies that June gaming revenue gains will have to hit 17.8 percent. “We remain positive on the longerterm Macau secular growth story; however, 2014 could be choppy due to a potential slowdown in VIPs driven by decelerating credit growth and a softer macro environment. LVS remains our top pick,” said Wells Fargo in a note to clients.
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June 3, 2014
Macau
Gold Rush lifts TSL profits 10 percent
T
se Sui Luen (TSL) recorded an almost 10 percent increase in profits last year after clients embarked upon a gold rush during the period April to June 2013, sparked by a sudden price drop in the metal, the jewellery company said. The net profit for the year ended in February grew 9.4 percent to HK$1.77 billion, while turnover reached HK$4.06 billion, a 13.9 percent rise year-on-year. ‘The growth was mainly driven by rapid increase in sales of 24-karat gold during the ‘Gold Rush’ period between April and June 2013 and enhanced brand image brought forth by its continuous brand building efforts,’ said the company in its annual results published last week. Last year’s gold rush fanned sales in Hong Kong and Macau by 16% growth year-on-year. Sales in China rose 7% and accounted for 34% of the group’s turnover. The company has plans to open one or two new stores in Hong Kong and more than 20 on the mainland this year, Annie Yau Tse, TSL’s Chief Executive Officer (CEO), told
reporters. “It’s a size we can definitely sustain,” Tse said. “Looking ahead, notwithstanding that the current operating environment remains challenging for the Group, I believe that the mid to long-term investments being made will pay off,” the CEO said. Mrs. Tse added that “due to continuing global economic uncertainties, the slowdown of economic growth and the change in business environment brought about by the new Tourism Law in Mainland China, we shall continue to take a cautious approach and mitigate our risks as and when required.” To the media, TSL also confirmed it is launching an e-commerce operation in June, initially via retail website Tmall, and mainly focused on attracting younger consumers. The new service will not sell highend products, products that clients usually prefer to see in person before buying. “People are more willing to buy jewellery online in the range of HK$3,000 or under,” the TSL CEO affirmed.
‘The Special One’ to lure Chinese gamblers S outh Korean casino operator Paradise Co has hired Jose Mourinho, the outspoken manager of English football giant Chelsea, as the face of its new advertising campaign to lure punters from China, where the sport is increasingly popular. He replaces Hollywood superstar Robert De Niro as Paradise’s brand ambassador. Paradise is teaming up with Japan’s Sega Sammy Holdings Inc to build a US$1.7 billion casino resort in the coastal city of Incheon, near the country’s main international airport, with construction to be completed in 2017.
Paradise hopes Mourinho will now kick goals for the casino and win over Chinese customers. It expects the Incheon resort to attract 160,000 visitors a day, of which two-thirds are likely to be Chinese. The number of Chinese tourists to South Korea surged 52.5 percent to 4.3 million last year, according to the Korea Tourism Organization. ‘The growing interest in football in China, and the fact that a significant number of casino customers are Chinese, was the main reason behind naming Mourinho as the model,’ Paradise said in a statement.
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June 3, 2014
Greater China
NQ Mobile gains on increased sales The firm expects unaudited first-quarter revenue to be above its previously estimated range of US$75 million to US$76 million
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he Chinese mobile-service provider that short-seller Carson Block has accused of overstating revenue gained the most in six weeks after increasing its sales forecast and selling a stake in a subsidiary. The American depositary receipts rose 12 percent to US$7.59 in New York on May 30, the steepest oneday gain since April 15. It was the best performer on the Bloomberg China-US Equity Index, which fell 0.7 percent. NQ Mobile is still down 67 percent since Block, founder of Muddy Waters LLC, called the company “a massive fraud” in October. NQ Mobile expects unaudited first-quarter revenue to be above its previously estimated range of US$75 million to US$76 million, according to a May 30 statement distributed by PR Newswire. It projected secondquarter sales between US$83 and US$84 million, compared with the median forecast of US$79 million by three analysts surveyed by Bloomberg. The company said in a separate statement that it is selling a minority stake in its FL Mobile gaming subsidiary for as much as US$25 million. “The reality is that the company is crushing it,” Taek- Geun Kwon, chief investment officer of Toro Investment Partners LP, a San Francisco-based hedge fund that holds NQ Mobile shares, said by e-mail. “The fundamentals are as strong as that of any company in the sector in China or anywhere. The earnings guidance is proof of that.” NQ Mobile sank 39 percent last month after delaying the release of its audited 2013 financial report for a second time as it waits for the final results of a probe into Block’s allegations. The Bloomberg index of the most-traded Chinese stocks in the U.S. advanced 3.1 percent in
May to 102.15, the steepest monthly gain since February.
Stake sale The Beijing-based company didn’t provide an update on the investigation, which is being led by the law firm Shearman & Sterling LLP and auditor Deloitte & Touche Financial Advisory Services Ltd. Block declined to comment, according to an e- mailed response to questions from a Muddy Waters spokesman. NQ Mobile said it has agreed to sell as much as 5.88 percent of FL Mobile, which distributes mobile games, to Bison Mobile Ltd.,
The reality is that the company is crushing it. The fundamentals are as strong as that of any company in the sector in China or anywhere. The earnings guidance is proof of that Taek- Geun Kwon chief investment officer Toro Investment Partners
Sherman & Sterling LLP (headquarters pictured) and auditor Deloitte & Touche Financial Advisory Services Ltd. are leading the investigations over NQ alleged overstated revenues
a division of Bison Capital Co. Ltd. and other investors that it did not name. The buyers have a right to sell the stake back if FL Mobile doesn’t complete a qualified initial public offering within 12 months after the sale, according to the statement. The deal values FL Mobile at US$425 million, compared with the market capitalization of NQ Mobile of about US$469 million. While NQ doesn’t disclose the revenue contribution from its subsidiaries, sales from mobile games amounted to US$21 million in 2013, or about 11 percent of NQ Mobile’s total revenue, according to the company’s unaudited financial statement on April 10.
“The investment in FL, which represents a minority of NQ’s revenue, was done at a valuation that is roughly equal to the enterprise value of NQ Mobile in totality,” Toro’s Kwon said. “It’s further third-party validation of the quality of the business NQ is building and the deep underlying value in its share price.” NQ Mobile’s second-quarter sales forecast is more than double the US$41.4 million it posted last year, according to the statement. Chief Executive Officer Henry Lin said in the release that the company has remained focused on its business during “a period of distractions.” Bloomberg News
Oil prices rise after strong Chinese manufacturing data O il prices rose in Asian trade yesterday as data showing strong Chinese manufacturing activity fuelled hopes of a pick-up in demand in the world’s top energy consumer. US benchmark, West Texas Intermediate (WTI) for delivery in July gained 44 cents to US$103.15 a barrel while Brent North Sea crude for July was up 25 cents to stand at US$109.66 a barrel in mid-morning trade. Financial markets in Hong Kong, China, Taiwan and New Zealand were closed yesterday for public holidays. China’s manufacturing activity strengthened to a five-month high in May, the government said Sunday, an optimistic sign amid slumping growth in the world’s second largest economy. The official purchasing managers index (PMI) reached 50.8 in May, the National Bureau of Statistics said in a statement, up from 50.4 in March. The index tracks manufacturing
activity in China’s factories and workshops and is a closely watched indicator of the health of the economy. A reading above 50 indicates growth. Desmond Chua, market analyst
at CMC Markets in Singapore, said the data had a “positive overriding sentiment” on oil prices. “This is the first time there is a steep rebound by new orders... which has
been the declining factor in the past six months or so,” Chua told AFP. Analysts said investors will also be closely watching a flurry of US data releases this week for clues about the health of the world’s biggest economy. April trade data will be released on Wednesday. US employment data, including initial jobless claims, non-farm payrolls data and the latest unemployment rate will be released Thursday and Friday. “We believe that there may be room for upside surprise, so do not be too shocked if we do get 300,000 or higher payrolls for May,” said United Overseas Bank. It said the data may reignite concerns the US Federal Reserve could fully wind down its massive stimulus programme earlier than the year-end deadline it has set itself. AFP
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June 3, 2014
Greater China Green card policy to be relaxed China is considering relaxing its “green card” policy by lowering the application and approval threshold, a move to attract more foreign talent. Authorities are deliberating revision to regulations on permanent residence for foreigners, considering more flexible and pragmatic application standards, the Organizational Department of the Central Committee of the Communist Party of China revealed yesterday. China launched its green card system in 2004. Under the system, the foreign family members of Chinese nationals and foreign people who have worked as elite talent or made large investments (at least US$500,000), among others, can apply for permanent residence cards.
Zao Wou-ki leads millionaire auction Sotheby’s sold modern and contemporary Chinese art for 115 million yuan (US$18.4 million) in a Beijing auction on Sunday. The most expensive lot was an abstract painting by Chinese-French artist Zao Wou-ki titled “Sous Bois Dans la Nuit” that sold to a client in the room for 36 million yuan, the auction house said in a statement. The pre-sale high estimate, excluding buyer’s fees, was 24 million yuan. The June 1 sale was Sotheby’s second auction in China. The company sold US$37 million of art at its inaugural Beijing sale in December.
New BeijingWashington non-stop flight Air China will offer non-stop flights between Beijing and Washington, D.C. four times a week from June 10 this year in the latest move to expand its network in the United States. The flight, operated with Boeing 777300ER aircraft, is scheduled to leave Beijing at 1:00 p.m. (Beijing time) and arrive at 2:35 p.m. (Washington time) on the same day. The return flight is expected to depart at 4:35 p.m. and arrive at Beijing Capital International Airport at 6:15 p.m. the next day.
5 bln yuan of shares unlocked next week Lock-up shares worth 35.2 billion yuan (US$5.71 billion) will become eligible for trading on China’s stock markets during this week’s four trading days. A total of 2.67 billion shares of 27 companies will be tradable on the Shanghai and Shenzhen exchanges, representing 0.64 percent of lockup shares in China’s A share market. China Avic Electronics Co. is the highest valued company with 16.9 billion yuan of shares coming online in the next few days.
CCTV senior producers suspected of bribery Two senior producers of the China Central Television (CCTV) have been taken compulsory measures for being suspected of bribery, China’s Supreme People’s Procuratorate (SPP) said on Sunday. The two suspects are Guo Zhenxi, director-general of CCTV finance and economics channel and advertising director concurrently, and Tian Liwu, a producer of the channel. The case is under investigation, the SPP said in the statement.
Horizon Resort Apartment in Suzhou Industrial Park
Strains building up for China property market New home prices have soared, more than quadrupling in Beijing and Shanghai since 2003 Kelly Olsen
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fter years of boom that have seen prices rocket, the prospect of a bust is looming over China’s vast property sector, with authorities hoping to avoid a meltdown that could send shock waves through the world’s secondbiggest economy. Housing was doled out by the state when Communist-style collectivism dominated economic management. But in the past two decades that has given way to market-oriented principles as China’s economy has opened. New home prices have soared, more than quadrupling in Beijing and Shanghai since 2003, and more than doubling in the country as a whole, according to a report by Jeremy Stevens, Beijing-based Asia economist at South Africa’s Standard Bank. The increases have been a key source of wealth for China’s rising middle classes, and a major driver of the economy. Now some -including individuals who have made fortunes- foresee imminent disaster. “I think Chinese property is the Titanic about to crash into the iceberg right in front of it,” Pan Shiyi, billionaire chairman of commercial developer SOHO China, said at a forum, China Business News reported last week. At the same time, surging prices have driven homes beyond the reach of many ordinary Chinese, stoking resentment and inequality. The People’s Bank of China, the central bank, last month asked domestic lenders to give first-time home buyers priority in mortgage lending, which analysts saw as aimed at boosting home purchases amid oversupply.
Observers and analysts concur that problems are rife and cannot be ignored by authorities, lest economic growth take a hit. “Real estate is nearly 20 percent of GDP (gross domestic product) in China so if that sector has a problem you definitely have a problem,” Joerg Wuttke, president of the European Union Chamber of Commerce in China, told AFP. “Definitely a real estate bubble bursting is bad news.”
Negative outlook Home prices in major Chinese cities posted their first monthly decline in nearly two years in May, an independent survey showed Saturday, providing new evidence the once redhot market is losing steam. The average price of a new home in 100 major cities declined by 0.32 percent from April to 10,978 yuan (US$1,758) per square metre (US$164 per square foot), according to the China Index Academy (CIA), the first fall since June 2012. Year on year, new home cost growth slowed for a fifth straight month, rising 7.84 percent, though prices fell in 31 of the 100 cities. The results mask huge variety, however, as some of the country’s largest cities are still maintaining double-digit gains. Beijing prices rose 22.39 percent year-on-year in May. Barclays economist Chang Jian said in a report that “the risks of a disorderly adjustment are real and rising”, given factors including expectations of falling prices, financial trouble among developers, heavilyindebted local governments and a weak financial system. Moody’s Investors Service downgraded its outlook for Chinese
property to “negative” from “stable”, citing an expected “significant slowdown” in residential property sales growth, high inventories and weaker liquidity over the next year, along with lower expectations for the economy.
Ghost cities There is so far little concern a domestic real-estate meltdown could trigger panic in the broader global economy and banking system
Real estate is nearly 20 percent of GDP (gross domestic product) in China so if that sector has a problem you definitely have a problem Joerg Wuttke European Union Chamber of Commerce in China president
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Greater China
Chinese wines struggle to uncork overseas sales China’s relationship with wine stretches back thousands of years, but the country is better known for its wines made from rice, sorghum and mead Dennis Chong
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such as during the sub-prime crisis in the United States, as China’s heavily regulated financial system and property market remain relatively isolated. The housing trouble, however, comes at a sensitive time as China’s leaders want to shift the country’s growth model to one where private spending, rather than public-sponsored investment, drives expansion. Wang Tao, a Hong Kongbased economist at UBS, said the government “still has many levers to pull to stabilise construction and support economic growth”. “We do not expect a sudden collapse of property prices or a financial or balance-of-payment crisis, as seen often in emerging economies,” she wrote in a report. But the consequences of a property bust could still be painful. Standard Bank’s Stevens said that over the last three years the vast majority of China’s middle class wealth increase has come from their home values, meaning they are now “more vulnerable to a price correction”. China’s government has been trying to contain property values through measures such as restrictions on purchases of second and third homes, higher minimum down-payments and taxes in some cities on multiple and non-locally owned homes. But it is a fine line to tread, as local authorities make much of their income from land sales to developers, so curbing property development can slow economic growth in China’s regions. The downside to unhindered development can be seen in China’s so-called ghost cities, urban areas scattered throughout the country and characterised by new and largely empty apartment blocks. “Unfortunately, housing is one of the few sectors that the Chinese government has not mastered its control over,” Societe Generale economist Yao Wei said in a report. “Adding everything together, the aggregate exposure of China’s financial system to the property market is likely to be as much as 80 percent of GDP,” she added. “This is not a sector that can go terribly wrong if China wants to avoid a hard landing.” AFP
hina’s makers of merlot and chardonnay have found success at home, but have struggled to convince drinkers overseas that their wines can compete with offerings from more established wine nations. Booths for Chinese wine producers displaying bottles of red, white and sparkling wines drew curious crowds at last week’s Vinexpo Asia Pacific in Hong Kong. But traders at the fair, the largest wine and spirits event of its kind in Asia, say the domestic popularity of the wines does not translate to success in overseas markets. “The appetite for ‘made in China’ wines outside China is very limited. If you think about wine, China would not be the place that comes to mind,” Judy Chan, one of a handful of Chinabased wineries exhibiting at the threeday trade show, told AFP. “We really only sell domestically,” said Chan, who works for Grace Vineyard that operates an estate of some 300 hectares of wine production facilities in the northern inland provinces of Shanxi and Ningxia. Like other exhibitors at the event, Chan believes that a spate of Chinese food safety scandals discourage international buyers from purchasing the country’s wines. “We have all these problems with our food,” she said. Public concern about food safety is high in China. In 2008, six babies died and 300,000 others fell ill in a massive scandal involving contaminated milk powder. “We don’t spend too much effort on the overseas market. Their market is mature, we are at an embryonic stage,” said Lu Wen, production director for China’s Dynasty Fine Wines Group.
“There may be demand from the overseas Chinese population, we just can’t really reach the masses abroad,” he said, explaining that 99 percent of the firm’s wines are sold domestically. But he added the domestic market is “big enough” for the company to grow, with wines priced below 40 yuan (US$6.40) -compared to the 50 percent duties levied on foreign imports- play a key role in local wine’s domination in China. More than 80 percent of all wine consumed in China is made domestically, according to Vinexpo. Dynasty’s financial controller Rex Yeung said culture also plays a part in the popularity of Chinese wine. “Other than Lafite, many (Chinese
We don’t spend too much effort on the overseas market. Their market is mature, we are at an embryonic stage Lu Wen production director Dynasty Fine Wines Group
Turpan in Xinjiang hosts Loulan wine company vineyards (pictured)
customers) just can’t pronounce the names (of foreign wines),” he said.
China can make good wine China’s relationship with wine stretches back thousands of years, but the country is better known for its wines made from rice, sorghum and mead. As interest in foreign wines grows in tandem with economic prosperity, China’s grape wine production is on the rise. “We know China can make good wine,” said Beijing-based wine blogger Jim Boyce, noting that a century ago Zhang Bishi of Changyu Pioneer Wine Company in Shandong won international accolades, and again twenty-five years ago fellow Shandong winery Huadong won medals abroad. “The difference today is that we see good wine being made throughout the country. The big issue for consumers is actually being able to find good local wines at good prices.” Stretches of land in China’s Northern province of Ningxia have been transformed into vineyards which have become internationally recognised. French multinational luxury goods conglomerate LVMH set up a joint venture there in 2012, helping to produce China’s first sparkling wine under the prestigious “Chandon” label.
Improving...some of them But there is a long way to go. “Improving” was the word chosen by most sommeliers and experts to describe the quality of Chinese wines this year. Vinexpo chief executive officer Guillaume Deglise said: “Their wines are improving. Not all of them I’m afraid, but some of them already have a very good quality.” Others say patience is required. “It takes time. Vines aren’t something you can plant and have good wine that year. Young vines produce a thinner less attractive wine. It’s just nature,” said Master of Wine Debra Meiburg. She added that good Chinese wines are on par with “mid-market” wines suitable for day-to-day drinking, and not for “very special occasions” nor are they “Michelin three star wines”. “China will rock our wine world - we just have to wait a little longer. It’s just too young,” she said. But to other buyers, China is simply not known for its wine. “We like the products that truly represent the area. I wouldn’t even buy white wine from Bordeaux,” said Angel Lee, director of Hong Kongbased wine trading company MBL. “In China, their tea is very good.” Although selling is a different story, when it comes to the casual sniff, swirl and sip, knowing the origin may not be necessary. “Wine is pleasure. If you don’t know the provenance, you have to enjoy what you have,” said a French visitor after taking a sip of “People’s Chardonnay” at the show. AFP
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Asia
Australian Securities Exchange entrance
Australian IPO markets’ golden sky Australia’s share market is trading at all-time highs Byron Kaye
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ustralian businesses have set a new record for money raised in public floats in the first five months of the year, with larger deals to come putting the country on track for its biggest IPO year since the Telstra privatisation began in 1997. Companies have raised US$2.89 billion in share market flotation in the year to the end of May, more than five times the amount generated in the same period last year, according to Thomson Reuters data. That makes Australia a bright spot in the Asia-Pacific region generally, where dozens of deals have been cancelled or
withdrawn amid volatile equity markets, unrest in Thailand and a cautious approach to approvals in China. Australia’s share market meanwhile is trading at all-time highs, buoyed by historically low interest rates, and recently listed companies like cleaning and catering firm Spotless Group Ltd, which raised A$995 billion (US$920.28 billion) in May, have posted strong after-market performances. Analysts say this is encouraging vendors to go to the market as opposed to selling privately, particularly private equity firms which are looking to exit mature assets they have been
holding through less favourable years. “People keep having these good experiences, they keep looking for the next opportunity to invest in,” said Andrew Stevens, joint head of equity capital markets at UBS, which managed Australia’s two biggest floats of the year so far - Spotless and Genworth Mortgage Insurance Australia Ltd. Stevens is working on a possible float of Healthscope Ltd, a hospital owner and operator worth an estimated A$4 billion which is owned by U.S. private equity giants TPG Capital Management LP and Carlyle Group. The owners are expected to
decide this month whether to sell via float or privately. Another float that could fetch A$4 billion is the planned sale of state-owned health insurer Medibank Private, due to list before the end of June next year. If both proceed in 2014, the year will be the biggest for Australian IPOs since 1997, when the government began its sell-down of telecom Telstra, the Thomson Reuters data shows. John McLean, the head of capital markets origination at Citi in Sydney, said that rather than being a bubble, the rush of IPO activity was due to a cocktail
Indonesia’s exports fall, pushing trade balance to deficit Adriana Nina Kusuma and Nilufar Rizki
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ndonesia’s exports in April surprisingly weakened, tipping the country’s trade balance into its largest deficit in nine months and renewing stress on the fragile rupiah. Recent signs of stability in the country’s current-account deficit and moderating inflation had helped to revive investor confidence ahead of presidential elections in July. Inflation picked up in May but largely met forecasts, underlining expectations that Bank Indonesia will likely leave interest rates unchanged in the near term to continue bolstering the economy as growth slows, analysts said. The G20 economy has kept policy
tight and taken steps to dampen imports to shrink the current-account deficit, which had ballooned last year and sparked capital outflows. Indonesia’s trade balance slipped to a US$1.97 billion deficit in April, government data showed yesterday, after two straight months of surpluses, and confounding analysts’ expectations for a US$220 million surplus. The trade deficit was larger in July last year when it was US$2.3 billion. “We had expected a sharp deterioration in Indonesia’s trade balance over April but the actual deterioration was truly shocking,” said ANZ’s Asia chief economist,
Glenn Maguire. He said export growth remained weak due to softer prices for key commodity and manufactured exports. And firm imports may be due to a combination of lagged foreign exchange effects and foreign direct investment inflows from a build-up in capacity. “The external position is likely to remain negatively pressured in coming months if our assessment of these dynamics proves true,” Maguire said. Others attributed imports to an increase in shopping and purchases, as Indonesians prepare for celebrations after the Ramadan fasting month.
Exports in April dropped 3.16 percent against expectations in a Reuters poll of 3.50 percent growth. Imports eased 1.26 percent compared with expectations for a fall of 7.7 percent. The rupiah hit its weakest in more than three months yesterday, after Indonesia’s unexpectedly large trade deficit. It fell as much as 0.9 percent to 11,775 per dollar. Gundy Cahyadi, an economist with DBS, agreed the surprise was the trade deficit and also that imports were better than expected, suggesting that some concerns about domestic demand had been a little stretched.
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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June 3, 2014
Asia KEY POINTS Australian IPOs on track for best year in over a decade Capital raised five times more than this time in 2013 Makes floats more attractive for Healthscope sale Australia provides bright spot for IPOs in Asia-Pacific
of previously withheld supply and the quality of businesses that are on offer. “I don’t think it’s too good to be true ... We’ve had fairly subdued levels for a number of years, other than the second half of last year,” he said. IPO activity in broader Asia remained subdued “so Australia has become a bit of a highlight regionally”, he added. The reopening this year of equity markets in mainland China after a 14-month hiatus and increased activity in Hong Kong is set to boost listings in the region, although initial expectations for a boom in China IPOs are being scaled back as regulators have been tentative about approvals. IPOs in Singapore have had a slow start while in Thailand, where the military launched a coup last month, volumes have plunged in the year to date. In Australia however capital raised in IPOs so far in 2014 is more than that raised in all of 2011 and 2012 combined. Reuters
“By all measures, Indonesia’s domestic demand remains resilient, and probably more so now that consumers and businesses have adjusted to the rupiah exchange rate.” He said the current account may continue to remain under pressure, although it still looked like the current account deficit could still come in below 3 percent of GDP this year. Annual inflation in May picked up to 7.32 percent due to higher food costs but matched forecasts for 7.30 percent, the data showed. On a monthon-month basis, the CPI was up 0.16 percent. Gundy expects Bank Indonesia to maintain a cautious stance. Bank Indonesia has indicated that it will continue to adopt a tight monetary policy this year to help stabilise the rupiah and to lower the current-account deficit to under 3 percent of gross domestic product from 3.3 percent in 2013. It has maintained its policy rate at 7.5 percent since December after increasing it by 175 basis points between June to November to support the rupiah. Meanwhile, the export outlook may brighten in the coming months as manufacturing activity surged to a record high in May, an HSBC Markit purchasing managers’ index survey showed yesterday. The index rose to 52.4 in May from 51.1 the previous month, the highest reading since data collection began in April 2011. A reading above 50.0 signals expansion. Reuters
Sri Lanka sees emerging market entry in 2015 S ri Lanka’s chief securities regulator said he aims to get the country in shape for entry to the MSCI Emerging Markets Index as soon as 2015. Nalaka Godahewa, chairman of the Securities and Exchange Commission, said the island nation needs a company to list US$500 million of equity to become eligible for promotion to the emerging-market index from the frontier-market gauge. “If one or two large existing companies increase their current public float to 20 percent, we are easily there,” Godahewa said in an interview in London on May 30. “I am hopeful that this will happen in 2015.” Any changes to market classifications will be announced on June 10, Sebastien Lieblich, executive director of MSCI Index Research, said in response to a request for comment on Sri Lanka’s status. In order for a market to be classified as emerging by MSCI Inc., it must have, among other requirements, at least three firms with a full market capitalization of US$1.03 billion and US$516 million of listed stock, according to the New York-based firm. Sri Lanka is seeking foreign investment to fuel an economy that has been growing at around 8 percent a year as the country recovers from a three-decade civil war. MSCI indexes are tracked by investors managing about US$8 trillion in assets.
Japan corporate capex up
Companies raised about US$20 million in three initial public offerings this year, an increase from US$3.8 million in one IPO last year, according to data provided by the bourse. Godahewa said he aims to double the exchange’s US$20 billion market capitalization in the next three to four years. The Sri Lanka Colombo Stock Exchange All Share Index has climbed 5.9 percent this year and rose 4.8 percent last year. The exchange is in “serious discussion” with as many as 45 companies seeking to list over the next three years and is targeting adding up to five more offerings this year, Godahewa said. “There are many large, very successful companies in the country, which are currently privately held,” Godahewa said. “If some of these companies list shares, it will change the formula completely.” Bloomberg News
Dai-ichi confirms Japan’s overseas insurance business expansion Japan’s second-largest private-sector life insurer plans to buy 100 percent of US company Protective Life Taiga Uranaka
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apanese insurer Dai-ichi Life Co is in advanced talks to buy Protective Life Corp of the United States, a source with direct knowledge of the matter said, in a deal likely to be worth over US$5 billion, the biggest acquisition by a Japanese insurer. Dai-ichi Life, Japan’s secondlargest private-sector life insurer, plans to buy 100 percent of Birmingham, Alabama-based Protective Life, said the source, who was not authorised to discuss the matter publicly. If completed, the deal would be the latest in a string of overseas acquisitions by Japanese insurers, seeking to offset weak future prospects at home amid a rapidly ageing population. In a statement, Dai-ichi Life said, “It is true that we are considering an acquisition of a U.S. life insurance company. But nothing has been decided.” A spokesman declined to comment further. The Nikkei business daily, which first reported the talks, said a deal would likely top 500 billion yen (US$4.9 billion). The U.S. company has a market capitalisation of US$4 billion and posted a net profit of US$393.5 million in 2013.
Eva Robertson, vice-president of investor relations at Protective Life, said in an email to Reuters that the company declined to comment, citing company policy on media reports. In early Tokyo trading Dai-ichi Life shares fell 4 percent, while the benchmark Nikkei 225 index was up 1.3 percent. Worth nearly US$15 billion by market value, Dai-ichi Life has led the way in overseas deals. Acquisitions by the company, the only one among the country’s top four life insurers to be listed, include the buyout of Tower Australia Group for US$1.2 billion in 2010 and a 40 percent stake in Panin Life of Indonesia for US$337 million in 2013. For the year ended in March, Dai-ichi Life was the only major life insurer to post growth in insurance premium revenue, boosted by its Australian unit. Sluggish domestic business weighed on its rivals. The biggest acquisition by a Japanese insurer so far is Tokio Marine Holdings Inc’s purchase of property and casualty insurer Philadelphia Consolidated Holding Corp for about US$4.7 billion in 2008. Reuters
Japanese companies raised spending on plant and equipment in JanuaryMarch by 7.4 percent from the same period last year, Ministry of Finance data showed yesterday, pointing to a gradual pickup in business investment that could help drive the economy. The rise followed a 4.0 percent increase in the previous quarter. The data will be used to calculate revised gross domestic product figures due on June 9 and follows a preliminary estimate that Japan’s economy expanded 1.5 percent due strong consumer spending and capital expenditure.
S.Korea manufacturing falls Manufacturing activity fell to a ninemonth low in May as new export orders shrank, a private-sector survey showed yesterday, adding to signs of a softening recovery in Asia’s fourth-largest economy. The HSBC/ Markit purchasing managers’ index (PMI) of South Korea’s manufacturing sector slid to a seasonally adjusted 49.5 in May from 50.2 in April, Markit Economics said in a statement. The May reading was the lowest since 47.5 in August 2013. A reading below 50 means activity shrank during the month. The index was just above 50 in March and April. A sub-index for new export orders that South Korean companies received during the month fell to 49.4 in May from 49.9 in April. The May reading was its lowest since September 2013.
Thai oil tanker recovered after hijacking A Thai oil tanker reported missing two days ago has been recovered with all of its crew members safe but pirates who hijacked the tanker took its cargo and damaged communications gear, the International Maritime Bureau (IMB) said yesterday. The MT Orapin 4 lost contact with authorities after departing for Indonesia from a terminal in Singapore on Friday, prompting the IMB to send an alert shortly after. The tanker arrived in Thailand’s Sri Racha port on Sunday evening and Thai authorities will be investigating the incident, Noel Choong, the head of IMB’s Kuala Lumpur-based Piracy Reporting Center, told Reuters.
Kia plans first plant in Mexico
The firm plans to break ground soon on a new plant in Mexico, two sources familiar with the matter said, a further sign that the company and its affiliate, Hyundai Motor Co, are easing an unofficial moratorium on capacity growth. The plant, to be built in Monterrey, will have a capacity of 300,000 vehicles and initially produce two small cars, one of the sources told Reuters. The facility would help meet demand in the United States, where Kia’s lone plant runs at full speed.
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International One week to pay the gas bill
IATA expects US$18bn Russia submitted a United Nations Security Council resolution airline profits yesterday seeking a ceasefire and peace talks in eastern Ukraine The International Air Transport Association said yesterday that it expects airline companies to record combined net profits of US$18 billion this year. Revenues were forecast to reach US$746 billion, IATA director general Tony Tyler said in Doha, pointing out that net margins stood to average 2.4 percent only. This amounted to less than $6 per passenger, added Tyler, who was speaking at an IATA-organised annual conference of the airline industry in the Qatari capital. IATA said in March that some 240 carriers representing 84 percent of global air traffic had revised down their profit forecast for 2014 to US$18.7 billion from US$19.7 billion.
NAK Naftogaz Ukrainy, Ukraine’s state-run gas company, said it sent a draft agreement before yesterday’s talks “to settle all disputed issues” in a move “aimed at constructive talks with Gazprom.” The proposal includes changes to “the price, volume and conditions of gas supply,” Naftogaz said in an e-mailed statement. Ukraine carries about 15 percent of the natural gas used by Europe through its Soviet-era pipelines and accuses Russia of using energy as a political weapon by ramping up prices. Russia is ready to consider lowering the price paid by Ukraine if the country pays its debt, Miller said.
Swedish CB warns of low-inflation threat Sweden’s central bank faces a “pretty serious problem” in tackling belowtarget inflation, Deputy Governor Per Jansson said. The next set of consumer price data will be very important in guiding the Riksbank’s decision when the board meets to discuss interest rates in July, Jansson told reporters in Stockholm today. “It’s worrisome that we have such low inflation,” Jansson said. “Should longterm inflation expectations deviate” from the target, “it will be too late,” he said. The central bank signalled in April that it’s ready to lower rates next month after failing to spur inflation closer to its 2 percent target.
Arabtec to float unit in Egypt Dubai-based construction firm Arabtec Holding aims to float half of its Egyptian unit on the Cairo stock exchange in 2016 or 2017 in an initial public offer that would value the unit at around US$10 billion, the firm said yesterday. In response to questions from Reuters, Arabtec also said it planned to invest about US$60 billion in Egypt over the next three years in sectors such as real estate development, infrastructure, trains, airports, and oil and gas. The company did not give details of its plans, which will depend heavily on factors outside its control.
Brazil targets Mideast money with Islamic bonds Banco do Brasil SA, Latin America’s biggest bank by assets, is courting investors in the Middle East and Asia as it prepares to start Brazil’s first Shariah-compliant equity fund this month. The fund will focus on shares of companies in industries including commodities, energy, mining and retail, according to Carlos Takahashi, chief executive officer of BB DTVM, the asset management division of the lender. Representatives of the bank last month met investors in the United Arab Emirates, Singapore and Hong Kong, he said, declining to comment on the size of the fund or expected returns.
Draft resolution The Ukrainian Energy Minister Juri Prodan arrives to attend a press conference after the negotiations of the gas supplies between the Ukraine and Russia in Berlin, Germany, 30 May 2014
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ussia gave Ukraine an extra week to pay in advance for this month’s gas supplies or risk a cut-off, at the start of a week of international talks on the crisis in the former Soviet republic. The move to a prepayment regime, originally set for tomorrow, was moved back to June 9, Alexey Miller, the chief executive officer of Russian gas export monopoly OAO Gazprom, said in an e-mailed statement yesterday. He made the announcement after Ukraine made its first payment for gas in months, transferring US$786 million for supplies received in February and March. Ukraine still owes Gazprom for supplies in April and May. The Russian move preceded the resumption of discussions with Ukraine in Brussels yesterday on a deal to keep the gas flowing amid the countries’ conflict over rebels trying to break away from the government in Kiev. It also came before President Vladimir Putin visits France for commemorations to mark the 70th anniversary of the World War II allied landings. “Moscow possibly did not want the prospect of gas cuts this week to dominate the agenda and sour the mood for Putin’s visits,” Tim Ash, head of emerging-markets research
at Standard Bank Plc in London, said in an e-mail.
Talks scheduled Putin and French President Francois Hollande are scheduled to meet June 5 before the Russian leader crosses paths with U.S. President Barack Obama at the D-Day events in Normandy a day later. A week of international engagement over Ukraine also includes meetings in Brussels of NATO defence ministers and of Group of Seven leaders, who boycotted a planned summit in Sochi to be hosted by Putin. Obama starts his tour of Europe tomorrow in Poland, which shares a border with Ukraine.
US$786 million
Ukraine paid February and March gas bill
Bloomberg News
Euro zone PMI eases in May The final figure was below the initial reading of 52.5 but held above the 50 mark that separates growth from contraction
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uro zone manufacturing growth slowed more than initially thought last month, a business survey showed on Monday, likely fuelling expectations that the European Central Bank will ease policy this week. Markit’s final Manufacturing Purchasing Managers’ Index (PMI) slipped to a six-month low of 52.2 in May from 53.4 in April as strong figures from Germany failed to offset a contraction in activity in France. The final figure was below the initial reading of 52.5 but held above the 50 mark that separates growth from contraction for the 11th straight
Russia submitted a United Nations Security Council resolution yesterday seeking a cease-fire and peace talks in eastern Ukraine, Foreign Minister Sergei Lavrov said at a televised news briefing in Moscow. The proposal would create humanitarian aid corridors, allowing civilians to seek safety and access for the Red Cross. “We deliberately framed our resolution in a depoliticized way, focusing on measures that can quickly relieve the suffering of the civilian population,” Lavrov said. “We hope the humanitarian character of our resolution will be understood correctly by the UN Security Council and will be adopted rapidly.” NATO ambassadors in Brussels will meet with the Russian envoy to the organization yesterday at his request “to discuss the security situation in and around Ukraine,” NATO spokeswoman Oana Lungescu told reporters. NATO “continues to call for Russia to de-escalate the crisis, to stop destabilizing Ukraine and to ensure a full, meaningful and verifiable withdrawal of all its troops from the Ukrainian border,” Lungescu said. In Kiev, the visiting U.S. assistant secretary of defense, Derek Chollet, reiterated warnings that the government in Washington is “prepared to do more” on sanctions against Russia over its support for the separatists.
month. A sub index measuring output fell to 54.3 from 56.5, weaker than the initial reading of 54.7. “The May drop in the manufacturing PMI will inevitably add to the clamour for policymakers to provide a renewed, substantial boost to the region’s economy and ward off the threat of deflation,” said Chris Williamson, Markit’s chief economist. To spur growth and boost lending, the ECB is widely expected to cut its deposit rate to below zero, reduce its main borrowing rate and launch a refinancing operation aimed at businesses when it meets on Thursday. Still, factories increased prices
marginally last month. The output price index rose to 50.3 from 49.2. Inflation in the 18 nations using the euro is predicted to have held steady at just 0.7 percent in May, well within the ECB’s “danger zone” of below 1 percent and also below its preferred 2 percent ceiling. The tepid overall growth was again supported by Germany, the euro zone’s largest economy. But in France, the second-largest, the PMI sank back below the 50 mark after just two months of expansion. On the other hand British manufacturing activity kept expanding at a rapid pace in May suggesting the economic recovery has lost little of its shine this quarter. The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) inched down in May to 57.0 from 57.3, but stayed far above the 50. New orders piled in at a healthy rate and manufacturers took on more staff, albeit at a slightly slower pace than in April. Reuters
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June 3, 2014
Opinion Business
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Leading reports from Asia’s best business newspapers
TAIPEI TIMES
How to become an oligarch Simon Johnson
Former chief economist of the IMF, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics and co-founder of a leading economics blog, The Baseline Scenario
Asia’s largest tech trade show will be a battleground for smart innovations when it begins in Taiwan tomorrow — pitting new inventions, such as car systems which warn the user if they are driving badly to a toothbrush-style camera that films the user’s teeth, against each other. More than 1,500 exhibitors, including some of the world’s leading technology brands, will set out their stalls at Computex in the Taipei World Trade Center, with 130,000 visitors expected to attend the five-day event in the Taiwanese capital.
THE STAR (Malaysian) companies may continue to struggle to live up to the market’s still lofty earnings projections after a dismal start to the year, leading to analysts lowering their expectations. Though some analysts pointed out that traditionally the January to end-March period had been the weakest for many companies, it is getting harder for investors to get excited about earnings after two years of relatively modest single-digit profit growth. […] A number of big stocks, including Petronas Dagangan Bhd, Sime Darby Bhd and UEM Sunrise Bhd had seen their target prices slashed and their share prices stumbling in May.
THE TIMES OF INDIA The finance ministry has begun discussions on allowing banks to fund local buyouts, a proposal that has not found favour with the RBI in the past. If fruitful, the move will be a major boost to domestic acquisitions. Source said that this time the plan is to let Indian lenders finance domestic acquisitions, mainly for stressed companies that are finding it difficult to meet their loan repayment commitments. The proposal being pushed by the department of financial services in the finance ministry entails making loans available to acquirers based on their balance sheet.
THE PHNOM PENH POST Three of Cambodia’s largest financial institutions were granted US$105 million in loans during last month alone. PRASAC, Cambodia’s largest microfinance institution, last week signed a loan agreement worth US$20 million with German development bank KfW. On May 19, Amret MFI, Cambodia’s second-largest microfinancer, received a US$10 million loan from the same German investment bank. KfW’s loan to PRASAC is valid for five years and accrues 6.8 per cent interest annually. In the commercial banking sector, the Asian Development Bank (ADB) last week gave Acleda Bank a US$75 million loan.
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ASHINGTON, DC – Let’s say that you would like to become one of the richest people on the planet, someone with enormous wealth and access to the top rung of political power. This is not an unreasonable aspiration for any fresh college graduate in today’s winner-take-all economies. But how realistic is it? You could have a good idea for a new technology with potentially widespread demand. With the right credentials and some luck, you could attract investment from a venture-capital fund. Many such ventures do not pan out; but –particularly in the United States– such equity-financed rapid-growth companies are strongly encouraged. Or you could issue a lot of debt. This might seem like a strange idea in the immediate aftermath of a major debtfuelled financial crisis, and with many homeowners still underwater on their mortgages (they owe more than the house is worth, even if they can still afford the monthly payments). In any case, to the extent that any recent American graduate thinks about debt, it is in the context of paying student loans. But a new book, Private Equity at Work, by Eileen Appelbaum and Rosemary Batt, explains exactly how a few people have become immensely rich through the shrewd strategic use of debt. The authors present a broad, detailed, and fair assessment of private equity – the business of investing in established companies through debtfinanced purchases of controlling stakes. (By contrast, venture capitalists support start-ups almost entirely through equity.) And Appelbaum and Batt are careful to point out that many
private-equity firms bring better management or other efficiency improvements to their portfolio companies. But some of the largest funds –in fact, most of the brand names in the industry– use the clever trick of securing the debt they issue with collateral owned by the company they buy. This is a little bit like buying a house. A bank or mortgage originator lends you a large amount of money, which is secured by the house as collateral. In other words, if you fail to make your payments on time, the lender can foreclose on the loan and take possession of the property – as millions of homeowners have experienced in the last decade. And yet there is a major difference between how private equity operates and how a family buys a home. Only a small part of the equity ownership acquired by any private equity fund comes from money provided by the partners who found and operate the fund. Most of it is raised from outside investors. (This would be like a family financing its down payment not from its own savings but from distant relatives about whom the family cares little.) The fee structure in this overall arrangement is such that the people running the privateequity fund want to have as much debt as possible; this will increase the way upside returns are calculated, which in turn is the main driver of the compensation that the controlling “general” partners can receive. More debt, of course, also means more risk; but this is not a sector focused primarily on risk-adjusted returns. If the company cannot make its interest payments, its assets will need to be sold or its activities otherwise scaled back. But, in contrast to the case of the struggling
There is a major difference between how private equity operates and how a family buys a home. Only a small part of the equity ownership acquired by any private equity fund comes from money provided by the partners who found and operate the fund. Most of it is raised from outside investors
homeowner, not much of those downside costs typically fall on the general partner. In addition, there are various other fees – charged to portfolio companies and to investors – that further encourage high levels of debt. The US tax code allows interest payments to be deducted as a business expense; there is no equivalent allowance for payments to equity investors. Appelbaum and Batt document
in impressive detail the way in which top-tier privateequity funds have been able to earn high returns and ultimately enormous wealth for their founders, while not necessarily helping the companies in which they invest. Interestingly, when returns are measured properly, the outside “limited” partners in private equity – including pension funds, insurance companies, and university endowments – also do not necessarily do so well. However, before graduates flock to private equity, they should know that only the very big funds can use debt to skew returns for insiders in this way, primarily because only they can raise the capital needed to buy well-established companies that are rich in fixed assets, and thus in potential collateral. Smaller privateequity funds typically buy into younger, smaller companies without such fixed assets, and the leverage in those deals is commensurately less. Regulators have recently woken up to the incentives for excessive leverage in this sector – and to the risks that such leverage poses to lenders and the broader economy. Not surprisingly, big private-equity firms seem determined to ignore or otherwise circumvent new restrictions. As the policy debate on this issue heats up, one hopes that all participants will become better informed by reading Private Equity At Work. If the new graduate in your life has the connections to join a very large brandname private-equity fund, the path to immense wealth, political influence, or even power becomes much clearer. Without such initial connections, however, it is very unlikely that he or she will become an oligarch. But you knew that already. The Project Syndicate 2014
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June 2, 2014
Closing BOJ reappoints quantitative easing father
French car sales slow, Spain’s accelerate
The Bank of Japan (pictured) will reappoint Masayoshi Amamiya, an architect of its quantitative easing, for a rare second term as an executive director to oversee a division that determines monetary policy options, people with direct knowledge of the process said. Appointed as one of the BOJ’s six executive directors in 2010, the 58-year-old career central banker had overseen the powerful Monetary Affairs Department until May 2012 when he was sent to the bank’s branch in Osaka. He was reappointed to oversee the monetary affairs department in March 2013 and helped Governor Haruhiko Kuroda to deploy the current massive stimulus programme a month later.
Car sales are an important indicator of business and household confidence which in France is overhung by low growth, tax rises to correct the national budget, and record unemployment. The latest car data fits an overall picture of unsteady confidence in the French manufacturing sector, a picture confirmed by new overall data for the sector yesterday. Meanwhile in austerity-hit Spain, trade figures showed that car sales jumped by 16.9 percent in May to 82,480, boosted by a programme of government subsidies for cars bought to replace old vehicles.
PetroChina joins Australia gas project ConocoPhillips, the third-largest U.S. oil company, is operator with 40 percent, while PetroChina Co. holds the balance of the project
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rigin Energy Ltd. agreed to buy Karoon Gas Australia Ltd.’s stake in a ConocoPhillips natural gas project for about US$800 million, giving the seller’s shares the biggest gain in more than five years. ConocoPhillips, the thirdlargest U.S. oil company, is operator with 40 percent, while PetroChina Co. holds the balance of the project in the Browse Basin off Western Australia. Origin, Australia’s largest energy retailer, is already ConocoPhillips’s partner in the Australia Pacific liquefied natural gas venture in Queensland state, one of seven export developments going ahead in the country to tap Asian demand. Origin, whose stock fell 3.6 percent, also plans to sell about US$1 billion in shares to refinance the acquisition. “Having strong venture partners like Conoco, PetroChina and now Origin give this project a very good chance at being developed,” Evan Lucas, a market strategist at IG Ltd. said today by phone from Singapore. Karoon shares jumped 43 percent to close at A$3.51 in Sydney trading, the most since October 2008. The stock had been suspended since April. Origin, whose A$24.7
billion (US$23 billion) APLNG project is due to start exports next year, declined to A$14.55.
Market tightness Chevron Corp., the secondlargest U.S. energy producer by market value, and BG Group Plc, the U.K.’s thirdlargest oil and gas explorer, are among those investing about US$180 billion in the seven projects. LNG market tightness will start to ease from 2015 with new supply, according to the International Energy Agency, after spot prices rose to a record in February. Options for development of the Poseidon field in the Browse Basin include transporting the gas to LNG production facilities in Darwin or relying on a floating
LNG facility, Origin said. A decision on how to develop the gas may be made as early as 2017, Origin Managing Director Grant King told reporters today on a call. The purchase gives Origin entry into one of the largest offshore gas discoveries at a “competitive entry price when compared to recent transactions in the BrowseBonaparte region,” King said in the statement. It also follows investments in the Cooper and Beetaloo Basins, he said.
PetroChina, Woodside
Having strong venture partners like Conoco, PetroChina and now Origin give this project a very good chance at being developed
PetroChina, Asia’s biggest oil producer, agreed in December 2012 to pay BHP Billiton Ltd. US$1.63 billion for its holding in Woodside Petroleum Ltd.’s Browse LNG venture in Western Australia.
Evan Lucas, market strategist at IG
Woodside last year ditched plans to build an onshore plant to exploit its Browse resources, estimating it would have cost more than A$80 billion (US$74 billion). “This is a step in the right direction for Origin as it needed to diversify its gas output outside Queensland,” IG’s Lucas said. “It may also put more pressure on Woodside to clarify its intentions for its gas fields.” Origin’s investment is favorable compared with other deals, William Allott, a Sydney-based analyst at Commonwealth Bank of Australia, said today in a note. While it implies a multiple of US$3.57 per barrel of oil equivalent, compared with US$5.17 per barrel in the BHP and PetroChina agreement, there’s significant risk in proving the size of the reserves, he said. Karoon is also negotiating with potential partners in South America and planning to attract US$200 million to US$300 million to fund its exploration plans in Brazil and Peru, Executive Chairman Robert Hosking said today by phone. Karoon is seeking to reach an agreement in Brazil “shortly,” while discussions in Peru may extend into next year, he said. Bloomberg News
Scotland tempted with taxes control China’s May CPI expected to rise
Viet PMI posts 52.5 in May
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he U.K.’s governing Conservative Party plans to give Scotland control over income tax if the country votes to reject independence, as Prime Minister David Cameron seeks to curtail support for the nationalists. The proposals were put forward in a report by Thomas Strathclyde, who sits in the unelected House of Lords, in Glasgow yesterday. They include giving Scotland the power to set tax rates and bands and supplement U.K. social-security benefits from its own budget. Cameron is expected to endorse them later today, according to an official who asked not to be named. “Decision makers should focus on where government money comes from as well as how it’s distributed,” Ruth Davidson, leader of the Scottish Conservatives, said in a statement today. “The people of Scotland should have good reasons to be passionate about wanting to remain within this Union. That is why it’s imperative to offer voters a positive vision of how our nation can progress and have a bigger say within the U.K.” Bloomberg News
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hina’s Consumer Price Index (CPI), a main gauge of inflation, is expected to grow faster in May, lifted by rising food prices, economists have said. Lian Ping, chief economist of the Bank of Communications, predicted the CPI will grow 2.6 percent year on year, a six-month high. His words were echoed by Zhu Baoliang, a researcher at the State Information Centre, who forecast the inflation will rebound after moderate increase during the beginning of the year, estimating a rate of 2.4 percent. Inflation eased further in April to 1.8 percent the lowest figure in 18 months. Both Lian and Zhu attribute the increase in CPI growth to rising food prices, which are estimated to grow 1 percent on a month-to-month basis in May. Prices of pork in 22 provinces and cities tracked by the statistics authorities jumped more than 20 percent month on month in May as demand recovered after the central government started to purchase pork at the beginning of the April. Xinhua
verall business conditions in the Vietnamese manufacturing sector strengthened in May amid on-going improvements in client demand, with output increasing for the eighth consecutive month amid another solid expansion in new business, the Hong Kong and Shanghai Banking Corporation (HSBC) said yesterday. In a report, the bank said the Purchasing Managers’ Index (PMI), a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing sector, posted 52.5 in May from 53.1 in the previous month to signal an improvement in operating conditions at Vietnamese manufacturing firms. Growth of new orders was recorded for the sixth successive month in May, with the solid rate of expansion only slightly weaker than April’s record high. Improving economic conditions had helped to support client demand. New export orders also rose in May, but the rate of growth was only slight. Higher customer demand led to another rise in production during the month, the eighth in a row. Xinhua