Macau Business Daily, April 24, 2013 by Business Daily

Labour Day weekend could boost April April gaming revenue could benefit from a long weekend bridging to the Labour Day holiday on May 1, says analyst Anil Daswani of Citigroup in Hong Kong. The Gaming Inspection and Coordination Bureau recently told Business Daily in an e-mail that revenue from live dealer multiterminal electronic games is counted as table revenue. Page 2

Subsidy up next month: Tam

“By setting the sum at 4,700 patacas a month, I think we have sought a balance to compensate workers while not allowing it [the scheme] to be abused by employers,” Secretary for Economy and Finance Francis Tam Pak Yuen said yesterday. But unions claim some unscrupulous employers are using the system to keep local wage rates low. More on page 3

www.macaubusinessdaily.com

Year II

Number 268 Wednesday April 24, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief Vitor Quintã

MOP 6.00

April 19, 2013

I SSN 2226-8294

Hang Seng Index 22100

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HK comeback boosts March visitors

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The number of visitors coming to Macau rose year-on-year in March for a second consecutive month, reaching 2.39 million. The increase was mostly due to a rebound in tourists from Hong Kong, which more than offset a drop in visitors from neighbouring Guangdong province; the most important single market for Macau. Page 3

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HSI - Movers Name

Investors double down on commercial mortgages Freeh report ‘deficient’: Chertoff Kazuo Okada has commissioned Michael Chertoff – a former U.S. Secretary of Homeland Security under President George W. Bush – to issue an “assessment” of a damaging report on Mr Okada by Louis Freeh, a former director of the FBI. The Freeh report, commissioned by Wynn Resorts Ltd, claimed Mr Okada was “unsuitable” as a director. Page 6

The value of commercial estate loans approved by Macau banks reached a record high in February, as investors wager on the city’s tourism sector. Low bank interest rates are pushing people to look for new investment vehicles, a banking executive says. The thriving tourism sector is also raising the resale value of shops, he added.

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%Day

LENOVO GROUP LTD

0.57

CHINA RES ENTERP

0.39

WHARF HLDG

0.36

SANDS CHINA LTD

0.25

MTR CORP

0.16

CHINA RES LAND

-2.82

COSCO PAC LTD

-2.99

CHINA RES POWER

-3.07

CHINA MERCHANT

-3.41

BELLE INTERNATIO

-4.11

Source: Bloomberg

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Mobius backs ‘family Hotels, casinos pay more for electricity playground’ Macau Page 2

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April 24, 2013

Macau

Labour Day long weekend could boost April revenue Live dealer multi-terminal games are wild card when estimating monthly market revenue growth says expert Michael Grimes

michael.grimes@macaubusinessdaily.com

A live dealer multi-terminal game

pril gaming revenue is likely to benefit from a strong finish to the month, with a probable long weekend b ri dging t o t he L abou r Day holiday on May 1, says analyst Anil Daswani of

Citigroup in Hong Kong. A number of analysts have previously been bearish on the full April numbers, arguing the lead up to Labour Day tends to see a slowing in gaming revenue. “We expect there will be

a rebound in the last nine days of the month, thanks to the Labour Day holiday (which runs from April 29th to May 1st),” says a note from Mr Daswani. This year the holiday falls on a Wednesday,

creating a possible incentive for visitors to take vacation time on Monday and Tuesday as well, suggests Mr Daswani. “As such, we only trim our April GGR [gross gaming revenue] forecast from 28.5 billion patacas to 28 billion patacas (up 12 percent year-on-year), applying the run rate of 990 million patacas per day (five percent higher than year to date average) for the remainder of month,” he states. Other analyst estimates of April’s year-on-year revenue growth range from eight percent at the lower end, to 15 percent at the top end of the range. All the estimates are based on unofficial industry returns. The official revenue numbers are not published until after the end of the calendar month in question. Some analysts decline to publish monthly estimates ahead of the official figures because of concern about the potential for shareholder

lawsuits if unofficial numbers move markets up or down and then later prove to be have been inaccurate. Some analysts include slot revenue in their estimates, and others do not. Slot revenue generally accounts for around five percent of all revenue from casino games. A potential wildcard in the monthly revenue guessing game is the contribution of live dealer electronic table games. Although there is a government cap on the number of traditional live dealer tables allowed in the market, many operators have been expanding the number of live dealer multi terminal games they operate. The regulator is allowing them to count 50 or in some cases 60 such terminals as equal to one live baccarat table.

Extra hands These electronic tables have smaller minimum bets than traditional live tables (typically HK$100 versus HK$500 on traditional live tables). But with more hands per hour, they are actually contributing to an expansion of total market revenue. Ben Lee of IGamiX Management and Consulting Ltd, a gaming industry consultancy, says that while a traditional eight-seater baccarat table at HK$500 per hand might generate 35 hands per hour and HK$140,000 in gross, a live dealer multi-terminal with 60 seats might manage 70 hands per hour at just HK$100 per bet and gross HK$420,000.

Mobius backs ‘family playground’ Macau City moving away from pure gambling to leisure and entertainment, suggests investment manager Michael Grimes

michael.grimes@macaubusinessdaily.com

ark Mobius – an investment manager widely considered as an opinion former on emerging markets opportunities – has been singing the praises of Macau gaming stocks on a visit to the city. “We see continued growth in view of the gradual transformation from an emphasis on only gaming to an emphasis on general entertainment for the family,” Mr Mobius of Templeton Emerging Markets Group said in an e-mail to Bloomberg News. “Macau and its surrounding areas will become China’s premier destination for leisure and entertainment,” he added. More than 28 million people visited Macau last

year, with 60 percent of them from the mainland. With China’s high-speed rail linking Guangzhou to major cities including Beijing and Wuhan having started in December, more middleclass Chinese tourists are expected to come to Macau, according to Karen Tang, a Hong Kong- based analyst at Deutsche Bank AG. Our sister publication Macau Business magazine will have an interview with Mark Mobius in the May edition. Sophisticated investors say that by the time stocks or sectors are being talked up via stories on newswire services, the optimal point of entry has often already been passed. Nonetheless mutual funds – that generally have

a lower appetite for risk than do private equity firms and hedge funds – have been showing an increasing interest in Macau gaming stocks because of some relatively undemanding price to earnings ratios, and the growing tendency to pay annual as well as special dividends to their stockholders.

Stock performance The Macau stock that performed most favourably yesterday following Mr Mobius’ endorsement of Macau in general terms, was one that had been perceived this year by analysts as relatively laggardly in valuation terms – namely MGM China Holdings Ltd. MGM China, a joint

Mark Mobius of Templeton Emerging Markets Group

venture between MGM Resorts International and Pansy Ho Chiu King – a daughter of former Macau casino monopolist Stanley Ho Hung Sun – rose 3.86 percent to HK$17.78 (US$2.29) according to Bloomberg. Sands China Ltd – a stock that is part of the Hang Seng Index and where the firm is controlled by U.S. billionaire Sheldon Adelson – rose 0.25 percent on the day to finish at HK$39.85. Galaxy Entertainment Group Ltd was up 0.16 percent to HK$31.90. Wynn Macau Ltd and SJM Holdings Ltd bucked the

trend. Wynn Macau slipped 1.39 percent to HK$21.35 – possibly in reaction to a report by Michael Chertoff, a former U.S. Secretary of Homeland Security, criticising a Wynn Resorts Ltd-commissioned investigation into Kazuo Okada, a former director of Wynn Resorts and of Wynn Macau. SJM Holdings Ltd was down 2.10 percent to finish at HK$18.66. Melco Crown Entertainment Ltd, which is only lightly traded in Hong Kong, was up 2.23 percent at HK$59.50. The benchmark Hang Seng Index dropped 1.08 percent on the day. With Bloomberg News

April 24, 2013

Macau

Wage subsidy up next month: Tam But unions claim some unscrupulous employers using system to keep local wage rates low Stephanie Lai

sw.lai@macaubusinessdaily.com

tarting next month the wage subsidy scheme will increase 6.8 percent to ensure that all permanent residents earn at least 4,700 patacas (US$588) per month. The scheme – first implemented in 2008 – gives low-earning permanent residents aged 40 or above a cash allowance to top up their monthly salary. The increase will be backdated to January, Secretary for Economy and Finance Francis Tam Pak Yuen said yesterday after a meeting of the Standing Committee for the Coordination of Social Affairs. “In July we will accept applications for the wage subsidy from [backdated to] the second quarter,” Mr Tam noted. “We will hand our suggested adjustment to the Executive Council for discussion as soon as possible,” he added. The secretary said the implementation of the scheme has been “positive”. The government has managed to encourage more low-paid, middleaged residents to find a higher-pay job, thus ensuring that they no longer need the subsidy, he suggested. “At the very beginning of the scheme in 2008, the quarterly applicants amounted to about 2,300 workers,” Mr Tam noted. “But in 2012 the quarterly figure had already dropped to 1,700 workers. We think the aim of our scheme is being achieved.” “By setting the sum at 4,700 patacas a month, I think we have

sought a balance to compensate workers while not allowing it [the scheme] to be abused by employers,” the secretary said. Ella Lei Cheng I, the labour representative at the standing committee disagrees. “It is still common that, with this scheme, employers have passed the buck to the government when it comes to raising the salary for resident workers,” said Ms Lei, a member of the Federation of Trade Unions.

No benchmark “We have a decreasing number of complaints from manufacturing workers over the abuse of this scheme, but there are still a lot of complaints from property management workers,” she added. During yesterday’s meeting th e com m i ttee s u g g es ted th a t government-outsourced cleaning and security staff should get a minimum of 26 patacas per hour, up by 13 percent from the current 23 patacas. The last adjustment to this minimum wage was done in September 2011. The government could implement the new minimum by June, Mr Tam noted. “The hike responds to the inflation rate changes in the past two years,” the secretary said. “But I have to reiterate that this 26-pataca [figure] is not meant to be a benchmark for the private sector to follow, or an absolute reference for the [citywide] minimum wage law

Wage subsidy scheme achieving its goals, says Francis Tam

discussion,” he added. “The ensuing discussion on a minimum wage law should take a broader range of factors into consideration, not only the inflation rate,” the secretary stressed. Trade union representative Ms Lei confirmed that so far

the standing committee is still discussing the formula for setting a minimum wage level for all cleaning and security workers. The government and the committee will try to draw up a proposal within the first half of this year, Mr Tam said.

Surge from HK keeps tide of visitors rising But the wave of tourists from Guangdong ebbs in March Vítor Quintã

vitorquinta@macaubusinessdaily.com

he number of tourists visiting Macau kept growing for the second month in a row last month, mainly because of a rebound in the number from Hong Kong. Almost 612,400 Hong Kong people visited last month, 9 percent more than in March last year, data released yesterday by the Statistics and Census Service show. It was the highest number of tourists from Hong Kong for seven months. The president of the Macau Travel Industry Council, Andy Wu Keng Kuong, told Business Daily in November that higher prices here were to blame for the decrease in the frequency of visits by Hongkongers. The tourist price index in the first quarter of this

The number of visitors in March was 1.6 percent higher than a year before

year was only 0.28 percent higher than in the preceding quarter, but was 7.9 percent higher than a year earlier. The rebound in the number of visitors from Hong Kong was more than enough to offset a decline of

1.1 percent to 1.43 million in the number of visitors from mainland China. A drop of 8 percent to about 633,000 in the number of visitors from Guangdong, Macau’s biggest source of tourists, was the main cause

of the decline. The number of tourists from Japan fell for the seventh consecutive month as the Sino-Japanese dispute over the Diaoyu Islands, known as the Senkaku Islands in Japan, continued. The number of Japanese visiting fell by 27.2 percent to 28,700. In contrast, the number of tourists from Russia rose by 26.2 percent to almost 3,000. The Macau Government Tourist Office opened a representative office in Moscow last month in an effort to tap into this new source of visitors. All in all, the number of tourists increased by 1.6 percent to 2.39 million, more than the number that visited in February, when Lunar New Year fell. The director of the tourist

office, Maria Helena de Senna Fernandes, has said it will focus on getting tourists to stay longer. The average stay lasted one day last month, 0.1 day more than a year earlier, but was still much briefer than the average stays of visitors to Singapore and Las Vegas.

26.2 % Annual increase in Russian tourists in March

April 24, 2013

Macau

Value of new mortgages on shops rises to record

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HOSPITALITY Places to lay your head The increase in the number of hotels in town means a rise in the number of hotel rooms. In the past year alone, 3,690 rooms have been added to the supply, not including rooms in guesthouses. The number of new rooms in two-star hotels and three-star hotels was a negligible 39. Most of the new rooms were in high-end lodgings: 2,422 in four-star hotels and 1,229 in five-star hotels. The increase in the number of rooms was proportionally greatest in four-star hotels, being 28.4 percent in one year. The increase in the number of rooms in five-star hotels was 17 percent. The number of bed spaces rose even faster.

Nearly 11,900 bed spaces were added to the supply last year. The pattern of growth in bed spaces was similar to the pattern of growth in rooms. The number of new bed spaces in two-star hotels and three-star hotels was only about 70. The number of bed spaces in five-star hotels rose by 21.4 percent or 7,920 to almost 44,900. The number of bed spaces in four-star hotels rose by nearly 40 percent or almost 3,900 to 13,618. So the concentration of the supply of bed spaces in high-end lodgings is even greater than the concentration of the supply of rooms. Only 10 percent of bed spaces are in two-star and three-star hotels, while 69 percent are in five-star hotels and 21 percent are in fourstar hotels. J.I.D.

65,324 Bed spaces in hotels at end-2012

New mortgage lending for shops was over three times the value of new mortgage lending for homes in February Vítor Quintã

vitorquinta@macaubusinessdaily.com

Banks approved more new mortgage lending for commercial property in February than ever before

he value of mortgage lending for commercial property approved by Macau banks rose to a record in February, as investors bet on tourism driving commerce. New mortgage lending for commercial property amounted to 7.4 billion patacas (US$925.4 million) in February, almost double what it was in January, according to statistics released yesterday by the Monetary Authority of Macau. February’s figure was the highest since detailed records began. A bank executive told Business Daily that as property prices were rising fast, it was only natural that investors were borrowing more money from banks to pay for real estate. Official data show that about 500 commercial premises were sold in February, for an average of 3 million patacas each, the average price having been 2.15 million patacas a year earlier. The bank executive, who asked to not be identified, said: “The

property market has grown so much. Bank valuations will follow the property market.” But he said this alone was not enough to explain new mortgage lending for commercial property being six times as much again in February as it was a year before. Low interest rates have a dual effect on investment in commercial property. First, money that sits in the bank loses its value when the rate of inflation is higher than the rate of interest. In February the annual rate of consumer price inflation was 6.16 percent. The six-month benchmark interest rate ranged between 0.58 percent and 0.56 percent. Second, low interest rates make it easier to get cheap loans to invest profitably in property. “Most people would like to invest rather than just keep their money in bank deposits,” the bank executive said. New mortgage lending for

residential property approved by banks fell in February to 2 billion patacas, 31.3 percent less than in January. This meant the value of new mortgage lending for commercial property was over three times the value of new mortgage lending for residential property for the first time since detailed records began. The bank executive believes investors see more value in commercial property, particularly premises that can be let to retailers. “Tourism is doing very well and the confidence of the investors reflects the prosperity of the business,” he said. In the fourth quarter of last year each visitor spent 975 patacas in the shops, on average, 3 percent more than a year earlier, and retail sales amounted 14.32 billion patacas, 14 percent more. “A commercial property in a prime location could generate a great deal of cash flow, while a home may face depreciation as it becomes older,” the bank executive said.

news where it matters

April 24, 2013

April April 24, 19, 2013 2013

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Financial Monitor One-way street The demise of manufacturing here is due mainly to the fast disappearance of the textiles industry. The disappearance of the textiles industry means exports have dwindled fast, especially since 2007. At the same time, growth in the population and the number of visitors has driven imports up. So the annual deficit in merchandise trade has grown fast. The international crisis in 2008 and 2009 slowed the growth in the trade deficit, as the patterns and volumes of trade then were atypical. But the trade figures since 2010 show the growth in the trade deficit is relentless. We have trade deficits with all our main trading partners, and our trade deficit overall is growing.

Our biggest deficit is with mainland China. More than one-third of our trade deficit is due to trade with the mainland. In 2008 over 55 percent of the trade deficit was due to trade with the mainland. But this exceptionally high proportion was the result of less trade with other places rather than any big changes in trade with the mainland. Our five next-biggest trading partners are France, Italy, Hong Kong, Japan and the United States, in that order. Our trade with these places accounts for slightly over one-third of the trade deficit. France and Italy have become more important as trading partners in recent years, while Hong Kong and Japan have become less important. Exports of textiles used to make up a big part of our trade with the United States, and as lately as 2008 we had a surplus in our trade with that country. Since then our trade with the United States has been in deficit and has declined in importance.

Okada hires U.S. security heavyweight versus Wynn Ex-Homeland Security head pitched against ex-FBI boss in battle of the gaming billionaires Michael Grimes

Michael.Grimes@macaubusinessdaily.com

azuo Okada has hired his own heavyweight from the United States’ law enforcement community in his battle against Wynn Resorts Ltd. First, Wynn Resorts retained former Federal Bureau of Investigation director Louis Freeh to produce what the firm described as an independent investigation into Mr Okada’s conduct while a director and near 20 percent shareholder of Wynn Resorts. That report, issued by Wynn in a regulatory filing in February 2012, said Mr Okada was “unsuitable” as a business partner because of alleged gifts and payments made to gaming regulators in the Philippines – where he was seeking to build a casino resort. Wynn Resorts last year forcibly redeemed Mr Okada’s shares for US$1.9 billion (15.19 billion patacas), about US$800 million below the prevailing market value at the time. Now Mr Okada has commissioned Michael Chertoff, a former U.S. Secretary of Homeland Security under President George W. Bush, to issue an “assessment” of the Freeh report. Mr Chertoff has also served as a judge on the U.S. Court

of Appeals for the Third Circuit, as Assistant Attorney General in charge of the Criminal Division at the U.S. Department of Justice, and as U.S. Attorney for New Jersey. The Chertoff review found the Freeh report to be “structurally deficient, one-sided, and seemingly advocacy-driven,” Mr Okada’s Japan-listed company Universal Entertainment Corp. said in a statement. Business Daily has not so far seen a copy of Mr Chertoff’s review. “This confirms what I have maintained since the day the Freeh report was issued and the Wynn board moved to strip us of our stake in a company we helped found,” Mr Okada said in a statement. “It’s obvious that the biased report was part of Steve Wynn’s campaign to eliminate me as a rival to his power within Wynn Resorts,” he added.

Early backer Mr Okada, chairman of Tokyobased Universal Entertainment, helped finance Wynn Resorts, founded by Steve Wynn. Wynn Resorts went public in October 2002 and Mr Okada was its largest

individual shareholder with nearly 20 percent, until February of last year. He has said Mr Wynn wanted him out because he opposed a US$135 million gift to the University of Macau. Mr Okada, who resigned from Wynn Resorts’ board ahead of a shareholder vote to oust him earlier this year, faces a U.S. criminal investigation of possible bribery related to his Philippine casino project, according to an April 8 filing in Nevada state court in Las Vegas by the U.S. Department of Justice. Mr Freeh’s company, Freeh Group International Solutions LLC, said in an e-mailed statement regarding the findings against Mr Okada: “We stand by the facts and documents set forth in our report, which have not been credibly challenged or contested by Mr Chertoff’s generalisations and desire for different conclusions.” It added: “Due to the ongoing criminal investigation regarding Universal in this matter, we are not able to make any further statement at this time.” Deanna Pettit-Irestone, a spokeswoman for Wynn Resorts, said in an e-mail that the company wouldn’t comment on the Chertoff review. With Bloomberg News

J.I.D. The content of this column is the work of Business Daily’s journalists.

33.8 %

Proportion of trade deficit due to trade with mainland, 2010-2012

Big guns – Michael Chertoff, left, pitched against Louis Freeh

Stay in the finest hotels in Macau and read Business Daily

news where it matters

April April 24, 19, 2013 2013

Macau

Big users to pay more for electricity

Corporate

Yuan appreciation pushes up cost of imported energy Vítor Quintã

vitorquinta@macaubusinessdaily.com

acau’s major enterprises, including big hotels and casino resorts, will pay more for their electricity starting today, power distributor Companhia de Electricidade de Macau SA – CEM announced. The company has increased the tariff clause adjustment, which reflects fluctuation in energy production cost, by 1 cent to 0.45 patacas (US$0.06) per kilowatt-hour for large enterprises. The new tariff clause adjustment is fixed quarterly. This time around it was the yuan appreciation that was “the main reason leading” to the tariff increase. CEM has had to pay more for the electricity it imports from mainland China, a company spokesperson told Business Daily. The yuan has appreciated by 2.1 percent against the pataca in the last 12 months, according to the website of the Monetary Authority of Macau. The distributor’s cheaper source of electricity generation is natural gas but the supply has been suspended

Special Olympic Golf Masters tees-off today

Energy bill to remain unchanged for small consumers (Photo: Manuel Cardoso)

since June 2011. As a result CEM had to import from the mainland 87.3 percent of the electricity it provided to Macau users last year. Despite the increase in costs the company decided to keep the tariff of small users unchanged, which cover about 99 percent of its users. CEM will subsidise 9 cents per kilowatt-hour – up by 1 cent – for this group that includes all Macau

homes but also small and medium enterprises such as shops and restaurants. Households also benefit from the government’s electricity subsidy, which increased from 180 patacas to 200 patacas per month in October. And the gap between small and big users could get even greater, as the government is proposing a higher electricity tariff for large hotels and casino resorts.

The Special Olympics Golf Masters 2013 begins today at the 175-acre Caesars Golf Macau just off the Cotai Strip, featuring 14 teams from 12 countries and regions. The first day of competition will start in the morning for Level 5 players and in the afternoon for Level 1 and 2 players. The Special Olympics Golf competition involves five formats, with Level 5 being the highest. The organisers welcomed the 47 athletes and 27 coaches on Monday with a dinner reception in the ballroom of the Sheraton Macao, the largest five-star hotel in the corporation’s global chain. Athletes were introduced on stage to receive event bags of full sets of golf gear and equipment. Yesterday they went on a sightseeing tour of UNESCO-listed World Heritage sites, the Macau Tower and the Panda Park in Coloane. The visit also included a visit to Lord Stow’s Bakery and a dinner at the Institute for Tourism Studies.

April 19, 24, 2013 2013 April

Greater China

Recovery falters as manufacturing growth cools April HSBC’s PMI points to tepid second-quarter recovery

anufacturing is expanding at a slower pace this month, fuelling concern that the world’s second-biggest economy is faltering. The preliminary reading of 50.5 for a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics compared with a final 51.6 for March. A reading above 50 indicates expansion. China’s stocks slumped as the data added to an unexpected slowdown in economic growth, reported last week, that prompted banks including Goldman Sachs Group Inc. to cut full-year forecasts. The PMI also rattled Hong Kong stocks. In Washington, central bank Governor Zhou Xiaochuan said on Saturday 20 that a 7.7 percent firstquarter expansion was reasonable and “normal”, highlighting reduced expectations after 10 percent-plus rates during the past decade. “This paints a picture of a continued painfully slow recovery for China’s manufacturing sector,” said Yao Wei, a Societe Generale SA economist based in Hong Kong. “The government needs to help translate the easy liquidity conditions into real growth.” President Xi Jinping’s officials are grappling with constraints on export demand, property-market overheating, the risks associated with a surge in so-called shadow banking, and weakness in consumption because of a campaign to rein in official perks such as spending on banquets.

The CSI300 of the leading Shanghai and Shenzhen A-share listings ended down 3.2 percent, while the Shanghai Composite Index skidded 2.6 percent to 2,184.5. The Hang Seng Index fell 1.1 percent to 21,806.6 points, retracing from its strong gains last Friday. In China, first-quarter growth slipped from a 7.9 percent annual pace in the final three months of last year, with bird flu in Shanghai and Zhejiang and an earthquake in Sichuan now adding to the challenges for officials. “This has been a very narrowly based recovery, predominantly driven by infrastructure investment, but now even infrastructure investment is also apparently slowing down,” said Tao Dong, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong.

Weaker demand A sub-index measuring new export orders fell to 48.6 in April from 50.5 in March, reflecting weaker global demand as the U.S. economic recovery remains fragile and the euro zone is mired in recession. The figures follow an unexpected contraction in export orders in March to Taiwan, one of the region’s biggest providers of tech gadgets, signalling that Asia’s trade-reliant economies may be losing further momentum. Exports from South Korea, another big supplier to the global tech industry, fell by 3.1 percent for the first 20 days of April from

a year earlier. “New export orders contracted after a temporary rebound in March, suggesting external demand for China’s exporters remains weak,” said HSBC’s China chief economist Qu Hongbin. “Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months.” Yesterday’s data show that weakness in demand, including for exports, is starting to weigh on employment in manufacturing, HSBC said in a statement. The preliminary report is based on 85 percent to 90 percent of responses to a monthly survey of purchasing executives at more than 420 companies. Goldman Sachs, Royal Bank of Scotland Plc and JPMorgan Chase & Co. last week cut estimates for 2013 expansion to 7.8 percent. That would be the same as 2012’s pace, which was the weakest in 13 years.

Investors’ doubts The slowdown, which came despite a credit boom, suggesting the cash sloshing around the economy is not having the desired effect of stoking growth and could instead exacerbate property and inflationary risks. China’s industry ministry noted in a separate statement yesterday that companies had no strong desire to invest given weak demand and overcapacity, and it did not see any improvement in their difficulties

Financial reform urged to curb shadow banking risks Think tank calls for more liberalised interest rate regime, unified bond market

Shadow credit channels have ballooned over the years

hina must speed up marketbas ed f in anc ial re forms to contain wild growth in shadow financing as well as the mounting risks stemming from the sector, a government think tank said in a report. Shadow banking traditionally includes activities such as

pawnbroking and peer-to-peer lending but now embraces vast offbalance sheet guarantees and loans in the banking system. China needs a more liberalised interest rate regime and a unified bond market to prevent borrowers and investors from rushing to the opaque shadow banking system for

new funding and higher returns, said the report made by the Chinese Academy of Social Sciences (CASS), a top government think tank. “Chinese government must step up a series of financial reforms in the near future to crimp the incentives for the blind and explosive expansion of shadow banking system,” said Zhang Ming, a researcher at CASS. China had made the initial effort last June to ease its grip on bank deposit and lending rates, but there are rising calls for a more liberalised interest rate to fully reflect market forces. Meanwhile, China’s bond market is fragmented into three parts due to rivalry among ministerial bodies, which has reduced the financing efficiency of the regular capital market and led to swelling shadow banking activities. The report said there is no evidence of a looming systemic risks in the shadow banking system, as the structures of those finance products are relatively simple and the leverage ratio being involved remains at a low level. “So far, only some trust products show the premature shape of securitisation and China’s shadow

Beijing has set a 7.5 percent GDP growth target for 2

operating in an uncertain and unstable global environment. Still, the HSBC PMI has been above the 50-point level demarcating growth from contraction from the previous month since November 2012, though its failure to break above 53 indicates that the economic expansion it signals is only moderate. Sub-indexes measuring both input and output prices fell in April, indicating overcapacity upstream and soft demand, according to the Flash PMI survey. An employment sub-index also dipped as factory activity cooled, although China’s job market is holding up relatively well despite

financing is much less complicated compared to the western countries,” Mr Zhang added.

Growing risks But it added that liquidity and default risks are indeed building up in the sector due to maturity mismatch between long-term assets of borrowers and short-term funding from investors. Chinese banks and other financial institutions tend to sell short-term finance products to provide funding for longer-term projects, such as infrastructure and property assets, leaving issuers to sell new products to roll over the debt and increase delinquency risks, analysts said. China’s shadow credit channels have ballooned over the past years, in part for banks to skirt around lending rules and for investors to seek higher returns for their savings, with much of them going to regulator’s unwanted sectors, such as local government financing vehicles and property developers. The fast growth has fuelled concern that some products may have been spun off from risky investments. Despite the downside risks to the entire financial sector, the report also affirmed the positive role played by shadow banking system in supporting the growth of real economy, as it provides funding for cash-strapped smaller firms and upstart enterprises that banks usually try to avoid. Li Yang, the vice president of CASS also said in a seminar last week that such a positive effect determined regulator’s attitude to help guide a healthier development of shadow financing rather than to stifle it.

April 19, 24, 2013 2013 April

Greater China China Mobile profit gain weakest in three quarters

hina Mobile Ltd, the world’s largest phone company by subscribers, reported its weakest profit growth in three quarters as higher costs eroded gains from an increase in users of highspeed network services. Net income rose to 27.9 billion yuan (US$4.5 billion) in the first quarter, from 27.8 billion yuan a year earlier, the Beijing-based operator said in a statement to the Hong Kong Stock Exchange yesterday. Chief executive Li Yue is fighting to maintain China Mobile’s lead

Vanke’s profit surge in Q1

2013

slower growth. Investors are assessing where the nation’s growth rate may settle as the working-age population declines, labour costs and incomes rise and officials wrestle with the environmental toll from polluting factories. The answer may be determined partly by the speed of efforts to tackle state monopolies and open the economy to more market forces. “China’s undergoing economic restructuring, which sometimes is not in lockstep with growth,” Mr Zhou said. “We need to sacrifice short-term growth for the purposes of reforms and structural adjustments.” Reuters/Bloomberg News

“The regulators’ intention is to better govern the shadow banking system to enable it serve the real economy well but not to kill it,” he added. Global rating agencies have also warned of growing risks in the sector, considering the fast expansion and lack of transparency. Ratings agency S&P estimated that outstanding Chinese shadow banking credit totalled US$3.7 trillion by the end of 2012, equal to 34 percent of on-balance-sheet loans and 44 percent of GDP. Fitch has cut China’s longterm local currency credit rating to A-plus from AA-minus, citing risks from the rapid expansion of shadow banking activities. Reuters

[China] must step up a series of financial reforms in the near future to crimp the incentives for the blind and explosive expansion of shadow banking system Zhang Ming, researcher, Chinese Academy of Social Sciences

KEY POINTS APRIL PMI SHOWS PRELIMINARY READING OF 50.5 SUB-INDEXES FOR INPUT, OUTPUT PRICES FALLING ECONOMY TO FACE SLOW RECOVERY – ANALYSTS STOCKS SLUMP AS MANUFACTURING SLOWS

hina Vanke Co., the nation’s biggest developer, reported a 16 percent jump in firstquarter profit as sales of smaller homes defied government curbs. Net income climbed to 1.61 billion yuan (US$260 million), from 1.4 billion yuan a year earlier, the company said in a filing to the Shenzhen stock exchange. Revenue gained 35 percent to 14 billion yuan. About 90 percent of Vanke’s projects sold were homes of smaller than 144 square metres (1,550 square feet), the company said. That helped it boost sales from buyers

in smartphone users over China Unicom Hong Kong Ltd and China Telecom Corp. by subsidising handsets for third-generation data users and adding fourth-generation services. The company said last month it will bear costs for the TD-LTE network, or 4G network, previously borne by its state-owned parent, boosting the listed unit’s capital spending 49 percent to 190.2 billion yuan this year. “The results were a bit lower than our expectations,” Ricky Lai, a Hong Kong-based analyst with Guotai Junan International Holdings Ltd, said. “The heavy handset subsidies strategy in 2013, with the total estimated at 27 billion yuan, will worsen its profit margins.” The profit growth in the period was the weakest since the second quarter of 2012, when the company posted a decline. Bloomberg News

who bought homes for self-use even as the government last month implemented the toughest property measures in a year by ordering the central bank to raise down-payment requirements and interest rates for second mortgages in cities with excessive price gains. Vanke, with 51 billion yuan of cash as of the end of March 31, will look for land acquisition opportunities, according to the statement. The Shenzhen-based developer’s contracted sales, based on bookings of apartments before they are built, rose 41 percent to 43.7 billion yuan in the first three months, the company said. Developers in China typically sell homes before construction begins and book earnings from sales progressively. Bloomberg News

China planning to ease life insurance rules Watchdog may scrap maximum rate on fixed-return policies

eijing plans to allow life insurers to pay higher returns on some policies, a person with knowledge of the matter said. That may make them more attractive for investors stymied by government limits on bank deposit rates. The China Insurance Regulatory Commission may scrap the 2.5 percent maximum rate on fixedreturn policies in a trial starting as early as next month, said the person, who asked not to be identified because the matter isn’t public. The new rules may prompt insurers to increase their reserves for payouts by about 20 billion yuan (US$3.2 billion), the person said. Premium growth has slowed as Chinese savers, seeking higher returns, turn to riskier investments such as wealth management products. Removing the limit on returns may revitalise revenue growth while also channelling savings away from less-regulated investments known as shadow banking. The regulator’s Beijing-based press office didn’t immediately reply to a fax seeking comment. One concern for the regulator is that allowing higher returns may cause more clients to end their

current policies, the person said. The forecast for higher reserve needs comes from the regulator’s base-case scenario, which predicts redemptions will increase by less than 50 percent by value from the current level, according to the person. That scenario estimates that returns on policies will rise to close to the five-year bank deposit rate of 4.75 percent, the person said. Offering higher returns may also crimp profits in the industry. China Life Insurance Co., the country’s biggest, reported a 40 percent slump in profit last year as it recognised

losses on investments in shares. To prevent insurers from offering excessive returns, regulators will keep a rule stating that companies may forecast a maximum 3.5 percent gain on their investments when calculating the level of reserves they need, the person said. Insurers that offer returns on policies of more than 3.5 percent will need regulatory approval and must set aside additional reserves, the person said. Such reserves would be reflected in the companies’ solvency ratios, the person added. Bloomberg News

April 19, 24, 2013 2013 April

Asia

OECD backs Japan deflation fight But urges Tokyo to step up efforts to shrink huge debt pile

he Bank of Japan should stick with its expanded quantitative easing to achieve its inflation target, but this may not be enough to foster sustainable economic growth unless it is coupled with structural reforms, the Organisation for Economic Cooperation and Development said yesterday. Japan’s government should stick with its plan to double the sales tax to 10 percent, compile a detailed plan to return to primary budget surplus in 2020 and boost revenue from other taxes, the OECD said. The size of fiscal consolidation needed means Japan does face the risk of a spike in interest rates that would hurt the financial system due to its large exposure to Japanese government bonds, the Paris-based think tank said. “The new quantitative and qualitative monetary easing should be implemented to meet the new The yen has depreciated 13 pct against the dollar this year

KEY POINTS ENDING 15 YEARS OF DEFLATION ‘IS A PRIORITY’ – OECD ORGANISATION SAYS TOKYO MUST CUT DEBT ECONOMY SEEN EXPANDING 1.4 PCT THIS YEAR STANDARD & POOR’S WARNS OF DOWNGRADE RISKS

2 percent price stability target, although this may not be enough,” the OECD said in its economic survey of Japan. “Pushing ahead with structural reform on a broad front is equally imperative to achieve sustained growth.” The BOJ earlier this month committed to open-ended asset buying to nearly double the monetary base to 270 trillion yen (US$2.72 trillion) by the end of 2014 to end 15 years of deflation and achieve its 2 percent inflation target in two years. Haruhiko Kuroda, the BOJ’s new

Indonesia warns multinationals not to be greedy Yudhoyono says the country wants ‘to have a fair share’

ndonesia’s president told major investors in his country’s natural resources not to be greedy, comments that suggest he is in no mood to row back on policies that foreign mining and energy firms have called a deterrent. But Susilo Bambang Yudhoyono sounded more accommodative in remarks over a long-delayed US$7.2 billion bank takeover by Singapore’s DBS Group and on the thorny issue of reducing state fuel subsidies, which are eating up a growing chunk of the government’s budget. “My criticism to the world is that many multinational corporations take too much and do not leave behind enough for the people of those countries,” Mr Yudhoyono told a Thomson Reuters Newsmaker event in Singapore yesterday. Indonesia has implemented a range of policies, especially in

the mining sector, to try to force companies to invest more in downstream businesses as a way to increase the value of products before they are exported. The country is a major exporter of copper, nickel and gold, among other commodities. The policies have led to criticism that Southeast Asia’s biggest economy is growing increasingly nationalist. The former member of the Organisation of the Petroleum Exporting Countries has also been criticised for doing too little to encourage investment in oil production. “What we need is genuine partnership and cooperation. What I want is to continue to work closely with multinational corporations ... not just for [companies] … to come and take it abroad,” Mr Yudhoyono said. “Please understand, we too

governor, has dubbed the policy quantitative and qualitative easing, because the BOJ is greatly increasing the size of asset purchases and changing the composition by focusing on longer-term government debt. Japan’s consumer prices are still showing small annual declines, and many private-sector economists doubt the BOJ can meet its price target by 2015.

Fiscal discipline The OECD forecast that Japan’s core-core consumer prices, which

exclude fresh food and energy, will rise around 0.5 percent in the fourth quarter of 2014 from the same period a year earlier. It is important for Japan to end deflation because this lowers nominal gross domestic product, which worsens Japan’s debt-to-GDP ratio, the OECD said. Japan’s debt burden is already the worst among major economies at more than twice the size of its US$5 trillion economy. In order to repair public finances, the government should not use multiple tax rates when raising the sales tax, the OECD said. Some

want to have a fair share. That’s all we want.”

Fuel subsidies Mr Yudhoyono said fuel prices should rise to reduce the increasing budget burden of maintaining subsidies on the products, a policy that critics say diverts funds that could be used in other areas, such as for building much-needed infrastructure. But Mr Yudhoyono also said the impact of cutting subsidies on inflation and the poor remained major concerns, underlining how politically difficult it is to get agreement on the issue, especially with parliamentary and presidential elections due next year. Officials have suggested the government might opt for a 50 percent increase in fuel prices for the country’s 11 million private car owners. But economists say that will have little impact on the subsidies, which account for more than 30 percent of state spending. The issue will be a key challenge for the next finance minister. Mr Yudhoyono this month appointed his chief economic minister, Hatta Rajasa, as interim finance minister. He did not say when Mr Rajasa would be replaced or who would become the country’s fourth finance minister in four years. The president said he hoped for a resolution to the year-old bid by DBS Group Holdings Ltd for PT Bank

My criticism to the world is that many multinational corporations take too much and do not leave behind enough for the people of those countries Susilo Bambang Yudhoyono, Indonesia’s president

Danamon in the “very short term”. The deal has been stuck though, with Bank Indonesia capping ownership stakes in local banks and

April 19, 24, 2013 2013 April

Asia lawmakers have argued that the government should exempt food and other items from sales tax hikes. Should doubts about fiscal discipline emerge, Japan’s financial sector would be vulnerable as government debt accounts for about a fifth of all bank assets, the OECD said. The OECD did turn more positive on Japan’s growth prospects due to expectations for higher private consumption and an increase in capital expenditure as exports recover. Prime Minister Shinzo Abe’s stimulus spending and a decline in the yen also led the OECD to upgrade its forecasts. Japan’s economy will expand 1.4 percent both this year and in 2014, the OECD said. That is higher than its previous forecasts of 0.7 percent growth and 0.8 percent growth, respectively. Australian Prime Minister Julia Gillard also added her voice to global endorsements of Japan’s efforts to revive its economy, even as the sinking yen contributes to undermining her country’s manufacturing competitiveness. “The Japanese economy certainly does need to take steps to pursue growth, so we are pleased that the new prime minister seems very focused on getting growth,” Ms Gillard said in an interview.

Downgrade risks Rating agency Standard & Poor’s said yesterday it saw more than a onethird chance that it would downgrade Japan’s sovereign ratings because of uncertainty about whether the government’s push to revive growth and end deflation will succeed. “The continuing prospect of a downgrade arises from risks associated with recent government initiatives and uncertainty of their success,” S&P said in a report. “Japanese Prime Minister Shinzo Abe’s plan to lift Japan out

of deflation and spur economic expansion – known as ‘Abenomics’ – has three pillars: bold monetary easing, fiscal efforts to spur growth, and a strategy to induce private sector investment,” it said. “Of the three engines that Mr Abe foresees reinvigorating the nation’s economy, so far only one, monetary easing, has kicked into full gear. The others remain idle.” S&P has an AA- long-term rating on Japan’s sovereign debt.

Regulator gives nod to Virgin-Tiger tie-up Watchdog allows Virgin Australia’s 60 percent stake in rival

Reuters/Bloomberg News

Japanese seek refuge in gold Japanese consumers are poised to become net buyers of gold for the first time in eight years as the yen’s decline and looming inflation drive them to seek refuge in bullion, according to Standard Bank Plc. Net sales of gold bars and coins by Japanese individuals shrank to 10.1 metric tons in 2012, the smallest amount since 2005, data from the World Gold Council show. A surge in purchases this month and the chance to buy after bullion slumped into a bear market foreshadow a turnaround in 2013, said Bruce Ikemizu, Standard Bank’s head of commodities trading in Tokyo. The currency has depreciated 13 percent against the dollar this year and is trading near a four-year low after the central bank’s pursuit of unprecedented monetary easing to end deflation was unopposed by Group of 20 nations. “The time has come for Japanese to buy gold with the government trying to engineer inflation,” Mr Ikemizu said. “Retail investors are turning from sellers to buyers of bullion.”

Deal expected to challenge Qantas’ 65 percent share of the market

ustralia’s competition regulator yesterday approved Virgin Australia Holdings Ltd purchase of a 60 percent stake in the local unit of rival Tiger Airways Holdings Ltd, despite concerns about the market becoming a duopoly. Virgin is Australia’s second-largest carrier after Qantas Airways Ltd and the Australian Competition and Consumer Commission (ACCC) had previously said it was worried about the impact on consumers of two main airlines controlling the market. But it ruled yesterday that “this acquisition is unlikely to lead to a substantial lessening of competition in the Australian market for domestic air passenger transport services”. “Essential to reaching this view was the ACCC’s assessment … that Tiger

Sri Lanka’s Cabraal sees 7.5 pct growth

politicians calling for greater access for Indonesian banks in Singapore in return. Reuters

oreign investment in Sri Lanka will probably double from two years ago, keeping economic growth on pace to meet a 7.5 percent forecast for 2013, said central bank governor Ajith Nivard Cabraal. Foreign investment is “on track” to reach at least US$2 billion this year from US$1.3 billion last year and US$1 billion in 2011, Cabraal said in an interview yesterday. Those gains will be driven by banks adding US$1 billion in capital and foreign investors buying US$300 million in stocks, he said. “There will be the sufficient inflows into the country that will provide the space for the country to grow at the 7.5 percent that we are expecting” this year, Mr Cabraal said. “That would be the number that would enable us to maintain inflation at the mid-single digits or slightly above that this year and also ensure that our reserve levels are sufficient.” The central bank has held its reverse repurchase rate at 9.5 percent and the repurchase rate at 7.5 percent to support economic growth and contain inflation in the south Asian island nation, as it seeks to attract new investment from the U.S. and other countries. President

Australia would be highly unlikely to remain in the local market if the proposed acquisition didn’t proceed,” ACCC chairman Rod Sims said. “Absent this conclusion the acquisition raised considerable competition concerns.” Tiger Airways Australia is the lossmaking local subsidiary of Singapore’s Tiger Airways and Mr Sims said it had a history of poor financial and operational performance. It was grounded by Australia’s air safety regulator for six weeks in 2011 in an unprecedented move over concerns about pilot proficiency, training and fatigue management. Mr Sims said the ACCC saw little chance that any other shareholders or partners would be able to turn around the airline, potentially leading to Tiger redeploying aircraft into its Singapore-based parent’s global operations. “We concluded that it was highly likely that Tiger Australia would leave the market if this acquisition didn’t go ahead, and accordingly blocking the acquisition would not serve to protect competition,” Mr Sims said. Tiger Australia launched in November 2007 and services 16 domestic routes with 11 aircraft. The takeover still needs the approval of the Foreign Investment Review Board but Virgin chief executive John Borghetti said the ACCC nod was an important step towards completing the A$35 million (US$35.8 million) acquisition. “By partnering with Tiger Airways, we can use our local expertise to build a sustainable budget carrier, which will offer great value airfares and benefit jobs and tourism in Australia,” he said. Tiger’s largest shareholder, Singapore Airlines Ltd, is helping to fund the takeover by acquiring a 10 percent stake in Brisbane-based Virgin for A$105 million. AFP

Mahinda Rajapaksa has pledged to spend US$1 billion annually on infrastructure projects. “We can see a much greater interest of people who are coming with direct investments,” Mr Cabraal said. Sri Lanka’s equity market is attracting investments from hedge funds and investment firms in the U.S., Europe and Asia, he said. “It’s a pretty interesting mix of investors who have shown continuous interest in the Sri Lankan market,” he added. “We expect that momentum to be sustained.” Bloomberg News

A$35 million

VIRGIN WILL PAY FOR STAKE IN TIGER AIRWAYS AUSTRALIA

April 24, 2013

Markets Hang Seng Index NAME

PRICE

DAY %

VOLUME

33.15

17212592

CHINA UNICOM HON

ALUMINUM CORP-H

2.83

-1.736111

10438000

CITIC PACIFIC

BANK OF CHINA-H

3.44

-1.714286

585430121

BANK OF COMMUN-H

5.77

-1.02916

23765647

BANK EAST ASIA

29.9

-0.3333333

2217665

12.12

-4.113924

41984189

ESPRIT HLDGS HANG LUNG PROPER

AIA GROUP LTD

BELLE INTERNATIO BOC HONG KONG HO

NAME

CLP HLDGS LTD CNOOC LTD COSCO PAC LTD

PRICE

DAY %

VOLUME

10.54

-1.495327

33481542

9.25

-1.069519

8677597

884273

-1.183432

3300908

TENCENT HOLDINGS

251.6

-1.333333

2395378

TINGYI HLDG CO

787666

CHEUNG KONG

HENDERSON LAND D

56.75 -0.08802817

5491389

CHINA LIFE INS-H

20.1

-0.9852217

28443417

CHINA MERCHANT

24.05

-3.413655

2365025

CHINA MOBILE

81.85

-0.9079903

12121778

HUTCHISON WHAMPO

22.9

-2.553191

21965300

IND & COMM BK-H LI & FUNG LTD

CHINA OVERSEAS

6351636

10.02

4148209

77.4

-1.212508

1379104

22.95

-1.713062

4482114

HONG KONG EXCHNG

126.7

-1.247077

2845265

HSBC HLDGS PLC

80.05

-1.17284

5573848

-0.7444169

3179763

5.21

-0.7619048

296079077

9.95

-1.289683

15175288

0.1628664

1825662

HONG KG CHINA GS

10018402

-0.7079646 -0.5184033

-0.48

192295114

-1.086957

112.2 95.95

-2.013423

-1.286174

12.74

SUN HUNG KAI PRO SWIRE PACIFIC-A

29.2

6.14

SINO LAND CO

4160897

124.4

CHINA CONST BA-H

7910195

-2.985075

HANG SENG BK HENGAN INTL

0.2515723

10.4

3116039 3082840

39.85

1473461

10802338

20398260

1708191

SANDS CHINA LTD

48737007

-1.349325 -2.047244

VOLUME

-0.2962963

-0.1949318 -0.5993151

-0.3394433

-0.5772006

25.6

6.22

DAY %

73.4

67.3

13.16 116.1

PRICE

POWER ASSETS HOL

13.78

CATHAY PAC AIR CHINA COAL ENE-H

NAME

CHINA PETROLEU-H

8.26

-2.59434

130221153

CHINA RES ENTERP

25.55

0.3929273

3548788

MTR CORP

30.75

CHINA RES LAND

22.4

-2.819957

7741000

NEW WORLD DEV

13.36

0.149925

13714382

CHINA RES POWER

23.7

-3.067485

4382105

PETROCHINA CO-H

9.41

-1.155462

70630266

CHINA SHENHUA-H

25.45

-2.676864

20656368

PING AN INSURA-H

58.6

-1.677852

14254994

WANT WANT CHINA

-0.2493766

8162778

11.6

-2.521008

12175792

0.3636364

4057309

WHARF HLDG

MOVERS

1 22110

INDEX 21806.61 HIGH

22100.19

LOW

21517.94

52W (H) 23944.74 21500

(L) 18056.4 19-April

23-April

Hang Seng China Enterprise Index NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.45

-2.266289

182413079

AIR CHINA LTD-H

6.12

0.1636661

8370045

ALUMINUM CORP-H

2.83

-1.736111

28 3.44

ANHUI CONCH-H BANK OF CHINA-H

NAME

PRICE

DAY %

VOLUME

CHINA PACIFIC-H

26.6

-2.025783

7834802

CHINA PETROLEU-H

8.26

-2.59434

130221153

10438000

CHINA RAIL CN-H

7.21

-1.232877

7067500

-3.28152

33293470

CHINA RAIL GR-H

3.75

-1.315789

10921000

-1.714286

585430121

CHINA SHENHUA-H

25.45

-2.676864

20656368

CHINA TELECOM-H

5.77

-1.02916

23765647

3.79

-0.5249344

51855140

25.35

-1.744186

4300419

DONGFENG MOTOR-H

11.48

-2.047782

11698363

CHINA CITIC BK-H

4.01

-1.474201

46970267

GUANGZHOU AUTO-H

6.3

7495922

CHINA COAL ENE-H

6.22

-2.047244

20398260

HUANENG POWER-H

8.3

-0.8363202

15840000

CHINA COM CONS-H

7.48

11163760

IND & COMM BK-H

5.21

-0.7619048

296079077

CHINA CONST BA-H

6.14

-1.286174

192295114

JIANGXI COPPER-H

14.88

-1.976285

15936869

CHINA COSCO HO-H

3.34

-2.623907

9482195

PETROCHINA CO-H

9.41

-1.155462

70630266

CHINA LIFE INS-H

20.1

-0.9852217

28443417

PICC PROPERTY &

9.37

-1.472135

10336203

CHINA LONGYUAN-H

7.17

-1.375516

6577968

PING AN INSURA-H

58.6

-1.677852

14254994

CHINA MERCH BK-H

15.02

-2.340702

21411571

SHANDONG WEIG-H

6.69

1.210287

9012000

CHINA MINSHENG-H

9.11

-2.462527

51155200

SINOPHARM-H

23.35

-5.273834

8664085

CHINA NATL BDG-H

9.67

-3.87674

48044200

TSINGTAO BREW-H

52.75

-0.3777148

1916300

14.52

-2.941176

9107390

WEICHAI POWER-H

BANK OF COMMUN-H BYD CO LTD-H

CHINA OILFIELD-H

28.05

-1.923077

NAME

PRICE

DAY %

VOLUME

YANZHOU COAL-H

8.61

-2.270148

23301865

ZIJIN MINING-H

2.24

-1.321586

29213853

ZOOMLION HEAVY-H

8.15

0.1228501

18595145

12.02

-2.276423

4063175

ZTE CORP-H

MOVERS

2 10630

INDEX 10425.09 HIGH

10617.47

LOW

10270.54

52W (H) 12354.22 10250

(L) 8987.76 19-April

4080502

23-April

Shanghai Shenzhen CSI 300 PRICE

DAY %

VOLUME

6.28

-4.704097

8707367

CITIC SECURITI-A

12.16

-4.925723

108903201

13702968

CSR CORP LTD -A

3.99

-2.205882

32468642

-5.876235

48500138

DAQIN RAILWAY -A

7.04

-3.030303

25685969

-3.428571

25473619

DATANG INTL PO-A

4.33

-2.036199

8008623

2.87

-1.37457

31232031

EVERBRIG SEC -A

13.45

-4.609929

4.59

-2.754237

52298123

GD MIDEA HOLDI-A

13.89

-2.183099

10.26

-3.752345

10738770

GD POWER DEVEL-A

2.76

BAOSHAN IRON & S

4.75

-1.452282

19488853

GEMDALE CORP-A

BEIJING TONGRE-A

22.57

-1.78416

9514173

GF SECURITIES-A

BYD CO LTD -A

23.26

-2.718528

6359579

GREE ELECTRIC

CHINA AVIC AVI-A

22.81

-1.426102

3242841

GUANGHUI ENERG-A

NAME

PRICE

DAY %

VOLUME

AGRICULTURAL-A

2.69

-1.465201

75154022

CHONGQING WATE-A

AIR CHINA LTD-A

5.28

-3.473492

14406045

ALUMINUM CORP-A

4.06

-1.932367

ANHUI CONCH-A

18.1

BANK OF BEIJIN-A

8.45

BANK OF CHINA-A BANK OF COMMUN-A BANK OF NINGBO-A

NAME

PRICE

DAY %

VOLUME

QINGHAI SALT-A

24.6

-7.484017

14652436

SAIC MOTOR-A

15.1

-3.94402

35632247

SANY HEAVY INDUS

10.02

-3.930968

36362296

SHANDONG GOLD-MI

32.13

4503942

SHANG PHARM -A

12.1

-4.347826

12430598

21389204

SHANG PUDONG-A

9.84

-3.7182

108826815

28240802

SHANGHAI ELECT-A

3.81

-2.307692

3073666

-1.428571

46770784

SHANXI LU'AN -A

16.18

-4.316972

15862922

6.99

-4.897959

68596717

SHANXI XISHAN-A

10.56

-3.385178

12511173

12.99

-5.3207

26850342

SHENZEN OVERSE-A

5.79

-3.5

46518198

25.58

-3.617182

37801337

SICHUAN KELUN-A

61.55

-3.496394

1102299

18.9

-2.627512

18305935

SUNING COMMERC-A

6.06

-2.728732

43977834

CHINA CITIC BK-A

4.24

-3.854875

36193745

HAINAN AIRLINE-A

4.74

-1.863354

24247450

TASLY PHARMAC-A

69.47

0.2308469

2494501

CHINA CNR CORP-A

4.01

-3.373494

36886747

HAITONG SECURI-A

10.24

-5.968779

116496093

TSINGTAO BREW-A

37.77

-2.55418

1585646

CHINA COAL ENE-A

6.79

-3

6376190

HANGZHOU HIKVI-A

38.88

0.4651163

5111672

WEICHAI POWER-A

23.05

-4.038301

9590766

CHINA CONST BA-A

4.65

-0.8528785

39868093

HENAN SHUAN-A

82.41

1.017406

2632524

WULIANGYE YIBIN

22.18

0.2712477

26090121

CHINA COSCO HO-A

3.42

-2.564103

14467716

HONG YUAN SEC-A

20.15

-3.588517

34709070

YANGQUAN COAL -A

12.81

-3.247734

7317294

CHINA EAST AIR-A

3.13

-2.1875

11050543

HUATAI SECURIT-A

9.62

-4.278607

38307601

YANTAI WANHUA-A

19.08

-1.952724

13025394

CHINA EVERBRIG-A

-3.536977

105966731

HUAXIA BANK CO

10.14

-4.339623

39088286

YANZHOU COAL-A

15.65

-3.095975

4027410

4.07

-0.7317073

53760220

YUNNAN BAIYAO-A

83.48

-2.40823

1697583

ZHONGJIN GOLD

12.19

-3.40729

20076198

CHINA LIFE INS-A

16.91

-1.800232

19995626

IND & COMM BK-A

CHINA MERCH BK-A

12.14

-3.574265

85782677

INDUSTRIAL BAN-A

18.22

-1.88476

147011204

CHINA MERCHANT-A

11.83

-5.586592

44920824

INNER MONG BAO-A

27.48

-2.518624

21955712

ZIJIN MINING-A

CHINA MERCHANT-A

12895480

INNER MONG YIL-A

29.67

-3.949498

10732408

ZOOMLION HEAVY-A

CHINA MINSHENG-A

9.76

-4.6875

195215169

INNER MONGOLIA-A

4.79

-2.642276

40492570

ZTE CORP-A

CHINA NATIONAL-A

9.33

-1.789474

33867640

JIANGSU HENGRU-A

30.9

-1.277955

6736585

CHINA OILFIELD-A

15.15

-3.071017

4986868

JIANGSU YANGHE-A

62.27

1.964958

7145245

CHINA PACIFIC-A

18.81

-4.56621

22646752

JIANGXI COPPER-A

20.11

-3.410183

9507424

CHINA PETROLEU-A

6.63

-3.913043

55443252

JINDUICHENG -A

10.16

-2.588686

11593860

CHINA RAILWAY-A

4.98

-3.488372

17494001

KANGMEI PHARMA-A

16.95

-4.453213

21556664

CHINA RAILWAY-A

2.77

-3.484321

28438847

KWEICHOW MOUTA-A

171.81

-1.093777

3095262

CHINA SHENHUA-A

20.64

-2.870588

14732378

LUZHOU LAOJIAO-A

25.18

-0.4743083

7864856

CHINA SHIPBUIL-A

4.38

-4.575163

38353440

METALLURGICAL-A

2.02

-1.941748

19785004

CHINA SOUTHERN-A

3.51

-3.571429

31940963

NINGBO PORT CO-A

2.47

-1.2

12971406

8.47

-1.166861

14391974

CHINA STATE -A

3.47

-2.52809

98877223

PETROCHINA CO-A

CHINA UNITED-A

3.52

-1.949861

69530992

PING AN BANK-A

19.08

-5.684627

80265938

CHINA VANKE CO-A

11.28

-3.507271

100475436

PING AN INSURA-A

39.92

-4.839094

36657677

CHINA YANGTZE-A

6.99

-1.963534

20426730

POLY REAL ESTA-A

11.75

-4.703974

67297548

CHONGQING CHAN-A

10.7

-4.121864

35830677

QINGDAO HAIER-A

PRICE DAY %

Volume

12.9

-3.587444

12174495

PRICE DAY %

Volume

MOVERS

281

3.1

-2.515723

42581187

7.64

-3.045685

39419528

11.07

-3.989592

25755327

6 2550

INDEX 2449.471 HIGH

2540.22

LOW

2449.47

52W (H) 2791.303 (L) 2102.135

2430

19-April

23-April

FTSE Taiwan 50 Index NAME ACER INC

NAME

PRICE DAY %

23.75

1.06383

3995689

ADVANCED SEMICON

25.7

-1.153846

25679010

ASIA CEMENT CORP

37.1

4317356

FUBON FINANCIAL

ASUSTEK COMPUTER

334.5

1.363636

3675589

0.3861004

40303019

143

-2.389078

17224499

HTC CORP

268

-3.249097

22308029

38.55 -0.7722008

13324991

HUA NAN FINANCIA

16.95

0.295858

2582332

YULON MOTOR CO

AU OPTRONICS COR CATCHER TECH CATHAY FINANCIAL

FORMOSA PLASTIC

3683426

TAIWAN MOBILE CO

78.3

0.7722008

2215039

41.75 -0.1196172

HON HAI PRECISIO HOTAI MOTOR CO

FOXCONN TECHNOLO

0.4807692

TPK HOLDING CO L

582

-5.825243

7980788

11184628

TSMC

106

-2.304147

45991072

76.2 -0.9102731

36616351

UNI-PRESIDENT

58.2 -0.5128205

252.5 -0.7858546

111970

UNITED MICROELEC

11.2

22744844

WISTRON CORP

28.85

1.22807

13570778

YUANTA FINANCIAL

14.55 -0.6825939

7078147

CHANG HWA BANK

16.9

4496429

LARGAN PRECISION

696

-1.694915

2923882

CHENG SHIN RUBBE

-1.492537

6036505

LITE-ON TECHNOLO

51.4

0.5870841

3835004

CHIMEI INNOLUX C

17.3

40629639

MEDIATEK INC

365

0.5509642

5391382

CHINA DEVELOPMEN

8.36

-1.531213

45844148

MEGA FINANCIAL H

23.2 -0.2150538

27517744

CHINA STEEL CORP

25.8 -0.1934236

9860816

NAN YA PLASTICS

55.7

1.642336

8737661

25134756

PRESIDENT CHAIN

180

0.5586592

1075990

3.873239

15880451

33.8 -0.2949853

20131680

CHINATRUST FINAN

17.75

0.2824859

93.9

0.1066098

3942072

QUANTA COMPUTER

18.55

22103661

SILICONWARE PREC

DELTA ELECT INC

135 -0.3690037

3900123

SINOPAC FINANCIA

14.65

0.6872852

22398675

FAR EASTERN NEW

31.9

0.1569859

4743959

SYNNEX TECH INTL

-1.309164

6361271

FAR EASTONE TELE

71.1 -0.9749304

1946942

TAIWAN CEMENT

38.75

-1.524778

3338850

16.8

3004283

1294800

27.8

0.3610108

661480

CHUNGHWA TELECOM COMPAL ELECTRON

FIRST FINANCIAL

17.9

1.129944

7845355

TAIWAN COOPERATI

FORMOSA CHEM & F

0.2949853

2939282

TAIWAN FERTILIZE

FORMOSA PETROCHE

76.8

0.655308

1252135

TAIWAN GLASS IND

Volume

104.5

MOVERS

51.2

1.386139

1456279

4759189

2024227

8 5580

INDEX 5519.6 HIGH

5574.9

LOW

5484.18

52W (H) 5639.93 5480

(L) 4719.96 19-April

23-April

April 24, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 32.40

59.50

17.8

32.25

59.25

17.7

32.10

59.00

31.95

58.75

17.6 17.5

Max 32.4

average 31.995

Max 40.5

average 40.175

Min 31.8

Min 39.85

Last 31.9

Last 39.85

31.80

Max 59.5

average 58.708

19.0

40.4

18.9

40.2

18.8

40.0

18.7

39.8

Max 19

average 18.757

Min 18.66

Last 18.66

18.6

Max 17.78

average 17.525

Min 17.32

Last 17.78

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Jun13

88.12

-1.199674986

-5.743929832

105.6800003

81.34999847

BRENT CRUDE FUTR Jun13

99.32

-1.065843211

-7.985918103

116.6699982

90.91999817

GASOLINE RBOB FUT May13

274.4

-0.917166173

-5.183137526

330.369997

237.7199888

836.25

-0.505651398

-8.305921053

992.75

799.25

4.252

-0.351535036

23.13929916

4.429000378

3.072000027

278.68

-0.80444223

-7.837819962

327.1399975

258.5000038

Gold Spot $/Oz

1413.89

-1.2984

-15.0541

1796.08

1322.06

Silver Spot $/Oz

22.7532

-3.5983

-24.4331

35.365

22.0713

GAS OIL FUT (ICE) Jun13 NATURAL GAS FUTR May13 HEATING OIL FUTR May13

Platinum Spot $/Oz

1416.4

-1.4678

-6.6776

1742.8

1374.55

Palladium Spot $/Oz

670.5

-1.6574

-4.1677

786.5

553.75

LME ALUMINUM 3MO ($)

1893

0.317965024

-8.683068017

2200.199951

1818

21.9

21.7

21.5

Max 21.85

average 21.541

Min 21.3

Last 21.35

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

DAY %

YTD %

(H) 52W

(L) 52W

1.0232 1.5215 0.9396 1.2982 98.68 7.9969 7.7645 6.179 54.4 28.82 1.2405 29.821 41.395 9728 100.974 1.21981 0.85323 8.0221 10.3811 128.1 1.0299

-0.4379 -0.1509 -0.5321 -0.4219 1.0539 0.0025 -0.0064 0.0453 -0.4664 -0.4511 -0.0645 0.0268 -0.2899 -0.1234 1.5034 -0.1107 0.2789 0.4799 0.4421 1.491 0.0097

-1.4068 -5.9409 -2.5756 -1.577 -12.7483 -0.1713 -0.179 0.8351 1.0937 6.1069 -1.5397 -2.6424 -0.9421 0.6682 -11.5347 -1.0108 -4.4314 2.4358 1.4382 -11.3427 0

1.0625 1.6381 0.9972 1.3711 99.95 8.0111 7.7713 6.3964 57.3275 32 1.2971 30.203 43.975 9904 105.433 1.25692 0.88151 8.4957 10.9254 131.12 1.032

0.9582 1.4832 0.9022 1.2043 77.13 7.9824 7.7498 6.1699 51.3863 28.56 1.2152 28.913 40.54 9175 74.482 1.20051 0.77553 7.7018 9.6245 94.12 1.029

LME COPPER 3MO ($)

6935

-0.78683834

-12.55831547

8496.75

6800

1882

-0.238536973

-9.519230769

2230

1745

15300

0.856954515

-10.31652989

18920

15092

15.045

-0.397219464

-2.841459477

16.95000076

14.5

619.5

-0.641539695

-11.15095016

824

527

696.5

-0.854092527

-12.2519685

900

664.75

1366

0.128275609

-2.096398495

1605.75

1217.75

142.35

-0.524109015

-4.81444333

202.1999969

133.5500031

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

17.43000031

ARISTOCRAT LEISU

3.71

3.055556

17.77777

3.94

2.29

1963785

69.94999695

CROWN LTD

12.8

3.30912

19.96251

12.98

8.06

1339966

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) May13 Jul13

WHEAT FUTURE(CBT) Jul13 SOYBEAN FUTURE Jul13 COFFEE 'C' FUTURE Jul13 SUGAR #11 (WORLD) Jul13

17.66

COTTON NO.2 FUTR Jul13

85.77

-0.450958286 -0.44109112

-10.53698075 11.57798881

23.05999947 94.19999695

Macau Related Stocks

World Stock Markets - Indices

VOLUME CRNCY

AMAX HOLDINGS LT

0.82

-3.529412

-41.42857

1.9

0.75

115601

BOC HONG KONG HO

25.6

-0.1949318

6.224065

27.1

20.85

10802338 336000

CENTURY LEGEND

NAME

0.3

-1.639344

13.20755

0.42

0.215

CHEUK NANG HLDGS

6.22

3.839737

6.74

2.8

144960

CHINA OVERSEAS

22.9

-2.553191

-0.8658025

25.6

14.624

21965300

CHINESE ESTATES

13.4

-1.470588

10.47521

13.8

7.697

1541479

CHOW TAI FOOK JE

10.14

-0.5882353

-18.48874

13.4

8.4

4637600

EMPEROR ENTERTAI

2.29

-0.4347826

21.16402

2.49

1.1

415000

FUTURE BRIGHT

2.14

1.904762

75.40983

2.75

0.77

2298000 5970400

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

14567.17

0.1351434

11.16464

14887.51

12035.08984

NASDAQ COMPOSITE INDEX

3233.554

0.8576893

7.088568

3306.95

2726.68

31.9

0.1569859

5.107083

35.7

16.94

FTSE 100 INDEX

6303.75

0.3682757

6.882893

6533.99

5229.76

HANG SENG BK

124.4

-0.48

4.802025

131.5

99.2

787666

DAX INDEX

7459.19

-0.2530051

-2.012511

8074.47

5914.43

HOPEWELL HLDGS

29.95

0.1672241

-9.924812

35.3

19.049

1543000

NIKKEI 225

13529.65

-0.2853696

30.15312

13611.58

8238.96

HSBC HLDGS PLC

HANG SENG INDEX

21806.61

-1.078552

-3.752984

23944.74

18056.4

CSI 300 INDEX

2449.471

-3.208597

-2.912499

2791.303

2102.135

TAIWAN TAIEX INDEX

7942.77

-0.3464076

3.159556

8089.21

GALAXY ENTERTAIN

80.05

-1.17284

-1.537519

88.45

59.8

5573848

HUTCHISON TELE H

3.75

1.351351

5.33708

4.05

2.98

5430794

LUK FOOK HLDGS I

21.05

-0.9411765

-13.72951

30.05

14.7

2797973

MELCO INTL DEVEL

14.22

3.49345

57.82464

14.28

5.12

8958572

6857.35

MGM CHINA HOLDIN

17.78

3.85514

33.90289

18.449

9.509

14175766

MIDLAND HOLDINGS

3.42

-0.5813953

-7.567569

3.249

804300

NEPTUNE GROUP

0.137

-1.438849

-9.868418

0.226

0.084

2140000

NEW WORLD DEV

13.36

0.149925

11.14808

15.12

7.95

13714382

SANDS CHINA LTD

39.85

0.2515723

17.3785

41.05

20.65

7910195

SHUN HO RESOURCE

1.49

0.6756757

6.428573

1.67

1.03

16000

755.149

SHUN TAK HOLDING

3.99

-0.4987531

-4.773271

4.65

2.56

1006000

3238.77

SJM HOLDINGS LTD

18.66

-2.098636

3.666667

22.15

12.34

8013706

SMARTONE TELECOM

13.06

-0.3053435

-7.244318

17.38

12.5

791100

WYNN MACAU LTD

21.35

-1.385681

1.909304

25.5

14.62

5477805

KOSPI INDEX

1918.63

-0.3986897

-3.926794

2042.48

1758.99

S&P/ASX 200 INDEX

5016.233

1.000332

7.900336

5163.5

3985

4975.209

-0.4345474

15.25526

5026.919

3635.283

FTSE Bursa Malaysia KLCI

1701.29

-0.3158178

0.7306367

1716.47

1526.6

NZX ALL INDEX

963.933

0.6937277

9.28289

965.655

PHILIPPINES ALL SHARE IX

4364.78

-1.298895

17.99955

4422.22

JAKARTA COMPOSITE INDEX

21.3

PRICE

LME ZINC

CORN FUTURE

17.3

Currency Exchange Rates

NAME

METALS

58.50

Last 59.5

40.6

Commodities ENERGY

Min 58.6

17.4

HSBC Dragon 300 Index Singapor

642.26

0.09

3.41

STOCK EXCH OF THAI INDEX

1552.75

-0.4072863

11.55374

1601.34

1099.15

HO CHI MINH STOCK INDEX

473.69

1.1229

14.49254

518.46

372.39

ASIA ENTERTAINME

4.58

-2.136752

49.67321

2.4

80383

BALLY TECHNOLOGI

48.57

1.398747

8.633418

52.7

41.74

759988

Laos Composite Index

1329.66

-0.6841846

9.457759

1455.82

980.83

BOC HONG KONG HO

3.22

4.885996

3.59

2.7

33795

GALAXY ENTERTAIN

4.15

1.566324

4.534004

4.93

2.25

900

INTL GAME TECH

16.23

0.9956441

14.53776

17.49

10.92

2612935

JONES LANG LASAL

93.32

0.8428788

11.17465

100.91

61.39

211470

LAS VEGAS SANDS

53.41

0.6596306

15.70624

56.83

32.6127

4258212

MELCO CROWN-ADR

23.05

2.081488

36.87648

23.69

9.13

2589197

MGM CHINA HOLDIN

2.1

13.51351

2.44

1.36

10000

MGM RESORTS INTE

12.33

0.8176615

5.927832

13.89

8.83

4961615

SHFL ENTERTAINME

14.99

1.489506

3.37931

18.37

11.75

259907

SJM HOLDINGS LTD

2.45

1.998335

6.060609

2.85

1.65

429900

WYNN RESORTS LTD

128.4

0.6585136

14.14348

129.6589

84.4902

1073687

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

AUD HKD

USD

April 24, 2013

Opinion

How to boost foreign investment Ana Palacio

Former Spanish foreign minister and former senior vice president of the World Bank

conomic globalisation, together with a rebalancing of power between the world’s north and south, has made developing countries, and many companies within them, key global economic actors. This provides a new rationale for strengthening the international framework to protect foreign investment. Once upon a time, global foreign direct investment flowed from only a few sources: the traditionally wealthy states of Europe, North America, and Japan. But cross-border investment from countries such as Brazil, India, and China is now flowing not just to other emerging and transitional economies, but also to the “old” FDI-exporting states. These changes have increased the complexity of the international investment regime, and should broaden interest in developing a more effective investmentprotection framework. But just the opposite is happening: a progressive weakening

of protection, with states increasingly flouting their treaty obligations and skirting or ignoring the outcomes of international disputeresolution proceedings. At the heart of the current system of investment protection is the World Bank, which created the International Centre for Settlement of Investment Disputes (ICSID) in 1966 in response to requests for arbitration by the Bank’s president. But, institutionally, the ICSID has developed less successfully than other members of the World Bank Group – particularly the International Finance Corporation – owing to a deeply rooted organisational culture at the Bank that perceives the ICSID as an instrument serving Western companies’ efforts to prevail over developing states. This internal fissure was a non-issue during the World Bank’s first decades, when the ICSID itself was a nonfactor, with only 38 registered cases between 1966 and 1996. This began to change

with the rapid proliferation of bilateral investment treaties (BITs), which typically granted private investors standing before the ICSID. This led to a corresponding rise in registered cases – 386 since 1996.

Lack of enforceability The ICSID and its jurisprudence thus became a central part of international investment law and policy. Yet the World Bank’s attitude toward the ICSID remained ambivalent. This was especially evident concerning compliance and enforcement, and matters came to a head with the deluge of cases brought against Argentina stemming from its 2001-2002 economic crisis. Faced with a large number of claims, Argentina chose to draw out the process by systematically using annulment proceedings against any unfavourable decision, and linked any payment to domestic judicial review – a procedure that violates the language and

intent of the ICSID Convention and the BITs themselves. The strategy worked; Argentina has avoided making any payments to its creditors. But Argentina’s short-term gain came at a steep price. A perceived lack of enforceability weakens compliance with investment treaties and rewards repeat offenders, such as Argentina, which has appeared in more ICSID cases than any other state. Indeed, Argentina has developed a general attitude of impunity, the latest example being the expropriation of energy company YPF from Spain’s Repsol one year ago. Moreover, the devaluation of the reputational benefit of being a party to the ICSID encour ages countries to leave the system, as Bolivia, Ecuador, and Venezuela have recently done. The unfortunate by-product of this self-reinforcing cycle of non-compliance and delegitimation is damage to the global economy in general, and, in particular, to the developing countries that are most in need of foreign investment. These countries are being denied a useful tool for attracting FDI, with recent evidence suggesting that signing a BIT by itself does not lead to increased inflows. For the moment, the only country that has taken real action is the United States, which last year suspended its trade-preference scheme with Argentina, owing to the country’s failure to pay ICSID-adjudicated awards to two U.S. companies. As for Europe, the Lisbon Treaty gives the European Union

Without FDI, there cannot be development; and, without legal security, there will be no FDI

exclusive competence in investment-related matters, but no mechanisms have been implemented to exercise this authority.

Key opportunity The upcoming start of Transatlantic Trade and Investment Partnership talks offer a key opportunity to advance the cause of stronger investment protection. As the two largest sources and destinations for foreign investment, accounting for a combined 56 percent of global FDI outflows and 42 percent of inflows, the U.S. and EU have a particular interest in ensuring a well-functioning international investment regime. An emphasis on investment protection could establish de facto international standards that ensure legal security for investors while providing sufficient scope for governments’ legitimate regulatory interests. The talks would have an even greater impact if the parties agreed on a unified approach to dealing with states that fail to meet their obligations. In thinking of ways to strengthen the ICSID, it would be helpful to consider the World Trade Organization’s dispute settlement mechanism (DSM), which enjoys a remarkably strong compliance record. Beyond the obvious availability of countervailing duties as an enforcement tool, several of the DSM’s institutional characteristics, which are absent in the ICSID, help to create and sustain legitimacy. For example, the existence of a permanent Appellate Body has led to significantly more consistent and predictable jurisprudence. But, most important, the ICSID would greatly benefit from the level of institutional support that the DSM has at the WTO. Reinforcing the ICSID is one of the biggest current challenges facing the World Bank and the international community. Without FDI, there cannot be development; and, without legal security, there will be no FDI. If we are to see truly global FDI flows, particularly to those countries that need them the most, we must begin to address the institutional deficiencies of the investmentprotection regime. © Project Syndicate

editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, 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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April 24, 2013

Opinion Business

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Leading reports from Asia’s best business newspapers

Malaysia needs to get off the road to mediocrity

Korea Herald The amount of debt owed by public companies as of last year approached almost 400 trillion won (US$357 billion), leading to concerns that the nation’s fiscal soundness may be at risk. The combined debts to be paid by the 28 state-owned firms as of December last year were 393 billion won, up 8.7 percent from the previous year. The figure also took a large part of the government’s total debt, which was some 445 trillion won. The land and housing developer LH had the largest amount of debt, totalling 138 trillion won, and electricity distributor KEPCO and Korea Gas followed with 95 trillion won and 32 trillion won, respectively.

China Daily Lenovo Group Ltd, the world’s second-largestpersonalcomputer manufacturer, said it is in “preliminary negotiations” about an acquisition following reportsthattheChinesecompany may purchase International Business Machines Corp’s server unit to beef up its enterprise hardware sector. The Beijing-based company is in talks with IBM to acquire the x86 server business. IBM is seeking US$5 billion to US$6 billion for its x86 server business, it said, citing an anonymous source familiar with the matter. Acquiring IBM’s server unit will increase Lenovo’s R&D capabilities.

Jakarta Globe Indonesia can do more to promote the services sector, which in turn can help propel growth in the nation’s economy, a government official said. Chatib Basri, chairman of Indonesia’s Investment Coordinating Board (BKPM), said there is big potential in the services sectors, such as hospitality, restaurant and telecommunications. In 2012, total foreign and domestic investment in Indonesia rose 25 percent to 313.2 trillion rupiah (US$33 billion). However, the services sector’s contribution was less than 5 percent of total investment, according to Mr Chatib.

Myanmar Times Singapore’s trade promotion agency, International Enterprise Singapore, opened an office in Yangon to boost economic ties betweenSingaporeandMyanmar. As Myanmar develops there will be many opportunities for companies from both nations to work together, said Teo Eng Cheong, IE Singapore’s chief executive. “The opening of IE Singapore’s Overseas Centre in Yangon underscores the interest Singaporean companies have in Myanmar,” he said. The volume of trade between Myanmar and Singapore ranks third after China and Thailand.

William Pesek

Bloomberg View columnist

n his bid for re-election, Malaysian Prime Minister Najib Razak has dispensed with all shame. Vote for me, he has essentially declared, or Malaysia will suffer “catastrophic ruin” and an “Arab Winter” of the kind that has undone economies from Egypt to Libya. Both warnings are ludicrous – signs of how worried Najib’s National Front coalition is of losing power for the first time since 1957. They speak to the desperation of a government that has come to serve itself, not Malaysia’s 29 million people. And they are emblematic of a leader whose talk of bold change hasn’t been matched by action. Najib’s claim is this: Giving the opposition, led by former Finance Minister Anwar Ibrahim, a chance to lead on May 5 would reverse all the gains Malaysia has made since the 2008 financial crisis. The economy would crater, stocks and the currency would plunge, and chaos would reign. Change through the ballot box in a democracy should never be disruptive or chaotic, and rhetoric suggesting otherwise is disingenuous. Najib likes to say: “The time has come for Malaysians to make a decision.” Actually, the time has come for Malaysia’s government to grow up. Najib’s scaremongering, some of which came out of an April 17 Bloomberg News interview, smacks of the reelection campaign run almost a decade ago by then U.S. President George W. Bush. Instead of this vote-for-me-oryou’re-in-danger appeal, Najib should scare up some headlinegrabbing reforms that leave Malaysia better off in the future.

Slow moving The country’s biggest problem is complacency. Malaysia Inc. can be a slowmoving, change-resistant animal in a very dynamic neighbourhood. Nations as diverse as China, Indonesia, the Philippines, Thailand and Vietnam are evolving in ways that have enabled them to leapfrog peers in a few years. They are all competing for the same infrastructure dollars, factory projects, bond deals and stock issues. Singapore, meanwhile, has become the beneficiary of many of Malaysia’s best and brightest, who have emigrated in search of a more merit-based economy. Malaysia is a resource-rich nation with huge potential. But it remains shackled to a fourdecade-old affirmative-action programme – favouring ethnic Malays – that turns off foreign investors and undermines national productivity. This so-called New Economic

Policy was devised by Najib’s father, Abdul Razak Hussein, the country’s second prime minister. Najib, 59, has indeed rolled back some of those preferences to encourage investment. He did away with a requirement that foreign companies investing in Malaysia and locally listed businesses set aside 30 percent of their equity for ethnic Malays and indigenous peoples known as “bumiputera”. It’s time to go much further and dismantle all race-based policies.

Little difference When, for example, can more ethnic Chinese expect to start winning the really big government contracts? Here, Najib’s real quarrel may be with his own government. Anwar is pro-markets and pro-investment, too. When you look at the core of what Najib is promising voters –

All too often, rapid gross-domesticproduct growth is used as a smoke screen to hide underlying cracks in an economy’s long-run potential

less corruption and higher living standards – it’s not wildly different from the opposition’s message. The trouble is, Najib is navigating a 13-party coalition whose interests are as entrenched as any in the world. His partners are pushing back quite assertively, afraid of losing the Malay vote they could once take for granted. The opposition has gained traction with its claims that Malay-run companies, from power producers to toll-road operators, unfairly benefit from their ties to the government. Najib’s pledges to clamp down on crony capitalism and to instil greater transparency have been undercut by measures such as the ban on street protests that passed on his watch. Now, many voters hope to wipe the slate clean. When he’s not trying to frighten voters, Najib is touting Malaysia’s 6.4 percent growth as proof he is a radical-

change agent. In fact, much of Southeast Asia also is booming, and the government is helping to artificially fuel growth with populist handouts. Even more than the US$444 billion of private sector-led projects ranging from oil storage to a mass-transit railway that Najib has championed, the country needs reforms that will revitalise the system as a whole. The government should be encouraging more startup companies, widening the tax base and hacking away at subsidies that institutionalise complacency. All too often, rapid grossdomestic-product growth is used as a smoke screen to hide underlying cracks in an economy’s long-run potential. In Malaysia’s case, the numbers mask a government too focused on staying in power to do its job. If anything should be scaring Malaysian voters, it’s that. Bloomberg View

April 24, 2013

Closing Telecom Italia to spin off fixed network

Napolitano begins talks on new coalition

Hutchison Whampoa Ltd is targeting Telecom Italia SpA’s mobile business and would not oppose a spin-off of its fixed-line network, removing a major political hurdle to a deal, a source told Reuters. Italy’s biggest phone operator and the HK company are in contacts over a possible tie-up that would see Hutchison owning 29.9 percent of Telecom Italia after selling its 3 Italia mobile business to the group and buying out some other shareholders. Telecom Italia is currently assessing the feasibility of spinning off the fixed-line network, which analysts value at between 12 billion euros (US$16 billion) and 15 billion euros.

Italy’s president launched urgent talks that could lead to the naming of a prime minister after two months of post-election stalemate that has weighed on a stagnant economy. No party leaders were invited to the meetings with the Senate and house leaders of all the parliamentary groups, which Giorgio Napolitano wanted to wrap up within the day, suggesting that a government could be in place by the weekend. Hopes that a government can be formed quickly gave a further boost to financial markets on Tuesday, with the yield on 10-year Italian government bonds dropping below 4 percent.

Japan casino lobby may Eurozone output submit bill by September continues Japanese market can become a lucrative gaming centre to fall Nathan Layne and Farah Master

Manufacturing, services shrink for 15th month

equation before things really get moving. We want to make that happen this year,” said Mr Iwaya, whose group is proposing an integrated resorts model that incorporates tourism, conventions and entertainment, as well as casino gambling – an approach based in part on the strategy adopted by Singapore when it opened its first casino in 2010. Yet many analysts remain sceptical there is enough political support. An attempt to introduce a casino bill last year to help fund rebuilding of the earthquake-hit northeast fizzled in the face of the December poll. One potential complicating factor is the Japan Restoration Party, formed last year by popular Osaka Mayor Toru Hashimoto, which has said it may introduce a bill on its own even though its lawmakers are members of the cross-party group. “One of the projects that would definitely bring investment into the country and create jobs is casino gaming. The issue is whether they can finally get their act together to make it happen,” said Paul Bromberg, gaming industry expert and CEO of consultancy Spectrum OSO Asia.

uro-area services and factory output shrank for a 15th month in April as the currency bloc struggled to emerge from a recession, adding to pressure on the European Central Bank to do more to boost growth. A composite index based on a survey of purchasing managers in both industries held at 46.5, London-based Markit Economics said yesterday. A reading below 50 indicates contraction. “Added weakness in activity indicators and continued easing in inflation indicators will raise the pressure on the ECB to provide more stimulus,” said Jonathan Loynes, an economist at Capital Economics Ltd. in London. “What form that will come in – interest rate cuts, LTROs or even bolder steps – remains to be seen. The hurdles to the ECB undertaking some form of QE are a lot lower than some people would suggest.” Although Markit’s composite gauge was unchanged in April, “the survey is signalling a worrying weakness in the economy at the start of the second quarter, with signs that the downturn is more likely to intensify further in coming months rather than ease,” Chris Williamson, Markit’s chief economist, said in yesterday’s report. ECB President Mario Draghi said last week that the economic situation in the 17-nation euro area hadn’t improved since the ECB’s last meeting on April 4. The euro-area economy has contracted for five quarters, and confidence has been shaken by political turmoil in Italy and the bailout of Cyprus. The International Monetary Fund last week lowered its global growth forecast and urged the ECB to pursue an “aggressive” monetary policy. The ECB predicts the euroarea economy will shrink 0.5 percent this year before growing 1 percent in 2014. Meanwhile the Bundesbank said yesterday that sluggish industrial production and cold winter weather may have delayed Germany’s economic recovery, which it had forecast for the first quarter.

Reuters

Bloomberg News

Japanese are already active gamblers

pro-casino group of Japanese lawmakers has tapped an influential member of the ruling Liberal Democratic Party (LDP) as its leader and plans to submit legislation this year aimed at opening the world’s third-largest economy to casino gambling. Although casinos are illegal, Japanese are already active gamblers, and a pinball-like game called pachinko generates some US$200 billion in revenue each year – about the same as Toyota Motor Corp. Japan is often touted as the next major casino market after Macau, which raked in revenue of US$38 billion (304 billion patacas) last year. A large and wealthy population coupled with a proximity to Shanghai and Beijing has the potential to transform Japan into a lucrative gaming centre, providing tax revenues to shore up the state’s ailing finances, analysts say. Broker CLSA estimates Japan’s gaming market could be worth at least US$10 billion if two large-scale integrated resorts are approved – more than Singapore’s US$5.9 billion and Las Vegas’ US$6.2 billion in 2012. The cross-party casino group aims to submit a promotional bill to parliament in the autumn, which

could be followed by concrete laws within two years, Takeshi Iwaya, the deputy head of the lobby of more than 100 lawmakers, told Reuters. Submitting a bill would mark progress for a pro-casino camp that has struggled to gain traction for more than a decade even as other Asian countries develop multi-billion dollar resorts to attract tourists and investment. A major roadblock in Japan has been the near constant change in political leadership.

Political changes But hopes have been raised by the return to power in December elections of the business-friendly LDP under popular Prime Minister Shinzo Abe, who has indicated he is open to the idea of casino resorts. Casino legislation could be submitted around September after an upper house election expected in July. The group will introduce Hiroyuki Hosoda, a veteran LDP lawmaker and former chief cabinet secretary, as its new chairman at a meeting today. Mr Hosoda will have the ear of the administration, an important piece of the puzzle that has been lacking in recent years, Mr Iwaya said. “You need both sides of the