Macau Business Daily, August 15, 2013 by Business Daily

Year II

Number 349

Thursday August 15, 2013

Editor-in-chief Tiago Azevedo

Deputy editor-in-chief

Vitor Quintã

MOP 6.00

April 19, 2013

Taxi profiteering again as typhoon hits transport

Passengers happier with airport, revenue grows Page 4

tourism boss has called for limited public bus services during typhoons to deter taxi drivers from profiteering. “If Macau wants to become an international tourism centre, the government must think what kind of mass transportation service it can provide under typhoon weather at the border gate,” Andy Wu Keng Kuong, president of the Macau Travel Industry Council, told Business Daily. Referring to the hundreds of visitors forced to wait for an hour or more for a taxi on the Macau side of the Gongbei Gate and then run the gauntlet of inflated fares, Mr Wu added: “It is basically the only terminal in Macau that, unlike the airport and the ferry terminals, remains in normal operation, which means a continuous inflow of tourists.” More on page 3

Illegal inn operators fail to learn lesson Page 6

Investors with Macau ties buy Napa winery Page 6

www.macaubusinessdaily.com

I SSN 2226-8294

SJM net profit up 12 pct in first half

Hang Seng Index

Macau casino concessionaire SJM Holdings Ltd posted a 12 percent increase in net profit in the first half. But SJM’s overall revenue market share in the first half dropped to 25.3 percent, it said in a statement to Hong Kong’s stock exchange yesterday. That’s a decline from the 26.7 percent share in 2012. The firm faces rising competition as rivals expand on Macau’s increasingly popular Cotai Strip. Page 2

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August 13

HSI - Movers Name

Manila airfares could go up: carrier The cost of a flight to Manila on Cebu Pacific Air is likely to rise, as the low-cost airline asked the Philippines aviation regulator for a two-thirds increase in the fuel surcharge on the Macau route. Even if the request is rejected, Cebu says it will ponder whether to increase the fares, as fuel prices rise beyond the aviation industry’s previous estimates. Page 4

Red Dragon trumps Utor in poker comp Typhoon Utor caused minimal disruption to the second day of the Macau Poker Cup qualifiers yesterday said the organiser. Around 20 percent of the expected 650 players for the event – known as the Red Dragon – are long-haul visitors from Australia, Europe and the United States. Union Gaming Research Macau said a few dozen flights in and out of Macau International Airport had been cancelled along with ferry services. Page 5

%Day

CHINA COAL ENE-H

6.85

CHINA RES LAND

5.97

CHINA SHENHUA-H

4.49

NEW WORLD DEV

4.12

BANK EAST ASIA

3.72

HONG KG CHINA GS

-0.49

CHINA RES ENTERP

-0.77

LENOVO GROUP LTD

-0.92

CITIC PACIFIC

-0.95

CHINA RES POWER

-1.08

Source: Bloomberg

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August 15, 2013

Macau

SJM net profit up 12 pct in first half But lagging in mass market table revenue growth and could benefit from a Cotai presence Michael Grimes

michael.grimes@macaubusinessdaily.com

acau casino concessionaire SJM Holdings Ltd posted a 12 percent increase in net profit in the first half. SJM’s net profit for the January to June period totalled HK$3.8 billion (US$487 million) versus HK$3.4 billion a year earlier. That was slightly better than an average forecast of HK$3.6 billion, according to Thomson Reuters Eikon data. Adjusted earnings before interest, taxes, depreciation and amortisation, rose to HK$2.14 billion in the three months to June, according to Bloomberg calculations based on the firm’s statement to Hong Kong’s stock exchange. It was higher than an average estimate of HK$1.99 billion from seven analysts compiled by Bloomberg. SJM’s gambling revenue from VIPs rose 10 percent to HK$29 billion in the first half, while massmarket revenue climbed four percent to HK$12.2 billion. But the latter result was significantly below the 26.7 percent year-on-year growth in mass table games revenue seen market wide in the first half, which was mainly linked to the expansion of

the so-called premium mass segment. During the period SJM’s slot machine revenue fell 5.7 percent compared with the year-earlier period. SJM’s overall revenue market share in the first half dropped to 25.3 percent, it said in a statement to Hong Kong’s stock exchange yesterday. That’s a decline from the 26.7 percent share in 2012. The firm, founded by Hong Kong entrepreneur Stanley Ho Hung Sun, faces rising competition as rivals including Sands China Ltd and Galaxy Entertainment Group Ltd expand on Macau’s increasingly popular Cotai Strip.

Cotai pending SJM does not yet have a presence there and is unlikely to have one until 2016 at the very earliest. It reiterated in yesterday’s filing it intends to build and operate a Cotai gaming resort “containing approximately 700 gaming tables and 1,000 slot machines as well as approximately 2,000 hotel rooms (subject to the obtaining of applicable licences)”. The company said it would

Corporate Steve Wynn bequest for eye disease cures Steve Wynn will donate US$25 million (199.7 million patacas) to the University of Iowa in the United States to accelerate the search for cures to eye diseases – including the one that hampers his own vision, says the institution. The donation from the Wynn Resorts Ltd chairman will be paid over five years and support the Institute for Vision Research. It will be renamed in tribute to the casino entrepreneur. The institute is a leader in genetic testing for eye disease and seeks to develop gene and stem cell therapies that could restore vision. Mr Wynn, 71, has retinitis pigmentosa, a disease that affects one in 4,000 people and causes night blindness and weakness in peripheral vision. “As a person who knows first hand what it is like to lose vision from a rare inherited eye disease, I want to do everything I can to help others who are similarly affected,” he said in a statement.

MGM China director has contract extended Bill Hornbuckle, president and chief marketing officer of MGM Resorts International, has had his contract extended until February 2017, according to a company filing to the New York Stock Exchange. The executive is also a director of MGM China Holdings Ltd, the Macau casino subconcessionaire that is 51 percent owned by MGM Resorts. Mr Hornbuckle was promoted to president of MGM Resorts in December last year after serving as chief marketing officer since 2010. Under his new employment contract, Mr Hornbuckle’s basic salary rises 13.6 percent to US$1.25 million (10 million patacas), with an annual target bonus of 150 percent of base salary. MGM Resorts had total long-term debt of US$13.1 billion at the end of the second quarter, down from US$13.6 billion on December 31. Company chairman Jim Murren said his goal is to reduce the firm’s total borrowing to below US$10 billion over the next couple of years.

SJM’s peninsula casinos could use some Cotai support

distribute an interim dividend of 20 HK Hong cents a share, double last year’s pay out. Macau generated 304 billion patacas (US$38 billion) gross gaming revenue last year, with two-thirds of that coming from high-stakes gamblers, although premium mass players are increasingly important contributors of revenue. Deutsche Bank AG has estimated that the city’s casino revenue will rise 17 percent to US$44.5 billion this year. Ambrose So Shu Fai, SJM’s chief

executive, said in a statement the firm was “pleased” with the first half performance. “…we continue to work on yielding our gaming floors and containing costs, whilst planning to meet the needs of the growing market with our large-scale resort development on Cotai,” he added. Shares in SJM were unchanged yesterday at HK$19.96. The Hong Kong market was closed due to Typhoon Utor. With Bloomberg News/Reuters

August 15, 2013 April 19, 2013

Macau

Taxi profiteering again as typhoon shuts transport Tourism industry calls for limited bus services during typhoon to protect city’s image Tony Lai

Tourist image

tony.lai@macaubusinessdaily.com

Hundreds waited hours on Macau side of Gongbei Gate for taxi yesterday

“W

e have been waiting for three hours for a taxi to Galaxy [Macau] but we are still stuck here,” says Deng Mingjun, who came from Fujian province with his girlfriend to visit the city. Mr Deng was one of the hundreds of visitors waiting to leave the Gongbei border gate yesterday as Typhoon Utor lashed the city and paralysed traffic. “We can’t cancel our plans as we have booked a [hotel] room here but I did not know there would be no bus, no shuttle, but only taxis,” he said. “If we could we would have already walked to Galaxy [Macau].” Typhoon signal 8 – the third highest level – was hoisted by the Meteorological and Geophysical Bureau at 5am and was only replaced by signal 3 at 3.30pm. During a stormy ten-and-a-half hours, most of the city’s public transportation – by land, sea and air – was suspended. A limited number of taxis were operating. And some taxi drivers saw a chance for profiteering, especially at the border gate taxi stop.

Flights, ferries halt as typhoon hits M

acau’s sea and air transportation was halted yesterday when this year’s first typhoon signal 8 was hoisted as Typhoon Utor came to the city. A spokesperson from the Macau International Airport Co Ltd said there were at least 50 flights delayed or cancelled from Tuesday until

time whenever there is a typhoon.” “We have urged the drivers not to charge passengers more but you have to understand that a run from Macau [peninsula] to Taipa could possibly take at least two hours as the traffic is congested,” he said. Under typhoon signal 8, traffic jams are common at the lower emergency deck of the Sai Van bridge, which becomes the only link between the peninsula and Taipa.

“The situation was messy this morning. Whenever a taxi came, many people, ignoring the queue, would rush to the car,” said a Guangdong tourist surnamed Huang. “It felt like we were evacuating from a disaster.” “I heard that some drivers asked for 600 patacas for going to The Venetian,” she said, adding she had been waiting two hours for a taxi. “Some taxis put up the ‘unavailable’ sign and drove around to look for the ‘right customers’,” she added.

Several other tourists and passengers told Business Daily some taxi drivers asked for up to 600 patacas (US$75) for a run from the Gongbei Gate to Cotai, and about 250 patacas to locations in the NAPE district, such as the StarWorld and MGM Macau casinos. The city’s flag fall fare for the first 1,600 metres currently stands at 15 patacas, plus 1.50 patacas for each 200 metres travelled afterwards. Some private car drivers also saw a

moneymaking opportunity yesterday morning and went around offering paid ride services to visitors stranded at the Gongbei border. “They asked for 1,000 [patacas] to the airport. I would have taken it if it was 500,” said another Guangdong tourist. The Transport Bureau said in a press statement yesterday they had found eight cases of taxi charge abuse and received one complaint over the issue. The bureau and the Public Security Police sent some 10 additional staff yesterday morning to the border gate to help maintain the order. The police said in a press statement they had caught 15 private vehicles offering taxis services and 18 taxis breaching traffic regulations until 4pm yesterday. In the first half of 2013 the police registered 113 cases of private vehicles serving as taxis, three times as much as a year earlier. Macau Taxi Driver Mutual Association chairman Tony Kuok Leong Son said: “This profiteering situation has been happening for a long

yesterday afternoon. All ferry services were halted from 1.30am yesterday, when Hong Kong observatory hoisted signal 8. A spokesperson for the Marine and Water Bureau said the ferries to and from Hong Kong had resumed at 3.30pm at the Outer Harbour Ferry Terminal and at 5pm for the Pac On ferry terminal in Taipa. “But the routes between Macau and mainland Chinese cities would only resume tomorrow [today], as the mainland ports were still closed,” the spokesperson said. Chinese official Xinhua news agency reported the typhoon had made landfall near Yangjiang, west of Guangdong province, late afternoon. In Hong Kong the stock exchange,

schools and banks were closed. Hundreds of flights were also cancelled or delayed. About 177 workers had to be evacuated on Tuesday night (pictured) from the artificial island where the Hong Kong-ZhuhaiMacau Bridge will meet land. Several hundreds of visitors were stranded at the Macau airport and ferry terminals yesterday with some complaining they had not received enough information, public broadcaster TDM Radio reported. Macau Travel Industry Council president Andy Wu Keng Kuong suggested that the government should ask the mobile service providers “to send out messages next time to all roaming services users with warnings

Traffic jam

Mr Kuok thinks more inspections during bad weather, as well as issuing more taxi licences could help solve the situation. But Andy Wu Keng Kuong, president of the Macau Travel Industry Council, thinks the government should do more to “safeguard the tourist image of Macau.” “If Macau wants to become an international tourism centre, the government must think what kind of mass transportation service it can provide under typhoon weather at the border gate,” he said. “It is basically the only terminal in Macau that, unlike the airport and the ferry terminals, remains in normal operation, which means a continuous inflow of tourists,” Mr Wu said. “The government could study whether buses can provide limited services under typhoon signal 8 or higher,” he said. “As the [public bus] service is now led by the government, it would be easier.” Public bus services are automatically suspended whenever typhoon signal 8 is hoisted. Mr Wu added: “The government can also consider setting up a fixed additional charge that taxi drivers can ask for under typhoon [weather] so that tourists and residents know what to expect.” The Transport Bureau said in yesterday’s statement it would quicken the steps to revise the regulations on taxi drivers to improve supervision.

If Macau wants to become an international tourism centre, the government must think what kind of mass transportation service it can provide Andy Wu, president, Macau Travel Industry Council

about the typhoon.” The government’s Civil Protection Centre said in a press statement 29 incidents were reported yesterday, most of which were due to falling objects. Two people were slightly injured. T.L.

August 15, 2013

Macau Giordano eyes big Venetian store Clothing retailer Giordano International Ltd wants to open “a large new store format” at the Venetian Macao in the second half of this year, the company said in a filing to the Hong Kong Stock Exchange late on Tuesday. The group operates two major stores in Macau, as well as one outlet under the BSX youth fashion brand. The company’s sales worldwide increased by 5 percent year-on-year to HK$2.84 billion (US$366.3 million) in the first half of 2013. Operational profits rose by 10 percent to HK$340 million in the same period, it said.

Cheap flights to Manila set to rise, says airline Cebu Pacific Air says either the fuel levy or ticket prices could be increased Tony Lai

Tony.lai@macaubusinessdaily.com

he cost of a flight to Manila on low-cost airline Cebu Pacific Air is likely to rise. The airline petitioned the Philippine Civil Aeronautics Board last week asking for a two-thirds increase in the fuel surcharge on the Macau route, Philippines media reported. The fee is levied on tickets in addition to the standard fare. The surcharge on a ticket on the Macau-Manila route would increase by US$10 (80 patacas) from the current level of US$15. Cebu Pacific said its request to the government was being processed and, if it was not accepted, it might seek to recoup costs by increasing fares. “Should the regulator disapprove the fuel surcharge adjustment request, CEB [Cebu Pacific] will review pricing and current fuel costs to evaluate whether an adjustment in fares will be necessary,” said vice-president for marketing and distribution Candice Iyog. She did not disclose the size of the increase the budget carrier had planned, saying it would “depend on prevailing fuel prices”. Rising fuel costs are the main reason behind Cebu Pacific’s approach to the regulator. Data from the International Air

Cebu Pacific Air flies once a day between Macau and Manila

Transportation Association show the average price of jet fuel was US$125.60 a barrel on August 2, up by 4.2 percent over the same time last year. The current price also exceeds the association’s forecast of US$123.40 a barrel. Cebu Pacific flies once a day between the two cities and the lowest fare on the route was set at 489 patacas, said Ms Iyog. The budget carrier also flies four

times a week between Macau and Clark, 64 km northwest of Metro Manila. Ms Iyog said the airline had “no changes planned at this time” for the cost of a ticket to Clark. Business Daily asked if Philippine Airlines, which also operates flights between Macau and Manila, had requested a fare or surcharge increase. There had not been a reply before press time last night. Budget carrier AirAsia Philippines

suspended its flights to Clark at the end of last year, a victim of volatile fuel costs, deteriorating relationships between Beijing and Manila, and high charges at the airport. Official data show the number of tourists from Philippines dropped by 4 percent year-on-year to about 141,000 arrivals in the first half of this year. There were over 17,600 non-resident Filipino workers here by the end of June.

Passengers happier with airport: survey P

assengers’ satisfaction with the Macau International Airport rose for a third consecutive quarter but the railway works are making it less convenient to get there, a survey shows. The Macau airport service quality survey, monitored by the Airports Council International, indicates the satisfaction rate rose to a record-high level of 4 points – with 5 being the top – in the second quarter. In a statement quoted by the local Chinese-language media, the airport operator Macau International Airport Co Ltd (CAM) said it “reflects an improvement in service quality at the terminal”. The company links the higher satisfaction rate with “the new restaurant services and the increase in retail stores”. Macau International Airport Co Ltd (CAM) said last month that in the first half of this year it had revenue of 420 million patacas (US$52.5 million), 18 percent more than a year earlier. Revenue from

The airport handled nearly 2.8 million passengers in the first seven months of the year

businesses other than aviation – duty-free retailing, restaurants and advertisements – was 233 million patacas, 16 percent more. The airport handled nearly 2.8 million passengers in the seven months to July 31, 13 percent more than a year earlier. The growth was also felt in aircraft movements. There were over 27,000 aircraft movements in the first seven months of the year,

a rise of 20 percent year-on-year, according to official data. The survey results show passengers were less happy with the land transportation to and from the airport (down by 5 percent quarterto-quarter) and with the parking facilities (down by 6 percent). CAM believes this drop was due to the relocation of the bus and taxi stops to accommodate the

construction works of the Light Rapid Transit elevated railway. Most of the new stops have no cover against the rain and the sun, dampening the satisfaction of visitors, the statement adds. The Airports Council International is a global organisation with over 1,600 airports across the world among its members. T.L.

August 15, 2013

Macau

Red Dragon trumps Utor in Macau Poker Cup Number 8 typhoon only a hiccup for leading regional contest at City of Dreams Michael Grimes

michael.grimes@macaubusinessdaily.com

Two-time Red Dragon winner Celina Lin

yphoon Utor caused minimal disruption to the second day of the Macau Poker Cup qualifiers yesterday said the organiser.

Around 20 percent of the expected 650 players for the event – known as the Red Dragon – are long-haul visitors from Australia, Europe and

the United States. Union Gaming Research Macau said in a note yesterday afternoon that a few dozen flights in and out of Macau International Airport had been cancelled along with ferry services to and from Hong Kong and Shenzhen as the storm passed 230 kilometres (140 miles) southwest of Macau. Most of those suspensions were in the period between 5am yesterday when the Number 8 warning signal was raised, and 3.30pm yesterday when the signal was lowered. Danny McDonagh, PokerStars’ director of live operations for Asia Pacific, told Business Daily: “We had a lower number of entries on the day – but still 60 tournament players in the casino playing in the satellite tournament for the main event. But because we have three ‘day ones’ in terms of qualifiers for the main event, by Thursday things will be back to normal.” He added: “We were expecting 30 qualifiers to arrive in Macau on Tuesday and 28 made it to the hotel

before transport was suspended so that was pretty good.” Mr McDonagh said 75 percent of participants for the tournament are from neighbouring Asian jurisdictions. The Macau Poker Cup is being held from August 14 to 18 at PokerStars LIVE at the City of Dreams, the dedicated poker venue at Melco Crown Entertainment Ltd’s Cotai casino resort. “There are usually two groups of players – people that come for all the events – and people that come at the last moment,” said Mr McDonagh. “The second group wouldn’t have been due here until Thursday or Friday in any case,” he added. “The Red Dragon is our biggest regional tournament for Asia by player numbers. It’s probably the most well known event in Asia. The Asia Championship of Poker, which is coming up in October, is the one we are looking to compete with the really big buy-in events. It’s HK$100,000 [buy-in] and there are probably only six or seven tournaments at that level around the world. That will have more than 50 percent of its players coming from outside Asia,” explained Mr McDonagh. April’s Red Dragon winner, Taiwan professional Terry Fan, pocketed HK$1.77 million. Mr Fan returns this month, along with other former champions including Zhenjian Lin, Victor Chen, Kenny Leong, Kitty Kuo and twotime Red Dragon winner Celina Lin. Last weekend Ms Lin won the opening tournament that is the prelude to the Macau Poker Cup main event.

August 15, 2013 April 19, 2013

Macau MGM sues daughter of HK film star Gaming operator MGM Grand Paradise SA is suing the daughter of Hong Kong film industry veteran Philip Chan Yan Kin for gambling debts of HK$4.52 million (US$583,000), the South China Morning Post reported yesterday. The casino operator says Joanne Chan Jo Yan accepted a HK$10 million line of credit to gamble at the MGM Macau casino last December, according to a Hong Kong High Court writ. The writ alleges Ms Chan accumulated debt of HK$7.52 million. MGM Grand Paradise says Ms Chan had repaid HK$3 million by June, with HK$4.52 million still outstanding.

Repeat offenders defy illegal inns law

he government’s three-yearlong fight against illegal accommodation continues but, with affordable rooms still hard to find, operators of unlicensed inns

seem no closer to giving up. Six alleged illegal inns that had been sealed before were busted for a second time this year, the Macau Government Tourist Office

announced in a statement. Since the law banning the operation of illegal accommodation came into effect on August 13, 2010, the tourism regulator has sealed 377 alleged illegal inn units. The authorities later unsealed 310 of those premises. The illegal inns discovered represent just a small part of the 1,795 premises investigated during the last three years and of the 1,338 reports submitted by citizens. Operators of illegal inns could be

fined between 200,000 patacas and 800,000 patacas (US$100,000), while those soliciting business for illegal inns could be fined for 20,000 patacas to 100,000 patacas, the law states. The tourism office began 383 sanction proceedings but did not disclose how many had led to fines. In February the regulator admitted it had fined just seven out of the 119 cases that could have led to penalties. In yesterday’s statement the office director Maria Helena de Senna Fernandes stressed that the fight against illegal accommodation is “a long-term” one. She pledged to carry out further promotion among visitors and apartment owners, as well as to join hands with the community, to crack down on unlicensed inns. Macau’s 33 guesthouses accounted for one third of all accommodation venues by the end of May. However they had just 633 rooms, 2.3 percent of the total. V.Q.

Readers want better checks on disaster donations R

A total of 377 alleged illegal inns have been sealed since 2010

Investors chase gold in Napa’s famed reds Macau-linked investors see potential for marketing Cleavage Creek wine to mainlanders Vítor Quintã vitorquinta@macaubusinessdaily.com

Hong Kong-based investment group with ties to the gaming industry here has purchased an unusually named winery in California, with the hope of starting exports to Greater China. The shuttered Cleavage Creek Winery and vineyards in Napa County was sold for US$4.95 million (39.5 million patacas) last month, according to the North Bay Business Journal, a newspaper serving the wine

region north of San Francisco. The report names FCC North American Investment LLC as the investor. The company is believed to have links to casinos in Macau, the San Francisco Business Times reported. FCC North American wants to restart production and export Cleavage Creek wines to Macau, where the unusual brand name would be a good fit for the market,

the report says. The winery’s former owner, Robert Brown, named the property Cleavage Creek and donated 10 percent of sales to breast cancer research, after his wife died from the disease. It closed in 2011, a month after Mr Brown died in an aeroplane crash. The winery is capable of producing 60,500 litres of wine a year from its 7.7 hectares of cabernet sauvignon vines. There is an option to put another 6.5 hectares under vine. Cleavage Creek is not the only California winery in the sights of FCC North American. The investors are also eyeing Calla Lily Estate and Vineyard and a pinot noir producer in the Russian River Valley, according to reports. With mainland consumers developing a taste for wine, investors are looking for opportunities in established winemaking regions. A year ago, Louis Ng Chi Sing, chief operating officer of SJM Holdings Ltd, bought Chateau de Gevrey-Chambertin in Burgundy. It was the first chateau to be bought by Chinese interests in Burgundy and sparked a backlash across France.

eports in April that cracks had appeared in a Macaufinanced school built in the mainland’s Sichuan province as part of the relief effort for the devastating 2008 earthquake, led to calls here for closer scrutiny of how donations for mainland disasters are spent. The Macau government funded the reconstruction of the Lingguan Secondary School in Baoxing county, opened three years ago, with 30.41 million yuan (US$39.39 million). But cracks appeared in the structure following a smaller 6.6-magnitude earthquake in April. Now a poll for visitors to Business Daily’s website has found that 52 percent of the respondents do not have confidence that Macau government donations to disaster relief in China are properly used. A further 20 percent said a charity independent of the Macau and mainland governments should check how such donations are used. A total of 15 percent said they did have confidence that donations were properly used. But 11 percent of those replying said the Legislative Assembly should monitor money donated by the Macau government, while three percent said the Legislative Assembly should have the power to veto any donations.

April 19, 2013

August 15, 2013 April 19, 2013

Greater China

Beijing plans faster capacity cuts

Banks’ bad loans rise for 7th-quarter

Govt to complete overcapacity reduction plan next year

Chinese banks’ bad loans rose for a seventh straight quarter, extending the longest streak in at least nine years as the world’s secondlargest economy continued slowing. Nonperforming loans climbed by 13 billion yuan (US$2.1 billion) in the second quarter from the end of March, reaching 539.5 billion yuan, the China Banking Regulatory Commission said in a statement on its website yesterday. Soured debt increased across all lender categories, including state-owned and regional banks. China’s economy slowed for a second straight quarter during the period, as growth in factory output and fixed-asset investment weakened. A June crackdown on off-balance-sheet lending and other credit outside the banking system caused a cash squeeze, driving money-market rates to a record. The increase in bad loans was the smallest since the first quarter of last year, narrowing from 33.6 billion yuan in the previous three months, and the end-June ratio of nonperforming loans to total credit was unchanged from three months earlier, at 0.96 percent, figures from the regulator show.

hina will push ahead with efforts to cull excess industrial capacity a year earlier than planned even as economic expansion slows, and will promote spending on information products to stabilise growth, an official said. The government will complete by the end of 2014 its overcapacity reduction plan for the five years through 2015, and will seek to cut further outdated capacity, China National Radio said yesterday, citing Industry Minister Miao Wei. Premier Li Keqiang has avoided economy-wide stimulus and instead issued targeted policies, including tax breaks and support for small companies, while curbing overcapacity and reining in financial risks to aid economic restructuring. Industrial output rose more than economists estimated in July, the National Bureau of Statistics said on August 9, adding to signs the economy is stabilising.

“One of the long-term issues that China has faced is excess investments in some segments, and this results in having too much productive capacity, and it’s inefficient,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co in New York. Government efforts are “important as part of a larger effort to provide a stronger foundation for long-term growth in China, and stability.” The process is in its earlier stages, and it “remains to be seen how far they’ll go with this,” Mr Hensley said in a phone interview. Still, the government is doing more than was expected, he said.

‘Reasonable’ growth Industrial growth “remains in a reasonable range,” although economic growth faces pressures to slow and small businesses may experience larger difficulties in the

second half, Mr Miao said, as cited by the official broadcaster. “Economic growth will be driven more by consumption,” he said. The State Council, the cabinet, will soon issue a new plan to encourage spending on information products and services in what Mr Miao said may be a “new breakthrough” in boosting growth after housing and automobile sales took off, National Radio reported. Information consumption may expand by an annualised 20 percent to exceed 3.2 trillion yuan (US$523 billion) in 2015, he said. Mr Miao said his ministry will promote “information consumption platforms,” such as business-toconsumer website operators such as 360buy Jingdong Inc and consumerto-consumer websites such as Alibaba Group Holding Ltd’s Taobao Marketplace. The Ministry of Industry and Information Technology in 2011 issued targets for eliminating outdated capacity in 19 key industries, including 48 million tons of steel and 370 million tons of cement. The agency said it seeks to finish the plans one year ahead of schedule to “make a new contribution” to cutting overcapacity and reducing emissions, according to a March 29 statement on its website. Bloomberg News

Auto industry unaware of probe A China Automobile Dealers Association official said he isn’t aware of any special investigation into pricing practices in the car industry, contradicting earlier a report that a probe is under way. “As far as I know, NDRC monitors pricing for various industries as part of its normal responsibilities and there has been no specific anti-monopoly investigation targeting the auto industry,” Luo Lei, deputy secretarygeneral of the industry group, told Bloomberg News in a phone interview yesterday. He spoke of the National Development and Reform Commission, China’s top economy planning agency. The dealers association routinely collects data on vehicle pricing and supplied the findings to the NDRC, Mr Luo said. Reuters reported on Tuesday, citing Mr Luo, that the NDRC was investigating whether carmakers were setting a minimum retail price for dealers in China and that the dealers association was collecting data for the probe.

Economic growth will be driven more by consumption Miao Wei, Industry Minister

China aims to cut overcapacity in key industries

Slowdown exposes debt stress in raw materials The mainland’s slowing economy has hammered businesses supplying the raw materials for growth, with coal and aluminium firms at risk of defaults and closures after clocking up at least US$490 billion of debt in a rush to expand. The debt mountain highlights the systemic threat posed by China’s smokestack industries, which Beijing wants to slim down after a stimulus-fuelled investment boom launched in 2009. Some recent data has raised hopes that China’s economy is stabilising, but growth has slowed for nine straight quarters, piling pressure on

these sprawling sectors, just as China has pushed banks to tighten credit to companies. “The inevitable is that we do see liquidity issues and failures for some of these companies and I think that will happen over the next six to 12 months,” said Andrew Driscoll, head of resources at CLSA Asia Pacific. Nearly 90 percent of mainlandlisted coal firms posted a profit drop in 2012, with total profits at a fiveyear low. Once market darlings, the financial position of Chinese-listed coal firms has deteriorated. Falling revenue has forced some miners to either delay payments or borrow money to pay salaries, according to the China Coal Association. With new mines coming onstream and imports still growing, the outlook for the coal sector, where prices have fallen to four-year lows, looks grim. The median debt-to-equity ratio of listed coal firms jumped 15 percentage points from a year ago to 55 percent, compared to 13 percent for Australian counterparts, according to Thomson Reuters data. Aluminium and steel firms are even worse off, with ratios of 121

percent and 113 percent, respectively. Problems have been surfacing in other traditional industries such as steel and shipbuilding. Steel minnow Pingte Iron and Steel Co Ltd declared bankruptcy in June and shipbuilder Rongsheng Heavy Industries Group Holdings Ltd had to ask for financial help from the government. “Industries that face over capacity problems will go through a tough restructuring in the second half. The big firms will get bigger but the smaller ones will fail,” said Helen Lau, senior analyst for China’s commodity sector at UOB-Kay Hian Holdings Ltd. Faced with a cash-flow squeeze, many firms have turned to the bond markets and private lending to refinance bank loans coming due. They have also raised huge sums via mining-related trust products since 2011. But an extended slump could also lead to defaults in the trust sector. “Many companies tend to turn to trust loans when they face financing troubles. A breakdown in this financing chain would eventually lead to a default on debt,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong. Reuters

Cathay Pacific swings to profit Cathay Pacific Airways Ltd, Asia’s biggest international carrier, reported first-half profit that missed analyst estimates as cargo revenue dropped and declining yields in North Asia masked gains from carrying more passengers. Net income totalled HK$24 million (US$3.1 million) in the six months ended in June, Cathay said in a stock exchange statement yesterday, compared with the HK$590 million median profit estimate in a Bloomberg News survey of five analysts. The Hong Kong-based airline reported a restated net loss of HK$929 million for the year-earlier period. Cathay’s cargo revenue fell 5.2 percent in the first half as it shipped fewer goods at lower rates while travel within the Asia Pacific region was affected by avian ‘flu and political issues in Northeast Asia, the carrier said. Freight volumes fell 1.7 percent and cargo yields, a measure of what the carrier charges, declined 3.3 percent in the first half, the airline said. Passenger yields, a measure of ticket price, increased 4.4 percent as the company cut capacity by 4.8 percent. Sales declined 0.6 percent to HK$48.6 billion, the airline said. “We continue to operate in a challenging business environment in the first half,” chairman Christopher Pratt said in the statement. “Our cargo business has been affected by weak demand since April 2011. There is still no sign of sustained improvement.” Bloomberg News

August 15, 2013 April 19, 2013

Greater China

Foxconn eyes troubled solar industry Decision to enter solar market by the end of the year, says spokesman

oxconn Technology Group, best known for assembling Apple Inc’s iPhones, will decide by year-end whether to branch off into unconventional new territory: making solar panels in China. It is an industry plagued by overcapacity that outstrips demand, and panel prices have tumbled by more than two-thirds in the past two years. Yet some analysts say Foxconn may end up timing it right, ready to make a move just as the sector shows some signs of stabilising. Foxconn, the trading name of Taiwan’s Hon Hai Precision Industry Co Ltd, has been testing the market for two years but has revealed little about its Fox Energy solar unit. The company has one small solar panel factory in eastern China, and has also held talks with the southwestern province of Guangxi about building solar power plants. “We aim to make a decision about whether or not we will enter this market by the end of this year,” Foxconn spokesman Simon Hsing told Reuters. “We believe renewable energy is a potentially good trend. It looks like a good project. This is an industry we probably need to know more about.” Hon Hai has not disclosed its investment in solar, which analysts reckon is small, but with US$22.7 billion in cash on the balance sheet as of March, it has

Solar panel demand fell sharply after the global financial crisis

the wherewithal to expand. The company is seeking to cut its reliance on Apple, which accounted for an estimated 60 percent of Hon Hai revenue that exceeded US$100 billion last year. It reported a secondquarter net profit of T$16.98 billion (US$567.15 million) on Tuesday, up 35 percent from a year earlier and exceeding analysts’ expectations.

The same strengths that have served Foxconn well with Apple – assembly efficiency, cost-control expertise and an international footprint – may also help it succeed in solar. But Foxconn has come under fire in recent years for working conditions in its factories in China, which employ 1.2 million people to mass produce

THERE ARE THINGS WE DON’T DO BUT WE DO • Advertising • Branding & marketing consulting • Marketing strategy • Creativity • Design

electronics components and gadgets such as iPads and iPhones. “Based on my recent contacts with several officials at Foxconn, they are still examining the industry to see whether the market still suits them, whether the market will become big enough for them to get in,” said Jason Huang, a Shanghai-based solar analyst with Taiwan-based consultancy TrendForce. Solar panel demand fell sharply after the 2008 global financial crisis, which forced many governments to slash subsidies for solar power. The solar industry is still grappling with severe overcapacity, with China alone boasting an annual capacity of 55 gigawatts (GW) versus total global demand of 35 GW estimated for this year. But market conditions have brightened recently. Chinese solar panel makers such as LDK Solar Co Ltd, Suntech Power Holdings Co Ltd and Trina Solar Ltd have been helped by an agreement between Beijing and Brussels last month, which averted what could have been a crushing trade war. The longer-term future depends largely on whether China can boost domestic demand and Japan keeps buying solar panels to help offset the loss of nuclear power shut off after the Fukushima Daiichi nuclear disaster in 2011. Reuters

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10 10

August 15, 2013 April 19, 2013

Greater China Li & Fung profit misses estimates on weaker demand Li & Fung Ltd, the world’s largest supplier of clothes and toys to retailers, reported first-half profit that missed analyst estimates amid sluggish demand from U.S. retail customers. Net income fell 16 percent to US$96 million for the six months ended June from a year earlier, excluding a writeback in the year-earlier period, the Hong Kongbased company said in a statement. That missed an average estimate of US$106.3 million from three analysts compiled by Bloomberg. Li & Fung, whose customers include WalMart Stores Inc, and Target Corp, has been pushing to revive its U.S. business after reporting a net income decline last year. Operating earnings are set to pick up in the second half of this year due to back-to-school and holiday season demand, the outsourcer said. “While the U.S. retail environment is tracking with the slow pace of economic recovery, it has remained challenging,” it said in the statement. Li & Fung gets more than 60 percent of its revenue from the U.S. and earnings declined last year as an increase in payroll taxes, higher fuel costs and federal spending cuts hurt consumer confidence in the world’s largest economy. Retail customers have all adopted a “more cautious view toward their winter sales this year,” it said. Core operating profit rose 1 percent to US$223 million. Second-half core operating profit will be 3 to 4 times that of the first half and orders for the second half are “solid,” chief executive Bruce Rockowitz said at a press conference. “The worst is behind us and we are on track to recovery in 2013,” the company said in its statement. Bloomberg News

Billionaire Huang readies Iceland bid Plans to invest US$200 mln in a resort and a mountain park

hinese billionaire Huang Nubo is ready to put money into developing property in Iceland as the new government reviews investment laws that had blocked his previous bids. “If we get a positive reply from the government, we can start the groundwork,” Iceland-based spokesman, Halldor Johannsson, said in a telephone interview. “We’re waiting for feedback from the authorities.” The coalition of Independence and Progressive parties that won April elections has signalled it may ease limits on foreign land ownership that had stymied Mr Huang’s earlier bids. The billionaire had planned to spend US$200 million on developing an Icelandic resort and a mountain park through his company, Beijing Zhongkun Investment Group Co. The 300 square kilometres (116 square miles) of land would become a platform from which to invest elsewhere in the Nordic region, he said in 2011. Internal Affairs Minister Hanna Birna Kristjansdottir “has met with representatives of Huang Nubo and explained to them that the laws on direct foreign investment need to be reviewed in their entirety,” her spokesman, Gisli Freyr Valdorsson, said by phone. “Not in light of this particular matter only; that review

Huang Nubo

will likely take place this winter.” To circumvent restrictions on foreign land ownership, local government representatives had sought to buy the property and lease it to Mr Huang. That model also met resistance from the previous Social Democrat-led government. The billionaire is now hopeful that a leasing arrangement will be accepted by the new government, Mr Johannsson said. Mr Huang, who has properties in California and Tennessee, is known for helping restore the 200-year-old villages

Xidi and Hongcun around Huangshan mountain in China’s eastern Anhui province, which are now included on the UNESCO world heritage list. The company built and operates resorts near the villages, according to Beijing Zhongkun’s website. Iceland Prime Minister Sigmundur David Gunnlaugsson has signaled the US$14 billion economy needs more investment to propel growth. The nation is still recovering from its 2008 financial meltdown, in which its biggest banks defaulted on US$85 billion in debt. Bloomberg News

11 11

August 15, 2013 April 19, 2013

Asia Fonterra executive resigns after milk scare The head of Fonterra Cooperative Group Ltd’s milk products business resigned yesterday, less than two weeks after the world’s biggest dairy exporter said some of its products could contain a bacteria that can cause botulism. Fonterra, New Zealand’s biggest company, said Gary Romano resigned as managing director of NZ Milk Products with immediate effect. It gave no reason for his departure. “Gary has made a significant contribution during his time at Fonterra and we respect his decision,” CEO Theo Spierings said in a statement.

Leighton disappoints on cash flow Leighton Holdings Ltd, Australia’s largest construction company, said its receivables had grown in the first half which dented its cash flow and sent its shares plunging 5.96 percent yesterday. Leighton, which subsidiary was chosen to build Wynn Macau Ltd’s maiden property in Cotai, said receivables rose to A$4.4 billion at June 30, 2013 from the A$3.8 billion at full-year 2012. The company posted an underlying net profit for the six months ending June 30 of A$255 million, excluding asset sales and impairments.

Glencore cuts budget for Philippine project Glencore Xstrata Plc will cut up to 920 jobs and slash spending at its US$5.9 billion Tampakan copper-gold project in the Philippines, one of several future mines under review since the company was formed in a recordbreaking takeover. Sagittarius Mines Inc, which is 62.5 percent-owned by Glencore, said it had revised its work plan as the project still faced “substantial development challenges” – including a ban on open-pit mining in South Cotabato province. Monthly expenditure will be cut to US$1 million from $4 million.

Malaysian Air jumps stake sale suggestion Malaysian Airline System Bhd, the country’s loss-making flag carrier, surged the most in three months after a minister was quoted as saying the government should sell its stake at the right price. The airline jumped 7.9 percent to 34 sen, the most since May 16, in Kuala Lumpur. The government should stay out of the airline business, Idris Jala, a minister in the prime minister’s department and formerly chief executive officer at the carrier, said at a conference on Tuesday, the Star newspaper reported. Mr Jala later clarified in a statement that the government has no current plan to sell the stake.

The Kaesong zone has been closed for five months

Two Koreas agree to re-open Kaesong park Industrial complex has been closed since April

orth and South Korea reached an agreement yesterday to re-open the Kaesong joint industrial zone – closed by Pyongyang in April at the height of soaring military tensions. The five-point agreement that came out of a seventh round of talks committed both sides to making “active efforts” to resuming normal operations as soon as possible after inspecting the shuttered plants in Kaesong. A joint committee will be set up to discuss compensation for economic losses suffered as a result of the complex’s closure, according to a copy of the accord released to reporters. Seoul had said the resumption of talks is a chance to rebuild trust with the North. “We feel a tremendous responsibility going to the talks today,” the South’s chief delegate Kim Ki-woong had said before leaving Seoul for Kaesong, which lies 10 kilometres (six miles) inside the North Korean border. “We will try our best to meet people’s expectations,” Mr Kim said. The agreement will help lower tensions ahead of the launch of joint South Korea-U.S. military exercises on Monday which the North had warned could bring the divided

India inflation rose sharply in July Wholesale inflation moves out of the central bank’s comfort zone

ndian inflation accelerated more than economists estimated in July as a plunge in the rupee stoked import costs, adding pressure on the central bank to stay focused on steadying the currency. The wholesale-price index rose 5.79 percent from a year earlier, compared

peninsula “to the brink of war”. Established in 2004 as a rare symbol of inter-Korean cooperation, Kaesong was a key hard-currency earner for the North and the decision to shut it down took many observers by surprise. The project had managed to ride out previous North-South crises without serious disruption, but it eventually fell victim to an extended period of heightened tension following the North’s third nuclear test in February.

Compromise reached Pyongyang initially barred access to the park and then withdrew its 53,000-strong workforce from the 123 South Korean firms based there. The previous six rounds of talks had foundered on the South’s insistence that North Korea provide a binding guarantee that it would not close the complex again. Yesterday’s agreement suggested a compromise had been reached where the North accepted the worker pull-out had closed Kaesong, while both sides promised to ensure it remained open in the future. “The South and the North will prevent the current suspension of the Kaesong industrial complex caused by

with June’s 4.86 percent climb, the Commerce Ministry said in New Delhi yesterday. Analysts polled by Reuters had expected a slight pick-up to 5 percent from 4.86 percent in June. The Reserve Bank of India raised two interest rates last month and the government this week stepped up efforts to curb a record current-account deficit and garner capital inflows, striving to stem the rupee’s 10.5 percent drop versus the dollar in 2013. The central bank has said it can tolerate inflation up to 5 percent, but that a faster pace of price increase hurts the economy’s long-term growth prospects. Costlier credit imperils economic expansion and poses a policy challenge for incoming central bank head Raghuram Rajan, according to Credit Analysis & Research Ltd in Mumbai. “It’s a tough situation for which there are no quick fixes,” Madan Sabnavis, chief economist at Credit Analysis & Research, said before the release. “The priority now is to stabilise the rupee and if the steps taken stay for longer, you

the workers’ withdrawal from being repeated again,” the agreement said. It also included a pledge to promote foreign investment in Kaesong – a key South Korean demand. The North had proposed the seventh round of talks last week, just hours after Seoul announced it was going to start compensation payments totalling US$250 million to businesses impacted by Kaesong’s closure. The payout move was widely seen as the first step towards a permanent withdrawal from the zone. Yesterday’s accord was immediately welcomed by the South Korean company owners who had complained that both Seoul and Pyongyang were using their livelihoods as a political football. “We will do our best to help the Kaesong industrial park boost its international competitiveness and become a globally viable place for investment,” the association representing the owners said in a statement. Before the shutdown, the nineyear-old park housed more than 120 South Korean companies manufacturing electronics, apparel and other goods. Last year, it produced US$470 million worth of products. AFP

can expect a delayed growth recovery.” The currency, which touched an all-time low on August 6, weakened 0.5 percent to 61.475 per dollar in Mumbai. The current-account gap, stoked by gold and crude oil imports and subdued overseas sales, and the prospect of reduced U.S. Federal Reserve monetary stimulus have weighed on the rupee. Indian Oil Corp, the nation’s biggest refiner, raised gasoline prices in June and July. Every 10 percent decline in the rupee adds as much as 80 basis points to wholesale-price inflation, Nomura Holdings Inc estimates show. Consumer prices rose 9.64 percent in July from a year earlier, a report showed on Monday. Finance Minister Palaniappan Chidambaram told parliament on Monday India plans to compress imports of gold, silver and some nonessential items, as well as demand for crude oil. The government on Tuesday raised import levies on gold, silver and platinum to 10 percent. Reuters/Bloomberg News

12 12

August 15, 2013 April 19, 2013

Asia

Tightening on officials’ casino SingTel’s profit visits shouldn’t hit revenue up on cost cuts, But Union Gaming thinks Singapore might move to Macau-style total ban on public servants visiting casinos

lans by the Singapore authorities to tighten rules on public servants visiting the city-state’s two casino resorts are unlikely to have a measurable impact on gaming revenue, says a note from Union Gaming Research Macau. Civil servants who go to casinos “frequently” or those who buy annual casino access passes will be required to declare such activities, Teo Chee Hean, Singapore’s deputy prime minister, said in the city’s parliament on Monday. Singapore has a S$100 (630 patacas) daily levy or S$2,000 annual tax for citizens and permanent residents entering the casinos. Union Gaming said in a note: “We believe that the impetus for this new rule was, in part, due to a scandal involving an assistant

director in Singapore’s Corrupt Practices Investigation Bureau. The official has been charged with 21 criminal counts, including the

misappropriation of S$1.7 million, of which some amount was gambled in Singapore. Ultimately, we would not be surprised if Singapore moved closer to a total casino visitation ban for all government employees (similar to Macau).” But the research house added: “Importantly, we note that the new rule simply will require government employees to declare casino visits – it will not prohibit them from visiting casinos (unless they are already prohibited by statute). “There is no indication of when the new rules will go into effect, although we suspect it could be implemented by year-end. Importantly, we do not believe this new rule will have a measureable (negative) impact on mass market gaming revenue…” M.G.

Head of Indonesia oil regulator arrested Accused of receiving US$400,000 from firm, says graft agency Fergus Jensen and Andjarsari Paramaditha

ndonesia’s anti-graft agency yesterday arrested the head of the energy regulator to investigate a l l e gat ions he re ce ived abou t US$400,000 from a private oil firm, piling more uncertainty on energy policy in Southeast Asia’s biggest economy. The arrest is a new blow to Indonesia’s attempts to attract more investment from international energy companies, several of which have threatened to scale back operations due to uncertainty about the investment environment. The former OPEC member’s oil output is declining, and the country has faced criticism for unclear regulations and complaints about a nationalist stance on resources. Chairman of SKKMigas, the country’s oil and gas regulator, Rudi Rubiandini and two others were taken into custody by officials from the Corruption Eradication Agency (KPK), said Elan Biantoro, a spokesman for the energy regulator.

KPK spokesman Johan Budi told Metro TV that Mr Rubidandini had been caught taking around US$400,000 from two people from a “private firm”. Mr Biantoro said the two officials were from an oil company that he was not familiar with. Mr Rubiandini could not be reached for comment. Some oil company officials were shocked by the news. “This industry is already tough to deal with and it shouldn’t be weighed down by this sort of scandal,” said an official at a foreign oil firm with operations in Indonesia. The oil and gas sector is politically crucial, accounting for about a fifth of Indonesia’s government revenue.

High profile Indonesia was once self-sufficient in oil and gas but has been struggling for years to attract investment to halt declining output from a peak

Indonesia is trying to attract investment into oil sector

of around 1.6 million barrels per day in 1995. Indonesia produced an average 831,000 bpd in the first half this year. Mr Rubiandini was appointed in January to head SKKMigas after the independent industry regulator BPMigas was declared unconstitutional. Some experts say the motivation was to gain greater control over the sector after SKKMigas was placed within the energy ministry. SKKMigas denied the arrest would damage Indonesia’s oil operations. The agency has existing contracts with oil majors including BP Plc, Chevron Corp and Exxon Mobil Corp. “Operations will continue to run. There is no impact,” Mr Biantoro said. “For now, with the vacuum in the top post, there are no crucial issues that need to be decided upon.” The head of the oil regulator was currently being questioned at the KPK headquarters and the graft agency had sealed off his offices, said Mr Biantoro. The SKKMigas chairman is the latest high-profile government official to be accused of corruption in Indonesia. KPK in December named Youth and Sports Minister Andi Alfian Mallarangeng as a corruption suspect, while senior police official Djoko Susilo is currently on trial for money laundering. While foreign investment continues to pour into the resourcerich country, there are growing concerns that rampant corruption and an incompetent bureaucracy could throttle growth and see that investment turned away. Reuters

associates S

ingapore Telecommunications Ltd, Southeast Asia’s biggest phone company, posted firstquarter profit that beat analyst estimates after cutting costs at its Optus unit in Australia and higher earnings from associates. Net income rose to S$1.01 billion (US$797 million) in the three months to June compared with S$945.3 million a year earlier, SingTel, as the Singapore-based company is known, said in a statement yesterday. Profit was projected at S$928.7 million, according to the average of three analysts’ estimates compiled by Bloomberg. Sales dropped 5.3 percent to S$4.29 billion. SingTel plans to spend S$2 billion on acquisitions as growth in wireless earnings slows in Singapore and other countries. The company’s expansion into faster-growing Southeast Asian markets, including a stake in Thailand’s Advance Info Service Pcl, is limiting the impact of slowing growth at Indian associate Bharti Airtel Ltd. after a price war. “Our regional mobile associates have continued to perform well,” chief executive Chua Sock Koong said yesterday. “We are also pleased to see some pricing discipline returning to the Indian mobile market.” The carrier owns stakes in Indonesia’s PT Telekomunikasi Selular and Globe Telecom Inc in the Philippines. Group revenue will decline by a “mid-single digit level” and earnings before interest, tax, depreciation and amortisation will fall at a “low single digit level,” the company said yesterday. SingTel previously forecast little changed sales. First-quarter Ebitda at Optus, Australia’s second-largest phone company, rose 4.9 percent to A$572 million (US$520 million). While revenue at Optus declined 5.3 percent, the company cut operating expenses 9 percent on lower selling and administrative costs. SingTel said it will retain the Optus Satellite unit after completing a review of the business. Revenue from its mobile business in Singapore rose 7 percent to S$506 million, helped by higher data contribution and a cut in handset subsidies, the company said. The profit contribution from regional associates climbed 14 percent to S$552 million in the quarter on higher results from Indonesia, Thailand and India, the company said. Bloomberg News

13 13

August 15, 2013 April 19, 2013

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 68.5

43.6

68.4

43.4

Max 44.55

Min 42.8

average 44.072

Min 43.45

Last 44.4

Max 68.5

average 68.195

Last 68.4

PRICE

average 22.389

Min 22.15

Last 22.65

22.0

22.00

44.3

19.9

21.75

44.0

19.8

21.50

43.7

19.7

21.25

43.4

Max 19.98

average 19.806

DAY %

YTD %

(H) 52W

Min 19.62

Last 19.96

(L) 52W

106.38

-0.421229992

13.50832266

108.9300003

86.23999786

BRENT CRUDE FUTR Sep13

109.34

-0.437078856

2.888867978

114.3699951

96.65000153

GASOLINE RBOB FUT Sep13

293.15

-0.373831776

7.071112897

309.1700077

260.2499962

GAS OIL FUT (ICE) Sep13

924.75

-0.323362975

1.872762324

980

832.5

3.312

0.821917808

-7.948860478

4.517000198

3.128999949

303.34

-0.449607824

1.332887924

319.1699982

275.5500078

NATURAL GAS FUTR Sep13 NY Harb ULSD Fut Sep13 Gold Spot $/Oz

1324

-0.326

-20.4547

1796.08

1180.57

Silver Spot $/Oz

21.477

-0.0837

-28.6715

35.365

18.2208

Platinum Spot $/Oz

1490.54

-1.1086

-1.7928

1742.8

1294.18

Palladium Spot $/Oz

735.4

-0.3591

5.1082

786.5

573.38

LME ALUMINUM 3MO ($)

1881

-0.212201592

-9.261939219

2200.199951

1758

LME COPPER 3MO ($)

7275

0.330988829

-8.27134031

8422

6602

LME ZINC

1945

-0.051387461

-6.490384615

2230

1779

14740

0.101867572

-13.59906213

18920

13205

3MO ($)

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

19.6

COUNTRY MAJOR

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

ASIA PACIFIC

CROSSES

15.15

0.597609562

-1.655306719

16.47500038

14.60000038

448

0.167691448

-25.30220925

665

445.75

WHEAT FUTURE(CBT) Dec13

639.75

-0.272798129

-22.0530003

913

638.5

SOYBEAN FUTURE Nov13

1219.75

-0.651598452

-6.371137977

1409.75

1162.5

123.1

0.081300813

-21.31671461

200

118.1499939

NAME

15.92999935

ARISTOCRAT LEISU

74.34999847

CROWN LTD

Dec13

COFFEE 'C' FUTURE Dec13 SUGAR #11 (WORLD) Oct13

17.21

COTTON NO.2 FUTR Dec13

Max 22

average 21.466

Min 21

Last 21.9

21.00

91.42

-0.231884058 -0.327082425

-14.20737787

21.82999992

16.10363221

92.54000092

World Stock Markets - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

15451.01

0.2031819

17.90938

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3684.443

0.3948827

22.02108

3694.188

2810.8

FTSE 100 INDEX

6593.47

-0.2793431

11.79523

6875.62

5605.589844

DAX INDEX

8412.38

-0.04016274

10.50905

8557.86

6871

DAY %

YTD %

(H) 52W

(L) 52W

0.91 1.5482 0.9364 1.3267 98.28 7.9881 7.7555 6.1195 61.3463 31.32 1.2702 29.969 43.77 10298 89.43 1.24231 0.85693 8.12 10.598 130.38 1.03

-0.3722 0.1877 -0.8009 -0.2181 -0.2137 0.005 0.0039 0.036 -0.2385 -0.2235 -0.4409 -0.02 -0.0617 0.0874 0.1655 -0.5852 0.4049 0.1589 0.2208 0.0153 0

-12.3145 -4.2903 -2.2426 0.5838 -12.3932 -0.0613 -0.0632 1.8155 -10.3532 -2.3627 -3.8419 -3.1232 -6.3171 -4.9039 -0.1152 -2.8036 -4.844 1.2007 -0.6379 -12.8931 -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 7.8056 9.7946 96.54 1.0289

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.39

2.093023

39.36508

4.63

2.49

VOLUME CRNCY 2162719

13.95

3.180473

30.74039

14.03

8.49

1731919

AMAX HOLDINGS LT

1.13

-1.73913

-19.28571

1.72

0.75

922225

BOC HONG KONG HO

25.1

-0.1988072

4.149376

22.85

13813770

0.345

6.153846

30.18869

0.42

0.22

108000

6.44

-0.1550388

7.512525

6.74

3.08

15336

CHINA OVERSEAS

24.65

2.282158

6.709955

25.6

17.28

33267825

CHINESE ESTATES

16.98

0.7117438

50.99308

16.98

7.824

261000

CHOW TAI FOOK JE

10.24

2.60521

-17.68488

13.4

7.44

2936646

EMPEROR ENTERTAI

2.68

-2.189781

41.79894

3.07

1.35

340000

FUTURE BRIGHT

2.28

3.636364

88.11476

2.76

1.053

2244000

43.55

2.591284

43.49258

44.95

19.82

9948389

126

1.694915

6.149961

132.8

109

3024395

HOPEWELL HLDGS

25.05

0.804829

-24.66165

35.3

23.047

3316267

HSBC HLDGS PLC

86.15

0.4664723

5.965556

90.7

65.85

13757209

HUTCHISON TELE H

3.63

-0.2747253

1.966294

4.66

2.98

5290000

LUK FOOK HLDGS I

23.95

4.585153

-1.844261

30.05

16.88

3842100

MELCO INTL DEVEL

16.9

1.684717

87.56936

18.18

5.54

5543000 4479875

CHEUK NANG HLDGS

DOW JONES INDUS. AVG

PRICE

Macau Related Stocks

CENTURY LEGEND

NAME

Max 22.75

20.0

WTI CRUDE FUTURE Sep13

CORN FUTURE

68.0

Currency Exchange Rates

NAME

METALS

Min 68

44.6

Commodities ENERGY

22.2

68.1

42.8

Last 43.55

22.4

68.2

43.0

average 43.233

22.6

68.3

43.2

Max 43.6

22.8

GALAXY ENTERTAIN HANG SENG BK

NIKKEI 225

14050.16

1.320834

35.16034

15942.6

8488.14

HANG SENG INDEX

22541.13

1.21165

-0.5110539

23944.74

19076.78906

CSI 300 INDEX

2349.08

-0.4233875

-6.891603

2791.303

2023.171

TAIWAN TAIEX INDEX

7951.33

-0.4375009

3.270733

8439.15

7050.05

MGM CHINA HOLDIN

22.65

1.797753

70.57933

23.65

11.27

KOSPI INDEX

1923.91

0.5687313

-3.662403

2042.48

1770.53

MIDLAND HOLDINGS

3.19

0.3144654

-13.78378

2.68

670000

S&P/ASX 200 INDEX

5157.419

10.93728

5249.6

4261.2

NEPTUNE GROUP

0.179

17.76316

0.23

0.131

11785000

4680.16

0.5967462

8.420187

5251.296

3978.078

NEW WORLD DEV

11.62

4.121864

-3.327791

15.12

9.38

16848020

FTSE Bursa Malaysia KLCI

1793.16

-0.1075155

6.170111

1826.22

1590.67

SANDS CHINA LTD

44.4

3.376019

30.78056

44.6

23.7

12641762

SHUN HO RESOURCE

1.52

-0.6535948

8.57143

1.67

1.06

NZX ALL INDEX

964.72

-0.08378827

9.372112

998.487

799.651

SHUN TAK HOLDING

3.89

2.368421

-7.159906

4.65

2.72

10360034

PHILIPPINES ALL SHARE IX

4039.13

1.165153

9.195776

4571.4

3411.69

SJM HOLDINGS LTD

JAKARTA COMPOSITE INDEX

HSBC Dragon 300 Index Singapor

617.35

-0.04

-0.6

STOCK EXCH OF THAI INDEX

1457.57

-0.1034899

4.715747

1649.77

1207.53

HO CHI MINH STOCK INDEX

503.57

1.173327

21.71464

533.15

372.39

Laos Composite Index

1340.94

0.07537707

10.38632

1455.82

1003.17

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

19.96

1.422764

12.46554

22.382

14.79

4809940

SMARTONE TELECOM

11.2

-1.060071

-20.45455

17.38

11.1

1858791

WYNN MACAU LTD

21.9

5.035971

4.534602

26.5

16.92

5980495

ASIA ENTERTAINME

-2.200489

42.11192

4.7647

2.4835

73268

BALLY TECHNOLOGI

74.88

1.394719

67.47931

43.16

418935

BOC HONG KONG HO

3.28

6.840393

3.6

2.99

9500

GALAXY ENTERTAIN

5.58

1.086957

40.55416

5.77

2.55

23079 1619129

INTL GAME TECH

19.35

1.150026

36.5561

20.25

11.35

JONES LANG LASAL

86.43

-1.155078

2.966402

101.46

69.56

815465

LAS VEGAS SANDS

56.75

0.5670743

22.94194

60.54

36.3606

3188511

MELCO CROWN-ADR

26.5

0.8371385

57.36342

26.6

10.41

2101284

MGM CHINA HOLDIN

2.92

66.82937

2.98

1.4665

1000

MGM RESORTS INTE

17.37

0.8125363

49.2268

17.67

9.15

7160738

SHUFFLE MASTER

22.78

-0.0877193

57.10345

23.08

12.35

434750

2.6

1.167315

14.15445

2.9481

1.9818

11500

139.62

0.8596403

24.1177

144.99

92.9122

739419

SJM HOLDINGS LTD WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

36.15

-0.1381215

20975519

CHINA UNICOM HON

2.7

2.272727

31178308

CITIC PACIFIC

3.34

3.08642

485430438

5.4

3.646833

54490621

BANK EAST ASIA

32.05

3.721683

5793801

BELLE INTERNATIO

12.04

0.6688963

25.1

CATHAY PAC AIR CHEUNG KONG

AIA GROUP LTD ALUMINUM CORP-H BANK OF CHINA-H BANK OF COMMUN-H

BOC HONG KONG HO

CHINA COAL ENE-H CHINA CONST BA-H

PRICE

DAY %

VOLUME

12.06

0.5

35855746

9.35

-0.9533898

17889328

CLP HLDGS LTD

64.15

-0.4654771

3642850

CNOOC LTD

14.56

1.392758

52389053

COSCO PAC LTD

11.22

0.1785714

18267608

ESPRIT HLDGS

13.66

-0.1988072

13813770

HANG LUNG PROPER

14.26

0.8486563

2013894

HANG SENG BK

115.6

0.5217391

6011532

HENDERSON LAND D

49.45

5.15

6.846473

134931598

HENGAN INTL

87.55

5.98

2.222222

351641301

CHINA LIFE INS-H

19.78

2.699896

66173699

CHINA MERCHANT

24.05

0.2083333

4627736

CHINA MOBILE

83.95

0.4787552

CHINA OVERSEAS

24.65

2.282158

5.88

0.8576329

105876126

CHINA PETROLEU-H

NAME

DAY %

POWER ASSETS HOL

70.3

0.5003574

2014522

SANDS CHINA LTD

44.4

3.376019

12641762

11.3

3.290676

6884428

1.538462

4267498

3597870

SWIRE PACIFIC-A

93.35

0.4303389

1415143

1.636905

5243440

TENCENT HOLDINGS

370

0.7076756

3058826

26.15

1.949318

7137759

TINGYI HLDG CO

19.5

1.5625

7393037

126

1.694915

3024395

WANT WANT CHINA

10.62

0.9505703

13194864

1.644399

3365265

WHARF HLDG

70.55

0.2842928

4048298

-0.284738

1846203

20.25

-0.4914005

7903469

126.3

1.527331

7287065

HSBC HLDGS PLC

86.15

0.4664723

13757209

15803314

HUTCHISON WHAMPO

92.85 -0.05382131

33267825

IND & COMM BK-H

SINO LAND CO

VOLUME

105.6

HONG KG CHINA GS

MOVERS

0 22550

INDEX 22541.13

7872623

5.28

2.923977

470348474

10.54

1.346154

39550779

CHINA RES ENTERP

25.75

-0.7707129

3967398

29.7

0.3378378

3256362

CHINA RES LAND

23.95

5.973451

12773261

NEW WORLD DEV

11.62

4.121864

16848020

CHINA RES POWER

18.38

-1.076426

10025788

PETROCHINA CO-H

9.33

1.413043

75237422

CHINA SHENHUA-H

25.6

4.489796

40855146

PING AN INSURA-H

54.4

2.351834

39928660

MTR CORP

PRICE

SUN HUNG KAI PRO

HONG KONG EXCHNG

LI & FUNG LTD

NAME

HIGH

22547.04

LOW

21723.89

52W (H) 23944.74 (L) 19076.78906

21720

9-August

13-August

14 14

August 15, 2013 April 19, 2013

Classifieds Mountain Villa For Sale in Koh-Samui

Bruno Beato Ascenção

Price: HK$ 16 million

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Translations

Duties

Inês Dias

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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.

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15 15

August 15, 2013 April 19, 2013

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The changing of the monetary guard

Korea Herald Hope that South Korea, gripped by a summer heat wave, will avoid blackouts is rising as the nation’s daily power reserves stayed above a safe level of 40 million kilowatts for two consecutive days thanks to nationwide power-saving efforts. “Despite bigger power demand today than yesterday, power supply remains stable thanks to power-saving efforts nationwide,” an official from the Korea Electric Power Corp said. Government and public organizations turned off air conditioning and lighting except for in necessary areas for two consecutive days.

Joseph E. Stiglitz

Nobel laureate in economics, is University Professor at Columbia University

below its current unacceptably high level; an unemployment rate of 7 percent – or even 6 percent – should not be viewed as inevitable.

Top contender

Inquirer Business Philippine exports rebounded in June from a slump in the previous months as global demand for the country’s petroleum, agro-based and mineral products rose. The pickup came despite the sustained contraction in global demand for electronics, the country’s main dollar earner. The National Statistics Office reported that merchandise exports amounted to US$4.49 billion in June, up 4.1 percent from US$4.31 billion in the same month last year. This brought total exports for the first half to US$25.58 billion, still down by 4.4 percent from a year earlier.

Asahi Shimbun Prime Minister Shinzo Abe exuded more confidence for Japan’s recovery and his goal after key economic statistics were released. But fast approaching is a challenge that could determine the legacy of Mr Abe’s second reign as prime minister. He must make a decision on whether to raise the consumption tax rate next April. Mr Abe will consult with experts and examine statistics ahead of an extraordinary Diet session to be called in mid-October. “The prime minister will make a decision on his own responsibility after taking all economic indicators into account,” Chief Cabinet Secretary Yoshihide Suga said.

Jakarta Post National flag carrier Garuda Indonesia will use its brand new Boeing B777-300 planes – bought to serve a new direct flight to London – for East Asia destinations due to lack of capacity of SoekarnoHatta International Airport’s runway. The runway’s inability to sufficiently handle the massive plane flying at full capacity to London, has forced the firm to delay its flights, which were initially scheduled to commence on November 2. Garuda said the jets would start serving the routes to Shanghai, Seoul and Tokyo by the end of the year.

Janet Yellen, U.S. Fed vice chair

ith leadership transitions at many central banks either under way or coming soon, many of those who were partly responsible for creating the global economic crisis that erupted in 2008 – before taking strong action to prevent the worst – are departing to mixed reviews. The main question now is the extent to which those reviews will influence their successors’ behaviour. Many financial-market players are grateful for the regulatory laxity that allowed them to reap enormous profits before the crisis, and for the generous bailouts that helped them to recapitalise – and often to walk off with mega-bonuses – even as they brought the global economy to near-ruin. True, easy money did help to restore equity prices, but it might also have created new asset bubbles. Meanwhile, GDP in many European countries remains markedly below pre-crisis levels. In the United States, despite GDP growth, most citizens are worse-off today than they were before the crisis, because income gains since then have gone almost entirely to those at the top. In short, many central bankers who served in the heady pre-crisis years have much to answer for. Given their excessive belief in unfettered markets, they turned a blind eye to palpable abuses, including predatory lending, and denied the existence of an obvious bubble. Instead, central bankers focused single-mindedly on price stability, though the costs of somewhat higher inflation would have been miniscule compared to the havoc wrought by the financial excesses that they allowed, if not encouraged. The world has paid dearly for their lack of understanding

Yellen brings to bear an understanding not just of financial markets and monetary policy, but also of labour markets

of the risks of securitisation, and, more broadly, their failure to focus on leverage and the shadow banking system.

Capital controls Of course, not all central bankers are to blame. It was no accident that countries like Australia, Brazil, Canada, China, India, and Turkey avoided financial crisis; their central bankers had learned from experience – their own or others’ – that unfettered markets are not always efficient or self-regulating. For example, when Malaysia’s central-bank governor supported the imposition of capital controls during the East Asian crisis of 19971998, the policy was scorned, but the former governor has since been vindicated. Malaysia had a shorter downturn, and emerged from the crisis with a smaller legacy of debt. Even the International Monetary Fund now recognises that capital controls may be useful, especially in times of crisis.

Such lessons are most obviously relevant to the current competition to succeed Ben Bernanke as chair of the U.S. Federal Reserve Board, the world’s most powerful monetary authority. The Fed has two main responsibilities: macrolevel regulation aimed at ensuring full employment, output growth, and price and financial stability; and micro-level regulation aimed at financial markets. The two are intimately connected: micro-level regulation affects the supply and allocation of credit – a crucial determinant of macroeconomic activity. The Fed’s failure to fulfil its responsibilities for microlevel regulation has much to do with its failure to meet macro-level goals. Any serious candidate for Fed chairman should understand the importance of good regulation and the need to return the U.S. banking system to the business of providing credit, especially to ordinary Americans and small and medium-size businesses (that is, those who cannot raise money on capital markets). Sound economic judgment and discretion are required as well, given the need to weigh the risks of alternative policies and the ease with which financial markets can be roiled. (That said, the U.S. cannot afford a Fed chairman who is overly supportive of the financial sector and unwilling to regulate it.) Given the certainty of divisions among officials on the relative importance of inflation and unemployment, a successful Fed chairman must also be able to work well with people of diverse perspectives. But the next leader of the Fed should be committed to ensuring that America’s unemployment rate falls

Some people argue that what America needs most is a central banker who has “experienced” crises firsthand. But what matters is not just “being there” during a crisis, but showing good judgment in managing it. Those in the U.S. Treasury who were responsible for managing the East Asian crisis performed miserably, converting downturns into recessions and recessions into depressions. So, too, those responsible for managing the 2008 crisis cannot be credited with creating a robust, inclusive recovery. Botched efforts at mortgage restructuring, failure to restore credit to small and medium-size enterprises, and the mishandling of bank bailouts have all been well documented, as have major flaws in forecasting both output and unemployment as the economy went into free-fall. Even more important for a central banker managing a crisis is a commitment to measures that make another crisis less likely. By contrast, a laissez-faire approach would make another crisis all but inevitable. A top contender to succeed Bernanke is Fed vice chair Janet Yellen, one of my best students when I taught at Yale. She is an economist of great intellect, with a strong ability to forge consensus, and she has proved her mettle as chair of the President’s Council of Economic Advisers, President of the San Francisco Fed, and in her current role. Yellen brings to bear an understanding not just of financial markets and monetary policy, but also of labour markets – which is essential in an era when unemployment and wage stagnation are primary concerns. Given the fragile economic recovery and the need for continuity in policy – as well as for confidence in the Fed’s leadership and global cooperation based on mutual understanding and respect – Yellen’s steady hand is precisely what U.S. policy making requires. President Barack Obama is supposed to appoint senior officials with the “advice and consent” of the U.S. Senate. Roughly one-third of Democratic senators have reportedly written to Obama in support of Yellen. He should heed their counsel. © Project Syndicate

August 15, 2013

Closing PT profit beats forecasts on CTM sale

Hyundai, Kia unions vote for strike

Portugal Telecom (PT) SGPS SA posted a higher than expected second quarter net profit, boosted by the sale of a stake in Companhia de Telecomunicações de Macau SARL (CTM), the city’s biggest telecommunications company. PT’s net profit rose to 257.3 million euros (US$340.8 million) from 67.7 million euros a year earlier, beating analysts’ forecasts of 240 million euros. PT said earnings before interest, taxes, depreciation and amortisation dropped 13.8 percent to 490.6 million euros. PT sold its 28 percent stake in CTM to Citic Telecom International Holdings Ltd for US$411.6 million (3.3 billion patacas).

Unions representing workers at Hyundai Motor Co and its affiliate Kia Motors Corp have voted in favour of a strike. Negotiations with management broke down over pay and other benefits. The development comes a year after workers at the South Korean carmakers walked out for four months, costing Hyundai US$1.5 billion in lost production. Strike action by the 45,000 workers the union represents could begin as early as Tuesday next week. “We don’t like to strike. But the company has accepted part of our demand only after we staged strikes,” union spokesman Kwon Oh-il told Reuters.

Euro zone exits recession

Beijing to launch new pharmaceutical bribery probe

German and French GDP stronger than expected

he euro area’s economy emerged from a recordlong recession in the second quarter, led by Germany and France, amid the first sustained period of financial-market calm since the start of the debt crisis. Gross domestic product in the 17-nation euro area expanded 0.3 percent in the April-June period after a 0.3 percent contraction in the previous three months, the European Union’s statistics office in Luxembourg said yesterday. That exceeded the median estimate of 0.2 percent growth in a Bloomberg News survey of 41 economists. From a year earlier, the economy shrank 0.7 percent in the second quarter. Germany and France, the euro area’s two largest economies, both showed faster-than-projected expansions in the quarter. While the overall outlook has improved, the recession pushed the unemployment rate to a record and parts of southern Europe remain mired in a slump, with more than half of young people in Spain and Greece out of work. “The upside surprise shows an underlying improvement in the euro zone as strong exports weakened the contraction in Spain and Italy and spurred growth in core countries, especially France,” said Ricardo Santos, an economist at BNP Paribas SA in London. “We’ll have to wait more to see any improvement in the labour market, but this shows the worst part of the recession is probably over.”

In Germany, GDP increased 0.7 percent in the second quarter, more than the 0.6 percent gain forecast by economists. The French economy expanded 0.5 percent after two quarters of contraction. Still, at least four of the euro area’s 17 member countries remain in recessions, including Italy and Spain. “This slightly more positive data is welcome, but there is no room for any complacency whatsoever,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a blog post. “A sustained recovery is now within reach, but only if we persevere on all fronts of our crisis response.”

Portugal growing The European Central Bank has cut interest rates to a record low and pledged to keep them there or lower for an “extended period” to bolster the economy. With the jobless rate at 12.1 percent, the highest since the euro’s debut in 1999, ECB President Mario Draghi this month described progress as “tentative”. Portugal’s economy expanded in the second quarter for the first time since 2010 as export growth accelerated. Gross domestic product rose 1.1 percent from the first quarter, when it fell 0.4 percent, the Lisbon-based National Statistics Institute said in a preliminary report yesterday. That follows ten consecutive quarters of contraction. Economists predicted an increase of 0.1 percent, according

The euro zone had been in recession since the end of 2011

to the median of 10 estimates in a Bloomberg News survey. GDP dropped 2 percent from a year earlier, after declining a revised 4.1 percent the previous quarter. The lower annual rate of contraction reflects a slowdown in the reduction of investment and a sharp acceleration in exports, the statistics institute said. Portugal’s trade deficit narrowed in the three months through June as exports rose more than imports. Banco Comercial Portugues SA, Portugal’s biggest non-state-owned bank by assets, said on July 29 that loans to companies are starting to pick up. “We feel Portuguese companies are having an exemplary conduct and you can see the clear replacement of imports and focus on exports,” chief executive Nuno Amado said. The nation’s jobless rate dropped to 16.4 percent in the three months through June from 17.7 percent, the first quarterly decline in two years. The International Monetary Fund last month cut its global growth projections, while the U.S. Treasury Department’s top international official, Lael Brainard, said Europe faces the risk of prolonged economic stagnation unless policy makers encourage domestic demand. Euro-area unemployment has held at a record since March and almost a quarter of young people across the bloc are without jobs. The ECB forecasts that the euro economy will shrink 0.6 percent this year. Bloomberg News

China is intensifying its investigation into rampant bribery in the pharmaceutical and medical services sector with a fresh three-month probe slated to begin today, the official Xinhua news agency reported. The probe by the State Administration for Industry and Commerce (SAIC), a regulator in charge of market supervision, is aimed at stamping out bribery, fraud and other anti-competitive business practices in various sectors, Xinhua said. It comes as other Chinese regulators such as the National Development and Reform Commission (NDRC) and the police conduct multiple investigations into how foreign and local companies do business in the world’s second-biggest economy. Much of the focus has been on the pricing of items from medicine to milk powder and whether companies are violating a 2008 anti-monopoly law. “It seems that the NDRC and SAIC have learned from their recent experience that they have the power to force companies to change their practices and bring prices down,” said Sebastien Evrard, Beijing-based partner at law firm Jones Day, which specialises in anti-trust law. “They seem to be willing to exercise their powers in even more sectors that directly concern consumers.” The NDRC, which oversees pricing, is already investigating 60 foreign and local pharmaceutical firms over their pricing practices. This investigation has yet to conclude.

Tencent’s profit below expectations Tencent Holdings Ltd, China’s largest Internet company by market value, posted profit that missed analyst estimates as it boosted spending on e-commerce and marketing to compete against Alibaba Group Holding Ltd. Net income rose 19 percent to 3.68 billion yuan (US$601 million) from 3.1 billion yuan a year earlier, the Hong Kong-listed company said in a statement yesterday. That compares with the 3.9 billion-yuan average of six analysts’ estimates compiled by Bloomberg. Tencent has added games and other new services to its WeChat instant messaging service, which has more than 300 million users, as it tries to commercialise the app without charging for access. The Shenzhen-based company is counting on the app’s popularity to compete against Alibaba, China’s biggest e-commerce company. “E-commerce is growing at a rapid rate, it’s a low margin business, if there’s any down tick in the e-commerce margins, that could drive down the bottom line,” Billy Leung, an analyst at RHB Research Institute Sdn in Hong Kong, said by phone before the earnings. “E-commerce is a double-edged sword.” Group revenue rose 37 percent to 14.4 billion yuan from a year earlier. Online advertising revenue climbed 53 percent from the previous quarter to 1.3 billion yuan while e-commerce gained 15 percent to 2.2 billion yuan. Tencent is investing the most since 2009 on research and development, building games and other mobile applications to lure customers who are spending more time on their smartphones and tablets.