Macau Business Daily, July 1st, 2014 by Business Daily

he CE electoral college has been chosen. The biggest sector is the business sector, and is well represented by the casino industry’s leading lights. MGM China’s Pansy Ho, Galaxy Entertainment’s Francis Lui and SJM Holding’s Ambrose So and Angela Leong figure prominently. The election of Macau’s next Chief Executive is scheduled for August 31

MOP 6.00 Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

Electoral College Convenes

www.macaubusinessdaily.com

Year III

Number 572 Tuesday July 1, 2014

Page 4

On a roll

Light at the end of the tunnel

The Bankers list commends ICBC, China Construction Bank, Agriculture Bank of China and Bank of China. They are the institutions who have made the most profits. In the world

It’s been a lengthy battle with the public antenna companies. And it’s affected the bottom line. Nevertheless, Macau Cable TV’s losses narrowed to 160 million patacas in 2013. The company’s chairman said ‘long and complicated’ negotiations impacted Cable TV’s performance. But there’s always ‘triple play service’ to look forward to Page

Page

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HSI - Movers June 30

Name

Foreign foibles The net is closing in on bribery. Legislators have unanimously approved a draft bill that tackles ‘foreign’ bribes. Anyone attempting to bribe a foreign official faces a fine of up to 10 million patacas and 3 years’ jail time Page

%Day

Galaxy Entertainme

3.59

Lenovo Group Ltd

2.12

China Resources Lan

2.01

Want Want China Ho

2.01

Sands China Ltd

1.56

Hang Seng Bank Ltd

-1.09

AIA Group Ltd

-1.14

Hutchison Whampoa

-1.30

China Mengniu Dairy

-1.38

Henderson Land Dev

-1.41

Source: Bloomberg

I SSN 2226-8294

Rollercoaster real estate

Behind the curve

Home prices plunged more than 20 percent between April and May. But homes are still more expensive than a year ago. Coloane is the most expensive place to purchase, followed by the Macau Peninsula and Taipa Page 6

Today marks a new phase for Macau. New Era bus company starts up, UnionPay terminals cannot be placed in the vicinity of casinos; and mainland tourists on transit visas can only stay five days. Critics and analysts say authorities have been dragging their feet. Until Beijing picked up the phone Page 3

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July 1, 2014

Macau

Cable TV losses narrow to MOP160 mln Macau Cable TV is still in the red, but the company said it would enhance investment in anticipation of providing triple play service Stephanie Lai

sw.lai@macaubusinessdaily.com

he city’s sole cable television service provider Macau Cable TV Co Ltd said its losses for 2013 had narrowed to 160 million patacas (US$20 million), following the fact that the company has finished its long legal battle against the public antenna companies here, Macau Cable TV noted in its annual results released yesterday. The uncertainty over a ‘long and complicated’ negotiation process over the renewal of the cable television concession service as well as competition with public antenna companies here in the past year have impacted Macau Cable TV’s performance, company chairman Lam Ion Fun remarked in the results dated to March 27 this year – although the company’s annual report was only published yesterday. The Court of Second Instance ruled in June last year that the government had 90 days to stop unlicensed public antenna companies from illegally relaying cable television signals, an act that Macau Cable TV has long complained has deprived them of a fair business environment. Macau Cable TV’s losses narrowed from the 170 million patacas for 2012 to 160 million patacas for last year, the company’s earnings records show. In the company’s loss column, Macau Cable TV also had its shareholders inject 110 million patacas in the past year so that the company

could keep meet the government’s required basic net asset worth as a cable television service concessionaire, the annual results noted. The government finally renewed Macau Cable TV’s cable television concession for five years commencing April 22 this year on condition that the service was no longer exclusive. The renewed concession contract also allows the company to provide an Internet service alongside the city’s dominant

BESOR posts MOP39.4mln profit in 2013 As the bank restructures, the balance sheet is affected by the initial costs of its strategy Alex Lee

alex.lee@macaubusinessdaily.com

ortuguese bank Banco Espirito Santo do Oriente (BESOR) posted a profit of 39.4 million patacas during 2013. Last year’s total income was 44.8 million patacas, it was announced in the company’s annual report. ‘The evolution of the results of BESOR is mainly explained by the activities developed in the sectors of Corporate/Trade Finance that are related to important commercial ties between Mainland China and other countries where Banco Espirito Santo Group has a strategic position, mainly in Africa, Latin America and Europa,’ the bank explained in its report. ‘Macau is used as a platform between China and the Portuguesespeaking countries,’ it added. From its total income of 44.8 million patacas the bank paid 5.4

million patacas in taxes. BESOR also emphasised the importance the deposits had on the profits achieved. ‘The growth of deposits in the last years continues to assume a great significance in the present context. BESOR has been developing commercial activities in different segments in order to maintain a [substantial] level of deposits.’ In 2013, BESOR felt the first costs of the new strategy that is going to be adopted from 2014 to 2017. The Portuguese bank in Macau is now focusing on a threeyear plan to attract more affluent clients, such as freelance workers or public sector managers. Also, the bank is hiring workers and changing its computer systems to expand its activities in Macau.

Companhia de Telecomunicações de Macau SARL (CTM). In his remarks on the annual results, Mr. Lam noted that the company will enhance investment in equipment and an optic fibre coverage network for its future participation in integrated cable television, Internet and landline telephone services. Director of the Bureau of Telecommunications Regulation Ho Chi Leong told media in mid-April

that he believed the said integrated service, known as the triple play service, should be realised within three years. Nevertheless, Mr. Ho noted at the time that the number of licences to be issued for running the triple play service would only be decided once the Bureau took reference from the University of Macau’s final report on local television service to be released in September this year.

Vitasoy Macau sales set the pace for group M

has operations in Mainland China, Australia and New Zealand, North America and Singapore. The revenues from Macau and Hong Kong stores reached HK$1.98 billion, around 5 percent more than the previous year (HK$1.87 billion), while profits jumped 10 percent from HK$317 million to HK$347 million. ‘A consistent growth driven by focusing on core categories and on store execution,’ the annual report revealed. Macau and Hong Kong are Vitasoy’s biggest market, accounting for half of the group’s revenues and 70 percent of its profits. For the total of the group, sales were up 11 percent to HK$4.5 billion and the gross profit totalled HK$2.17 billion, 13 percent more than in the financial year of 2012/2013.

ore demand for milk and tea and a better distribution channel and product location in stores here has Macau’s market outperforming the group’s average growth of 11 percent and triple that of Hong Kong’s. The sales of Vitasoy in Macau went up 13 percent last financial year, as more clients chose its products fuelled by a better distribution and an improved location of its products in stores, the company said in a filing with the Hong Kong Stock Exchange. Without disclosing the absolute figures for Macau - they’re consolidated with Hong Kong - the maker of soy milk, tofu and tea highlighted the performance here in its annual results for the year ended March. The 13 percent growth rate in revenues in Macau was higher than the group’s average (11 percent) and more than three times that of Hong Kong’s market (whose sales increased 4 percent). Vitasoy also

A.L.

July 1, 2014

Macau

With a little help from our Beijing friends New Era buses are rolling on Macau’s roads, new UnionPay terminals are forbidden around casinos, and mainland tourists on transit visas can stay up to 5 days only. The solutions found for three of Macau’s big issues this year start today, but also illustrate the tardiness of the government here in tackling the territory’s problems and how Beijing’s hand is still crucial, experts say Alex Lee

Alex.lee@macaubusinessdaily.com

or months, they dominated the headlines. Who´s the new bus company taking charge of bankrupted Reolian? How will the authorities stop illegal money transfers using UnionPay terminals in Macau casinos? How can the abuse of transit visas by mainland tourists that crowd the territory be limited? In the aftermath of dozens of press conferences, hundred of quotes by experts and millions of dollars lost by the gaming operators in the stock market, the government chose July 1 as the deadline to implement the measures to resolve the aforementioned three problems: New Era has taken charge of Reolian, jewellery and pawnshops close to casinos are not allowed to add more UnionPay terminals and transit visa stays are now valid for five days, not seven. One is left, however, with a distinctly bitter taste: the Macau Government could have done more to tackle these problems, could have applied sterner measures and in the end only reacted when Beijing applied the pressure. “The feeling we have is that it’s always Beijing who has to solve Macau’s problems,” economist Albano Martins told Business Daily.

From buses to baccarat In all three cases, Beijing’s hand was present. Take the ‘Reoliangate’ debacle, for example. Despite being partly owned by a French company – Veolia – with years of experience in managing public bus firms around the world, including China, the Reolian operation was short-lived. It went bankrupt last October with a record number of complaints after a mere three years. The government here took almost a year to find a solution and it had a China stamp on it.

The feeling we have is that it’s always Beijing who has to solve Macau’s problems Albano Martins, economist

The Reolian concession was awarded to New Era, a newly formed company owned by the Nam Kwong group, which already holds TCM, another of the three bus companies here. Nam Kwong’s close ties with Beijing were probably decisive when the time came to decide, and left the conglomerate that also owns oil depots, hotels, garages, supermarkets and gas stations with 70 percent of Macau’s public bus market with TCM

and New Era combined. “The Nam Kwong option was comprehensible given the situation of Reolian, but you sense the invisible hand of China,” Mr. Martins said. But if Reolian was a local matter, the UnionPay crackdown had much wider implications involving millions of dollars in losses. The use of UnionPay terminals in Macau that recorded the transactions here as made in mainland China worked as an open highway for gamblers to get unlimited cash and to transfer money out of China skipping the stricter capital restrictions imposed by Beijing. Casino floors, pawnshops and jewellery stores around gaming venues were hot spots for this scheme, as mainland visitors made fake purchases in exchange for cash. Mainlanders are only allowed to take a daily limit of 20,000 yuan (MOP25,000) out of China.

The fake ban Folllowing a Reuters report in February uncovering the fraud, authorities in Beijing pressured Macau to react. Especially, when no-one knew how much money was being transferred outside China via the world’s gambling mecca. Analysts estimated that something like US6$ billion dollars in illegal transactions using UnionPay terminals were made here. The

South China Morning Post’s report last month that Macau authorities would impose a ban on all UnionPay terminals in casinos starting July 1 set gaming stocks in Hong Kong on a downward spiral with shares falling 3 to 5 percent in a single session. Investors did the maths: gamblers with less access to money means less revenues for casino operators. After weeks of blackout and denials of a July 1 ban, the government here decided on a half measure: The ban is only applied to new terminals and in shopping areas surrounding casinos. For Albano Martins, this is a nonpermanent measure only created to buy time for Beijing to understand and resolve the issue of illegal UnionPay transactions in Macau. In the end, the economist believes, China will demand the cessation of UnionPay terminals near casinos in Macau. But the worries about Macau’s schemes are not over. The visa transit loopholes were the latest to be tackled by Beijing, given that 80 percent of visitors travelling under such visas here do not continue their onward journey. With a limit of only two visits to Macau per year via China’s Individual Visit Scheme (ISV) millions of tourists and gamblers use transit visas to travel freely to Macau. Last year, of the 2.6 million Macau transit visas issued to mainlanders, only 20 percent traveled on to a third country, using Macau for a genuine stopover. The rest stayed

seven days in Macau, travelling or gambling. The government decided to reduce the allowed stay to five days, but analysts say it won’t prevent the abuse as the average stay for mainland tourists and gamblers in Macau is for two days only.

Losses and losses Despite assurances that the UnionPay ban and visa restrictions on mainlanders would not impact performance, the biggest casino operators suffered several headwinds in the first half of the year due to the negative news coming out of Macau regarding these issues. Investors feared that less gamblers and less money would threaten the secular success story of Macau’s gaming scene, an industry that has seen its revenues and profits climb two digits every year. Gaming stocks in Hong Kong went through the deepest and longest turbulence in share values in years since the crackdowns began in March. According to Morgan Stanley, the casino shares of the biggest operators here fell on average 25 percent since the beginning of the year with millions of dollars lost for shareholders. The Reolian, UnionPay and transit visa cases are set to be held up as an example of the future of Macau. “The problem solving here always comes through China,” concludes Albano Martins.

July 1, 2014

Macau

Prominent casino bosses join CE electoral college The city’s casino bosses – Pansy Ho, Francis Lui, Ambrose So and Angela Leong – are among the list of members that will elect the Chief Executive by Aug 31 Stephanie Lai

sw.lai@macaubusinessdaily.com

Lower budget cap for CE election campaign

he final name list of the electoral college members eligible for electing and nominating the city’s Chief Executive were announced yesterday. They include casino operator bosses Pansy Ho Chiu King and Francis Lui Yiu Tung, who belong to the commercial, industrial and finance sector, the one with most seats in the college. Of the eligible 5,448 voters electing electoral college members on Sunday, the Election Commission noted that it had recorded 4,505 voters that cast the ballots, meaning the turnout was 82.69 percent. Of these, 4,241 were considered valid votes. Altogether, some 400 electoral college members will nominate and elect the city’s Chief Executive on August 31; the Official Gazette confirmed the election date yesterday. According to current electoral rules, a candidate for Chief Executive now has to be nominated by 66 college members, which means the final election can accept up to 6 candidates running for the Chief Executive post. For the first time, Macau-based casino operator MGM China Holdings Ltd’s co-chairperson Pansy Ho and

Galaxy Entertainment Group Ltd’s vice-chairman Francis Lui are also amongst the electoral college members representing the business sector, alongside SJM Holdings Ltd’s chief executive Ambrose So Shu Fai – who was one of the electoral college members for the last MSAR Chief Executive election in 2009. Of 689 effective votes for electing the business sector representatives sitting in the electoral college, Ms. Pansy Ho was the college member with the third highest number of votes (600 votes) after local businessman António Ferreira and local banker Stanley Au Chong Kit; Mr. Francis Lui, on the other hand, received 572 votes, the same as former MSAR Chief Executive Edmund Ho Hau Wah’s brother Ho Hao Tong. Angela Leong On Kei, although an executive director of SJM Holdings Ltd, is representing the Legislative Assembly, sitting in the electoral college. According to electoral rules, there are 50 ‘political’ representatives sitting in the college, and they are from the city’s Legislative Assembly, the local delegation for the National People’s Congress and China People’s

No. of reps in Electoral College

Sector

No. of voters

Political Consultative Conference. The turnout for the commercial, industrial and financial sector, with 120 seats in the electoral college and thus the sector with the biggest proportion, was 83.39 percent, a figure that is still a distance away from the active participation of the voters electing the 59 labour sector representatives for the electoral college, whose turnout on Sunday was 92.14 percent – the highest when compared with the cultural sector, education sector, professional sector, sports sector and social service sector. (see table) As in the previous Chief Executive elections, the labour sector seats in the electoral college have been dominated by the local traditionalist Federation of Trade Unions. Familiar names from the local prominent Ma family – businessmen Ma Iao Lai, Frederico Ma Chi Ngai and Ma Iao Hang – are again electoral college members, the final name list shows. Mr. Ma Iao Lai was the president of pro-Beijing trade association Macau Chamber of Commerce while his brother, Mr. Ma Iao Hang, is an electoral college

No. of eligible voters

The First Sector

120

708

849

83.39%

The Second Sector

Cultural Sector

424

637

66.56%

Education Sector

253

292

86.64%

Professional Sector

463

576

80.38%

Sports Sector

539

668

80.69%

Labour Sector

844

916

92.14%

Social Service Sector

1274

1510

84.37%

Total: 4505

Total: 5448

* Final voting result for the electoral college members

member sitting in the sports sector. Speaking to Business Daily on Sunday following the election process, Mr. Ma Iao Lai remarked that the incumbent Chief Executive Fernando Chui Sai On has been able to continue the work of his predecessor Edmund Ho to build a favourable business environment for Macau; but Mr. Ma declined to comment on other possible candidates’ names aside from Mr. Chui, who was by far the only one that has openly confirmed his intention of running for the Chief Executive post. According to the Election Commission’s tentative schedule, the full name list of the electoral college members will be gazetted by July 10 after the vote audit committee has run through the procedure of delivering the college members’ names to the Court of Final Instance and the Election Commission.

Turnout

Industrial, Commercial and Financial Sector

The Third Sector

The Official Gazette published yesterday noted that the campaign budget for each candidate participating in the upcoming 4th Chief Executive Election is capped at about 5.77 million patacas (US$722,771), which is even lower than the campaign budget for the last election in 2009 at 8.94 million patacas. Article 55 of the Chief Executive election law states that the campaign budget ceiling should be calculated as 0.02 percent of the total budgeted revenue for the city, which for this year should be 30.7 million patacas. Business Daily has approached the government for the rationale for the budget cap rule but failed to obtain an answer by the time the story went to press.

Source: Vote audit committee Note: The ‘’political’’ representatives sitting in the electoral college for electing the Chief Executive, also known as the ‘’fourth sector’’, are from Legislative Assembly (22 members), and the local delegation for National People’s Congress (12 members) and Chinese People’s Politicial Consultative Conference (16 members). The electoral college also includes 6 religious representatives, which are picked from negotiations amongst local religious associations or groups instead of through an election.

July 1, 2014

Macau

Corruption net thrown wider

Realtors: Keep calm and carry on

Legislators have approved the outline of a bill that extends its anti-corruption scale; those attempting to bribe any non-Macau public officials will face severe punishment once the bill passes its final reading in the Assembly

The city’s real estate agents whose operation venue is registered for residential or industrial use may now resume operations in their original workplace with a five-year provisional licence, until June 30, 2015

Kam Leong

Aries Un

newsdesk@macaubusinessdaily.com

egislative Assembly members yesterday passed the first reading of the bill against corruption in external trades which prohibits any act of bribery of foreign public officials and officials of international organisations. The Commissioner of the Commission Against Corruption (CCAC), Fong Man Chon, explained that any Macau citizen offering bribes inside or outside the territory to any civil servants working for any other government or international public organisation will be considered as having violated the law. Currently, Macau does not have any regulations combating external bribes. The bill is expected to complete the current anti-corruption system by extending its sanctioning scope from public and private trades of the city to external trades, according to Mr. Fong. The bill is also seen as being in compliance with the United Nation’s Convention Against Corruption, which came into effect in February 2006 in China, Hong Kong and Macau. Offering bribes to public servants of China, Hong Kong and Taiwan also fall under the terms of the provision, said Mr. Fong. “The terms ‘Foreign Public Officials’ and ‘Officials of Public Organisations’ are limited to only be used in terms of countries,” Mr. Fong said. Hence, Macau, as a Special Administrative Region of China, has

to clearly define the scope of its laws. Legislators unanimously approved the outline of this bill, which Mr. Fong predicted will “gain three advantages in one single move”. According to an earlier discussion by the Executive Council, CCAC is authorised to assume the responsibility to investigate any related corruptive acts. Offenders will face a fine of up to 10 million patacas and a maximum sentence of three years in prison suggested by the outline of the bill and article 339 of Macau’s Penal Code against bribery acts. However, such punishments will not be applied to those receiving bribes since many other countries have their own laws to combat corruption, according to Mr. Fong.

he amended estate agents bill passed on the first reading at the Legislative Assembly yesterday. It allows the city’s real estate agents to apply for a provisional licence of operation, even if their registered operation venue is for residential or industrial use. Such a licence will only be valid until June 30, 2015, amounting to a total of five years of the traditional period during which the operators mentioned above may look for other legitimate venues for their real estate operation. Nonetheless, some legislators - including Au Kam San, Kwan Tsui Hang, Ho Ion Sang and José Pereira Coutinho - have questioned why it took a year for the authorities to bring the law back to the Legislative Assembly for discussion and the possibilities of similar cases across the city. The head of the Legal Affairs Bureau, Cheong Wen Chon, who also attended the general discussion, remarked that the legal significance behind the law was complex although it only involved minor adjustments, given the prevalence of properties in the city. An in-depth analysis, therefore, was necessary before modifying the law. When questioned about the efficiency of introducing modifications to a fresh law this

time, Lau Si Io, Secretary for Transport and Public Works, explained that unlike other complicated bills that require more effort and time, this estate agents bill would be easier to modify as it only involved minor amendments. The estate agents law, which came into force on July 1 last year, saw a number of applicants ineligible for the application for the provisional licence due to their registered operation failing to meet the legal conditions imposed.

July 1, 2014

Macau Brands

Trends

Summer Chocolate Raquel Dias newsdesk@macaubusinessdaily.com

f you appreciate the good things in life, then you’ll definitely like chocolate. Actually, it’s more than that; you like good quality chocolate. Brands like Cadbury’s, for example, are not allowed to market themselves as ‘chocolate’ in most EU countries, as cocoa is virtually non-existent in their list of ingredients. Luckily, in recent times the market has presented us with no shortage of expensive, high quality chocolate. The other thing about this treat is that it’s usually associated with winter days. Drinking a cup of hot chocolate has to be the best way to spend a cold winter Sunday at home. However, this need not be the case. If you pass by Godiva, the premium Belgian chocolate brand established in 1926, you’ll see what we mean. Not only do they have some delicious ice cream - a treat available during summer only - but special iced drinks as well. The famous Chocolixir flavours have new limited Matcha flavours. Feel free to indulge in a Dark Chocolate Raspberry or a Dark Mint Chocolate. Topped with vanilla cream and Japanese Matcha powder, they’re certainly a different way to enjoy summer. Godiva’s signature chocolate dip strawberry is also a must and refreshing in these hot days. The brand’s chosen name, after the English noblewomen who rode naked on her horse to protest her husband’s taxation laws, suggest bravery and beauty, wrath and tenderness, much like our beloved chocolate. Luckily for us, the Chocolatier has two branches in Macau ready to serve up these tantalising treats.

May close to a million The number of people visiting Macau on package tours reached 925,000 in the month of May alone

here was a 21 percent increase in the number of visitor arrivals to Macau in the month of May alone over that of the previous year. That means that as many as 925,000 visited the territory on package tour arrangements. For the whole first five months of the year, the total number of visitor arrivals on package tours reached 4.5 million by May over the same period last year. According to the latest official data from the Statistics and Census Service Bureau, the increase was mainly attributable to Labour Day holidays, during which visitors from mainland China accounted for 734,000 of the total, an increase of 25 percent. Of these, almost one third at 240,000 came from Guangdong Province. In addition, the number of visitors from Taiwan jumped 50 percent to 62,000, while those from Hong Kong increased slightly by 3 percent to 33,000. South Korean visitor numbers, however, dropped 2 percent to 27,000. Two percent more residents travelling outbound of Macau chose the services of travel agencies, accounting for 116,000 of the total

departures, while those travelling on package tours totalled 47,000. The majority of outbound travellers at 70 percent chose mainland China as their primary destination, followed by Taiwan at 8 percent and South Korea at 7 percent. In the first five months of 2014, outbound residents totalled 585,000, up by 1 percent year-on-year.

Drop in guestrooms Some 99 hotels and guesthouses were operating at the end of May,

50pct jump in Taiwan visitor numbers

providing 28,000 guest rooms, down 1 percent year-on-year; 5-star hotels accounted for 66 percent of the total supply with 18,000 rooms. A total of 886,000 guests checked into hotels and guesthouses during the month of May, down by 3 percent from a year ago. Of these, guests from Hong Kong decreased by 29 percent to 103,000. Guests staying in 5-star hotels accounted for 58 percent of the total. In addition, the average length of stay of guests was 1.4 nights, up slightly by 0.1 nights compared to May last year. The average occupancy rate of hotels and guesthouses increased by 7 percentage points year-on-year to 86 percent, with 4-star hotels leading at 88 percent. In the first five months of the year, hotel guests totalled 4.4 million, up by 2 percent over the same month last year. And the average occupancy rate stood at 86 percent, an increase of 7 percentage points. Between January and the end of May, visitor-guests accounted for 70 percent of the total overnight visitors, down by 2 percentage points over the first five months of 2013. S.F.

Residential transactions drop a quarter From April to May, the prices of homes per square metre decreased 20.1 percent. However, year-on-year they increased by 7.2 percent. Coloane is the most expensive region of Macau Alex Lee

alex.lee@macaubusinessdaily.com

he number of residential transactions in Macau decreased by 25.8 percent to 741 in May from 998 transactions in April, the Financial Services Bureau announced yesterday. The price of homes also fell from 131,589 patacas per square metre to 105,260 patacas per square metre. Since last month, there has been a 20.1 percent reduction in the price of homes. In May, Coloane was the most expensive area to buy a home. On average, a square metre cost 128,134 patacas. Macau Peninsula came in second (103,837 patacas per square metre) while Taipa was the cheapest (101,424 patacas per square metre) in terms of residential transactions. Meanwhile, the biggest volume of transactions occurred on the Macau Peninsula with a total of 594 transactions (80.2 percent) out of 741. Taipa was second (106; 14.3 percent) followed by Coloane (41; 5.5 percent).

Prices grow 7.2 pct y-o-y Whilst prices may have dropped by 20.1 percent from April to May, this still represented an increase of 7.2 percent compared to May 2013. In May, a square metre cost on average 105,260 patacas; last year it was priced at 98,187 patacas.

Coloane was where the cost of residential transactions grew most steeply with an increase of 23.9 percent (30,535 patacas) from 97,599 patacas per square metre to 128,134 patacas. Taipa registered the second largest increase from 83,294 patacas to 101,424 patacas (10,130; 17.98 percent). On Macau Peninsula, prices

increased 3.6 percent from 100,150 patacas to 103,837 (3.6 percent). At the same time, there was also a reduction in the number of house transactions. In May 2013, there were 741 transactions, a year-onyear decrease of 45 percent (606) from 1,347 transactions registered in 2013.

July 1, 2014

Macau

Iao Kun applies to list in Hong Kong I

Casinos lead gain as HK, China shares rise

hina shares rose early yesterday, lifted by a surging aerospace sector and broadly stronger banks while Hong Kong markets also advanced with Macau casinos leading gains. The Hang Seng Index inched down 0.1 percent to 23,190.72 points. The China Enterprises Index of the leading offshore Chinese listings in Hong Kong was up 0.3 percent. For the quarter, they were up 5.1 and 3.0 percent, respectively. The CSI300 of the leading Shanghai and Shenzhen A-share listings rose 0.8 percent, while the Shanghai Composite Index was up 0.7 percent at 2,050.07 points. Both mainland indexes were holding onto quarterly gains of 1.0 and 0.8 percent, respectively. “The market sentiment is stabilizing. We didn’t see a cash crunch as we saw this time last year, thanks to the policy of targeted loosening,” said Guo Yanling, senior analyst at Shanghai Securities. “But the momentum is not enough to lead to an overall rebound, as the strong performance of new initial public offerings will continue to divert funds from existing stocks,” she said. A fourth new mainland listing - Shanghai Lianming Machinery - surged the maximum allowed 44 percent on its trading debut in Shanghai yesterday. The three listings that started trading on Thursday in Shenzhen rose 10 percent, the

maximum allowed on days after the first one, as they did on Friday. Guo said the outlook for the A-share market in coming months is brightening, with improved liquidity conditions and expectations for targeted stimulus measures in the second half. In Shanghai, four aerospace firms soared the maximum allowed 10 percent. Analysts said investors chased defencerelated stocks on speculation tensions with neighbouring countries would spur Beijing to spend more on the sector. Macau gambling firms were again key outperformers on the Hang Seng. Galaxy Entertainment Group climbed 3.9 percent to its highest since April 28, after its founder and chairman Lui Che-Woo said on Friday that China’s

slowdown won’t hurt business. Sands China also gained 2 percent. China Telecom Corp was up 3.0 percent and China Unicom Hong Kong 0.7 percent after they received high-speed 4G mobile network test licences for the FDD-LTE standard in 16 cities late on Friday. Rival China Mobile dropped 0.5 percent, the largest drag on Hong Kong’s benchmark index. Tencent Holdings inched up 0.1 percent to a 3-1/2 month high after China’s biggest listed tech firm said it would buy 20 percent of online classifieds company 58.com Inc for US$736 million. Hong Kong will be closed today for a holiday. Reuters

ao Kun Group Holding Company Limited has announced it has applied to list its shares on the main board of the Hong Kong Stock Exchange. The company said that the Exchange will review the application for three days, and that if it accepts the application for further consideration, it will post details on the Exchange website. The junket operator has VIP gaming rooms in StarWorld, Galaxy Macau, Sands Cotai Central, City of Dreams Macau and Le Royal Arc casinos. Last year, Iao Kun posted a net income of US$5.4 million (43 million patacas). However, it incurred extraordinary expenses related to the King’s Gaming, Bao Li Gaming and Oriental VIP Room acquisitions.

July 1, 2014

Macau

Caesars, Genting vie for New York casino licences Last year, Caesars Entertainment Corp sold its Macau golf course. The U.S.-focused casino firm has long coveted an Asian operation, but was unable to parlay its Cotai plot into a gaming operation Freeman Klopott and Christopher Palmeri

he fight for four New York state casino licenses is set to intensify as operators including Caesars Entertainment Corp. and Genting Bhd. jockey for access to the 8.3 million residents of the biggest U.S. city. Formal bids were due yesterday (Macau time) at the state Gaming Commission, which in April received US$1 million filing fees from 22 entities. At least three filers, including Foxwoods Resort Casino of Connecticut, have since dropped out. The biggest prize among three regions approved for casinos is the Catskill Mountains-Orange County area, parts of which are only 50 miles (80 kilometres) from New York City. The commission must balance the goal of economic growth in the Catskills, a once-booming resort destination, against the potential for more tax revenue in Orange County. “This is turning out to be who can generate the most revenue for the state,” said Charlie Barbuti, the supervisor for Liberty, a Catskills town where Foxwoods had planned its casino. The company said in a letter to the local newspaper that it was unable to secure financing because of the prospect of competition in Orange County. “We can’t generate the same revenue as those closer to a city of 8 million people,” Barbuti said.

Voter approval New York became the largest U.S. state to allow non-tribal Las Vegas-style casinos when voters approved a constitutional amendment in November. The state expects to raise an additional US$430 million from

gambling annually once the four casinos open in the next two years, according to a May 30 report by Comptroller Thomas DiNapoli. The cash would be split among the host municipalities and schools across the state. The Empire State is entering the casino industry at a time of increasing market saturation in the Northeast. In Atlantic City, New Jersey, the casino cash haul has fallen about 44 percent since 2006 as gambling options expanded in Maryland and Pennsylvania. Revel AC Inc.’s casino in Atlantic City has filed for bankruptcy twice since opening in 2012, and is now seeking a buyer at auction. Caesars said last week it would close its Showboat property there on Aug. 31 amid falling revenue and increased competition. “The proliferation of gaming facilities in neighboring states in recent years may reduce New York’s ability to attract out-of-state gamblers,” DiNapoli said.

Picking winners The gaming commission said it will pick winners before year-end. Economic development and potential tax revenue will make up 70 percent of the judging criteria, DiNapoli said. Orange County, with its potential to generate more revenue because of its proximity to the metropolitan area, won’t carry an advantage over the Catskills, according to Robert Williams, acting executive director of the commission. The intent of the law “is to provide maximum benefit to the state through bringing economic benefit to munic-

ipalities that have been economically disadvantaged,” Williams wrote in a June 16 letter to John Bonacic, the Republican who heads the senate’s gambling committee. Bonacic, who represents areas in the Catskills and Orange County, said by e-mail that Foxwoods’ dropping out of the race already shows the potential impact of casinos in Orange County. “However, I do believe that proposals in the Catskills will be strong contenders for the licenses, as they most fit the spirit of the legislation,” Bonacic said. The original casino measure Bonacic pushed didn’t include Orange County, he said. It was added when Governor Andrew Cuomo sent the final version to lawmakers after negotiations with legislative leaders, the lawmaker said.

Test preparation “When I looked at that, I said, ‘Wow, if I were a public casino company, I’d certainly look in Orange County if they allow you to bid,” said Jeff Gural, chief executive officer of American Racing & Entertainment LLC. The company is looking to add a full-scale casino to its Tioga Downs racetrack in Nichols, in the Southern Tier along the Pennsylvania border, one of the three regions. The third is the area near Albany, the capital. Rich Azzopardi, a Cuomo spokesman, didn’t respond to a request for comment. Empire Resorts Inc., which wants to build a US$750 million casino near the Monticello racetrack in the Catskills, where it already operates a video slot

machine parlor, isn’t worried, said Charles Degliomini, a spokesman. “We feel like we’re the students who are overly prepared for the tests,” he said. “We believe in this process, and we trust there’s going to be a fair outcome.”

Tuxedo junction Monticello is in Sullivan County, where unemployment averaged 8.7 percent in 2013. That compares with 7.2 percent in Orange County and 7.7 percent state-wide, according to the state Labour Department. Genting, the Malaysian gambling giant that already runs a video-slot parlour in the New York City borough of Queens, wants to build a resort-casino in Tuxedo, in Orange County, that would incorporate a Renaissance fairgrounds and a ski mountain, according to plans filed with the town. Tuxedo is about 45 miles northwest of Manhattan. Stefan Friedman, a spokesman, declined to comment. Caesars would build a $750 million casino in Woodbury, 55 miles north of Manhattan and near Woodbury Common Premium Outlets, a destination shopping mall. The company is collecting data to underscore Orange County’s economic hardships, said Jan Jones Blackhurst, head of government relations for the Las Vegas-based operator. “Our position is you can have one in Orange County and one in the Catskills, depending on how you design them,” she said. “New York would be leaving too much on the table to exclude Orange County.” Reuters

July 1, 2014

Greater China

Weak yuan disappoints investors The Chinese currency has notched up a ratio of minus 2.2, the worst six-month performance since the second half of 2010

he first half of 2014 has been an forgettable one for the Chinese currency, so far Asia’s worst performer. Borrowing in an equal-weighted basket of the Japanese yen, Swiss franc and the U.S. dollar and investing the proceeds in the Chinese yuan, would have handed investors a negative return of 3.4 percent in the first six months of 2014, a Thomson Reuters analysis shows. Carry trades -borrowing in loweryielding currencies and investing in higher-yielding ones- is a strategy pursued by investors especially in times of low market volatility. The renminbi’s underperformance stands out even more starkly if seen through the lens of the Sharpe ratio, which takes into account percentage returns of the currency minus riskfree rate returns adjusted for currency standard deviation or swings. Using that metric, the Chinese currency has notched up a ratio of minus 2.2, the worst six-month performance since the second half of 2010, according to Thomson Reuters data. In comparison, on a Sharperatio basis, the renminbi posted a rate of return of 2.8 in the corresponding period of last year. That is because while currency market volatility in general has been subdued for much of this year, the renminbi’s moves have been unusually volatile thanks to the People’s Bank of China’s stance towards the currency. “The underperformance of the yuan in the first half has been led by the central bank’s policies to stamp out hot money inflows into the market,” said Dominic Bunning, a senior currency strategist at HSBC in Hong Kong.

The underperformance of the yuan in the first half has been led by the central bank’s policies to stamp out hot money inflows into the market Dominic Bunning, senior currency strategist, HSBC

“Now that policy has largely succeeded, we expect a return to a path of modest appreciation in the second half,” said Bunning, who expects the yuan to strengthen to 6.14 by the end of 2014. That performance changes only marginally, with the overall trend to remain intact, even if one of the borrowing currencies is substituted with other low-yielding currencies such as the euro. In at least two different phases in February and April, it brought U.S. dollars aggressively via its agent banks in the currency markets and fixed the daily midpoint -around that the currency is allowed to tradesharply weaker against the dollar, according to traders. It also widened the currency trading band to 2 percent in March from a previous 1 percent, giving it greater flexibility to carry out its

currency market policies. But the renminbi’s pronounced weakness in the first half has started to make some investors cautiously optimistic about a rebound in the currency in the second half. On Monday, the yuan stood at 6.2070 per dollar, just below its strongest level in more than two months. Investor sentiment on most emerging Asian currencies improved over the last two weeks, with the first bullish bets seen on China’s yuan in four months as the currency showed signs of stabilising, a Reuters poll showed. With China embarking on a wave of reforms in recent weeks aimed at simplifying the movement of funds across borders, market watchers believe the central bank is satisfied with the level of the currency for now, another sign of likely slower gains. Reuters

PMI seen at a six-month high Growth in the world’s second-biggest economy is stabilising

hina’s vast factory sector probably registered its best performance this year in June as growth quickened to a six-month high, further signalling that its economy is regaining strength after an unsteady start to 2014. A Reuters poll of 19 economists showed the official Purchasing Managers’ Index (PMI) is forecast to rise to 51 in June, edging further from the 50-point level that denotes growth from contraction in activity on a monthly basis. The PMI stood at 50.8 in May. “The effect of stabilising economic growth will be more obvious in June,” economists at Industrial Bank said in a note. “It will lessen the market’s pessimistic expectations.” A PMI reading of 51 would be the best since December and the latest sign that growth in the world’s second-biggest economy is stabilising, after hitting an 18-month low of 7.4 percent

51 PMI June forecast

in the first quarter. Still, some investors are likely to worry that the economy is not out of the woods due to risks from the cooling housing market. Accounting for about 15 percent of China’s economy, the real estate sector is the

country’s biggest wild card this year in terms of growth, some economists say. Home prices retreated in May for the first in two years, while sales of new homes and new construction have fallen sharply. Pessimistic analysts fear

that a sharper-than-expected downturn in the real estate market could strain the banking system and hobble the economy, and are therefore urging authorities to relax investment rules in the sector to bolster growth. But the property market

aside, China’s economy has recently shown encouraging signs of stabilisation. Growth in factory output, retail sales and fixed asset investment all either met or beat market expectations last month, with retail sales notching its best showing in five months. The first piece of economic data to be released by the government each month, the official PMI is closely watched by the market and is one of five similar surveys of the manufacturing and services sectors. Reuters

July 1, 2014

Greater China Bank of China is the fourth worldwide bank in profits. ICBC is the top one.

Hon Hai buys a stake in SK C&C The world’s biggest electronics component maker, said yesterday it had bought a 4.9 percent stake in South Korean IT services firm SK C&C for 381 billion won (US$376.59 million). The move marks Hon Hai’s second merger in less than two months as part of a broader effort to diversify away from the contract manufacturing business. Hon Hai, the major supplier of iPhones and iPads and also known as Foxconn, paid 155,500 won per share for the stake, which was for “long-term investment”, according to a company statement.

Xinhua online news launches IPO The online arm of China’s official Xinhua news agency said it is seeking to raise US$240 million in an initial public offering, the second state media firm to go public as Beijing looks to transform the sector into a more commercial one. Xinhuanet Co Ltd, which plans to list in Shanghai, is aiming to raise about 1.5 billion yuan (US$240 million) by selling 51.9 million shares, it said in its prospectus posted on the China Securities Regulatory Commission website on Friday.

Fund managers to increase investment Chinese fund managers said they would raise the proportion of their portfolios invested in stocks over the next three months, marking a bounce from a 21-month low in May as sentiment rose on an expected loosening of liquidity, according to a Reuters poll. Fund managers said China’s central bank’s reduction of reserve requirement ratios (RRR) for some lenders and the slowing pace of drainage in the money markets were the key factors that would help keep liquidity conditions loose. Average recommended stock weightings in June rose to 79.4

Party chief of Guangzhou dismissed in graft probe Wan Qingliang was dismissed from his post as Party chief of Guangzhou City in south China’s Guangdong Province, said the Organization Department of the Communist Party of China (CPC) Central Committee here yesterday. The CPC Central Commission for Discipline Inspection (CCDI) announced on Friday that Wan was under investigation for suspected serious violations of disciplines and laws.

China, Russia trade volume rises Trade volume between China and Russia rose 1.8 percent between January and May from a year earlier, according to data released on Sunday by China’s General Administration of Customs (GAC). China’s exports to Russia in the first five months of this year edged up 1.6 percent year on year to 114.08 billion yuan (US$18.55 billion), and imports from Russia in the period rose 2 percent to 111.89 billion yuan, said the GAC.

Chinese banks lead global China’s banks account for 32 percent of the industry’s global earnings

op banks in China accounted for almost one-third of a record US$920 billion of profits made by the world’s top 1000 banks last year, showing their rise in power since the financial crisis, a survey showed yesterday. China’s banks made US$292 billion in aggregate pre-tax profit last year, or 32 percent of the industry’s

global earnings, according to The Banker magazine’s annual rankings of the profits and capital strength of the world’s biggest 1,000 banks. Last year’s global profits were up 23 percent from the previous year to their highest ever level, led by profits of US$55 billion at Industrial and Commercial Bank of China (ICBC). China Construction Bank, Agriculture

Bank of China and Bank of China filled the top four positions. Banks in the United States made aggregate profits of US$183 billion, or 20 percent of the global tally, led by Wells Fargo’s earnings of US$32 billion. Banks in the Eurozone contributed just 3 percent to the global profit pool, down from 25 percent before

Iranian oil imports to China Concerns about unrest in Iraq disrupting oil supplies meant that supplies as more stable than Iraqi crude

hina’s Iranian crude imports rose by more than a third in May to the second highest on record, helping keep overall Asian buying above the level allowed under a deal that eases some Western sanctions, government and tankertracking data showed. China, Tehran’s largest oil client, has since late 2013 been stepping up purchases after a landmark November nuclear deal eased some sanctions on Iran and has been making up the main portion of stronger Asian imports since then. Iran’s biggest buyers - China, India, Japan and South Korea together took in 1.26 million barrels per day of the Islamic republic’s crude last month, up 8 percent from the same period a year ago, government and tanker-tracking data showed. For the first five months of 2014, their imports averaged 1.25 million bpd, up 25.3 percent from a year ago, keeping Tehran’s exports above the 1 million bpd cap that it agreed under a deal with the West for six months to July 20. There are no indications that Washington will loosen up on the cap until a full nuclear deal with Tehran is reached, but there have been some signs of improving ties, including on how to respond to an Islamist militant insurgency in northern Iraq. An oil industry expert in Asia, who declined to be identified, said concerns about unrest in Iraq disrupting oil supplies meant that some importers

KEY POINTS

Catherine Ashton, P5+1 and Iran foreign ministers in Geneva negotiations. Nuclear programme talks’ evolution is key for Iran oil sale.

May Iran crude imports rise 8 pct y/y to 1.26 mln bpd Asia’s Jan-May Iran oil imports hit 1.25 mln bpd, up 25 pct Tanker movements show Iranian ship loadings rise again in May Some viewing Iranian imports more favourably due to Iraq oil risks

were also viewing Iranian supplies as more stable than Iraqi crude. Tough western sanctions since 2012 have slashed Iran’s oil exports and crippled its economy by choking the flow of foreign exchange, but some of those measures were relaxed in November’s diplomatic deal in return for Tehran curbing its nuclear activities and shipments have been up from last year. With less than four weeks left until a late-July deadline to strike

an accord, Western officials have said Iran and six world powers have made very little progress towards striking a deal that could end years of hostility. Asian buying volumes have held consistently above 1.1 million bpd since January - excluding oil going to other destinations such as Turkey and Syria - indicating the six-month export target will be missed. Iran’s total crude loading also seem to have rebounded in May

July 1, 2014

Greater China

Shanghai firms meet carbon targets

US$292 billion Chinese banks 2013 aggregate pre-tax profit

profits the 2008 financial crisis, the study showed. Italian banks lost US$35 billion in aggregate last year, the worst performance by any country. Banks in Japan made US$64 billion of profit last year, or 7 percent of the global total, followed by banks in Canada, France and Australia (US$39 billion in each country), Brazil (US$26 billion) and Britain

(US$22 billion), The Banker said. The magazine said ICBC kept its position as the world’s strongest bank, based on how much capital they hold - which reflects their ability to lend on a large scale and endure shocks. China Construction Bank jumped to second from fifth in the rankings of strength and was followed by JPMorgan, Bank of America and HSBC. ICBC, which took the top position last year for the first time, was one of four Chinese banks in the latest top 10. Wells Fargo has this year jumped to become the world’s biggest bank by market value, after a surge in its share price on the back of sustained earnings growth. Its market value is US$275 billion, about US$75 billion more than ICBC. The Banker said African banks made the highest returns on capital last year of 24 percent - double the average in the rest of the world and six times the average return of 4 percent at European lenders. Reuters

The permits were enough to allow seven laggard firms to meet their targets

total of 7,220 tonnes of CO2 permits were auctioned by the Shanghai carbon exchange yesterday, the bourse said, enabling local firms to meet a deadline to comply with their carbon targets. The permits, sold to companies at a minimum price of 48 yuan (US$7.73) per tonne, were only a small fraction of the 580,000 tonnes of permits put on offer by the Shanghai government, but were enough to allow seven laggard firms to meet their targets, the exchange confirmed. “We didn’t expect a higher bidding price from the auction -all the big shortfalls had been filled if you look at the trading volumes since the auction was announced,” said Tong Yan, founder of ideacarbon, a Chinese consultancy. The 191 local firms covered by the scheme faced yesterday deadline to buy permits to cover their emissions in 2013. The secondary market for permits closed last Friday, with a final price of 39.4 yuan per tonne. Companies buying permits have to surrender them to the government by June 30 to cover their emissions, but a shortage of permits on the market had made it difficult for some of the bigger emitters to comply, forcing Shanghai to announce the last-day auction. Seventy percent of carbon permits on the exchange are allocated to large state firms such as the Baoshan Iron and Steel Corp., Huaneng Power, and Shenergy Corp, which has impeded liquidity.

We didn’t expect a higher bidding price from the auction -all the big shortfalls had been filled if you look at the trading volumes since the auction was announced Tong Yan, founder of ideacarbon

But after a rise in activity in the last few days of trade, only seven of the 191 companies had not yet met their targets, according to an official note published on Friday. “There is limited demand from the remaining seven companies, and the ratio of sellers to buyers was rising in the last couple of days, which put pressure on prices and encouraged most companies to buy all they needed from the market,” said Tong. The Shanghai Environment Energy Exchange launched the market last November, and is one of seven pilot carbon trading exchanges in China. Reuters

above U.S. ceiling Local govts seek 1.5 trillion yuan some importers were also viewing Iranian

The calls for funds suggest China is still reliant on heavy investment to power its economy

back up to about 1.38 million bpd, for arrival to destinations mostly in June, according to sources who track tanker loadings.

China’s imports near record Iranian crude imports by China expanded 36 percent in May from a year ago to the second highest on record of 757,900 bpd, pushing up its average imports for January-May higher to nearly 50 percent on a

year earlier. India’s imports fell 0.6 percent to 255,200 bpd in May from a year ago, but its intake in the first-five months of the year still was up 37.7 percent at 310,500 bpd. South Korea’s imports fell 43.3 percent from a year ago to 66,500 bpd of Iranian crude for the month. Shipments to Japan fell by 23.7 percent to 181,892 bpd last month, trade ministry data showed yesterday. Reuters

even Chinese regional governments are seeking at least 1.5 trillion yuan (US$241.7 billion) worth of state and private investment to bolster growth in the world’s second-largest economy, local media said yesterday. Governments in the provinces of Guangdong, Gansu, Jiangxi, Shaanxi and Henan as well as those in the cities of Chongqing and Changsha are seeking financing for nearly 1,200 projects from state and private investors, China Business News said. Most of the requests for investment were issued in June with the exception of Henan province in central China and Changsha city further south. The concerted requests for investment is the latest attempt by authorities to lift China’s flagging economy, where growth cooled to an 18-month low of 7.4 percent between January and March, but has recently shown signs of stabilisation. The calls for funds suggest China is still reliant on heavy investment to power its economy, but they also underscore officials’ intent to clean up indebted public finances by allowing private investors to provide some muchneeded funding. Some governments did not announce their appeals for funds on their websites, but the solicitations are all reported by a range of state media including the Xinhua news agency. For Shaanxi province in western China, authorities are seeking

1,200

projects need private funding for developing investment for 39 projects worth 270 billion yuan, the government said in a statement on its website earlier this month. The projects include the construction of railways, subways, information technology infrastructure, gas development works and cultural investment, the Shaanxi government said. Further west in Gansu province, the local government is seeking funding for 100 projects that include the construction of transport networks, power grids and water conservancy works, Xinhua said in a report last week. No figure was given on the value of the projects. Henan authorities had sought 385 billion yuan of funding for 400 projects in February, according to a statement on the government’s website, while officials in Changsha had sought 101 billion yuan of financing for 86 projects in May. Reuters

July 1, 2014

Asia Philippines domestic borrowing plan set The Philippine government plans to raise as much as US$3.09 billion from the domestic debt market in the third quarter, up 15 percent from actual debt sales during April-June, it said yesterday. The Bureau of Treasury plans to sell 60 billion pesos worth of Treasury bills and 75 billion pesos worth of seven-, 10- and 20year Treasury bonds between July and September, it said in a notice to government securities dealers. It raised 116.84 billion pesos from bills and bonds in the second quarter.

S.Korea delays decision on rice market opening South Korea has delayed a decision on how it will open its rice markets to allow more time to consult with farmers and the public, senior government officials said yesterday. Deputy Trade Minister Choi Kyong-lim told reporters in a briefing that a policy decision, originally expected in June, would come after a public hearing held by a parliamentary committee. With the country’s 20-year-old agreement with the World Trade Organization allowing Seoul to cap exports set to expire at year-end, the government is under international pressure to begin opening its rice markets to more foreign competition.

NZ business confidence falls New Zealand business confidence fell but was still relatively strong in June, as higher interest rates, softer commodity prices, and a strong exchange rate depressed sentiment, an ANZ Bank survey showed yesterday. The survey’s headline measure of sentiment showed a net 42.8 percent of respondents expected the economy to improve over the year ahead, from a net 53.5 percent in May. The monthly business outlook survey, which hit a 20-year high in February, showed a net 45.8 percent of businesses expect to grow in the next 12 months from 51.0 percent.

Japanese shopping mall opens in Cambodia AEON Mall, Japan’s single- largest shopping mall developer and retailing operator, officially opened yesterday. Cambodian Prime Minister Hun Sen and visiting Japanese Foreign Minister Fumio Kishida jointly inaugurated the country’s largest modern mall, which is reportedly built at a cost of more than US$200 million. “For Cambodia, this is a giant shopping mall,” Hun Sen said. “ The investment shows Japanese confidence in Cambodia’s political stability and favourable climate for businesses.” Kishida said the mall would contribute to the development of Cambodian economy and tourism.

India to overhaul labour to create jobs Labour unions cutting across party affiliations have opposed the state government’s move and have asked Modi to intervene

rime Minister Narendra Modi has set in motion the first major revamp in decades of India’s archaic labour laws, part of a plan to revive the flagging economy, boost manufacturing and create millions of jobs. Successive governments have agreed labour reform is critical to absorb 200 million Indians reaching working age over the next two decades, but fears of an ugly union-led backlash and partisan politics have prevented changes to free up labour markets. Now, with the benefit of a single party majority in the lower house of parliament for the first time in 30 years, laws that date back to just after the end of British rule are set for an overhaul. Officials at the labour ministry say this is a top priority in the government’s first 100 days in office. India has a forest of labour laws, including anachronisms such as providing spittoons in the work place, and are so complex that most firms choose to stay small. In 2009, 84 percent of India’s manufacturers employed fewer than 50 workers, compared to 25 percent in China, according to a study this year by consultancy firm McKinsey & Co.

Australian inflation gauge steady Inflation would remain within RBA’s target band over the next year due to weakness in domestic wage growth

private gauge of Australian inflation was unchanged in June as prices for fruit and vegetables fell back, hinting at a moderation in inflationary pressure after a couple of high months. The flat reading for TD SecuritiesMelbourne Institute’s monthly measure of consumer prices followed increases of 0.3 percent in May and 0.4 percent in April. The annual pace of inflation ticked up to 3.0 percent, from 2.9 percent, putting it at the top of the Reserve Bank of Australia’s (RBA) long term target band of 2-3 percent. The central bank has sounded confident inflation would remain within its target band over the next year or so, in large part due to weakness in domestic wage growth. “We expect … RBA Board Meeting (that will gather today) to pass without much excitement, with the statement likely to resemble those of recent past...and voice a neutral to dovish bias,” said Annette Beacher, head of Asia-Pacific research at TD Securities.

Reserve Bank of Australia headquarters

The official measure of consumer prices for the second quarter is due out later in July and Beacher expects underlying inflation to rise just a touch to 2.75 percent. Yesterday’s survey showed price rises for rents, petrol and tobacco in June, were offset by falls in fruit and vegetables, health and recreation and culture. Non-tradables prices, mainly services, rose 0.3 percent in the month and held steady at 3.3 percent in the year. Prices for

tradable goods and services dipped 0.3 percent, likely in part due to the strength of the local dollar, while the annual pace edged up to 2.6 percent. Core prices, which exclude volatile items and statistical outliers, increased only moderately in June. The trimmed mean rose 0.2 percent for the month and 3.0 percent on the year, while prices excluding fuel, fruit and vegetables rose 0.1 percent and 2.5 percent respectively. Reuters

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July 1, 2014

Asia The World Bank said in a 2014 report that India has one of the most rigid labour markets in the world and “although the regulations are meant to enhance the welfare of workers, they often have the opposite effect by encouraging firms to stay small and thus circumvent labour laws”. Business leaders hope Modi, who advocates smaller government and private enterprise, will be a liberaliser

A salt field worker in India

in the mould of Margaret Thatcher or Ronald Reagan. Perhaps the most important change, they say, is to rules making it hard to dismiss workers. First up, though, to win public support, his Bharatiya Janata Party (BJP) government is looking to make changes that benefit workers, three senior officials at the labour ministry said. Among the changes: making more workers eligible for minimum wages, increasing overtime hours and allowing women to do night shifts. “We are trying to provide a hassle free environment that helps both workers and industry,” a senior labour ministry official involved in the deliberations said. “It is a priority for us.” Next on the reform agenda will be the most sensitive issue of loosening strict hire and fire rules. Officials said they have begun preliminary talks with concerned groups about slowly implementing the changes. “There is a definite push ... you will see more measures,” said another official at the ministry who is privy to the discussions within the government. India’s 20-year streak of fast economic expansion is often derided as “jobless growth” since the service sector-led model has been capital rather than labour intensive. India does not produce reliable, regular jobless data, but long-term surveys by the statistics department show the country only created 5 million manufacturing jobs between 2004/5 and 2011/12. In the same period some 33 million people left farms looking for better paid work. The majority were absorbed into low productivity and irregular work on construction sites. Reuters

Japanese industrial output awakens The ministry maintained its assessment of factory output, saying it is in a flat trend

actory output rose in May after companies cut production in April to offset the impact of a national sales tax hike, underscoring views the economy will absorb the increase largely unscathed. The 0.5 percent month-on-month rise compared with the median estimate of a 0.9 percent increase in a Reuters poll of economists, and followed a 2.8 percent drop in April, data from the Ministry of Economy, Trade and Industry showed yesterday. The data is likely to support a view that the economy will rebound in the summer from the April 1 sales tax rise and spending slump in the current quarter. That rebound could further dampen expectations the Bank of Japan will ease policy again this year, as it is likely to support the bank’s optimistic view of an economy is on track to resume moderate recovery and meet its 2 percent inflation target. Manufacturers surveyed by the ministry expect output to fall 0.7 percent in June but grow 1.5 percent in July, the data showed yesterday. Market reaction was muted. “Output is recovering. But it is still in the stage of adjustments given falling shipments and rising inventory,” said Takeshi Minami, chief economist at Norinchukin

KEY POINTS May output +0.5 pct m/m vs f’cast +0.9 pct Output seen falling in June, rising in July Economy likely to rebound in Q3 after tax hike Research Institute in Tokyo. The government raised the national sales tax to 8 percent from 5 percent on April 1 to pay for rising welfare costs, which has chilled private spending. Manufacturers have reduced production after the tax hike to avoid piling up inventories. Analysts expect the economy to contract in the second quarter due to the tax hike, with a Reuters poll conducted in June projecting a 1.2 percent quarterly drop. However, a bigger-than-expected decline in household spending and a drop in exports in May mean that the contraction could be more pronounced and subsequent rebound may be delayed. Reuters

ANZ to expand physical commodity trading ANZ is looking to take advantage of its strong balance sheet and a lighter regulatory burden on Australian banks compared to rivals operating in the United States

ustralia and New Zealand Banking Group is considering expanding its physical commodity trading business as it aims to step into the gap left by the retreat of big Wall Street and European banks, a bank source with direct knowledge of the matter said. Australia’s No.3 lender is set to put a proposal to launch a physical commodities trading desk to its risk committee and board in July, the source told Reuters. The plan to expand physical commodities trading beyond just gold and silver comes as major global banks are scaling back the business because of rising capital requirements, regulatory scrutiny and weak margins. JPMorgan Chase & Co and Morgan Stanley have sold off large parts of their physical trading businesses, while Barclays PLC and Deutsche Bank AG are quitting the commodity markets altogether. “With the exit of big U.S banks from the business of physical commodity trading, we see an opportunity to get into that business,” the source, who did not want to be identified as the matter is not public yet, told Reuters. Unlike ANZ’s current

KEY POINTS ANZ eyes expanding physical commods trade beyond gold, silver Physical commods trading desk proposal to be put to board in July ANZ’s model may be different to Macquarie’s - investor

ANZ branch office

gold and silver trading, the proposal is for the bank to operate in all aspects of the supply chain, from sourcing to warehousing and freight contracts. It is not clear which commodities it will trade. A spokesman at ANZ declined to comment on the issue. The proposal fits in with ANZ’s “super regional” strategy as it seeks to position itself as a leading trade bank in Asia. ANZ is expanding its

suite of services to cater to its biggest corporate clients and provide them with specialised services, sources within the bank said.

No curbs on prop trading Its Australian rival Macquarie Group, the country’s largest investment bank, earned A$1.1 billion (US$1.04 billion) in net income from physical commodities trading

in the year to March 31. Unlike Wall Street banks, Australian lenders have no restrictions on proprietary trading. Banking regulator Australian Prudential Regulation Authority did not comment specifically on physical commodity trading by banks when asked by Reuters but reiterated its position that lenders must set aside more capital for high-risk activities.

“There is a potentially urgent appetite for that activity because there are no restrictions at this stage. It’s a market opportunity,” said a consultant who advises Australia’s major banks on financial risk management. ANZ posted a cash profit of A$3.52 billion for the half year-ended March, setting itself up for a sixth year of record profit. Reuters

July 1, 2014

International EU approves aid for Bulgarian banks The European Commission’s office in Sofia said yesterday that it has approved a state credit line of 3.3 billion leva (1.7 billion euros, US$2.3 billion) for Bulgaria’s troubled banking sector. The Commission said the “state aid implied by the provision of the credit line is proportionate and commensurate with the need to ensure sufficient liquidity in the banking sector in the particular circumstances”. Bulgaria’s President Rossen Plevneliev was forced Sunday to deny that country’s banks were on the verge of collapse, as six people were arrested for “spreading false information” about several lenders.

Companies raise half a trillion dollars Firms have flocked to issue equity thanks to record highs in stock markets and low volatility

US$449.1 billion

equity capital markets total global activity

Philips to restructure divisions Philips is to merge two lighting components divisions into a new business which could be separately listed, a major step in its strategy to focus on healthcare and large lighting systems and services. Under Chief Executive Frans van Houten, the Dutch company has been shifting away from the consumer electronics sector in a restructuring which has involved more than 5,000 job cuts and the sale of its television business. The merger of its Lumileds components and its automotive lighting businesses should be completed by the first half of 2015, and cost Philips 30 million euros.

Ineos to enter plastics joint venture The firm will buy full control of its Styrolution plastics joint venture with BASF SE for 1.1 billion euros (US$1.5 billion). The companies plan to complete the transaction by the end of the year, they said in a statement. Rolle, Switzerland-based Ineos had a call option to buy its German partner’s share in the partnership under an agreement reached in 2011, they said. Styrolution has set a goal of generating half of sales from specialty products and half of revenue from emerging markets by the end of the decade.

Vestas wins U.S. wind-turbine orders Vestas Wind Systems A/S, the world’s biggest wind-turbine maker, won orders totalling 450 megawatts from Electricite de France SA’s renewable unit to supply two U.S. wind farms. Vestas will deliver 225 machines to EDF Renewable Energy’s Roosevelt project in New Mexico and its Slate Creek farm in Kansas, according to a statement on the website of the Aarhus, Denmark-based manufacturer. Both wind farms are scheduled to be completed in the fourth quarter of 2015, Vestas said. Its factories in Colorado will be involved in manufacturing key components, including the nacelles, blades and towers, it said.

Transnet profit rises Transnet SOC Ltd. said annual profit rose 25 percent as South Africa’s stateowned rail and ports operator boosted revenue from transporting minerals. Net income advanced to 5.17 billion rand (US$488 million) in the 12 months ended March 31 from 4.14 billion rand a year earlier, Chief Executive Officer Brian Molefe told reporters yesterday in Johannesburg. Revenue increased 13 percent to 56.6 billion rand, he said. The state-owned company is investing about 308 billion rand over seven years through 2019 to increase capacity in rail freight, ports and fuel pipelines in Africa’s second-biggest economy.

Deutsche Bank headquarters in Frankfurt

irms around the world have raised almost half a trillion dollars by selling shares in 2014 so far - the highest total for the first half of a year since 2007, before the onset of the financial crisis, data showed yesterday. Firms have flocked to issue equity thanks to record highs in stock markets and low volatility, while private equity firms have seized the opportunity to sell out of investments made before the crisis, capitalising on strong investor demand. The surge in activity reflects investors’ hunger for yield in a world of rock-bottom interest rates, a confidence in stock markets, and a focus away from emerging regions towards the developed markets that play host to many large companies requiring funds. Total global activity in so-called equity capital markets (ECM) has hit US$449.1 billion in the year to date, up 16 percent from the same period in 2013, Thomson Reuters data showed.

And it has been accelerating US$254 billion was raised in the second quarter, a third up on the first three months. The market for initial public offerings (IPOs) has boomed, with the amount raised by companies worldwide soaring 60 percent to US$107.2 billion in the first half, compared with a year ago. Investors have focused on Europe, rushing to cash in on the region’s nascent recovery and cheap money released by central banks, despite the turmoil in Ukraine which has delayed several listings by Russian firms. The cash raised in European IPOs rose almost 250 percent to US$41.2 billion. But there have been recent signs of cooling as, spoilt for choice, investors are getting more selective and turning away from businesses with the most questionable valuations. “I personally think that in many ways the (IPO) market is at its healthiest at the moment,” said Richard Cormack, co-head of ECM for Europe, Middle East and Africa at Goldman Sachs.

“At the start of the year the market was pretty euphoric. You then had a correction in April started by the sell-off in high-growth stocks in the U.S., which impacted IPO sentiment.” The financial sector has led the way for ECM activity with a fifth share of the market, driven by a slew of bank capital raises, including Deutsche Bank’s 6.8 billion-euro rights issue, and sector stock market listings in the euro zone. The listing of ING’s insurance arm NN Group is set to be Europe’s biggest of the year so far in terms of the firm’s market capitalisation, with an expected value of roughly 8 billion euros following its debut. Goldman Sachs ranked first globally for ECM deals by volume, with 221 deals totalling US$43.3 billion, followed by BofA Merrill Lynch and JP Morgan. It has proved a lucrative business for banks, with underwriting and advisory fees rising by a third to US$10.9 billion worldwide. Goldman scooped the highest ECM fees, earning almost US$826 million. American IPOs rose a quarter on the same period in 2013, but with Europe stealing the show the U.S. market share fell to its lowest since 2011. Reuters

Eurozone inflation keeps the suspense going Ninth straight month that inflation has maintained within what European Central Bank President Mario Draghi has called a “danger zone” of below 1 percent Martin Santa

uro zone inflation in June was flat, official data showed yesterday, easing immediate pressure on the European Central Bank to act again soon to tackle slow price rises. The year-on-year June inflation rate in the 18 countries sharing the euro stood at 0.5 percent for the second month in a row, the European Union’s statistics office Eurostat said. It was the ninth straight month that inflation remained within what European Central Bank President Mario Draghi has called a “danger zone” of below 1 percent. Prices of food, alcohol and tobacco

fell by 0.2 percent in June, while the prices of services rose by 1.3 percent and energy costs were up by 0.1 percent year-on-year, Eurostat data showed. Core annual inflation -excluding energy, food, alcohol and tobacco- rose by 0.8 percent year-on-year in June after a 0.7 percent increase in May. Earlier this month, the ECB reacted to vanishing price inflation with a raft of measures, including cutting the deposit rate below zero and offering long-term loans to banks aimed at boosting lending to business. The ECB insists that there is no acute risk of outright deflation in

the 9.6 trillion euro economy. Three countries, however, experienced deflation in May. Analysts polled by Reuters said the bank has probably done enough for now. Some, however, argue that a quantitative easing programme to ‘print money’ will be required for any lasting impact. The ECB lowered its forecast for euro zone inflation in June, predicting that it would reach 1.4 percent in 2016 - far off its target of below but close to 2 percent. The ECB’s Governing Council meets again on Thursday. Reuters

July 1, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

New hope for India Martin Feldstein

Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research

THE STRAITS TIMES Private home resale prices rebounded islandwide in May from the month before, contrary to analysts’ expectations that they would continue to weaken the rest of this year. Prices climbed 0.8 per cent overall from April to May, according to Singapore Residential Price Index (SRPI) flash estimates released yesterday. They had fallen 1 per cent from March to April as new launches drew buyers away from completed homes. The index, compiled by the National University of Singapore (NUS), tracks a basket of completed homes across the island.

THE JAPAN NEWS Power suppliers are increasingly worried about the possibility of their aging thermal power plants being hit by glitches in summer when electricity demand peaks as all nuclear power reactors in the country remain offline. In fiscal 2013, a total of 169 cases of thermal power plant shutdowns, mainly due to glitches, were reported by nine of the country’s 10 regional power suppliers, excluding Okinawa Electric Power Co. The figure was up some 70 percent from the level in fiscal 2010, before the 9.0-magnitude earthquake and subsequent huge tsunami hit north-eastern Japan.

PHILSTAR Inflation may have accelerated to as fast as five percent in June on the back of higher food prices and transport fare hikes, the Bangko Sentral ng Pilipinas said over the weekend. BSP Governor Amando M. Tetangco Jr. said the rate is forecast to settle between 4.1 percent and five percent this month. “The elevated forecast reflects a combination of increases in prices of certain commodities, including rice, tuition fee hikes and provisional fare rate increases,” Tetangco said in a text message to reporters.

THE PHNOM PENH POST Cambodian firm Angkor Gold Corp (ANK) on Thursday finalised a partnership agreement with Hong Kong firm Tohui Beishan Property Group Holding Limited (TG) worth more than US$10.4 million. According to a company statement issued on the Toronto Stock Exchange, ANK granted the Hong Kong firm 7.9 million shares in the company at $0.285 per share, valued at US$2.25 million. In addition to the share sale, ANK has granted TG the option of purchasing a further 7.9 million shares at US$0.5 per share (valued at US$3.95 million).

A photo dated 26 May 2014 of new Indian Prime Minister Narendra Modi (L) with his new cabinet ministers Rajnath Singh (2-L), Sushma Swaraj (2-R) and Arun Jaitley (R) during his swearing-in ceremony in New Delhi

AMBRIDGE – India’s recent general election could be the most important positive economic event of 2014. Indian voters decisively rejected the Congress party, which had governed India virtually without interruption since it gained independence from Britain in 1947. They are likely to be happy they did. Sonia Gandhi, the head of Congress and the widow of former Prime Minister Rajiv Gandhi, has been the power behind the throne since 1998, turning Prime Minister Manmohan Singh into little more than a figurehead. Under her leadership, Congress has pursued a populist agenda that increased transfer payments and reduced India’s annual economic-growth rate to less than 4% in 2013. GDP per capita is still only about US$4,000, less than half the level in China. The newly elected prime minister, Narendra Modi, campaigned on a platform that promises to deliver to India as a whole the rapid growth in employment and income that the state of Gujarat achieved when he was its chief minister. Under Modi’s leadership, Gujarat became a businessfriendly state that expanded economic activity, and attracted business investment from both Indian and overseas companies. A remarkable feature of the recent election is that Modi’s Bharatiya Janata Party (BJP) received an absolute majority in the national parliament, an almost unprecedented achievement in India. As a result, Modi will not have to compromise with the other national or regional parties to pursue his legislative agenda. Two key officials will help Modi manage his economic program. The new finance minister, Arun Jaitley, is an experienced political leader who served in ministerial positions in previous BJP governments. Jaitley

is also known as a strategic thinker who is sympathetic to business interests. The head of the Reserve Bank of India (the central bank) will continue to be Raghuram Rajan, a distinguished economist who has already shown his desire to reduce India’s near-doubledigit annual inflation rate, and to reform some of the inherited counterproductive restrictions on the country’s financial sector. The measures needed to stimulate economic growth will take time to implement and to produce results. But anyone who wants to see whether the new government is acting to achieve faster longterm growth should examine whether progress is being made in the following ten policy areas. Education. Although India has excellent institutions of higher education and technology, only a small share of the population can take advantage of the opportunities they offer, because primary and secondary education is so inadequate. Only 60% of the adult population can read and write at an elementary level. Teachers themselves are poorly educated, and many are so unmotivated that they do not even show up at the schools where they are supposed to work. Infrastructure. India needs better roads and ports to enable efficient transport of products domestically and to the rest of the world. The recent expansion of private airlines and airports shows what private firms in this sector can accomplish. Fiscal consolidation. Large budget deficits are absorbing the national savings that should be used to expand business investment, and are increasing the national debt that will have to be financed by future taxes. Privatization. The enterprises owned by the Indian government in manufacturing and other sectors operate

The newly elected prime minister, Narendra Modi, campaigned on a platform that promises to deliver to India as a whole the rapid growth in employment and income that the state of Gujarat achieved when he was its chief minister

inefficiently and often produce losses that absorb national saving. Selling off these enterprises would contribute directly to accelerating the pace of economic growth. Removal of subsidies. Subsidized electricity and fuel leads to wasteful overconsumption and contributes to the fiscal deficit. Though these subsidies are politically difficult to eliminate, they should be replaced by cash transfers, which can now be done efficiently in India, owing to a remarkable new system of fingerprint-based cash transfers.

Agricultural reform. In the current system, the government buys, warehouses, and distributes agricultural products. As a result, an enormous amount of goods are spoiled in storage, while production incentives are misdirected. Agricultural markets should be privatized. Property rights and zoning. Anyone who visits Mumbai or other major Indian cities sees how zoning restrictions cause misuse of urban land and limit modernization. Ambiguous property rights, especially to agricultural land, prevent industrialization in rural areas. Relaxing limits on foreign investment. Foreign firms are now barred from majority ownership of banks and insurance companies. Relaxing such restrictions would strengthen the financial sector and play an important role in economic growth. Tax reform. India’s complex system of national and state sales taxes distorts domestic trade. Replacing these taxes with a national value-added tax and using revenue-sharing to the states has been long debated and should now be enacted. Corruption. Major cases of high-level corruption have undermined economic confidence and impeded official decision-making. India is also handicapped by small-scale corruption, with bribery a common feature of all forms of business and personal transactions. The government should crack down on instances of highlevel graft and use the new system of cash transfers to limit the scope of petty corruption. The Indian stock market is up about 20% this year in anticipation of stronger growth and rising profits. Now it is up to Modi and the BJP to show that they can deliver on their campaign promises. The Project Syndicate 2014

July 1, 2014

Closing Xu Caihou expelled from CPC in graft probe

Boeing, Airbus enter bids for refuelling plane order

Former vice chairman of China’s Central Military Commission, was expelled from the Communist Party of China (CPC) and his case was handed over to prosecutors, announced the CPC Central Committee yesterday. The decision was made at a meeting of the CPC Central Committee Political Bureau, presided over by President Xi Jinping. Investigations found that Xu took the advantage of his post to assist the promotion of certain people and accepted bribe personally and through his family members, said the statement issued after the meeting.

Boeing and Airbus were among three bidders in South Korea’s roughly 1.4 trillion won (US$1.38 billion) programme to buy four refuelling tanker aircraft, two people briefed on the matter said yesterday. The bids yesterday saw the Boeing 767-based KC-46 pitted against Airbus’ A330 Multi Role Tanker Transport (MRTT) and Israel Aerospace Industries Ltd’s entry of an overhauled B767300ER, the people said. Boeing and Airbus are in a global competition to fill various requirements for refuelling planes. Tanker aircrafts are used to refuel fighter jets and other warplanes during flight.

Hong Kong bittersweet numbers symphony Deposits went up while deficits exceeded HK$10 billion

he Hong Kong Monetary Authority announced yesterday that the city’s total assets of the Exchange Fund amounted to HK$3,020.2 billion (US$389.70 billion) as of May 31, 2014, HK$29.8 billion lower than that at the end of April 2014. Foreign currency assets decreased by HK$15.3 billion and Hong Kong dollar assets decreased by HK$14.5 billion. The decline in foreign currency assets was mainly due to a decrease in unsettled purchases of securities, which was partly offset by the purchase of foreign currencies with Hong Kong dollars and valuation gains on foreign currency investments. The decline in Hong Kong dollar assets was mainly due to fiscal drawdowns and the sale of Hong Kong dollars for foreign currencies. These decreases were partly offset by valuation gains on Hong Kong equities. The Currency Board Account shows that the monetary base at the end of May 2014 was HK$1,260.7 billion, up by HK$2.0 billion, or 0.2 percent, from the end of April 2014. The rise was due to an increase in the outstanding amount of certificates of indebtedness. The amount of backing assets increased by HK$3.2 billion, or 0.2 percent, to 1,356.9 billion HK dollars. The rise was attributable to

The Hong Kong Monetary Authority entrance

1.4 pct deposits rising in May 2014

an increase in assets connected with the issuance of additional certificates of indebtedness and revaluation gains. The backing ratio increased from 107.54 percent at the end of April 2014 to 107.63 percent at the end of May 2014.

Deposits up According to statistics published yesterday by the Hong Kong Monetary Authority, total deposits with

authorized institutions in Hong Kong went up by 1.4 percent in May 2014. As the expansion in savings and time deposits exceeded the contraction in demand deposits, Hong Kongdollar deposits grew by 1.7 percent during the month. Overall foreign-currency deposits rose by 1.1 percent in May, while renminbi deposits in Hong Kong declined by 0.4 percent to 955.8 billion yuan (US$153.91 billion) at the end of May. The total remittance of renminbi for cross-border trade settlement amounted to 444.0 billion yuan in May, compared with 461.5 billion yuan in April. Total loans and advances rose by 1.6 percent in May, within which loans for use in Hong Kong (including trade finance) picked up by 2.2 percent and loans for use outside Hong Kong edged up by 0.4 percent. As Hong Kongdollar loans expanded at a slower rate than deposits, the Hong Kong-dollar loan-to-deposit ratio decreased to 82.5 percent at the end of May from 82.7 percent at the end of April. Seasonally adjusted Hong Kongdollar M1 fell by 0.9 percent in May but rose by 6.1 percent year on year. Seasonally unadjusted Hong Kong-dollar M3 grew by 1.6 percent and expanded by 10 percent from a year earlier. Yesterday, the government announced its financial results for the two months ended May 31. Expenditure for April-May amounted to HK$57.9 billion and revenue HK$47.4 billion, resulting in a deficit of HK$10.5 billion. Government said that the deficit was mainly because some major types of revenue are received towards the end of a financial year. The fiscal reserves stood at HK$745.2 billion as of May 31.

Everyone’s invited to the new bank

Philippine infrastructure India opens low-cost spending up spaceship era

hina would welcome the participation of the United States, Japan and European countries to help set up a new multilateral bank to fund infrastructure projects in Asia, the country’s finance minister was quoted as saying yesterday. Finance Minister Lou Jiwei said China would likely have a 50 percent stake in the planned Asian Infrastructure Investment Bank, and even if it does not it would be the largest shareholder. The bank aims to have a capital of US$50 billion, paid for by its members, and Lou said a memorandum of understanding is expected to be signed in the autumn. China’s President Xi Jinping and Premier Li Keqiang first announced plans for the bank during visits to Southeast Asian countries in October. Lou said that China had held numerous consultations with unnamed Asian countries about the new bank. Lou said he expected the bank would cooperate with the World Bank and Asian Development Bank. Reuters

he Philippine government’s infrastructure spending expanded by 24.5 percent on year to 93.7 billion pesos (US$2.14 billion) in January to April, the Department of Budget and Management (DBM) said yesterday. Budget Secretary Florencio Abad said the government stepped up its spending for reconstruction and rehabilitation efforts in areas devastated by typhoon Haiyan (local name: Yolanda). Infrastructure spending during the period brought the overall disbursements of the Philippine government to 626.1 billion pesos (US$14.3 billion) in the first four months of the year. This is 7.2 percent higher than the 584 billion pesos (US$13.34 billion) released in the same period last year. Apart from increasing spending for areas devastated by the typhoon, Abad said the national government has also been increasing its support for local government units. The DBM also reported that interest payments in the first four months of the year declined by 4.5 percent on year to 116.5 billion pesos (US$2.66 billion) Xinhua

Xinhua

rime Minister Narendra Modi hailed India’s low-cost space technology yesterday, saying a rocket which launched four foreign satellites into orbit had cost less to make than the Hollywood film “Gravity.” India’s domestically-produced Polar Satellite Launch Vehicle (PSLV) blasted off yesterday morning from the southern spaceport of Sriharikota, carrying satellites from France, Germany, Canada and Singapore. “India has the potential to be the launch service provider of the world and must work towards this goal,” Modi said from the site one month after coming to power at the head of a right-wing government. Satellite launch industry revenues totalled US$2.2 billion in 2012, according to the US Satellite Industry Association, and India is keen to expand its modest share of this market as a low-cost provider. Last year, India launched a bid to become the first Asian nation to reach Mars with a mission whose price tag was the envy of space programmes world-wide. The total cost at 4.5 billion rupees (US$73 million) was less than a sixth of the $455 million earmarked for a Mars probe launched shortly afterwards by US space agency NASA. AFP