Macau Business Daily, Nov 20, 2014

MOP 6.00 Year YearIIIIII Number Number638 671Monday ThursdayOctober November 6, 2014 20, 2014 Publisher: Publisher: Paulo Paulo A. Azevedo A. Azevedo Closing Closing editor:editor: Luis Gonçalves Sara Farr

Off the mark

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miscalculation of large proportions.

This week, Secretary for Economy and Finance Francis Tam said MOP115 billion is the target for direct gaming tax in 2015.

He also said it was in line with this year’s figures. But Business Daily begs to differ.

Calculations using official data suggests this year’s figures could reach MOP130 billion.

Through direct gaming tax alone by the end of December. That equates to a 10 percent shortfall next year Page 3

Midland Realty: Property prices to drop 5pct in 2015 Page 5

Revel will take new name under Brookfield ownership Page 7

Philly sports fans to get new casino in shadow of stadiums Page 7

HSI - Movers November 19

Name

Visitors spend more in Q3 Visitor spending is up. It increased 5 percent in the three months ended September 30, for some MOP15.5 billion. Mainland Chinese visitors remain the biggest spenders. Per capita expenditure is MOP2,220, despite a 4 percent year-on-year drop

%Day

China Unicom Hong Ko

1.08

China Merchants Hold

0.78

AIA Group Ltd

0.69

Wharf Holdings Ltd/T

0.18

CLP Holdings Ltd

0.15

China Shenhua Energy

-1.94

Belle International

-2.24

Kunlun Energy Co Ltd

-2.87

China Resources Ente

-3.18

Hong Kong Exchanges

-3.39

Source: Bloomberg

I SSN 2226-8294

www.macaubusinessdaily.com

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4G licence bids submitted New strategy, new power Six bids have been submitted for four 4G licences. Four have been accepted unreservedly. But paperwork is paperwork. Two companies have until the end of the day to provide further details. Or be out of the running.

The winners will be announced in Q1

China has announced its energy strategy. The plan calls for annual coal consumption to be constrained.

Below 4.2 billion tonnes until 2020. That’s 16.3 percent more than the 3.6 billion tonnes burned last year alone

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2 | Business Daily

November 20, 2014

Macau

4G licence winners to be announced first quarter The Telecommunications Regulation Bureau (DSRT) accepted the six bids for 4G wireless services yesterday.

However, bids from China Telecom and Hutchinson were only accepted on condition they provide extra information throughout today

Cartel accusations

João Santos Filipe

jsfilipe@macaubusinessdaily.com

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ll six bids to provide 4G wireless services in Macau were accepted yesterday by the Telecommunications Regulation Bureau (DSRT). However, the bids

by China Telecom (Macau) Limitada and Hutchinson – Telefone (Macau) Limitada were accepted on condition the companies provide additional information within 24 hours.

“This is a detail related to a document of identification which we will solve tomorrow [today] without any problem”, the Assistant General Manager of China Telecom (Macau) Limitada, Samuel Chan, explained.

“We are the largest provider of 4G [services] in China and we’re very

confident that we’re going to get one licence”.

Hutchinson – Telefone (Macau)’s bid was accepted after an hour-long closed meeting to assess it. The problem was caused by a document related to the fees to be paid.

“There were some discrepancies with some documents but we will solve it tomorrow [today]. We have been operating in Macau for some years now and so I don´t think it will be a problem”, Windus Lam, Chief Operating Officer for Hutchinson in Macau, told Business Daily.

“We’re very confident with our bid as we’re experienced in Macau, and a worldwide player”.

The bids from Companhia de Telecomunicações de Macau S.A.R.L. (CTM), Smartone – Comunicações Móveis S.A., China Mobile Hong Kong Company Limited and U Hong Comunicações Limitada were accepted unreservedly.

However, before the end of the meeting for the opening of the bids at the DSRT office, some questions were raised, as the companies wanted to have access to other bids. In the end, they were told that they could access the documents hours later and all was resolved.

All the representatives of the bids told the press that they were confident of being awarded a licence. However,

Visitors Q3 spending up 5pct to MOP15.5bln But per capita spending of visitors, even from the highest spending group of mainland Chinese, has posted a decline over the year, official data shows Stephanie Lai

sw.lai@macaubusinessdaily.com

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he city saw a nearly 5 percent increase in inbound visitor spending of MOP15.5 billion patacas (US$1.9 billion) for the third quarter this year but a decline was recorded in per capita spending of visitors – in particular, the highest spending mainland China visitors travelling to Macau in the three-month period.

While Macau recorded an 11 percent year-on-year increase in the number of inbound visitors at 8.2 million for the third quarter, visitors’ expenses here, excluding those on gaming activities, amounted to MOP15.5 billion, representing a rise of 4.6 percent compared to the same period last year, latest data released by the Statistics and Census Service shows.

The government data shows that the per capita spending of visitors during the period was down by a slight one percent year-on-year to MOP1,878, whilst short-haul visitors from Asia, especially from China, Japan, Singapore and Malaysia, actually spent more than their longhaul counterparts.

The highest spending group were the mainland Chinese, whose per capita spending in the third quarter reached MOP2,220, representing a 4 percent drop year-on-year, even though expenditure by those travelling

only four of the six companies that bid for the tender will be allowed to run 4G wireless services in Macau.

“We’re going to do our very best for the final result of the tender to be known during the first quarter of next year. As for the 4G wireless service, it is supposed to be available for the citizens of Macau by the end of the year”, Hoi Chi Leong, Vice-Director of DSRT, said. “They will have to cover 50 percent of the territory when they start operating but that will not be an issue. Otherwise they wouldn’t have presented their bids”, he added when queried.

under the individual visit scheme (IVS) grew 7 percent to MOP2,758.

But of the 8.2 million visitors coming to Macau in the third quarter, of which nearly 68 percent or 5.6 million were from the mainland, visitors from Guangdong Province still comprised a significant part of overall mainland Chinese visitors at around 42 percent, the official visitor arrivals record shows. Guangdong visitors are also the group that are mostly likely to travel to Hong Kong and Macau on a same-day basis.

The latest official data noted that the per capita spending of sameday mainland visitors travelling here under the IVS scheme was MOP1,185, down 4 percent compared to a year before; for overall same-day visitors from the mainland, per capita spend in the period was MOP707, nearly 12 percent less than a year before.

Nearly half of visitors’ expenditure here in the third quarter went on shopping, in particular jewellery and watches, food products, handbags and shoes; while 26 percent of visitors’

Hoi Chi Leong also commented on the fact that the telecommunication companies in Macau are being accused of cartel-like behaviour as they intend to end their mobile plans for unlimited access to the Internet.

“We will follow this situation closely but we haven´t received complaints yet. So far, no such cases have been detected”, the ViceDirector of DSRT said.

The accusations of being a cartel

by Macau New Association were also denied by Declan Leong, CTM´s Vice President of Network Services.

“We’re in a competitive market and we’re separate companies. Our offer to the market depends on market requirements and from times to time we have to adjust our plans. There have been no conversations with other companies on such issues. This is a competitive market”, he told Business Daily.

spending was on accommodation.

Overall, the per capital spending for visitors staying overnight in Macau was MOP3,310 in the third quarter, which is a year-on-year rise of 4 percent; same-day visitors’ spending here in the period was down by 8 percent to only MOP599.

Japanese visitors travelling here followed the Chinese as the secondhighest per capita spending group at MOP1,954, which is even higher than Singaporean visitors at MOP1,927 per capita.

For long-haul visitors travelling here, those from the UK had a relatively high per capita spend, which grew sharply by 38 percent to MOP1,563; visitors from Australia spent 21 percent more than a year before at MOP1,498, official data shows.

Less than half of the visitors surveyed in the third quarter said Macau had sufficient attractions, the Statistics and Census Service noted in the visitors’ spending data.

The Macau Government Tourist Office announced recently that its long-term strategy is to boost local tourism attractions to add more “walking tour routes”, namely routes designed to diversify the flow of visitors away from overcrowded destinations such as Leal Senado Square in San Ma Lou. A survey conducted by the Office to gauge public perception of the walking tour routes plan, released in late September, reveals that there are concerns about the negative impact such a plan can impose on the transport system in the city – a finding, however, that does not alter MGTO’s plan to continue expanding the walking tour routes.

The transport service is the category which inbound visitors are least satisfied with and demand improvement from, the census said in its third quarter report on visitor spending. The bureau also asked visitors about their level of satisfaction regarding hotels, gaming facilities, restaurants, shopping outlets, and environmental hygiene.

Business Daily | 3

November 20, 2014

Macau

Gaming tax revenue to drop 10pct in 2015 Francis Tam said this week that the government expects to collect MOP115 billion through direct gaming taxes in 2015, a performance, he claimed, would be in line with this year. But in 2014, this tax will generate much more than that: MOP130 billion Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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he Government will suffer a 10 percent decrease in gaming tax revenue next year, a different scenario to the one announced this week by Francis Tam, who’s expecting a flat performance from the revenues generated by casinos for the public coffers.

The Secretary for Economy and Finance said Tuesday that the government here expects to collect MOP115 billion from its direct tax on gaming in 2015, “maintaining” the level of this year. Tam’s words probably were referring – or comparing – to the figures included in the 2014 budget, in which the expected gaming tax should reach MOP117 billion this year.

However, according to Business Daily calculations using official data and the latest estimations from investors, the government will amass much more than that. At least MOP130 billion is likely to enter the public accounts in 2014 through direct gaming tax charged to casinos (35 percent of gross revenues made by all operators here).

As at October, the government had already collected MOP110 billion in gaming taxes, the latest data from the Financial Services Bureau shows. In the two months left until the end of the year, public coffers will receive an additional MOP18 billion in revenues from direct gaming taxes, pushing the total revenue to almost MOP128 billion.

Worse than flat The actual consensus among investors is that gaming revenues in Macau will drop 20 percent in

November and December. Last year, casinos in Macau generated MOP30 billion in November and MOP33 billion in December in revenues, according to data from the Gaming Inspection and Coordination Bureau.

If market predictions materialise, gross gaming revenues here will total MOP51 billion in the last two months of the year. This means that the government will collect MOP18 billion from this sum (the 35 percent tax) that will be added to the amount of MOP110 billion amassed from January to October.

With an expected MOP130 billion in direct tax from gaming in 2014, the MOP115 billion figure advanced

by Mr. Tam this week, means that the revenues from this tax will not stay flat but decrease by 10 percent.

Despite the turbulent year and the five straight months of gaming revenue decline (likely to be seven

by December) the government will close the year with more money from gaming than in 2013. According to the Financial Services Bureau, last year revenues from the casino tax amounted to MOP126 billion.

Today, authorities make twice the money charging casinos than in 2010 (MOP65 billion) and three times more than in 2009 (MOP42 billion).

The government was also forced to revise down its numbers. Mr. Tam said this week that he’s working on the 2015 budget with a monthly gross gaming revenue estimation of MOP27.5 billion (using the average of revenues from June to October) versus the previous MOP30 billion.

The budget for 2015 was described by the Secretary for Economy and Finance as “conservative”. In Macau, the gaming industry generates 95 percent of its direct taxes and 80 percent of all government revenues.

The outlook for Macau’s gaming industry in 2015 is also becoming bleak as the data from the sector continues to get bad press. The consensus among investors is that gaming revenues will stay flat this year or suffer a small decrease in the low single-digit range.

For 2015, the market is expecting another decline in gaming revenues between 0 to 4 percent. Like 2014, next year will probably be divided into two opposite stories in terms of revenue performance. The first half will continue to see a drop in gaming revenues in the double-digit range, with the first three months the worst.

For the second half, investors predict a recovery due to a better comparative effect with 2014 and also more revenues arriving with the opening of several new properties in Cotai.

Work insurance to be mandatory on typhoon days

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he government wants to make it mandatory for companies to provide insurance against occupational accidents for employees who have to work during days when the typhoon signal is 8 or above.

The new regulation was announced yesterday and will be included in the new amendments of the

upcoming compensation regulation of occupational accidents and disease law. The change got the green light from the Executive Council and has to be approved by the Legislative Assembly. Casino workers and repair professionals like electricians are some of the groups that will benefit from cover under the new ruling.

Gov’t renews Chinese lottery representative contract

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government dispatch released yesterday announced that Mr. Gonçalo Jorge Cabral Lourenço da Silva, a representative from the government stationed with lottery company Sociedade de Lotarias Wing Hing Lda, has had his term renewed for another year with effect from October 25. Wing Hing, which has been signing one-year contracts with the government since 2010 to run the Chinese lottery concession here, is known locally as Pa Ka Pio (sometimes Westernised in lottery outlet signs as ‘Pacapio’). An official announcement has yet to be gazetted to state the renewal terms for Wing Hing, as the current concession for this lottery monopoly expires on December 31.

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November 20, 2014

Macau iGaming suppliers seek opportunities in Macau Several e-gaming platform providers believe Macau has great potential as local regulations foresee the possibility of mobile casino gaming.

Joanne Kuai

joannekuai@macaubusinessdaily.com

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he Internet is changing the way people play their favourite games and many are eyeing this opportunity to boost the online gaming market.

Play’n GO, an iGaming company based in Sweden, told Business Daily that they are in town to search for partners.

“We have years of experience of creating interactive gaming applications. In Asia, we’ve collaborated with one of the two gaming operators in the Philippines already. Here in Macau, we’re also looking for licensed operators that need an online gaming solution,” said Robert Skogh, business

development director of Play’n GO, at the 2014 Macau Gaming Show.

Mr. Skogh introduced the company that considers itself a gaming specialist and leading developer of smart systems and designed for performance on mobile phones, tablets, game terminals and websites.

The e-gaming platform equipped with back-office administration tools for surveillance and marketing would help clients take a bigger market share of the online gaming industry.

Leading Japanese company BBTECH said they solve more than technical

Perfect Shape HK, Macau interim revenues rise 82pct The Hong Kong-listed company also announced that its interim net profit had risen by 68.7 percent to HK$71.17 million

aspects for their clients.

“Regulatory compliance can be achieved instantly as we can develop live studio software from one of our offshore studios. And we have the appropriate e-wallet that can be loaded via China UnionPay credit card to expedite transaction,” said Keiri Mitsouka, vice president of operations of BBTECH. Mr. Mitsouka said the company had been established by Japanese and Koreans with background as real operators and technical platform providers, and provides turnkey solutions for online gaming.

Currently in Macau, gaming activities can only

take place in locations approved by the local government, including online gaming, the local laws governing operations of casino games state.

A Macau bylaw gazetted in November 2012 foresaw the possibility of ‘mobile’ gaming inside some of the city’s gaming premises.

This particular bylaw was primarily concerned with conventional slot machines and slot parlours but also mentioned the possibility of mobile gambling using wireless networks although ‘only inside gambling areas especially authorised’ by the city’s Gaming Inspection and Coordination Bureau.

Chow Tai Fook suffers Occupy Central backlash

Stephanie Lai

sw.lai@macaubusinessdaily.com

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he Hong Kong-listed Perfect Shape (PRC) Holdings Ltd, which runs beauty salons in Hong Kong, Macau and mainland China, recorded a staggering increase in revenue for both SARs for the six months ended September 30, the company told the Hong Kong Stock Exchange after trading hours Tuesday.

Perfect Shape’s interim revenue from both the Hong Kong and Macau market reached HK$166 million (US$21.4 million), representing an increase of 82 percent when compared to the same period last year.

Perfect Shape, which also sells slimming and beauty products, runs a beauty salon in San Ma Lou. The company said it saw a ‘satisfactory’ result from

Macau, where its revenues derived from the market surge by a year-on-year 68 percent to HK$5.3 million – although occupying only around 1.6 percent of the company’s whole revenue at HK$325 million.

Perfect Shape said it is committed to building a presence in the local market, although it has not announced any expansion plan here.

The beauty service, headquartered in Hong Kong, saw its interim net profit rise by 68.7 percent year-on-year to HK$71.17 million; its net profit margin also increased by 3.8 percentage points to 21.9 percent in the interim period.

Au Yeung Kong, chairman and chief executive officer of Perfect Shape, noted in the briefing for the interim

results that the company anticipated an even better performance for the second half of the financial year while the company’s principal beauty salon businesses in the Causeway Bay and Mong Kok districts had been unaffected by the pro-democracy Occupy Central movement.

While the company’s clients who subscribed to slimming services had also spent on medical beauty services, Perfect Shape’s operation in Hong Kong focuses primarily on the medical beauty segment, Mr. Au noted in the briefing.

The company declared an interim dividend of HK5.8 cents. The basic earnings per share for the interim period is HK6.5 cents, up from the HK4.2 cents of a year before.

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how Tai Fook announced this week that the traffic in their Hong Kong stores had been directly affected between October 1 and 31 by the Occupy Central movement, which has been protesting in the neighbouring Special Administrative Region for over seven weeks now.

‘Customer traffic in and the business of our point-ofsale in certain areas in Hong Kong was affected by the demonstrations happening nearby’, the group involved in jewellery sales reported in

a filing with the Hong Kong Stock Exchange.

During October, retail sales value growth and samestore sales growth of the group’s Hong Kong market registered drops of 17 percent year-on-year and 24 percent year-on-year, respectively.

This is not a new trend this year. During the second quarter of the 2014/2015 fiscal year the company had already registered a decline of 20 percent yearon-year for retail sales value growth and a drop of 29 percent year-on-year for same-store sales growth.

Business Daily | 5

November 20, 2014

Macau

Investors apportion little value to MGM Cotai impact, says Wells Fargo

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nvestors are not giving enough credit to MGM China’s plans in Cotai as the stock price of the operator continues to perform below expectations given the future impact of the project on the presence and performance of the company in Macau, Wells Fargo said yesterday.

The US$2.9 billion integrated resort set to open in Autumn 2016 will be a game changer for parent company MGM Resorts International, offering 1,600 rooms, 500 gaming tables and 2,500 slots. Upon opening, MGM China will triple its hotel capacity and double its table base and gross floor area, the US bank said in a note to clients after an investor dinner with the company. The Cotai resort will be MGM’s second property here.

‘Given the sizeable increase in rooms and tables, we believe MGM China should be able to at least double its EBITDA after ramping’, wrote Wells Fargo, adding that the MGM China stock price has little

MGM Art Space for diversification Pansy Ho, co-chairperson and executive director of MGM China Holdings Ltd (pictured third left) said the company is keen to introduce diverse art and cultural programmes at the opening ceremony of two exhibitions

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Midland Realty: Property prices to drop 5pct in 2015

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Joanne Kuai

joannekuai@macaubusinessdaily.com

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GM Macau is hosting two exhibitions – namely, ‘Red Sandalwood Art Exhibition of Old Beijing’s City Gates’ and ‘One Hundred Photographers Focus on Macau’ - at its art space in commemoration of the 15th anniversary of the founding of the Macau SAR. “The ‘MGM Art Space’ is conceived as a source of inspiration as much as a medium for MGM to engage and entertain visitors from around the world. The aim is to connect people through arts and cultures. The space will provide a pioneering platform to further contribute diversification and entertaining experiences in line with Macau’s positioning as a global leisure tourism hub,” said Pansy Ho, co-chairperson and executive director of MGM China Holdings Limited.

The ‘Red Sandalwood Art Exhibition of Old Beijing’s City Gates’ is the first art exhibition held in the city with a theme revolving around the old Beijing city, according to the organisers. The gates were the symbol of ancient Chinese civilization and prosperity, which showcased sophisticated urban planning through intricate construction.

The major exhibits are the

Cotai project value priced in. ‘We believe little value is attributed to MGM’s Cotai project’. EBITDA is the operational profit of a company and the most used indicator by the gaming industry to compare performance along with revenues.

Wells Fargo also underlined the good performance of MGM in Macau’s mass segment.

The company was able to outperform the market every month of this year, except May. In October, for example, revenues from MGM’s mass floors increased 16 percent against a drop of 8 percent in Macau’s gaming industry.

The maintenance of a market share of 8 percent in the mass segment of Macau despite having only 3 percent of 4 and 5-star hotel rooms and 7 percent of tables was also highlighted

by Wells Fargo. ‘We believe MGM China can continue to maintain or grow its EBITDA as it still has plenty of room to shift its mix from VIP to mass’.

miniature landscape of Yongding Gate and the Hall of Prayer for Good Harvests in the Temple of Heaven, both made of red sandalwood, also known as ‘Imperial Wood’ in Chinese history.

“As China’s economy continues to develop, the country and the public have a stronger aspiration to the revival of traditional Chinese culture.

The China Red Sandalwood Museum has always taken this as its mission,” said Chi Chungsui, director of the Beijing Red Sandalwood Culture Foundation that co-organised the event.

The ‘One Hundred Photographers Focus on Macau’ exhibition illustrates

Macau’s unique culture as well as its development since the establishment of the SAR. Through the visions of 100 photographers from mainland China, Hong Kong, Macau and Taiwan, some precious moments have been captured.

The publisher of China Daily, Zhu Ling, said “The exhibition and the publishing of the album is significant to promoting mutual understanding and cultural exchange between mainland China and Macau. The works also show Macau’s vitality and potential for development and their confidence about the future.”

The exhibition is open to the public from today until March 2015.

he real estate market may experience a five percent decrease in property prices in 2015 with transaction volumes for 2014 at a record low, according to industry representative estimations.

Midland Macau Chief Executive Officer (CEO) Ronald Cheung told Business Daily that in the first half of this year property prices had increased spectacularly but that the second half would lose momentum as the gaming industry is suffering from a decline and Hengqin in Zhuhai has become the new hot spot for investors.

According to the latest data revealed by the Statistic and Census Service (DSEC) the average volume for the first three quarters of 2014 was less than 700 transactions. The average property price for the third quarter stood at MOP9,472 per square metre, a ten percent decrease compared to the previous quarter.

Local realtor Midland Macau expects that the total volume for 2014 will be around 7,700 transactions, a record low and a 36 percent decrease compared to 2013. Turnover this year is expected to be in the order of MOP50 billion, which is a 26 percent decline on the previous year.

“Visa restrictions have been tightened for mainlanders, gaming revenue is dropping, and interest rates have been raised. All these factors have contributed to the instability of the real estate market,” said Mr. Cheung.

J.K.

6 | Business Daily

November 20, 2014

Macau Brands

Trends

Green Metamorphosis Raquel Dias newsdesk@macaubusinessdaily.com

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here’s an argument to be made that the world increasingly lives via the mirror of perception. The image a product projects is increasingly important, often more so than the product itself. In recent years, it has increased the stature of brands which have collaborated with renowned designers and artists. The fact that we spend a lot of time taking pictures to post on our social networking paired with increasing competition means brands have to make their products ever more desirable.

One of the latest examples of such efforts comes from world-renowned champagne Dom Pérignon Vintage.

Fashion designer Iris van Herpen was invited to create a premium piece of art and an exclusive series of gift boxes featuring a bottle of Dom Pérignon Vintage 2004. Dom Pérignon Metamorphosis by Iris van Herpen marks the end of Dom Pérignon Vintage 2004 as we know it in its first Plénitude and celebrates its pending metamorphosis into P2, or Second Plénitude of the Dom Pérignon Vintage.

The piece of art titled ‘Cocoonase’ was inspired by the importance of time in crafting the premium champagne. Cocoonase highlights this duality of time to underscore the singularity of Dom Pérignon wines.

Beautiful and original, the art unquestionably makes the bottle stand out.

Retail expectations Despite a noticeable drop in retail sales between 2010 and 2013 those in the know say the future is full of great expectations

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he latest figures from the Statistics and Census Service show the value of retail sales in Macau fell to MOP16.37 billion (US$ 2.04 billion) in the second quarter of this year from MOP18.31 billion (US$ 2.29 billion) in the preceding three months. Despite the decrease, however, comparing second quarter 2014 sales with the same period in 2013 the take still increased from MOP15.87 billion (US$1.99 billion) to MOP 16.37 billion (US$2.05).

The general director of the Macau Shopping Festival Organising Committee 2014, Vincent Tung, says a slowdown is not unexpected despite Beijing’s anti-corruption campaign and curb on UnionPay.

Retail continues to move in a positive direction, saying, ”Retail revenue has gone to over MOP60 billion, year-on-year, with 20-plus percent increase year-on-year”.

For the past three to four years, big shopping malls have enjoyed double-digit growth, posting 20 to 30 percent gains. In two years’ time, with the completion of the bridge connecting Hong Kong, Zhuhai and Macau, as well as the opening of three mega resorts, and the maturing of Hengqin Island, Mr. Tung believes that Macau will be a premier destination for all types of visitors, particularly families. “Then, of course, families with kids will enjoy more shopping plus the youngsters and all those

non-gaming people will be enjoying entertainment and shopping rather than just gaming.”

In an interview given in 2011 to our sister lifestyle magazine Essential Macau, vice-president for retail development of Las Vegas Sands Corp David Sylvester said that even though historically Hong Kong was for shopping and Macau was for gambling that has changed.

“Just to give you an idea, last year [2010] we did some market research and found the first reason a lot of people come to The Venetian is to shop”, he said at the time.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.

Online retail therapy Not as popular here as it is in the UK, US and Australia where armies of Internet users shop at least once a week.

In Macau, the trend is still getting off the ground

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2012 study conducted by the Macau Internet Project looking at the shopping perceptions and behaviour of Internet users found that 80 percent had never shopped online. By contrast, a double-digit percentage of Internet users in the United Kingdom, the US and Australia shop online at least once a week.

According to a survey on information technology usage conducted by the Statistics and Census Bureau in 2013, some 82.6 percent of households go online for a whole host of reasons but only 13.6 percent is for shopping.

Clothing, footwear and handbags

comprise more than three quarters of total online shopping volume, followed by electronic devices and travel services.

With regard to the Internet as a business tool, local small and medium-sized enterprises (SMEs) remain at ground zero. Most do not even have a website, although the government is now trying to change this by its welcome introduction of a new subsidy.

This scheme can subsidise up to 70 percent of the expenses of constructing, upgrading or maintaining websites. For enterprises with no website, a maximum of MOP14,000 (US$112,000) for

website construction and MOP6,000 for three years maintenance is on offer.

The Macau SME Association says that very few SMEs are running websites, estimating that less than 30 percent of local businesses have an online footprint, with most of these Information Technology (IT) related. The Association does not collect statistics on online sales but says that less than five percent of local SMEs provide online shopping services.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com.

Business Daily | 7

November 20, 2014

Gaming

Revel will take new name under Brookfield ownership

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hile it’s unclear whether Revel AC Inc. will ever pay a dime to unsecured creditors, one thing is known: The buyer, Brookfield Property Partners LP, won’t operate the now-shuttered Atlantic City, New Jersey, casino under its old name.

The bankruptcy court in Camden, New Jersey, approved a US$110 million sale to Brookfield on October 7. The sale has yet to be completed, Revel said in a court filing.

In the course of asking court permission to terminate a license to use the Revel trademark, the casino said Brookfield won’t be using the name when the property reopens.

Revel filed for creditor protection in June with a proposed Chapter 11 plan contemplating a sale. The company said this week that the plan must be modified and asked the bankruptcy judge to extend its exclusive plan-filing

rights until March 16.

Before a plan can be filed, Revel said, it must resolve disputes over real estate taxes. To that end, the casino this week asked the judge to abrogate a settlement made in an earlier bankruptcy that fixed the tax assessment at $1.15 billion.

Revel said the property is “grossly” over-assessed, giving it the highest taxes among the casinos in Atlantic City, even though it sold for only US$110 million.

The request to terminate the prior tax settlement, scheduled for hearing on December 8, raises the question of whether the agreement from the prior bankruptcy is a so-called executory contract that the court even has power to terminate.

The bankruptcy judge already refused to reopen the first bankruptcy and set aside approval of the prior tax-assessment settlement.

At a hearing tomorrow,

Philadelphia sports fans to get new casino in shadow of stadiums

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the official creditor’s committee will oppose final approval of bankruptcy financing. The committee quoted the judge as saying the loan was “probably the most onerous DIP financing I’ve ever seen.”

If approved, the loan would sop up every unencumbered asset available to pay unsecured claims. The committee said Revel came into bankruptcy with US$9.8 million in cash and US$7.5 million in property not covered by lenders’ liens. The financing would give those assets to the lenders, along with the right to sue.

All things considered, the committee said, “these cases are being run solely for the DIP lenders’ benefit.”

A hearing on the exclusivity motion is set for December 8. At the same hearing, Revel will ask for authority to terminate the trademark license agreement.

Bloomberg

ordish Cos and Greenwood Gaming & Entertainment Inc, two closely held real estate developers, won a license to open a casino in Philadelphia within sight of the homes of the city’s professional sports teams.

The seven-member Pennsylvania Gaming Control Board voted unanimously yesterday to award the licence. The US$425 million project, called Live! Hotel & Casino, will be located in south Philadelphia, at a Holiday Inn, near the stadiums where the city’s professional sports teams play. It will have more than 2,000 slot machines and 125 table games as well as a 240room hotel, restaurants and bars.

The award spells continuing competition for Atlantic City and other casinos in the northeastern U.S. Live will be the fifth casino in the greater Philadelphia area and the 13th in Pennsylvania, a state that passed New Jersey in 2012 to become the second-largest U.S. gambling hub after Nevada.

Joe Weinberg, managing partner of Cordish, said the project’s location near the sports arenas gives it access to more than 8.5 million annual visitors.

“We think the market has tremendous potential that is

untapped at this point,” he said in a telephone interview.

The project topped three other applications, submitted by local developers. Wynn Resorts Ltd. and Penn National Gaming Inc. earlier dropped out of the bidding.

The project will compete with local casinos including Caesars Entertainment Corp’s Harrah’s Philadelphia Casino & Racetrack in Chester, Pennsylvania.

Other proposals Mohegan Sun Tribal Gaming Authority was an investor in one rejected proposal, the Market 8 Casino, while Isle of Capri Casinos Inc was to manage another, called the Provence, according to state filings.

Philadelphia has professional teams in Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League. While there has been a renewed push for legalized sports betting, federal law bans it in all but four states: Nevada, Delaware, Montana and Oregon. New Jersey, which passed a law allowing sports betting, has been sued by the professional sports teams to block the law.

Bloomberg

8 | Business Daily

November 20, 2014

Greater China

Energy consumption increase to shrink China surpassed the European Union as the world’s largest net coal importer in 2012

C

hina, a week after unveiling an accord aimed at limiting carbon emissions, plans to cap the increasing rate at which it consumes energy to 28 percent for the seven-year period to 2020.

The nation is targeting energy use equivalent to an annual 4.8 billion metric tons of standard coal by 2020, according to a statement issued by the State Council yesterday. China’s energy use surged 45 percent in the seven years to 2013, according to data from the National Bureau of Statistics.

The statement marks the latest attempt by China’s policy makers to limit the nation’s appetite for energy.

Reflecting its rapid industrialization and economic growth, China has become a voracious consumer of energy, changing global energy markets and the geopolitics of energy security.

The goals set by the State Council represent a road map for China’s energy development strategy until 2020 and are contained in a paper dated June 7. The document, compiled before President Xi Jinping last week said China will strive to double the amount of energy it gets from zero-emission sources in the next 16 years, aims to cut coal consumption in Beijing, Tianjin, Hebei and Shandong, the Pearl River Delta and the Yangtze Delta region.

As part of the State Council plan, the government also targets getting 15 percent of its energy from nonfossil fuels, more than 10 percent from natural gas and less than 62 percent from coal. The nation will

Qinshan Nuclear Power Plant control room

limit coal consumption to about 4.2 billion tons by 2020.

The targets are set against the backdrop of increasing environmental pollution, which is pressuring China’s authorities to curb coal consumption and increase the share of lower- emission technology used in energy production.

Coal accounted for 66 percent of China’s energy consumption last year, according to the statistics bureau. The U.S. gets about 30

percent of its electricity from coal, according to Bloomberg New Energy Finance data.

Global coal demand surged by more than 50 percent in the 10 years to 2013, with China the principal source of the increase, the International Energy Agency said in its most recent World Energy Outlook. China surpassed the European Union as the world’s largest net coal importer in 2012, the IEA said.

China aims to have coal-bed methane output of 30 billion cubic meters by 2020 and shale gas production of above 30 billion cubic meters, according to the statement.

The world’s second-biggest economy also plans to install as much as 58 gigawatts of nuclear power by 2020, with an additional 30 gigawatts or more under construction by then.

China has about 15 gigawatts of nuclear power at the moment.

Bloomberg News

Jack Ma challenges China stigma with Alibaba bond The company is planning to refinance existing debt in order to reach a broader base

J

ack Ma had to play down Alibaba Group Holding Ltd.’s China roots during a world-record initial public offering. Now he’s due to test confidence in the state- dominated economy with Asia’s biggest dollar bond sale.

The internet giant, which Ma said in September just “happens to be in China,” may pay a yieldpremium on the planned $8 billion issue that is higher than developedmarket peers, according to Bank of New York Mellon Corp. Concerns corporate governance and disclosure in the nation are lagging have forced investment-grade Chinese issuers to pay 15 basis points more on average than their Asian peers this year to sell notes, Bank of America Merrill Lynch indexes show.

China’s richest man has tried to overcome criticism of Alibaba’s corporate governance structure, which gives 30 individuals the ability to nominate a majority of the board, and sought to burnish its image in meetings with U.S. chief executives as well as with former President Bill

Business Daily | 9

November 20, 2014

Greater China Volkswagen China growth slows The company plans to significantly extend its product portfolio to better compete with General Motors for the top spot in China Samuel Shen and Matthew Miller

V

olkswagen AG’s growth in China is expected to slow to around 10 percent this year from 16 percent in 2013 due to a conservative strategy that has limited its production capacity, the head of its Chinese operations said.

A shortage in capacity is the only reason Volkswagen’s growth rate has lagged overall growth in China’s vehicle market recently, Volkswagen China President Jochem Heizmann told reporters in Guangzhou, ahead of an annual auto show that will open on Thursday in the southern Chinese city.

The German carmaker plans to step up investment in manufacturing so that this is no longer an impediment, he said.

Heizmann said he expected Volkswagen Group, whose brands include Audi, Skoda and Porsche, to deliver a total of 3.6 million vehicles in China this year, which amounts to an annual increase of around 10 percent. That’s a slowdown from last year’s 16 percent growth.

Volkswagen said in late 2013 it planned to invest 18.2 billion euros (US$22.8 billion) from 2014 to 2018 to increase annual production capacity to around 4 million vehicles.

That plan was based on an average annual sales growth estimate of around 5 percent, which Heizmann said was “a very conservative planning base.

This is why we have a lack of capacity.

We’re clearly going beyond this 4 million issue.”

Clinton. Shares sold in the US$25 billion IPO on Sept. 18 have jumped 63 percent and attracted investors including Soros Fund Management LLC, Fidelity Investments and Third Point LLC.

Record debt Alibaba’s bond sale may help lower yield premiums for other Chinese issuers by helping familiarize international investors with their offerings, according to Pratt.

The operator of websites including Taobao Marketplace, which links individual buyers and sellers, has an A+ rating from Standard & Poor’s, its fifth-highest investment score.

That places it one notch below the AA- score on Amazon.com Inc. and one above the A ranking on EBay Inc. The planned issuance from Alibaba, based in the eastern city of Hangzhou, is attracting attention as international investors buy unprecedented amounts of debt from the world’s second-largest economy.

Chinese borrowers have sold a record US$179 billion of dollar-denominated notes this year, up 61 percent from all of 2013, Bloomberg-compiled data show. The fundraising from Alibaba also underscores Premier Li Keqiang’s attempt to switch the economy’s focus toward services from smokestack industries.

Some 86 percent of the bonds from Chinese borrowers this year were in a Regulation S only format, which U.S.based investors aren’t allowed to buy.

Alibaba’s transaction will be under rule 144A, allowing institutional

There is still potential in China’s passenger car market, especially in tier three, four or five cities

They should be able to attract many first time investors into China credit from U.S. high-grade buyers and they have the ability to re-price the Chinese credit curve Jon Pratt, Barclays Plc, head of Asia-Pacific debt capital markets

investors from the country to purchase them, people with knowledge of the matter said last week, asking not to be identified because the details are private.

U.S. access Alibaba, which also operates Tmall.com that connects retailers and consumers, provides a venue for the sale of everything from Alaska salmon to Boeing 747s. It has been a bright spot in an economy hampered by a slumping property market and concerns about bad loans that have

Hebei Iron and Steel Group Co has signed an agreement to raise its stake in Swiss-based Duferco International Trading Holding (DITH) to 51 percent, in a move aimed at boosting the stateowned conglomerate’s ability to sell steel overseas. Hebei had already acquired a 10 percent stake in DITH for US$78 million in 2013 through its Tangshan Iron and Steel Group Co subsidiary. The latest deal puts China’s largest steel-making group in control of a big European trading firm, underlining the dominance of China in the steel market.

HK-SHG link lose momentum

Jochem Heizmann, Volkswagen China President

Volkswagen also plans to significantly extend its product portfolio to better compete with General Motors for the top spot in China.

It is “making very good progress” towards launching a budget car in China and is also developing a China-only luxury sedan “to show the customers that the Volkswagen brand is not just a volume brand in China”, Heizmann said.

The company also aims to launch more than 20 electric or plug-in hybrid models in China by 2018.

“There is still potential in China’s passenger car market, especially in tier three, four or five cities,” Heizmann said, brushing aside concerns of a drastic slowdown in the world’s biggest auto market.

Steel firm to control Swiss trader

Even as growth in China’s overall car market is expected to slow to singledigit pace over the next five years, it will still be “tremendous growth ... much higher than any other relevant market in the world”, he said.

Separately, Heizmann said that plans to raise Volkswagen’s 40 percent stake to 50 percent in its joint venture with Chinese partner FAW Group Corp could take time.

“This is a process which is not just done in weeks,” he said, adding the company so far was “just preparing” and had not started negotiations with FAW. Company sources told Reuters last week that Volkswagen’s bid to increase its stake had stalled after more than a year of talks.

Foreign buyers used only 20 percent of their 13 billion yuan (US$2.12 billion) daily quota of Shanghai stocks yesterday as demand for mainland shares cooled noticeably two days after a scheme connecting the Hong Kong and Shanghai markets debuted. Trading was sedate yesterday compared with Monday, when the full daily investment quota for Shanghai stocks was quickly taken up as international investors scrambled to get into mainland markets.

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.

CCB lists in Luxembourg

Reuters

prompted authorities to take steps to shore up growth. That’s led to a 1.5 percent rally in the yuan against the dollar this half, and pushed the yield on benchmark 10-year government notes down 45 basis points to 3.61 percent.

Chinese issuers have grappled with increasing scrutiny of their finances since Moody’s Investors Service warned of “red flags” on the accounting of 61 companies in 2011. A slump in notes from Agile Property Holdings Ltd. last month after chairman Chen Zhuolin was confined by prosecutors is the latest example of investor risks in the nation.

People have “lingering concerns” about corporate governance and rule of law in China, said Goetz Eggelhoefer, managing partner of Asia discretionary investment at the Rohatyn Group, the New York-based asset manager also known as TRG Management LP that focuses on emerging markets.

“There is simply a fear that the lack of transparency equates to an incomplete understanding of the underlying investment.”

Investment-grade bonds denominated in dollars from the country have still returned 8.4 percent this year as investors seek more exposure to Asia’s biggest economy, which economists surveyed

by Bloomberg forecast will expand 7.4 percent in 2014. While that would be the slowest growth in more than two decades, it’s still the fastest pace expected from any major economy worldwide, the data show.

Bloomberg News

The Luxembourg Stock Exchange (LuxSE) listed and admitted on Tuesday to trading on its Euro MTF market four bonds from China Construction Bank(CCB), a leading commercial bank in China. According to a statement of LuxSE, the bonds are tranches of the bank’s US$5-billion medium term note program and the first to be listed in Luxembourg. All four tranches are denominated in renminbi or Chinese Yuan with a total issue amount of CNY 3.3 billion (US$539 million).

Guizhou gets WB loan Southwest China’s impoverished Guizhou Province is to receive a loan of US$100 million from the World Bank over the next five years for rural development. The loan will be used to improve infrastructure and public services and increase the incomes of 440,000 rural residents in 11 counties, said the provincial poverty reduction authorities on Tuesday. The Chinese government will earmark 247 million yuan (US$40 million) as supporting funds for the project.

Part of ZTE deal in jeopardy Ethiopia has told Chinese telecoms firm ZTE Corp it risked losing part of its deal worth US$800 million to expand the nation’s network because of differences over costs of upgrading existing systems, an Ethiopian minister and executive said.

The deal last year with monopoly staterun operator Ethio Telecom was part of a US$1.6 billion package, split between ZTE and firm Huawei Technologies Co Ltd. The African nation wants to double mobile subscribers to 50 million in 2015 and expand its 3G service.

10 | Business Daily

November 20, 2014

Greater China

Risky rewards for China’s overseas investment boom Analysts blame Chinese investors’ inexperience and decisions driven by government policy rather than business sense Fran Wang

C

hina’s inexorable economic rise is set to see it become a net global investor after decades of Western money flowing into the country, but analysts warn the change offers risks as well as profits.

Chinese oil behemoth CNOOC’s US$15 billion acquisition of Canada’s Nexen, completed last year, was just a fraction of the US$625 billion the country has invested abroad, much of it resources driven and also taking in other sectors including agriculture, manufacturing and banking.

But the looming changeover may be a sign that China is becoming less attractive as an investment destination itself, while some deals have been less successful than others.

Chinese external acquisitions were strictly controlled until 2000 when the Communist Party listed overseas investment as a new growth strategy, widely described as “going out” to secure technology, resources and market access.

Overseas direct investment (ODI) has since ballooned -- along with China’s foreign exchange stockpile -- and reached US$90.2 billion in 2013, more than 30 times what it was a decade previously.

Incoming foreign direct investment (FDI) stood at US$117.6 billion last

year, official data showed, and the latest figures on Tuesday showed the gap between them has narrowed substantially in 2014.

China invested US$4.19 billion in non-financial sectors in the US alone in the first 10 months of this year, the commerce ministry said, almost twice as much as the US$2.32 billion that flowed in the other direction.

“It is a matter of time before China’s overseas investment exceeds the foreign investment it receives,” assistant commerce minister Zhang Xiangchen told reporters last month.

China is now the world’s third largest investor after the United States and Japan, according to the United Nations Conference on Trade and Development, and Beijing’s figures show the US and Australia as its top recipient nations.

But the spending spree has been largely driven by big state-owned enterprises (SOEs), backed by state banks as they purchase mineral and energy resources, sparking concerns over China’s growing economic power and possible political motives.

‘None of his business’ At the same time, some projects have not proved as profitable as hoped.

Even if it is not realised this year, it will in the near future. China is soon to become a net capital exporter Zhang Xiangchen, China’s commerce minister assistant

Auto manufacturer SAIC Motor took a controlling stake in South Korea’s SsangYong Motor Company but lost several billion yuan when it went bankrupt and suffered a bitter strike, which ended only with a police raid featuring commandos rappelling from a helicopter in a hail of missiles.

Insurer Ping An saw its US$3.5 billion investment in European financial group Fortis wiped out in the global financial crisis of 2008.

Wang Jiahua, executive deputy chairman of the China Mining Association, an industry group, said 80 percent of Chinese mining investment abroad had “failed”, the state-run Economic Information newspaper reported in June.

China Power Investment Corporation is reported to have lost at least 7.3 billion yuan (US$1.2 billion) on the controversial Myitsone hydropower plant in Myanmar, where President Thein Sein ordered the project halted in 2011.

Tao Jingzhou, managing partner of law firm Dechert LLP China, told AFP that the “primary cause” of problems was poor thinking, and failures to carry out sufficient due diligence.

“A merger and acquisition contract is logged as an achievement of the SOE (head) once it is signed,” he said. “It will be none of his business when it incurs losses in two years’ time.”

Experts also caution that having more funds flowing out of the world’s second-largest economy reflects declining confidence in China.

“If capital finds the rest of the world more appealing on the whole, it indicates that opportunities in China are being prematurely closed off, most likely by government policy,” Derek Scissors, of the Washington-based American Enterprise Institute (AEI), told AFP. Beijing has denied that a swathe of inquiries in sectors ranging from auto and pharmaceuticals to software are targeting foreign firms, but China’s growth has slowed in recent years, while land and labour costs have risen.

‘Irrational’ Equally, many destination countries are wary of Chinese investment, sometimes provoking angry accusations of bias by Beijing.

Analysts say private firms’ share of Chinese investment is rising and state-owned firms scaling back, so that “sensitivity about government involvement and thus scrutiny should also ease”, according to Brian Jackson of research firm IHS Economics.

But data compiled by AEI and the Heritage Foundation think-tank showed more than 100 projects or acquisitions worth US$100 million or more have fallen through for nonmarket reasons since 2005.

Chinese technology giant Huawei in 2008 abandoned a joint US$2.2 billion bid for US firm 3Com because of opposition by Washington’s Committee on Foreign Investment over security concerns.

Nexen buyer CNOOC earlier mounted a failed US$18.5-billion bid for US oil and gas producer Unocal in 2005.

Under a free trade agreement sealed

by Australia and China this week, Canberra has retained the right to examine all investments by Chinese SOEs, despite Beijing reportedly seeking an exemption for deals up to around US$940 million.

“A lot of buyers are irrational, pushing prices up and making people suspect whether China’s political, military or other ends are behind such deals,” said Tao. AFP

Business Daily | 11

November 20, 2014

Asia

BOJ stands pat on policy Kuroda hints at discontent over tax hike delay Leika Kihara and Stanley White

T

he head of the Bank of Japan warned yesterday that the government is solely responsible for maintaining trust in the country’s finances, in a thinly veiled show of discontent over premier Shinzo Abe’s decision to postpone a sales tax increase.

While Haruhiko Kuroda avoided directly criticising the delay in the tax increase, which had been slated for next October, he urged the government to meet its fiscal target and abide by last January’s agreement with the central bank.

Under that agreement, the BOJ pledged to hold responsibility for meeting its inflation target, while the government promised to take steps to fix Japan’s tattered finances.

“We hope the government steadily implements measures ... to create a sustainable fiscal structure,” Kuroda told a news conference yesterday after a central bank policy meeting.

“Fiscal discipline is the responsibility of the government and parliament, not that of the central bank,” said Kuroda, who had repeatedly urged Abe to proceed with the tax hike.

In a widely expected move, the BOJ voted to continue its massive stimulus efforts by purchasing more government bonds and risky assets to

KEY POINTS BOJ maintains massive stimulus as widely expected BOJ sticks to view economy recovering moderately Kuroda says core CPI may briefly slip below 1 pct Weak GDP may force BOJ to cut growth forecast in Jan

Bank of Japan (BOJ) Governor Haruhiko Kuroda speaks during a news conference held at the BOJ headquarters in Tokyo yesterday

increase base money at an annual pace of 80 trillion yen (US$683 billion).

More headaches The postponement of the tax hike compounds problems for Kuroda, who already faces a divided board and markets that are questioning his credibility.

Board member Takahide Kiuchi, a sceptic of the current quantitative easing programme, dissented to yesterday’s policy decision in a show of his continued disapproval to last month’s surprise monetary easing that was made by a closely split vote.

Kuroda said last month’s easing was not intended to nudge Abe into proceeding with the tax hike.

“It was solely aimed at ensuring we achieve our 2 percent inflation target. I’ve never felt that (last month’s

easing) was wrong or that we should have waited longer,” he said.

But the delay in raising the tax stokes worries that the BOJ’s ultra-easy monetary stance is bank-rolling an alarmingly high public debt, already the highest among major economies.

“The government’s decision to delay the sales tax hike has taken the BOJ further into monetisation.

This is an uncomfortable position for Kuroda,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management.”

Upbeat view intact Despite the dismal third-quarter, the BOJ maintained its view that the economy remained on a moderate recovery trend, stressing that companies continue to raise wages and spending.

But the second straight quarter of contraction will almost certainly force it to cut its forecast of a 0.5 percent economic expansion for the current fiscal year at a quarterly review of long-term projections in January, analysts say.

Sluggish economic growth will weigh on consumer inflation, which is still roughly half the 2 percent level targeted by the BOJ. Kuroda, who just a few months ago said core consumer inflation was unlikely to slip below 1 percent, acknowledged that level may be breached in the coming months due largely to slumping oil prices.

“Both prices and the economy are undershooting the BOJ’s forecasts. That will heighten market expectations of further easing,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

Reuters

OECD recommends India to step up reforms Economist say India needs near double-digit economic growth to generate jobs to employ millions of young people who join the job market each year

I

ndia’s economy is coming out of its worst slowdown in a quartercentury, but needs major structural reforms if it is to return to pre-2011 growth levels, the OECD said yesterday.

The OECD said in its India Economic Survey that annual growth should top 6.5 percent in the coming years, but reducing barriers to manufacturing growth was “critical”.

India’s growth has languished at below five percent for the last two financial years, hit by high interest rates, stubborn inflation and weak investment.

The OECD report called for a “simpler and more flexible labour law, covering more workers, coupled with better education and training programmes”.

India’s economy grew by 4.7 percent in the last fiscal year to March 2014 and the central bank projects 5.5 percent expansion this year.

“Structural reforms would raise India”s economic growth,” the report said.

“In their absence, however, growth will remain below the eightper-cent growth achieved during the previous decade.”

New right-wing Prime Minister Narendra Modi, whose Hindu nationalist Bharatiya Janata Party government was elected to power in May, has already taken some action to chop away at India’s thicket of regulations, seen by economists as discouraging crucial investment.

But the report said the government needed to do more to simplify the country’s infamous bureaucratic red tape to speed up commissioning of industrial projects and other investment.

It must also improve governance to crack down on widespread corruption, the report said.

Still high inflation, a wide fiscal deficit, large energy and fertiliser subsidies and delays in passing key tax reforms to make doing business easier and cheaper in India are among other brakes on economic growth, the OECD said.

Public investment in physical infrastructure such as roads and social institutions such as hospitals and schools are vital to boosting economic

5.5 pct

expansion forecast

by Reserve Bank of India for this year expansion and reducing inequalities, the report added.

The Paris-based Organisation for Economic Cooperation and Development provides economic analysis and advice to its industrialised country members.

AFP

12 | Business Daily

November 20, 2014

Asia SK’s weaker than expected recovery South Korea’s finance minister said yesterday the economy is recovering at a slightly weaker pace than previously thought, and reiterated his concerns about the impact on the nation’s exporters from a weak yen. Finance Minister Choi Kyung-hwan made the remarks during a forum hosted by a group of lawmakers. South Korea is worried that the yen’s tumble over the past two years would give Japanese exporters an upper hand over their South Korean rivals.

Japanese investors speak French The European Central Bank’s ultra-easy monetary policy and the BOJ’s expansion of its US$1.4 trillion stimulus have effectively thwarted some investors’ expectations of a selloff in French bonds as the euro zone’s second biggest economy stagnated and its reforms slowed. Latest data from Japan’s finance ministry shows that besides snapping up U.S. Treasuries, Japanese investors favoured French and German bonds in September after a lull in August. They bought about 460 billion yen (3.2 billion euro) of French government bonds, also known as OATs, and 555 billion of Bunds that month.

Indian cotton trade stalls

A drop in global cotton prices to a fiveyear low due to slowing demand from China has hit India’s cotton trade. Farmers, unwilling to accept the lower prices, are holding back on sales. The delay could keep Indian exports subdued in the next few months, providing some support to global prices and giving rivals, the United States and Brazil, an opportunity to increase their shipments. The Indian state, meanwhile, is ramping up purchases from farmers and expects to accumulate more cotton than traders say India will be able to export this year.

Medibank target price up Australia yesterday bumped up the target price range for Medibank IPO, Asia’s biggest in two years, because of strong demand from institutional investors. The upgrade just six days before the country’s biggest IPO privatisation in two decades gives Medibank a market capitalisation of up to A$6.33 billion (US$5.49 billion), compared to its previous maximum market value of A$5.5 billion. Finance Minister Mathias Cormann said the government would now sell 2.75 billion shares in the company for between A$2.00 and A$2.30 each, compared with the range it offered in its prospectus of A$1.55 to A$2.00.

Rajan inflation focus spurs sales as yields drop India needs to spur investment to achieve a government forecast of as much as 8 percent economic expansion within two years, up from 5.7 percent currently

R

eserve Bank of India Governor Raghuram Rajan’s success in curbing inflation is starting to deliver growth dividends as corporate borrowing costs drop at the fastest pace since 2009.

Five-year AAA yields have fallen 55 basis points this quarter to 8.69 percent, the lowest level since June 2013, allowing Rural Electrification Corp. to sell notes with an 8.56 percent coupon last week versus 9.04 percent in October. PVR Ltd., which manages Bollywood movie theatres, sold bonds this year for the first time since 2010, helping lift 2014 rupee offerings to 2.28 trillion rupees (US$36.9 billion), nearing a full-year forecast of a record 3 trillion rupees by Axis Bank Ltd., the nation’s top-ranked bond arranger since 2007.

“These are attractive levels for companies to borrow at,” said Shashi Kant Rathi, Axis Bank’s Mumbaibased head of investments and capital markets. “The market’s already factored in a rate cut after

the recent fall in inflation. Apart from the usual issuers, lots of rare borrowers are also checking the market.”

Central bank adviser Ashima Goyal said this month that falling oil prices and efforts to cut the budget deficit may “enable the RBI to support the growth process” by cutting its benchmark interest rate

by March.

Hydro power ICICI Home Finance Ltd., a unit of the nation’s largest private sector lender, issued three-year notes at 8.8 percent last week, down from 9.05 percent last month. NHPC Ltd. plans to raise 16 billion rupees this month as it prepares to build India’s biggest hydro-power plant.

The RBI will reduce the 8 percent repurchase rate as early as next month, according to Capital Economics Ltd. and Credit Agricole CIB, as consumer price inflation dropped below Rajan’s 6 percent

Yields are luring issuers to market. The issuance pipeline looks strong and there’s no doubt 2014 will be a record year Ajay Manglunia, Edelweiss Financial Services, head of fixed-income markets

January 2016 target more than a year ahead of schedule.

UBS AG says the central bank will ease policy rates in the first quarter of 2015 by 25 basis points, and that

S. Korea puts economic unification tab at US$500 billion A survey released by the Unification Ministry earlier this year showed that while 70 percent of South Koreans support the idea of a unified peninsula, almost half have no interest in helping cover the massive financial cost

S

outh Korea’s top financial regulator said yesterday that developing North Korea’s moribund economy in the wake of eventual reunification would cost around US$500 billion.

Financial Services Commission (FSC) chairman Shin Je-Yoon told a seminar in Seoul that the estimate covered a period of 20 years that would be needed to raise the North’s per capita GDP from the current US$1,251 to US$10,000.

The FSC stressed the figure of US$500 billion was open to revision and should not be taken as an official government position, but rather a starting point for discussion.

The FSC estimate noted that the South’s GDP was more than 40 times greater than the North’s in 2013, compared to the near 10-fold difference between West Germany

and East Germany at the time of their reunification in 1990.

Shin said half the needed funds could be bankrolled by public finance institutions in the South such as the Korea Development Bank and Korea Exim Bank.

The other half could be financed by commercial banks, tax revenues from development projects in North Korea and international organisations such as the World Bank, he said.

Forecasting the cost of unification is an almost meaningless task, given the large number of possible scenarios under which a merger might occur.

As a result, estimates vary wildly, with the only real consensus being it would be far from cheap.

Last year, South Korea’s finance ministry put the cost at around seven percent of South Korea’s annual GDP for a decade.

That would mean around US$83 billion a year for 10 years -- and that is assuming a peaceful unification scenario, which is by no means assured.

President Park Geun-Hye has said reunification would bring a “bonanza” through the marriage of the South’s capital and technology with the North’s human and natural resources.

But the nuclear-armed North Korea reacted angrily, accusing the South of dreaming “a pipe-dream” of reunification through absorption.

Because the 1950-53 Korean conflict ended with a ceasefire rather than a treaty, the two Koreas remain technically at war.

Cross-border tensions remain high and there have been a number of minor skirmishes involving exchanges of fire along the land and sea borders in recent months.

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 20, 2014

Asia a rate cut in December wouldn’t be a “significant surprise” because of the lower energy and food prices.

India imports 80 percent of its oil needs. The RBI is next due to review policy Dec. 2.

Aggressive cut Consumer prices rose 5.52 percent in October from a year earlier, the slowest pace since the index was created in January 2012, official data released November 12 showed.

Finance Minister Arun Jaitley said last month in an interview with the Times of India that the time had come to moderate interest rates, currently a “disincentive” for growth.

“I see an aggressive rate cut of at least 50 basis points post March after the budget has been announced and if inflation continues to fall,” Jayesh Jain, the chief financial officer of PNB Housing Finance Ltd., said in a phone interview November 13.

New Delhi-based PNB plans to raise about 5 billion rupees selling bonds either at the end of next month or in early January, Jain said, adding he doesn’t expect interest rates to move any lower between now and then.

At least 66 billion rupees of securities is due to be sold before the end of this month, preliminary data compiled by Bloomberg show.

Billionaire Mukhesh Ambani’s Reliance Jio Infocomm Ltd., the telco owned by the operator of world’s largest oil-refinery complex, sold 5 billion rupees of five-year notes yesterday with an 8.95 percent coupon. State-owned Bank of

Reserve Bank of India Governor Raghuram Rajan

Maharashtra and Mangalore-based Corporation Bank plan to raise a total of 20 billion rupees selling debt.

Shrinking premiums Tata Power Co., a unit of India’s biggest industrial group, sold 15 billion rupees of bonds earlier this week. The company hasn’t tapped that market since December 2012,

Bloomberg data show. Its three-year securities paid a 9.32 percent coupon and its five-year notes 9.48 percent.

Tata Power’s rupee average weighted fixed coupon is 9.99 percent.

“Yields have bottomed for now because a rate cut has already been factored in,” Axis Bank’s Rathi said.

The extra yield on five-year AAA corporate debt has fallen 37 basis points since the start of the year to

33 basis points. Premiums touched 29 basis points June 23, the least since July 2005.

“Spreads between government and corporate bonds have shrunk to uncomfortable levels,” Rathi said.

Even so, he added, “I don’t expect them to widen too much from here because the interest-rate scenario looks benign.”

Bloomberg News

Australia stands firm against G20 pack on climate change U.S. President Barack Obama used a high-profile speech in Brisbane to warn Australia that its own Great Barrier Reef was in danger Jane Wardell

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ustralian Prime Minister Tony Abbott yesterday warned that next year’s landmark climate change summit in Paris will fail if world leaders decide to put cutting carbon emissions ahead of economic growth.

Just days after host Australia was embarrassed into addressing climate change at the Group of 20 Leaders Summit in Brisbane, Abbott defiantly held his country’s line - the polar opposite of most other G20 nations.

“It’s vital that the Paris conference be a success... and for it to be a success, we can’t pursue environmental improvements at the expense of economic progress,” Abbott said.

Abbott made the remarks at a joint press conference in Canberra with visiting French President Francois Hollande, who said he hoped a new deal on carbon emissions would be legally binding and linked to a new United Nations fund to help poor nations cope with global warming.

“If the poorest, most vulnerable countries can’t be accompanied in their transition to sustainable development, then there will be no binding agreement,”

We can’t reduce emissions in ways which cost jobs because it will fail if that’s what we end up trying to do Tony Abbott, Australia’s Prime Minister

French President Francois Hollande (L) and Australian Prime Minister Tony Abbott speak during a press conference at Parliament House in Canberra yesterday

Hollande said earlier this week in New Caledonia, where he met top government officials from Kiribati, Cook Islands, Vanuatu, Niue, Tuvalu and French Polynesia.

The Green Climate Fund now stands at US$7.5 billion following pledges by the United States, Japan, France, Germany, Mexico and South Korea. That is within sight of a US$10 billion goal,

brightening prospects for a U.N. climate pact next year.

Asked if Australia would contribute to the fund, Abbott said Australia, one of the world’s biggest carbon emitters per capita, had already committed A$2.55 billion (US$2.21 billion) to a domestic initiative to reduce the country’s emissions by 5 percent below 2000 levels by 2020.

“What we are doing is quite comparable with what other countries are doing and we do deliver on our reductions targets unlike some others,” Abbott said.

Still, U.S. President Barack Obama used a high-profile speech in Brisbane to warn Australia that its own Great Barrier Reef was in danger, a message that reportedly angered G20 organizers.

Obama was at the forefront of a successful push by the majority of G20 nations to override Australia’s attempts to keep climate change off the formal agenda of the summit.

The final communiqué called for strong and effective action to address climate change with the aim of adopting a protocol, with legal force, in Paris.

Reuters

14 | Business Daily

November 20, 2014

International Ghana targets IMF deal this week Ghana hopes to seal a provisional agreement with the IMF on financial assistance this week and aims to cut its budget deficit to 6.6 percent of GDP in 2015 from more than 9.6 percent in 2014, a senior official told Reuters ahead of budget’s announcement. The official also said economic growth would slow to 5-6 percent next year, from an estimated 6.9 percent this year. The annual budget is key to government efforts to tackle a fiscal crisis caused by overspending and lower commodity prices and restore balance.

SNB seen delaying cap exit as Draghi bond purchases loom The franc hit a 26-month high versus the euro this week as investors bet the ECB will enact still more stimulus to shore up inflation Catherine Bosley and Joshua Robinson

ICO sees global coffee demand up Global coffee demand is likely to climb 2.5 percent a year until the end of the decade, driven by strong growth in appetite in markets such as China and Russia, the head of a global industry body said yesterday. The International Coffee Organization’s (ICO) executive director told Reuters in an interview that demand would hit 175 million 60-kg bags in 2020, up from 149.45 million bags estimated this calendar year. But growing demand means the global coffee market will see a production deficit of at least 800,000 bags in the crop year that started last month.

Petrobras scandal hits Brazil builders A graft investigation at Brazilian staterun oil company Petroleo Brasileiro SA is hurting the credit outlook for major suppliers accused of participating in the alleged bribery scheme, Moody’s Investors Service said. Moody’s downgraded its rating of Mendes Junior Trading e Engenharia SA to B3 from B2 and put a negative outlook on the rating for both the engineering company and construction conglomerate OAS SA. Executives at both companies were arrested on Friday after police raided their offices in search of evidence that they had skimmed billions of dollars off Petrobras contracts and into political parties’ coffers.

U.S. Senate fails to pass Keystone XL bill The institution narrowly failed to pass a bill that would have approved construction of the controversial Keystone XL pipeline, rejecting a measure the House of Representatives approved last week. The vote count was 59-41 in favour, but 60 “ayes” would have been needed to assure passage.

Fourteen Democrats voted for the bill, joining all 45 Republicans who voted to support the pipeline. TransCanada Corp’s US$8 billion pipeline would help transport crude oil from Canada to the Gulf of Mexico, but is opposed by environmentalists.

Switzerland’s index hits 9,000 mark Switzerland’s SMI equity index hit the 9,000 point mark for the first time since late 2007 yesterday, tracking recent gains in stock indexes worldwide. The index was up 0.3 percent at 8,994.78 points by 1003 GMT after hitting an intra-day high of 9001.84 points. The Swiss index has gained nearly 10 percent so far this year, outpacing all European major stock indexes including Germany’s DAX, down 0.7 percent over the same period.

Mario Draghi, president of the European Central Bank ECB and the Chairman of the European Systemic Risk Board attends the EP Committee on Economic and Monetary Affairs at the EU Parliament in Brussels

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witzerland’s central bank will keep its cap on the franc into 2017 to ward off the effects of the European Central Bank’s unconventional measures, according to Bloomberg News’s monthly survey of economists.

More than half of respondents say the SNB won’t remove its ceiling on the franc of 1.20 per euro until that year or later. Just 3 of 18 expect an exit next year.

The franc hit a 26-month

high versus the euro this week as investors bet the ECB will enact still more stimulus to shore up inflation. President Mario Draghi has said the central bank is ready to do more if needed and this week explicitly cited government-bond buying as a policy tool officials could use. The SNB set the 1.20 limit three years ago after the franc nearly shot to parity with the euro amid Europe’s sovereign debt crisis.

“Since we expect the ECB to keep rates low until 2017, this in turn forces the SNB to maintain its minimum exchange rate,” said Birgit Heim, senior research analyst at Zuercher Kantonalbank in Zurich.

According to the survey, conducted November 7-14, just one economist expects an exit this year and three each foresee it happening next year and in 2016. One respondent sees the ceiling being dropped in 2016 or later.

ECB stimuli In a bid to stoke weak inflation, the ECB has already enacted a negative deposit rate, bought covered bonds and will start purchasing asset-backed securities this week. Draghi said after the ECB’s most recent monthly policy decision on November 6 that officials have been tasked with preparation of further stimulus measures. Nearly all

respondents in a separate Bloomberg survey see the chance of further measures in the euro area this year or next.

A November 30 national referendum to require the Swiss central bank to hold at least 20 percent of its assets in gold has also raised pressure on the franc. Policy makers have said the measure, if implemented, would prevent them from fulfilling their price stability mandate.

Gold holdings The SNB has pledged to defend its cap on the franc with unlimited purchases of foreign currency. The initiative would require the SNB, which currently holds about 8 percent of its assets in gold, to stock up on bullion in the next five years if it didn’t reduce its balance sheet.

A poll published late last month by researcher gfs.bern indicted voters hadn’t yet made up their mind on the “Save Our Swiss Gold” proposal. An online poll released this week by news portal Cash said they will reject it.

“If it is accepted on November 30, then the cap might soon be history,” said Martin Gueth, economist at LBBW in Stuttgart. “I don’t expect this, but if so, then this is the earliest date for cap to be terminated.”

Bloomberg News

Deutsche Bank sees APAC revenue growing Germany’s biggest lender has made “large hires” for wealth management in the region and is adding people in investment and transaction banking Darren Boey

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eutsche Bank AG’s AsiaPacific revenue may expand at a “double-digit” pace over the next three to five years, said Gunit Chadha, co-chief executive officer for the region.

Germany’s biggest lender has made “large hires” for wealth management in the region and is adding people in investment and transaction banking, Chadha, said in an interview with Bloomberg Television’s Haslinda Amin in Singapore today. He didn’t give numbers.

Deutsche Bank reported a 94 million-euro (US$118 million) loss for the three months through September after setting aside funds to cover the costs of settling investigations. Growth in trade financing in the Asia-Pacific region was a bright spot in what the lender described as a “challenging” quarter for transaction banking.

“We feel very good about the Asia Pacific and especially as we see some

We feel very good about the Asia Pacific and especially as we see some markets coming back into growth Gunit Chadha Deutsche Bank, CEO for APAC markets coming back into growth,” said Chadha, who leads the bank’s operations in the region with Alan Cloete. The firm is “deeply invested” in 16 countries, he said.

Deutsche Bank has about 18,000

Asia-Pacific employees, according to Chadha. That compares with about 98,000 people globally at the end of September, a company presentation shows.

While a deeper slowdown in China could trigger cuts in benchmark interest rates, the nation will avoid a “hard landing,” Chadha said, adding that he was confident in the Chinese leadership’s ability to manage a transition to a more market-driven economy.

In India, Prime Minister Narendra Modi has made a “great start” on removing constraints on the economy and entrepreneurs are showing more confidence, he said.

The International Monetary Fund last month estimated growth rates of 7.4 percent for China and 5.6 percent for India this year, more than a forecast gain in world output of 3.3 percent.

Bloomberg News

Business Daily | 15

November 20, 2014

Opinion Business

wires

Japan can’t print people

Leading reports from Asia’s best business newspapers

THE PHNOM PENH POST

James Saft

Reuters columnist

Real estate financier Oxley Worldbridge Specialized Bank officially launched operations in Cambodia. Despite being the 11th entrant into Cambodia’s specialised banking market, the owners of the Kingdom’s newest bank are confident there is room in the industry for financial institutions catering for the property sector. “Our plan is to help small and medium enterprises and also to help home buyers to own a home by giving loans with competitive rates,” Ching Chiat Kwong, chairman of Oxley Worldbridge Specialized Bank said.

VIETNAM NEWS Only 30 per cent of smalland medium-sized enterprises (SMEs) have access to bank loans while the rest have to use their own capital or borrow from other sources at high interest rates. These figures were released at a conference on improving SMEs’ access to loans in the context of ASEAN Economic Community integration in 2015 held here. K. Balasingam, general director of the Institute of Manpower, Banking and Finance (BTCI), said Vietnamese SMEs were facing numerous challenges such as the long-term decline in consumption demand, and this had led several businesses to stop their operations.

THE STAR The value of jobs given out this year to the construction and renovation industry in Penang is expected to be around RM6bil, compared with RM9.25bil a year ago.

Penang Master Builders and Building Material Dealers Association president Datuk Lim Kai Seng told StarBiz that the number of jobs to be given out this year in Penang was around 400, compared with 539 in 2013. “The reason for the slowdown is because many of the important construction jobs from the Government had already been given out in 2013.

“Last year saw a record 539 jobs worth RM9.25bil being given out,” Lim said.

THE NEW ZEALAND HERALD Lightbox is putting up a brave front to Netflix’s plans to launch in this country next March. Netflix, an online television and movie website with 53 million customers worldwide, is likely to directly compete with both Sky TV and Lightbox, the online television service launched by Spark earlier this year. Lightbox chief executive Kym Niblock said she welcomed the competition from Netflix. “We’re confident in our product,” she said.

Asked how Lightbox planned to stand up against Netflix’s content library, Niblock replied: “We’re very confident the offer we have are things that Netflix won’t have,” she said.

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apan’s attempts, through Abenomics, to beat back against the tide of demographics may be proving futile.

Japan has lapsed into its fourth recession since 2008, with its economy contracting at a 1.6 percent annual clip in the third quarter, frustrating hopes that the Abenomics cocktail of fiscal and economic stimulus topped up with deregulation would be enough.

While asset markets have surged, and inflation risen, though less than desired, wages have not kept pace and a rise in a consumer tax in April derailed economic momentum.

The talk now is of more of the same: not just more stimulus from the Bank of Japan, but potentially more government spending, a delay to another planned tax increase and a snap election to allow Prime Minister Shinzo Abe the chance to win a reaffirmed mandate.

With the exception of delaying the planned tax increase, now slated for October 2015, this amounts to more of the same, begging the question of why steps taken thus far have not worked.

“What if the Japanese economy simply can’t sustain the desired inflation any more? What if the historical epoch during which that expectation was feasible is now over?” writes Edward Hugh, an economist with a particular focus on demographics.

“Obviously it isn’t difficult to generate a certain amount of consumer price inflation if you raise consumer taxes, and again you can also get it if you devalue your currency, and keep doing so. But as we are now seeing, you do need to keep repeating the moves. There doesn’t seem an underlying mechanism there waiting to be kick-started.”

The theory underlying Abenomics holds that a fall in the value of the yen will stimulate investment and help, along with other measures, to end the deflationary mind-set in which deferring consumption or investment seems wise.

That brings on a self-sustaining recovery, one which won’t just generate inflation, but the growth needed to help Japan outpace its debt.

But Hugh suggests Japan’s particular set of issues, characterized by a shrinking and rapidly aging population, may make this formula less effective.

Instead, we might want to consider the work of Depression-era economist Alvin Hansen, an early identifier of the ‘secular stagnation’ theme recently expanded upon by Lawrence Summers. In Hansen’s views, firms need to see both a strong outlook for profits and for market growth in order to ramp up investment, rather than simply cheap funding costs.

Investment risks Take the situation facing a Japanese corporation considering making an investment. It will be fully aware that its domestic market is not only far from healthy, given the shrinking purchasing power of households, but also that the country itself is in the midst of a long-running period of population loss and demographic-driven consumption changes.

While surely a cheaper yen makes investment attractive - after all goods made in Japan will be more competitive internationally - that situation may not be permanent. There is a reason that competitive currency devaluation is called

While surely a cheaper yen makes investment attractive - after all goods made in Japan will be more competitive internationally that situation may not be permanent.

There is a reason that competitive currency devaluation is called a ‘beggar-thyneighbour’ strategy, and that is because it is a zero-sum operation

a ‘beggar-thy-neighbour’ strategy, and that is because it is a zero-sum operation.

Japanese corporations have seen currency moves before and are well aware that they are not permanent. China, Japan’s huge and less than friendly neighbour, need only decide, and the yen losses against the dollar could be swamped by yuan weakening.

So perhaps it is not entirely surprising that a self-sustaining recovery in Japan has failed to materialize.

There is only so much which either monetary or fiscal policy would seem to be able to do in these circumstances. The Bank of Japan, after all, can print yen, but not Japanese, much less Japanese willing to consume with abandon.

Despite the fact that the BOJ’s most recent avowal of doing more was won with only a 5-4 majority vote among central bank officials, the most likely bet is that both the central bank and Abe stick to their guns.

And after all, it is possible that the problem is simply one of scale, and that a big enough bazooka will eventually be found.

Almost more to the point, there isn’t a well enunciated alternative. Surely structural reforms can help, particularly Japanese efforts to increase workforce participation. These things take time, however.

As always with Japan, given its very large public debt, time may not be an unlimited resource.

At some point the realization may dawn that Japan can’t raise taxes to service its debts and grow.

Expect more stimulus, more liquidity and more yen weakness.

Reuters

16 | Business Daily

November 20, 2014

Closing Turkey backs Silk Road Economic Belt initiative

Indonesia appoints Chinese to be Jakarta governor

Turkey has given priorities to developing strategic cooperative ties China and fully supports its initiative for building Silk Road Economic Belt and marine Silk Road, said Turkish President Recep Tayyip Erdogan (pictured) yesterday in Ankara when meeting with Meng Jianzhu, special envoy of Chinese president Xi Jinping. Erdogan asked special envoy Meng Jianzhu to convey his best wishes to President Xi, stressing Turkey is willing to further enhance pragmatic cooperation with China and join hands with China in combating terrorism. Turkey will never allow any organization or individual to engage in separatist activities against China in the country, he stressed.

President Joko Widodo (pictured right) yesterday appointed Basuki Tjahaja Purnama (pictured left), an ethnic Chinese, to be governor of the capital city until 2017, making him the first governor installed under the new regional governor election law. Under the new election law, the governor is elected by regional parliament and installed by the president in the capital city. Basuki, who had been acting governor of the capital city after the thengovernor was elected president, obtained unanimous clearance from councillors in Jakarta regional parliament last week. Basuki served as vice governor for Joko Widodo.

New methods for chasing corrupt traders The latest technology uses fuzzy logic, which instead of hunting for a smoking gun, builds up an understanding of the relationships and probabilities that might predict transgressions

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tung by billion-dollar fines for malpractice on their trading floors, the world’s big banks are using ‘fuzzy logic’ tools such as relationship mapping and behavioural analytics to read the minds of would-be cheats among their traders.

Older systems to catch misconduct, still in use at some firms, pick through conversations for trigger words, but they can be easily circumvented.

“Traders have moved on. They know their communications are being monitored; they are using different channels and new words,” said Richard Moore, head of financial crime and security services at DBS Bank in Singapore.

The latest technology hopes to overcome that via behavioural analytics, using fuzzy logic, which instead of hunting for a smoking gun, builds up an understanding of the relationships and probabilities that might predict transgressions.

Moore said DBS employs analytics experts in its compliance team and is working on a module to extend their behavioural profiling of ATM transactions and cardholders

to chats and emails.

“What we need is the ability to profile behaviour, to know what is normal behaviour and realise when it begins to change,” he said.

A host of surveillance firms have stepped forward with analytics that promise to do that.

Singapore-based TrustSphere specialises in uncovering all the relationships a person has from all digital interactions across an organisation.

Two people colluding in a crime, such as fixing prices or trading confidential information, would need to have a strong relationship, said Manish Goel, founder of TrustSphere, whose clients include financial services firms and governments.

Patented algorithms Catelas, which has patented algorithms in behavioural science, specialises in social network and relationship analytics and has tied up with Nasdaq OMX, which has a market surveillance product.

In a typical such system, a computer algorithm sifts through thousands of email

Information and timing are key for successful trading. That makes them an extremely sensitive matter

and messaging conversations, bundling them into topics.

Another algorithm updates the traders’ relationships and interactions map. A third aligns these results to the risk score of the trader, which is derived by software that maps business and individual risk profiles.

The objective is to match suspect conversations and behavioural clues with parties that have a relationship, said Michael Karbouris, head of Asia business development at Nasdaq OMX.

China-Taiwan financial regulators to meet

ADB approves loan to upgrade Indian roads

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aiwan’s top financial regulator is set to meet his counterparts in China next month, three sources with direct knowledge of the matter said yesterday, in a sign of growing financial cooperation across the Taiwan Straits.

William Tseng, chief of the Financial Supervisory Commission (FSC), is scheduled to hold meetings in Beijing on December 25 and 26 with the chairmen of the mainland’s banking, insurance and securities authorities, the sources. They declined to be identified as the matter has not been made public.

On the agenda, among others, is to have China accelerate its approvals for Taiwan banks to open branches there, a source said.

Trade and banking ties with China have picked up steadily since President Ma Yingjeou took office in 2008. Both sides agreed a deal in 2013 to allow Taiwan to be an offshore yuan centre, joining Hong Kong and Singapore.

Reuters

Complex event processing platform Apama, a unit of Germany’s Software AG, is another tool used by banks to identify and prevent fraud and comply with risk controls.

The company says more than 40 trading institutions use it, including UniCredit, Royal Bank of Canada and ANZ Bank.

The banks, however, are not talking.

Even traditional wordbased tools are getting smarter, enabling monitors to add channels of formal

and informal communication to the search and update vocabulary in real time.

U.S.-based NICE Actimise sells software that surveys communication content, with a learning capability that constantly adds new terms to its suspect word cloud.

This arms race is having an impact on the working environment at the larger banks, where traders can now be required to surrender their mobile phones and the right to use private email.

Reuter

Shell wins tax case in India

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he Asian Development Bank (ADB) said yesterday that it has approved a US$350 million loan to upgrade district roads in India’s central Madhya Pradesh state.

The Manila-based lender said in a statement that the loan is ADB’s first in India’s district roads sector.

Ravi Previ, a principal transport specialist at the Transport and Communications Division of ADB’s South Asia Department, said an efficient and safe road network is essential for Madhya Pradesh’s economy, India’s second largest state.

Madhya Pradesh has a road network of about 127,000 km, including 4,700 km of national highways, 11,000 km of state highways, and 20,000 km of major district roads. The project will upgrade about 1,600 km of major district roads in the state through lane widening, surface improvements, and strengthening of culverts and bridges.

ADB’s loan will cover 70 percent of the total project cost of 500 million U.S. dollars, with the state government of Madhya Pradesh providing the remaining US$150 million. The project is expected to be completed in April 2018.

nglo-Dutch energy giant Royal Dutch Shell has won a lengthy court battle against Indian tax authorities, marking a significant victory for multinationals involved in taxation wrangles in the country. The Bombay High Court ruled in favour of Shell, whose Indian unit had been accused of under-pricing shares issued to its parent firm by about 180-billion rupees (US$3 billion).

The company had challenged a demand by Indian authorities for tax on the interest that would have been earned.

The judges quashed the income tax department order, a move Shell welcomed.

“This is a positive outcome which should provide a further boost to the government initiatives to improve the investment climate,” the company said in a statement yesterday. The amount demanded by Indian tax authorities was not immediately known and Shell did not disclose the figure. The government has not said whether it will appeal the ruling.

The tax claim was one in a string imposed

by Indian authorities on foreign firms including HSBC, IBM and Nokia.

Xinhua

AFP