Macau Business Daily, Nov 19, 2014

MOP 6.00 Year YearIIIIII Number Number 669 638 Wednesday Monday October November 6, 2014 19, 2014 Publisher: Publisher: Paulo Paulo A. Azevedo A. Azevedo Closing Closing editor:editor: Luis Gonçalves Sara Farr

Lopsided link highlights Chinese rejection of HK stock icons > PAGE 8

6 companies bid for four 4G licences W

e’ll call you. Six companies have submitted bids to Macau’s Telecommunications Regulation Bureau. Four licences are available for 4G wireless services from 2015. CTM, China Telecom, Hutchison and SmarTone are known quantities. Dark horses China Mobile Hong Kong and newbie China Mobile Hong Kong have also thrown their hats in the ring. Investment will be high and there’s already talk of sharing infrastructure costs. There’s a possibility of a fifth licence in two years Page

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SMEs treading water SMEs are fighting back. They’ll match inflation, local trade associations say. Daniel Iong, vice-president of Macau Small and Medium Enterprises Association, says employees can expect a 5-6 percent hike post-CNY. The Association has 600 member companies; primarily engaged in retail, manufacturing, F & B, and construction

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HSI - Movers November 18

Name

%Day

China Mobile Ltd

1.27

China Merchants Hold

0.78

COSCO Pacific Ltd

0.76

Hengan International

0.36

Swire Pacific Ltd

0.19

Galaxy Entertainment

-3.00

China Resources Ente

-3.08

Sands China Ltd

-3.17

Kunlun Energy Co Ltd

-3.22

Li & Fung Ltd

-3.78

Source: Bloomberg

I SSN 2226-8294

Brought to you by

Glass now half full Investors are back. Hoping to pick over casino stocks currently ‘very high’. Morgan Stanley says they’ve rebounded 14 percent since October. Galaxy and Sands China lead the hike, with stocks rising 18 percent. Although clouds remain on the horizon, spirits are up. With all eyes on the new projects. A recovery is expected in the second half of 2015 Pages

www.macaubusinessdaily.com

Business Oscars 42 candidates. 30 judges. 10 awards. One great occasion. All eyes on Friday’s Business Awards of Macau. The business elite gather at Grand Lisboa’s Grand Ballroom that evening to honour those honouring Macau. And in so doing “We want to recognise the commitment of the companies, corporations and individuals to Macau and to their own ideas and identity,” say the organisers.

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Straw houses Central government action proved to be weak.

China’s home prices fell again in October. While construction still slows, the service sector gets US$53.1 billion in FDI

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Foreign casino operators have invested big in Macau Page 7

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2 | Business Daily

November 19, 2014

Macau

Investors jump back into gaming stocks Morgan Stanley says investors’ interest in Macau gaming shares is currently ‘very high’. Casino stocks have rebounded 14 percent since October despite the worst revenue performance in years Luís Gonçalves

luis.goncalves@macaubusinessadaily.com

VIP bets plunge from HK$25mln to HK$4mln

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nvestors are returning to bet on gaming stocks as they plan to profit from the current cheap price of shares with hopes of cashing in when the anticipated recovery kicks in here during the second half of 2015 with the opening of myriad new properties. The market is expecting that with new casinos and hotel rooms available from 2015 on, the capacity of Macau to attract new gamblers will increase, bringing more revenues and lifting share prices.

Despite the worst performance in years in terms of revenue, the unknown impact of the full smoking ban and the challenges of dealing with Beijing’s anti-corruption campaign,

the stock prices of the big six casino operators in Macau has increased by double digits since October.

According to a Morgan Stanley report released yesterday, from early October to November 17, Macau gaming industry shares shot up 14 percent. Galaxy and Sands China lead the hike, with stocks rising 18 percent. SJM and MGM were the underperformers, with shares increasing 5 percent and 8 percent, respectively.

For the US bank, the figures show that interest in Macau casinos is rising significantly. ‘Investor interest in the industry is very high, and most want to participate early in the recovery

Macau gaming industry stock performance

Source: Thomson Reuters / Morgan Stanley

that is expected to come in 2H15 with the help of new casino openings and a lower base effect’, the report said.

Waiting for better times Investors are entering the casino industry again as they try to profit from the cheap prices of stocks. Prior to the current buzz among investors for casino operators starting, Macau’s gaming shares dropped 40 percent between the first quarter of this year and early October. Galaxy and Melco Crown lost 46 and 48 percent value, respectively, in six months. With an almost 50 percent discount, investors quickly returned to the market. Now, gaming shares are underperforming the first quarter peak by 32 percent and January by 27 percent, according to Morgan Stanley.

The US bank noted that the 14 percent rebound was also caused by the better than expected third quarter results posted by Macau operators. Even if fundamentals are deteriorating (revenues went down 23 percent in October, staff costs are increasing, for example), investors don’t appear worried.

But Morgan Stanley warned its clients that the current prices of gaming stocks could suffer another

The record drop in revenues in recent months is not due to fewer gamblers in casinos here. The problem is that players are betting less. A lot less. And it doesn’t matter if it’s VIP, premium mass, mass or grind mass. From recent interactions with Macau’s gaming industry, Morgan Stanley learned that the size of VIP bets today is six times smaller than they used to be and that the number of lower minimum bet tables are on the rise in casino floors.

The US bank says that one of the largest junkets in Macau revealed to its analysts that the money spent on bets by high rollers here has “dropped significantly”. Each VIP customer typically spent, on average, between HK$25 million and HK$30 million in Macau. These players are now betting only a fraction of this amount, in the region of HK$3 to HK$5 million. The anti-graft campaign launched by Beijing is making high rollers more low key in terms of gambling, with some avoiding excessive spending that could alert authorities.

But this trend is not exclusive to the VIP segment. Morgan Stanley also noted that in Macau the number of lower minimum bet tables on mass floors is increasing. This, the US bank says, could be caused by the rising number of group travellers (that normally bet less) and by the full smoking ban.

blow in the coming months, as the expected decrease of more than 10 percent in mass revenues and profits in Macau this quarter have not yet been priced in. The fourth quarter will be a challenge. Morgan Stanley predicts that gaming revenues will decline by 15 to 20 percent year-onyear, with profits going down around 10 percent from a year ago.

Credit Suisse: Grand Prix exerted weak impact on gaming revenue

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he impact of the Macau Grand Prix, held from November 1316, appears to be weak, Credit Suisse said yesterday.

‘Average Daily Revenue (ADR) last week (10-16 November 2014) further decelerated to MOP750 million. The Grand Prix race during 13-16 November may hurt revenue, but a 11 percent

week-on-week decline appeared to be weak’, the bank noted in its report on the Macau gaming market.

According to the Swiss bank, for the first 16 days of the current month, Gross Gaming Revenue (GGR) achieved MOP12.75 billion, which implies an ADR of MOP797 million.

This amount is lower than the ADR

of October (MOP850 million) and September (MOP852 million).

Credit Suisse is now predicting that the gaming revenue in November will fall.

“Assuming an ADR of MOP800 million to MOP850 million for the rest of November, the GGR of this month may drop by18-21 percent year-on-year to MOP24 billion to

MOP24.7 billion”, it said.

In the opinion of the bank’s team, mass market will remain soft due to the transit visa policy and smoking ban that came into effect on 6th October. In addition, the VIP segment is not showing signs of a significant recovery that would be able to change the current trend.

Business Daily | 3

November 19, 2014

Macau

Six companies compete for four 4G licences Six companies have submitted bids to Macau’s Telecommunications Regulation Bureau for four licences to run the fourth-generation wireless (4G) telecommunications services in the city in 2015 Joanne Kuai

joannekuai@macaubusinessdaily.com

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ix companies had tendered for a licence to run fourthgeneration wireless (4G) telecommunications services by yesterday’s deadline.

Enterprises competing for the four licences to be issued by the government in the first stage are Companhia de Telecomunicações de Macau SARL (CTM), China Telecom (Macau) Company Ltd, Hutchison Macau, and SmarTone, all of whom currently provide telecommunication services in Macau. Two ‘outsiders’

also submitted bids: China Mobile Hong Kong Company Ltd, and newly-founded telecom company Yu Hang.

China Telecom told Business Daily that the shortterm return on investment is not very promising as the cost of initiating the 4G network could be considerable but the operators cannot charge customers for the increased cost as other service providers may retain their fee-charging.

Vice-General manager of China Telecom’s local branch, Mr. Song Tong, told Business Daily that he didn’t expect

revenue growth anytime soon as the competition in the market is fierce but he looks forward to the development of the technology and the opportunities accompanying it.

“It’s impossible to see a drastic increase in revenue but we’re eyeing the tremendous potential of the technology and the possibility that it could bring in a large increase in the number of users,” said Mr. Tong. “Currently, mobile phones are the main receivers of this 4G service but nowadays more devices are emerging as the terminal,

such as cameras, watches and even electricity meters. For example, when you take a picture on your camera, it would upload to other devices right away through the 4G network. In future, more users will benefit from the network through different channels; we have to evolve with the market”.

The China Telecom representative also told Business Daily that entering the 4G market together with other operators would lower the risk as they can share some infrastructure and MTel’s expanding service may help reduce costs.

Mr. Song said even though the bid doesn’t seem to be a lucrative one for the time being, as a telecom operator they have the responsibility to cater to their customers and upgrade with the market.

The company is confident that they are fully ready to embrace the technology as they have done so in many cities across Mainland China.

CTM chief executive Vandy Poon Fuk Hei said earlier in a press briefing about CTM’s parent company Citic Telecom International Holdings Ltd’s interim results that his company was technically ready to run 4G services as soon as the licence

Junkets keen to diversify business Macau junket operators, also known as VIP room promoters, are seeking to promote their brands and diversify business in parallel with the growth of the mass market Joanne Kuai

joannekuai@macaubusinessdaily.com

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t’s more than just sitting at the table and playing a few hands – high rollers who come to Macau are becoming more demanding, say local junket operators who primarily promote the VIP market of the gaming industry.

“For the best VIP experience, we have to attend to their every need during their travel in Macau. We offer ferry, airplane and helicopter ticket services, car service, hotel reservations as well as entertainment.

Some of them may require tickets to concerts or the Grand Prix, for

example. We’ve also launched our own app on mobile devices to keep up with the ever-changing market.

It’s no longer just serving a cup of tea at the gaming table,” said Rita Lei, associate director of business development for junket operator David Group.

Based in Macau for 10 years, David Group now owns seven VIP rooms in Wynn Macau, L’Arc, MGM Grand, Galaxy and Four Seasons. The group, seeking global expansion, has even established its own travel company,

David Travel.

“Apart from organising tour groups, local tours, we take our VIPs on an adventure across the globe.

For some high rollers that want to gamble elsewhere than Macau, we provide trips to other places in Asia such as the Philippines, Laos and Cambodia,” said Ms. Lei. Macau casinos have been reliant on the VIP high roller sector, which accounted for nearly two-thirds of gaming revenue last year, according to data from the Gaming Inspection

was issued. He expects that the services could further boost CTM’s business and lift the monthly average revenue per user (ARPU) figure.

In a written reply to Business Daily, Hutchison Macau said that they have abundant experience in telecommunication operations here in Macau and have the confidence to run the 4G network.

“We have the confidence and the advantage of collaborating with the longterm development strategy of Macau’s telecommunication market and providing customers with better 4G service,” said Hutchison in the statement.

Hutchison also embraces the competition. “With regard to how many LTE operators Macau can host depends on the market. From our point of view, fair competition is most important for the healthy development of Macau’s telecommunication market,” said Hutchison Macau.

The government is issuing four 8-year licences for running the 4G services in the city by 2015. The telecom regulator also noted the possibility of launching a fifth licence within two years of issuing the first four 4G licences, depending on “actual conditions in the market”.

and Coordination Bureau (DICJ).

But the landscape has been changing: resort development and mass market growth have creased a US$50 billion run-rate in revenue after nine years of 28 percent annualised growth.

Local junkets operators facing the shifting of the market and fierce competition among their peers are joining the second edition of the Macau Gaming Show to build up their reputation.

“We’re here with the same purpose as every other junket operator: to promote our brand,” said Ridden Wai, marketing manager of Heng Sheng Group. “There are of course potential customers. But there’s also the possibility of finding some funding. ” “In order to distinguish ourselves, we’ve launched the insurance service against losing bets on baccarat. We’re the only one that has this service in Macau,” said Mr. Wai. There are more than 210 licensed junkets in Macau with around 190 companies and more than 20 individuals, according to a list issued

by DICJ.

4 | Business Daily

November 19, 2014

Macau SMEs to increase salaries 5–6pct after CNY Small and medium-sized companies here say the wage rise percentage is what they can afford to retain staff, payable after Chinese New Year Stephanie Lai

sw.lai@macaubusinessdaily.com

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truggling to retain workers against escalating competition with the casino operators and the government, local small and medium-sized businesses are planning to increase employee salaries by at least 5 to 6 percent next year, an amount meant to match inflation, local trade associations say.

Daniel Iong, vice-president of Macau Small and Medium Enterprises Association, estimated that employees working for small-sized companies here can expect an average of 5 to 6 percent increase in their salary – a percentage that is similar to this year – after Chinese New Year in 2015.

“This salary increase is set basically to keep close to inflation rate changes so far and is at a level that is still affordable for most small companies here,” said Mr. Iong, whose Association currently serves some 600 member companies primarily engaged in retail, manufacturing, the food and beverage business and construction.

“For the companies that earn more, like those working in the convention and exhibition business or information technology, they can offer up to 7 percent or 8 percent salary increase for next year, which is a level higher than the average for retail and restaurants here,” he said of the review.

Another local trade association, the United Association of Food and Beverage Merchants of Macao, also said that small and micro-sized restaurants here are planning to

increase staff salaries by 5 percent to 10 percent next year.

“The small restaurants are desperate to recruit people here; they’ve actually been up-adjusting their salary offer more than once a year, as you can see from their recruitment notices,” said Mr. Ip Sio Man, vice-president of the United Association of Food and Beverage Merchants of Macao.

“For management positions for the restaurant business, the salary lift the companies are offering is actually just close to the inflation rate at some 5 percent,” he said. “But if you’re referring to the ones with lower base salaries, like those taking up the cleaning in restaurants at MOP7,000

(US$876) to MOP8,000, the salary lift can be as much as 10 percent because it’s still not easy to find recruits to fill that type of position.”

The unemployment rate in Macau as at end-September remained at 1.7 percent, a level that suggests a tight labour supply and also the lowest on record per employment data published online since 1992.

“In these two years, some of the old local restaurants, mostly run on small or micro-scale, have closed or undergone change of ownership because they could not find any suitable staff or get sufficient imported labour,” Mr. Ip noted. “Coupled with the rental pressure, this was not what these

small companies could take.”

Both Mr. Iong and Mr. Ip expect that small and medium-sized companies here will continue to struggle to hire staff at attractive pay in the face of competition with the city’s big employers, as it is about to see another wave of casino-resorts opening over the next two years.

Human resource management consulting unit ECA International recently released a survey saying that although Macau employees will receive an average of 5 percent increase in their wage for next year - the same wage rise as their counterparts in Hong Kong - the city will actually see wages ‘decrease’ in real terms once inflation is factored in.

Tam: Direct gaming tax flat at MOP115bln for 2015 The Secretary for Economy and Finance said that Macau could expect a flat gaming tax revenue for next year, whilst stressing that it would not impact public expenditure Stephanie Lai

sw.lai@macaubusinessdaily.com

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peaking to the Legislative Assembly yesterday, Secretary for Economy and Finance Francis Tam Pak Yuen said Macau could expect its direct tax from gaming to reach MOP115.5 billion (US$14.46 billion) for 2015, a level that would not affect the administration’s plan for public expenditure.

Mr. Tam was speaking at yesterday’s plenary assembly that discussed the city’s budget plan for 2015, which forecast that the total revenue for the government would reach MOP154.66 billion, with direct tax occupying about 80 percent.

Of the MOP124.95 billion of direct tax that the government expects to collect for next year, the Secretary noted that gaming taxes would reach MOP115.5 billion, a level that would “maintain” a similar level to this year.

The government expects to collect

MOP117.85 billion of direct taxes from gaming for this year, including not only the 35 percent special gaming tax on gross gaming revenue but other taxes such as those paid by gaming promoters, the latest accounts released from the Financial Services Bureau show.

While the bulk of MSAR’s income is from gaming revenue, in continuous decline for five months, the city’s budgeted income at MOP154.66 billion for 2015 only represents a year-on-year rise of 0.7 per cent.

Noting that the forecast has already taken into account the annual gross gaming revenue drop recorded between June and October, Mr. Tam said that with the MOP115 billion gaming tax revenue estimated for 2015 only the surplus of the city would be affected while public expenditure would remain as planned.

The government estimates that MOP83.71 billion will be spent next year, which would represent an increase of nearly 8 percent or MOP6.1 billion compared to this year.

A total of MOP14.78 billion will be allotted to the city’s public investment plan (known by its Portuguese acronym PIDDA) for 2015, covering the major infrastructure projects here – the artificial island where the Hong Kong-Zhuhai-Macau Bridge will land, the public transport system, and the cost of the urban reclaimed zones.

The allotment for the city’s welfare expenses, including the cash handout and continuing education scheme, will total 9.85 billion patacas, Mr. Tam said.

The budget plan for 2015 will still have to go through further deliberations in the sub-committee

of the Assembly.

At the plenary session yesterday, legislators also rejected pro-democrats Au Kam San and Antonio Ng Kuok Cheong’s bid to debate whether Macau should prepare for political reform next year – one that can realise the universal suffrage goal of electing the city’s Chief Executive by 2019 and adding more directly-elected legislators to the Assembly.

The legislators opposing debate, including veteran business sector representative Cheang Chi Keong and the Federation of Trade Union’s Kwan Tsui Hang, reckoned that the prodemocrats’ bid had been influenced

by Hong Kong’s ‘Occupy Central’ movement and should be discussed by the public at large; the legislators also questioned the timeframe set by Mr. Au and Mr. Ng for electing the Chief Executive by 2019.

6 | Business Daily

November 19, 2014

Macau Business Awards of Macau announces finalists

Brought to you by

João Santos Filipe

jsfilipe@macaubusinessdaily.com

HOSPITALITY Flying higher The third quarter data for passenger flights at Macau Airport shows that their numbers keep growing at a steady pace. Overall, the number of flights in the last quarter reached the 6,021 mark, which constitutes a new record in terms of quarterly figures.

Compared to the same quarter last year, that figure represents an increase of 4.4 percent in the number of passenger aircraft landing in the territory. If we take the cumulative value for the first three quarters, growth this year stands at 6.8 percent relative to last year; and if compared to the same period in 2010, we find the growth rate standing at 36.4 percent. That is, the activity posted an annual average rise of about 8 percent. These are figures that point to the continuation of solid growth of the activity, even though current values suggest this year’s growth will be somewhat slower than the average for the last four years.

Flights originating in China are the major source of the rising trend. The annual number of flights originating there, between 2010 and 2013, rose by 74.9 percent, a figure that sits quite a way above the overall one. The latter stood at 29.6 percent in the same period. This year, China flights have also been rising faster than the average. In the third quarter, while flights from other origins virtually stalled, those incoming from China rose by 10.6 percent.

They were responsible for almost 90 percent of the absolute flight increases. As a result of these trends, the inbound flights from China rose from just about one quarter in the beginning of 2010 to figures close to 40 percent in the three first quarters of the total currently.

J.I.D.

88.8%

January to September rise in flights from China, compared to same period in 2010

“T

his is a project that awards companies for their fantastic job and it is a way for us to say to all of them, not only to the winners but to all finalists: keep up the good work”, organisation head Paulo Azevedo said yesterday during the presentation of Business Awards of Macau. “We want to recognise the commitment of the companies, corporations and individuals to Macau and to their own ideas and identity”.

Business Awards of Macau is an event organised on a joint venture basis

by De Ficção Multimedia Projects and the Charity Association of Macau Business Readers with the purpose

of distinguishing entrepreneurship within the local business community.

The second edition of the event will take place on Friday in the Grand Ballroom of Grand Lisboa.

Yesterday, the names of the 42 finalists nominated by 30 judges were announced. In total, there are 10 categories, one more than last year.

“It’s a project by civil society to encourage companies, corporations and individuals to share their ideas and their example. This way, it is Macau that is winning”, Mr. Azevedo said.

“This project was conceived not to have any specific award related directly to the gaming industry. But,

Sasa profit growth stalls in Macau and Hong Kong The group, involved in retailing and wholesaling of cosmetic products, has posted a decrease of 4.9 percent in its profits. Hong Kong and Macau promotions and discounts caused a reduction of 0.8 percent in profits

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he strategy of encouraging volume transactions by offering discounts and promotions stalled the growth of profits for Sasa in Hong Kong and Macau by 0.2 percent from HK374.8 million to HK$371.9 million during the first six months of the company’s fiscal year.

“Profitability was restrained due to gross margin pressures. Gross profit margins dropped by 2.4 percentage

points. This performance was due to the need to sustain high growth in a slower market, which in turn led to ongoing promotions and discounting to stimulate volume”, the company explained in its interim report for the fiscal year that started in April.

During this period, there was a 6.7 percent decrease in average ticket size of Mainland customers.

This was explained by Sasa by the inferior spending power of the growth

The organisers of the event announced yesterday the 42 candidates nominated for Friday’s 10 awards recognising companies and individuals that have contributed most to the development of Macau. The ceremony will take place in Grand Lisboa’s Grand Ballroom

of course, gaming operators can run for the awards”, he said. “It is good to recognise that revenues produced by gaming are fantastic - but Macau wouldn’t exist if it wasn’t also for other industries and institutions”.

of Chinese tourists coming from lower tier cities on the Mainland.

According to the company, these visitors were more focused on lower price point products.

The company also noted the impact of the Occupy Movement in its interim report issued yesterday.

“As a result of the ongoing Occupy [Central] movement in Hong Kong, the retail sales growth of Hong Kong and Macau has slowed to 0.4 percent year-on-year (Fiscal Year 2013/14 third quarter: +18.9 percent) while same store sales dropped by 2.4 percent percent year-on-year (Fiscal Year 2013/14 third quarter: +15.8 percent).

There are currently 97 Sasa stores in Hong Kong and another eight in Macau.

The profit for the group, which includes other markets such as Mainland China, Singapore, Malaysia and Taiwan, decreased 4.9 percent year-on-year in the first six months of the fiscal year 2014/2015, from HK$357.4 million to HK$339.8 million.

J.S.F.

Business Daily | 7

November 19, 2014

Macau Transport, storage Foreign casino operators have sector grew invested big in Macau 7.6pct in 2013

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t’s no secret that Macau is all about casinos. They dominate government taxes, drive up tourist revenues and with the Cotai properties in the pipeline it’s no surprise that in terms of foreign investment it’s all about them, again.

The gaming industry attracted 75 percent of all direct foreign investment undertaken here in 2013. Casino operators invested MOP27.8 billion last year, 34 percent more than in 2012, data from the Statistics and Census Office reveals.

Total investment by foreign companies totalled MOP36 billion that year.

The increasing flow of money spent by casino operators to build their new properties in Cotai is in sharp contrast to the drop in interest by other sectors. Last year, the direct investment undertaken by foreign banks and securities in Macau decreased 13 percent, while outside retail and wholesale companies invested 65 percent less in 2013 and the cultural and recreational sector attracted 63 percent

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less financial interest.

The majority of investment came from the Cayman Islands and British Virgin Islands (70 percent of total investment), tax haven locations favoured by most foreign companies to set up operation to minimise tax obligations.

But investing in Macau is still good business.

According to the report from the statistics bureau, direct investment income (the money companies make from investments) increased 36 percent to MOP78.9 billion

last year. The gaming industry was, again, the sector that saw income from its investment increase most (39 percent), followed by banking (36 percent) and retail (20 percent).

In all, foreign companies have invested a combined MOP189 billion in Macau’s economy in recent years.

The gaming industry is now responsible for 60 percent of the investment here (MOP114 billion), with the banking sector occupying a share of 16 percent.

L.G.

he transport and storage sector in Macau grew 7.6 percent last year, with the number of establishments increasing 10.5 percent and the contribution to the Macau economy rising some 14 percent.

Last year’s good performance helped the sector gain some weight in Macau’s economy, as it employed more people and posted more revenue. The performance was ‘attributable to an increase in visitor arrivals and vigorous growth in the outbound travel of Macao residents’, wrote the Statistics and Census Service (DSEC).

According to the DSEC report, the number of establishments in the transport and storage sector increased by 226 to 2,375, the largest increase since 2008.

Its companies accumulated MOP17.5 billion in revenues last year, 7.6 percent more than a year before. Over the last five years, the sector has expanded 50 percent.

With Macau becoming a major tourist destination,

it’s no surprise that the contribution to Macau’s economy from companies that offer land, air or sea travel is also on the rise.

The report says that last year the gross value added to the economy from the sector was MOP4.7 billion, 14.1 percent more than in 2012.

Since 2008, the contribution to the economy here more than doubled. Transport and storage investment reached MOP467 billion in 2013, a small amount but still a 38.9 percent increase.

Revenues from passenger transport companies increased 10% year-onyear to MOP 7.99 billion, of which air transport amassed MOP4.24 billion.

L.G

8 | Business Daily

November 19, 2014

Stocks Lopsided link highlights Chinese rejection of HK stock icons

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hinese investors failed to show up for some of Hong Kong’s foremost companies on the first day of the exchange link with the mainland, confounding the predictions of Deutsche Bank AG, BNP Paribas SA and Goldman Sachs Group Inc. Shares of Tencent Holdings Ltd, HSBC Holdings Plc and Galaxy Entertainment Group Ltd, identified by analysts as likely targets for mainland investors, declined as the cross-border trading program debuted Monday, sending the Hang Seng Index down 1.2 percent, its biggest retreat in almost a month. Hong Kong stock purchases through the link totaled RMB1.77 billion (US$289 million, HK$2.2 billion), less than 14 percent of the amount bought by foreign investors in Shanghai.

One reason for the tepid response from Chinese investors is that share

prices for industry leaders previously out of reach on the mainland had already run up in anticipation of the link, according to UBS AG. Tencent, operator of the WeChat messenger service, and Galaxy, which runs Macau casinos, both jumped more than 7 percent last week after the start date was announced.

“Investors from China are clearly trying to pick value,” Yang Xia, the Shanghai-based head of China equities at UBS, said in a phone interview. “They are not just buying shares that are not available domestically.”

Poor record Some mainland investors were also turned off cross-border investing by the poor track record of Chinese money managers who buy foreign shares through the Qualified Domestic

Institutional Investor program, according to Shenyin & Wanguo Securities Co. Others just don’t want to go through the trouble of learning a new set of market rules when they already have access to domestic shares, said Dai Ming, a money manager at Hengsheng Asset Management Co in Shanghai.

Galaxy, controlled by billionaire Lui Che Woo, dropped 2.7 percent in Hong Kong on Monday, the first decline in seven days. Tencent lost 2.1 percent, the biggest slide in almost two months. HSBC, Europe’s biggest bank by market value, slipped 0.4 percent to a four-week low.

Deutsche Bank, Goldman and BNP had all picked Tencent as a beneficiary of the link in research reports this month, while Deutsche Bank also recommended Galaxy. HSBC was mentioned by Goldman, BNP and Credit Suisse Group AG as likely to gain from the link.

Galaxy slipped 0.5 percent at 9:45 a.m. yesterday in Hong Kong and HSBC lost 0.1 percent, while Tencent increased 0.2 percent. The Hang Seng gauge was little changed as Hong Kong stock purchases through the link today totaled RMB119 million.

Getting comfortable Monday’s debut marked one of China’s biggest steps toward opening up its capital account, increasing global use of the yuan and turning Shanghai into a world financial center.

International investors purchased the

maximum RMB13 billion of Shanghai shares allowed through the link by 1:57 p.m. local time, triggering a halt in buy orders for the rest of the day.

Hong Kong stock purchases were within expectations, Charles Li, the chief executive officer of Hong Kong Exchanges & Clearing Ltd, said at a briefing after the bourse closed. Some Chinese investors are still monitoring how trading through the link works, he said. Mainland traders with at least RMB500,000 in their accounts are eligible to purchase Hong Kong shares.

“It will take time for local investors to get used to foreign markets,” Gerry Alfonso, a China equity sales and trading director at Shenyin & Wanguo Securities Co in Shanghai, said by e-mail.

Dual-listed shares valued at a discount in Hong Kong were also among Monday’s losers, after surging in recent months in anticipation of Chinese buying through the link. All of the 20 dual-listed shares that slumped more than 5 percent in Hong Kong yesterday trade at a discount versus their Shanghai counterparts, according to data compiled by Bloomberg.

Dalian Port PDA Co. sank 12 percent, widening its discount in Hong Kong to 47 percent. Nanjing Panda Electronics Co., which now trades 46 percent cheaper in Hong Kong, slid 9.9 percent.

“The price gap between some smallcaps in the two markets will persist for a while,” Zhang Haidong, an analyst at Tebon Securities Co, said by phone from Shanghai.

Bloomberg

Business Daily | 9

November 19, 2014

Greater China

Home price fall deepens despite policy support News of slowing foreign direct investment rubbed salt in the house price wound Xiaoyi Shao and Kevin Yao

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hina’s home prices slumped an annual 2.6 percent in October, shrugging off a range of government support measures in a nationwide downturn that threatens to stifle economic growth.

October’s year on year price drop was the biggest since Reuters started calculating nationwide prices in 2011.

Falling prices will more than likely deter investors seeking capital gains, and most analysts now expect the housing market correction to continue in coming months as developers struggle with high inventory levels.

News of slowing foreign direct investment rubbed salt in the house price wound, with overseas investment down 1.2 percent in the JanuaryOctober period from a year earlier, with the fashionable service sector attracting US$53.1 billion versus the modest US$32.5 billion that flowed into once-rampant manufacturing businesses.

Despite moderating FDI growth, China has repeatedly said it expects its FDI to hit a record high of US$120 billion this year, barring no sharp changes in global capital flows.

House prices in the capital Beijing dropped 1.3 percent year on year - the first fall since October 2012.

“China’s housing market is still on the way down in its correction,” said Bill Adams, senior international economist for PNC Financial Services Group.

KEY POINTS Oct home prices down 2.6 pct y/y, 2nd straight monthly dip Oct prices fall 0.8 pct m/m, down sixth straight month New home prices fall m/m in 69 cities FDI lags in services switch

“Real estate corrections can persist for 5-7 years, meaning this slump in China is likely to persist into 2015 and 2016 at least.”

Falling prices have led the government to cut mortgage rates and minimum downpayment levels in late September for some home buyers, taking one of its biggest steps this year to boost an economy increasingly threatened by a sagging housing market, which directly impacts on about 40 other sectors of the economy.

New home prices fell month-onmonth in 69 of the 70 major cities the National Bureau of Statistics monitors, unchanged from September. Year-onyear, home prices fell in 67 cities in

October, up from 58 in September.

Liu Jianwei, senior statistician at the NBS, said recent policy relaxations may have boosted home buying interest as developers promoted sales to reduce inventories, pointing to the milder 0.8 percent month-on-month price decline in October, versus a 1 percent monthly fall in September.

(Home price figures published since January 2011 are not comparable with previous periods as the bureau introduced a new calculation method.)

Despite a range of stimulus measures unveiled since April, China’s annual growth slowed to 7.3 percent in the third quarter, the weakest since the global financial crisis.

The bad loan ratio at Chinese banks rose to 1.16 percent at the end of September, up 0.09 percentage points from June, adding to concerns that the slow economy and cooling property market might hit banks and increase financial risks.

Foreign direct investment into China reflected shifting patterns in global commerce. Among the 10 biggest investors into China, flows from South Korea expanded 26.4 percent on an annual basis and from Britain surged 32.4 percent.

In contrast, investment from Japan plunged 42.9 percent from a year earlier while FDI from the United States fell 16.2 percent and European Union dropped 23.8 percent.

Reuters

Chip designer spawns low-priced smartphone boom Thanks in large part to system-on-chip, the average price of a smartphone should fall to US$267 by 2018 from US$314 now

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hips from Taiwan’s MediaTek Inc. were mostly passed over by the big phone brands a decade ago, with the likes of Nokia and Motorola commanding legions of inhouse engineers who could advise on electronics and circuitry.

Fast-forward to the age of the smartphone.

The market is heaving with Chinese smartphone makers out to grab share from Apple Inc. and Samsung Electronics Co Ltd with lowpriced handsets. Sparking the boom in budget smartphones is MediaTek, now a US$23 billion go-to chip designer

favoured by margin-conscious phone makers.

MediaTek pioneered bundling low-cost chips with recommendations on hardware such as lenses and speakers. This “system-onchip” approach saves phone makers the cost of finding and testing parts to match the chips they buy. That in turn allows them to cut prices and, in the past year, seize 10 percentage points of market share from leader Samsung.

Thanks in large part to system-on-chip, the average price of a smartphone should fall to US$267 by 2018 from US$314 now, showed data from researcher IDC. That

compared with a U.S. starting price of US$749 for the latest Apple iPhone 6 Plus.

MediaTek says system-onchip has won it the patronage of every phone brand bar Samsung and Apple. It helped low-priced smartphone maker Xiaomi Technology Co Ltd become the industry’s No.3 in just three years, and is tipped for similar success with Google Inc’s Android One in India.

MediaTek’s system-onchip strategy has helped the company’s market value rise 125 percent to T$715.8 billion (US$23.39 billion) in less than three years.

The strategy involves collaborating with almost 200 Chinese component makers and handset assemblers to supply MediaTek’s smartphone customers with parts compatible with its chips.

MediaTek built up its supplier network in the feature phone era. At that time, it says, larger rivals sold chips to big phone makers which would employ thousands of

You can think about MediaTek as having a franchise business model, like McDonald’s.

McDonald’s gives you all the equipment you need, and the initial cost for you is lower David Ku, Mediatek, CEO

engineers to find and test components such as screens for the chips to operate.

To differentiate, MediaTek began recommending hardware for its chips and targeting companies with limited means of sourcing and testing components independently. That lowered the barrier to enter the phone business, reduced costs and helped handsets reach the market quicker.

Thrifty handset buyers have helped MediaTek sales rise at least 40 percent each month this year, culminating in October’s 56 percent. For the full year, it estimates sales of 350 million smartphone “chipsets” from just 10 million in 2011.

That would amount to 30 percent of the global market, showed Reuters calculations.

Fubon Research analyst Carlos Peng estimated nearer 50 percent when excluding chipsets from the likes of Qualcomm Inc. and Samsung that are primarily destined for high-priced smartphones.

Reuters

10 | Business Daily

November 19, 2014

Greater China HK daily stock quota underused Chinese buyers took up just 7 percent of their 10.5 billion yuan daily quota of Hong Kong stocks yesterday, as mainland investors remained lukewarm on the second day of a landmark scheme connecting Hong Kong and Shanghai stock markets. On Monday, mainland investors had taken up 17 percent of the available quotas for stocks, with analysts attributing the tepid demand to relatively expensive valuations in Hong Kong. The Stock Connect scheme, which allows Hong Kong and Shanghai investors to buy and sell shares on each other’s bourses, is the latest step towards opening China’s tightly controlled capital markets.

Offshore investment programme passed China’s central bank has approved a pilot programme allowing some domestic institutional investors to buy offshore yuan products, the official Shanghai Securities News said, as Beijing pushes ahead in internationalizing its currency. The People’s Bank of China (PBOC) has recently approved the so-called Renminbi Qualified Domestic Institutional Investor (RQDII) programme, the newspaper reported yesterday, without saying which institutions would be qualified to participate.

To elevate the yuan’s status as a global currency, Beijing has established offshore yuan centres from Sydney to London.

Power consumption breakdown China consumed 450.8 billion kilowatt hours (kWh) of electricity in October, up 3.1 percent from a year earlier, data from the National Energy Administration showed. Over the first 10 months, power consumption increased 3.8 percent on the year to 4.5484 trillion kWh, the administration said. Following is a breakdown of China’s power consumption and other data for October, posted on the administration’s website.

Australian exports to China still face hurdles Several major agricultural foodstuffs, including sugar, rice and cotton, are currently excluded from the FTA Jane Wardell

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trade deal signed with great fanfare between China and Australia has been touted as a major step towards Australia shifting its economy from a “mining boom” to a “dining boom,” but the reality is likely to be more sobering.

Australia is looking to replace its reliance on exports of minerals such as coal and iron ore as mining investment wanes and demand begins to dwindle. The government would prefer to expand its food and agricultural exports to capitalise on a rapidly growing Asian middle class.

It has high hopes for the proposal for a free trade agreement (FTA) signed on Monday by Prime Minister Tony Abbott and Chinese President Xi, but the more likely winner from the deal is the services sector.

The deal is designed to open up Chinese markets to Australian farm exporters and the services sector, while easing curbs on Chinese investment in Australia. China is already Australia’s top trading partner, with two-way trade of around A$150 billion (US$130 billion) in 2013.

Several major agricultural foodstuffs, including sugar, rice and cotton, are currently excluded from the FTA, and Australia’s frequent severe droughts impose a natural production ceiling on those sectors that are part of the pact.

Experts are waiting for the full text of the pact, which Australia called the best ever between Beijing and a Western country, warning the devil may yet be in the detail.

“Labour is deeply concerned that key export sectors like sugar have been told to expect nothing from the deal,” said opposition Labor Party leader Penny Wong. “Mr Abbott has talked about a two-step FTA. The fact is Australia can’t afford a second-rate FTA with China.”

Exclusions HSBC chief economist Paul Bloxham said the deal would support Australia’s “great rebalancing act”, but others warned the agricultural sector is comparatively tiny.

Of Australia’s total exports to China of A$94.7 billion in 2013, iron ore accounted for A$52.7 billion, according to the Department of Foreign Affairs and Trade. Wool, the top agricultural export, made up just A$1.9 billion.

Boosting agriculture also requires big investment in isolated, dry and volatile areas with limited water supply.

Large swathes of eastern Australia are currently in drought.

Australian farms’ return on capital has seldom topped 2 percent in a year on average during the past decade, excluding changes in land values, according to government research bureau ABARES. The unpredictability of earnings is greater than in the United States, Africa and Brazil.

Meanwhile, the sugar, rice, wheat and cotton sectors will have to wait three years for a review of their tariffs. Even then, any changes are likely to be contingent on Australia relaxing its existing requirement that

Meeting with Vietnam to strengthen ties Border guard forces of Vietnam’s northern border provinces held talks with the delegation of border guard forces of China’s Yunnan province to strengthen cooperation.

The 10th meeting on border work between the two sides was held in Vietnam’s Lao Cai province, an online newspaper of Lao Cai said yesterday. During the meeting, the two sides reached consensus on strictly abiding the legal documents signed by the two governments on border issues, sharing information for a win-win cooperation as well as coordinating to give advisory for authorities of both sides to open new border gates.

Hurdles to boosting Australian farm exports to China Several key commodities excluded from deal Commodities supply glut in China curbing imports Healthcare a bright spot as China’s population ages all investment proposals by Chinese state-owned entities be scrutinised by the Foreign Investment Review Board.

“In this day and age, sugar being excluded in what looks like a political trade-off is an absolutely unacceptable outcome,” said Paul Schembri, chairman of industry group Canegrowers.

Faltering demand At the other end of the deal, China faces a supply glut as economic growth falters. Inventories of iron ore, coal and cotton are bulging at ports across the country and state granaries are overflowing. The Australian dairy industry’s hopes of a “white gold” rush have been dashed.

Businesses last week complained about Beijing’s response, using nontariff barriers from customs clearance to quality restrictions, which would skirt the FTA, to curb raw material imports.

The financial sector is also cautious, noting the dominance of its Asian peers in China. That means Australian businesses will probably dabble in niche projects, rather than trying to compete in core banking services.

Andrew Whitford, Westpac Banking Corp’s head of Greater China, said it was still early days, and Westpac was “certainly not going to be opening more branches.”

Ageing population

New research centre with Australia Academic relationships between Australia and China are set to expand further following the establishment of new cross cultural research centre. Yesterday, the University of Tasmania and the Yunnan Normal University signed a formal agreement on the establishment of the Sino-Australia Cross Cultural Research Centre, which aims to provide scholarships and exchange opportunities across the two countries. The University of Tasmania will provide five PhD tuition fee scholarships, each worth close to US$22.000, for four years, while, the Yunnan Normal University will provide in excess of US$800,000 to fund research activity, fellowships and exchange opportunities.

KEY POINTS

Chinese President Xi Jinping (L) and Australian Prime Minister Tony Abbott walk together as they leave the House of Representatives at Parliament House in Canberra yesterday

One sector where the road seems clearer is healthcare.

Chinese per capita health spending is growing the fastest in Asia, having quadrupled to US$321 a year in 2012 from US$80 in 2005, according to the World Bank.

China wants to shift to a communitybased health system, as opposed to hospital-based, to cut costs and ensure universal access, leaving it with a shortage of providers in outof-hospital health sectors like aged care and pharmacy.

An advanced aged care industry is “one of Australia’s great comparative advantages”, said Business Council of Australia CEO Jennifer Westacott.

Peter Hope, who runs a pharmacy in the small Australian state of Tasmania, said the new rules would allow him to quickly expand beyond his already planned Beijing store in April next year to 1,000 franchises around China.

Reuters

Business Daily | 11

November 19, 2014

Asia

Australian, Indian leaders target free trade pact Trade between Australia and India stands at around US$15 Matt Siegel

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ustralia and India will push for a free trade pact, Australian Prime Minister Tony Abbott and Indian Prime Minister Narendra Modi said yesterday during a rare state visit to Canberra by an Indian leader.

“We want to go further and that’s why the next priority for Australia is a comprehensive economic partnership agreement with India,” Abbott said.

Modi, in an address to Australia’s parliament, pledged greater cooperation on regional security, issuing a veiled swipe at China over disputes with its neighbours over islands in the South China Sea. “Our region has seen huge progress on the foundation of peace and stability but we can not take this for granted,” Modi said.

“Even when they have bitter disputes, we should maintain maritime security.

We should work together on the seas and collaborate in international forums and we should work for universal

respect for international law and global norms.”

Modi on Monday addressed thousands of expatriate Indians at a packed 21,000-seat arena in Sydney that just last week hosted the Rolling Stones, underscoring the rock-star status he enjoys among some Indians at home and abroad.

Modi, who arrived on Friday for the G20 economic summit in Australia, where about 300,000 Indians live, urged Indians to boost

If I may say so, this is a moment in time. This is the time to get this done Tony Abbott, Australia’s Prime Minister

Indian Prime Minister Narendra Modi in a ceremonial welcome at Parliament House in Canberra yesterday

investment at home.

Modi also said he wanted early closure on a deal for Australia to sell uranium to India, which was sealed in September, and also offered to increase supplies of conventional fuel to help India overcome chronic shortages.

Talks towards the

Civil Nuclear Cooperation Agreement began about two years ago after Australia lifted a long-standing ban on selling uranium to energy-starved India.

Australia is emerging as a key source of thermal coal for India’s growing number of electricity users, but Modi insisted he only wanted fuel

that would not damage the environment.

Indian trade and infrastructure conglomerate Adani Enterprises has signed a pact for a loan of up to US$1 billion from the State Bank of India for a US$6 billion Australian coal mine, rail and port project.

Reuters

Widodo raises Indonesia’s fuel price Falling oil costs gave the president room to limit the fuel price increase

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ndonesian President Joko Widodo raised fuel prices to reduce state energy subsidies, moving on an election pledge less than a month after taking office to free funds for development plans.

The price of subsidized gasoline was increased to 8,500 rupiah (US$0.70) a litre from 6,500 rupiah effective yesterday, and diesel has been raised to 7,500 rupiah a litre from 5,500 rupiah, after an announcement by Widodo in Jakarta late on Monday. The central bank will hold an unscheduled monetary policy review yesterday, spokesman Peter Jacobs said.

Indonesia’s finance ministry yesterday maintained its estimate of 5.1 percent growth in gross domestic product for this year, indicating minimal impact from a fuel price hike on Southeast Asia’s biggest economy.

Budget impact “Raising the subsidized fuel price will ease the pressure on Indonesia’s fiscal deficits and is a positive step for the sovereign rating of Indonesia,” Takahira Ogawa, a director of sovereign ratings at Standard & Poor’s, said in an e-mail yesterday.

Even so, “unless a comprehensive overhaul of the domestic fuel price mechanism is put in place, Indonesia’s fiscal position is still vulnerable to fluctuation in global oil prices.”

The price of Brent crude has slumped about 30 percent since the

end of June. Indonesia is vulnerable to fluctuations in international oil prices as much of its fuel is imported.

Some 276 trillion rupiah (US$23 billion) was earmarked for fuel subsidies in the 2015 budget prior to on Monday, or 13.5 percent of total spending. Oil imports have contributed to a persistent currentaccount deficit.

Parliament’s Role “The country needs a budget to build infrastructure and for education and health,” Jokowi said as he announced the price changes.

Jokowi doesn’t need parliamentary approval for any fuel price increase this year. He will need the legislature, which is dominated by his political opposition, to sign off on his spending plans for a revised budget next year.

Indonesia has been subsidizing fuel since the first oil price shock in the 1970s and kept prices at less than US$0.20 per litre until 2005, according to a World Bank report published in March. Before on Monday’s announcement, the price of gasoline at the pump had most recently been raised in 2013, to 6,500 rupiah per litre from 4,500 rupiah.

Inflation The central bank has said it will take steps to manage the inflationary impact from a fuel-price increase.

Hopefully, the decision to shift the subsidy to the productive sector will open the door for a budget that will be more beneficial for the Indonesian people Joko Widodo, President of Indonesia

Indonesian full-year 2014 inflation will probably be 7.3 percent after taking into account the price rise, Finance Minister Bambang Brodjonegoro told reporters on Monday. Consumer prices rose 4.83 percent in October from a year earlier, official data show.

The increase in prices will free about 100 trillion rupiah of state

spending and reduce the 2015 budget deficit from the current forecast of 2.2 percent of gross domestic product, Brodjonegoro said.

Some of the money will be allocated to infrastructure and some to “strengthen the social security for poor and near-poor families,” he said. Funds also will be allocated for maritime development in the archipelagic nation, he said.

Difficult reforms Infrastructure-related companies will benefit from the fuel-price increase, while consumer staples stocks will get a boost from socialsupport programs, Jahanzeb Naseer and Bernard Kie, analysts at Credit Suisse Group AG, wrote in a report yesterday.

Dismantling the decades-old fuel subsidy program is a political hot potato -- protests accompanied past price increases and riots spurred by soaring living costs helped oust dictator Suharto in 1998. The front page headline in English- language newspaper the Jakarta Globe yesterday read “A Bold Move”.

Southeast Asia’s largest economy expanded 5.01 percent in the third quarter from a year earlier, the least since the period ended September 2009.

Bloomberg News

12 | Business Daily

November 19, 2014

Asia Japanese firms probed for trust Three Japanese firms, including electronics conglomerate NEC, said they are being investigated by Japan’s Fair Trade Commission on suspicion of violating anti-monopoly laws in connection with sales of fire fighting emergency radio systems. Oki Electric Industry Co Ltd and Japan Radio Co Ltd also said in statements that they are under investigation. All three firms said they are cooperating with authorities.

Financing in S.Korea hits year high Corporate financing in South Korea through sales of bonds and equities hit this year’s high last month as borrowing costs became lower after the Bank of Korea (BOK) ‘s rate cuts, financial watchdog data showed yesterday. Direct corporate financing, which indicates sales of bonds and equities in the capital market, reached 13.09 trillion won (US$11.9 billion) in October, marking the largest monthly amount in 2014, according to the Financial Supervisory Service (FSS). It was up 17 percent from the prior month.

Japan 1-year bill at negative yield Japanese one-year government bills were sold for the first time at negative yields on Tuesday, underlining strong demand for the debt under the Bank of Japan’s qualitative and quantitative easing policy, through which it buys big amounts of short-term debt. The Ministry of Finance sold 2.312 trillion yen (US$19.84 billion) of one-year bills in which the average accepted yield was -0.0029 percent.

New leader for NZ’s main opposition Former trade union head Andrew Little was named the new leader of New Zealand’s main opposition Labour Party and charged with reversing the party’s fortunes after its historic defeat in September’s general election. A lawyer by profession acted as solicitor for the Engineering, Printing and Manufacturing Union before becoming the union’s national secretary in 2000. He was elected president of the centre-left Labour Party in 2009, the year after it lost power to a centre-right coalition led by Prime Minister John Key and his National Party.

S.K. online banking tops 100 million users Internet banking user in South Korea topped 100 million in the third quarter, the first time since such banking system was introduced in 1999, central bank data showed yesterday. The number of South Koreans, who opened transactions with banks via the Internet, was 101.1 million as of end-September, up 1.6 percent from three months earlier, according to the Bank of Korea (BOK). The figure passed the landmark 100-million level, but more than 50 percent of the users have not used such system over the past year.

Abe seeks stronger position with snap election Tax hike to be on hold until April 2017 after solid and generalized pressure

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apanese Prime Minister Shinzo Abe said yesterday he would delay a planned rise in the nation’s sales tax to 10 percent till April 2017 and call a snap election to seek a fresh mandate, just two years after taking office.

The economy unexpectedly slipped into recession in the third quarter, data released on Monday showed, a sign the pain from an initial rise in the sales tax to 8 percent from 5 percent in April was lasting longer than expected.

Abe said he would dissolve parliament on November 21.

No general election need be held until late 2016. But political insiders say Abe - who returned to power in December 2012 pledging to fix the economy with his “Abenomics” strategy of ultra-loose monetary policy, spending and reforms wants to lock in his mandate while his ratings are relatively high and before tackling unpopular policies next year.

In delaying the tax hike, Abe must tread a fine line to avoid suggesting that Japan is abandoning fiscal reform despite a public debt that is already twice the size of the economy.

Finance Minister Taro Aso, signalling that a delay was likely, told reporters yesterday that a sales tax hike at some point was inevitable to pay for the bulging social welfare costs of Japan’s fast-ageing population.

Shinzo Abe waving from official airplane entrance. Leaving or arriving?

told a news conference that the prime minister was attempting to cover up signs that Abenomics was failing.

“Abe is trying to rest everything by dissolving parliament,” Kawabata said in comments shown on NHK public TV. Few expect the LDP and its smaller ally to lose their majority.

But financial markets and analysts are now contemplating the possibility that the ruling bloc might fair less well than initially anticipated and that Abe could emerge weaker after the vote.

“A recession will give opposition party attacks on Abe more salience, suggesting the possibility that the ruling coalition could lose seats,” wrote Tobias Harris at consultancy Teneo Intelligence. The LDP and the Komeito party now hold a two-thirds majority in the lower house.

Abe, who is serving his second term as prime minister after a troubled 2006-2007 term, inherited the sales tax plan from his predecessor based on a ruling-opposition party agreement in which he played no direct part.

Reuters

“Weather fine, waves high” Removing a clause in current law that allows the government to delay the tax hike if economic conditions are too severe would be one option to reassure investors that the increase would not be postponed again, Aso said.

“It’s better to have some form of guarantee,” he said.

Abe is also considering some form of measures to stimulate consumption and help struggling regions, Natsuo Yamaguchi, the head of the Komeito, the junior party in the ruling bloc, told reporters after meeting the prime minister. Media reports said the package could be worth 2-3 trillion yen (US$17-US$26 billion).

Abe has been tight-lipped in public about his plans, but repeated on Monday that beating the deflation that has gripped Japan for most of the past two decades was vital.

On Monday, he also hinted he was preparing for battle at the polls.

Speaking at a reception, Abe quoted a phrase - “weather today fine but high waves” - used by a Japanese admiral in a telegram before a naval battle in the 1905 Russo-Japanese war. The Japanese fleet destroyed two-thirds of the enemy vessels.

Tatsuo Kawabata, a senior official of the opposition Democratic Party,

The official opening ceremony, which was attended by guests and members of the world’s media, featured prominent gaming dignitaries, representing influential organisations including MGEMA, Macao Foundation, Gaming Inspection and Coordination Bureau (DICJ), Macao Trade and Investment Promotion Institute (IPIM), Macau Government Tourist Office (MGTO), General Association of Administrators and Promoters for Macau Gaming Industry, Associação de Mediadores de Jogos e Entretenimento de Macau, Macau Jockey Club, Macau Slot, and Macau (Yat Yuen) Canidrome Company.

A busy stream of visitors in the first hour of the exhibition opening augured well for the second edition of MGS which comprises a record 146 exhibiting companies, a 30% increase on the 2013 figures.

Macao Gaming Show, which includes six product sectors comprising Gaming Equipment & Accessories, Gaming Promoters & VIP Clubs, Casino Fixtures & Fittings, Promotional Services & Memorabilia, Food & Beverage and Entertainment & Performance, also features the Macao Gaming Summit, a three day conference programme focusing on key gaming topics and how they impact both established and emerging gaming jurisdictions including Japan, Laos, Cambodia, Vietnam, Korea, Sri Lanka as well as Macao.

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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Business Daily | 13

November 19, 2014

Asia

Samsung shows speed lesson to Sony Sony cut its smartphone sales forecast for a second time, citing poor performance in China Pavel Alpeyev and Grace Huang

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amsung Electronics Co. is giving Sony Corp. a lesson in quick decision-making by moving engineers from its smartphone unit less than a month after posting a profit slump in the business.

Samsung is transferring about 500 workers from mobile phones and allocating them largely to the Internet of things initiative, according to people familiar with the matter.

Sony Chief Executive Officer Kazuo Hirai today told investors about targets for higher entertainment earnings after previously saying the company has been slow in adapting to change.

The move highlights Samsung’s ability to make speedy decisions at its biggest business even as Chairman Lee Kun Hee remains hospitalized, a contrast to Sony’s struggle to revive the phone unit since buying out Ericsson AB’s share in 2012. The

Korean company’s mobile division was responsible for Samsung last month reporting its lowest quarterly profit since 2011.

“Unlike its Japanese peers, at Samsung its chairman’s plans are executed fast,” Atul Goyal, a Singapore-based analyst at Jefferies Group LLC, said in a telephone interview on Monday. “Being familycontrolled has worked in their favour.”

Operating profit at Samsung’s mobile unit slumped to 1.75 trillion won (US$1.6 billion) in the three months ended September from a record 6.7 trillion won a year earlier.

Sony’s mobile communications unit lost 172 billion yen (US$1.5 billion) in the period, after booking a onetime charge.

Yesterday Sony said it’s targeting sales of US$10 billion to US$11 billion at the motion pictures business in the

OW Bunker Far East to meet liquidator On top of the US$750 million OW Bunker owes financers such as banks and pension funds Jane Xie and Henning Gloystein

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he Singapore arm of bankrupt Danish shipping fuel trader OW Bunker will meet with its liquidator KPMG in early December to discuss the firm’s outstanding debt, which totals almost US$1.5 billion globally.

OW Bunker, a leading supplier of marine fuel oil known as “bunker”, filed for bankruptcy in Denmark earlier this month after it revealed losses of at least US$125 million at one of its Singapore-based subsidiaries Dynamic Oil Trading, sending the bunker fuel market into turmoil.

A letter signed by OW Bunker’s board of directors and seen by Reuters said that a meeting would take place on December 4 in Singapore to start winding down the firm and receive a list of creditors and estimated amounts of their claims.

A telephone call to OW Bunker Far East was answered by a KPMG representative, who declined to comment.

On top of the US$750 million OW Bunker owes financers such as banks and pension funds, the firm also owes around 150 trading counterparties globally at least US$730 million in

outstanding fuel bills, OW Bunker creditor data dated November 7, circulated in the industry and seen

by Reuters, showed.

Of the creditors, almost half the fuel debt is owed to 20 firms in amounts of US$10-35 million each, including large energy companies such as Statoil, BP, Sinopec, Glencore subsidiary Chemoil, and Phillips 66 , with many other majors like Royal Dutch Shell or Repsol owed slightly less than US$10 million.

Another large creditor is the Aegean group of companies, including U.S. listed Aegean Marine Petroleum, with a combined outstanding debt of more than US$25 million.

Asked about OW Bunker’s outstanding debt, a BP spokeswoman in Singapore said via email: “BP does not comment on its commercial activity and we are not able to provide any commentary on the bunkering industry in general. BP continues to operate its business as usual.”

Requests by phone or email for comment from the other companies were not immediately responded to.

Reuters

year ending March 31, 2018, with an operating income margin of as much as 8 percent. The music business is projecting sales of as much as US$5.2 billion in the same period, Sony said yesterday.

The outlook for its entertainment unit comes less than a month after Sony cut its smartphone sales forecast for a second time, citing poor performance in China. The company will end development of models for the country, Chief Financial Officer Kenichiro Yoshida said at the time.

Yoshida will address Sony investors in Tokyo on November 25 when the company holds a separate briefing on its electronics operations.

“I can only conclude that our response to these environmental changes has been neither effective, nor nimble enough and that we have been late in enacting decisive change,” Hirai said on May 22, according to a Bloomberg transcript of a conference call.

Four months later, he widened Sony’s loss forecast for the year ending

March and said the Tokyo-based company will cut 1,000 jobs in the smartphone business, or 15 percent of the unit’s labour force.

Both Sony and Samsung battle Apple for the high end of the smartphone market, while fending off Chinese manufacturers including Huawei Technologies Co., Lenovo Group Ltd. and Xiaomi Corp. in the mid-range and low-end market.

Samsung’s Internet push is one of the first major initiatives under Lee Jae Yong, who has taken on more of a leadership role since his father, Chairman Lee, was hospitalized in May. The heir apparent, 46, has to calm investor concerns over the business outlook and his leadership skills.

Samsung responds faster than Sony, Goyal said. “When they see something working even if a little bit, they will speed up much faster, shift people and resources into it and push very aggressively.”

Bloomberg News

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November 19, 2014

International EasyJet winter bookings rise British low-cost airline easyJet reported a small rise in winter bookings yesterday, shrugging off concerns about an increasingly competitive European travel market. The company also posted a 21.5 percent rise in pretax profit to 581 million pounds (US$909 million) for the year ended September 30, in line with an upgraded forecast it made last month. Cheap fares have helped easyJet and rival Ryanair win market share in the European short-haul travel sector, against traditional airlines such as Air France-KLM and Lufthansa, which have recently announced plans to expand their own budget services.

Window for London FX ‘fixing’ to widen London’s benchmark foreign exchange “fixings” will move to a five-minute calculation window, from one minute currently, as of 2200 GMT on Sunday, December 14, the WM Company said in a memo sent to banks. The move

by WM, a unit of State Street Corp, follows the levying of the first fines on banks in a row over alleged manipulation of foreign exchange markets and the fixings, used to set reference values for thousands of contracts worldwide.

Martoma to begin prison term Mathew Martoma, a former portfolio manager at billionaire Steven A. Cohen’s hedge fund SAC Capital Advisors LP, has been ordered to begin serving his nine-year prison sentence for his insider trading conviction on November 20.

U.S. District Judge Paul Gardephe in Manhattan issued the order on Monday, five days after the 2nd U.S. Circuit Court of Appeals rejected Martoma’s bid to stay out of prison while he appeals his conviction. Richard Strassberg, a lawyer for Martoma, declined to comment. He had asked Gardephe to delay Martoma’s surrender date until December 1, after the Thanksgiving Day holiday.

Senate panel to probe into commodities A heavyweight list of bankers and regulators will appear before a U.S. Senate committee this week in a probe into Wall Street’s role in commodity markets and ahead of possible tougher rules from the Federal Reserve. Markets will weigh every word from Federal Reserve Governor Daniel Tarullo, in charge of financial regulation at the central bank, which in January said it would come out with rules to rein in banks’ activities in the market. Tarullo will testify on Friday.

Madoff trustee recoups more for customers Former customers of Bernard Madoff may soon recover an additional US$496.8 million as a result of a settlement with two “feeder funds” that was announced by the trustee liquidating the swindler’s firm. The settlement, with the Herald Fund SPC and Primeo Fund, both based in the Cayman Islands, is one of the largest obtained by the trustee, Irving Picard, since the failure of Bernard L. Madoff Investment Securities LLC in December 2008. If approved by U.S. Bankruptcy Judge Stuart Bernstein in Manhattan, the payout would push the sum recovered by the trustee for Madoff customers above US$10.3 billion.

Brazil’s Petrobras vows graft probe Petrobras delayed the release of its third-quarter earnings last week following accusations that the company systematically overpaid for assets and work by contractors

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razil’s state-run oil company Petroleo Brasileiro SA vowed to fully investigate a graft scandal that has knocked its shares lower and saddled President Dilma Rousseff’s government with its biggest political crisis.

In their first public comments since a former Petrobras executive was arrested in connection with the scandal last Friday, Chief Executive Officer Maria das Gracas Foster and other company leaders said they had hired legal consultants to investigate the allegations.

Petrobras delayed the release of its third-quarter earnings last week following accusations that the company systematically overpaid for assets and work by contractors. The excess funds were then funnelled to political parties including Rousseff’s ruling Workers’ Party, prosecutors said.

While neither confirming nor denying that such conduct took place, executives said Monday that Petrobras will reassess the value of some assets based on whether bribes were part of the purchase price, and could take accounting losses accordingly.

As a result, fully audited quarterly results might not be available until the end of January, they said.

That raises the prospect of a long period of uncertainty for a company that was once the crown jewel of Brazil’s economy, but has in recent years become a symbol of

We are working with all our strength to have the (audited) earnings report ready and to cooperate with the investigation in the hope that it is resolved quickly Almir Barbassa, Petrobras, CEO

the country’s fall from grace.

Rousseff was chairwoman of the Petrobras board of directors for seven years through 2010, when much of the alleged corruption took place. While she has denied any role in the wrongdoing and is not facing charges, the scandal could further weaken her government at a time when it faces a stagnant economy and falling investor confidence.

Investors have been concerned that the world’s most-indebted major

oil company risks a technical default on about US$12 billion dollars in bonds if it doesn’t report unaudited earnings by year end Petrobras will be unable to sell new debt until it releases the earnings, company officials said.

Petrobras’ total debt stood at around US$140 billion at the end of June, and its stock of outstanding bonds are equivalent to US$54 billion.

Arrests On Friday, Brazilian federal police arrested Renato Duque, the company’s former director of corporate services, and several leaders of powerful Brazilian construction and engineering companies in connection with the scandal. The company’s former refining chief, Paulo Roberto Costa, whose allegations led to the dragnet, has also been under arrest since March.

During police questioning on Monday, Duque denied taking part in any criminal activity and said he knew nothing about an alleged cartel of Petrobras service providers, according to a statement released by his advisers.

Rousseff, who won re-election on October 26, has pledged a thorough investigation and said on Sunday the case could help change Brazil’s culture of corruption.

Reuters

Argentina steps up fight against dollar black market Tax authorities have raided currency exchange houses and stock brokers, slowing capital flight in the short term

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rgentina, which faces an acute hard currency shortage, sought to toughen international trade controls by creating a new agency to keep track of imports and exports and said it would keep tightening currency restrictions.

Financial authorities in the South American country are waging a crackdown on black-market dollar trading and capital flight mechanisms after a sharp slump in the peso and a drain on foreign currency reserves this year.

“It was agreed to sustain and deepen policies and procedures for controlling and monitoring the (financial) system,” the central bank said in a statement after a meeting of financial bodies including the tax office.

President Cristina Fernández began restricting access to dollars through legal channels in 2011, forcing many Argentines to use the black market and legal loopholes to purchase greenbacks.

A devaluation in January and a debt default in July battered confidence in the peso and triggered an outflow of capital. The peso sank to a record low of 15.95 in late September, prompting the latest crackdown under the watch of a new central bank chief, Alejandro Vanoli.

The bank has tried to dampen demand for U.S. currency by further limiting the amount available to importers. It also clamped down on the so-called “blue-chip swap,” whereby Argentine investors buy local stocks cross-listed in New York and convert them into American Depositary Receipts, selling them in the United States for dollars.

Tax authorities have raided currency exchange houses and stock brokers, slowing capital flight in the short term.

Critics of Fernández question how sustainable her controls are amid wider concerns about Latin America’s No. 3 economy.

On Monday the government published a decree creating the Trade

It was agreed to sustain and deepen policies and procedures for controlling and monitoring the (financial) system Argentina’s Central Bank

Operations Tracking Unit which will “verify the price and quantity of goods and services exported and imported, along with the inflow and outflow of foreign exchange.”

Reuters

Business Daily | 15

November 19, 2014

Opinion

Reforming China’s wires commanding heights Business

Leading reports from Asia’s best business newspapers

THE STRAITS TIMES The Ministry of Trade and Industry will release its detailed data on Singapore’s economic performance in the third quarter of this year on November 25, it said yesterday. The Economic Survey of Singapore will include information and data on the overall GDP performance of the economy, sectoral performance, sources of growth, inflation, employment and productivity in the July-September quarter. The advance reading of Singapore’s third-quarter gross domestic product (GDP) released on October 14, showed that the economy grew a slower-than-expected 1.2 per cent from the previous quarter on a seasonally adjusted and annualised basis.

Michael Spence

Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution

TAIPEI TIMES Cathay Financial Holding Co, the nation’s biggest financial services provider, said that its banking arm plans to maintain a prudent attitude when reviewing loans to Chinese companies, following a potential problem of bad debts with a syndicated loan to Chinese urban footwear manufacturer Fujian Ultrasonic Shoes Co Ltd. Cathay United Bank, the banking subsidiary of Cathay Financial, in August led a US$60 million syndicated loan to Ultrasonic Shoes, whose German holding company, Ultrasonic AG, has been listed on the Frankfurt Stock Exchange for years.

PHILSTAR Remittances from overseas Filipino workers amounted to US$2.3 billion in September, rising 8.1 percent relative to the comparable period last year, the Bangko Sentral said.

In a report, the central bank said for the first nine months of the year, personal remittances amounted to US$19.6 billion, representing a 6.7-percent year-on-year growth. BSP Governor Amando Tetangco said the growth in remittances was driven by the steady increase in transfers from land-based workers with work contracts of one year or more (5.4 percent), and sea-based and land-based workers with work contracts of less than one year (8.2 percent).

BANGKOK POST Land and Houses Bank (LH Bank) is in talks with three major financial institutions in Japan, China and Malaysia about its possible sale. After months of rumours, president Sasitorn Pongsathorn acknowledged LH Bank was in search of a new strategic partner for its expansion plan.

Potential buyers include CP All, the operator of 7-Eleven in Thailand, a source familiar with the matter said. LH Bank has become attractive to foreigners looking for a foothold in Thailand through a local strategic partner.

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hinese President Xi Jinping’s massive anti-corruption campaign has advanced a number of key objectives: It has gone a long way toward restoring confidence in the Communist Party’s commitment to a merit-based system; countered a decades-old pattern of public-sector domination; reduced the power of vested interests to block reform; and bolstered Xi’s popularity among private-sector actors, if far less so with the bureaucracy. In short, Xi’s effort to root out corruption has empowered both the Party and the reformers. The question is how far they will take their reform ambitions.

Xi is certainly not finished yet, having outlined a set of legal reforms at last month’s Fourth Plenum of the Communist Party aimed at creating a more level playing field for the public and private sectors. If implemented properly, the reforms will create a more efficient system for the creation and enforcement of contracts, ease the path for market entrants, and strengthen the application of China’s competition laws.

Greater fidelity to the rule of law will also lead to the creation of a legal and financial infrastructure that reduces fraud in the private sector, including in financial reporting. That, together with increased access to capital, will help to accelerate the development of the services sector, which is needed to create urban employment.

Better management of China’s considerable public assets – which include US$3.5-4 trillion of foreign-exchange reserves, substantial land holdings, and majority ownership of the stateowned enterprises that dominate the economy – would complement these efforts.

Indeed, it could help to boost competition, encourage innovation, strengthen the financial system, and expand access to capital.

The question is how China could achieve this. As it stands, China’s economy follows, to some extent, the old Leninist “commanding heights” model, with the Party holding all political power and controlling major enterprises and sectors, even as the burgeoning private sector drives growth and employment. In this context, the kind of “meritocratic professionalism” that China is pursuing is important; but it is no substitute for genuine competition in the public or private sector – at least not if innovation and structural change are the goals.

Of course, Xi could simply declare that China’s version of state capitalism has worked well in the past, and will continue to do so. But experience with the microeconomic dynamics of advanced economies (where China is headed) makes this a weak stance – and, thus, one that Xi is unlikely to take.

The alternative would be to embark on a sustained program of privatization to shrink the asset side of the state’s huge balance sheet.

But China’s balance sheet has served it well, enabling the extraordinarily high rates of investment that have fuelled rapid growth. Meanwhile, many advanced economies have suffered considerably from their balance-sheet composition, with limited, poorly measured assets and outsize debt and non-debt liabilities.

In fact, given an increasingly unequal distribution of income between capital and labour (as well as across the income spectrum for labour) a larger store of public assets certainly has merit, as it equalizes the distribution of capital and wealth, albeit indirectly. Not only can public assets be used to cushion shocks and counter adverse trends; they can also help fund an expansion of social insurance.

The problem in China is not the volume of stateowned assets, but their concentration in a few companies and industries – a situation that poses risks to economic performance

The problem in China is not the volume of state-owned assets, but their concentration in a few companies and industries – a situation that poses risks to economic performance. Given this, the logical solution is not to dispose of the state’s asset holdings, but to diversify them over time.

Such an approach would have a number of benefits. First and foremost, it would reconcile a large state balance sheet with an expanding role for markets, bolstering employment, stimulating innovation, and advancing the economy’s structural transformation. To this end, public investment in infrastructure, human capital, and the economy’s knowledge and technology base would remain crucial.

Furthermore, the diversification of China’s asset holdings would deepen its financial markets considerably. Over the next several years, as the traded or tradable share of the state-owned sector’s market capitalization increased from today’s low base of 10-15%, more institutional investors, such as pension funds and insurance companies, would become involved in Chinese equity trading, which is currently dominated by retail investors. This would augment savings options for an increasingly affluent population and strengthen support for long-term investment and development.

Debt markets would also benefit from such an initiative. Blurring the line between the private and the state-owned sectors would, over time, reduce the latter’s privileged access to – and overuse of – bank financing, leading to the expansion of corporate bond markets.

With public entities like the social security system and sovereign-wealth funds holding more diversified asset portfolios, incentives would be substantially reduced for market intervention favouring incumbents in which the state owned a large share.

This, along with enhanced enforcement of competition law, would go a long way toward levelling the playing field in markets.

Clearly specified fiduciary responsibilities and governance would help to ensure that publicly held assets were managed to maximize long-term risk-adjusted returns, with the state and citizens as beneficiaries and the market as the arbiter of efficiency and innovation. The best-managed state-owned enterprises could emerge – or remain – as successful and prominent players, adapting to expanded market competition and combining innovation with economies of scale.

Indeed, public-sector asset management could be “outsourced,” with private asset managers competing for the job. This would accelerate the development of the asset-management sector, with far-reaching benefits for savers and investors.

China does not have to give up the safety net provided by large asset holdings to allow markets to play a decisive microeconomic role. It can abandon the commanding heights model and develop its version of “state capitalism” to support the best of both worlds. All that is needed is a persistently strong government commitment to the public interest – and, of course, a skilfully executed reform strategy.

Project Syndicate

16 | Business Daily

November 19, 2014

Closing ASEAN railway conference to boost connectivity

Maduro calls for OPEC coordination to defend prices

The 36th ASEAN Railway CEO’s Conference opened in Vietnam’s capital Hanoi yesterday, aiming to boost closer connectivity among ASEAN members. The event, themed “Towards Closer ASEAN Connectivity,” drew participation of 206 representatives and observers from railway sectors of seven ASEAN countries including Cambodia, Indonesia, Laos, Malaysia, Myanmar, Thailand and Vietnam as well as from the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the International Union of Railways (UIC). The three-day 36th ASEAN Railway CEO’s Conference is an annual activity that is hosted by railway sectors of ASEAN countries on the principle of rotation.

Venezuelan President Nicolas Maduro urged “common actions” of oil-producing nations to tackle the global oil price slump. In a televised speech, he said a group of countries want to “take new strategies” before the OPEC’s November 27th meeting in Vienna after a 30-percent decrease in oil prices since midJune. “We have coordinated a special meeting with OPEC nations and other oil-producing countries to take common actions to defend the price of oil and its global market,” said Maduro. The leader said he has commissioned Foreign Minister to visit various countries to talk over these “strategies and common interests.”

I have no concern whatsoever about any bigger calamity.

Money is still flowing in here, no-one is taking anything out Niklas Hageback Valkyria Kapital partner

Finances unharmed by ending protests Barriers get cleared in Admiralty and Mongkok after legal decision and losing strength in recent weeks

Pro-democracy demonstrators remove barricades in an occupied area of Admiralty in Hong Kong

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ong Kong’s government yesterday cleared some barriers that have blocked the city centre for the past seven weeks, with little opposition from protesters who erected them.

Court bailiffs and security staff wearing white gloves moved to enforce an injunction against studentled demonstrators blocking an entrance to Citic Tower in the Admiralty district.

The protesters earlier moved some barriers themselves to reinforce those at the main protest site nearby on roads outside the government’s headquarters, where hundreds of demonstrators remain camped out in tents.

Hong Kong’s appeal to the financial community has withstood protests that threatened to become the city’s biggest political crisis in decades, according to a Bloomberg Global Poll.

BoC to issue 32 billion yuan of preferred shares

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Eighty-seven percent of the survey’s 510 respondents said the democracy movement that blocked major roads and shopping districts for seven weeks hasn’t diverted financial activity away from the city. Fifty-seven percent said the protests could drive away business if they continue, while 30 percent said that the protests were unlikely to affect the city’s position as a financial centre. Ten percent said they weren’t sure.

“Hong Kong has a strong rule of law and continues to be a major Asian financial hub,” said Jason Petras, a Sydneybased portfolio manager at BT Investment Management Ltd. His firm had seen no disruption in its trading of Hong Kong options and futures, said Petras, who participated in the quarterly poll of investors, traders and analysts who are Bloomberg subscribers.

The Hang Seng Index has risen 0.5 percent since

Taiwan to end fight for control of bank

the demonstrations started September 26, even as the occupation pushes the government to predict full-year economic growth close to the bottom of its forecast range.

The Bloomberg Global Poll was conducted on November 11-12 by Selzer & Co., a Des Moines, Iowabased firm, and has a margin of error of plus or minus 4.3 percentage points.

The city’s bourse, which occasionally shuts during strong typhoons, remained open throughout the crisis.

Riots on September 28 caused the Hang Seng’s biggest twoday slump in more than seven months. The benchmark gauge lost 3.2 percent in that period, as the city’s dollar sank to the weakest level since May 2012 versus its U.S. counterpart.

Bloomberg News

Toyota to become first hydrogen car seller

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ank of China Ltd., the nation’s fourth-biggest lender by market value, sold 32 billion yuan (US$5.2 billion) of preferred securities to yield 6 percent, two people with knowledge of the matter said.

The private placement took place yesterday, the people said, asking not to be identified because the issue hasn’t been made public. Bank of China said in September it won regulatory approval to sell as much as 600 million preferred shares, with the first batch of 320 million to be completed within six months, according to a statement posted to the Shanghai Stock Exchange.

The issuance will help Beijing-based Bank of China shore up its capital buffers after Chinese lenders’ bad loans jumped by the most since 2005 in the third quarter. Bank of China raised $6.5 billion last month selling additional Tier 1 securities in Asia’s largest ever note offering denominated in U.S. dollars.

Officials at Bank of China’s press department didn’t immediately respond to a telephone call seeking comment on the latest sale.

Nonperforming loans rose by 72.5 billion yuan from the previous

he Taiwanese government asked Taishin Financial Holding yesterday to offer a “feasible solution” to end its battle with the finance ministry over the control of mid-sized lender Chang Hwa Commercial Bank.

Taishin, which counts investment firms BlackRock Inc and Norges Bank as investors, is the top shareholder in Chang Hwa after paying US$1.2 billion for its stake to the government.

The finance ministry, the second largest shareholder, wants to reassume control of the lender, whose profits have been steadily rising, and has been pressing Taishin recently to cut its stake or reduce its seats to a minority on Chang Hwa’s board.

Taishin is in no mood to give up control. Its president warned last week it could face a paper loss of more than T$10 billion (US$333 million) in 2014 if it cedes control of Chang Hwa to the government in upcoming voting.

Chang Hwa will have its board elections early in December. The elections are held every three years and could determine who will control the bank.

apan’s major automaker Toyota said Tuesday that its hydrogen-powered vehicle named “Mirai” will hit the Japanese market on December 15, making it the world’s first seller of such fuel-cell vehicle (FCV) for general consumers.

“Mirai,” which means “future” in English, will be sold at around 7,236,000 yen (about US$62,000), said the automaker, adding that it aims to sell about 400 units domestically by the end of 2015. It also plans to usher the green car into U.S. and European markets next summer.

The new generation of green car can drive up to 650 km on a single tank of hydrogen and emits only water vapour, according to Toyota, adding refuelling only needs about three minutes.

The four-door sedan uses a system that features both fuel-cell and hybrid technologies, and also includes Toyota’s new proprietary fuel-cell stack and high-pressure hydrogen tanks, the automaker said.

Toyota’s President and CEO, Akio Toyoda, was quoted as saying that Mirai is a chance for Toyota to make a fundamental difference in the auto industry.

Bloomberg News

Reuters

Xinhua