Macau TO foot bill for new border Ilha Verde flats not so affordable A total of 500 affordable units will hit the market in the peninsula’s Ilha Verde district next month but they will be more expensive than three other public housing projects sold in the last two years, with some apartments costing as much as 1.55 million patacas (US$193,600). Page 2
M Residences pre-sale ceases Property development and investment company Lippo Ltd has posted a big drop in first-half profit, blaming the fall on lack of enthusiasm among real estate investors. But there is no such problem in Macau, where the pre-sales of the company’s project M Residences ran out of supply. Page 6
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here is still no timetable or budget for the new border crossing between Macau and Zhuhai, planned for the Ilha Verde district. But the MSAR and the Guangdong province have already agreed that, whatever the cost might be, Macau will assume the construction expenses, the head of the Land, Public Works and Transport Bureau, Jaime Carion, revealed yesterday. Even without a budget, the works have already been directly awarded to the state-owned Guangdong Nam Yue Group Co Ltd, which is in charge of the new University of Macau campus, whose cost has skyrocketed. Macau will also be in charge of
developing the project, as most of the facilities are located within the territory. The government has already began working on the relocation of the Nam Yuet wholesale market and the vehicle inspection centre. The new wholesale market in the Zhuhai-Macau cross-border industrial park is still in the design stage but the administration hopes to begin construction by year-end and conclude the project within two years. The new crossing will also connect the future Macau Light Rapid Transit system with the Zhuhai terminal of the Guangzhou-Zhuhai intercity railway, through an enclosed footway.
Insurers wary of accident-prone taxis The drivers of the 200 taxis that will soon start operating under new eight-year licences could struggle to find insurance coverage, an industry representative warned during the launch of the Macau Taxi Federation. The new body is calling on the government to impose criminal charges on ‘bad’ taxi drivers but is also pondering a further fare hike.
Luxury rush fuels retail boom
Sky the limit for realtor commissions
Even though the number of tourists decreased in June, retailers are still confident that business will remain good during the remainder of the year. And it’s difficult to argue against such optimism after retail sales grew by 30 percent in the second quarter, with luxury goods increasingly dominant.
The first regulation on real estate agents will set no limits for the sales commission they can charge, after the government won a staring contest with legislators. The bill also introduces penalties such as the revocation of an estate agency’s business licence but it is not yet known who will enforce the new rules.
www.macaubusinessdaily.com
Brought to you by
HANG SENG INDEX 20130
20080
20030
More on page 3 19980
Page 4
Page 7
I SSN 2226-8294
Page 5
19930
August 20
HSI - Movers Name
%Day
ESPRIT HLDGS
5.74
TINGYI HLDG CO
4.98
CHINA RES POWER
4.88
HENGAN INTL
2.96
WANT WANT CHINA
2.70
CHINA RES ENTERP
-1.24
HENDERSON LAND D
-1.47
BANK EAST ASIA
-1.50
CHINA MOBILE
-1.55
BANK OF COMMUN-H
-1.70
Source: Bloomberg
Brought to you by
2012-8-21
2012-8-22
2012-8-23
26˚ 33˚
27˚ 34˚
26˚ 32˚
Year I - Number 102 Tuesday August 21, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00
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business daily August 21, 2012
macau
Higher prices asked for Ilha Verde flats Some 500 homes in subsidised housing in Ilha Verde are about to be put up for sale Xi Chen xi@macaubusinessdaily.com
A
ffordable flats at Ilha Verde’s public housing complex will be more expensive than homes in three other public housing developments sold in the past two years, with some costing as much as 1.55 million patacas (US$193,600). Details of the Cheng Chong complex in Ilha Verde were made public yesterday. The complex will have two towers, one with 27 storeys and the other with 37, together containing 300 two-bedroom flats and 200 threebedroom flats. There will be about 600 parking spaces for light vehicles and motorbikes. Prices for a two-bedroom flat will range from 814,200 patacas to 1.1 million patacas. A three-bedroom flat will cost between 1.07 million patacas and 1.55 million patacas. The average price is 1,351 patacas per square foot, which is higher than the average of 1,256 patacas per square foot that was asked for space in public housing in Alameda da Tranquilidade when it was sold last year. The Housing Bureau said slightly over half the flats would be sold for less than the average price. If the flats are resold in the private market, the sellers will have to pay the government 51.1 percent of the
resale value. The government will begin today sending out letters to selected households inviting them to buy. Viewings will begin on September 4 and pre-sales begin one week later. Macau Economic Association president Joey Lao Chi Ngai told TDM that the new subsidised housing would improve the supply of housing on the peninsula. The advent of the new homes would put downward pressure on prices of some second-hand flats nearby. The asking prices of subsidised housing are calculated using a formula which takes into account the buyer’s purchasing power, where and how old the building is, and the characteristics of the homes, including their size and what floor they are on. Legislative Assembly member Kwan Tsui Hang told TDM that the prices of the homes in Cheng Chong were acceptable. But she disagrees with the formula used to calculate them. She said housing policy lacked a “human touch” and suggested that the government be more flexible in its response to individual needs. A disabled applicant for subsidised housing was sent to the bottom of the waiting list this year after he declined
business as usual
Greed is Macau’s shame Paulo A. Azevedo pazevedo@macaubusinessdaily.com
A
10-million-pataca (US$1.25 million) grant from the Macau Foundation to the Macau Civility Development and Research Centre – which is led by Legislative Assembly member Lee Chong Cheng – is beyond scandalous. The grant and its official sanctioning, represents the disregard some of our senior leaders show for what is right and proper. And it is proof that we are close to the total deregulation of transparency among the city’s leadership. The foundation gave the grant to an association without any documented prior activity. The association counts members of the Legislative Assembly and political figures among its affiliates and friends. It plans to spend half of the grant to pay for office “improvements” and tens of thousands for other “office related expenses”. The office itself is likely to be temporary, and is located in the building used by the Chinese-language Macao Daily News. The newspaper got the land from the government at a lower price than the market value – a deal that also raised a few eyebrows – on the condition that it pledge not to make money by subletting office space once it had the building ready. So, if there ever was a case worth investigating by the Commission Against Corruption, these arrangements would be it. What has the commission done? Not much. It is hiding behind a wall of silence. One of its functions is to “uphold fairness, lawfulness and the efficiency of the public administration”. Clearly, it should be investigating matters that are of real concern to the public. I am pleased that the graft buster has found out that a foundation employee has been using a car paid out of the public purse without authorisation. But the bureau could use its resources better in investigating more relevant matters. Instead the anti-graft watchdog seems to prefer to focus on chasing small fish while there seems to be little accountability by the people who run the city. An excess of money seems to fuel all kinds of schemes, as well as impunity for some, and it can only end badly. Scandals such as the grant to the Civility Development and Research Centre are more than tragic jokes with punchlines about elites trying to get their hands on whatever they can, regardless of their role. They reflect a breakdown in morality and transparency. It is a topic I have written about for years, as well as the inability, or lack of will, to stop this utter disgrace.
The Housing Bureau will begin selling affordable flats in the Cheng Chong complex on September 4
to view a flat in Seac Pai Van on Coloane because of its location. Ms Kwan said the government should
consider giving applicants a choice of two different areas when inviting them to buy homes.
August 21, 2012 business daily | 3
MACAU
Macau to fork out for new entry point The government says it will foot the bill for the new border crossing because the facility will be on its soil Tony Lai tony.lai@macaubusinessdaily.com
T
he government will pay for the new border crossing and take the lead in building it. Land, Public Works and Transport Bureau director Jaime Carion told members of the Old Neighbourhoods Regeneration Committee yesterday that Macau would be in charge of the border crossing project because most of the facilities would be on its soil. The bureau said Macau and Guangdong had agreed that the government would pay for the new crossing, while mainland officials would help with matters of policy. The bureau’s urban planning department chief, Lao Iong, told reporters there was no approved schedule or budget for the project, which was needed Beijing’s approval. “Both sides have set up five task forces to follow up the relevant work,” said Mr Lao. He said groups were working on infrastructure design, customs, traffic management and environmental protection. “Right now what we can do is the relocation of the Nam Yuet wholesale market and the vehicle inspection centre before the project kicks off,” he said. The new wholesale market in the Zhuhai-Macau cross-border industrial park is still in the design stage, but the government hopes to begin construction this year and finish it within two years. The idea of a new border crossing for pedestrians only on the site of the Nam Yuet market in Ilha Verde was first raised at the annual Guangdong-Macau Cooperation Joint Conference in May. The government has said it expects 200,000 to 250,000 people a day to be able to use the new crossing if it is open around the clock – a possibility
Footway to link the new border crossing to the Zhuhai terminus of the Guangzhou-Zhuhai intercity railway (Photo: Manuel Cardoso)
that is being considered. The crossing is meant to improve the flow of traffic through the Gongbei border crossing, which handles more than 260,000 people every day.
Tender feelings The new border crossing includes plans for a customs inspection building, an exhibition centre for products made in Macau or Guangdong, and a moving walkway. A 450-metre-long enclosed footway will cover a stretch of the Canal dos Patos.
Malo Clinic ‘unaware’ of bankruptcy claim
T
he company that operates Malo Clinic in Macau says it has not been notified or has knowledge of the pending bankruptcy court claim filed by one of its suppliers over debts
of more than 8 million patacas (US$1 million). The court claim was filed earlier this month by architectural and engineering company Macau Professional Services, a member
The crossing will connect the Zhuhai terminus of the GuangzhouZhuhai intercity railway with the northern end of Macau’s Light Rapid Transit elevated railway. Tourists from Guangzhou could make the trip in one hour. A covered moving walkway to the Zhuhai railway terminus is intended to divert the flow of pedestrians away from the Gongbei border gate. The authorities expect the GuangzhouZhuhai intercity railway to be carrying 395,000 passengers a day by 2015. The contract for the design, construction and management of the
of CESL Asia Group, over the payment of more than three years of consultancy services, as Business Daily reported. In a press released quoted by public broadcaster TDM yesterday, Pacific Health Care Ltd stresses it “is not in a state of bankruptcy”. The company also “adamantly” denied having “a long list” of creditors, which according to Business Daily’s sources includes the clinic’s landlord, The Venetian Macao-Resort-Hotel. The statement says both the clinic and the medical spa – publicised as the biggest in the world – “are in full activity, going through a phase of rapid growth and development”. Last week Pacific Health Care chief executive and administrator José Peres de Sousa admitted that the company had not yet managed to break even, mainly due to a heavy initial investment. Paulo Maló, president and chief executive of Maló Clinic, estimated the investment in Macau at US$70 million. Mr Sousa confirmed the clinic was negotiating a revision of the tenancy agreement with The Venetian. Yesterday the company pledged to announce “very soon new services that will meet the needs of and benefit Macau’s residents and visitors”. V.Q.
facilities for the new border crossing has been awarded to Guangdong Nam Yue Group Co Ltd because of its experience with another cross-border project, the new campus of the University of Macau on Hengqin Island. Legislative Assembly member Chan Meng Kam has criticised the government for awarding the contract to Nam Yue without putting it out to tender. Mr Chan said in a written inquiry sent to the government yesterday that it should have followed a fair and open procedure in awarding the contract.
Healthcare handout increasingly popular About one-fifth of healthcare vouchers handed out by the government have already been used, the Health Bureau said on Sunday. This year’s take-up was twice as high as it was last year, the bureau said. More than 330,000 residents have vouchers and they have until the end of this month to use last year’s handouts at one of the 649 private healthcare clinics that joined the scheme. Officials have inspected 300 clinics so far this year. Four were struck off the scheme. The government has so far spent about 200 million patacas (US$25 million) on vouchers for last year.
Business using more water With more hotels opening and more tourist arrivals, water consumption by businesses here soared by 12.7 percent last year, the Water Conservation Working Group announced on Sunday. Water used by households eased by 0.7 percent. Daily consumption also fell by 2 litres a person from 2010. The working group believes this drop is partially due to the subsidy scheme launched during the salt-water tides’ season, which lowers tariffs for households who lower their water usage by at least 10 percent. Overall consumption increased by 5 percent to 70.55 million cubic metres, with the Macau peninsula accounting for more than two-thirds. Taipa and Cotai accounted for 15 percent and 11 percent. The government will release a study on possible uses for recycled water next month.
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business daily August 21, 2012
macau Teachers’ council born next month The Teaching Staff Professional Council, which will supervise the new performance assessment system for private school teachers, will be set up next month, according to yesterday’s Official Gazette. The body, which will meet at least four times a year, will also draft professional guidelines for teaching staff. The council will include three school representatives, two members of education associations, two experts and scholars, four full-time public and private school teachers and two Education and Youth Affairs Bureau representatives.
Taxi fleet facing insurance hurdle Operators of the city’s 200 new taxis may struggle to get the vehicles insured Vítor Quintã vitorquinta@macaubusinessdaily.com
No fewer than 687 taxis were involved in accidents reported to the police in the first half of this year (Photo: Manuel Cardoso)
T
he number of accidents involving taxis is scaring away insurance companies, with some potentially declining insurance for 200 new cabs soon to roll onto the streets, according to the chairman of the Macau Traffic and Transport General Association, Leng Sai Ho. Mr Leng criticised insurers for their reluctance to give taxis coverage. “They claim to be losing money because we have too many accidents,” he told reporters after a ceremony to launch the Macau Taxi Federation, a body representing five associations of cab operators. Altogether, 687 taxis were involved in accidents reported to the police in the first half of this year – 90 fewer than a year before. Insurance companies “should look at the whole picture,” Mr Leng said. “They are making money from all the other 200,000 cars currently circulating in the city.” He fears that the operators of the 200 new taxis will be unable to insure them. The government auctioned the eightyear licences for these cabs in April. The law says cars are allowed on the road only if they have third-party insurance. If three or more insurers refuse to provide coverage, a would-be policyholder can ask the Monetary Authority of Macau for help. The Monetary Authority may then set
the terms of a policy written jointly by a number of insurers of its own choice. The taxi operator would have to accept this policy or face disqualification from obtaining any kind of car insurance for anything between six months and three years. Any valid claim would be paid jointly by the insurers that wrote the policy.
Bad apples Mr Leng said the operators of the new taxis would “surely” have to turn to the Monetary Authority. “We want to have a meeting with them soon,” he said.
KEY POINTS Insurers are wary of accident-prone taxis Call for overcharging to be made a serious crime Reputation of drivers blamed for deterring recruits New taxi federation wants another fare increase
Business Daily tried to contact the Macau Insurance Association for comment but had received no reply by the time we went to press. The results of a Consumer Council survey released in January indicate that each of the six insurers that took part admitted to refusing coverage to some applicants, particularly to drivers involved “in cases of reckless or dangerous driving”. Mr Leng said the purpose of the new Macau Taxi Federation was to improve the image of taxi drivers, which had been tarnished by a few bad apples. The Transport Bureau’s deputy director, Chiang Ngoc Vai, said on Sunday that the government wanted to increase the maximum fine for taxi drivers that overcharge passengers from 1,000 patacas (US$125) to at least 5,000 patacas. Mr Leng thinks the government should go further and make overcharging a serious crime. “We are hearing about of a lot of drivers who refuse to use the meter and bargain with customers, which is illegal,” he said. He said the poor reputation of cab drivers was one reason why young people were staying away from the job. “There are not enough human resources and most of our members
are already over 55. We have had to lower the rents [for cabs] or else they won’t accept it,” he said.
No choice Representatives from the associations of taxi operators attending yesterday’s launch said they would propose an increase of 2.00 patacas in the taxi flag fall rate of 15 patacas. The flag fall was last increased only on July 1. Mr Leng acknowledged that the public would probably be unhappy with any increase but said the taxi operators had no choice but to ask for it. Fuel prices had increased six times since July, he said. “We don’t want to increase the prices, because we know some people might not afford it, but we have to do it,” he said. The federation is the brainchild of David Chow Kam Fai, the owner of the Landmark casino hotel and the Fisherman’s Wharf theme park, who also owns a number of taxi licences. Mr Chow said the federation would set up a fund to help retired taxi drivers and drivers with financial problems. He said he would make a contribution to the fund, and that the associations of taxi operators would come up with the rest of the money.
August 21, 2012 business daily | 5
MACAU
Committee rejects limits on estate agency commissions The estate agency bill makes progress towards its second reading in the Legislative Assembly Xi Chen xi@macaubusinessdaily.com
proposed limits on commissions. But she said the majority felt that the government should not interfere in the market. The average commission charged by estate agents is about 1 percent, although buyers can negotiate to pay less.
A Legislative Assembly committee decided in closed debate that estate agents should be allowed to charge what they like
A
Legislative Assembly committee has agreed that the bill to regulate estate agents should not limit the amount of commission they can charge on a sale. This was the result of two hours
of debate behind closed doors yesterday by the assembly’s first standing committee. Assembly member Kwan Tsui Hang told reporters that the committee had no big disagreements about the bill, even though some members had
In Macau, the average commission charged by estate agents is about 1 percent Members first proposed limits on commissions last year when the bill was introduced in the assembly. The government rejected the proposal then and has shown no sign of changing its mind since.
The bill would require all estate agents to be licensed and at least to have completed their secondary education. Ms Kwan said the bill would allow for a three-year grace period during which the Labour Bureau would offer courses that would bring unqualified estate agents up to the required standard. The bill would require estate agents to disclose in contracts they sign whether they were working for more than one real estate agency. It provides for penalties such as the revocation of an estate agency’s business licence if the agency breaks the law. The bill does not say which arm of the government would be responsible for enforcing the law. That detail is supposed to be resolved before the bill is enacted. Ms Kwan said the bill was not meant to cover private property transactions that did not involve a middleman. She said the bill would be revised and would soon be sent to the full assembly for its second and final reading.
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business daily August 21, 2012
macau
Weak housing sentiment weighs on Lippo profit Lack of enthusiasm among buyers of property slashes Lippo’s first-half profit by three-quarters, but the M Residences loom on the horizon Tiago Azevedo tiago.azevedo@macaubusinessdaily.com
The M Residences project, near the reservoir, is expected to be completed in 2014 (Photo: Manuel Cardoso)
P
roperty development and investment company Lippo Ltd has posted a big drop in first-half profit, blaming the fall on a reluctance to buy in the real estate markets. Lippo told the Hong Kong Stock Exchange on Friday it made a firsthalf net profit of HK$203 million (US$26.2 million) this year, almost 76 percent less than the HK$839 million it made a year before. Lippo said its first-half turnover was HK$171 million. Its investments in property are its principal source of revenue, accounting for 67 percent of turnover. A wholly-owned subsidiary of Lippo, the Hongkong Chinese Ltd (HKC) group, owns all of Macau Chinese Bank Ltd, a commercial and retail bank, and owns all of a housing project here called M Residences. Hongkong Chinese made an unaudited consolidated loss of about HK$112
million in the first half. The same time last year, the company made a profit of HK$1.12 billion. “The loss was mainly attributable to the absence of fair value gains of the investment properties of the HKC group’s associates and reduction of profit arising from sale of properties
311 Homes in the M Residences development
by an associate of the HKC group in the period under review, as compared with the corresponding period in 2011,” Lippo’s report said. Property-related assets accounted for 83 percent of Lippo’s HK$20.6 billion worth of assets on June 30. The company said the foundations of M Residences had been completed. “Superstructure works of M Residences will be commenced in the second half of 2012,” the company said.
Quality portfolios The 13-storey building will be on a site covering about 3,398 square metres in Estrada de Cacilhas, near the reservoir. The building will contain 311 homes with a combined sellable floor area of about 26,025 square metres. Lippo expects the development to be completed by 2014.
The company said pre-sales of homes in the development had begun last November, and that by June 30 about 90 percent of the available space had been sold. The sales director of Centaline (Macau) Property Agency Ltd, Noel Cheung, said pre-sales had ceased. “All the flats have been pre-sold. They are even closing the show flat,” Ms Cheung told Business Daily. She said most of the homes in M Residences would be studio flats. “It will also have some onebedroom flats, a few two-bedroom apartments and even less threebedroom units,” she said. Macau Chinese Bank’s first-half revenue dropped to HK$5.9 million, 7.8 percent less than a year before. “The operating environment is tough because of the strong competition, high operating costs and subdued global economic activities,” Lippo said. “Nevertheless, the management remains positive to the development and growth in the region, manages to maintain the quality of its client and loan portfolios and will seek opportunities to expand the products and customer base.”
Weather Beijing 29/17o C Changchun 20/9o C
Harbin 21/9o C
Xian 29/18o C Shanghai 35/27o C Chengdu 32/202o C Kunming 25/16o C Haikou 31/23 o C Sanya 33/26o C
Guangzhou 35/25o C
MACAU (20-25 August) Day
Temperature
Humidity
08/20
27/32o C
60/90 %
08/21
27/33o C
55/90 %
08/22
26/32o C
55/90 %
08/23
26/32o C
55/95 %
08/24
26/32o C
55/95%
08/25
26/31o C
60/95 %
Shenzhen 35/26o C
ASIA (today)
Hong Kong 33/27o C
Manila
TOKYO
Jakarta
30/25o C
30/25o C
32/26o C
32/24o C
Macau 33/26o C
Bangkok
SEOUL
K. lumpur
33/26o C
SINGAPORE
29/24o C
32/25o C
taipei
32/23o C
August 21, 2012 business daily | 7
MACAU
Jewellery, watches power retail boom Luxury goods continue to dominate retail sales with sales reaching 12.7 billion patacas in the second quarter; new records are likely Tiago Azevedo tiago.azevedo@macaubusinessdaily.com
R
etail sales eased slightly in the April-June period compared to the previous three months but it was still the second-best quarter in 12 years. Retail sales hit 12.7 billion patacas (US$1.59 billion) in the second quarter of this year, down by 3 percent from the January-March period, according to Statistics and Census Bureau figures released yesterday. On an annual basis, sales grew by 30 percent, up from 9.81 billion patacas. The quarterly sales record of 13.1
MOP4.1 billion
Sale of watches and jewellery in the second quarter
billion patacas was set in the first quarter. It was the best result recorded since 2000, when the bureau began recording data. With the strong showing in the second quarter, average quarterly sales have more than doubled in less than three years. In fact, retail sales in the second quarter were higher than for all of 2006. A 54-percent surge in year-on-year terms for watches and jewellery was the main driver for last quarter’s result. Total spending on these luxuries reached 4.1 billion patacas and accounted for about one-third of all retail sales. The second most popular segment was goods from department stores, 13 percent of the total – which is a 22 percent increase over the same time last year. With the release of the latest quarterly numbers, retail sales for the first half reached 25.9 billion, up by a staggering 31 percent from a year earlier. The lion’s share of spending came from mainland tourists. Of the 13.5 million tourists arriving in Macau in the first half, mainland tourists accounted for 13.2 million visits. Retailers should continue to benefit
Rebirth of Iao Hon faces extended delay
T
he urban regeneration projects planned for the Iao Hon district are likely to remain on hold until a long-delayed bill governing renewal of older neighbourhoods is passed by the Legislative Assembly. That is the view of Lao Iong, the head of the urban planning department at the Land, Public Works and Transport Bureau, who spoke to reporters yesterday after a meeting of the Old Neighbourhoods Regeneration Committee. Mr Lao said only under the new law could “the complexity of the property rights” in Iao Hon be solved. “So, there is no timetable for when the project can begin,” he said. “This law may be the most complicated law involving the most aspects in the history of the Macau SAR administration.” The bill to control the way older neighbourhoods are redeveloped had its first reading at the Legislative
Assembly in March last year and has since been stuck in the assembly’s second standing committee. The rebuilding of Iao Hon was first proposed in 2006 but the government has so far only carried out preparatory works. A committee was first established to plan the bill in 2005. The bureau surveyed residents in each of the seven housing complexes earlier this year. Mr Lao said the survey was needed because property rights had become more complicated since the previous survey completed in 2007. The bureau found that almost half of the area’s residents were renting, while about one-third of the survey saying they owned their home. The remaining flats were either empty or being used as retail space. The number of non-resident workers renting flats in the area had also grown by about two-thirds since 2007. T.L.
Quarterly sales of watches and jewellery were among the highest in more than a decade in the April-June period
from further expansion of inbound tourism. But with the number of visitors dropping 3.4 percent in June year-on-year, there could be negative effects from the mainland’s economic slowdown. Retailers, however, are confident of a strong second half. About 81 percent of the retailers
surveyed anticipated their sales volume would increase or stabilise in the third quarter. Just 21 percent expect sales to decline. The overwhelming majority of retailers, some 77 percent, expect prices will not increase. A further 14 percent predict a price increase and 9 percent forecast price cuts.
8 |
business daily August 21, 2012
greater china
InBrief List of essential drugs increases China is set to increase the number of products on its price-controlled “essential drugs” list to 700 from 307 by the end of the year, the official Shanghai Securities Journal reported On Saturday, quoting industry sources. The move would signify a scaling back of plans announced in February to increase the number to 800, as Chinese pharmaceuticals companies struggle. The essential drugs list is a key tool for the government in its attempt to provide affordable, universal, high-quality health care to a population of 1.3 billion, many of them poor, while cracking down on corruption and over-prescription problems common in Chinese hospitals. However, Beijing has struggled to balance the desire to provide the social benefit of cheap drugs with its strategic goal of creating a profitable pharmaceutical industry. Five Chinese drug makers issued profit warnings in March. Some analysts believe the low pricing will benefit the largest players in the industry by forcing consolidation.
China’s currency under pressure as g Central Bank seen as trying to slow down the depreciation
C
hina’s currency is facing strong downward pressure this year as the country’s once surging growth rates slow amid a stalling global economy and signs of capital flight after years of inflows. It is a new development for the yuan, once on a steady upward trajectory on the back of expectations that China’s impressive economic strength made the currency a one-way bet. The economy, though, has slowed for six straight quarters and the 7.6 percent year-on-year expansion in gross domestic product for the three months ended June 30 was the worst since the 2008-2009 global financial crisis. The yuan has dropped just one percent this year, but the fall has
6
Number of quarters the economy has been slowing down Chinese economy, still hoping for a soft landing
Steel production rises slightly China’s daily crude steel output rose 1.1 percent in early August, as many steel mills resumed production after a round of brief maintenance in midJuly, industry sources said. However, the persistent supply glut and swollen inventories will put further downward pressure on iron ore prices. Daily crude steel output was 1.970 million tonnes in the first 10 days of August, up from 1.949 million over July 21 to 31, data from the China Iron & Steel Association showed. “Amid fears of losing market share and urging by local governments to maintain economic growth as well as the rapid fall in iron ore prices, steel mills are reluctant to cut production in a big way”, said Qiu Yuecheng, an analyst with Xiben New Line Co Ltd, a spot steel products trading platform. Shanghai steel futures fell to record lows on Friday, hitting 3,614 yuan (US$570) a tonne.
East China Sea tension still high Ten Japanese on Sunday landed on an island in the East China Sea claimed by both Japan and China, fuelling a dispute between Asia’s two biggest economies in a region that has no shortage of territorial spats. The tit-for-tat mission by Japanese nationalists, including some legislators, came days after a group of mostly Hong Kong activists were arrested and deported for their own visit to the island in the chain known as Diaoyu in China and Senkaku in Japan. Demonstrators gathered in several cities in China and in Hong Kong to protest against what they said was Japan’s illegal occupation of the outcrops and detention of Chinese citizens. Tensions are rising over the islands – and the right to the energy reserves and fisheries that go with them. Japanese and U.S. military officials will meet on August 23 in Washington to discuss strengthening maritime defences around outlying islands, the Nikkei newspaper reported yesterday.
come after years of gains amid foreign pressure by China’s trading partners, especially the United States, who claimed it was undervalued. The China Securities Journal, a state newspaper, carried a frontpage commentary this month saying markets have now accepted that the currency is on a weakening track, calling that a potential boon for the economy. A weaker yuan could spur positive effects such as boosting exports, it added. Broader trends are also pressuring the yuan as the dollar has started to strengthen this year against other
Asian currencies, said Bill Belchere, chief emerging markets economist at Mirae Asset Securities in Hong Kong. Analysts say that the decline so far in the yuan, also known as the renminbi, would be far larger if authorities were not providing a floor by selling some of China’s trove of US$3 trillion in foreign reserves. “If it were freely traded today the RMB would be 10 percent below where it is,” said Shanghai-based independent economist Andy Xie. “That’s what the real economy is trying to get.” Mr Xie added, however, that authorities cannot let that happen
as they are dealing with a serious property slump which, if mishandled, could lead to a loss of confidence. “If the currency drops significantly, the property market will collapse,” he said. “They are trying to achieve some sort of soft landing.” The People’s Bank of China, the central bank, has since April set a daily central parity rate from which the yuan can only trade one percent up or down, though that is a doubling from the previous 0.5 percent band. Another reason economists cite for the yuan’s atypically bearish 2012 also includes capital outflows, evidenced by China in the second
Home prices putting C policymakers in dilemma Concerns persist that property bubble may rebound
Housing, a critical sector for policymakers
hina’s new-home prices rose in the largest number of cities in 14 months in July after interest-rate cuts and incentives for first-time buyers, complicating the government’s efforts to stimulate economic growth while curbing property speculation. Prices climbed from a month earlier in 49 of the 70 cities tracked by the government, the National Bureau of Statistics said on its website on August 18. Buyers, buoyed by two interest-rate cuts since June, have returned to the market even as the government pledges to maintain real estate curbs to make housing more affordable. The risk of a rebound in the property market may deter the People’s Bank of China from reducing rates further or cutting banks’ reserve requirement ratios to boost funds in the financial system and support lending after new credit slumped in July. “Rising property prices are constraining aggressive policy action from the central bank,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. “The government will introduce more policies to contain a property bubble,” including the extension of a property tax to more cities, he said. An inspection last month ordered by the State Council found recent increases in prices and easing policies by some local authorities among problems
August 21, 2012 business daily | 9
greater china
growth slows
quarter recording its first capital account deficit since 1998. “There is a flight to quality,” said Alistair Thornton of IHS Global Insight in Beijing. “You’ve seen this against all broad emerging markets, you’ve seen risk-on, risk-off, all this capital leaving emerging markets.”
Not everyone agrees Wang Qinwei, China economist for Capital Economics, cites a surge in foreign currency deposits in China,
A stronger currency would increase household purchasing power and facilitate reform of the financial sector, IMF says
If the currency drops significantly, the property market will collapse Andy Xie, Shanghai-based independent economist
which on the books are classified as an outflow, as likely pressuring the central bank to sell reserves. “Fears about capital leaving China are overdone,” he wrote in a report, adding that “firms are in less of a hurry to exchange foreign currency receipts into renminbi now that expectations for renminbi appreciation have fizzled out”. The State Administration of Foreign Exchange said in a report in March that “expectations on the yuan’s unilateral appreciation have been broken”, citing volatility in global markets from late last year. Last month, the International Monetary Fund said the yuan was now more closely aligned with China’s overall economy, yet remained “moderately undervalued”. A stronger currency would increase household purchasing power and facilitate reform of the financial sector, among other positives, the IMF said in a report. “Currency appreciation continues to be an important component of the package of reforms needed to transform China’s economy,” it said. AFP
Gu Kailai given suspended death sentence: lawyer Employee charged as accomplice gets nine years
A
Chinese court yesterday handed Gu Kailai, wife of the disgraced leader Bo Xilai, a suspended death sentence for murdering a British man, a lawyer for the victim’s family said. He Zhengsheng told reporters after that Mrs Gu had been found guilty and given the death penalty with two years’ reprieve – a sentence that is usually commuted to life in prison. Mrs Gu confessed during her trial this month to killing 41-year-old Neil Heywood by pouring poison down his throat, saying that she had threatened her son after a business deal went sour. Yesterday’s hearing was closed to foreign reporters, but Mr He, who was in court, said that she was present to hear her sentence. Zhang Xiaojun, an employee of the Bo family who was charged as an accomplice to the murder, was sentenced to nine years in jail, Mr
He said, adding, “we respect today’s [yesterday’s] decision”. Mr Heywood’s death in a hotel room in southwest China last November was initially attributed to a heart attack, but Chinese authorities said in April that Mrs Gu was suspected of killing him. The case brought down her husband Bo, who had been tipped for promotion to the elite group of Communist Party leaders that effectively rules China until the allegations against his wife burst into the open. He was placed under investigation for corruption in April and his fate remains unclear. Political analysts say China’s leaders are eager to draw a line under the controversy, which revealed deep rifts at the heart of the party ahead of a generational handover of power due to begin this autumn. AFP
He Zhengsheng, a lawyer for Mr Heywood’s family, told reporters that Gu Kailai had been found guilty for the murder of the British businessman
that need “particular attention,” the official Xinhua News Agency reported on August 17.
Big Four increase loans by 40 pct
‘Bottomed out’
Move reinforces belief in monetary easing shortly
“China’s home prices have bottomed out,” Johnson Hu, a Hong Kongbased property analyst at CIMB-GK Securities Research, said in a phone interview. “The central government may start to strictly implement the current curbs. New policies will depend on the trend of home prices. With the home purchase restrictions in place, it’s very unlikely housing prices will rebound strongly.” “I definitely don’t think there will be clampdowns, because frankly the government is very happy with the fact that prices have stabilized and started to go up,” John Saunders, Asia chief executive officer of MGPA, a privateequity real estate investment firm, said in a Bloomberg Television interview yesterday. “I don’t expect there to be huge growth in property prices, not in the near term at least, because there’s still a degree of concern and nervousness.” The latest report adds to evidence the housing market is picking up after the PBOC cut interest rates for the first time in three years on June 7 and announced a second reduction less than a month later. Bloomberg
C
hina’s top four banks extended 70 billion yuan (US$11 billion) of new localcurrency loans during the first half of August, up from 50 billion yuan in the same period a month earlier, an official newspaper reported on
yesterday. However the pickup in new lending by the Big Four, which typically account for 3040 percent of total bank lending, does not mean other banks are extending loans at a similar pace, the Shanghai Securities News said,
citing unidentified sources. China’s Big Four banks are Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Agricultural Bank of China Ltd. New yuan loans extended by all Chinese banks in July came to 540.1 billion yuan, the lowest level in 10 months. Chinese banks grant loans at the central government’s behest, and money and credit numbers have become the most closely watched data as they reveal both policy aims and the state of credit demand. The central bank has cut 150 basis points from the required reserve ratio in three steps since November last year, freeing up an estimated 1.2 trillion yuan for new lending. It has also cut interest rates twice this year. Many analysts expect the central bank to ease monetary policy imminently to boost lending and support growth, with some anticipating action as soon as this weekend. Reuters
10 |
business daily August 21, 2012
asia
Sharp to dispose of assets to pay for short term debt Overseas TV production facilities and Tokyo offices likely to be sold
J
apan’s embattled TV maker Sharp Corp. will submit an asset appraisal report to its banks next month they will use to identify businesses the century-old company has to sell in return for funding, sources at the lenders said. Sharp, with debt of 1.25 trillion yen (US$16 billion), is scrambling for money to refinance as much as 360 billion yen of short-term commercial paper and a 200 billionyen convertible bond maturing in September next year. While the unprofitable company may balk at giving up parts of its business that ranges from washing machines to solar panels, it can ill afford to resist a bank-led fire sale. “I don’t think Sharp holds much decision-making authority anymore,” said Katsuhide Takahashi, a creditsector specialist at Citigroup in Tokyo. “Sharp has a lot of pride, and now its reality has been turned upside down, it’s not responding quickly enough.” Mizuho Financial Group and Mitsubishi UFJ Financial Group will provide several tens of billions of yen in stopgap financing until the report,
being compiled by two consultants, including PricewaterhouseCoopers, is ready, the sources said on condition they weren’t identified. So far, Sharp has said it is considering various options to restructure its business in a bid to underpin its finances, without giving details. Its banks may wait until the consultants deliver their assessment of what Sharp owns, what it is worth, and where its liabilities lie before making specific demands on what it should sell. “At the moment we have no comment,” said Machiko Watanabe, a spokeswoman for PricewaterhouseCoopers.
Fire sale
KEY POINTS Sharp’s debt totals US$16 billion Shares fall 5.4 percent in Tokyo Hon Hai negotiating a stake
Pakistan mobile networks suspended on security fears
P
akistan shut down mobile phone networks overnight in major cities to prevent Taliban and Al-Qaeda attacks as celebrations began for the biggest Muslim festival of the year. The draconian security measure kicked in on Sunday at 8.00pm (1500 GMT), at a time when millions ordinarily telephone friends and relatives with greetings for Eid alFitr. Networks were working again yesterday mid-morning. Karachi and Lahore, Pakistan’s
Like rivals Sony Corp. and Panasonic Corp., Sharp has been hammered by waning global TV demand and aggressive overseas competitors led by Samsung Electronics that are grabbing a bigger slice of a shrinking pie. The creator of the electronic calculator, which has lost around US$7 billion in market value this year, has warned it would report a 100 billion-yen operating loss this fiscal year, prompting ratings agencies to cut their credit ratings. The company said it will axe 5,000 jobs, about a tenth of its global workforce and its first redundancies in six decades.
two largest cities, and the troubled city of Quetta, in the insurgencytorn province of Baluchistan, were among the places where networks were suspended. “We regret that it had to be suspended in some cities due to the risk of terrorist attacks,” Interior Minister Rehman Malik was quoted as saying by state TV. “We regret inconvenience caused to youths and children.” Terrorists were plotting to target “a few areas of Punjab province”,
Local media reports last week said Sharp will sell units ranging from its money-making copier business to its money-losing solar panel factory. The level of funding needed will also depend on how much investment Sharp secures from Taiwanese partner, Hon Hai Precision Industry. Hon Hai is renegotiating a planned 67 billion-yen investment in Sharp for a 10 percent stake that valued its shares
of which Lahore is the capital, the minister said. Sindh province, where Karachi is the capital, and Baluchistan were also targets, he added. Authorities feared that mobile telephones could be used to coordinate attacks or trigger a remote-controlled bomb. The Eid festival marks the end of the holy fasting month of Ramadan and, in Pakistan, is accompanied by a three-day public holiday, until Thursday. The country has been on alert for Eid and security forces stepped up their presence in major cities as celebrations got under way. AFP
at 550 yen. The stock since has fallen to below 180 yen, prompting Hon Hai to seek a lower price per share and a possible increase in its stake. Sharp’s shares fell 5.4 percent to 174 yen yesterday following a 13 percent jump on Friday on a splurge of local media reports of potential asset sales. Sharp’s consumer electronics business accounts for almost twofifths of revenue, with its home appliance business and a printers and cash registers unit making up a tenth of sales each. Its solar panel division is 8 percent of income, with the remainder of sales generated from LCD panels and other components. The company is mulling the sale of assets including TV assembly plants in Poland, Malaysia and Mexico, and office buildings in Tokyo, a company source told Reuters last week. Sharp also holds around US$500 million marketable securities in medical equipment maker Olympus Corp, flash memory chip maker Toshiba, audio-visual equipment maker Pioneer Corp and unlisted Eliiy Power Co, a lithium-ion battery joint venture. Reuters
August 21, 2012 business daily | 11
asia
Dictator’s daughter wins NF party’s primary First woman to be a candidate to South Korea presidency
S
outh Korea’s ruling party overwhelmingly voted for the daughter of an assassinated dictator to be its presidential candidate, the first time a major party has chosen a woman to run for the post. The vote took place yesterday. Veteran politician Park Geun-Hye secured a landslide 84 percent of
the vote to easily see off four male challengers at the primary of the conservative New Frontier Party. Opinion polls show her as current favourite to win the presidency in the December 19 vote. Ms Park, now 60, had narrowly lost out to Lee Myung-Bak in the party’s 2007 primary. Mr Lee went
on to become president but the country’s leaders are restricted to a single five-year term. Beaming broadly, Ms Park accepted a bouquet of flowers from party leaders and promised to secure the presidency and create a country “full of dreams and hope”. She reiterated a commitment to
Park Geun-Hye has dramatic political family story
“economic democratisation”, in a country with a growing wealth gap and high youth unemployment, and said she would work to improve welfare schemes and create jobs. Ms Park promised to eradicate corruption, which has tarnished Mr Lee’s administration, and safeguard the nation against external threats. “I, Park Geun-Hye, will not tolerate any actions that threaten our people or damage our sovereignty,” she said in an acceptance speech. She cited North Korea’s “provocations and nuclear threats” as well as territorial disputes with other countries, an apparent reference to the row with Japan over ownership of islands in the Sea of Japan (East Sea). Ms Park is the daughter of Park Chung-Hee, who seized power in a coup in 1961 and was assassinated by his spy chief in 1979. He won wide respect for transforming the poor war-ravaged nation into an economic juggernaut, but is also reviled in some quarters for his human rights abuses. Park Geun-Hye also lost her mother to a gunman, a pro-North Korean agent who shot the first lady in 1974 while aiming for the president. An opinion survey in yesterday’s JoongAng Ilbo newspaper gave her 38.8 percent support, followed by 27.1 percent for software mogul Ahn Cheol-Soo, an independent who has not officially declared his candidacy. Moon Jae-In, the likely candidate of the left-leaning main opposition Democratic United Party, was third at 8.6 percent. The party will select its candidate next month. However, the survey showed Ms Park leading Mr Ahn only narrowly in a two-way race. AFP
India blames Pakistan for exodus of migrant workers Bulk text messages service suspended to quell spread of threats
I
ndia has blamed Pakistan for posting threatening messages on the Internet that triggered a mass exodus from Bangalore and Mumbai by migrants fleeing to their homes in the northeast. “Our agencies have discovered that bulk of these messages have been uploaded on various websites in Pakistan,” Home Secretary R.K. Singh told reporters. “This is a first of its kind and we believe that it is highly reprehensible.” The exodus was sparked by threats sent via mobile phones and the Internet that people from northeastern Assam state would be attacked by Muslims after the end of the holy month of Ramadan in reprisal for recent ethnic violence. Local media reports estimated that over 35,000 people have fled the cities of
Bangalore and Mumbai in recent days. Extra trains were arranged to accommodate panicked students and workers. Three weeks of clashes in remote Assam between members of the Bodo tribal community and Muslims have claimed at least 80 lives and displaced more than 400,000 people. Mr Singh said India would register a formal protest with Pakistan. “We will raise this issue with Pakistan... I am certain that they will deny out of hand but our technical people are definite,” he said. India has banned bulk text messages temporarily to try to halt the spread of threats and incendiary rumours. Police in southern city of Bangalore have also arrested three people for spreading
images and video clips across India. The images of atrocities allegedly on Muslims sparked tension and people hailing from the northeast were attacked in western and southern cities. Prime Minister Manmohan Singh said those who were fanning the rumours should be punished, saying “communal harmony” was at stake. India and Pakistan have fought three wars since independence in 1947, two of them over the Himalayan region of Kashmir, which is divided by a heavily militarised Line of Control and which both countries claim in full. Last year they resumed their tentative peace process, which collapsed after IslamistgunmenfromPakistankilled166 people in Mumbai in November 2008. AFP
Myanmar may see annual 8pct growth for a decade
M
yanmar’s economy may grow as much as 8 percent a year over the next decade as inflation remains low and the government increases trade ties with neighbours China and India, according to the Asian Development Bank. The near-term outlook for the economy, one-tenth the size of neighbouring Thailand, is “relatively upbeat” because of higher foreign investment and commodity sales, the ADB said in a report today. Annual growth of 8 percent may triple per
capita gross domestic product to US$3,000 by 2030, it said. “Myanmar has rich natural resources, a plentiful youth population and a strategic location in the region,” said Cyn-Young Park, the ADB’s assistant chief economist, who co-wrote the report. “All these will help Myanmar achieve very strong and inclusive growth in a fairly short time.” Myanmar President Thein Sein has taken steps to modernise the economy and allow greater political
Another line of tension between the two countries
freedoms since taking power last year, prompting Western nations to ease sanctions and attracting companies such as Coca-Cola Co. and Visa Inc. He is seeking to create jobs before national elections in 2015. The government should “urgently” develop the agricultural sector, which employs almost two-thirds of Myanmar’s workforce. About 20 percent of the country’s land area is used to grow crops, and about a fifth of that is irrigated, according to the ADB. “The potential of exploiting its own agricultural resources to improve productivity is enormous,” Mr Park said. “This is the lowhanging fruit for the country which can benefit a large population in a very short time period.” Bloomberg
12 |
business daily August 21, 2012
MARKETS Hang SENG INDEX NAME AIA GROUP LTD ALUMINUM CORP-H BANK OF CHINA-H BANK OF COMMUN-H BANK EAST ASIA
PRICE
Day %
VOLUME
27.35
0.5514706
12529235
3.3
-1.197605
7015052
2.98
-0.3344482
175568692
5.2
-1.701323
22555731
29.5 -0.06775068
PRICE
Day %
VOLUME
CHINA UNICOM HON
12.18
2.698145
37994965
CITIC PACIFIC
11.22
0.3577818
2624220
SANDS CHINA LTD SINO LAND CO
65.5
-0.152439
2070856
CNOOC LTD
CLP HLDGS LTD
15.56
-0.1283697
34044738
2314724
COSCO PAC LTD
10.66
0.3766478
2079429
6985364
ESPRIT HLDGS
12.16
5.73913
16913061
BELLE INTERNATIO
14.94
BOC HONG KONG HO
24.65
0.8179959
6994871
HANG LUNG PROPER
13.1
0.6144393
1340392
HANG SENG BK
109.5
-0.5449591
2353262
HENDERSON LAND D
CHINA COAL ENE-H
7.31
-1.082544
15681572
CHINA CONST BA-H
5.35
-0.742115
145696943
CHINA LIFE INS-H
21.5
0.2331002
15139371
CHINA MERCHANT
24.4
0.2053388
586153
CHINA MOBILE
82.35
-1.554094
43723811
HUTCHISON WHAMPO
CHINA OVERSEAS
18.34
1.438053
24198386
IND & COMM BK-H
CHINA PETROLEU-H
7.49
-0.5312085
49667778
CHINA RES ENTERP
23.95
-1.237113
6837239
14.8
-0.8042895
CHINA RES POWER
17.18
CHINA SHENHUA-H
30.25
CATHAY PAC AIR CHEUNG KONG
CHINA RES LAND
0.8097166
NAME
HENGAN INTL HONG KG CHINA GS HONG KONG EXCHNG HSBC HLDGS PLC
27.3
0.1834862
3220124
111.4
-0.4468275
756155
46.9
-1.470588
2978439
74.75
2.961433
2177883
18.5
0.5434783
2915209
109.7
0.7346189
3600870
69.1
0
7830129
NAME
PRICE
Day %
62
0.7311129
2121347
27.5
2.61194
12445136
POWER ASSETS HOL
SUN HUNG KAI PRO
13.4
-0.7407407
2509752
101.7
-1.166181
3744917
93
0.4862237
1375200
250
0.7252216
3034017
20.85
4.984894
18588751
9.51
2.699784
10964579
46.95
0.4278075
1455373
SWIRE PACIFIC-A TENCENT HOLDINGS TINGYI HLDG CO WANT WANT CHINA WHARF HLDG
MOVERS
25
VOLUME
22
2 20160
INDEX 20104.27
70
-0.8498584
8032422
4.45
-0.8908686
212313583
LI & FUNG LTD
12.78
0.3139717
11205867
HIGH
20151.69
MTR CORP
28.15
-0.177305
1810933
LOW
19923.66
13028172
NEW WORLD DEV
10.18
-1.165049
4986249
4.884005
7912474
52W (H) 21760.33984
PETROCHINA CO-H
9.89
0.1012146
31591819
0
8998825
PING AN INSURA-H
60.25
-0.4132231
6052134
19920
(L) 16170.35 16-Aug
20-Aug
Hang SENG CHINA ENTErPRISE INDEX NAME
PRICE
DAY %
VOLUME
CHINA PACIFIC-H
24.9
-1.190476
5652950
5194000
CHINA PETROLEU-H
7.49
-0.5312085
49667778
-1.197605
7015052
CHINA RAIL CN-H
6.6
1.694915
20.55
1.231527
5560500
CHINA RAIL GR-H
3.16
2.98
-0.3344482
175568692
CHINA SHENHUA-H CHINA TELECOM-H
PRICE
DAY %
VOLUME
AGRICULTURAL-H
3.09
-0.9615385
72705007
AIR CHINA LTD-H
5.25
-0.5681818
3.3
ANHUI CONCH-H BANK OF CHINA-H
ALUMINUM CORP-H
NAME
PRICE
DAY %
VOLUME
12.04
-2.272727
26498200
ZIJIN MINING-H
2.51
-0.7905138
19739688
11300000
ZOOMLION HEAVY-H
9.23
1.98895
10932440
-0.6289308
13711000
ZTE CORP-H
11.14
-1.065719
2805927
30.25
0
8998825
5.2
-1.701323
22555731
4
-0.7444169
29666889
13.98
0
1727400
DONGFENG MOTOR-H
11.04
1.284404
12051493
3.9
-0.7633588
26939296
GUANGZHOU AUTO-H
6
2.739726
3360453
CHINA COAL ENE-H
7.31
-1.082544
15681572
HUANENG POWER-H
5.67
3.090909
22580000
CHINA COM CONS-H
6.95
-1.41844
6210906
IND & COMM BK-H
4.45
-0.8908686
212313583
CHINA CONST BA-H
5.35
-0.742115
145696943
JIANGXI COPPER-H
18.42
0
5687000
CHINA COSCO HO-H
3.31
-1.19403
6906911
PETROCHINA CO-H
9.89
0.1012146
31591819
CHINA LIFE INS-H
21.5
0.2331002
15139371
PICC PROPERTY &
8.8
1.149425
9791001
CHINA LONGYUAN-H
5.17
0.7797271
2402020
PING AN INSURA-H
60.25
-0.4132231
6052134
CHINA MERCH BK-H
13.98
-1.410437
15124671
SHANDONG WEIG-H
8.65
0.9334889
3321000
BANK OF COMMUN-H BYD CO LTD-H CHINA CITIC BK-H
NAME YANZHOU COAL-H
MOVERS
12
23
5 9850
INDEX 9794.86 HIGH
9847.29
LOW
9707
CHINA MINSHENG-H
7.05
-1.12202
16795000
SINOPHARM-H
24.05
-1.434426
1246000
52W (H) 11916.1
CHINA NATL BDG-H
8.12
2.78481
27753102
TSINGTAO BREW-H
43.2
-0.4608295
1295340
(L) 8058.58
CHINA OILFIELD-H
12.4
0
4522000
WEICHAI POWER-H
22.75
0.2202643
2723624
9700
16-Aug
20-Aug
Shanghai Shenzhen CSI 300 NAME
PRICE
DAY %
VOLUME
PRICE
DAY %
VOLUME
AGRICULTURAL-A
2.5
-0.3984064
30300170
DAQIN RAILWAY -A
5.85
-0.6791171
16832314
AIR CHINA LTD-A
5.2
-2.255639
15157349
DATANG INTL PO-A
4.65
-1.273885
DONGFANG ELECT-A
15.7 11
ALUMINUM CORP-A ANHUI CONCH-A
5.95
-0.8333333
5200233
14.05
-1.953943
18178489
NAME
EVERBRIG SEC -A
NAME
PRICE
DAY %
SAIC MOTOR-A
12.23
-0.2446982
VOLUME 6747375
4192874
SANY HEAVY INDUS
11.59
-0.2581756
15631420
-1.875
5960077
SHANDONG GOLD-MI
34.98
-0.02857959
6188995
0.1821494
5382157
SHANG PHARM -A
11.26
-1.22807
12157501
BANK OF BEIJIN-A
7.33
-0.6775068
6442074
GD MIDEA HOLDING
9.23
-0.6458558
11285913
SHANG PUDONG-A
7.52
-0.397351
27038216
BANK OF CHINA-A
2.78
0.3610108
14303367
GD POWER DEVEL-A
2.62
0
12772621
SHANGHAI ELECT-A
4.27
-0.2336449
1739214
BANK OF COMMUN-A
4.38
-0.9049774
23890463
GF SECURITIES-A
12.73
-0.4691165
8068988
SHANXI LU'AN -A
19.72
-0.1013171
4808035
BANK OF NINGBO-A
9.71
-1.919192
10394700
GREE ELECTRIC
20.51
-1.630695
9831945
SHANXI XINGHUA-A
38.02
1.902975
1664538
BAOSHAN IRON & S
4.11
-0.9638554
11356886
GUANGHUI ENERG-A
12.86
0.233827
13716148
SHANXI XISHAN-A
14.15
-1.256106
7832186
8.47
0.1182033
39291029
SHENZEN OVERSE-A
5.61
-1.232394
21885235 101107389
14.81
1.856946
5709189
HAITONG SECURI-A
CHINA CITIC BK-A
3.83
-0.7772021
5434473
HANGZHOU HIKVI-A
CHINA CNR CORP-A
3.65
-1.617251
17973146
CHINA COAL ENE-A
7.43
-0.9333333
5130882
CHINA CONST BA-A
4.04
0.248139
CHINA COSCO HO-A
4.18
-0.7125891
CHINA CSSC HOL-A
20.51
CHINA EAST AIR-A CHINA EVERBRIG-A
BYD CO LTD -A
28
2.564103
2982064
SUNING APPLIAN-A
6.18
0.4878049
2.61
-1.136364
13446270
TSINGTAO BREW-A
33.29
1.062538
1275225
HENAN SHUAN-A
62.56
0.5787781
1074385
WEICHAI POWER-A
18.9
-1.613743
4367478
10116421
HONG YUAN SEC-A
16.93
1.377246
11471107
WULIANGYE YIBIN
34.85
2.019906
17823085
6617959
HUATAI SECURIT-A
8.47
0.4744958
7697198
XIAMEN TUNGSTEN
42.93
-0.6479981
8079026
-1.536246
2465553
HUAXIA BANK CO
8.71
-1.247166
10869082
YANGQUAN COAL -A
15.14
0.1322751
6224383
3.66
-1.081081
7067531
IND & COMM BK-A
3.84
0.2610966
16030788
YANTAI CHANGYU-A
55.04
-0.9893866
1457128
2.75
-0.7220217
13805199
INDUSTRIAL BAN-A
12.48
-0.6369427
19716963
YANTAI WANHUA-A
12.76
-0.3125
5971937
HEBEI IRON-A
17.14
-2.502844
10579067
INNER MONG BAO-A
37
-1.64806
32976102
YANZHOU COAL-A
18.57
-0.1075847
1628998
CHINA MERCH BK-A
9.88
-1.397206
25097469
INNER MONG YIL-A
19.23
2.287234
6334331
YUNNAN BAIYAO-A
61.86
1.376598
1261504
CHINA MERCHANT-A
10.01
0.4012036
6438970
INNER MONGOLIA-A
6.06
0.3311258
72224556
ZHONGJIN GOLD
22.17
1.048314
9036780
CHINA MERCHANT-A
20.2
-1.607404
6401735
JIANGSU HENGRU-A
28.96
0.6604101
1371341
ZIJIN MINING-A
3.8
-0.7832898
31688525
8.9
-3.365907
58554025
11.1
-0.6266786
9273922
CHINA LIFE INS-A
CHINA MINSHENG-A
5.92
-0.8375209
30881111
JIANGSU YANGHE-A
134
0.3745318
1606234
ZOOMLION HEAVY-A
CHINA NATIONAL-A
6.06
-0.1647446
15696490
JIANGXI COPPER-A
21.37
-0.2334267
3727962
ZTE CORP-A
CHINA OILFIELD-A
16.82
0.238379
3467136
JINDUICHENG -A
12.32
0.3257329
2206412
CHINA PACIFIC-A
19.33
-3.542914
17725745
JIZHONG ENERGY-A
13.94
-0.2147459
7303779
6.12
-1.130856
10754067
KANGMEI PHARMA-A
15.25
0.3949967
10093291
KWEICHOW MOUTA-A
CHINA PETROLEU-A CHINA RAILWAY-A
4.49
-0.2222222
8722462
232.65
1.319571
2405208
CHINA RAILWAY-A
2.53
-0.3937008
10974191
LUZHOU LAOJIAO-A
39.32
0.5883858
6346216
CHINA SHENHUA-A
22.1
-0.2257336
4640729
METALLURGICAL-A
2.24
-1.754386
21454854
2.49
0
8583052 80065849
MOVERS
91
195
14 2340
INDEX 2301.788
CHINA SHIPBUIL-A
4.86
1.25
27351867
NINGBO PORT CO-A
CHINA SOUTHERN-A
3.75
-1.315789
25205293
PANGANG GROUP -A
4.16
-2.803738
CHINA STATE -A
3.1
-0.3215434
16586319
PETROCHINA CO-A
8.91
-0.5580357
5315854
HIGH
2334.57
CHINA UNITED-A
3.77
2.168022
101411476
PING AN BANK-A
14.85
-1.394422
15579504
LOW
2281.49
CHINA VANKE CO-A
8.5
-1.277584
40163770
PING AN INSURA-A
41.14
-1.153292
12715913
CHINA YANGTZE-A
6.49
0
4777005
POLY REAL ESTA-A
10.02
-3.000968
44984337
CITIC SECURITI-A
10.75
-0.462963
46996755
QINGDAO HAIER-A
10.11
-3.068073
12541187
CSR CORP LTD -A
4.28
-0.6960557
19854905
QINGHAI SALT-A
33.81
0.0295858
2712731
52W (H) 2907.398 (L) 2254.567
2280
16-Aug
20-Aug
FTSE TAIWAN 50 INDEX NAME
PRICE DAY %
Volume
NAME
PRICE DAY %
Volume
ACER INC
26.8
-2.545455
19888686
FORMOSA PLASTIC
82.5
-0.241838
1830560
ADVANCED SEMICON
22.7
2.48307
56828909
FOXCONN TECHNOLO
119
1.276596
16085868
39
0.6451613
10016802
FUBON FINANCIAL
30.1 -0.8237232
285.5
-1.551724
1657885
HON HAI PRECISIO
84.8
0.3550296
18526706
9.01 -0.7709251
22439272
HOTAI MOTOR CO
200.5
-4.52381
618528
239.5
-4.2
16663824
16 -0.3115265
3195285
ASIA CEMENT CORP ASUSTEK COMPUTER AU OPTRONICS COR CATCHER TECH
7875001
150
-1.315789
7987487
HTC CORP
29.25
-1.015228
6889179
HUA NAN FINANCIA
CHANG HWA BANK
15.3 -0.3257329
6229239
LARGAN PRECISION
615
0
755974
CHENG SHIN RUBBE
73.6
0
3127343
LITE-ON TECHNOLO
35.2 -0.2832861
1167401
CHIMEI INNOLUX C
9.25
-3.141361
18533325
MEDIATEK INC
298
1.188455
10113222
CHINA DEVELOPMEN
7.26
1.966292
61341493
MEGA FINANCIAL H
22.65
-1.091703
13743839
CHINA STEEL CORP
26.4 -0.5649718
8104714
NAN YA PLASTICS
57.8
-1.196581
2030082
PRESIDENT CHAIN
163.5 -0.9090909
1344562
77.6 -0.3851091
3057296
CATHAY FINANCIAL
0
13241419
CHUNGHWA TELECOM
CHINATRUST FINAN
17.55
89.7 -0.3333333
2928646
QUANTA COMPUTER
COMPAL ELECTRON
27.6
0.5464481
9715189
SILICONWARE PREC
1.981707
8989756
DELTA ELECT INC
104
2.463054
7364672
SINOPAC FINANCIA
12.1 -0.8196721
8594661
FAR EASTERN NEW
34.7
0.7256894
8880904
SYNNEX TECH INTL
66.5 -0.7462687
1457432
FAR EASTONE TELE
73.3 -0.2721088
2931573
TAIWAN CEMENT
34.35
-1.293103
5046684
FIRST FINANCIAL
16.65
0
13332346
75.6 -0.5263158
4746068
17.1 -0.5813953
6517328
TAIWAN COOPERATI
FORMOSA CHEM & F
81 -0.6134969
1239152
TAIWAN FERTILIZE
FORMOSA PETROCHE
90
1070475
TAIWAN GLASS IND
0
33.45
28.25
-1.73913
1576156
NAME
PRICE DAY %
TAIWAN MOBILE CO
Volume
109
-2.242152
2886158
391.5
-2.125
4633036
TSMC
82.4
0.4878049
21037426
UNI-PRESIDENT
49.2 -0.2028398
TPK HOLDING CO L
UNITED MICROELEC
4303769
12.15
-2.409639
49705396
WISTRON CORP
33.1
0.9146341
6346633
YUANTA FINANCIAL
14.3
-2.054795
7962651
YULON MOTOR CO
54.5 -0.9090909
3624012
MOVERS
13
32
5 5160
INDEX 5092.04 HIGH
5157.76
LOW
5084.39
52W (H) 5621.53 (L) 4643.05
5080
16-Aug
20-Aug
August 21, 2012 business daily | 13
MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) galaxy entertaInment
max 22.5
average 22.127
melco crown entertaInment
min 21.85
last 22.5
mgm chIna holdIngs
22.6
30.0
22.4
29.9
22.2
29.8
22.0
29.7
21.8
sands chIna ltd
13.0
max 30
average 29.708
min 29.65
min 27
last 27.5
26.9
PRICE
average 16.951
DAY %
YTD %
(H) 52W
(L) 52W
WTI CRUDE FUTURE Sep12
96.21
0.208322071
-2.690401537
110.8699951
77.69999695
BRENT CRUDE FUTR Oct12
114.45
0.650778296
9.448216506
123.2900009
89.11000061
GASOLINE RBOB FUT Sep12 GAS OIL FUT (ICE) Oct12 NATURAL GAS FUTR Sep12 HEATING OIL FUTR Sep12
303.4
0.214698596
14.21902647
320.4399824
237.3699903
982.75
0.306200561
9.437639198
1044.75
799
2.691
-1.029790364
-18.03228754
4.630000114
2.221999884
311.25
0.643471513
9.252694022
332.9600096
251.5599966
Gold Spot $/Oz
1617.38
0.0606
3.3529
1921.18
1522.75
Silver Spot $/Oz
28.185
0.3604
1.2574
44.2175
26.085
1468
-0.4239
5.2707
1915.75
1339.25
601.03
-1.187
-8.0291
792.93
537.54
LME ALUMINUM 3MO ($)
1858
0.868621064
-8.01980198
2476
1827.25
LME COPPER 3MO ($)
7539
1.208215868
-0.802631579
9304
6635
LME ZINC
1797
0.672268908
-2.601626016
2311
1718.5
Platinum Spot $/Oz Palladium Spot $/Oz
3MO ($)
LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep12 Dec12
15630
0.676328502
-16.46178514
22450
15236
15.445
0.162127108
2.761144378
18
13.95499992
816.75
1.176834933
39.31769723
849
499
18.9
16
18.8
15.95
18.7
15.9
18.6
min 15.86
18.5
last 15.98
max 18.84
average 18.689
last 18.72
min 18.52
PRICE MAJORS
ASIA PACIFIC
CROSSES
AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP
0.9388 1.5235 0.7712 1.2043 75.35 7.9823 7.7526 6.2769 45.565 29.79 1.2021 28.911 41.57 8507 72.057 1.1002 0.77553 7.7018 9.6245 94.12 1.0288
MACAU RELATED STOCKS (L) 52W
3.25
1.88
847951
153.6999969
CROWN LTD
8.94
1.016949
10.5068
9.29
7.47
2119657
25.77999878
19.23999977
AMAX HOLDINGS LT
0.061
0
-29.88506
0.119
0.055
0
102.25
64.61000061
BOC HONG KONG HO
24.65
0.8179959
33.96739
24.9
14.24
6994871
CENTURY LEGEND
0.238
-0.41841
3.478259
0.335
0.204
119000
3.14
-0.9463722
12.14286
3.62
2.3
10000
CHINA OVERSEAS
18.34
1.438053
41.2943
19.16
9.99
24198386
629.5
1691.5
1115.75
COFFEE 'C' FUTURE Dec12
164.3
0.674019608
-30.38135593
285.6499939
SUGAR #11 (WORLD) Oct12
20.31
0.64420218
-11.03810775
COTTON NO.2 FUTR Dec12
74.2
1.227830832
-15.52823315
NAME
PRICE
CHEUK NANG HLDGS
World Stock MarketS - Indices YTD %
(L) 52W
1.0857 1.6573 0.9972 1.4549 84.18 8.0413 7.8077 6.406 57.3275 32 1.3199 30.716 44.35 9662 88.637 1.24736 0.88845 9.2841 11.6793 111.94 1.0311
(H) 52W
953.25
37.74133278
DAY %
(H) 52W
2.537 1.1195 -3.438 -4.6138 -3.3065 0.1289 0.1405 -1.0111 -4.8076 0.0952 3.521 0.9199 3.5061 -4.7074 -5.8032 1.3097 5.9511 3.5452 4.8187 1.3526 0.0097
21.36363
24.6875
0.789913413
PRICE
YTD %
0.4607 0.1274 0.247 0.2351 0.0251 0.0075 0.0064 -0.0126 0.0538 -0.0317 0.0878 -0.02 0.0071 0.021 -0.4348 0.0017 -0.0928 0.0076 -0.0071 -0.2034 0
0
0.36333147
1658.75
COUNTRY
DAY %
1.0468 1.5717 0.9715 1.2363 79.54 7.9893 7.7565 6.3593 55.745 31.52 1.2525 30.003 42.355 9517 83.264 1.20106 0.78658 7.8557 9.8761 98.33 1.03
2.67
897.75
SOYBEAN FUTURE Nov12
(H) 52W
(L) 52W
DOW JONES INDUS. AVG
US
13275.2
0.1893569
8.656726
13338.66016
10404.49
NASDAQ COMPOSITE INDEX
US
3076.588
0.4636248
18.09639
3134.17
2298.89
FTSE 100 INDEX
GB
5850.59
-0.03126912
4.994545
5989.07
4868.6
DAX INDEX
GE
7059.07
0.2583484
19.67872
7194.33
4965.8
NIKKEI 225
JN
9171.16
0.09451569
8.465772
10255.15
8135.79
DAY % YTD %
VOLUME CRNCY
CHINESE ESTATES
9.48
1.066098
-24.16
13.68
8.3
1500
CHOW TAI FOOK JE
9.72
0.621118
-30.17241
15.16
8.4
1343200
EMPEROR ENTERTAI
1.37
0
23.42342
1.48
0.97
800000
FUTURE BRIGHT
1.16
-2.521008
176.1905
1.24
0.3
6954000
GALAXY ENTERTAIN
22.5
0.896861
58.00562
24.95
8.69
8125171
HANG SENG BK
111.4
-0.4468275
20.88985
116.7
84.4
756155
HOPEWELL HLDGS
23.75
1.06383
19.58711
24.658
18.56
456600
HSBC HLDGS PLC
69.1
0
17.11864
71.8
56
7830129
HUTCHISON TELE H
3.67
0.273224
22.74247
3.86
2.53
2132000
LUK FOOK HLDGS I
20
0.2004008
-26.19926
42.7
14.7
1081000
MELCO INTL DEVEL
6.16
-0.1620746
6.759099
9.17
4.3
3431000
MGM CHINA HOLDIN
12.98
0.309119
35.31893
14.804
7.6
2581400
4.27
-2.28833
7.990624
5.217
2.887
1990000 1160000
HANG SENG INDEX
HK
20104.27
-0.05865957
9.058497
21760.33984
16170.35
CSI 300 INDEX
CH
2301.788
-0.5052138
-1.873772
2907.398
2254.567
TAIWAN TAIEX INDEX
TA
7431.91
-0.4821958
5.088037
8170.72
6609.11
MIDLAND HOLDINGS
KOSPI INDEX
SK
1946.31
-0.01181584
6.603901
2057.28
1644.11
NEPTUNE GROUP
0.159
-0.625
43.24324
0.205
0.08
S&P/ASX 200 INDEX
AU
4364.288
-0.1329947
7.585923
4448.5
3840.2
NEW WORLD DEV
10.18
-1.165049
62.6198
10.96
6.13
4986249
SANDS CHINA LTD
27.5
2.61194
25.28473
33.05
14.9
12445136
JAKARTA COMPOSITE INDEX
12.8
16.05
ARISTOCRAT LEISU
WHEAT FUTURE(CBT) Dec12
NAME
last 12.98
CURRENCY EXCHANGE RATES
NAME
CORN FUTURE
min 12.86
15.85 max 16.02
Commodities
METALS
average 12.936
wynn macau ltd
27.1
ENERGY
max 13.98
sJm holdIngs ltd
27.3
average 27.175
12.9
29.6
last 29.7
27.5
max 27.5
13.1
ID
4160.508
0.4471768
8.857054
4234.734
3217.951
FTSE Bursa Malaysia KLCI
MA
1649.79
-0.01818083
7.777992
1654.53
1310.53
NZX ALL INDEX
NZ
813.164
0.5363329
11.42281
814.11
712.548
PHILIPPINES ALL SHARE IX
PH
3460.89
-0.1062181
13.65663
3531.5
2695.06
HSBC Dragon 300 Index Singapor
SI
585.96
-0.32
18.06
NA
NA
WYNN MACAU LTD
STOCK EXCH OF THAI INDEX
TH
1228.51
0.3758446
19.81723
1247.72
843.69
HO CHI MINH STOCK INDEX
VN
437.28
0.8836083
24.38629
492.44
332.28
Laos Composite Index
LO
1052.02
1.670967
16.96129
1053.04
876.33
Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.
SHUN HO RESOURCE
1.13
0
13
1.28
0.82
0
SHUN TAK HOLDING
2.81
1.079137
9.803014
3.892
2.241
4063750
SJM HOLDINGS LTD
15.98
-0.8684864
27.78341
18.285
10.079
5909200
SMARTONE TELECOM
17.02
-1.50463
26.63691
18.5
9.8
302922
18.78
0.9677419
-3.692308
25.5
14.62
4904217
ASIA ENTERTAINME
3.64
-4.960836
-38.09524
8
2.4
73961
BALLY TECHNOLOGI
43.96
-0.1136105
11.12234
49.32
24.74
1105066
BOC HONG KONG HO
3.1408
-0.9211356
31.02021
3.18
1.81
4500
GALAXY ENTERTAIN
2.89
11.15385
54.54545
3.24
1.08
2300
INTL GAME TECH
11.76
-0.3389831
-31.62791
18.1701
10.92
3428391
JONES LANG LASAL
71.82
1.04108
17.23801
87.52
46.01
225863
LAS VEGAS SANDS
41.43
0.6070908
-3.042358
62.09
34.72
8150970
MELCO CROWN-ADR
11.62
1.043478
20.79002
16.02
7.05
4067862
MGM CHINA HOLDIN
1.55
0
30.06704
1.96
1.0025
470
MGM RESORTS INTE
10.52
1.44648
0.8628925
14.9401
7.4
9704247
SHUFFLE MASTER
359778
14.88
2.479339
26.96245
18.77
7.48
SJM HOLDINGS LTD
2.05
0.4901961
27.52144
2.3177
1.2624
2000
WYNN RESORTS LTD
104.8
0.5372218
-5.149785
154.7051
90.108
1208844
AUD HKD
USD
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14 |
business daily August 21, 2012
Opinion
Rejuvenating India’s growth Clive Crook Tobin Harshaw Bloomberg Editors
made glancing reference to it in his Independence Day speech: “To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India.” Yet he offered no specifics. Far from promising to unravel the Subsidy Raj, he took credit for the outlays needed to advance it: seed subsidies, fuel subsidies, housing subsidies, you-name-it subsidies, a bank account for every household, electricity for every household. Oh yes. There’ll also be room in the budget for a Mars orbiter mission.
Failing will?
I
s India’s growth miracle coming to an end? Sadly, and despite the nation’s vast untapped potential, the answer may well be yes. Prime Minister Manmohan Singh had a chance to dispel the pessimism on Wednesday, and wasted it. His address from New Delhi’s Red Fort to celebrate India’s 65th birthday as an independent nation was a moment to convince the country of the need for a new round of economic reform, the cause he first championed 20 years ago as finance minster. Nobody was surprised that the speech was low-key: Singh is calm and quiet to a fault. Even so it was a letdown. Heavy on generalities and devoid of details, it conveyed no sense of purpose or urgency, two things India badly needs. Before the reforms that began in 1991, India had grown sluggishly for decades, even as China’s economy had soared. Complacent politicians blamed democracy. Change was hard, they said. India couldn’t hope to match an authoritarian state when it came to growth. Singh and the other reformers proved them wrong. They dismantled the socalled License Raj – a system of permits and controls that told the country’s industrialists exactly what to make and how – and they eased restrictions
on foreign trade. The growth rate doubled to 9 percent and stayed there. World-class companies appeared from nowhere, and poverty retreated faster than ever before. The miracle began to fade in 2009, not just because of the global recession. Last year the economy grew by 6.5 percent – halfway back to the “Hindu rate of growth” that an earlier generation of leaders deemed depressingly adequate. The World Bank a n d o t h e r development agencies, and many Indian business leaders, say the country should still be growing at 9 percent or 10 percent a year, and they’re right. Growth is faltering because the first great surge of reform petered out. The public sector remained a crushing fiscal burden, through an unfathomable array of badly targeted subsidies. The
direct cost of food, energy and other supports is nearly 10 percent of gross domestic product. Their indirect cost is enormous, too. Subsidies on such a scale invite corruption, which is worsening, spurring the populist reform movements of Anna Hazare and others. Subsidies can also deter private investment, a main cause of the power cuts that blacked out half the country this month. Crowded out by the cost of subsidies, pressing infrastructure needs go unmet. The tax system is complicated and unpredictable. Recently the government broke its promise to let foreigners compete in retailing, a sector crying out for modernisation. Many industries continue to be heavily regulated. Singh understands all this and
A different case for reform is needed, one based on an undisguised commitment to market forces and private enterprise
The prime minister blamed a lack of political consensus for recent policy reversals and slowing growth — an echo of the favourite excuse from the pre-reform era. He’s right. He leads a turbulent coalition, shares de facto power with Sonia Gandhi, and is opposed at every turn by the Hindupopulist Bharatiya Janata Party. It’s hard to be India’s prime minister, all right, but leaders have to build consensus, and Singh is failing. In the early 1990s, an economic crisis provided the initial momentum to the reform programme. Today’s sluggish growth is disappointing, but it isn’t an emergency, so a different case for reform is needed, one based on an undisguised commitment to market forces and private enterprise. A constituency receptive to this case now exists thanks to the flowering of Indian business since 1991. Two recent appointments offer a glimmer of optimism. Singh has reinstated Palaniappan Chidambaram, a veteran reformer, as his new finance minister and hired Raghuram Rajan of the University of Chicago’s Booth School of Business as his economic adviser. Intellectually, this triumvirate is convinced of the need for fiscal discipline, investment in crumbling infrastructure and renewed economic reform – and investors know it. They know, too, that turning those ideas into action is the problem. India’s leaders solved it once, and must solve it again. The first step is for Singh to pick a fight he can win, and use it to announce a new phase of reform. Letting foreign investors enter retailing is the perfect place to start. The government’s retreat on the issue signalled weakness; that message needs to be reversed. The economic case in favour is strong and, crucially, can be cast in populist terms: a more competitive retail sector would drive down prices of food and other goods, so the policy is pro-poor. It won’t be an easy fight, but settling for paralysis could unwind the achievements of the past 20 years. Avoiding that tragedy is worth a few risks. Bloomberg View
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August 21, 2012 business daily | 15
OPINION Business
wires Leading reports from Asia’s best business newspapers
Early retirement for the eurozone? Nouriel Roubini
Chairman of Roubini Global Economics and Professor at New York University’s Stern School of Business
Korea Post Ssangyong Engineering & Construction has been honoured with Grand Prizes – platinum and gold – given by Building and Construction Authority (BCA) of Singapore in recognition of its state of art construction and engineering performance for its construction of Marina Bay Sands Hotel in Singapore. The resort structure features over 2,500 rooms, a 120,000 square-meter convention centre and a 74,000 square-meter shopping mall. On the rooftop is a sky park equipped with three swimming pools, a spa and an observation deck and gardens.
Business Times Listed companies paid out higher remuneration to their directors in 2011 compared to 2010 despite the cautious economic climate brought about by the eurozone debt crisis, a Malaysian Business annual survey of the “highest-paid directors” revealed. According to the business magazine, the top 20 companies forked out RM534.95 million (US$170.8 million) last year, up 17 percent from 2010, in terms of total payouts. Genting Bhd topped the list with a big payout of RM117.69 million to its board. However, this was a modest rise of 5.6 percent over the previous year.
Jakarta Globe The government says it expects a 36 percent increase in energy subsidies next year, more than double the 15 percent gain in infrastructure spending. Spending on energy subsidies will most likely rise to Rp 274.7 trillion (US$29 billion) next year, according to the proposed 2013 state budget. The subsidies – including Rp 193.8 trillion for fuel and Rp 80.9 trillion for electricity – account for 18.2 percent of the total budget. The energy subsidies are larger than the Rp 193.8 trillion that the government will allocate for capital goods and infrastructures development next year.
Business Line ‘Discom’ bonds to be issued by Indian states may not be all that attractive for investors. This is because the government has dropped a proposal to back such bonds with statutory liquidity ratio (SLR) status. The bonds issue is part of the restructuring package for the sick electricity distribution utilities. Absence of SLR status will compel States to offer higher interest rates on such bonds to attract banks and financial institutions to buy them, say bankers. Banks prefer bonds with SLR status as they are more liquid compared to other securities without such privilege.
W
hether the eurozone is viable or not remains an open question. But what if a breakup can only be postponed, not avoided? If so, delaying the inevitable would merely make the endgame worse – much worse. Germany increasingly recognises that if the adjustment needed to restore growth, competitiveness, and debt sustainability in the eurozone’s periphery comes through austerity and internal devaluation rather than debt restructuring and exit (leading to the reintroduction of sharply depreciated national currencies), the cost will most likely be trillions of euros. Indeed, sufficient official financing will be needed to allow cross-border and even domestic investors to exit. As investors reduce their exposure to the eurozone periphery’s sovereigns, banks, and corporations, both flow and stock imbalances will need to be financed. The adjustment process will take many years, and, until policy credibility is fully restored, capital flight will continue, requiring massive amounts of official finance. Until recently, such official finance came from fiscal authorities (the European Financial Stability Facility, soon to be the European Stability Mechanism) and the International Monetary Fund. But, increasingly, official financing is coming from the European Central Bank – first with bond purchases, and then with liquidity support to banks and the resulting buildup of balances within the eurozone’s Target2 payment system. With political constraints in Germany and elsewhere preventing further strengthening of fiscally-based firewalls, the ECB now plans to provide another round of large-scale financing to Spain and Italy (with more bond purchases). Thus, Germany and the eurozone core have increasingly outsourced official
financing of the eurozone’s distressed members to the ECB. If Italy and Spain are illiquid but solvent, and largescale financing provides enough time for austerity and economic reforms to restore debt sustainability, competitiveness, and growth, the current strategy will work and the eurozone will survive. In the process, some form of fiscal and banking union may also emerge, together with some progress on political integration. But, however important the fiscal and banking union elements of this process may be, the key is whether large-scale financing and gradual adjustments can restore sustainable growth in time. This will require considerable patience from governments and publics in the core and periphery alike – in the former to maintain large-scale financing, and in the latter to avoid a social and political backlash against years of painful contraction and loss of welfare.
Unlikely scenario Is this scenario plausible? Just consider what must be overcome: economic divergence and deepening recessions; irreversible balkanization of the banking system and financial markets; unsustainable debt burdens for public and private agents; daunting growth and balance-sheet costs in countries that pursue internal devaluation and deflation to restore competitiveness; asymmetrical adjustment, with moral-hazard risks in the core and insufficient financing in the periphery fuelling incompatible political dynamics; fickle and impatient markets and investors; austerity fatigue in the periphery and bailout fatigue in the core; the absence of conditions for an optimal currency area; and serious difficulties in achieving full fiscal, banking, economic, and political union. If a gradual process of
disintegration eventually makes a eurozone breakup unavoidable, the path chosen by Germany and the ECB – large-scale financing for the eurozone periphery – would destroy the core central banks’ balance sheets. Worse still, massive losses resulting from the materialisation of credit risk might jeopardise core eurozone economies’ debt sustainability, placing the survival of the European Union
If a breakup is unavoidable, delaying it implies much higher costs. But politics in the eurozone does not permit consideration of an early breakup
itself in question. In that case, surely an “orderly divorce” now is preferable to a messy split down the line. Of course, a breakup now would be very costly, requiring an international debt conference to restructure the periphery’s debts and the core’s claims. But breaking up earlier could allow the survival of the single market and of the EU. A futile attempt to avoid a breakup for a year or two – after wasting trillions of euros in additional official financing by the core – would mean a disorderly end, including the destruction of the single market, owing to the introduction of protectionist policies on a massive scale. So, if a breakup is unavoidable, delaying it implies much higher costs. But politics in the eurozone does not permit consideration of an early breakup. Germany and the ECB are relying on large-scale liquidity to buy time to allow the adjustments necessary to restore growth and debt sustainability. And, despite the huge risk implied if a breakup eventually occurs, this remains the strategy to which most of the players in the eurozone are committed. Only time will tell whether betting the house to save the garage was the right move. © Project Syndicate
16 |
business daily August 21, 2012
CLOSING Qantas chief to forgo bonus
Report of bond-cap plan ‘misleading’
Alan Joyce, chief executive of Qantas, has said he will forgo his bonus and pay rise after a sharp plunge in the airline’s profits. Qantas has forecast a 90 percent fall in its profits for the financial year ending June 30, amid losses at its international operations and high fuel costs. The troubles have seen its share price drop 35 percent since April this year. “It’s absolutely appropriate that when company returns go down, executive pay should go down as well,” Mr Joyce was quoted as saying by the Australian Financial Review.
The European Central Bank yesterday dismissed as “absolutely misleading” a report that it planned to set a cap on the borrowing costs of debt-wracked eurozone countries. “It is absolutely misleading to report on decisions, which have not yet been taken and also on individual views, which have not yet been discussed by the ECB’s governing council,” a spokesman said. Der Spiegel newsweekly reported on Sunday that the ECB was planning to set a limit on the borrowing costs of individual countries and intervene on the markets to maintain this level.
Taiwan’s export orders deteriorate July orders slumped 4.4 percent from a year earlier Faith Hung and Clare Jim
Major Asian exporters have all shown deepening signs of economic stress
T
aiwan’s export orders, a forward indicator of overseas sales, slumped 4.4 percent in July over the previous year, far more than expected, casting further doubt on any turnaround soon in global demand for Asian goods. Analysts polled by Reuters had forecast a drop of 2.91 percent in July, a fifth straight month of contraction after falling 2.62 percent in June. The island’s export orders are a leading indicator of demand for hightech gadgets, and typically lead actual exports by two to three months. July orders from China fell 5.5 percent on the year and Europe 4.7 percent, larger percentage declines
than seen in June, suggesting demand in the island’s top two export markets continued to deteriorate. U.S. orders, however, picked up 1.4 percent after contracting in June, which some economists said could be as a result of modest back-to-school demand as well as the expected launch of high tech products including Apple Inc.’s Iphone5. Recent surveys and shipments show that U.S. retailers are expecting another solid showing this holiday shopping season, even though many consumers remain hesitant to spend. A key element for exporters will be how much inventory stores are willing to risk carrying into year-end.
Much of the eurozone, however, could be facing a prolonged recession, further dampening demand for Asian goods.
Weak demand “I expect value of export orders in August will recover a little, but momentum will remain weak and we may not see growth until next year,” said Cheng Cheng-Mount, an economist at Citi. “Precision [goods], electronics and information and communications products are the main drags; even though there are new products coming into the market, the end demand is not strong.” Taiwan, home to major tech firms
such as the world’s biggest contract computer chipmaker Taiwan Semiconductor Manufacturing Co Ltd (TSMC), plays a central role in the global tech supply chain, so its export data is closely watched. The government last week cut its 2012 economic growth forecast to 1.66 percent, the eighth time it has lowered the target as demand for its exports continues to slow. That would be the island’s slowest expansion since 2009. Taiwan’s exports-to-gross domestic product ratio stands at 74 percent, and almost half of the exports are of electronics, making it extra-vulnerable to declines in external demand. “July export orders were worse than market expectations mainly because of the European market. If orders from the U.S. are going downhill, the impact will be worse and Taiwan may not even be able to post GDP growth of 1 percent,” said Lucas lee, analyst at Mega Securities in Taipei. Despite weakening external demand, the latest export data is likely to reinforce views that Taiwan’s central bank will leave interest rates unchanged at 1.8 percent at its next quarterly policy meeting in September. Other major Asian exporters such as Japan and South Korea have all shown deepening signs of economic stress as Europe’s sovereign debt crisis, China’s slowdown and sluggish activity in the United States weigh on the global economy. Reuters
BAA to auction London’s Stansted airport After court defeats against a forced breakup of its assets
L
ondon Heathrow airportowner BAA Ltd said it will sell the U.K. capital’s Stansted terminal after losing the latest court action against a forced breakup of its assets ordered by antitrust regulators. “BAA has decided not to appeal to the Supreme Court and is now proceeding with the sale of Stansted airport,” the London-based company said in a statement yesterday, while adding that it’s still of the belief that the U.K. Competition Commission failed to recognise that Stansted and Heathrow serve different markets. The decision to sell comes days after Qatar Holding LLC, the investment arm of the Middle East country’s sovereign-wealth fund, agreed to pay 900 million pounds (US$1.4 billion) for a 20 percent stake in BAA. Possible bidders for Stansted include South Korea’s Incheon International
Airport Corp. and Manchester Airports Group, owner of Britain’s top airport outside London. Stansted, the main base for Ryanair Holdings Plc, Europe’s largest discount airline, attracted 18 million passengers last year, versus 69 million at Heathrow and almost 34 million at Gatwick. It also ranks behind Manchester’s 19 million, though ahead of London Luton and Edinburgh, each with 9.5 million. New York-based Global Infrastructure Partners Ltd, which beat Incheon in the bidding for BAA’s Edinburgh terminal with an 807 million-pound purchase in April, already has two London bases – City airport, located close to the main financial district, and Gatwick, acquired from BAA for 1.51 billion pounds in 2009 – and wouldn’t be allowed to bid for Stansted.
Stansted attracted 18 million passengers last year
Ryanair is keen to take a 25 percent equity stake in Stansted by joining one of six or so groups it reckons might bid, chief financial officer Howard Millar said July 30. Only one or two serious bids are likely to emerge, he added. BAA is auctioning Stansted after the Court of Appeal in London rejected its attempts to halt a sale in a July
26 ruling. The airport operator had challenged Competition Appeal Tribunal findings from February, saying the airport market had become more competitive since the Competition Commission ordered the disposal of airports in London and Scotland three years ago. Bloomberg