Macau Business Daily, August 13, 2013 by Business Daily

The government spent eight billion patacas (US$1 billion) in July, the highest monthly outlay so far this year, official data show. Most of it (7.18 billion patacas) went on running costs, including the wages of public servants. They increased in May. Public investment accounted for just 510.6 million patacas last month. The government has spent only 7.9 percent so far this year of the 17.91 billionpatacas investment budget. Page 3

Future Bright bakes in value via biscuit maker

Photo by Manuel Cardoso

MOP 6.00 Vitor Quintã Deputy editor-in-chief Editor-in-chief Tiago Azevedo Tuesday August 13, 2013 Number 347 Year II

Public spending soars, but not on investment

April 19, 2013

estaurant operator Future Bright Holdings Ltd is to pay four million patacas (US$500,000) for trademark rights to Macau Yeng Kee Bakery in Macau and Hong Kong. The move is to develop Future Bright’s food souvenir business, managing director Chan Chak Mo told Business Daily. The 85-year-old bakery uses the registered name here of Macau Ieng Kei Bakery Ltd. Its owner, Lam Iok Han, will run a joint venture with Future Bright. The restaurant firm will indirectly control 70 percent of the new operation. The remaining 30 percent will go to two Macau companies controlled by “relatives and/or business contacts” of Ieng Kei Bakery and its owner.

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More on page 5

Youth start-ups need more than first loans

Urban planning, land law both approved Page2

CTM tipped to ease Citic Telecom debt

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C Y acquires Macau Asia Adult Expo slot management firm may cut ties C Y Foundation Group Ltd, a Hong Kong-listed company, has acquired a firm that manages electronic games at a Macau casino. Following a vote by C Y’s shareholders on Friday, the firm now has control of the entire issued share capital of Weike (G) Management Macau Ltd. The latter company manages 205 slots and electronic table games at Pharaoh’s Palace Casino at The Landmark Macau hotel. Page 5

Asia Adult Expo and Intimate Lingerie Asia – an annual trade show here in the past five years – will have a Hong Kong edition for the first time later this month, for business-to-business only. A Macau version with access for the public will happen in December. But organiser Vertical Expo Services Co Ltd told Business Daily unless attendance by professional buyers improves, this year’s show could be the last. Page 6

%Day

CITIC PACIFIC

8.51

PING AN INSURA-H

7.27

CHINA RES POWER

5.57

CHINA SHENHUA-H

4.93

CHINA COAL ENE-H

4.56

POWER ASSETS HOL

0.43

CLP HLDGS LTD

0.39

CATHAY PAC AIR

-0.28

HENGAN INTL

-0.40

TINGYI HLDG CO

-1.23

Source: Bloomberg

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August 13, 2013

Macau

Youth start-ups need more than just loans The risk of failure is higher for entrepreneurs with little knowledge, pundits say Tony Lai

tony.lai@macaubusinessdaily.com

he government should offer training and free consultation to first-time entrepreneurs, not just interestfree loans, to reduce the risk of start-ups failing, authorities on the subject say. Any permanent resident aged between 21 and 44 can now apply for loans of up to 300,000 patacas (US$37,500) to start his or her first business. “Many youths want to give it a shot,” Macau Small and Medium Enterprises Association chairman Stanley Au Chong Kit said yesterday. “But there will be more harm done than good if they try blindly,” Mr Au said on the sidelines of a forum on youth start-ups held by his association. The Chinese-language Macao Daily News reported that Macau Economic Services, in its first week of accepting applications for loans, received 12 and had 69 inquiries. Mr Au said only about 60 percent

of new companies kept going for five years. “The government should do more to teach about business risks and how to manage enterprises,” he said. A former minister of Taiwan’s National Youth Commission, Jack Lee Yun Jie, also thinks support services are as important for young entrepreneurs as loans. “Many youths fail in the end to succeed in running businesses because they are constrained by their debts,” said Mr Lee, who was a speaker at the forum. “Training courses are important,” he said. “The government should prioritise providing more information to young people.” He said they needed to know in

particular about accounting and financial management.

Creative risk Mr Lee said the Taiwan government lent money at low rates of interest to entrepreneurs aged between 20 and 45. But the National Youth Commission requires the applicants for loans to take 20 hours of lessons on how run a company. The commission also puts on courses on managing companies – some online – and offers consultation services and seminars. Macau’s Secretary for the Economy and Finance Francis Tam Pak Yuen said this month that young people should plan well

before starting a business. Mr Tam did not say whether the government would offer support services for first-time entrepreneurs. Mr Au believes cultural and creative industries are “a good choice” for young entrepreneurs because the sector “does not require much financial input in the beginning”. Taiwan-Hong Kong Economic and Cultural Co-operation Council director Lo Chih-Cheng told the forum that Macau “has the potential” to develop cultural and creative industries as its economy was based on service industries such as the tourism industry. But Mr Lo said cultural and creative industries were risky. “It would then be safer if one had abundant capital to hand,” he said.

Tesco merging China unit with eye on Macau T

esco Plc, the biggest United Kingdom retailer by sales, is to merge its 131 stores in China with the mainland’s second biggest hypermarket chain and take a minority position in the new entity. It ends nearly a decade of majorityowned Tesco operations in China. The U.K. supermarket chain plans a joint venture with China Resources Enterprise Ltd that will run supermarkets, convenience stores, and other outlets in Macau and Hong Kong as well as on the mainland. Tesco will have a 20 percent stake in the tie-up, with China Resources holding the remaining 80 percent. Business Daily attempted to contact Tesco but got no reply by press time. Only three years ago Tesco said it wanted to open 80 shopping mall developments in China by 2016. It opened 12 new hypermarkets there last year. In April however the firm admitted the strategy had not been as successful as it had hoped. It said in April it planned to “refocus on a more profitable approach” in China, but added the country remained “strategically important” to Tesco. The agreement would allow Tesco to maintain a presence in the world’s second-largest economy where it’s been closing stores amid greater competition from regional rivals such as Sun Art Retail Group Ltd. The U.K. retailer is exiting some international markets after almost two decades of aggressive expansion into central Europe, Asia and the United States took the focus off its home market. M.G. with Bloomberg News

Many youth entrepreneurs fail in their ventures because they lack management knowledge

SJM concession revision leaves dredging untouched

he gaming concession contract of Sociedade de Jogos de Macau SA (SJM) will be revised but the company will still be in charge of dredging the city’s harbour – and get the corresponding tax benefits. In a dispatch published in yesterday’s Official Gazette, Secretary for Economy and Finance Francis Tam Pak Yuen is authorised to review SJM’s contract provisions on dredging and casinos location. The revision will allow the dredging operations to be transferred to SJM from parent company Sociedade de Turismo e Diversões de Macau SA (STDM), director Ambrose

So Shu Fai told Business Daily. Until now STDM did the dredging and would then be reimbursed by SJM, Mr So explained in an e-mailed reply. SJM will keep doing the dredging and other maritime obligations as before, the Gaming Inspection and Coordination Bureau confirmed, and enjoying the same tax benefits. All other casino operators must hand out 2.4 percent of their gaming revenue for “urban development, tourism promotion

and social security”. In SJM’s case that figure is just 1.4 percent. Last year alone this one percentage point difference was worth 806 million patacas (US$100 million) to the company. The revision will also update the list of SJM’s casinos. It does not imply any change of status of any of the company’s gaming venues, the gaming regulator told Business Daily in an e-mailed reply. V.Q.

August 13, 2013 April 19, 2013

Macau Paradise could get investment Hong Kong-listed Paradise Entertainment Ltd could raise up to HK$60.3 million (US$7.8 million) in investment after issuing 45.5 million warrants at HK$0.03 each to Silver Coast Holdings Ltd. The British Virgin Island firm owned by Chang Wang will have the right to subscribe for one share at HK$1.30 for up to one year once the deal is completed. If Silver Coast exercises all subscription rights, it will own 4.7 percent of Paradise. Paradise is the parent company of Macau-based gaming equipment manufacturer LT Game Ltd. Both firms are controlled by Jay Chun (pictured).

Public spending soars, but not on investment Government’s budget surplus inching closer to new record high Vítor Quintã

vitorquinta@macaubusinessdaily.com

he government spent eight billion patacas (US$1 billion) in July alone, the highest monthly outlay so far this year, official data released yesterday show. Most of it (7.18 billion patacas)

went to running expenses, which include the wages of public servants. They increased in May. In contrast public investment accounted just 510.6 million patacas last month. The government has

spent only 7.9 percent so far this year of the 17.91 billion-patacas investment budget. According to the Financial Services Bureau, the government spent more public money last month

MOP 61.48 bln Govt budget surplus in January-July

Government’s public investment plan includes the LRT elevated railway (Photo: Manuel Cardoso)

than in the whole of the first quarter of 2013. In the first three months of the year, 6.37 billion patacas were assigned for that purpose. This year’s investment plan provides for work on building the artificial island where the Hong Kong-Zhuhai-Macau Bridge will land, the Light Rapid Transit elevated railway and the University of Macau’s campus on Hengqin Island. The government’s investment spending usually picks up in the second half of the year, especially in December, when bills for many big contracts are settled. Even though the administration had projected an ambitious 31.5 percent growth in overall spending this year, not even the July boom was enough to offset a slow first half. In the first seven months of 2013 spending reached 25.07 billion patacas, down by 2.1 percent year-on-year. This figure represents just one third of the 74.63 billion patacas budgeted. The government was still able to make more money than it spent, with revenue hitting 12.69 billion patacas in July. With five months yet to be counted, revenue has reached three-quarters of the 115.07 billion patacas the authorities had forecast for the whole year. As a result the public budget surplus continued to inch closer to a new record high. In the January-July period the surplus reached 61.48 billion patacas, 52 percent more than the government’s prediction for the whole of 2013. The surplus is on pace to reach 105.4 billion patacas by the end of this year. That would be a new record, easily eclipsing the 2012 surplus of 72.8 billion patacas. The surplus will be added to the fiscal reserve, established in February 2012. The reserve contained 166.09 billion patacas in June, official data show.

Urban planning, land law approved The two long-waited bills will come into force on March 1 next year Tony Lai

tony.lai@macaubusinessdaily.com

he Legislative Assembly finally approved the longwaited urban planning bill and land law revision yesterday but many members fear it could open the door to huge compensation payouts for developers. The urban planning bill states developers can claim compensation if the enforcement of urban plans affects projects that have already obtained a construction permit. Some legislators, however, pointed out that the public would remain in the dark, particularly because the compensation amount is negotiated between a government

committee and the developer. According to public broadcaster TDM, legislator Ho Ion Sang slammed the government yesterday for putting the power in the hands of a committee made up of public officials only. Despite the government’s pledge that the committee would seek the opinion of an independent professional as a reference, Mr Ho is worried such a committee would only serve as “a rubber stamp”. In response Secretary for Transport and Public Works Lau Si Io said his department would “consider the suggestions” on publicising the whole negotiation procedure and

compensation amount. But he added it would only do so if that did not contradict any confidential agreement or cause legal issues. The urban planning bill will come into force on March 1 next year, allowing for the drafting of two urban plan types: a master plan for strategic principles on the overall development of Macau, and detailed plans for specific areas. But the government did not provide an exact time frame for when these plans could be ready. The land law revision will also come into force that same day. Legislator Kwan Tsui Hang

criticised the land bill for failing to improve on the calculation method for land premiums, which will still be too low and “lagging behind the current market price”. Companies or individuals that are awarded a land plot must pay the government a fee. The value of it depends on the plot’s location and characteristics, as well as what the developer wants to build on it. Mr Lau admitted “there is still room for improvement” in the calculation method but defended it as “reasonable”. The government will review the calculation formula at least once every two years, he said.

August 13, 2013

Macau

CTM tipped to ease Citic Telecom load Analysts say revenue from Macau may help halve Citic Telecom’s gearing by 2015 Vítor Quintã

vitorquinta@macaubusinessdaily.com

he weight of Citic Telecom International Holdings Ltd’s debt could decrease by half in the next two years, analysts say, as it reaps the rewards of buying Macau’s biggest telecommunications company. Citic Telecom, a Hong Konglisted subsidiary of state-owned Citic Group Corp, spent US$1.16 billion (9.27 billion patacas) to become the controlling shareholder in Companhia de Telecomunicações de Macau SARL (CTM). About half of the money came from a syndicated loan, leaving Citic Telecom with debt equivalent to 118 percent of its equity by the end of June, CIMB says in a note to investors. CIMB analysts believe Citic Telecom’s debt gearing will gradually fall to 84 percent next year and 64 percent by the end of 2015. CIMB expects the company to get more than HK$1 billion in cash flow from international calls and CTM’s business. DBS Vickers Group says in a note that Citic Telecom’s acquisition of CTM was completed only on June 25, which means CTM’s contribution to Citic Telecom’s earnings in the first

half of this year was small. DBS Vickers says CTM “will become the major revenue contributor” for Citic Telecom from the second half onwards. HK$3.5 billion of Citic Telecom’s debt is in 12-year bonds with an annual interest rate of 6.1 percent. The company is paying interest 3.5 percent above the Hong Kong benchmark lending rate on another HK$4.9 billion of debt.

Key drivers CIMB says Citic Telecom will pay around HK$370 million in interest every year, but that it will earn six times as much. As interest rates remain low, the analysts expect Citic Telecom to restructure next year the loan it took out to buy CTM. Analysts are pleased with CTM’s first-half results, but they believe the best is yet to come for the company. CIMB says this is because of the “robust tourism and gaming industries in Macau”. CTM made a first-half profit of HK$497 million, 10.4 percent more than a year earlier, even though its turnover fell by 2.7

Corporate Galaxy launches free Wi-Fi on shuttle buses Casino operator Galaxy Entertainment Group Ltd is providing a free wireless Internet service on its fleet of 74 shuttle buses. The company says the Wi-Fi system will give passengers access to travel and entertainment information and make them eligible to enrol in a draw for free hotel accommodation and other prizes. The prize draw runs from now until October 31. “We are delighted to be the first gaming operator to provide this thoughtful amenity for the tourists visiting Macau,” says Galaxy Entertainment president and chief operating officer Michael Mecca. Galaxy’s buses are used to move tourists from the city’s border crossings with the mainland and from Macau’s ferry ports and airport, to the company’s casino resorts StarWorld Hotel on the peninsula, and to Galaxy Macau on Cotai. Journeys from the Gongbei gate to Galaxy Macau can take 25 minutes or longer, depending on the time of day.

Telecoms firm connects with IT education Macau’s main telecoms provider CTM – Companhia de Telecomunicações de Macau SARL is hosting visits by local students as part of what says is an effort to promote information technology education in the city. In a labour-constrained market, such events are also a useful way for companies to connect with potential new recruits. CTM chief executive Vandy Poon Fuk Hei recently told Business Daily that the company faced a challenge in retaining trained staff. “…we are doing things in a different way to stabilise our workforce, reviewing our salaries more often. We have also re-established an encouraging and motivating engineering trainee programme,” he stated. Recently a group of 20 students from a local educational institution called the Innovative Smart Center visited the telecom firm’s headquarters. Paula Yung, a senior manager of human resources at CTM, gave them a briefing on CTM’s structure and goals, as well as available careers at CTM.

CTM will become the main contributor to Citic Telecom revenue, analysts say

percent to HK$2.23 billion. Profit rose because a bigger chunk of the company’s revenue came from more lucrative services. CIMB says revenue from CTM’s wireless network was “particularly strong”, having risen by 33 percent because of “a substantial increase”

in roaming charges for visitors and data charges. DBS Vickers Group says CTM got a larger proportion of its revenue from “the key drivers”: wider-margin wireless services, which brought in 33 percent more, and internet services, which brought in 9 percent more.

August 13, 2013

Macau

Future Bright buying baker’s trademarks for its souvenirs The restaurant operator will launch new-look Macau Yeng Kee Bakery products Stephanie Lai

sw.lai@macaubusinessdaily.com

estaurant operator Gourmet Co Ltd, to develop F u t u r e B r i g h t the bakery’s brand in Hong Holdings Ltd has Kong and Macau. agreed to pay 4 million Future Bright told the patacas (US$500,000) for stock exchange on Friday Macau Yeng Kee Bakery’s that it would indirectly M a c a u a n d H o n g K o n g control 70 percent of the trademarks. joint venture company, and F u t u r e B r i g h t t o l d that two Macau companies t h e H o n g K o n g S t o c k controlled by “relatives and/ Exchange that the price of or business contacts” of the trademarks had been Macau Yeng Kee Bakery and s e t “ h a v i n g t a k e n i n t o its owner would own the rest. account the long history and “We started to look into popularity of the two Macau the local bakery brands at trademarks”. the beginning of this year, Future Bright managing and eventually we reached director Chan Chak Mo told Bus iness Daily that the purchase was part o f h is com pany ’s strategy to develop its souvenir food product business. The 85-yearold Macau Yeng Kee Bakery and Price Future Bright its owner, Lam Iok Han, will enter is paying for Macau into a joint venture Yeng Kee Bakery with Future Bright, trademarks called Bright Elite

MOP4 mln

Macau Yeng Kee Bakery,” Mr Chan said. “The process for reaching the deal was quite smooth all the way through.” Business Daily had been unable to get in touch with the owner of Macau Yeng Kee Bakery by the time we went to press. Future Bright told the stock exchange that Bright Elite Gourmet would redesign the layouts of the bakery’s trademarks and the labels that bear them, and start a campaign in Macau to promote the newlook souvenir food products “sometime next year”. Mr Chan could not say exactly when the campaign would begin. Macau Yeng Kee Bakery sells almond cookies, egg rolls, moon cakes, beef jerky and sweets. It has one shop in Macau. It has 18 outlets in the mainland, three of them franchised, including outlets in Shenzhen and Zhongshan in Guangdong, and in Beijing. Macau Yeng Kee Bakery

will continue to own its mainland trademarks. Future Bright told the stock exchange that it would consider buying the bakery’s business in the mainland after next year’s promotion campaign. In April Future Bright signed a four-year lease for more than 1,580 square

Macau Yeng Kee Bakery has been in business for 85 years (Photo: Manuel Cardoso)

C Y Foundation acquires Macau slot management unit Plans for expansion of casino operations in the region, Business Daily learns Michael Grimes

michael.grimes@macaubusinessdaily.com

Pharaohs Palace Casino

Y Foundation Group Ltd, a Hong Konglisted company, has acquired a firm that manages electronic games at a Macau casino. According to the filing, following a vote by C Y’s shareholders on Friday, the firm now has control of the entire issued share capital of Weike (G) Management Macau Ltd. The latter company manages 205 slots and electronic table games at Pharaoh’s Palace Casino at The Landmark Macau hotel. The casino itself is operated by David Chow Kam Fai’s Macau Legend Development Ltd under a service agreement with Macau casino concessionaire Sociedade de Jogos de Macau SA. Weike (G) Management Macau shares a common shareholder with Singaporebased casino equipment

metres of industrial floor space in the Zhuhai-Macau Cross-Border Industrial Park for making food souvenir products. Mr Chan previously said he hoped Future Bright’s share of the market for souvenir food products here could grow to 2 percent within two years.

supplier Weike Gaming Technology Ltd. But Ray Poh, a director of Weike Gaming, told Business Daily the two are managed independently. “The similarity is only that they share a common shareholder, but other than that, the two are totally separate legal and business entities and have always been so,” explained Mr Poh. “But when the management entity name was originally chosen, Weike (G) Management didn’t have the kind of plans it has now,” he added.

Name change “The plan is to change the name of Weike (G) Management Macau to make sure people are clear there is a separation between the gaming equipment manufacturer and the management business,”

explained Mr Poh. “A number of names have been considered, but nothing has been chosen yet.” Mr Poh said the acquisition of Weike (G) Management Macau by C Y Foundation would allow the management unit to raise capital on the public market. “That should enable it to expand more quickly than previously, when it was doing everything privately,” said the executive. “Weike (G) Management is not planning an investment road show at the moment, as C Y themselves have enough capital to open up a few more sites.” Mr Poh explained the management unit was looking to expand regionally. “It is targeting the management of other potential sites in Macau and also in other parts of Asia. It is looking at a number of different business models,” he stated, but declined to discuss details. “Currently Weike (G) Management is looking at managing electronic gaming but it’s going to be open as to whether it also looks at managing casino gaming – including table gaming,” said the executive. C Y Foundation took its current name in May 2007 as an investment vehicle. Its chairman is Sneah Kar Loon.

August 13, 2013 April 19, 2013

Macau

Asia Adult Expo considers saying farewell to Macau The organisers of the trade show cannot attract enough new buyers Stephanie Lai

sw.lai@macaubusinessdaily.com

he Asia Adult Expo and Intimate Lingerie Asia, which has been held here for the past five years, will be held in Hong Kong for the first time later this month. The next Macau event will happen as planned in December, but the organisers, Vertical Expo Services Co Ltd, told Business Daily that lower-than-expected growth in the number of buyers could push the trade show out of the city. The company said that unlike Macau’s show, Hong Kong’s would be only a business-to-business event, closed to the public. “There will be seminars held, in large part focusing on online trading,” said Vertical Expo project coordinator Lucas Yip. “We have brands and industry professionals from China, Thailand, Germany, Hong Kong, Japan, Luxembourg, the United States and the United Kingdom coming to the Hong Kong trade show,” Mr Yip said. The Macau event will be similar to what it was in previous years, including an open day for the public. Vertical Expo chief executive Kenny Lo Yuk Wa told Business Daily: “Doing the show in Macau in a business-to-consumer format

was never what we planned for.” In the past, the organisers complained of not being accepted in any exhibition venues in Hong Kong. But Mr Lo said “the biggest worry” that led Vertical Expo to Hong Kong was less-thansatisfactory growth in the number of buyers attending the show in Macau. He said the number of buyers had grown by under 10 percent in the past five years. “That is not good, when you see it is outpaced by growth of about 20 percent in exhibitors,” he said. Mr Lo said the same old buyers always turned up at previous shows.

It is difficult when you are required to submit all the information on a buyer’s identity and flight schedule one month in advance Kenny Lo Yuk Wa, Vertical Expo Services chief executive

Room rate shock Last year’s Asia Adult Expo had 80 exhibitors and 38,300 visitors, of which just 2,000 to 3,000 were buyers. Mr Lo said it was becoming increasingly difficult to hold the show in Macau as buyers realised the cost of coming here had risen sharply in the past few years. “We are talking about a hotel room rate of HK$2,000 [US$258] to HK$3,000 a night, currently,” he said. “In terms of transport, Macau does not offer the same convenience

as Hong Kong, as it does not have as many flights, and buyers – even from mainland China – always have to rely on ferries to get here.” Mr Lo said Vertical Expo could give up holding Asia Adult Expo here if more buyers from a greater variety of companies did not come. He said holding the event in both Hong Kong and Macau was an experiment. “Then we will decide whether we will continue to host the expo in Macau.” Vertical Expo gets government subsidies to help cover logistics costs, but the company says rigid administrative procedures can make matters difficult. “There is no problem with the subsidy amount,” said Mr Lo. “But it is difficult when you are required to submit all the information on a buyer’s identity and flight schedule one month in advance in order to get the subsidy,” he said. A buyer’s confirmation of attendance “is always tentative,” he said. “We think Macau Economic Services have been very helpful for event organisers,” said Mr Lo. “We will also inform them of our problem to see if they can allow more flexible rules for granting a subsidy for hotel room rates,” he said.

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August 13, 2013 April 19, 2013

Macau

Mañana – Spanish govt stalls on Adelson’s smoking plea Country’s decision-makers go on summer break without resolving casino project’s potential deal breaker Michael Grimes

michael.grimes@macaubusinessdaily.com

pain’s central government has started its annual August holiday without ruling on a request by Las Vegas Sands Corp that smoking be allowed in its proposed casino resort, reports the country’s ABC newspaper. “The government has gone on vacation without a change to the smoking ban to allow smoking in EuroVegas,” said the outlet, using the name tag commonly applied by media – but not the company – for the estimated six billion euros (64.13 billion patacas) project. Sheldon Adelson, chairman of LVS, said last month that he would delay proposals for construction of the scheme at its preferred site Alcorcón – a largely commercial district to the southwest of the Spanish capital Madrid – until there was clarity on whether smoking would be allowed in the casino portion. Since January 2011 Spain has banned smoking in all indoor public spaces, including

restaurants, bars and cafes. Michael Leven, chief operating officer of LVS and head of its global development, told Business Daily in February that “gaming will probably be less than five percent of the total resort – if that”. But it will undoubtedly be the main generator of revenue for the site, which LVS says could create many thousands of jobs. The Madrid regional government has already agreed to waive its normal 40 percent tax on gross gaming revenue, in favour of a 10 percent rate. Mr Leven told us in February that there would be no additional sales tax on bets at its planned casino.

to play a role similar to that of the tourist boom of the Sixties [1960s], that of being a lever to support economic recovery in difficult times.”

Mr Leven told Business Daily in February that LVS hoped to open the project at “New Year’s Eve 2018”. LVS said in a press release in late July it had presented a “nonbinding viability study” to the Madrid regional government. But with no news on a possible exemption from the smoking ban, and seemingly no prospect of a decision before the executive and legislative branches of national government reconvene in a few weeks, it’s unclear whether LVS’s preferred development timetable can be achieved. Mr Leven told us the firm might fly high roller gamblers from Macau and Singapore to play at the Spanish resort, describing Europe as “a very interesting destination” for Asia’s newly-rich.

Economic lever Esperanza Aguirre, a member of Spain’s governing People’s Party and a former president of the Madrid regional government, said in her regular column in ABC: “I think that a project like EuroVegas is called for,

Sheldon Adelson at proposed site of Spanish project

August 13, 2013 April 19, 2013

Greater China Shanghai gets US$41 bln loan Shanghai will receive a 250 billion yuan (US$41 billion) loan from Agricultural Bank of China Ltd, to help fund the city’s planned Disneyland park and free-trade zone, the South China Morning Post reported yesterday. State-owned Agbank signed an agreement last week to provide the funding, which is equal to about 12.5 percent of the city’s gross domestic product last year, the newspaper said, citing unidentified government and banking industry sources. The loan is a sign the government is relaxing its policy stance to prevent the economy from slowing further, Zhang Zhiwei, chief China economist at Nomura Holdings Inc said.

China set to surpass India as top gold c As gold consumption jumps 54 pct in the first half

onsumption of gold in the mainland in the first six months of the year surged by more than half as sliding prices of the metal lured buyers, data showed, reinforcing expectations that the nation will overtake India as the world’s top gold consumer this year. Gold prices have lost about a fifth of their value this year after 12 years of gains, releasing pentup demand across the world and particularly in India and China, where gold is an essential part of weddings and gift-giving. China consumed 706.36 tonnes of gold in the first half of 2013, up 54 percent from the year-ago period, the China Gold Association (CGA) said in a statement on its website yesterday. It consumed 832.18 tonnes in all of 2012 and about 460 tonnes in the first half of 2012. Demand accelerated from growth of 26 percent in the first quarter, according to data from the association, which is funded by miners, refiners, retailers and jewellery makers. “China bought a lot when prices fell below US$1,350 in April thinking it will not fall further,” said Chen Min, precious metals analyst at Jinrui Futures in Shenzhen. “They bought much more than usual in April and May to meet the need for later in the year.” In April, gold witnessed its biggest two-day fall in 30 years. The metal has recovered after dropping below US$1,200 in June, but is still subject

Consumption reached 706.36 tonnes in the first six months

to volatile trading and negative sentiment as a recovering U.S. economy stirs worries of a scale-back in the Federal Reserve’s stimulus measures.

‘Great potential’ “China’s demand in April and May was unmatched,” said one Shanghai-based trader. “They bought more than anyone and were consistent buyers even after prices recovered a little.” China’s gold demand could hit a record 1,000 tonnes this year and will overtake India, the World Gold Council said last month. “China may overtake India as the biggest consumer as early as this year,” said Zhang Wei, an analyst at Zhaojin Futures Co in Zhaoyuan. “Demand in China has great potential

KEY POINTS First half gold consumption up 54 pct Gold output up 9 pct in the first six months Second half demand may not be as strong

Regulator to allow more private banks Lenders encouraged to channel more credit to small firms

hina’s cabinet has unveiled plans to set up more private banks to boost financial support for cash-starved smaller firms, in the latest bid to bolster the slowing economy. “We will actively develop smallsized financial institutions and open up the channel for private capital to enter the financial sector,” the cabinet said in a set of guidelines published on the central government’s website. “We will promote trials by private capital to initiate the establishment of private banks responsible for their own risks, as well as financial leasing companies and consumer finance companies

and other financial institutions.” The government will support the establishment of more village banks and credit companies in areas where smaller firms are concentrated, according to the guidelines. Beijing has been trying to open up the banking sector to private investors as state banks have channelled the bulk of their loans to state firms and local government vehicles. China Minsheng Banking Corp is the only private bank among the country’s 10 largest commercial lenders. Small- and medium-sized enterprises (SMEs) account for 60 percent of China’s gross domestic product and some 75 percent of new

China Minsheng is the only private bank among the country’s largest lenders

jobs created in the country, but they are struggling to cope with weaker global demand and tight credit. Under the guidelines, banks will be encouraged to widen credit securitisation to help channel more credit to small firms and qualified

banks will be allowed to issue special bonds and use the proceeds to support smaller firms, the cabinet said. Banks are encouraged to tolerate higher non-performing loans when they lend to smaller firms, it added. The government has announced a

August 13, 2013 April 19, 2013

Greater China Daimler plans more models, outlets Daimler AG’s Smart brand plans to introduce more models and expand its sales network in China as the producer of two-seater compact city cars seeks more orders in a market dominated by SUVs and minivans. The automaker plans to bring to China an electric version of its two-seater Smart Fortwo and a new fourseater being developed with Renault SA, head of Smart Brand Annette Winkler told Bloomberg. Smart expects to boost annual sales in the nation by 15 percent annually, on average, in the next few years by tapping demand in cities with a population of more than one million, she added.

consumer Stocks jump to two-month high Amid optimism the economy is stabilising after a two-quarter slowdown

to improve further as the country encourages private sector holdings.” India’s consumption this year is expected to be lower than last year’s 860 tonnes as the government is trying to curb imports and reduce its trade deficit. India doubled a tax on inbound shipments and curbed financing to tackle a surge in demand after the metal entered a bear market in April. The Chinese government does not release data on gold consumption or imports. Investors rely on data from trade groups such as the CGA and import numbers from Hong Kong – a key supplier to China – to gauge demand. “All signs have been pointing towards China overtaking India. Their demand in the second half may not be this high, but they are still way ahead of India,” said the Shanghai-based trader. Chinese consumers would like to see more stability in prices and not just lower prices, which is why Chinese demand is subdued currently, analysts and traders said. The CGA also said output in China, the world’s biggest gold producer, reached 192.82 tonnes in the first half, up 9 percent from a year ago. Gold is heading for its worst year in three decades as some investors lost faith in the metal as a store of value and amid speculation the U.S. Federal Reserve will curb debt-buying. Reuters/Bloomberg News

We will actively develop smallsized financial institutions and open up the channel for private capital to enter the financial sector China’s State Council

series of targeted measures to support the slowing economy, including scrapping taxes for small firms, offer more help for ailing exporters and boosting investment in urban infrastructure and railways. Reuters

hinese stocks rose to the highest level in almost two months, led by commodity producers and financial companies. A gauge of energy producers surged 5.7 percent, the most since September. China Shenhua Energy Co, the nation’s biggest coal producer, rallied 6.1 percent and Jiangxi Copper Co, the largest copper producer, had its biggest gain in a month. Poly Real Estate Group Co, the second-largest developer, climbed 5 percent amid speculation the government will relax a ban on real estate companies raising funds through share sales. The Shanghai Composite Index advanced 2.4 percent to 2,101.28 at the close, the biggest one-day gain since July 11. The CSI 300 Index advanced 2.9 percent to 2,352.79. New yuan loans topped estimates in July and money supply unexpectedly accelerated, according to official reports after the market closed on Friday. Data earlier in the week showed industrial output and exports improved. Hong Kong shares also posted strong gains yesterday, with investors cutting bearish bets. The Hang Seng Index ended up 2.1 percent at 22,271.3 points in its biggest daily gain since July 23. The China Enterprises Index of the top Chinese listings in Hong Kong jumped 3.4 percent to its highest since June 11. Gains came in the highest turnover in three weeks. “Investors are beginning to feel confident that the economy could be recovering after last week’s data,” said Zeng Xianzhao, an analyst at Everbright Securities Co in Chongqing. “Liquidity also looks OK now.” A gauge of financial companies in the CSI 300 including banks, insurers

Investors beginning to feel confident

and developers jumped 3.8 percent, the most in a month. Ping An Bank Co, surged 4.9 percent to 10.33 yuan (US$1.69). Ping An Insurance Group Co, the second-largest insurer, rose 4.5 percent to 34.51 yuan. Poly Real Estate rallied 5 percent to 11.42 yuan. Gemdale Corp increased 4.4 percent to 7.31 yuan.

2.4 %

Shanghai Composite Index

2.1 %

Hang Seng Index

Li Ning narrows L first half loss

i Ning Co Ltd, China’s best known sportswear company, reported a smaller-than-expected loss in the first half and said inventory levels had returned to close to normal levels, fuelling hopes that the beleaguered industry is finally on the mend. The sector is still grappling with massive oversupply after China’s six biggest sportswear companies, expecting a wave of interest after Beijing hosted the 2008 Olympic Games, opened a combined 12,300 stores between 2008 and 2011, an average of 11 per day. Li Ning, which is backed by U.S. private equity firm TPG Capital, said the worst was behind it as it expects to start seeing returns from investments to help cut inventory, adding that its annual net loss will be

Aggregate financing was 808.8 billion yuan (US$132 billion) in July, the People’s Bank of China said last week, compared with the 925 billion yuan median estimate of analysts surveyed by Bloomberg News. New yuan loans exceeded forecasts and accounted for about 87 percent of the total, the most since September 2011. M2 money supply growth unexpectedly accelerated to 14.5 percent. The China Securities Regulatory Commission will make decisions regarding financing for real-estate projects based on examinations of the company and opinions of the Ministry of Land and Resources, according to a statement posted on the regulator’s website on Friday. “There’s optimism developers will be allowed to raise funds again,” Zhou Lin, an analyst at Huatai Securities Co, said. “Investors are also putting money now into cyclical stocks such as energy and property because of the recent macro data.” Bloomberg News/Reuters

less than last year’s. “For the full year of 2013, we expect the company’s operating cash flow will continue to improve, along with our distributors’ profitability,” chairman Li Ning, an Olympic gymnastics champion, said in a statement. The company said its net loss totalled 184.2 million yuan (US$30 million) for the JanuaryJune period. That was worse than a 44.3 million yuan profit in the same period a year ago but better than an average forecast for a 241 million yuan loss from three analysts polled by Thomson Reuters. Li Ning said first-half revenue tumbled 24.6 percent to 2.91 billion yuan but its gross profit margin improved to 43.6 percent in the period, up from a restated 43.2 percent a year earlier. Reuters

10 10

August 13, 2013 April 19, 2013

Greater China

Cashing in on food scares, online sales boom Chinese consumers shaken by series of food scandals Dominique Patton

KEY POINTS Online food retailers say they offer peace of mind Firms working to convince customers of safety promises Analysts predict market set for strong growth

packaging barcodes that can be read by smartphones help consumers verify the origin of items. And companies go to some lengths to describe their products online. Customers looking at free-range chickens on the Benlai Shenghuo website, a 2012 startup whose name roughly translates as ‘original life’, get details on the breed they are selecting and its diet, along with photos of the birds wandering on farms.

Milk powder – latest food scandal that hit Chinese shoppers

Building networks

hinese consumers are responding to a powerful new marketing tactic that plays to a widespread fear of food contamination – the promise of safe groceries sold online. Pledging produce direct from the farm, vendors have found food is becoming one of the fastest-growing segments of Internet retailing as they cash in on scares from cadmiumtainted rice to recycled cooking oil. The trend is adding momentum to a Chinese online retail boom driven by a rapidly expanding middle class, with companies such as COFCO Ltd and Shunfeng Express betting that a decent slice of a 1.3 billion population will pay for the peace of mind they say their services offer. “I think people are willing to pay a higher premium than in the West. In other markets, like the U.K., food e-commerce is about convenience. Here, there’s going to be a higher quality and safety premium,” said Chen Yougang, a partner at consultancy McKinsey & Co. But convincing some sceptical Chinese consumers on food quality will remain a battle. Shanghai-based Zhang Lei expressed doubt on the credentials of some products being touted as organic. “Everyone knows that in China organic is not the real thing,” said the mother of one. Nonetheless, total online sales of fresh produce in China could rocket to 40 billion yuan (US$6.5 billion) in five years from about 11.5 billion yuan this year, said Zhou Wen Quan, a senior analyst at Beijing Orient Agribusiness Consulting.

Research firm Euromonitor has more modest expectations, but still sees growth comfortably beating major overseas markets. It looks at volumes rather than values of online purchases of fresh food, with the Chinese market expected to grow by around 8 percent by 2017 from 664 million tonnes this year, compared to U.S. growth of about 5 percent from 77 million tonnes.

New market So far, most food sold on China’s largest online shopping sites such

I think people are willing to pay a higher premium than in the West. In other markets, food e-commerce is about convenience. Here, there’s going to be a higher quality and safety premium Chen Yougang, McKinsey & Co

as Yihaodian, majority owned by Wal-Mart, and Jingdong Mall has been packaged items or fruit with a relatively long shelf-life. But a wave of new businesses are focusing on fresh and premium produce, using the Internet to target higher-income consumers than supermarkets, which typically serve a broader customer base, analysts say. “The vegetables are really fresh,” said Beijing resident Lei Na, who shops on websites such as Womai. com, owned by China’s top food processor and trader COFCO. “Supermarket food doesn’t look that fresh, especially if you only get there in the evening.” Shunfeng Express, China’s largest delivery company, last year launched Shunfeng First Choice offering a range of food to around 500,000 consumers. About 70 percent are imported products such as wine and milk powder, but it also sells local seafood, meat and vegetables. “We go directly to the farms to pick the produce, and then using our own logistics, deliver straight to the consumer. So from the tree to the consumer’s dining table, we’ll remove all the sectors in between,” said Yang Jun, director of sales and marketing. Persuading customers they can meet promises on food safety is crucial for online retailers. “If I’m busy I use websites. But if I have time, I prefer to drive to the supermarket and choose vegetables myself,” said Ms Zhang in Shanghai. But vendors say that cutting out middlemen increases freshness and makes food more traceable, while

Online customer reviews and ratings are also key in convincing potential buyers of quality, said Chen Liang, a senior research expert at Alibaba.com Ltd, owner of China’s biggest online marketplace Taobao. With its 10 million users per minute, Taobao has ridden the e-commerce boom in China, with its customers moving from non-essential items such as books and electronics to clothes and recently food. Its sales of meat, seafood, fruit and vegetables grew 42 percent last year to nearly 1.3 billion yuan. “Before, people thought the Internet wasn’t suitable for selling clothes. But now it’s the most suitable channel. I think food will follow this trend,” Chen Liang said. Another major challenge facing e-commerce food firms is the cost of developing nationwide cold chain logistics, with McKinsey’s Chen suggesting players work together to connect suppliers with a network of cold storage facilities. But with food scandals hitting Chinese shoppers thick and fast – products from the world’s largest dairy exporter Fonterra Cooperative Group Ltd have just been recalled from Chinese shelves – firms are confident they can overcome hurdles in the market. “During the bird flu outbreak, our chicken sales exploded,” said Steve Liang, founder of Shanghai-based online retailer Fields, referring to a jump in sales after a new strain of the virus discovered in February that killed over 40 people in China and Taiwan. Reuters

11 11

August 13, 2013 April 19, 2013

Asia

Japan GDP growth misses expectations Weak business investment continues to slow economy

Exports one of the biggest contributors to growth in the second quarter

apan’s economy slowed more than forecast in the second quarter as businesses cut investment, undermining gains in consumer and government spending that helped reduce deflationary pressures. Gross domestic product rose an annualised 2.6 percent in the AprilJune period, after climbing 3.8 percent in the previous quarter, the Cabinet Office reported yesterday in Tokyo. The median of 32 estimates was for a 3.6 percent gain. Unadjusted for price changes, nominal GDP growth accelerated to 2.9 percent. On a quarter-to-quarter basis, Japan’s economy grew 0.6 percent in April-June. The report adds to the debate on whether Japan is strong enough to sustain a planned 3 percentage point bump in the sales tax in April, with Prime Minister Shinzo Abe deciding in coming months on whether to proceed. While consumers continue to propel Japan’s rebound, companies have yet to commit to the Abenomics project, paring capital spending for a sixth straight quarter. “Opponents will gain momentum to try to prevent raising the sales tax, while politicians who back it will reinforce their argument by pointing to positive consumer spending and price data,” said Hideo Kumano, executive chief economist at Dai-ichi Life in Tokyo who previously worked at the Bank of Japan. Apart from the debate, the data show “the economy is making a step forward to ending deflation,” he said. External demand added 0.2

Japan Inc profit doubles J

apan’s top listed companies doubled earnings last quarter from a year earlier, exceeding already high forecasts and generating support for the economic recovery effort of the government. With almost all of the Nikkei 225 Stock Average companies reporting, profit surged 103 percent and beat

percentage points to growth, while domestic demand contributed 0.5 points. Private consumption rose 0.8 percent from the March quarter on robust spending on food, travel and consumer electronics. But capital expenditure slid 0.1 percent, much weaker than a median market forecast for a 0.7 percent increase and marking the sixth straight quarter of decline. “The economy has been steadily rising since the inauguration of the administration last year,” Mr Abe told reporters. “I’ll continue to take all possible care about the economy. I’d like to focus on the economy, including implementation of further growth strategies in the autumn.” The Tokyo stock market lost 0.70 percent yesterday in thin trading following the GDP data. The benchmark 225 Nikkei index closed down 95.76 points to 13,519.43, while the Topix index of all firstsection shares fell 0.55 percent, or 6.29 points, to 1,134.62.

the matter after revised GDP data due on September 9. “There is no need to raise the sales tax in a hurry,” Koichi Hamada, a key adviser to the prime minister and a professor emeritus at Yale University, told Reuters. “One idea is to delay everything by one year. I feel that raising the sales tax as scheduled might hurt the economy.” Consumer spending, which accounts for about 60 percent of the economy, contributed 1.9 percentage point to the annualised real growth rate in the second quarter. Inventories subtracted 1.1 percentage point as companies drew down stocks of unsold goods at the fastest pace since the fourth quarter of 2011. Government spending and trade added 0.7 percentage point each.

“The numbers continue to be good in terms of criteria to decide” on whether to raise the sales tax, Economy Minister Akira Amari told reporters after the release. “By using all available measures, including tax system, budget and financial measures, I expect capital spending will expand.” Yesterday’s report showed some evidence that efforts by Abeappointee Haruhiko Kuroda, the governor of the Bank of Japan, are

starting to bear fruit in combating deflation. The GDP deflator, a broad measure of prices across the economy, fell 0.3 percent in April-to-June from a year before, the smallest drop since the third quarter of 2009. The nominal expansion exceeded real growth for the first time since the first quarter of 2012. This shift “signals Japan is finally becoming a normal economy,” said Takuji Aida, chief economist at Societe General Securities Ltd in Tokyo. “Still, it’s too early to say this trend will be sustained as temporary factors from government spending and a weak yen from monetary easing are key reasons for boosting the economy.” A separate gauge of corporate goods prices released by the BOJ yesterday showed an increase of 2.2 percent, the biggest since August 2011. With Mr Kuroda’s pledge to double the monetary base over two years, a slide in the yen has caused energy costs to jump – especially with Japan’s deeper reliance on imports of fossil fuels since the shutdown of most of the nation’s nuclear-power industry since the Fukushima meltdown in March 2011. With little sign of companies raising employee wages, higher electricity costs crimp household budgets even before the scheduled step-up in the consumption tax in April. Mr Abe’s administration is forming a panel to analyse whether and how to proceed with the bump in the levy. Mr Abe adviser Etsuro Honda is among those calling for an alternative. The government has said it will decide on

analyst estimates by 16 percent, the most in two years, according to data compiled by Bloomberg. Companies topping estimates range from Toyota Motor Corp and Sony Corp to Shiseido Co and Kobe Steel Ltd. The magnitude and breadth of the profit surge means Japan’s leading companies have the money to help stoke the economy – through investment, dividends and higher wages – which would aid Prime Minister Shinzo Abe’s effort to break two decades of stagnation. Slumping corporate investment has hindered the recovery, with gross domestic product figures released yesterday

showing companies cut spending for a sixth straight quarter. “The first quarter got the fiscal year off to a great start,” said Takashi Aoki, a fund manager at Mizuho Asset Management Co, which oversees about US$33 billion. “There will definitely be more capital spending, and increased spending will definitely stimulate the economy further.” Capital investment by enterprises fell at a 0.4 percent annual pace last quarter, according to yesterday’s GDP report by the Cabinet Office. Japanese companies are benefiting from Mr Abe’s economic policies, including the weakening of the

country’s currency. The yen’s 19 percent drop from the same quarter a year earlier made Japanese cars, auto parts, machinery, electronic components and home appliances more competitive abroad. The Nikkei 225 companies have the most cash per share in more than a decade, according to data compiled by Bloomberg. Cash rose 19 percent last quarter for the 216 companies that have reported, the steepest jump in at least nine years, the data show. The companies had an average of 3,255.91 yen (US$33.72) of cash and equivalents per share, the most since at least 2000.

‘Normal economy’

Bloomberg News/Reuters

KEY POINTS Third quarter of expansion for the Japanese economy Exports, public spending contributed most to growth Investments made by businesses declined Below-forecast growth fuels sales-tax debate

Bloomberg News

12 12

August 13, 2013 April 19, 2013

Asia

Singapore cuts trade outlook As China slowdown caps recovery

Lending has picked up “modestly” in Vietnam this year and the country should grow slightly faster than projected earlier, the International Monetary Fund said. The IMF said it expects no interest rate cuts in the short term. The Fund projected 2013 economic growth at 5.3 percent, compared with April’s estimate of 5.2 percent. The IMF has put the 2012 pace at 5.2 percent, while the government said it was 5.03 percent. “Credit growth has picked up modestly in real terms, mostly concentrated in the export-oriented and agricultural sectors,” the IMF said.

ingapore lowered its forecast for exports this year as a slowing expansion in China crimps demand for the nation’s goods, even as services helped the economy grow more than initially estimated last quarter. Non-oil domestic exports may be unchanged or rise 1 percent this year, compared with a previous forecast of 2 percent to 4 percent, the trade promotion agency said in a statement yesterday. Gross domestic product rose an annualised 15.5 percent in the three months through June from the previous quarter, when it grew a revised 1.7 percent, the Trade Ministry said separately. Southeast Asian nations from Malaysia to Indonesia have seen exports slump as growth slows in China while Europe and Japan struggle to sustain economic recoveries. Singapore’s exports in June extended the longest run of declines since the global financial crisis as electronics dropped for an 11th month. “While we are seeing surer signs of bottoming in some places in the world economy, there is no guarantee of a sustained and accelerating recovery from here,” said Vishnu Varathan, an economist at Mizuho Bank Ltd in Singapore. “Looking at the export sector, it’s premature to declare we are out of the woods. Singapore’s growth support is coming from the services sector.” The median estimate in a Bloomberg survey of 11 economists was for a 14.2 percent increase in quarter-on-quarter GDP, and a previous forecast by the government was for a 15.2 percent expansion. The Monetary Authority of Singapore stuck to a policy of allowing gradual gains in its currency in April as inflationary pressures curbed scope for monetary stimulus. That stance remains appropriate, central bank deputy managing director Ong Chong Tee told reporters yesterday. Singapore’s Prime Minister Lee Hsien Loong raised his forecast for economic growth to a range of 2.5 percent to 3.5 percent this year, up from 1 percent to 3 percent. The

Newcrest plunges to first annual loss in 11 years

Export outlook not faring well

economy expanded 2 percent in the first half, Mr Lee said in a televised message on August 8, on the eve of the country’s National Day.

Global uncertainties “We have made steady progress this past year,” said Mr Lee. “Our economy is holding steady amidst global uncertainties. We are attracting more quality investments. Unemployment remains low.” GDP ex p a n d ed 3 . 8 p er cen t last quarter from a year earlier, better than the 3.7 percent estimated previously, yesterday’s report showed. The International Monetary Fund lowered its 2013 global growth forecast last month as China’s economy levels off and Europe’s recession deepens. China’s gross domestic product rose 7.5 percent in April-to-June from a year earlier, down from 7.7 percent in the first quarter, extending the longest streak of sub-8 percent expansion in at least two decades.

Indian rupee forwards up on RBI auction plan I

ndian rupee forwards touched a one-week high after the central bank pledged to curb the supply of cash in a bid to stem an unprecedented slide in the currency. The Reserve Bank of India will auction 220 billion rupees (US$3.6 billion) of cash-management bills every Monday, it said in an e-mailed statement. The move follows a review of the impact of earlier measures to steady the currency and is for “effective liquidity management,” the RBI said. One-month non-deliverable forwards touched 60.87 per dollar, the strongest level since August 2, data compiled by Bloomberg show. The rupee fell to an all-time low of 61.805 on August 6 and has lost 9 percent in the past year. Its threemonth historical volatility rose to

Vietnam growth to quicken: IMF

11.94 percent on August 8, the highest level since 2009. “The RBI’s move is to ensure that the short-term rates stay high to make it expensive for investors to short the rupee,” said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd in Singapore. “The fundamental issue facing India has not changed though. With growth slowing and deficit countries getting overlooked by investors, the rupee will continue to come under depreciation pressure.” A short position is a bet a currency or security will decline. The central bank last month cut its economic growth forecast for the year through March 2014 to 5.5 percent from 5.7 percent, and said India’s record current-account deficit remains the biggest risk to Asia’s No.

“As China adjusts its policies to promote more sustainable growth, unintended consequences, such as an excessive tightening of liquidity, could lead to a sharp slowdown in growth,” Singapore’s Trade Ministry said yesterday. “This could in turn have spill-over effects on other export-oriented Asian economies.” Singapore’s exports to the world’s largest economy fell for a second month in June. The U.S. was Singapore’s fifth-biggest trading partner in 2012 after Malaysia, the European Union, China and I n d o n es i a . S wi n g s in d e m a n d for pharmaceuticals can make Singapore’s export figures volatile. The “export outlook hasn’t been faring well over the last couple of months because we are undergoing a down cycle in pharmaceuticals and electronics,” Irvin Seah, a Singaporebased economist at DBS Group Holdings Ltd, said before the report. The government may have been “a bit biased to the upside with the export forecast” previously, he said. Bloomberg News

3 economy. Gross domestic product rose 5 percent last year, the slowest pace in a decade. The sale of cash-management bills, which typically mature within 91 days, is in addition to about 150 billion rupees of bonds auctioned each Friday as part of the government’s budgeted borrowing programme. The Finance Ministry also issues about 120 billion rupees of treasury bills, which mature in at least 91 days, every Wednesday. Bloomberg News

US$3.6 bln

THE RBI WILL AUCTION OF CASH-MANAGEMENT BILLS EVERY MONDAY

Newcrest Mining Ltd, the world’s fifth largest gold producer, reported its first annual loss since 2002 yesterday, hit by A$6.2 billion (US$5.7 billion) in writedowns it flagged in June after gold prices plunged. Newcrest reported a net loss of A$5.78 billion. Gold-mining companies have all been hammered by a 26 percent plunge in gold prices this year, and been forced to book huge writedowns, slow expansion projects and slash costs. The Australian gold miner reiterated it would focus on slashing costs and boosting production from its lowest cost mines, as it looks to shore up cashflow and fend off another downgrade in its credit rating.

Mantra to expand in Indonesia Mantra Group, the Australian hotel operator controlled by CVC Asia Pacific Ltd, plans to open 20 hotels in Indonesia in the next three years and manage about the same number of properties in Thailand in six years. The closely-held company, which opened its first resort under its fourstar Mantra brand in March in Bali, is in talks to add six more hotels in the resort province, chief executive Bob East told Bloomberg. The Gold Coast, Queensland-based company, which is also in initial talks to run a hotel in Jakarta, will either sign management agreements or take minority stakes in properties in the country, he said.

UGL to spin off property business Australian engineering company UGL Ltd said yesterday that it will split its engineering and property businesses after reporting a 73 percent fall in annual profit. UGL, which has a market value of about A$1.2 billion (US$1.1 billion), plans to create two separately listed companies, one focused on global property services and the other on engineering services. “We believe a demerger will enhance shareholder value over the short and long term and prove beneficial to our clients and our people,” UGL chairman Trevor Rowe said in a statement. UGL’s annual profit for the year ending June 30 fell to A$36.5 million.

13 13

August 13, 2013 April 19, 2013

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

Max 42.45

Average 42.185

Max 43.15

Min 41.25

Average 42.866

68.60

22.5

42.15

68.55

22.4

41.85

68.50

22.3

41.55

68.45

22.2

41.25

Last 42.45

Min 41.9

42.45

Average 68.493

42.85

19.9

42.50

19.8

42.15

19.7

Max 19.92

Average 19.811

PRICE

DAY %

YTD %

(H) 52W

Min 19.68

Last 19.68

108.9300003

(L) 52W

WTI CRUDE FUTURE Sep13

105.79

-0.169859394

12.87878788

BRENT CRUDE FUTR Sep13

107.59

-0.582147477

1.242119131

114.3699951

96.65000153

GASOLINE RBOB FUT Sep13

289.11

-0.587992573

5.59552942

309.1700077

260.2499962

GAS OIL FUT (ICE) Sep13

910.5

0.552181115

0.302946847

980

832.5

NATURAL GAS FUTR Sep13

3.246

0.495356037

-9.783212896

4.517000198

3.128999949

NY Harb ULSD Fut Sep13

298.5

-0.283948555

319.1699982

275.5500078

86.23999786

Gold Spot $/Oz

1328.27

1.0506

-20.1981

1796.08

1180.57

Silver Spot $/Oz

20.9692

2.0523

-30.358

35.365

18.2208

Platinum Spot $/Oz

1497.99

-0.267

-1.3019

1742.8

1294.18

743

0.1348

6.1944

786.5

572.7

LME ALUMINUM 3MO ($)

1871

1.684782609

-9.744331886

2200.199951

1758

LME COPPER 3MO ($)

7275

1.252609603

-8.27134031

8422

6602

1944

2.585751979

-6.538461538

2230

1779

14680

2.442428472

-13.95076202

18920

13205 14.60000038

Palladium Spot $/Oz

LME ZINC

68.40

19.6

Max 22.5

Average 22.322

Min 22.15

Last 22.25

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep13

21.30

21.10

20.90

Max 21.25

Average 20.860

Min 20.7

Last 20.85

COUNTRY MAJOR

ASIA PACIFIC

CROSSES

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

DAY %

YTD %

(H) 52W

(L) 52W

0.9158 1.5474 0.9258 1.3305 96.67 7.9879 7.7553 6.1221 60.725 31.21 1.2613 29.951 43.68 10311 88.527 1.2318 0.85977 8.1434 10.6276 128.62 1.03

-0.5214 -0.1549 -0.3672 -0.2773 -0.4758 0.0075 0.0064 -0.0016 0.2245 0.0961 -0.3092 -0.0367 -0.4579 -0.4267 0.0429 -0.1031 0.1024 0.5772 0.5298 -0.1788 0

-11.7556 -4.3398 -1.1234 0.8719 -10.9341 -0.0588 -0.0606 1.7723 -9.436 -2.0186 -3.1634 -3.065 -6.1241 -5.0238 0.9037 -1.9743 -5.1584 0.9099 -0.9146 -11.7011 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3691 61.8063 31.62 1.286 30.228 44.181 10343 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2256 77.13 7.9818 7.7498 6.1138 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.78128 7.8031 9.7946 95.94 1.0289

15.2

0.065832785

-1.330736774

16.47500038

-0.220628792

-24.59358066

665

452

645

-0.347624565

-21.41334146

913

643.5

SOYBEAN FUTURE Nov13

1188

0.486360753

-8.808290155

1409.75

1162.5

COFFEE 'C' FUTURE Sep13

122.9

-19.38340439

196.75

115.3499985

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

15.92999935

ARISTOCRAT LEISU

4.33

0.2314815

37.46031

4.63

2.49

1352738

74.34999847

CROWN LTD

13.4

1.055807

25.58575

13.75

8.49

668849

Dec13

WHEAT FUTURE(CBT) Dec13

SUGAR #11 (WORLD) Oct13

17.03

COTTON NO.2 FUTR Dec13

88.53

0.294464075 -0.449791971

-15.10468594

21.82999992

12.43332487

89.55999756

World Stock Markets - Indices NAME

20.70

PRICE

452.25

CORN FUTURE

22.1

Currency Exchange Rates

NAME

METALS

Last 68.5

20.0

Commodities ENERGY

Min 68.45

43.201

41.80

Last 42.95

Max 68.6

Macau Related Stocks

AMAX HOLDINGS LT

1.15

-4.958678

-17.85714

1.72

0.75

1952050

BOC HONG KONG HO

25.15

0.8016032

4.356845

22.85

13801953

CENTURY LEGEND

0.325

22.64152

0.42

0.22

6.45

-1.07362

7.67947

6.74

3.07

46799 26235965

CHEUK NANG HLDGS

COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15425.51

-0.4697929

17.71478

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3660.108

-0.2457262

21.21515

3694.188

2810.8

FTSE 100 INDEX

6582.81

-0.008810051

11.61448

6875.62

5605.589844

DAX INDEX

8319.15

-0.2297828

9.284341

8557.86

6871

VOLUME CRNCY

CHINA OVERSEAS

24.1

1.687764

4.329003

25.6

17.28

CHINESE ESTATES

16.86

0.3571429

49.92599

16.98

7.824

200355

CHOW TAI FOOK JE

9.98

0.8080808

-19.77492

13.4

7.44

3177800

EMPEROR ENTERTAI

2.74

1.481481

44.97355

3.07

1.35

1025000

2.2

-0.4524887

81.51424

2.76

1.033

1326000

GALAXY ENTERTAIN

42.45

2.909091

39.8682

44.95

19.64

11283585

HANG SENG BK

123.9

1.22549

4.380795

132.8

109

1395557

HOPEWELL HLDGS

24.85

1.428571

-25.26316

35.3

23.047

1587209

HSBC HLDGS PLC

85.75

1.179941

5.473551

90.7

65.85

14656482

HUTCHISON TELE H

3.64

0.2754821

2.247193

4.66

2.98

3156000

LUK FOOK HLDGS I

22.9

1.777778

-6.14754

30.05

16.88

1170000

MELCO INTL DEVEL

16.62

0.1204819

84.4617

18.18

5.54

1881000 1660321

FUTURE BRIGHT

NIKKEI 225

13519.43

-0.7033321

30.0548

15942.6

8488.14

HANG SENG INDEX

22271.28

2.126419

-1.702088

23944.74

19076.78906

CSI 300 INDEX

2352.794

2.921422

-6.7444

2791.303

2023.171

TAIWAN TAIEX INDEX

7903.38

0.6013131

2.647963

8439.15

7050.05

MGM CHINA HOLDIN

22.25

-0.2242152

67.56689

23.65

11.27

KOSPI INDEX

1884.83

0.2190662

-5.619293

2042.48

1770.53

MIDLAND HOLDINGS

3.18

1.597444

-14.05406

2.68

868000

S&P/ASX 200 INDEX

5108.653

1.057167

9.88831

5249.6

4261.2

NEPTUNE GROUP

0.179

0.5617978

17.76316

0.23

0.131

14030000

4612.64

-0.606385

6.856024

5251.296

3978.078

NEW WORLD DEV

11.16

1.454545

-7.154746

15.12

9.38

10973430

FTSE Bursa Malaysia KLCI

1783.5

0.2349212

5.598156

1826.22

1590.67

SANDS CHINA LTD

42.95

1.656805

26.50957

43.7

23.7

5822585

SHUN HO RESOURCE

1.53

3.378378

9.285716

1.67

1.06

208000

NZX ALL INDEX

965.095

-0.3010303

9.414627

998.487

796.908

SHUN TAK HOLDING

3.8

-9.307877

4.65

2.72

8145918

PHILIPPINES ALL SHARE IX

3936.92

0.4667448

6.432582

4571.4

3411.69

JAKARTA COMPOSITE INDEX

SJM HOLDINGS LTD

19.68

-1.204819

10.88787

22.382

14.77

4159625

SMARTONE TELECOM

11.32

1.252236

-19.60227

17.38

11.1

1366500

WYNN MACAU LTD

20.85

-0.7142857

-0.4773306

26.5

16.92

5177673

ASIA ENTERTAINME

4.09

3.02267

45.30944

4.7647

2.4835

31790

-0.0135925

64.52695

74.26

43.16

396861 11533

HSBC Dragon 300 Index Singapor

617.97

0.11

-0.5

STOCK EXCH OF THAI INDEX

1432.25

-1.030294

2.896693

1649.77

1207.53

HO CHI MINH STOCK INDEX

499.46

-0.2317127

20.72124

533.15

372.39

BALLY TECHNOLOGI

73.56

LAOS COMPOSITE INDEX

1322.64

-1.215168

8.879869

1455.82

1003.17

BOC HONG KONG HO

3.16

2.931598

3.6

2.99

GALAXY ENTERTAIN

5.34

-0.2987304

34.50882

5.77

2.5

3200

INTL GAME TECH

19.31

0.5205622

36.27382

20.25

11.19

1884315

JONES LANG LASAL

87.84

-0.6447234

4.646173

101.46

69.56

585862

LAS VEGAS SANDS

56.13

-1.005291

21.59879

60.54

36.3606

2419989

MELCO CROWN-ADR

26.36

-0.1515152

56.53207

26.6

10.22

1704431

MGM CHINA HOLDIN

2.92

1.74216

66.82937

2.98

1.4381

1000

MGM RESORTS INTE

17.25

-1.372213

48.19587

17.67

9.15

7230808

SHFL ENTERTAINME

22.77

0.04393673

57.03448

23.08

12.35

347857

SJM HOLDINGS LTD

2.6

14.15445

2.9481

1.9818

300

138.13

-0.9465758

22.79314

144.99

92.9122

703590

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

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

NAME

AIA GROUP LTD

36.2

1.40056

16289060

CHINA UNICOM HON

ALUMINUM CORP-H

2.64

6.024096

33338715

CITIC PACIFIC

BANK OF CHINA-H

3.24

2.208202

282873766

BANK OF COMMUN-H

5.21

2.964427

34213744

BANK EAST ASIA

30.9

1.311475

1959706

PRICE

DAY %

VOLUME

NAME

PRICE

DAY %

VOLUME

1.694915

54747968

POWER ASSETS HOL

69.95

0.4307251

1854424

9.44

8.505747

28002305

SANDS CHINA LTD

42.95

1.656805

5822585

CLP HLDGS LTD

64.45

0.3894081

3535806

SINO LAND CO

10.94

1.296296

7744400

CNOOC LTD

14.36

2.571429

84906716

104

0.7751938

2175760

11.2

2.3766

3508563

SWIRE PACIFIC-A

92.95

0.9229099

1772116

367.4

2.797985

3231566

19.2

-1.234568

6280000

COSCO PAC LTD

SUN HUNG KAI PRO

BELLE INTERNATIO

11.96

4.363002

21017001

ESPRIT HLDGS

13.44

-1.030928

2901731

TENCENT HOLDINGS

BOC HONG KONG HO

25.15

0.8016032

13801953

HANG LUNG PROPER

25.65

3.012048

5101967

TINGYI HLDG CO

CATHAY PAC AIR

14.14

-0.2820874

2195103

HANG SENG BK

123.9

1.22549

1395557

WANT WANT CHINA

10.52

1.544402

16195955

CHEUNG KONG

115

0.4366812

4071513

HENDERSON LAND D

48.65

1.459854

2005226

WHARF HLDG

70.35

2.252907

6060671

CHINA COAL ENE-H

4.82

4.555315

145953572

HENGAN INTL

87.8

-0.3970505

1164910

HONG KG CHINA GS

20.35

1.75

7391923

HONG KONG EXCHNG

124.4

4.187605

7168501

HSBC HLDGS PLC

85.75

1.179941

14656482

CHINA CONST BA-H CHINA LIFE INS-H CHINA MERCHANT CHINA MOBILE

5.85

3.723404

289761619

19.26

3.99568

57560226

0.8403361

7654691

83.55

1.211387

16589447

HUTCHISON WHAMPO

92.9

1.363884

10120092

CHINA OVERSEAS

24.1

1.687764

26235965

IND & COMM BK-H

5.13

3.219316

327483086

CHINA PETROLEU-H

5.83

3.552398

165898442

LI & FUNG LTD

10.4

0.9708738

19476210

CHINA RES ENTERP

25.95

0.9727626

4634498

MTR CORP

22.6

2.262443

7439054

NEW WORLD DEV

CHINA RES POWER

18.58

5.568182

12346500

CHINA SHENHUA-H

24.5

4.925054

35772587

CHINA RES LAND

29.6

1.369863

2930161

11.16

1.454545

10973430

PETROCHINA CO-H

9.2

3.720406

86435941

PING AN INSURA-H

53.15

7.265388

43884996

MOVERS

22280

INDEX 22271.28 HIGH

22274.74

LOW

21653.45

52W (H) 23944.74 (L) 19076.78906

21650

8-August

12-August

14 14

August 13, 2013 April 19, 2013

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editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

15 15

August 13, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

China Daily

India’s fear of growth Clive Crook

The value of China’s solar exports fell by almost onethird in the first half of 2013 as trade disputes took a toll on prices, an industry group said. According to the Photovoltaic Product Branch of the China Chamber of Commerce for the Import and Export of Machinery and Electronic Products, the value of solar cell and module exports plunged 31 percent year-on-year to US$6.5 billion in the first six months. Prices were down 41 percent, while export volume increased 17 percent, the organisation said.

The main failure of India’s post-reform development has been lack of growth in labour-intensive industries

Economic Times India’s finance ministry is set to unveil a slew of measures it could take over the next few months to boost capital flows, which will help stabilise the rupee. Finance Minister P Chidambaram is likely to make a statement in Parliament on measures to deal with the country’s current account deficit. The possible steps to boost inflows include a special drive to raise non-resident deposits, bond issues by staterun companies, measures to attract sovereign wealth funds and easier norms for overseas borrowings.

Jakarta Globe Economists expect Bank Indonesia to maintain its benchmark interest rate at 6.50 percent when the board meets this week to discuss ways to boost the slowing economy amid an acceleration in inflation. The benchmark rate has been raised twice this year – once each in June and July – by a total of 75 basis points, as the central bank seeks to tame a pick-up in inflation after a 33 percent average increase in the price of subsidised fuel in June and to control volatility in the foreign exchange rate.

The Star Despite strong economic growth in recent times, the external environment remains a key challenge to Malaysia to maintain a positive growth in near-term. Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said global economic uncertainties and jitters that surrounded the 13th general election were major factors that dragged Malaysia’s economy in the first half of the year. “At the same time, weak commodity prices dented the export sector and affected the headline growth,” he said. Mr Nor Zahidi said the situation was also being amplified by weaknesses in some emerging economies.

Bloomberg View columnist

Raghuram Rajan

ongratulations to India for appointing Raghuram Rajan as the new governor of its central bank. It would be hard to think of anybody better qualified – not even Janet Yellen. But condolences to India for the news that monetary and financial policies aren’t the main obstacles to its prosperity. The economy needs better management, all right, but not at the Reserve Bank of India. Rajan, a former chief economist at the International Monetary Fund and for many years a professor at the University of Chicago’s Booth School of Business, is justly celebrated in the U.S. for sounding an alarm before the crash about the systemic risks of financial innovation. His views were widely dismissed, but all too soon he was vindicated – more dramatically than he could have wished. His book “Fault Lines” reflects at length on those lessons; it will be required reading for many years. Monetary policy and financial reform loom large in India right now because of the recent slowdown in growth, the steep fall in the rupee, and the need to modernise India’s financial sector – a topic on which Rajan has done a lot of work. Vital as these issues are, the causes of the country’s recent disappointing performance mainly lie elsewhere, and beyond the reach of any RBI governor, however able. For years – well before the radical economic reforms of the early 1990s and in the two decades since – the main question about India has been: Does this country sincerely want to be rich? Visit Beijing, and there’s no

doubt what China’s leaders want: growth, first and foremost – to raise living standards; to create jobs, pacify the population and keep the Communist Party in power; to secure China’s rightful place in the global order. Growth isn’t just the top priority, it’s also the overriding priority. It’s literally in the air they breathe: China wants growth at any price. Despite China’s recent slowdown, growth at any price is what it’s had, and the country has been transformed from top to bottom, overwhelmingly for the good. India’s feeling about growth (or the feeling of its political class, at any rate) is that it’s all very well, but... It’s all very well, but it won’t improve public services, attack illiteracy or lift the burden of disease. It’s all very well, but it won’t end poverty or secure social justice. It’s all very well, but what about inequality? This ambivalence, which Chinese policy makers would see as a form of derangement, pervades India’s public discourse – and India is a vibrant democracy in which public discourse matters. Recently, in an intellectual confrontation that could only happen in India, the authors of two contending texts on the subject of growth have been slugging it out, and their quarrel has been national news. Jagdish Bhagwati and Arvind Panagariya are the authors of “Why Growth Matters” (published in India as “India’s Tryst with Destiny”; maybe the claim that growth matters was judged as too provocative for the local market). The book argues that growth helps the poor and advances social goals in its own right, and that it also

provides the means for the government to spend more on education, health care and other social programmes. It documents the surge in growth that followed the liberalisation of the early 1990s – which the authors vigorously advocated – and rebuts a variety of claims about the supposed shortcomings of that experience. One can only commend their bravery: Against the odds, they defend a programme that more than quadrupled gross domestic product in 20 years and visibly improved the lives of Indians rich and poor, urban and rural at a rate never previously seen.

Instituting reforms Amartya Sen and Jean Dreze are the authors of “An Uncertain Glory.” (Love that title.) They acknowledge that the reforms of the early 1990s boosted growth, though choose not to dwell on their failure to support them at the time. They also agree that the growth has done some social good. Their book, however, concentrates on what growth has so far failed to do for the poor and disadvantaged. They go further, arguing that social investment is necessary from the start for the right kind of growth – it shouldn’t wait, as Bhagwati and Panagariya suppose it must, until the country can afford it. The two sides and their respective supporters have been battling in the Indian press. The quarrel has become needlessly personal (though that helps sales, obviously). Points of disagreement have been overemphasised, obscuring the many things about which the two camps agree. Believe it or not,

Bhagwati and Panagariya are against poverty and are for good schools and hospitals; Sen and Dreze are in favour of economic growth. The quarrel, when viewed dispassionately, is mainly about the order in which economic reforms are undertaken – about what comes first, rather than about what matters most. Even though, to put it mildly, my sympathies in this debate lie with Bhagwati and Panagariya more than with Sen and Dreze, I still want to recommend “An Uncertain Glory”. Sen and Dreze are right to draw attention to the limits of India’s success and how much remains to be done. They are exemplary scholars, and everything they say is worth careful study. But Bhagwati and Panagariya are right on the main points. First, growth may not guarantee sustained social progress, but it’s the essential condition for it. Second, liberalisation in India worked. Third, that programme of reform is unfinished. The main failure of India’s post-reform development has been lack of growth in labour-intensive industries (see China). And the main cause of that undue tilt toward capital-intensive development has been the insane tangle of labour-market rules that the 1991 reforms left untouched. An uncertain glory, indeed. Only in India would it be necessary – and controversial – for two leading scholars to make the case that growth matters. Unless and until the country and its politicians stop saying, “Growth is all very well, but...” the country’s amazing potential will go unfulfilled. Bloomberg View

August 13, 2013

Closing Lenders seize assets from Kingfisher

Asian boom boosts Prudential profits

Indian banks have begun seizing assets controlled by Indian business mogul Vijay Mallya over debts run up by Kingfisher Airlines Ltd, the the Economic Times reported yesterday. Lenders to his failing carrier took possession of one of the group’s corporate offices, Kingfisher House, in suburban Mumbai, the newspaper said quoting an unnamed bank official. Mr Mallya’s parent firm, United Breweries Ltd, is in a battle with the lenders, seeking damages of around 45 billion rupees (US$730 million) and arguing they have no right to sell the assets. Kingfisher’s spokesman said the company would not comment “on any matter which is sub judice”.

British insurer Prudential Plc reported a 22 percent rise in first-half operating profits yesterday, as it benefited from its exposure to fast-growing Asian markets as well as a jump in income in its U.S. operation. Prudential said operating profit came in at 1.415 billion pounds (US$2.2 billion) for the six months to endJune. In Asia, where Prudential focuses on selling products to a growing middle class in South East Asia, operating profit jumped 18 percent. While this outpaced a 12 percent rise in new sales, Prudential said it saw record sales in seven of its local business units, with China up 42 percent and Philippines and South Korea up 38 percent.

Greece’s slump eases as GDP picks up Economy shrinks 4.6 pct in second quarter

reece’s economy shrank at annual pace of 4.6 percent in the second quarter, a slight improvement on the 5.6 percent fall between January and March. Even so, it contributed to a slump of more than 20 percent in real terms since 2008. The figures were slightly better than economists’ average forecast for a 5 percent contraction, but that will be cold comfort for Greeks, who are facing a sixth consecutive year of recession in 2013, as austerity measures have crippled private consumption, the main engine of its economy. The government and the lenders who have provided the country with bailout funds during the euro zone debt crisis project a 4.2 percent contraction for the full year. “Recession will decelerate in the third quarter, helped by tourism, and in the fourth, helped by base effects,” said Dimitris Maroulis, an economist with Alpha Bank. “That means that recession will not exceed 4.2 percent this year,” he added. Yesterday’s figure brings the Greek economy’s contraction in the first half of 2013 to an annual pace of 5.1 percent. Data on quarter-onquarter changes were not provided. The data came at the same time as Greece reported a budget surplus of 2.6 billion euros (US$3.5 billion), trumping its target of a 3.1 billioneuro deficit. The sharp pick-up is largely due to the country receiving more European subsidies than expected and spending less of the money than initially

India July exports rise as weak rupee helps But trade deficit almost flat compared with June

Tourism expected to help economy rebound

planned on investment projects. The figure was also boosted by one-off payments from central banks returning profits they made on Greece’s government bonds, a deal agreed as part of its international bailout. Despite the slight improvement in Greece’s finances, it remains in the recession it entered at the height of the financial crisis.

ndia’s exports rose 11.64 percent in July from a year earlier while imports fell, a rare bright spot for its struggling economy, but with the trade deficit almost unchanged pressure on the current account deficit and rupee currency remained high. At US$25.83 billion, July exports were the highest since March, while imports fell 6.2 percent to US$38.1 billion from a year ago, trade secretary S R Rao told reporters yesterday, citing provisional trade data. However, despite the positive trends, the trade deficit of US$12.27 billion in July was almost the same as in June. Mr Rao, India’s top trade official, said uncertainty about where the rupee was headed meant companies had yet to see the full benefit of the weaker currency on foreign sales.

It has been the worst affected of the euro zone economies by the financial crisis, and was the first to receive an international bailout in May 2010. It has seen a 25 percent drop in output since 2007 and has an unemployment rate of 26.9 percent. The country was given another 6.8 billion euros last month from the

European Union, the International Monetary Fund and the European Central Bank. The money has strict conditions attached which require that government debt levels are reduced. That has meant deep job cuts, tax increases and reductions in wages and pensions.

“A stable exchange rate helps exports. Volatility does not permit exporters to get full value from the depreciation,” Mr Rao said. In a research note, RBS said a sharp fall in gold imports to US$2.9 billion in July from US$4.5 billion a year ago would likely help the trade deficit going forward. “It does appear that the RBI’s efforts to curtail gold purchases are finally starting to filter through,” the note said. The Reserve Bank of India and the government have taken a series of steps including increasing import duties to curb India’s rampant demand for gold, which makes the country the world’s biggest buyer. Gold imports in May surged to a record US$8.4 billion as people took advantage of falling prices. The rupee has lost around 12 percent to the dollar since the start

of May, caught up in an exodus of foreign investors from emerging markets after the U.S. Federal Reserve said it would begin scaling back stimulus measures. To prop up the currency, which hit a record low of 61.80 to the dollar last week, the central bank last month engineered an increase in money-market interest rates in an effort to give investors in short-term rupee debt an incentive to keep their money in India. The central bank unveiled further measures late last week to drain cash from the financial system by auctioning government cash management bills every week. Expectations are high that Finance Minister Palaniappan Chidambaram will soon announce measures to draw in foreign inflows and restrict imports of non-essential.

Reuters