Macau Business Daily, August 7, 2012 by Business Daily

Under 21s face

casino bust T

he entry age for customers and workers at Macau casinos will be raised to 21 with effect from November 1. The new rules – included in a bill regulating entry, employment and gambling in casinos – had been due by July 2. The reason for delay hasn’t been made public. But some legislators were unhappy that slot

parlours and the horse racing and dog racing tracks were not covered by the new rules. That means 18-year-olds can still gamble or work in those places. Other issues of concern were whether casino workers should be barred from gambling in any casino. At present they’re only banned from their own workplace. There were

doubts too about the effectiveness of a voluntary scheme whereby problem gamblers can apply to be excluded from casinos. Under the new law, casinos will be able to check people’s identification selectively at the entrance if they suspect the visitor is under 21. Individuals that break the rules will be fined between

1,000 patacas (US$125) and 10,000 patacas. Casino operators can be fined 10,000 to 500,000 patacas if they let in under 21s either as customers or workers. Some 18- to 20-year-olds will be allowed to work in casinos subject to approval by Gaming Inspection and Coordination Bureau. More on page 3

IPO pachinko chain wants casino licence

I SSN 2226-8294

HANG SENG INDEX 20100

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Social security funding ‘unsustainable’

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Gaming tax-rich Macau is learning an accounting lesson about state pensions that is already familiar to Europeans – as the population ages and lives longer the pension commitments get higher. That means the contributions of those still working have to go up too. Monthly payments to the Social Security Fund may soon double, according to a proposal to the government. But an expert warned the system is still far from sustainable and more increases will be needed in the near future. The contribution will rise to 90 patacas (US$11.30) says Chan Pou Wan, deputy director of the Social Security Fund. The official stressed that the number of beneficiaries has soared from 38,000 to over 60,000 since the new social security fund came into effect in 2010. An International Labour Organization report says by 2050 there will be eight non-working residents for every 10 economically active ones.

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newly Hong Kong-listed pachinko hall operator from Japan says it’s talking to Macau casino operators – about possibly bidding for a Japanese casino licence. “If legal systems are developed for casinos in Japan, we would like to partner as a casino operator with big overseas casino operators,” says Yoji Sato, chairman of Dynam Japan Holdings Co.

HSI - Movers Name

%Day

ESPRIT HLDGS

6.40

BELLE INTERNATIO

5.90

SINO LAND CO

4.99

CHINA UNICOM HON

4.18

LI & FUNG LTD

4.08

PING AN INSURA-H

0.33

CLP HLDGS LTD

0.07

SANDS CHINA LTD

0.00

CHINA RES POWER

-0.83

POWER ASSETS HOL

-1.21

Source: Bloomberg

Govt concession over two plus two

he government made a concession to the pan-democrats over political reform. ‘Two plus two’ – an extra two seats for directly elected legislators and two for indirectly elected ones – meant the latter will actually grow disproportionately. After a closed doors meeting it was announced the mix can be changed after 2013’s elections, if in line with “legal procedures”. Page 5

SMEs again losers after Hengqin ‘snub’

he city’s small- and medium-sized enterprises suffered a labour squeeze in the gaming boom and could miss out again if excluded from the stimulus plan for Hengqin Special Area. So says Kenneth Lei Chi Leong, Macau Small and Medium Enterprises Association administrator. He called on the government to give more information to SMEs about Hengqin. Page 6

Year I - Number 92 Tuesday August 7, 2012 Editor-in-chief: Tiago Azevedo Deputy editor-in-chief: José I. Duarte MOP 6.00

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business daily August 7, 2012

macau Govt ends telecom taxes The government will pocket about 100 million patacas (US$12.5 million) less this year after adjustment in the taxes on telecommunication services. The Executive Council has finished discussing the revision of the regulation on license fees and fines of the telecommunication services, which suggests terminating the taxes charged on the paging and mobile services due to the development in the sector. Such service charges, accounting to 107.4 million patacas last year, have been exempted since 2008, the council spokesperson Leong Heng Teng said yesterday. The revision also includes turning the subsidies for telecommunication equipment on fishing boats into a regular mechanism, because the fishing industry has been under financial pressure for a long time, he added. The industry only needs to pay half of the charges on the equipment since 2008 and about 24,500 patacas worth of equipment was exempted last year. Meanwhile, the executive council also backed the special bank note issue of the Macau branch of Bank of China Ltd to commemorate the 100th anniversary of its establishment. The bylaw says 3 million bank notes of 100 patacas will be issued.

Extra contributions no help to laboured welfare fund A doubling of the monthly contribution will not be enough to save Macau’s fledgling social security system, academic Vítor Quintã vitorquinta@macaubusinessdaily.com

An ageing population means the number of beneficiaries drawing an old age pension has soared since January last year

T Amax faces boardroom coup Macau gaming investment company Amax Holdings Ltd faces an attempt to remove its entire board and replace it with nominees of an Amax shareholder recently the victim of a triadstyle attack. The motion will be discussed at a meeting in Hong Kong on September 12. It calls for all eight directors – including chairman Brian Cheung Nam Chung – to be axed. In would come 24 percent Amax shareholder Ng Man Sun and four other people. Mr Ng, a veteran Macau junket operator also known as Ng Wai or Kai Sze Wai, was left hospitalised after being attacked with sticks and hammers at a restaurant in the New Century Hotel, Taipa in June. Amax owns a 24.8 percent equity stake in the Greek Mythology casino operation inside the New Century. As such, Amax has to give its consent for a US$250 million initial public offering in Hong Kong for Greek Mythology. An obstacle is the refusal last week of Amax’s auditors – appointed by the current Amax board – to sign off on Amax’s latest annual report.

Prosecutors eye more powers The third standing committee of the Legislative Assembly will today review the opinion of the Public Prosecutors’ Office on the proposed revision of the Penal Procedural Code, with the prosecutors calling for the power to apply all restrictive measures to suspects, instead of the courts. According to Portuguese-language newspaper Ponto Final, the prosecutors’ were particularly critical of the government’s decision not to heed their suggestion on a reform “and improvement” of the pre-trial phase. The office is also worried about the proposal to extend the period for adding documents to the procedures or to file an appeal from 10 to 20 days, stressing that the measure could “turn out to be an inappropriate way to delay the whole process”. Meanwhile the assembly committee has also asked for an opinion from the Macau Lawyers Association and the Judicial Magistracy Council.

he government wants monthly contributions to the Social Security Fund to double but an expert warns that further increases will soon be needed to create a sustainable welfare net. Social Security Fund deputy director Chan Pou Wan on Sunday said monthly contributions would increase to 90 patacas (US$11.30). The number of beneficiaries has soared from 38,000 to more than 60,000 since the revamped social security fund came into effect in 2010, she told reporters on the sidelines of a public event in Iao Hon. If contributions did not increase, the fund’s sustainability would be at risk and even more so as the city’s population becomes increasingly older. With a big part of the population now aged between 55 and 64 years, the number of elderly will increase rapidly in the next few years. The 2011 Census highlighted an acceleration in the trend. Macau currently has the second best demographic profile in the world, but according to a 2010 International Labour Organization report, there will be eight non-working residents – children and elderly – for every 10 active workers by 2050. In October 2010, Social Security Fund president Ip Peng Kin said one forecast predicted that the financial health of the social security system was secure for at least 50 years. “The scheme’s budget will continue to be balanced,” he said at the time.

Balance shifts But University of Macau professor Jenny Huang Bihong says even after doubling payments to the fund, its long-term future could only be secured with further top-ups from the government. Thegovernmentannouncedlastmonth it would inject 2.3 billion patacas into the Social Security Fund in October, by depositing 6,000 patacas in each central saving system’s account. “Thecontributionneedstobeincreased regularly because at this point the system depends on government

allocation of money coming from the casino tax revenue,” said the social security expert at the university’s Faculty of Business Administration. She said revenues from the city’s casinos would not always be able to plug gaps in the fund. Year-on-year gambling growth slowed to just 1.5 percent last month.

KEY POINTS Payment to Social Security Fund set to double Critic says increase still not enough to sustain system Workers’ payments to be matched by employers Monthly old-age pension may also be raised

Ms Huang expects the government will increase contributions for at least the next two to three years but in a gradual manner that builds widespread public acceptance. Just last month, Mr Ip admitted that the contribution should be much higher – around 440 patacas – to ensure that paying a monthly pension of 2,000 patacas each to the city’s retirees did not deplete the fund. For now, the burden of the planned increase will be lighter for employers. “We will also adjust the ratio of employers and workers’ contributions. We hope to change it from a 2-to-1 ratio to 1-to-1,” Ms Chan said. The citywide social security system was launched in January last year with the monthly contribution set at 45 patacas. Employers are required to pay two-thirds, 30 patacas, while workers pay just 15 patacas.

Pension boost If the new proposal is approved, both workers and their companies

would pay 45 patacas a month. Employers’ contribution would increase by 50 percent while workers’ bill would triple. The Social Security Fund wants to implement the new ratio by 2015, Ms Chan said. “We are taking a step-by-step approach,” she said. “We hope we can reach that point by 2015.” The proposal got the cold shoulder from the Macau Federation of Trade Unions. “I think the current 2-to-1 ratio is more appropriate,” said federation president Chiang Chong Sek. “Even if they change it in the future, the authorities should consider the economic situation, employees’ salary levels and whether they can afford to pay this,” TDM News quoted him as saying. MsHuangdownplayedtheimportance of the ratio, adding that contributions were factored into labour costs. In other jurisdictions, she said workers contributed more than employers and it was “reasonable” for Macau to follow suit. Employers are also wary of the planned changes, according to the president of the Macau Association of Building Contractors and Developers, Tommy Lau Veng Seng. “I think this increase should be implemented gradually because employers don’t want to face this sudden increase,” the Englishlanguage Macau Post Daily quoted Mr Lau as saying. Mr Lau sits on the board of directors for the Social Security Fund. The proposal delivered to the government also suggests increasing the elderly pension. It was last revised from 1,700 to 2,000 patacas in April last year. Ms Huang, who authored a book on the mainland’s pension scheme, agrees with the increase and would like to see it indexed to the inflation rate, which has remained above 6 percent since March. She said any increase to the pension would, however, defeat the purpose of the increasing the size of contributions and lead to a more rapid depletion of the fund.

August 7, 2012 business daily | 3

MACAU

New casino age limit effective in November Only those aged 21 or above will be able to enter or work in casinos Xi Chen

xi@macaubusinessdaily.com

Casino entry age to be tightened, says Francis Tam Pak Yuen, Secretary for Economy and Finance

esidents and visitors between 18 and 20 years old will no longer be able to access Macau casinos, after legislators overwhelmingly supported a bill newly regulating entry, employment and gambling in casinos. The bill was originally due to come into force on July 2. It will now be effective from November 1 following lengthy discussion by the Legislative Assembly’s first standing committee. The law will raise from 18 to 21 the age at which people can visit or work in casinos. Qualified technical staff younger than 21 years old can still work in casinos if the employer obtains a special permission from

the head of the Gambling Inspection and Coordination Bureau. “The committee decided to support the bill to protect the youth of Macau. However, young people can still be exposed to other types of gambling such as horse racing, dog racing, sports betting etc,” committee president Kwan Tsui Hang warned. “The government should consider measures in the future for the other areas. Some of the new rules are set out to help pathological gamblers, however the execution of the law can be difficult,” the legislator added. Casinos will be able to check people’s identification selectively at the entrance if they suspect the visitor

is under 21. Legislator Paul Chan Wai Chi said a more feasible way to implement the rule would be for all visitors to present an identification card when entering casinos. In response, Secretary for Economy and Finance Francis Tam Pak Yuen said that “the control over casino entries will be tightened and guests will be checked even if there is the slightest suspicion”.

Ban doubts Individuals that break the law will be fined between 1,000 patacas (US$125) to 10,000 patacas. Casino operators can be fined

between 10,000 to 500,000 patacas if they have allowed people aged below 21 to enter or work in the premises, even if it is due to negligence. However a legal advisor for the administration clarified that if the individual misleads the casino on purpose, the casino will not be penalised. All fines collected will be counted as government revenue The new law also states that people with mental problems and gambling addictions are banned from entering casinos. But legislator Mak Soi Kun questioned how the government would define who is considered “crazy” and how gambling operators could know whether a person entering the casino is a gambling addict or not. The law also allows pathological gamblers to be banned from entering the casino for up to two years, if they filed a request or accepted a request filed by close relatives. Legislator Au Kam San stressed pathological gamblers might not recognise themselves as addicts, and thus would not volunteer themselves or accept a ban, which would make enforcing the law difficult. Legislator Ho Sio Kam agreed and also added that the government should beef up efforts on education and advertising for responsible gambling, as well as to start the legislative process on online gambling. Despite these minor issues, the bill was passed with little difficulty. Only legislator Ho Iat Seng abstained from voting on the provision, due to doubts over the exception created for qualified technical staff younger than 21 years old, he told media after the session. The rest of the bill passed with support from all 25 legislators present at the gathering.

Shopping mall for Call for law new border crossing on illegal labour T Legislator Angela Leong

he new border crossing planned for the northern Macau district should include a “huge leisure shopping centre,” Angela Leong On Kei said during yesterday’s Legislative Assembly session. The Macau and Guangdong province governments are looking for approval from Beijing to launch the new crossing, which will be located in the current site of Nam Yuet Wholesale Market, in Ilha Verde.

The legislator believes the project is also an opportunity to “completely change the residential and commercial landscape” of the district, but only if the government learns from the mistakes made in the planning of the Gongbei border crossing. The businesswoman said traffic was given priority in Gongbei’s planning, while commercial areas “were almost forgotten”. In the end, the district has little benefit from the huge flows of visitors coming into Macau, she bemoaned. The executive director of Hong Kong-listed gambling operator SJM Holdings Ltd called for the construction of a shopping mall but also of facilities for conventions and exhibitions and budget hotels. In addition, authorities should improve pedestrian links to Dr Sun Yat Sen Municipal Park, the Ilha Verde hill, Avenida Horta e Macau and the Lam Mau area, Ms Leong said. V.Q.

he government must draft “as soon as possible” a specific law to “solve once and for all” the issue of illegal labour, legislator Kwan Tsui Hang said during yesterday’s Legislative Assembly meeting. The legislator said the existing legal framework used to tackle illegal labour has been found lacking. “Due to the flaws and deficiencies of the system … as well as due to the difficulty in presenting evidence, it is difficult to catch the offenders,” she said. And even when the case goes all the way to the end, “in most situations a suspended prison sentence is applied or the sentence is replaced by a fine,” said Ms Kwan, also the vicepresident of the Macau Federation of Trade Unions. The fight against illegal work “has not been producing any deterrent effects,” she added. Ms Kwan urged the government to fulfil a promise made by former

Chief Executive Edmund Ho Hau Wah and draft a specific law “that heavily punishes whoever hires illegal workers”. Such law should “clearly prescribe an actualjailterm…withoutthepossibility of suspension or replacement with a fine,” she said. In addition, fines should be higher and other punishments should be introduced. V.Q.

Legislator Kwan Tsui Hang

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business daily August 7, 2012

macau

Pachinko firm ‘talks’ with Macau ops on Japan: boss But Land of Rising Sun casino plans ‘uncertain’: consultant Associate Editor

eports that a newly Hong Kong-listed pachinko hall operator in Japan is talking to Macau casino operators – about bidding for a Japanese casino licence – have been played down. “Progress on the Japan casino licence legislationisuncertainatthemoment,” says Aki Tsuruoka of Gaming Capital Management, a Tokyo-based consultancy currently advising a procasino group of Japanese lawmakers called the Casino Congress Member Association. “The government has a lot of other domestic issues to deal with, as well as controversy with the parliamentary opposition. That contributes to the political situation being quite unstable,” he adds. Dynam Japan Holdings Co. – an operator in Japan of 355 halls for the pinball-based game pachinko – raised HK$1.5 billion (US$194 million) from an initial public offering in Hong Kong yesterday. Yoji Sato, Dynam’s chairman and

companies, he added. Dynam had hoped to raise US$250 million from its Hong Kong IPO according to a July report in Japan’s Asahi Shimbun newspaper. The stock started trading at HK$12.40 yesterday – 11.4 percent below its offer price of HK$14 – despite Mr Sato’s positive comments regarding possible talks with Macau casino concessionaires about a tie up in Japan.

Pachinko – a uniquely Japanese industry seeking new allies

chief executive said yesterday in heralding his firm’s move: “If legal systems are developed for casinos in Japan, Dynam group would like

to partner as a casino operator with big overseas casino operators.” His company has been getting offers to meet with Macau gambling

19.4 trillion yen pachinko sales in 2010

Greener pastures for pachinko fund raising Parlour operators find barriers to cash in Japan

ne reason for Dynam Japan Holdings Co. listing in Hong Kong rather than Tokyo – suggested some analysts spoken to by Business Daily – is that pachinko operates in a legally grey area in Japan and it’s hard for pachinko companies to raise funds via public markets. “We have been in talks with other pachinko operators to list in Hong Kong. Many of them want to list here, not just one or two,” says Mitch Minakata, a senior partner at Seiwa Audit Corp., the Japanese

branch of RSM International Ltd, a global network of independent accountancy firms. Dynam’s Hong Kong IPO prospectus indicates the challenges faced by pachinko operators at home. It states: “Because no Japanese laws explicitly address the legality of the Three Party System on which the pachinko industry is based, there are legal uncertainties with respect to our business. We face the risk of anti-social forces being involved in the pachinko industry. The pachinko industry has historically been linked

Changing times Pachinko sales falling since mid 1990s

he short-term reason for Dynam to raise money in Hong Kong is so it can consolidate its share of Japan’s pachinko market by building bigger better venues and possibly buying out smaller rivals. Dynam is one of the ‘big three’ pachinko operators – those that each have more than 100 parlours. But it still has currently only 2.7 per cent of the market. That’s because more than half of the 4,000-plus pachinko operators only have one parlour each. “We will increase the market share by building new parlours as well as acquiring other operators’ halls,” said chairman Yoji Sato, adding that 75 percent of the IPO proceeds – about HK$1.2 billion – would be

used to finance 75 new halls in the next three years. Dynam posted a net profit of 15.9 billion yen (US$202 million) on sales of 165.1 billion yen for the financial year through March 31, according to a filing with the Hong Kong Stock Exchange. That was 1.8 percent down on the 16.2 billion yen net profit a year earlier. Sales in Japan’s pachinko industry are more than seven times those of the gross revenues generated Macau’s casino industry. Pachinko gross revenue stood at 19.4 trillion yen (US$247.4 billion) in 2010 – the most recent available figures – says Japan Productivity Center, a non-profit body set up by the Japanese government. The Center advises on management innovation

to anti-social forces.” That’s a reference to the linkage in sections of the Japanese media of the yakuza – Japan’s organised crime gangs – with portions of the pachinko industry. The sector has also been linked with police corruption. A 2003 study called ‘Above the Law? Police Integrity in Japan’ presented to some of Japan’s leading lawyers at the Japan Federation of Bar Associations, identified pachinkorelated corruption as one of the three main pillars of police graft. A.E.

in Japanese industry. Macau last year reported gaming revenue of 268 billion patacas (US$33.5 billion). But the sales trend for pachinko has been steadily down since the mid1990s adds the Center. In addition gross margins on pachinko are typically modest – nine percent to 10 percent of sales compared to the 35 percent that can be achieved on mass-market table games in Macau. Japan’s pachinko parlours also traditionally lack the supporting revenue streams such as shopping and restaurants that are features of Macau’s casino resorts. The pressure is therefore on the pachinko operators to offer bigger, more luxurious venues both to diversify the entertainment offer and bring in customers new to the game – particularly women. Dynam’s Hong Kong listing may therefore be more a function of pachinko’s domestic challenges than of a desire among mainstream Japanese companies to raise cash on the city’s bourse. Hong Kong

Yoji Sato, chairman of newly Hong Kong-listed Dynam Japan Holdings Ltd

is nonetheless perceived in Asia as one of the more liberal regulatory environments – despite the recent announcement of a tightening on the policing of IPO prospectus statements. That followed a series of accounting scandals among mainland companies listing in the city. Mitch Minakata of Seiwa Audit Corp. said one reason for Japanese companies coming to list in Hong Kong was the tightening in Japan’s stock market regulations over the past five years. “The standard for getting listed in Japan is getting higher,” he said, adding: “It’s too tight for companies. You don’t have a Sarbanes-Oxley in Hong Kong.” The U.S. government passed the Sarbanes-Oxley Act in 2002, in reaction to several corporate accounting scandals at U.S.-listed companies including the energy firm Enron and the security systems business Tyco International. A.E.

August 7, 2012 business daily | 5

MACAU

Reform bills to be ready before summer break The government’s political reform bills are one step closer to being passed by the Legislative Assembly Tony Lai

tony.lai@macaubusinessdaily.com

he Legislative Assembly is on track to pass the two bills on political reform before its summer recess. Chan Chak Mo, who chairs the assembly’s second standing committee, said his committee agreed with the latest versions of the bills, in which the government changed the wording for clarity. The bill designed to add four seats to the chamber now also includes a line saying the number of directlyelected and indirectly-elected members can be changed after next year’s elections, if the change is made “in accordance with the legal procedures”. “We are now drafting our opinion… and we hope to submit the proposals to the assembly by August 15,” Mr Chan told reporters yesterday after a committee meeting. The committee expects the bills to be ready to be passed during this current session of the assembly, which ends on August 31.

The bills would add two directlyelected and two indirectly-elected seats to the assembly in time for next year’s elections, and increase the number of members of the committee that elects the chief executive from 300 to 400. The committee also discussed a bill to change the structure of legal aid yesterday. The bill seeks to establish a committee to screen legal aid applications and would require the committee’s chairman to hold a law degree. Subsidiary legislation would govern the committee’s composition. Membersagreedwiththegovernment’s proposal and objected only to technical flaws in the draft bill. “We have had many meetings before and the government will not make any big adjustments any more,” Mr Chan said. He expects his committee to be ready to report on the bill by the middle of this month so it can have its final reading before the summer recess.

Bank loans growing faster than deposits B

ank loans grew faster than deposits in June but the capitalisation of the banking industry here is still healthier than in other developed economies, data released by the Monetary Authority of Macau yesterday show. The data show the banks set records for loans and deposits in June. Their deposits rose by 0.6 percent from May to a record 479.5 billion patacas (US$58.8 billion), mainly because of growth of 1.8 percent in deposits by non-residents, which reached 125.7 billion patacas. Their loans to the domestic private sector increased by 2.5 percent to a record 179.8 billion patacas and their loans abroad rose by 6.8 percent. With lending growing faster than deposits, the value of their loans

was 79.5 percent of the value of their deposits in June, 3.1 percentage points more than in May. This proportion is greater than the 75 percent ceiling set for all commercial banks in the mainland, but lower than the 110 percent average in the European Union, according to the Wall Street Journal. The high loan-to-deposit ratios of European banks have caused them problems. But if loan-to-deposit ratios are too low, banks may not be earning as much as they could be. This may be the case with the business Macau banks do with residents. The value of loans to residents was only 50.8 percent of the the value of deposits by residents In June, 1.2 percentage points more than in May. V.Q.

Chan Chak Mo said he hopes to submit the political reform bills to the assembly by August 15

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business daily August 7, 2012

macau

SMEs see hope in sluggish economy A stuttering economy may give smaller businesses the chance to grab workers Tony Lai tony.lai@macaubusinessdaily.com

Lack of information is deterring SMEs from becoming involved in the development of Hengqin Island

he slowdown in economic growth may help rather than hinder the city’s smaller businesses, the Macau Small and Medium Enterprises Association says. Association president Stanley Au Chong Kit said SMEs had been suffering from high rents and a shortage of suitable manpower, exacerbated by overwhelming competition for labour from the gaming industry in the past decade. But he told a seminar on Saturday that the sluggishness of the economy could benefit smaller businesses. The economy grew at an annual rate of 18.4 percent in the first quarter of this year. But Secretary for Economy and Finance Francis Tam Pak Yuen forecast last month that growth this year would slow to a “high single-digit” rate. Growth in gaming revenue last month was the slowest since the global financial crisis in 2009. The director of the association, Kenneth Lei Chi Leong, said the economic slowdown could help SMEs by “stabilising human resources”. SMEs have long complained about the casinos poaching their employees. “With the slowdown in the gambling sector, we expect there will be lower staff turnover in the SMEs,” Mr Lei told Business Daily. “We are more capable of retaining staff.” Last year the city’s employee turnover rate was around 12 percent but there are no separate figures for employee

turnover among SMEs. The association says the city’s small businesses are unable to compete with the gaming industry for labour during boom times, as the pay and benefits they offer cannot compete with packages offered by the casinos. “There may even be staff available in the market after being released by the gaming operators who can be absorbed by the SMEs during periods of downturn,” Mr Lei said.

Mystery island Mr Lei said the present unemployment rate of 2.1 percent meant “almost every citizen is employed”. But he thinks the government should give more information about unemployment than “just a figure”. He said the administration should disclose the number of unemployed residents that were actually looking for jobs, and the reasons they were unemployed in the first place. SMEs also feel they are missing out on opportunities presented by the development of Hengqin Island. The association says they can only look on from the sidelines as they are in the dark about the island’s future. “It has been suggested the Hengqin border crossing be open for 24 hours and the local SMEs are keen on the idea. But no progress has been heard of for these past two years,” he said. Mr Lei complains that the government gives news about Hengqin only when asked.

With the slowdown in the gambling sector, we expect there will be lower staff turnover in the SMEs Kenneth Lei Chi Leong, Macau SMEs Association director

“The government should take a more direct role in the development … and release relevant information regularly to the SMEs,” he said. The government announced in November 2010 that approval for the Lotus Bridge crossing for vehicles to be open around the clock was due to be given early in the following year. Chief Executive Fernando Chui Sai On said last month that the opening hours of the Gongbei and Hengqin crossings would be extended but that the exact arrangements had yet to be decided. Mr Lei said it could take a few years for the infrastructure in Hengqin to be completed so the island could begin attracting investors.

Weather Beijing 32/25o C Changchun 31/21o C

Harbin 31/22o C

Xian 34/21o C Shanghai 29/25o C Chengdu 33/22o C Kunming 25/17o C Haikou 30/24o C Sanya 32/27o C

Guangzhou 34/25o C

MACAU (6-11 August) Day

Temperature

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08/06

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08/07

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50/95 %

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55/95 %

Shenzhen 34/28o C

ASIA (today)

Hong Kong 33/28o C

Manila

TOKYO

Jakarta

29/25o C

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Macau 34/27o C

Bangkok

SEOUL

K. lumpur

31/27o C

SINGAPORE

33/24o C

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taipei

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August 7, 2012 business daily | 7

Macau firm opens hotel in Xinjiang Hang Huo opens the first five-star hotel in the Xinjiang city of Shihezi, strengthening links with the resource-rich region Xi Chen

xi@macaubusinessdaily.com

acau conglomerate Hang Huo Enterprise Group Ltd opened a five-star hotel in the western Chinese region of Xinjiang on Sunday, the Chinese-language Macau Daily News reported. The new Grand Link Hotel is in Shihezi, the region’s second-largest city after the capital, Urumqi. It is the first five-star hotel in Shihezi. The property covers 55,000 square metres and has more than 300 rooms. Hang Huo president Ngan Iek said the group was the first company from Macau to invest in Xinjiang, when it started a property company and a venture capital business there in 2006. The venture capital business had one Xinjiang company listed on the Hong Kong Stock Exchange and another four were in the process of going public. Shihezi’s mayor, Wang Pinghai, said he hoped the Grand Link would promote the city and attract more investment from Hong Kong and Macau. Attending the opening ceremony was a delegation of Macau members of the National Committee of the Chinese People’s Political Consultative Conference, including former chief executive Edmund Ho Hau Wah and Hang Huo’s chairman Ngan In Leng. The delegation met Xinjiang officials to discuss the region’s development. Mr Ngan said Hang Huo had been involved in big projects in numerous

industries through collaboration with local and stateowned companies. The group has interests in tourism, farming, irrigation, food processing and mining. He said Xinjiang was resource rich and had huge potential for development but lacked manpower. To attract investment and lessen the shortage of labour, the regional government should offer tax incentives and train and employ more workers belonging to ethnic minorities. Most the people of Xinjiang are either Uyghurs or Kazakhs. Mr Ho said Macau would continue to support Xinjiang and he hoped the two regions could cooperate more closely in culture, education and tourism. Chief Executive Fernando Chui Sai On visited Urumqi for last year’s China-Asia-Europe Economic Development and Cooperation Forum. “We pay attention to and strive to fully support Xinjiang’s development and progress,” he said at the time. Mr Chui promised closer cooperation with Xinjiang in the fields of education and culture, and that Macau would help it promote its “abundant tourism resources” and its trade with Portuguesespeaking countries.

Former chief executive Edmund Ho led a Macau delegation on a visit to the Xinjiang region at the weekend

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business daily August 7, 2012

greater china

Chinese economy likely to stabilise at Concerns deepen on world trade slowdown effects

nvestors will be looking to a data deluge from China this week to give the global economy a further lift after last Friday’s strong U.S. jobs report. They risk being disappointed. Figures for July, starting on Thursday and covering everything from trade to bank loans and investment, are likely to show the world’s second-largest economy is, at best, stabilising rather than recovering briskly. And while Beijing has both the will and the means to provide extra fiscal and monetary stimulus if growth flags, China-watchers rule out a repeat of the massive expansion of credit that successfully rebooted the economy after the global financial crash of late 2008. That means China, and Asian economies increasingly tied to it, can do little to overcome the headwinds blowing in from the United States and, especially, Europe. “The problems in Asia that are causing the slowdown come predominantly from outside the region,” said Rob Subbaraman, chief economist for Asia at Nomura in Hong Kong. “Europe is a bigger than the U.S. as an export market for most Asian countries now, and it’s a big investor in the region.”

Rebalancing act Asia as a whole wants to wean itself off exports and generate more domestic growth. China’s current account surplus is just a third of

what it was in 2007. The process, though, is generally slow. “Over the next decade we will see domestic demand becoming a bigger engine of growth for China, and that will change the picture quite a lot for Asia,” said Rajiv Biswas, chief AsiaPacific economist for IHS Global Insight in Singapore. “But we’re not yet in a situation where the growth engine in Asia is strong enough to cruise through a recession in Europe and stagnant growth in the U.S.,” he added. China’s economy expanded 7.6 percent from a year earlier in the second quarter, the slowest pace in three years. Economists expect growth to pick up moderately in coming months since Beijing has cut interest rates and is speeding up the approval of investment projects. But this year has been remarkable so farforwhathasnothappenedinChina: the ruling Communist Party has not gone flat out for growth despite the imperative to preserve economic and financial stability ahead of a once-ina-decade leadership transition. That is because the 2008 pumppriming has swapped one sort of dangerous imbalance for another: China’s external surplus has shrunk, but the economy has become more dependent than ever on investment, which accounts for close to 50 percent of GDP. Personal consumption, by contrast, is no more than 35 percent of GDP, half that of the United States. Beijing wants better-balanced

growth and so, to the surprise of some, it has kept in place curbs to tamp down house prices. It has also kept local government investment on a fairly tight leash. Seen in this light, the danger from this week’s figures is not so much that growth undershoots but that, if it does, Beijing presses the panic button and puts investment spending back on the fast track. “The risk is that you get more stimulus but it leads to a more unbalanced economy,” Nomura’s Mr Subbaraman said. As such, he said he would be paying particular attention to the relative strength of July’s data on retail sales and fixedasset investment. Economists have been paring their full-year growth forecasts for China to 8 percent or less. Markets would react badly to a further slowdown, but Ting Lu, Bank of America Merrill Lynch’s China economist, said even a 7 percent pace would not be bad given the weakness in the global economy. “We expect China to achieve a growth soft-landing if the euro zone does not break up,” Mr Lu, who has an 8 percent forecast, said. “We see many risks, but the Chinese economy is still far from collapse.”

Shifting down a gear

7.6%

Second quarter year-on-year growth

Economists at Barclays Capital agreed that the overwhelming likelihood was recovery rather than

PBOC pledges to adjust monetary, credit policies

Chinese state

In bid to boost ‘the development of the real economy’

U.S. expressed concern o

Worrying about a slowing economy

hina’s central bank pledged on Sunday to intensify its monetary policy fine tuning in the second half of this year and improve credit policy to bolster the real economy, echoing earlier government commitments amid an economic slowdown. The comments follow a meeting of China’s top policymakers last week which said Beijing would step up efforts to make policies more targeted, pre-emptive and effective to cope with decelerating growth. “In the second half, we must continue to

reinforce fine-tuning and pre-emptive adjustment in monetary policy and improve credit policy to support the development of the real economy,” the bank said in a statement on its website. The People’s Bank of China will enhance research into the economic situation at home and abroad to better steer policy and help maintain stable and relative fast economic growth this year, it added. The central bank said it would widen the use of its yuan currency in cross-border trade and investment, and repeated that it would gradually push ahead

with capital account convertibility for the yuan. The central bank has also analysed potential problems faced by the country’s financial sector and will strengthen supervision to prevent systemic risk in the industry. However, it did not say how it would contain such risks. China’s economy is facing downward pressure from shrinking external demand and a domestic property market downturn, with the annual economic growth rate slowing to 7.6 percent in the April-June period, the slackest pace in more than three years. To spur growth, Beijing has followed a programme of policy fine-tuning since the autumn of 2011, cutting interest rates, easing rules on bank lending, fast tracking investment projects and cutting taxes and bureaucracy for businesses. The latest Reuters benchmark poll forecasts that China’s economy should recover modestly in the second half, with growth of 7.9 percent in the third quarter and 8.2 percent in the fourth quarter. China’s official factory purchasing managers’ index fell to an eightmonth low of 50.1 in July, suggesting the sector is barely growing, while a rival HSBC survey indicated the more market-sensitive private sector is starting to recover. Reuters

hina’s state-controlled media lashed out at the United States yesterday,accusingWashington of “trouble-making” over criticism of Beijing’s claims to a wide swathe of the disputed South China Sea. China’s ire was provoked by a U.S. State Department statement Friday expressing concern over increased tensions in the area and criticising Beijing for establishing a new city and military garrison on an island in the waters. The Chinese foreign ministry reacted Saturday by summoning a senior U.S. embassy diplomat, who was told

August 7, 2012 business daily | 9

greater china

lower growth level

Deal to exploit coalbed methane Cnooc Ltd, China’s largest offshore oil producer, has signed a deal to spend 9.93 billion yuan (US$1.56 billion) to explore for coalbed methane (CBM) in China over the next five years as part of a 30-year agreement. A deal on the project was signed between Cnooc Ltd and China United Coalbed Methane Corporation Ltd, which is half owned by Cnooc’s parent, China National Offshore Oil Corporation (Cnooc Group), and half owned by China National Coal Group Corp, CNOOC said in a filing with the Hong Kong bourse. The two firms aim to explore, develop and produce methane gas in China for 30 years, Cnooc said. China is investing 100 billion yuan to double coalbed methane output by 2015. Beijing wants gas output from coal seams of up to 30 billion cubic metres (bcm) by 2020, which would account for 15 percent of China’s total gas production, up from 5 percent last year. Beijing plans to double the share of natural gas in its energy mix by 2015 and reduce the role of coal in a bid to ease pollution and slow greenhouse gas emissions. China will import more gas, but it also aims to boost output from domestic natural gas fields as well as develop unconventional sources of gas.

KEY POINTS China poised to recover but not roar Economy stabilising after 30 years of double-digit growth Europe and Asia tied to each other

CSCR drafts rules for staff holding shares

relapse in China over the rest of the year as the government steps up efforts to support growth. But they said financial markets needed to adjust their expectations to a China that grows at 8 percent

a year and not the 10 percent average annual rate of the past three decades. “Unlike post the 2008-09 crisis, China will not save the world. Political and economic constraints in China (as well as in

the other economies) suggest there will be no silver bullet or panacea to quickly pull the global economy out of the doldrums, and 2012 will be a difficult year,” they said in a report. Reuters

China’s stock regulator is considering a scheme under which listed companies can buy back shares and use them to pay up to 30 percent of wages and bonuses for staff, its latest move to help boost the country’s sagging stock market. In draft rules published over the weekend, the China Securities Regulatory Commission (CSRC) said the shares issued to staff would have to be bought on the secondary market, which would support stock prices, and staff must hold the shares for at least 36 months. Shares held by staff members must not exceed 10 percent of a listed company’s outstanding shares in total, and a single employee could hold no more than 1 percent, according to draft rules published on the regulator’s website. The regulator is seeking public comment on the proposed changes by August 17. Draft rules are typically brought into effect with only minor changes two weeks to a month after the deadline for comment. The CSRC has recently taken a slew of steps to boost China’s stock market, including cuts to transaction fees and encouraging China’s 2,000-plus listed companies to buy back their own stock.

e media blast U.S. over sea criticism

on mounting regional tensions

Taiwan’s inflation puts strain on Central Bank South China sea disputes not fading

Washington must “respect China’s sovereignty and territorial integrity”. The China Daily newspaper kept up the heat Sunday, stating in an editorial that the U.S. statement “has deservedly evoked curses on the street” and describing it as “outright trouble-making”. It said the U.S. criticism of Sansha, the new city China established last month in the Paracel Islands to back its claims, “displays stunning disregard for the principle of noninterference in another country’s internal affairs”. A commentary in the overseas edition

of the People’s Daily, the mouthpiece of the Communist party, used more colourful language, bluntly telling the United States to “shut up” on the issue. “The statement by the U.S. side confuses right and wrong, strongly misleads public opinion, sends the wrong signal and should be sternly refuted,” it said. “We can completely shout to the U.S.: shut up.” China, citing centuries of contact, says it owns much of the South China Sea, including the disputed Paracel and Spratly islands. The Philippines, Vietnam, Brunei,

Malaysia and Taiwan also claim parts of the sea as well, and the dispute has become more pronounced in recent months. Friday’s statement, issued by State Department spokesman Patrick Ventrell, said the U.S. was “concerned by the increase in tensions in the South China Sea” and was “monitoring the situation closely”. The new garrison and city run “counter to collaborative diplomatic efforts to resolve differences and risk further escalating tensions in the region,” the statement said. AFP

Taiwan’s inflation rate in July rose to the highest in more than three years as the cost of food climbed, reducing scope for the central bank to support growth. The consumer-price index rose 2.46 percent from a year earlier, compared with a 1.77 percent pace reported for June, the statistics bureau said in Taipei yesterday. The median of 12 estimates in a Bloomberg News survey was for a 1.95 percent gain. Taiwan’s inflation has accelerated even as the economy struggles, with gross domestic product contracting in the second quarter from a year earlier as Europe’s debt crisis and a slowdown in China hurt exports. The island’s central bank has left interest rates unchanged for more than a year, striving to support expansion while containing price pressures. “The high CPI number has killed rate-drop expectation out there,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp. “The central bank probably won’t cut interest rates in September, and will use other monetary policy tools to boost liquidity.”

10 |

business daily August 7, 2012

asia

Indonesia’s growth unexpectedly quickens Pick up supported by domestic consumption, investment

ndonesia’s economy unexpectedly accelerated as rising investments countered declining exports, reducing pressure for monetary easing as the nation withstands Europe’s sovereign-debt crisis. Gross domestic product rose 6.37 percent in the three months ended June 30 from a year earlier, the Central Bureau of Statistics said in Jakarta yesterday. That compares with a revised 6.32 percent gain for the first quarter and above the median estimate of economists’ forecast. Growth in Southeast Asia’s largest economy has held above 6 percent this year, the fastest among Group of 20 nations after China, even as the faltering global recovery hurt its currency and damped expansion in neighbours from Taiwan to Singapore. President Susilo Bambang Yudhoyono has sought to boost investor confidence as he strives to leave behind the turmoil of the Asian financial crisis, when the country was forced to seek an International Monetary Fund bailout. “The data points to strength of domestic demand,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “It reduces the already slim odds of a rate cut” this week, he said. Economists however cautioned policymakers may need to consider tighter policy in the medium-term to prevent distortions in the economy as rising imports causes a trade deficit. “The strong Q2 growth provides a cushion against the risk of

further growth setbacks in the rest of the year,” said Aninda Mitra, an economist at ANZ Bank in Singapore. “But we still think policymakers will need to tighten policies to ensure that the strong growth does not destabilise the external financing gap, which could be rupiah negative and ultimately not good for inflation either.”

Rate decision As demand from China and Europe fell in recent months, Indonesia has had consecutive trade deficits between April and June, putting pressure on the rupiah. The currency, which has fallen 4.4 percent against the dollar this year, is the secondworst performer among emerging Asian currencies. “As per today’s data, Indonesia remains one of the fastest growing, and perhaps more importantly, one of the most stable economies in Asia,” said Taimur Baig at Deutsche Bank in Singapore. But he added: “We are concerned that rates are too low and could cause over-consumption and investment in the medium term, but for the time being we remain comfortable with the view that Indonesia is poised for 6 percent plus growth this year and next.” Bank Indonesia Governor Darmin Nasution and his board will keep the benchmark reference rate at 5.75 percent on Thursday, most economists predicted.

Policy makers from China to South Korea and the Philippines lowered rates last month, a move Mr Nasution may avoid amid the risk of price pressures as the world’s largest Muslim population observes the fasting period of Ramadan and the Eid al-Fitr festival that marks its end. Consumer prices rose 4.56 percent last month from a year earlier, after climbing 4.53 percent in June, the statistics bureau said last week. Bank Indonesia forecasts inflation of 3.5 percent to 5.5 percent in 2012 and 2013. President Susilo Bambang Yudhoyono has pledged to build more roads, ports and airport to achieve average growth of 6.6 percent by the end of 2014. In July, the central bank lowered its GDP forecast to about 6.1 percent to 6.5 percent this year, from a previous estimate of as much as 6.7 percent growth. The expansion may be of about 6.3 percent to 6.7 percent in 2013, it said.

is the widest in at least five years. Exports fell 16.4 percent in June from a year earlier, while imports rose 10.7 percent. Second-quarter growth was mainly supported by investment, government spendingandhouseholdconsumption, while exports slowed due to declining commodity prices as demand eased on Europe’s debt crisis, according to the statistics bureau. Investment climbed 24 percent to 76.9 trillion rupiah (US$8.1 billion) in the three months ended June 30 from a year earlier, M. Chatib Basri, chairman of the Investment Coordinating Board, said on July 25. Low interest rates have spurred loan growth and helped commercial banks to post higher net profits. PT Bank Central Asia, Indonesia’s biggest financial services company

Trade deficit Indonesia’s growth in the second quarter is the fastest in the G-20 after China’s 7.6 percent. Many countries in the group haven’t released data for the same period. While investment in Southeast Asia’s largest economy is increasing and has bolstered imports, easing exports led to a June trade deficit of US$1.32 billion that data showed

6.37% Indonesian GDP growth in the second quarter of 2012

Vietnam to ease rules to lure stock investors Planning to cut the minimum holding period for stocks and widening trading bands

ietnam plans to ease rules on equity trading and accelerate initial public offerings of stateowned companies this year to attract investors to a market that’s valued almost 15 times less than Singapore’s. The State Securities Commission is preparing to cut the minimum holding period for stocks, Nguyen Doan Hung, vice chairman of the commission, said in an e-mailed response to questions from Bloomberg. The regulator is also considering widening stock trading bands and starting an online auction system to boost volumes and speed up sales, he said, without specifying when the measures may be started. “These are the right steps to make the market more competitive and as attractive for traders as its regional peers,” Attila Vajda, a broker at ACB Securities Ltd, the nation’s third-largest brokerage, said. Vietnamese stocks are valued at US$37 billion, compared with US$552 billion in Singapore, Southeast Asia’s largest market, even after the benchmark VN Index jumped 19 percent this year. The value of stocks changing hands on the Ho Chi Minh City Stock Exchange slumped 40 percent last month from June. Vietnamese companies raised about US$10 million from IPOs in the

first half of this year, while Malaysia’s IHH Healthcare Bhd. raised US$1.98 billion in an IPO in July. The VN Index is the third-best performer in Asia this year, rebounding from a 27 percent loss in 2011 amid speculation the central bank would ease monetary policy to bolster growth. The gauge is valued at 9.9 times estimated profit, from a record low of 7 times in January. The MSCI Emerging Markets Index traded for 10.4 times on August 3.

Trading bands The value of Vietnam’s equity market has jumped 40 percent this year, the biggest expansion after Venezuela, according to data compiled by Bloomberg. Malaysia’s market is valued at US$432 billion and Indonesia’s US$407 billion, while Japan is worth US$3.48 trillion. Vietnam’s stock market is classified by MSCI Inc. as a frontier market, which denotes an average stockmarket value of about US$27 billion. To help lure investors, the State Securities Commission wants to cut the minimum period investors must hold shares to two days from three days by the end of this year, and reduce it further to one day

Vietnam’s two exchanges have about 700 stocks

next year, said Mr Hung. The limit on daily share-price gains or losses may be widened from 5 percent on the main Ho Chi Minh City exchange and 7 percent on the Hanoi Stock Exchange, he said. “Wider bands would help increase circulation of stocks in the market, bringing more trading options,” Giang Trung Kien, Hanoi-based head of research at FPT Securities Joint-Stock Co. said. “Liquidity would definitely rise.” The government also said that it will lift from September 15 the amount of registered capital companies must have to list on Vietnam’s exchanges

in a bid to improve the quality and size of publicly traded equities. The value of Vietnamese IPOs sank by 50 percent in the first six months of 2012 from a year earlier to a combined 206 billion dong (US$9.88 million), Mr Hung said. Vietnam’s stock exchange in Ho Chi Minh City started trading in 2000 with shares of four companies that began as state-controlled businesses. The first private company was listed four years later and a second bourse in Hanoi opened in 2005. The two exchanges now have about 700 stocks. Bloomberg

August 7, 2012 business daily | 11

asia Surprise profits show worst over for Indian airlines Carriers expected to be profitable in the year ending March 2014 Anurag Kotoky

Bank Indonesia is expected to keep the benchmark reference rate at 5.75 percent on Thursday, economists say

by market value, reported a 10.5 percent gain in first-half net income to 5.3 trillion rupiah as lending increased 42 percent. “Domestic demand should stay resilient,” said Eugene Leow, a Singapore-based economist at DBS Group Holdings Ltd. “Credit

growth has been well-supported. Other high frequency indicators such as car sales have also remained robust, supported by rising wealth and wage growth. In terms of investment, there have been no signs of slowing thus far.” Reuters/Bloomberg

or India’s healthier airlines, the worst is behind them as drastic flight cuts by embattled former No.2 Kingfisher Airlines Ltd enables the others to raise ticket prices. Market leader Jet Airways India Ltd and third-placed SpiceJet Ltd, which unexpectedly reported quarterly profits last week, were upgraded by Bank of America-Merrill Lynch to ‘buy’. The carriers should post smaller losses this financial year and turn profitable in the year ending March 2014, the bank said yesterday. “The recent first-quarter results of SpiceJet and our own checking of ticket prices every two weeks suggests that pricing recovery has already started. Airlines appear to have achieved some ticket price hikes in the last three months,” it said. “We expect another hike may come during the third quarter, which is the peak season,” Anand Kumar and S. Arun, analysts at Bank of AmericaMerrill Lynch, wrote in a note to clients. Passenger yields on Jet’s domestic flights rose about 9 percent in the quarter to end-June, while average revenue per passenger at SpiceJet jumped 24 percent. Yield is a measure of the average fare paid by passengers for a particular distance. Challenges remain for an industry plagued by high fuel taxes and airport charges, stiff competition, subsidised

losses at state-owned Air India and regulatory uncertainty. KotakInstitutionalEquitiesmaintained its ‘sell’ rating on Jet yesterday, citing the company’s high leverage, but said improving yields are a positive for the industry. It has a ‘buy’ rating on SpiceJet, a budget carrier. “From here, any reduction in costs could lead to significant improvement in profitability as the sector has high operating leverage,” analyst Jasdeep Walia wrote in a note. In the fiscal year that ended in March, of India’s six big airlines, just one, unlisted IndiGo, turned a profit while the industry lost a combined US$2 billion. Reuters

Market leader Jet Airways was upgraded by Bank of America-Merrill Lynch to ‘buy’

F&N seen breaking up in Singapore Break-up would make it more focussed and lure suitors to individual segments

raser and Neave Ltd’s agreement to sell its stake in the Tiger beer business to Heineken NV may spark a breakup of the Singapore conglomerate as bidders pick over its property and soft drinks divisions. F&N’s board of directors will recommend Heineken’s S$50 (US$40) a share offer for Asia Pacific Breweries Ltd to its shareholders, the company said last Friday. Acquiring F&N’s 40 percent stake in Singaporelisted APB will give the Dutch brewer control of its main distributor in Asia. It also leaves F&N’s biggest shareholders, brewers Thai Beverage Pcl and Kirin Holdings Co., marooned in a business dominated by shopping malls, serviced apartments and industrial buildings that might appeal to developer CapitaLand Ltd, said Religare Capital Markets Ltd. Kirin says it is interested in F&N for its food and beverage business, while Coca-Cola Co., the world’s largest soft-drinks maker, is exploring a bid for F&N’s beverage unit, people with knowledge of the matter said. “F&N might be more open to part with the remaining beverage business,” now that it has accepted Heineken’s offer, Goh Han Peng, a Singapore-based analyst at DMG & Partners Securities, said. “In a sense, they will achieve a break-up.” Asia Pacific Breweries was a key draw to investors in F&N, and without it, Kirin and Bangkok-based ThaiBev

may struggle to justify owning stakes in the remainder of F&N, according to Olivier Nicolai, a London-based analyst at UBS AG. The two companies stand to gain financially from the sale of APB, according to estimates from Deutsche Bank analyst Gregory Lui. Mr Lui expects a sale of APB at S$50 a share to provide F&N and its shareholders “significant” one-time gains and special dividends of about S$2.71 a share, according to a research note published last month. With almost 213 million shares, or 15 percent of F&N, Kirin’s gain from APB’s sale would be worth about S$577 million (US$465 million), according to data compiled by Bloomberg. ThaiBev agreed on July 18 to buy 22 percent of F&N and now has a 24.1 percent stake.

CapitaLand In the year to September 2011, property accounted for more than 66 percent of F&N’s profit, data compiled by Bloomberg show. Frasers Centrepoint, an F&N subsidiary, oversees nine malls in Singapore, while the company has development projects in the U.K., Australia, New Zealand, Thailand, Vietnam and China, according to the Frasers Centrepoint website. “The elephant in the room is what happens to the property assets,” said Jonathan Foster, Singapore-

F&N’s dairy and soft-drinks business may be worth as much as US$3 billion

based director of Global Special Situations at Religare. Selling them to CapitaLand, Southeast Asia’s biggest property company, would create a Singapore developer with the scale to compete with global peers, he said. “With a strong balance sheet including a strong cash position of S$5.1 billion, CapitaLand is always open to exploring opportunities in markets where we have a presence,” the company’s corporate communications department said. F&N’s dairy and soft-drinks business, maker of sports drink 100Plus and Farmhouse-branded milk, may be worth as much as US$3 billion, people familiar with Coca-Cola’s interest in the units have said. “Part two of this saga is FNH,” said Mr Foster at Religare. “There is no point in being a property business with a relatively small soft drinks and dairy business.”

Kirin is interested in F&N’s soft drinks businessbecauseofitsreachinSoutheast Asia, the company said last Friday. Bloomberg

KEY POINTS Heineken gets 82 percent of the maker of Tiger Beer Break-up of Fraser and Neave could unlock more value Move would give more attractive options for stakeholders F&N’s consumer business valued at about US$6.7 billion

12 |

business daily August 7, 2012

MARKETS Hang SENG INDEX PRICE

Day %

VOLUME

PRICE

Day %

VOLUME

26.95

0.7476636

18275690

CHINA UNICOM HON

11.96

4.181185

37270476

ALUMINUM CORP-H

3.22

1.577287

10631922

CITIC PACIFIC

11.34

1.612903

1688000

BANK OF CHINA-H

2.99

1.355932

273769419

BANK OF COMMUN-H

5.22

0.7722008

17469944

BANK EAST ASIA

27.45

1.855288

2507744

BELLE INTERNATIO

14.72

5.899281

22677000

NAME AIA GROUP LTD

NAME

CLP HLDGS LTD

66.9

0.07479432

1847604

CNOOC LTD

15.66

2.08605

58671481

COSCO PAC LTD

10.76

2.281369

2446026

9.97

6.403415

12306585

ESPRIT HLDGS

BOC HONG KONG HO

23.95

0.8421053

7844749

HANG LUNG PROPER

2.564103

4826633

CATHAY PAC AIR

12.92

2.053712

1917879

HANG SENG BK

108.9

0.4612546

975665

CHEUNG KONG

107.6

3.561116

9909098

HENDERSON LAND D

46.85

2.741228

4807346

CHINA COAL ENE-H

7.66

0.6570302

59906974

CHINA CONST BA-H

5.32

0.9487666

264851016

CHINA LIFE INS-H

21.55

1.173709

18033182

CHINA MERCHANT

23.8

1.927195

1701790

89.7

1.931818

12649408

18.16

0.8888889

12039266

CHINA MOBILE CHINA OVERSEAS CHINA PETROLEU-H

7.28

110598404

CHINA RES ENTERP

21.65

1.882353

2574061

CHINA RES LAND

15.3

2.684564

8353724

CHINA RES POWER

16.7

-0.8313539

4867300

CHINA SHENHUA-H

29.75

1.709402

12215666

HENGAN INTL

74.25

0.9517335

2488000

HONG KG CHINA GS

17.92

0.4484305

5364071

HONG KONG EXCHNG

107.1

1.709402

4211816

HSBC HLDGS PLC

67.05

2.210366

20259932

HUTCHISON WHAMPO

69.1

1.097293

10902905

IND & COMM BK-H

4.56

1.333333

217401217

15.32

4.076087

15980666

LI & FUNG LTD MTR CORP

27.35

0.5514706

1559697

NEW WORLD DEV

10.34

2.579365

14775525

PETROCHINA CO-H

9.58

1.590668

79720418

PING AN INSURA-H

61.65

0.3254679

6301598

NAME

PRICE

Day %

-1.214575

3538512

23.6

12917835

POWER ASSETS HOL SANDS CHINA LTD

VOLUME

SINO LAND CO

13.88

4.992436

13374624

SUN HUNG KAI PRO

99.25

2.372357

9601714

94.8

2.541915

1398115

TENCENT HOLDINGS

233.6

1.388889

2070763

TINGYI HLDG CO

19.32

1.791359

2765400

9.47

1.067236

8683437

45.85

1.325967

6084524

SWIRE PACIFIC-A

WANT WANT CHINA WHARF HLDG

MOVERS

1 20090

INDEX 19998.72 HIGH

20084.9

LOW

19467

52W (H) 21760.33984 (L) 16170.35

19460

2-Aug

6-Aug

Hang SENG CHINA ENTErPRISE INDEX NAME

NAME

PRICE

Day %

VOLUME

25.35

1.4

10001700

CHINA PETROLEU-H

7.28

110598404

10631922

CHINA RAIL CN-H

6.87

6.018519

17977000

ZOOMLION HEAVY-H

7536235

CHINA RAIL GR-H

3.4

1.796407

15753000

ZTE CORP-H

29.75

1.709402

12215666

4.18

3.209877

69017553

11.26

3.492647

12307000

PRICE

DAY %

VOLUME

AGRICULTURAL-H

3.19

1.592357

100287282

AIR CHINA LTD-H

5.35

1.711027

7178000

ALUMINUM CORP-H

3.22

1.577287

0.9615385

BANK OF CHINA-H

2.99

1.355932

273769419

CHINA SHENHUA-H

BANK OF COMMUN-H

5.22

0.7722008

17469944

CHINA TELECOM-H

6.060606

3029085

DONGFENG MOTOR-H

CHINA CITIC BK-H

3.99

2.835052

46164974

GUANGZHOU AUTO-H

5.59

3.327172

2873298

CHINA COAL ENE-H

7.66

0.6570302

59906974

HUANENG POWER-H

5.16

-5.839416

72578000

CHINA COM CONS-H

6.85

2.698651

10632592

IND & COMM BK-H

4.56

1.333333

217401217

CHINA CONST BA-H

5.32

0.9487666

264851016

JIANGXI COPPER-H

17.72

2.427746

11449495

ANHUI CONCH-H

BYD CO LTD-H

CHINA PACIFIC-H

3.33

4.0625

18929302

PETROCHINA CO-H

9.58

1.590668

79720418

21.55

1.173709

18033182

PICC PROPERTY &

8.67

-0.1152074

14800000

CHINA LONGYUAN-H

4.82

2.335456

2622000

PING AN INSURA-H

61.65

0.3254679

6301598

CHINA MERCH BK-H

14.24

0.5649718

9867947

SHANDONG WEIG-H

8.62

1.891253

2512000

CHINA COSCO HO-H CHINA LIFE INS-H

NAME YANZHOU COAL-H

PRICE

Day %

12.84

3.883495

44786635

2.6

5.691057

60386769

9.34

2.30011

12264920

10.5

0.7677543

4654120

ZIJIN MINING-H

MOVERS

VOLUME

0 9850

INDEX 9812.92 HIGH

9843.55

LOW

9529.86

CHINA MINSHENG-H

7.28

0.8310249

17092689

SINOPHARM-H

23.1

2.439024

4039350

52W (H) 11916.1

CHINA NATL BDG-H

8.12

1.120797

29017093

TSINGTAO BREW-H

44.25

-0.1128668

1296300

(L) 8058.58

CHINA OILFIELD-H

12.1

2.716469

6413213

WEICHAI POWER-H

21.2

5.210918

2185824

9520

2-Aug

6-Aug

Shanghai Shenzhen CSI 300 NAME

PRICE

DAY %

VOLUME

PRICE

Day %

VOLUME

AGRICULTURAL-A

2.5

-0.7936508

41906372

DAQIN RAILWAY -A

6.06

0.6644518

27130583

AIR CHINA LTD-A

5.86

-1.346801

35391964

DATANG INTL PO-A

5.02

-0.7905138

ALUMINUM CORP-A

6.05

1.851852

8181844

DONGFANG ELECT-A

16.02

ANHUI CONCH-A

15.13

0.933956

21182855

EVERBRIG SEC -A

BANK OF BEIJIN-A

7.56

-0.1321004

11475643

BANK OF CHINA-A

2.75

-0.3623188

BANK OF COMMUN-A

4.39 10.21

BANK OF NINGBO-A BAOSHAN IRON & S

PRICE

Day %

VOLUME

SAIC MOTOR-A

12.48

0.8077544

25138234

5714245

SANY HEAVY INDUS

12.39

2.227723

23516181

3.756477

13547316

SHANDONG GOLD-MI

33.88

2.232951

10123542

12.67

2.425222

10183995

SHANG PHARM -A

11.19

1.084011

14164180

GD MIDEA HOLDING

9.81

1.763485

20121705

SHANG PUDONG-A

7.72

-0.2583979

46411105

18062293

GD POWER DEVEL-A

2.67

-0.7434944

27158383

SHANGHAI ELECT-A

4.42

2.314815

7020820

-1.126126

43772916

GF SECURITIES-A

14.05

2.855051

21459225

SHANXI LU'AN -A

21.63

2.124646

14125140

0.591133

16266731

GREE ELECTRIC

21.1

0.6679389

8697027

SHANXI XINGHUA-A

38.01

2.868742

3163967

20648133

GUANGHUI ENERG-A

12.76

2.73752

11414937

SHANXI XISHAN-A

14.67

3.164557

21539211

4.25

NAME

15.45

7.21721

18292611

GUIZHOU PANJIA-A

17.64

3.157895

8125496

SHENZEN OVERSE-A

5.98

1.013514

21830788

CHINA CITIC BK-A

3.96

0.5076142

15860045

HAITONG SECURI-A

9.9

0.814664

42888457

SUNING APPLIAN-A

6.5

1.088647

55512212

CHINA CNR CORP-A

3.79

0.530504

24247150

HANGZHOU HIKVI-A

29.5

5.281941

6888216

TSINGTAO BREW-A

34.15

0.35263

6484377

CHINA COAL ENE-A

7.77

1.436031

10698418

HENAN SHUAN-A

62.76

0.416

1159505

WEICHAI POWER-A

24.16

1.769166

5107004

CHINA CONST BA-A

4.02

0.2493766

18045206

HONG YUAN SEC-A

19.37

0.8854167

19786697

WULIANGYE YIBIN

36.6

1.808067

23979569

BYD CO LTD -A

CHINA COSCO HO-A

4.32

1.408451

6856411

HUATAI SECURIT-A

9.52

1.927195

14433609

XIAMEN TUNGSTEN

41.87

10.01051

19847201

CHINA CSSC HOL-A

20.87

2.05379

5174664

HUAXIA BANK CO

8.86

18676695

YANGQUAN COAL -A

15.88

1.860167

17819602

CHINA EAST AIR-A

3.97

-1.732673

41241261

IND & COMM BK-A

3.77

-0.5277045

29804035

YANTAI CHANGYU-A

61.07

1.766372

1036337

CHINA EVERBRIG-A

2.76

22870058

INDUSTRIAL BAN-A

12.52

0.07993605

34020669

YANTAI WANHUA-A

13.57

0.8172363

7561326

CHINA LIFE INS-A

18.86

0.3725386

10082640

INNER MONG BAO-A

41.46

9.364284

79331194

YANZHOU COAL-A

19.38

2.161307

5406710

CHINA MERCH BK-A

10.01

0.1

30987052

INNER MONG YIL-A

18.86

1.561659

18613626

YUNNAN BAIYAO-A

61.89

0.09704027

2161477

CHINA MERCHANT-A

10.86

1.971831

9412664

INNER MONGOLIA-A

5.73

9.980806

173729356

ZHONGJIN GOLD

21.97

1.712963

7979726

CHINA MERCHANT-A

21.34

0.6129184

15055115

JIANGSU HENGRU-A

29.75

1.39741

3146041

ZIJIN MINING-A

3.76

1.621622

45621951

142.6

1.063076

1293917

ZOOMLION HEAVY-A

9.82

1.973001

31866005

21.5

5.134474

13641421

11.29

0.1774623

18490128

JINDUICHENG -A

12.54

2.702703

6327450

CHINA MINSHENG-A CHINA NATIONAL-A CHINA OILFIELD-A CHINA PACIFIC-A CHINA PETROLEU-A

0.1669449

62237534

JIANGSU YANGHE-A

6.21

1.470588

22481635

JIANGXI COPPER-A

1.735488

8508905

21.97

2.13854

12116875

JIZHONG ENERGY-A

14.63

3.100775

13477220

6.1

0.3289474

13624918

KANGMEI PHARMA-A

15.93

0.5681818

10547906

248.83

0.7572076

1732099 6469939

CHINA RAILWAY-A

4.73

20385456

KWEICHOW MOUTA-A

CHINA RAILWAY-A

2.63

0.3816794

21959952

LUZHOU LAOJIAO-A

40.6

1.652479

CHINA SHENHUA-A

22.67

0.9799555

11536701

METALLURGICAL-A

2.34

0.862069

18311953

2.52

0.8

12627921

ZTE CORP-A

MOVERS

271

4.8

1.265823

23599189

4.12

-0.2421308

28992092

PANGANG GROUP -A

3.84

41049887

CHINA STATE -A

3.1

0.3236246

40891606

PETROCHINA CO-A

9.02

10825698

HIGH

2387.73

CHINA UNITED-A

3.72

2.762431

63059110

PING AN BANK-A

15.1

-0.330033

15331221

LOW

2327.77

CHINA VANKE CO-A

8.76

0.6896552

63653858

PING AN INSURA-A

44.6

1.248581

14631067

CHINA YANGTZE-A

6.57

-0.3034901

13857835

POLY REAL ESTA-A

10.63

1.431298

53019568

CITIC SECURITI-A

12.2

1.582015

44572593

QINGDAO HAIER-A

11.05

0.4545455

5811458

CSR CORP LTD -A

4.36

0.2298851

14991779

QINGHAI SALT-A

35.04

2.157434

5763962

CHINA SHIPBUIL-A

10 2390

INDEX 2385.611

NINGBO PORT CO-A

CHINA SOUTHERN-A

52W (H) 2932.14 (L) 2254.567

2320

2-Aug

6-Aug

FTSE TAIWAN 50 INDEX NAME

NAME

PRICE DAY %

Volume

ACER INC

26.05 -0.7619048

18917663

FORMOSA PLASTIC

ADVANCED SEMICON

23.95

2.350427

26654037

ASIA CEMENT CORP

38.5

0.5221932

ASUSTEK COMPUTER

276.5

AU OPTRONICS COR

8.21

CATCHER TECH

PRICE Day %

VOLUME

PRICE Day %

VOLUME

3.15534

17166790

NAME TAIWAN MOBILE CO

104 -0.4784689

6743176

FOXCONN TECHNOLO

106

35180691

TPK HOLDING CO L

354

0.7112376

5826778

5540931

FUBON FINANCIAL

31.7

1.44

18649293

TSMC

80.9

1.378446

58469961

0.1811594

2846024

HON HAI PRECISIO

87.3

6.985294

69231360

-1.911589

82588293

HOTAI MOTOR CO

202.5 -0.4914005

644315

137 -0.3636364

UNI-PRESIDENT UNITED MICROELEC

1.923077

9869782

12.7

2.419355

35591133

24251319

HTC CORP

258.5

-6.846847

3429268

WISTRON CORP

32.15

3.044872

12837000

CATHAY FINANCIAL

29.55

0.8532423

21574058

HUA NAN FINANCIA

16.95

0.8928571

11806402

YUANTA FINANCIAL

14.05

2.181818

23563476

CHANG HWA BANK

16.55

1.533742

15982126

LARGAN PRECISION

592

-4.516129

1584721

YULON MOTOR CO

54.4 -0.1834862

8042675

CHENG SHIN RUBBE

74.1

0.8163265

22785274

LITE-ON TECHNOLO

37.6

-0.660502

6706183

CHIMEI INNOLUX C

8.74

0.3444317

40532218

MEDIATEK INC

275

-1.433692

11374440

CHINA DEVELOPMEN

7.04

0.7153076

43926351

MEGA FINANCIAL H

24.25

1.041667

31165689

CHINA STEEL CORP

26.35

0.7648184

15989544

NAN YA PLASTICS

58.5

2.631579

7371936

CHINATRUST FINAN

18.2

2.824859

42771794

PRESIDENT CHAIN

162.5 -0.9146341

2755347

CHUNGHWA TELECOM

89.5

7606399

QUANTA COMPUTER

73.5

3.375527

COMPAL ELECTRON

27.1

0.3703704

6511499

SILICONWARE PREC

32.95

1.384615

6555226

-2.020202

7597139

SINOPAC FINANCIA

12.7

1.6

33645275

FAR EASTERN NEW

34.45

1.026393

9762369

SYNNEX TECH INTL

0.7874016

6624039

FAR EASTONE TELE

73.6

-1.340483

5952438

TAIWAN CEMENT

35.7 -0.2793296

8124215

DELTA ELECT INC

FIRST FINANCIAL

11924720

18.45

1.09589

21506184

TAIWAN COOPERATI

16.9

1.197605

17039341

FORMOSA CHEM & F

1.376721

4781112

TAIWAN FERTILIZE

71.8

0.4195804

4530519

FORMOSA PETROCHE

87.4

2059468

TAIWAN GLASS IND

27.5

0.9174312

2094429

MOVERS

2 5040

INDEX 5001.13 HIGH

5031.07

LOW

4909.12

52W (H) 5621.53 4900

(L) 4643.05 1-Aug

6-Aug

August 7, 2012 business daily | 13

MARKETS GAMING STOCKS - DAILY PERFORMANCE (Hong Kong Stock Exchange) GALAXy ENtErtAINMENt

Max 19.58

Average 19.445

MELco croWN ENtErtAINMENt

Min 19.24

Last 19.3

MGM cHINA HoLDINGS

19.6

26.5

19.5

26.3

19.4

26.1

19.3

25.9

19.2

SANDS cHINA LtD

11.0

Max 25.7

Average 25.7

Min 25.7

Average 24.047

Min 23.6

Last 23.6

24.6

14.4

24.4

14.3

23.6

PRICE

17.3

17.2

17.1

14.1 14.0 Max 14.36

Average 14.254

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Sep12

91.15

-0.273522976

-7.808233033

110.8699951

77.69999695

BRENT CRUDE FUTR Sep12

108.53

-0.376353956

3.440716737

124.1999969

88.90999603

GASOLINE RBOB FUT Sep12

291.53

-0.535653361

9.750404698

320.4399824

237.3699903

924

0.135464644

2.80945758

1046.5

798.5

2.806

-2.467848453

-14.52939385

4.630000114

2.221999884

291.72

-0.30415912

2.397416547

332.9600096

251.5599966

1607.66

0.2563

2.7318

1921.18

1522.75

GAS OIL FUT (ICE) Sep12 NATURAL GAS FUTR Sep12 HEATING OIL FUTR Sep12 Gold Spot $/Oz Silver Spot $/Oz

27.79

1.9069

-0.1617

44.2175

26.085

Platinum Spot $/Oz

1399.25

-0.4801

0.3406

1915.75

1339.25

Palladium Spot $/Oz

576.78

-0.4264

-11.7399

792.93

537.54

LME ALUMINUM 3MO ($)

1860

1.086956522

-7.920792079

2476

1832.25

LME COPPER 3MO ($)

7445

1.568894952

-2.039473684

9304

6635

LME ZINC

1840

1.545253863

-0.27100271

2311

1718.5

15610

2.360655738

-16.56867985

22600

15236

15.9

-0.469483568

5.788423154

13.95499992

800

-0.92879257

36.46055437

820.5

499

WHEAT FUTURE(CBT) Dec12

897.75

-0.663900415

24.6875

953.25

629.5

SOYBEAN FUTURE Nov12

1593.75

-2.148887183

32.34378244

1691.5

1115.75

COFFEE 'C' FUTURE Sep12

174.55

0.431530495

-25.48559232

288.8500061

SUGAR #11 (WORLD) Oct12

21.97

-0.136363636

-3.766973281

COTTON NO.2 FUTR Dec12

0.081160411

-15.75591985

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep12

Min 14

17.0

Last 14.36

Max 17.24

Dec12

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

Average 17.159

Last 17.02

Min 17.02

PRICE

DAY %

YTD %

-0.246 -0.4923 -0.1544 -0.1776 0.0638 0.0025 -0.0026 -0.022 0.4797 -0.0635 0 0.1236 0.0239 0.0739 0.2891 0.025 -0.336 -1.2261 -0.6419 0.2269 0

(H) 52W

3.2716 0.1287 -3.4479 -4.5984 -1.9255 0.1502 0.1612 -1.2379 -4.3681 0.1587 4.3961 1.1458 4.8302 -4.2243 -5.1321 1.281 4.8896 3.2442 4.806 2.7741 0.0097

(L) 52W

1.0857 1.6618 0.9972 1.4549 84.18 8.0449 7.8113 6.4431 57.3275 32 1.3199 30.716 44.35 9662 88.637 1.24736 0.88861 9.2878 11.6793 112.71 1.0311

0.9388 1.5235 0.7071 1.2043 75.35 7.9823 7.7526 6.2769 44.885 29.72 1.2001 28.792 41.57 8507 72.057 1.00749 0.77553 7.7018 9.6245 94.12 1.0288

(H) 52W

(L) 52W

ARISTOCRAT LEISU

2.42

2.978723

9.999998

3.25

1.88

1202143

150.0999908

CROWN LTD

8.54

1.304864

5.562421

9.29

7.45

1138961

25.77999878

19.23999977

AMAX HOLDINGS LT

0.061

-29.88506

0.119

0.055

102.25

64.61000061

BOC HONG KONG HO

23.95

0.8421053

30.16305

24.45

14.24

7844749

CENTURY LEGEND

0.234

1.739129

0.335

0.204

2012

3.01

7.500002

3.62

2.3

87000

CHINA OVERSEAS

18.16

0.8888889

39.90756

19.16

9.99

12039266

CHINESE ESTATES

9.15

0.9933775

-26.8

13.68

8.3

51000

CHOW TAI FOOK JE

9.1

2.362205

-34.62644

15.16

8.4

6706200

World Stock MarketS - Indices COUNTRY

DAY %

1.0543 1.5563 0.9716 1.2365 78.42 7.9876 7.7549 6.3739 55.4888 31.5 1.242 29.936 41.82 9469 82.675 1.2014 0.79454 7.8786 9.8773 96.97 1.03

MACAU RELATED STOCKS NAME

PRICE

CHEUK NANG HLDGS

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

13096.17

1.687181

7.191373

13338.66016

10404.49

NASDAQ COMPOSITE INDEX

2967.9

1.997752

13.92434

3134.17

2298.89

FTSE 100 INDEX

5792.85

0.09624556

3.95835

5989.07

4791.01

DAX INDEX

6908.59

0.6252858

17.1275

7194.33

4965.8

NIKKEI 225

8726.29

2.000909

3.204367

10255.15

8135.79

EMPEROR ENTERTAI

DAY % YTD %

VOLUME CRNCY

1.4

0.7194245

26.12612

1.6

0.97

1410000

FUTURE BRIGHT

1.03

145.2381

1.1

0.3

1488000

GALAXY ENTERTAIN

19.3

1.578947

35.53371

24.95

8.69

7140357

108.9

0.4612546

18.17688

116.7

84.4

975665

1.545254

15.81067

24.658

18.56

1130656

HANG SENG BK HOPEWELL HLDGS HSBC HLDGS PLC

67.05

2.210366

13.64407

72.05

20259932

HUTCHISON TELE H

3.74

1.081081

25.08361

3.86

2.53

2148280

LUK FOOK HLDGS I

18.9

6.299213

-30.2583

46.15

14.7

2884000

MELCO INTL DEVEL

5.7

1.785714

-1.213171

9.94

4.3

1010000

MGM CHINA HOLDIN

2.230483

14.67706

15.276

7.6

4414761

4.38

5.542169

10.77258

5.217

2.887

3971000

0.205

0.08

17111500

HANG SENG INDEX

19998.72

1.690923

8.485933

21760.33984

16170.35

CSI 300 INDEX

2385.611

1.354187

1.699639

2932.14

2254.567

TAIWAN TAIEX INDEX

7286.33

0.9535144

3.029519

8170.72

6609.11

MIDLAND HOLDINGS

KOSPI INDEX

1885.88

2.012247

3.294008

2057.28

1644.11

NEPTUNE GROUP

0.161

2.547771

45.04504

S&P/ASX 200 INDEX

4272.586

1.210594

5.325334

4448.5

3765.9

NEW WORLD DEV

10.34

2.579365

65.17571

10.96

6.13

14775525

SANDS CHINA LTD

23.6

7.517081

33.05

14.9

12917835

SHUN HO RESOURCE

1.13

1.28

0.82

SHUN TAK HOLDING

2.66

-2.205882

3.941644

4.148

2.241

13627280

JAKARTA COMPOSITE INDEX

10.8

Last 11

CURRENCY EXCHANGE RATES

NAME

Min 10.84

14.2

Commodities

CORN FUTURE

Average 10.927

WyNN MAcAU LtD

23.8

METALS

Max 11.02

SJM HoLDINGS LtD

24.0

ENERGY

10.9

25.7

Last 25.7

24.2

Max 24.6

11.1

4105.499

0.1386893

7.417783

4234.734

3217.951

FTSE Bursa Malaysia KLCI

1639.43

0.268495

7.101192

1647.94

1310.53

NZX ALL INDEX

794.413

0.3960676

8.853481

806.015

700.441

SJM HOLDINGS LTD

14.36

3.757225

14.82914

18.798

10.079

4147670

PHILIPPINES ALL SHARE IX

3512.56

0.1868221

15.35349

3528.28

2695.06

SMARTONE TELECOM

16.44

-0.1215067

22.32143

18.5

9.8

1695527

HSBC Dragon 300 Index Singapor

591.12

0.96

19.1

WYNN MACAU LTD

0.591716

-12.82051

25.969

14.62

4109731

ASIA ENTERTAINME

2.5

-5.660377

-57.48299

9.45

2.4

262217

BALLY TECHNOLOGI

44.08

2.084298

11.42568

49.32

24.74

302163

BOC HONG KONG HO

3.05

1.328904

27.23244

3.15

1.81

39070

GALAXY ENTERTAIN

2.46

3.797468

31.5508

3.24

1.08

4745

INTL GAME TECH

11.2

0.9009009

-34.88372

18.1701

11.01

3123205

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67.27

4.020411

9.810646

87.52

46.01

361080

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38.75

4.985099

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34.72

12865430

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6.029107

16.02

7.05

3715541

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13800

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-11.21764

14.9401

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8816246 525901

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1025.56

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17.77494

1247.72

843.69

20.3698

492.44

332.28

14.01953

1061.86

876.33

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business daily August 7, 2012

Opinion Why Eurobonds are Un-American Daniel Gros

Director of the Center for European Policy Studies

he emerging consensus in Europe nowadays is that only “debt mutualisation” in the form of Eurobonds can resolve the euro crisis, with advocates frequently citing the early United States, when Alexander Hamilton, President George Washington’s treasury secretary, successfully pressed the new federal government to assume the Revolutionary War debts of America’s states. But a closer look reveals that this early U.S. experience provides neither a useful analogy nor an encouraging precedent for Eurobonds. First, taking over a stock of existing state debt at the federal level is very different from allowing individual member states to issue bonds with “joint and several” liability underwritten by all member states collectively. Hamilton did not have to worry about moral hazard, because the federal government did not guarantee any new debt incurred by the states. Second, it is seldom mentioned that U.S. federal debt at the time (around US$40 million) was much larger than that of the states (about US$18 million). Thus, assuming state debt was not central to the success of post-war financial stabilisation in the new country; rather, it was a natural corollary of the fact that most of the debt had been incurred fighting for a common cause. Moreover, the most efficient sources of government revenues at the time were tariffs and taxes collected at the external border. Even from an efficiency point of view, it made sense to have the federal government service public debt.

debt-service cost of 4 percent. In of total revenues. The real problem modern terms, the “net present is the rollover of existing debt in a value” of the total debt (federal and stagnating economy. For example, state) was reduced by about one-half Italy will soon have a balanced budget if one were to apply the usual exit in structural terms, but must still face the problem of refinancing old debt as yield of 9 percent. Moreover, the new federal bonds’ very it matures each year. long maturities meant that there was no rollover risk. It would have been Restructuring very dangerous to expose the federal government to this danger, given that Assuaging doubt about the sustainthe operation was rightly perceived at ability of public debt in the eurozone the outset as extremely risky. would thus probably require a deep For the country’s first few years, restructuring as well. The eurozone debt service swallowed more than 80 crisis could certainly be resolved if all percent of all federal revenues. The existing public debt were transformed slightest negainto 20-year Eutive shock could robonds with a have bankrupted yield of 3 perthe new federal cent, and a fivegovernment. Foryear grace period A closer look tunately, the opon debt service. posite happened: reveals that this One can easfederal revenues ily anticipate the early U.S. experience tripled under the impact that this impact of a rapid would have on fipost-war recon- provides neither a nancial markets. struction boom, More interesting useful analogy nor an and continued in view of the to grow rapidly, encouraging precedent current situation aided by the in the eurozone country’s ability for Eurobonds is what followed to remain neutral roughly a halfwhile wars ravcentury after aged the European continent. Hamilton acted. In the 1830’s and By contrast, growth prospects in 1840’s, a number of states had overEurope today are rather dim, and invested in the leading transport interest payments, even for Greece or technology of the time – canals. When Italy, account for less than 20 percent the canal-building boom ended, eight

states and the Territory of Florida (accounting for about 10 percent of the entire U.S. population at the time) were unable to service their debt and defaulted on their, mostly British, loans. British bankers threatened that they would never again invest in these untrustworthy Americans. They could point to the precedent set by Hamilton, and had probably invested on the implicit understanding that, if necessary, the federal government would bail out the states again. But, despite foreign creditors’ threats, the federal government did not come to the rescue. The bailout request did not succeed because it could not muster a simple majority of the states (represented by the Senate) and the population (represented by the House of Representatives) under the normal decision-making procedure (the “Community method,” in European Union jargon). The defaults proved to be costly. The 1840’s were a period of slow growth, and continued pressure from foreign creditors forced most of the official debtors to resume payments after a while. Default was not an easy way out, and all U.S. states (with the exception of Vermont) have since embraced balanced-budget amendments to their constitutions as a way to shore up their fiscal credibility. Are EU members prepared to take a similar step? © Project Syndicate

Stabilisation Federal assumption of the states’ war debts also yielded an advantage in terms of economic development: once states no longer had any debt, they had no need to raise any revenues through direct taxation, which might have impeded the growth of America’s internal market. Indeed, after the federal government assumed the states’ debt (already a small part of the total), state revenues fell by 80-90 percent. The states then became for some time fiscally irrelevant. Finally, the key to the success of financial stabilisation was a profound restructuring. Hamilton estimated that the federal government could raise enough revenues to pay approximately 4 percent interest on the total amount of debt to be serviced – significantly less than the 6 percent yield on the existing obligations. Holders of both state and federal bonds were thus offered a basket of long-dated bonds, some with an interest rate of 3 percent, and others with 6 percent (with a ten-year grace period). The basket was designed in such a way as to result in an average

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August 7, 2012 business daily | 15

OPINION Business

wires Leading reports from Asia’s best business newspapers

Mario Draghi cannot save the Euro Simon Johnson

Professor at the Massachusetts Institute of Technology’s Sloan School of Management

Jakarta Globe London-based energy giant BP plans to invest US$12 billion for the development of the Tangguh liquefied natural gas project in West Papua, an official at the state oil and gas upstream regulator says. The construction of the plant, which will have the capacity to produce 3.8 million tonnes per year, will begin next year and is scheduled for completion in 2017. BP controls a 37.16 percent share of the enterprise and is the principal operator of the project.

Japan Today Sharp said on Thursday it will cut 5,000 jobs by March, its first cuts since 1950 as it reported a quarterly loss and said it would remain in the red for the rest of the year amid losses at its struggling TV business. Jobs will be eliminated through natural attrition and voluntary retirements, the company said. Its operating loss was 94.1 billion yen (US$1.2 billion), plunging from an operating profit of 3.5 billion yen a year ago. Sales fell 28.4 percent to 458.6 billion yen.

Bangkok Post The minimum wage of 300 baht (US$9.5) a day is taking its toll on small and medium-sized enterprises (SMEs), leading several to close and start doing business without registering with the Commerce Ministry, according to a university study. They generally opt to purchase condominiums or other types of buildings and set up a new firm without registration. Most of these businesses have no more than five or six employees. The companies place ads on electric poles, telephone booths and websites, providing contact via mobile phone.

Korea Times The sale of Korea Aerospace Industries is set for takeoff, but so far it has struggled to find a party interested enough to even fill out a bidding application. In recent trades, the stock price has fallen as the market expects the bid to fail. The government and the Korea Finance Corporation last week announced its plan to privatise the aerospace company by selling the combined shares of 41.75 percent via a publicly opened bid. No foreign companies are permitted to enter a bid.

n July 26, Draghi said his institution would do “whatever it takes” to preserve the euro, and reinforced this with a nice turn of phrase: “Believe me, this will be enough.” He followed this up last week with a more official statement that the ECB “may undertake outright open market operations of a size adequate to reach its objective,” signalling that the bank is preparing to buy more bonds to lower the borrowing costs of struggling governments such as Italy and Spain. Optimists hope that Draghi is trying to put an end to the policy uncertainty that has characterised the euro crisis. In the run-up to 2008, many investors thought there were big potential bailouts implicit in the structure of the currency union – a view reflected in the nearly identical yields on German, Greek, Italian and Spanish bonds. This confidence collapsed as events in Greece, Ireland and Portugal demonstrated that the ECB would not support all government debt irrespective of the circumstances. Now, the logic goes, if Draghi could just restore the promise of unconditional and unlimited “support,” he would put the genie back in the bottle.

Fish soup A better analogy would be that it is easier to make fish soup from fish than to do the reverse. Once you have understood that the ECB does not necessarily stand behind euro-area government debt, it is hard to disabuse yourself of the notion. Presumably this is why markets sank last week when Draghi failed to offer concrete action to ease monetary policy, either by lowering the bank’s target interest rate or by buying more bonds. A broader question is what, if anything, Draghi might achieve with a looser monetary

policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labour force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?

Perhaps the bet is that easy money will inflate nominal wages and prices in the Germanic core. But it wouldn’t change the fact that Germany keeps getting more productive and pulling ahead of its partners Perhapsthebetisthateasymoney will inflate nominal wages and prices in the Germanic core of the euro area while weakening the euro, so that peripheral countries become more competitive in relation to Germany and the rest of the world. It’s hard to see how this would work in practice. It certainly wouldn’t change the fact that Germany keeps getting more productive and pulling ahead of its partners. Maybe Draghi’s policies can buy time for deeper “structural changes” in the periphery, although quite what those

are and what difference they would make in the near term remains elusive. Firing publicsector workers in the midst of a steep recession won’t boost growth and transform industrial productivity. It’s hard to see how providing politicians in troubled countries with unlimited credit will increase the likelihood of real reform of any kind. More likely, a shift in ECB policies would make the European situation uglier. For one, Draghi would essentially be conceding fiscal dominance, demonstrating that if governments run budget deficits, they can count on the central bank to finance them. More important, the political consequences could be dire if the ECB actually succeeded in stoking German inflation and weakening the euro.

Economic history Inflation is unpopular and very unfair. People who think that higher inflation would somehow help the poor and hard pressed in the European Union should study economic history more carefully. It could lead the Germans to question the viability of the euro, increasing the risk that the currency will break

apart for political reasons. The Germans didn’t turn over their monetary sovereignty to the ECB to facilitate bailouts of irresponsible governments and the crazed banks that funded real-estate bubbles. Throwing greater fiscal transfers from Germany into the mix will serve only to worsen the situation. Perhaps Draghi is planning the same game with fiscal authorities that the Banca d’Italia used to play with Italian politicians in the 1980s and early 1990s – keep interest rates low enough to prevent fiscal collapse, yet high enough to keep fiscal prudence as a priority. Make no mistake about it, inflation or not, this is a strategy of high real interest rates. But debt levels in Italy and other euro area countries are much higher now than they were then. And relatively high real interest rates won’t be conducive to private-sector growth, which is what Europe needs more than anything else. Draghi and the ECB are increasing the risk that the euro area will fall to pieces. This scenario would be ugly for many people, and not just in Europe. Bloomberg View

16 |

business daily August 7, 2012

CLOSING FAO cuts global rice output forecast

Syria’s prime minister defects

The United Nations’ food agency cut its 2012 global rice production forecast but said that there was no increased risk of a food crisis as long as countries do not resort to export bans. The Food and Agriculture Organisation (FAO) said yesterday it had cut its outlook for rice paddy production this year by 7.8 million tonnes to 724.5 million tonnes, due mainly to below-average monsoon rains in India. That is still higher than levels reached in 2011, it said. “The situation is still very comfortable on the rice side,” a FAO senior economist, Concepcion Calpe, said.

Syrian Prime Minister Riad Hijab has defected from President Bashar alAssad’s government to join “the revolution”, his spokesman says. Mr Hijab was appointed less than two months ago and his departure is the highest-profile defection since the uprising began in March 2011. His family is reported to have fled Syria with him. “I announce today my defection from the killing and terrorist regime and I announce that I have joined the ranks of the freedom and dignity revolution,” ran the statement read by his spokesman yesterday. Mr Hijab is the first cabinet minister to defect.

India to unveil path for fiscal consolidation Finance minister aims to cut deficit, clarify taxes

ndia’s new Finance Minister yesterday sought to soothe worried investors by saying he would bring clarity to tax laws and unveil a plan to rein in the country’s fiscal deficit. He also suggested he wanted interest rates to be lower, prompting bond

yields to pull back. “Since investment is an act of faith, we must remove any apprehension or distrust in the minds of investors,” Palaniappan Chidambaram told reporters in his first comments on policy since becoming finance minister on July 31.

Finance minister Palaniappan Chidambaram pledged to remove ‘any distrust in the minds of investors’

India’s economy grew at 5.3 percent in the March quarter, the slowest in nine years, as companies held back investment, partly on worries over uncertain policymaking, including tax proposals that could be implemented retroactively. “We are conscious that current interest rates are high. High interest rates inhibit the investor and are a burden on every class of borrowers,” Mr Chidambaram said. “Sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers. We will take appropriate steps in this regard,” he said. Bond yields fell 5 basis points after his comments on interest rates. Mr Chidambaram said the government hopes to bring investment back up to 38 percent of GDP, its level in the fiscal year that ended in March 2008. It was 32 percent of GDP in the year that ended in March 2012. “Uppermost in my mind is the duty to regain the confidence of all stakeholders. Obviously, where necessary, our policies have to be modified or fine-tuned in order to meet the expectations of different

stakeholders,” he said. Mr Chidambaram, who was previously home minister, returns to a finance ministry post he has held twice before, and investors hope he is able to revive the prospects for an economy that sputtered under his predecessor, Pranab Mukherjee, who left his post to become India’s president. However, political opposition, including from within the ruling Congress party coalition, has curtailed the government’s ability to push through reforms. India’s fiscal deficit has been bloated by hefty fuel subsidies and other populist spending, and the government of Prime Minister Manmohan Singh has been politically unable to raise subsidised diesel prices. India’s budget deficit for the fiscal year that ended in March was 5.76 percent of GDP, and many economists say its aim to trim that to 5.1 percent for this fiscal year is optimistic. For the April-June period, the deficit rose to 1.9 trillion rupees (US$34.08 billion), or 37.1 percent of the full fiscal year 2012/13 target. Reuters

HK Secretary’s property MasterCard files appeal interests draw controversy with EU’s highest court

ong Kong’s five-week old government was rocked by its third controversy involving senior officials, as Secretary for Development Paul Chan acknowledged he knew about the sub-renting of a unit owned by a company in which he was a director. A property bought by Harvest Charm Development Ltd had been sub-divided when it was purchased in 1994, the development secretary said in a statement on the government website. He said in a previous statement that he had “no knowledge” about suspected unauthorised alterations at the site now.

Mr Chan’s statement comes after his predecessor resigned amid allegations of abusing a government allowance and new Chief Executive Leung Chun Ying acknowledged there were unauthorised building structures at his home. Ms Leung said when he campaigned for office in March that he would address building safety issues associated with sub-divided units. Mr Chan said he and his wife will exit Hong Kong’s real estate market to “allay public concerns” and only buy property in the city for personal use. Property prices in Hong Kong have surged more than 80 percent since 2009, Centaline Property Agency data show. Mr Chan took over from predecessor Mak Chai Kwong as development secretary on July 30, after Mr Mak resigned on July 12 following allegations reported in the Apple Daily that he abused his government housing allowances. Bloomberg

asterCard Inc. is asking the European Union’s highest court to overturn an EU decision that the company’s crossborder card fees breach antitrust rules. MasterCard filed its appeal at the EU Court of Justice in Luxembourg in a case that may affect the future of card payment systems in Europe. MasterCard told a lower EU court in a hearing last year that it can’t operate without the fees it charges on credit-card payments. The company lost its first appeal and has now taken its fight to the top EU court. “The legal issues arising from this case are important for the future development of card payment schemes and for the continued delivery of the most advanced electronic payment solutions in Europe,” MasterCard Europe said in an e-mailed statement yesterday. “It is important, and in the best interests of our customers, consumers and merchants” that the EU court “is given the opportunity

to clarify these legal uncertainties.” The EU General Court, the bloc’s second-highest, in May backed the European Commission’s 2007 decision that MasterCard’s levies unfairly inflated the transaction fees paid by retailers for processing payments. The second-biggest card network, supported by banks including HSBC Holdings Plc and Royal Bank of Scotland Group Plc, previously argued the so-called multilateral interchange fees are crucial for sharing the costs of debit and credit card payments. Bloomberg